Land of Milk an...'s  Instablog

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! #37 227 comments
    Aug 18, 2014 10:15 PM

    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 #37. 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, #36: 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!:

    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! And several have published SA articles!

    Disclosure: The author is long SPY, IWM, DIA, QQQ, LINE, CVX, F, TOT, MU, SAN, LAZ.

    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 (227)
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  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » --

     

    On the fear or participation scales:
    when institution and advisor participation is lower than it's been

     

    ... is it time to jump in with the spare cash?

     

    Or time to follow their lead and back off, while keeping an eye out for the turn around?
    19 Aug 2014, 04:03 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    Welcome newcomer's! We've moved onto chapter #38. Come join us there!

     

    http://seekingalpha.co...

     

    This current chapter 37 has a lot on market direction indicators and what they're saying at the current moment.
    24 Aug 2014, 05:04 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    L,

     

    from my comments on Aug 7th

     

    "I note S & P 500 --

     

    Rel strength on the index is at lows last seen on Apr 15 when the S & P rallied 5 days from 1842 to 1879 "

     

    I mentioned that i use a variety of rel , strength indicators to get a feel for the short term market gyrations

     

    they were on target as the S & P had an intraday low of 1904 on that day (when many were claiming dire scenarios for equities) and has now rallied some 77 points to 1981.

     

    all of this amidst the Russian Ukriane and other geopolitical follies ...

     

    these indicators now show that the market has worked off that oversold condition . while not yet flashing a extreme overbought condition in the short term they are close to the top of the range ..

     

    Perhaps enough left for a push to new highs ..

     

    (RUT) has regained its 50 day MA after pushing above its 200 day MA yesterday .. no we will see if it holds..

     

    All of this is short term gymnastics..

     

    "is it a good time to jump in with spare cash ?"

     

    it's all about picking up stocks that are tossed away with market knee jerk reactions

     

    remember when they threw (NASDAQ:AAPL) away , trashed by every author here on SA , analysts and pundits --- - now a new all time high

     

    They threw (NASDAQ:GILD) away when the biotechs made the headlines every day amidst absurd talk about the sector.

     

    plenty of opportunities, just like these - look "beyond" the "noise" and the ill advised "short term" approach to investing..

     

    In my view, we are investing with a backdrop of a secular bull market.. when they "give" them away, and offer convoluted reasons for doing so (Russia,Ukraine, GAZA, PUtin, the fed , ever present perma bear talk, etc.)

     

    -- accept the "gifts"
    19 Aug 2014, 07:50 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    L,

     

    My comment in the last segment was solely about the industry itself.

     

    It was to do with someone I knew given spiffs to sell particular funds, who informed me this is a regular practice, to pay bonuses for selling underperforming funds.

     

    I'm not a great fan of the industry, in general, hearing about this and advisors not acting in the best interests, of their clients.

     

    It seems you may have assumed it was a "shot" relating to this blog. It was nothing of the sort.

     

    Sorry for any misunderstandings.
    19 Aug 2014, 09:58 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » RD

     

    Glad to hear it!!

     

    So if it's about details about the industry, those details help a lot! That way those reading can understand the depth of what the problem is.

     

    I had a financial adviser (in person) tell me to always be careful about brokerage advisers and their advice. He's worked for a big broker running their office, and was appalled at how decisions for clients and advice was done. All about the deals and connections the brokerage had in the works, not about the client.
    19 Aug 2014, 11:14 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    L,

     

    I borrowed this from another article

     

    interesting observation from T Boone Pickens who "knows' a thing or two about oil..

     

    http://cnb.cx/1rTRYov

     

    it brings to mind the beaten down oil sector and the opportunities that are showing up there ..
    19 Aug 2014, 08:02 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » - Picken's article

     

    Hmm?... I found it contradictory. He says prices will stay up because OPEC sets them & needs them high. Then the article lists other oil sources being developed. So to me that means, supply will increase and separate from OPEC, and price will decline.

     

    One commenter QUATTROPORTE claims to point out Picken's prior track record errors. I've never heard of Pickens before, so I have no opinion
    21 Aug 2014, 01:07 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    L,

     

    i am biased towards Mr Pickens, and will now show my age :) -- he founded Mesa petroleum back in the 70's

     

    came to be known as a shareholder friendly CEO , because he was all about finding undervalued situations in the Oil business and by acquiring, created wealth across the board..
    In the 80's he was the guy to follow....

     

    Im biased because as a basic dummy in the business back then, i had the dumb luck to follow him & his exploits and turned nice some profits in doing so .. it helped with the dummy lossess I racked up .. ;)

     

    hes turned to activism lately , and one of the other things i like him for is his outspoken criticism of our energy policy here in US ....

     

    a big proponent of natural gas , as he would like to see the US use our most plentiful resource and get rid of any dependence on OPEC.. once and for all
    21 Aug 2014, 08:49 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » FG

     

    Wow, then he should definitely know what he's talking about. I agree, getting away from OPEC is good.

     

    Not just for us, but I'd heard a studied theory that oil or any country dependent on a single product managed by it's elite has limited interaction with the rest of the world by it's regular folks, compared to countries doing day to day business with each other. So get away from oil, and it can be good for the populations to grow closer to democratic style and freedoms... harder to contain and dominate them.
    21 Aug 2014, 11:32 AM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    LMH: I am content with my performance numbers YTD for the entire year particularly after the robust move last year and since March 2009. Consequently, I am not likely to do any robust buying. I recently completed a stock allocation reduction that eliminated my net additions between October 2013 and June 2014.

     

    Still, I will buy securities viewed as presenting a favorable risk/reward profile, but I may pair that purchase with the disposition of another security, particularly a fund that has underperformed its benchmark.

     

    An example almost occurred today, but I decided to wait to see if CVX pulls back below $125. I was thinking about buying 50 (NYSE:CVX) with the proceeds realized by selling most of my underperforming stock CEF known as Blackrock Real Assets (NYSE:BCF). That CEF has been hurt by its exposure to metal companies like Vale, BHP, Rio Tinto and several gold miners.

     

    I have an excess amount of cash in the IRAs due to selling some bonds and equity preferred stocks into this year's bond rally, along with some bond redemptions by issuers. I am redeploying that cash cautiously and in a very slow manner. My most recent add, and it is risky so I bought only 100 shares, is a REIT (NYSEMKT:APTS) discussed in a recent SA article:

     

    http://seekingalpha.co...

     

    I also just bought back 100 shares of (NASDAQ:ARCP) in an IRA that was sold at a higher price earlier this year. I had a favorable opinion about its second quarter earnings release after frequently criticizing some recent actions including a large stock issuance at $12. I also own 300 shares in a taxable account.

     

    7. Paired Trade: Sold 100 ARCPP at $23.43 and Bought 300 ARCP at $12.69
    http://bit.ly/1nCbTHJ

     

    I will frequently buy higher yielding REIT common and preferred stocks in a Roth IRA since their distributions are not characterized as qualified, and I turn what amounts to ordinary taxable income into tax free income.

     

    I would like to buy Canadian REITs in an IRA, but unfortunately their distributions have 15% withheld by Canada which is not recoverable when the security is owned in an IRA. Those distributions are not viewed as dividends subject to the U.S.-Canada tax treaty that exempts dividends paid into retirement accounts from withholding taxes.

     

    Consequently, all of my Canadian REIT purchases are made in a taxable account. My most recent add was to buy more of Northwest Healthcare REIT in anticipation of selling later my 300 shares of HealthLease bought a few weeks ago near C$10, which is going to be acquired at C$14.2

     

    Chart:
    http://yhoo.it/1kT6Q7U;range=1y
    19 Aug 2014, 08:36 PM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    SG - Funny you mentioned cvx. I bought yesterday @ 126 (the 100 day moving average) but stuck in a larger buy order if it moves lower (around $122 - the 200 day moving average).

     

    Today I made three trades. I got out of my tcrd (explained the reason in the previous chapter). I initiated an options spread - buying 2 slb Jan 110 calls and selling 3 hal Jan 70 calls - net credit $100. I think slb will gain on hal and hal options volatility is at a premium to slb. This is the first time I've done this type of options spread using two different companies so it will be interesting to see how it turns out. I intend to do more if I can do it at a better level. And I bought a few gme weekly calls (they report this week). All the metrics and the big short interest suggest this could be a big mover to the upside, but I didn't want the risk of stock ownership since a bad report could send it down by 10%.

     

    I am so thankful I was away when I was. I lost a fair bit of money on the decline but wasn't watching the market or even worrying about it. As of today the account is at a new high for the year - with the help of a few gtc orders that were executed while I was away.

     

    BTW - thanks for the info yesterday on the Fidelity etf's - I didn't even know they were offered - and I should have since I have a Fidelity account.
    19 Aug 2014, 09:44 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    DD: I would prefer SLB to HAL long term, but have no idea which one will outperform the other over a short period relevant for an option trade.

     

    (NYSE:SLB) and (NYSE:NOV) would be my top two selections in oil service. I do not personally own NOV but do own it in a trust account.

     

    I prefer the Fidelity sector ETFs over the Sector SPDRs. I view it as important to have a broader sector allocation which includes mid and small caps even if the weighting is in the large caps. The Fidelity ETFs also have slightly lower expense ratios, and I can not buy the Sector SPDRs anywhere commission free. The SPDRs own only companies in the S & P 500.

     

    Select Sector SPDR ETFs
    http://bit.ly/1kTlOuG

     

    The Industrial SPDR (NYSEARCA:XLI) has an expense ratio of .16% and has 64 holdings. That would be find for an investor who wants large cap sector exposure. The Fidelity Industrial Sector ETF (NYSEARCA:FIDU) has 356 companies and a .12% ER.

     

    I have also played the Vanguard sector ETFs also, which are both cheap and broad. I can buy those commission free in my Vanguard brokerage account.

     

    Vanguard Sector ETFs
    http://bit.ly/1kTlQms

     

    The Vanguard Industrial ETF (NYSEARCA:VIS) has a .14% expense ratio and 353 holdings.

     

    My best performing mutual fund this year is the Vanguard Health Care, up 17.4% year to date and it has an annualized total return of 28.25% over three years.

     

    http://bit.ly/1jWklDl

     

    The low cost Vanguard Health ETF (NYSEARCA:VHT) is up 13.93% YTD, with an annualized three year total return of 29.83%.

     

    http://bit.ly/1kTlQmu

     

    In an earlier conversation with LMH, I mentioned that CVX was my second choice among the large, good dividend paying U.S. energy companies. I went with two fifty share buys of (NYSE:COP) earlier this year instead, with the last purchase around $63.
    19 Aug 2014, 10:43 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    I own (NYSE:CVX) from $12-13. It's been sad to watch it come off it's $132 high off the Russian noise, down to $124-7. Is the oil industry and pricing coming down, going to be a limit for them going forward?

     

    I'm thinking of buying, but I'll go for diversity so with the list that FG posted yesterday (or before that) of energy-rated (not the deepsea rig-specific).

     

    I can't believe you're making new highs. I'm still off from my prior high, 1.7% or so. So I'm happy to finally have something to post, that's doing well in comparison.

     

    I also bought just before the dip (NYSE:TOT) at $66, which as already 5% off it's prior. It's been down more, and keeps staying down over Russia. But 5% div, so I plan to hold it a while, and not worry (much)!
    19 Aug 2014, 11:58 PM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    LMH - Most of my stocks are still off their highs, but I've been lucky that several have outperformed in the past couple weeks - brkb, peix, csiq, lyb and hd are the biggest gainers. All are vulnerable to profit taking so the out performance may not last.
    20 Aug 2014, 09:13 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » DD

     

    Congrats on good picks! (NYSE:LYB) looks appealing. PE <15. 2.5% div. Seems to be a sort of commodities.
    21 Aug 2014, 12:18 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » SG

     

    Interesting read, along with your Fidelity ETFs above. Haven't looked at REITs yet. Good to know where the tax benefits are.
    21 Aug 2014, 12:45 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    L,

     

    RE: CVX
    "It's been sad to watch it come off it's $132 high off the Russian noise, down to $124-7. "

     

    the price of oil certainly has come into play with any name that is oil related

     

    BUT to me it just looks like a mere consolidation after a run.

     

    the stock has had a 17% run in less than 5 months .. 112 to 132 , now a 6% dip after that move.. quite normal.... Russia or not :)

     

    looking at it from the div. growth perspective

     

    your buy @ 112 locked in a 3.8% yield that will only increase over time as CVX sports a 10 yr div growth rate of 10%
    20 Aug 2014, 08:39 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » FG

     

    Good to know! Yep, enjoying the dividend while waiting.
    20 Aug 2014, 11:44 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    I read some comments about the BDC (NASDAQ:TCRD) in the last Instablog. It might be helpful to simply summarize how I would evaluate a potential purchase in this sector. Before doing that analysis, I would make the following observations about this BDC.

     

    It is externally managed, and the market price for externally managed BDCs will generally hug the net asset value per share.

     

    This BDC was formed after the Near Depression, with an IPO in 2010, and has not yet been tested by a recession.

     

    I will first read the last earnings report available at the firm's website, financial websites or the SEC.

     

    This is a link to the SEC filings of THL Credit:

     

    http://1.usa.gov/1lhurje

     

    The last earnings release was for the 2014 second quarter:

     

    http://1.usa.gov/1lhuoUE

     

    I noted that the net asset value per share was $13.28, down from $13.36 per share as of 12/31/13.

     

    As of 6/30/14, "THL Credit’s investment portfolio at fair value was allocated 40 percent in first lien debt, including unitranche investments, 31 percent in second lien debt, 20 percent in subordinated debt, and 9 percent in other income-producing and equity securities."

     

    Subordinated unsecured debt could easily be wiped out in a BK given the high leverage and lien debt for these private companies, who are borrowing at high rates from BDCs and who are viewed as too risky by most banks.

     

    Second lien debt is also problematic and I have seen second lien debt become worthless or close to it in a BK when the firm had a significant amount of first lien debt. The second lien and subordinated debt will consequently have higher yields and greater risks than first lien debt.

     

    This BDC is weighted in second lien and unsecured debt and is consequently reaching for higher yielding risk assets.

     

    Then, I noted this worrisome statement:

     

    "As of June 30, 2014, THL Credit had three loans on non-accrual status with an aggregate amortized cost basis of $39.4 million and fair value of $30.2 million, or 5.3 percent and 4.1 percent of the portfolio’s amortized cost and fair value, respectively."

     

    While I recognize that defaults will occur with high risk loans, that is a high default rate. I would now want to identify those borrowers, the nature of the loan, when those loans were made and how quickly they went south. That information will tell me something about the competence of the managers. In my view, the managers of all externally managed BDCs are worth a tiny fraction of what they are being paid.

     

    I will also look at the trend in net asset value per share. This information can easily be found in the 10-Q filings. I can quickly pull up all the 10-Q filings at the SEC by simply entering "10-Q" in the "Filing Type" box. Those numbers will generally be found at page 2 or 3.

     

    9/30/2010: $13.1
    12/31/11: $13.24
    6/30/2012: $13.17
    12/31/12: $13.2
    3/31/13: $13.2
    12/31/13: $13.36
    3/31/14: $13.34

     

    Looking at those numbers, I see nothing that would justify a market price at any premium to net asset value given the risks in the portfolio.

     

    I then examined the chart since the IPO:

     

    http://yhoo.it/1lhuoUG;range=5y

     

    I see that for most of the history that price was below or near net asset value per share, which is appropriate in my opinion.

     

    Starting in mid-July 2012, the market price became unhinged and started to drift up to an unjustified premium to NAV, topping out at almost $17 per share in November 2013. It is not surprising to me that there was a price adjustment occurring over the next several months that brought the price back closer to NAV per share.

     

    I also would look at how often the BDC has tapped the equity market. There is a conflict of interest between the external managers and the public shareholders, recognized in the Risk section of the annual reports. The managers want to increase assets since part of their compensation is based on a percentage of assets under management including those assets acquired with debt. There is an incentive to increase assets by selling stock even if that issuance is below net asset value per share and even when the available investments are likely to result in a higher than normal level of defaults.

     

    See 2013 Annual Report starting at page 41
    http://1.usa.gov/1lhurjj

     

    An investor will rarely see such a long summary of risks in any publicly traded security that can be found in any externally managed BDC's risk section.

     

    So far, this BDC is not a serial issuer of new stock. I will generally look in the last 10-K to find this history or simply looking for "prospectus" filings at the SEC site (sometimes referred to as "497" filings) That would include both debt and equity issuances and I am interested in both.

