The Skinny Report

Yuck...

2007-11-12T18:13:00.001-08:00

My positions did/are doing rather poorly recently (but so are everyone elses), I made a small profit before getting stopped out on PRFT. UXG has been rather poor although I continue to hold (without my normal stop-loss, which admittedly could be a disaster waiting to happen). This is a longer-term idea really and I need to play it as such. The money story (inflation) isn't changing and junior miners are going to reap the rewards. And my FTK position was doing quite well up over 10% in little over a week before it got dropped on their earnings miss. I ended with a loss because my trailing stop got jumped when the stock dropped 18% on the earnings news in the premarket. In case you haven't seen it, please watch Ron Paul lambasting Bernanke on the government's monetary policy.

Buffett, Taxes and this crazy country of ours...

2007-10-30T17:06:00.000-07:00

I happened to have on CNBC this morning as I was getting ready for work and I noticed Warren Buffett was on so I sat down to watch. The short piece was a discussion of Warren's thoughts on taxes. Warren discussed that in the prior year he had paid approximately 17% income tax. The 14 people polled in his office all had higher tax rates. Everyone of them and the average was in the mid 30%'s. One of the richest men in the world pays less relative tax than his damn secretary does. If you are a middle income American and that doesn't piss you off, you need to get your head checked out. People can blab all they want about how increasing taxes on the rich is not in the best interest of the nation because of the economy and jobs and blah blah blah, but he's not even paying the same relative amount. Where oh where is Steve Forbes and his flat tax when you need him. Lets be honest, that is ridiculous no matter how you slice it. But let me argue for my point a bit more...

I believe by my nature in utilitarianism (greatest good for the greatest number) just because I think this world is a mess and I am an idealist. The common arguments against utilitarianism are that it is costly to transfer wealth from the rich to the poor. The extra cost argument is generally two-fold. First, there is the administrative cost of collecting the tax and distributing it through programs and whatever so that it gets to the poor that need it. The other cost is the economic cost. The economic cost includes the productive efficiency of the rich (i.e if they are keeping less of their income due to taxes, they will not work as hard) as well as the job cost (i.e. if the rich aren't making as much money, they will higher fewer, generally poor, workers). The 'big trade off' here is between efficiency and fairness. Agreed? Good. Let's proceed...

So if we say we have 3 main variables to consider efficiency, fairness (duty to the poor in this case) and economic health. Now anyone who knows a lick about finance should remember the Efficient Frontier? The one that maximizes (the definition of efficiency) the risk/reward ratio for investments. Well I would stand to argue that their should then be an 'Efficient Frontier' that balances the economic and 'fairness' variables we discussed. Specifically, there is a point where the greatest good can be served without moving away from the 'Efficient Frontier'. I know the issue then becomes putting numbers on all of this but there are smart people out their with very complex computers that can run simulations of changes in GDP vs. changes in the tax structure (to promote fairness). It can be done.

New positions...

2007-10-26T06:51:00.000-07:00

Opened two positions today. One in UXG (sizable) and one in FTK just as a short-term trade. We'll see how they do.

"I believe in a strong dollar"

2007-10-24T16:03:00.000-07:00

O'Henry! Hank, the tank? Henry Paulson is full of it and he knows it. His policy is anything but a strong dollar policy. When you a forced to not just cut but cut beyond expectations, as he will be asked come next week, you are not endorsing a stronger dollar. You are damning the dollar to hell. Fed fund futures, although not perfect, do serve as a proxy for the feds actions next week; and they are indicating a 100% chance of a 25 basis point cut. Which means that the street is going to sell off if it gets only that. Watch. They know they own the fed. With the ex-Goldman hero/villain Paulsen, the street is sure to get what it needs. Do you think for one second that he is going to let his partners and friends at Goldman lose their jobs under his watch? Not a chance in hell. In my opinion (and I am guessing) the fed acts "proactively" and cuts another 50 basis points next week. Which begs the question...if things "aren't that bad" (as the fed likes to so rigorously contend) why 100 basis points in little over a month? I'm hoping to get a piece of a few names...UXG, GG, GFI, CVX prior to the meeting, but UXG and maybe CVX are the only likely ones.

There was an interesting article on Sears Holding (SHLD) in this weekend's Barrons. It discussed Lampert's one time street darling, Sears, recent issues...and its potential. As some of you know I'm a big believer in "betting the jockey not the horse". Lampert is as smart as they get, and if he's down, it won't be for long. The street marks Sears as a retailer. It is a conglomerate or one in the making. Anyone who has done their homework on Lampert knows he has grandiose plans for SHLD and they don't end with buying Sears. This is a great long-term price for SHLD.

I opened a position in PRFT today for a trade. The technicals were improving and I got it at a discount to yesterday's nice rally. I'm also looking at VIVO for a possible trade in the next few days. We'll see...time reveals all.

Updates...

2007-10-21T21:25:00.000-07:00

An interesting end to an interesting week, with the Dow tanking 366 points on Friday. With a handful of earnings disappointments, another series of freakouts related to the sub-prime fallout, this time relating to SIV's, and news this weekend that the G-7 again failed to accomplish anything, the risks remain and the market's weakness is likely to continue in the next week up to the fed meeting. I expect Wall Street to encourage the Fed (read 'more bad news') to cut again and maybe even cut with 'high impact' (50 basis points). The banks need to paint a bleak picture in order to appropriately fuel future growth through liquidity. And as Barry says, the fed has already shown that the are "Wall Street's bitch". Again, at the end of the day, more money will fuel higher asset prices. Barron's noted recently that the ridiculous growth of derivatives and leverage are only serving to multiply the risks. Its a bit of a house of cards, but no one is quite sure how it might fall. The author of the piece Alan Abelson noted that the fed's, "actions were strategically flawed in failing to address the 'moral-hazard dilemma that continues to underpin asset-dependent economies.'" Basically they are reinforcing the problem and not working to alleviate it.

Last week the ratio of gas prices to crude prices fell to close to a six year low. Assuming that oil maintains some strength here which in my opinion is likely given geopolitical risks and continued supply worries, gas prices should rally here. As you may know I continue to favor commodities. I currently have no open positions, I'm hoping some gold, silver, oil or gas stocks sell off with the general market prior to the Fed's upcoming meeting. One stock that I like is already been selling off on some recent drilling results. UXG is still technically weak and I'll look for some improvements before entering.

The fed's bailout

2007-10-18T11:35:00.001-07:00

I had mentioned at the original 50 basis point cut in September how I believe it was a bailout. Barry Ritholz had a reference to a nice article about how the Fed was acting to save Wall Street's head honchos. In Barry's word's the fed is "Wall Street's bitch".

http://www.slate.com/id/2175724/

No inflation huh? Right.

2007-10-12T06:09:00.000-07:00

http://bigpicture.typepad.com/comments/2007/10/the-incredible-.html#

Outtie...

2007-10-02T16:09:00.000-07:00

Well I closed out of my SLW and GFI positions both for 20% gains. I think gold could stick here but there is a downward bias short-term. Tomorrow I will close my BC and CSX trades as they have both contributed a 5 or 6 percentage points and will likely undergo some weakness in the short term. I'm currently changing brokerages from Tradestation, which I love, to Scottrade. The Tradestation platform is wonderful (I will come back) just way to expensive relative to the size of my account. I'm waiting for the metals and maybe oil to sell-off before reloading for the next leg up. I'm also hoping that the homebuilders continue their nonsensical rally so I can get short. That's easy money folks...home inventory is high, sales are low, builders can't sell, won't make profits and the stocks will tank. Bring on the rally!

Interesting Reads...

2007-10-01T12:16:00.000-07:00

Barry Ritholz who I read daily had links to some other well reknowned financial bloggers so I have some new regular reading material. Couple interesting articles I found today...

Article on Corporate Governance at Countrywide. It certainly leads one to believe that this debacle is probably not over.

http://tinyurl.com/35s7j3

Article on the Fed's next move...

http://tinyurl.com/2lwesw

Article arguing Barry Ritholz's critique of the Fed's inflation measures. I actually think that both Brad and Barry are saying the same thing really. Inflation exists but the Fed must figure out a way to downplay it some so as to lead the public to believe that continued rate cutting is acceptable in the face of any inflationary concerns. You can't say we are going to cut rates because inflation is not existent if you don't have data to support it so they say there is weak core-inflation, cut rates and everyone is happy. Except Barry maybe :), although I'm sure his commodity trades he has recommended are doing quite nice so I doubt he's that unhappy.

http://tinyurl.com/2qdqak

My current thoughts on the fed...
I think the fed will cut again at the end of this month. I'm hoping gold can keep support at or near the current levels. I'd hate to get stopped out of my positions in GFI and SLW knowing the fed is going to cut and that the rally in gold is going to continue (a Barron's article this weekend said gold would likely trade to $1,000 in short order). But after 25%+ gains in each, I need to protect the gains. In a perfect world, I would get stopped out w/ my gains and would find a re-entry point on some short-term weakness prior to the fed meeting and get back in prior to the next leg up to $800? $850, $1,000!? But who knows. It's a guessing game so I just play by my own rules. If I have a solid plan and solid buy/sell rules I'll do fine. Long SLW, GFI, BC, CSX.

