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Land of Milk and Honey
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Individual investor. Generally using index Mutual Funds or ETFs. Trying to diversify more (foreign in particular). Pick up tips & concepts, & learn more. I'm at alpha to keep a finger on the current moods & predictions... and so I notice up coming big financial news events before... More
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #27 259 comments
    May 25, 2014 11:50 AM

    I've set up this blog ...as a community place to share our investing ideas. Hopefully so we all gain more ALPHA!! It's a great way for my contacts to talk to each other at the same time, not just to me :).

    .

    All topics welcome. Investing, stocks, bonds, commodities, economy, politics about economy, and social (so we know who we're talking with). Please invite other investors! Stop by once in a while, or hang out all the time. Please post your questions, make a joke, or share your insights with us!!

    .

    My money has done well since I started this blog... so I'm hoping it adds value for everyone!

    .

    Only rules of the road are not to insult others, so state your view but don't call others names or put them down. Every view is valuable, if only to convince you, you are right!

    .

    This is Chapter #27. As the instablog gets long, I'll create a new blog & post a link at the end of the comments. Here's a link to the prior, #26: seekingalpha.com/instablog/11150861-land... (I've been putting in the right links, but sometimes this doesn't seem to work correctly. You can always go to my profile, then to my instablogs, and find the latest.)

    .

    Links

    Regular poster Fear & Greed has instablogs outlining his ideas which are great! -- also SA articles!:

    seekingalpha.com/user/706857/instablog

    Interesting Times has a fun Portfolio Challenge:
    seekingalpha.com/instablog/5038891-inter...-8

    Also his regular instablog: seekingalpha.com/instablog/5038891-inter...-50 It's more oriented to precious metals, & economic concerns (worries) than mine.

    As for the regular posters, you'll get to know us, if you hang around!!. Several have their own instablogs with their ideas outlined well!

    Disclosure: I am long SPY, IWM, DIA, QQQ, LINE, CVX.

    Additional disclosure: ...and more... ask me if you're curious!

Back To Land of Milk and Honey's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (259)
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  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » Have a good Memorial Day!

     

    On that note - any thoughts on defense stocks and CEFs, or on stocks relating to care for soldiers?
    25 May 2014, 11:52 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » Welcome! If you're new, we've moved onto chapter #28, so please come join us!
    http://seekingalpha.co...
    3 Jun 2014, 07:43 AM Reply Like
  • dancing diva
    , contributor
    Comments (2554) | Send Message
     
    http://bit.ly/1h2J3Rp
    25 May 2014, 01:32 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Good to remember why we celebrate Memorial Day, to give tribute to all those that gave the ultimate sacrifice for our country, and thank all those that have served and are in uniform today. The bravest of the brave....thank you.

     

    My grandfather used to be the single remaining WWI vet in my home town. For years he walked in the annual Memorial Day Parade, but in his 90s was glad to sit in a convertible car. He served on the hospital trains, all over France. We still have the map of France that traces all the places he went in France.

     

    My dad served in WWII. He never said much about his years in the Navy, right out of high school....but with good reason, he found it difficult to like the Japanese. We never learned much in school about what exactly the Japanese did during WWII. After reading "American Caesar" about the war, I understood better.

     

    Some day, I hope we never have to send our troops anywhere.
    27 May 2014, 09:18 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » DD

     

    Nice article DD!
    27 May 2014, 08:27 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Autozone (AZO) just reported a good quarter; profit & revenue up

     

    http://cnb.cx/1htTlVa
    27 May 2014, 08:55 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    durable goods report

     

    http://cnb.cx/1htW4Oq

     

    Not what we want to see to show the economy is improving, but doesn't prove that the economy won't pick up in the next few months either. Wow defense contractors really doing well....no wonder (LMT) (NOC) doing so we..

     

    However, it isn't just durable goods that makes the GDP.

     

    Plenty of other exciting things going on, mergers are picking up (shows companies are ready to spend $) and many advances in technology continue

     

    "apple meet the jetsons"

     

    http://cnb.cx/1htW3tV
    27 May 2014, 09:03 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    The M & A activity continues

     

    http://nyti.ms/1weF607;

     

    A stock like (LAZ) will benefit
    27 May 2014, 09:08 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    (BAC) may be an opportunity since its recent downfall

     

    (PSEC) up in the pre-market

     

    futures are up today; confounding all the experts, the markets continue to go up ; )

     

    Dow 17,000 getting closer
    27 May 2014, 09:27 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    what the hedge funds like/don't like

     

    http://cnb.cx/1hu6DkC

     

    Hedge funds on average lost 0.2 % so far this year....no doubt you are out performing that all by yourself, and saving the fees to boot.
    27 May 2014, 09:46 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    Blue,

     

    IMO, they will be carried out feet first with their 'short" on (GILD)
    27 May 2014, 09:50 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    F&G, it amazes me that anyone would pay those fees, and then give up even more if there are profits. Maybe if you are so wealthy you don't care if your portfolio loses $ for 2 years in a row. Although there are a few hedge funds that actually do make money, they are in the minority. - 0.2 % is just terrible! And that's the average....must be plenty of people who have lost way more. Must really hurt when you look at the gains since 2010. This year, I wasn't expecting much after huge gains in 2013 but have been very pleased so far with my stocks.

     

    (GILD) continues to go up & they have more than Solvaldi going for them. This stock could go to $200 in a couple of years.

     

    Imagine when all those investors fed up with hedge funds start to get into this market.

     

    Low interest rates, slow upward momentum (going up too fast is not good) as the economy continues to slowly expand is fine with me.
    27 May 2014, 12:24 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » - How is everyone and your investing doing today, after the holiday break?

     

    I'm still in break mode - catching up after getting back...
    27 May 2014, 12:50 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    L,

     

    no complaints here -- many of my recent ideas are looking pretty good.. of course its nice to have the "push" of the overall market at your back ...
    27 May 2014, 02:23 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Blow out day for me L, even with (AZO) & (FL) giving some back.

     

    Nasdaq up 51.26, Dow up 69.23, S&P up 11.38 (new record)
    Russell 2T up 16.

     

    (PCLN) (GILD) (CELG) (ICPT) (TSLA) (NVAX) (FB) (PSEC) (BGS) (WDAY) many more up today....let's see what tomorrow brings.

     

    This year is turning out better than I expected. Buying the dips - even the momentum stocks after they dipped - is working out ok.

     

    (BGS) is up over $1,000 for me; last year, I continued to buy it after it fell. Took quite awhile to get ahead, but collected the dividends while waiting.

     

    There are still some stocks undervalued in this market. If you believe in technology, buy (IBM) (MSFT) (SSYS) (WDAY) (PCLN) (GOOGL) (AAPL) (SWKS) (FB) (TSLA)

     

    Biopharm continues to develop new drugs (CELG) (GILD) (NVAX) (ICPT) and others - do your DD before you buy.

     

    The BDCs have taken a beating lately. (PSEC) (TCRD) (TCAP) (MAIN). Private equity (BX) (KKR) (OAK)

     

    (SBUX) (KKD) (DNKN) all coming up - but have room to go higher.

     

    There will be some down days ahead. Take advantage of them.

     

    As always, YMMV. Proceed with care, but don't be afraid to get into the market.
    27 May 2014, 04:35 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    All those fat premiums on BAC $15 put sales starting to look like money in the bank.
    27 May 2014, 02:06 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    T,

     

    u made a good move-- based on this news --

     

    http://seekingalpha.co...

     

    I have been wrong with the financials so far this year as interest rates have not gone the way I anticipated.. However, as I suggested two weeks ago it was time to accumulate rather than bailout now -- I still believe that ...
    27 May 2014, 08:15 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » - FG, T -- Sounds good :)!
    27 May 2014, 03:48 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    Been a rough several days. I've clearly been wrong being short, as we are levitating higher, although volumes and overall participation have been beyond anemic.

     

    Not much else to add. The numerous technical (negative) rally divergences, which have worked in every cycle for many, many years, simply do not seem to matter in this cycle.

     

    They say markets don't lie, I would challenge that as things do not line up. However price is the final arbiter and I'm wrong there, and have given back some of the the strong year I was having.

     

    Adding all up I don't get the risk / reward in chasing here, but obviously the market disagrees.

     

    I remain short financials and social media / momo tech.

     

    I highlight the comments by (C) today about revenues, which were largely ignored. Is what it is. Also of note, housing stocks (and other consumer discretionary) refuse to rally -- but meaningless to this point.

     

    Leading sector -- utilities.

     

    I have covered my broader index shorts and am sticking with the individual stocks, as money is driving the indexes higher. No idea where it ends up.

     

    Companies continue to borrow money to buy back stock at a record rate, as this will continue as long as investors are willing to invest in junk bonds at low yields.
    27 May 2014, 08:41 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    You have vacillated on the general market direction so many times that it's apparent that you should have recognized that your very own ambivalence should have been a warning sign. It's one thing to identify some obviously out-of-bounds individual issues; it's another to guess short-term market directions.

     

    The foregoing notwithstanding, and despite your "divergences," there have been numerous indicators that market were not about to reverse. The rotation into energy, commodities and emerging markets was a glaring one. Also, the retreat on interest rates was widely misconstrued as a sign of weakness, rather than a logical correction from prior tapering hysteria.

     

    P.S. Personally, I believe you'll get pasted shorting financials, in particular.
    27 May 2014, 09:00 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    T,

     

    Personally,

     

    Thanks for the advice but I will keep my own counsel.
    Do what works for you. I will do the same for myself.

     

    Emerging markets are selling off, again, while overvalued -- to me anyway -- small caps roar back. Penny stocks are exploding in activity. Hmmmm. Where is that healthy rotation? Are small caps at @ 80 TTM now great values?

     

    I am in no way vacillating on market direction but both managing my exposure and honouring stop losses. If you never have had a losing investment in your life, I commend you.

     

    I have taken some losses and freely admit some puzzlement at the divergences I see which are clear.
    27 May 2014, 09:29 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    I was providing no advice, just telling you where I think your own counsel is leading.

     

    The reason that people post opinions here in SA is to debate them and so folks can decide what course makes most sense. It's pointless to advise me to keep my views to myself, as it is equally for you to do the same.
    27 May 2014, 09:56 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    T,

     

    Noted, except I offer no advice on what others should do -- only current observations.

     

    If you wish to opine on my observations, specific commentary on the specific divergences I'm observing, is useful.
    27 May 2014, 10:06 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    I have more than once explained my views on what I have believed has been suggested by the rotation and the recent action in rates. So far, it's been playing out as I had expected.

     

    What divergences most confound you at the moment?
    27 May 2014, 10:34 PM Reply Like
  • extremebanker
    , contributor
    Comments (1717) | Send Message
     
    I sold my LEAP options today at a nice profit hoping for some type of consolidation soon. I am still heavy on the long side just not leveraged as much.
    27 May 2014, 09:33 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    http://seekingalpha.co...

     

    This is not a sign most investors are risk adverse still.
    27 May 2014, 10:27 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    There's always risk in the market, minimizing it is more of an art than a science, at least for me. It is crazy for some, but having around 60 positions spreads out the risk.

     

    The best move I made recently was buying (GILD). The worst? Buying (SCTY). It has moved up a little but has a ways to go....and this is not one I feel good about buying more shares to lower my average cost per share. Unlike (BGS) which has been a very good company to purchase additional shares while it languished the previous 6 months. Plus (BGS) pays a 4% dividend. What this has taught me is to stay with the quality companies that pay dividends. Although I like (SCTY)'s business plan & solar is what we need....the company has a long ways to go.

     

    As of yesterday, I'm up about 6%. Not great, but not bad either.

     

    Mac, come on you know you have done well this year, just be careful going forward & this year is already a good one for you.
    28 May 2014, 07:33 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Predicting what a stock will do (or major market moves) is really hard, especially short term.

     

    My style of investing is not that hard, buy quality companies at low prices, that pay dividends....and then hold until the dividends get cut.

     

    Because what I do can be very boring, sometimes I do venture into the wild growth stocks. However, I never "bet the farm" but instead make very small investments, usually $5,000. Unless I think it's a really good bet, then I put more in, like with (CELG) and (GILD). 300 shares of (GILD), a 100 shares of (CELG).

     

    Check out (NVAX). It's a good company, wish I had bought more than the 1200 shares I did buy. If it goes back to $7 I'll sell some. Or maybe keep holding, if the news for their drug pipeline gets even better.

     

    (ICPT) goes up & down, this one is volatile. Hopefully they will overcome the problems. If your liver is failing, their new drug could save you. But your cholesterol will become a problem. The current argument is....save the liver & the patient lives. Then worry about the high cholesterol.

     

    (PCLN) finally paid off; the GOOGs are still making a comeback. (AAPL) will go to $700 & hopefully even higher.

     

    (PSEC) has come back but still has a ways to go. Many BDCs are beaten down, could be a good entry point if you don't already own them. However, be careful not to put too much money in them. (PTY) is still my favorite, for a place to keep your cash.
    28 May 2014, 07:52 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    "P.S. Personally, I believe you'll get pasted shorting financials, in particular."

     

    I'm wondering exactly where the revenue growth for financials is going to come. (C) has already warned on trading revenue due to the low volatility. Mortgage App's continue to be weak. And the yield curve continues to flatten. European yields continue to sink today, and I expect US 30 year bonds to "break out" today to new low 1 year yields.

     

    How is any of this bank positive. exactly?

     

    BTW I expect RECORD low yields on 30 year bonds. This rally has a ways to go. People are short; and I believe the economy is weakening.

     

    I will stay with my short financials.
    28 May 2014, 08:35 AM Reply Like
  • Eudaimonia
    , contributor
    Comments (752) | Send Message
     
    Macro, you believe rates are going lower from this point? The ten year is going to be 4% before its 2%
    28 May 2014, 09:57 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    We'll see.
    28 May 2014, 11:19 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    Since you are a trader, I am even more surprised to see you expressing those fundamentals. The reason I believe your short is a bad one is that the market has already discounted the effects on banks of the recent news on trading profits (only the C news is new) and the decline in interest rates.

     

    The time to short was a couple months ago, not now. Look at KBE, which just bounced off major support around $31.
    28 May 2014, 12:26 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    T;

     

    In a word; No chance. This market has discounted no negatives whatsoever at today's valuations.
    28 May 2014, 01:16 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    You're reacting from your gut, and you've evidenced your constant nervousness here in SA. But, in fact, look at bank P/E's:

     

    JPM - 13.4
    WFG - 12.5
    C - 11.1

     

    And, these are trailing numbers. This represents some blatant overvaluation?
    28 May 2014, 01:24 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    T;

     

    I don't know why you feel the need to reference my apparent "nervousness" or whatever.

