A 10 YEAR HIGH THAT HAS INVESTORS RUNNING SCARED
This article also featured on TheStreet & Fidelity There are different points in time since the mid-90's that I can classify based on their ability to produce fear and greed on either a short-term, intermediate-term or long-term basis. What I mean by that is that I have vivid memories of the manner in which pullbacks were greeted during each time period or market cycle. The amount of fear during each time period was determined by what had occurred in the period preceding. For example, there was little fear during the pullback that started the internet collapse in 2000 since we saw a near uninterrupted bull market in the years prior. Following the internet bubble collapsing it took a period of YEARS for investors to finally understand that dips should not be bought. It was only when this fact was understood completely that the markets were ready to move the other direction. All the excesses had been unwound. Fear was easily generated through even the most moderate of pullbacks. Fast forward to 2007-2008. Retail investors were too busy getting rich off of their homes to pay much attention the markets. It was the institutions, hedge funds and professionals who were going to be victimized this time around. The collapse that occurred in 2008 was a direct assassination of the professional investors psyche. Those hedge fund and institutions that survived are like battle scarred war vets. They jump at every loud noise and are startled by small children making sudden movements. We are now at a point in the financial markets when even normal pullbacks, such as the one we saw over the past several weeks, are greeted by a mentality that anticipates the end of world imminently arriving. This creates the proper dose of fear necessary to make bullish moves like we have seen the past few days. Of even greater significance is the fact that the move up we are seeing currently is being greeted by the same skepticism that said the markets had more to go on the downside last week. You can see the eager attitude with which investors will take on a bearish stance by the squeeze in companies with a high amount of short interest over the past few days. Last week I presented 5 stocks that I came up with as a result of a scan that pinpointed companies showing relative strength during the bull market run. I scanned for a high amount of short interest, low float, market cap under $2 billion and a few more qualifiers. That portfolio is up 12% since last week. A boatload of other companies that I track...
WHY AAPL, GOOG AND EBAY WILL SLASH AND BURN INVESTORS
This article also appears on Forbes We are squarely in the middle of a point in history where the speed of innovation is causing entrepreneurs, innovators and investors to question everything they know about business. Never have we witnessed a point in time when companies that were thought to be bulletproof so quickly fall into the trash heap labeled: has been and wanna be. To be an established technology company in such an environment is an exercise in prescription drug dependence and paranoia. To be an up and coming technology entrepreneur during such a time is an exercise in opportunity and limitless possibility. 10 years ago investors thought companies like MSFT, CSCO and YHOO possessed the dominance and relative value necessary to blossom into investments that would put their kids through college, fund an expensive bathroom with an odd looking sink, or perhaps support an addiction that had become way too fun to give up. Instead these companies have been left behind by investors as technology has already turned them into dinosaurs. Even worse than becoming a dinosaur is becoming a fossil embedded in solid rock, covered up by mounds of dirt. Companies like Palm, Nokia, Vonage, Sirius and RIMM are all flashes in the pan. Judging by that list, it would seem that the world of wireless is the fastest moving technology innovator. And why wouldn't it be? We use these devices nearly every single minute of every single day. They are the devices that have come the furthest in terms of innovation over the past 5 years. They are also the devices that will see the most changes and innovative add-ons in the next 5-10 years. With all this said, here is a list of 3 companies that should keep you up at night if you are a long-term investor in any of the names. Their futures, while appearing solid, are anything but due to the whims of the modern day consumer, the speed of the technology cycle and the path that technology is currently taking: - AAPL - Cult following. Everybody has at least one of their devices. There is nothing but a circle of love and praise being hailed upon the company. They recently made plans to build a circular spaceship type of office. Pretty cool. At the same time, it reminds me of other grandiose plans that have marked the top of not just companies, but entire civilizations of people. The bottom line with AAPL is that it is a maker of gadgets. Gadgets will only get you so far before consumers and technology move onto other products and companies that are moving in...
