Daily Archives: December 30, 2009

Any Last-Day Oddities?

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I guess I feel a little silly doing all these posts over the holidays, but my commitment to my loyal readers is strong. I particularly appreciate the guests doing posts, since that gives me a chance to actually vacate on my vacation. I notice some formerly-popular blogs have virtually shut down, doing a post only once every few days or so. People are gearing up to say adios to 2009, it seems.

And here we are, down to the final trading day of this year. I imagine it will be a low-volume affair, although there's bound to be some freakiness, particularly in the final hour. I mean, these days, we can't seem to close the day out without something totally bizarre happening in the final thirty minutes. Monday, a ramp-up; Tuesday, a ramp-down; today, another ramp-up.

Will there be any special reasons to buy or sell tomorrow? My hunch is that whatever end-of-year weirdness there is, it will be on the buy side. I mean…….tax-loss selling? What tax losses? Everyone who bought stocks is in the green. So what losses would they try to take?

How about window dressing? Yep, that would make sense. Stuff those portfolios with AAPL, GOOG, and other winners.

I personally think the tax-driven selling won't take place until March. Why? Because one year will have passed since the bottom on March 6th. If you bought a ton of, say, DTG in early March and have a multi-thousand percent gain, wouldn't you like to score a 15% tax rate instead of 39%? I personally know of people that have gigantic profits on these securities that are praying to God that things hold together until March so that they can get the hell out at an advantageous tax rate. I imagine such tax-based selling will continue for a few months, commencing promptly on March 6th.

It will be interesting to see what stocks like PIR (Pier One), shown below, are going to do in the coming months. I mean, how many scented candles and imported bongo drums does our nation need? Stocks like this, which have gone from ten cents to five bucks (for instance) have created a lot of very profitable positions. They're going to want to take their profits sometime!

1230-pir
 

As for me, I think I'm going to sign off for the day. The Santa Claus effect definitely seems to have pooped out last week, and my numerous positions are finally making minute progress in the right direction. I, for one, will be pleased to start with a fresh slate next Monday. I'll see you in the morning, before the opening bell!

Bear in a China Shop (by Fayssoux)

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Jim Chanos and Mark Faber have been making high profile observations about a potential implosion in China due to excess credit and overbuilding ("Dubai, 1000 times worse").  The inference from the Chanos interview is that he is looking to short raw materials companies that have been riding the China infrastructure boom, as well as companies listed in Hong Kong.

FXI is already down a bit since November.  Near term, the Baltic Dry Index has started to dip, possibly a seasonal effect, but potentially a signal the decline has begun.   .

$bdi 

Are You Bullish? (by Gary Tanashian)

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If you are bullish now, but were not bullish last March, you are the
guy or girl in the room saying "who's the mark?" and may be in for a
rude surprise. If you were bullish at the March bottom, perhaps you
have got your stuff together and I am just a cranky contrarian jumping
the gun.

Every instinct I had in November '08 and March '09 told
me that deflationist and bearish were the wrong way to be. The current
situation with the long bond yield rising muddies up the waters today,
so until it is resolved, the commodity and inflation trade must be
considered ongoing… along with perhaps the stock market dragging its
tired ass higher as part of what is now becoming the anti-treasury
trade.

But any bull reading anything decent, reputable or sound
into any of this is just a slave to convention, and believe me, there
are many highly educated people in finance. That could prove to be
their undoing. Talk of risk premiums in bonds and the like is just so
much bromide now because we are off the charts, Treasury is talking
about somehow taking us further off the charts (despite the mini
rebellion in the t-bond) and stock market longs are populated by the
momentum herd, trend followers and increasingly, a weary public.

It
is funny; an early subscriber of NFTRH cancelled last summer as he had
come across some information that the markets were going to crash in
the Fall. It would be lights out so he no longer needed the newsletter.
I should have known right then and there that the rally would extend
longer than I thought likely. It is amazing how easily people fall for
bear fairy stories in the age of inflation policy a go-go, which works
constantly against the deflation/bear market argument.

Well
right now, it is bull fairy stories being constructed by the
troubadours on Wall Street and the massive and self-interested
financial services industry the world over, not to mention the
financial media that touts the agenda 24/7. The risk to the bullish
stance – at least for interim hard correction – remains untenable. Real
contrarians endure and await opportunity, whether it be next week or in the spring (repeat: I only need one or two good trades a year, I only need…)

Meanwhile, the
gold-silver ratio remains subdued but in bullish pretense. Dat be
bearish for everything else my friends, if it turns up. A rising GSR
would signal the draining of the swamp despite the best efforts of
policy on crack.

Gsr

Bodacious Bevy of New Shorts

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As we draw into the final ten hours of the trading year, I am increasing my short positions. Here are the symbols I just shorted, with their respective stop prices:

ADSK…….25.91

ATPG…….19.96

BA…….56.57

BLC…….5.99

BNE…….7.28

BWLD…….43.01

CBT…….27.53

DDS…….20.15

DIOD…….21.11

DOV…….42.76

EAT…….15.56

EMN…….61.96

FCS…….10.35

FCX…….84.29

FISV…….50.01

FORM…….22.66

GEF…….58.90

HBI…….25.95

HTCH…….10.30

KEG…….9.51

KLAC…….37.55

KWK…….16.27

LAMR…….32.24

MTB…….69.16

NE…….42.61

OSK…….39.25

PWR…….22.13

R…….44.26

RCL…….27.40

ROK…….48.31

SNX…….30.65

STP…….17.69

STR…….43.27

SWKS…….14.40

TCK…….38.46

TEG…….43.00

TROW…….54.47

WBS…….13.00

WDR…….31.23

WSM…….22.50

The above should give you plenty to chew on – – – we're expecting a ton of snow here, so I'll be skiing part of the day.

Fading the Fads

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Some people are famous because they're famous (think Ashton Kutcher). Some assets rise in value because they rise in value. Sometimes they're called momentum stocks; at others they're called fad stocks. Their nature is to rise – sometimes exponentially – until the public in general changes its mind.

I tripped across one of these last night while I was idly thumbing through the stocks in my Wrecks list – – none other than Jones Soda, which I had sort of forgotten about. Jones is a maker of specialty beverages (including some really tasty cream soda) that had a spectacular run of about 17,000% from late 2002 to April 2007. For some reason, people thought that cane sugar-based drinks (which are admittedly way better than the corn syrup junk most people drink) would be in every pantry in America.

1230-jonesgood

What took me by surprise when I saw the chart last night was just how far this thing had fallen. It is down about 98%, has a market cap of only $12 million, and apparently is looking to simply be bought out at this point.

1230-jonesbad
So the question to ponder at this point is………what are the "fad" stocks right now? What assets have zoomed up in price simply because they'd been bid up for months on end? Apple? Amazon? Or – dare I say it – gold? Not everything that goes way up in price is fated to plunge. But sometimes what creates an asset's value can largely be based on such animal spirits. It's worth considering.