"This is just hideous"

2007-09-27T08:59:00.000-07:00

New home sales data is out...and apparently the news is "hideous"...are we at all surprised? Nope. It's just supply and demand economics, not brain surgery.

http://tinyurl.com/2n3ddb

Very interesting stuff..

2007-09-20T15:11:00.000-07:00

There is some incredible stuff potentially going on in the market right now. However unlikely (the U.S. administration simply can't allow this to happen), the fed's policy of air-mailing liquidity may finally be biting them is the butt. Amidst an already historically low dollar, some nations are considering releasing their currency pegs to the dollar. The thinking is: why should we (the other nation) inherit America's economic issues? If this happens, it could trigger a world-wide dollar dump (a domino type effect). If this is the case, and this is probably a big if, you will see massive inflation, a complete collapse in housing and likely a depression. Not recession...depression. Here. Crazy stuff. I gotta say, I get more intrigued by the market everyday. Check out the article at the below link.

http://tinyurl.com/yp7q5u

New Position - BC

2007-09-18T12:55:00.000-07:00

Today I added a small position in BC. It will likely just be a short-term (one to two months) trade as I think the economic risks remain high and a recession is more likely than most economists are forecasting, although not a definite. And in a recession the market for boats and other luxury type goods disappears. BC has quality management but has been battered for a while now and the price is attractive both from a long-term and short-term perspective, but with the economic risk, I'll play it as a short-term trade.

In other news, I wasn't at all surprised by the Fed today. This is pretty much the nail in the coffin for the dollar. It may get a brief rally but I don't expect it to spend much time north of 80 in the in the intermediate term. Gold prices are easily going to take out the previous cycle highs around $730. The recent Fed action shows they want to talk down inflation, not actually do anything about it (they like to throw a nice scare into the commodity markets). They reason that all the economy's issues just require more dollars (through injections or lower borrowing rates). Well folks that is inflation, regardless of what the screwy PPI numbers say. That coupled with news today that Spain, the world's largest seller of gold this year, will not be selling more gold puts the downside risk to gold (and other precious metals) at a minimum.

My current holdings include: SLW, GFI, CSX, and BC.

The Fed = "Wall Street's Bitch"

2007-09-18T12:50:00.000-07:00

Great comment from Barry Ritholz today. Couldn't be more true. Bailout city.

http://tinyurl.com/2eg9ot

Great Article...

2007-09-09T20:55:00.000-07:00

I read a great article on Minyanville tonight...it pretty much says what I think a lot clearer and more eloquently than I can say it:

http://tinyurl.com/2ffqe6

New position - CSX

2007-09-06T08:26:00.001-07:00

I just added a position in CSX, a railroad company. As you may know this is an industry Warren Buffett added to his portfolio in April. In April he disclosed he added BNI to his portfolio. He added them at around $81.50/share which is just about where prices sit now roughly six months later. I'm not as long term oriented as Warren but I expect CSX to move to $100 in the next 2 to 3 months. As everyone knows Warren is the best at picking sound companies and holding them. So we can assume that the company's (on average) will maintain a long-term uptrend. What I've noticed is many of his investments also display very deliberate and very visible intermediate and shorter term movements. Check out the very smooth undulations in the 1 year chart for BNI, these moves provide the opportunity to make extra money within the long-term move. That is in essence what I try to accomplish, try and take smaller pieces, with less run-downs within a long-term uptrend.

The see-saw continues...

2007-09-06T06:24:00.000-07:00

It's hard for anyone to say with certainty where this market is headed, however in the absence of time-earned wisdom, I'll make a stab at it. All I have heard recently is how the fed's action a couple weeks ago, cutting the discount rate wasn't so much a bailout but was the fed stepping in to save the operability of the banking system. That's fine, call it what you wish, but it still served as a bailout. All the market pundits on CNBC tell us that the Fed's sole mission is to ensure the stability of the nation's banking system. Well that statement is about to be put to a bit of a test in my opinion.

Market valuations and earnings indicate that the economy is on solid ground, and in little need of a rate reduction to fuel earnings. The other piece of the puzzle and the one that people still do not want to talk about is the average mortgage consumer in this country over the last 7 years. A large chunk of them will not be able to afford their mortgages when their rates adjust out. This isn't a newsflash, but what may be is the fact that these ARM's are adjusting out at a much greater rate over the next nine to twelve months. The issues that exacerbated the credit crunch are only going to get worse. The Fed's mission may now include ensuring the stability of the banking system by ensuring the stability of the housing market. A series of rate cuts could provide the cushion the housing market needs to stabilize. The stock market probably doesn't need, nor deserve a rate cut, but housing certainly does.

So my guess is that the Fed cuts in September and each of the meetings after that until the end of the year, because the housing system is now irrevocably intertwined with the banking system which the Fed is charged with ensuring the stability of. So now the loan that Joe Smith got from some deadbeat loan shark, which he used to buy his $400k house on his $50k salary has a direct effect on the entire economy. But what do I know I'm just a kid.

The market will continue to see-saw sometimes violently in the absence of some clear indication by the fed on what they intend to do with rates.

So where does a possible rate cut leave us? Back in the Greenspan liquidity snowball, of course. Excess liquidity drives inflation. Commodity prices will rally because the dollar will have been weakened by the Fed's series of "economic stimulus". I think gold, silver and oil will be very strong and if the excess supply issues in natural gas can be resolved, I think the gains in natural gas could be very dramatic. There are very strong long-term and international growth prospects, but the credit issue and liquidity issues are just being pushed to a later date. The government these days likes throwing more money at the problem.

I currently own significant positions in SLW and GFI.

Ouch.

2007-08-15T16:34:00.000-07:00

Some of my favorite names are getting pounded, and I love to see that because that means I'm not far from making money. PTR, KRY, UXG, GFI, SLW, SHLD are all getting hammered. Stay tuned.

The Fed's Pickle...

2007-08-14T19:29:00.000-07:00

The fed is in a major pickle of their own doing in my opinion. That probably isn't a newsflash. But I do want to take issue with what a lot of the members of the street and financial media are saying regarding the fed and the newly beloved Bernanke. The street has been singing the fed and central bankers around the world's praises since last weeks record cash injection. Why? Because it's just what the street ordered. They make the calls here. All the fed did was push back the inevitable. They are stuck between a rock and a hard place. Everyone knows the housing market is a mess, regardless of what the NAR tells everyone ("it's a buyer's market"). The fed knows if the raise or leave rates where they are to counteract inflation, the financial companies will lead (as they always do) the country into recession regardless of the fundamentals of the stock market. Without new liquidity coming online in the form of lower rates or fed capital injections, earnings will suffer, stocks will decline. Millions will lose their houses because irresponsible bankers put them in homes they could never afford over the long term. The flip side of the coin is that the fed lowers rates, helps the housing market land (albeit not softly) and keep the economy pressing on. That would be accomplished at the cost of higher inflation (i.e. oil and the like). If the fed lowers I expect to see $80 oil and $750 gold in short order. Friday's action by the fed and the world's central bankers appeared to me as more of an act of desperation than an instrument of policy. In the premarket it looked as if another 'Black Monday' was coming with the Dow Futures down nearly 200 points in premarket action. So the Fed did all they could outside of an emergency rate cut.

A cut is coming its just a matter of when. I'm not sure I buy the street's 100% anticipation of a cut at the September meeting. All these theatrics and the crazies ( like Jimbo Cramer: you gotta see this video if you haven't already --> http://www.youtube.com/watch?v=SWksEJQEYVU ) on CNBC sound like a bunch of beggars asking the garbage men to come clean up the trash they made their beds in. Goldman and the other Financials deserve to take a bath for putting themselves in the position they did. They reaped the rewards, now it's time to pay the piper. And I have no sympathy for Jimbo's buddies on the street who are losing their jobs. They are responsible for putting hard working American's out on the street because they wanted to make a quick buck selling Joe Smith a $400k loan knowing he can only afford $250k. Enjoy the unemployment line.

The Fed seems to want to continue to drive liquidity into the markets however it can to stave off a recession. Oh where, oh where is the M3 when you need it...that's right they conveniently got rid of that. Well a look at http://www.shadowstats.com/cgi-bin/sgs/data shows the reconstructed M3 running at 13% annualized prior to the central bank injection last week.

