Published August 26th, 2007
in Portfolio - Updates (all).
As the Fed’s liquidity injections and cut in the discount rate have had a calming effect on the market, it appears as though the old play book – don’t fight the Fed is back in vogue. However, this is doesn’t feel like your normal run of the mill financial crisis and Bernanke is showing that he is no Greenspan. Could we see this positive tape action fade quickly? Tune in next week and let’s see.
At least last week, the markets performed as though the all clear signal has been blown.
The DOW, S&P 500 and NASDAQ were up 2.3%, 2.3% and 2.9% respectively for the week. Semiconductors were up 1.6%.
Continue reading ‘Week in Review 8/24/07 – Don’t Fight the Fed’
Published August 18th, 2007
in Portfolio - Updates (all).
Two weeks ago the DOW closed up, but most didn’t feel good going into the weekend. This week the DOW closed down and many feel renewed. Go figure. On Friday, the Fed cut the discount rate that it charges to banks by 50 basis points. The DOW jumped 233 points on the news ending a six day losing streak.
The talking heads have been yapping about a 10% correction and the DOW finally accommodated them on Thursday. The DOW dropped 343 points, but finished the day almost flat. Initially I thought the miracle recovery was simply program buying. However, I wonder if insider news of a rate cut played a role.
Whatever the reason - it appears as though the Fed is not going to let the market go into free-fall without a battle. According to Jim Cramer, if the Fed hadn’t responded on Friday the market was setup to lose 1000 points over the next two days. He might have been right. The DOW Futures were down triple figures Friday morning before the move and Japan’s benchmark Nikkei closed down 5% .
Before getting too excited and start buying with both hands, keep this in mind. Continue reading ‘Week in Review 8/17/07 – Uncle Ben to the Rescue’
Published August 12th, 2007
in Investing - General.
The DOW triggered by a French Bank citing U.S subprime mortgage issues free falls 380 points and two homebuilders Beazer Homes (BZH) and Hovnanian Enterprises (HOV) go up 10%. Often stocks up on down market days are signalling good news ahead. What kind of news could be on the horizon for homebuilders? Maybe they will set a record for the most unsold homes in history.
I don’t know how it is in your town, but in mine new houses are still going up left and right. Hello homebuilder CEOs - stop building houses. How about taking an economics course. There is this new concept called supply and demand that you should learn about.
Obviously the stocks weren’t up on good news, but were up on some bizarre behavior by quantitative hedge funds. According to an article in the Wall Street Journal, “Behind the Stock Market’s Zigzag,” quantitative funds are funds that rely on computer models to pick which stocks to bet on and which to bet against. They have been liquidating positions to raise cash. They sold stocks they liked forcing prices lower. For the stocks they sold short, the opposite occurred; to exit those positions, they were forced to buy.
“A massive unwinding is occurring,” says Tim Krochuck, managing director of GRT Capital Partners. Buying and selling by hedge funds are “pushing those crummy names higher, and pushing the names you like lower.” Do you think these are the same computers telling the homebuilders to keep building houses?
Believe it or not there are roomfuls of Ph.Ds writing the computer models for these quant funds. This is sorta like revenge of the nerds.
Published August 11th, 2007
in Portfolio - Updates (all).
After being slapped around for 3 weeks, the market was overdue for a bounce. Monday, Tuesday and Wednesday were quite accommodating as the DOW rallied 286, 35 and 153 points. Just as soon as we thought the water was safe, we were hit with a 380 point loss on Thursday. The subprime mortgage fiasco that Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson so often said was contained reared its ugly head in a major French bank.
Can you imagine wanting to redeem your money from a fund and being told not right now? That’s what France’s largest bank, BNP Paribas, did. It froze $2.2 billion worth of funds citing U.S subprime mortgage issues. This was only a week after saying it would not be affected by US subprime loans.
Continue reading ‘Week in Review 8/10/07 – Bernanke and Paulson Blew It’
Published August 10th, 2007
in Investing - General.
A couple of nights ago I was shooting the breeze with a guy on the 19th hole and he mentioned to me that he owned Intel (INTC). The memories from 2000 are finally starting to fade, so I don’t twitch as much when people mention technology stocks. He said that he had purchased Intel at $36. I knew that it was selling around $24, but had no idea that it hadn’t seen $36 since January 2001. Has buy and hold worked for anyone other than Warren Buffett? I abandoned it after almost being wiped out during the internet implosion.
On the August 9th show, the CNBC Fast Money traders discussed strategies on how to manage in such volatile markets (video here). Eric Bolling doesn’t like selling in down markets, but prefers to put hedges in place. Jeff Macke suggests selling until you can sleep. No one said not to worry because the market averages 10% annually over time. Matter of fact, the next time you hear that spiel put your hand on your wallet and run.
Continue reading ‘Leave Buy and Hold to the Billionaires’
Published August 7th, 2007
in Investing - Energy.
A nice plug for Echelon (ELON) in the Motley Fool today. I discovered and wrote about Echelon (Echelon a Tech Star in the Making and Echelon Corporation an Infrastructure Play) in May. Those that chose to act on those articles are sitting on almost a double in less than 3 months.
Knowledge is not power. Acting on knowledge is power!
Oh yea, what is a negawatt?
Per the Motley Fool,
The idea behind the negawatt is that the easiest, fastest, cheapest, and ultimately cleanest way to meet new power demands is to keep that demand from ever occurring in the first place. After all, the greenest and cheapest type of energy is that which never has to be produced.
Correction: After today’s 23% pop, anyone who would have acted on those articles would have doubled their money.
Published August 4th, 2007
in Portfolio - Updates (all).
It looks like “talk-too-much-itis” is running rampant amongst the financial company executives. Last week Angelo Mozilo, CEO Countrywide Financial (CFC), held the longest conference call in history. The more he talked the more the market dropped. We almost escaped this week without another market moving speech, but at 2PM on Friday Bear Stearns (BSC) decided that another one was warranted.
Having had two hedge funds collapse and having halted redemptions on another – the market needed to know that worst was over for Bear Stearns. Instead Sam Molinaro, CFO Bear Sterns, had the following to say, “I have been at this for 22 years. This is as bad as I have seen it in the fixed income market.” When asked if the company would initiate a stock buy back, often a sign of confidence, Molinaro said, “Our stock is very cheaply priced. The current stock price is not reflective of the value of the company, but we are going to preserve our capital to weather the storm.” In other words, why throw good money after bad. “Talk-too-much-itis” strikes again.
Continue reading ‘Week in Review 8/3/07 – Stocks Pummeled Again’
FEED
Reviews