rovo's Market Journal -- 2011

[yclept]

"Monday I bought some TMF with the thought that people would begin moving into bonds this month. So far my theory has worked. This will be a short term trade."

I've had the opposite (less leveraged) play going for quite awhile via TBT. Up to now I've just been patient, saying to myself that interest rates have to rise and thus bonds fall. I know Bernanke keeps pushing the time frame out in an attempt to bolster confidence and sentiment, but I don't think he can hold that line much longer. The price of oil is wending its way through the entire economy, increasing the cost of anything that has to be transported -- inflation is higher than reported and is accelerating. The Fed is going to have to move sooner than Bernanke is suggesting. He has said they are beginning to unwind Quantitive Easing, which will have the effect of raising interest rates without having to announce a higher overnight rate. I expected the bond market to react to that before now, but safe-haven concerns due to world political turmoil has, I think, offset the effect. So that's been my thought process up to now.
But your post above has made me throw another factor into the equation. If the market is topping out and folks (like me) are largely "going away in May", where will that money go? Mine so far is staying in cash with the plan to go short when the other shoe drops, but I think a lot of small investors automatically use bond instruments (for example in 401-type programs, there is often a choice between "fixed income" and "stock" -- the fixed income is bonds. Programs like that seldom have the logical anti-stock choice, which would be "short stocks".
TBT just continually stair-steps its way lower, day by day. With each step I think to myself it ought to level off and base, but as proof that the market gods hate me, it doesn't. So maybe I have to take a few more hits as your short-term play works out and the go-away-in-May money boosts bonds for awhile. I'd like to think that my strategy coincides with the "big boys" and that they are supplying the bonds that the "small" and "foreign-safe-haven" investors are buying -- that's what I'd like to think!
I never know if a situation like TBT is a test of my ability to keep to a longer-term conviction or of my stubbornness/stupidity! Reckon we'll see; damn near sold it this morning.

[livinincali]

My opinion is that when and if we correction the only rising asset will be cash. Effectively everybody hates cash because of Ben's printing and the massive inflation it's going to cause. When that massive inflation doesn't show up the leverage will come out of the system and everything will decline together. The only other course would be massive inflation so great that you'd be losing anyways. Germany's stock market looked good in the initial stages of inflation but once hyper inflation hit business went south and the stock market crashed.

There's just so much debt built into the system that effectively stored wealth has to crash. The next generation just can't take on enough debt to support the wealth in the system. 80-90% of the wealth in this country is somebody's debt because of fractional reserve lending. Just think about the balance sheet at the global level. Stock market is worth what 10 trillion. Housing market is worth another 20 trillion. But there's 50 trillion of debt out there as well. It's a negative global balance sheet.

[rovo]

Hillenbrand, HI, reported the quarterly results last night and beat the projections by a tad. Expected $0.51 per share and reported $0.54 adjusted per share. I believe they lower expectations for the year from $1.80 to $1.78.

Looking at a down market today so I don't know which way HI will move. Results were fine but the market is in the pits. I'm trying to reduce my holdings in HI by 2/3 but they actually look quite safe compared to many other positions.

[livinincali]

Technically HI still looks ok although today's price action is certainly a possible topping formation. Looks like 22.25 is the first significant support followed by 22.00. I'd start getting nervous about holding on to HI if it falls below the 22.00 level and stays there. There's just not a a lot of solid support levels below that until the recent lows around 18.50-19. There's a 200 day moving average at 21 but not much else in that area.

[yclept]

www.wired.com/autopia/2011/05/ford-google-prediction-api/

Ford and Google collaboration. While I can see potential for efficiency, this stuff all smacks a bit too much of Big Brother for me to be comfortable with it. I'd rather have a car performing more along the lines of Stanley, perhaps doing all of the driving, but I'm not at all sure it needs to remember everywhere it's ever been. Information is power:

"Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."
John Emerich Edward Dalberg Acton, first Baron Acton (1834–1902)

[rovo]

I just picked up 1K shares of ZSL, utra-short silver at $21.61 for a short term trade. I should have gotten in at a lower price but I wasn't paying attention and the price of silver rose very quickly and then reversed just as quickly. I expect to be out of this trade today and I'll just take what I can get out of the play.

[rovo]

Sell order placed on ZSL trade at $23.22. I'll have to see where it goes and change the sell order accordingly. I just checked my paper journal and this is my first trade since April 27th.

[yclept]

I've had a limit buy on ZSL for over a week at (don't laugh) $14.50. If it wants to come to me there, I'll take it, but I'm not willing to chase it right now while it's behaving like a Mexican jumping bean. If it establishes a trend, I may buy some later (obviously at a higher price), but I'll need to be convinced that all of those shiny metal folks are completely demoralized and running for the doors. I still view "precious metals" as nearly worthless with no fundamental analysis possible.
I did see some news program (BBC?) the other day that this is some kind of Hindu holiday period where everyone buys gold -- might cause upward pressure on gold near term (don't know about silver). There are a lot of Indians, and they are crazy about gold. I've seen pictures of women standing in UNICEF/other-charity food lines with emaciated children and yet wearing their gold earrings and pierced nose jewelry -- pure insanity! Reckon when the price of gold gets too high they have to cut back on less essential things like feeding their kids!
I did buy some COW yesterday. A nice fat cow, or pig, or chicken, now there's something one can sink one's teeth into! If one wants to add some vegetables and grain, DBA looks like it might be at a mid-term bottom too, but it hasn't been nearly as pounded as COW. Must have been a tough old cow to have needed that much tenderizing.

