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GaltMachine

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  • A123 Systems (AONE -10.7%) crashed to a new low of $0.28 today in the absence of major news. Shares are now 40% below the level they traded at before A123 announced a giant and controversial financing deal with China's Wanxiang Group. The Street may be worried the deal will fall through due to political concerns, or will be dilutive to the point where existing shareholders are left with very little. [View news story]
    "Last August, following a nationwide competition among America's clean-energy technology leaders, Vice President Biden traveled to Michigan to announce that A123 was one of the 48 companies to win a Recovery Act grant for advanced battery technology.
    So this is what's possible in a clean-energy economy -- these folks right here, doing extraordinary work. This is what happens when we place our bets on American workers and American businesses. And we're going to continue working to help them manufacture more success stories like these across all sectors of our economy."
    President Obama, April 30th, 2010.
    http://wapo.st/OvQEUL

    Curiously it seems like an endorsement from the President is the kiss of death for any company :)
    Aug 29 05:39 PM | Likes Like |Link to Comment
  • More on Pending Home Sales: "Limited inventory is constraining market activity," says the NAR, with chief spinmeister Lawrence Yun blaming sales weakness in the West on "an acute inventory shortage." More from Yun: "Expected gains in housing starts of 25-30% this year, and nearly 50% in 2013 are insufficient to meet the growing housing demand." [View news story]
    bbro,

    I think it depends upon definition - housing starts includes multi-family - and on this metric you are correct:

    "Housing Starts:
    Privately-owned housing starts in July were at a seasonally adjusted annual rate of 746,000. This is 1.1 percent below the revised June estimate of 754,000, but is 21.5 percent above the July 2011 rate of 614,000.

    Read more at http://bit.ly/QzEIGt"

    Single family starts:

    "Single-family housing starts in July were at a rate of 502,000; this is 6.5 percent below the revised June figure of 537,000. The July rate for units in buildings with five units or more was 229,000."
    Read more at http://bit.ly/QzEIGt

    So as usual it pays to read the fineprint and find out the definition being used :)
    Aug 29 05:32 PM | 1 Like Like |Link to Comment
  • More on Pending Home Sales: "Limited inventory is constraining market activity," says the NAR, with chief spinmeister Lawrence Yun blaming sales weakness in the West on "an acute inventory shortage." More from Yun: "Expected gains in housing starts of 25-30% this year, and nearly 50% in 2013 are insufficient to meet the growing housing demand." [View news story]
    Tack,

    Thanks I will bookmark and check out your suggestions.
    Aug 29 05:28 PM | Likes Like |Link to Comment
  • Q2 GDP (2nd revision): +1.7% in-line with expectation, +1.5% prior. Price index +1.6% in-line with expectation, +1.6% prior. [View news story]
    bbro,

    That's why I pay Jeff Gundlach to do it for me. Duration is the big risk but a pro like Gundlach has managed waters like this before. Has a high emphasis on current yield and very low duration on DBLTX and to a lesser extent DBLFX which are my core fixed income holdings.

    Amazingly most people don't understand MBS's and the fact that they are weirdly correlated with interest rates and in some cases depending upon the tranche can have a negative duration. They also don't understand that you can actually generate capital gains from bonds especially if they are distressed/undervalued for some reason akin to stocks.

    Trying to do that as an individual investor is kind of crazy - I just don't have the resources or the skill to to do the level of evaluation necessary. The bond market is highly inefficient relative to the equity market and this is one reason why skill can make a big difference.

    LQD is passively managed and I think to survive today you need a really good active manager and this is one area of the market where active management works and paying it for it is worth it.

    Jeff's a value guy which corresponds to my philosophy.

    We'll see what happens in the future but right now, not bad. That move up from 1.42 actually resulted in a gain for the funds above.

    Cheers and good luck.
    Aug 29 05:22 PM | Likes Like |Link to Comment
  • Russ K's Guide To Economic Indicators (Infographic) [View article]
    Freddy,

    "Having collaborated with gov't statisticians, I completely dispute your insinuation of stat manipulation."

    Really you don't think the "margin of error" has room for some tweaking?

    I appreciate your sincerity and belief that they don't manipulate but seriously Q1 2011 was originally reported as a 1.8% quarter and then subsequently revised to this barely above zero level.

    I don't think so !!!

    Anyway I think you have the right read now.
    Aug 29 05:15 PM | Likes Like |Link to Comment
  • Junk bonds sold during periods of heavy issuance perform worse in the short term than those sold during slower times, according to very cool Barclays research from the last 2 years. High-yield paper sold in weeks with more than $7B of supply has lost money over the following 14 days. [View news story]
    High issuance means low rates on the issues. Corporations aren't stupid they take advantage of what the market is giving them.

    Low rates on junk mean higher risk. No need to over-complicate it.
    Aug 29 01:25 PM | Likes Like |Link to Comment
  • Russ K's Guide To Economic Indicators (Infographic) [View article]
    Freddy,

    Q1 2011 case in point - final revision 0.08 !!!

    I find that laughable. What combination of 3 month's growth could (0.04, 0.12, 0.08) possibly give you that final number with such accuracy?

