Saturday, October 31, 2009

Flood Of Orders Causes Problems For The NYSE

You may have heard that the stock exchange had problems Friday morning due to what they called "...a flood of orders..." I'm assuming they were sell orders given the direction of the market. Sounds like the recent downturn is probably driven by hedge fund redemptions. Oh well, we'll get through it. These things wouldn't be nearly as dramatic if momentum traders didn't pile on, but like I said, oh well, we'll get through it.

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Wednesday, October 28, 2009

Efficient Markets Go Bye Bye

Our colleague wrote a good one on the markets at seekingsigma. Here's the link

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Plenty Of Volatility To Go Around

The Dow is up while the NASDAQ is down 1%, the S&P is down .5% while the NASDAQ is up 1%, oil is down $2 in the morning then up $3 in the afternoon. Sound familiar? Schizophrenic markets point to inflection points. They're also dangerous for retail investors with weak stomachs and also point to larger negative issues within our markets. To think, last year regulators concluded there was no speculation in the commodities markets - yeah right.

This smells like the short side is trying to change momentum, but that's hard to do without the masses. Many people left the market and haven't returned. Many people who used to leverage up, aren't anymore. Many people that used to take huge risks, aren't at the moment. It's true, the vast majority of trading is done by professionals, but a lot of that professional money is backed by people like you. Also, to create real panic, they have to have the retail investor involved, or it just doesn't take.

So this latest pull back is starting to look tired. We're about 4.5% down from the recent high on the S&P (that's intraday with the S&P at 1047). Someone told me yesterday, that it looks scary, so that's when you buy.

Note: Aflac (AFL), 2011 model portfolio member, reports after the close.

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Tuesday, October 27, 2009

Opportunities Abound In An Irrational Market

As expected, this recent pullback has created more than a few opportunities. We like Dow Chemical (DOW) anywhere around 20 after that much better than expected quarter. Also, what can you say about the biotechs. They've come down quite a bit, and some for no reason, like Vivus (VVUS). We haven't had a good lie or bogus story spread in a while until today. 'They' took 1 1/2 points off the stock on no 'real' news. Other biotechs of interest include Arena (ARNA) and Human Genome (HGSI), but look out for final Phase 3 results for their Lupus drug on 2 Nov and they're also going to seek approval for their Hepatitis C drug within the next couple of months.

The a fore mentioned biotechs have such rich pipelines, developing drugs that address key health issues, and NO funding issues, we'd add to our positions. We also still anticipate consolidation in the biotech industry to ramp up, soon.

The sell off has definitely opened the door for some to get in, if they haven't already.

Disclosure: long everything mentioned

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Monday, October 26, 2009

Stop Trading

The past week or so is another lesson why the average person has no business trading. Invest your money, don't trade it. The market has sold off the past week and many retail investors were caught chasing stocks after the market ran up. This thing will get turned around, but you've got to be willing to stick with it for more than a month.

If you've borrowed to trade or you're the nervous type, you're in trouble. Those with a time horizon longer than a month will find plenty of opportunities. What's going on now looks a lot like what went on in late June/early July.

Funny thing is, many professionals who have been waiting to get back in, still won't get back in, then after we start to move up again will still be standing around waiting for some great pull back. Those people waiting for the kind of pull back we had in Feb and early March, keep waiting. When this market is down 5% from its high, I buy more. Why, because 5-7% seems to be the limit. I'm thinking about 1040 on the S&P and I start buying more of the same - insurers, materials, industrials, and select banks.

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Saturday, October 24, 2009

Moving Right Along

'Buy the rumor, sell the news' seems to be in action. We've had a lot of good news lately and stocks seem to sell off. We were due for another 3-5% sell off and they seem to come toward the end of the month. Nevertheless, we think this gets turned around by late next week.

We like the usual suspects we talked about here and believe November/December will be very good months. One stock of note is GE. The pull back has created a very nice opportunity there.

For those that don't think the economic rebound is real, look at companies like Apple (AAPL), Microsoft (MSFT), and Amazon (AMZN). They had great quarters and talked about good things going forward. If things were so bad, these a fore mentioned companies would not be at or near 52 week highs.

