The More Things Change. . . . Or, there is never anything new under the sun……

. . . but one issue of bonds is sometimes made the basis for other issues. Indeed, one of the money- making devices of the time is the formation of companies that issue their bonds on the security of other people's bonds that they have purchased, either yielding a higher rate of interest or obtained at lower prices than they expect to realize for their issues. There seems, in fact, to be no limit to the production of securities that are spread before capitalists. There never was a time when it was so easy to invest money — and to lose it. Of the securities that are offered with first-class recommendations, it is probable that about one third are actually good, one third have some value, and one third are practically worthless. Hence the very natural inference that whatever art there may be in the matter of investing is to be exercised chiefly in the avoidance of unworthy offerings, and it is to that point that a profitable discussion of the subject must be mainly directed.

Click on the title page pictured above and be transported to this book on line…. 

CVI

Here’s a chart for your review.  I’ve never heard of CVR---I found them on a stock scan.  From the company’s website

 

CVR Energy is an independent petroleum refiner and marketer of high value transportation fuels in the mid-continental U.S. and, through a limited partnership, a producer of ammonia and urea ammonium nitrate, or UAN, fertilizers. At current natural gas prices, our nitrogen fertilizer business is one of the low cost producers and marketers of ammonia and UAN in North America.

They are not one of the fertilizer names that you hear about.....might be an opportunity. I know that I'm looking.

UNG Revisited

Here’s another look at UNG.  You’ll remember that I had this in a post about Weinstein’s never to buy a stock below its 30 week moving average.  This is a weekly chart.  The volume is nothing short of staggering over the last three weeks.  What I find interesting is that the close for the weekly white candle and the red candle was within one penny:  13.71 v. 13.70 respectively.  Am I suggesting that it is a bottom?  I might be—but more importantly, the subsequent stock action would be a better tell—to confirm rather than guess.  I’m already in, but at a favorable entry.  Accordingly,  I’m not a seller here. 

Analyst Ratings and Price Points….Perilous to your Capital

From FINVIZ—I consider FINVIZ a staple in my stock research.  If you’ve not visited them, take a look here.

No where is it more apparent on the idiocy of analyst ratings and price targets than at market turns.  Remember, analysts are selling inventory—do not become the you in “Sold to you!"

Here’s another example—Had you been buying in May as UBS encouraged, your capital would have gone away……with impunity.

Again, from FINVIZ……

Pay attention to charts, fundamental and emotions---do not pay attention to analysts.

Inflationistas v. Deflationistas , Uncertainty and Mental Models

My father sent me an interesting article from Hoisington Management.  You can view it here, and I’d encourage you to do so.  I think that the article is straightforward.  Upon reading it, and seeing the conclusion, I clicked on the linked.  Hoisington is a fixed income money manager.  Accordingly, I would expect their opinion to be nothing other than presented.

I don’t say that to impugn the article in any way, but rather to REMIND that point of view colors the processing of all of the information that is received.  (As I wrote this, I digressed into searching for ‘mental models’….I soon will own 2 books on the subject). 

 

 

Provided I read these, I’m sure that I’ll write about them.  I’m intrigued by the subject for the reason that inflation v. deflation, bull v. bear and any other oppositional ideas are presented in ways that seemingly require us to choose because they are presented as mutually exclusive.  Is there really such a thing as elemental truths from opposing points of view that are truly mutually exclusive? 

Our job then as human beings is to mine for those truths and forget the buckets.  Hard to do, and I don’t pretend to be able to do that well. But this post is provoking a nascent interest in understanding it better.  This blog is named The Perplexed Investor, and certainly the space between to opposing points of view is where the state of being perplexed exists. 