     

    The last stock issuance was over a year ago:
    http://1.usa.gov/1lhuoUI

     

    So, this BDC is due for a new stock issuance which may provide an opportunity to buy below book value per share.

     

    The prospectus will not tell you the price of the stock about to be sold. That can generally be found in a subsequent 8-K filing. I did not see one that disclosed that information for THL. So I went to THL website and looked under "press releases" and found a press release disclosing that information:

     

    The company priced the offering at $14.62 and sold 7.59M shares:

     

    http://bit.ly/1lhuoUK

     

    I doubt that this BDC could sell stock anywhere near that premium to NAV per share now. An offering of a similar size now would have to be sold near book value.

     

    I will look at other issues, but those are the main ones.

     

    I will try to eyeball how much of the dividend is covered by recurring interest revenues. Sometimes, I can find that data in table form on the internet. Wells Fargo prepares summaries for their clients. Barron's reproduced a table in a May 2014 blog:

     

    http://bit.ly/1qt49Zc

     

    The TCRD data shown in the table is not reassuring. The WFC "adjusted cash flow" coverage was just 76% as of 12/31/3. It is only by taking into account PIK interest (which I would discount) and fees collected that the number goes over 100%.
    20 Aug 2014, 09:09 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (3001) | Send Message
     
    Thank you for your research South, explains why (NASDAQ:TCRD) fell in price.

     

    Your explanation gives me a map to follow for researching (NYSE:TCAP), appreciate it. Every day I'm learning a lot here on this blog, especially from you. Enjoy your day!
    20 Aug 2014, 09:22 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » SG

     

    Wait a sec for me to grab a cup of coca.... before I settle down to read all your info :) !

     

    Thanks for all the details. They're not a novice's easiest thing to assess and follow.
    20 Aug 2014, 12:06 PM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    SG - Impressive post. Looks like I was a bit early getting out of tcrd but I made the correct decision.
    20 Aug 2014, 03:23 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    From Josh Brown,, - (I love his candid approach to the market)

     

    http://bit.ly/1lhAlRt

     

    and having said this over & over for quite some time ---
    i Wholeheartedly agree

     

    The accompanying Gallup poll in his commentary is also "telling" ......
    20 Aug 2014, 10:22 AM Reply Like
  • BlueSkyForever
    , contributor
    Comments (3001) | Send Message
     
    F&G, I remember 1999 very well. Back then, in the 1990's I was a programmer analyst for a major insurance company. We were trying to get ready for the "2000 computer problem." Basically, programming done since the 1960's didn't account for the turnover in century. You had virtually every legacy system out there programmed to accept birthdays, etc. with just 2 digits for the year.....yeah that was a major problem. Incredibly, fortran legacy systems were still running software for major US companies. With the old fortran language, based on fewer bits, it was good to "save space" by shortening the year to 2 digits instead of 4.

     

    Also at that time, the economy was going great. Maybe we were too busy working to notice the stock market....that's my excuse anyhow.

     

    Subsequently, it was a shock when many tech companies went broke practically over night. A warning of what was to come? Perhaps.

     

    Even after the financial debacle of 2008/2009 I don't feel that there is anything we cannot overcome. By sure perseverance & hard work, we have come back from financial hardships & are stronger for it.

     

    But then, perhaps that's my perspective because I never gave up. Even after losing huge sums of money because my husband's company stock crashed, some of the financial investments we held went sour, etc. etc.

     

    It did change our lifestyle. But not our outlook on life.

     

    Hard work, and that means working long days & weekends, does pay off.

     

    Saving for "rainy days" is a good idea. It's the main reason we were able to survive for years living on an income that was less than 50% of previous year's income. In fact, for many years the only income we had was from my investing results.

     

    Maybe because I learned at an early age to be a saver, that helped. Never was into going into debt in order to live beyond our means. I've always preferred a simple life & lots of savings.

     

    As a realtor, I worked harder than I ever did previously. Fortunately, the hard work paid off.

     

    But what has really been the best for me is managing all our family investments myself.

     

    I worry every day that the market could turn ugly; we could go into a recession. Then I remember "been there done that."

     

    Never a bad idea to park some cash somewhere, just in case.
    20 Aug 2014, 01:54 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (3001) | Send Message
     
    Josh Brown is one of my favorites too....he's fantastic.
    20 Aug 2014, 01:54 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    BSF,

     

    All good advice.
    20 Aug 2014, 01:57 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    a lot of people hate to watch CNBC , Bloomberg , etc, and i do understand why ..most of it is talking head media chatter...

     

    However , if you listen carefully there are certain "regulars" and an occasional guest that really have been quite good at their market calls and individual ideas.

     

    Josh Brown is one of them ....
    20 Aug 2014, 04:57 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    I am encouraged by the performance of my short portfolio in recent days. In spite of a 200+ rally in the Nasdaq and over 80 SPX points from the trough, I am down in that time less than 1% total, in spite of levering in to a broad stock short position across several sectors.

     

    The last 3 days, largely, simply my shorts will not rally. I did cut down (NASDAQ:Z) this morning as it does have too much life, and added a new short in (NYSE:P).

     

    Tells me 2 things -- first is I'm a great stock picker, which I doubt, or the rally is getting narrower. I also note, the IWM has resumed its underperformance.
    20 Aug 2014, 11:04 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    Ive expressed my thoughts on what i believe is transpiring in the (RUT)

     

    another perspective from a diff source .. it seems to share the same view as mine , at this point in time ...

     

    http://bit.ly/1na8spm
    20 Aug 2014, 11:43 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » --

     

    (RUT) small caps is about 1/2 up it's trading range. I'm going to wait till it's closer to it's top, to start assessing if another range down, or an actual correction will come. For now - it's going to it' 118-120 before it starts topping again. It may be way overvalued at that, but investors remember history and will think of it's prior 118-120 as reasonable(collective on it's various stocks), whether or not it is...

     

    That's my 2 cents.
    20 Aug 2014, 12:02 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    They don't ring bells at tops, and one rarely hears the bullet coming....so they say.
     
    Here is a short list of why I am highly defensive, right now, and recommend others do so and raise cash before the fall arrives, and it's all about the internal indicators, the weak foundation of the current rally.
     
    1. Divergences. Although the Nasdaq and SPX have rallied back, small cap stocks (NYSEARCA:IWM) continue to substantially lag. The rally -- continues to narrow in breadth and in new 52 week highs.
     
    2. Treasury bonds continue to substantially outperform junk bonds. The curve continues to flatten.
     
    3. Commodities are starting to sell off, hard, both Oil and Copper in particular. Both this and the bonds put into question economic strength going forward.
     
    4. Poor retail, banking and housing stock sector performance. Strong utilities, a classic defensive indicator.
     
    5. Overwhelming belief -- market cannot be timed. Common at tops. Market timing becomes most popular -- prior to cyclical lows.
     
    6. Complete faith in Central bank's ability to sustain asset prices regardless of underlying economic trends..
     
    7. Record corporate profit margins, far above the mean, sustained by junk bond issuance, corporate Buybacks, special dividends. Lack of organic growth.
    Aug 14 09:46 PM|4 Likes|Report Abuse|Link to Comment Signs Of An Approaching Bear Market [View article]

     

    Robert Duval , Contributor
    Comments (2831)| Following | Send Message  
    8. Lack of consensus bearishness on SA and elsewhere, especially compared to pre 2013 levels. Bears have been converted to bulls, or simply have their hides laid out in the sun...if one read the commentary and feedback from 2009 - 2012...it was regularly forecasting the return of another 2008 crash. We don't see that much, anymore. Conversely.....
     
    9....The Billionaire club....is getting much more cautious, holding and raising substantial cash reserves. Warren Buffett (currently holding his largest cash allocation, ever), Seth Klarman, (50% cash) Wilbur Ross (selling 6x his buying ) and others....all legends very cautious, and largely dismissed or even ridiculed on this site.
     
    10. QE conclusion...to those who would call irrelevant -- would ignore historical precedent in 2011 and 2012 at the conclusion of QE programs, then. The Fed is determined, IMO, to get out of the QE business, at least for now. A valuation adjustment, is entirely rational. And like 2011.....
     
    11. Europe is having issues, once again, and threatening to return to recession. Stock markets in Germany, Spain, Portugal, France are correcting hard. To say the US will sail through without being affected...ignores history.
     
    12. Continued US contractionary fiscal, taxation and regulatory policy.
     
    Conclusion. I am highly defensive on US markets here. I recommend investors raise substantial -- I mean 30-50% cash and / or buy long dated option protection. I also believe investors would be well served examining out of favour emerging markets with secular growth stories, when the time comes.
     
    These are my thoughts alone from 16 years in this business, and I make my trading plan accordingly..
    14 Aug, 08:20 PMReply! Report AbuseLike0
    20 Aug 2014, 11:54 AM Reply Like
  • The_Hammer
    , contributor
    Comments (5110) | Send Message
     
    where do u have that large cash hoard stashed? would be kind of reluctant to hold all in mm's being the talk of bail ins.
    20 Aug 2014, 02:26 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    Above is my summary on why I am cautious and recommend raising cash. The items above, none are a silver bullet, all are probably debatable, and many have been in place for some time.

     

    This fact alone, does not invalidate their existence. Added together, they add up to substantial weight of the evidence for me, and where I see opportunity.

     

    The above is a week old so obviously individual items change here and there, but the overall picture is what I am basing my plan on.

     

    None of the above is in any way calling a "top" intermediate or otherwise, in the large cap SPX, it is only a risk reward exercise.

     

    That being said, I do believe an intermediate IWM top is being formed, and junk bonds too.

     

    New all time highs in both of the above, may invalidate my caution at this time.

     

    This is my trading plan. I do not advocate anyone follow it, it's just shared as an outline. Use however you wish.
    20 Aug 2014, 11:59 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » RD

     

    Thanks for the ideas... :)

     

    I'm sure there are lots of opinions folks have ... and can share their interpretations too.

     

    A lot of it is timing, and that seems to be a hard question with the Fed in the mix.
    20 Aug 2014, 12:23 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    (NASDAQ:MU)s up on good contract news today. Sold out at $33 at 3.76% gain. I'll try to buy back on next dip. No div to wait for.

     

    My goal was $33.54 for this round. There was a series of poor news last week bringing it down, that made me feel like the shine was off it. Now I'm wondering if that was brokerages getting news blurbs out...before this contract news popped it up? I may regret selling out too soon...

     

    Now of course it's coming back up toward's it's day's high. I put a limit into Scottrade at several cents under bid price, and got my limit not the bid. I'm beginning to wonder about this (not the first time.)
    20 Aug 2014, 12:12 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    L,

     

    avoid the media chatter and noise .. :)

     

    (NASDAQ:MU) is now overbought on a short term basis after coming off that dip .. so, U may have that chance to get back in if that is your plan....

     

    if you are going to trade for 3-4% gains and are easily influenced by market noise , my suggestion is to take a stock like MU - buy it and sell the upside call

     

    If u remember i mentioned that a while back ,,
    July 28----- buy MU @ 32.91 sell the 8/22 weeklys strike price 33 option for 1.12 -- 3.4% yield and if called 3.7% -- for less than 30 days holding period

     

    Those options expire in 2 days if MU now dips below the 33 strike price and you aren't called away you can do the same thing all over - that would be a nice position to be in .. IF its called so what u have your gain and u booked the profit back on 7/28 . If it then dips - do it again...

     

    advantage -- it takes all of the , "noise " out of the picture.. and you print money .. I put this position on after mentioning it that day for many accounts.. grinding out 3% a month equals a 30%+ return in a year.
    the call writing portfolio i have here on my SA blog shows a $30,980 profit on an original 100K investment from 6/5/13. go check it out. NOT here to tout ,or attempt to impress anyone -- its been there for anyone to follow if they wish

     

    every trade is documented from inception -- I did it simply to show that it can be done , -- & I 've been doing that on a portion of my holdings for a long time..

     

    & its not as hard as so many people think..
    20 Aug 2014, 05:18 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » FG

     

    Well, 3.75% (or 4% with my short lived option trade) is okay for today... Missed another 1%, maybe more in the next few days. Oh well, I'll live. I'm repeating that mantra, can't get the tops and the bottoms; in between is good enough.

     

    It wasn't noise that decided this :). A few days ago, from the chart, I'd decided to sell at $3.54. It could go higher short term (last high was higher), but also looked like a good possible turn around point for the stock to catch it's breath. So I guess, I based on what you've identified as overbought here.

     

    Saw the pop on good news while everything else was red, and figured I'd take advantage, for my already in place plan. Thinking, it'll probably come down off that news soon. I'd spotted it at 3.24 but by the time I got thoughts gathered - it was 3.04. I'm definitely not nimble yet.

     

    Also I'd missed that the market mood had shifted to improving, and I was selling while the general market was rising and would spill over to this. I bet there'll be one more good news blurb that will bring it up, then it will reverse again.

     

    Last time I got 4% then missed the buy back in (and it hit my expected price.) So this time I'm aiming to get back in, price marked in my file, ding, ding. (When I have time I'm hoping to set up a google spread sheet that brings in the price, then puts a blinking text when a condition is met -- to catch my eye.)
    20 Aug 2014, 10:20 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » I'd tried out options and really like that plan. Also with selling puts. I haven't spotted good prices much yet.

     

    On (NASDAQ:MU), I'm running into the problem that I'm not completely sold on the idea that this stock is going to keep running up nicely. So I've been hesitant to tie it up with cover. I want to run away if it suddenly starts tanking. I need to have more individual stocks that I can try this with. Possibly my (NYSE:http://bit.ly/KPnoYz), (NYSE:http://bit.ly/ontL3t), (NASDAQ:http://bit.ly/u2RFAM), (NYSE:http://bit.ly/pXMU9v). I didn't buy even lots, need a few more shares on some. Come to think of it, a lower priced stock has advantage of getting to 100 lots for less $ in.

     

    I can see from your description here, how it helps stabilize the "timing" way of earning on a swing trade type stock, and instead lets you hold for the happy whole ride (up, with pull backs), while letting you earn on the side. Cuts down on commission risks & losses too.

     

    I'm not sure how you're finding such great options prices & deals, so I have to look & learn more. I'm spotting .5-2% returns that aren't worth the risks (calls restraining profit, or forced buy in a little high on puts.)

     

    If called, do you have to pay commission when selling to cover?

     

    (NYSE:http://bit.ly/1ivpvB5) is very close to it's prior high too. That's less of a trader's stock (for others) & a longer term hold, so decided to just let the ride. Are you taking profit here on it?
    20 Aug 2014, 10:59 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    L,

     

    as with any strategy it pays to have a few positions on going to diversify.. If one turns on you have the others hopefully working .. That is why i stress that when one embarks on this they have to pick stocks they want to own IF the market turns on you.

     

    In the call portfolio here you will see that is exactly what has happened at times. no system or strategy works perfectly. ive been "stuck" in a position when it dropped , waited it out and returned to write another call. Mixing a div player is also ok, if that turns then you have the div there also -- (NYSE:FCX) is one that i have going now..

     

    As far as the yields - i'm selecting stocks that have "some" volatility and that is why the "premiums" are so good. and i have a criteria list that i adhere to, and the bottom line - I have no issue with the name if i do get "stuck"

     

    (NASDAQ:MU) is a good example of nice juicy premiums.. 3% month. the names you listed in your holdings are not as volatile hence you will not see the nice premiums unless you go out 3 months or so in duration

     

    i usually don't write calls on core positions - div aristocrats , etc,

     

    Interesting that you mentioned (NYSE:LAZ) , its been strong and I was checking out the calls this morning ---i'm looking to sell the Oct 55 call for around 1.30

     

    its at another new high (my indicators also suggest it's overbought in the short term ) and if i get called at 55 with the 1.30 premium and the div's collected its a 19-20% gain since March .. my original target was upper 50's ...

     

    if i don't get called - i just lowered my cost basis and still have a stock that yields 2.5% and the fundamentals are in tact - not the end of the world..

     

    another way to look at it - i'll take a stock with a $1.20 div and double it by selling the $1.30 call and go from 2.5% to 5% ..

     

    and i may get to write another call down the road ..

     

    do this with a few positions and it really adds up quick

     

    You can turn a no yield name into a high div. situation in a short period of time..
    21 Aug 2014, 12:50 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » FG

     

    Yep, I need more stocks I'm familiar with -- to pick ones I don't mind holding if stuck for a while, nor losing.