So what does this mean to my trading?? Well I continue to favor commodities, oil and gold...especially at these recently depressed prices. Any rate cut will really spark a serious rally. I'm waiting for entry points in GFI and PTR which should come as soon as the Dollar resumes its long term down trend, which should come sometime in the next week or so.

10 Things I Think I Think

2007-06-03T17:11:00.000-07:00

The government’s decision to stop publishing the M3 data serves to hide the overall market truth - this market is flooded with liquidity, inflating asset prices across the board. A website, www.shadowstats.com, has reconstructed the original M3 to a five-nines (.99999) correlation. That current construction shows the M3 running at annualized rate of 12.8%. More money equals inflation. This excessive printing by the government to fund the war and keep the housing market from crashing, is exacerbated further by the other liquidity issues in the market (high leverage, consumer credit, etc). All this money serves to drive asset prices higher, but at an increasingly growing risk.
Which leads to the next point…The governments production (and I use that term due to the theatrical sense of today's market) of its inflationary data is a joke. The release keys of "core" inflation which is essentially inflation without the inflationary inputs. They remove the items they consider are non-"core" which are food and energy, which are part of the core expenses everyone needs to live. That makes no sense, hence the use of the word production. A recent WSJ article surmised that U.S Prices have been growing between 8 and 11% annually since 1996, dramatically higher than the reported core rates between 1.5 and 4.5%. The M3 reconstruction, and the uselessness of reporting that "core" inflation remains tame supports my overall liquidity theory.
The spread between gas and oil is very interesting. Oil supplies are high, and gas production is lower due to seasonal refining capacity issues, which are very high and likely to continue to be high (i.e. lower capacity) for the summer season. Historically, according to the WSJ, these refineries run at 92-96% capacity during mid-summer, this year's projections are for the refineries to run around (or just below) 90%. Continued refining capacity issues will keep this spread high and drive stock prices of these companies higher. A recent Barron‘s article pointed out that supply last month of gasoline was at a 50-year low of just 21 days. That is extremely low and any issues slowing supply could spark not just a rise but a spike in gasoline prices. The Middle East and Nigeria issues will be the drivers in the price action most likely throughout the summer and the hurricane season (which is predicted to be highly active according to the government) will drive prices for both crude oil and gas towards summer's end. Oil should remain strong as the U.S. supply serves to barely meet demand. According to the WSJ’s recent interview with T. Boone Pickens, worldwide oil production supplies 85 million barrels a day, and demand is right at that number. Any disruptions will drive oil prices higher and as long as refining capacity remains historically weak, gas prices will go higher as well.
The China talk is absolutely dominating the media and rightfully so if some of the speculation ends up true. The Blackstone deal could be indicative of China's desire to employ their reserves more actively. Sovereign investment companies are growing in number. The Blackstone deal could amount to a toe-dipping prior to a cannonball for China. A recent WSJ article discussed that China's recently formed State Investment Company (acquirer of the Blackstone interest) could invest between $200 to $400 billion in the market. Considering that China's reserves are increasing annually at $200 billion per year indicates the funds could grow quickly. This is extremely bullish long-term for stocks.
Warren Buffett has been rather outspoken in his criticism of the U.S. Government's handling of the trade deficit (especially with regards to China). Recently he commented that, "Running a $700 billion annual trade deficit is effectively selling the U.S. to its trading partners” (China). The Blackstone deal reiterates that fact. Now China own tons of their reserves in U.S. Treasuries (U.S. Debt) and now they are indicating their intent to own U.S. Companies. Buffett is right; the government is selling the farm.
This LBO stuff is unbelievable. Though I'm young I can't recall a time there was literally billion dollar buyouts being announced on a daily basis. This is a consequence of the two double-edged swords: the seemingly endless liquidity and Sarbanes Oxley. Liquidity helps strengthen economies, but excess liquidity creates bubbles. SOX was designed to give investors comfort over management’s controls over their financial reporting, but it has done so at a monstrous cost to the companies and therefore to shareholders. The beneficiaries of SOX, the big four accounting firms are wondering what all of this means to them. A recent poll by PricewaterhouseCoopers noted that 2/3 of senior financial executives polled thought their organizations will undergo significant M&A activity in the coming five years. Supply and demand 101 teaches you, when there is fewer shares available due to buyouts (without corresponding new supply - i.e. IPO's) and more dollars (see money supply discussion above) prices have to go up. It's not rocket science, it's supply and demand. If private equity shops can get cheap loans and buy quality companies, they will continue until they determine the prices aren't reasonable.
Also on my gripe list of government statistics is…drum roll please…employment data. The monthly BLS data is, well, worthless in every sense of the word. How useful can data be if it has to be revised (drastically) two, sometimes three times, often several months later. On top of that, the BLS appears to greatly understate unemployment. And this is evidenced by? Another BLS report of course! The Business Employment Dynamics (BED) report. This, according to the WSJ, shows dramatically different data and substantially higher unemployment. Well, I wish I knew which data set was more accurate to use? Let's see, the BLS uses some curious "birth/death" model to guess job gains and losses while the BED report uses, "nearly complete coverage 'of the employment universe provided by the unemployment insurance system." I think I'll go with the latter, more realistic, more accurate report not the government's "Let's paint a pretty picture" report.
Goldman Sachs and the Fed are doing a rather nice job turning a cold shoulder to the housing market’s slow down…and its potential effects. Let’s take a look at the facts: A high number of Adjustable rate mortgages are adjusting out in the next 12-16 months (see exhibit below). The current housing inventory of 4.2 million units is running at 8.4 month supply at current sales rates. The Case-Shiller Home Price Indices show negative annual returns in the U.S. for Q1 2007. Returns were down 1.4% since Q1 2006, which is in sharp contrast to the Q1 2006 returns which were 11.5% above Q1 2005. Perhaps the most interesting statistic is that sales of existing home units have been decreasing for 3 consecutive years. The simple fact is, if foreclosures continue to grow, due to ARM’s and other exotic mortgages adjusting to today’s higher interest rates, some small regional bank or even worse a larger, national bank will falter or fail (think New Century Part 2). Funny how we find out later that the big bully on the block, Goldman Sachs, was the largest creditor to New Century. Housing isn’t stabilizing like the NAR would like you to believe. The facts scream otherwise…

The market fundamentals for gold remain very strong. Even the fed acknowledges that inflation is an issue (and they like to paint that rosy picture!). The market supply of dollars due to excessive printing of money, leaves us with more dollars to buy the same amount of gold. World currency markets are reflecting this supply/demand relationship. The Euro, in the midst of a short-term pullback, is near a historical all-time high vs. the dollar. On top of that demand for gold remains very strong. Industrial demand in China and commercial and personal demand in India are both strong. Additionally, supply of gold is weak around the globe. Gold serves as a strong inflationary hedge and therefore the Fed’s very public stance that inflation remains their chief concern, will continue to drive investors towards the inflationary safe-haven. Also, gold serves as a safe-haven for investors who are weary about the continued instability of the Middle East. The only thing keeping a cap on gold prices has been the increased level of selling by central government bankers. The question is, how much gold is in the coffers, and are they actually delivering on it or is it just a paper deal to keep gold in check?
Bringing it all together: The main issue in the market is liquidity, and an excess of it. This market has all the signs of retreat but that is in the face of a strong rally. So…what gives? I think the answer is that today is a different day in age in the markets. The government is able to sway popular opinion with voodoo reports and strong language in all forms of media (tv, newspapers, blogs etc). There are some simple facts laid out in the above 9 points: liquidity is high due to excessive printing of money, inflation does exist, oil and gas (energy in general) remain fundamentally strong, sovereign funds and private equity buyouts could continue to drive these markets forward regardless of fundamentals, the government is selling itself to its trade partners especially China, debt and fast money continue to fuel the LBO craze which is driving the markets share supply/demand relationship, unemployment is understated, housing is weak and getting weaker and gold remains fundamentally strong. And this week we find out that GDP came in at a meagre 0.6% for Q1. Production is slowing, although the business writers opine that growth will pick up in Q2. So what can we gather? The markets should be reaching a tipping point but that tipping point is continuously being pushed to a later, albeit messier, date by money printing, some fancy work with the government data, the rise of the sovereign wealth funds, and the LBO craze. The delay of a much needed correction only increases the risk associated with being involved in this rally. So when will this market reach its spill-over point? That’s anyone’s guess, but I’m not wasting time trying. I have, in the words of a recent commentary in Barron’s, “a wary acceptance of the market’s recent gains.” Currently I’m patiently waiting for gold and oil stocks to trade into an accumulation zone so that I can load up on these fundamentally strong industries.

