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Vikram Saxena

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  • Technicals: Where Is the Pullback? What Pullback? [View article]
    After some time in the seat, my conclusion is that Charts do not lie; but fundamentals/economic indicators may have a source bias. To dwell on one while ignoring the other is inviting disaster.

    I did a quick analysis of historical SPX data from Yahoo and a five week up streak is followed by another Up week 52.3% times (since 1950).

    The market is in a bull run; whether it is a bear market rally or a true bull market does not matter much. A disciplined trading approach with appropriate stop loss levels will work in this market
    Apr 9 11:15 PM | 7 Likes Like |Link to Comment
  • Global Decoupling: Distinguishing Between Economies and Markets [View article]
    Thanks for your thoughts Clive (I have your book and get your daily mailings).

    The frontier markets are going to be the emerging markets of the last decade. As long as you are selective about where you go, there is a strong chance of out-sized returns as these markets are discovered. Of course out-sized returns come with the risk of out-sized losses. Loose but firm stop levels, is what you definitely need with these markets.

    Look at the Indian market today. If you had bought some index options last week, you might as well be ready to retire today :).


    On May 18 09:43 AM morph366 wrote:

    > One thing to remember about being a pioneer in a "frontier market"
    > - you might end up with an arrow in your back :-)
    May 18 10:12 AM | 3 Likes Like |Link to Comment
  • Long Term Treasury Yields Likely to Rise, Pressuring Dollar Lower [View article]
    All the green shoots being sighted are unlikely to grow into trees, if the longer term interest rates continue their upward march. Unless Ben does a Greenspan, and encourages people to use ARMs, the Fed efforts to re-capitalize US consumers via cheaper rates on fixed rate mortgages will be in serious jeopardy if this spurt continues. Long bond yields tend to move in big spurts and the current spurt has taken the yield on the 10 year up by more than 70 bp since the low reached after the Fed's quantitative easing announcement in March. This trend will "Round-Up" the green shoots if not arrested.
    May 1 05:14 PM | 3 Likes Like |Link to Comment
  • Is Bank of America Poised for a Major Move Up? [View article]
    Darvania:

    I was intrigued by your comments so tried out a log scale. This following link shows how that looks on a 6 month and a zoomed in version (3 month).
    screencast.com/t/0qxxa...

    To me even the log graph clearly shows a W shaped double bottom on the right side of the cup. I have marked it with yellow lines. It is a stronger pattern since the second low was higher than the first low. In fact the log chart tends to de-emphasize the steep fall which would have worked against the pattern.

    If you just consider the closing prices (third graph) we can see a V shaped. However this closing low was well (23%) above the intra-day low reached on the capitulation day which had much higher volume. Further the closing prices ignore the true range of the stock especially if the swings are made on high volume. Sure the base is very spiky but we are trading in very volatile times.

    Trade smart and enjoy your gains.


    Apr 13 05:40 PM | 3 Likes Like |Link to Comment
  • General Electric: Genuine Risk of Collapse? [View article]
    This article has a lot of useful information, but the author's judgment seems to be clouded.

    (1) The author asks why the AAA company had to use Federal facilities! Does he have any clue about the status of the credit markets?
    (2) The author questions GE's share buyback program. Did he short S&P Futures in October last year? Very few people except the perma-bears would have predicted the worst year ever for the US stock market.
    (3) The author questions why GE agreed to pay Buffett 10%. The author seems to be living in alternative world where he does not understand how Mr. Buffett's imprimatur helps a company; in the case of GE it allowed them to sell common stock and raise more capital.
    (4) The author wonders how GE will roll over its long term debt. GE can continue to raise short-term debt via the Fed's commercial paper facility, till the credit market improves.
    (5) The author sees GE's efforts to get its customer to pay loans back faster and reduce its balance sheet as a sign of weakness, and not as prudent action in the time of a credit crunch. The irony couldn't be more obvious: the author is critical of GE because of their leverage; but also critical of their efforts to cut leverage!

    I have not analyzed GE enough to say whether GE deserves AAA or not. But the obvious slant in your article hurts your credibility. A shorter article with a focus on the financial metrics which deserve scrutiny would have been more effective in making your case instead of this tome with speculative arguments. Plus calling Mike Shedlock, "a brilliant financial analyst" really destroys the author's credibility. If Shedlock has his way we will be back to the Gold Standard and instead of fighting for oil which at least has a utility value, we will be fighting war for Gold which has very little utility value beyond certain industrial applications. What we need are well defined regulations which are followed and enforced to ensure accountability and reward for carrying risk, not just for pushing risk to the next guy.
    Nov 21 07:03 PM | 3 Likes Like |Link to Comment
  • China Is Now in Firm Control of U.S. Debt Markets [View article]
    Food for Thought: An alternate perspective.

    www.treas.gov/press/re...

