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  • Don't Fall for Today's Market Head-Fake  [View article]
    Bigbab, my sentiments are with you. My feeling is that this downturn is a correction toward more realistic valuations. Recent earnings have been inflated by various factors and it is unreasonable to extrapolate them into the future. Yes, trailing P/E's are at historic lows, but if future earnings fall short, these ratios may fall into line. This is my prediction, but I could certainly be wrong.

    It is worth mentioning that one ubiquitous feature of stock markets is that they tend to overshoot their target (when headed up and when headed down). I think this is particularly so when changes are swift, as the last two weeks certainly have been. So, today's closing bell rally is, at a minimum, a reaction to the "overshoot," but possibly the beginning of a sustained upward trend. I don't think anyone really knows at this point.

    Last summer, when markets were also tanking, Bernanke was able to step in and inflate equity prices with easy money because the "recovery" was young and this approach hadn't been tried recently. All of last year's macroeconomic concerns remain, and in fact, may even have deteriorated since then. Bernanke may yet signal a third round of money printing, but this is far from certain, and moreover, there would undoubtedly be less enthusiasm in the markets this time around. I am not a gold bug, but I just can't envision the scenario in which gold does not continue to outperform in the near term. If we had seen a more controlled sell-off, I would have taken a short position, but because of the high volatility, I think gold is the safest "bearish" position right now.
    Aug 9, 2011. 10:02 PM | Likes Like |Link to Comment
  • Don't Fall for Today's Market Head-Fake  [View article]
    Thank you, orvinfive, you beat me to it.

    For those interested in a nice illustration of inflation-adjusted closing prices over the last several decades, including when secular bull and secular bear markets occurred, see the following:


    While I think it is safe to say that the 2000 tech bubble was indeed somewhat above the long-term trendline, this is really not the case for the 2007 housing bubble and the 2011 peak. Anyway, I found the remainder of this article to be largely unsubstantiated conjecture.
    Aug 9, 2011. 06:01 PM | 9 Likes Like |Link to Comment
  • The Day After: Stay Away From Gold, Treasuries; Buy Solid Blue-Chip Stocks  [View article]
    I appreciate this thoughtful comment.
    Aug 9, 2011. 02:23 AM | Likes Like |Link to Comment
  • Equities May Have It Wrong, At Least for the Moment  [View article]
    Out of curiosity, Peter, are you also considering C? I couldn't sleep at night with BAC in my portfolio, but I have been weighing C lately. I am interested in your take.
    Aug 8, 2011. 11:20 PM | Likes Like |Link to Comment
  • S&P Snapshot: The Monday Market Massacre  [View article]
    Having just last week retraced all of 2011, tomorrow will likely have the dubious distinction of retracing all of 2010. Congratulations!
    Aug 8, 2011. 11:20 PM | 1 Like Like |Link to Comment
  • Buy Stocks, Sell Bonds  [View article]
    I agree with your sentiments, rpodraza. It's certainly true that stocks are not "worth 20% less" than earlier this year, as the author points out, but that's not really at issue. What is at issue is whether stock valuations were overly optimistic back then, based on extrapolating unsustainable earnings growth in recent quarters, indefinitely. Those who continue to proclaim that (trailing) P/E ratios are at historic lows do so at their own peril.

    I do not know if a recession is in the cards, but I do believe that the all-out, doubling-in-two-years bull market we saw simply did not fit the macroeconomic data that has accumulated during that time period. Unemployment is stuck above 9%, GDP growth is near zero in nominal terms (and probably negative in real terms). The most likely scenario I see is a flat, depressed market for the near future. The second most likely scenario is a continued collapse. Honestly, the least likely scenario, at least as I see it, is the kind of miraculous rally that would justify this "buy stocks" advice the mainstream media is peddling. I hesitate to even short the market with an ETF like SH or SDS, simply because those instruments fare so poorly in relatively flat markets. Gold and bonds are likely the most attractive option for a longer-term investor who is unhappy with the prospects of sitting out the bear entirely.
    Aug 8, 2011. 11:20 PM | Likes Like |Link to Comment
  • Sirius XM: The Company May Continue to Outperform the Stock Awhile Longer  [View article]
    I completely agree with you, Ian. While I think that, in a vacuum, this stock may have continued in the fashion Cameron predicted for the foreseeable future, stocks certainly do not trade in a vacuum. As you say, the " in freefall," and moreover, consumer spending appears to be at an inflection point. (See: research.stlouisfed.or...[1][id]=PCEC96) The last time we saw an inflection point in consumer spending coincide with a severe market downtrend was at the beginning of 2008. There are those who want to believe that 2011 will be more like 2010, but there were far fewer red flags then than there are now.