Updates and fyi's

2006-12-26T14:24:00.000-08:00

The start of my fund is taking a long time. The programming of the software is a considerable pain in the you know what...It's moving but slower than I would like. As for the market...Iran is going to be a major, major issue for our country and the markets. Any continued political action or offensive rhetoric from the Iranians could set off what I see as an impending recession. The economy is weak, inflation does exist, housing isn't cooling, it's in a recession. Higher adjusted rates = higher mortgages = less expendable cash = weaker economy...it's not rocket science, it's common sense.

As for particular ideas...
Currently I own US Gold (UXG), Crystallex (KRY) and Silver Wheaton (SLW). All three will rally on any slow down (collapse!) of the $USD and would also benefit if the Iranian situation escalates. Other ideas I currently have include a long term play on SHLD. A company and owner I respect highly. They have had a great year so I'm waiting for a pull back, which may have already started?!? Word on the street is that SHLD could make a major play in the retail sector (possibly HD or GAP??). A recession could make these even more attractive to Lampert and his crew. This is a long term idea only and not consistent with the more short and intermediate term strategies to be employed in my fund.

To new endeavors...

2006-11-17T18:20:00.000-08:00

Well kids, I’m back. I have been very busy getting things set up for my new endeavor which I mentioned in a previous post. If you know me, this probably isn’t news. If you don’t know me it is. The last two or three months have been consumed with research and work regarding me starting my own hedge fund. I am in the process of proving out my system using historical data before organizing formally the offering memoranda. My system will be technical based and that is as much as I can give. I plan on calling the fund CL Capital Holdings. I have started a management company, Brian P Egan Management, to serve as advisor to the fund. I’ll keep you up-to-date as I see fit.

As for open positions, I currently have two, KRY (which was opened around $2.80) and SNDK (opened just two days ago at $46.50). I have a very tight (5%) trailing stop on the SNDK trade. I’m not terribly sure of that one, but I love the stock’s tendency to trend. I may guess the direction wrong but I’d bet money its not within 10% a month from now. As for KRY, you know my position on them. They get the permits and Goldcorp-Glamis will be knocking down the door with an offer somewhere between $10 and $14. KRY has a monster holding in Venezuela. To me it seems like an issue of timing, when, not if.

Not much else to report. I will discuss my plans for my fund in the future as I see fit.

Good, getting better…

2006-09-04T18:01:00.000-07:00

Well I feel I’m really getting the hang of things in this game. I’ll give a run down of my positions and rational here in a minute but I want to talk conceptually now. I’m now using strict 7.5% trailing stops on all positions (I'm currently evaluating the appropriateness of 7.5% versus other %'s). This allows my stocks to consolidate after runs some without giving up additional upside potential. I continue to focus on attractive prices (i.e. those with low RSI’s 20-30 and have shown they are more likely to go up (through the MACD and the related histogram). I’m more and more focused on trading the price and not the company.

Yesterday, I closed my position in GG for a 2% loss. Today GG agreed to buy Glamis in a deal valued at $8.6B. The price came back quite a bit today on the news and the chart from here doesn’t look good. It was just above the trailing stop, but I cut it anyways. Without a strong rally in gold itself, GG will trade back down to 24 or so at which time I will look at its attractiveness again. The new company certainly will become one of the biggest players out there.

With the closed GG position I added a position in USGL which had worked its way down to an RSI of just below 30 on a significant drop. The chart just looked to good to pass up. The combination of the low RSI, an evening out of the MACD histogram, and major support at the 200 day moving average were just too much for me. I will keep an eye on it and the price of gold as they are likely to move in concert with each other. With the GG deal today there is additional support because we now know that the majors are out shopping for all levels of metal companies. GG was willing to pay a 33% premium on the stock of Glamis. I don’t think McEwen (C.E.O. of USGL) would ever sell, but these things can lend support to the whole industry. McEwen built GG before heading to start anew at USGL. He has aspirations of building USGL into a powerhouse and he financed the overwhelming majority of the company with his own equity (potentially by divesting some of his equity in USGL). But I don’t trade company’s I trade prices, and this one appears to be a good one.

As for my current holdings, I have a nice ear to ear smile going now. Here’s the run down on them. First, you’ll recall my disgust with myself over my handling of my initial trade in SNDK http://theskinnyreport.blogspot.com/2006/07/another-lesson.html. Well, not wanting to miss a good thing, I bought it after earnings, I thought it would move towards $60 and boy was I dead on. As of this point, I am up 28.2% in a little over a month. That’s an annualized gain of 282%! But it may not stay that good. Currently the stock is running at an RSI in the high 70’s which doesn’t regularly bode well without additional fuel to the fire (positive news). Hopefully she can consolidate some and stay above my trailing stop. Otherwise I would look to sell around $64 most likely as there is some serious technical resistance there.

One of the other positions is in PEIX which I discussed at

http://theskinnyreport.blogspot.com/2006/08/little-movement.html. Well, currently I sit with a gain of 16.5% in two weeks (annualized to 395%!). PEIX ran all the way to around $21 (which if it held would have made for a 30% gain) before consolidating some. But let’s not talk about maybe’s. I think it could be posed for another run here. This stock doesn’t trade in a narrow zone for long. Check out the chart, normally two weeks is the most she has traded in a narrow zone. So a move is coming, whether that move is up or down remains to be seen but my trailing stop is going to protect my trade. It likely will depend on the price of oil (discussed below).

With the closed GG position I added a position in USGL which had worked its way down to an RSI of just below 30 on a significant drop. The chart just looked to good to pass up. The combination of the low RSI, an evening out of the MACD histogram, and major support at the 200 day moving average were just too much for me. Additionally, the chart appears to be triangulating and yet to be resolved. At such a low price based on the RSI, it would be hard to imagine a scenario where it would resolve down (which would take the RSI to the 10-20 range). With the GG deal today there is additional support because we now know that the majors are out shopping for all levels of metal companies. I don’t think McEwen (C.E.O. of USGL) would ever sell, but these things can lend support to the whole industry. McEwen built GG before heading to start anew at USGL. He has aspirations of building USGL into a powerhouse and he financed the overwhelming majority of the company with his own equity (potentially by divesting some of his equity in USGL). But I don’t trade company’s I trade prices. I will keep an eye on it and the price of gold as they are likely to move in concert with each other.

As for oil, it’s a monster. Check out the link to Bill Cara’s discussion of the manipulation of the oil futures market http://www.billcara.com/archives/2006/08/energy_markets.html#more. Can you believe T. Boone Pickens had a personal take of $1.5 billion last year (that’s billion with a B!...in one year). Actual regulation in the market likely won’t happen and even if it did it would take years to get through. I think the pull back we are seeing in oil and the downside that is forecasted could be a major set-up of the Moms & Pops as Bill calls them. T. Boone and his boys are sending prices down just to ramp them up and have a repeat of the prior year. If the facts in the governments study are accurate, T. Boone could manipulate the market up and down as he wants. The man is playing with a stacked deck. If you can’t beat em’ join em’. And even if it’s manipulation he is into, the price will still tell the truth. I will be delving into this more to see how I can track the movements of T. Boone’s moves. Apparently, his fund returned 700% last year. For a guy who is already one of the richest men in the world achieving 700% returns on his money for any period of extended time is scary. The guy could end up in the trillionaire category at that rate, which to the best of my knowledge doesn’t exist.

I also want to discuss my overall performance during the last year for the purpose of a project that I’m going to be getting into in the next couple weeks which if things go right will be a major personal change for me. For the year I have had a return of 50.6% not including additional capital contributions during the year. My performance has been largely due to the increased time and effort I have put into following my stocks, developing my personal strategy and reading from some of the best out there. And the vast majority of the personal approach change has been in the last 7 months. I hope my performance justifies my next move, which I can discuss in detail when the time is right.

A little movement...

2006-08-15T15:48:00.000-07:00

Well the SNDK trade is looking good...had some nice action today and appears to be breaking out to the upside. I'm going to reduce my GG position tomorrow. I'm not eliminating it just need to take some money to use elsewhere...more on that in a second. GG is moving pretty much in concert with the gold price which is seeking some direction. The USD looks like it could be heading down again. I'll see if GLD can bounce off it's 50 day MA before I make a more definitive call on the position. With the partial sale I plan on adding PEIX which has been a favorite of mine for sometime. The stock has worked its way down to an RSI of below 30 for the first time in a long time. With the continued strength in oil, the alternatives will do well.

