PORTFOLIO UPDATE: ALL THAT VOODOO
During the trading day last Friday, I tweeted the following: In a year that has been marked by taking pride in what I've liquidated rather than anything held, I made the decision early on not to allow SGGH to get away from me on the downside. Steadily began scaling out of the name in the 8 range starting in November and finished selling last week. Not at all comfortable with the way the name has been trading as they attempt to raise the capital needed to pursue their acquisition. Some of that discomfort comes from the fact that I'm having a difficult year in terms of performance, which automatically creates less of a tolerance for buffoonery in new names. Another part of that discomfort comes from the fact that the company needs their stock for currency in order to facilitate the acquisition. The further it drops, the more expensive the acquisition becomes for management in terms of overall costs. Lastly, the company SGGH is attempting to acquire is tied to commodities, which are in an absolute royal rumble at the moment. Anything related to the sector could see some outsized volatility. Didn't want to sit through that when other opportunities exist to profit. I will be watching the name into 2015 to see if there is an opportunity for reentry once everything is ironed out. In January, I should have a new research report on a financial name that I have been accumulating since November. What looks to be a really outstanding opportunity in what was formerly a significant sized company. I'm working on putting together the research as I continue to slowly accumulate shares. It is difficult name to accumulate due to the lack of liquidity. As for the general market, the opportunity remains to the upside. The power with which declines are being bought is not euphoria or signs of a bubble as popular perception seems to dictate. Rather it is a testament by the market of the underlying bid that continues to exist in equities. What should be kept in mind is that since the beginning of this bull, this market has exhibited a pretty consistent tendency towards rotation. Early on it was from financials to tech. Then it was from small-caps to large cap names. Now it looks like the next great rotation is from "new school" tech, which are companies that I would be define as being around since 1995-present, to "old school" tech, which are well established technology companies that blazed the trail for the technology we are all so familiar with today. Think Intel, Microsoft and Oracle. I do believe that the outperformance of...
5 CHARTS SHOWING WHY A SYMMETRICAL MARKET IS A HEALTHY MARKET
The following charts demonstrate how symmetrical this market remains. A symmetrical market is generally a healthy market. It is only when symmetry begins to break down and chaotic price movement becomes the norm that significant reversals take place. click chart to...
THIS SENTIMENT INDICATOR IS A BEAR’S WORST NIGHTMARE
History rhymes and so do bull markets. The 90s bull offers the astute investor a grab-bag of tidily wrapped treats for the taking. The treats come in the form of snippets of information that hint to us what to expect from a technology led bull market that is doubted, lambasted and scoffed at for most of the way up. With this in mind, I present quite possibly the only sentiment indicator that should be in the toolbox of an investor: The put/call ratio. What you see below is a moving average only version of the put/call going back nearly 20 years. You will immediately notice that we have not even started to dent the skeptic sentiment that marks important tops for secular bull markets. Instead put buyers remain resilient in their conviction that every 5% pullback will turn into a 25% pullback. A bear market will emerge. The skeptics will fly high above the city merrily cheering as the optimists are herded back into their lives of perpetual peasantry. The chart below flys in the face of this type of thinking while telling us exactly why the pullbacks are so short lived. In three words: Too many bears. click chart to enlarge...
WHY IMMEDIATE LIQUIDITY IS THE GREATEST CURSE TO EQUITY INVESTORS
Imagine for a second that the real estate market in the U.S. was as liquid as the stock market. That home prices for every single residence in the country traded on an exchange that could be accessed each business day. Imagine that selling your home was as simple as clicking "sell" and you would have a predetermined amount of time to move out. Actually, let's make it even easier than that. Let's say as part of this real estate liquidity program, within 24 hours of selling your home on the real estate exchange, movers automatically show up, pack your belongings and send you off. Now let's assume the opposite were true for company stock. Imagine that stocks took months to sell. There was a tremendous amount of paperwork involved. The value of your stock wasn't quoted daily. If you wanted to sell your stock, you had to physically move a portion of the furniture, equipment or machinery at the company to another location. In other words, there was a tremendous amount of work and inconvenience involved. How would this reshape the ability to produce profits in both of these assets? Investors I have met over the past 20 years have managed to produce tremendous profits in real estate, while very few have held onto their profits in the financial markets. Is this because the stock market is difficult? Is the stock market rigged, as some would have you believe? Has this been an adverse period for stocks? Is there something about real estate that makes it more steady and simple for the average investor? Accessibility is the at the root of the answer to the question of why individuals fail at stock speculation at a much greater rate than real estate speculation. The fact that the stock market is quoted on a daily basis allows for emotions to get involved. Further, the ease with which you can move millions of dollars, allows for emotions to be acted upon in a feverish manner, avoiding deliberate, careful judgement while embracing fear and uncertainty. For the average investor, real estate doesn't allow for emotions to get involved. In fact, it plays into the human tendency towards laziness given that selling a property involves both time and effort. And this is why investors, for the most part, are much more successful in buying and holding real estate than they are with stocks. In the real estate market, individuals are being rewarded for human traits that come naturally. In the stock market, individuals are punished for human traits that come naturally. The individual investor in the equity markets is being manipulated on a daily...