     

    Volatility - that makes sense. (NASDAQ:MU) used to be a trader's stock. The div aristocrats, I don't mind getting stuck with - but volatility isn't their thing :). Now too, I understand why you it with only part of your portfolio.

     

    I'd noticed better options on (NYSE:LAZ) but I have <1/2 position so under 100 shares. ...and I refuse to buy at these prices. Next dip.
    ....And no comments about my being a dip for not buying on the recent dip!

     

    It really is such a cool idea! A great way to own a stock, while increasing worth. I imagine often getting stuck is during a general market turn. Less often that it goes down with no hope of return -- and often it's best to hold through individual downs no matter. I'm suspecting your adding a lot with execution skills. ...I'm a learning :)!
    21 Aug 2014, 10:22 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    I view IWM as overvalued, but the market may not bring that index within a fair value range through the correction process. Instead, as F & G noted, the small caps may simply churn for awhile, waiting for earnings to catch up to the current market multiples.

     

    It has not gone unnoticed by investors that small caps have outperformed large caps by a wide margin over the years, and this has probably caused a crowded trade in that sector.

     

    Since 1980, a $10,000 investment in small cap value would be worth $601,860 by the end of 2010, while the same sum in large cap growth would have risen to $187,071.

     

    http://bit.ly/1gbKVGL

     

    This kind of data suggests to me that small caps are probably due for a long period of relative underperformance.

     

    While I do not short stocks, one possible paired trade idea would be to go long (NYSEARCA:OEF) and short IWM.

     

    The annualized total return for OEF through 8/19/14 was 16.07% and 7.44% for ten years.
    http://bit.ly/1najrz3

     

    IWM's total annualized return for five years was 17.18% and 9.46% for ten years. YTD that ETF is up by .71% on a total return basis while OEF was up YTD 8.23%.

     

    http://bit.ly/1najrz7

     

    I learned a long time ago that the market frequently makes even the most informed, rational and level headed investors look foolish. A rational investor learns to be humble and simply try to learn from mistakes.

     

    The biggest mistakes have their origins in simply refusing to become informed about the big picture events that shape the overall market direction and the specific relevant factual information for each investment. Any new factual information needs to be digested and incorporated into the investor's opinions, even if that requires a reversal of a prior opinion. Ego has no place in a successful investor's world.

     

    The book chapter that I referenced yesterday, titled "The Behavior of Individual Investors", goes into detail about the reasons for failure:

     

    http://bit.ly/1rVatc2

     

    One reason underlying a lack of success is paying too much for growth. Possibly, there is always a chance that the investor playing that game will be able to exit the positions by selling to the greater fool. More often than not, the individual investor playing that high multiple and momentum game will lose. The best example at a mass level was shown by what happened in the late 1990s.
    20 Aug 2014, 12:26 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    SG,

     

    I believe you may be correct in that the RUT will under perform for a while as it works off the excess of the out-performance it has experienced - A sort of reversion to the "mean" if you will

     

    In my view the weakness in the (RUT) has garnered a lot of attention from a variety of sources, and understandably so .

     

    However, taking a period of consolidation and perhaps under performance , (which really would be a healthy event) and suggesting it will permeate to the entire equity market, in my view is a quantum leap...

     

    to that end, I simply don't see the RUT taking down the entire market.

     

    I'd rather take a look at the renewed strength on the Dow transports as a signal or a 'clue" as to where the economy and the equity market may be headed ..

     

    as far as "humbling" ,, ANYONE that has been involved in investing in the equity market has been humbled more than once -- market "humbling" knows no bounds, no one is exempt..

     

    as it goes with the turf.....

     

    20 Aug 2014, 06:22 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (3001) | Send Message
     
    (NYSE:FL) will report on Friday. I was tempted to sell some shares today....put in a limit price over the last closed price, $52.17. Thought some more about it, then canceled the trade. I have 500 shares of (FL) and IMO this company will report a solid quarter. (NYSE:NKE) already reported, & their sales were up. (FL) sells lots of Nike shoes & clothes. This is an excellent company, one that is expected to see earnings continue to increase in the coming years. Will see how it goes on Friday. The stock is already up 48% this year.

     

    Last price just now for (FL) .... $52.27.
    20 Aug 2014, 01:30 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    SG,

     

    So true. I've been humbled so many times I cannot count. I do know how to lose money better than most people. Made every mistake in the book, but I keep discovering cousins of all the mistakes.

     

    IWM may very well churn. This is still unknown.

     

    My shorts for the most part are already entrenched solidly in bear markets of their own, commonly defined as more than 20% lower than their relative high prices. This is significant, in the context of the broader market making new record highs.

     

    Thanks for the wise comments.
    20 Aug 2014, 01:33 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    Another theme to consider would be long US dollars, especially against the euro.

     

    One of my themes above relates to euro zone weakness, and it is my firm belief the euro is a flawed currency in its current form. It may be that another euro area crisis is on the way, and that would be a risk off catalyst.

     

    I believe, as many do the European union needs to split the euro, into south and north currencies, to allow each zone to adjust their currency to the vastly different economic policies and strengths in each region.
    20 Aug 2014, 02:12 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    I'd like to add to my thoughts regarding market sentiment.

     

    It's a common belief that prior to any major market correction, investor sentiment must achieve some form of euphoric state where every person is talking about stocks, everyone is all in on margin, etc.

     

    Josh Brown correctly alluded today, this state is not there today.

     

    However the belief that corrections only occur after, or that an euphoric condition is even important whatsoever, is simply not supported by historical intermediate tops.

     

    Looking backwards, certainly neither the 2011 or 2012 significant corrections were preceded by any euphoria, and if anything were preceded in 2011 by considerable anxiety.

     

    Looking back to the major 2007 highs, no euphoria existed back then, either, at least in the stock market. (housing would be another matter). One could say in 2007, a major degree of complacency existed, which I would submit exists in equal measure today, if not to an even greater degree.

     

    A businessinsider article I read this week is titled, "the easiest money ever" and profiles a fund manager who simply says, "every minor dip in the market, we (automatically) buy, because it's always worked". No analysis of conditions, required.

     

    2 prominent articles are calling for SPX 2300 -- 2500, one by Stiffel who just flipped bullish and is calling for 2300, with certainty, by years end. Quite a reversal, I'd say.

     

    I don't list euphoria on my list of 12 reasons to be cautious, because it simply is not a proven, time tested indicator, and even Josh, who I follow and is quite cautious in other writings, never says its absence, means anything at all.
    20 Aug 2014, 07:07 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    http://seekingalpha.co...

     

    Check this out, and especially the mindless comment calling Buffett senile. THAT'S where we are in sentiment folks! Exactly! Buffett has lost it because he won't pile in. Even Forbes says so. Pay attention -- we've seen this movie before!
    20 Aug 2014, 09:25 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    RD.
    I would just like to add that while u are correct with the no euphoria in 2007 - we also do not have the same credit and banking issues that were prevalent back then..

     

    therefore in my view , this isn't 2007 all over again ,

     

    as far as complacency , I mentioned my latest thoughts on that topic last week

     

    "So we have all been inundated with headlines, notes and queries centered on fears that investors have grown complacent, setting up stocks for an inevitable fall. So think about this for a minute, if everybody is worried about complacency, "it tells me investors aren't complacent."

     

    I like to keep things 'simple"

     

    from another blog post :

     

    "According to the naysayers we are all too complacent - the Vix is too low ,etc. .. I demonstrated that these viewpoints are totally overblown and misleading--- back on June 21st."

     

    here is an excerpt from that commentary on 6/21

     

    My view is what we are seeing now in the Vix is NORMAL. Its just that many are still scared and reflect back to an upsetting market experience when the Vix spiked and spent a lot of time at increased levels.. It was a nightmare that many are still reminded of.. and its understandable.. But that really isn't "normal" .....

     

    However, in more benign, boring environments, such as where we are now and where we are heading, the VIX has spent years in low double digits (for example, 2003 to 2007, and 1992 to 1996).

     

    I produced charts to show that in fact the periods i highlight the VIV was totally benign. Looking at those charts tells a very different story as to our perceived notions about what the Vix should or should not be..

     

    It has convinced me that we are in a NORMAL VIX environment . Not the other way around as many perceive .

     

    each can decide for themselves ...

     

    as far as articles on S & p 2300 or so - there are also an abundance of articles that are calling for a crash and i've left comments on most of them here on SA.

     

    At the end of the day each "side" can produce whatever evidence they wish to believe and follow to make decisions.

     

    For the record I don't believe anyone here is throwing caution to the wind ,, and when someone suggests a name or names to buy it should not be taken or confused that anyone is implying to go "all In"

     

    I'm not interested or concerned about market 'noise' , if i make a call and the market noise , sentiment or any other event , takes it down and 'humbles" me , its of no concern UNLESS the fundamental picture of that particular name has changed .

     

    for me or any one else for that matter , it can present major opportunity

     

    i don't want to beat the same drum but its necessary to make a point ---(NASDAQ:GILD)

     

    so when (GILD) was 70 , the choices are the (GILD) fundamentals OR

     

    a worry about a market top developing, thoughts of 2007 , everyone is complacent , all are euphoric, everyone is all in, the RUT is underperforming, the market has come too far, the VIX is too low because all are complacent and on an on and on ..

     

    its very easy to see what was the right choice..

     

    at the moment the SAME applies to a lot of individual stocks -----the choice -- THEIR fundamentals or the ever present and at times overwhelming concerns of the market ..

     

    in my view there is no choice .. as I try to look past the "noise" of the week or month . and that is where i may differ from most ....

     

    Remember when ALL is "right" and "rosy" in the world , and there are no concerns present it is then that THE market top will be put in --

     

    we aren't there yet..
    20 Aug 2014, 09:26 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    F,

     

    Everyone can decide for themselves. Complacency is hard to measure, and in any event is perhaps 1 minor item on my list of 12.

     

    I will in the end continue to let price and technicals dictate my strategy. Sentiment is complacent enough by my measurement, and SA has always, and will always, have crash articles around, every month into eternity, most likely. Tells us, very little. There are much less of them these days.

     

    As far as credit and banking issues, we actually did not have any idea we really had any in 2007, until well after the top, if memory serves.

     

    Only when the tide goes out (in the credit markets) do you find out who is swimming, naked.

     

    Everyone can decide for themselves, what risk they are willing to accept. Warren buffett appears to refuse to spend his cash at today's valuations, and is called a fool for doing so. Tells me a lot.
    20 Aug 2014, 09:39 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RD: There was a great deal of news about the emerging mortgage loan problems starting in early 2007. Most investors believed Uncle Ben when he said that it was "contained":

     

    "At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency. We will continue to monitor this situation closely."

     

    Testimony Ben Bernanke 3/28/07:
    http://1.usa.gov/18GoLI9

     

    The market suffered an initial jolt in February 2007 with a spike in the VIX. There was a lot of bad news that month on the brewing subprime debacle. In August 2007, the VIX spiked again in a major way, based on more bad news, and formed what I call a Trigger Event, a major sell signal.

     

    VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern
    http://bit.ly/12K50f1

     

    A lack of volatility, exemplified by continuous movement in the VIX below 20, is a predicate for a long term cyclical bull market. When there is a burst into the high twenties out of that low volatility pattern, then it is time to worry big time.
    20 Aug 2014, 10:00 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    SG,

     

    I'm curious. Are you bullish in the intermediate term, on worldwide, organic, growth trends? If not, what is the primary investment premise today? (or should be?)

     

    Also, any thoughts on QE and the dampening effect it may have had on volatility? Any thoughts on the anemic volumes?
    20 Aug 2014, 10:14 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » RD

     

    If you get a chance to check out SG's VIX model on his blog -- it's very interesting. He's back tested it, and it's intriguing. (Since SG doesn't toot his own horn on that one, I will :). )
    20 Aug 2014, 10:25 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RD: In each weekly blog, I give a synopsis of my future forecasts. My intermediate term forecast for stocks is what I call "slightly bullish". That is due to the market being slightly overvalued currently and borrowing some from future gains in my opinion at its current level. I would be more comfortable now with the S & P at its 2014 low, somewhere around 1750.

     

    S & P Chart:
    http://yhoo.it/oMrhro;range=1y

     

    Some of my recent thoughts about valuation are summarized in my 8/9/14 blog:

     

    Introduction Section Under "Stocks"
    http://bit.ly/1sMMWuK

     

    Alternatively, I would prefer to see no gains this year and more churning through the first half of 2015.

     

    The valuation issue caused me to eliminate my net dollar stock addition of $55,000 between October 2013 and June 2014 over the past two months.

     

    There are several reasons for maintaining a high exposure to stocks.

     

    The most important is my opinion that the weight of the evidence supports a long term secular bull market characterization. In my approach, this is critical. This characterization results in more of a buy and hold approach with nips and tucks, rather than the hyper active trading strategy employed in long term secular bear markets which is simply described as selling the rips and repeated major allocation shifts.

     

    I only gradually came to that conclusion over a three year period. Initially, between 2009-2011, I viewed it as more likely than not that the move was a cyclical bull move within a long term secular bear market, primarily a counter-reaction to the huge decline similar to what happened between October 1974 to 1976. I viewed the primary problem causing the bear market to be too much debt that would take longer to resolve.

     

    Some of that earlier thinking was explained in these posts from that period:

     

    More on 1982 or 1974 (September 2009)
    http://bit.ly/YsLXOY

     

    The Roller Coaster Ride of the Long Term Secular Bear Market (May 2010)
    http://bit.ly/UiFHsF

     

    The Importance of Identifying the Underlying Causes of Long Term Bull and Bear Markets
    http://bit.ly/VxKIwo (June 2011)

     

    The Big Picture Questions (August 2011)
    http://bit.ly/Xif11d

     

    In my trading system, it did not matter between 2009-2011 how I characterized the move. I would play it like 1974-1976 or 1933-1937 even with a characterization of a short term cyclical bull in the confines of a long term bear market. Eventually, I have to fish or cut bait on the issue.

     

    A number of factors changed that opinion over time including the continuation of the refinancing tsunami that caused households in the aggregate to de-leverage by reducing their long term debt service costs, as reflected in the waterfall decline of the DSR Ratio. This is a long term positive secular force. I discuss those reasons at length in my blog that go beyond the DSR ratio issue.

     

    Another factor keeping me invested is the green light signal of my Vix Asset Allocation Model.

     

    I would note that the technical indicators used by Investors Business Daily are saying that investors need to be 100% invested at the current time. Now, I have over 20% in cash earning nothing, so I am not that bullish. I also have a balanced worldwide income portfolio which throws off a constant stream of cash flow. I would like to see a 20% correction now, similar to what happened in the 2011 summer.

     

    QE is scheduled to end this October. The market does not appear to be concerned. I have no reasonable doubts that it will end this year.
    20 Aug 2014, 10:56 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    SG,

     

    This is extremely interesting. I will read your blog in detail. I'm not sure I will agree with every detail -- IMO consumer delerveraging -- spell check grrr --- may have a ways to go. Wage growth -- is not supporting spending, at least yet. This is a terrible recovery, one must say.

     

    That being said, at SPX 1750 it would be much more attractive for me to buy and hold, at least partially. That's a big move and would involve a fear refresh, which I enjoy buying during such periods.

     

    I have found it tough as we never have that. It's a Prozac market without emotion or volume, or conviction, and it's simply both too complacent and too expensive. Of course, my opinion.

     

    I am short 10 different stocks across different industries. None are inclined to rally from broken, lower bases, even during this "V" bottom move we've had. So on my positions, I am not being proven wrong -- so I am holding.

     

    We will see what the fall brings with Europe and the conclusion of QE.

     

    Good luck as well and I will follow your blog. I like your approach and decision to raise cash makes prudent sense, IMO.
    20 Aug 2014, 11:39 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    "Since 2009, more than 19.5 million mortgage refinances have been completed through Fannie Mae and Freddie Mac, including more than 3.1 million through HARP. FHFA estimates that as of first quarter 2014, there are roughly 810,069 borrowers who are still eligible and have a financial incentive to refinance their homes through HARP. Nationwide, these borrowers could save an average of almost $2,300 per year on their mortgage"

     

    http://1.usa.gov/XCwpAj

     

    There are several million more refinances for mortgages that are privately owned by banks.

