Friday, June 29, 2007

Window Dressing

Look for lots of end of the quarter window dressing. Big gainers from this quarter like AMZN RIMM GOOG CROX NTRI AAPL TNH CMG will be moving higher as funds buy in to make it appear they were holding the best performing stocks. Institutions are so full of crap.

Pre Market

Asia closed on the bullish side though Shanghai is down once again. Europe is slightly bullish as well.

The personal income report came in with moderate income and spending numbers and a low core PCE price index figure - all good news. The key negative was a surge in the overall price index from the non-core components. Personal income rebounded 0.4 percent in May, following a 0.2 percent dip in April. The May number was below the consensus expectation for a 0.6 percent gain. The key wages and salaries component also rebounded, rising 0.4 percent, following a 0.5 percent drop in April. April's wages and salaries had been weak due to a return to normal levels after a surge in bonus payments earlier in the year. Personal Income and Outlays
Treasuries rose after a government report showed the Federal Reserve's most closely watched measure of inflation slowed in May and consumer spending increased less than economists forecast. U.S. government securities also got a boost from investors who typically buy Treasuries at the end of the month to match changes in benchmark indexes. The 10-year note's yield has declined on the last business day of June each of the past five years. Bloomberg

Standard & Poor's, Moody's Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans. The highest default rates on home loans in a decade have reduced prices of some bonds backed by mortgages to people with poor or limited credit by more than 50 cents on the dollar and forced New York-based Bear Stearns Cos. to offer $3.2 billion to bail out a money-losing hedge fund. Almost 65 percent of the bonds in indexes that track subprime mortgage debt don't meet the ratings criteria in place when they were sold, according to data compiled by Bloomberg.

On the eve of Apple Inc.'s release today of its much-vaunted iPhone, Research In Motion Ltd. continued to blow past expectations on the back of strong BlackBerry sales and watched its shares rocket up in after-hours trading in response.The Waterloo, Ont.-based company Thursday posted a first-quarter profit of $223.2 million US, or $1.17 per diluted share, up 16 per cent from a year earlier.Revenue was $1.08 billion, up 76.5 per cent from $613.1 million. RIM added another 1.2 million subscribers in the quarter for a total of nine million. Read the rest Here

On the eve of the day of reckoning for the most-hyped gadget in recent memory, eager customers lined up Thursday, a few even braving torrential rain, to be among the first to get their hands on the coveted new cell phone from Apple Inc.The gadget, which combines the functions of a cell phone, iPod and wireless Web browser, will go on sale in the United States at Apple and AT&T stores at 6 p.m. Friday in each time zone.

Thursday, June 28, 2007


Choppy session with the bulls in control for a long time though at the close it appears the bears are slipping into the drivers seat. The Dow and S&P 500 closed flat to slightly down while the Nasdaq finished up marginally. The Fed decision to leave rates the same was met with an initial surge which presented a great opportunity to fade the markets. Inflation is still an issue, rates are rising, liquidity is drying up, the Chinese are losing their appetite for US Govt. bonds and oil prices are moving up. In short, the bulls are running out of reasons to extend this rally.

Precious metal, distillers and airlines were the leading sectors today while oil, home construction and consumer electronics lagged. There were good moves in NTRI LVS OXPS OVTI GLD and SLV among stocks I own.

The race for finance- and tech-savvy quants has never been so ferocious, pitting investment banks, hedge funds and Silicon Valley darlings against one another in a wild, snarling, saber-toothed competition for warm, talented bodies. Google’s big edge? The California sunshine. Read Here
Capital Game: California hands down. NYC winters suck

Natural gas is falling… but is this just a calm before the hurricane season?
Natural gas has fallen back below $7 per Mcf, mostly on news that underground storage is safely 18% above the 5-year average. And, while this sounds like good news, it’s also important to remember that we’re just entering hurricane season. Continue reading
Capital Game: Get Long UNG

Yet another fund has bellied-up in the wake of the subprime fallout, following a revelation earlier this week that a London fund run by Cheyne Capital lost $91 million for similar reasons. Full Story
Capital Game: How many more blowups to go ?

Playboy Enterprises (PLA) is hoping that its luck is about to change in China. The media company has struggled for years to get a foothold in the country while at the same time combating trademark pirates who rip off the image of the Playboy bunny. But the House of Hefner until now has had little to show for its efforts in the world's largest country. That's not surprising, given the Chinese government's frequent anti-porn campaigns and its censorship of sex sites such as Read Here
Capital Game: Will Hugh Hefner be around to see the fruits of his labor ?

The volatile action in todays capital markets provides ample opportunities for profit, but keeping risk low is the greatest challenge. The last few weeks have produced some wild and at times violent swings and being long volatility has been the best bet.


Fed Keeps Rate at 5.25%, Retains Focus on Inflation (Update1)

By Craig Torres

June 28 (Bloomberg) -- The Federal Reserve kept the benchmark U.S. interest rate at 5.25 percent and stressed that inflation is the greatest risk facing the economy.

``Readings on core inflation have improved modestly in recent months,'' the Federal Open Market Committee said today after a two-day meeting in Washington. ``However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated.''

Officials have resisted calls for rate increases and cuts in the past year, helping the economy weather a housing slump and giving inflation a chance to recede of its own accord. While price gains have slowed, the statement suggests policy makers still envisage risks to price stability.

``The committee's predominant policy concern remains the risk that inflation will fail to moderate as expected,'' the Fed said. Turning to growth prospects, the Fed said the economy is ``likely to continue to expand at a moderate pace over coming quarters.''

Read the rest here

Since the announcement the market has bounced around with the Dow , S&P and Nasdaq intially up by a fair amount before pulling back. If inflation is still a problem, the chances of rate cuts later this year are very slim.

Pre Market

The markets in Asia are mixed with Shanghai down 4%. The European indices are very bullish. The all important FOMC announcement is today at 2:15et and how the traders of the capital markets react waits to be seen.

GDP numbers for the first quarter came in below consensus indicating slow economic growth. Analysts are of the opinion that this was the low end of the cycle and growth will pick up from here. The slowdown in housing and restrictions on mortgage credit continues to hae an adverse effect.

