Trend and Value

^ 19.03%

2012-01-01T22:26:00.001-06:00

at the beginning of 2011 I started contributing to my company's 401(k) plan. first time I've ever participated in one of these schemes. In the beginning it frustrated me how few real options the fund offered. a number of different stock funds, but all of the general variety, no sector or industry specific funds, or anything like that. and then a handful of bond funds, but the only thing I really wanted -- a long duration treasury fund -- was, of course, not offered. so I just signed up to put everything in the Pimco Total Return fund.

so I left everything with Pimco until October 4, when I transfered it all into a small-cap fund. then I put it back into Pimco on October 24.

according to the retirement fund website my rate of return for the year (adjusting somehow for contributions) was 19.03 percent. meanwhile, the Pimco fund returned 3.64% for the year, and the stock market was flat at best.

by comparison, the best performing mutal fund (according to Bloomberg) gained 12.1 percent in 2011.

so my retirement account outperforms the best mutual funds and yet had exposure to stocks for all of three weeks in the entire year. call it luck, but to me it demonstrates that a disciplined approach to market timing may actually have a place in long-only, 401(k) type investment planning. thoughts?

who got a match?

2011-12-28T21:05:00.001-06:00

Mr Market has been holding it for oh so long but looks just about ready to take a piss worthy of the history books. huge deterioration in breadth today, particularly considering the relatively mild percentage declines on the major indicies. one prerequisite I've had for a real bear market has always been a sustained underperformance of gold, and we've finally seen that. this isn't a call on gold, merely an observation. but an observation with great implication.

my bearishness grows for a whole host of reasons, which I may end up cataloging here, but aside from my puts on oil, I'm still on the sidelines. just listening to some good music for now.

no visible means of support and you have not seen nothin' yet
...everything's stuck together

$OSX:$OIX again

2011-12-24T13:55:00.000-06:00

it is always dangerous to place too much emphasis on a single indicator, but the persistent deterioration of the $OSX:$OIX ratio cannot be ignored. plus, oil (along with all else) has been rebounding on paltry volume.

I bought deep-out-of-the-money puts on December 2012 WTI late last week. pretty speculative as a trade, but I prefer to view it as a hedge to our future income (my employment and Lisa's mineral rights).

VT - world stock ETF

2011-12-15T21:43:00.001-06:00

pretty awesome triangle here. great trading setup, if you are clairvoyant. me, I like being all in cash, minus the Christmas gifts.

USO

2011-12-14T19:47:00.001-06:00

so I got out of the USO short prematurely today. but I have been making solid gains by closing positions well before targets are reached.

right now the account sits completely in cash, waiting for the next 'reactionary' opportunity.

and by the way, I'd like to thank Gary at biiwii for establishing the initial crude oil upside target a while back.

Sony

2011-12-07T21:08:00.000-06:00

you know, I had written a whole piece on why I bought Sony (SNE) but then never posted it. thought I would refine it more or whatever. then this morning I notice the stock up 4 or 5% and I'm like, "shit, I'll take that money!" and closed the trade. so now y'all will never know all the reasons that SNE is (was?) a great buy for the holidays.

the drawback in closing out the position is that I no longer have any long positions to balance my short of USO, the crude oil ETF. but at least I have more cash available to take advantage of the next opportunity.

The Transactional Value of Cash

2011-12-07T19:47:00.000-06:00

Mark Cuban explains:

that is the best three minutes of investing advice I've ever heard.

GDX:GLD

2011-12-04T20:40:00.001-06:00

another triangle. I love wasting time by optimizing point and figure charts to portray triangle patterns in the most visually appealing manner.

this latest one is kinda funny looking though. but it's the best I could do.

Crude oil futures price curve

2011-12-04T19:41:00.003-06:00

WTI in blue, Brent in red.

not sure that the market structure is telling us anything significant here, except maybe producers are competing to lock in prices on the distant contracts.