     

    Roughly speaking there are still 9 to 10 million homes with negative equity. Many of those homeowners do not qualify for refinancing under the HARP program since their mortgages are not owned by Fannie or Freddie:

     

    Map of Homes With Negative Equity
    http://bit.ly/SWsEAK

     

    Negative Equity Report 2014 1st quarter:
    http://bit.ly/XCwsvJ

     

    The map shows a concentration of negative equity homes in Florida, California and a few other areas.

     

    When examining this problem, it is important to keep in mind that there are several Americas. There are households who are deeply in debt, have trouble servicing that debt, have little wage growth, etc. It also needs to be kept in mind that many of those citizens receive significant government assistance too.

     

    For a large segment of the Indebted Class who have refinanced, their disposable income has increased after debt service payments and that monthly increase in disposable income is building up and will have a cumulative effect over time. And, the refinancing is ongoing with new households refinancing their mortgages long term everyday. It is a slow build positive long term secular economic force.

     

    Then there is a large grouping of households that have no mortgage debt. About 1/3 of homes are owned free and clear. That is based on the last Census report. Zillow estimates that the number is 29% as of 1/2013:

     

    http://bit.ly/XCwsvL

     

    Far more homeowners are free and clear than those who are underwater.

     

    About 1 out of 20 U.S. households have investable assets of over one million dollars exclusive of real estate.

     

    http://on.wsj.com/1iLHEIz

     

    I would agree that wage growth is barely keeping up with inflation. Another problem restraining the growth in disposable income is a lack of earnings from risk free savings, with over $10T parked in investments that pay just about zilch.

     

    Over the past 15 years or so, workers have been receiving less of the income generated by productivity gains.

     

    See Discussion under "Labor Productivity and Wages" in the introduction section:
    http://bit.ly/1cPSWgb

     

    The entire economy would benefit by labor receiving more of the income being generated by their efforts in my opinion, though many here would choose to differ on that point.

     

    Average Hourly Earnings of All Employees: Total Private
    http://bit.ly/13rAYgC

     

    The current average hourly rate certainly beats the $2 per hour that my father paid me in 1971.

     

    See Pay Stub Snapshot:
    http://bit.ly/TrX6jQ
    21 Aug 2014, 07:58 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    L,

     

    Agree, southgent's Vix model is worth reading about and following ..

     

    in addition to other info on his blog..
    21 Aug 2014, 08:52 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    RD,

     

    Price action and technicals, along with the factors we have discussed will also dictate my strategy going forward.
    Its how they are interpreted that may offer different opinions on the market direction..

     

    best description for me at the present time ---- cautiously optimistic on the overall market

     

    very optimistic on SELECT situations..
    20 Aug 2014, 09:56 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    At the end of the day, while waiting for all to be perfect never works in investing, IMO most assets are already close to perfectly priced.

     

    There is no discounts, no (or very few) deals to account for the continuing struggling worldwide growth we continue to see, because of the inflated valuations caused by QE programs and ZIRP. Assets are largely, too expensive for conditions, and I simply refuse to pay up, as growth continues to refuse to show up.

     

    Issues that are discounted, largely have good reasons. Investing then, assuming continuing weak trends, becomes the "there is no alternative" or "greater fool theory". Cash is trash.

     

    One wonders where risk is in a discussion that primarily is focused on "not missing out on the rally"........

     

    Anyway -- each must make ones own risk assessment decision.
    20 Aug 2014, 10:09 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    RD

     

    "Remember when ALL is "right" and "rosy" in the world , and there are no concerns present it is then that THE market top will be put in --"

     

    my reference was to all of the concerns that you and many others express---- from the condition of the global economy , QE , the fed, housing , and the other concerns u write about. etc..

     

    agreed, they aren't rosy for sure , but in my view they aren't terrible either ...

     

    and more importantly in the markets view they are IMPROVED from where we have been

     

    and my belief is -----that CHANGE is what matters - the positive change that has/is occurring is what the market reacts to & not the "absolute" of all is good .. and THAT is the reason why the market is higher ..

     

    many investors can't embrace that principle , that is why they disdain the market now as its going up, but will embrace the market when all "feels good "-- EXACTLY the opposite of what they should be doing..

     

    somewhere down the road ,there will be the voices of people saying "how can the market be going down" when this or that report is great and this or that is doing so well , and we are at full employment, housing is wonderful, GDP is good .

     

    its quite simple , the market will then be looking at the coming NEGATIVE change and be headed down..

     

    that is the time to turn negative-- and in my view we aren't close to that point in time

     

    My market philosophy differs from most ..

     

    I wont disdain the market when all looks questionable -NOW

     

    & I wont embrace the market when all looks rosy - DOWN THE ROAD

     

    so it may not be for everyone.. but it works for me .....
    20 Aug 2014, 10:52 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    F,

     

    How much cash are you holding as a %, or advocating holding, at this time?

     

    I'd love it if others would answer, as well.
    20 Aug 2014, 11:52 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    RD,

     

    My personal portfolio is at 12% , that number will fluctuate more than the "average" investor , because of my call writing strategy on a portion of my holdings. For me it's a balancing act to keep as much money working , while feeling comfy ..

     

    I don't have a cookie approach to investing as each individual situation is dependent on factors like age, station in life , goals, etc. and of course risk tolerance for that individual.

     

    Therefore, i don't advocate any percentage of cash to hold as gospel..

     

    I "recommend" action/inaction, its up to the individual to follow .. I control no accounts or hold money... Much cleaner and easier ..

     

    the mutual goal is to grow the account over time..
    21 Aug 2014, 09:14 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    Here's a thought on this weird market that doesn't go down no matter what.

     

    ....I thinking since it's largely experienced investors or untimid ones (not the moms and pops), they're more likely to buy the dips instead of getting scared and selling off.

     

    ------
    Tomorrow sure is a busy econ news day.
    21 Aug 2014, 01:04 AM Reply Like
  • Eudaimonia
    , contributor
    Comments (952) | Send Message
     
    LMH

     

    It's not weird for markets not to go down... markets generally trend up for long periods of time, and have short periods of significant down turns.
    21 Aug 2014, 04:22 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » Eudaimonia

     

    By weird, I was referring to how we haven't been having those short periods of significant down turns. Not much of those, and folks keep expecting them, but instead "buy the dip" has been taking precedence. I wasn't trying to be exactly on market moves, but instead was suggesting a dynamic that may be in place... to see what others though on that.
    21 Aug 2014, 11:14 AM Reply Like
  • Eudaimonia
    , contributor
    Comments (952) | Send Message
     
    Up until recently, I had 120-40% exposure not through margin but by selling ITM puts against margin on FXI, those have since rallied significantly and i have closed a small portion of them, I have begun to raise modest amounts of cash, so including various puts I'd say my exposure is 110%.

     

    But I am young I think my exposure to the US markets is 45%, my yearly salary is high in proportion to the size of my portfolio, and I own an apartment which I rent out.
    21 Aug 2014, 04:21 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    Buffet is only 10% in cash. It's a lot of $s, but one of the commentors pointed out -- it's only 10%.

     

    Berkshire also needs to keep a cash pile since they buy companies, not just stocks.
    21 Aug 2014, 11:18 AM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    http://seekingalpha.co...

     

    This article answers the point made here about the supposed oceans of cash held by individuals in MM and bank accounts, highlighted by both Marketwatch and Josh Brown yesterday, detailed in those Fed reports linked by SG, and supposedly more fuel for investment markets and the economy.

     

    I have never bought this argument, for a couple of reasons, further digging shows the vast majority of this cash to be held by the wealthy, as the middle and lower class, have no liquidity to speak of. Next, the savings rates stats, don't support it. Here's more;

     

    As Cullen Roche explains here, households aren't holding more safe assets, only the composition has changed from longer to shorter, as the Fed has purchased bonds via QE.

     

    Happy reading.
    21 Aug 2014, 09:32 AM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    RD:

     

    George and Martha never did move market, either before or now. What they are or are not doing is irrelevant.

     

    What is relevant is that the cash balances and bond holdings around the system are at all-time highs, evidencing a systemic preference for safer assets. If this preference were to change, wither because more holders became bullish or because rising rates made bonds unfavorable, then there's plenty of liquidity to drive markets higher.

     

    The key determinant for markets in all this is whether corporate incomes keep marching higher. Of course, as long as they do, then increases in market valuations will remain justified.
    21 Aug 2014, 10:05 AM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RD: I don't think that the article, written by that youngster, supports what you saying and he makes mostly assumptions anyway including this statement unsupported by data:

     

    "In fact, there’s a good chance that the reduced interest income via QE has actually contributed to their lack of spending as a result of changing the composition of financial assets from safe high interest bearing assets like T-bonds to safe low interest bearing assets like deposits."

     

    I seriously doubt that most individuals have ever owned T Bonds. Instead, the flow into "savings accounts" (owned by the wealthy you say?) originates from saving some disposable income and selling risk assets, as many investors fled the stock market.

     

    The savings rate has returned to over 4% and that amounts to a lot of change. Those numbers are contained in the monthly PERSONAL INCOME AND OUTLAYS report. The last report was released August 1, 2014 and covers June:

     

    "Personal income increased $56.7 billion, or 0.4 percent, and disposable personal income (DPI) increased $51.5 billion,
    or 0.4 percent, in June, according to the Bureau of Economic Analysis."

     

    http://1.usa.gov/qTFsOo

     

    Real disposable personal income per capita is currently almost $37,000 annually now.

     

    http://bit.ly/XCOgad

     

    Disposable personal income: Per capita
    http://bit.ly/XCOgaf

     

    The average checking account balance is over $4,000, recently reaching a 25 year high:

     

    http://bit.ly/XCOePr

     

    As to money on the sidelines, almost 1/2 of Americans do not invest in stocks at all. A 2013 Gallup poll found that only 52% of American adults own stock.

     

    http://bit.ly/11STFW4

     

    Of the 48% who own no stock, some of those citizens are just risk adverse and will allow savings to just pile up in savings accounts and bank CDs regardless of the rates being paid. A large segment of those non-stock owners do not have the money to invest, but that does not mean that there is a lack of money to spend.

     

    Real personal consumption expenditures per capita
    http://bit.ly/1rU3MqM
    21 Aug 2014, 10:15 AM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    I'm out of (NASDAQ:Z) short for @ -4.00, shows you how hard it is to short "strong" stocks. The remainder of mine, are all "broken" charts.
    21 Aug 2014, 10:24 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    I'll just continue to add , from my very unofficial findings in talking to money managers friends , colleagues,,

     

    Investors have to be coaxed into equities like a 5 yr old has to be coaxed into a pool. no one is running and diving in..

     

    ans its been that ways for years now -- the last financial "shock" hasn't worn off.
    21 Aug 2014, 10:27 AM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    FG: The Gallup polling data confirms that point. Stock ownership among adults is at a record low.

     

    http://bit.ly/11STFW4

     

    "Half of Americans say investing $1,000 in the stock market right now would be a bad idea"

     

    Gallup Poll January 2014
    http://bit.ly/SkqRrl

     

    Antidotally, I know more people who pulled out of the market between September 2008 and March 2009, and have never come back, than who stayed the course and continued to buy during that rare opportunity to buy really cheap.
    21 Aug 2014, 11:23 AM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    And I thought everyone was bearish:

     

    http://seekingalpha.co...
    21 Aug 2014, 10:47 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » R

     

    That bespoke sentiment chart never grabs me. It feels like a way for them to get clicks without any work.

     

    1) They're never clear about WHO's answering their survey.

     

    2) It's so short term, based on nothing much that it just reflects the mood the market has, which is just as easily seen in SPX.

     

    For a while as a mathematician, I posted a growling comment, suggesting more clarity / transparency. Now I don't bother clicking on them.
    21 Aug 2014, 10:57 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    On this whole question of whether folks are afraid or not afraid, does it matter?

     

    I'd asked SG ages ago and gotten an answer that it's not the euphoria that's the problem triggering market correction... it's a sign that parallels overvaluation conditions, and wild buying.

     

    So the more key questions would seem to be -- how much liquidity is available over years, which will eventually make it back in.
    21 Aug 2014, 11:01 AM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    RD:

     

    Wow, we bounce back from the latest Ukraine-inspired market contretemps, and you want to use it to support your constant refrain that most people are bullish and "all in."

     

    Why not add this to the AAII data, which isn't all that bullish after all: http://cnnmon.ie/QxDqZ3
    Even with all the major upswing in the last few days, fear still abounds, apparently.

     

    If you genuinely believe that there's too much bullishness, then you should stop being "agnostic" and short the SPX or DOW. It's shooting fish in a barrel, right?
    21 Aug 2014, 11:06 AM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    Tack,

     

    Thanks for your advice, I'll continue to follow my own plan.

     

    I'm simply posting a data point.
    21 Aug 2014, 11:11 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » - Options questions

     

    " Unable to enter the order because selling puts to open is not available at Scottrade"

     

    I wanted to sell a put to pick up (NASDAQ:MU) at $31.50 on Sept 5-20th if filled.

     

    Is selling puts a brokerage speciality?

     

    Can it be called (what's the term) at ANY time till the date, or only on that date?

     

    Do you have to pay sell/buy commission IN ADDITION to the option commission, if a covered call is called, or a put is filled?
    21 Aug 2014, 10:51 AM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    LMH:

     

    You have to be authorized to write/sell (not buy) options at any brokerage. They usually have some qualification questions in an online form.

     

    Options can be exercised at any moment until expiration date.

     

    Commissions are paid on the initial options transaction and on its exercise.
    21 Aug 2014, 11:00 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » Tack

     

    I am authorized and have sold & written call options. So is selling a put a speciality? Have you ever heard of it not being offered by a broker? (The error message doesn't tell me to apply for the option.)

     

    Write/sell is the term, okay good. Scottrade has this list to trade of [buy to open, sell to open, buy to close, sell to close.] I always thought those terms were hard to follow. When I asked, the office manager just reiterated that it's buying/selling. Write makes make more sense.

     

    On the rest, thanks. Good to know.
    21 Aug 2014, 11:09 AM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    LMH:

     

    "Write" and "sell" are the same thing.

     

    Most brokerages will allow investors to write covered calls without further ado.

     

    Here are all the option-approval levels at Etrade:

     

    Level 1
    Covered calls, including:
    Covered calls sold against stocks held long in your brokerage account
    Buy-writes (simultaneously buying a stock and writing a covered call)
    Covered call roll-ups/roll-downs

     

    Level 2 All Level 1 strategies, plus:
    Synthetic long puts
    Married puts
    Long calls
    Long puts
    Long straddles
    Long strangles
    Covered puts (short stock and short put position)

     

    Level 3* All Levels 1 and 2 strategies, plus:
    Equity debit spreads
    Equity credit spreads
    Equity calendar/diagonal spreads
    Index debit spreads
    Index credit spreads
    Index calendar/diagonal spreads
    Naked equity puts
    Butterflies
    Iron butterflies
    Condors
    Iron condors

     

    Level 4* All Level 1, 2, and 3 strategies, plus:
    Naked equity calls
    Naked index calls
    Naked index puts
    21 Aug 2014, 11:17 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » Tack

     

    I had to fill out a special form and wait for approval to trade options. I think I set it to level 1 (so I couldn't do something stupid accidentally.)

     

    I'd think if puts were another level, their error message would be like before I signed up for options, saying there's a form. Rather than saying Scottrade doesn't sell puts.

     

    I'll have to call them.
    21 Aug 2014, 11:23 AM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    LMH:

     

    If you can't sell puts, you need a new broker.
    21 Aug 2014, 11:26 AM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    Some brokerage houses won't allow you to trade options with unlimited risk - like selling puts - unless you tell them you have experience with options. This is also true of futures trading. This is to cover their own asses.

     

    I had to jump through hoops initially with Fidelity to get their highest options clearance. And like an idiot I was honest with Interactive Brokers and was barred from trading currency futures since I said I had no experience with them (despite my almost two decade experience with futures trading).
    21 Aug 2014, 12:13 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    DD:

     

    Selling puts does not have unlimited risk. The underlying issue can only go to zero. Selling naked calls has unlimited risk, as they can go to infinity.
    21 Aug 2014, 12:24 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » - Options.

     

    That was unexpected.

     

    .
    I got a reply. Soooo.... To go past selling covered calls, and buying calls & puts,

     

    "you have to open a separate account with our Scottrade OptionsFirst® platform."
    It's separate trading platform and clearing firm that can't be linked to regular accounts.

