Search This Blog

Monday, January 31, 2011


Picked me up some Ford. Will enter a second position if 14.70s are seen.

Not that valuation or dividend has anything to do with my purchase of F right now, my decision is mainly technical, but those selling Ford are loosing sight of their profitability. Ford will re-instate their dividend, and around 15 it will be a nice one. The chatter that I see is that F should produce $11B in 2011. With 3.5B shares outstanding, they will be able to issue $1 dividend within a year. But to be conservative, lets just say w/in 2 years.

Here are some operating profit breakdowns for 2011, from their guidance and web chatter:

1. 13M vehicles sold (Ford's guidance)
2. $2B from Credit division (Ford's guidance)
3. 5.5B CapEx (Ford's guidance)
4. $800 profit per vehicle (My assumption as an average. But a realistic analysis would break it down per region. For me, a base case is sufficient. Chatter that I have seen is that it is much higher. More like +$1,000 for North America.)

So basically operating profits are about $12.4B. With estimated CapEx its $6.9B

Sunday, January 30, 2011

Thoughts on Ford

I like Ford, I really like Ford. I have actively traded it since their secondary around 4.15, and have been waiting patiently for an opportunity to start playing it again. Regardless of the chatter, this is how I am going to trade F:

When/if Ford nears the mid 15s, I will enter an initial position due to the 98SMA on the daily chart. The 98SMA historically has acted as support/resistance. I think it will act as support this go around.

If the 98SMA does not hold, I will enter a second position at the weekly 28SMA, around mid/high 14. High 14 also happens to be the low-end of the trailing PE range (of 8-9) that I think is very conservative for Ford given its nice balance sheet. (see the 'forward PE' link at the top right, under Links)

Saturday, January 29, 2011

Market Thought... systemic?

To understand the depth of the market correction is to understand the question. Real market corrections come from 'apparently' real threats to the economic status-quo. So, I ask myself, is this social unrest systemic enough to pose a real threat to the current economic status-quo?

In my most-humbly-unqualified-opinion, no.

(When reading the below post, its my assumption to the true effects toward the market. That's it. Politically, I believe the people have a right to protest, and inspire policy changes that give them the same opportunity seen in Brazil, China, India, Russia and America. I am glad to see people organizing to obtain these opportunities if their current leaders do not give it to them.)

Through-out the last couple of months the world has seen, but has been ignoring, pretty hard core protests in Iran, Thailand, Greece, Tunisian, Yemen and Egypt (until Friday). Economically, the reason for the market's apathy is obvious, the combined GDP of these countries is $2.4 trillion dollars. So I was pretty surprised to see the headlines using Egypt to justify the market decline. (I can not complain about this because my Gold trade was exacerbated by the continuous headlines.)

Now lets be realistic about Egypt. (Ignoring the fact that 2.4trillion on a global economic perspective is not that significant. And when factoring that probably far less than 20% of that 2.4trillion economy was affected by their social unrest, makes this even less economically significant). What the chatter/research tells me about Egypt, and what it may mean:

1. It has a $500B GDP. (On a company's earnings front, it means very very little.)

2. The protest is mainly to obtain more economic opportunities by the average person. (This can be obtained by policy shifts, who ever creates the shift is irrelevant.)

3. The army appears to be on the side of the people. They are allowing the people to protest. (Peaceful protests maintain a social fabric.)

4. The army and their associated front companies, which apparently dominate the economy, have a large interest toward ensuring social stability. (This makes me think the army has it in their best interest to encourage the hand of policy shifts.)

Basically, I see policy changes coming with little economic impact.

If I am completely wrong, the worst case scenario chatter that I have seen is that Egypt will act as a catalyst to social revolution to the entire Middle East region. The worst case scenario is a bit much for me to swallow, as the scenario assumes current leaders will not be preemptive and adjust policies to satisfy requests of the people. (But international relations is not the point of this blog.)

The last real correction seen was in May, with the 'apparent' threat of European debt. That correction lasted for four months. The European debt issues had a very real potential systemic threat, meriting a lengthy decline. I can not say the same for this, at least not yet. So I do not think we get a pull back to the long-term trend line, the 360SMA.

I am still inclined to believe in the 're-assessing' post.

We are at support levels, valuations are very fair and suddenly the market is not as overbought as it was this past Thursday.