[rovo]

It looks to me like I'm going to get burned on ZSL. I'm looking for an exit point.

[yclept]

Tough ol' Rovo, tenderizing his head:

[rovo]

May 12, 2011 13:17:30 GMT -5 @yclept said:

Tough ol' Rovo, tenderizing his head:

OK. Silver has my permission to reverse course and head back down. ;D The 5 minute chart looks like it has peaked but we all know how deceiving the charts can be at times. I've wasted an entire day trying to make some money on ZSL and yet I'm in the hole $1,440 on this trade. Drat.

[rovo]

I'm still holding the ZSL trade in silver but it isn't going very good for me. Currently I'm down about $1,880 on this play. I'll give it a few more hours and see what happens.

The port is being hit today with only two positions in the green for today. These are BRCM and TSTC.

[livinincali]

SLV looks like a bubble that has popped but it doesn't mean we won't get some wild swings. The absolutely best days the stock market has ever experienced were in the midst of a crash. I think you'll be alright holding ZSL for a period but I'd stay with a small position. If you're wiling to take the huge risk, huge reward trade I would think about buying puts on SLV

[rovo]

cali, Thanks for the info. This is just a very short term play for me in silver and I do not wish to hold it for very long. Bought 1K shares of ZSL at 21.61 and currently have the sell order at $22.03. Current price is 20.99 so my loss is being eliminated very rapidly. The sell price is not hard and fast, subject to price revision.

[rovo]

I'm out of TSTC as of the opening bell.

Bought 2K TSTC on 31 March for $6.67 Total = $13,340.00
Sold 2K TSTC on 16 May for $7.49 Total = $14,969.72 Gain of 12.2%

[yclept]

As golfers would say, "good out"; not that I think TSTC is necessarily a sand trap! It's seeing unusual trading range today; I've no idea what that means or what might be causing it or whether it is good or bad.

The Chinese tell the story of an old man who owned a bony plow horse. One spring afternoon the horse ran away. The old man's friends, trying to console him, said, "We're so sorry about your horse, old man. What a misfortune you've had." But the old man said, "Bad news, good news-who knows?"

A few days later the horse returned home leading a herd of wild horses. Again the friends came running. Filled with jubilation, they cried, "How wonderful!" But the old man whispered, "Good news, bad news-who knows?"

Then the next day, when the farmer's son was trying to ride one of the new horses, the young man was thrown to the ground and broke both legs. The friends gasped. The old man stood still and said, "Bad news, good news-who knows?"

And a short time later when the village went to war and all the young men were drafted to fight, the farmer's son was excused because of two broken legs. Good news. Bad news. Who knows

[rovo]

My position in ultra-short silver (-2), ZSL, has swung into the green this morning. This is a short term trade and I may exit the position today.

TSTC made quite a move to the upside yesterday and appears to be continuing today. I saw the price going up just prior to yesterday's opening bell and tried to change my sell price but I missed by a few seconds and the order filled at the open. I should have just hit the cancel button but instead tried to change the sell price. Confusion in the heat of battle.

[yclept]

I'm still hoping to buy ZSL down around 14-1/2; not for any fundamental reason, but I'm unwilling to buy it for more. I don't think there are any fundamental analyses applicable to precious metals; they are all a contest pitting fear on one side against the next-bigger-fool on the other.
Good move selling the TSTC (my opinion, this is one of those stocks for those who are fleet-of-foot). Though this one has good fundamental values (one can never be sure with Chinese accounting, or for that matter with US accounting!), it's so small one has to treat it like a hot-potato. Here, we're fighting the fact that there are only 12M shares outstanding and only 9M of float. Multiply that by a $7-$8 share price, and you're still talking a market cap of ~90M, or to put it another way, you could get 60% of a Raptor, or all of a Typhoon, or two Russian fighters with change to spare, or 3 Chinese fighters. I guess that puts several things into kind of a bizarre perspective!

F-22 Raptor stealth fighter jet costs $150 million
Sukhoi Su-30MKI costs $35.74 million
Eurofighter Typhoon costs €90 Million
Chengdu J-10 costs $27.84 million

[rovo]

I agree with yclept on the metals and lack of fundamentals. I guess the driver is pure emotion on these puppies. Historically I have played the metals a few times but never made any money on them. Hopefully this time will be different. I put a day order in for the sale of ZSL at $24 against the current $22.04. I don't expect a fill on this but I'm going off-line and would be pleased to get $24.

[yclept]

Whoops, the Eurofighter is in Euros, so you can't get the whole plane for the market cap of TSTC.

[rovo]

I picked up 200 Contracts today on Ford options. Specifically Ford Sept 17, 2011 $20 Call at $0.06 per share. Total cost $1,359.99.

