Fund My Mutual Fund

Updated Position Sheet

2010-03-21T20:14:00.001-04:00

Cash: 71.6% (v 73.1% last week)
Long: 19.3% (v 19.2%)
Short: 9.1% (v 7.7%) [long US dollar positions are considered "short"]

This data is updated weekly and can be found on 'Performance/Portfolio' menu tab on the website. As always the total gain/loss (both dollars and percentages) only apply to the open portion of the position; it is does not apply to portions of the position sold earlier.

[click to enlarge]

LONG (1 photo file)

SHORT

OPTIONS

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Bookkeeping: Getting Rid of This Morning's Downside Protection

2010-03-19T15:52:00.000-04:00

I was hoping for a move closer to S&P 1151-1152 when I put on the index shorts this morning on the break below 1160, but like a starved squirrel I am so very happy to find even a single acorn on the short side in this day and age. Hence, I am going to take my 3-4ish acorns (3-4 S&P points) and run like a bandit before Summers and Bernanke take their rifles and tag me.

Unless the S&P 500 gets below 1150 that's about all the downside I guess we can hope for (S&P 1155) and with Monday coming up (which is up, 9 out of every 10 times the past half year) the odds are against us collecting any more acorns without risk.

So with that our SPY 115 puts, and short TNA (long TZA in the real world) are gone after a 5 hour rental.

No positions

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Two Corporations Begin Run for Congress. Yes, I'm Serious.

2010-03-19T15:30:00.003-04:00

You'd think this headline was from the satirical website, The Onion - but indeed brave Americans, we have entered the next logical step in our corporaticy (is that a word?). While a bit of a political stunt (kudos to the public relations firm), one can only imagine some corporations salivating at the thought. That said, why bother? Much better to continue the status quo & have their human puppets take all the flack while they collect all the rewards quietly in the background. This is actually a perfect book end to this morning's piece where Jon Stewart showed us all the things he could get away with in America, if he was a corporation rather than a human being.

Via The Economist:

THE effort to elect Murray Hill to Congress is a political campaign unlike any other. It is rare for an election candidate to pledge to “put people second, or even third”, instead of the habitual first, but then the aspiring representative for Maryland’s 8th District is not a person but a company.
According to its YouTube advert, Murray Hill, a public-relations firm, is taking advantage of a recent Supreme Court ruling that granted corporations full first-amendment political rights as people, to help create “the best democracy money can buy.”
This candidacy has its attractions. After all, it would become the first elected official truly available to constituents 24 hours a day, seven days a week. Nor is it alone: according to the Washington Post, a firm called Computer Umbrella is now running for Congress in Virginia.
Despite the Supreme Court’s controversial 5-4 ruling in the “Citizens United” case, which removed longstanding restrictions on political activism by companies, these bids for office still face significant obstacles—not least the requirement that candidates in Maryland be at least 18 years old. Murray Hill is just five. And it is hard to imagine many people voting for a candidate explicitly committed to putting business first.
Still, the Murray Hill candidacy does raise an important point about the future of democracy and the role of business within it. The Supreme Court decision appears certain to increase the influence of business in American politics, which is widely perceived as having grown significantly in recent years, and is often assumed, fairly or not, to be a bad thing.

(email readers will need to come to site to view 1 minute video)

Via Washington Post

Murray Hill might be the perfect candidate for this political moment: young, bold, media-savvy, a Washington outsider eager to reshape the way things are done in the nation's capital. And if these are cynical times, well, then, it's safe to say Murray Hill is by far the most cynical. After the Supreme Court declared that corporations have the same rights as individuals when it comes to funding political campaigns, the self-described progressive firm took what it considers the next logical step: declaring for office.
"Until now, corporate interests had to rely on campaign contributions and influence-peddling to achieve their goals in Washington," the candidate, who was unavailable for an interview, said in a statement. "But thanks to an enlightened Supreme Court, now we can eliminate the middle-man and run for office ourselves."
William Klein, a "hired gun" who has been enlisted as Murray Hill's campaign manager, said the firm appears to be the first "corporate person" to run for office and is promising a spirited campaign that "puts people second, or even third."
The ad makes a particularly passionate case for why it's necessary to have more direct corporate representation in Congress. In a soothing voice, a narrator bemoans that "as much as corporate interests gave to politicians, we could never be absolutely sure they would do our bidding." The ad includes images of gleaming office towers and disgraced lobbyist Jack Abramoff and promises Murray Hill will bring "enlightened self-interest and corporate accounting" to Congress.
The firm, whose clients include labor unions and environmentalists, is seeking to enter the Republican primary for the 8th District seat held by Rep. Chris Van Hollen (D). The firm "wanted to run as a Republican because we feel the Republican Party is more receptive to our basic message that corporations are people, too," Klein said, adding that his client has no particular beef with Van Hollen.
Murray Hill does face a couple of tiny problems in its effort to get elected to Congress. For starters, candidates must officially register to vote as a Republican to run in a Republican primary in Maryland. Late this week, the Montgomery County Board of Elections wrote to Murray Hill, informing the firm that its voter registration application had been rejected. (down with the humans!) Just another case of The Man sticking it to Corporate America.
The firm is weighing legal action, but the ruling still leaves open another potential path to victory. In Maryland, independent candidates are not required to be registered voters. They can qualify for the fall ballot by collecting enough signatures from voters in their district -- about 4,500, in this case. But the same pesky age issue is posed by the U.S. Constitution. It requires candidates for Congress to be at least 25 -- a concern that is likely to be flagged at the point the corporation attempts to file for office, which it has yet to do, said Jared DeMarinis, director of the candidacy and campaign finance division of the Maryland State Board of Elections.
The firm has prepared to deal with other "antiquated" parts of election law through the use of a "designated human" capable of signing paperwork and showing up at debates, for example.

Which leads to the next logical steps:

Murray Hill's interest has sparked other speculation among the political chattering class in Maryland. Why not have an accounting firm run for comptroller, the state's chief tax collector? Why not a law firm for attorney general? The winning firm could arrive in office with a full cadre of associates and save taxpayers money.
In the meantime, Murray Hill is looking to franchise -- and found its first taker: Computer Umbrella of Sterling. The company is planning to run in Virginia's 10th Congressional District.

Bookkeeping: Closing Seagate Technology (STX)

2010-03-19T11:35:00.000-04:00

I am closing out Seagate Technology (STX) for non performance in a market gone ballistic. It appears it is stuck being associated with Western Digital (WDC) whose chart is a mess. HAL9000 no longer seems interested in these stocks with PEs in single digits (6ish for STX) as there are retailers with PE of 40+ to chase after. You have to respect the microchips even if you don't understand them. Western Digital actually looks like a great short set up, it has been rejected on any bounce for almost a month straight.

I've been trading around this STX position since inception early February - essentially we've made nothing and leave flat.

I will seek out a consumer discretionary stock to buy in its place, preferably one with a PE ratio in excess of 50, which are all the fashion.