    All of the above is very bad news for a stock that is, as Ian says, "relying on consumer discretionary income." Whether the inflection point leads to a real slump or merely a bump in the road, I can't say, but either way, I would not risk wasting my money in a stock like SIRI. I sold at $2.08 and it looks like plenty of other folks did the same. Even AAPL is down lately, but only half as much as SIRI. There is money to be made no matter what the condition of the market is--if you held AAPL and SIRI, which would you sell first to free up capital? Heed Cameron when he says that SIRI the stock is not Sirius XM the company.
    Aug 4, 2011. 11:43 PM | Likes Like |Link to Comment
  • Sirius XM: The Company May Continue to Outperform the Stock Awhile Longer  [View article]
    Those who remain in the $2.50 camp certainly are wearing blindfolds, but I don't see how you can blame a 10% decline on manipulation when the overall market is down a similar amount. SIRI longs are quite lucky the price isn't even lower.
    Aug 4, 2011. 11:39 PM | 1 Like Like |Link to Comment
  • Sirius XM Earnings: Company Hits It Out of the Park  [View article]
    The small pre-market rally today was all we can expect from the earnings report. Intraday today, SIRI continues to track the market reasonably closely. If the market eventually recovers to its most recent high, SIRI ought to trade between $2.26 and $2.30 based on today's rally.
    Aug 2, 2011. 01:54 PM | Likes Like |Link to Comment
  • Timing of Debt Deal Will Benefit Sirius XM  [View article]
    Do yourself a favor and compare the intraday patterns over the last six days for IVV and SIRI. If you do, you will see that the two are virtually identical. There has been virtually no intrinsic movement in SIRI--just marketwide patterns. There is certainly no evidence of a vast conspiracy. SIRI is a high-beta stock, so while its movements follow the broader market, they are magnified on a percentage basis.

    You state that "there is no way that a stock price [...] can move like this" -- I think it is perfectly reasonable for a stock price to follow the broader market. In fact, that is what most stocks do on most days. There has been absolutely no news out of SIRI for some time now, so there is nothing to trade on. The fact of the matter is that many people here made a purely speculative bet on a pre-earnings run, and it hasn't happened. To say "there is no way" that one's own assumptions will not be borne out is a sign of an investor who does not hedge against risk.
    Aug 1, 2011. 01:15 PM | Likes Like |Link to Comment
  • Timing of Debt Deal Will Benefit Sirius XM  [View article]

    Your comments on SIRI-related articles have been consistently emotional and reactionary. Calm down. Making investment decisions based on emotions is a sure-fire recipe for disaster. Remember why you invested in SIRI in the first place: if you still feel the same way, you have nothing to worry about. If not, then reconsider your options going forward. If you never really had a good reason to invest in SIRI, well then, that's another story.

    SIRI is not a steady blue chip stock; it is the playground for traders and speculative investors, and as such, it is volatile on a day-to-day basis and presents substantial risk. This much should be clear from its high beta value and P/E ratio. If you are a long-term investor, day-to-day volatility is irrelevant to the long-term trend: it is simply noise.

    Moreover, SIRI's intraday behavior has closely mirrored the broader markets for some time now. Take a look at one-day, intraday charts for IVV and SIRI and compare them side-by-side for each of the last several days. Notice that the general shape of the curves are almost identical. Today's decline is no different. SIRI is trading just like the rest of the market--six straight down days. Once the debt ceiling issue is conclusively resolved (i.e. signed by the president), this temporary snag will disappear, both from SIRI's stock price and from the broader market. Obviously, though, other macro concerns remain. SIRI is not immune to these concerns, nor is any stock, for that matter.

    I am long SIRI in the mid-term and expect a moderate rise in the stock price over the next 6 to 18 months.
    Aug 1, 2011. 11:44 AM | 3 Likes Like |Link to Comment