$OSX:$OIX

2011-12-04T18:27:00.000-06:00

while WTI crude has rallied the past couple months (USO in light red on chart), the ratio of oil service stocks to oil producers ($OSX:$OIX) hasn't done much. I've found the ratio to correlate nicely to crude prices over the years, and so view the ratio's lack of strength as a bearish tell for the oil market moving forward.

I don't feel any obligation to make disclosures on this half-conscious blog, but I will say that I shorted USO on Friday. although I think oil can move substantially lower over the longer term, I'll probably take profits on this particular trade if USO drops to around $35 (low $90s for WTI).

if I am wrong, then hopefully oil will advance in the context of a broader year-end liquidity rally and my long position in SNE will offset. if oil goes up and equities tank, then I'm pretty much fucked.

S&P 500 -- perfect triangle

2011-11-10T20:30:00.000-06:00

Charting the rebound -- S&P hourly

2011-10-10T20:22:00.001-05:00

the rally from ~1080 has been pretty impressive, but I had to lighten up on my most speculative positions at the end of trading this afternoon. I'll gladly take even more immediate gratification from this market, since I'm still seriously long, but the chart above makes plain my outlook for the next fortnight or more. a 40 to 50 point consolidation is in order, followed by another 100 point plus rebound.

Crude Oil versus Natural Gas

2011-09-25T20:27:00.002-05:00

I think it is finally time for oil to significantly underperform natural gas. the moment has been a long time coming, but evidence mounts (though don't expect any in this post).

a long-term chart of the crude oil / natural gas ratio shows the sustained and extreme overvaluation of crude to gas over the past couple years:

I expect the ratio to drop to 13 and after that down to 9 or 10. Even these are conservative targets taking both physical and historical references into account.

the structure of the futures market makes it difficult to exploit this outlook simply by buying gas contracts and shorting crude. My preferred strategy is to purchase certain depressed natural gas producers* during market panics (such as now) while shorting or otherwise betting against buoyant oil companies or crude oil itself when the market rebounds somewhat, as I believe it will. while I have have my eyes on ~1080 for the S&P, if it hits that target I expect the index to meander back into the mid-1200s before things really go to shit.

*we bought PVA late last week. The stock's been in free fall, very large short interest, extremely low price-to-book. just an extremely low quality stock, really. hopefully they don't go bankrupt.

yen chart

2011-09-01T21:50:00.001-05:00

as the nippy flutters around its multi-decade target of ~130, a megaphone pattern has emerged over the last year. and it's been about a year since I looked at a chart of the yen, so that's convenient.

Sick of the Swiss

2011-03-10T20:59:00.000-06:00

(poem)

2010-10-17T12:16:00.001-05:00

she hacked my system to determine

how often I use spell check*

*specialty software for wizards

sometimes I conflate

win and when

scratching her neck

she can relate^

^she also claims to 'refate', but that's hard to determine

and begin

Strip (poem)

2010-10-15T10:46:00.001-05:00

her hero remiss

driven into the sunset

by a bond of perpetual debt

with a coupon of zero

his return is bliss

Some stocks that look cheap

2010-10-13T08:32:00.005-05:00

Here are eight stocks that appear substantially undervalued, according to a fundamental valuation screen of mine:

TVR	Ticker	Company	Sector	Industry	TL/CF	TL/CA	P/E	P/S	P/B
1.34	HIMX	Himax Technologies, Inc.	Technology	Semiconductor - Specialized	2.27	0.31	10.13	0.56	1.07
1.42	BG	Bunge Ltd.	Consumer Goods	Farm Products	8.69	0.82	4.81	0.2	0.84
1.72	CALM	Cal-Maine Foods, Inc.	Consumer Goods	Farm Products	1.84	0.71	8.48	0.71	1.89
1.89	GLT	PH Glatfelter Co.	Consumer Goods	Paper & Paper Products	4.63	1.74	6.09	0.42	1.17
1.93	NTT	Nippon Telegraph & Telephone Corp.	Technology	Telecom Services - Foreign	2.82	2.16	9.6	0.48	0.96
1.97	ANDE	The Andersons, Inc.	Consumer Goods	Farm Products	4.72	1.15	13.28	0.24	1.7
2	ADM	Archer Daniels Midland Company	Consumer Goods	Farm Products	6.31	0.93	10.85	0.34	1.48
2	SKYW	SkyWest Inc.	Services	Regional Airlines	8.15	2.29	9.74	0.31	0.57