Worsening condition in the mortgage market have cause Carlyle Group to postpone an IPO of a mortgage fund. After the blowup in the Bear Stearns hedge funds, investors and traders are very wary about anything to do with mortgage backed securities no matter the yield.

Gold and silver prices are moving up this morning along with the price of crude oil.
The US dollar is moving down as is the Yen while the Euro is higher.

I expect a mixed open on the major US indices. I do not expect any direction till the FOMC announcement at 2:15pm.

Wednesday, June 27, 2007


A very weak open followed by a bounce off support levels and a strong rebound . The Dow, S&P and Nasdaq all closed up big on good volume. Semis, utilities, oil and housing were the big winners today. My positions were all in the green apart from LVS and FFIV. Todays trading makes me believe that the big money is already aware of the FOMC statement that is going to be released tomorrow. The question is are they propping up this market so they can sell or are they loading up for a bull ride. With the level of volatility, who knows what is going to happen next.

There is a looming credit crunch on the horizon and the Bear Stearn hedge fund situation is only the beginning. Once the values of the CDOs are reassessed and in all probability valued as junk, margin calls will be forthcoming and things could get uglier. Where there is smoke, there is also fire. The Bear Stearns hedge fund saga will continue to unfold bringing grave consequences to the capital markets.


Initial weakness on the Dow, S&P and Nasdaq has been replaced by mild bullishness. It appears the traders of the capital markets are snapping up some of the stronger names affected by the recent pullback. HANS SNDK NTRI MU RACK NYX OVTI are some the names working out well for me.

Pre Market

Once again Asia and Europe are very weak with Shanghai being the only exception.

Orders for manufactured goods plunged last month by the largest amount in four months. The question is whether this 2.8% drop is just an aberration or the development of a new trend.

The FOMC meeting begins today and an announcement will be made tomorrow concerning interest rate change which is expected to remain steady. Traders of the capital markets will be keeping a close eye on the language used. An indication of potential interest rate tightening could kill this bull. Language indicatin potential rate cuts could reignite the bulls. Either way tomorrow should be very interesting.

The markets are expected to open weak today. I am keeping a close eye on S&P 1490.

Tuesday, June 26, 2007


Despite the fact the market was barely down, I got killed on most of my positions. Apart from SBUX MMS PRAI IBKR SNDK and a few others, my longs were beaten up by a baseball bat.
NYX and LVS have become such garbage I am ashamed that I own them. And the less said about GLD and SLV the better. Gold and Silver were murdered today. First they were hung from a tree, than tortured with a blowtorch and finally decapitated. Someone is seriously try to shake out Gold and Silver longs.

Todays market saw capital fleeing speculative securities and move into larger caps and more secure companies like PFE PG WMT GIS. Google is also looking very solid as it sits near 52 week highs.

Was Bear Stearns fooled by '6 inch hooker heels' ? PIMCOs Bill Gross thinks so.

Consumer confidence and housing continue to deteriorate. As the days of easy credit are left behind, the American consumer will start to feel the pinch. No American Express, Mastercard, Discover or Visa as they are all maxed out. From now on it will be PayDay Loans, Advance America and Cash Call. EZPW CSH FCFS AEA will be some likely beneficiaries from this trend.

I am starting to sense a change in the overall market trend. Unlike the sudden plunge on February 27, this change has been set in motion over the past few weeks. Higher volume on down days combined with financials falling behind. You can sniff the big money running for the exits. The capital markets are serious business and the major players appear serious in their desire to leave. The rush to get that Blackstone IPO on the market was a telling sign. BX incidently fell below its IPO price today. What a surprise !

Pre Market

The Asian indices are mainly red though Shanghai made a good recovery to end in the green after being down over 3%. Currently, Europe is looking very weak with red arrows across the board.

Consumer confidence and new home sales will be out at 10am ET. The capital market will be anticipating these numbers and move accordingly.

The Yen is gaining substantial ground today due to signs of intervention by Japan's Ministry of Finance to support the currency.

Could the collapse of the Bear Stearns hedge funds be just the beginning of a ripple effect ?

Home builder Lennar swings to 2nd quarter loss and warns of 3rd quarter loss as housing woes continue. Home building stocks are thus under pressure this morning.

Key support levels to look out for:
DOW 13251
S&P 1487

Monday, June 25, 2007


Very strong intraday reversal in the indices. Lets see how the last hour goes. Lots of red flags everywhere - Housing numbers weaker than expected , rates rising, a ridiculous Goldman upgrade of GM ,rising oil prices and a general realisation that the Apple iPhone might be overhyped.

On a side note I have been further liquidating some long positions. Like I previously said, the current market action scares me and cash is king.

Sunday, June 24, 2007

The Week ahead

The week ahead in the capital markets will be testing. Here is an economic calendar for the week ahead. Below are the important pieces of economic data that I will be looking out for.

  • Existing Home sales on Monday
  • Consumer confidence and New Home sales on Tuesday
  • Durable goods on Wednesday
  • GDP and Federal Open Market Committee announcement on Thursday
  • Personal Income and Outlays, NAPM Chicago, Construction spending and Consumer sentiment on Friday

As one can see, there will be an overload of data being thrown our way and how the market reacts will be key. The Dow, the Nasdaq and the S&P 500 are all at critical junctures and anything can happen. We could break support levels especially on the S&P 500 at 1490 and face a substantial drop. For now while the bull market is still intact there are subtle signs of the equity market wearing itself down. Volume on down days has been high, financials and especially banking have been breaking down and the powerful utility sector is tumbling. Not to mention oil prices breaking out to near $70.

As a side note, the ability to watch DVD movies on your computer courtesy of Netflix is going to boost the company tremendously. At a buck away from 52 week lows, NFLX is a good buy especially when you also take into account rumors of a potential buyout by Amazon.

I am also keeping a close eye on Google. The stock is breaking to all time highs and I think GOOG $600 could be on the scorecard pretty soon as long as the overall markets hold up. The release of the iPhone and the movement of Apples stock AAPL will be another item to watch.

The breakout in the Semiconductors and momentum in names like SNDK MU MXIM TXN NVDA as well as SMH and USD will require a close watch.

The movement of the US dollar, the Yen , the Euro and Gold and Silver will be of special interest to me. Long Gold, Silver and the Euro.