5 COMPANIES THAT SHOULD BE A PART OF EVERY INVESTORS PORTFOLIO & WEEKLY INDEX ROUNDUP
It was another week of fury and rage that, in the end, amounted to a hiccup when all was said and done. I decided to take a look at 5 companies that I think should be a part of every investors portfolio. And, of course, my weekly look at the general markets. (click on charts to enlarge)
I’M GOING CHINESE
There are some opportunities to be had in the Chinese stocks. Everybody is running scared with the specter of John "I am Jesus" Paulson getting hit due to an investment in a supposedly legitimate Chinese company. This has called into question ALL Chinese companies. Whenever ALL of anything is called into question, opportunities open themselves up. Fear has a funny way of making otherwise smart people do stupid things. It has happened over and over again over the past 11 years. Internet bubble, financial crisis, real estate crisis. Over and over again we have seen the herd dump stock in the face of fear and ask questions later. If you can pick through the fear and determine what is good, then you win. I am looking at a couple Chinese companies for a trade. I will more than likely initiate one tomorrow morning. I will post a Trade Update once I do. I believe a lot of the Chinese companies are setting up for an epic short squeeze. I plan on assisting in the beatdown of whatever short sellers want to play at these...
3 SMALL-CAP STOCKS WITH BRIGHT FUTURES
This article also featured on TheStreet Over the past few months I have mentioned a number of names that I thought would present opportunity for profit to investors over an intermediate to long-term time horizon. What I've rarely done is to pass on opportunities in my favorite area for investment – micro and small cap stocks. I go one step further in my research of these names and look for companies that are undergoing some type of distressed situation that forces old habits to disappear, being replaced by new ways of doing things that tends to bring out the value in a much more timely manner. Investors have a tendency to get caught in value traps more often than not. You will look at a company that seems reasonably priced based on any number of metrics and think to yourself that a 100% gain will be a simple goal over the next 12-24 months. What ends up happening is the stock is passed over multiple generations as your great grandchildren await the day when the promise of value becomes a reality. Sure, I am exaggerating a bit. But you get my point. What investors overlook more often than not are catalysts. Every investment needs a catalyst to realize its value. It doesn't matter if it seems like the cheapest stock in the history of our universe, if a catalyst doesn't exist to extract the juice from the lemon, then it will sit around doing absolutely nothing. I have come up with 3 names that not only provide value, but have the catalysts necessary to see that value become a reality. The catalysts come in the form of new economic realities, a restructured balance sheet/management team or a macro trend that will favor the company going forward. MAMS – MAMS Software Group is a UK based company that provides software to automotive parts distributors, service companies and manufacturers. They have a dominant position in their marketplace with a controlling share of the current market. Amongst their current customers in the US you have: Autozone, NAPA Auto Parts, Monro Muffler Brake, Fountain Tire and US Autoforce.A majority of the companies revenues come from their UK operations, however. The U.S. side of the business has become more of a focus for the company over the past 12 months and should add to the company's top and bottom line in the coming years. MAMS was spunoff from its parent company in 2008 during the peak of the financial crisis. Due to the timing of the spinoff it was not just ignored, but completely buried under a torrent of negativity. Since the spinoff, the...
5 STOCKS TO KEEP THE TATTOOED INMATE FROM ENDING YOU
During every market correction opportunities come about that only become clear in hindsight. This is followed by imaginary calculations of the amount of profit that could have been yours if you had bought at precisely the bottom and held onto the point where your profit was maximized. You sit for a number of minutes daydreaming about the comfort and joy that money would have brought to your life. Then reality sets in and you decide that during the next market correction you will be more vigilant in researching these opportunities and seizing the moment when it arrives. Here we are midway through 2011. We are in the midst of a correction that could be at the beginning stages of exhausting itself, leaving the market with the option of either working sideways for awhile or perhaps moving right back up. I have observed the speculative fervor that gripped the financial market during the first quarter of this year dissipate greatly. It has been replaced by an unreasonable gloom that doesn't seem to be to far away from the hearts and minds of investors given the torture they have been put through the past 10 years. Sustainable lows in the financial markets are built on a foundation of investor nausea, anxiety and anger. It is the act of investors vomiting up stock that allows the financial markets to carve out the bottoms from which future rallies can ensue. From memory I can think of every bottom I have been a part of since 2000. There hasn't been one where I haven't had some degree of fear run through my body. There hasn't been one where all of my peers were afraid to pull the trigger and add exposure. There hasn't been one where the media wasn't telling the entire investment community that a one eyed dragon was standing above them with the intention of incinerating all of their capital. There hasn't been one where people thought I was crazy for disseminating bullish opinions in the face of such obvious bearish realities. What have I learned? Just this: What is obvious is obviously wrong. This is tattooed across the markets neck. I have seen this tattoo close up as the market has tried to murder me on many occasions. Yes, the market is a tattooed killer. Imagine the most ferocious inmate in the most dangerous prison and multiply it by 10. That's what you are contending with in this arena. That guy. He hates your guts, carries a sharp knife that used to be a comb and he wants to use it on you. Tricks, deceit, lies, manipulation, brainwashing. All of these...
