Wednesday, November 02, 2011

SPY Chart | 11/02/11


Above is a 60 minute SPY chart with a volume@price overlay.  As I've never shaken my belief that charts tell us nothing so fully accurate as price history, I do look at where the market has voted with its collective wallet. It is these places where the inextricable psychological and economic investment shows up--and where breaches of these areas (to the upside or the downside) are likely to elicit a reaction (buy to catch up or  Neither pundits nor technical analysis have any dibs on future certitude of market direction.   Since my last post, the market seems to be reacting to its current (in)digestion of news out of Europe. 


Euphoric, despondent and incredulous are all apt emotions that the market has experienced.  Who knows what it will bring today?  We are entering a area of important price support (to my eye anyway).  Likely to be more chopping as market participants try to digest the Euro stuff and the MF Global debacle.  And the MF Global evaporation is a reminder that the so-called smart money, is not so smart (said with schadenfreudic sarcasm).







Monday, September 19, 2011

Deja vu


The market these days is reminiscent of the pre-Lehman/Bear Stearns market.  The markets were hyper-reactive---with maniacal swings up and down. As I had done so much research and understood the factual underpinnings of the events (before they unfolded so dramatically), I was able to evaluate statements made by various talking heads.   I was not assured by assurances.

Rather, I understood clearly the systemic risk potential before anyone was talking about it. I had invested hundreds of hours of personal research to understand the unfolding risks.  I read financial statements (of mortgage insurers, insurance companies, mortgage companies and the investment banks) and saw the loan loss reserve and derivative language which told me that using historical methodologies in the sans-sane underwriting environment was going to lead to sharp losses.  I read the S&P, Fitch and Moody's reports which FGIC published on their site.  They no longer do. Most importantly, I understood that systemic risk would collapse all asset classes--there is no basket of diversification that would be safe.   And as we soon found out, even some safe classes--money markets--were not safe.

This research made my head hurt.  The only industry I had a passing acquaintance with was the mortgage industry and that was from audit experience very long ago.  I found the investment bank financial footnotes overwhelming.  But I read them. I thought the insurance companies would be at risk because of the amount of fixed income securities they bought.  Turns out that I was right.  I saw no analyst or talking head suggest that this was a sector that would suffer.
Sure, many were talking about the dangers of derivatives and agressive lending, but all of the doom and gloom centered on a symptom of the problem, subprime.  Rather the entire housing industry that was in a bubble due to easy money for all--just not subprimers.  A few hours at the OFEO site and reviewing their statistical reports for average earnings of households to average home prices and a 2 minute calculation  indicated to me that the problem was sorely underestimated.

The new designer mortgages were not to get undocumented folks into homes, but to get "normal" households into homes where the home values as a multiple of household income had increased markedly (39%).    From 2000 to 2006 housing values increased 76% while household income increased 27%.  It is worth noting that home values increased even more post 2006--but my research was in 2007, and there is no need to update it.

Now, fast forward.  We are awaiting another clown-sized shoe to drop in the form of the European 'stuff' and in the form of no new jobs creation for the US and the threat of a a continuing (or new) recession.    Hard to know if it has dropped already or if we are just cowering in its shadow as it hovers above. My only surprise is that it has taken this long for the giant festering pustule of the Euro-centric economic mess to finally pop.  Similar to our own issues in 2007.  The demise of the banking industry was long foretold in 2006 and so. It takes a while for these whispered, muted fears to take on gut grabbing terror. However, today, I do not feel buoyed by the certainty of my research.  I do not profess to understand the intricacies of what is going on in Europe. 

There is a great paper called Irrational Optimism (Dimson, Elroy, Marsh, Paul and Staunton, Mike, Irrational Optimism (December 2003). LBS Institute of Finance and Accounting Working Paper No. IFA397. Available at SSRN: http://ssrn.com/abstract=476981 or doi:10.2139/ssrn.476981).  It is worth your taking time to read.  Here is the first paragraph from the abstract:

We address the tendency of many investors to overestimate the rewards and underestimate the risks of investing in stocks over the long term - that is, investors' irrational optimism. In particular, we examine the widely held belief that stocks are a "safe" investment for the long run. The probability of experiencing a real loss on equities depends on the expected real return and standard deviation of stocks. Judgments about the future magnitude of these two parameters typically involve extrapolating from history. We use a global database of real equity returns from 16 countries during the 103-year period from 1900 through 2002 to confront the optimism of investors with the reality of history
While I feel somewhat ill-equipped to know with any certainty of what is down the road,  I do know that ultimately we have to rely on our own judgments of the risks. Dimson etal's paper is one that helps illuminate perceptions, and I try to keep the valuable perspectives in that paper at hand.   If we could learn anything from the last bout of certitudes where the eventualities of the collapse of the dollar and treasuries were 'no-brainers', we should learn this:  conventional wisdom in unconventional times is not worth much.












Tuesday, August 30, 2011

On Forecasting Economies, Markets and Hurricanes and the Democratization of Blather

I am seeing many critics now stepping out with their perennial second guessing (at best) and ridiculing (at worst) Irene's denouement landfall.  Though only a schadenfreudically disappointing CAT 1 hurricane, I'm here to tell you that being in the purple wind bands for a sustained period of time is no fun.  Having your entire county's power grid knocked out is even less fun.  A 150 year old red oak or beech tree is a powerful force when it comes crashing down on your home, car, or body.

Waiting until there was certitude about the storm's intensity and the when/where it would make landfall means that you are too late if you've underestimated. When dealing with catastrophic losses of life/property, the error that should be made is on the side of overestimating, not underestimating, the magnitude of the event.  With time comes certainty, but time also erodes options (such as evacuations) in the event that you underestimate the outcomes of a particularly event. 

What you want to avoid is being on the other side of an event of some consequence (weather, economy, market, or some trick you've decided to try with your car/boat/motorcycle/skateboard/mountain bike) and hanging your head, kicking the dirt and dazedly muttering, "coulda, woulda, shoulda" in some refrain.  Katrina, 'subprime' (which was so much more than that), lead paint, asbestos, DDT among many other events, bear witness to the costs of underestimating (or ignoring) consequences. 

Weather events, like economic and market events, (and our personal stunts that end badly) can only be evaluated with full clarity in hindsight.  These critics suffer from the need to second guess decisions that needed days of consideration and many hours of execution on limited information from the vantage point of hindsight.   I surely do not want my health and welfare in their hands.  From where I sit still recovering from being in the purple wind bands in a county whose electrical grid was entirely (not partially) decimated by many hundreds of fallen trees (of the 150-200 year old age), the din of the sideline carpers at least is drowned out a bit by the hum of the generator and buzz of the chainsaws.

Such writings also make me question if the internet's democratization of opinions is such a good thing.  Freedom of speech and having something worthwhile to say do not go hand in hand--and sometimes the internet and the many forums of 'expression' feel like the democratization of blather.  I'm sure that I've made my own deposits to the blather bank, but I try not to.