     

    I'd appreciate it if those line of comments stop immediately.

     

    Bank earnings estimates will come down, and likely fall below 2013's
    28 May 2014, 01:34 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    I'm making that observation because of your rather constant vacillation on the direction of the overall markets, as evidenced by your very own posts.

     

    OK, you're not "nervous;" you're just constantly unsure. You seem to keep believing everything should go down and have a hard time accepting any rationale why it isn't.
    28 May 2014, 01:38 PM Reply Like
  • extremebanker
    , contributor
    Comments (1717) | Send Message
     
    M:

     

    Long short pairs can make money even if the short side does not decline but increases less than the long. Is this your approach or are you just straight short?

     

    I have had little luck selling short although I certainly think it should have it's place in a portfolio.
    28 May 2014, 02:19 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    T,M,

     

    I have been wrong on the financials so far this year - as they have under performed , I , along with many others have had the interest rate backdrop incorrect.

     

    That said, I mentioned two weeks ago that instead of running from them they should be accumulated..

     

    And it is because of the valuation levels in these names.
    28 May 2014, 02:33 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    FG:

     

    "Financials" covers a lot of ground. U.S. banks have been down, as well as BDC's, for obvious reasons, but it's been pretty happy times for various overseas banks, MREITs, some other REITs and almost any financial preferreds.
    28 May 2014, 02:37 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    When I add up all the evidence; I see a highly speculative and complacent atmosphere.

     

    I reiterate this is a risky time to commit new money to the market, and I will be focused on the short side from now until the fall.

     

    Other than for bonds and bond like equivalents --- I am long 30 year treasuries via futures -- I do not see the risk / reward in the intermediate term for most equities.

     

    I do not know if the market turns or when, or goes sideways, simply do not like the risk / reward here, for now.

     

    We have had a record number of trading days since the SPX tested its 200 DMA, I think that would be a much better entry level.

     

    SHORTS (BAC) (GS) (AMZN) (P) (YELP) (TWTR) (DB) (MET) (NFLX)
    28 May 2014, 08:52 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    There are some companies that are worth buying now, and holding while they continue to grow.

     

    (DNKN) (KKD) are good candidates; so is (WDAY). (SSYS) is making money now, as is (SWKS). I am holding all of them for the time being. Watch (PCLN) go higher - lots of people traveling over the summer.

     

    (BX) (KKR) (OAK) (PSEC) (TCAP) (ARI) (FB) all good candidates to buy now.

     

    (MU) has an extremely low PE & just keeps going higher. I've been watching...since the low 20s, hoping for a nice dip before buying. Nope, no dips. Just keeps going higher.

     

    I'm looking where to buy more shares, but will wait for our next good dip. Which will happen, maybe later in June or July.

     

    Sorry Mac, (BAC) has been beaten up. It's on life support, but going higher : )

     

    Disclosure: (BAC) is my bank; Merrill Edge is my broker.
    28 May 2014, 09:08 AM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    It will be interesting to see how stocks react when the government releases the first quarter real GDP tomorrow. The last estimate was an annualized increase of just +.1%.

     

    http://1.usa.gov/vgZr0y

     

    The current consensus is for a negative .6%:

     

    http://bit.ly/1aWXU8J

     

    The PCE price index will be included in table 8.

     

    The PCE index has been running well under CPI:

     

    http://bit.ly/1mEFaBk
    28 May 2014, 09:12 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    BSF:

     

    I'll bet you some of your favorite cooking vs my wife's good Canadian cooking, (WDAY) trades negative today, and that's telling if it does.
    28 May 2014, 09:17 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Ahhh that Canadian bacon, they make pizza with that & pineapple back in my home town (in Iowa). It's the kind of pizza that isn't popular in NJ, sadly. The pizza place there is run by the grandson of Sicilians that moved to Iowa to work on the railroad. Railroad is long gone, but the annual Italian Festival is still going on.

     

    You're right, if (WDAY) falls today that's not good. It's extremely speculative, but they are getting new customers & reported a good quarter. Will they ever make real $? Sure hope so! But it's going to take a few years. Wow the volume is way up today; price is falling. In the after market yesterday it was over $86. Lots of profit taking. Cramer talked about it a lot this am, advising that it's not going much higher. The stock is bouncing around $83. I'll be baby sitting this one for awhile.

     

    Taking profits is always a good idea. (KORS) had a really great quarter, but the stock is only up a little after falling earlier. The PE ratio is high, 26.0 fwd 12 mos. So maybe more will sell rather than hold. Fashion is so fickle, but then so is Mr. Market.

     

    Meanwhile, down goes (BAC).
    28 May 2014, 10:18 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    Not just a little wrong.
    28 May 2014, 12:30 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    T -- How's that? On (WDAY)?
    28 May 2014, 01:50 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Has anyone else noticed that around 11 am, the market changes? Up until around 2 pm.

     

    My theory is this is when people with jobs take their lunch hour & start trading.

     

    Today may be one of those days when the "lunchtime traders" cause the market to fall even more.

     

    I've also found the worst time to buy stocks is during the am. If you are looking for a low price, wait until later in the day. Some days, we see a plunge during the last hour of trading.

     

    I've also noticed that day traders start dumping their positions around 2 pm....in anticipation that they will get an even lower price if they hold past 3 pm. Normally on Friday, you see many stocks fall as traders don't like to hold over the weekend.
    28 May 2014, 10:38 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    The market is reacting to positive economic news announced in the prior weeks regarding PMI data, ISM data , etc..

     

    For the sake of brevity a lot of that was in my market updates in the last 2 weeks .

     

    The dow transports making new highs and the rail traffic numbers are also telling ---in that they do not see economic weakness ahead.

     

    S & P at new highs - the nasdaQ has firmed up , the (RUT) appears to have put n a double bottom --

     

    Not saying we are going to the moon here - In fact , i see that the S & P is overbought on a "short term" basis ..so a trade down to the lower end of the S & P trading range can happen at any time.. and would not be a shock or surprise ....

     

    but In my view it will take an "event" which is not on anybody's radar screen to cause major damage to the indices from here..

     

    As the days rolled by in May ,, the "sell in May crowd" , became frustrated (once again) and the hedge funds that were short -- expecting a correction were also caught ..

     

    When i see and mention stats that say Hedgies are short the (RUT) at record levels -- The price action we have seen in the last few trading days should come as no surprise..

     

    Now if all of these guys now decide to chase -- ???
    28 May 2014, 12:09 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    F&G, I agree with you that to me, the economy is slowly getting better. But there is a big group that continues to believe we are headed for disaster. Their head cheerleader is that screamer on CNBC, the Chicago bond guy. Today he screamed about Europe. And some other stuff. If he would stop screaming, maybe I could listen better....really hate it when he & the CNBC economist go after each other.

     

    I like the ticker on CNBC. Sometimes, the volume gets muted because the talking heads get too annoying.

     

    Many are taking a little off the top today. Could be a good idea.

     

    There is a view about life that whatever you think will happen, eventually does. It requires that we all agree, for the market to go over a cliff.

     

    Fortunately, there is plenty of disagreement at the moment.
    28 May 2014, 12:52 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    BSF:

     

    Forget all the useless blather on CNBC. It's all entertainment to attract viewers and sell advertisers.

     

    As regards the markets, as long as there continues to be a major fear preference for non-equity assets (cash, bonds, gold, etc.), we're on nice solid ground. As bbro (a good SA source of random facts) recently pointed out, there is presently $7.4 trillion residing in bank and money-market accounts, earning zilch. This isn't the sign of an over-exuberant, euphoric market.

     

    And, it's turned out to be major plus that the economy keeps expanding at a slow, boring rate, rather than getting all fired up at 5% or more. If that happened it would get investors all overly excited, and neither the economy nor markets could sustain the results. In contrast, this ever-doubtful, turtle-like pace can extend a long time.
    28 May 2014, 01:01 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Turtle pace - sounds like me : ) and yes, boring is good. If we did get that dizzying 5% GDP growth, look what would happen to interest rates, inflation, etc. Much better to go slow.

     

    Absolutely, CNBC is for advertising. But it's awful quiet here at home....just me & the dogs.
    28 May 2014, 01:15 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    The penny stock volumes; --- up 40% Y/Y to new all time highs --- among a ton of other indicators, make the case that the market has a predominant fear based preference unlikely.
    28 May 2014, 01:21 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    M, could it be that penny stocks attracted more $ because some investors have decided regular stocks are too high for them & they don't like bonds? To me, penny stocks going up means these are people that are willing to take on too much risk. Great place to lose money, IMO. Meanwhile, they probably would be better off in a mix of stocks & bonds.

     

    "get rich quick" hardly ever works & never has for me.

     

    My favorite guy on CNBC is the trader named Josh. The other day, he was telling people "stay out of penny stocks." Good advice.
    28 May 2014, 01:29 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    BSF;

     

    But Tack is telling us the whole market is preferring fear based investments. I don't understand how this can be when penny stock volumes are at all time highs, far beyond 2000's.
    28 May 2014, 01:35 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    Blue,,

     

    I use the talking heads on CNBC as just another point of information.. as long as u have a scorecard and know who the players are - and their respective takes on the markets.

     

    BTW - there are some personalities there that have been very accurate regarding the markets..

     

    The "Chicago Guy" is Rick Santelli - he has been on the wrong side of the equity trade for years.. FWIW - he is the ultimate fed basher.. Anyone following him has been on the sidelines throughout ....

     

    For me its another form of entertainment-- and can be a bit of a sentiment indicator--

     

    the majority of folks that were rolled out from the first week in May on, had a negative bias and were all calling for the elusive correction in May --

     

    so much for that..
    28 May 2014, 02:44 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    FG;

     

    If the market is reacting as you say, why is the 30 year going to the moon here?
    28 May 2014, 12:11 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    You just have your nose too close to the ^TYX chart. Step back and examine a two-year chart and you see that ^TYX spiked off its nice trend line, as last year's tapering hysteria occurred. Now, that's all been shown to be 100% bogus, and ^TYX is regressing back to its trend line.

     

    http://yhoo.it/1r7RCJn;range=1y

     

    It's not some dramatic evidence of weakness; it's just a boring adjustment.
    28 May 2014, 12:35 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    I disagree with this assessment.
    28 May 2014, 01:18 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    M,

     

    its seems that the prevailing theory out there is that "something has to give" and bonds are surely telling us something.. because stocks & bonds are rising .

     

    thoughts from my blog on 5/18

     

    "Some people have a misunderstanding of the correlation between stocks and bonds. They aren't perfectly negatively correlated, which would mean one rises when the other falls. Stocks and bonds have close to a zero correlation historically, which means there is basically no relationship in their movements."

     

    "So they can rise together, fall together or move in opposite directions with no real pattern. In fact, on average, they have risen together more than not."

     

    "These are the percentages of time that the annual returns from the S&P 500 and 10 year treasuries rise in the same year by decade. Nearly 60% of the time both stocks and bonds rise in the same year at the same time."

     

    "So one can draw the conclusion that Stocks and Bonds can rise together and maybe "nothing has to give " and bonds aren't telling us anything at all. "And so the "wall of worry" goes on --

     

    I'll take my cues from earnings, PMI, ISM data, and the many other positive economic data that I have seen and mentioned . I haven't had to look too far to gather all of the positives i have mentioned in the last month .. the data is out there.. I believe it is why the S & P is at 1900....
    28 May 2014, 12:39 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    FG;

     

    You are correct but there has been a fairly steady negative correlation for most of my trading career.
    28 May 2014, 01:27 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Not everyone buys the same investments. Some hedge funds shorted bonds, one explanation of why the 10 year yield is so low - short covering.

     

    A lot of people moved into bonds, anticipating that stocks would fall off a cliff. It didn't happen, but with so many buying bonds, yield went down as the price of the bond went up. I'm not buying bonds until the par value gets way under 100. Might be awhile, before that happens.

     

    Meanwhile, where to put your $? Penny stocks went up. Wow, that's crazy - penny stocks are now over valued.

     

    The hedge funds are having a tough time. Nope, no sympathy from me! Makes me happy : )

     

    Stocks are going up, because there still are some undervalued investments. Utilities....financial... sense they are getting bought. Even the under appreciated, often sneered at traditional DGI stocks.

     

    Yes, some stocks are over valued. We had a nice correction in March. Now some of these stocks are attracting investors again,
    (TSLA) (PCLN) (GOOG) etc. even (WDAY).

     

    Do your due diligence...many companies are not worth buying, even after getting beaten up.

     

    There will always be stocks out there that can be shorted. It's tough though, IMHO harder to short than go long.
    28 May 2014, 12:40 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Toll Brothers just reported blow out numbers.

     

    They can't build 'em fast enough.
    28 May 2014, 12:56 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    BSF;

     

    Really. And what do the weekly mortgage apps say?
    28 May 2014, 01:22 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    One reason (TOL) is doing well is their homes are more upscale. Lots of people are retiring, moving into 55+ homes & (TOL) has some of the nicest new construction. Here in NJ, their homes would be my top recommendation, because of the quality, location(s) etc. Plus (TOL) builds all over the US.

     

    After selling their old home, these older buyers often pay cash for their new retirement home. No mortgage required.

     

    I don't get too concerned about mortgage app numbers. Mainly because for young people, it's better for them to 1) live with mom & dad for as long as possible 2) rent rather than buy, because they don't have the financial resources yet in order to buy 3) often, renting is better than buying a home, if you are young & likely to move in a few years.

     

    Then for many people who would like to move, they can't because they are underwater in their current home. And they don't have the $ to pay off their current mortgage, then put 20% down on the new home.

     

    I've seen the volume of homes being sold here in Holmdel, NJ go down a lot. But you know, before the crazy real estate days 2002 - 2007, the number of homes sold each year used to be very low. So we are just getting back to normal.

     

    Comparing housing #'s to what we saw during the real estate mania years is often not realistic. In fact, it may take another decade before we see mortgage apps go back to what they once were, if ever. As always, all real estate is local. Every market is different....from Miami to San Francisco to Indianapolis etc.

     

    In my world, low mortgage apps is actually good.

