Friday, June 30, 2006

The end is near! Cats & Dogs living together...

England World Cup Fans Reportedly "Drinking Germany Dry"

June 28, 2006 2:00 p.m. EST

Julie Farby - All Headline News Staff Writer

Nuremberg, England (AHN) - England's s massive army of World Cup fans is reportedly drinking Germany dry, with breweries warning beer could run out before the final game because of huge demand from supporters.

In Nuremberg, organizers revealed 70,000 England fans who flooded the city drank 1.2 million pints of beer-an average of 17 pints each.

According to the Daily Mirror report, one astonished bar keeper Herrmann Murr says, "Never have I seen so many drink so much in such little time," with fans draining all 32 of his 50-liter (11 gallon) barrels available at his city bar.

Murr calculated Britons were shifting beer at a staggering rate of 200 pints per minute.

According to City official Peter Murrmann, "The English proved themselves world champs. They practically drank us dry."

Stuttgart bar chiefs say an extra 900,000 pints were drained last weekend where 60,000 fans partied before and after the 1-0 win over Ecuador. Meanwhile, the Veltins brewery also revealed it produced a record 418,000 gallons in a bid to keep up with demand.

A spokesman says, "It is incredible how much is being drunk but the hardest thing for the breweries is keeping up with the thirst of the English."

Thursday, June 29, 2006

CNBC: more fluff, less nutricious

I don't know whether to just get upset at CNBC, or to give them kudos for having a little something for everyone. I'd like to wake up in the morning and see some actual financial "news" while getting ready for my day. Take this morning for example:
I'm not a big sports guy, but the first thing I see this morning when I turn on the only financial channel available in my room is talk about MBA picks. They manage to tie it in to money, but we all know it's really for the sports fan in everyone.
After my shower, I come out to see two political hacks trying to out-shout each other with their own rhetoric on offshore drilling for natural gas. I can't believe the garbage that people will say to promote their cause. After that, they moved onto the "FED watch" and played Europe's "The Final Countdown" for the umpteenth time this week.
But I drew the line when they brought in a professional coffee-taster. All the guys on Squawk Box were gathered around samples of black coffee for a lesson in taste-testing. If my wife had suddenly walked in, she would have probably asked me what happened to the regular cast of the Today Show. Although the streaming quotes across the bottom of the screen might have given it away, first.
CNBC is no Bloomberg, but it IS definitely much more entertaining. That's probably why just about every financial office has TV's mounted up high, tuned to CNBC. But, it's finance, how entertaining can that be just by itself?

Wish my office would put up some TV's...

Tuesday, June 27, 2006

All's Quiet

As I watch CNBC and listen to Bloomberg radio, I hear the guys that get paid to talk about the stock market saying the same thing I was thinking last night: the markets are trading within a range while it waits for the Fed announcement. Well, hey, maybe I'm doing something right.

Should the Fed really be such a driver of the stock market? Fed rates have always been a factor before, but I don't see what makes it such a big deal now. Heck, even the price of bonds have already moved to 5.25% in anticipation of a rate increase on Thursday. We've become so distracted with what Big Ben Bernanke is going to say that we've overlooked the fact that oil is just plain overpriced. Crude oil prices have long been subject to the slightest speculation because of the volatility of the nations that produce most of it.

Frankly, I think we've been getting the short end of the stick for several years now, to the benefit of OPEC and commodity traders. They're making HUGE profits now, and have enjoyed the good times while it lasts. Oil is a cyclical business, and prices will fall again. OPEC knows it, just listen to them talk. And the Middle East will struggle to cope when all their hundreds (thousands?) of Sultans suddenly find themselves without an income to support their very excessive lifestyles. Only the United Arab Emerates seems to have built an infrastructure to support non-oil industries. It's risky, but I would like to look there for places to put my money.

Monday, June 26, 2006

Everything you've learned about the Stock Market is wrong.

The more I learn about day-trading, the more I realize how the markets really work. And all the famous quotes we've all heard about investing are starting to show their true meaning. Read this, and take heart! Thanks to Barry Ritholtz for bringing this to my attention.