    These are the monthly inflows in the last quarter of 2008. The net inflows were 273.1,61.3,74.0 in Oct,Nov&Dec respectively; a total of 408.4B for Q4 2008.

    www.treas.gov/press/re...
    The TIC data for Jan-March 2009 showed inflows of -143.5 -91.1 23.2, a total of -211.40B for Q12009.

    So over the last two quarters the net-inflow has been 197B. The number for Sep2008 was 142.7, taking the total to 339.7B since Sept08.

    Were the outflow in Q109 is a readjustment after the rush to safety last Fall? Also note that the inflow went positive in March in spite of the Fed's Quantitative Easing Policy.
    May 31 01:23 PM | 2 Likes Like |Link to Comment
  • Weekly Preview: How Stressed Will the Markets Be? [View article]
    prudentinvestor: If you have been following my posts, you would know that my portfolio is primarily in cash, with some index shorts and some bond longs. It is positioned in a risk averse manner pending the resolution of the current uncertainty. I do trade in and out of the markets; my long term bias is flat to negative.

    However your post actually highlights the angst being felt by the investors who missed out this rally. You might be strong in your conviction, but every day which goes by without a correction is weakening the conviction of many. This is especially true of money managers who are paid to invest and have been caught with too much cash in their portfolio.

    To see an example, the ES futures continue to trade higher in spite of the leaked reports that BAC, C, WFC, PNC etc. may need tens of billions in additional capital. A few weeks ago, news like this would have meant the futures trading down a few percentage.

    There is a change in risk appetite which needs to be respected. Whether and how long the appetite for risk will last is another question. We are no longer in a market where you can buy and hold, or short and hold; it is a trading market where investors have to move in and out of positions, without leaning too strongly towards either side of the market (bullish or bearish).

    On May 04 07:42 AM prudentinvestor wrote:

    > "There is a lot of money sitting on the side-lines, trying to get
    > in to the market. This money sat on the sidelines during the period
    > of extreme pessimism ..."
    >
    > Interesting that those who have gone all-in, and thus have no money
    > left on the sidelines, like to speak for those who still have money
    > on the sidelines!
    >
    > I suspect that those who kept money on the sidelines, myself included,
    > have done so for a reason, and perhaps their reason is their inability
    > to see sound underlying economic fundamentals. The government has
    > stabilized the system, but their notion of repairing it is to restore
    > speculative lending, and to encourage people to spend by borrowing,
    > without having jobs and earning capacity to support their borrowing
    > and spending. This model is exactly what caused the current crisis,
    > and It should be clear that restoring a failed status quo ante cannot
    > lead to a sustainable recovery.
    >
    > Thus, I'd suggest to the pundits to put their own money where their
    > mouth is, and to avoid the arrogant assumption that others who have
    > kept money on the sidelines are just waiting to be told when and
    > how to commit it to the market.
    May 4 08:57 AM | 2 Likes Like |Link to Comment
  • Trading the Crude Oil Contango with Two ETFs [View article]
    thotdoc:
    The issue is the amount which each fund rolls over versus the magnitude of the contango. USO rolls over all contracts; USL rolls over only 1/12th. So the impact of the contango is more on USO than USL. Note that since USL rolls out to the contract one year out, the size of the contango can be significantly higher than the contango on with the next month which USO rolls into. But unless the annual contango is 12x higher than the monthly contango, USL will outperform USO around the roll time.
    Feb 18 08:41 AM | 2 Likes Like |Link to Comment
  • UNG Hasn't Changed the Laws of Natural Gas Supply and Demand [View article]
    William,
    The problem with UNG is the contango roll costs. You can look up the forward curve for natural gas
    finance.yahoo.com/q/fc...

    The price for the January '10 is a full $2 above the price of the Oct '09 contract. This a lot more than the same spread next year; Jan '11 is just $1 above the price of the Oct'10. If you go further out, the difference between the Oct and the next Jan contract is even smaller (70-80c). So even if the price of Natural Gas rises in a few months, UNG investors will be short-changed since the forward curve is already pricing in the rise in the price of natural gas.

    Since UNG and other commodity funds have become very big players in the futures market the market games them. Plot NGV9-NGU9 and you notice that the spread went up from around 25c to 40c just as UNG was rolling over.

    In the short term the market is really depressed because storage is almost full since supply is not diminishing at the same rate as demand, thanks to new shale wells which have very high output initially. The September contract collapsed in pricing as it got close to expiration; there is the same risk even with the October contract. Over the past 4 weeks the spread between October and November contract has widened by almost 30c!

    Right now the premium to NAV for UNG is close to 14.2%. GAZ is relatively less pricey though its premium shot up as the news about GAZ not issuing more shares leaked out yesterday.

    What we need is a product like USL which has an equal weighted portfolio of contracts spread over an year. Such a fund can capture the structural moves in the pricing of natural gas. Right now UNG is just a proxy of the front month contract.
    Aug 22 01:42 AM | 1 Like Like |Link to Comment
  • U.S. 5 Year Bond Auction Effectively Fails [View article]
    There is a lot of emphasis being placed on foreign buyers and their lack of interest. However we need to look at the bigger picture.

