Zachary Scheidt

Genco Shipping: Coming Out of Hibernation

TheHague - if you're investing for the emotional high and low - basically for the action and the rush - you should probably move to LasVegas and find a great craps table to stand next to. While I certainly love this business and enjoy the dynamic of finding opportunities and following the swings, at the end of the day you have to have a system, discipline, and risk control to stay alive.

The quote "you have not lost anything until you sell" is quite misleading. Maybe we should rephrase - you don't know how much you have lost until you sell. The stock you own is worth less - now of course it could rebound tomorrow, but for now you have lost. If the original reasoning you used to get involved is no longer valid, you should go back to cash and evaluate what happened.

Dividends are great, but only if you can maintain the capital balance you start with. If you receive a 10% yield and lose 15% of the value, that hardly does you any good.

Please be careful and don't believe all the "prases" you hear. Successful investing is 90% damage control.
zachstocks.com

GDP Report Offers Positive Headline, But Negative Details

Sr. EM - sometimes fewer words can yield greater wisdom. Yes I think you're right.

FB5000 your points are well taken - although not necessarily agreed with. I don't think the economic indicators are as clear as you make them out to be. I'm not the "gold gun and grub" guy in a bunker, but I do think it pays to understand that this is not an ordinary recession that works its way out in a few quarters. There are serious issues we need to grapple with and until we are willing to actually FIX problems and not try to re-inflate another bubble, we will continue to have unsustainable recoveries and then crashes.

You can bash Fox and I'll bash CNN and maybe the two of us can end up somewhere in the middle...

To use your line, that's all
zachstocks.com

Why Gold Could Hit $1,300 This Year

I think gold could certainly have a strong run, but actually have more confidence in Silver. The dual purpose metal (both an industrial metal as well as a precious metal) is facing production shortages at a time when inflation could add sharply to demand. On top of that, the industrial uses for Silver could compete with inflation hedges to push Silver past $20 fairly quickly (that's 36% from here and it actually could go much higher).

zachstocks.com

GDP Report Offers Positive Headline, But Negative Details

Mad HFT - I like your analogy of taking money out of one pocket, putting it in the other, and calling it a profit. The statistics show significant weakness - as a whole - and in specific areas. While we may not be falling at the same rate as the first quarter, *falling* still means that the trend is lower.

Thiazole - I suppose there is a chance that Q3 shows growth, but it seems highly unlikely. Even if we DO see GDP tick slightly higher in Q3 it will only be as a result of higher government spending which in the long run will come back to bite us. That's not an increase to our true domestic product - it's an accounting gimmick - like many corporations have been punished for using.

Monthly reporting may be helpful to see what is going on in a bit more detail, but remember that the more often you take samples, the more "noise" or statistical irrelevant information you must sort through. I personally think it's better to use quarterly reporting but then to look at some of the monthly figures such as retail sales, unemployment levels, etc to see what is going on on a shorter-term basis.

ETF desk - very good point. How bad would consumer spending be without Uncle Sam shoving future taxpayer money into the retail pocket and then begging him to spend it?

Thanks for the good comments guys - keep em coming!
zachstocks.com

Fundamental Misconceptions in the Speculation Debate

wow - so those who believe that the futures markets fall outside of normal capital markets "merely reveal their ignorance"?? That's a bit extreme don't you think?

My article on position limits (zachstocks.com/2009/07.../) inspired a lot of comments on both sides of this argument, but I would always consider opinions with respect even if they didn't match my own.

The futures market is part of capital markets and is vital for the functioning of the cash markets. An active and broad assortment of traders (both speculators as well as commercials) will give us the best price discovery. We SHOULD act to keep large players from manipulating markets but there's less evidence of this type of activity than many realize.

What worries me is that limiting position sizes is just one of many steps away from a free capitalistic market and towards one where the government influences prices. That's manipulation from a player that is MUCH larger than any Goldman or Morgan Stanley trading desk.

First Solar's Great News...No, Terrible News...Wait...

While the dynamics are changing for FSLR (and the margin compression is certainly disappointing), the stock still trades at an attractive multiple considering both historical and future growth. I think FSLR will end up as one of the "surviving giants" and the lower price may offer a buying opportunity.

However as you state, the volatility in these names is tremendous as evidenced by the stock now 25% below the May high, but also 50% above the March low. It may make sense to hold a reasonably sized "core" position in FSLR and then use some additional capital to trade around the position - buying fear and selling greed.

It's too soon to jump in and buy the fear after only one day of selling, but sometime in the next week or two, it probably makes sense to begin dabbling in this industry leader once more.

zachstocks.com

More on Capital Ratios of U.S. Banks

One of the biggest dangers to the capitalization rates (and ultimately to the banks survival) is the commercial real estate market. Many loans to developers and builders on the commercial side have not taken the hit that residential mortgages have. But the losses could simply be the next step of this ugly economic cycle.