What Drives the Financial Markets

An excellent clip on the manipulation of the financial markets and how it is done. Professional traders and market makers are always going to beat the retail trader and pocket their cash. Money is made taking advantage of opportunities that present themselves during panic such as 9/11. Smart money always know what is really going on while retail are manipulated by the news.

Saturday, June 23, 2007

Buffett MBA Talk

This is a clip of a speech Warren Buffett made before a graduating MBA class. There is some great investment and financial advice presented as well as general advice on how to live a successful life. There are 10 parts in total covering more than an hour. The clip below is from Part 1. Once the clip is over you will have the option to access part 2 and so forth. This is well worth the watch. Brilliant stuff.
Buffett is an investment genius and the way he breaks down complicated investment concepts into a simple and easy to undertstand form is amazing.

Friday, June 22, 2007


Today was a pretty horrible day to be long. The Dow, Nasdaq and S&P were down 1.37%, 1.07% & 1.29% respectively. Volume was extremely heavy with banking, housing and utilities taking it on the chin. Advancers were outnumbered by decliners 3-1 on the NYSE. Small caps didn't do too badly today with the Russell 2000 down only 0.6% which is comparative outperformance to the overall markets.

Some winning stocks today included BX JBL M SMSI SOHU. The stocks getting beaten up included QTWW INPC ALTH VRNM ZN NUAN.

Today was a good day to have plenty of QID SDS MZZ DXD SKF stuffed away. You never know when these hedges are going to come in handy.

Gold did really well today with my GLD position closing up . Its about time gold seperated itself from the overall market.

Blackstone Group's IPO was the main story today with the stock jumping over 20% at its open before settling down at the close. Forbes 400 members Schwarzman and Peterson are now both billions richer and laughing all the way to the bank.

With the volatility in the markets in recent weeks, cash is king . Wait till the market regains direction and then deploy the cash towards profitable use. I am glad I decided to liquidate some long positions a few days back. The extra cash can either be deployed towards inverse ETFs, puts or shorting stocks in general if a bear phase commences. On the other hand if the market regains its upward tilt than I can load up on some strong trending stocks like SNDK HANS MU NTRI PRAI OVTI BIDU and bull ETFs like DDM SSO QLD MVV UWM.

Right now I feel worn out. Exhausted like I've run a marathon wearing a 500 lb body suit. Its really hot here in Arizona. You step outside for a second and feel drained out. The sun zaps every ounce of energy from your body.

Pre Market

The indices in Asia were bearish. Europe is also currently bearish.

There is no economic data out today.

Blackstone Group is set to start trading today on the NYSE under the ticker BX. It will be ironic if today marks the all time high for Blackstones share price.

Bear Stearns is attempting a $3.2 Billion bailout of a money losing hedge fund unit of its. This will be the largest bailout since the LTCM debacle of 1998.

Financial stocks are under pressure as of late and today is no exception with BSC MS GS all down in pre market. I believe the markets will continue to act choppy until financials gain a solid footing.

Bond yields are up today with the 10 yr pushing 5.2%. Gold is also on the rise as the US Dollar continues to weaken this morning. The Yen meanwhile has dropped to a 4 year low against the USD.

On a side note, semiconductors look very strong. The SMH and USD look to be great plays for broad exposure to semis.

The US market looks to open lower this morning. Whether early morning weakness turns into something bigger or the bulls rally waits to be seen.

I will be busy most of the morning interviewing prospective admin assistants. In between I will be unloading as much of BX as possible.

Thursday, June 21, 2007


The markets rallied to a higher close after some serious weakness early in the session. Semiconductors and oil led the way while banking continues to be weak. Going long SKF might be a good hedge.

I had huge gains in my SNDK MU OVTI HANS BBND VCLK HOKU longs though SBUX gave me a bat to the head. LVS and NYX are also giving me ulcers.

Starbucks is a world class company and the way I see it, SBUX could go down to $20 and I will continue buying till its 10% of the fund. Based on my calculations, SBUX will be $50 + within 3 years as international growth boosts the coffee maker. If I can get an average price of $25 , and double it in less than 3 years, thats a 25% annual rate of return. Not bad for a low risk investment.

Panera Bread Co. is also on my radar . Under $50, PNRA looks to be a low risk, high return investment. Like Starbucks, Panera is a world class company with excellent management.

Better than expected economic data played a role in todays rally. Both the Philly Fed Survey and the Leading Indicators are showing an economic rebound.

Speaking of short squeezes, HOKU is really killing those betting against this green energy/solar cell maker. This company has a low float, 50% insider ownership,low institutional ownership and a short position that has multiplied in recent days. The perfect recipe for a short squeeze.

Two Lawmakers are asking the SEC to postpone Blackstone's IPO. Maybe Waxman and Kucinich want in on a piece of the action.

The S&P 500 closed above the 1520 resistance level which is a positive sign.The S&P bounced of its 50 day moving average today after intial weakness. Major resistance exists at 1540.


An excellent read on the 30 yr bond courtesy of Marty Chenard.


Just because the markets made a huge reversal on the hour, does not mean the bulls are ready to resume their march. I don't trust the current market action. Its too volatile and could drop again as the day progresses. SNDK MU and the SMH look really good here.

Pre Market

The Asian markets did well. Europe is streaked with red.

Today is the all important Philly Fed survey.

Leading indicators will be out 30 minutes after the open.

Jobless claims are up though its nothing astonishing.

Gold prices are attempting to pick up this morning after yesterdays drop.

The 10 year bond yield is up slightly this morning.

The US Dollar appears to have hit long term resistance and is likely to head downhill from here.
The chart shows the various peaks in late 2005 , early 2006 , late 2006 and now. Its been a series of lower highs and lower lows. Unless the trendline is decisively broken I would expect the downtrend to continue.

Pre market futures are showing a lower open. There is resistance for the S&P at 1520 and support at 1490. I expect a rally after a weak open.

Wednesday, June 20, 2007


The Asia Pacific markets seem to be doing fine. No panic as of yet. Shanghai is rebounding. I am sitting by the pool puffing a cigar. I got of the phone with KGB . As the acronym suggests, KGB is a Russian associate of mine based in Chicago who works in upper management at a large financial institution. He believes there will be bloodshed on the street as a major hedge fund faces collapse due to a series of bets gone spectacularly awry.