Friday, January 28, 2011


1. I bought back AAPL. (It has no business being in the 330s.)

2. Looking to sell the DGP around 38.50.

My desired positions:

1. AXP around 42.50
2. GS around 160
3. PBR around current price. (Just debating. I have enough, but with the decline in Oil and its technical set up, I want to add more.)
4. IBM around 159. (Have a limit order on option that should trigger around that price. Regardless, I may just add today.)

Thursday, January 27, 2011

Trade... GLD

I entered an initial position in DGP (double long gold ETF) due to the technical set up.

I also have a limit order at 35.98 to enter a second position. (this is a continuation of the previous short GLD trade)

Keep in mind, this trade is only for the pop off of the weekly 32sma. If the support is broken, I will close the position. Also, I am not a fan of Gold as an investment. (I happen to like the world we live in, and want to see society flourish.) This is purely technical.

Wednesday, January 26, 2011

Market Thought... re-assessing

Back in November I assessed the market from a macro-economic fundamental perspective, and the conclusion was to remain bullish until valuations got extended. The thesis looks to be correct with a few changes/additions.

The relatively new threat, as per the Queen of Doom, is the muni defaults. Although there are pretty big heavy weights that do not necessarily see it the way she does. (Makes me think this is a none issue, but time will tell.) The most supportive development for my market thesis is that SP500 companies have been exceeding their estimates in both top line and bottom line.

In November the aggregate SP500 earnings estimates stood around $86 in 2010, and 93 in 2011. With such a strong showing, across the board, I would not be surprised if the actual 2010 eps was around 88 and 2011 is more like 96. (I do not have access to real-time SP500 estimates, and do not produce my own tracking off all the companies.)

If we look at SP500 with a multiple range of 14-15 and earnings at 88, the SP500 should have a range of 1,232-to-1320. If we look at it with the same multiples and earnings of 96, the SP500 range should be 1344-to-1420.

Given the growth seen macro-economically and at the company levels (top and bottom line), I seriously doubt we test 1,232 again. The charts also support this. Within the daily chart, there is support via the 28 and 32SMAs. Then via the weekly, the 14SMA should move up to around 1250-1260, after this week.

The markets are in overbought territory , but given the differential between 2010 market range and 2011, we can easily go to around 1320, which would then merit a pull back on a trailing PE basis. But regardless where the potential pull back would be, when the market pulls back, it should be shallow and the overbought condition should go away sooner.

(To which I will not hesitate to buy back positions I sold due to large appreciations.)

Updated 7:39pm 01/27/2011 - Included a link regarding the muni threat.

don't judge by its cover

This morning I wake up and see BA's head line EPS of 1.56, and get really excited regarding ATI's earnings. Figuring is BA blew it out of the park, it would mean ATI would too.

Oh how wrong that assumption was.

First, BA's earnings were not a beat. They were really a miss, masquerading in a beat due to a 0.50cent tax benefit. Not cool Boeing. Then, I was disappointed to see ATI's headline number. They missed by 15cents!!! That is huge in my book.

But at a closer look, operationally, they actually beat, by a lot. Inventory did screw them via LIFO charge, as well as start-up and idle facility costs. If these cost were not present, they would have produced an EPS of $0.41.

ATI did provide bullish guidance, which is consistent with the chatter that has drawn me to the name. So the macro-economic thesis to me liking ATI is still intact. My only concern with them now, is whether or not they can overcome these 'charges' quarter after quarter w/their cost cutting efforts.

Hopefully the market does not punish ATI too much today.

Update 9:35am 01/26/2011 - Apparently the market is rewarding ATI nicely. Nice :)
Update 2:36pm 01/26/2011- Needless to say, but I took my profits in ATI.

Tuesday, January 25, 2011

wouldn't it be cool...

If the 'short-gold-trade' was made before Goldman announced they don't like it anymore? Oh wait... cough, cough ;)

Just an FYI... I do have a limit order for DGP at 35.98 to play the potential pop after the GLD tests the weekly 32sma.

morning action

1. I closed out my protection this AM, considering I have less to protect.

2. Purchased ATI on the decline. (I wish I can say I purchased it on its +1.50 decline, but that didn't happen.) I want to be exposed to ATI as it reports earnings. Please keep in mind, this stock can move fiercely in either direction. The only negative chatter that I have been hearing about the company is concern over its elevated inventory levels. A very real concern, but if we are entering a aerospace boom the elevated levels are justified.