I was thinking earlier and reviewing some of my trade calls from earlier in the summer. I realized on several occasions the calls were timed very well, and I had the right idea as far as time horizon but some of my other rules got in the way. I think if I have a time horizon on stock that is both fundamentally and technically cheap that I should stick to it regardless of the short-term price action. For instance my call in my post http://theskinnyreport.blogspot.com/2006/06/oils-for-summer.html. If I had kept my original time horizon the returns would have been fantastic, but I either got stopped out or wimped out. I need to come up with more of total approach. I have individual rules but they don't seem to work together to well all the time. I'll be looking at these in more detail soon and try and get one solid plan together.

Another lesson...

2006-07-29T13:54:00.000-07:00

It seems I'm not going too many days without learning a new lesson in this game. I don't know if that's good or bad. I'm making money but without some of the mistakes I would have made a lot more. Well this past week was no small exception. End of last week I decided that Sandisk (SNDK) had been beaten down long enough and that it was attractive enough for a purchase. I bought some and placed a tight 5% stop loss on it. My rationale for the purchase was simple the company is a quality company with several quality products that seemed under priced. The technical indicator had shown signs of turning around: the RSI was in the low 20's and turned upwards at the same time the MACD looked like it was heading for a crossover. Well that was the signal to buy and I did. The rationale for the stop was that I normally go with a 7.5% stop loss but the market had been showing a lot of overall weakness. So I decided 5% kept me a little safer if the stock decided to continue to freefall down to $30 or whatever. Well the very next trading day the stock dropped like a rock 6.4% triggering the stop. Trade closed. Well I never wanted to time the bottom quite that accurately. I like to be in after the trend has shown indication of reversal. I played the trade right. The stop is what killed me. You see Tuesday SNDK killed their earnings estimates. The stock went up 12.8%. Only I had been stopped out just two days earlier. If I had played my normal stop loss it wouldn't have triggered, and I would have made a lot of money. Lesson learned. If you have rules, stick to them...don't make exceptions. The rules were made to protect you. Not just from downside risk, but also from yourself. Not wanting to miss a good thing I bought some SNDK after the earnings because I believe that the trend is now broken and that the stock will be back on its way to where it once was. The pounding it had taken was overdone, both in time and severity and the way up will likely be slower but well worth it. I bought at 45.94 and I expect the stock to trade into the $50 range this coming week and on its way to the $60's in the next several months. For research reports on SNDK check out http://www.billcara.com/archives/2006/07/more_differing.html#more.

I also decided to open a position on GG towards the end of the week, I bought it at $28.68. The stock had bounced off its 200-day moving average and had risen from an RSI of 40 or so. All indications from the Fed point to one last rate cut before a pause or drop. That will send gold through the roof. So both the technical indicators and the fundamentals indicate that the long term trend for gold is alive and well and this position (a hiccup away from the 200 day MA) is a small price to pay for the major move coming the next month or so. I'm thinking gold may go up exponentially like it did from late March until early May.

Anyways, here's some great articles I read during the past week...

http://bigpicture.typepad.com/comments/2006/07/strong_opinions.html#comments

http://bigpicture.typepad.com/comments/2006/07/new_more_string.html#comments

http://finance.yahoo.com/columnist/article/richricher/7810

Out and about...

2006-07-17T18:04:00.000-07:00

Well I got stopped out of my GG and SLW trades both for gains (4% and 12% respectively) which was a bit of a surprise. I expected them to stay in their uptrend trading range. The metals came back hard Friday and Monday and it looks like my comment regarding the "short-lived" rally in the metals might be true. You'll recall I discussed how the GLD was outperforming (up strongly) the metal stocks (down mostly) towards the end of last week and how this may be the markets indication that the leverage offered by the metal stocks was not considered valuable in relation to the metal itself. If the overall market can stay flat to up, the prospects for a metals rally will be strong. I'm not sure though. The Dow is teetering right at a key support level at 10,700 which if it breaks will likely crumble down much further. Then again, if you read the post last week http://theskinnyreport.blogspot.com/2006/07/this-week.html you would have known the bottom was going to fallout again. The possible continued breakdown could be entirely driven by what happens in the Middle East. Interesting how the fighting broke out just as the G-8 nations were meeting to discuss the worldwide energy crisis. Trust me, oil companies are licking their chops. A full-out war in the middle east will easily mean $100+ oil and gas at $4 at the pumps here in the states. Which means the fat cats at the oil companies can continue to pay themselves those ridiculous salaries.

Anyways, I'm actively looking for some bargains and perhaps some hedged trades (buy a stock and short the market where I'm confident the stock will outperform the market). If the trend in GLD itself breaks I'm willing to go short, the market is awfully volatile and there is likely the potential to make money in either direction. Perhaps the better play may be to short the stocks since they seem to be underperforming the metal. Some heavy due diligence this weekend should come up with some trades.

On another note I was talking to an individual in real estate here in Baltimore who said the local governments are "busting their asses" to keep foreclosure numbers down. Check out Barry Ritholz's article today about ARM's and I/O loans (http://bigpicture.typepad.com/comments/2006/07/the_impact_of_v.html#comments) . I think we could be looking at a major problem in key markets. I'm smiling though, it only makes for more potential gains later. We'll see, this could be next year's big story.

The GLD - KaChing!

2006-07-12T19:45:00.000-07:00

Well, I got stopped out of my PEIX trade for a 2% loss. No big deal, the GG and SLW trades are more than making up for that and seem like they will continue. Gold was up today, on a day where everything else was getting battered. We are back in major rally mode for the metals and my trades will follow the metal's rise. Today, I noticed that GG and some of the other gold stocks were down while the GLD was up, which to me says that the markets believe the leverage associated with owning the company's rather than the metal will not pay off as much (i.e. a short-lived rally). I'm not buying it. I expect to see GLD at it's early May highs by September. I'm heavy in the metals now with tight stops, but I think they should be safe. I'm thinking tomorrow could be a big day for the stocks and the metal based on today's show.

Anyways, some other ideas I'm contemplating...SNDK is a good company that has been battered but I'm not sure the battering is done given the broad market weakness. SHLD is a very good company that would be very attractive on any pull back and is an excellent long-term holding.

Great article on Barry Ritholz's site... http://bigpicture.typepad.com/comments/2006/07/making_insider_.html#comments

This week...

2006-07-09T20:14:00.000-07:00

Well here's my thoughts on the upcoming week...

I'm pretty worried about the downside risk of the overall market as well as my holdings. Friday was a bit of a scare and I think we could be seeing the beginnings of a repeat of the May Meltdown (the one I forecasted...see post http://theskinnyreport.blogspot.com/2006/05/spxa-knockout-coming.html). Anyways, the shorter-term indicators are turning negative right around the point where the long term indicators are indicating a long term breakdown. The long term prospects are seriously in jeopardy. Martin Pring, perhaps the most well-known market technician, is now forecasting a major bear market. Take the time and read through the history lesson and support for his argument in the following link. (http://pring.com/articles/return.pdf). I've moved up my stops again so that I'm protected better. These trades have worked out pretty well for me so far and may improve but I'm thinking not, and preparing for that by limiting my risk and leaving my positions open in the chance that my current take is wrong.

New position and update...

2006-07-05T15:50:00.000-07:00

Back from vacation and back at the game...Today I added PEIX at $25. I liked the action in $WTIC since last week and the alternatives tend to act in concert with oil. I've been very happy with the action in my other two holdings, GG and SLW. GG is up 11% from my purchase about two weeks ago and SLW is up 23% from about the same time. Anyways, I've moved the stops up so I won't lose money on these investments. I'm going to make protective stops a regular practice on all trades from now on. I do most of the time but in this market (a bear indeed) I don't want to take any big losses on swing days. Anyways, here's some links to recent articles by some of the writers I really respect...

Mutual funds suck (http://finance.yahoo.com/columnist/article/richricher/6720)

Housing market collapse? (http://bigpicture.typepad.com/comments/2006/06/haefling_on_hou.html#comments)

Margin accounts heading lower (http://bigpicture.typepad.com/comments/2006/07/margin_drops_6b.html#comments)

Into it...

2006-06-21T20:13:00.000-07:00

I'm back in the game. I got SLW last week at 7.85 and I'm buying GG at the open tomorrow. I loved the price action and relative performance of the metals today. The broad-based equity run was lead by the metals which were all up big. Both silver and gold crossed their downtrend lines and have a lot of upside to make it back to their highs. I'll keep nice 5% or so stops in case I get it wrong but I'm pretty confident that the market has reached at least a temporary bottom. See the chart below pay attention to the break-through of the downtrend line as well as the MACD histogram indicating a possible crossover.

Out for a while...