     

    .
    You still can't... "mutual funds and fixed income products are not able to be traded via Scottrade OptionsFirst®." Is this more restricted than other brokerages?

     

    They don't mention a criteria to qualify in the email reply. Nor any cost / fees.

     

    (So why didn't it say anything about this account on the margin form I filled out? Or when showing "sell to open" put prices?)
    21 Aug 2014, 09:36 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RD: I would not pooh a savings rate of over 5%. This is another quote from the June Report:

     

    "Personal saving -- DPI less personal outlays -- was $687.9 billion in June, compared with $688.0 billion in May. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 5.3 percent in June, the same rate as in May."

     

    http://1.usa.gov/qTFsOo

     

    The labor force size is over 139 million souls:

     

    http://1.usa.gov/zfg7ya
    21 Aug 2014, 11:18 AM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    Impressive US economic stats today. I'm getting more convinced the wage gains will be coming soon; good for the consumer. That said, there aren't too many bargains in the consumer space - although the cruise lines look attractive from the standpoint their energy costs are coming down, their p/e's fairly low and pricing is solid. I put on an initial small position on CCL - but it was a tossup whether to buy it, rcl or ncl.

     

    I also note KSS appears in the process of breaking out of a multi-year sideways pattern. I have a small position in the stock purchased in late July and am kicking myself I didn't but more.

     

    The biggest negative to me at this point is the fact the US economy is obviously looking so much better and I don't know how much bullishness has been already factored in.
    21 Aug 2014, 11:26 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » - DD

     

    On your last point, that does seem to be the question. Case by case on stocks, whether they're valued conservatively... or edging into overvalued. And whether that will be worked off while they pay divs, so it does really matter.

     

    Anyone have thoughts here? Seems like an important question.
    21 Aug 2014, 11:34 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    L,

     

    i continue to be selective , looking for names that have a story , a catalyst - continued solid fundamentals..

     

    OR some beaten down names - the oils -- that in my view will be ok to own down the road. it's time to start positions or accumulate more here..
    
    banks are strong across the board today - if they get involved with upside action , the overall market strength may continue ..
    21 Aug 2014, 12:58 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    DD: I have generally stayed away from investing in retailers, though I will buy and own stocks like Disney and EBay. I have a framed Disney stock certificate near my desk that goes back a ways.

     

    I sense that the prices of consumer discretionary stocks need to remain range bound for a year or so, and the valuations are not that attractive to me. Both wage gains and employment will be picking up. More disposable income is flowing every month to the bottom line after debt service payments for households who have refinanced their main debt obligation. More disposable income will be generated when the FED finally starts to raise the FF rate next year that will gradually increase income for the $10T+ stashed in savings accounts, etc.

     

    I have (NYSEARCA:FDIS) as a sector perform over the next 12 months or so.

     

    Fidelity Site:
    http://bit.ly/XD0109

     

    Recognizing that I may be wrong, I just bought 50 FDIS and may add to that minimal position with small adds as I review job and wage data during the coming months.
    21 Aug 2014, 11:41 AM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    I agree most of the discretionary stocks aren't that attractive. However there should be specific instances - such as companies whose revenues have been fairly flat that have been actively reducing their share count over the past few years - that should benefit most by any increases in revenues.

     

    Know any screens for a case like that?
    21 Aug 2014, 12:27 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    DD: I am not aware of any screens that would catch stock buybacks.

     

    I went to Morningstar and used their premium screener available to subscribers.

     

    I searched solely in the consumer cyclical sector and limited my search to

     

    Forward P/E Less than 15
    PEG Ratio Less than 1.5
    Price to Cash Flow Less than 10 Currently

     

    I got 54 matches. Among the better known names, the screen pulled up FORD, Einstein Noah Restaurant Group, and Norwegian Cruise Line.

     

    One of my recently purchased Lotto's ZAGG also made that cut.

     

    I can add or change criteria that will give different names. By increasing P.E.G to 2, I picked up 8 additional names. One of those was Sonic Automative (NYSE:SAH). Two others were foreign companies: WOLTF and REXFF. The "F" in the last letter is a pink sheet designation for ordinary shares priced in USDs rather than an ADR. Both have ADRs that trade much better (OTCPK:WTKWY) and (OTCQX:REXMY).
    21 Aug 2014, 12:46 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    DD: I just bought the falling knife (OTCQX:KGFHY) which is the third largest home improvement retailer. Their stores are mainly in the U.K. and Europe and that is not good at the moment.

     

    One recent SA article mentioned that Kingfisher might be a good fit for Lowe's seeking to expand.

     

    Kingfisher has a 5 star rating from Morningstar.
    http://bit.ly/XD9t3Q

     

    1 ADR equals 2 Ordinary Shares Traded in Pence (100 Pence to a Pound)

     

    The ordinary shares declined in the U.K. by 1.67% today to 306.8 Pence

     

    3.068 GBP=USD $5.0887 x. 2=ADR USD $10.1774

     

    The pound is weakening which will flow through into the pricing of the USD priced ADR. The GBP recently broke its 200 day SMA line to the downside.

     

    http://yhoo.it/1hL5RAe;range=1y

     

    Kingfisher Key Statistics
    http://yhoo.it/XD9t3T
    21 Aug 2014, 12:56 PM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    Thanks! I'll take a look at it.
    21 Aug 2014, 02:16 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    For those who have not read Warren Buffett's investing tips, which can be found starting at page 17 of his last letter to Berkshire shareholders, it is worth a read:

     

    "Some Thoughts About Investing"
    http://bit.ly/1mRn1zK

     

    He starts off by quoting Ben Graham: "Investment is most intelligent when it is most businesslike"

     

    21 Aug 2014, 11:48 AM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    Highly recommended reading for anyone who believes we're even remotely within the grips of a bullish frenzy:

     

    "Memoirs of Extraordinary Popular Delusions and the Madness of Crowds", Charles Mackay, 1852
    21 Aug 2014, 01:12 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (3001) | Send Message
     
    We may have to wait awhile for the next dip....meanwhile I'm patiently waiting, cash in hand for the next buying opportunity.

     

    Some stocks that have been beaten down are showing signs of life. (NYSE:IBM) (NASDAQ:MAT) (NYSE:BA) (NYSE:BGS) even (NYSE:MCD) (NYSE:WMT) (NYSE:AFL).

     

    Banks are starting to show some upside (NYSE:BAC) (NYSE:JPM) (NYSE:C).

     

    Sept/Oct are going to be very interesting. The big hedge funds & financial mgrs are going to be under pressure to show earnings. When they start to sell & the markets dip, that is what I'm waiting for.

     

    IMO the US markets are a haven for investors all over the world. This is why long term, we will do even better.

     

    Imagine all the rich people in Russia trying to find a safer place to put their $.

     

    Could explain why we continue to go higher, in spite of bad data everywhere else (Europe, Ukraine/Russia, etc.).

     

    We need to remember that only 5% of the US population (more or less) is cognizant of the stock market & has the $ to invest in it.

     

    What the other 95% does has little bearing on the markets. Kind of makes you wonder what we are worried about : ) At least we are in the group that might make $.
    21 Aug 2014, 02:50 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    Blue,
    "Banks are starting to show some upside (NYSE:BAC) (NYSE:JPM) (NYSE:C). "

     

    they were throwing them away in May ....
    21 Aug 2014, 03:22 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    RD assured us we should be shorting (NYSE:BAC) at $15. So sorry I missed that trade and sold puts instead.
    21 Aug 2014, 03:35 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    L,

     

    Re tacks comment. I thought after our discussion we were done with the personal challenges and shots.

     

    Have you had no wrong ideas in your career, Tack? Never had one losing investment? I'm impressed.

     

    Do you plan to personally attack and target evey idea I publish, as your main contribution Tack to this forum?

     

    FYI I retracted my call to short any bank quite some time back. How does it contribute to attack this call now?

     

    Congratulations on your successful trade in selling puts. It's regretful you feel the need to attack at the same time.
    21 Aug 2014, 04:26 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    You announced that we should short it. I'm just highlighting the results for everybody's edification. Sorry that offends you personally.

     

    Shorting almost anything in this environment is a perilous exercise. Still way too much liquidity out there, notwithstanding that you don't believe it.
    21 Aug 2014, 04:44 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » Tack

     

    We are aiming on here not to get personal at other posters.

     

    It's find to ask someone how they're doing with a position they've said they had, and then listen to their answer. It's not fine to poke at others. It's takes the blog into a less comradere, less readable direction.

     

    I see this continues back & forth below - where I haven't read yet. So I'll let this be my "big" comment on this!
    21 Aug 2014, 07:18 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    Tack,

     

    I've been asked to contribute in not taking the blog in that direction, which is to not make the blog a personal challenge board on everyone's wrong calls. I sense that's what the majority wishes, and I personally apologize, to everyone, for my part in taking it there, at times.

     

    On (NYSE:BAC), yes I did short it, announce I shorted it, and announce also I covered the trade at perhaps a 30 cent or so loss, and that the banks were too cheap to short, even though I'm not a great fan with the current interest rate spread and regulatory environment, and I'm not a fan of (Bac) management.

     

    At least I'm transparent enough to post specific ideas, instead of making my main contribution criticisms of others.

     

    I've actually written some articles with specific ideas. How many have you written, sir? What are your specific contributions, with price targets and timelines?

     

    Again I ask, what exactly is the point of a personal shot at me for a trade I have not been in for 2 months?
    21 Aug 2014, 04:58 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    Sorry, RD. You do express doubts about the views of those more inclined to invest on the long side, and you state your shorts with repeated assurance. I guess one should expect such results to be foloowed, if made public. But, I'll back off. My apologies.

     

    I'd rather discuss the market's underpinnings and investment strategy, anyway. And, I believe I've offered a wealth of useful commentary over the years. It seems confirmed by emails I have received from numerous followers.
    21 Aug 2014, 05:09 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    Tack,

     

    I made a mistake in shorting BAC, as it was too cheap.

     

    I admitted the mistake and covered, publically.

     

    Exactly what is the issue in doing so?

     

    Have you ever made a an error on an investment decision?

     

    Again, I'm asking what the value to this blog is, in raising a 2 month old trade, today?

     

    For the record, my recommendation is that investors raise 30% cash. SG for one is at 20%.

     

    Exactly what is the problem with that recommendation?
    21 Aug 2014, 05:14 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    You kicking a dead horse? I replied and apologized.

     

    I don't believe in cash, as i have stated before and why.
    21 Aug 2014, 05:20 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    On that note I give FG full kudos on (NASDAQ:GILD) and (NASDAQ:MU). They have been star performers. I wish I still owned (GILD), I did make some $ on it -- good vision on those stocks!
    21 Aug 2014, 05:08 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    Oh good. I got to the end of this sequence... and both of you handled things very well. Thanks!

     

    Yay!!
    21 Aug 2014, 07:29 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    (NASDAQ:EBAY) the "story" that got me involved in this name earlier in the year is back, the Paypal spinoff.

     

    Its been a frustrating position to own - i originally bought in at 53 last Dec, and again at 57 in march , when i thought the stock had broken out of a long base period and was set to move higher , instead the breakout was false and it dropped to test the lows @ 49 .

     

    Now with the renewed paypal story the stock jumped today to the 55 area.. also , Carl Icahn is involved as he was the one who prodded the board to split the company up to unlock value..

     

    in my view, Its one to do some research on -- I'm going to try and get some numbers to see what this spinoff means in terms of dollars.

     

    something to think about going forward..
    21 Aug 2014, 07:46 PM Reply Like
  • td94306
    , contributor
    Comments (47) | Send Message
     
    Fear,

     

    Seth Klarman initiated a position in EBAY in Q2 2014. It's 3.6% of his US Portfolio. You are in good company!
    22 Aug 2014, 03:03 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    td,

     

    thanks

     

    i knew about Icahn , but missed the klarman position ..
    22 Aug 2014, 08:42 AM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    Regarding (NYSE:BAC), I have owned its trust preferred securities and several of its equity preferred floating rate stocks. Back in the Dark Period, I was picking up its TPs with 20%+ current yields. I will just say no to its common. I do not own any BAC security at the present time.

     

    I prefer to own banks that did not have to worry about being sued for undesirable activities leading up to the Near Depression.

     

    A $16+ billion dollar settlement may warm the cackles of some investors, causing their hearts to flutter with desire, but I have a negative view of any institution that ends up in such a big mess. Guilty until proven innocent beyond a reasonable doubt. BAC has been settling lawsuits for years now.

     

    The big banks never learn and will periodically blow themselves up in pursuit of profits.

     

    I do not mind owning a financial ETF that includes the big banks among their largest holdings. I currently own (NASDAQ:FNLC) which has the big banks in the top four positions.

     

    Fidelity Site:
    http://bit.ly/1s71fcJ

     

    This sector financial ETF includes banks, Berskshire Hathaway, REITs, insurance companies, credit card issuers like American Express, and brokers.

     

    The regional bank ETF (NYSEARCA:KRE) still looks to me like a triple bottom.

     

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

     

    One of the small banks that I mentioned as forming a triple bottom, (NYSE:BHLB), rose 3.16% today, closing today slightly above its 200 day SMA line:

     

    http://yhoo.it/1AzneiI;range=1y
    21 Aug 2014, 08:10 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    SG:

     

    I like the regionals, too.

     

    But, it's the "scary" headlines on (NYSE:BAC) and (NYSE:C) actually make them such good values.
    21 Aug 2014, 10:27 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » Tack

     

    How often have those scary headlines resulted in an undervalued stock going poorly for you?

     

    Is there anything scary that would give you pause to skip over an unloved issue?
    21 Aug 2014, 10:35 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    LMH

     

    On the contrary, the scary headlines are like receiving one of those discount codes when you want to make an Internet purchase.
    21 Aug 2014, 10:39 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » T

     

    I've gathered that you've made a successful investing career out of this "coupons." (My mom loves discounts -- have to tell her this one.)

     

    I'm wondering how often (%, or count of times) the discount hasn't worked out? Can't be 100% successful?

     

    Also, what type of news gives you flags not to buy into a discounted issue. Such as SEC investigation... are there flags of discounts that are for good reasons?
    21 Aug 2014, 10:52 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    You ask not an entirely simple question, but I'll say that I am more alert to bad news reported by a company than bad news or negative commentary by others.
    21 Aug 2014, 11:11 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    T,
    "But, it's the "scary" headlines on (NYSE:BAC) and (NYSE:C) actually make them such good values."

     

    and now that the govt. extortion programs appears to be over :) , add in a whiff of a rate increase and maybe we get the financials participating on the upside ..
    22 Aug 2014, 08:47 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    Any knowlegdge of or opinions on this pundit?
    http://bit.ly/Y8kbv6
    21 Aug 2014, 10:24 PM Reply Like
  • bbro
    , contributor
    Comments (11234) | Send Message
     
    LMH...

     

    Martin Armstrong...

     

    http://on.wsj.com/VHrXhO

     

    http://buswk.co/VHrXhQ
    22 Aug 2014, 12:50 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » bbro

     

    That's certainly definitive, lol. Thanks!
    22 Aug 2014, 02:38 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    The S & p has had a good run form S & p 1904 to the present new high some 88 points or so .. in a 2 week period
    from totally oversold to now slightly overbought ..

     

    Some food for thought , i came across this tid bit last night, which is making the rounds in financial circles..

     

    the ISE put/call ratio has popped over 200 for 3 straight days indicating that the numbers are heavily skewed to the "call " side

     

    this chart shows the last time this took place in Jan '14 ..

     

    http://bit.ly/1wha4XS

     

    and this chart indicates an occurrence in 2011

     

    http://bit.ly/1wha4XS

     

    admittedly , i wish this guy would use a diff. chart structure, :) but u get the point ..

     

    as always this is ONE data point , and if i can add my .02 to the 2011 occurrence , it was also the time when the debt ceiling fiasco was taking place.. and of course that is not taking place now..

     

    PERHAPS this suggests a short term dip form here instead of going for another leg up..
    either way - its short term in nature and in my view , doesn't alter the LT Uptrend 

     

    and may give LMH, another chance to buy something at a lower price :)
    22 Aug 2014, 10:01 AM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    Odds are for some choppy consolidation or a slight dip, but those even considering 2011 as an analog are way off base.