I’m beginning to believe that being perplexed is a GOOD thing—particularly if the state of perplexion leads to discomfort. Why?  The only remediation to that discomfort is to investigate  and understand the issues at hand.  Understanding the issues does not mean that you resolve the conflicts.  However, understanding DOES mean that you are equipped to evaluate outcomes and make decisions that are appropriate for your situation.  Isn’t that the only way to become COMFORTABLE (in a discomfiting way).  That’s healthy dynamic tension.  It means that one understands that there is uncertainty and the state of being puzzled by it means that one isn’t duped into believing that there is one clear answer thereby occulting one’s view of other possibilities.  I’m listening to FSO and their military futurist guest.  I will likely go hide under a rock after listening to it. (I should be concentrating on this post).

I think that one of the most dangerous periods for new investors is when they are struck by the belief (pick a style) that there is a sense of a ‘holy grail’ for investing.  Buy and hold, value, contrarian, technical analysis or whatever else, are sometimes presented as seemingly holy-grails without an attendant presentation and/or understanding of the risks.

Ultimately, successful investing (living) is about managing risk and reward over a specific time horizon. And my new mantra is from Napier---in that to make money in the market, I don’t have to forecast the future accurately, only slightly better than the majority.  That sounds like a hubris-infused comment, but it is not meant to be. Education, flexibility, discipline and humility are armament against hubris.

A. M. Post

I retired early as my internet connection was down since just past noon.  It came up briefly at 9pm and crashed shortly thereafter.  I went up to bed and picked up Mamis. In his book, the Nature of Risk, he devotes about 3 chapters to market language.  And in re-reading those chapters, it was a reminder that while technicals are helpful, nothing beats looking through a chartbook every night to watch how charts are unfolding in the face of the technicals--as in every market, it will unfold differently.

While market tools are readily available, there is a true skill.  Sometimes I think that it is a disservice to most investors to hold out the greats and say "You can be like this too if you do ...x, y, z".  Like putting oils and brushes to the masses and say that all can go from paint by colors to becoming a master of the canvas.   I've found my best picks from my mind-numbingly clicking through charts. Early a.m. with coffee.  p.m. with wine (I tend to blog at those times too which may explain alot!. 

Click, click, click---back up. And the one that makes you pause and look a little closer sometimes is 'the one' and sometimes you look and find a wart within a pimple with a hair getting ready to sprout...click, click, click.  I do find lots of obscure stocks that way that go on to be quiet performers.  Sometimes they are rabid dogs that need to be shot and put out of their misery. But Mamis's comment really concretized the importance of looking at many charts and getting an intuitive feel for what is going on.

For those of you are working on your technical analysis skills, I recommend your getting Dan Fitzpatrick’s free video.  It’s just a few minutes, and he’s an excellent, gifted teacher.  His video prompted this post in that I read Mamis last evening and saw Dan’s video this morning. And if you take the time to LOOK at charts, really look at them, you’ll see ‘stuff’ unfold that is not in the media.

Here’s my update on WH that I did not have last evening due to the 5 minute window of my internet malaise.  This is a weekly chart.  I’m spending more time scanning using weekly charts—I’m finding that it gives a cleaner view….less noise.  The above chart is becoming my favorite view.  I can see the Bollinger Band width (the light purple line), volume and relative performance to the SPX.  The expansion in the BB is unsustainable, so I fully expect this stock to pull in. 

Back to Mamis…..one of the things that he noted that I wanted to share with you is that the leaders of yesterday will not be the leaders of tomorrow.  I had to think about that a bit particularly relative to energy, metals and agriculture which were the last leaders. 

I'm also listening to GaryK this a.m..  He’s talking about gold.  Here’s a chart of the GLD

 

I’ve been looking at this chart and see a potential double top OR a potential INVERSE H&S----so watch the $100 level.  I’ve still not gotten over my INACTION from the Thanksgiving’s work of looking at all of the gold stocks and not acting.  I’m reminded that study without action amounts to not much. And that goes to anything….hard work without achieving an outcome doesn’t amount to much either….we can look to our business life and see that as well.

That is another manifestation of risk….that you CAN work hard and NOT accomplish what you want (but surely you’ll accomplish SOMETHING if not only the practice of knowing what it is like to work hard).  That doesn’t mean that you don’t work hard, you must.  For if you do not work hard, you are unlikely to be successful, and if you do work hard you are likely to be successful—the degree to which is unknown, but surely higher than your choosing to NOT work hard.