2006-06-13T08:31:00.000-07:00

I sold my positions in PTR, SU and USGL today all for small losses. PTR was particularly bad. I should have had my stops closer given the market weakness I doubled the problem then, rationalizing the positions because I still think all three are good long-term holdings they just may go down 35% more before they get back to business. I abused Barry Ritholz's number one rule..."Don't let a trade become an investment". Live and learn. I'm waiting to see what the Fed does at the end of the month before I stick my toe in again most likely. If I were in a position I would just short the Dow and Nasdaq with tight stops. I'll look into it more tonight.
Now that's a meltdown!

I had an unfortunate incident this morning. Someone broke into my car and stole some things. Couple of electronics worth 200$ or so. The criminals, in all of their intelligence, left the my 500 or so CD's and my $1,500 worth of golf gear in there. Way to go. Those losers are in trouble if I catch em'. I'm gonna beat em' for taking my stuff and breaking my window. And then I'm gonna beat em' for being so stupid. The city is getting old to me. My buddy Pete's brother and girlfriend just got mugged at gunpoint, another friend got jumped and had his jaw smashed in pieces by a guy with brass knuckles, just for his cell phone. Next time, take the phone leave the jaw. I'm gonna get out of here when my lease is up. I lost my patience with this area.

Home Depot's 180

2006-06-03T09:02:00.000-07:00

Well it seems that Reason and Sound Judgement finally got the better of the folks in management at HD. They did an about face this week after shunning the shareholders at their annual meeting roughly a week ago (see Yahoo! article http://biz.yahoo.com/ap/060601/home_depot_shareholders.html?.v=2). It's a pity you get these overpaid CEO's who come in, do nothing for shareholder value (see 1st chart since current CEO's tenure started), lose ground to the competition (2nd chart of Lowe's Co.), take their multi-millions in pay and then have the audacity to tell the shareholders to shut-up and go home at their annual meeting. Remember, these are the people that OWN THE COMPANY! What geniuses at HD decided it was ok to hold a 15 minute meeting and then tell the shareholders they don't deserve answers to legitimate, well-thought out questions? Home Depot was a great company for a long time, with consistent growth, co-founded by Arthur Blank, a responsible and respectible businessman who happened to graduate from the nation's premier entreprenuerial school, Babson College. But, the current company seems to be a shade of it's former self. I haven't done any detailed analysis of HD's fundamentals and financials, but I have a problem with the company not being able to increase shareholder value during the same period as the biggest housing boom in the history of the country occurred. As a shareholder (owner of the business) I demand a certain level of accountability from those individuals I help elect to management. For those same individuals to say I don't deserve that right is a show of arrogance and stupidity. I don't own HD but if I did I would sell my shares. That type of governance has no place in my portfolio. HD may return to be a great company, but I don't see it happening under the current regime.

Charts courtesy of www.bigcharts.com - - A great Chart site...

Oils for the summer...

2006-06-01T19:45:00.000-07:00

I plan on adding PTR to the my portfolio tomorrow to go along with SU. I would have liked it 2 weeks ago but I was so damn excited about how low USGL had gotten that I lost my wits (see post http://theskinnyreport.blogspot.com/2006/05/not-bad-day.html). Anyways the current RSI (14) is about 43 which is below my normal trigger point in strong bull markets of 50, but higher than it was recently so I don't consider it a chase. If the summer is remotely like last summer expect oil to go to $80+ and in that circumstance PTR will probably go $130-$140, which would provide approximately a 22%-32% return from today's close. Historically buying under the 50 day MA and around an RSI of 40 has proved a successful buying strategy (see chart below). Anyways, tomorrow is a big day for me potentially. I'll fill you in later when it's all taken care of.

USGL rockets forward...

2006-05-30T20:53:00.000-07:00

Added more to my already established USGL holding today right at the open today ($8.40/shr.); +8% on the day, not too shabby...I plan on selling GG in the morning. The chart just isn't moving like I expected it to. I'll take the small gain. Anyways, here's a link to a good article by Robert Kiyosaki, the author of Rich Dad Poor Dad...

http://finance.yahoo.com/columnist/article/richricher/4795

To the owners of Capital

2006-05-21T19:42:00.000-07:00

Very interesting post and comments on Bill Cara's wonderful site...

http://www.billcara.com/archives/2006/05/insider_trading.html#more

Bill's site should be part of everyone's daily reading.

Not a bad day...

2006-05-19T14:53:00.000-07:00

Well the getting just got too good for me today. The gold stocks finally worked themselves down to around RSI's of 30 and I was just aching to get in. I looked mid-morning and saw the metals and oils were getting smacked again; USGL was down 15% on no news. Which is ridiculous. Well that was my cue. I bought USGL at $6.21. Well, it's early, but USGL closed at $7.05 up a cool 13.5% from where I bought it. Not bad at all if you ask me. At that rate, I'm going to be richer than Warren Buffett by the end of the year. Well USGL started my spending spree...I bought GG at $28.74 (it ended at $30.17, up a modest 5.0%). I didn't finish with just the metals either. Suncor, one of my "watch list" oil stocks reached an RSI of just a hair above 30 and I decided to pull the trigger. I added SU at $74.62 (it ended at $77.04, up a modest 3.2%). Well I'd like to say that my one day average (really 1/2 a day) gain of 7.2% is well, how do you say...damn impressive. One more year like today and I can buy my boat and sail into the sunset. But, I'm not sure the direction of these stocks quite yet...So, I left some coin in the coffers just in case these puppies comeback some more so the kid can load up. The move down was shockingly quick. I figured it would be a few weeks before these stocks got in my trading range again...it ended up taking little more than a week. The major trend for gold and oil is not dead, even if the overall markets trend is. Bet on it. I suspect Gold at $800+ by year-end and oil to $80 probably before year-end.

Right, Left, Uppercut.

2006-05-17T17:50:00.000-07:00

Wow, the Dow was down 214 points, nearly 2%...quite a move. That makes it a cool 4.2% off the high 7 days ago. Core inflation rose above expectations and that's not the worst of it in my opinion. The idea of "core inflation" to me is a joke. It's an idea created by the fed to take out the volatility of goods that everyone and every company has to pay for. People eat and people use oil. Volatility in prices creates problems for fed policy makers. Anyways, I called the knockout punch last week see my post at http://theskinnyreport.blogspot.com/2006/05/spxa-knockout-coming.html

The metals, and most of my current "watch list" stocks, continue to get crushed. PEIX is down 9.2%; it's pullback is getting it close to the 50 day MA as well as an RSI of 50 (normally possible buypoints in LT trends) but I'm sensing continued weakness there as the preceding rally was largely speculative in nature. The gold stocks have continued their slide as well. GG is off 3.8% andUSGL down 1.4%; this despite GLD be down only 0.7%. The GLD's pullback has been very small in comparison to the gold stocks. The fact that the forward price remains strong compared to the gold stocks indicates the markets belief that going forward gold and gold stocks will continue their longer term trend despite the short to intermediate pull back. My normal buy point rules may not apply here since the overall market is so very weak. I'm thinking an RSI of 30-40 will be better than my traditional entry point for the golds and oils.

I'm thinking the Dow could have another 2% to go down this week alone. Please take note of one of the popular explanations of the cause for the 1987 Market Crash per Wikipedia "Another common theory states that the crash was a result of a dispute in monetary policy between the G-7 industrialized nations, in which the United States, wanting to prop up the dollar and restrict inflation,tightened policy faster than the Europeans. The crash, in this view, was caused when the dollar-backed Hong Kong stock exchange collapsed, and this caused a crisis in confidence. Jude Wanniski stated that the crash happened because of the breakup of the Louvre Accord, a monetary pact between theUS, Japan, and Germany to keep currencies stable. Just prior to the crash, Alan Greenspan has said that the dollar would be devalued." Hmmm...this sounds oddly familiar. Do your homework before entering this market. This long bull run for the overall market is over as of last Thursday.

Metal Melt Down

2006-05-15T18:09:00.000-07:00

Well today was a very interesting day for the metals. GLD was down 5.2%, SLV down 8.3%. Previous holdings of yours truly were down as follows: GG down 9.7%, CKCM down 5.2%, USGL down 8.1%, and SLW down an astounding 12.7%. Here's what I had to say end of last week. I'd say my timing couldn't have been much better. Anyways, my watch list got pounded pretty hard today and that makes me smile because I know that those stocks will be reaching an accumulation zone in the coming couple of weeks. SU, PTR, PEIX, GG, USGL, SLW, CKCM and ADM all got hit hard. Watch for RSI's below the standard 50 trigger for strong bull markets. The metal stocks specifically were headed down ahead of the gold spot price. So once the GLD gets below 50 it may be time to look back at the metal stocks. Oil has strong support back around $65-$66 and a pull back to that level will likely be a good entry point to the summer oil rush (think Hurricanes, higher demand, and who knows what America will be doing in Iran). Keep this one idea in mind, unless the fundamentals change, the long term trend will continue. For gold and oil that trend is up.

