Market Thought... almost

Nothing really new I can say other then I think we are almost there.


I am aware of all the negative stories, and horrible possible outcomes. The fundies simply do not merit such outcomes.

Don't get me wrong, I am not trying to have delusions of grandeur here either.

Obviously this is going to be a consolidation year, tailored for trading.

Whatever scenario the markets are in, IBM is about to trade with a forward PE below 10. There is a name for a situation like that... opportunity. (and I will take it)

A word on Nassim Taleb

The more and more he opens his mouth, the more and more I find him to be irrelevant. (Not that I ever had high regard for the defeatist mindset of this guy.)

Basically, he called Buffett "lucky" in regards to Buffett's investment success. (article) I mean, that is just annoying.

Buffett created north of $170 BILLION dollars with Berkshire. Let me repeat that, Buffett has overseen his company grow to an enterprise value of $170 BILLION dollars.

So, creating $170Billion in value is potentially considered "lucky" now-a-days?

I am sure Buffett would consider himself the luckiest SOB in the world, but to simplify such an huge achievement and even consider to brand it 'luck', is just asinine.

Market Thought... clarity

When I see this Fast Money clip, I am fairly amazed at the level of uncertainty. (video, first 5 min) I am no stranger to this confusion. I spoke of my own personal confusion the other day, and how I gained clarity.

IMO, listen to the underlining business of strong companies. Fuck the noise.

I will still go heavy when my trigger is achieved.

If you don't know what to do, follow my trigger to start entering the market.

FYI... I did enter KMP today. TOO oversold, and yielding at 7% with very little to doubt the dividend after they just reported.

Market Thought... a coin

There are two sides to every coin. The two sides of this market are no different, just a tad more complex.

I have made the case that the market valuation is not optimistic when recent earnings are taken into account, and yet have given the purely technical view of the bearishness that can potentially bring the markets to their 200SMA.

To put it bluntly, it is a mix signal and its confusing. That confusion can be annoying.

So its time to stop being annoyed, and gain clarity.

When we look at this SP500 chart, with the July as the starting point, there were clearly buy signals.

Buy signals were triggered around Aug 17, early Sept, early Oct and late Oct/early Nov.

These were triggers because for the dynamic of this rally, the fear level was too high at those point.

However, look at mid Jan. There is no inversion yet, the fear has not triggered a bottom. IMO, we need to see a SP500/VIX inversion to trigger short-term bottom to this weakness.

Based on this, we need to see more weakness. BUT, when that weakness comes, I will enter heavy. As that weakness will bring individual stocks to levels that can not be ignored.

My fundamental thesis has not changed. When I see the inflection, I will go heavy in IBM (120 jan 2011 calls), AAPL (190 jan 2011 calls) and GOOG (520 calls).

AMSC

Another company that does everything right, yet it sells off. It beat the street at pretty much every measure, but apparently is too expensive and sold off.

(I do not understand this. How can a company beat, and guide higher, yet is deemed too expensive.)

If anyone was ever interested in the name, there is support around 34-35.

(I will not be entering. Will look to play it at 32, but my current strategy does not fit the 'initial buy' at 34-35. Will explain my strategy later in the day, with my end of day Market Thought post.)

YouTube rentals

Many are playing down the fact that YouTube made a little over $10K from 5 independent films in 10days.

When I first saw the news I thought it was a good number. The engineer in me forced me to extrapolate the potential. Let me explain.

1. 5 movies were used as a test.

2. of the 5 movies, they were independent films. Which means they grossly lack critical mass.

3. it was 10 days.

This tells us a few things.

1. Basic Algebra: YouTube made $1K a day ($10K/10) from movies not designated to a mass audience.

2. Obviously there are people who are willing to rent videos off of YouTube.

3. If #2 exists, and the YouTube library expands nicely to titles that have more critical mass, we will obviously see more revenue coming in. And it will come in exponentially.

3. With #2, and an expanded library of movies/tv shows/'pay for clips', a subscription models is definitely in the cards. Especially since devices like Apple TV allow you to stream YouTube video. And the more inclined techies know how to connect their laptops/computers to their TV to watch the video directly on a big screen.

Ladies and Gents, this is good news. YouTube is correctly attacking all sides of the video angle from advertising, to ala chart and eventually subscriptions.

I agree, in a different way

Reading Paul Volcker's opinion in the NYT, its hard not to agree with him. Simply put, he is right. But I fail to see how a large over leveraged hedge fund under the GS umbrella would cause less harm than one that is independently owned. Case in point, Long-Term Capital Management (LTCM).

LTCM was a large over leveraged fund that sent a shock wave through the entire system when it was failing. The fact that it was independent meant nothing. It was large, and over leveraged. That is the key here.

The tools are available to prevent, too large and too leveraged. For starters:

1. all trading vehicles must go through a clearing house. (to ensure margins and capital requirements are met. This must be a requirement prior to given the approval to trade.)

2. the less liquid and more exotic the trading vehicle the more capital is required. (The holding company should not be taken into consideration w/respect to the capital requirement. The capital requirement must come from the subsidiary trading, as the subsidiary will be the company that can then fail without systemic risk.)

3. the new regulator must have power over any company, regardless of title, if the company is 'trading' any vehicle. The regulator should approve the ability of the company to trade and should actively monitor capital levels with respect to potential losses. (To prevent another AIG situation)

I definitely agree with Mr. Volcker, I just do not see how breaking up banks for the sake of making them smaller will do anything. But for those banks that can not have their trading subsidiaries have sufficient capital requirements, to prevent failure of the entire bank, then the trading subsidiary must be independent or raise capital.

And we, as a society, can not have this new regulator asleep at the wheel, they must be proactive regulators.