An ugly day across the board as decliners led advancing stocks 4-1 on the NYSE. Utilities and oil got murdered thanks to rising interest rates and increased oil inventory. The Dow, NASDAQ and S&P were all down over 1% with volume on the heavy side. The failure of the Dow and S&P to break out to new highs is very disturbing. Its been 4 sessions in a row where an all time high was at hand only for a sell off to occur. The Dow and S&P both look like double tops not to mention Shanghai and Bombay. Cash and inverse ETFs are king until we witness a decisive beakout on the Dow and S&P.

Is this a joke ? The founder of MySpace trying to buy a 25% stake in Dow Jones & Co. WTF !

Bear Stearns Hedge Fund collapse is going to have far reaching consequences. This is only the tip of the iceberg.

I cut down on several of my long postions and raised cash. I believe we may be entering a bearish period. The increased volatility is usually present during tops and bottoms and this hardly looks like a bottom. If 1490 breaks on the S&P I will be loading up on SDS.


I'm starting to liquidate a few long positions. I don't like the way the market is acting.

Pre market

The markets in Asia are mostly green though Shanghai looks like it may have put in a double top with a strong reversal in the final session. The markets in Europe are all bullish.

Morgan Stanley saw a 40% rise in profit on gains in stock trading and bonds as well as investment banking fees. MS is up in pre market along with the other big I-Banks.

FedEx saw an increase in quarterly profit as international shipments continue growing.Domestic shipments continue declining reflecting a slowing US economy.

AT&T maybe a bigger beneficiary from the iPhone than Apple as people switch over. Perhaps a trade might be long T and short VZ Q and S.

Blackstone is moving up its IPO date. Could this be perhaps because President Bush's Yale roommate and current Blackstone chairman Stephen A.Schwarzman has gotten the signal from his 'friends' in high places that the days of liquidity are ending soon and he needs to cash out fast ?

Stocks to Watch

Keep an Eye on
  • Price of Gold and Silver
  • Oil prices
  • US dollar
  • 10 year bond yield
  • Yen

Pre Market stock futures are indicating a very bullish open. The 10 yr bond yield continues to ease though I feel it is nearing support at 5%. Could a second market reversal occur at this point ?

Tuesday, June 19, 2007

The markets in Asia are all fairly bullish. The markets in Europe are mainly bearish.

Terry Semel is finally out at Yahoo. Things can only get better for the internet giant.

Construction of new homes fell sharply in May. Things continue to get worse for the housing sector.

Best Buy sees big drop off in profit and cuts annual forecast. Sign of retail weakness ahead and perhaps a good time to sell RTH.

Monday, June 18, 2007

Pre Market

The markets in Asia are very bullish save India. Europe is a mixed bag though things may change once the US markets open.

Economic Calendar
Housing starts on Tuesday and Jobless claims, leading indicators and Philly Fed survey on Thursday will be the main focal point this week.

Things to Watch

  • the 10 year bond yield . Rising yield = lower stock prices and vice versa.
  • the US Dollar. The USD has been gaining strength as of late which may cause the rising equity trend to reverse.
  • the Japanese Yen. How much longer can the Bank of Japan keep rates low and how long before the carry trade unwinds.
  • the price of Crude Oil. Oil is starting to break out as of late and lets see what affect this has on equities.
  • the price of Gold. Gold is at a critical juncture and could go either way. Inflation is still a problem as the CPI showed and I would expect Gold prices to rise.

I expect the market to close flat to moderately higher today in anticipation of tomorrow's Housing data.

Sunday, June 17, 2007

Gambling with the Yen

June 18 (Bloomberg) -- Japanese businessmen, housewives and pensioners betting against the yen in their spare time are wrecking the forecasts of the world's biggest currency traders.
The yen has slumped 4.6 percent to a 4 1/2-year low against the dollar this quarter, making it the worst performer among 72 major currencies and confounding predictions by strategists at Deutsche Bank AG and UBS AG for gains of about 1 percent.
The banks didn't reckon on the risk appetite of Japanese individuals, who are borrowing money like never before to buy currencies with higher yields. They tripled their trading in the year ended March to a record $11 billion a day, according to Tokyo-based Yano Research Institute Ltd., publisher of an annual report on the business. Globally, currency trading by retail investors rose 54 percent in 2006, according to research firm Greenwich Associates in Greenwich, Connecticut.
``Japan's interest rates are too low,'' said Hiroshi Ono, a 40-year-old sales clerk at a telephone company in Tokyo. Ono said he has made about $17,000 since March by borrowing $200,000 of yen and buying U.S. dollars to take advantage of the 4.75 percentage-point difference between Japanese and U.S. interest rates.

Read the Rest here
Housewives Outmaneuver UBS, Deutsche Bank in Yen Carry Trading

Reading this article makes me feel the Yen carry trade is going to unwind pretty soon.

Friday, June 15, 2007


Strong day for the bulls or rather a strong opening session followed by a drift the rest of the day. It appears a lot of this recent rally has to do with option expiration and the need to pin the Dow S&P and Nasdaq to certain levels. I would not be surprised by a pullback next week. Semis, gaming and autos were the best performing sectors while airlines, personal products and telecom were the worst.

PENN IFON INFN YGE KUN DRA were among the bigest percentage gainers while BBW CRYO ENCY were the biggest losers.

Oil price rose to a 9 month high on refinery concern. I was hoping for a big move in oil out of its $61-67 range and it looks like I got it.

Penn National Gamings takeover by Fortress Investment Group boosted the gaming sector as MGM LVS WYNN MPEL were all up.

Insider trading or coincidence ? How TXU option activity surged the day after KKRs first meeting with TXU.

Pre Market

The markets in Asia and Europe are bullish .

The Consumer Price Index rose less than forecast indicating that inflation may be under control. Gasoline and food had the big increases.

Ben Bernanke is speaking in Atlanta today at a monetary policy conference. The mix of Bernanke and good CPI numbers could be steroids for the bulls today.

The Nymex is up big in pre market as it explores options to sell itself. NYSE Euronext, Deutsche Boerse AG or Chicago Mercantile Exchange Holdings Inc are the potential suitors.