All the better to overestimate Irene and have her disappoint, than to have her juiced up and/or wobbling outside the bell curve of underestimation.  I can point to several hundred old oak trees more than 150 years old that have weathered many a hurricane...but not this one.  And many a person decided to ride out Katrina because 'in their experience' such storms, despite warnings, could be endured.  Right.

The art of assessing risks and making considered judgments based on a possible range of consequences is just that...an art.  When we have to act is not always at the time that we have full information.  And having full information generally makes it too late to act.  Too many last breaths are preceded by "If only..."




 




Monday, August 29, 2011

Return from Hiatus

I am returning from a much needed vacation away from the markets.  I found myself zigging when the market was zagging and then zagging when it was zigging.  Guess what got zinged?

I have a page on this blogged tagged "wisdom".  It serves as a place for me to write down things that I find important and want to both reference and share.  I would like to highlight a couple that are very meaningful to me.



The first is from Musashi:

Harmony and disharmony in rhythm occur in every walk of life. It is imperative to distinguish carefully between the rhythms of flourishing and the rhythms of decline in every single thing.

And the second is from Munenori (a nice corollary to the one above):
When fighting with enemies, if you get to feeling snarled up and are making no progress, you toss your mood away and think in your heart that you are starting everything anew. As you get the rhythm, you discern how to win. This is "becoming new."

Sun Tzu reminds that choosing not to fight can be a successful strategy.  So with the zig and the zag and the zing, I elected to put my pencil down and rest my head a bit.  I am feeling more clear eyed and refreshed from the break.

Sunday, July 10, 2011

Parsing out Leisa-land "Stuff" from The Perplexed Investor

I shouldn't let my state of peplexion (This is a word that I freely made up when naming this blog in 2006) fill this space with other "stuff" that I want to write about that has no bearing on the market.  But I like to write, and I like to share the other stuff, so I elected to create a blog called Notes from Leisa Land.  It is a bit cleaner, and is likely to help eliminate some confusion about why the heck am I writing about wine, snakes or countertops.

I hope you'll visit me there.

Tuesday, July 05, 2011

Notes from my Life: Life and death

If I had some perspicacious or lucky guess on this market that we are in, I'd comment about it.  I've no clarity of thought, and I've been preoccupied with other projects and some down notes that Nature plays in her sometimes awful symphony. (This is a rather morose post, so if you are feeling down, you'd best move along).

First, my long-deceased brother's birthday was over the 4th of July.  I did pause to remember him though we were estranged at the time of his death.  I wrote about the circumstances of his death here.  I hope that you'll take a moment to read it if you are preoccupied with what you do, how much you earn or any other externally calibrated notion of you worth.  You can find it here:  http://theperplexedinvestor.blogspot.com/2007/01/deeply-personal-story-but-investment.html  If you are quizzical and cautions and are wondering what the post is about, it is simply about my brother who lost his money in the stock market and took his life.  He had a beautiful wife and two young girls. He has been gone more than 21 years now.  Perspective is everything in most things.  Never lose yours.

Rusty, the orphaned deer, had to be dispatched to the netherworld. A raging infection---likely the result of no mother's milk gained the upper hand. He was one of the gentlest creature I had the pleasure to ever know.  What a gift to know him.  Nature blew a rancorous note on a trombone with respect to sweet Rusty.  How I am glad that I was a small part of his short life.

I learned today that a friend lost two dogs over the weekend under a tragic circumstance. I mourn for her loss.

Today, we had to dispatch a snake to the netherworld.  I do not say this lightly.  Here is the fella snaking his way into the bird feeder bush.

Well, I didn't kill him (I left that to the men-folk), but I did enter the discussion with my husband and son on this fella's fate.   I ensured that we had not mistaken him for the more harmless puff adder/eastern hog nose. You can see that the color and striking pattern are similar but distinct enough.  All snakes heads look triangular to me in my fear filled squinting eyes.



Trust me when I tell you that our bias was to let him go.  However,  he was just too close to our normal activities (which should have shooed him away).  After careful deliberation, we agreed that the risks of his staying in this habitat were too great for us.  Had we encountered him just 25 yards away we would have let him be.  10 feet from us is just oo close.

This bush that he was in is a snowball bush; and it is in it that we have our bird feeder.  The birds were still feeding in that last frenzy before they go to winkie land.  This bush is adjacent to the house and the deck on which we were sitting.  Mark spied the movement and saw that Minnah and Malcolm had a bead on him.

We brake for snakes.  We don't take killing snakes lightly, and letting them be is a very high preference.  I took some pains to make a positive identification as you can see above.    I will always remember the Richmond Times-Dispatch outdoor writer, Garvey Winegar, writing a column about donning a mining hat to safely view the dusk-post dusk ground in Virgina to keep from stepping on these diurnal feeders.

While there used to be much made of the eight degrees of separation between all of us and Kevin Bacon, I can say that I'm 1-2 degrees separated from 3 people who have been bitten by a copperhead.  That's too close for me.  Further, for myself, I have had plenty of close encounters (wrapped around a bush that I was weeding around, raking them out of the flour bed and on the road while walking).  That does not include the many copperheads (some bigger than my arm) that I have seen crossing the road at night. Once my daughter accidentally ran over a very large copperhead--large enough that in her Jetta it felt like a speed bump.  We circled back to make sure that he was not suffering.  He was gone.  No doubt breeding this frisky fella for revenge.

I'm quite certain that given my fear of snakes, I would likely die quicker from fear than the bite should I ever be bitten. I will credit an Audubon book on reptiles given to my daughter at age 2 by a neighbor (eagerly called for as 'the snake book') as a major force in helping me desensitize myself to these serpents.  Nevertheless, snakes always startle me.  If you enjoy picking blackberries, sooner or later you will find a vine that moves or one beneath the bush.  Once I looked down to see my sandaled foot adjacent to the eastern hognose that you see above.  However, when I saw the strongly patterned snake, I thought (in a frantically shouting in your skull sort of way) copperhead!  My berries went one way and I went the other.

This fella was in the wrong vector of time and proximity to my home.  Too accessible to one of us trodding upon him, or one of the cats or dogs messing with him sealed his fate after careful deliberation.  Not 15 minutes earlier, my husband was filling the birdfeeder in that bush.  No doubt he was attracted by the last feeding by the birds.  The snowball bush provides ample cover from the hawks who view bird feeder's as a buffet.  Our feeder, nestled in the entangled branches provides amble cover from predatory birds, but apparently not great cover from snacking snakes. A paradox, no?

I do give that bush a keen scout before venturing into  the arching branches.  Some years ago I watched a black snake crawl into that branch structure, and just hang out like our venomous friend above.  I would shudder as I imagined replenishing the bird feeder only to come eye to eye with a snake.  I have played that vision over too often in my head.  Here it was repeating twice real.