    The Bureau of Lies and Statistics must have decided that a negative print would have been a no/no for the animal spirits and the "green shoots" even after the fact.
    Aug 29 01:23 PM | Likes Like |Link to Comment
  • The put/call ratio on the S&P 500 moves to the danger zone - low enough to signal few enough are hedging against stocks falling as to almost assure that outcome. However, cautions Tommy Thornton, wait for indicator to turn higher before beginning to sell. [View news story]
    Joe,

    The link I provided above provides a graph of the Investor's Intelligence Survey you provided. I also pay attention to this one as well.

    Still not at an overly extreme level - get bears under 20 and bulls over 50 and that's a pretty good sell signal.
    Aug 29 01:16 PM | Likes Like |Link to Comment
  • More on Pending Home Sales: "Limited inventory is constraining market activity," says the NAR, with chief spinmeister Lawrence Yun blaming sales weakness in the West on "an acute inventory shortage." More from Yun: "Expected gains in housing starts of 25-30% this year, and nearly 50% in 2013 are insufficient to meet the growing housing demand." [View news story]
    867,

    One thing often overlooked in these discussions is transaction costs. Houses are probably the single most expensive asset you can sell when it comes to the cost of the transaction - a rule of thumb is 10-15% of the selling price will go to legal, commissions, taxes, moving, etc.

    So it is really the net proceeds from the sale of the house that matter the most to the seller and their banker. Given where prices are today and a further deduction for transaction costs, anybody who bought in the 2000-2009 period is in for a rude awakening.

    Prices are going to have rise a decent amount especially if someone under water before they will be willing to put it up for sale.

    I live in South Florida bought in 2003 and according to the Broward property appraiser my house is worth less than what I paid for it back then.

    We need to get those distressed properties cleared from the system as quickly as possible.
    Aug 29 01:11 PM | 1 Like Like |Link to Comment
  • More on Pending Home Sales: "Limited inventory is constraining market activity," says the NAR, with chief spinmeister Lawrence Yun blaming sales weakness in the West on "an acute inventory shortage." More from Yun: "Expected gains in housing starts of 25-30% this year, and nearly 50% in 2013 are insufficient to meet the growing housing demand." [View news story]
    Tack,

    Would you play this with one of the etf's like XHB or ITB?

    PE's seem rather high at 19,18 respectively. I am kind of surprised they are that high.

    Thanks.
    Aug 29 12:09 PM | Likes Like |Link to Comment
  • Q2 GDP (2nd revision): +1.7% in-line with expectation, +1.5% prior. Price index +1.6% in-line with expectation, +1.6% prior. [View news story]
    bbro,

    That is somewhat true but are they commensurate with the risk?

    In 2008 you could have got a 5% return virtually risk-free so on a million bucks you would generate $50k of income. On that same money today and in the same instrument you might get $2.5k.

    I call that financial repression.

    By the way, I personally am an investor in corps, MBS's and everything else bond related and I have done very well doing so over the past few years but the average gramma/grandpa shouldn't have to do this. That's all I am saying.
    Aug 29 11:04 AM | Likes Like |Link to Comment
  • The put/call ratio on the S&P 500 moves to the danger zone - low enough to signal few enough are hedging against stocks falling as to almost assure that outcome. However, cautions Tommy Thornton, wait for indicator to turn higher before beginning to sell. [View news story]
    bbro,

    Do you look at the OEX in combination with these other indicators?

    http://bit.ly/xQNJ14

    Seems to also be signalling a near-term top.
    Aug 29 10:27 AM | 1 Like Like |Link to Comment
  • More on Pending Home Sales: "Limited inventory is constraining market activity," says the NAR, with chief spinmeister Lawrence Yun blaming sales weakness in the West on "an acute inventory shortage." More from Yun: "Expected gains in housing starts of 25-30% this year, and nearly 50% in 2013 are insufficient to meet the growing housing demand." [View news story]
    Funny that was the quote that made me chuckle as well. Inventory would be fine if the prices were attractive to sellers - that's called supply and demand.

    Potentially this could result in upward price pressure assuming buyers were willing to pay more. Sellers at these prices don't want to lock in losses and/or negative equity unless they have no choice.

    This looks like the signs of life in the housing market actually has some legs assuming we don't get that fiscal cliff economic weakness that is screwing with people's expectations.

    P.S. -- Larry Yun deserves a promotion or at least the "Perpetual Employee of The Month Award" - reminds me a lot of SpongeBob.
    Aug 29 10:22 AM | 3 Likes Like |Link to Comment
  • July Pending Home Sales:+2.4% to 101.7 vs. +1.0% expected; -1.4% prior. [View news story]
    bbro,

    That's quite the shocking factoid. Well at least there is room for growth without inflationary pressures!
    Aug 29 10:15 AM | Likes Like |Link to Comment
  • Q2 GDP (2nd revision): +1.7% in-line with expectation, +1.5% prior. Price index +1.6% in-line with expectation, +1.6% prior. [View news story]
    Does anyone believe the price deflator (inflation) is really that low?

    What are the Hedonics on gas, food, and shelter? Somehow the story of rising rents is not translating into inflation?

    Of course it is in the govt's interest to keep this number low so that all the inflation linked accounts (social security, medicare, pensions) don't see annual increases. I feel sorry for old people stuck on fixed incomes in combination with financial repression this is not a pretty story.
    Aug 29 10:13 AM | Likes Like |Link to Comment
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