Hansen Natural the maker of Monster energy drink, is surging in pre market as it gets a Goldman Sachs upgrade. I've been a big buyer of HANS following the Coca Cola decision to buy Vitamin water. This stock has a lot of upside.

How much do you pay for luxuries ? How the super rich are taking it to new levels. Companies like COH TIF LVMHF are some of the plays here.

OXPS is a stock I am keeping a close eye on. Based on trading volume, option activity and chatter, there is indication they may get a takeover bid.

Pre market futures are indicating a bullish market open.

Thursday, June 14, 2007


The bulls took control today and lifted the indices substantially higher. Even higher inflation readings and increasing 10 yr bond yields could not dent the bulls .

I will be back later for a more indepth recap and look at todays market. I'm off to a lunch meeting.


The Dow, Nasdaq and S&P all closed up today and it appears a bottom has made made. There is a chance the indices will face resistance at its previous highs and in the case of the S&P strong resistance exists at the 1540-1550 level. Oil, recreational and mining were among the winning sectors today while brewers, real estate and mortgage related were the big losers. Among individual stocks, HOKU IAX LUNA CLWR BRLC AZC KRY were the biggest gainers while SAT HBP DECC CMRO MPP were among the biggest losers.

Adobe beat after hours but the stock is down as Q3 outlook came below consensus. ADBE is a great long term stock though if I were to buy I would wait for it to come down 15-20%. It is a little pricey at a PE just under 50.

A Bear Stearns hedge fund liquidated about $4 Billion of subprime mortgage backed securities after sustaining losses. Who was buying is what I would like to know. Buying subprime CDOs is worth the risk if they can be purchased for substantially under market value.

Late mortgage payments and foreclosures across the nation are up exponentially. California,Florida, Nevada and Arizona were the worst hit. These 4 states though are probably the best places to go find distressed real estate. Once this crisis has passed, these 4 states will have the fastest real estate appreciation. People who invested in California in the early 90s could have sold out by 2005 at 4-5 times the purchase price. Not bad for an investment that one can purchase with 5% down.

Memories of my days clubbing across Europe in the 90s. This was probably the most played song in clubs from Amsterdam to Paris to Frankfurt to Barcelona. Good times......

Pre Market

The markets in across Asia and Europe are very bullish.

The big news this morning is the Producer Price Index which is up sharply signaling inflationary pressures and thus treasuries are down and yields are rising in anticipation of a Fed rate hike sometime this year.

Losses in derivatives and widening credit spreads hits Freddie Mac hard.

Goldman Sachs reports increased profits though revenue in its trading and principal investment business was down considerably due to 'continued weakness in the subprime sector'. GS is down in pre market

Bear Stearns is reporting a 10% slump in profts as mounting home loan defaults reduced trading revenue. BSC is down in pre market.

Here is one to watch. Shares of Hoku Scientific HOKU are up over 60% in pre market as the company signs $678 million deal with Suntech Power STP. This small Hawaii based polysilicon maker already has $1 billion in contracts and its current market capitalization is around 75 million prior to todays jump.

Pre market futures are indicating a higher open. I would think the market sells of today as yields rise. Talk of rate hikes is not good for equities.

Wednesday, June 13, 2007


The bulls came out to play and the bears ran away. -

The bulls put on quite a show today and from the get go pretty much wrecked any chance the bears had of gaining control. Strong retail sales and a Beige Book reading signaling growth revitalised the bulls. The Dow up 187 , S&P 22+ and the Nasdaq 32+ was the final count. Mining,Oil, construction, utilities, banking and transports led the way while airlines and healthcare lagged.

Chipmakers are suffering the effects of declining prices. Prices have been effecting chips for quite a while and I believe a bottom is in.

Blockbuster low price subscription strategy is validated by Wallstreet and the stock price is soaring. Netflix though continues to lose ground. NFLX though might actually be a good buy based on constant buyout rumors. The stock price is only a few percentage points above 52 week lows.

Semel of Yahoo continues to defend himself and his lofty $71 million pay package against irate shareholders. A smart hedge fund or private equity outfit may consider buying into YHOO forcing Semel out and getting the company turned around. YHOO suffers from poor leadership and this Semel guy is a Silicon Valley boob. He doesn't know jack about tech and his leading style is the kind you learn from the back of cereal boxes.

Oil prices are up and thus the oil sector outperformed as gasoline inventories fell. Oil needs to break decisively in a single direction. This $61 to $67 dance is getting annoying.

A nice clip showing what happened to market bears. Or in this case a solitary bear cruising the streets of LA in his Monte Carlo.


Bulls are beating up on the bears. Revenge for yesterday. 10 yr yield is dropping and markets are currently inversely correlated. Short the ^TNX long the Dow might be a decent short term trade.

Pre Market

The markets in Asia got run over by the bears save Shanghai which is up. Europe is mixed. With rising bond yields, it appears traders are running for the exits as we experience a short term equity market melt down.

US retail sales in May jumped twice the amount forecast despite surging gas prices. Surprising though it does show the resilience of the US consumer.

US advertising spending is expected to grow even slower than previously forecast as corporation scale back budgets.

With rising bond yields, the US Dollar has been making a strong run as of late.

The pre market futures are strong and indicate a higher open for the US indices. This might be the day to sell any rally. It does look like we may have another leg down before things stabilize.

Tuesday, June 12, 2007


The bulls got beaten up today. Murdered would be a better word. The worst part is that the indices recovered from big losses and went green at 2pm ET with the Dow erasing a 100 point loss and going up 25. Than part II of the massacre took place with a more than 150 point Dow loss in the final two hours of trading. Dow down 129, Nasdaq 22 and the S&P 16. The S&P in particular is facing heavy resistance at the 1515 level. Transports, utilities , housing and oil were beaten up today. The Qs and tech in general were better relative performers.

Netflix shares took a drubbing as Blockbuster introduces lower priced subscription to its online rental service. Was it not too long ago when NFLX was rumored to be an AMZN buyout target ? Hmmm how things changes in a short span of time.

Blackstones bottom line financial hocus pocus ? Like anyone cares. They will all buy the IPO and race to the exists. When money is cheap and plentiful, you do not ask questions.

Surging bond yields are being blamed for the market drop. As the cost to borrow becomes more expensive there will be a drop off in buyouts. I would not be surprised to see a few current deals get quashed as financing issues arise.