No position

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Bookkeeping: Short Maidenform Brands (MFB)

2010-03-19T11:05:00.001-04:00

I've only chosen this name for the sport of it all [Mar 10, 2010: Some Stocks Have Not Gone Down in a Month] - I am short Maidenform Brands (MFB) @ $21.35 level, with a 3% allocation. Any move over recent highs (low $22s) will have me out with modest losses of 4%ish.

A dream scenario would be to fill that gap near $18 but I will be content with more conservative targets.

With that I am short $300 jeans and cheap bras. I won't even make a sarcastic comment, although tempted.

Short Maidenform Brands in fund; no personal position

EDIT 11:10 AM (as outlined in previous post, I will be short indexes once 1160 has broke - which it is now doing, stop out will be something like 1163ish; near term target 1151-1152)
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Strategy For a Downside Move in the S&P 500: The Empire Strikes Back

2010-03-19T10:25:00.005-04:00

I am going to employ a sequel to my strategy outlined Monday [Mar 15, 2010: Strategy For a Downside Move] except instead of striking when/if the S&P 500 breaks below 1140 (which it failed to do), move that figure up to 1160. Indeed it's an identical set up... on Monday the market had bounced off 1140-ish intraday the previous few sessions, and now it's 1160ish.

Unlike Monday however, we have a new support level (1150) standing between us and a gap fill at S&P 1124. (old resistance becomes new support) So the shorter term move would be to short below 1160 with a target of 1150 where certainly the "persistent bid" will show up to support the market. Then a break below 1150 would perhaps lead to our gap fill.

That said, with what I see as euphoric joy off a census laden jobs report a week from next Friday - plus end of quarter mark ups (not that this happens because the SEC is on the job) next week, I'd be surprised to see us break 1150. That said this is the general outline to perhaps try to catch 8-9 S&P points of downside if and when....

For now, I am sitting back and watching the absolute carnage... the DJIA is down 0.15%. The horror of it all. Someone stop this, I can't look anymore. Ban short selling immediately. (how come we never hear discussions of banning long purchases when the market is up say 23 of 25 sessions? Or that longs are manipulating the market? if it was the opposite - down 23 of 25 sessions - you'd have cries of injustice and talks that shorting needs to be stopped. Or bring back the uptick rule. Etc. Funny that.)

Bookkeeping: Buying Back TriQuint Semiconductor (TQNT) Sold Yesterday

2010-03-19T10:07:00.002-04:00

I am simply trading around a core position in TriQuint Semiconductor (TQNT) as the stock has become a great vehicle to move in and out of, due to volatility. By not going straight up with no rest, we can squeeze some extra monies out of the name. Yesterday morning I punted 1/3rd of the position @ $7.30 (lock in the gains) as is the company pre-announced to the high end of guidance. I wrote:

We had a limit buy order hit for the stock Monday @ 6.78. With the stock up nearly 8% in 3 days I am going to take 1/3rd of the position off the table around $7.30, basically reversing the exposure I added Monday. I will repurchase if the stock can get over recent highs i.e. upper $7.40s.... or on a decent pullback. I think most of today's "surprise" announcement already was reflected in yesterday's big jump.

I placed a limit purchase order at $6.85 hoping it would get filled in the next few weeks. Instead the stock has dropped in 24 hours 30 cents, so I am simply going to buy back what I sold yesterday at $7.00 and then look to add to the position if it falls to the 50 day. Of course if it breaks that $6.70 area we have to cull exposure but it seems strange that this company that keeps announcing good news gets ignored, while other fare are going up relentlessly on nothing but HAL9000 PhD programmed "this is the playbook" buying. But it is what it is.

I am content to get back my exposure for this quick 4% reduction in cost basis. Since I was able to get back my 'trading' position so quickly, I can lower the price for any additional purchases down from $6.85 to $6.75ish.

p.s. things are so out of hand to the upside, even "buy buy buy" Jim Cramer says we need a pullback.

Long TriQuint Semiconductor in fund; no personal position

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Dow Theory Confirmed as of Yesterday's Close

2010-03-19T09:30:00.005-04:00

I am not sure if it's a moot point by this stage of the rally, but for those who still use Dow Theory - yesterday's close on the DJIA was a confirmation of good times ahead. Disclosure: I only follow this measure very loosely.

Via Bloomberg:

The Dow Jones Industrial Average yesterday rose above the midpoint of its last bull market in a positive sign for U.S. stocks, according to Richard Russell, who has studied the average since 1958. The advance by the 30-stock Dow also was a bullish signal for followers of Dow Theory, which holds that moves by the Dow Jones Transportation Average must be “confirmed” by the industrial average, and vice versa, in order to be sustained.
Yesterdays's close was the highest for the benchmark since October 2008 and its first close decisively above the 10,725 midpoint of its 94 percent advance during the bull market that started in 2002 and ended in 2007.
A close by the Dow above the midpoint is “a big positive for equities,” Russell, the 85-year-old editor of Dow Theory Letters, said in a telephone interview yesterday. “I would probably turn somewhat bullish.”
The confirmation by the industrial average of recent gains by the transportation average “would also be very bullish,” Russell said. The 20-stock transportation average, whose biggest components include FedEx Corp. and Union Pacific Corp., rose to a new high for 2010 on March 9 and has continued to advance every day since. The transports gauge has climbed for 10 straight days, its longest streak since 1993.
“I don’t want to be in stocks unless, or until, the Dow closes decisively above 10,725,” Russell wrote to subscribers of his biweekly newsletter March 16.
Gold is still a better investment than U.S. stocks because it offers protection from currency devaluation, Russell said. Gold futures for April delivery climbed to $1,124.20 an ounce yesterday and have rallied 21 percent over the past year. “The gold bull market is the strongest metric around now after going up for nine years,” he said. “If stocks had been making higher highs for nine years in a row there would be a frenzy for stocks. There’s very little excitement about gold.”

[Video] The Daily Show: In Dodd We Trust

2010-03-19T09:00:00.014-04:00

This is not so much 'funny' as it is sad and probably 'educational' to the masses who don't keep up with Wall Street's doings on a regular basis. Luckily, Jon Stewart's research staff seem to have a pretty good handle on the wonderful state of affairs. Judging from the quiet laughter in the crowd, it's either still above their head or all new information to them...

I have not even bothered to detail the Lehman Brother findings but basically it exposes Sarbanes Oxley legislation -especially the part where C-level executives must sign off on financial documents and hence be RESPONSIBLE for them - as a complete joke. It also speaks to our complaints about what a pathetic situation there is on corporate boards across America in terms of oversight. If you have not looked up WHOM (WHO?) was on Lehman's board, it's worth the google search. Thankfully, NO ONE appears to be in trouble... even though corporations now have the same rights as humans in Cramerica.

Carry on.

10 minute video (you can skip right to minute 2) - email readers will need to come to site to view

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

In Dodd We Trust

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Health Care Reform

Bookkeeping: Restarting Quality System (QSII)

2010-03-18T15:57:00.002-04:00

Quality Systems (QSII) broke over early March highs after being completely dead the past 5 weeks, so we'll see if we can catch a breakout here. I tried the same idea with Braskem (BAK) and it has not worked at all as the stock stalled immediately after the breakout. If QSII can rally from here, there should be no sweat until reaching $68. I will begin with a 1.4% exposure in the $60.80s.