We captured the cats, and herded the dogs in.  Our business was done quickly with minimum agitation to the snake.  It was just too much danger to ourselves and our pets.  Had we been in the woods, we would have let him be.

It is a good time of year to be vigilant in Virginia.  While Garvery Winegar's admonishment to wear a mining hat in Virginia's beautiful summer evenings is not one that I've heeded, I do keep a sharp eye out when I can see with my naked eye, and I stay inside otherwise or have a flashlight.  You should too.  It was surprising with the level of  activity that this fella was even about.  Don't pick up buckets or anything else that has been turned over, and be particularly vigilant if you have rubbish/firewood near your home.  A woodpile is a very accommodating habitat.  While not a fatal bite to humans (pets another matter), the bite can cause a great deal of necrosis, swelling and accompanying pain.  One friend's son almost lost a finger (snake bit him when the boy's hand was placed down behind him to support sitting); and another friend's wife was bit in the leg.  That bite cause a lengthy hospital stay and continued swelling more than 6-8 months later.

I hope that your symphony is playing kinder notes. Sorry this post is not better written, but .....

07/07/11:  Today I learned that Mr. Winegar passed away.  I've long missed his writing since he retired; and I'm sorry that he has departed.

07/08/11:  Another picture


Thursday, June 23, 2011

Russell Indices Reconstitution

The Russell Global, Russell 3000 and Russell Microcap are being reconstituted this week.  The Russell Investments website, has that information available to you.  You may find it here.  If you've not visited the website, you will find interesting information about index composition as well as real-time market analysis.


From the website, here is a graphic of the reconstitution time-line (Click to make larger):






To assist you in bird dogging your own opportunities, I have created a FINVIZ profile for the additions and deletions for the Russell 3000 and the Russell Microcap. I did not include the Global as there are non-US listed companies there.  To see the additions and deletions, simply click on the links to see the composition of each.  At the FINVIZ site, you can download the tables into an Excel file.

Additions Deletions
Russell Reconstitution
3000 3000
Microcap Microcap


I have not looked at the list in detail myself (but will), rather I wanted to put the information in a format that you could readily analyze.  I am not promoting Russell Investments products or services; however, I wanted to share with you an important action to popular indices that may have ramifications for your portfolio or house some opportunities.


How is this information actionable?  With additions/deletions to indices for reconstitution, funds mirroring these index changes will have to buy/sell accordingly.  There may be some long/short opportunities for sharp-eyed traders. Or, you may own some of these names, and you may notice some unusual activity.


I hope that you find this information useful.


Position:  No stocks mentioned, but ready to investigate for opportunities.

Wednesday, June 08, 2011

Performance Transparency

In my business and personal life, I am a big believer in appropriate transparency to various constituencies:  lenders, stockholders, customers, donors and employees.  Transparency builds trust and cultivates loyalty.  Telling people what they need to know v. what they want to hear is a difference some do not understand. Best to make sure that you understand the difference too.


I like to nose around for no-spin, facts that help me independently assess which way the economic windsock is blowing.  There is quite a bit of hot air in the media and through so-called experts that can whip that windsock around. If your nose is similarly motivated, you might be interested in what I  want to share with you today-- a couple of companies that provide monthly operational reports:  Fastenal (FAST) and W. W. Grainger (GWW). Click on the company name to be transported to their sales releases..


Though you may not have an interest in either of these companies from a trade/investment perspective, if you wish to have a data source that allows you to have a no-spin, facts regarding industrial supplier volume (a nice bellwether for economic trends from these giants), then you have a nice resource.


Because I believe that Fastenal provides the yardstick by which all companies should be measured for periodic reporting of key data, I wanted to highlight that for you.  For those of you who are fundamentally oriented, how do your favorite companies measure up?


Since the market is getting a little jiggy, let's take a look at the industrial suppliers weekly chart (click to enhance):







As you can see, this group has exceeded its pre-crash high. I am not providing separate charts for FAST or GWW as their charts are identical to this one.  As you are looking at performance information, viewing this industry chart will help you see what others are concluding and how they are voting with their dollars.

This is Rusty.  His only care about transparency is that you can see when his bottle is empty and fill it back up.  He's about two weeks old now.

Monday, May 30, 2011

Memorial Day

Summer.  Though it doesn't officially begin until June 21, it begins early, and unofficially, with Memorial Day and ends early with Labor Day.   Two holidays that too easily become associated with three day flankings of summer and without a true understanding or honoring of spirit of the holiday. 

While leaving my neighborhood to meet the other transport volunteer coming from Williamsburg, I ran over a neighbor's dog.  I did not know the neighbor nor the dog.  I'm a careful driver, and the only dog that I have ever run over is my own.  She was a miniature poodle that came running out on  dark rainy evening.  Something she had done a hundred times before, but somehow she ended up under my front wheel.  The anguish that I felt in hitting this lovely dog was no less.  At least she was killed instantly, and I can say in all honestly, there is not another driver out there that could have avoided the outcome.  She came flying out of a wooden fence enclosure (intent on chasing/confronting whatever vehicle she heard) where there are tractors housed (so I had no chance of seeing her movement sooner nor even anticipating that an animal would dart out).  She then stopped right in front of me.   There was no place to go, and veering right or left would have had a more noxious and gory outcome as she would have been pressed beneath a wheel.
 
There I was kneeling beside this jumbled body sobbing in anguish, " No, no, no." The owner obviously heard me and the nature of my lament would have been unmistakable.  He came out, knelt on the other side of her.  After a minute, he straightened her out and said, "This is going to be very hard for them." He  offered some comfort to me, as he was overcome as well.  He picked her up, and carried her across the street to her home. 

I left to meet my transport.  I was so overcome (and I'm generally pretty calm during disasters), but I was deeply shaken.  I managed my transport--a beautiful Brittany named Phoebe.  But I ended up with a stress induced headache and a general sick feeling in the pit of my stomach that did not abate until yesterday.  The irony of the day did not escape me.  Dogs, cats and children are no match for a car--and try as we might, those cruel intersections of time and space create grievous emotional wounds. 

I stopped by the home of the dog later, but they were not home.  I went home and wrote a heartfelt note and delivered a basket of flowers.  In my note, I mentioned that I wished I could have turned back the hands of time and expressed all of my heartfelt sadness--knowing their own sadness would be amplified even more so.  I also mentioned that I wished I had known her name to mention it in my letter.  I put my e-mail address on the letter.  I received a kind acknowledgment of the note and the flowers, as well as their concern for my own feelings.  Her name was Roxy, and they had 8 good years with her.  Their note back meant much to me.

With Memorial Day, the names of the fallen should also be known.  I had the opportunity to watch "Taking Chance:"  It is not a movie I had seen before, and Kevin Bacon plays the lead character beautifully.  It was a fitting movie to see on this weekend of remembrance.  The movie is based on a true story.  Rather than my telling you about it, you can read about it here. I hope that you'll take a minute to do so. And if you have a chance to see the movie, I think that your time will be rewarded.