     

    I remember the summer of 2011 quite well. The economic stats were failing during the spring (the Phil Fed turned negative by the summer) and the ECRI was infamously predicting a US recession. Plenty of articles about a "double dip" recession. Throw the debt ceiling debacle into the mix and the market cratered, losing over 200 points (around 16%) in the space of about two weeks. It wasn't until the Fed announcement of another QE program in the fourth quarter that the market found its footing. Coincidentally, the economic data started to improve by late summer.
    22 Aug 2014, 11:56 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    DD,
    totally agree about 2011, it just goes to show how a headline and a chart can have a 'scary" reference UNTIL one looks at the info presented closely.

     

    BTW that 2011 debt ceiling fiasco turned out to be quite an opportunity.. :)

     

    I do however pay attention to the Put call ratio and the data being presented to us now , it does warrant consideration..

     

    as you indicated maybe choppy and a dip from here..
    22 Aug 2014, 12:07 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    DD: Negative events were behind the almost 20% dip in the 2011 summer.

     

    Corrections of 10% to 20% can occur based on valuations in addition to external events.

     

    As of 8/15/14, the forward estimated P/E for the S & P 500 was 16.25 based on the non-GAAP "operating earnings" estimates.

     

    Historically, the average forward P/E number is 13.7, using data starting in the 1970s:

     

    Figure 1:
    http://bit.ly/1mrZULk

     

    The last clear cut buying opportunity as shown in that Yardeni chart was during the 2011 summer.

     

    The S & P 500 "operating earnings" estimate, as of 8/24/14, is 130.55 based on the "bottom up" forecasts.

     

    At a forward 13.7 P/E, the S & P 500 would be at 1788 or about 10% below its current level of 1991. That is slightly above the low earlier this year.

     

    A 20% correction would take the index down 398 points to 1593, where it would be selling at a 12.2 P/E.

     

    Without a recession that changes the forecast materially, I do not see that happening. If the move is near that amount without a recession causing it, more of a typical valuation correction or a flash crash type market event, then those kind of moves present buying opportunities in a clear fashion.

     

    The buying opportunity in 2011 extended beyond stocks into equity preferred stocks, European hybrids and junior exchange traded bonds. I picked up some SANPRB at $13 in August 2011 that I still own for example. When the stock market becomes that volatile, the negative impact spreads to other types of securities and results in an air pocket for them too.

     

    I noted the huge declines in several classes of securities during one day in August 2011:

     

    1. Enhanced Price Volatility in CEFs, European Hybrids, and Equity Preferred Stocks During Periods of Fear
    http://bit.ly/WeiCIb
    22 Aug 2014, 01:21 PM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    Barring the data turning negative I can't see a 10% decline unless there's some major event.

     

    While the forward p/e is 10% above the levels seen as average since the 1970's, that figure is biased downward by the exceptionally low p/e's early in that period (due to the extremely high interest rates which attracted money into fixed income and out of the stock market). In addition, one could make the case that the multiple should be higher today than prior to 2003 due to the sharply reduced tax rates on dividend income. And there were other changes to the tax code prior to 2003, reducing both marginal tax rates and capital gains taxes that both increased the demand for stocks and raised the multiple.

     

    I'm not smart enough to figure out what interest rates and changes to the tax code should mean to forward p/e's, but it's clear to me going forward that 13.7 level will be rising as more years are added unless tax policy is reversed. At a more normal 4-5% 10 year treasury rate that level could be as high as 15 or 16, which suggests to me the stock market isn't overvalued at all, but close to fairly priced. Which is what the market may be telling us by its resiliency.

     

    Of course there could always be some sort of exogenous shock (Europe, China, who knows what) that could send the market tumbling, but that suggests buying put options rather than raising a lot of cash.
    22 Aug 2014, 01:56 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    DD: Interest rates and inflation expectations are material to valuations. The most important consideration is not present inflation or interest rates but anticipated inflation and rates. The market is forward looking and that is one of the many inherent problems in the Shiller P/E ratio.

     

    As I have said many times here and in my blog, anticipated low inflation is supportive of my characterization of the current move as being a long term secular bull market. A long and typical discussion can be found in the introduction section of a December 2013 blog:

     

    http://bit.ly/1cIkQrJ

     

    The current average annual CPI forecast embodied in the 10 year price was 2.17% as of yesterday. That is a benign for stocks. I calculate that number daily.

     

    The prior long term secular bull market started in August 1982 when it become clear that the direction in both rates and inflation was down, even though inflation and rates were still sky high in August 1982. I would have liked to see the debates at SA between bulls and bears back then. The bulls would have looked really crazy. The country was in recession, the 30 year mortgage rate averaged 16% that year and the ten year treasury was yielding 13% in August 1982. The correct view was that bulls were sane in concluding that the FED had killed the inflation bogeyman, though most disagreed at the time and viewed the powerful move as merely another cyclical bull market within the confines of a long term secular bear market. Just another example of bulls going crazy.

     

    Low inflation and interest rates were supportive of the bull move between 1949 to 1966, just as the advent of problematic inflation was the underlying cause of the long term secular bear markets in both bonds and stocks circa 1966 to August 1982 (annualized total real return of the S & P 500 was -1%).

     

    The 13.7 average is also driven much higher by the clearly asinine valuations that developed starting in 1996, reaching an apex of absurdity four years thereafter. If I excluded those four years then the number would be much lower.

     

    I would view 13.7 as a good proxy for a fair valuation under current conditions, where the market is forecasting tame inflation and interest rates far into the future.
    22 Aug 2014, 02:26 PM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    Well, we'll have to agree to disagree regarding what constitutes a good proxy as a fair value for forward p/e, but that's what makes a market!
    22 Aug 2014, 03:03 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    "and may give LMH, another chance to buy something at a lower price :)"

     

    You read my mind!!
    22 Aug 2014, 11:23 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    How does the put/call ratio tell anything about mood? Both puts and calls can each be used to short and go long, both when buying and writing.
    22 Aug 2014, 12:03 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    LMH:

     

    The write side of the equation is limited by availability of buyers, so if the put/call balance is weighted to calls, it evidences a stronger demand to buy call, which is a bullish disposition. But, that ratio is often a contraindicator.

     

    It's much better to have a put-heavy overhang because that means the short play has already been made and absorbed by the market, and it's the fact that those puts will have to be covered that provides upside impetus.
    22 Aug 2014, 12:13 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » T, anyone

     

    Let me see if I can understand this in lay terms.

     

    More calls means lower ratio.
    More puts means higher ratio. (Basic ratio math)

     

    Figuring the ratio uses writing of both, because writing is representative (of both writing & buying frequency) since writing can only exist if there are also buyers for them. (So essentially the ratio uses transactions rates.)

     

    Call options are options to buy shares down the road. That's long / bullish, when shares are being bought. So a low ratio (call heavy ratio) is bullish.

     

    Puts are short plays. A high ratio, (meaning lots of puts) means lots of shorts have been sold. When those are covered it pushes the market up with the buys to cover. ...so your saying high put/call ratio is bullish, but the chart is claiming it's bearish since it means expectations of investors writing options is bearish. So that's one confusion for me. That'd be the main question I'd have.

     

    This is another point where I'm getting lost, is that lots of puts doesn't have to be short sold: Puts can be shorting by writing for a lower price. You can also write a put for a higher price (long), if the price to buy / sell the put is more desirable than a put that's shorting from current prices. So writing puts can still be bullish on the market direction. (Or is writing a put at a higher bullish price rarely done so it doesn't effect the ratio much?)
    22 Aug 2014, 12:49 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    LMH

     

    Writing puts is always bullish, but buying them at any price is bearish.

     

    When the buying demand for calls exceeds puts it indicates a bullish bias, but ironically is often a contrarian indicator.
    22 Aug 2014, 01:00 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    Plus there's all the fancy delancy writing options to make a little on the side, or for complicated plays. So all of those could dilute the straight pool of regular shorting puts, and long calls. Making the ratio not the meaningful.
    ...unless it's been shown over time to be meaningful.
    22 Aug 2014, 01:05 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » T

     

    "Writing puts is always bullish, but buying them at any price is bearish."

     

    How so on writing, since the strike price can be either above or below current market price? Below is bearish. Above is bullish.
    22 Aug 2014, 01:08 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    LMH:

     

    You keep looking at the issue from the writer's perspective, but the sale of puts, at any price, depends on a willing buyer, all of whom are bearish. There is no bullish put price for a buyer.
    22 Aug 2014, 01:34 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    L

     

    here is the simplest way to look at the put call ratio that is being presented..

     

    at present the ratio is telling us that there are more calls being bought than puts ..

     

    I like to use put/call ratios to see if the masses are getting too one-sided. Remember, once everyone is expecting something, it rarely happens when it comes to investing.

     

    So, when everyone is buying calls (especially on equities like this ratio tracks) that could be a warning traders are a little too excited, in the short term

     

    Remember we are using this as a 'contrary" indicator

     

    Again it is ONE of many data points that u can use to determine a short term swing , up or down .

     

    22 Aug 2014, 02:14 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    I get it now. I wrote out a math style spread sheet for all the quadrants and options (8 combos possible).

     

    I was missing that a big factor to options trading is "the spread". On some you're betting that the movement will be larger than the other guy thinks. So a lower strike isn't expecting bearish; it's still expecting bullish but with limited risk exposure if it goes down.

     

    "There is no bullish put price for a buyer. "
    Buying puts is an option to sell, so you're always hoping for bearish movement (aka sell high, buy low).
    22 Aug 2014, 05:47 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » -

     

    So if put ratio is high (lots of puts, i.e. bearish bets placed)...

     

    it's either a sign of caution and bearish movement to come (as the chart implies)

     

    or it's a contrarian sign, that the bearishness is bought & priced in, and now covering for it will be bullish.

     

    And of course there's the factor that this is only one small factor. ...just bothered me that I couldn't sort it out, so I persisted.

     

    ---

     

    Oh and put buying is bearish but all the other combos are bullish... so when put transactions get high (high put/call ratio), it's the only time bearishness can be measured showing up in the ratio. ...even though the investors writing those puts are bullish.

     

    (Since, if the bullishness was high, it'd show up in calls transactions too, so the ratio wouldn't be high in that case either.)
    22 Aug 2014, 05:51 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    Couple of quick comments. Junk bonds are not confirming the positive market.

     

    I've covered my retail short exposure, and added to commodity related shorts with new positions in (NYSE:CLF) (NYSE:PBR) and (NASDAQ:WPRT).

     

    (NYSE:RIG) has broken major support at 38.
    22 Aug 2014, 12:09 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RD: I would agree with you on RIG and would anticipate more downside.

     

    http://bit.ly/1ohYfXv

     

    As to junk bonds, (NYSEARCA:JNK) hit a closing low of $40.25, shortly after piercing its 200 day SMA line to the downside, and has now moved above its 50, 100, and 200 SMA lines:

     

    http://yhoo.it/V27lAM;range=1y

     

    Lipper reported that junk bond fund reported a net inflow of $2.2B for the week ending last Wednesday. There had been several weeks of outflows:

     

    http://on.barrons.com/...

     

    I personally do not view JNK to be worth the risk given its yield. The sponsor shows a dividend yield of 5.77%:

     

    http://bit.ly/ADVwtv

     

    I do own some leveraged bond CEFs with varying decrees of junk exposure. I can pick up another 2.5% in yield, compared to JNK, by buying (NYSEMKT:ERC) which has about a 60/40 mix of junk and investment grade bonds respectively.

     

    Click Portfolio Characteristics Tab at CEFConnect:
    http://bit.ly/XoefSu

     

    I can pick up about 1.5% more going with (NYSE:GDO) with its shorter duration (3.96 years as of 6/30/14) compared to ERC (4.2 Years) and more exposure to investment grade bonds at roughly 65%/35% investment grade to junk. GDO is a term bond fund scheduled to liquidate in 2024.

     

    http://bit.ly/1jHTVSj
    22 Aug 2014, 12:56 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    SG,RD

     

    on (NYSE:RIG) ---I also noted the technical Break below $38 , at this point i respect the price action and have taken a portion of that position and rolled it over to (NASDAQ:GSJK) $25.90 -- a name I mentioned earlier this week - it has a 7% yield and i do see some upside with a recent catalyst ..

     

    that move keeps the div stream from the rig investment intact . I wanted to wait and get GSJK cheaper but felt this was the time to make a switch ..

     

    We should know in short order whether this "break" will be carried thru or a "false" signal..
    22 Aug 2014, 02:22 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    FG, RD

     

    Exactly as I predicted earlier, RIG rose into the ex-div date. It's common for yield issues to see pressure ex-div. Accordingly, I bought back my puts at a rather insignificant gain on div day at the open.

     

    I'll consider selling more puts if the weakness persists for a while.
    22 Aug 2014, 02:47 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    F & G: For RIG, I sold out of small positions in three family member accounts near $45 after receiving a quick pop after purchase, but elected to keep my 30 shares.

     

    That kind of position does not matter to me, and I can hold it forever.

     

    Eventually, probably in a year or maybe two, the cycle will turn up, and possibly the market will anticipate that turn before it actually happens and will reflect a more positive view in the price action. I will not have enough information myself to predict that turn. The price action now reflects in my opinion the "end of days" type of forward looking valuation, as if conditions will never get any better. The anticipated decline in 2015 E.P.S. is probably expected to get worse in 2016 based on the price action that we are now seeing.

     

    Consensus $4.52 in 2014
    $3.32 in 2015
    http://yhoo.it/1oi3mad

     

    I would predict a high probability of a dividend cut after RIG pays out the four $.75 share quarterly dividends, unless it is clear that the downturn is ending or about to end. RIG has two more $.75 per share dividends after recently going ex dividend for the second.

     

    I will not have to time that turn once I have adopted a buy and hold approach, which I can do more easily, at least for me, when I have a de minimis position and my negativity in this name caused me to buy such a small position.

     

    The market sentiment on RIG is so negative now that you could cut it with a knife. I may actually buy 30 shares on a spike down in my trust account that I manage.
    22 Aug 2014, 02:50 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    SG

     

    You expect a dividend cut because of the market decline or because of earnings? I'd think only the latter would matter, and they would not voluntarily add to selling pressure.
    22 Aug 2014, 02:54 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    Tack: I anticipate a dividend cut due to the expected decline in earnings, the heavy debt load, the ongoing capital expenditures for new rigs, and a lack of any long term history dividend paying history.

     

    RIG Dividend History:
    http://bit.ly/1iUDcst

     

    The shares moved up from $27 to $170 between 2003 and 2007 during an up cycle when no dividends were being paid.

     

    http://yhoo.it/Wny0sy;range=my

     

    And, the four payments of $.75 were part of a settlement with Icahn and were to be paid out of capital surplus which is why they are being classified as a return of capital rather than a dividend subject to the Swiss withholding tax.

     

    In the last conference call, the company would only state that it intended to maintain a "competitive" dividend. I don't see that being $.75 per share with E.P.S. sinking toward $3.5 or lower. The price action now tells me that the market believes the down cycle will last longer than a year.
    22 Aug 2014, 03:09 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    SG,

     

    i'm not throwing in the towel completely here on RIG,
    this is when you buy out of favor cyclicals,, when they are thrown away - lets keep in mind the latest earnings beat, they aren't flowing in red ink..

     

    However,i do respect the technicals, and that is why i made the decision i made today . I left a portion of that position on the table as "false " breakouts or breakdowns in this case can fool the best of us .. 
    For me,
    the switch to (NASDAQ:GSJK) gives me the yield i wanted to get from the (NYSE:RIG) investment and i believe some upside from present price.

     

    IF (and its a big IF) RIG holds here , and shows a bit of a rebound it could just as well be added again with the line in the sand being 37.50 - 38 as a stop..

     

    I'm not in the camp of a div cut just yet & the price action from here may be the tell for that -- just my .02

     

    The latest dayrates they just published and the backlog numbers aren't horrible .
    From that report dated 8/21

     

    Jack Bates - Awarded a two-well contract in Australia at a dayrate of $420,000 ($59 million estimated backlog). The rig's prior dayrate was $380,000.
    GSF Celtic Sea - Awarded a one-well contract in Angola at a dayrate of $338,000 ($15 million estimated backlog). The rig's prior dayrate was $328,000.

     

    Deepwater Invictus, commenced operations on its three-year contract in the U.S. Gulf of Mexico at a dayrate of $595,000. Additionally, the newbuild ultra-deepwater drillship, Deepwater Asgard, commenced operations on its three-year contract on August 21, 2014 at a dayrate of $600,000.
    22 Aug 2014, 03:54 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    F & G: I do not view the current price as rational, nor would I view the $170 price as rational. The latter assumed that down cycles do not exist while the current price assumes that up cycles have become a relic assigned to the dinosaur age.