We've been out of this stock since August 2009. The majority of the position was stopped out around $53, so it really has not done much considering the character of the market the past half year - essentially the stock rallied from last summer with the overall market, but gave much of it back. Still a quite expensive stock on PE basis, but it has had some time to get less expensive as higher earnings quarters have replaced lower earnings quarters. That said while I like the fundamentals, I am hoping to catch a nice move up on technicals. Or cause the market to finally sell off (see below)

My master plan now is to buy 1 new stock every 4 hours, and become more complacent by the minute. Perhaps only that will create a selloff in the market.

[Mar 25, 2009: Stimulus Funds for E-Records Augur Big Windfall for Small Health Firms]

Quality Systems, Inc. engages in the development and marketing of healthcare information systems in the United States. Its system automates various aspects of medical and dental practices, as well as networks of practices, such as physician hospital organizations and management service organizations, ambulatory care centers, community health centers, and medical and dental schools. The company offers proprietary electronic medical records software and practice management systems.

Long Quality Systems in fund; no personal position

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Large Public Homebuilders Benefit from Tax Aid - Lobbyists Win Again

2010-03-18T15:15:00.010-04:00

One major fallout from this recession is the discrepancy of what has happened between small private companies and large public companies, in the same sector. With the Federal Reserve shoving money into the capital markets there has been a flood of capital to deploy. This is why, despite the worst recession in decades, there have been so few public company failures... any company in trouble is able to issue shares and recapitalize itself. Casinos are too big to fail, home builders are too bit to fail, REITs are too big to fail - very very few public companies have actually failed these past few years. The entire public commercial real estate market has recapitalized itself this way, about 8-9 months ago company after company came to market, issued boatloads of shares to dilute shareholders... and the stocks shot up. Magic. No such "out" for private companies. Even as recently as this past week, I have watched companies in various sectors shoot UP after they do a secondary offer - that's not how is used to work. Usually in economics 101, when more supply hits the price goes down... somehow Uncle Ben has successfully repealed the laws of economics. When companies diluted their shareholders, the stock would go down... I can only attest there is so much money now flowing in the capital markets with no place to call home, institutional investors are piling in.

Specific to the homebuilders - in the worst downturn in US history - there have been no major PUBLIC homebuilder bankruptcies. Despite a death watch about 2 years ago. [Jan 29, 2008: Credit Default Swaps Paint Ugly Picture for Homebuilders] [Jan 11, 2008: Standard Pacific (SPF) - the First Major Homebuilder to Go?] [Jan 24, 2009: Bloomberg - Hovnanian May Fail Absent Miracle] Apparently miracles do happen and Schumpeter's "Creative Destruction" is now old school. (what's that you say about destruction being a necessary piece of capitalism?) Good old American ~~corporate socialism~~ free market capitalism.

Speaking of miracles, the US Congress is also a miracle maker.... especially when lobbyists are involved. 2 years ago when the first "beautifully titled" Foreclosure Prevention Act of 2008 was passed, we said this was a complete hoax... this was a bailout for banks and homebuilders (shocker!); it had very little do with preventing any foreclosures. [Apr 4, 2008: Congress is Rushing to Help Homeowners Out!! (Not)] As written in 08:

The National Association of Home Builders, one of the top 10 corporate donors to politicians, has stopped contributing to congressional candidates after it failed to get what it wanted in recent anti-recession legislation.

The association had unsuccessfully pressed lawmakers to adopt a provision to reduce the tax liability of home builders by allowing them to offset their past profits with future losses.

Since 1990, the trade group has given nearly $20 million to federal candidates,

But who says nothing gets done in the halls of Congress? When they are motivated, and see their political contributions at risk... boy, they are like a steamroller! In under 60 days...

Homebuilders and the mortgage industry are emerging as big victors in a bipartisan agreement reached by Senate leaders on legislation designed to limit the housing crisis.

The bill contains a $6 billion emergency tax break that would let companies use losses from 2008 and 2009 to offset profits earned over the previous four years, instead of the usual two-year timeframe.

Other big beneficiaries would be Wall Street banks such as Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley.

While Democrats and Republicans called the bill a productive bipartisan compromise, Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington, questioned whether the trade off was worthwhile for Democrats. "This is first and foremost helping the big villains in the story," he said.

So please don't say Congress doesn't do anything. The minute their campaign donations are threatened they are among the most efficient bodies in the world.

About 9 months ago, I highlighted another story [Jun 23, 2009: WSJ - Land Deals Help Home Builders Stay Alive (Not to Mention Tax Rule Changes, and Government Largesss]

Other publicly traded home builders also dumped land during the crunch. By selling land at huge discounts to what it was once valued, big builders generated large losses for tax purposes.

By applying those losses against profits during prior years, they have collected about $2.55 billion in tax refunds this year, according to Zelman & Associates, a housing-research firm.
Big builders are benefiting in other ways from the high mortality of small and midsize builders. The smaller players had loans cut off by lenders and are dying off in droves, surrendering market share to the big players. As many as half of the nation's privately held builders have shut down during the housing bust, and many others are struggling to survive, according to a Credit Suisse estimate.

So the big get bigger & consolidate power, and the small(er) die. If you are a major political contributor, heaven and earth will be moved for you. If you are smaller - you should go into that dark corner, fend for yourself, and preferably rot so that the bigger can take over more of the market (and the politicians get even more political contributions). Welcome to Cramerica.

The past quarter I was doing a lot of reading of housing earning reports... across the board they beat estimates by huge margins. Business rebound? Not so much. But a massive handout by Congress with tax loss rule changes contributed huge gains to EPS. It has become so egregious that much like the smaller banking institutions in America are complaining about the "firewall" around the largest banks, we are now seeing the same thing in the housing industry.

Not that it matters, because it's business as usual, and as speculators we just have to giggle in glee and accept the taxpayers handouts. (Remember, Wall Street = Main Street). By direct transfer, the taxpayer losing out on this money means more money for me as a speculator. Did I mention Cramerica is a wonderful place?

Via AP:

It's tax season, and the IRS is being particularly generous to some of the nation's largest homebuilders. Several publicly traded companies, including Lennar Corp (LEN)., Hovnanian Enterprises Inc. (HOV)and Pulte Homes Inc (PHM)., expect to rake in roughly $2.5 billion in federal tax refunds combined, according to company filings.

Stop for a moment there. $2.5 Billion. The majority in about 9-10 companies. Once more let me say as I've repeated over and over the past 3 years, the best ROI (Return on Investment) in America is lobbying dollars. Crony corporate socialism defined. (and this is why we are seeing the huge beats in earning estimates)

Lawmakers amended the tax code last fall to help struggling companies stay in business by essentially giving them a greater opportunity to recoup previously paid taxes. The move has helped some of the biggest builders turn a profit for the first time in years.