Much like investing.  Some will put as much work into it as others.  A ‘few’ will be more successful than the ‘some’ just as surely as ‘some’ will be more successful than the many. Napier’s comment from the FT’s Long View particularly resonates…..He said (paraphrased), “I don’t have to forecast the future accurately, only slightly better than you.”  If you cannot be the best, it pays to be marginally better than others.  Sounds a bit like an underachiever’s mantra!

Never Get an Internet Only Phone

I don’t have an internet only phone, and today was a reminder as to what a stupid idea that might be.  I write this post sans internet, and that way since 12 pm or so.  I was working remotely---meaning I was home in my less fine clothes—and reliant on the internet to connect me to my work.  Thankfully, I started very early this a.m. and was able to log onto a client’s computer while she was working through something (thank goodness for gotomypc.com!) that required my guidance.

I also had brought home a box filled with crap that needed to be gone through.  It was from a client and represented ‘stuff’.  I needed to go through it, so being unplugged helped me winnow my way through the box.  I had file folders and a labeler.  I’m down to a small stack of “stuff”.  I know what it is because I’ve handled it about 10 times more times than the paper experts tell you that you should.  I’m not sure why I cannot make a decision to do anything with it.

The bummer is that there is an important doc in my in box at a client that I’ve been waiting for, and I cannot read it.  I was connected through cell phone and regular phone.  I couldn’t help but reflect on being without a !%%##$#% phone at all had I had only a VOIP connection.  Cable just is no where near as reliable.  I’ve rarely been without phone service—and it was natural disaster related. 

I sold some of my holdings into this strength.  I lightened up on UYM by 1/2 which was up 20%and sold my ERX which was now close to break even.  I have CEF, Great Basin Gold, TGB for gold stocks. My WH is doing quite well.   Here’s an old picture from 03/27—It has recovered from its Acapulco Cliff Diving. 

 

The other nice thing about this stock is that it pays a very nice dividend.  IN fact they stated recently that they want a payout of 30-40% of profits to go out as a payout.  NOt too shabby.  But, dividends do not mean much if the stock goes south, and that “getting paid to wait” doesn’t mean much if the stock takes a 30% dive.  I believed in the fundamentals enough to hang onto this stock (but too scared to buy more!).  As my holdings are often thinly traded stocks (ahh, the beauty of a small account!), I do not always have stops on them.  I know that goes contrary to what many admonish.  However, for thin issues, you can get shaken out prematurely.  IN reality I guess what I’m saying is that I was too stubborn or stupid to have a stop loss.

Now my internet is working having been out 9 hours exactly.

Odds and Ends

Jeff Saut should be part of your regular reading.  Click on the pic below to be transported to a very informative and funny piece.

 

I’ve been a little under the weather with a mild stomach bug.  Thankfully it was just stomach pain, headache and low grade fever and none of the other accoutrements that make a stomach bug ‘uncomfortable’ and downright perilous if one ventures too far from the loo.I’m drinking coffee this morning with no pain….so I’m declaring myself free from the bug.

I was reading a bit before turning in and AFTER watching the last episode of 24 (and missing the first, early hour in the two-hour finale).  I picked up John Murphy’s The Visual Investor.   I read it some time ago, and it is a good primer.  I like to be reminded of the basics—because simplicity has its own elegance.  It is too easy to get caught up in so many technical factors giving mixed signals that one feels like they are chasing their tail.

One of the sections of this book is on intramarket analysis.  I’m a big believer in looking at sectors because there is always actionable action somewhere (other sectors, other markets). I was reminded of the importance of the bond market and the inverse relationship of bond prices and stock market action.  More specifically, bond prices and utilities as utilities are very interest rate sensitive.  Interestingly, this a.m. I see a column my Helene Meisler on RM and Saut mentioning utilities.  Here’s a 10 year chart on XLU—

 

 

I’ve no opinion other than it’s a tenuous looking chart.