     

    As a former realtor, wayyyyyy too many people bought homes during the real estate insanity years. They fell for the "no money down, cash back at closing, interest only payments" and the worst "no income verification, don't worry about your 10% mortgage interest" etc. pitch. We all know where that insanity led. So in my honest opinion, these people should never have bought homes they couldn't afford. Then the house dropped up to 50% in value.....they lost their job....or had health care problems (more people declare bankruptcy because of medical bills) it just all went bad.

     

    Some people listened to me & resisted their mortgage guy's sales pitch. Others just got a new realtor.

     

    You can disagree with me, it's okay. I really only know the housing market here in the part of NJ that I live in.

     

    House prices have actually gone up too fast here. However, as the young people in NYC decide to start families, they will start moving to the suburbs which will spark our market some day.
    28 May 2014, 01:54 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    One more issue is that nobody is re-financing right now.

     

    Likely they did that already. You would not believe how many people own their homes outright. Over 25%, even higher in places like Iowa.

     

    Another reason mortgage apps could be declining, especially when you look at y-o-y data.

     

    M, you really need to stawp (NJ accent, sawry) looking at the data : )

     

    Really, things in NJ have been bad for a long time. But recently, we are starting to do better.

     

    If enough people leave NJ, maybe our auto insurance rates will go down. If schools have less students, we might see property taxes drop.

     

    Less people, less problems.
    28 May 2014, 02:02 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » -

     

    - Good thing I didn't have any trades in the works. ...been without power since yesterday. Oddest thing, one line of outlets isn't working, but the fuse didn't blow. Guess the whole painted-in fuse box will have to come out to replace that fuse.

     

    CWinn's info on housing doing well, seems quite solid.

     

    Penny stocks going up is curious while defensive stocks with dividends were up and RUT was down. ...could new investors be dipping in and newbies tend to get interested in penny stocks?
    28 May 2014, 02:04 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    I confess to frustration -- that word -- because in spite of the divergences, there is neither selling pressure nor any buying interest. IMO QE is still a dominant force and why the market, IMO, is way ahead of both the economy and revenue growth.

     

    Certainly the economy did not increase 32% last year.

     

    Those who point to tapering are ignoring the fact the Fed has indicated they will likely reinvest maturing bonds, making that further perpetual QE. In addition Fed speakers have indicated they are watching asset prices and will "not allow" any significant weakness to develop. In addition we have the ECB about to start their own QE. Japan is doing QE. It's everywhere and forever it would seem.

     

    The Central banks has outlawed corrections, the natural ebb and flow that is normal for markets. I throw up my hands as its very risky to me to overpay for assets because the Fed says so. All asset classes are expensive based on GDP and revenues.

     

    However if we muddle along at 1-2% per year, this could continue for a long time. If the economy dives stocks will go down, if the economy takes off hard we get inflation and stocks and bonds go down.

     

    Until then central banks are in full control of valuations.

     

    It is what it is and volatility will not return and associated opportunities for my style, until the CB's get out of the way.
    28 May 2014, 11:47 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » M

     

    There is a confounding factor to the market that the Fed is monitoring and making sure there isn't a "fear inducing" type of drop to the extent they can control that. It does seem to change the natural ebb and flow.

     

    You have an interesting observation. If currently it's set up so that assets will climb (they're the only game left in town with ZIRP around)... as some point will the opposite be true where this supported gain will be paid for? With inflation, and equaling expensive asset classes?

     

    Tack & FG make good points, that have been in the right direction to before.

     

    While we may get out of this scathed, it could take a long, long time. Or by then the economy could have caught up to valuations. Which is the Fed's hope, I believe. Either way, assets are propped up.

     

    I'm with you, that it makes for an uncomfortable situation at this point.
    29 May 2014, 09:26 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    "...Fed has indicated they will likely reinvest maturing bonds, making that further perpetual QE..."

     

    That is not more QE. That just means that they will sustain the existing portfolio until such time as they wish to draw in capital in a tightening move. If they failed to roll over maturing bonds that would be the same as tightening, and clearly the Fed has no intention to tighten at this time, even if they are winding down further monetary expansion via tapering.

     

    Also, contrary to suddenly-popular thinking, stocks do not decline in early stages of inflationary markets; they rise, even while bonds decline. At some point the degree of rise may lag inflation, but they won't go in reverse until such time as the Fed would dramatically raise rates. Just to cite and example, from 1975-1981, when inflation was roaring, the SPX increased 84%.
    29 May 2014, 12:09 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    M,

     

    I appreciate your thoughts - however when i'm faced with answering the same concerns you present from colleagues, friends, etc..

     

    rather than go into a lengthy discussion , embracing or admonishing Central Bank policy, or trying to "outwit" the PHD's that are in charge -- - my simple answer -

     

    Play the "hand that you are dealt" , because that is what i am doing.. & I'm no PHD.

     

    & now I just realized I have been saying that since early 2010 ... some 900 S & P points ago..

     

    as those same questions , concerns are still being presented to me, today ..
    29 May 2014, 08:57 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    FG;

     

    Playing the hand you are dealt is always wise advice!!!

     

    However -- and perhaps my bias -- haven't valuations on a variety of metrics changed substantially from 2010?

     

    Certainly the economy has not improved 900 SPX points worth -- at least yet. Look at today. an (expected- negative print), immediately discounted and next quarter estimates raised. Weather or no weather -- should we be seeing a negative print at this point?

     

    What I am reading; contrary to your heard concerns; is folks feel they Have to invest -- TINA logic. (There Is No Alternative).

     

    Its a liquidity bull -- but getting more and more stretched, IMO. Obviously I'm having difficulty with it at this stage.
    29 May 2014, 09:25 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    M,
    TINA - absolutely agree ,and part of my thoughts of "playing that hand"..

     

    your point is well taken about the 32% gain last year in the market - with a 7% y/y earnings gain-- an example of pe expansion for sure..

     

    Up until this latest rally the market return was flat and that might suggest a function of allowing earnings growth to catch up to the index appreciation.

     

    I am now looking at the possibility of 9-10% y/y earnings growth this year as an example of how the S & P might meander around here as earnings do in fact "catch up" . and then your concerns of the market being "stretched" may be lessened .

     

    The negative GDP print was widely anticipated - so I can see how the market has shrugged it off as its in the rear view mirror.

     

    However, if we get a disappointment, we surely will see things come back in line ... If the market continues to grind higher and we get an "In line" 2Q GDP print - I can see the market selling off on that news , leaving everyone scratching their heads..

     

    I'm not forecasting or expecting this ----BUT if we get an increase of one point in the PE ratio this year it represents 200 S & P points.. I believe before this is all over we will in fact see a PE multiple higher than we are today as the last stage of euphoria takes over-- & IMO I don't believe that is just around the corner..

     

    I have no crystal ball either, so for now - i will also meander along looking to where i can garner 10-15% on an intermediate holding- & continue to write calls for income.. 
    29 May 2014, 11:04 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    F;

     

    Market simply is ignoring both some of the economy and technical. Again we have a troublesome housing data point, again home builders and retail struggle -- and banks churn, another new relative high treasuries -- and again markets ignore it. (it is month end though).

     

    Housing is a reliable market and economic leading indicator, Home builder stocks have struggled for over a year now.

     

    Whats leading today? Utilities, Telecom, healthcare. Again. And Oh the expensive MOMO stocks -- NFLX -- back to 410! TWTR, YELP, and speculative stuff.

     

    It's not a healthy mix.
    29 May 2014, 11:23 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    M,

     

    we are stretched a bit here in the short term and i could see a 40-50 point drop in the S & P just to cool things off ...

     

    I'm looking at some of my covered call positions which are now ATM or slightly ITM, most of these are "weeklys" and this morning I was contemplating rolling them out a bit.. " the greed factor "-- LOL

     

    Usually when i get those thoughts the market is about to take a breather.. :)
    29 May 2014, 11:33 AM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    Tack: Problematic inflation is not a positive for stocks which is what you are suggesting with this statement:

     

    "Just to cite and example, from 1975-1981, when inflation was roaring, the SPX increased 84%"

     

    You are starting the period after a catastrophic stock market decline.

     

    The S & P 500 declined from 119.87 on 1/1/1973 to 62.34 on 9/30/1974 or about 48%.

     

    Why not measure the S & P 500 from that 119.87 closing number on 1/1/1973 to the 103.71 close on 8/2/1982?

     

    The appropriate number would be real S & P 500 numbers with dividends reinvested.

     

    Between 1/1/1966 to 12/31/1981, the annualized return of the S & P 500, adjusted for inflation and with dividends reinvested, was a -1.04:

     

    http://bit.ly/vFOfUm

     

    Between 1/1/1973 and 12/31/1981, the annualized return of the S & P 500, with dividends reinvested and adjusted for inflation, was a negative -3.79%.

     

    ********

     

    So far, the market is taking the -1% first quarter real GDP number in stride. That number is much worse than I would have expected even from the weather induced impacts on the economy.
    29 May 2014, 09:02 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    SG;

     

    The market continues to give the economy multiple mulligans.

     

    I think we are very late stage here at least cyclically, but I hold no crystal ball.
    29 May 2014, 09:27 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    S:

     

    "Tack: Problematic inflation is not a positive for stocks which is what you are suggesting with this statement:"

     

    The early onset of increased inflation does not set stock values scurrying for cover. Stocks are merely proxies for the prices of goods and services in the economy, and if they rise, and as long as economic activity remains positive, stock prices will rise, too. Of course, some asset classes (usually, real estate, energy, commodities, etc.) will do far better than others.

     

    Stocks get negatively impacted when the Fed decides to tamp down whatever level of inflation that they may consider excessive by raising interest rates to the point where the economy is intentionally negatively impacted. My point was and remains only that inflation in and of itself does not send equity prices running for the woodshed. There could well be an ample period where equities rise while bond decline.

     

    29 May 2014, 10:59 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » --

     

    Jobless rate seems improved quite a bit to 300k, 317 expected.

     

    GDP Q1 was revised a quite a bit -1% vs. -0.5% expected, (+0.1% previous.)

     

    Has growth slowed down this year from last?

     

    I liked one person's comment:
    "I think the plan is to make the first quarter sound as bad as possible so that the growth looks so much better ahead, ie, kinda like a "kitchen sink quarter". Is this an election year by chance??? "
    29 May 2014, 09:16 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » -

     

    The economy hasn't growth 32% last year the way the market did. But since the 2008-9 crash, has the economy recovered by the amount the market has climbed?

     

    In other words does the high price climb sound out of touch, but actually makes sense because of how much valuations fell during the crash?
    29 May 2014, 09:29 AM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    LMH: Numbers need to be placed in context. For example, the government reported today that the 4 week moving average of initial unemployment claims fell to the lowest level since August 2007. That appears to be a positive data point and consistent with the numbers in prior economic expansions:

     

    Long Term Chart: 4-Week Moving Average of Initial Claims
    http://bit.ly/UO7THj

     

    But the labor participation rate has declined significantly too and the long term unemployed who are still searching for a job remains at high levels:

     

    Civilian Labor Force Participation Rate
    http://bit.ly/sBiT0v

     

    Average (Mean) Duration of Unemployment
    http://bit.ly/1k3ZxJa

     

    Number of Civilians Unemployed for 27 Weeks and Over
    http://bit.ly/1k3ZxJc

     

    Prior to 2008, the S & P 500 had peak earnings at 96.14 in May 2007 and the number had grown only to 101.93 by December 2013 (12 month E.P.S), or about a 6% increase according to this website:

     

    http://bit.ly/PkkL82

     

    But when measured in the foregoing time frame, the S & P 500 has gone up only about 20%. That index closed at 1848 on 12/31/2013 and at 1531 on 5/31/2007 or about a 20%.

     

    Interest rates are another component relevant to stock valuations.

     

    In May 2007, the ten year was hovering at 5%, closing at 4.9% on 5/31/07, about twice as high as now.
    http://bit.ly/WGQM6i
    29 May 2014, 10:16 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    The Dow was at 14,000 back in October 2007....today it's 16, 650 at 12:07 pm.

     

    After 7 years, even if 2007 was over valued, I don't think the Dow is too high. 17,000 could be hit before this year ends. Most of the Dow stocks are still under valued.

     

    There will be ups & downs to come. The turtle pace really is the best....hard for some but great for many. Low interest rates actually help business in the long run. Who wants inflation? Inflation hurts everyone, especially the poor.

     

    Consider where technology has gone since 2007. We are innovating ourselves into the future. The one drawback of new technology is that it does tend to put unskilled people out of work. OTOH, all this innovation is getting us ahead of the rest of the world. Whether you like it or not, the US leads the world when it comes to innovation.

     

    (TSLA) (WDAY) (CRM) (CNQR) (PANW) (FEYE) (QCOM) (AAPL) etc. most are headquartered in Silicon Valley, CA

     

    Of course there are companies advancing technology other than in the US, just not as many. (SSYS) is one. They employ people all over the world, even in Minnesota! It's informative to look at their website for career opportunities

     

    http://bit.ly/1k4lKH4

     

    Another exciting field is biopharmaceuticals. (REGN) (CELG) (GILD) (NVAX) (ICPT) etc. Thankfully not all of these companies are in California.

     

    Many other companies in the US continue to expand worldwide. (KKD) (MCD) (SBUX) even (DPZ). (PG) (MMM) (JNJ) (MCK) too.

     

    The tragedy is the third world, countries that have growing populations but limited opportunities.

     

    We really don't have any big problems in the US, Canada, most of Europe - and we are very fortunate indeed.

     

    Perhaps we should worry about the future of the Third World more. Helping them modernize, although difficult, might insure our own future. How much richer will we get? Will the less advantaged ever get richer? Hard to say. At least in the US, you can still start out poor but get to a better place thru hard work. Even if you come here from a foreign country. The American Dream is still happening...which gives people all over the world their own dream of obtaining success.

     

    **********************...

     

    Although down today.....(WDAY) continues to build its customer base

     

    http://bit.ly/1k4lN5J
    29 May 2014, 12:18 PM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    BlueSky: Based solely on the P/E multiples, using TTM as reported earnings and forecasted operating earnings for the S & P 500, the market was not overvalued in 2007. The problem was that the earnings were not sustainable based on what was generating them, which included the housing bubble and all of the economic activity connected with it (and the anemic new home starts is a reason for the current slower than normal recovery). The earnings of financial institutions in particular were distorted by that bubble and the innumerable financial schemes concocted by them that ultimately almost undermined the world's economy making their pre-2008 profits more than illusory on a net basis.

     

    The current earnings are more sustainable and are consequently of higher quality in my opinion.