Mortgage defaults surged 90% last month according to RealtyTrac. Where are all those clowns that were on the financial networks proclaiming an end to housing and subprime woes ? They should all be brought on national television and flogged. Good thing they do not live under a totalitarian regime or else they would be executed for their bullshit ANALysis.

Congress is being urged to double tax rates on hedge fund managers and private equity managers. If this bill passes I would buy up a lot of luxury real estate in tax free havens like the Caymans. Hedge funders and Private equity will be migrating in hordes.

Well after today crazy market action lets see what the next 24 hours brings.


Rising bond yields are stalling this rally. We need to see a strong surge in bond buyers and falling yields to get this rally back on track. So far equity money flows are still positive and there is nothing to suggest that the big institutions are liquidating positions. Caution at this stage is more vital than ever. Unlike 1999-2000, the smart money has no one to distribute stocks to. Retail buyers are not participating in this rally perhaps remembering all too well how they got burned last time around.

Pre Market

The markets in Asia all closed in green save Japan. Europe is all red.

Lehman Brothers Q2 profit up 27% on robust stock trading and buyout business.LEH shares are up along with GS MS MER

Texas Instruments reduces top end of it earnings forecast.The chip sector is thus under selling pressure this morning. Weakness in INTC AMAT NSM MU SNDK .

Employers in the US are expected to continue hiring at the same pace next quarter as they have the previous three months.

Inflation continues to soar in China as rising pork prices causes 8.3% jump in food prices and pushes overall May inflation up to 3.4%.

Pre market futures are indicating a lower open for US equities.

Monday, June 11, 2007


The indices closed flat after the bulls were in control most of the session. In all I extracted plenty of alpha as a lot of positions SNDK LVS NYX PRAI OXPS FFIV LVS OMRI IBKR closed solidly in the green while I made money on inverse ETFs as well. Oil was the big winner today followed by utilities while housing and to an extent transports got beaten up.

Hedge fund Atticus Capital is urging Barclays to drop its bid for ABN because its buying "an inferior business in an auction at inflated prices".

Carlyle Group, the influential private equity outfit is creating a group to seek out investment opportunities in the global financial sector. Sounds like a good idea as financial institutions will be the biggest beneficiaries of global growth.

Apple launched an internet browser to compete with Microsofts Internet Explorer. AAPL the stock was down hard today. There appears to be a short term change in trend to the downside.

IBD has published a list of its Top 10 rated dividend paying stocks. Got to agree with names like PCU and TKC. My personal favorite dividend paying stock not on this list is FRO.

Since everyone is talking about it I might as well post this clip. FYI I have watched a grand total of 20 minutes of this show including this clip. Never got into it.


There appears to be a good amount of resistance in the Dow 13475 area, the S&P 1515 and the Nasdaq 2585 area. Friday is option expiration and quadruple witching as well as CPI. PPI comes out on Thursday. Retail sales on Wednesday. There is alot here that could potentially move the market this week.
I added more NTRI under $66 , HANS at $38.50ish, RACK at $13.20ish and VCLK $29.9-30.20. Took a new position in BBND which is a recent IPO and looks promising. OXPS IBKR LVS FFIV NYX PRAI OMRI have been some of my leading performers. GLD and SLV has also done really well.

pre market

The markets in Asia are bullish and so is Europe.

Blackstone Group is expected to go public as early as this month. Might this be the market top ? I'm subscribing to the IPO. Shares will likely double the same day.

The Yen is gaining this morning. There is a strong inverse correlation between the Yen and the movement of US equities. A stronger Yen may lead to market weakness today.

Gas prices across the nation posted their first decline since January. While this is welcome news for the consumer, I believe the damage has already been done. I don't foresee an increase in consumer spending until gas prices pull back atleast 15-20%.

Pre market futures are indicating a lower market open.

Things to look for this week
  • A rebound in Gold, Silver and Oil prices. Rising liquidity is only going to push commodity prices up further.
  • Watch the movement of the USD. It has been strengthening as of late and it will be interesting to see what happens next.
  • With option expiration on Friday volatility will likely increase.

Saturday, June 09, 2007

Technical analysis of indices.

The Dow appears to have found atleast short term support in an area of congestion from the early part of May. There has been a break of the uptrend line going back from the March lows and this could act as an area of resistance.

The S&P looks like it broke its uptrend in early May and it subsequently acted as resistance. There appears to be support at the 1490 levels of which it bounced yesterday and the 1480 level. The 50 day moving average alos comes into play and perhaps yesterday was a good time to go long the S&P due to 50MA support.

The Nasdaq had broken its uptrend line in early May too and it acted as resistance several times . There does appear to be support at the 2520 levels or thereabout. Worth noting like the S&P, the Nasdaq found support at its 50 day moving average.

Friday, June 08, 2007


The markets did a 180 today and ended in buying panic. Its like everyone was rushing to get on board the bull train before it chugged off without them. Everything was going up except for gold and silver which was tossed out like excrement from a horses rear. Steel , semis, housing and airlines were the big winners despite the fact that aside from steel, the other groups have been big laggards off late. It looks like traders fell for the lipstick on the pig. Could have been the beer goggles from washing down all those pints from the pain of yesterday.

NSM INFN CAE TNC AZZ TELK and that dog VG were some of the biggest winners today. RACK INFY MRVL AKAM INTC CSCO WYNN LVS AMZN ETFC GS MS FRO MCD AMTD all had an outstanding day .

How could I miss this ? Thats the question I've been asking myself for the last few hours. This IPO was up 48% today. Feels like 1999.

I mentioned SBUX earlier today and now this article. Looks like they were reading my mind. Maybe this has become a crowded trade. Might need a decline below $25 before it becomes attractive again.

She needs to get the electric chair. The gallows would be an alternative........


I have a long postition in Starbucks around 1.5% of the fund and I am starting to reassess it. I bought in at at an average of just under $29. From talking to people I've noticed that quite a few have started getting their daily dose of java from McDonalds rather than SBUX. From surveys it appears MCDs coffee is a hands down winner while consumers appear to have lost their appetite for SBUX coffee. There is also a noticeable price difference with MCD coffee going for $1.50 vs around $3 for SBUX. Over the last 3 months MCD has gone from $43 to $51 while SBUX has dropped from $32 to $27. I wonder if this is going to be a long term trend.