Sunday A.M. Miscellany

Last week, though busy, was so much easier as I worked normal hours.  Today is the second weekend that I’ve not had to work all weekend.  I do have to do into one client and get a couple of things done.  I had to ask Client 1 for some forbearance so that I could work on Client 2’s ‘stuff’ that was urgent.

I helped with a dog run yesterday—meaning I gave a hand rather than drive.  I’m glad I gave a hand, they needed it.  Now that we are in the hot/humid months of VA, it is hard work….and hard on the animals too. 

Last evening we were invited to a birthday party for a dog—Gilly.  His owners are a lovely young couple. Mark works at the same school as the wife who is an art teacher their.  They are both outgoing and very active people.  Part of the invitation was to bring a dog.   We elected to bring Macy our American Bulldog mix. 

There was quite a mix of dogs there. Gilly’s two brothers were there.  They were part German Short-haired Pointer and Lab—a good looking set of fellows with the GSP coloring and the lab disposition.  There were Chihuahuas, Dachshunds, and a cornucopia of other breeds.  Jackie had a professional photographer there, so hopefully I’ll see some pics.  I didn’t take my own camera, so I’ve nothing to share.

All the animals got along terrifically, and I was proud of Macy.  She was a little nervous at first, but not frightened.  It was a lot of fun, and I was glad that we were able to take Macy out.  As we live where our dogs can get plenty of exercise, I don’t have to take them out to other places. 

---

I finally converted my husband’s old SEP IRA into a brokerage account.  The mutual fund model for investing just doesn’t make any sense for my investing style.  I’ve kept his money safe in the bear market.  I elected to put 1/2 in the FHKCX at the buy point noted above.

I sold on the gap up—I just saw so many of the sector charts stopping dead in their tracks, I didn’t want to press my luck.  His account is already up 25% for the year just on two positions.  To EXIT this position, I had to pay a short term redemption fee. 

From a technical perspective, I’ve sold a position showing obvious strength.  I may have overthought the position and have let my bias get in the way with chart work.  There are no volumes on mutual funds, so let’s look at a proxy—FXI

 

I try to pay attention to volume, and more importantly divergences.  While stock prices can fall merely on their own weight, volume is needed to propel a stock upwards.  This volume pattern is a bit of a conundrum to me.  Why?  Because the volume now is QUITE heavy relative to the earlier rise in this ETF.  I expect a pull back, and I’ll likely re-enter, but I wanted to preserve some profits.  NOw, I’d like to show you something dumb ass that I did…..

 

Here’s an 11 cent stock that I bought.  See that massive spike.  Somehow, while I was at work that day, I was compelled to check that stock just at that time it was hitting .35.  I failed to just hit “sell”.  It would have been a very nice profit.  Funny, I’ve had the best luck with penny stocks this year.  I don’t generally buy them….but a chart is a chart.  Gary Kaltbaum started out selling penny stocks. 

Making decisions in the market has more to do with quelling one’s natural emotions---a nice gain can dissipate into status quo in the span of just a few minutes.  My first response was “Oh WOW, something exciting is happening, and there is news that I don’t know about that is BIG…..I’ll just hang on.”  Yeah, right. It did happen to be the last day they were listed (they are now on the PINK sheets). 

Here’s a chart that I wished I had found. 

 

My preference is to be in a position before the move.  I’m not good about chasing moves either higher or lower.  In fact, my best success this year has been from being patiently in positions and then have them move.  However, when the move gets made (a la PDRT) you have to part with it.  Sigh…..

A Chart to Watch

Here’s a chart that might bear watching (in a more hospitable market environment).

The Horizontal and the Not So Horizontal

 

As I look at charts, I’m reminded of lines that are important.  Stan Weinstein implores that you should NEVER buy a chart that is not trading over it’s 30 week moving average.  (I’ve ignored that advice on occasion to the peril of my portfolio!). 

He also pointed out something that I’ve not seen stated so clearly, and that is that HORIZONTAL breaks of trendlines (either up or down) are more important than sloping lines.  Here’s a chart of UNG.  I don’t own it, but I do have some of my husband’s money in the Fidelity Natural Gas Fund. 