As for today, it's very interesting to watch the Markets leading up to the Fed announcement. There's just not a lot of volume right now, and all the indices appear to be forming a decreasing sine-curve around a mean. In other words, they're hovering within a certain range, just waiting.

We still haven't seen the next big drop that many analysts are predicting. Has anyone else heard about a major turning point occuring on July 10?

Friday, June 23, 2006

Oil's Goin' Down! (um, when?)

Fadel Gheit of Oppenheimer was just interviewed on CNBC's Squawk Box about the Anadarko acquisition of Western Natural Resources and Kerr-McGee. Oppenheimer, incidentally, also sponsored this morning's ticker stream during the show. Back to APC, they're using none of their own cash on the deal, it seems. Apparently, they're taking a loan out a value equal to their own market cap to make the deals. I find that very unusual.

But here's the real story: he mentioned that the oil companies in general are planning around oil moving to $45 a barrel. It's a lower target than what I heard on Bloomberg the other day, but it appears that the analysts are agreeing on a range.

APC's already down 10% in pre-market trading on the news, making the market cap drop below the loan value. KMG is up to 68.91 right now, and the sale price is offered at 70.50. It will be interesting to see how the price moves after the opening bell. A nimble trader might get an opportunity to ride a quick inefficiency.

Thursday, June 22, 2006

House of Cards

SAN FRANCISCO (MarketWatch) -- The Energy Department said crude supplies rose 1.4 million barrels for the week ended June 16. They total 347.1 million -- their highest level since the week ended May 29, 1998, the report said.

Crude oil supplies are at the highest level in 8 years, even the Saudis are cutting production because they have nowhere to put their extra inventory. The bottleneck is now at the refining capacity, if there is a bottleneck. What was the price of oil 8 years ago, May 29, 1998? $15 a barrel, and later dropped to $12 by the end of the year! See Chart

Today, the quiet experts are saying that the fundamentals for drilling crude is $50-$55 a barrel. And even the Oil Sands of Canada can stay profitable above $50. Aside from the Oil Sands, I think there's even more breathing room for oil to drop if the floor falls out. And if it does drop back to those levels, watch the UAE for some moderation in its unbridled real estate development.

This supply report helped me to understand the fundamentals behind the early signs I thought I could see. I was wondering why Chavez and his Venezualan gang were pushing a $50 floor on prices instead of the supposed $25 floor. The rest of OPEC, of course, denies that there is any price target. But as Venezuala's comments were shrugged off, even the Saudi's had some comments that displayed concern over prices becoming too low. I kept asking myself why all this bearish talk from the producers when the train is still hauling at full steam.

There is a glut of supply in crude oil. The U.S. has a glut of supply of housing, whether we'll admit it or not by looking at housing starts. It all appears to be a "house of cards", waiting for a slight wind to make it all come crashing down. When it does, I expect to see the stock markets crash with it. But, I also expect to see the large cap stocks to be the first to recover as the survivors move their money into the tried-and-true blue chips.

That's my prediction for today. The real trick is to be able to tell when it comes!

Tuesday, June 20, 2006

Break's Over

Had a long weekend that just ended. So what did I miss? Looks like Monday turned out to be a bad day for the Indices after all, and today begins the bounce. Then again, only the Dow looks like it's poised to make a comeback. It might have an up day, but I wouldn't expect too much from the Nasdaq or S&P 500.

But who's buying Index ETF's anyway? Here's to UNF dropping another $5, I've got options to cash-in!

Saturday, June 17, 2006

Da Bears-s-s-s-s!

I hate to say that I'm already bearish on this upcoming week. We just had a few days of major gains in the markets, but I believe I can already see weakness. Friday showed marginal and slight losses across all indices, and the volume comparisons show that the strength is fading fast on this small upswing. Unless the S&P 500 can climb above about 1260 and stay there on Monday, I'd say we're back to sliding down in falling prices. We'll have to see how the week starts out.