RUNNING SCARED: THE MOST SPECULATIVE GROUP OF INVESTORS HAVE LEFT THE MARKET
This article also featured on Forbes Remember the phase 4 stocks? Those companies that the most speculative traders always seem to gravitate to during every intermediate or long term top in the market. I wrote an article about it in February. In that article I mentioned 3 stocks that were making me concerned about the future of the bull market. Those 3 stocks were JDSU, FNSR and CIEN. It wasn't simply the fact that they were up a lot over the past few months. It was the manner in which they were going up that had me worried. It reeked of sloppy, greed driven buying that always ends in disaster. The market simply doesn't cater towards these types of investors. It might over the very short term or during anomalous market cycles, such as the internet bubble. However, during normal cycles, the market makes it hate for these types very well known by destroying their capital and leaving them with rabbit ears the size of dumbo. Let's take a look at the three Phase 4 stocks that were mentioned on February 17th as being sloppy and indicating excessive amount of optimism in the financial markets: (click on charts to enlarge) That haven't just declined, they have all literally crashed. They all have company specific issues that go beyond this current market decline. What shouldn't be missed, however, is the ferocity with which they are falling. It's an extraction of excessive speculation. The guys who are dumping are the most aggressive investors in the marketplace. Not only are they the most aggressive, they are also typically the ones who are late to the bull market party as described in the Phase 4 article. If you were a Las Vegas sports book, these are the guys you would want visiting your book on a daily basis. If you sold used cars, these are the customer you would want on your lot. If you traded oranges on a daily basis, when these guys started buying you would want to begin selling your inventory. In other words, these are the market participants you want to be betting against as often as possible. When they are bullish, you want to be bearish. When they are bearish, you want to buy everything in sight. Guess what they are now? They are as bearish as they have been in sometime based on the ferocity of their selling, which was only matched by the greed with which they bought at the February top. Anyone wanna take a guess as to who will be caught with their pants down once again? No, not Anthony Weiner. This time it's...
6 CHARTS THAT WILL KEEP YOU AWAY FROM YOUR BOTTLE OF XANAX DURING THE WEEK AHEAD
click on charts below to enlarge
THE SCENARIOS ARE CRYSTAL CLEAR FROM HERE: 2 POSSIBLE SCENARIOS
One of the skills that children seem to develop quickly is the ability to find computer viruses that have no place on Earth, but somehow seem to find a way into your PC. Viruses that make you question how dark spirited the human race must be that these types of creations - only serving destructive objectives - actually exist. I was planning on taking a look at some charts tonight. However, a virus managed to kill the PC that I use to create charts, screen captures. All the good stuff. I'm left with a MacBook that doesn't have the same software or capabilities while the PC is getting fixed. Fortunately, I can still post. There are a few items of note: 1. Put/call ratios were literally off the charts today. There were individual equities that had 3 to 4 times as many puts being bought as calls. It occurred across all sectors. From tech to energy stocks. Investors were literally loading the boat with either protection or outright speculative shorts. 2. The combined put/calls hit stratospheric levels today. The equity put/call saw levels not seen since the catastrophe of 2008. Total put/call is seeing its moving averages move up to where it made the lows of 2010. 3. The most significant aspect of this put buying activity is as follows: The last time we saw this level of put buying activity was June of 2010. In June of 2010 it took a 14% decline and a 5 month low to make investors this bearish as expressed through put buying. In our current downtrend, it only took a 7% decline and a 2.5 month low to make investors load the boat with puts. What does all of this mean? It means definition. Yes, definition. Definition is the best thing that an investor could have in a situation like this. By definition I mean that your risk is becoming extremely well defined at these levels as are the possible scenarios going forward. Scenario 1: Given the massive amount of pessimism we are seeing before we even break the March lows of this year, you can assume that if a break of those lows does occur there will simply be too many people loaded on the short side to allow a successful breakdown. In other words, a break of the March lows should be bought hand over fist. It will be a fakeout. The snapback rally will be a sharp one. Scenario 2: We do not break the March lows and begin snapping back up over the next few days. I believe that this will be the more confusing of the two...
TRADE UPDATE – SSO
Took a tiny profit on SSO at 49.05. Trade didn't work as expected. Moving on.