     

    An array of historical S & P 500 numbers can be downloaded from S & P's website that breaks down the data into years and quarters, as well as into sectors and into "as reported" earnings and two sets of forecasts for operating earnings (top down and bottom up).

     

    I can not link that data series but a search yielding this phrase will have it as the first entry:

     

    "XLS Reported Earnings-S & P Dow Jones Indices"

     

    Using that data, the TTM as reported earnings was $84.92 as of 6/30/2007 and the forward operating earnings for the S & P 500 was 91.47. Based on the closing price of 1503.35, the TTM GAAP P/E was 17.7 and the forward estimate was at 16.44. Those numbers are lower than the ones for the 2013 4th quarter.

     

    The DJIA would have had lower P/E multiples.
    29 May 2014, 01:02 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    SG, it always comes back to earnings. And future outlook, which does worry me. I keep checking my portfolio, trying to see if it's a good idea to sell a few shares; or add some shares. Not doing much of anything right now.

     

    Looks like we will have a "melt up" situation for awhile. At least until there is some data showing that the economy is going down. If the GDP number for 2nd Q is good, & the employment number is good....well we shall see. When Q2 earnings get reported, that will continue the tale.

     

    Meanwhile, it's a wait & see kind of market for me. If we get any future dips, I'll be buying. The more shares I can accumulate, at lower prices, will help me generate more future dividends. The overall value of my portfolios doesn't concern me as much; although it is nice to be up. Increasing income is my goal now.

     

    Long term, I am an optimist. Short term....that's the tough part.
    29 May 2014, 04:40 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    SG, that is interesting about the S&P historical data, thanks for posting it.

     

    I remember back in 2007 not being too worried about anything, as I was working all the time. Didn't pay much attention at all to the markets.

     

    Well that was a mistake. Although from even before 2005, I thought the real estate market was totally nuts (20% appreciation year after year, not normal) never thought it would fall as much as it did, and that we would have the financial crisis blow out either.

     

    Without all that Fed intervention, I'm sure we would be looking at a worse situation today.

     

    Imagine the run on the banks, the unemployment going up to 25% (like after 1929) and a long, harsh depression.

     

    To me, the Great Recession was bad enough. We are recovering, slowly. I'm one of those people that is satisfied with the slow recovery.

     

    And I happen to like low interest rates. Many businesses have managed to refinance their debt or totally clear off their debt during the past 5 years. Look at homeowners that refinanced. Lower interest rates on mortgages has helped many to enjoy extra money every month.

     

    I guess more people are actually saving, then spending. Maybe they learned something about reckless spending, not incurring huge credit card debt, etc. Saving $ is a good thing. Not something most Americans are good at.

     

    Then there are those investors that are looking at their phat retirement portfolios, and retiring sooner. That might help explain why so many are retiring, every week.

     

    Things are actually pretty good. Some still have a ways to go, but we are finally seeing some brighter days ahead. I see more people eating out, more are taking a vacation this summer....lots of jobs are out there, just have to move to Texas or San Francisco, the Dakotas....it isn't all bad.
    29 May 2014, 04:56 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    South , Blue,

     

    I believe i posted this earlier here in this blog .. -- the Dow components are not overvalued at all

     

    http://on.barrons.com/...
    29 May 2014, 05:08 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Thanks F&G, wow 2015 PE ratios even lower....this is exactly why Dow 17,000 is going to happen.

     

    It's not going to be a cruel cruel summer....not at all.
    29 May 2014, 05:27 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » - The Dow's been behind since I bought it earlier in the year. I'm not surprised it's not as bloated ... so to me the question is whether the SnP overvalued.

     

    Does that difference in their recent past DOW vs SnP seem true?
    29 May 2014, 08:01 PM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    OK, so you guys talked about solar before, can any elaborate on the investment thesis there or add any info on individual names?
    29 May 2014, 01:03 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    BC, solar is full of companies....some are doing better than others. (SCTY) is down & poised to have a little rally; however there are many that believe this company is no good. (FSLR) may be better.

     

    Off the top of my head, best thing you can do is read some articles here on SA; google the company name so you will see what other info is out there.

     

    It all depends on what kind of investor are you....long or short term. I believe solar is going to be very successful in the coming years. (FSLR) may be a better company, but SunEdison & others are worth looking at. (SCTY) has an interesting business model, they lease the system back to you, no money down. Some believe you should own your system - but that will cost $20,000 or more. Then there's the question of maintenance.

     

    http://seekingalpha.co...

     

    Good luck!
    29 May 2014, 04:25 PM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    BC: With increasing environmental costs associated with energy produced from coal, more utilities will retire older coal fired generating stations. It has gone from bad to worse for utilities operating coal plants:

     

    http://nyti.ms/1mwnOVw

     

    Possibly, some of these burdens being imposed by the current administration will change when and if a Republican is elected President. Hard to say now whether that will happen.

     

    Some nuclear stations have even become uncompetitive as shown by the recent PJM auctions where 3 Exelon nuclear stations were priced out of the auction.

     

    http://bit.ly/1mwnMNl

     

    Utilities are not moving in a big way toward replacing older coal or nuclear plants, which will be retired, or meeting new demand, with solar energy.

     

    I understand that Barclays has a different opinion. I do not see solar generation, and storage of that power, replacing baseload energy requirements in anywhere close to the time frame anticipated by that firm.

     

    "Based on our analysis, the cost of solar + storage for residential consumers of electricity is already competitive with the price of utility grid power in Hawaii. Of the other major markets, California could follow in 2017, New York and Arizona in 2018, and many other states soon after."

     

    http://bit.ly/1id3ypa

     

    I can see that happening in Hawaii that has historically depended on oil fired baseload generation.

     

    http://bit.ly/1mwnMNp

     

    The trend throughout North America now is to build large gas fired generating stations to provide baseload requirements.

     

    I noted a couple of weeks ago in comments here (exchange with Macro) that gas turbines have traditionally been used sparingly to meet peak load. The newer turbines are becoming cost effective to provide baseload, that is, the base power requirements needed 24/7. This will require a lot of natural gas.

     

    That trend favors MLP's that transport and store natural gas and natural gas producers to a lesser extent.

     

    If I was going to play this theme, I would go with natural gas ideas first and then look for a "clean energy" ETF that combines both wind and solar names.

     

    There appear to be several of those including this one from Ishares:

     

    http://bit.ly/1mwnMNq

     

    I would not try to pick an individual name in this sector unless I first spent a lot of time learning about the technology which probably would not give me much comfort in making a selection given my severe knowledge limitations involving science and technology.
    29 May 2014, 04:48 PM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    SG - Yes, I had the sense that solar did not make sense for power companies, but it does seem that consumers are getting lots of panel installed. I've also seen some power companies do a deal where consumers who get solar can share some of that with the power companies and in return get compensated (presumably for help with peak loads during the middle of the day). It sounds like what you are saying is that natural gas will fill that peak demand role. I had read a long while ago (maybe a few years?) about how coal was slow burning and more suited for 24/7 power generation whereas natural gas was only for peak demand, but based on what you are telling me, natural gas can be 24/7 due to newer turbines. That is interesting. Thanks for the analysis.
    29 May 2014, 05:09 PM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    BC: I do not see any trend around here for home solar panel installations. There are none in my subdivision at all, just as an example. Many of the ones installed by homeowners are small, probably adequate on sunny days to keep the water heated and to power some light bulbs.

     

    I looked at a chart of 2013 annual PV Capacity Additions, and most of the new solar capacity originates in a few states and most of that capacity is built by utilities.

     

    http://bit.ly/16pEaad

     

    In 2012, I read that rooftop installations hit 488 megawatts:

     

    http://bit.ly/1mwIXPn

     

    An average size coal plant produces more MW. A 500MW plant could provide power for about 375,000 homes. The heavy users are industry and commercial buildings.

     

    Gas turbines are becoming more competitive to coal due to new technology and to the tremendous environmental costs associated with pollution control for coal plants. Those environmental costs have escalated over the past several years and will likely become more onerous soon.

     

    The new technology is broadly labelled a combined cycle power plant that features gas and steam turbines.

     

    All types of data can be found at Electric Power Monthly, published by the government:

     

    http://1.usa.gov/GWcJ0B

     

    For new power plant additions in 2013, 6,861MW was natural gas fired and 1,507 was coal fired.

     

    http://bit.ly/1mwJ11z

     

    Just some recently announced plans:

     

    "Duke Energy Florida seeks okay for 1,640-MW power project"

     

    http://bit.ly/1mwIXPr

     

    "Indianapolis Power & Light to retrofit coal-fired plant to combined-cycle, natural gas facility"

     

    http://bit.ly/1mwJ11B

     

    Dominion holds official groundbreaking for natural gas-fired power plant
    http://bit.ly/1mwIXPv

     

    "Duke Energy Florida to retire coal-fired units, invest in combined-cycle"

     

    http://bit.ly/1mwJ11G

     

    GE is one beneficiary of this trend:

     

    http://bit.ly/1mwIXPy

     

    "GE Launches Breakthrough Natural Gas Turbine for Baseload and Fast Ramping"

     

    http://bit.ly/QBaFAz
    29 May 2014, 06:51 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    BC,

     

    One that has my attention is (FSLR) - i have no position - TTM EPS is $4.15 -- PE is 15 ....

     

    I will be doing more research on that name .. I need to get educated on that entire industry.. and write a blog post or an article on it..
    29 May 2014, 03:58 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » -

     

    Someone on SA that keep in touch with, wrote to me about solar... and I thought useful insights.

     

    ---- "The business is growing, but the competition is growing faster; good for users, not businesses. I was researching them with the intention of installing an electrical solar system, and what I realize now is that the biggest and best prospects for gain probably will come from the development of more efficient technology -a breakthrough, so to speak, in collecting photons. As I recall, the current efficiency of harnessing the incoming energy is well under 10%. A new concept like SNDK's flash memory replacing the hi-speed hard drives' energy driven wear-inducing moving parts technology. The solar collecting break-through could come from any chemistry-centric business, even Drug companies, so it's hard to know where to look." ------

     

    It made me think twice about jumping into solar. At the least I'd want to be in a big enough company that they can and would be motivated to buy out any new tech ideas that come along. Or maybe stick with (TAN) so it picks up whatever is the next big one.
    29 May 2014, 08:00 PM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    LMH: The first article which I linked in my prior comment was from the "Solar Energy Industries Trade Association" and that association made this comment about the solar companies:

     

    "The average price of a solar panel has declined by 60 percent since the beginning of 2011.
    While these price drops are beneficial for solar consumers, the sharp fall in prices, due in part by a global oversupply, has put a serious strain on solar manufacturers worldwide."

     

    The data goes through the 2013 third quarter.

     

    http://bit.ly/16pEaad

     

    Now, those statements are being made by the trade association for the solar industry.

     

    29 May 2014, 08:48 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » SG

     

    Very interesting. When it's coming from the trade itself... that's news. I still think solar will perform, but currently it's at the sorting itself out stage.

     

    ...and it may never be priced well at the time that it's possible to pick the right company with good potential. The key as I understand it, to finds, are having information or insights that aren't well known. This is an industry that's been paid a lot of attention to.

     

    On the other hand... maybe it'd be good to get in... and ride it out over the long, long term for when it does start to improve... All I know is (TAN) is too high for me at the current price. And if margins are pressed, there's more sorting out to do...
    29 May 2014, 09:07 PM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    LMH: I bought and sold TAN several years ago. That ETF underwent an ignominious 1 for 10 reverse stock split in February 2012. Adjusted for that stock split, the price went from $295 in 2008 to $41.88 today. Maybe better times are ahead for this industry, but solar stocks have been a widow maker since TAN's IPO.
    29 May 2014, 09:16 PM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    I am using the rally to shed some underperforming stock CEFs. I pared one today.

     

    As a temporary holding pond for funds raised this week by selling lower yielding securities, I bought 200 shares of JPI (100 shares in both Roth IRA accounts, where I turn the taxable dividend into a tax free one).

     

    It will be two or more weeks before I discuss this CEF in my blog, and I will just briefly discuss it here.

     

    This one is a term CEF. This fund intends to liquidate on or before 8/31/2024. The leverage adjusted duration is 8.01 years. As of 3/31/14, credit quality was weighted in investment grade securities (52.9% at BBB, 12.3% at A, and 3.7% in BBB, with most of the remainder in BB) The market price went from $26.38 on 5/8/13 to $21.77 on 12/12/13, in response to the spike in rates last year. The net asset value per share went from $26.29 to $24.51 during that same period. Unadjusted for dividends, the market price declined 17.48%, while the net asset value per share went down 6.8%.

     

    Today, the shares closed at $23.38 with a net asset value per share at $25.52, creating a discount of -8.39%. The distribution yield at that price is currently 8.1%, payable in monthly installments of $.158 per share.

     

    CEFConnect Page:
    http://bit.ly/1hDIF6v

     

    One of my buys was at $23.38 today, and the other was made a few cents lower earlier this week.
    29 May 2014, 09:00 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    http://bit.ly/1pr8ka9

     

    Please take note. I believe this is a problem. It may not be "2008" but it sure feels a lot like "2007" all over again.
    30 May 2014, 08:42 AM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    Macro - I'm not sure what you're trying to link us to there. It's funny because just last night I was reading Josh Brown and thought I found some good red meat for you in the form of this link:

     

    http://bit.ly/RKrlpm

     

    Is that what you were intending to post?

     

    I'm wondering if you think about shorting a Splunk here? Or if you have any other surgical shorts? The above link makes me want to short XHB a bit.
    30 May 2014, 10:01 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    I read Josh Brown's blog every day as I believe it offers a fair and balanced view of the markets

     

    My takeaway is the conclusion

     

    "That is not to say what happens next will play out in the same fashion this time around as it most certainly will not. "

     

    "In the end, 2007 was still an up year for the markets , but whether investors knew it or not, they were incurring a large risk for only a few percent reward"

     

    If we now put things into perspective and context , the investor who has participated in the bull run to date has made a nice return to say the least..

     

    Even IF this scenario plays out these type of scenarios attempt to suggest that the same investor who has huge gains will give them all back in the next horrible correction..

     

    Its a fallacy..

     

    There were signs both technical and otherwise then and there will be technical signs once again IF and WHEN the primary trend changes..