Monday, January 24, 2011

crazy giddy

I'm really giddy, but in a way that is making me cautious. I have been dead-on over that past couple of months, with the exception of RHT, my level of appreciation is going to cause me to re-assess all my positions to ensure I am not letting my giddiness get the best of me. (Even though a thoroughly assess my trades prior to making them w/an entering and exiting strategy. I will refer to the directly-below post about Apple as an example.)

IBM is just kicking ass, and I think that is what has me on edge. I am dealing with an internal struggle: fundamentals vs. technicals. IBM's set up makes me want to ease up. I rarely hold names in such overbought positions for so long, but my fundamental thesis justifies it.

I am throwing my giddiness in my own face to test my discipline. I have seen significant appreciation, and the technicals merit taking profits, although I still very much believe in the fundamental story. Keep in mind, my discipline would have normally forced me to sell IBM 5 points ago due to the technical set up. But the fundamental story allowed me to push the envelope.

I took a lot of profits in IBM due to the over reaching technicals, but I am still exposed in case it keeps riding upward to 165. Another thing to keep in mind, any pull back, any weakness (even if it is just intra-day weakness) in IBM, I will add back some of what I sold today. (It is in bull mode, and the pull backs should be shallow.)

Also, I repositioned a bit today...

RHT - Took my losses in RHT.

PBR - Added to my position.

Saturday, January 22, 2011

trading dynamic of AAPL

Last week was not kind to AAPL. It pulled back about 7% from its absolute high (351 in after hours, to 326). I made no secret that I was buying as it pulled back because the stock is already being discounted by the street.

If a discount was not present, AAPL would be trading with a higher multiple, more like GOOG, especially considering the growth they are seeing withing the Asian markets.

The street chooses to be inefficient, so I am taking advantage, but realistically of course. The pattern I have observed was that AAPL trades within a defined trailing PE of 19-21ish. (I use the band of 19-20 to be conservative.)

Make no mistake, the street will try to find a reason for this discount, and it is seen via articles like this from the Wall Street Journal. Within this article, a Columbia Professor no less, makes the absolutely incorrect assessment that 'open always wins'. The example he uses within his article are completely wrong (ie Microsoft) and the assessment of 'open always wins' is complete and utter bullshit. Microsoft Windows, Office are not open but won their era's race because they provided usability. Linux open operating systems existed as did open office suite programs at the time, but none caught on because 90% of users do not care about openness. The argument is not about 'openness', it is about consumer usability! (I expect more from a Columbia University Professor.)

Regardless of the bullshit commentary that is being circulated, the fact remains AAPL's trading behavior looks more negative than I think it really is. Let me explain, and bare with me.

With the blow out earnings, AAPL's trailing PE band of 19-20 gives the stock price a range of 340-358. Unfortunately for current holders of the stock, the computers were not recognizing this last week. Anyone using a quant, and is connected to the same data feed as Yahoo Finance or Google Finance (which are a lot of them), would have seen AAPL's trailing PE around 22. I would not be surprised if they had a logic function to sell it due to a higher PE verse its pattern after reporting earnings. The stupid managers that oversee these quants just listen to the system, and sell some of the position (and there are plenty of them too). The selling starts breaking intra-day support, triggering 'momentum-whores' (who can care less about valuation and only care about how the chart looks) to sell.

Now AAPL is in a situation where it is trading at a trailing PE in the 18s. Fortunately for the current investors, the central data feed is now accurate, and I believe a bunch of quants will highlight AAPL cause now it is trading inefficient to its pattern.

You might think the above assessment is bullshit, and it may very well be me talking out of my ass. But with 70% of the market's trading taking place by quants, I am simply trying to understand how they think too. (It is just another variable in the current era of trading we have to deal with.)

Regardless of the assessment, AAPL is very very inexpensive right now. With $60B in the bank, that equates to some $65/share in cash. The current stock is valuing AAPL's business to be worth $261 per share. Not to mention AAPL's long-term trend is still very much intact.

(IMO, this is too inexpensive for even Apple to ignore. Their best capital allocation at this point, without hindering R&D, would be to announce a $30-40B buy back. Unfortunately, I think that news will go hand-in-hand with some sad news to society.)

Funny Note: As I am writing this post I am watching Terminator Salvation. I thought the irony is amusing. And no, the show did not give me the inspiration to write it, I was thinking about AAPL's trading throughout last week as AAPL was declining :)

Friday, January 21, 2011

Added to AAPL

Within my 10min of lunch I have for today, I noticed AAPL is down. Since the market has it on sale, I added to the position.

It is too way too inexpensive here.