Our fallen warriors and our workers on whose sweat 'stuff gets done'...they bookmark the time of the year where procreation and recreation fill the long days. I've not looked at one stock chart this weekend, and I'm happy for that.

Saturday, May 28, 2011

Notes from my Life: Fawn!

I heard that my next door neighbor was caring for a baby deer.  It was found near his pond by a young man who was fishing.  It wasn't a case of the mother depositing it and foraging.  He was dehydrated/starved and had a major tick infestation in his ears. Tim believed that it was no more than a day old, and he was likely a triplet runt left behind.

I wandered over there just now.  They've made a safe enclosure with straw bedding.  As he lay there in the straw (I'll get pic), I marvelled that he wasn't as big as an adult cat. Of course his legs were tucked under him, but even then he is tiny. He is being fed from a bottle.  He enjoys being held, and I got to both hold him and feed him.  They had him inside, and he was laying with Lacy, his lab mix.   Those oft-circulated photos of deer and dogs are no anomalies.

Spring is often a cruel time of year where the helpless emerge into the world and do not find it hospitable. We recently had a wood duck pair make a poor nesting choice, that had no other possible outcome than fatal disaster for the hatchlings.

Since the rapture did not come to pass, I guess the harsh realities of life will come to pass.  Why that person got any air time, I will never know. 

I'll be helping out the Brittany Rescue today, and shuttling a dog a short bit up the road.  It is nice to lend a hand.

Friday, May 27, 2011

Real Estate Woes

My daughter is ready to spread her wings and purchase a home.  She had an offer in on one Fannie Mae home.  She had quite a saga.  She pre-qualified for a loan.  Found a home.  Made an offer.  Verbally said yes.  Then said best and final.  Then copper was stolen from home. She was strong armed to pay for 1/2.  Financing became difficult due to property age and new underwriting standards.  Owner couldn't wait 48 more hours for my daughter to get the second financing secured (she had verbals that the next lender would underwrite).  My daughter's offer was 15k more than the offer taken.  She was treated pretty shabbily for being a first time home buyer.  She learned a few lessons.

While it was a neat, old property, there were some real issues with it.  In preparing it for sale, the painters just scraped all of the lead-based paint off and let it collect around the perimeter of the home.  All of the windows were oversprayed on both the inside and out.  The windows were painted shut, and the kitchen cabinets were rolled--doors shut and all of the hardware covered in paint.  But he property was charming, and she was willing to remediate those items.  She was heartbroken when it fell through.

To be fair, they did ask her to give them a $2K non-refundable deposit.  It was a pretty crappy thing to ask for, because she had already agreed to pay 1/2 for their plumbing mishap (when she had no legal requirement to do so).  She also fixed 11 panes of glass to satisfy her underwriter to meet the deadline. Otherwise, they would have piddled about and likely made her pay for 1/2 of some exorbitant price. Oh well...the new owners have at least 11 panes of glass that have no overspray. She didn't give it to them because she had no way of controlling what the new underwriter would opine even though they had verbally said it looked doable.  It looked doable to the other one too!  She's not in a position to lose $2K to the whims of the mortgage gods. She said no, resubmitted her offer in 48 hours when she got a yes in writing and gave them the $2K non-refundable.  Too late---they had settled for $15K less.  Sigh....

There is no shortage of homes available.  My daughter is moving onto other properties.  I've been in research mode, having not visited real estate too much since my exhaustive work back in 10-2006 and throughout 2007.  I used to keep a list of the trustee sales on each Friday.  It was an informal way of chronicling the snowball of foreclosures.  I used to split the note amounts between < than and > than $90K.  At first the foreclosures were mostly in the lower range, and then they moved higher.

Now, it has been a while since I tiptoed into that work.  But the real madness in escalating home prices began in 2005 and continued through 2009.  The snapshot to the left shows the issue that I'm seeing quite starkly--that any poor schmuck that bought a home in 2007-2009 is potentially underwater.  This home is assessed at $315K, but Fannie Mae took a fanny-whacking and has a note of $458K--the assessment is not even 70% of the note that was taken back.  In fairness, the home is listed at $255K and will likely make a nice purchase for someone.
However, I'm seeing plenty of Fannie Mae homes that are listed higher than the assessment.  Good luck with that.  There are sublime homes, and there are "oh-my-god-can-you-live-in-that homes".  Assessments kept up with the madness.  Here's a look at an assessment history that is the norm for newly built homes. 


No fun paying $569,835 for a home that now sports an assessment of $437,600.  While the absolute numbers above are not representative (that happens to be an expensive property), the relative relationship between assessments and purchase price is representative.

For one nearby county, here is the history in a lovely middle-class neighborhood that is represented by attractive homes on large lots. 


When we ask the question,  "When is the bottom in real estate?" I would hazard a guess that the answer is nested in an assessment table.  If we were in the froth in 2007-2009,  I've got to believe that it is somewhere in the 2003-2005 valuation area. But that is a guess, hazardous or otherwise.  An average of those assessments puts us at about 69% of current assessed values.

If you have voyeuristic tendencies as I do yet don't know where to look, you can peruse the Fannie Mae listings in your area by going to   http://www.homepath.com/  Select your state and the city/county that you are interested in.

I also dug up an old study that I did when I was convinced that this was never about subprime but rather something larger. Simply put, all housing had been bid up in a way that it outstripped earnings.  And for lenders to lend, they had to come up with fanciful (and fruitcakesque) ways to lend money.  Here's my little nebbish chart.


It was my grand ah-hah! I still believe that this big ball will get unwound further. 

The other thing that I'm seeing are homes coming onto the market as part of estate settlements. These are homes where the carpet is old, bathrooms are gross, kitchens sorely in need of updating, peeling paint, rotten trim, roof rot and HVAC repairs.  These are not homes that can get financed through FHA due to their requirements AND these are homes where there is not much available money from cash-strapped heirs.  On top of our current stressors, we have the bolus of older folks who are dying and leaving behind homes that are nearly uninhabitable. (I'm talking about ordinary middle-class folks, and not the monied class).

I'm not really posing any questions, and I surely have no answers, but these are 'things' to ruminate upon and think about how their dynamics will shape our current woes.

Thursday, May 26, 2011

Colleagueship

With Mark Haines' recent passing, CNBC reporters spent yesterday remembering their colleague. It was a visceral reminder of the importance of the binds that tie us.  My last group of colleagues used to make fun of me a bit in the reverential way in which I regarded colleagueship. Yesterday's tribute to Mark Haines by his colleagues was a reminder that I'm not in a minority.

Good colleagues anchor us when we need to be grounded and push us to step in the tenuous ground of the unknown.  They laud our talents and tactfully help us reflect on our lesser traits.  They have our back and are not looking for a tactical place to insert a dagger.  The very best thing that we can have in our work lives are true colleagues.  They are often our true friends, too.