SPX...a knockout coming?

2006-05-13T17:13:00.000-07:00

Unbelievable end to the past week in the market. Back to back 120+ point days to the downside. And I'm hear to tell you I think this is just the start of a major pullback for the broad market. I think we could be heading for a knockout punch. The technicals don't look good and the current rally has seemingly had little basis (in my opinion). Interesting to see the government put out the deficit report this week noting that it shrunk. Umm...How? Not to over-exercise my first amendment right, but could this be a little embellishment of the truth by an administration that is well not doing so hot? Anyways, I think we could be seeing the tip of the iceberg here. If you took the time to read the link in the previous post, you'd probably agree the world economy has serious, serious issues. It's going to take a unified, world-wide initiative to stave off serious financial breakdowns in many key markets. Currency markets are in total disarray due to the breakdown of the dollar. Real Estate is slowing in a higher interest rate market. Inflation (oil and energy) are getting nastier looking everyday. So with that knowledge where do we go? I think the following are good ideas: long gold (wait for an RSI around 50 or lower, likely lower given the broad market weakness), long oils (same advice as for gold), short the dollar and the broad market with fairly tight stops. The broad markets have been trading in a tight range for several months now. We are at the very bottom of that range. One more big down day and the trend will be over. So the tight stop will protect any downside risk if the market holds the trend.

Thumbs up: Taylor and Liz Whitehurst (great wedding, great people)

Thumbs down: France (are they serious about wanting to extradite Zacarias Moussaoui)

China, The United States and the Liquidity Issue

2006-05-11T12:57:00.000-07:00

Very good article about the liquidity issue China could face if they allow their currency to appreciate...

http://www.bepress.com/cgi/viewcontent.cgi?context=ev&article=1131&date=&mt=MTE0NzM3NzI4MA%3D%3D&access_ok_form=Processing...

I'm out, for now

2006-05-11T06:49:00.000-07:00

Well the market has gotten ahead of itself if you ask me so I spent the last few days exiting positions. Here's a recap...sold USGL at $9.10 for a one month gain of 11%, sold GG for $39.02 for a 7 month, 93% return, I also sold SLW for the same price I bought it and sold CKCM for a quick 11% loss. I think the long term trend for gold is higher but I just wanted to take it off the table and take some gains while I know its over extended (GLD's RSI is around 80). That's not to say that events couldn't drive the price higher in the short and intermediate term. I just think its more likely that gold pulls back closer (maybe not all the way to) its 50 day MA. I'll be looking for entry positions in the oils and gold in the next month or two. As for other ideas...PEIX has been out of this world and I wish I would have bought it when I started following it about two months ago when it was sitting at nice price of about $19. Two months later its at $40 and I'm playing the what if card. You win some you lose some. I didn't want to chase and the stock didn't want to come back for me. I'll live to try again. I currently own no stocks, which is scary and kind of annoying. This a point where bad traders get antsy and make a mistake chasing something. I'll wait and find the right opportunity.

Tomorrow one of my good friends is getting married. The first of my close circle of friends. It should be a great time. I wish Taylor and Liz the best. Cheers.

Click Commerce rebound?

2006-05-07T16:43:00.000-07:00

One of my favorite young companies, Click Commerce, is announcing earnings this week. The stock, in my opinion, is significantly undervalued from a fundamental standpoint. The have grown earnings consistently over the last 2 years and have established themselves as a powerful name in RFID technology (check out the client listing at www.clickcommerce.com). Earnings have tended to be on the high side of expectations; however, the stock has sold off since early February. I'm thinking earnings could be on the high side again, and with the recent sell off, this presents a potentially nice buying point. From a technical standpoint the stock is trading below its 50 day MA. I'd like to see it break through that prior to earnings to give it some technical strength. I'll keep track of this one; buypoint is friday's close of $22.57. Keep a nice tight 7.5% stop loss on it.
Gold had another strong week. The pullback is coming, more when then if. I'm waiting for another entry point. I'd love to load up on some more USGL at an RSI below 50. Looking forward to the discussion at the FOMC on Wednesday.

Silver moving to the big time!!

2006-04-27T17:49:00.000-07:00

Tomorrow the new silver ETF begins trading under the ticker SLV. Let's review the rationale for why SLV may be a potentially good investment:

1. The fed chairman today spent the day fretting about inflation in front of congress. This is likely his ammunition to continue to raise rates.
2. The value of the dollar continues to tank. When dollars aren't as valuable, the things consumers want get more expensive. From a technical standpoint the 50 day MA is now crossing over the 200 day MA for the dollar.
3. Silver has sold off considerably over the last week or so and is now sitting around an RSI of about 50. For investments with strong, longer-term upward trends (as silver has) buying at an RSI of 50 is typically rewarded with the continued strenth of the upward trend.

Putting the brakes on...

2006-04-20T18:29:00.000-07:00

After several extremely strong days for gold and silver, today the metals got pounded. Silver was down almost $2! As the rise has been meteoric here in the metals, there is not a lot of support on the downside, save the psychologically important $600 level. I expect a recovery tomorrow with some weakness next week as the metals are still technically overbought. I'm thinking GLD is on its way back to an RSI of 50.

Another favorite of mine, PEIX, is looking like it could be breaking down. The MACD looks like it is going to cross any day now to the negative. I'd love to get this back around $22...keep your eye on this, the trading has been very volatile and the pull-back could be quick.

Corporate earnings have been very strong and today GOOG blew away the analysts with 60% growth...justifying the enormous P/E...not at all. I'll see you when GOOG is back at $150 after the markets come back over the next 2 years. I can't fathom an advertising company with a P/E of nearly 90. Anyways, you won't see me buying that stock any time in the near future.

Guess who's back...

2006-04-12T12:08:00.000-07:00

Well I haven't exactly been good about keeping up with this but lets try it again...

One of the biggest problems I have noticed personally in my trading is the unwillingness to pull the trigger to lock in gains when stocks are overbought. I'm constantly trying to update my trading profile...how I find stocks to buy and sell. I try to go from a "top-down" approach. What are the major market trends currently? From there I attempt to identify companies displaying consistent technical signals indicating price direction.

Right now I think the major trend is inflation keyed by oil and energy. So, as far as industries go, I like the oils and precious metals. As for oil I'm waiting for a sell-off before the big summer run. I really like SU and PTR. Both have had excellent returns and both have decent dividends (making them strong long term holdings). As for the metals, I like a couple. Namely GG, SLW, RGLD, and USGL. USGL is the brainchild of the former CEO Rob McEwen from Goldcorp. USGL recently sold off due to some stock subscriptions granted at quite a discount to the current price. During long term trending markets I will typically look for stocks on my list with RSI's of 50 or lower and potential for a MACD crossover. I bought some USGL today at 8.19; I would have liked it at yesterday's price more but didn't have the cash to do it. I'll keep track of it and let you know when I unload.

A couple other stocks I'm interested in but waiting for better technical signals are: ADM, PEIX, DNA, CEO, CKCM and SNDK. Keep your eye on the RSI (below 50 or so) and MACD for the first 4. As for the last 2, wait for RSI 30 and an MACD cross.

Talk to ya soon!?

CKCM Nailed

2005-10-11T06:41:00.002-07:00

It looks like I hit the nail on the head with my previous CKCM post as the stock traded down to the top of the gap at $14.90 Friday. The moves in these small cap stocks can be quick when the techs break; the professional traders know when to make their quick hits. I'll be looking for an entry point soon. The gap down to $12.50 is still not out of the question but I think its probably safe. The current P/E is pretty low (around 19) for a tech company in a potential huge market (RFID). I think the current price is ok, but i'll wait for the technical indicators before I jump in.

CKCM update

2005-10-05T10:57:00.000-07:00

As mentioned before I like to trade a small RFID company, CKCM, from time to time. I believe the company is poised to do pretty well in the future. Today there is a breakout to the negative on the MACD. This stock will likely slide back to the gap around 15 and with a weak market and lack of news it could slide further to the $12.50 range at the bottom of the gap prior to earnings (could be a set-up for the market makers out there to load positions at a discount). I'm not going to trade this one but keep an eye on it. A technical bottom after this slide could be an excellent entry point.

Trading Update...long time coming...

2005-10-01T13:03:00.000-07:00

Well, its been quite a while since my last post, but I want to keep doing this so here it goes...I have closed all the previous positions I had (from previous posts), although I have been in and out of gold stocks PDG and GG. I'm currently long GG and plan on holding. I expect $525 gold (at least) in the next 9 months or so. I think the economy will continue to be held down by potential inflation, higher interest rates, and the energy cost Goliath. I have a feeling even a moderately cold winter will create havoc in the markets due to dramatically higher natural gas prices and energy prices in general. So I'd be long gold and short the dollar and be careful trading gas and oil. There's my macro analysis. And I'm pretty confident that those are safe positions to take and would limit your downside risk in a mediocre to down market.