     

    Risk is part of the investment landscape.. as far as the "risk" for a few percent comment ----- I can go back and look at my own writings here on SA and point to countless articles , etc that made similar comparisons or suggested the reason that we are at THE top.. They were being rolled out at S & P 1700 , S & p 1800 .... I read and was told by many here on SA that it wasnt worth the risk for a few percent ------- Now, 220 points later .......

     

    Its always Ok to be cautious.. but as the great Peter Lynch said - "one can incur more losses preparing for a correction than the actual correction.."

     

    Many investors have done just that all during this bull market..
    There are plenty of opportunities with the market rotation we have seen to trade and invest at these levels using the PRIMARY trend .. rather than go into a turtle shell.
    Plenty have been discussed here .. (MU) is up 30 % while the market is up 2% in the same timeframe.. (GILD) up 15% in the same period ... These can be trimmed or sold depending on one's timeframe.. all adding to the prior market gains..
    Many others like those two examples.. 
    30 May 2014, 10:54 AM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    FG - I am not really bearish here, don't get me wrong. I was just catering to Macro with that link to get his reaction. I'm sorry if I gave the wrong impression.
    30 May 2014, 12:04 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    BC, & Macro

     

    No, my fault,, i should have put in a note that my words & feelings :)

     

    were aimed at the article itself and other articles that have sent the same message over the course of the bull market..
    30 May 2014, 12:11 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » FG, BC

     

    In 2007-2009 - even I knew something wasn't right. Many conversations with friends about the public racking up too much debit; banking & business being too obscure and you didn't know what was going on in there; and we all were living a cushy life on the backs of developing countries and it felt like borrowed time.

     

    I wasn't looking at the market at all. I had no idea that market was going to crash. However, if we who weren't used to following economics, we feeling concern, there were indicators. No idea if there were classics for the market, but the overall economy felt like it "couldn't fail" (i.e. complacency in the extreme), at the same time as showing lots of credible signals.

     

    I will say this last crash was different. It was less about overvaluation, and more about underlying corrupt process happening (lending practices -- and overvaluation in housing.)

     

    I'm not trying to be bullish or bearish here. Just adding observations about right before the last crash.
    30 May 2014, 12:29 PM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    FG - Indeed. I hope most people can look at arguments such as "a calm before the storm" and see how little substance there is. If you can't find data to support a bear case, then I guess you have to appeal to vague fear and uncertainty or decry too much complacency. The problem with those arguments is that they could almost always be used and so there's not really much predictive power there. The only time there should be fear in the market is if the data is really bad. If you get bad data and have no fear, then that's complacency. But if you get good data and have no fear, that's how it should be! I think a lot of people subscribe to 'fear for the sake of fear' and so they just stay out of the market forever and miss all the gains. As you are a "fear & greed trader" I'm sure I'm just preaching to the choir.
    30 May 2014, 12:53 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    F&G, BC Josh said today he likes (FSLR) and (SPWR) for solar stocks.

     

    If you are going to buy solar, go in slowly. We may see some dips in the next month(s) so I would spread out my purchases.

     

    The problem is solar stocks are volatile & do not give any dividends, so you aren't paid while you wait for an upswing.

     

    I wouldn't buy any of these volatile stocks before making a firm foundation in high quality companies with dividends first.

     

    Also I would keep my total exposure low, so that you don't have say 20% of your portfolio tanking. Most of the solar stocks have lower earnings per share projected, and already have very high PE ratios so they are not cheap at this time.

     

    Meanwhile, (MU) keeps going up. This is because (MU) is still cheap with a forward PE of 10. However, the PEG ratio is 23.95 which is really high (under 1.0 or at least under 2.0 is desirable). One year expected EPS growth is 58%; but the stock is already up 140% this past year. So I haven't bought it for these reasons, although it's a growing company so who knows, it may go even higher.

     

    On days when the markets go south, some of my stocks go up. These would be (CL) (CLX) (ED) (MO) (JNJ) (PG) (WEC) (CBRL) (WAG) (GPC) (SNA) the typical DGI stocks.

     

    Also up today (MSFT) (AZO) (ABBV) (M) (COST) (TSCO) (WMT) (VZ)
    30 May 2014, 01:29 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    ....stocks that went up help to offset the many that went down today.

     

    Get ready for next week. Confirmation that the economy is doing better may cause a small rally.

     

    Otherwise, we may experience a dip. If we do get a couple of down days, it might be time to go shopping to add to existing positions.

     

    Although I'm more inclined to just stay the course and let dividends accumulate.

     

    More stocks up today (KO) (PEP) (NLY) (OHI) (HCP)

     

    BDCs, private equity, banks, all down today along with some tech, biopharm stocks. Take a look at the stocks getting bashed, there might be some opportunity here
    (OAK) (MAIN) (ARI) (KKR) (BX) (PSEC) (TCAP) (TCRD)
    (KKD) (DNKN) (SSYS) (JPM) (NVAX)

     

    Also (GE) (T) (IBM) buy on the dips.

     

    If you are a long term investor, focus on stocks with dividends. Read Carnevale's latest article & his past articles for good ideas

     

    http://seekingalpha.co...

     

    My foray into risky stocks is ongoing. Not making a lot of $ just yet, but some of my positions bought on dips in the past few months are doing better. (PCLN) (GILD) (AZO) (SWKS) (CELG)

     

    Overall, my DGI stocks are performing far better, plus earning solid dividends. Buying blue ribbon companies that pay dividends really does work best for me.

     

    (LMT) (NOC) (BUD) (STZ) (LVS) (FL) (M) (MCK) (BGS) (MMM) (AAPL) (JNJ) (MCD) (PEP) (WEC) (SCG) all doing well, along with the already mentioned gainers today.

     

    Buying on the dips, small numbers of shares over time has done well for me.
    30 May 2014, 01:55 PM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    BSF - I may not be quite as defensive as you, but I absolutely agree with the dollar cost averaging/scaling in to positions. If I was to coach anyone on how to get in to the market (if they had been on the sidelines), that's the first point I would emphasize and if people don't have enough money to do that then they have no business trying to pick stocks and should just do index investing until they have more money. I suspect a lot of people are doing exactly this by default via 401k passive investing that will just gradually work its way in. I'm a huge believer in that. The only reason I'm on SA is due my over-active curiosity and it helps me calm my nerves and develop a comfort level to learn the internal workings of the economic/financial system. Also, I do have a passive portfolio that is purely mechanical (rebalancing across all asset classes) and I consider that my firm foundation. So, I don't mind being a bit more aggressive with my active portfolio. There's some research showing that most people are too risk averse, did you know that? So I am trying to set aside emotion and be more logical.

     

    I do have (TGT) and (PSEC) now so that should make you happy :) However, if you take a lot of the names you mention and consider their smaller, riskier cousins, I probably have a lot more of those (e.g. (TMUS) instead of (VZ) & (T)).

     

    Also, you seem to have a lot of exposure to the donut space (KKD) *and* (DNKD)?? May want to ask Cramer if you are diversified :P
    30 May 2014, 03:16 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    Blue,

     

    I can see your hesitancy with MU -- the peg is skewed because of the Up & down earnings history.. If that is bothersome, I understand..

     

    I view this as an intermediate trade and not a core holding .. so its not one to fall in love with

     

    That being said - The "game changer" for MU was their purchase of Elpida, and the reason for the earnings explosion..

     

    The fundamental "demand" story looks fine , and the earnings numbers they are posting justify the stock price .. i never look where a stock has been , but where its going ,, if we use the former as a strategy no one would touch GOOG, PCLN, etc,, think about it .. :)

     

    I believe (MU) stock is now worth about $35 -

     

    @ $22 - $30 was my first target.. it's closing in on that now.. (28.75) its presently overbought --short term..

     

    in my view if it trades back to the $26 area -- it is a buy

     

    I do understand why many can't get their arms around this one .. but i'm not going to marry it .. :)
    30 May 2014, 03:26 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    lol BC, yup I like the donuts : ) They go well with (SBUX). Sadly, I have to refrain from going to those establishments.

     

    I have over 60 stocks, sounds like a lot but after reading the DGI authors here on SA, I liked the strategy of having 2% positions, so that makes 50 positions minimum. I'm managing 5 portfolios so that's how I ended up with over 60. A few of my stocks occupy more than 2 %. Plus I diversify over oil/energy; pharmaceutical/biophar... tech; utilities; financial; consumer staples; consumer discretionary; aeronautics; railroads; industrial; etc. Then I have some BDCs, Reits, CEFs, private equity to increase yield.

     

    The good thing is that on most down days, some of my stocks go up. Unless we go down a lot, but even then investors pile into the "safe stocks" like utilities & consumer staples.

     

    The dividends are very nice. My goal is to increase the overall portfolio yield to $100,000. So far, this year will be over $60,000. However I'll be buying more dividend growth stocks this year, as I move out of the stocks that don't pay a dividend. (T) is on my shopping list. 5.19% dividend is very attractive.

     

    The crazy growth stocks are less than 5% of my total portfolios. I only buy a few, and only because my life got too boring. Now it's not so boring....but we'll see how it goes. (GILD) (CELG) (PCLN) & (SWKS) are in the green, so that helps.

     

    I have cash, probably way too much. But I like to keep 3 years or more of living expenses in cash.

     

    If we get the "super big dip" I'm ready, I'll just put some of that cash stash into blue ribbon stocks when they go on sale.

     

    Last year, I transitioned form mutual funds/individual bonds into stocks. It has worked out really well, and it keeps me busy researching.

     

    One thing I learned here is to take some profits, when your stock is in overvalued territory. I sold some (TSCO) (SBUX) (MCK) (LMT) shares and a few others when they were at or near 52 week highs. That worked out well, as they all fell after. I bought back 50 shares of (MCK) and it is again at a 52 week high. That's the hard part for me, selling.

     

    I've gotten better at picking stocks from reading articles here on SA by Carnevale, Chowder, Wells, & others that explain how to evaluate a stock. And listening to the posters here.

     

    Could be that some day, I'll get back into ETFs & some bonds, just to make life easier. It's a full time job, looking after all these investments.
    30 May 2014, 05:09 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    F&G, every time I thought it would go down, (MU) went up! So if it ever goes down a bit, and I have some cash from getting out of another position, I'll buy it. Should have bought it months ago....and instead of some of the other ones I bought. Can't win 'em all.

     

    Today we had a nice close. It's a tough call for me, I want the market to dip so I can buy more shares cheap. But not before I can reap some profits. "Sell in May" turned out to be a bad strategy this year, but I didn't sell anything so worked ok for me.

     

    Every time we have a big up day, it should be a day for me to find something that has gone up a lot to pare down. Selling is still very hard for me.

     

    Learning the investment game is not easy, but if you get it right sometimes it can sure be a life changer.
    30 May 2014, 05:21 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    Blue,
    the investment game isn't EZ , i have been at it over 30 years and learn new things every day - usually by making mistakes :) .

     

    selling is always the hard part..
    use the old axiom when contemplating trimming a position - no one EVER went broke taking a profit .

     

    there are many, many opportunities if you are patient enough to wait for them to present themselves..
    30 May 2014, 08:47 PM Reply Like
  • td94306
    , contributor
    Comments (43) | Send Message
     
    Fear,

     

    I am also long MU and this is what I did on Friday 5/30 (for some of my MU shares) - sell Oct 29 Put for $2.89, sell Oct 29 Call for $2.78, and collect $5.67 in premium. Come Oct, I will end up selling my MU shares for an effective price of $34.67, or buy more MU shares at $23.33. Just something to consider.
    1 Jun 2014, 02:43 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    TD,
    nice move -- it demonstrates many ways to add to profits by using options ..
    1 Jun 2014, 09:38 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » - td94306

     

    Definitely something to consider. Thanks for sharing it! :)
    3 Jun 2014, 08:24 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    It doesn't matter what collection of quotes are assembled. The reality is that economic and credit conditions bear no resemblance to 2007, so one isn't going to get a repeat of 2008. Of course, if one wishes to posit that we could get hit my an undetected meteor at any time, which could tank markets, that's always possible, but it's a heck of a way to make investments.
    30 May 2014, 08:47 AM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    The government reported today that the PCE price index increased .2% in April and 1.6% from April a year ago.

     

    Page 3:
    http://bit.ly/1prjL1F

     

    The Y-O-Y increase was 1.1% in March.

     

    The FED prefers the PCE price index over CPI.

     

    http://bit.ly/1prjMTc

     

    As noted in that WSJ article, medical costs decelerated last year due to temporary budget cuts to healthcare providers. Prior to those temporary cuts, medical costs were rising at a 3.1% annualized rate (which is actually below the long term average of 5.5%)

     

    "CHART OF THE DAY: Health Care Cost Inflation Is Accelerating"
    http://read.bi/1prjMTf

     

    I would just note that the PCE index will generally show less inflation compared to CPI. The current Fed's preference for PCE may change when and if it starts to run hotter than CPI, which I expect to happen. The trigger for the PCE index rising to a higher level would likely be caused by its far higher weighting in medical costs (over a 20% weighting compared to 7% for CPI):

     

    http://bit.ly/1prjL1J

     

    This article at Business Insider has a chart, near the bottom, of the "Annualized Quarterly Change in Health Care PCE":

     

    http://read.bi/1prjMTh
    30 May 2014, 09:41 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » SG, T

     

    Measuring inflation (at these relatively low rates), seems to be more of an art or political measure than a science.

     

    So the gov't has more than one measure it can use -- and switch between if it wants to project or justify a course of action...
    31 May 2014, 12:16 PM Reply Like
  • User 7415181
    , contributor
    Comments (798) | Send Message
     
    LMH,

     

    For you:

     

    http://seekingalpha.co...

     

    (not a perverted stalking letter or something)
    30 May 2014, 06:08 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » U7

     

    Thanks! I guess I'll have to check my PMs for the stalking letter :).

     

    I think I'm finally beginning to see why you're focusing on CEFs. It's that looking at NAVs gives you another a way to assess evaluation, which isn't as readily available with individual stocks.
    31 May 2014, 12:11 PM Reply Like
  • User 7415181
    , contributor
    Comments (798) | Send Message
     
    Pretty much.
    31 May 2014, 12:37 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » U7

     

    Well it's a great idea!
    3 Jun 2014, 07:44 AM Reply Like
  • User 7415181
    , contributor
    Comments (798) | Send Message
     
    I will point out that there aren't as many opportunities to find high yield/big discounts/good nav performance compared to the beginning of the year. I'm thinking about focusing on preferreds for a while for new buys (which have also gone up a lot since the beginning of the year).
    3 Jun 2014, 07:53 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Here's an article that gives a summary on solar companies, and how they will affect the big utilities

     

    http://cnb.cx/1kllP8p

     

    (DUK) is one of the big utilities that is already invested in solar energy. If you own utility companies, it's important to keep an eye on them to see if they are incorporating solar, wind.