Yesterday's remembrances of Mark Haines' rich legacy at CNBC was a reminder of the importance of colleagueship.  Colleagueship is both the personal and the collective.  It does not exist without individuals who embrace that grand ideal of "all for one and one for all."  Yesterday's remembrances demonstrated how much purchase in practical life a grand ideal such as colleagueship can gain on the slippery slope of workplace dynamics. 

Colleagueship should not be relegated just to our off-line lives. Though one not oft-practiced; it is a useful ideal in on-line life as well. On-line life gives us a chance to express our opinions no matter how sublime or noxious.  We can instantly vote up or down on just about anything.  Being able to say something is not the same thing as having something (of merit) to say--I suppose that is the difference between blather and discourse, and I'm quite sure that there could be several indictments against me on the former.

As part of our on-going professional growth, cultivating the quality of our colleagueship in our on-line and off-line venues is a worthy endeavor.

Sunday, May 22, 2011

Notes from my Life: 05/22/11

If I had any great ideas about stocks, I'd share them with you. Alas,  I'm finding the market's current apoplexy unnavigable; therefore, I exercising my right just to stand aside.  But there are a few things going on outside of the market, so I thought I would write a small bit on them.

Yesterday's mail brought Howard Marks' book:  The Most Important Thing:  Uncommon Sense for the Thoughtful Investor.  I'm three chapters into this well written, sensible and accessible book.  Marks' conversational style, presented thoughtfully (as you would expect from the title!) make for a very enjoyable read.  As most of what I've read so far reflects many of my own thoughts, I'm finding that it tickles my sensibilities--and articulates them so much better than I've been able to do!  I'll write more later, but it is definitely going to go on my recommended reading list.

We have been invited to a 50th birthday party for someone billed as "The Queen of Shooters".  The moniker is apt, as she always concocts great shooters for parties she attends.  I've never made a shooter in my life.  Guests are asked to bring a shooter to the party--which will be judged by the birthday girl.  Well, I consider this a culinary challenge, as well as a chance to venture into a food frontier.  As I want to ensure that I don't end up with too much of a mess, and I have something easy to transport and share, I elected to get these injectors.  I ordered extras...I can see these being featured (responsibly) at an entertainment event at my home. 

My serendipitous excursion into finding shooter recipes led to something called molecular gastronomy.  You did not expect to read about that here, now did you?  Using food-stuff (think pureed olives or creme brulee) that is bathed in a solution of alginate (and then rinsed in calcium lactate solution), it creates an exterior that gels, while the interior remains soft so that it explodes into your mouth.  Though tempted, I've not ordered any alginate or calcium lactate.  But if you are interested, you can go here, http://www.molecularrecipes.com/, (and photo credit goes to them too) and learn more.

My next serendipitous milestone took me to whip creamers that use nitrous oxide cannisters to whip the cream. I was watching America's Test Kitchen, and they featured the Liss model on their gadget segment. Well, in doing some research, I learned that in addition to whipping cream, you can make mousse and foams and you can infuse oils and alcohol with all sorts of flavorings...habanero vodka or rosemary/garlic olive oil.  The N2O creates a pressurized environment that allows cream to be extruded.  As much as I cook--particularly desserts--you would have thought that I would have his gadget in my arsenal of cooking tools.  Alas, that is not so.  But, I did order two of them, along with the necessary cartridges.

I'm coming full circle here, as I believe that watermelon shooters with a hot pepper bite might just be the ticket for the upcoming party!  I still have to wrap my head around my final offering, but the possibilities are starting to gel.

Our weekend weather was beautiful here...soon it will be hot, humid and just plain miserable.  But for now, it is great to see the flowers, hear the birds, and watch the garden grow.

If you are looking for a beautiful cake to take to any summer outings, let me suggest Chef John Folse's Summer Lemon Pound Cake. It is divine on its own, but with glazed mixed berries (creme de cassis and orange marmalade on the stove, then pour over berries; toss gently) and some premium vanilla ice cream, you will delight many and use nature's bounty in a most delicious way.

Saturday, May 14, 2011

Notes from my Life: 05/14/11

This place has been a wasteland of late, for which I apologize.  I have experimented with writing a few articles directly for Seeking Alpha.  They have a program that if you submit directly to them, they pay you a penny per page view.  I've written three articles, and they were kind enough to publish all three.  Of all the stuff that I have written over the years, both here and other places, it is the first time that I've been paid for it.  So, it is a bit of a milestone.  If you have an interest in reviewing those articles, you can find them here.

In this interregnum, I was busy helping my daughter purchase a home.  It was not successful.  Everything that could go wrong did--none through any fault of her own.  It was a good lesson for her in negotiations, risks and rewards.  Unfortunately, she had her hopes set on acquiring this property.  Learning to deal with the bitterness of disappointment was a central lesson as well as the perils of dealing with others when they are not engaged in good faith negotiations.  Something we all must learn to do.

I have also been digging out of a pile of undone things that have been accumulating in my life.  Needful things, that bite you in the ass if left undone too long or trip you up if piled about.  Putting stuff in a Goodwill bag was just so difficult.  How does one become inextricably tied to an article of clothing?  I have such a good eye for utility, that the someday/maybe nature of most things in my life make it difficult to let go.  I need to practice non-attachment.. . . and exercise, and better diet.  There is no end of things that I need to improve upon.  At least I confine the practice of that trait to myself, and operational processes!

I hope that your own life matters are in good balance or that you are in a process to restore that balance as well as you can.

Thursday, May 12, 2011

Fact or Opinion?

My daughter is a special education teacher for 4th and 5th graders. One learning task was to help her charges determine the difference between fact and opinion. She created an enjoyable slide show to engage them in this important task.  She chose the recent royal wedding, something with which they were all familiar. Each slide had a statement requiring them to answer fact or opinion.

"The queen wears silly hats."  Fact.  No, uhhmmm, opinion.

As she was sharing with me this enjoyable exercise, I was reminded that in market life we must keep our wits about us and ensure that we discern between fact and fiction.  Insofar as I know, there is no one that can divine the future.  Accordingly, statements of certitude about the direction of the market or your favorite stock, are just an opinion.  It is a fact, and not my opinion, that depending on your position in the market, you will overweight opinions of others who support your position.

While the future is unknowable, it is defined by probabilities assigned to possibilities.  Nevertheless, it is a fact that only one outcome will be achieved--and it may not be the highest weighted probability. Do not mistake an emphatic embrace of an outcome as a fact.  It is comforting to follow those that are so certain that the next bear market lurks behind every bump down, or that the bull market gallop is sustainable in perpetuity.  Gold and silver and other commodities are the most recent entries into the fact box that nothing goes up forever.