Thursday, January 20, 2011

Bullish on IBM?

If you are not, re-assess your position because the company's management sure is. They are about to give hundreds of millions of dollars worth of stock to its employees. Technically its only $1000 worth of stock, but they have some 400,000 employees. So even if half are eligible, that is $200M dollars.

This is significant. Basically management is saying they see a significant appreciation in their share price over the next 5 year. (ie They are basically raising their growth estimates. Which means higher multiples, and a much higher stock price.)

IBM is arguable the best capital-allocators on the street. They know when to take on debt, they know what ratios maximize company growth, they know how to return capital via dividends and share buybacks. So when they do something like this, it means something.

How I am trading MF, and debating RHT

MF - If it rallies toward 9.50 before earnings, I will unload 1/2 the position, and let the rest ride through earnings. If, at any time, it is between 7.50 and 8, I will add 1/3 of my position.

RHT - They should do well this quarter, and get back into favor w/the street. But it does not help that other high fliers (ie FFIV) are crashing. I have to see how much punishment I can take with it. May have to sell it to reposition my self into ATI (prior to earnings). Right now its a wait, and see game.


Made a bunch of re-adjustments:

1. closed out the 140 IBM calls, and entered 150 April calls. (Boosts my cash while still being exposed.)

2. purchased more AAPL

3. purchased MF

3. closed out the Gold short, waiting to enter DGP for the bounce. (I would have kept the Gold short on, but the next two days I was put on a high priority project at work and may not be able to act precisely enough. The draw backs of a day job.)

4. Closed out some protection, but still have 2/3 of it on.

Wednesday, January 19, 2011

Market Thought... yum

No, not the China power-house brand, but as the market declines, I say yum.

As the protection thesis takes hold, the obvious question is when to start buying. No easy answer. For instance, I look at AAPL, and it is trading below the 19 trailing PE. So I like it again. It should not be trading in the 330s any more. In my forward PE analysis, I think it should be trading between 340 and 358. And my use of PEs are at a discount. For instance, GOOG has a trailing PE of 25. If AAPL had a trailing PE of 25 it would be trading at 447. (It is not unrealistic to compare GOOG and AAPL, as both companies are dependent on a consumer's individual choice.)

So, as the market decline allows for the above situation to unfold, I did add back to the AAPL I traded over the past couple of days. (I am also very interested in MF and PBR, and waiting for the right set up for ATI, AXP and DIS.)

The next question is when to cover the protection. I still think valuations are very fair, and when I look at trailing market multiples, the SP500 is under valued. (see 'forward PE' under Links section) But as we know, psychology knows-no-fundamentals :)

When I look at the VIX, historical comparisons are difficult for the current market scenario. There were too many systemic issues to hold relevance over the past few years. Prior to 2008, around 32 usually would indicate a market rally low. But I do not think we are in a situation to see around 32, or higher. Barring any systemic issue, the VIX should see around 20-23 to re-gain bullishness for the current market trading dynamic.

This should correlate to an SP500 move to around 1260 or so.

Limited market down side, imo, is also supported by limited down side from the 10yr yield.

Tuesday, January 18, 2011

Market Thought... kick ass, but still protected

Earnings are developing to be, simply put, kick ass. With that said, I am still protected as indicated from the previous post. Seeing how things are playing out, we may see a market consolidation after the brunt of earnings are announced.

There is really nothing more that can be said about AAPL. The quarter was impressive, and is a flavor of more to come with its current product cycle.

I took a look at the revenue growth seen from 3rd q-to4rth q. Here is the break down:

Services +6.38%
Software +34.6%
Hardware +46.5%

(That is with an increase in margins from 45.3% to 49%.)

Uhmmm, yeah, if the numbers mean anything, IBM will see multiple expansion sooner. I am not selling my current position in IBM until 165. (I get that from my 'forward PE' assessment. See link at the top right of the blog.)

IBM :)

Crushed it. Nice.

Theory of expanded multiple is becoming a reality. Awesome.

As you can tell, I am happy :)

The year-over-year growth numbers are really nice. A very real acceleration in growth is present definitely meriting a higher multiple.

I will take a look at the quarter-to-quarter numbers for their businesses over the weekend. If there is hints of acceleration, the multiple expansion will happen sooner-rather-than-later.

FYI... aapl

I was a buyer of AAPL calls in the AM.

There is certainty within the fundamentals of the company (ie product launches) for the next two-three years. So any discount created by the street through the perception of uncertainty is not justified.

