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Logical Thought
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My name is Mark B. Spiegel and I'm the Managing Member of Stanphyl Capital Management LLC. I can be reached at: mark (at) stanphylcap (dot) com. My Twitter feed is @markbspiegel
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Stanphyl Capital Management LLC
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I don't have a blog, but here's a link to a WSJ article regarding my thoughts on the "flash crash"
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  • More TIPs Issuance from Treasury?
    There's an interesting article in today's Wall Street Journal about Treasury substantially increasing its TIPs issuance to foreign governments that are afraid of the inflationary ramifications of the huge U.S. debtload. I see this as bullish for bonds, as it should surely hold down long-term rates. After all, even if the CPI is somewhat "rigged", this should still provide quite a bit of comfort to buyers of newly-issued paper. As additional comfort for buyers, theoretically the more TIPs that are issued, the greater the pressure the Fed will feel in the future to hold down the rate of inflation, as it will suddenly have much more "skin in the game". As someone who is very short stocks right now (as of this writing, the S&P has bounced cleanly off the 50-month EMA I've been targeting as a great-looking resistance point), I think it's fair to note this potential removal of a potential near-term "crash catalyst".

    As planned, using margin, I increased my SDS position on Friday at S&P 1145, just under the 50-month EMA. As of Friday's close, I was around 82% in SDS (I wanted to go 100%, but they've raised the margin requirements for leveraged ETFs and half my funds are in a non-marginable retirement account), 35% in DUSA, and 5% in YCS. I will stop out a chunk of the SDS (at least everything on margin) if the index penetrates the 50-month EMA and gets into the low 1150s

    Jan 11 12:00 PM | Link | 6 Comments
  • The "Tiger Woods Indicator" Says Short the VIX Now, But Get Long After Christmas!
    Wondering if there might be a relationship between the degree of Tiger Woods's infidelity and the volatility of the stock market, I decided it would be worth digging into the data; the results may pleasantly surprise you!

    Tiger and Elin were married in 2004 on October 5th. Seeing as Tiger was undoubtedly DEEPLY in love at the time, I think it's safe to assume that he didn't start cheating on her until October 6th.

    On the 5th (the last night he was likely to not be cheating on her), the S&P 500 closed at 1134.48. Now, stay with me on this, because here is where it gets interesting...

    Tiger had his car "accident" on the night of November 27th, which was a Friday, and it's probably safe to assume that was the LAST day he was able to cheat. The next trading day after that (in other words, the first trading day he DIDN'T cheat) was probably Monday, November 30th, when the market closed at 1095.63.

    So, on the last and first dates that Tiger was likely to not be cheating (a period of over five years!), the S&P 500 closed apart by only 3.4%! But BETWEEN those two dates (i.e., all the time Tiger WAS cheating), the market got as high as 1576.09 and as low as 666.79, which-- looking at it from the low to the high-- was a differential of 236%, during which the VIX soared to as high as 89.53!

    Therefore, the evidence clearly indicates that when the Tiger is on the prowl stock market volatility soars, but when Elin has him imprisoned on their boat (as she did on their wedding night and reportedly does now), stock market volatility takes a dive. So, the correct play here may very well be to short the VIX between now and Christmas, and then immediately get very long the VIX, because that's when Elin reportedly plans to dump him... www.radaronline.com/exclusives/2009/12/r... ...and he will thus be free to once again "play the field".

    Dec 13 1:15 AM | Link | 6 Comments
  • Friday's Jobs Report and Corporate Profits
    My belief has been that while at some point (perhaps even now) the economy will stop getting worse, it will be a very long time before it gets better (due primarily to the massive overhang of consumer debt). This is hardly an original thought and is commonly known as either "the L-shaped scenario" or (as,. the guys at PIMCO call it) "the new normal". In line with this scenario, I've been thinking that at some point soon corporate profits would stop improving (as there would be no more expenses to cut while revenue flatlines), thereby causing a compression in PE multiples. I originally thought that this would occur following the Q2 numbers, but corporate America surprised me with its expense-cutting ability, and thus Q3 profits-- despite lousy revenues-- were substantially better than those for Q2.

    Specifically, Q3 operating earnings for the S&P 500 are currently estimated to be $15.76, which annualizes to approximately $63. A 15x multiple on this figure (which I think is the best-case scenario if earnings really do flatline from here) would put fair value for the S&P 500 at 945 (with the downside scenario being a double-dip recession causing a 10x-12x multiple on $45-$50 earnings, thus transalating into 450 to 600 on the S&P 500).

    However, the surge in temporary workers reported in the last couple of monthly jobs reports is starting to make me think that corporate America may have actually fired too many people to support even the currently lousy level of revenue. If companies thus have to increase payroll spending without an accompanying increase in revenue, it will have negative implications going forward both for corporate earnings and PE multiples. Even a small decline in run-rate earnings caused by a modest amount of hiring (bringing the S&P 500's annualized operating earnings figure down to, say, $60 from $63) accompanied by a 14x multiple (which might even be high in the face of declining corporate earnings) would make for an L-shaped recovery target of 840 on the S&P 500, and that's without a "double-dip" recession.

    So, the next time the market cheers corporate hiring unaccompanied by additional revenue, you may want to think about the implications for corporate profits and, thus, stock prices.


    Disclosure: Long SDS
    Dec 05 3:17 PM | Link | Comment!
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