I'm expecting Ford to break out to the upside at around the end of this month. I don't expect to see Ford at $20 per share but the option rises in value along with the stock. Now I have to watch the option price vs. the stock price to see what the d$ Option/ d$ Share is.

[rovo]

Bullish comment? Things seem to be slowing down in the economy and I'm not really bullish. Hopeful, yes, bullish no. Food and energy inflation is real and the food part will probably get worse due to the floods throughout the mid-continent area. Also I see little being done to improve our future prospects. I see lots of band aids being applied and efforts being made to improve the economy but the causes are not being addressed. As such we should be ready for ups and downs in both the economy and the markets. I also expect we will begin to slide back into a technical recession around the end of the year. Flat or negative GDP in Q4 or Q1 of next year.

[yclept]

Rovo,
If memory serves, you have some AAPL. This can't be good news for them: online.wsj.com/article/SB10001424052748704816604576335262591187804.html?ru=yahoo&mod=yahoo_hs

[rovo]

Excerpted from the article:

SHANGHAI—A large explosion ripped through a Foxconn high-tech plant in southwestern China Friday night, killing at least two people and suspending production at the facility.

The Chengdu Municipal government said the explosion occurred in Foxconn's "polishing plant" at around 7 p.m. Experts say it is likely a cleaning stage at the end of the production process after devices are assembled.

Shaw Wu, an analyst with financial service firm Sterne Agee, said he wasn't too concerned because Foxconn has dozens of production lines for the iPad spread across different buildings and sites. "It seems like it should be easy to maneuver around," he said. Shares of Apple were only slightly down from Thursday's closing price of $340.53.

Wall Street currently expects Apple to sell about 32 million iPads in the current year, more than double a year ago.


It will be interesting to see if AAPL dips on the news and it could provide a great entry point for anyone trying to establish a position in Apple.

[ModE98]

Looks like the shorts may do well today....
World markets were sharply lower Monday amid signs of U.S. economic sluggishness and escalating worries about Europe's debt crisis after Italy and Greece were slapped with credit downgrades.

[rovo]

ModE, Yes, the market does look shaky today. Everything seems to be about to open much lower than Friday's close. We also get the second estimate of Q1's GDP on Thursday which may well be a downward revision. It appears we are in for a very erratic week in the markets.

[IPAfan]

ENH is just getting hammered with natural disasters one after another. The year will almost certainly have a negative impact on book value per share. The question is whether the company is a good investment at this price even with this year's negative performance baked in.

I could try to sell out and buy cheaper. I've messed this up on numerous occasions so I'm going to stick with my long term plan and hold the shares. If I can develop enough liquidity where I feel comfortable adding more to my stock position I will probably buy more.

ENH announced something very interesting today which I believe shows how management is working to preserve shareholder value, and create the potential for some great investment returns here if the business performs well going forward (after this bad year.)

ENH just priced $230 million of 7.75% preferred stock. This comes on the tails of buying back 30% of the outstanding common shares in the past 2 years. The bad insurance market makes it necessary for ENH to raise some capital. I think management is being shareholder friendly to sell preferred stock.

This can keep the insurance company with strong equity ratios and give the common a lot more leverage.

[rovo]

The charts of the indexes, QQQ, SPY, DIA all look pretty much the same. It appears we have bottomed and are in the very early stages of an uptrend. There are so many things happening in this world that could cause the reversal to abort and so I'm not saying it will happen, it just looks like the odds favor the uptrend at this time.

I looked at Beer's ENH and that is one scary looking chart. It reminds me of the old WW2 submarine movies ..... Dive, Dive, Dive. Disaster after disaster plays havoc on an insurance company stock.

Most of my holdings have been hit harder than the indexes so I know how Beerfan feels.

[rovo]

Broadcom, BRCM, took off yesterday to the plus side and is continuing this morning. I have a small holding, 1,000 shares, in BRCM at a price of $35.71 which was purchased on 27 April as a short term trade. In premarket activity it is trading at about $35.55.

BRCM plunged after the last earnings report. They report earnings of $0.68 vs. expected $0.59. The problem occurred when they stated the outlook for the remainder of the year was not very clear.

Broadcom is a specialized semiconductor firm. Company description as follows, copied from TD Ameritrade:

Broadcom Corporation (Broadcom) is a provider of semiconductor for wired and wireless communications. Broadcom products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. The Company provides a range of system-on-a-chip (SoC), and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. Its product portfolio includes broadband communications, mobile and wireless, and infrastructure and networking. In November 2010, the Company completed the acquisition of Percello Ltd. (Percello). In November 2010, the Company completed the acquisition of Beceem Communications, Inc. (Beceem). In December 2010, the Company completed the acquisition of Gigle Networks Inc. (Gigle), a company that develops SoC solutions for home networking over power lines. In April 2011, the Company acquired Provigent Inc.

[rovo]

Some interesting movement in SOXL, Ultra-Semiconductors ETF, as it has bounced of the lower Bollinger Band. Currently at $53.60, recent low of $49.20, and most likely will rise to about $62 in the next 7 to 10 trading sessions.

I have a small position, 1,000 shares, in SOXL and will probably add to it this morning.