Although I am of the strong belief that the culture of Apple (impressive innovation) will last far beyond 3 years.

(Does anyone really think none of his top management learned from him over the last 14 years?)

Monday, January 17, 2011


Steve Jobs greatest invention is Apple. He learned from the mistakes of his youth, and came back with a plan of innovation. A deep bench, with operational excellence and an assembly line of innovation.

Every tech blogger has already given their two cents about the implications, from a company perspective. But my focus is on the perspective of the stock.

Uncertainty causes a discount. That is a fact.

When we look at AAPL's 2012 forward PE, it is around 15. Google, arguably AAPL's closest comparison (with respect to being a large fast growing company) is trading at a next year forward PE of 18-19.

If European trading is any gauge, AAPL will take a big hit tomorrow. If it takes an 8% hit its 2012 forward PE will be around 13. Think about what this means. It means the market thinks the forward estimates are too high. AAPL usually trades around a 20 PE. Assuming the market is efficient, the market is saying next year AAPL will have an earnings of 16.5 (stock price of 330 in relation to a PE of 20: 330/20). Zero growth compared to the last four quarters of earnings.

For a company that is entering one of the strongest product cycles in history, that will last for at least 2-3 years, Apple is already trading at a long-term discount.

But looking at AAPL from a trailing PE basis, AAPL should report north of $6 per share tomorrow (if you listen to some of the top bloggers) or mid/high 5s (if you listen to wall street estimates). With the strength of its product cycle, AAPL should not be trading below a trailing PE of 18 (it should be trading higher).

With an EPS of 6.30, its tailing PE is 17.78, which means stock price below 320 is a steal.

With an EPS of 6.00, its tailing PE is 17.48, which means stock price below 314 is a steal.

With an EPS of 5.70, its tailing PE is 17.18, which means stock price below 309 is a steal.

Nothing lasts forever, no matter how much we would like it too, but the next 2-3 years are fairly certain. (Three years is enough time to prove Jobs' greatest legacy is the factory of innovation known as Apple, Inc.)

I wish you well Mr. Jobs

Apple Statement

Saturday, January 15, 2011


Back in September I established a goal to gain 185% in 4 months.

As of January 14th my account performances were:

1: +67%
2: +35%
3: +26%

The motivation behind the 185%, outside of what I already mentioned, was that I wanted a specific portfolio value by this time. That is why I view this as a failure. (Obviously this type of performance in 4 months is not bad.)

On the positive side, I am very glad to see I maintained my trading discipline throughout, and I feel as if I did not miss opportunities. I did not change my trading behavior because I wanted more gains, or make a very risky trade 'in hope' to do better. Assessing risk properly, and acting on that assessment, has become second nature, and would not compromise on it.

Discipline is a bitch, but that bitch is my friend :)

Regardless, your only as good as your last trade, so keeping track like this is meaningless to me. (But I do want to see my total value of my portfolios at a specific level still.)

Happy Trading.

Note: From Sept. to Jan. I do not use leverage, and did not even come close to going on margin. The market conditions did not call for it, as they did during the summer. (I can count on one hand the times I went 'all-in' throughout the past few years.)

Berlusconi, a crazy mofo

A part of me shakes my head wondering just how close to the sun this man thinks he can fly.

The other part wants to have a drink with the guy :)

see video

Friday, January 14, 2011


The trigger is achieved. I added to my protection.

No doubt earnings will be great. I am cautious of 'sell-the-news' type of action next week.

I wonder sometimes

There is no mystery to the stocks, market or the economy. It is a pretty straight forward thing. You just got to find the information, know its relevance and have the balls to act.

Sometimes the information is right in front of our face, but many choose to ignore it (for whatever reason).

Today, IBM's research arm issued a eye-brow raising report. There is no need to get the entire thing to understand the implications of what the teaser numbers, they give us, mean.

Small and Mid sized businesses drive the US economy. If they will expand cloud and analytic services, it will be good for these providers in 2011. (i.e. The market is not giving names like IBM, RHT, CRM and other cloud names enough credit.)

Obviously we can view the study as self-serving, but IBM usually uses its research to drive its direction in business. So I would say its more objective then many would otherwise think.

Updated 10:40am 1/14/2011 - I figure I add an article about IT adoption rate for utilities this year to the above argument. Enjoy.

Thursday, January 13, 2011

Trade... GOLD

A few days ago I did an assessment of Gold. Today I am seeing some stresses that would suggest it will test the 32SMA, on its weekly chart, soon.