     

    Ultimately, RIG's price action has nothing to do with a dividend, but to the market's perception of whether the cycle will be up or down and how far market participants will postulate the continuation of a current trend. The general tendency is to forecast cycles for longer than they normally last. I would just guess that the market believes at the moment that a two to three year down cycle is just beginning.
    22 Aug 2014, 04:15 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » SG

     

    "he general tendency is to forecast cycles for longer than they normally last."

     

    I've started noticing that (in general, not for oil).
    22 Aug 2014, 04:19 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    SG,

     

    "Ultimately, RIG's price action has nothing to do with a dividend, but to the market's perception of whether the cycle will be up or down and how far market participants will postulate the continuation of a current trend. "

     

    agreed-- and as we have seen in the past, irrational behavior can lead to opportunity--

     

    but the irrational behavior can last a long time -

     

    its never EZ --- :)
    22 Aug 2014, 04:19 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    SG

     

    It is interesting that more and more commodity based stocks are approaching their 2009 lows.

     

    I'm not sure what to make of it.
    22 Aug 2014, 05:10 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RD: Over long periods of time, I would expect a negative correlation between commodities and the S & P 500 or a positive correlation during bear markets when both tank.

     

    (NYSEARCA:DJP) DJ-UBS Commodity Index ETN
    Total Annualized Returns:
    DJP vs. SPY
    YTD: -.73% / +9.02%
    1 Year: -3.85% / +23.62%
    3 Years: -8.6% / +23.54%
    5 Years: -1.16% / +16.48%

     

    DJP Annual Returns Taken from Morningstar and the numbers are through 8/21/14:
    http://bit.ly/1wiN5Ma

     

    This makes sense to me since I started to invest in the long term secular bear market that started in 1966. It only took a modest amount of common sense to figure out what was going wrong:

     

    CONSUMER PRICE INDEX, 1913-
    http://bit.ly/WB2il7

     

    Commodities worked during that period when bonds and stocks were in a long term secular bear market caused by rising and problematic inflation that was stoked in significant part by rising commodity costs. The stock and bond markets did not like the inflation numbers shown in that table between 1966 to 1982. However, gold and oil stocks liked it just fine.

     

    This SA article examples some historical correlations between stocks and commodities:

     

    http://bit.ly/1wiNbDy

     

    As shown in that article, there was a negative correlation in the 1970s: commodities up and stocks down.

     

    I would call 1 to 30 a low positive correlation, 31 to 69 modest, and over 70 as high. I would use the same breakdown for negative correlations.

     

    I decline in commodity prices is good for most companies, since their input costs decline improving their profit margins. And, to the extent that decline in commodity prices help keep inflation down and under control, then that helps stock valuations as investors are willing to pay more for the future stream of earnings and dividends.

     

    I suspect that the recent decline in many commodity prices has to do with China turning away from construction spending as the fuel for growth. There are only so many large cities that can be built with no inhabitants.

     

    There will be brief periods when commodities and stocks will run together and show positive correlation. Two recent examples were the Near Depression and the rebound starting in March. During the meltdown, virtually all asset classes were negatively correlated to the downside. For a couple of years after that debacle, risk assets were positively correlated to the upside before starting to diverge in different directions.
    22 Aug 2014, 07:01 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    SG,

     

    What do you make of the junk Bonds weakness and curve flattening we saw today? I know, only one day...but it seems to be a developing trend.
    22 Aug 2014, 07:17 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RD: I look at data in context and over longer periods of time. I simply do not draw the same conclusions.

     

    Part of my response to this question can be found in my comment to you at 22 Aug, 07:20 PM and relates to this data series:

     

    YTD/1 Year/3 Year/ 5 Year Total Annualized Returns:

     

    SPY: +9.02 (risk asset)/+23..62%/23.54%...
    JNK: +5.35% (risk asset)/+11.43%/10.12%/...
    TLT: +16.56%/ 17.92%/4.63%/8.08%
    IWM: +.51%/ +14.99%/ +22.84%/ +16.35%
    XLU: +14.04%/ +18.97%/ 13.91%/ 11.85%
    XLE: +11.39%/ +24.4% / 17.7% / 15.3%

     

    Data collected from Morningstar. Returns calculated through 8/21/14.

     

    From my perspective, junk bonds are up for the year, and some increase in the spread to treasuries is to be expected after hitting a record low during June, as I noted earlier citing a Barron's article:

     

    http://bit.ly/1whRQpn

     

    A 5.35% total return YTD for JNK is good considering its five year annualized total return of 10.12% compared to TLT's 8.08%.

     

    I also noted that I approach junk bonds from a different perspective. I am not looking at a ratio like JNK/TLT or the spread differential. I look at it by answering a simple question: Is the junk bond yield worth the credit risk, and my answer is no.

     

    I also mentioned earlier that I constructed a junk bond ladder in 2011, using a barbell approach, with the bell curve apex in the 2016-2018 time frame. The yield to worst was over 12% as late as July 2012. Those bonds are being called regularly this year at premiums to par value, as the junk rated issuers refinance, extending the maturity out several years at much lower rates.

     

    As to yield curve compression, I would not use any adjectives to describe what is happening:

     

    http://1.usa.gov/1m4Chf7

     

    I compared some dates at the treasury site and did not draw any conclusion from the slightly different slopes in the out years:

     

    http://1.usa.gov/wxWTJ2
    22 Aug 2014, 09:36 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    SG;

     

    Once again -- The TLT / JNK ratio is poor today. It hasn't mattered. One day I think it will for stocks. These divergences IMO are dangerous to completely ignore.

     

    JNK / TLT; is actually at its lows of the year today.

     

    Also you find this interesting; who is a "seller".
    http://on.wsj.com/1whQiM6
    22 Aug 2014, 01:27 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RV: Are you referring to this kind of chart:

     

    http://bit.ly/1whROxJ

     

    Back in June, the junk bond spread to treasuries hit a record low, just 3.43%. During May the spread did not go below 4.23%.

     

    http://on.barrons.com/...

     

    A correction in that spread differential toward more normal levels is not that meaningful in my opinion.
    22 Aug 2014, 01:36 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    Yes; SG; except I've plotted HYG / TLT
    22 Aug 2014, 01:39 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    I've been doing this a little while; and I am blown away by the market's ignoring of some very loud technical divergences.

     

    Just observed today:

     

    Junk bonds selling off as treasuries rally.
    Small caps (were ) weak. (a bit better today / yesterday)
    Huge curve flattening / 30 Yrs up / 5 yrs down.
    Oil weak as anything.
    Europe stock markets getting hammered

     

    I'm short, and I'm frustrated. This market is making me look extremely foolish. The divergences Are NOT agreeing with the Nasdaq / Semiconductors message of economic acceleration.
    22 Aug 2014, 04:13 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    RD:

     

    I keep pointing out the combined impact of liquidity and low volumes. Maybe, you should ponder that further.
    22 Aug 2014, 04:24 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » RD

     

    Sounds like you need a new model. Like there's something -now- operating, that hasn't been when you've used those factors before.

     

    Scientifically when the model doesn't work... the academic answer is to check what's amiss in the model.
    22 Aug 2014, 04:18 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    LMH: John Hussman is one money manager who could learn from that advice. A model that produces an annualized total return loss of 1%+ over the last ten years is one in need of a serious re-think, rather than just insisting that the model will work given enough time.

     

    Hussman Strategic Growth HSGFX
    10 Year Annualized Total Return= -1.26%

     

    http://bit.ly/QgZCw8
    22 Aug 2014, 04:59 PM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    Hussman's strategy works perfectly, for him. He scares the bejesus out of folks, sells newsletters and makes management fees on non-performing funds into which he's scared his followers.

     

    What could possibly be better?
    22 Aug 2014, 05:05 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » Tack

     

    "What could possibly be better?"

     

    Lol. Having a conscientious. All the REALLY good stuff in live, depends on the compassion that goes with having one.

     

    And that's my fortune cookie writing for the day.
    22 Aug 2014, 05:31 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    L,

     

    There is nothing, ever new in the stock market.

     

    There's nothing wrong with the model that identifies important divergences. It's simply means the market is not ready to respond to the divergences, which are time tested indicators and quite rational.

     

    Junk bond performance -- is a key component of a healthy market. Either it becomes healthy, soon, or the risk of corrective activity rises.

     

    Just because the market hasn't responded, does not invalidate the indicators. Just like the flip side of buying an asset with improving fundamentals that doesn't move, it just requires further patience, sometimes.

     

    Let me repeat: Long bonds are Soaring. (risk off).
    Junk bonds are struggling (risk off)
    Oil is selling off (risk off // slower growth)
    Small caps are lagging (risk off / shift to defense)
    Utilities are the leading sector this year (risk off).
    Europe, the US largest export market other than perhaps us Canucks up here, selling off hard.
    Even financials, are doing nothing special.

     

    This stuff isn't pulled out of a cheerios box. It's time tested.

     

    This time is different -- the most dangerous 4 words.

     

    These divergences can all be resolved without a selloff, but cannot continue too long, as they are.

     

    Today I moved some short exposure, from the consumer area to the commodity area, as that seems to be the "leading edge".
    22 Aug 2014, 06:22 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9070) | Send Message
     
    Author’s reply » DV

     

    In my comment, I wasn't suggesting throwing out the model.

     

    By new model, I didn't suggest dumping it --> I suggested looking for more factors that help make it more accurate, or look at if some assessment of these factors could be adjusted better.

     

    Even in a model that's working, there's always room for improving it.

     

    Since no one can time the corrections exactingly, we know for certain, there's possible improvements to make even in the most time tested market models....
    22 Aug 2014, 06:33 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    I would keep those points in a different context.

     

    1. Any asset class that is up a lot over a five year period may give some of those back and that really does not tell me anything about the future. The asset class may simply be correcting an excess valuation buildup.

     

    2. Junk bonds have outperformed treasuries over the past 5 years and are now giving back a little this year.

     

    3. Most risk asset classes are still holding up or going up in price.

     

    YTD/1 Year/3 Year/ 5 Year Total Annualized Returns:

     

    SPY: +9.02 (risk asset)/+23..62%/23.54%...
    JNK: +5.35% (risk asset)/+11.43%/10.12%/...
    TLT: +16.56%/ 17.92%/4.63%/8.08%
    IWM: +.51%/ +14.99%/ +22.84%/ +16.35%
    XLU: +14.04%/ +18.97%/ 13.91%/ 11.85%
    XLE: +11.39%/ +24.4% / 17.7% / 15.3%

     

    Data collected from Morningstar. Returns calculated through 8/21/14.

     

    I would not being using any superlatives to describe what has happened this year. Mostly, it is a sector rotation. XLU and VNQ did not have the same kind of year in 2013 as did SPY, which had a total return of 32.31% compared to XLU at 13.05% and VNQ at +2.31%. The interest rate rise dampened the enthusiasm of investors for bond like stocks. This year is different as rates gave up some of that increase.
    22 Aug 2014, 07:20 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    RD,

     

    i could come up with a counter for most if not all of the points you are making , but we have gone down that road before and to get involved in a long debate over it is pointless for both if us.

     

    However , i can go back to a point that i believe we do agree on --price action

     

    it trumps all

     

    in my view the market is and has been making a statement via price action, and it has been doing so for quite some time now. ..

     

    Now u say it cant continue too long , - maybe u r right

     

    u mentioned the 4 most dangerous words - this time is different --

     

    But , Maybe there is nothing "different" at all about "this time" ,maybe there are precedents (I believe there are.) to what is transpiring now for many if not all of the "issues " that you point out & many are wringing their hands over.

     

    However consider this quote to go along with your views..

     

    the market can stay irrational (I'll add- in the eyes of some , but not in my opinion) for a lot longer than you or anyone can else can stay solvent .

     

    & the price action is continuing to say that ..
    22 Aug 2014, 09:32 PM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    F & G: I would agree that the current price action confirms an up market. I would emphasize the word "current".

     

    IBD's indicators have the market in a "confirmed uptrend" currently.

     

    My Vix Asset Allocation Model is flashing green and the VIX is moving in its most bullish pattern currently:

     

    Phase 2-Stable VIX Pattern-Mostly Continuous Movement Between 10-15

     

    Vix Asset Allocation Model Explained Simply
    http://bit.ly/XIe6mV

     

    The VIX went down today even though the S & P 500 was down slightly. Usually, the two are negatively correlated and the VIX would be up when the S & P 500 was down.

     

    Closing VIX: 11.47 Down 0.29 (2.47%)
    http://yhoo.it/103ynXD

     

    I do not see a flattening yield curve:

     

    http://1.usa.gov/1m4Chf7

     

    JNK is up almost 6% this year and has had an excellent five year total annualized return. The price dipped only briefly below its 200 day SMA line before recovering. I do not draw any negative conclusions about the spread differential increasing between JNK and TLT, particularly given the record low spread occurring in June and the significant outperformance of JNK vs. TLT over the last 3 and 5 years.

     

    I view the intermediate and long term treasury rates as being manipulated by the FED which has created an artificial shortage, owing in most cases over 50% of the available supply maturing in 10 years or more.

     

    http://nyfed.org/12yg38A

     

    So, I would not draw any conclusions about the decline in those longer term treasury rates this year that would give me a cautionary signal about stocks. In my view, the treasury market is being manipulated and does not properly reflect a free market determined real rate of return spreads to anticipated inflation.

     

    If there was an unusual divergent in prices today, it was reflected in the following three ETFs.

     

    TLT: +.56%
    VNQ: -.8%
    KRE: +.23%

     

    KRE SMA Lines Converging
    Closing price $38.97
    50 day 39.22
    100 day 39.15
    200 Day 39.41

     

    I would anticipate a one day upside cross above all three lines next week barring some event news that takes the market down.
    22 Aug 2014, 10:48 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    SG,

     

    Appreciate the comments. I looked again tonight at the longer term charts. Obviously basis index action I am trying to pick a top, and it may be premature.

     

    Perhaps the divergences aren't proven yet or overt enough.
    23 Aug 2014, 12:02 AM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    FG,

     

    Just to clarify I mean a rally without correction, shouldn't continue too long in the presence of these apparent divergences.

     

    What can I say. Regardless of the technicals I follow, the SPX, qqq, IYT, XLF, continue to make highs. IWM, bends but doesnt break.

     

    I must acknowledge the divergences may be resolved, and the market just continues higher.

     

    We are at an all time record interval without a 10% correction, but that seems meaningless, too.

     

    It's not a "natural" market to me, and hasn't been for a long time. Low volumes, and no ebb and flow. Many others, say the same thing.
    23 Aug 2014, 12:08 AM Reply Like
  • dancing diva
    , contributor
    Comments (2752) | Send Message
     
    RD - I can appreciate your frustration, but I have to say I think you are looking at the wrong things as far as your divergences. And I do believe you have some misinformation.

     

    Eg, we are not at an "all time record interval without a 10% correction". In fact, there have been 4 times previous to this since the early 1960's that the rally has lasted longer. We are now roughly at day 1052 (+/- a couple days).
    http://bit.ly/1l2YHOg

     

    Falling commodity prices are more often bullish for the market. Some of the best bull markets have come when they are flat or declining. Look at this continuous commodity price chart. The biggest bull market from the early 80's to 2000 came when the broad trend was sideways to lower.
    http://bit.ly/1l2YHOi
    Yes, if they are as a result of a sharp GDP contraction that's a negative, but none of the data bears out that's occurring. While there's no doubt world growth is on the weakish side, there's nothing at all to suggest it's rolling over. I was actually more concerned about growth prior to July. I felt consumers were tapped out and the nail in the coffin would be another US drought. Thankfully mother nature was kind and we'll see a bumper crop and no food inflation. And lower energy prices are a big help for both consumers and businesses.

     

    Regarding the curve flattening. Yes, the 2yr-10yr spread has flattened, but there's lots of weird crap going on. European 10 year rates are so low they are positively impacting the demand for the US 10 year.
    http://bloom.bg/1b1LnFr
    And while I can't buy long bonds at the current level, preferring defensive dividend stocks that pay more and grow dividends each year for that part of my portfolio, there are many companies or more rigorous investors than I that must hold a certain percentage of their portfolio in bonds.