So if you dear peon make financial mistakes in your life... say overextend yourself, you tend to have to deal with minor things like bankruptcy. That's the life of a taxpayer. If however, you are a public corporation with politicians wrapped around your torso, you don't suffer the same consequences. Indeed, money will be transferred to you so you do not suffer from your decision making. It's a good life no? (insert dogmatic line here "We need to bailout the largest homebuilders or the economy would fail") No wait, that was the line used for the banks.... err, well get back to me and I'll think of a good reason for this handout - especially for homebuilders that were not even in real financial trouble but who benefited during the bubble times and in down times were given massive reverse Robin Hood (steal from the many, to give to the few) handouts.

But some small builders say the souped-up tax break is primarily giving their large rivals yet another competitive edge. That's because the latest windfall looks less like a lifeline and more like a war chest. Several large builders are now sitting on more than $1 billion in cash and are snapping up tracts of land to be ready for the next building boom.
"These public (builders) sold hundreds of millions of dollars worth of land and took huge losses and wound up with hundreds of millions of dollars of checks from the government sitting on their balance books," said Ken Endelson, CEO of Kenco Communities in Boca Raton, Fla. "It was a real bailout. No different than the banks."
In November, Congress passed a law that lets companies of all sizes that are losing money reach back five years and get a refund for taxes paid when they were making money. Previously, large companies were limited to recouping taxes paid up to two years earlier. That extension was a boon to builders because the economy and the housing market were flying high five years ago and they couldn't put up new houses fast enough. "They were earning bubble profits back then," said Credit Suisse analyst Nishu Sood.

On FMMF, we call this the "heads we win, tails we still win" ethos that now dominates almost all of the major industries in America (not to mention corporate executive compensation) - but only if you are amongst the largest players of course. You win from the bubble profits.... (which you had to pay taxes from) but when the bubble bursts... guess what, we will retroactively make sure you are refunded those taxes paid!

Sood, the Credit Suisse analyst, estimates that a dozen of the publicly traded builders paid about $8.5 billion in taxes between the booming years of 2004 and 2007. As of November, the builders had recouped $3.7 billion in refunds.

So basically HALF of the BUBBLE year profits in taxes, were handed right back to the homebuilders. Good thing the US doesn't have a budget deficit or anything ... or else we'd actually need this money we just handed back to a select few companies.

But we are not DONE yet...

At the current pace, the large builders combined are on track to recover at least $6 billion in refunds.

Boo Yah! Almost 3/4ths of the tax receipts from the Ben Bernanke/Alan Greenspan bubble will be handed right back to the homebuilders. Heads they win, tails they still win. Now bonus those executives because it takes a certain type of talent that only a few people on Earth have, to run a company where you don't even have to pay taxes. And all your mistakes are washed away by Congress. (remember this is what executives tell us when anyone question's compensation - they have a skill set that is so rare)

In recent weeks, builders have reported quarterly results that include the gains they expect to receive from tax refunds. Among those to post a profit were KB Home, Lennar, Hovnanian, D.R. Horton Inc., Beazer Homes USA Inc., Ryland Group Inc. and Meritage Homes Corp.
Pulte, the nation's largest builder, lost money in its fourth quarter despite an $800 million tax benefit. (that's real money folks, you just handed back almost $1 billion to one company... did you receive a thank you note in the mailbox from Pulte?)
Hovnanian, which is based in Red Bank, N.J., earned $236 million for its fiscal first quarter -- its first profit since 2006. But without a $291 million tax benefit, the company lost about $55 million, or 69 cents a share. (you're welcome Ara, the CEO who has been paid $90 million in the 5 year period through 2008, thanks to Ben Bernanke's bubbles, this was one of the companies that should have been put out to pasture if the "free market" existed. Now it will probably be a $30 stock in a few years - the taxpayers of America are a generous people) Analysts say the tax refunds have allayed bankruptcy concerns for Beazer and Hovnanian.
Government efforts to prop up the housing market, such as two tax credits for homebuyers, helped drum up orders last year. But most builders have said sales remain weak, so they're bringing in less in revenue. To stay afloat, builders laid off thousands of employees, halted developments and generated cash by selling land at sharp discounts. That led to losses they are using to collect tax benefits now.

So the tax refunds helped a few public homebuilders that should of gone to bankruptcy survive, but for the others it just helped pad their war chest. So they can win again with the taxpayers help during the next real estate rebound...

For others, such as Pulte, Lennar and D.R. Horton, each with more than $1 billion in cash reserves, it's given them more financial elbow room.
Many large builders have been buying up developed home sites, often from banks that have repossessed the land from other builders unable to make loan payments. It's a smart move because the land is cheaper now and homes built on it can be sold eventually at a higher profit. The bigger companies also can afford to wait out the market better than smaller builders.
"We don't have the ability to buy a bunch of property right now at a discounted price like (large builders) do," said Mick Galatio, owner of Desert Wind Homes in Las Vegas. "They're really getting a jumpstart on the small, private builder and we're going to have to work very hard to try to compete with that."

Sorry Mick... you are ~~too big to fail~~ too small to care about.

Speaking of, it's almost time to start buying some homebuilders so we can all watch in amazement as May home sales are higher than April home sales, and June home sales are higher than May.... remember, last year when that happened every pundit was shocked at the "housing recovery", and home building stocks surged. Even though this seasonal pattern happens every year, we have to prepare for the cries (of joy) of "here comes the housing rebound" when once again it happens this year. Need to go find my Kool Aid costume...

Long taxpayer handouts so public companies can benefit, and small private companies can go into a corner and die. Yee haw.

Bookkeeping: Restarting Alpha Natural Resources (ANR)

2010-03-18T14:18:00.001-04:00

We've been discussing coking coal a lot of late, and when I sold Potash this was one sector (the other being iron ore) I wanted to offset that sale by going into. However, the stocks involved have simply been on fire, and most days you have to chase just to be involved. Of the major met coal stocks, Alpha Natural Resources (ANR) is the one that has lagged a bit, and is now the closest to a support area so I will throw in the towel and "kind of" chase it here around $50.50. I am beginning with only a 1% allocation - I'd rather buy more in the $46 to $49 range but at this point it's a victory to buy anything even at the 10 day.

As the chart below shows even the "laggards" in this sector you have to chase around the 10 day moving average because they won't even fall to the 20 day. When this market finally does correct this type of company will have some days it loses 8% in a session.

ANR was once our largest position - in fact there was a buyout for the stock when it was our top position, but in a wicked twist of fate the largest shareholder wanted nothing to do with the acquisition so I was lucky enough to own a stock that went down after a buyout offer. It's been a while since we've owned it.

As for the greater market - just another groundhog day. At some point you'd expect the market to at least pullback to mid 1150s or something to create some opportunities for purchases, but we only fall 0.2%. Hence similar to what we saw a week or two ago, the market is working off oversold conditions by just going sideways rather than down. Before the next grind up.

I am lemming, hear me roar.

[Jul 31, 2009: Alpha Natural Resources Finalizes Foundation Coal Deal to Secure #3 Spot in US]

Long Alpha Natural Resources in fund; no personal position

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Bookkeeping: Selling 1/3rd TriQuint Semiconductor (TQNT) as it Takes Guidance to Top End of Range

2010-03-18T09:40:00.006-04:00

That was quick. Just over 3 weeks since last reporting earnings [Feb 26, 2010: TriQuint Semiconductor - Solid Earnings, Guidance Good] the company has already pushed guidance up to the top end of the previous range.