If losses begin to mount on the commercial real estate portfolios the capitalization rates could evaporate and it wouldn't surprise me to see TARP #2 (or #3). This would be very troublesome for not only the banking industry but for the overall economy (and ultimately the broader equities market). Risk control is still necessary although the current market would lull many investors to a false sense of security.

Zach
zachstocks.com

eBay: Still Clouds over Skype IPO

Interesting to see eBay as the feature story on barron's this weekend. Some speculation that the spinoff would unlock value but no significant discussion of the legal issue... Seems like this would be pretty relevant for the discussion!

Two Stocks to Short: Marriott, Green Mountain

Can't agree with you more, although I was early to the game on GMCR (zachstocks.com/2009/06.../) - It's certainly over-valued and prone to a "fad" crash. But timing is very difficult in these situations.

Playing with options like you suggest certainly helps cut back on some of the risk.

The Proposal to Limit Commodity Positions Will Hurt Free Markets and Economic Growth

well obviously this is a highly debated topic and I'm glad we could discuss in a (somewhat) orderly fashion.

We talk about the "real" market as if there were two different forces at work. In actuality, the market is made up of buyers and sellers - plain and simple. The oil market is just too big and fluid for anyone to "corner" or artificially move prices to any significant degree. Producers and consumers need speculators to offer liquidity. If the price is "artificially" high, you will see speculators "regulate" the market by selling. And I don't hear anyone complaining about prices being too low in the early part of this year.

One thing that always drives me nuts is that Goldman gets so much criticism even though they are a publicly traded company... Sure, their executives and traders are richly rewarded. But so are their shareholders. And who are these shareholders? The Investing Public! If you're jealous of the profits Goldman is booking - go buy their stock! Then they can be YOUR profits.

For whatever it's worth, and as an aside note, I may pull in six figures, but that only happens when I'm providing seven for my investors. I'm a big fan of the "eat what you kill" setup which is why I have my own company and live and die by my ability to keep my clients happy. It's more risky, yes - but then so is counting on an employing firm to stay in business and continue making payroll...

I appreciate the spirited debate, and I'm sure I'll get dinged on the "positive / negative" comments for this one, but honestly I can't make an argument against a freely operating market. Manipulation by the Government, Goldman Sachs, LTCM, or any other institution should be fought. Unfortunately, few see this move towards stiffer regulation as the manipulation that it truly is.

Zach
zachstocks.com

Blackrock's Toxic Asset CEF: Buy in Post-IPO After-Market

241885 - excellent analysis! And you're right, the investment bankers will likely support this IPO in particular because if it trades successfully, they will want to roll out several more just like it.

Ultimately, the chances are very high that the fund price will dip below NAV (over the next 6 months). But NAV will be VERY difficult to determine as the assets being bought are not necessarily easy to price.

If run well, the NAV should have much less risk based on the fact that the assets are being picked up at pennies on the dollar. However, the public perception of this strategy will swing wildly based on economic reports, unemployment, housing sales etc. I would expect the security to be extremely volatile even though the published NAV will not likely move significantly for the first several quarters.

Zach
zachstocks.com

Housing: 'Invest at the Point of Maximum Pessimism'

It looks as if many of these charts are running up into and possibly stalling at key resistance points. Also, how can we expect housing to turn when unemployment is still growing? Even if employment stabilizes, that still leaves us with too many who are out of work...

But unfortunately, we are STILL heading down and jobs are still being lost. As fewer and fewer people are bringing in paychecks, it's hard to imagine any sustainable rebound in real estate.

Zach
zachstocks.com

VistaPrint: Potential Short on Lawsuits and Legislation

Poor business practices and fraud will eventually come back to bite you even if you are profitable for a time. This is why I have avoided VPRT and would consider shorting once the s--- hits the fan.

Zach
zachstocks.com

Breadth at an Extreme

While I turned overly bearish late last month and have had to do some adjusting, I am now beginning to wonder if we could see more strength as underperforming managers and impatient retail investors finally jump in from the sidelines. Barron's had a good article about this last week.

If there is a decent amount of sideline cash to be sucked in, we could see another 10 th 15% but that would likely set up a very nasty reversal this fall or early 2010.

Momentum has a way of surprising us with it's stamina sometimes...

Zach
zachstocks.com

Hedge Funds Recovering Faster than in Past Periods

It's always interesting to see performance numbers on "hedge funds" as an aggregate number even though the tactics and strategies vary so widely. Hedge funds as a category may be improving, but there are extreme winners and losers depending on what the individual funds are doing. I think one of the most important changes that the financial crisis has caused is that funds are now limited as to how much leverage is available. Hopefully this will help protect consumers from such excessive losses in future quarters even if the strategies fall out of favor.