UPDATE: disclosure - I have probably drunk less than a dozen cups of coffee in my life. Tried SBUX maybe twice and MCD once. Milk and JW Blue Label are my drinks of choice :)

Gold and Silver

Gold and Silver and their respective ETFs GLD and SLV are taking a beating today. The trend for both seem to be up and while there may be continued weakness short term, I am taking this opportunity to buy more.

pre market

The Asian markets are bloody sans China. Europe is being raided by the bears.

The US trade deficit declined more than expected as a cheaper US Dollar has fueled exports.

Consumer confidence tumbles to a 10 month low as record gas prices take it toll.

Stocks in Play

Same store sales rise 8.7% in McDonalds.Worldwide demand is booming and they stock should continue to outperform.

Pre market futures are indicating a bullish open. It will probably be wise to sell the rally. A gap down open would be better to buy under these circumstances. I would like to see panic selling and a plunge before buying.

Thursday, June 07, 2007


We have wiped out more than 3 weeks of gains in 3 trading sessions. Amazing. The bull goes up the stairs the bears goes out the window is an appropriate analogy. Dow down nearly 200 points with 45+ points down in the Nasdaq and 26+ points down in the S&P 500. We finished near the lows of the days and the worst part atleast for the bulls was that panic selling was no evident. The selling was slow and steady mostly institutional via block trades. Even the strong names earlier on like AAPL AMZN GOOG RIMM CROX allmade big turnarounds towards the end finishing lower or barely higher. As far as sectors and industries go utilities, transports, gold and silver, housing and oil bore the brunt of the punishment. Volume was enormous with the Qs trading well over 200 million shares, something it has not done since early March. Three down days on heavy volume can break the back of any bull market and while I am not predicting the demise of this bull, it is something that needs to be kept in mind. In the following days lets see if buy the dip still works or if the new strategy is sell the rally.

When there is only positive news about a company, the time is usually ripe to short it since it often tends to be downhill from there. On that note, Apple appears to be an excellent candidate for a short according to this financial writer.

Not too long ago Jim Cramer , yes the bald headed screaming lunatic, was touting Monster as a buyout candidate. Shares of MNST were beaten up today following the resignation of it CFO. The CFO resigning is usually a sell sign.

Hedge Funds earned 2.43% on average in May trailing the S&P which returned 3.49%. In recent months investors have railed about the large performance fees hedge funds charge in lieu of their sub par performance. One needs to keep in mind that hedge funds often outperform in times of volatility or declining market. When markets rise steadily, hedge funds often underperform since by definition they are hedged.

Case no. 060607 Citi v Citi . How are subscribers to this analysis ever supposed to make any sense of all this ? Is that how they make decisions on their trading desk too ?

My long position got beaten up today to the tune of 1.5%+. Luckily my double inverse ETFs came to the rescue allowing a break even. I may start selling some of my longs depending on tomorrow and next week. Lighten up a bit and go in cash. On the other hand I may buy even more possibly even doubling on stocks like MMS MU SNDK RVBD RACK FFIV PRAI OXPS OMRI NYX NTRI HANS HNR BSQR KNOT UXG GRZ KRY JSDA. I am not using any leverage and I have the ability to use quite a bit. So we will wait and see.

Stocks to watch

With the markets falling hard its good to look at names that are bucking the trend. Today GOOG AAPL RIMM AMZN NFLX CROX EBAY SUNW AMD CVS are all up in an ugly tape. Some smaller names that I have postions in BSQR and KNOT are also up sharply. Other than that, the tape looks really ugly. I continue to believe that yields rising above 5% is playing a big part though there is still a lot of denial out there.

"I think there is some healthy profit-taking going on out there," said Michael
Church, portfolio manager at Church Capital Management, describing concerns
about bond yields as overblown. "Everyone seems to like to focus on this 5
percent level. I think it's in many ways mythical. Five percent is really not
that high of an interest rate."

10 Yr Bond

With the 10 Yr Bond yield rising fast it may seem like a good idea to move from equities to bonds. I reckon 5% is a pscychological barrier when once crossed leads to institutions reasessing risk. I'm not really seeing signs of big buying though there appears to be plenty of selling going on. Maybe the tide is starting to turn.

Pre market

The Asian markets are mixed though China is up over 3%. Europe is bearish.

The 10-yr Treasury is over 5% for the first time since August as New Zealand unexpectedly raised rates and traders fear similar moves in the future from other central banks around the globe.

Slowing retail sales in the US and consumers curb their spending. High prices at the pump and lower mortgage equity withdrawals having an affect no doubt.

While traditional advertising dwindles, internet advertising is surging to new records. I like names in the internet advertising and related sectors like VCLK DRIV GSIC .

Pre market futures indicate a lower open to the market. I think weakness needs to be bought here.

Wednesday, June 06, 2007


The markets finished well off their lows of the day though they still were heavily in the red. The Dow with a rare triple digit loss and the Nasdaq down over 24 points and S&P over 13. It could have been a lot worse at one stage. Relatively good comeback over the last 2 hours of trading. The internets led today with GOOG having a solid day. Home improvement and real estate were the big losers which is no surprise. They both stink.

PNRA really got beaten up today while WFMI took a hit as well. JSDA looks really good. I am building a position in JSDA because for some reason I feel I will look back at this stock in 5 years or so and think why I didn't buy it. I'm building positions in PNRA and WFMI. I hope they both continue drifting lower so I can add more. Perhaps build them to where they can each be 5% of the fund. IBKR looks really good and I may build a postion here too.

The volume on the Qs was ridiculously high today though a close well off its lows is a bullish sign.


Ok now the markets are really starting to get murdered. I still expect a rally in the last two hours of trading. If not we may close down over 200 points on the Dow. Increased inflation, slowing growth, no rate cuts in sight,increased bond yields, decreased productivity.....maybe the market is starting to get the message. Maybe the bulls are getting worried. Or maybe I'm going insane. Whatever the case I think GLD looks really good. Its holding up well in a crappy tape. And NTRI still looks amazing.