So I entered a position in the DZZ (double short gold ETF).

Keep in mind, once GLD declines to 128-129, I will cover it then go long DGP (double long gold ETF). But I will stay long only for the initial POP off the weekly 32SMA.

Wednesday, January 12, 2011

PBR is just interesting

Although I sold some of my PBR this morning, but still have a position, I am beginning to question my selling at the current level.

1. There was a nice article this morning about how its retail sales grew 17% throughout last year. That is awesome, and reflects PBR's direct exposure to the expanding middle class and strength of Brazil.

2. Its proven reserves in relation to its market capitalization indicates its valuation is too low.

3. The technicals are looking interesting with today's move. Ever since its massive secondary, the stock has been depressed, and channel trading for some time. Today may indicate a breakout from this trading dynamic.

IMO, bullish.

The weekly indicates mid 40s to low 50s is achievable.

I already sold my 'trading position' in PBR, but the position I currently hold I will not sell until the 44 area.

Market Thought... my trigger

The VIX/SP500 overlay is headed toward the lower horizontal line again, making me cautious.

This cautiousness is for short-term movement. I sold off some stocks that moved heavily and are somewhat over bought (ie ATI and PBR). I still own IBM, AXP, PBR, RHT. A technical argument can be made around some of the stocks being overbought. Since I refuse to sell some stocks (IBM and AXP due to valuation, and RHT is technically sound) at current levels, I chose to add light protection.

The market maybe positioning itself for a 'sell-the-news' on earnings. I will add to the protection if/when the VIX hits the lower horizontal line. I am not expecting the SP500 to go below 1260.

Tuesday, January 11, 2011

A few thoughts... AXP, IBM, AAPL and Dimon

With certain stocks we can get a good base from a future-trailing PE perspective, hence my 'forward PE' link.

AXP - AXP typically trades with a trailing PE of 14-15. Their last quarter closed, and are about to report soon. If the estimates are taken at face value, and incorporate the last 3 earnings, a trailing PE range will lead AXP to trade between $47-52. The stock is at 45 right now. The market is being inefficient, and (IMO) very incorrect. There is a leveling off of consumer credit, declining delinquency rates, better job market and very robust retail sales. Basically AXP should out perform on the earnings front. If they do not, the stock is still below where it should be. Looking to unload around 48.

IBM - The stranglers have about a week left, if not sooner. IBM usually rallies into earnings, then sells off even after good numbers. A similar future-trailing PE assessment as AXP is to be made for IBM. However, that is at a minimum. I am of the school of thought that IBM's businesses will begin to out perform, which will lead to a slight multiple expansion toward 16ish. We may need to see a solid growth quarter with increased guidance for that.

Looking to sell some IBM north of 150. Not selling below 150. (But I plan on always being exposed to it throughout this year for the multiple expansion thesis.)

AAPL - AAPL currently trades north of the future-trailing PE, and is technically overbought. Typically, this is when I get nervous. AAPL usually beats, by a lot, and this years guidance will accelerate faster then many think due to the Mac Store and Verizon iPhone. (Although I think the Verizon iPhone will eat away at iPod sales.) Within my 'forward PE' link I assume AAPL will beat consensus (5.31) by 19cents (to 5.50). Basically, AAPL deserves to be trading at the high-end. I did not have the courage to re-enter today. Thought about it when it was around 340, but discipline made me wait. If AAPL consolidates before it reports, I will enter. If not, I will wait until after earnings to start trading it again.

Dimon - If anyone wants a valid commentary on the current economic landscape watch this video of Jamie Dimon. He is one of the straightest shooters on Wall Street, and provides greater insight than any other blogger (except me ;), commentator or 'so called' economic gurus.

Monday, January 10, 2011

Market Thought... reality doesn't bite

Things are good. That is not a bad thing. People just have to accept it. Regardless, a healthy skepticism is not a bad thing either.

My trigger for protection was this chart, with the VIX nearing the lowest horizontal blue line.

We saw it once about two weeks back, and I got cautious. But we are just chilling for the time being.

With earnings coming on line next week for the cream-of-the-crop, I am very hard pressed to be negative. When I see companies like AXP, IBM, and many more trading below already depressed trailing PEs (see 'forward PE' link, under Links), I can not be too bearish, even with relatively over extended technical positions.

Adding to the not so bearish market thesis is the 10yr yield. It is sitting on a light support, and near stronger SMA support.