     

    Some day, (SCTY) may be a huge utility company.
    1 Jun 2014, 08:17 AM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    BSF:

     

    It's funny you mention (SCTY) as that was the one I started to look into!! I'm encouraged that many solar companies either (1) are insulated from the plummeting panel prices, or (2) are actually beneficiaries. The falling prices, while bad for manufacturers, aren't necessary a negative for other solar companies. It's my task now to investigate this. If you read (SCTY)'s 10-K, they actually list as a risk that prices will stop falling or rise. (SCTY) has an interesting business model. I think "interesting" is about the best I can say at this point because it's very hard for me to understand and I suspect that a lot of investors have this one wrong. It's not getting revenue from leasing out panels the way people think. It's getting the tax credit for the panels but it's mainly a lease pass-through where certain (SCTY) investors get the revenue for the first x number of years and only after that point does the revenue stream get handed back to (SCTY). So, I guess the understanding people have is still kind of true, but the devil is in the details. It also talks about how critical net metering is to the business model. The "net metering" is where you can sell back surplus energy to the grid. I'm gathering there is a broad national push for some degree of utilities having to do net metering but within that it does seem like states have latitude to alter the exact rules and one of the big risks is that those rules change. If the energy can't always be sold back to the grid, that's revenue that will be lost. (SCTY) is set to get the revenue only after x number of years which raises the risk that rules will change by that time (in fact there is already a lot of talk about what's going on in California, which as you can imagine is a big market for solar companies).

     

    So, I have to admit to being a bit daunted by the complexity of (SCTY) as it requires a lot of finance to understand and the tax credit/regulatory dimension adds even more variables. I'm trying to work out rough estimates just based on how big the solar market will be and taking a stab at what market share Solar City will get. The advantages are (1) they are the first to really be a big residential player (the biggest at the moment if I understand correctly), (2) they are doing aggressive marketing with key partners such as Home Depot and Best Buy (in my opinion the Home Depot thing is genius), (3) turn-key services (they have sales, engineering, design, maintenance, financing, installation, etc., all wrapped into a one solution), (4) flexibility to use whatever panels they want.

     

    I definitely think that makes them a contender in the overall sense, but I really can't predict how durable the business model is and foresee that actually it may have to transition to a glorified solar installer (no more lease pass-through). This would be a lower margin business but if they have huge scale then it should still command a respectable valuation. There are a lot of comments that defend the lease model pointing out the fact that a lot of people lease cars, but as noted it's actually not that straightforward here and I'm also not sure because from my perspective I would rather buy the panels straight out (same with cars though so I am biased).

     

    (DUK) is having a lot of the coal problems mentioned by SG. The problem isn't just a global warming/GHG/carbon concern. It's some rather awful mishaps where the toxic crud in their storage ponds spilled out into the environment. I think that was up in Tennessee or South Carolina. SG would probably know more. But it seems like it was more than instance of this happening and anyway they are having to shell out big time to address this (both the spills and presumably to put in more safeguards at existing ponds). (DUK) has bought Progress Energy down here in Florida and that should be good for them. In general I think the bigger utility companies have the size and scope to adapt to solar and partly this could prove to be a challenge for solar companies. However, I am a believer that they're in a bit of a box and have to watch out for the 'death spiral' - if they adapt by raising rates, that only encourages more solar panels. I'd think it'd be better to embrace solar but try to manage it and even get their own slice of the action. For example, one thing they could do is to have a high grid connection fee. I think it will be a while before people can really go 'off grid' so until then the utilities will still have sway. The other obvious lever they have is in designing a rate structure to tamp down the advantage of panels (e.g. charge higher rates at night). I think there will eventually be public backlash if the utilities abuse their monopoly power, though, and then local governments will bare their teeth. So they'll need to beef up their lobbying efforts some.

     

    The whole situation is a lot more interesting than I had at first imagined, which is why I've been trying to read up on it. But I'm also trying to be careful to avoid jumping to any conclusions. In a broad sense, how much of solar is an Obama effect? If a lot of the federal subsidies are scaled back or eliminated, how will that effect the industry? Even if the federal stays online, what about the complexities of various state laws and utility policies? Also, here's a big one that no one seems to address: what if panel prices stop falling and actually stay put or get higher? I noticed that the majority of the cost reduction comes from the modules and hardware but the 'soft costs' of labor for installation and so forth seem more sticky and so I hope we're not extrapolating too much that for sure solar will continue to get cheaper. I also think you have to be a bit more sensitive to shifting costs of other forms of energy (crude, nat gas, and so on) which could make solar less competitive. There was a point in time in the last ten years where people were convinced that energy usage would only go up (just like house prices). Then, something unexpected happened and we actually used LESS energy for the first time in forever. There were articles on how teens were driving less and spending more time on Facebook and how people were leaving the exurbs to live closer to work. The hope is that with more economies transitioning to advanced consumer economies that will provide a tailwind for energy prices but it's important to note the curious social trends and what effect they may have. I also think the global economy can probably only handle energy prices up to a point and beyond that it has to crash and find an equilibrium. I'm not sure how many people remember but in 2008 gas got to $4.00/gallon (I think we're back to $3.60 something presently).

     

    The other solar companies I've seen mentioned a lot are (FSLR) which does more commercial solar but is getting into the residential market (they also make their own panels and have a lot of R&D), (SPWR) don't know about yet, (RGSE) don't know about yet.

     

    Also, while it has been pointed out that solar is still a very small percentage of the overall power pie, I think there are reasons to not take it too lightly. For example, the economics of energy prices, it's sensitive to peak demand and solar directly affects that as people get the best solar energy mid-day when it's hottest and when the A/C is running full-tilt. So, solar can have a disproportionate effect to what you would expect from looking at the power output in absolute terms. The other point I would make is that it really does seem to be a long-term trend and closer to mass adoption than people realize. This does hinge on the cost/value proposition continuing in the same direction and I've noted about some caveats such as the 'soft costs', but without more analysis I am not sure those caveats will matter. I welcome any thoughts on that.
    1 Jun 2014, 12:42 PM Reply Like
  • CWinn1970
    , contributor
    Comments (372) | Send Message
     
    BC,

     

    I think solar also is regional. From what I've read on it, mainly for the use of going off grid, places like the US southwest (Arizona in particular) is in a more advantageous region.
    1 Jun 2014, 09:13 PM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    CWinn1970:

     

    Good observations.

     

    Regional. Yes, there are tons of regional factors: favorable sun exposure, state tax credits/subsidies, and whether net metering is used or not. Google turns up many useful infographics (more from the customer perspective). I'm surprised I didn't mention any of that in my long ramble.

     

    Off grid. I personally wouldn't want to risk going 'off grid' since hurricanes can curb sunlight for long periods of time. I have to believe that would be true for different weather events in most parts of the country so my baseline assumption is that most people would not be going 'off grid'. The recent polar vortex is a case in point. This is good for utility companies because if people really could go 'off grid' what recourse would they have? Instead, in the long run I imagine the grid acting as a big battery system (unless household batteries prove good enough to last through long duration hurricane type events).

     

    I have more research to do on this.
    1 Jun 2014, 09:51 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    Hmmm did Bernanke cause the May rally in stocks? Seems he gave a few speeches to large Hedge fund managers & banks where he opined that the Fed will not be raising rates for a very long time. This is supposed to be good for stocks.

     

    http://cnb.cx/1klmYww
    1 Jun 2014, 08:23 AM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    BSF:

     

    Bernanke and Dudley are both talking about the terminal rate being permanently lower, they are not saying ZIRP is permanent. I wish they would say ZIRP is permanent but people are all uptight about inflation. The 64 million dollar question is: what is the terminal rate? Insofar as the 10 year is a proxy for this, you could also couch it in those terms. What's the right price for the 10 year right now? Tack and SG have argued this before, though, so let's not open that can of worms again.

     

    It is interesting to think that Bernanke's speeches could still be influencing markets. He should charge more ;)
    1 Jun 2014, 01:33 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    BC:

     

    I see my name mentioned, so I can't resist comment.

     

    The misunderstanding of QE has been persistent and pervasive. It's been almost entirely a myth that QE has dictated rates, which some fondly imagine would be much higher, but for QE. Even with tapering well under way and rates not only not rising, but falling, does reality dawn.

     

    The market has and does set the rates. There's no upward pressure because the economy is still recovering from a once-per-lifetime deflationary event, growth is modest and credit formation the same. Add to this a persistent level of fear post-2008, which has seen vast sums still huddling in cash and bonds, and it's pretty clear why rates are going nowhere fast.

     

    As QE has been running almost entirely into excess reserves, it's outlived all its initial benefit, and it's absence will not be felt by the markets or economy nearly at all. There's no reason to continue it and even less to fear its removal.
    1 Jun 2014, 04:31 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    Tack,

     

    With all due respect, to both claim the presence of QE has had zero impact on the pricing or amplitude of risk assets, and it's complete removal -- we are not there yet -- will have no impact on same, ignores the history of market pricing with active QE in place and without.

     

    It is a ridiculous claim that the Fed itself doesn't even make! They enacted and kept QE partly at least to boost risk assets in a hope that the trickle down theory would boost the economy though increased spending by asset holders.

     

    By first locking rates at zero, and then removing a large quantity of bonds from supply, they have competed with pension and mutual funds for that same supply -- forcing investors out the risk curve into corporate, junk bonds and equities.

     

    Companies in turn have willingly met this demand and issued loads of bonds, using the proceeds to buy back stock and pay dividends. So both stock prices and earnings through reduced floats, have been greatly impacted.

     

    To prove this, someone look up total SALES in 2009, not earnings, and TOTAL SALES now. I'll bet the price to sales ratio, has exploded in the SPX.

     

    Now tell me again, so I can chuckle, that QE has had zero impact on any market pricing.

     

    People fearfully hiding in bonds? You live in a different world. Try hiding in the riskiest segment of junk bonds. Have you looked at both the quality and quantity of the crap being issued at ridiculous low yields? 2007 stories in credit these days.

     

    Your perception of people fearfully hiding under the bed at this point is pure fantasy. Sorry not buying it!

     

    Let's see where we are by mid - fall when QE (hopefully) is totally done.
    1 Jun 2014, 06:43 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    QE was only effective in the early going when it re-liquefied the banks and financial system. Since then, it's impact has been almost ineffectual, as it's piled up in excess reserves. Rates are low because demand for sovereign bonds is huge and we are still not at escape velocity from the recent worst deflationary event in 75 years.

     

    If we needed further proof of this, all we have to do is examine the yield chart for Treasuries, which spiked in the wholly mistaken notion that tapering would send rates skyrocketing because, remember, it was only the Fed that was holding them down artificially. Of course, with tapering now 47% completed that canard has been exposed.

     

    The SPX is where it is because profits have recovered and expanded since the 2008 crash and because low interest rates (i.e., lower discount rate) support higher P/E multiples. Even so, P/E multiples in the broad market are not significantly extended, given historical norms, especially at these rates.

     

    If the market has been suspended in thin air because of QE, then why hasn't it plunged as tapering was announced and, now, even more materially, been reduced 47%?

     

    The answer is that the entire hypothesis that rates were kept artificially low and markets artificially high by Fed action alone has been specious from the start, regardless of what the Fed's intentions or statement may have been. The results in a rising- and falling-QE world speak louder than the verbiage. The Fed's actions in the early going of the crisis provided confidence, but the heavy lifting has been done by everybody outside of those offices.
    1 Jun 2014, 06:59 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » Tack

     

    A couple questions...

     

    While the market hasn't plunged as QE is tapered, wouldn't it take a while for the effects of removal to filter into effecting corporate earnings & GPD?

     

    On sovereign bonds (foreign bonds), as rates dropped with ZIRP, that's when I had looked at foreign bonds, as had every one around me. Some opted to take the risk. So that demand would seem to be a consequence of Fed policy on rates. Has it now become so much of a demand that it's become a driver of keeping rates low?
    1 Jun 2014, 09:44 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    LMH:

     

    How would tapering of QE affect the economy when all the QE has been piling up in excess reserves? Even the Fed, itself, had admitted that QE hasn't been doing anything any more.

     

    Foreign rates have dropped because their economies are improving and because it finally dawned on investors that the ECB wasn't going to allow anybody to go under, just as the Fed does.
    1 Jun 2014, 09:54 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    Tack,

     

    You've answered none of my points at all by talking continually only about treasury rates. Who cares? That's not in the least the focus of my comments.

     

    That has nothing to do with the risk appetite and pumped up earnings I'm discussing as a consequence of QE.

     

    Earnings growth has NOT been organic -- at least a large chunk of it.

     

    Address that specifically and we will have something to talk about.
    1 Jun 2014, 10:16 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    You simply don't wish to accept my answer. You and some others believe QE has directly levitated equities artificially and led to questionable corporate results, too. I've heard that story since last 2009, in fact, and that it was all "unsustainable" and would end badly. How's that worked out for those adopting such views?

     

    Low rates have occurred worldwide as a hangover effect of the deflationary credit collapse. Absent an substantial increase in economic demand, rates will remain low. But, low rates have positive side effects, like making the future value of earnings streams worth more, leading to higher valuations and allowing corporations and individuals to refinance debt at favorable rates, improving profit margins. These effects are very real, not contrived.

     

    First, all the critics said the world would end because of QE (inflation, debt, etc.). Now, when that didn't happen, the new story is that everything will come apart because QE is taken away. This despite the fact that neither interest rates nor markets are following the new doomer script.

     

    I don't know what else to tell you. You've spent many months here with a decided bias to short and awaiting a systemic decline, not just individual issues. Apparently, your views, so far, have not been vindicated. It's not my fault; I just try to give the alternate explanation for why things have not been following the predicted pessimistic trajectory.

     

    And, you're still free entirely to disagree.
    1 Jun 2014, 10:31 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    You are stating opinions with no facts. Facts are:

     

    Top line growth has been weak.

     

    Buybacks have reduced the share count and changed earnings per share.

     

    Leverage is rising.

     

    And market amplitude has slowed since tapering began.

     

    I repeat, let's see what happens when IT'S DONE. Not before. QE is still in effect.

     

    I predict when QE ends so will the junk bond appetite.