Another fact about the market is that there are some very smart folks on both sides of any opinion about the market.  I learned long ago to discard the opinion of the perma B's (bulls/bears/buffoons). Worse is that when they finally get it right, they crow and chest thump. Avoid those people.  To be sure it builds camaraderie as we like to be around people who see things just as we do.  They are so smart!  Be careful of the consensus opinions.  If everyone has bought or sold, who is left?  The very smart people on the other side of your trade. The market goes through enough cycles to make even an imbecile look like a genius at one point or another.  I forget who said that the the crowd is right during most trends (up/down), but generally wrong at the turns.  It's the turns that are a bitch, and that's where most drivers become acquainted with ditches and trees in a way they would rather not.

I've had my own idiot/savant moments. My work is to tip the scales toward savant.  I managed to almost top-tick (a fool's game!) silver on a short via ZSL.  Such a beautiful trade.  It reminded me of when I was 5 or so riding my bike.  I let go of the bars to show my parents that I could ride with no hands.  I promptly crashed.  While that example seems like a more fitting story for one that BOUGHT silver at the top, it is nevertheless a poorly managed trade when it is closed too early.  I need a push broom to sweep up all of the money that I left under the table and on the lawn. Sniff!

Equanimity in the market is the most precious commodity of all. Unlike other commodities, this is one that you pay dearly for if you do not have it, and once you possess it, it will pay you. Like my exercise and diet regimens, my practice of equanimity is a spotty one. Having a balanced view of the market and your position in the market is critical.  

It is a fact that the market closed down yesterday.  It is a fact that none of us knows with certainty what the market will do today. Though there will be many opinions about today's market and the market of a 1000 tomorrows, it is a fact that you must choose among outcomes and position in accordance with your risk profile and time horizons.  Understanding your risk profile and time horizons is the first step in your practice of equanimity.

Thursday, March 31, 2011

Sokol's Great Lubrizol Misadventure

While there is much to say about Sokol's lapse of judgment (the kindest thing that can be said about his purchase of ~100k shares of Lubrizol and advancing the company forward as a potential investment prospect), I offer these four observations:

Observation 1: BH has a code of conduct of ethics that clearly outlines expectations of employees. You can read that code here.

Obervation 2: Sokol's activities appear to violate this code.  Specifically, the section on Corporate Opportunities, noted below (highlights are mine), seems to be at the forefront of his abrading against this code:

2.    Corporate Opportunities.

Covered Parties are prohibited from taking for themselves opportunities that are discovered through the use of corporate property, information or position without the consent of the Board of Directors of the Company.  No Covered Party may use corporate property, information or position for improper personal gain and no employee may compete with the Company directly or indirectly.  Covered Parties owe a duty to the Company to advance its legitimate interests whenever possible.

In his position, Sokol would have been invited into confidential discussions and provided confidential information that an ordinary investor would not be privvy to. His making a personal investment on information that he obtained while performing his duties appears to be a clear violation of the above policy (to my eye).  There is no defense to that code violation.

In the event that the clause above was too obscure, you would think that the following clause might give one engaged in such a transaction some pause:

Given the variety and complexity of ethical questions that may arise in the Company’s course of business, this Code of Business Conduct and Ethics serves only as a rough guide. Confronted with ethically ambiguous situations, the Covered Parties should remember the Company’s commitment to the highest ethical standards and seek advice from supervisors, managers or other appropriate personnel to ensure that all actions they take on behalf of the Company honor this commitment. When in doubt, remember Warren Buffett’s rule of thumb:

“…I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper – to be read by their spouses, children and friends
– with the reporting done by an informed and critical reporter.”

And finally, under "Violations of Standards" we have this

2.    Accountability for Violations.

If the Company’s Audit Committee or its designee determines that this Code has been violated, either directly, by failure to report a violation, or by withholding information related to a violation, the offending Covered Party may be disciplined for non-compliance with penalties up to and including removal from office or dismissal. 

So egregious the transgression of this code, so indefensible his actions, there really was no choice but to resign for there would be no reasonable choice but to fire him.

Observation 3:  Perhaps the code should be a little more specific for those that are unable to comprehend their special access to information as an invitee for the purposes of BH making acquisition or the simplicity and power of  Buffet's rule of thumb and state: UNDER NO CIRCUMSTANCE IS A COVERED PARTY TO HAVE AN UNDISCLOSED FINANCIAL INTEREST IN A COMPANY THAT IS RECOMMENDED FOR CONSIDERATION FOR INVESTMENT/ACQUISITION. ALL SUCH FINANCIAL INTERESTS SHOULD BE DISCLOSED TO THE AUDIT COMMITTEE AND LEGAL COUNSEL AND THE COVERED PARTY WILL ACT IN ACCORD WITH RECOMMENDATIONS BY EITHER OF THOSE TWO BODIES. Or something like that...  At the very least, BH needs an internal control that BEFORE an investment is made, there is an internal conflict of interest check to ensure that such matters are discovered prior to their becoming issues and that executives with recommendation and/or approval responsibilities submits a periodic disclosure of his or her holdings.

 Observation 4:  You hear much about these so-called smart guys.  Well, you and I could easily read the Code of Conduct and know that buying Lubrizol on information obtained as an invitee for purposes of a transaction consideration and subsequently recommending Lubrizol without disclosing that one had a financial stake in the transaction, smells worse than three day old fish. Smart money has not looked too smart in the last decade, and not so smart in this new decade either.  Another good example for not selling yourself short!

Wednesday, March 30, 2011

Squeezing into True Religion Jeans

Today's listing boat concerns the ~22% short interest in TRGL.  Let's take a look at the chart (click to make larger):



According to FINVIZ, the short float in this stock is just north of 23%.  They have already reported earnings which were not the catalyst that the shorts were hoping for.  The company's financial profile looks terrific:  they have great earnings, cash flow and no debt.

Not sure what the bears are looking for, but they might be at a campfire expecting to roast marshmallows and might go home with with singed fur.  I took a long position earlier today anticipating a squeeze with an entry of $23.16.  Let's look at a 30 minute chart pulled today:


A breach of $23.40 may cause some bovine ursine! angst from being wrong-footed on this short trade.

Sunday, March 06, 2011

Post Cards from the Edge: Existentialist Market Warrior

Prologue:  This post puts together a few things that I have read (and in some cases written about) separately.  I wanted to put them together in a post).

Justin Mamis wrote that we all find our particular way of becoming a victim in the market. That is true in life as well but without the stark price tag. Think of one of your great friends or colleagues who is wonderfully interesting and engaging—who everyday has something new and exciting to share with you. Sometimes your friend buys you lunch or drinks; other times your friend freeloads on your nickel. At other times, your friend brings you an unexpected gift; but jilts you on your birthday.

Such a friend! Except, sometimes your friend arrives late or sometimes not at all. And sometimes your friend meets you and sucker punches you. You withstand these breaches because your friend is so exciting to be with and the propensity for delight and surprise makes you willing to withstand the indignities.You don’t need friends like that; and if you expect the market to be a friend to you, that is just the type of friend it will be.