The market seems fairly stable, around its 14SMA, and if it breaks, there are multiple strong supports that most likely will be tested. Considering the last time we saw a real correction was a month ago.

Some chatter that was highlighted that may facilitate market short-term weakness are: 1. EU debt and 2. sell the news on AAPL

As for #1, the EU basically told the world they will not let the EU fail. They are doing their version of printing money, and they will do what it takes to maintain relative stability. (aka, not a real market threat anymore.)

AAPL will most likely sell the news tomorrow. Only because the chatter throughout the weekend was so strong, the real news was being priced today. But the selling on the news will be a buying opportunity. (I will be looking to re-enter in the mid 330s, ideally around 336.)

Saturday, January 8, 2011

Aerospace boom?

In late November I posted about the potential 'aerospace' boom, and indicated ATI was my favorite play on it. Since then, ATI saw a new high for the year, and upon its consolidation I entered a position.

If a boom is measured via equity performance, a long-term look at the aerospace ETF (PPA) indicates this boom just started. (At least from an equity perspective.)

The equity performance is still trading within a consolidated base. This is not what we should be seeing from a 'boom'. A boom should suggest a rallying market. Albeit, the weekly DMI is suggesting very bullish action and via the daily chart the PPA appears to be rallying, but from a long-term perspective, it should be breaking from this base.

The fundamental knowledge that I know (stated in the previous posts), tells me this could mean the so called 'boom' is still in the very early stages.

If this assertion is correct, ATI looks good here.

ATI was consolidating for about a year before it broke out a few weeks ago. This recent break only adds to the argument of the so called 'boom in aerospace'.

On the short-term, ATI is roughly where I purchased it, but has tested one of its SMA supports. It looks good here for an initial position, and an additional position if it tests its 62 SMA.

Update - 01/11/2011, 1050am eastern: Alcoa's earnings report adds to the thesis of Aerospace, and other ATI related markets doing well.

Friday, January 7, 2011

Add this for AAPL

Just saw this: MG Sieger, TechCrunch's blogger and Apple fan-boy of the fan-boys, was invited to a special Verizon event on Jan 11 (this Tues).

Too much chatter is falling into place. The Verizon iPhone is very near. And analysts have not properly reflected this into their estimates. (Their estimates range from 5M to 1M. Too low for Verizon's market share.)

Add this to reasons why this year's estimates are far too low for AAPL.

A few thoughts...

1. AAPL - 1 M Mac App Store downloads with in 24hrs!!!! I was one of them. It was quick, efficient and easy. I am a fan, but that is coming from an established Apple fan-boy.

Simple extrapolations tells you how big this thing can be. Assume 1M downloads a day (but that should grow) with an average of $1 per download (but it should be more cause the prices range pretty heavily). Taking the 30% into account, that is ($1M x 365 x .30) $109M a year to the bottom line. That's awesome.

Then, when you think of the level of intangibles that this will create, the value is far more than $109M in added hardware sales. Earnings estimates, for this year, are far too low for AAPL.

With today's decline, I entered a light position in the April 320 calls.

2. PBR - It consolidated nicely, and with Oil's consolidation (and sitting on support w/an oversold condition), I liked adding PBR here.

Thursday, January 6, 2011

Market Thought... more detail

(Apparently there is no meeting, or rather people just put things on the calendar and like to waste time.)

Here is more detail around my current action. Along with my previous post, I kept thinking about a post I wrote after I got back from my honeymoon, 'maybe, maybe not'. The thesis of this post is dead on. So if we are in a situation where the market multiple will guide the market (while facilitated by the technicals), I can not ignore it.

Within the 'Links' section (upper right corner, below the pic) within 'forward PE', I incorporated a market range based on the estimates that I have for 2011. The multiple is between 14-15.

I will not ignore the technical set ups. This is just a baseline to gauge where we are with respect to market expectations. Barring a one-off event, right now, the SP500 is still below the low-end, and waiting for the proper technical set up to trigger a real correction.

Basically, the way I am now protecting myself is to sell of overbought names (ie AAPL, MF), and hold onto consolidated names (ie PBR, ATI, IBM, thinking of adding RHT.)

Market Thought... a ton of thinking

This is going to be a quick post, got a meeting, more detail later.

I took a hard look at what I was protecting via my positions, and realized that most were not over bought, and that I am seriously considering adding more of these names. With this conclusion, I realized I was not protecting anything other than a few over bought positions.