Let me point out yesterday's stock action smacks of "leak" as the stock was up strongly when its peers did nothing. I'll go email the SEC to look into it (insert laugh track here)

TriQuint Semiconductor, Inc.(TQNT) a leading RF front-end product manufacturer and foundry services provider, updated its Q1 2010 guidance and now expects revenue on the high end of previous guidance of $175 million, which represents more than 47% year-over-year growth.
A tax credit of about $1 million will be recorded, and non-GAAP earnings per share is expected to increase from previous guidance of $0.08 - $0.10 per share to approximately $0.11 per share for the quarter ending April 3, 2010.
Ralph Quinsey, TriQuint’s President and Chief Executive Officer, announced this update at its annual Investor and Analyst Day in New York today.
Following Quinsey’s overview, several members of the executive team are outlining TriQuint market strategies and operational initiatives; these presentations are being webcast and the audio will be archived and accessible from the Events tab of TriQuint’s investor website.

We had a limit buy order hit for the stock Monday @ 6.78. With the stock up nearly 8% in 3 days I am going to take 1/3rd of the position off the table around $7.30, basically reversing the exposure I added Monday. I will repurchase if the stock can get over recent highs i.e. upper $7.40s.... or on a decent pullback. I think most of today's "surprise" announcement already was reflected in yesterday's big jump.

Long TriQuint Semiconductor in fund; no personal position

WSJ: SEC Tried to Ease 2003 Curbs

2010-03-18T09:10:00.000-04:00

A disgusting, although not in any way shocking, story fronting the Wall Street Journal today. For all the recent ills of Eliot Spitzer, his rampant ambition for higher office led him to actually be able to push through some much needed reform early in the 2000s as NY's Attorney General, after the abuses of the 1990s. Obviously our banking oligarchy were incensed, and it seems one of the nation's main regulators has been working hand in hand with the oligarchs to try to reverse some of those reforms. Yet another example, in a countless string, of a captured US regulator.

Just remember, the SEC is here to protect ~~the financial oligarchy~~ you. [Mar 1, 2009: 60 Minutes - Harry Markopolos - The Man who Figured Out Bernie Madoff]

Via WSJ:

The Securities and Exchange Commission joined 12 Wall Street firms in seeking to scrap a key portion of a landmark 2003 deal that put strict curbs on stock analysts, a move that could heighten the ongoing debate about a broad overhaul of the financial-regulatory system.
In a ruling Monday, U.S. District Judge William H. Pauley III in New York rejected a proposed change to the legal settlement put in place to end abuses on Wall Street. The proposal would have allowed employees in investment-banking and research departments at Wall Street firms to "communicate with each other…outside of the presence" of lawyers or compliance-department officials responsible for policing employee conduct—an activity strictly prohibited by the settlement.
The settlement came soon after the bursting of the technology-stock bubble, which was caused in part by overly optimistic reports from Wall Street analysts that sent stocks soaring. After the bust, it was revealed that many of those analysts were touting stocks at the behest of their firms' investment-banking operations, which were profiting from initial public offerings. One solution to the conflict of interest was separating the analysts from the investment-banking operations. (if you were not around at the time, many analysts were touting absolute junk to the masses so their investment banking arms could sell the crap, all the while sending internal emails to each other laughing at what was going on, knowing outright these companies brought public were complete jokes)
The 2003 settlement led to changes in how securities firms operate. During the Internet bubble, some analysts publicly suggested investors buy stocks, even as the analysts disparaged the companies in private emails. The companies usually were investment-banking clients of the analysts' firms. (i.e. the same behavior that goes on in any good scam artist operation)
The 2003 pact included a complete separation of research and banking staffs, budgets and chains of command—and a physical separation of the two operations. Analysts were prohibited under the settlement from even speaking to investment bankers unless someone from the firm's compliance department was present. The firewalls were aimed at prohibiting improper communications.
"The parties' proposed modification would deconstruct the firewall between research analysts and investment bankers erected by the parties when they settled these actions," Judge Pauley wrote in his ruling. Approving the request by the SEC and securities firms "would be inconsistent with" the settlement "and contrary to the public interest."
Securities firms covered by the settlement, including Goldman Sachs Group Inc., Morgan Stanley and the Merrill Lynch & Co. unit of Bank of America Corp., declined to comment.
Some outsiders expressed surprise that the nation's top securities watchdog sided with Wall Street in an effort to unwind a major provision of the $1.4 billion settlement. (what outsiders are surprised? The SEC is basically a partner to the investment banks...err, I'm sorry - the watchdog) The agreement settled allegations that securities firms issued overly optimistic stock research in order to win lucrative investment-banking business. "I am all for judges being the hero, but isn't the SEC supposed to be?" said James D. Cox, a law professor at Duke University. "The issue of communication between analysts and bankers was at the heart of the entire issue that led to the global settlement. My initial question is: Who at the SEC allowed this to happen?"
Harvey Goldschmid, a SEC commissioner when the settlement was reached, said the judge's ruling "was right." "The separation of investment banking from the analysts was a wise thing when we approved it in 2003, and I would not change it," he said. "The firms can argue it would be more efficient to allow the contact, but sometimes when you're talking about very marginal efficiency, there's reason to keep rules that are clear and enforceable."

[Video] Scott Bleier: Behold the Zombie Market

2010-03-18T08:20:00.001-04:00

A very solid interview with Scott Bleier of Createpcapital.com over on Yahoo Tech Ticker... Scott touches on a lot of themes and gives a realistic point of view on what is actually going on in the markets. Doesn't vary much from many of the points of view outlined on this site over the past few years.

[Email readers will need to come to site to view video]

Stocks were higher midday Wednesday, putting the Dow on track for a seventh-straight gain while the S&P 500 moved to its highest level in 17 months. In what's become a familiar pattern, the rally is occurring on low volume and without any of the drama investors have become accustomed to in the past two years. That's good news but it's also a sign of what Scott Bleier, president of CreateCapital.com, calls a "zombie market," where the vast majority of trading volume is computer driven and occurs at the open and during the last 10 minutes of the session.

Bleier's theory -- which definitely has some "conspiracy" elements -- is that policymakers at the highest levels of government have come to the realization that "it's the capital market tail that wags the economy's dog." While there's no way to prove the "plunge protection team" is in the market buying futures to make sure major averages stay above "critical" levels, what is true is the Federal Reserve has taken extraordinary measures to aid the financial markets.

By keeping rates at zero for an "extended period," the Fed has allowed the banks to repair their balance sheets by earning the spread between the fed funds rate (effectively zero) and the "risk-free" rate of return on 10-year Treasuries, which is hovering around 3%. This "free money" trade is a big reason why banks have been sitting on TARP funds, rather than lending them out.

But the Fed's comments about buying mortgage-backed securities are at least as important as the comments about rates, Bleier says. The Fed has pledged to purchase $1.25 trillion of agency mortgage-backed securities. In effect, the Fed is allowing banks and brokers to park their "toxic" assets on the Fed's balance sheet and given the investment community cash equivalents in exchange. "They then turn that into investable dollars. They leverage it up and buy stocks, bonds and commodities," Bleier says. While one of many factors, the Fed's MBS purchase program is the single-most important reason why the financial markets have risen so dramatically in the past year, Bleier suggests.