    (1) The yield curve is very steep especially in intermediate term bonds. So going out an year or two gives you over-sized gains in yield. With the risk appetite growing, bond buyers might be willing to extend their duration and start moving further along the steep curve instead of crowding into the shorter term maturities. This seems to have been reflected in the good 7 year auction.

    (2) The local demand for US treasuries is going to increase as the US savings rate goes up, and the boomers retire and shift towards less risky investments. So while foreign demand will continue to be critical, the pendulum will likely swing back as more Americans try to secure their nest-eggs in the perceived safety of Treasuries. The spreads on High Yield, Corporate and MBS have come back close to pre-Lehman level and a result treasuries are going to see an increased domestic bid vis a vis non-govt. bonds.
    Aug 1 01:53 PM | 1 Like Like |Link to Comment
  • Yields Soar as Mortgage Bond Holders Start to Sell [View article]
    I was betting that TBT will go down. However to keep my risk limited I used options, since it limits my max loss. I used a put spread to reduce the theta (time decay) while capturing most of the delta (price based movement). Regarding strikes, I opened the long leg, at or near the money, and the short leg at or near my downside price target.


    On May 28 12:08 PM RiskReturnOptimizer wrote:

    > Please elaborate your Long TBT Bearish Put Spread position.
    >
    > This one is very interesting to me, since TBT is already double inverse
    > price of 20 year treasury.
    >
    > Put spread is buying one put and selling another put.
    >
    > What strike prices are you using?
    >
    > What exactly is the derivative trade (e.g., put spread on a double
    > inverse index) ....... is there is simpler bet on direction of treasury
    > yield?
    Jun 12 01:13 PM | 1 Like Like |Link to Comment
  • Higher Mortgage Rates Are Not a Threat [View article]
    The difference between the past and now is that most buyers do not want to use ARMs anymore. Even first time buyers want the safety of a fixed rate mortgage since the future appreciation of houses is still questionable. The current recovery in home purchases is being driven by first time home buyers who find homes affordable. Further the Fed wants to re-capitalize the balance sheets of US households by offering them low fixed rate refinancing options. I will be curious to see how many homes which went under contract last month actually close.
    Jun 5 08:04 AM | 1 Like Like |Link to Comment
  • India ETFs and ETNs Are Not the Best Emerging Market Investments [View article]
    "Many believe this may be due to India's greater dependency on foreign countries, whereas China and Brazil have more substantial middle classes."

    Indian economy is a lot more insular and less affected by foreign countries. China had to pump its economy with a massive stimulus package to ensure that the economy does not follow exports and collapse. India had to do an order of magnitude less to get similar results, since most of the growth in India is organic and not export driven.

    Much of China's stimulus has been handed out as loans, whose future performance is uncertain. Though it has created a big buzz, it is not clear whether it will result in sustainable growth, in the absence of growth in exports.
    May 22 05:57 PM | 1 Like Like |Link to Comment
  • Monday Market Review: Bulls Back with a Vengence [View article]
    Respirate: The area between 85 and 90 was strong resistance. It is likely to provide strong support and a good entry point with well defined stops.


    On May 19 07:05 AM Respirate wrote:

    > Vikram, if you can answer a question: What level are you looking
    > at for an OIH trade? $86-87?
    >
    > I agree that 'Services' is the sweet spot in the oil sector. It's
    > easily outpaced the S&P in recent months and may be expensive
    > in the short term.
    > Thanks -- R
    May 19 07:47 AM | 1 Like Like |Link to Comment
  • Is Bank of America Poised for a Major Move Up? [View article]
    Darvania:

    The market has thrown out all rules during the past year. Further the scope of the market decline has matched some of the worst bear markets in history. As a result the ratios which may have worked well in the past can not be applied religiously here since the market is not behaving in a manner when those rules were developed and refined.

    As I noted in my article, even if we accommodate for stretched ratios, the pattern is not perfect and has to be traded with a lot of caution. However, there is no denying that the 1st order metrics of the pattern, especially how the volume has behaved during different price periods are close to what Mr. O'Niel suggests (higher green volume bars, rising volume into right side, falling volume during the handle, high volume at capitulation low and breakout days etc.)

    One aspect which I disagree with you quite strongly with you is your claim of a V shaped bottom. I see no V here; I do potentially see a W on the right side of the cup. I also would reiterate the fact that in a market with extreme moves like this, some of the basing action is bound to be more spiky and choppy than more normal times . However the handle over the past few weeks has been much better behaved, reflecting a gradual stabilization the market, which is also being reflected by the VIX.

    This a period where disciplined traders can make money and BAC is one of the stocks with the potential to do so, as long as you are careful about when and where you enter the position and when you take your losses.
    Apr 12 10:23 PM | 1 Like Like |Link to Comment
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