Still, I see longer-term indicators on many stocks (retail) looking good. And I'm finding long-term sentiment in the Smart Money is still bullish for Q4 of this year. Even Cramer (sorry if I don't associate him with the SM above) says July should be a good time to snap up clothing stores before the back-to-school rush, and I agree. Not that I have to validate the Mad Man of Wall Street, but I'm reading the tea leaves myself. And it looks like I'm seeing confirmations that this is still only a short-term market recession.

Good luck, and stay strong!

Thursday, June 15, 2006

My Crystal Ball?

As I ran some stocks through technical analysis last night, I noticed a possible trend recurring across several stocks. MACD histograms for these guys looked like it was setting up for a second recovery cycle that just repeated the recent downtrend. What happens after that, if this is the end of the correction or just another cycle, it's too early to tell.

But what I found most interesting is that the trend from these MACD histograms would require about another 10 sessions (8-13 is the range) before we might see confirmation of a long-term rally. Suspiciously, the next Fed rate release is scheduled 10 sessions from now on June 29, the day after my birthday. I'd say it is coincidence, but I'm sure we'll see some strong movements as soon as Big Ben makes his announcement.

Wednesday, June 14, 2006

A Little Relief

It was nice to see that bounce finally hit today. A few quick trades pulled me from last to first in my Virtual Stock Exchange game today, and maybe I saved a little face.

I see MACD curves on the indices showing positive divergence, signalling the end of down days approaching.

Interesting, Cramer just mentioned all the margin calls that are going on this week. It just so happens that I heard from a trader yesterday who was saying that he noticed a record number of margin calls. A lot of investors were forced to liquidate their positions, selling stocks to pay off margin loans. Brokers putting some of that money back into stocks might be part of the reason things went up today. I noticed a final upturn in the last hour today, that might be a good sign for tomorrow!

I'm sticking with the theory that by Wednesday next week we'll be down again. Now, I'm thinking it might start Monday.

Monday, June 12, 2006

Dead-Bull Bounce

Wow, first Kudlow & Co. and now I'm watching Cramer talking about hitting bottoms today. Earlier today, I looked at the technicals on the Dow, NASDAQ, and S&P, and thought to myself 'it's gonna bounce tomorrow.' My guess is 3-4 sessions going up, followed by another drop back to the Bearish trend by this time next week.

I don't think this Bearish cylce is over. Everyone is still rambling on about what the Fed is going to do next, although I think they're finally getting tired of it. People are all over the board on whether Big Ben Bernanke is going to raise rates one more time, but the more recent forecasts believe he's going to do it. I don't know, but it's starting to look like I grabbed my 30-yr bonds at a pretty good price.

Meanwhile, I see the high-paid money managers and analysts on K&C saying they would 'buy' tomorrow, and Jim Cramer opens up talking about 'bottoms' while showing a pic of J-Lo sporting some jeans. He's blaming the whole Bear market on Ben & the Fed, but I say Ben inherited the recession (say, haven't we heard something like that before?). I hear a joke originated at a trading desk in Canada about the death of Abu Zarqauwi, saying "They got the wrong guy!" next to a picture of Ben Bernanke. They've been upset for over a year, now it's turning to hatred! Love hurts, eh?

I've opened up a game on MarketWatch's Virtual Stock Exchange. It just started last Thursday and is on until the end of the year. If you're interested, email me and I'll send you an invite.

Thursday, June 08, 2006

Computer Nerds will Rule the World!

I'm getting a custom program built to help me with my fundamental analysis. Meanwhile, an associate has been discussing his methods, which tend more towards technical analysis. I've been meaning to use technical analysis together with my existing method, where fundaments decide what to buy, and technicals decide when to buy.

But as I think about it, technicals tell you when to buy and sell. Why bother with fundamentals if one is going to bother with technicals? I suppose I'm really comparing apples & oranges, there is probably a time and place for everything.

So, while I'm still finishing up the details on the fundamentalist program, I've been tinkering with technical analysis programs. If anyone out there uses software that they are proud of, I'd be happy to hear about it!