The Dow is down over 100 points, the Nasdaq down 25 and S&P down 12. I expect a rally into the close. GOOG AAPL SNDK AMZN all look very good here.

Pre Market

The markets in Asia are a mixed bag while Europe is a sea in red mostly likely in reaction to the ECB raising rates.

US worker productivity increased last month less than expected while labor costs rose 3 times more than expected suggesting inflation continues to be a problem.

Speaking of inflation, General Mills is raising the price of cereals due to higher commodity prices.
Panera Bread Co. cut its 2nd quarter earnings forecast and shares are plummeting nearly 10% in pre market trading.I had picked up PNRA for the fund in late Jan. in the low 50s and sold it as it quickly ran up into the 60s a month later.In the low 50s, I think this stock is a good buy.

Pre market futures show the US indices are expected to open sharply lower.Reduced productivity, increased inflation and rising bond yields are making for a jittery market.

Tuesday, June 05, 2007

This is Madness ! ...... No This is United !

Awesome ......


The markets closed off their lows and the comeback in the NASDAQ and the Qs was impressive. In two words ; Buy Tech. Better yet go long ROM, the ultra long tech ETF or QLD the ultra long Qs ETF. AMZN AAPL RIMM GOOG BIDU were all on fire today. Looking at the strength in tech, I think EBAY is a strong buy here. It seems to be lagging but if money is flowing into tech, it will catch up soon. As far as sectors the internets led the way while retailers and real estate got beaten up. The oils continue to hold up though they peaked around this time last year.

US services growth picked up unexpectedly in May. Another nail in the coffin for those hoping for a rate cut.

The 10-yr bond yield is something to keep an eye out for. It is at its highest point since last August and I suspect a move above 5% could reverse the equity markets.


Hmmm. So buying the dip eyes closed is not a good idea. There is a better chance of rates increasing than decreasing. Bernanke thinks inflation is still a problem.

RACK is up big today on heavy volume and I reckon something will be announced in the next few days.

GOOG is a strong technical buy along with BIDU .

NTRI is looking excellent . Someone asked me about NTRI a few weeks ago when it was under $60 and I said a cup and handle formation was in place and upside volume looked really good. $10 later things still look good.

I am buying MU on the dip. SNDK too .

In light of Cokes purchase of Vitamin water, HANS looks excellent.

AMZN is ridiculously strong. I did try to short it a few weeks back but got out fast. It will eventually collapse 30-40% but after it goes up to 80 or 100.

AAPL keeps on moving higher.

Pre market

Looks like that mini China collapse is over. After being down over 5% for the day and nearly 25% from its peak, Shanghai managed a comeback to end up 2.63%. Most Asian indices are bullish as well though Europe is slightly bearish probably in anticipation of the US ISM report .

Speaking of Europe, the expectation is that the ECB will raise rates tomorrow and thus the Euro is soaring to a record versus the Yen.

The mobile virtual network industry is tough. Just ask Amp'd Mobile who have filed bankruptcy just 17 months after launch.

Oil prices are dropping as concerns of a storm approaching the Persian Gulf fade. I guess traders use any excuse to jack up oil prices. A major geopolitical event and oil could see $100 in a flash.

Based on the Lone Star deal to buy Accredited for $400 million, I would try picking up smaller mortgage lenders such as NFI AHM DFC HMB DRL IMH. These stocks have all been battered and atleast one or more will be bought out as the mortgage industry consolidates.

Pre market futures are indicating a lower open for US equities. I would buy the dip eyes closed.

Monday, June 04, 2007


The Dow, Nasdaq and S&P 500 all finished in the green which was not surprising considering how any morning weakness is heavily bought time and time again. I reckon a day will come when weakness is sold and we could have a repeat of Febuary 27. For now the trend is up and why should one fight it. The only disconcerting item from a bullish perspective was the lack of volume especially on the Qs. Less than 65 million shares traded versus a 3 month average daily volume of over 115 million.

On to more juicy news, I suspect something is up with RACK. Volume was heavy today and Maverick Capital appears to have built up quite a position in this stock. RACK was trading at an all time low of $11.25 a share a week earlier and now its up over 10% to $12.69. I suspect a buyout is in the works. Either that or the stock looks like a steal at these prices especially with around $6 a share in cash and no debt. I currently have a small position in this stock and I plan on adding more.

The US Dollar is being dropped like a bad habit. Less and less countries are going to tie their currencies to the almighty greenback and the USD will continue its decent over time. I don't know how good that will be for US equities in the long run.

The chances of a rate cut by the Fed continue to diminish as Merrills Rosenberg abandons his forecast for a Fed rate cut this year. I suspect a rate cut will only occur if we have a 10% plus decline in the indices.

I think if GOOG finally breaks $513, it could run to $600 in a hurry. AAPL and RIMM look amazing.

If I blog less in the weeks ahead, it may be because I am waiting in line to watch this. Wicked .......


The Shanghai pullback has not had much of an affect on the US markets. The oil sector has been outstanding today with big gains across the board. Airlines are the weakest sector.
I've been seeing some nice gains in NYX NTRI SNDK JMBA MMS and OVTI. Lets see how things close.

Pre Market

Most of the indices in Asia ended in the green though China is down over 8%. Europe is red all across the board. I'm am still a little surprised that a drop in Shanghai of over 15% in the last few trading sessions has had no effect on other markets.

Palm shares are skyrocketing this morning on news of plans to sell a 25% stake to a private equity firm.

Flextronics is acquiring Solectron in a deal worth $3.5 billion.

JP Morgans Highbridge Capital Management is starting a $2 billion buyout firm. When money is cheap, everyone wants to get in on the act.

Pre market futures are pointing to a lower open in the US markets. This could turn out to be another buy the dip day but I would proceed with caution.

Sunday, June 03, 2007

Shanghai is declining precipitously down almost 5%. Lets see if it recovers and how this decline affects global markets.

Friday, June 01, 2007

Pre Market

The Asian indices are mixed with China down. Europe is more bullish.

Employment, personal income, consumer sentiment and ISM manufacturing are all on the economic agenda today. We could be in for a volatile trading session.

Manufacturing in the European region expanded at the slowest pace in more than a year.

Sears and Costco report weak quarters.

Pre market futures are pointing to a higher open. Will it be a sell the open or buy the dip day is anyone's guess.