So, I sold the over bought names and closed out my protection. This leaves me in a pretty cash heavy position, and flexibility to act quickly when I want to purchase more. (I really want to add more IBM, ATI and PBR.)

I will still short the market, as a trade, when the VIX is near the lower horizontal line from the chart I posted yesterday.

Wednesday, January 5, 2011

re-positioned protection

I repositioned my market protection. Closed out of the 127 Feb SPY puts, and added the same number of the 129 Feb SPY puts. This effectively increases my market protection, but not significantly.

The SP500/Vix overlay has lowered and entered a position to which triggered the re-positioning. If/when the blue (vix) chart approaches the lower blue horizontal line, I will add to the 129 puts.

Still not selling IBM. The 'stranglers' can prey it off of my cold dead hands. Its too inexpensive here. The 'forward PE' in the top right corner clearly shows 149 being the low-end. And that is at a PE lower than the current trailing PE. I will not sell it below 150, no way.

Tuesday, January 4, 2011

A look at Gold

Bunch of chatter on Gold today because of its decline, and rightfully so. The GLD is testing its daily trend/support.

Along with the potential head-and-shoulder taking place, the set up looks to want to break down. At least for the short-term.

With the daily trend broken, the next stop is the support via the weekly. The weekly 32 SMA has acted as support in the past, and the chances are high it will do so during this correction.

At the very least, a nice bounce from the wkly 32SMA should be expected. I may play DGP when this happens, but only for the pop.

(I am from the school of thought the world is getting functional again. With a functioning world, the demand for Gold declines.)

Trades - AAPL

Sold off my AAPL positions. Waiting on a re-entry. (Still very inexpensive, but this is a technical trade, and my 330 was achieved.

The market still looks like it can move upward for a few more days. I am still waiting for the VIX/SP500 overlay to trigger added protection.

In the mean time, I am chipping away at my long positions. (I will not sell any IBM until the VIX/SP500 chart triggers me to sell some or it trades above 150. It is just too inexpensive below 150.)

Waiting on 59-60 for ATI. (But this one can move nicely in the coarse of 6months, especially in an aerospace bull market.)

Sunday, January 2, 2011

anonymous no more

With the new year, comes identity.

My name is Themistoklis Zacharatos (but everyone can still call me echo :) I am currently a manager at Pfizer Pharmaceuticals. My group project-manages manufacturing discrepancies for Prevnar. Basically we analyze manufacturing issues to find a data-driven root cause, proper corrective actions and assess product quality. (The mentality of trading and assessing risk is actually pretty complimentary to the job function, and has helped me move rapidly upward within the organization. Even after the threat of termination.)

In university I wanted to learn about molecular electronics and alternative energies, hence studied Chemistry and Chemical Engineering; but I always had an obsession with current events and the markets. So I read, watched and listened, then read some more, educating myself on economics and the fundamentals of the markets.

I had the misfortune, or fortune, to graduate university (New York University and Stevens Institute of Technology) during the 2002 recession. Despite graduating with honors, the job market was so crappy and demoralizing, the lack of opportunity en-grained in me a sense of self-dependency. Since 2002, I have been continuously observing current events, attempting to understand their effects and attempting to monetize the understanding. I created a methodology that gives me a relative independence. (I use ‘relative’ because I am now married :)

I am hoping the lack of anonymity will give the blog more credibility, and eventually be a communication forum for a partnership. (The partnership will be predicated on complete transparency, so it is only fitting that I remove the anonymity.)

The information on this blog has always been (and will always be) about what I would do or what I see within the markets, stocks or events. It is not advice. I am proud of the quality of information given on this blog. (Although I do recognize the grammatical errors and typos are a bit much at times. But this is a consequence of not sacrificing quality on my work performance for Pfizer, and ensuring the trade executions are correct.)

Its a pleasure to introduce myself to all of you :)

happy trading

2010 Timeless Portfolio performance

The 2010 performance for the 'timeless portfolio', as indicated via the link to the right under 'Links', has come to a close.

With one adjustment toward the end of the year, the 2010 performance was 22.8%.

KMP: +14.4%

BKE: +39.6%

IBM: +16.9%

F: +43.0%

BGCP: +5.7%

(NAT was exchanged for BGCP on 12/08/10. NAT had a -5.9% loss during the time held.)

The actual performance exceeded the high-end estimate of 13%. (The high-end estimate can be observed within the 'timeless portfolio' link under the tab 'high'.)