     

    And a lot is tied to that. They are the "fool at the table" now.
    1 Jun 2014, 10:38 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    Well, according to all your facts, then, it's all an anomaly, right? And, unsustainable, right? And, markets should be much lower, right?

     

    If you wait long enough and come up with enough theories, eventually the economy and markets will decline, and you will be right.

     

    I don't wait to see what happens when some future event occurs, or may occur. I invest, based on the cards I see on the table. I don't see any major negative events occurring, but I see lots and lots of anxiety and lots of liquidity, which is very positive

     

    Now, you're a trader, so if you're going to make any money, you have to guess right and take a stance. You won't make any money after it's all obvious what's happening.

     

    So, what's you plan, long, short or watch?
    1 Jun 2014, 10:46 PM Reply Like
  • Eudaimonia
    , contributor
    Comments (752) | Send Message
     
    Why are buybacks increasing EPS a bad thing? If my company is valued at 7-10% and I can borrow at 2-3% why wouldn't I?

     

    It's not like the companies buying back shares are leveraging themselves up uncontrollably.
    2 Jun 2014, 01:17 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    Yair,

     

    It's a good thing for the company, I'd do it too.

     

    But for the investor buying corporate debt at 0.5% spread above treasuries, it's beyond stupid in the long run. There's nothing there and no security of govt debt.

     

    At some point spreads will widen and the appetite will disappear for that debt. Then there go the Buybacks.
    2 Jun 2014, 07:51 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » Tack,

     

    The theory is that QE is in excess reserves and not effecting. My question was on the proof. Wouldn't it take a while after QE tapers and ends for any impact to appear. Therefore proof (vs. theory) that QE didn't have an effect isn't proven until then.

     

    On foreign rates that makes sense that economies are improving and ECB isn't letting anyone go under, so bonds would be more appealing. ZIRP has also been a contributing factor at least in my neck of the woods so there could be some underwinding I would think (except that bonds are often long term purchases). The part that lost me is a basic - how does foreign rates being lower because of influx of money, keep US rates lower?
    2 Jun 2014, 10:05 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    LMH:

     

    If the added QE wasn't circulating in the economy, but rather tied up in excess reserves, then how could its reduction have actual economic effects. If, later, the economy subsides, one would need to find another excuse. There's been this persistent mania about QE, that it's supposedly caused literally everything, e.g., low rates, levitating economy, exaggerated markets, etc., and, therefore, it's reduction will reverse all of those. I categorically reject that premise, and, so far, it's proven correct on all fronts.

     

    U.S and foreign rates are low because of the relative lack of overall credit formation and economic demand and because there's a still-lingering desire for "safe" assets. That's how powerful the 2008 PTSD effect has been. Relatively speaking, if rates elsewhere are lower than U.S. rates, that would make our bonds more appealing and drive up prices, i.e., lower rates.
    2 Jun 2014, 11:08 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    "proven correct on all fronts"

     

    How's that? QE is STILL running at 45B per month!
    2 Jun 2014, 11:23 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    Because it's half what it used to be, and where are those higher rates? You conveniently left off, "so far," and I've been correct, up until now. But, you remain free to bet against my view.

     

    You posting history suggests constant vacillation on the market direction, even though you've evidenced a strong downside bias. So, what are you going to do, wait until it's zero, then short the market? Short now and hope you're right about the effects later? What's the plan?
    2 Jun 2014, 11:35 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    I am short the momentum stocks again, along with IWM, and I am looking correct now on that trade. I expect that trend to accelerate and improve for me as they wind up QE -- assuming the ECB doesn't start a huge program of their own.

     

    Who's been calling for higher rates? Not me. Ive been long the long bond some of this year. (not now though)
    2 Jun 2014, 06:19 PM Reply Like
  • freed0m
    , contributor
    Comments (928) | Send Message
     
    @Tack,

     

    I don't think that it is 2008 PTSD causing the desire for "safe" assets. The demand for "safe" assets has always been big. Just look at how much AAA rated senior tranche of RMBS was created before 2008. If there was no such demand, hard to imagine that the crisis could be that bad. Post financial crisis, the supply of "safe" financial claims are smaller as all those AAA rated senior tranche of subprime RMBS are removed, yet the demand for such assets is not any smaller, I guess.
    2 Jun 2014, 10:15 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    f:

     

    In either case, it's all market dynamics, not some all-powerful Fed manipulation.

     

    The one area where I would differ is that one cannot compare 2006-2008 demand with today because it's far more plausible to understand the earlier demand at then prevailing rates than today's demand at current paltry rates.
    2 Jun 2014, 10:23 PM Reply Like
  • freed0m
    , contributor
    Comments (928) | Send Message
     
    @Tack,

     

    I am not saying that the low rate is caused by Fed manipulation. But just based on low yield on Treasuries and high demand for "safe" assets, concluding that lots of sidelined money are waiting to enter the market might not be correct. A lot of money never enters the equity market; it stays in "safe" assets forever.
    2 Jun 2014, 10:37 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    f:

     

    It may seem so in the post-2008 hangover, but rest assured if we were to see any genuine decided run-up on interest rates, money would flood out of those "safe" investments, now more than ever because of the effects of convexity of the bond curve at such low rates. Anything but the shortest durations would be losing principal fast, and everybody's definition of what's "safe" would suddenly change.
    2 Jun 2014, 10:42 PM Reply Like
  • freed0m
    , contributor
    Comments (928) | Send Message
     
    @Tack,

     

    for example, the Chinese government. They would always try to invest into "safe" assets. No matter how much the interest rate runs up, it will stay in the "safe" assets. So do many other institutions, who values "safety" more than "growth". The amount of money flowing among assets could be much smaller than you think. It can make a huge impact partially because equity market is illiquid and a lot of money are trend following.
    2 Jun 2014, 11:17 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » - freed0m, welcome to the blog!

     

    I agree that a lot of money stays in safe assets. Especially post crash, even with low rates.

     

    On the other hand, I've been surprised to see runs to bond funds at various points... I'm not moving to bonds (non-fund) because down the long term road, I don't want to risk being in 2% if more inflation sets in for any reason. I can't shrug off & ignore the discount price meanwhile, and live off that interest rate...
    3 Jun 2014, 07:51 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » Tack,

     

    "QE ... tied up in reserves... so can't have actual economic effects"

     

    is the theory. And it sounds plausible.

     

    And agreed, so far the data shows no ill effects from tapering, and shows positive market movements.

     

    However, my question or thought is... wouldn't it take time for a taper effect (if there were to be one) to trickle down into the data and market? Therefore it's too early to declare that the market's data supports and proves a lack of effect from tapering. That claim and victory still need to wait till the data is in. It's still very possible that their won't be ill effects this time (because it was hanging in excess reserves), but not yet proven. Meanwhile, what can be declared is that so far the big instant collapse has been proved to be myth.
    3 Jun 2014, 08:20 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    LMH:

     

    Anything can be seen more clearly as history; it's just that you can't make investment decisions after the fact.
    3 Jun 2014, 09:44 AM Reply Like
  • Eudaimonia
    , contributor
    Comments (752) | Send Message
     
    So what if the buybacks go?
    3 Jun 2014, 03:31 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    My observations on the market .

     

    stocks higher as many are going to money funds & bonds ...

     

    http://seekingalpha.co...
    1 Jun 2014, 09:41 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    FG:

     

    From your link:

     

    "But first - Its everywhere -- from the TV media to the internet , seemingly a day does not go by without hearing this question -"What is the bond market telling us "? , something has to give here, they both can't go up at the same time. Of course the conclusion that many are drawing from this - the equity market is vulnerable because the action in bonds portends a slowing economy.. & bond investors must "know something.""

     

    If folks would stop for a moment and examine the Treasury yield charts for the last two years they would see that rates were trending mildly higher, then spiked on tapering hysteria last May through near the year end. Then, tapering occurred with no obvious pressure on rates, so the market realized the panicky upward excursion was unwarranted, so rates have steadily declined.

     

    But, and this is critical, the rates are still just above the old pre-May-2013 trend line, so the reversal seen, so far, has only moved rates back to the pattern that existed prior to taper hysteria. Unless rates drop appreciably below that old trend line, the recent reversal is nothing more than a reversion to the existing rate pattern, and does not yet confirm some new indication of a weakening economy.
    1 Jun 2014, 11:20 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    T,
    I absolutely agree - and go on to conclude in my thoughts on the markets that the bond market isn't telling us anything at all..

     

    But it plays good for the wall of worry .... :)

     

    similar to the start of QE - then the fed was "in a box" during QE and they could "never" wind down the program , the tapering of QE, and now the end of QE ...

     

    The market may surely have a deep correction at some point but it will have nothing to do with QE at all, it will be because the market has outsized gains that will need to be worked off.

     

    QE 2 announced Sept 10 - S & P 1140

     

    today S & P 1920 , the difference in watching the price action and following the trend-- instead of "fed watching" has been "life changing" for many.
    2 Jun 2014, 09:36 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    FG,

     

    IMO we have zero wall of worry at this time, unless one is only reading Hussman or zero hedge.
    2 Jun 2014, 06:22 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M: Just read the ongoing blizzard of articles here in SA and, even more so, the endless stream of pessimistic commentary.

     

    See here and any related articles:

     

    http://seekingalpha.co...
    2 Jun 2014, 06:27 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    Tack, come on. SA at times, is almost as bad as zero hedge.

     

    You're going to take millions of investor sentiment from some guy with 200 followers? Who cares what SA writes. Look at the VIX. Look at CNBC. No "breaking news crisis" See any fear there?
    2 Jun 2014, 06:38 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    So, we should all be in cash or short?

     

    M, I've been doing this for a very long time -- through every which kind of supposed disaster -- and made myself quite comfortable doing so. The answer I recommend to others is not to hungrily buy nor flee in fear, but to establish a good, high-paying portfolio well balanced between equities, preferreds and debt issues. They'll do well over time and won't need to make wild-ass guesses about almost anything.

     

    I engage in these debates with you for the intellectual exercise and because I hope others benefit from it in some manner, but it has zero impact on my portfolio management.
    2 Jun 2014, 06:55 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    After all, Dennis Gartman, who is always correct, says no correction (ever, I presume)

     

    http://on.mktw.net/1p2...
    2 Jun 2014, 06:58 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    Tack, I can't advise anyone because the benchmark keeps changing. Recently one of the Fed Governors indicated in a speech NO asset price weakness would be tolerated in the lens of deciding tapering / tightening.

     

    So the Fed is targeting asset prices, not inflation and unemployment targets? Obviously if that becomes policy we should all be 200% long as they devalue the dollar.

     

    If the ECB says on Thursday they are starting a 2 trillion QE program it would change my view somewhat.

     

    In the absence of either, I would recommend investors raise 25% + cash right here, as I expect better entry prices.
    2 Jun 2014, 07:14 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    M

     

    Dennis Gartman is a rube and should be ignored..
    2 Jun 2014, 08:08 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    "zero wall of worry" - not sure about that -- as i stated over the weekend ------the comments are everywhere -- "the bond market is telling us something" - and that portends that the equity market is in trouble..

     

    for the record the bond market isn't telling anybody anything......

     

    hey,,, maybe they will finally be correct -- we have had a huge advance -- wouldn't that be NORMAL to finally have a correction ?? yet they will all make it sound like Armageddon ..
    & after the correction , when they will proclaim victory, they will be WRONG again .. on the ultimate direction of the equity market..

     

    presently many are running into bond funds and bearish mutual funds as i mentioned in my weekly update .. there is no euphoria here -- the "melt up" will now strike another nerve as they realize the mistake , once again of being in cash or in a bearish fund..

     

    it will be fun to watch the entire crowd that has been on the wrong side of this trade for the past few years to tell all of the bulls how we have had the story wrong , IF and when we get a 10-15% correction ....

     

    In my view that will be comical -- for those that have been long the equity market, that event will equate to PENNIES on the dollar..
    
    2 Jun 2014, 08:26 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    FG,

     

    No macro calls from me other than we are massively overdue for a correction to the 200 dma on the SPX.

     

    Last 2 days the momo stocks have rolled over so things are improving for me again, that's more my focus than the SPX or even the IWM necessarily. I just think there will be better prices ahead. I look at the VIX near all time lows, hard to see a strong wall of worry and anxiety level there.
    2 Jun 2014, 08:35 PM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    F&G: The perma bears will not need a 10% to 15% correction to claim victory. The dip earlier this year was sufficient to bring out the "I told you so" claims. Disaster is always just around the corner for them.

     

    The 45%+ declines turn their beliefs into immutable truths. Yes the great clairvoyants Hussman and Grantham saw a problem in 1999 when valuations reached obviously asinine levels, and they will never let anyone forget their obvious call.

     

    It really does not matter to them that we have had three of those events in my lifetime as an investor, with the first taking the S & P 500 down to around 62 back in October 1974 (now over 1900 of course). While it takes some time, the market has recovered after those major and infrequent major downdrafts that gives perma bears such sustenance.

     

    Even after the S & P cratered in 1974, it was still up over 300% since the year of my birth.

     

    So, after a few decades playing this game, I take it all in stride, the good and the bad, and just try to stay focused on whatever appears to me to be the best investment, given my conservative nature and preferences for income generation, for each precious dollar that I have.
    2 Jun 2014, 08:46 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    S:

     

    The worst part is that when all those permabears get long of tooth in old age, with a wholly inadequate basis of financial support, they'll do exactly as they do now and blame everyone else but themselves for their errors, and, worse, they'll want all the successful investors punished in order to to pay for their own failure.
    2 Jun 2014, 10:01 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » Macro

     

    You've talked about zero wall of worry before. While I agree with some of your assessments, I disagree on this one. As a retail buyer who talks with friends and family, practically everyone but me is not getting into the market. Some held their prior money in place that was in stocks or bonds funds if it's a small enough part of their portfolio... but -no one- is adding or feeling confident in what's they already have in.
    3 Jun 2014, 07:55 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » - M con't

     

    True though for a market measure of investors already in the market, the VIX is low.
    3 Jun 2014, 07:59 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » M

     

    What are sources that aren't prone to bearishness and so not useful to judge from (or often to read)? Barron's seems like a better one... others that aren't perpetual bears?
    3 Jun 2014, 08:01 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » T

     

    Yep, it has benefit to others :).
    3 Jun 2014, 08:02 AM Reply Like
  • Eudaimonia
    , contributor
    Comments (752) | Send Message
     
    What do you guys think of shorting the (TLT) now?
    2 Jun 2014, 02:51 AM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    YG:

     

    FWIW, I'd think it's pure speculation and probably not a big winner anytime soon. While I don't expect interest rates to keep falling, nor would it seem likely that they'll experience any sizable upside pressure soon, as the economy remains modest in performance and markets seem subject to more horizontal consolidation.