Tuesday, June 06, 2006

The Soothsayers are getting louder

I was just listening to another interview, this time with Barry Hyman, equity market strategist at EKM financial. He expects to see the S&P hold around 1240-1250, with no upside beyond about 1320-1350. And if it gets bad enough, it could go down to 1150-1180 during a "second decline" between late summer to early fall. Today's close was 1263.85

He believes there is "excess" in the market, and is looking (even hoping) for another Bear rally soon to provide opportunities to buy good stocks from late in this year to early next year. They just aren't sure exactly when, but they believe it will happen.

He just laid out everything I've been piecing together all in one sitting. This is just one more comfirmation of the theories I've been hearing from the "quiet" newsmakers of the Street. And I think it's about time to start finalizing strategies to approach this (Puts, anyone?).

Saturday, June 03, 2006

The 30-YR Bond Test

My custom-made database is almost functioning at 100%. Special thanks to the India-based programmers who are making it all possible at affordable prices!

I was going through all the records I've made so far in efforts to debug the program. And I started noticing something about a special feature that I had requested: a red flag that signals when a company's initial rate of return (ROR) is less than the current 30-yr bond (or T-Bond) rate.

First, let me explain how I make this comparison. I treat the current diluted EPS as a yield. To find the yield rate, the yield is divided by the price, just like bonds. If a company's initial ROR turns out to be less than the highest-yielding bond rate (usually the T-Bond unless you have an inverted yield curve), then you might as well put your money into the bonds until either earnings rise or the stock price falls... OR until the T-Bond rate drops. DISCLAIMER: This is treating your stock like a bond, and ignores potential earnings growth and any other factors that could influence the future price of the stock.

I noticed a lot of companies were giving me this red flag mentioned above. So I decided to count how many companies are "worse than bonds" right now. I got 21 out of 44, that's 48%. About half of my companies are estimated to give out less money than the 30-yr Bond! And many of those that did beat the T-Bond were not much higher. Those that excelled greatly in initial ROR included financials like CFC, LFG, FMT, & NEW (but not CBH), and housing stocks like BMHC, HOV & KBH. The losers included technology, healthcare, pharmaceuticals, and insurance, while retail and manufacturing is right about at the same level. I also noticed that a company's P/E had nothing to do with my results; some companies that failed the test had lower P/E's than those that passed.

This makes me think that I should look into buying some bonds soon. I'm still looking for signs to prove the theories I've been hearing on another market correction within the next few months. If this happens, bonds should be in demand until the 4th quarter recovery (also part of the theories). Other theories predict a soft recession for the rest of the year, with no guidance after that. So, as I said, I'm still looking for rules on reading the tea leaves.

For your information, right now I have only 47 companies on file. This isn't much, but considering the Dow Industrial Average contains only 30 companies, I'd wouldn't worry too much about it. 4 of my companies are also on the Dow: HPQ, JNJ, PG, & UTX, and there's a few more I'd like to add; only JNJ passed the T-Bond yield. I eliminated 3 companies from this analysis because of their questionable earnings conditions: KKD, SLR, & SUNW.

Thursday, June 01, 2006

How about that?

You Are Bart Simpson

Very misunderstood, most people just dismiss you as "trouble."

Little do they know that you're wise and well accomplished beyond your years.

You will be remembered for: starring in your own TV show and saving the town from a comet

Your life philosophy: "I don't know why I did it, I don't know why I enjoyed it, and I don't know why I'll do it again!"


A big day for the markets today! But why? Yes, I love to ask that question, and I will ask it often. I don't quite know the answer this time. But I'm guessing it's a combination of traders slowly coming off of vacation, and the month-old news on inflation as well as retailers reporting better sales in May. I thought past performance was NOT supposed to indicate future results.

I heard a second source this morning predict that there should be a short recovery followed by a lower low before we see a true rally later this year. I might try to ride this short wave with more stop-limit orders, and possibly a few puts to get this theory to work. Here's to the chase!