The market was not created to keep your money safe in a happily hereinafter way. To be sure, there is an entire industry crafted around that very notion.  However the laws of money dynamics do not work that way.  While a rising tide lifts all boats, when the wind shifts, or worse, the tide goes out, your portfolio might feel like a dinghy traversing the Cape Horn passageway.

Approaching the market with the right mental model will go a long way toward keeping your feet planted on your road to discover your inner market genius and keeping your eyes and ears tuned to speeding vehicles that might mow you down. That model conjures up visions of raccoons and skunks in search of pheromones and all they found was the tough, acrid love of Goodyear or Michelin. It is a vision worth keeping in your head.

We could take our mental model many rungs higher, and craft a great existentialist view of market life and our place in it. Here are a few bulleted points from the website, All About Philosophy about Existentialism:
• Human free will
• Human nature is chosen through life choices
• A person is best when struggling against their individual nature, fighting for life
• Decisions are not without stress and consequences
• There are things that are not rational
• Personal responsibility and discipline is crucial
Let’s consider the third bullet: A person is best when struggling against their individual nature, fighting for life. That, my friend, is the essence of what I want to convey with great gravitas and import. We must first understand and conquer our own demons before moving to outward.That leaves us with a more concrete model of a great warrior. Gerald Loeb wrote the investment classic, The Battle for Investment Survival—one of those timeless books that warrant your time and attention: and such a battle it is!

Your approach to the market is that of a warrior—and for a warrior to survive, s/he must be prepared physically and mentally. Miyamoto Musashi, pictured to the left (click on image to learn more about Musashi from Wikipedia), was a Japanese swordsman in addition to a long list of other accomplishments: expert swordsman, author, artist, calligrapher, sculptor, teacher and finally, strategist.

Go Rin No Sho, or The Book of Five Rings, is the work for which he is best known. I have a cork board by my desk. To it I have pinned the following nine underpinnings of Musashi’s philosophy cum success. I look at these each day, though, like exercise and other needful things, I must profess that my practice of them is left wanting--and that does translate into lack of desired results.

  • Think of what is right and true. 
  • Practice and cultivate the science. 
  • Become acquainted with the arts. 
  • Know the principles of the crafts.
  • Understand the harm and benefit in everything. 
  • Learn to see everything accurately.
  • Become aware of what is not obvious. 
  • Be careful even in small matters. 
  • Do not do anything useless.
The Book of Five Rings
Miyamoto Musashi

Translated by Thomas Cleary, 1993; 1997 Barnes & Noble Books

 
It is a slim little book in a number of incarnations, and I highly recommend it.

The importance of these items in everyday life is self explanatory. A rich and informed life is a mosaic of understanding arts, the crafts and science and more importantly developing skill. Doing so provides balance. To do battle you must have skill and confidence. To be a strategist you must have the proper perspective (seeing things accurately—and becoming aware of what is not obvious). Being careful even in small matters and resisting engaging in useless tasks are the foundation of discipline and efficacious undertakings.

To succeed as a warrior you must meld strategy with mental and physical preparedness. You might find this metaphor preposterous. There is an aphorism, “there is nothing new under the sun”. That saying is true in market life and non-market life. Using a warrior metaphor will help you remember that there are many skills that you need to bring to the battleground called market life. These are the same skills that you need for non-market life. Failing to see the parallel between market and non-market life means that you will bring to the market the same potential for victimhood as you may in your non-market life.

Two other passages from this wonderful book are instructive:

Two essential elements of ancient martial and strategic traditions:

  • The first of these basic principles is keeping inwardly calm and clear even in the midst of violent chaos;
  • The second is not forgetting about the possibility of disorder in times order.
~~~~~
Harmony and disharmony in rhythm occur in every walk of life. It is imperative to distinguish carefully between the rhythms of flourishing and the rhythms of decline in every single thing.

 The last item that I would leave you with is something that I have found very useful when I find myself in a rhythm that is akin to running the market gauntlet. This passage is from Yagyu Munenori.  I often cite this passage when I see my on-line colleagues frustrated by market events or their own actions:

When fighting with enemies, if you get to feeling snarled up and are making no progress, you toss your mood away and think in your heart that you are starting everything anew. As you get the rhythm, you discern how to win. This is "becoming new."

The Book of Family Traditions on the Art of War
Yagyu Munenori
Translated by Thomas Cleary, 1993; 1997 Barnes & Noble Books

I hope this little post helps provide you with a model for crafting a mental model that works for you.

Friday, February 25, 2011

Institutional Voyeurism: Gold and Gold Miners

Some years ago I did more writing on Institutional Voyeurism.  There is something fascinating about taking a peek under the hood of institutional holders' (IH) portfolios.  I indulged this fascination this morning upon waking with the idea of wanting to look at the composition of IV's in both GLD and GDX that had these tickers as a top 5 position. 

My favorite place to go on IV's is J3SG  My data is from their website.  Here's the table that I prepared showing institutions group by the ranking of each ticker in their portfolio (click all images for enhanced viewing).  


What is this table saying?

GDX:  52.5% of the dollars are held by 6.4% of  the total IHs as a top 5 holding.
GLD:  42.8% of the dollars are held by 16.6% of the total IHs as a top 5 holding.

Let's take a closer look at this composition:

 Forty-nine % of holdings are held by three IH's:  Julius Baer (32%/position rank 1 in portfolio), Blue Ridge Capital (10%/position rank 4 in portfolio) and Greenlight Capital (7%/position rank 8 in portfolio).  Seems very lopsided to my eye.  Let's look at GDX's kissing cousin, GLD:


 GLD is enjoying more diversity of distribution. <1% holders comprise 46% of the holdings.  The other notable large holders are Paulson (16%), Northern Trust (8%) with the balance of holders distributed as 5% and less.

What conclusions can be drawn?  The obvious is that there appears to be a rather heavy concentration in these funds among just a few AND that concentration is a top holding in the portfolio.  In contrast,  USO, for example, while having concentrated holding among the big investment banks, does not have such a high percentage of top 5 portfolio ranks. 

This may just fall into the category of interesting, not actionable.  But I thought I would share it with you.

Monday, February 14, 2011

Weekly Sector Report | 02/11/11

Sorry to be late out of the gate on this week's sector report.  The broad market index advanced 1.6% for the week and 5.79% year to date.  Also, the broad market is just 4.94% below September 2007 levels.  Let's take a look at the sectors (click on all images for enhanced viewing):






At the subsector level, here are the 10 top/bottom performers:


As you can see, the super-sexy Tire industry was a big winner, and Auto Parts has resurged again after a correction.  There are not many tickers in the tire industry.  Here's a snapshot from the WSJ Industry Page

One of the reasons I enjoy reviewing sector performance is that it forces me to poke about and find names that might be performing outstandingly, yet are flying below the radar.  TWI is one such name I am familiar with.  I'm not in this name currently, but I thought it a nice stock to highlight.  Let's look at the chart:

It has more than doubled since September.  One way to look at the headline movers, in this particular case, agricultural stocks/equipment, is to think about ancillary participants.  TWI makes the tires that go on the equipment.  Getting to know stocks in moving sectors and to think about stocks in supplying sector, can help you pinpoint some attractive opportunities as they unfold.

We will close with the broad market index which has successfully cleared its volume bar hurdle:


I've prepared for you a chart book:

Sunday, February 06, 2011

Weekly Sector Report | 02/04/11

The bulls found their footing after stumbling the previous Friday. The broad market sector was up 2.75% Here's how the cylinders were firing on the markets' engine (click all images for enhanced viewing):


Moving to the industry level, here are the Top 10 Best/Worst performers:

The sharks are swimming in the current areas:


We close with the broad market index:

With this week's close, it has poked its price nose above the long volume bar that has previously acted as resistance.

As usual, I have created a full report for you:

Saturday, January 29, 2011

Weekly Sector Report | 01/28/11

Such a day in the market on Friday!  The unrelenting march forward was stopped and then pushed back.  For the week, though, the change was merely a .35% decline.  However, looking at the sector/industry charts, you will note that that there has been some serious damage done to these charts.  Drilling down to individual stocks, the carnage is even more brutal.

We must be ever cognizant that market indices are like a house which goes up brick by brick.  For an index, the bricks are individual stocks and their collective performance.  An index house will eventually roll over once the sector bricks are weakened one by one--but that rolling over is through a successive failures in stocks/sectors. That is why topping is a process. And while the market tops over a period of months (e.g. Financial topped in Feb of 2007 (in fits and starts); Basic Resources topped a full 16 months later), they all seem to bottom at the same time, with October 2008 and March 2009 a collective double bottoming for every sector.

I've been providing a view of the total stock market index.  Let's take a look at that daily chart here (click all images for enhanced viewing):

As we can see by the volume@price bars, we have quite a bit of price memory here.  Note that the last peak is at the bottom of the bar which would offer the next range of support with some worrisome vacuum underneath.

How did our sectors fare over the week?





Here are the top/bottom ten performers at the industry level (This is weekly only):



In days such as yesterday when all the world is going to hell (or seemingly so), spotting divergences is informative (for those of you that trade individual securities v. indices).  For those of you inclined that way, this weekend is a good time to review that information which you can do easily on FINVIZ (though I have prepared my usual report for you which you can find here):

  • Industry subsector performance: You can find the industry subsectors here. (sorted in best to worst).  If you like to see this information graphically, you can do so here.
  • Individual stock performance:  You can find individual issues here (sorted best to worst)--be sure to use the filtering tools to pull out thin capitalizations and low priced stocks--a graphical rendition is found here where you can see the sector + individual notables (the good, bad and the ugly).
  • Short interest change:  You can the change in short interest (in addition to the total short interest here.
  • Relative Volume:  Viewing sectors by relative volume can also be fruitful.  You can find that view here.
Let's see where the short interest changes are:




Whether we had a healthful consolidating pullback or something more will be determined with the passage of time. Many of the sector leaders (e.g. automobiles/parts) have been weakening over the past couple of weeks. Price action has moved ahead of the news. News is now coming out that informs the correctness of the market's anticipation of future events. The market by its nature is anticipatory; however, we should always remember that its crystal ball is cloudy. It does act decisively when its expectations are not met. We should as well.

I wish you good trading for next week, and I hope that that you find some use from this week's report.

Sunday, January 23, 2011

Weekly Sector Report | 01/21/11

The week saw the broad market index decline 1.05%. Only two sectors, media (+1.3%) and utilities (+.42%), were positive. Here is the weekly profile on the sectors (click all images for enhanced viewing):



For the subsectors, here is a graphic of the top/bottom performers.  GE led the Diversified Industrials with a 4.9% change for the week:


This week short interest changes were reported. Familiar sectors are still on the top 10 list.  I am also including for you the top absolute % changes in short interest so that you can see where the bears are increasing their holdings. 


As is usual, I have prepared for you a chart book.  I have a lagniappe for you!  I included chart thumbnails for the 148 subsectors as well as the 24 sectors (in addition to the detailed weekly/daily charts).  Sometimes the bird's eye view helps build perspective.  You can find the chart book here.

And finally, I will close with the chart of the total stock market index--both daily and weekly.

First the daily, then the weekly. 


The weekly chart (2nd chart) shows no damage to the trend lines, and the daily chart is showing some bumping against its trend lines.  (Note that a 13 EMA on a weekly chart is a 13 week EMA, while on a daily chart it is a 13 day EMA).

I hope you find this information and the weekly chart book download helpful to your due diligence efforts. 

Thursday, January 20, 2011

Daily Sector Snapshot: 01/20/11

The broad market was down just .29% today.  Here's how the sector activity lined up (click all images to make clearer):





Here's a view of the Best/Worst today:

And finally, here is a view of the total market.  When you enlarge the graphic you will see that there was a bounce at the 21 day exponential moving average (though it was breached during the day). It was also the highest volume day of the year so far..







Platinum and Precious metals is at the bottom of the list again today.  Not a pretty chart unless you were short.


Daily Sector Snapshot: 01/19/11

Given yesterday's rumbling across all sectors, I wanted to provide you with a quick snapshot.  Here are the sectors with their respective changes as well as the best and worse (click all images for enhanced viewing).




And I want to close with a 60 minute chart on the total stock market index.
I will providing these updates daily...something that I used to do years ago--and something that I hope that you will find adds value to your own due diligence.

Sunday, January 16, 2011

Weekly Sector Report | 01/14/11

The broad market advanced .73%.  Much is being made of how January starts as a great prognosticator for the balance of the year.  Statistics for the first week in January and what that bodes for the entire market abound, along with analogs, ideologues and all manner of other 'stuff'.  History repeats, rhymes, and more often reminds that we never step into the same river twice, but most times our feet will get wet, sometimes the river has run dry and sometimes we just might drown.  I find that to be a useful mental model as an antidote for over generalizations and wild prognostications.

Here is how the major sectors performed (click on all images for enhanced viewing):


From the subsectors, here is a view of the best/worst performing areas:


I have created a chart book for you which you can find here.

Asset Managers is the second best subsector.  Let's take a look at the sector chart:


 There are many constructive charts in this space (so long as the market remains hospitable!).  I created a chart book for you for the names in this space for those interested.  You can find it here.

Let's close with looking at the broad market chart. I'm including both a weekly and a daily chart.


The weekly chart remains in the overbought area.  On the daily chart, the daily is making a new high without the oscillator--a bit of negative divergence. As you can see from the broad sectors, money is moving into new sector leadership...and so long as this broad index moves up, that also denotes new money coming in.


I wish you good trading this week.