The lower the number to the far left ("TVR" -- Total Valuation Ratio) the more fundamentally attractive the stock. The list includes companies with TVRs of 2.00 or lower. By way of comparison, the typical blue-chip issues currently have TVRs around 4~. (Update: The median TVR on the Dow right now is 3.86. This excludes the financial stocks in the Average.)

I can't say that I am too bullish on equities in general, and I don't have immediate plans to buy any of the above mentioned personally, but I thought I'd throw something up on this blog, since it's been a while.

Ortega y Gasset's Obras Completas condensed to a single comic strip

2010-09-10T21:00:00.003-05:00

Bought USD/CHF and USD/CAD

2010-09-10T01:31:00.001-05:00

Also added to my positions in USD/NOK (long), AUD/JPY (short) and XAU/USD (short gold).

No stops on any of this stuff, it's a buy and hope, err, hold play. While I can tolerate a moderate drawdown, I'm fairly levered up in the trading account now, so I doubt I'll be taking on any more positions for a while. I'll just be sitting on my hands for an extended period.

GLD -- an unprecedented low-volume and low-volatility rally

2010-09-09T13:30:00.000-05:00

Do you smell something?

US Dollar -- Seasonal Index

2010-09-09T02:09:00.000-05:00

Here's how the trade-weighted dollar (TWEXM on FRED) has performed over the course of the year (on average) since 1973:

You can see that the value of the currency has a tendency to decline about this time of the year. Personally, seasonality, whether in currencies or anything else, doesn't concern me much, but it's still worth the time to draw up the chart.

EMB -- Emerging Markets Bond ETF

2010-09-09T01:08:00.001-05:00

EMB is another key symbol to put on your radar. The chart is currently showing some weakness. Would that be due to the general consolidation in the overall bonds market, or is there something intrinsic to emerging market bonds that is starting to concern investors? It could be something of both, I suppose.

Let's have a look at the performance of EMB relative to U.S. Treasurys. We'll use IEF as our denominator, since the two funds have comparable durations.

You'll notice that this EMB:IEF ratio looks fairly similar to a typical stock market index chart. Much more deterioration in the ratio would be a pretty good clue that the 'risk' trade is back off again.

Here are the top holdings of EMB, by country:

Russian Federation	9.19%
Brazil	8.86%
Turkey	7.94%
Mexico	7.91%
Philippines	7.10%
Indonesia	6.25%
Colombia	4.54%
Venezuela, RB	4.51%
Peru	4.12%
Kazakhstan	3.35%

CHL and VOD

2010-09-08T21:37:00.000-05:00

CHL broke a well-defined support level on high volume today, as Vodafone (VOD) said it is selling about $6.6 billion worth of shares of the company.

While I can't blame Vodafone for selling, I think it's crazy that they are going to use the proceeds for a share buyback. Well, 70 per cent of the proceeds, according to the newswires. This is a company that is like $50 billion in debt.

Somebody should look into this Vodafone company. $50 billion in debt, and they're out retiring shares and paying out 7 per cent dividends? I guess I'm old fashioned, but that just doesn't seem right.

$REIT index

2010-09-07T23:18:00.003-05:00

For all the negative talk about real estate, REITs have been some of the best performing issues over the past year. However, this chart looks toppy. Nothing for sure, but there is definitely the potential for a reversal soon. We'll keep it on our radar.