Along with raised earnings expectations, the "hand-off between a government-supported market and a market that can stand on its own two feet" is the "major risk" facing the bulls, Bleier says. "We have not see any technical signs to bail from this current rally [but] we have got our finger on the trigger."

Bookkeeping: 2nd Half of Index Position Exited as S&P 1165 is Broken

2010-03-17T15:22:00.007-04:00

So far so good. Out of the 2nd half of the index positions as outlined an hour or so ago, once we broke S&P 1165. No questions asked.

Now I have to wonder if my theory of how this move ends will play out. [What's the Potential End Game for this Move] If we actually had a selloff from here, my old school theory would be near perfect, within about 5 S&P points. But, for all I know we gap up over S&P 1170 tomorrow morning. A time to observe for now, we squirreled away our gains and can let those who enjoy the high wire try to keep the act going in increasingly thin air.

Next long index positions will be on new highs, i.e. over S&P 1170.

Broken record alert: "we are so overdue for a pullback".

The Stock Market Priced in Gold is Actually Down Since Last Fall

2010-03-17T14:58:00.004-04:00

A telling illustration if you believe gold is the ultimate store of value, as it is beholden to no government printing press. The US stock market is actually lower in value today than it was last fall, if you price it in gold terms.

Meanwhile, if you price the S&P 500 in US pesos, we are in a party for the ages. Of course most people fail to recognize a flood of new money will push up values of all assets of finite quantity (limited supply of X - oil, gold, copper, stock certificate - chased by ever increasing amounts of paper money)

Even more scary considering much of 2010 has been a period of outperformance for the dollar due to the Greece debacle.

Nominal... versus real gains. If Ben Bernanke has his way, more Americans are going to learn the difference between the two. If the stock market is up 40% since 2003 but Alan Bernanke (or is it Ben Greenspan) devalues your currency by 40%, you've truly made nothing. Luckily for the powers that be, almost all Americans only understand the nominal world.

We'll revisit in 6 months. Or sooner is Ben's master plan helps get crude oil over $100, and people start wondering why they are paying $3.50 for gas in a tepid economic recovery. (I'm sure they'll blame China or Congress will have the oil executives paraded on Capital Hill; meanwhile Ben will be collecting more power for his Fed)

(just for kicks, the S&P 500 priced in oil - once more, our purchasing power is being destroyed silently)

Bookkeeping: Selling Half of Index Positions as S&P 500 Runs to 1170

2010-03-17T13:53:00.004-04:00

I am selling half of both the TNA ETF and SPY April 116 calls I bought yesterday morning [Here We Go] as the S&P reaches my target of 1170. (just below)

I was hoping to catch a "16" point move on the downside this 4 week period if S&P 1140 was broken Monday (target downside 1124). Instead I caught a "16" point move to the upside as we entered over 1154 and now we have 1170(ish).

The 2nd half of both positions will be sold on a break below 1165 so I can preserve profits (less profits than this half of the trade, but still very nice ones). If 1170 is breached to the upside I'll let the other half run as the house's money.

I was more aggressive than usual on my allocations this time around

TNA ETF I went in with a 13% allocation, 6.5% of which is being sold now. I caught roughly a 4.5% gain in about 1.25 of a session.
SPY April 116 calls with a 9% allocation, 4.5% of which is being sold now. I should have about a 35% gain on those in 1.25 sessions.

Again to repeat, if S&P 1165 is broken to the downside - I sell the rest, no questions asked. If 1170 is broken to the upside I will carry the rest and just play it by ear. These index plays are just made to amplify our returns in very short bursts so I've been waiting for one of these moves that I could correctly catch for about 4 weeks. I could be greedy and keep the whole batch of index positions and hope for S&P 1180, 1200, heck 1250 at this pace, but the idea here is to rent our cash for very short periods of time and make our return, and get back our money. This reduces risk; it's not about squeezing every last dime - it's about squeezing as many dimes as possible with as little exposure as possible to the market.

p.s. S&P 1078 gap still remains... from here that is 92 S&P points down or nearly 8%. I can't wait to make hay on that trade. The higher we go from here, the bigger than trade will be; if we only catch half of it with puts it will be huge. April or May 2010.

Long both names mentioned in fund; no personal position

x

Massey Energy (MEE) Seeks to Double Metallurgical Coal Sales with Purchase of Cumberland Resources

2010-03-17T13:09:00.002-04:00

As much as I am a long term bull on these coal names (and have been since 2007), the moves of late remind me of when companies announced a stock split or a new website launch in 1999 and speculators ran into the stock, driving it up 15% overnight. Right now people are frothing at the mouth for anything coal - specifically metallurgical coal related (which is the type of coal that goes into steel). [Mar 8, 2010: BHP Billiton Pushes Through 55% Price Increase in Coaking Coal Prices, Quarterly Pricing - Iron Ore Also Potentially Set to Soar] Massey Energy announced a purchase ($1B) deal Tuesday evening and the stock is flying today.

Coal producer Massey Energy Co. said Tuesday it has agreed to buy privately held rival Cumberland Resources Corp. for $960 million in cash and stock. Richmond, Va.-based Massey called Cumberland a good fit for its strategy of capitalizing on growing Asian demand for higher-priced metallurgical coal. Approximately half of Abingdon, Va.-based Cumberland's 416 million tons of reserves in Virginia and Kentucky can be used as metallurgical coal, a key ingredient in making steel.
Massey recently announced its first shipment of 80,000 tons of metallurgical coal to China and expects to sell about 2 million tons of coal to India this year. Earlier this year, the company announced plans to invest $160 million this year in the first phase of a a mining complex capable of producing 2 million tons of metallurgical coal annually.
Terms of the deal call for Massey to pay $640 million in cash and $320 million in stock.

Obviously this is far more concrete than opening a new website, but the delirium associated around these announcement is striking. Cumberland Resources apparently has enough met coal to double Massey's sales in that subsector, and in today's market that is enough to create great joy.

This is one of the sector's I had been looking to move into (along with iron ore) when I sold my Potash exposure, but I was waiting for this elusive pullback that just seems to never appear. Chasing stocks has been the way to go in this now 5 week non stop rally.

Mine operator Massey Energy says this week's $960 million acquisition of Cumberland Resources will advance its goal of doubling sales of higher-priced coal used to make steel by 2012. Massey, like other coal producers, has moved aggresively to capitalize on surging demand in Asia for metallurgical coal, with the U.S. and Europe still recovering from the recession.
Massey told analysts Wednesday the company is pushing for 20 million tons of metallurgical sales. Virginia-based Massey plans to ship 10 million tons this year and says Cumberland should contribute 5 million more within two years. Cumberland shipped 800,000 tons of metallurgical coal last year.

So Massey thinks it can increase from 800K tons to 5 million in 2 years on the Cumberland assets? I am not a mining expert, but wow - that seems aggressive. Was Cumberland asleep at the wheel or some awful operators that they were not able to ramp up on their own? But the reality of what actually happens in 2 years does not matter at this moment - if it is promised today, speculators salivating on their shirts want in. If Massey can pull this off, it will position it along side Walter Energy (WLT) as one of the favorite's for the met coal crowd.