It’s worth watching for these points.

A Random Walk through Charts

Here’s an example of a chart pattern that you would NOT commit new money to.  To my eye, this stock is under significant distribution. 

I’ve no position in this stock, but I did want to point out to you a dangerous chart pattern.  NOte too that this stock has been under distribution for a LOOOOOOOOOONG time.  I learned my lesson in these insurance stocks the hard way….I bought heavily (for me) into puts; but the chart breakdown went beyond my time frame.  (Wahhhh!)

I’ve no crystal ball.  However, I would expect that this stock will break heavily to the downside.  If you don’t use price/volume charts (where the bar is to the left or right), I would encourage your using them.  Those bars tell you where the support is.  As you can see, this stock is already trading below the longest volume bar.  To my eye, that means that the chart has a built in vacuum to pull it down as there is not much support below.  We can follow it and see if the chart fulfills its promise.

Here’s an example of another chart with a distribution top—though not as domed. When these break, they break hard.

 

Mother’s Day and Other Stuff

Happy Mother’s Day to those of you who are mothers or honor your mothers on this important day.  My two kids—well they are officially adults at 18/2--I gave me flowers, a gift certificate for some much needed personal beautification and did an EPA cleanup.  I was very appreciative.

Since mid-January, I’ve been working full-time plus.  In fact, I cannot remember a busier time in my life than the last 30 days.  Today is the first weekend I’ve had off since March 26.  The days were beginning to run together. I don’t care for that. 

My family has been ‘used’ to having me around.  Though busy 10 hours a day with my stock research and ‘stuff’, it is very different from operating in deadline and outcome oriented days.  I do have to grocery shop.  I’m out of everything. Frankly, doing some mundane chores would be welcome.

I did a dog run yesterday.  I’m sore from lifting crates, pups and dogs.  I had a lovely hound mix riding shotgun.  A very sweet dog who was content to sleep but intent in contact.  So many of these dogs crave the human touch.    My ‘Fit by Fifty’ jag as been compromised by all of this work.  It’s an excuse more than a reason.

My portfolio has done well by my not ‘monitoring’ tick by tick.  I’ve been listening to Gary K more regularly, only because I’m at a client, and I can listen while running payroll and doing other ‘must do’s’ that don’t include concentration.  Concentrated work requires quiet for me:  no music, no TV, no disturbances.  The good news is that I can concentrate for very long periods of time.  That is also the bad news—it’s not good to sit too long.  I’ve had long strings of that this month (15 hour days), and I’m glad to be over that for a small bit of time.

What little time I’m spending on the market, I’m spending by looking at charts.  Here’s a weekly chart of just one of the many charts that are starting to move.

This chart has the characteristics of what you would want to look for….consolidation along a base coupled with volume on an outbreak.  It’s not rocket science, but it sure does seem to be made that way. 

When I started writing this blog almost 3 years ago, I named it The Perplexed Investor, because I was truly perplexed.  I’m much less perplexed now.  But only for the long hours of study and a steady diet of tuition payments.  I feel like I’ve learned life-long investor skills.  Would that I had learned them earlier!

I do know this…one really has to learn this stuff for themselves.  Otherwise, the charlatans and the professionals—oftentimes one of the same—cannot be distinguished.  But, ultimately, one has to depend on themselves—and that means studying.  I still believe the singular best book on the market is Stan Weinstein’s book.  If you master the disciplines in that book. that is all you need to know.  That way, you can find charts like this on your own…and you must know how to read a chart; otherwise, you might as well cross the highway blindfolded.  You don’t take such risks with your person; why should you do it with your money?

Bear Market Comparison

http://www.nytimes.com/interactive/2008/10/11/business/20081011_BEAR_MARKETS.html

 

You might remember that the NY Times did a comparison of this bear market v. other bear markets.  Click above to be transported.  I see that they’ve updated to 2009.  That’s recent, as I looked not too long ago and did not see an update.  It’s worth a look.