Bruce Pile's Instablog

Bruce Pile's Instablog Stock analysis is a serious hobby for me. I compete at Ken Kam's Marketocracy, where they do capital management using the best member mutual fund track records with extensive tabulations of alpha, beta, R-squared, and many other fund management evaluations. I've been running 4 funds there for about 8 years now using various versions of my basic method and a 5th experimental fund where I try new things. Marketocracy publishes a Forbes newsletter, Marketscope, for which I've written; and provides input to forbes.com via the buy/sell activity of the M100, the top 100 ranked fund managers on the site. You can check their reports on the M100 at forbes.com - go to "Markets" and "Equities" and "Inside Equities" and "guru picks". My model fund has typically run a since-inception alpha return over 12% annualized over the years. Its performance has been running even with the top 3 diversified general funds (nonsector and noncountry funds) as ranked by Morningstar. Marketocracy also tabulates how consistent your alpha is over the long term with a chart showing the likelihood that an investor in your fund will out-pace the S&P 500 over any random time frame up to 24 months (my 24 month figure runs around 80% or higher). In addition to offering managed accounts run by top ranked members, Marketocracy reviews the record of about 30,000 or more members monthly and takes the top 100, the M100, to make up their Masters 100 Fund (along with some considerations of current market conditions and members' ability in those conditions). I've been in the M100 a big part of my membership there. My fund methodology is high diversification, usually running over 25 stocks about equally weighted, and low risk, usually running a beta of around 0.80 (80% the risk of a S&P 500 index fund). Bruce Pile http://seekingalpha.com Solitario - A Stock of Interest http://seekingalpha.com/instablog/152129-bruce-pile/40553-solitario-a-stock-of-interest?source=feed 40553
A summary of their projects was given by their CEO in an article here at SA in June 2007 when the stock was valued at around $4. It went to $6 before being smashed by the general market sell off:

In the meantime, they have gotten to the point where they will be doing some major drilling projects in their large copper, gold, and silver properties next year. Any positive results could quickly return the stock to where it was in mid '07, when gold was much cheaper. The drilling plans were announced yesterday .

Technically, the stock looks to be just now regaining consciousness from the '08 party. A resistance level at $2.20 has developed and the 50 & 200 dma have crossed and gotten nicely upsloping and parallel - often a sign that a stock is getting its act together. The gold pullback hasn't phased its approach to the resistance level yet. If it breaks the formation, it may run pretty good.
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A summary of their projects was given by their CEO in an article here at SA in June 2007 when the stock was valued at around $4. It went to $6 before being smashed by the general market sell off:

In the meantime, they have gotten to the point where they will be doing some major drilling projects in their large copper, gold, and silver properties next year. Any positive results could quickly return the stock to where it was in mid '07, when gold was much cheaper. The drilling plans were announced yesterday .

Technically, the stock looks to be just now regaining consciousness from the '08 party. A resistance level at $2.20 has developed and the 50 & 200 dma have crossed and gotten nicely upsloping and parallel - often a sign that a stock is getting its act together. The gold pullback hasn't phased its approach to the resistance level yet. If it breaks the formation, it may run pretty good.
]]> xpl gold A Test For The Market's Lead Scouts ? http://seekingalpha.com/instablog/152129-bruce-pile/40328-a-test-for-the-market-s-lead-scouts?source=feed 40328
The faithful Baltic Dry Index that has been the lead canary is approaching a crunch area:

It's soon going to have to snap out of this large double top foolishness or we could be in for a down market soon. I've written a post, The Best Market Advice Is Free, about how the 140 dma (exponential for better smoothing) has proven to be an effective divider between good and bad market periods over many years. We see that the Baltic is staying above a 140/200 cross, but the cross is looking a little mangled and weak right now. It would be quickly undone by a turn south from the circled zone.

If we look at the BDI's close cousin, the Shanghai Index of China, we see a very similar condition:

It too is staying above the crossed over 140 dma, but the robust leadership out from the carnage in March is waning and threatening to put in a big double top also. As for fundamentals, the debt woes of Dubai, Greece, and a growing number of insolvencies could grip the emerging markets.

The other leader groups, retail (RLX), consumer discretionary in general (XLY), and tech (QQQQ) all are staying well above their 140 dma and are posing no double top threat. But remember that the BDI and China have tended to be earlier indicators than these other groups.

I don't consider the transports to be a leader group. They are, in fact, a severely lagging group if you look at the TRANQ index with few rails (which are levered to commodity prices as much as economic health). But this group is important in Dow Theory as a confirmation group to confirm the nice new highs we've had this year in the broad market. If you look at this attempted confirmation process, you see another 140 crunch zone approaching:

These transports, without the rails, are struggling in an ascending triangle formation to show a gain for the year. If they don't soon hold the 140 dma and break the formation to the upside, it will be a troublesome nonconfirmation of the nice market move we've had this year. A break out of the formation to the downside would probably accompany the aforementioned double tops. Something to keep an eye on.