I'm actually fascinating by this sector's movements, considering China - who is the main country sucking up the world's commodities while the rest of the largest developed economies suck wind - is making noises about slowing down its economy. Quite a dichotomy but it does fit in the thesis of those who believe the world economy will be back to (near) normal by 2011.

No position

WSJ: Business Sours on China

2010-03-17T12:10:00.009-04:00

A very interesting headline story in the Wall Street Journal, on how foreign business is increasingly wary in doing business with China. So many cross currents happening here, it is hard to even begin to touch the surface of the topic... but a lot of this should be of no surprise. There has been a reason every foreign investment in China is done by joint venture and since the time frame of foreign executives (especially of the American kind) is very different then the Chinese, what has been a 'win-win' in the near term (10-20 years) is going to potentially create some major stresses down the road. For now, multinationals have been able to shed costs (Western labor) at a rapid clip, creating massive wins for the executive class while (to gain access to the China market) being forced to share know how, technology, and the like. Eventually the Chinese are going to find these Western companies "inconvenient" to keep around....

Many dismiss any threat from this relationship because "the Chinese don't know how to innovate"... what beautiful narcisstic dogma. Give it 2 generations... already we can see on the horizon Chinese cars coming to the US market (3-5 years). Just as Hyundai was laughed at 20 years ago, so will this first wave. But check to see what auto company fared best in the past 3 years. Rinse, wash, repeat across industry after industry... as more and more manufacturing and now research & development centers sprout up across China.

These are long term trends, and on Wall Street if the tree is not directly ahead of us, we could care less. But the greater issues for economies, countries, and our dear multinationals are going to be multi faceted. In the meantime, our pathetic political class - in a move to find a fall guy to distract Americans from their inability to do a darn thing - are now creating a new villian... the Chinese.

Five senators including Charles Schumer of New York and Lindsey Graham of South Carolina introduced legislation yesterday to make it easier for the U.S. to declare currency misalignments and take corrective action. Even if the bill stalls, it may have “ripple effects” that lead the Treasury Department to declare China a currency manipulator, William Reinsch, president of the National Foreign Trade Council, said.
“The only way we will change them is by forcing them to change,” Schumer said. The yuan is undervalued by as much as 40 percent, which is “blatant protectionism,” Bergsten said.

Of course, just as America is neutered in many areas of the Middle East due to its addiction to oil (remember our limp response to $140 oil), it is very similarly neutered in China. Geithner almost caused an international incident in his confirmation meetings when people thought he implied China *might* be manipulating its currency. How can you strike back against your drug dealer? Who would buy all our IOUs?? Oh baby... somewhere Niall Ferguson is smoking a cigar and cackling as he watches this play out. [Aug 30, 2009: Chimerica Headed for Divorce]\

Via WSJ:

China's relationship with foreign companies is starting to sour, as tougher government policies and intensifying domestic competition combine to make one of the world's most important markets less friendly to multinationals. Interviews with executives, lawyers, and consultants with long experience in China point to developments they say are making it much harder for many foreign companies to succeed. They say the changes suggest Beijing is reassessing China's long-standing emphasis on opening its economy to foreign business—epitomized by the changes it made to join the World Trade Organization in 2001—and tilting toward promoting dominant state companies.
Technology executives say they are highly concerned about government procurement rules issued late last year that would favor local suppliers who have "indigenous innovation." The rules, if implemented, could limit foreign access to tens of billions of dollars in contracts for computers, telecommunications gear, office equipment and other goods.
Patent rules imposed Feb. 1 threaten to increase costs in China for foreign innovators in industries such as pharmaceuticals, and let authorities force foreign drug companies to license production to local companies at state-set prices.
Executives in several industries say the liberalization spurred by China's WTO entry is stalling. Foreign makers of wind turbines and solar panels say they are being shut out of big renewable-energy projects. (even as much of Americ'a stimulus money - i.e. taxpayer money - for renewables is going to China) Regulatory barriers effectively cap participation in insurance: Foreign companies had just 4.7% of China's life-insurance market as of June, and 1% of its property and casualty market, according to PricewaterhouseCoopers.
Some sectors haven't been significantly hindered. Car makers like Volkswagen AG and General Motors Co. benefited hugely from China's booming market last year. But state-run media have reported government plans to increase domestic brands' share to over 50% of passenger vehicles by 2015, from 44% last year.
Many foreign executives say they see an upsurge in economic nationalism, accelerated by China's world-beating performance during the recession and a new disdain for Western economic management.
Signs of nationalism are evident in the grooming of state-owned companies to dominate their industries as "national champions," often at the expense of private Chinese companies as well as foreign firms. From airlines to coal mining to dairy products, government policies are expanding the state's role.
For many multinationals in China, today's profits follow years of investment, much of it encouraged by government policies designed to lure capital. Now, at the point when their dream of access to a giant market is becoming reality, China is so prosperous that it has less need for foreign funds. (bingo)
Beijing has long harbored suspicions the West wants to hobble its economic rise. Analysts say that lately, such insecurities have strengthened the hand of leaders who want to limit foreign presence in the economy. While there are still proponents of openness, says Mr. Ross of WilmerHale, "there are louder voices pushing China to be more protectionist and to be more nationalist."

NBC/WSJ Poll: 17% Approval Rate for Congress; Half of Americans Would Vote Every Member Out

2010-03-17T11:27:00.003-04:00

The message is finally getting across to Americans ... who for so many years have been distracted by the politicos with "hot button" issues. Years of giving away the country to a tiny fraction of special interests (who apparently are "people" too according to the Supreme Court), appears to have finally caught up to our ~~feckless~~ fearless leaders. My only worry is that by November 2010 the census workers are going to create a lot of "job gains" so the economic data is going to be overstated, which might have people think it's better than it really is. But let us see. As I wrote in [Jan 20, 2010: What Can (Scott) Brown Do for You? Not Much... if you are an Incumbant] the GOP wrongly clung to this victory as some sort of referendum on "their way". Their way, as we saw for 8 years, has been very little different then the other side of the 2 headed monster - at least if you watch their actions, and ignore their empty words. As written in January:

Both of these fair and balanced channels have it wrong - as did the political commentators on these, and many other channels. Living in the NYC or D.C. media ivory tower's; they simply do not get what is happening "out here" on Main Street. People are very angry...indeed I'd say frightened in many cases because they don't fully understand the big picture of how we got here. But they know something is very wrong and it did not just start 1 or 2 years ago. I proposed in 2007 that the conventional wisdom that America loves gridlock because at least the politicians could do no damage was now officially dogma - except on Wall Street where gridlock = secure profits for the largest of our corporations. This current crop of politicians can do damage by doling out political favors in any formation - gridlock or no; they are just *that* talented. I said, unlike perhaps in the 80s or even early 90s when the politicians were not helping the country but at least a somewhat bemusing sideshow - the current era politco class is like a long trail of iron spikes on the freeway of America. They inflict monster damage with their crony corporate socialism... all the while inflicting untold damages to future generations that have not even begun to be truly accounted for.