     

    Regarding the recent relative weakness in junk bonds. It's my guess there's been some money flowing out simply because yields have gotten so low that money is seeking alternatives. While I'm not bearish to junk, the long term risk/reward isn't that favorable at 5.6% (the last months payout annualized). Wouldn't you rather be in a utility that pays over 4% instead (ed, so, ppl 4.4-4.9%) than a junk bond fund? Historically, if the market is about to roll over because of recession defensive stocks actually go up for awhile after the S&P and junk bonds top.

     

    And while the the defensive sectors were outperforming the S&P earlier in the year, they topped out relatively in April/May.
    http://bit.ly/1l2YHOk
    http://bit.ly/1l2YHOl
    23 Aug 2014, 06:52 AM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RD: Historically, there have been longer periods without a correction, as shown in these charts published by Yardeni:

     

    http://bit.ly/1rpnonq

     

    Figure 3 covers the period from late 1990 to October 1998, a much longer time without a 10% correction than the current period. There were two dips of -8.9% and -9.6% before there was a 19.3% decline in late 1998.

     

    I would note that the VIX was in a Stable Vix Pattern during that period until an October 1997 Trigger Event.

     

    VIX and S & P Compared 1990 to 1997
    http://bit.ly/XIe6mR

     

    The market remained in an Unstable Vix Pattern until late 2003 when another Stable Vix Pattern was formed by the market. This led to another long period without a correction: Figure 2

     

    Vix Charts from 2004 2005 2006 Stable VIX Patterns Phase 1 and Phase 2
    http://bit.ly/YsaseY

     

    If an investor had sold after the October 1997 Trigger Event when the VIX briefly returned to below 20, then that investor could have bought when the Stable Vix Pattern formed again at a lower level, and would have missed all of that up and down motion going nowhere.

     

    I would add the following caveats. This kind of data about time periods need to be taken in context. I was worried about the time period without a correction between 1984 to October 1987: Figure 4

     

    That concern was based on the context. Interest rates were high, and the ten year was moving up in yield in 1987:

     

    http://bit.ly/WGQM6i

     

    I was more uncomfortable with valuations then than now in that context. The forward P/E was not that high when the October 2007 crash occurred:

     

    Figure 1
    http://bit.ly/1mrZULk

     

    I would add a caveat or two based on experience.

     

    First, I have lived through a large number of 10%+ corrections. They do not concern me. What really concerns me is the advent of a long term secular bear market and those 45%+ type declines that occur over relatively short periods during those secular bear markets. I do not see one of those catastrophic events on the near or intermediate term horizon. During my investing career starting back in the late 1960s, the market went from October 1974 to 2000 without one of those events. Then we had two over a 10 year period with the first caused by clearly excessive valuations that were not corrected entirely by the 49.1% decline between 2000-2002, in my opinion.

     

    I do believe, however, that the odds of a market event, similar to October 1987, increase after about three years without a correction, taking into account the magnitude of the S & P 500 bolt upwards without one.

     

    The S & P 500 was near 1100 three years ago, and that is a relevant fact too. The S & P 500 closed at 1099.23 on October 3, 2011 and at 1988.4 last Friday, or +80.9% without a correction. Money does not grow on trees like that very often.
    23 Aug 2014, 09:02 AM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    SG:

     

    "I do believe, however, that the odds of a market event, similar to October 1987, increase after about three years without a correction, taking into account the magnitude of the S & P 500 bolt upwards without one."

     

    One hopes that you're not anticipating a -21% day.
    23 Aug 2014, 09:31 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    RD,

     

    I acknowledge your 'points" as you deem them to be valid and as you said there are many others that are cautioning about these divergences..

     

    if your "divergences" lead you to the conclusion that we need a 10% correction - join the club ;)

     

    The fact that we haven't seen a 10% correction has even the most bullish scratching their heads .

     

    The S & P is now at 34 months from the last 10% or so dip..

     

    BUT it is not without precedent -- consider this fact

     

    The longest period without at least a 10% pullback was during the 1990-1997 run--- approx. 82 months..
    & ---- No fed - no QE

     

    Now I'm not drawing comparisons to the economic conditions from that period to now , my reference is on the price action that took place .. so 34 months without a correction is not without precedent ..

     

    In my view , this market is not seen as 'natural" because of the enormous obsession with the fed that the headlines bring to us on a daily , sometimes hourly basis .

     

    My opinion,--- that feeds into the disbelief, as everyone then loses sight of the earnings and improved economic data. Of course that sparks an entirely diff. debate.

     

    Bottom line - each side can go out and make a "case" to 'validate" their investment approach .. and while neither side will "buy into" the others ideas,

     

    then I believe, the deciding factor is 'price action"

     

    We are heading into a seasonally weak period , My "Guess" is that fact, combined with what I believe will be a knee jerk , headline crazed over reaction to the end of QE , may be enough to spark that correction.

     

    but who really knows..
    what i do know and how i'll be playing it - unless i see evidence to the contrary -any corrective phase will be a buying opportunity.
    23 Aug 2014, 09:32 AM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    FG:

     

    Repeating, ad nauseum, two big mitigating factors:

     

    1) The economy has meandered higher at a rather steady ~2% pace. This rate of growth is far more sustainable than when we get runaway recoveries that cannot be sustained at 5, 6 or 7%.

     

    2) Because of #1, and because of complete misunderstanding of and suspicion about the effects of monetary policy, market participation has remained weak, notwithstanding massive available liquidity. Consequently, again, when we observe the five-year trend line for the SPX, for example, we see a very linear pattern, with rather small variations either above or below, and exhibiting none of the typical hyperbolic acceleration that accompanies buying euphoria.

     

    And, because of the low existing participation and volumes, plus huge available liquidity, elsewhere than equities, it takes almost no buying pressure to blunt any attempted sell-off.

     

    I see no likely break in this pattern until either euphoria or abject fear reasserts itself, occasioned by some major new development.
    23 Aug 2014, 09:50 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    T
    "The economy has meandered higher at a rather steady ~2% pace. This rate of growth is far more sustainable than when we get runaway recoveries that cannot be sustained at 5, 6 or 7%."

     

    and that may in fact be a "goldilocks" scenario that will continue to confound many..

     

    & i'll add "Goldilocks " should be loved , not scorned :)
    23 Aug 2014, 10:07 AM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    Tack: I view the October 1987 event to be similar to the 2010 flash crash, except that it lasted longer and probably restrained the market for over 4 years before a durable uptrend could be established again. It was not until 1991 that the market could calm down enough to generate a sustainable up move. That event was a traumatic one and gave bears renewed vigor and street creed since they had been claiming all along since August 1982 that the move up was just another cyclical bull within a long term bear market rather than the start of a new long term secular bull market.

     

    On 5/6/2010, the DJIA plunged almost 1,000 points. Both events are market driven.

     

    Something happens that causes sell programs to go into overdrive and that is compounded by sellers who are seeing year's worth of profits dissipitate in a blink of an eye. The herd tries to squeeze through the same narrow door at the same time which causes the door to explode and the wall to fall down in a stampede for the exit.

     

    When that happens, and the reasons may vary, the full extent of the decline can not be predicted ahead of time. All that I can say now is that the risk increases of an abrupt free fall decline as the gains without a correction increase over a longer period of time without a correction.

     

    When I say that risk increases, that is not a prediction that there is a 100% chance of anything, let alone the magnitude of the market event. The 2010 flash crash was close to 10% and the valuations were much lower then than now. As valuations increase, that could impact the magnitude of the quake event.

     

    The 1987 crash was also preceded by a Trigger Event occurring in the Spring, followed by a return in the VIX below 20 before the crash happened. The VIX data does not go back that far but there is volatility data for the more stable S & P 100 index going back to that time period:

     

    More on the Vix Model: What it Does not Predict is as Important as What it Does/Parallels to VXO 1987-1988
    http://bit.ly/YsauDJ

     

    To correct a slight brain malfunction in my previous comment, it is necessary to substitute "October 1987" for "October 2007" in this sentence:

     

    "The forward P/E was not that high when the October 2007 crash occurred"
    23 Aug 2014, 10:50 AM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    Thank you for all the replies. Sincerely.
    We all have bias at times. I believe as iron sharpens iron, in bringing my bias to a forum like this, to have it challenged. Its constructive for me.

     

    Things I read that stand out:
    FG / T --- the economy has meandered 2% annually. However the SPX has rallied 80% in 3 years. On a market cap / GDP basis, or price / revenues, are we not just a little ahead of ourselves? Where is the growth the market is forecasting? Why so continually slow?

     

    Rest of world -- why are we the only market trending, straight up essentially? Is not participation by the ROW important , both economically and their markets? What is the QE connection there? Exhibit A -- Europe markets.

     

    Consumer -- DD I acknowledge the lower input prices -- what bugs me is the middle class seems to be really struggling. Wage growth, retail, housing, all extremely sluggish. Will they ever, really recover? Car sales are great -- but subprime loans there are widespread.

     

    Volumes Tack -- I acknowledge the low participation etc -- but it's ridiculous -- yesterday, a Fed day, among the lowest of the year. Yes there is no selling pressure -- but little real buying, either. Whats going on?

     

    I would love to buy -- good value or good organic growth. At SPX 2000 I see little of either. We have a catalyst approaching, the end of QE here. We can debate its impact on markets, but it would seem prudent to wait.

     

    In february we had the first real correction in momentum, I have been looking for a second, basis IWM, since then. Now lately, we see a sustained selloff in oil prices. Could this be tied to QE ending, a reduction in growth and inflation epectations by markets tied to QE winding up?
    I don't know.
    23 Aug 2014, 10:53 AM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    1990's continuous rally -- a different time.
    Peak earnings and investment years for boomers, booming growth and productivity, international participation. Organic!

     

    I ask -- where is the organic growth -- to support today's secular bull?
    23 Aug 2014, 10:56 AM Reply Like
  • South Gent
    , contributor
    Comments (6119) | Send Message
     
    RD: Over the next several decades, with occasional digressions, most of the organic growth with occur in developing markets, as vast numbers enter the middle class.

     

    http://bit.ly/1nCbR2y

     

    This is not to say that all emerging market stocks will do better than the U.S. market over that long time period. Much of the increases in revenue catering to that demand force may be harvested by multinationals located in developed countries.

     

    Europe is in a mild slowdown and has been mostly a no show in the worldwide recovery since the financial meltdown. In that respect, Europe is similar to what has been happening in the U.S. housing, which normally turns on a dime and helps propel an economic recovery along with auto sales after a garden variety recession. The last recession was not one of those and the problem originated to a large decree in too many homes being built and sold to those who really could not afford them.

     

    New One Family Houses Sold: United States
    http://bit.ly/MKSuTr

     

    Ultimately, time is the only cure for that kind of problem.

     

    Housing will turn up in the U.S. and Europe will find its sea legs. The fact that new home sales are still near lows from the last recession has held back the U.S. recovery so far and has probably contributed to the benign inflation numbers.

     

    For U.S. demand, there are several Americas. There are those in the bottom two quintiles who are struggling but still have money to spend. Many receive substantial government assistance. The average household in the top two quintiles have a growing amount of disposable income and have increased their wealth over the past decade. That is a lot of people who can afford to spend and/or save more.

     

    I noted in a previous comment that $687.9 Billion was added to "savings" in June, almost identical to the amount saved in May. Savings is defined by the government as disposable personal income less personal outlays. Is that insignificant?

     

    http://1.usa.gov/qTFsOo

     

    The decline in oil may or may not be temporary. Hard to say now. It may be currency related as the DXY has risen some. The Dollar Index goes up and down and frequently just creates a lot of noise signaling nothing of real importance about the future.

     

    U.S. Dollar Index (DXY) Chart

     

    http://bit.ly/1tvHYDW
    23 Aug 2014, 11:36 AM Reply Like
  • Tack
    , contributor
    Comments (16498) | Send Message
     
    RD:

     

    Whenever I see the word, "organic," I get a similar reaction to when I see the word, "real," as pertains to inflation-adjusted numbers. Frankly, I don't much care about either.

     

    We live in a world where the only dollars that can be invested, counted or grown are nominal dollars. As long as the total sales are growing (http://bit.ly/1553mUS), measured as such, then the total market valuations will likewise increase, also as measured in nominal terms.

     

    I find it curious that the discussion of growth frequently gets sidetracked by discussions that want to introduce extraneous concepts, such as "real" and "organic." In the end, is nominally-measured values increase, share prices, also, expressed in those same nominal values, will do likewise.
    23 Aug 2014, 11:46 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10512) | Send Message
     
    RD,

     

    Remember, I wasn't comparing the economy of the 90's to now , just referencing the price action and that 82 month streak back then .
    yes we have had an 80% rise , but don't lose sight of the fact that its coming off a better than 50% decline -can't dismiss that ... and corp. profits have risen 300 % off of the lows,, so is the market really that far ahead of everything as many suggest ? each can decide that for themselves.

     

    In my opinion , I won't buy the "end of QE" as a reason to change my overall view of the market. ..
    here's one of many reasons for that ,
    I've asked the question , and have yet to receive an answer- the fed is now down to 25 B a month a 70% reduction in purchases , while this was and is taking place , corp. earnings are coming off a series of very good quarters,the last being the most impressive .

     

    The year-over-year growth rate for actual q2 ’14 earnings was 10.2%, the best quarter since 2011 , all while the fed was reducing QE . How is that explained ?? less fed intervention - better earnings . 
    how will the remaining reduction (25B) have such a dramatic impact and wreak the havoc that many are hanging their hat on for their market thesis. ?
    i don't see it at all, that along with a host of other reasons as well, have me in the camp that the end of QE "should" be a non event ,just like the ongoing taper is ..
    and in my view if/when the markets correct and it happens to be at the end of Oct , it will be because of the nice run the market has had, quite "normal" and have nothing to do with QE at all.
    of course we all will be told otherwise .. but that's another story..
    as far as valuations, IF i am correct, the PE's that we have right now will pale in comparison when the market finally hits the TOP , as there is surely precedence for PE expansion , not contraction , as this bull market ages and finally exhausts.. We have a forward PE of 15 ..
    just my .02 ,
    as for now , FWIW , that is how I'm playing the cards that are dealt and positioned accordingly ..
    
    23 Aug 2014, 11:57 AM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    SG, T,

     

    I accept that housing, and the associated broad based consumer strength that implies, will ultimately, return.
    It's just that, on valuations, it seems we are paying for such growth now.

     

    I would say I am not so much economically bearish, but that to put it in one sentence, that expectations as expressed by market prices, have run far, far ahead of the economy.

     

    I am concerned for those buying today, without substantial cash reserves / or on margin, the market will having an awakening that the revenue growth required to support today's valuations, is much farther out than current expectations, and there will be a valuation repricing.

     

    The savings referenced is significant SG. However from what I have read it is heavily biased to the top quintile. I'm not believing , from other data, this is broad based across a majority of American consumers. Please correct me, if I am wrong.

     

    If I am, why are 7 year car loans, the norm? Why subprime car loans? If A broad base has so much (investable) cash, why such historic highs in margin debt? Why such, for that matter, such lax rules on margin -- one of my brokers, interactive, allows portfolio margins at 15%!

     

    Is it broad based -- or a "hoarding" by the wealthy?
    23 Aug 2014, 12:12 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    FG,

     

    To answer your earnings growth question, I continue to believe an important component is the junk bond and corporate markets, the willingness of participants to lend in those markets at very low rates, and the impact that in turn has on share Buybacks, and in return earnings.

     

    It would be an interesting exercise to search, what would earnings growth be, backing out all share Buybacks funded by new debt issuance, for whatever time period one chooses.

     

    Again, one way to measure this, which accounts for the growth in revenues, is examine price / sales, not p/e, for valuations.

     

    IBM is a poster child -- revenues keep falling, but share Buybacks keep the eps picture alive. Suppose it is, what It is.
    23 Aug 2014, 12:23 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    Folks, as I said as well, I'm allocating in regards to what I've written, not by shorting the SPX or high quality stocks, but weak stocks with weak fundamentals, as I think they would decline in an amplified fashion, to even a minor sustained correction in the SPX / Nasdaq.

     

    Speaking of the Nasdaq, semiconductors have been a leader -- but haven't they run far, far ahead of the economy, as well?
    23 Aug 2014, 12:30 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message
     
    http://seekingalpha.co...

     

    http://seekingalpha.co...

     

    2 articles from ETF writer gary gordon, not by any measure a doom and gloomer.
    23 Aug 2014, 12:39 PM Reply Like
  • South Gent
    , contributor