     

    In this market, for the moment, I'd much rather have yield issues that threw off large spreads and hedge any economic upside with long positions in energy and commodities.
    2 Jun 2014, 06:16 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » - PMI is up. ISM is down. Which one matters more?
    2 Jun 2014, 10:07 AM Reply Like
  • Eudaimonia
    , contributor
    Comments (752) | Send Message
     
    Follow the things that matter :)
    2 Jun 2014, 10:26 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » Yair

     

    And that would be? :)
    2 Jun 2014, 11:04 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    Info on the ISM number

     

    http://on.mktw.net/1iL...
    2 Jun 2014, 11:38 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    ISM now revised to 56.0
    2 Jun 2014, 11:48 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » - Can't believe they revised the number, twice -- and it didn't catch their attention before release.

     

    Does make for a more consistent picture though!
    3 Jun 2014, 08:04 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4679) | Send Message
     
    Author’s reply » -

     

    I was in a Target yesterday. 1st floor parking was full, with a line for higher parking levels. I've never seen the parking that crowded.
    2 Jun 2014, 10:12 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    ISM brutal in my view. Slowing growth, higher inflation. Small cap shorts working well today.
    2 Jun 2014, 10:35 AM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    Looks like a data error Macro. Heads up.
    2 Jun 2014, 11:48 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    Pressing shorts here.

     

    Really believe -- and we can debate reasons -- we are due for corrective activity led again by the Momo / small caps / and financials, and far better long side opportunities and pricing will come in the fall sometime.
    2 Jun 2014, 10:55 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5727) | Send Message
     
    M,
    and once again that corrective activity comes after another week of new highs on S& P , Dow 30- & Transports and should come as no surprise..
    2 Jun 2014, 11:36 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1906) | Send Message
     
    So the debate continues. QE Bad/QE Good. QE did what the Fed hoped it would do, but now I'm in agreement with Tack. QE has had less effect as it was applied (3 times now?), and so while it is being unwound, we are not noticing as much. Remember the "taper tantrum" the market had last year, when the mere mention of QE stopping tanked the markets? Well we are just about half way done now, and the market has not crashed. The confluence of events that the Fed was counting on is really helping. Rising employment, expected better GDP....despite 1st Q being -1.0....we will know soon enough when 2nd Q earnings & GDP get reported.

     

    Here in Jerseyland, it is summertime. People are going out, spending money, even buying houses. Especially new construction. Existing homes, priced right & spiffied up, are selling too.

     

    The "smart" money turned out to be "dumb." Most hedge funds are having another really bad year.

     

    Investors that have stayed long quality stocks are benefitting. Dividends have been rediscovered.

     

    There is going to be an election in November. This could rile the markets more than QE ending.

     

    However, I'm betting that the economy will trump everything. As long as a company is making profits, their stock will go higher. Those companies that don't earn profits will fall.

     

    Nothing much has changed. It's a market of stocks - the stocks you own - that really matters.

     

    Sentiment is changing. More are feeling like the glass is half full.

     

    Keep some powder dry in case there are jitters (and there always are!) so you can profit.

     

    Long term, over my lifetime (57 years?!) the market has done one thing. Go up, even after falling 50%. Stay away from scary companies that have no earnings history and too much air in their PE ratio etc. Take some profits from time to time. Buy stuff when it's undervalued. Sell when it's overvalued.

     

    Don't forget to buy some donuts, drink lots of coffee, buy stuff (made in the USA or maybe Canada) and spend your money - the economy needs you more than ever : )
    2 Jun 2014, 12:07 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    BSF:

     

    Excellent and sensible comments.
    2 Jun 2014, 12:27 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    BSF,

     

    Fine comments but it's still premature to say the market has experienced no effects from QE tapering. IWM continues to lag and more importantly the overall market is narrowing in its advance. Let's see what happens by the fall. My focus is on the short side through then and the mid- terms. I see tons of opportunity there is spite of the calm stability of the SPX.

     

    I believe we are in a topping process that will lead to a full blown correction that will include the SPX for at least 10%.
    2 Jun 2014, 06:10 PM Reply Like
  • Eudaimonia
    , contributor
    Comments (752) | Send Message
     
    (LULU) still absurdly priced, nice dip to add more today.
    2 Jun 2014, 12:33 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    I've covered (MET) and (BAC) shorts at modest losses on the higher rates from the prices paid component of ISM. Added (LNKD) short. Keeping (DB) as the sole financial short as a different thesis. Momo shorts look the best here.
    2 Jun 2014, 12:37 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    http://seekingalpha.co...
    2 Jun 2014, 04:52 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    What is it that we're supposed to be reading?
    2 Jun 2014, 05:26 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    Tack, your blind spot regarding QE is in its physiological effects on risk appetites. Where the QE monies end up is actually much less important than the belief structure of participants.

     

    If people believe the Fed has enabled and will guarantee both a permanently higher plateau of profit margins and PE ratios on those elevated margins, they will chase accordingly assets higher.

     

    However to believe mean reversion in these ares has been repealed is the height of complacency.

     

    Inflation expectations will likely force the Feds hand -- they are behind the curve already.
    2 Jun 2014, 05:58 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    M:

     

    You first paragraph is 100% correct, but you then go astray.

     

    Yes, exactly, it's the psychological effects that initially prompted people's beliefs. That's why the Fed embarked on the program to begin with, to restore confidence. And, it worked. But, now, the economy is functioning at whatever level entirely on its own, not one iota because of QE, and even the Fed realizes this, as they have stated overtly that QE is no longer doing anything. Hence, it's removal is a non-event.

     

    And, just as market participants have found out --some to their dismay -- that tapering doesn't cause a hyperbolic rise in interest rates, so they, too find out that it's removal is benign.

     

    There was little major "real" effect, exactly as you postulate in the beginning. Only now, everybody (or most) recognize that that's the case, and the big, bad wolf of its removal scares no one. In essence, QE's fifteen minutes of fame is way past its use-by date, and nobody is paying the slightest attention to it, anymore, either in the form of announcements or in actual practice.

     

    You seem to insist that there's two views: 1) it's all going to collapse, or 2) complacency. Apparently, it's not acceptable to believe it won't collapse, but not be complacent? But, the markets and economy need reasons to collapse, not just hopes and wishes from nonbelievers.
    2 Jun 2014, 06:17 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message
     
    Tack, you are quoting 2 things I dont even reference. 1) the economy, and 2) interest rates. I talk about neither.

     

    I'm discussing risk appetites and profit margins in the stock market, and that alone. That is entirely different in the short to intermediate term, than the state of the economy.

     

    The psychological effects of QE continue to drive investor behaviour today. Look, it's been a great party. No one wants to leave. But some are quietly leaving.

     

    The market soared on a weak economy due to QE. It can and will certainly fall on a healthy economy -- ESP. If the market smells inflation as a future threat.

     

    I don't trade the economy. I trade the stock market. In a true sense, all I trade is risk itself.

     

    The momo stocks have all turned over again hard. In 2 days I've made back a pile of money I gave up shorting a little too soon. It's only a matter of time before the distribution I see shows in index pricing.
    2 Jun 2014, 06:26 PM Reply Like
  • User 7415181
    , contributor
    Comments (798) | Send Message
     
    Macro,

     

    For the love of Mike, please hit "reply" instead of "post" or whatever it is. You have interesting things to say, but I'm damned if I can follow who you're talking to at any given point in time. : )
    2 Jun 2014, 08:53 PM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    I am probably the odd man out here on interest rates. I have already had a debate with Tack and others here at SA. I will just make the following observations.

     

    (1) The FED has created a shortage of treasuries maturing in 10+ years to meet the current demand, including from pension funds and other institutional investors. This shortage is being aggravated by the continuation of QE and the reinvestment of maturing securities. The combination of increased demand and this artificial shortage is causing interest rates to become even more disconnected from inflation and inflation expectations.

     

    (2) While it is too early to draw any firm conclusions, inflation is starting to pick up meaningfully. The FED is still more concerned about the economy's momentum and will continue to downplay inflation in order to keep ZIRP well into 2015 and to only gradually wind down QE. Normally, the FF rate would be 2% or higher with inflation running at current levels (2% CPI and rising).

     

    (3) The FED is already behind the curve. Even with inflation picking up steam into the remainder of 2014, the FED will dismiss it due to their greater concerns about the economy.

     

    (4) The risk is that the inflation genie will be let out of the bottle. The FED may not even react at all to an acceleration of CPI toward 2.5% or the PCE price index over 2%, calling any such moves as temporary blips. Even when the FED reacts, it will be with slow and measured increases in the FF rate, as Dudley recently mentioned in a speech.

     

    (5) While Tack disagrees, I view it as obvious that QE is responsible for keeping rates at abnormally low levels. It is in no way normal to have an expected 2.2% average inflation rate over 10 years and a 2.45% ten year treasury yield.

     

    One danger to the stock market is "problematic" inflation. That kind of problem starts out slow. If allowed to fester and grow, it can be a major problem for stocks and bonds.

     

    I look at a wide variety of inflation indicators. A number of forward looking indicators are running hotter than CPI already.

     

    Maybe inflation will cool down later this year and into next. That will give the FED some wiggle room. But my point here is that the abnormally accommodative monetary policies will continue even when it becomes obvious that inflation is accelerating beyond 2% and their policies are stoking that inflation.

     

    Sure, bank reserves are at excessive levels. Loan activity is picking up however, and the FED is going to have big problems draining that huge pile of money (over $2.5 trillion) if and when it starts being used significantly in the real economy.

     

    Excess Reserves of Depository Institutions
    http://bit.ly/198OGbE
    2 Jun 2014, 09:20 PM Reply Like
  • Tack
    , contributor
    Comments (13797) | Send Message
     
    S:

     

    "(5) While Tack disagrees, I view it as obvious that QE is responsible for keeping rates at abnormally low levels. It is in no way normal to have an expected 2.2% average inflation rate over 10 years and a 2.45% ten year treasury yield."

     

    That you are in error on this point is virtually assured by the fact that, while QE has been reduced by almost half, rates have declined, not increased. Why is that? It's because the market forces are far stronger than anything the Fed might do. If QE were zero, which it will be soon enough, we'd still see no obvious effect on rates unless the market so dictates.

     

    That rates appear to be an anomaly versus inflation is entirely dictated by risk aversion that still persists and by a still-lingering hangover effect from deflationary forces. Market rates are set by lenders, not the Fed, whose only contribution is to establish the risk-free cost of money. Lenders could demand whatever rates they wish, provided sufficient credit demand exists to get it. For the time being, that demand is lacking.

     

    "Sure, bank reserves are at excessive levels. Loan activity is picking up however, and the FED is going to have big problems draining that huge pile of money (over $2.5 trillion) if and when it starts being used significantly in the real economy."

     

    Why does this view persist? The size of the excess-reserve pool is really meaningless. Only the rate at which it flows through the credit-formation sluice gates matters, and the Fed can narrow or slam shut those gates on a moment's notice should they decide to do so. One can debate whether they'll act, but not whether they are able to act.
    2 Jun 2014, 10:11 PM Reply Like
  • South Gent
    , contributor
    Comments (3575) | Send Message
     
    Tack:

     

    "The size of the excess-reserve pool is really meaningless. Only the rate at which it flows through the credit-formation sluice gates matters, and the Fed can narrow or slam shut those gates on a moment's notice should they decide to do so."

     

    How would the FED stop those funds flowing into the economy on a moment's notice without selling treasuries? And what harm can be caused by the FED raising rates on "Reverse repos"?

     

    http://bit.ly/1nm9HD1

     

    And, can you reference someone who agrees with your position that the size of the excess reserve pool is meaningless?

     

    You keep asserting that the reduction in buying to $25 billion a month and the decline in interest rates somehow proves your point. It does not prove anything except that the FED continues to aggravate an existing shortage to meet the current demand.

     

    Again, if anyone is interested in how this is occurring, it is simply necessary to look at the percentage of outstanding treasuries maturing in 10 years or longer that are currently owned by the FED, taking into account there is another $5 trillion owned by the SS trust fund, etc.

     

    Click Tab "T Notes and T Bonds" at
    http://nyfed.org/12yg38A

     

    Give me a single year when the ten year treasury was selling at less than .3% spread to inflation expectations when there was no ZIRP or QE, something that I requested that you do earlier. We have a long history going back centuries of how investors set rates when allowed to so without massive FED participation in the market as a buyer.
    2 Jun 2014, 11:28 PM Reply Like
  • Broken Clock
    , contributor
    Comments (126) | Send Message
     
    SG:

     

    Do you have any sources that I could read up on that talk about inflation and what the optimal levels are? As Yair notes below there are many who think it should be higher. I'm also aware that some don't care for inflation targeting and would prefer a different style of policy. The Fed has demonstrated some willingness to adapt. How do you view these developments?
    2 Jun 2014, 11:43 PM Reply Like
  • Tack
    , contributor
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    S:

     

    "How would the FED stop those funds flowing into the economy on a moment's notice without selling treasuries?"

     

    1) Increase rate of interest on reserves.
    2) Increase bank capital requirements
    3) Increase discount rate
    4) Sell Treasuries

     

    And, why does the notion that the Fed might sell some Treasuries provoke gasps? It's decried that rates are too low because they're buying Treasuries, but, then, if they reversed course to what is claimed by critics to be causing the too-low rates (no, I don't agree), that's a huge mistake, too.

     

    To me, this is like all the other forecasts of doom that have proven wrong from the get-go. It's always the next thing around the corner that's going to topple the whole house of cards irretrievably.

     

    "Give me a single year when the ten year treasury was selling at less than .3% spread to inflation expectations ...."

     

    Give me a single year when the economy was coming out of the worst deflationary crisis since the Great Depression.

     

    And, no I can't reference somebody else's argument on this subject that concurs with mine, not because that such may not exist, but because I formulate my own independent opinions by assessing various facts and what I see occurring, not by seeking comfort in the views of another pundit.

     

    There is no end to this debate, I imagine, until we see what happens when QE is zero. Then, I guess, a new whipping boy will materialize, no matter what happens to rates.
    3 Jun 2014, 02:51 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4996) | Send Message