I expect Scott Brown - he whom I know nothing about other than his catchy sound bites that sound almost identical to every candidate before he/she heads off to Washington (I assume he is a "maverick") - to be a precusors for major incumbent carnage in 10 months. Even with the power of familiarity in American politics, and the crime that is the cattle trading of Congressional redistricting it has now reached the point the flustered, angered, and downright exasperated US public is going to rotate new people into these roles until they find people who actually are "reprensentatives" again. Who actually will think out 5-10-20 years and tell us things we might not like to hear but know we must. (Volcker, David Walker) It might take 20 years, but we're just getting started on this path.

So today the GOP celebrates as they believe they have captured the desperate independent vote ... while many of said independents wish there was a 3rd, 4th, or 5th viable party in our corrupted system. Until then the same oligarchic system that exists in most major US industries, repeats in our political system and the "change" will have to come from within its confines.

Change is coming, I only wish we did not have to waste another 8 months. No idea if the new crop will be any better (my assumption is mostly "no") but I'd expect if not, they will be sent packing in 2-6 years hence:

More than half of respondents in the new NBC News/Wall Street Journal poll said they would vote to defeat every single member of Congress, including their own representative.
The poll found that, overall, members have a 17 percent approval rating.
More than three-quarters of voters, 77%, said they disapproved of the job Congress was doing.
More broadly, the survey showed continued gloominess among all voters about the country's direction, with nearly six in 10 saying it is on the wrong track.
Asked if they would still vote to replace every single member of Congress if that resulted in Democrats still controlling Congress, nearly three-quarters (72%) said yes.
And asked if they would still vote to replace every member if that resulted in Republicans controlling Congress, a virtually identical number (73%) said yes.

This is the definition of a broken system.

You Can Still Make Money on the Short Side, but It's Tough

2010-03-17T10:27:00.001-04:00

When I added Cemex (CX) and Vulcan Materials (VMC) as shorts Monday, to create some downside hedges - I offered my third choice would have been Shanda Interactive (SNDA) ... indeed if I was not writing down all my material moves on the website, I offered in "the real world" I would have done this transaction.

In the real world, I'd probably place a short here (20 day moving average) with a very tiny stop loss (within 1%) - but I don't want to bother writing the transactions out on the website ("I'm short!" but 20 minutes later "I'm stopped out!"), so I'm skipping it at this level, but it's one of my outstanding short limit orders and worthwhile for the nimble...

In retrospect that one actually would of worked, to the tune of 7%! Which in this type of market is akin to 25% considering how strong the market is. That gain actually would of offset the 2 losses in CX and VMC nicely and kept us flat among the 3 short positions - which is a victory in this sort of circumstance. So a bit of misfortune as I did not take the trade that did work, and instead went with two that the market melt up helped carry up. But it sure isn't easy to have anything on the short side of the ledger.

As Jim Cramer says .. there is always a bear market somewhere. Err...

No position

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Moving Mental Stops on Index Up About 10 S&P Points; Stopped Out of Cemex (CX) Short

2010-03-17T10:16:00.002-04:00

Full breakout mode at this point... I thought Monday if S&P 1140 was broken we'd get our "easy" 16 point move to the downside (to fill a gap). It appears instead it will be going to the upside, which running a long-short strategy is fine by me. As we sit looking at S&P 1165 I will begin locking in some profits on the index instruments either (a) as the S&P 500 approaches 1170 OR (b) on a pullback to the lower 1160s as I don't want to give away these profits.

The short on Cemex (CX) just triggered its stop out with a 4% loss as $10.65 was surpassed; no surprise here as we're in melt up mode.

Otherwise, anything else I'd offer on the market itself would be a broken record. Obviously when we do correct it will be nearly impossible to be holding any short positions because they will all be stopped out.

Yikes...

I Should Own at Least One Staffing Company

2010-03-16T15:30:00.003-04:00

Why I do not own one staffing related company, as temporary labor jumps and the next few employment reports should be very positive, is beyond me.... smacking myself in the forehead.

Even Manpower (MAN) which is more "slow growth" European oriented [Apr 21, 2008: Manpower as a Weak Dollar Play? Who Knew] is flying.

You can even go the online route, with a company like Monster Worldwide (MWW) <--- breakout (with no volume confirmation of course)

Simply amazing to watch all these stocks rally with volume shrinking... all the technical analysis books will need to be revised, rewritten, and trashed under the new rules of a stock market that can levitate with no need for volume.

No position, sadly

FOMC Non Event

2010-03-16T14:47:00.002-04:00

To no one's surprise just about nothing changed in today's statement. So far the market has rallied off the "cheap and free money" IV stuck into the arm of speculators for an even longer period of time, but let's keep an eye out. While everyone is complacent and being a bear has been a fool's game, eventually we must correct at least a bit.

However, today's announcement has my early 2009 prediction of no interest rate hikes until 2011 looking very probable. It is widely known now that "an extended period" means "6 months" per some Fed officials. With the next Fed meeting April 27-28, 6 months hence would take us to late October 2010. There is a Fed meeting Nov 2-3, 2010 - so if they changed the language in 6 weeks, it would mean the first rise would come in November.

That said, I cannot see the Fed changing the language at that meeting although what I forecast to be a huge jump in employment in the March data (released first Friday in April) will change the calculus a bit. Since census workers will be hired fast and furious the next 3 months, and the Fed is waiting for a turn in employment it will be very interesting to see what the Fed does over the summer. The reason for that is the Fed won't have a good clean organic look at employment data until next winter since the census workers are going to be messing with the numbers both to the upside and downside the next half year.

Just as I said in 2009, I will reiterate Bernanke is a student of the depression - that's how he became (in)famous. The general belief in America is the mistake of the depression was to start pulling back the spigots of credit, stimulus once the economy began showing signs of improvement in the early 1930s - hence that is what caused the Great Depression. Right or wrong - that is the dogma in the country by most academics, of which Bernanke is the foremost. Tim Geithner also worships at this altar as you can hear in almost every speech he makes. So Bernanke does not want to go down in history as repeating that mistake. Which is why he will err on the side of caution and creating future bubbles. Plus the bubbles he creates now will help "solve" some of our problems - especially of the wealth effect kind, pension plans, and the like. At least in his mind.

Unless the "extended period" language is changed at the late April meeting, the next time it can be changed will be June 22-23, 2010. 6 months hence takes us to the December 14, 2010 meeting. Either way this type of thing will be leaked to the media and in speeches well in advance because all American policy is now created so as to not "spook the market". Because in a debt laden, financed based service economy it all centers around making ~~our financial oligarchy~~ the market happy.

As for the S&P 500, 1150 is the new baseline - all decisions will be based on that pivot point as we did with 1109, 1125 etc. The market is quite difficult here because we are simply grinding up in small increments most days... it is much easier to make trades around swooshes up and down. Very few days are giving us such opportunities - all these +0.3%, +0.2%, +0.4% days are not the type of sessions we can make much hay. Hence it is kind of boring and it feels like treading water even as the market overall continues up.