From time to time, through reading and research I learn of potential risky plays. I like to play these somewhat carefully though. I look for small tech or drug stocks that have a lot of potential and I use technical analysis (MACD in particular assisted by RSI) to determine proper entry points. I always, always use protective stops set at 7% down. I like to take large positions so playing these and keeping my risk limited is essential. Some of my favorites to play (and I've been in and out of these two or three times during the past year) are CKCM and TKO. Currently I don't really see anything technically that I like but they are both in a spot where they could breakout technically at any point so I'll be keeping my eye on them for news and a breakout of the MACD. I've made a good deal of money in TKO trading using technical MACD breakouts. More interesting to me is the promise of a small biotech with a monster of a potential drug, Atherogenics (AGIX). This company has a plaque (as in the stuff that clogs arteries and is responsible for the number 1 and 3 killers in America today) busting drug in phase III trials. The drug will be a first-to-market drug of its kind if and when approved (anticipated to be mid 2006). The drug has already impressed in its phase II trials, showing large reductions in plaque buildup in major arteries. The stock is currently priced at quite a discount to its potential at $16. Some estimates say the drug could be a multi-billion dollar drug in the not-to-distant future. I really like this stock's potential and that coupled with some rumblings of a potential buyout by Merck should protect the stock's downside barring any unforeseen disappointments in the drug's trials. I plan on adding to this position considerably coming up.

My current weighting is about 80% risky (AGIX and potential plays with CKCM and TKO), 20% safe (GG and other plays discussed in the previous paragraph). I'll keep you up-to-date on these, although I plan on holding AGIX at least until a buyout or the drug completes phase III sometime next year.

Thumbs up - Colder weather. The summers here in Baltimore are getting to be too much.
Thumbs down - Rafael Palmeiro (as if cheating and lying weren't bad enough he had to sellout his teammate, Miguel Tejada. Good riddance.

Back soon hopefully.

Challenge

2005-06-27T09:52:00.000-07:00

Recently, I had written a few of the people I know and respect both within and outside my work setting to try and promote the spread of a message about the social inequities going on in Africa. One of the individuals I wrote was Bill Cara, a trader whom I read daily and admire for his rational take on the markets. Bill's blog is very very popular (I want to say several 100,000 hits daily). Last night Bill responded to his readers and me with an excellent discussion of the injustices being done in Africa and the corruption involved in the assistance process.

The most important part in this or any problem is not the realizing there is a problem it is doing something about it. This is where people get lazy. Yes nearly everyone in America realizes that the situation in Africa is not right. But how many of them are willing to do something? 1 million? I doubt it. Bill offered the following possible solution: "In my case, I believe I could, without difficulty, organize 100 or more of the world's top traders to manage offshore (and untaxed) a pool of billions of dollars of donated capital, at minimal cost, with the profits going to finance this programme."

Well Bill, consider yourself challenged. I'm not sure if you can do it. I hope for everyone's sake you can. I realize this is no short order, contrary to your statement that it would not be difficult. If you need assistance, any at all, do not hesitate...you know how to reach me. Let's see what we can conjurer up in the next week and I could do some promotion at Live 8 in Philly. In addition, I'd love to hear other people's ideas on how we can combat the problems.

You can visit Bill Cara's blog at www.billcara.com.

Trading Follow-up - TKO and PDG

2005-06-23T12:46:00.000-07:00

Just a little follow up on my TKO and PDG posts. I haven't added again to my TKO position quite yet. I'm waiting for it to break out of its current trading range between $4.85 and $5.30. I will add to my position once I see it move from its base here. As for PDG, I haven't sold yet, being as the stock has been up nearly every day since I purchased it about two weeks ago. Other stocks I like right now are: PTR and SU (i'm convinced we will see $100 oil before we see $40 oil and even at $40 the valuation is still too low for these two high quality oil stocks); another stock I like for an inter-month (within one month) trade is RIMM (the techs on this support a good $10 move to the upside in the next month or so.

2005-06-23T09:31:00.000-07:00

This is me up in Boulder, Co. in the mountains. I went out for work and had a day to mess around so I went hiking in the mountains there. It is gorgeous and I can't wait to go back.

Quit Whining!

2005-06-16T15:26:00.000-07:00

As you may have noticed I am a big proponent of giving aid to Africa and other impoverished nations to help them help themselves. The media (namely the news agencies) have done little to promote the "good" and righteous side of the men and women who are donating their time and money to make things happen for Africa. In fact, they seem to have done quite the opposite. Instead of rallying people to help they attract people to slay these campaigns. I don't know if this is power politics or what (I'm guessing so because there's billions and billions of dollars at stake). But something got to change. The article on MSNBC (http://www.msnbc.msn.com/id/8216883/) today is a very public unwarranted and unprovoked attack upon the individuals who are putting together the Live 8 Concert to raise awareness for poverty and AIDs in Africa and other poverty stricken nations (learn more at http://www.live8live.com). Here's a well deserved kudos to those who are getting off of their couches and finally doing something about these things that they find wrong in this world. I believe it was Mahatma Ghandi who said, "Be the change you want to see in the world." I think people sit around and do nothing but complain about things or other people because they are too lazy to actually do something. The simple fact is that its easier to complain. I'm not proclaiming to be better than others at the "doing something" part, but I think anyone with a shred of common sense and a shred of knowing good from evil can agree that helping people in Africa is good. I'll leave you with a quote from the Donald, "People settle for mediocrity for one reason: they're lazy. I've seen it so often. People go into something, they don't want to go that extra step. They know it's not going to be great, it might be good, it might be ok, it's not going to be great. They settle for mediocrity. They're lazy."

Thumbs-Up: Sir Bob Geldof (Live 8 Promoter)
Thumbs-Down: Complainers

Technical Breakout in Gold Stocks

2005-06-15T19:44:00.000-07:00

Gold Stocks and a particular one I like, Placer Dome (PDG) have started to enjoy a bit of a technical breakout from their decline. The recent (somewhat of a paradox) strength of the U.S. dollar had contributed to the decline in gold. That seems to have taken a turn. I like PDG alot in this range. Short-term target of $17.50 by early-July and perhaps back up to the 52-week highs after that if the rally is prolonged. I'll stick with this until the tech's change.

Telkonet (TKO) Trading Skinny

2005-06-14T20:17:00.000-07:00

I've been in and out of this company Telkonet for almost a year and half now. They produce and market in building BPL technology (the ability to make a building's electrical lines disperse a broadband signal). Recently, I bought at $3.20 and then again at $3.45 and $4.10. The company is awaiting FIPS certification for two of their proprietary technology products and has been rising in anticipation. The certification should give way to contracts with EDS and the government, with whom TKO has pre-established relationships. The current price of $5.19 will likely be much lower than the post-FIPS price (I expect new 52-week highs). If the process is slowed (more than a week or two) there will likely be a slight pull back to the mid to high $4's at which point I will likely add to my position. For now the technical indicators remain strong. I'm up over 50% and my initial target was 100%. I'm beginning to think I may have underestimated this. In the next week I plan on tacking a 15-20% trailing stop on the trade as a little insurance. My price target for this summer is in the $7 range.

http://bigcharts.marketwatch.com/intchart/frames/frames.asp?symb=tko&time=&freq=

Social Equity in Africa

2005-06-14T18:36:00.000-07:00

One of my big things that I'm interested in is awareness and political pressure for aid to Africa. Very recently President Bush and Tony Blair and the G8 nations agreed on complete debt relief for many of the world's poorest countries. I believe there is still a massive amount of work to be done for Africa. 6,500 people a day die of preventable causes; 1 million die a year because they can't afford mosquito nets to prevent the spread of malaria. This is preventable. I extremely encourage all individuals to view the following links to educate themselves (most importantly sign the petition at the first link):

http://www.one.org/

http://www.data.org/archives/Crisis_Facts.pdf

http://www.data.org/pdf/SpeakingOut.pdf

http://www.data.org/pdf/ActionSheet.pdf

http://www.live8live.com/

'There is one thing we should fear more than evil men. And that is, the indifference of Good Men.'

Welcome

2005-06-14T17:55:00.000-07:00

Welcome to my blog boys and girls. I decided to do this so I can have some outlet to the world to express my views on the capital markets, politics, sports and whatever whim I may be on. Look forward to hearing from you all.

As for the information and opinions on this blog, the opinions are my own and are not intended to be investment advice, so don't take them as such and if you do, do your own homework. If you don't like it, read something else. If you do, let me know...it'll make me feel good.