Disclosure: no positions

Disclosure: Disclosure: no positions]]> Thu, 17 Dec 2009 16:28:58 -0500
The faithful Baltic Dry Index that has been the lead canary is approaching a crunch area:

These transports, without the rails, are struggling in an ascending triangle formation to show a gain for the year. If they don't soon hold the 140 dma and break the formation to the upside, it will be a troublesome nonconfirmation of the nice market move we've had this year. A break out of the formation to the downside would probably accompany the aforementioned double tops. Something to keep an eye on.

Disclosure: no positions

Disclosure: Disclosure: no positions]]> xly Baltic Dry Index China One Word - Plastics http://seekingalpha.com/instablog/152129-bruce-pile/39811-one-word-plastics?source=feed 39811
The stock came public in 2007, climbed sharply, then got lambasted in the meltdown where it's been ever since:

The fast growth isn't overly cheap except by PE, but you aren't likely to nab this one much cheaper. It's garnering some investor attention as evidenced by the transition from ultra thin trading to some gathering volume. If you like dip buying, it is in a nice one right now:

The buying volume has been very predominate lately, but the stock has stubbornly stayed right around $7 or $8 except for the aborted explosion to the teens. The next explosion may not abort.
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The stock came public in 2007, climbed sharply, then got lambasted in the meltdown where it's been ever since:

The buying volume has been very predominate lately, but the stock has stubbornly stayed right around $7 or $8 except for the aborted explosion to the teens. The next explosion may not abort.
]]> China Stump the TA Chump http://seekingalpha.com/instablog/152129-bruce-pile/39394-stump-the-ta-chump?source=feed 39394 More Bear Signals on July 14 on why any sensible TA man would be short to the hilt at that point with the market's driver turning the wheels south. However, as I pointed out back then, the only thing that's been right all year is the game of follow-the-leader-groups, the leader groups being retail, tech, and the BDI (Baltic Dry Index). They were a lonely group back then calling for a north turn out of the market's funk, and they were right again as they had been in April.

Now we see the market technicals attempting to fool us some more:

Any technical analyst knows the small caps fizzle first in a run, and in early November we were having a major flameout with the Russell. Also we have this:

Here we see some major negative RSI and volume fade. So we should be an idiot and buy if the leader groups are right again. If you check the RLX, QQQQ, and BDI, they are sticking out their tongues at the technical analysts and saying "see you at the finish line, chump".

Disclosure: no positions]]> Thu, 10 Dec 2009 23:57:12 -0500 More Bear Signals on July 14 on why any sensible TA man would be short to the hilt at that point with the market's driver turning the wheels south. However, as I pointed out back then, the only thing that's been right all year is the game of follow-the-leader-groups, the leader groups being retail, tech, and the BDI (Baltic Dry Index). They were a lonely group back then calling for a north turn out of the market's funk, and they were right again as they had been in April.

Now we see the market technicals attempting to fool us some more:

Any technical analyst knows the small caps fizzle first in a run, and in early November we were having a major flameout with the Russell. Also we have this:

Here we see some major negative RSI and volume fade. So we should be an idiot and buy if the leader groups are right again. If you check the RLX, QQQQ, and BDI, they are sticking out their tongues at the technical analysts and saying "see you at the finish line, chump".

Disclosure: no positions]]> spx qqqq market direction Capital Gold - A Capital Idea http://seekingalpha.com/instablog/152129-bruce-pile/39195-capital-gold-a-capital-idea?source=feed 39195
But the problem with juniors is they almost always are all talk and no dough - no fundamentals because all their gold is in the ground with the if-and-but method of valuation. I just hate that. I buy them in that condition anyway, but when I find an under-the-radar small fry with some actual valuation numbers, I give them preference other things being equal.

One such company is Capital Gold (CGLD) with a good producing mine in Mexico.
They are based in New York and used to be called Leadville Mining and Milling. I can see why they changed their name. Capital Gold sounds so much more exciting. They certainly have turned their stock from lead into gold recently as this chart shows:

They aren't drowning in debt ($8.2 mil. on a $178 mil. market cap) with a current ratio around 3. Insider interest is a high 42% ownership of the shares.

Gammon Gold put forth a merger offer back in mid-March valued at about $.76 a share. It took Capital Gold just two weeks to return an answer of "no thank you" and the stock has climbed to over $1.00 since. I like the way this stock has behaved over the course of the credit crisis - more like the larger cap miners with decent cash flow. But it is a tiny, fast mover just now breaking up a long term resistance level in place since the early stage of the gold bull. It was valued by the market at higher levels in the gold bear years of 1999 and 2000 when it had no financial results whatsoever. It stands to reason that it could return to those prices in the heat of the gold bull market with sharply growing fundamental value.