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Monday, October 19, 2009

Back To Business

The next 2 weeks should be interesting. Now that most of the big banks are out of the way with earnings, except Wells. After seeing the BofA number, I'm not sure how Wells comes in with a good number. I just keep thinking about Wachovia. They probably won't add much to loss reserves, so things may not look too bad, but you can't play that game forever.

We believe the numbers from many well known companies over the next couple of weeks will come in better than expected and I think this fuels the rally. We still believe the story unfolds with a big rally into the end of the year, as many people are still waking up to the reality that the world didn't end.

The dips are shallow and the moves up are long. These people who keep calling for the market to revisit the March lows may eventually be right - in March 2012 (I heard that's when the world is suppose to end).

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Thursday, October 15, 2009

I Don't See Citi Losing Almost $4.5 bil This Quarter

About 4 or 5 hours until Citi (C) reports Q3 numbers and the most up-to-date analyst estimates call for a loss of $4.3 bil. No way. Last week it was a loss of about $2.5 bil. Analyst don't know a lot. Maybe that 4.5 loss number was a misprint. Either way, they have it wrong, as usual. From where I'm sitting, C is being set up to win.

If they come through like I believe they will, the stock could finally start to make it's push towards $10. With interest rates on the floor, bank fees sky high, trading back in vogue, deals starting to come back, and banks still playing the waiting game with housing (refusing to write down those assets to where they should be), banks are set to do quite well.

Disclosure: long C

pG2

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Wednesday, October 14, 2009

Same Story With The Insurers

We still like the big insurers like Hartford (HIG), Aflac (AFL), and Genworth (GNW). These names have been on fire the past few months. First they were priced for destruction and now buyers can't get enough of them. For the record PaperGains readers have been on to this for a while and nothing has change, except things have gotten a lot better.

Here's something to think about. HIG had factored in, what now appears to be a low return for the S&P this year with the S&P reaching low 900s. Well we've blown past that already. This means their formerly poor performing assets are performing quite well which will boost book value by a lot and take much of the risk out of the stock. Think of it this way, it's the exact opposite of what happened a year ago when asset prices were falling and business had dropped off.

The other large insurers have a similar story. Their portfolios are performing nicely and this should create a bonanza this earnings go round. Also, many probably haven't noticed, but analyst have been quietly raising estimates. After they report great numbers, they'll say it's phony, as it's directly related to marking up assets. So! On the way down they didn't say it was phony when the primary issue was marking down assets.

As far as that analyst who downgraded some of the insurers and said while they'll probably have a good quarter he didn't like them. Just another example of why you should pay them almost no attention. Smart people know nonsense when they hear it.

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Tuesday, October 13, 2009

Novartis And Vanda Doing Business

Looks like Vanda (VNDA) wasn't able to sell, I say that because I'm guessing they really wanted to sell outright. They sold North American rights to their psych to Novartis for at least $200 mil. I say at least because details are still fuzzy. I was hoping for a straight acquisition, as I believe the little company may be in over it's head and would have been better off selling.

Vanda is about a $300 million market cap company and I can only assume a garage full of employees, but if the price wasn't right, then the price wasn't right. So much for that, I'd be a seller in here.

On to the next thing.

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Thursday, October 8, 2009

So Commodities Are Back In Vogue

What a surprise. I guess people realized the world wasn't about to stop spinning! Alcoa (AA) is back from the brink, as are a number of other commodity stocks. Now the upgrades will follow, but where were the upgrades when these stocks were a real bargain?

I am neither surprised nor concerned at the recent movement in commodity stock prices. The only stock that does open my eyes a little is Freeport (FCX). Wow! Look at it go. To think, it was sitting at 12 bucks earlier in the year.

Cliffs (CLF), Arch (ACI) and Steel (X) have yet to lift off, but I think they will.

pG2

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Saturday, October 3, 2009

2011 Model Portfolio Update



Here's an update on the portfolio. Up about 90% from inception in March versus 27% for the S&P, so that 62% relative return you see is percentage points!! Our portfolio has tripled the return of the market.

Reminder, we did buy GE and ditched NYX and had we included GE, our return would be higher. Our returns include dividends this time.

tm

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The Vix

About This Blog

Where we rant and rave about the market and of course give our opinions on stocks we love or hate. We're not advisors and urge you to conduct your own due diligence.

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