Disclosure: long CGLD]]> gold miners Oddsmakers Take On Iran http://seekingalpha.com/instablog/152129-bruce-pile/38499-oddsmakers-take-on-iran?source=feed 38499
These two entities, STRATFOR and Israeli intelligence, know more than the rest of us. So what do "the rest of us" think? Let's look at intrade.com for a collection of opinion who've studied it seriously enough to wager money on odds contracts. They bill themselves as "THE Leading Prediction Market" and invite you to "tap into the wisdom of crowds". This wisdom sets a probability for events of interest to occur by a certain date. For example, what would you say are the odds for Mike Huckabee to be the Republican presidential nominee in 2012? The pricing of the current contract you can buy has this chance at 10%. Turning to the markets, there was a running bet all year on the U.S. GDP declining 10% or more off the peak between Q4 2008 and Q4 2009 (inclusive). The wisdom of the crowds had this probability spiking to 50% in late February when the market was spiking toward the floor. It's currently at 0.9%. So this wisdom, as far as the markets are concerned, may be of use as a contrary indicator.

They have had a series of contracts for an Israeli and/or U.S. air strike on Iran over the last few years. I checked out the two covering about a year period for 2008 and 2009 and compared them alongside the sabre rattling out of Israel about an imminent strike. As the charts below show, there is some correlation between this sabre rattling and what the wisdom of the crowds think about a war (click to enlarge)

In both years, mid-year sabre rattling by Israeli officials roughly accompanied a chance of war outbreak spiking to as high as 40%! But then a slide into year end - current quote for a strike by March 31 is 11%.

But, as was the case with the February GDP/market outlook, the smart opinion may be just the inverse of this pattern.

The quieting pattern into year end isn't what you would expect from the saber rattlers if we are building to a blowup. But consider the observation of Andrew Apostolou and other analysts interviewed a few months ago on Israel's willingness to strike Iran.

"... it's unlikely, they say, that Prime Minister Benjamin Netanyahu will reach that conclusion in the coming weeks or months...Israel is locked in a wait-and-see mode, planning to let U.S. diplomacy exhaust itself. Matthew Silver, a historian at Emek Yezreel College in the Galilee, agrees: "Netanyahu figures, "Okay, let Obama talk to the mullahs. It's a preordained failure." That the Israeli prime minister is making loud noises about a possible military strike, Apostolou says, suggests one won't come anytime soon. "If the Israelis really wanted to scare the Americans, they'd say nothing. When the Israelis go really quiet, that's when you have to start worrying. But in the meantime, Israel will continue to match Iran's belligerent signals."

And theatlantic.com ran a July 13 article titled "The U.S. Should Worry When Israel Gets Quiet". Well, Israel does seem to have "gone quiet". Lately, their pronouncements have been preferring diplomacy if the military option is even mentioned. And now they say things like what Michael Oren, Israel's ambassador to the U.S. recently said on August 16 - Israel is "far from contemplating" a strike on Iran. That statement reminds me of the kid who denies eating any cake with chocolate smeared all over his face. It's interesting that the quiet zones in the above chart for this year and last coincide with the optimal time window of the year for a strike, September to November, when the prevailing monsoon winds keep the radioactive fallout and dust primarily in Iran and out of neighboring countries. I suspect that they were on the verge of doing the strike last year, but the financial crisis may have aborted it.

The opinion that knows, Israeli officialdom and STRATFOR, indicate the opposite of the slumping odds out to the March 2010 contract shown above. The current contract goes out to June 2010, and its current quote is a little higher at 18%. But all this would imply that the stock market impact would be severe - it doesn't seem to be very highly discounted.
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These two entities, STRATFOR and Israeli intelligence, know more than the rest of us. So what do "the rest of us" think? Let's look at intrade.com for a collection of opinion who've studied it seriously enough to wager money on odds contracts. They bill themselves as "THE Leading Prediction Market" and invite you to "tap into the wisdom of crowds". This wisdom sets a probability for events of interest to occur by a certain date. For example, what would you say are the odds for Mike Huckabee to be the Republican presidential nominee in 2012? The pricing of the current contract you can buy has this chance at 10%. Turning to the markets, there was a running bet all year on the U.S. GDP declining 10% or more off the peak between Q4 2008 and Q4 2009 (inclusive). The wisdom of the crowds had this probability spiking to 50% in late February when the market was spiking toward the floor. It's currently at 0.9%. So this wisdom, as far as the markets are concerned, may be of use as a contrary indicator.

They have had a series of contracts for an Israeli and/or U.S. air strike on Iran over the last few years. I checked out the two covering about a year period for 2008 and 2009 and compared them alongside the sabre rattling out of Israel about an imminent strike. As the charts below show, there is some correlation between this sabre rattling and what the wisdom of the crowds think about a war (click to enlarge)