Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
dd - NWD. Chinese don't eat noodles, they eat rice .......
Here's a technical summary on the stock for your viewing pleasure.
TECHNICAL OPINION - New Dragon Asia Corp. (NWD) - 12/10/2003
Daily Opinion: HOLD
Wednesday's near average volume (103% of average), with little or no movement relative to the open, has no significant technical importance. Wednesday's gap up in price suggests further new highs are ahead. However, the stock's Close showed some weakness suggesting the stock could attempt to fill the gap before continuing higher.
Short-Term Opinion: HOLD
On a short-term technical basis, the trend is Neutral (sideways) and the stock is below its 50-day moving average at 0.76 which also confirms its Neutral (sideways) trend. The stock is neutral according to the Stochastic indicator (44.82).
Long Term Opinion: HOLD/SELL
On a long-term technical basis, the stock (NWD) is trading above its 200-day moving average, but has broken through an important support level, which implies it is in a neutral trend.
The stock has support at 0.65 and 0.55. If the stock breaks down through support at 0.65 then it will probably continue lower to 0.55. The stock has resistance at 0.75 and 0.80. If the stock breaks up through resistance at 0.75 then it will probably continue higher to 0.80. The 200-day moving average is at 0.65. This will also act as support. The stock's long-term uptrend has changed into a sideways or downtrend. In this case, the stock will either go sideways for a while or sell-off back to where it started prior to the latest big upmove. This is a risky time for the stock, so be careful. Use caution during times like these, as the stock will be more volatile. Pay close attention to the Short-Term and Daily Opinion. The stock is neutral according to the Stochastic Indicator (51.30).
Regards,
Naz
MG, thanks. For the sake of disclosure, I need to reiterate that I'm holding all free shares of WITM and GTVCF at this point. I've cashed in my original investment plus a sizeable profit on each. Therefore, my risk tolerance will be much higher than it would be for more recent shareholders.
Regards,
Naz
MG - WITM & IVAN.............................................
Yes, I'm still bullish on WITM. The drilling campaign is in progress and if they should hit in the gold rich area of Witwatersand, South Africa, which is where more than 30% of the entire world's gold has been discovered, there's no telling where this stock will end up. Rumor also persists that positive news will soon be forthcoming.
I also agree with your analysis of IVAN from your previous post. Nice work.
Good luck.
Regards,
Naz
dd - IVAN, Oh ye of little faith . Like MG, I added on the drop as well @$2.60.
Except for HEC and GTVCF, the rest of my turds are acting well today .
GTVCF had a news release last night. In layman's terms, here's the deal. The company is acquiring a large mineral claim in a very prolific area in the Amapa State in Brazil. Many of the multi-nationals are doing exploration and production in the area. The deal is based on a stock price of $1.50 which is bullish.
Rarely do you see deals done at a premium to the current stock price. The terms of the deal were probably negotiated last week when the price of the stock was around $1.00, so it speaks wonders for the current management team. Later, payments can be made in cash or stock at a deemed share price of $3.00.
Another big plus for current shareholders is that shares issued to get the deal done are restricted and become vested at the rate of only 200,000 shares for each of the two sellers every 6 months for the first 18 months.
On a totally different note, I have heard that one very interested European institution was left out of the deal, as the company doesn't need any more funds at the current time. However, company officials are rumored to have told the fund to give them another call when the stock is priced at $5.00. Bottom line, the stock should continue to perform well. Strictly on a technical basis, the 5-year chart clearly illustrates GTVCF is likely headed to the $4 level in the near-term.
Good luck.
Regards,
Naz
dd, I did quite a bit of portfolio adjustment this afternoon..
Covered my 10K short position in the QQQ's @$34.47 from $35.73 last week. I'll now trade the QQQ's around Max Pain. I know many traders don't believe in MP and indicate it doesn't work. However, when I read their posts, I'm convinced they clearly don't understand it. Its not an absolute, but a range. And O.I. dictates the strength of that range. Very easy money IMO.
Couldn't resist and sold 1/2 of my 30K shares in GTVCF @$1.40's from my buy @$0.33 and $0.34 three weeks ago. I realized a double on my money for the entire amount of my purchase with the 1/2 sale and am still holding 15K free shares at this point.
http://www.investorshub.com/boards/read_msg.asp?message_id=1795391
I'm still hearing that positive news is imminent on GTVCF. Stock acting very well again today and has traded to yet another new 52-week high of $1.52. Wouldn't surprise me to see GTVCF priced at $2+ before the end of the week. The same group that has been behind Centurion Gold (CGHI - $3.58) is behind GTVCF. Centurion has traded from $.03 cents to its high of $11 prior to a 3-for-1 stock split and the stock has tremendous "staying" power.
Sold about 3/4 of my 25K share position in WITM @1.30's from my buy @$0.60's several weeks ago. Again, I realized a profit on the entire purchase and am holding the balance of my 7K shares for free.
Recycled IVAN long @2.80. Expecting some positive developments out of the company and the stock is grossly oversold.
Recycled IMMU long @4.16-4.19. Expecting an announcement regarding a new partnership. However, technically, the stock is on a sell signal. So like an idiot, I'm probably going to be chasing additional shares at lower levels.
Recycled FEEC long @3.05-3.07. No details at this point, but the Amazing Commercial Trading Monkey gave the command to do so .
Also holding NVI long from the end of last week and DBBD long from yesterday.
Will try to keep you posted as my schedule permits. Good luck.
Regards,
Naz
dd, LQMT is a dog. Hard to find a worse looking chart........
http://finance.yahoo.com/q/bc?s=LQMT&t=1y
Here is technical summay for your viewing pleasure. Hope you enjoyed your nap. Must be nice .
TECHNICAL OPINION - (LQMT) - 12/09/2003
Daily Opinion: HOLD
Tuesday's Bearish (down) bar with low volume (35% of average) has no significant technical importance. This day's price action formed a Bearish Key Reversal which suggests the stock will go lower in the short term, but the desreasing volume suggests that if there is a decline, it may be short-lived..
Short-Term Opinion: HOLD
On a short-term technical basis, the trend is Neutral (sideways) and the stock is slightly below its 50-day moving average at 2.51 which also confirms its Neutral (sideways) trend. The stock is extremely overbought according to the Stochastic indicator (75.40).
Long Term Opinion: HOLD
On a long-term technical basis, the stock (LQMT) is trading below its 200-day moving average which implies it is in a negative trend.
The stock has support at 2.30 and 2.14. If the stock breaks down through support at 2.30 then it will probably continue lower to 2.14. The stock has resistance at 2.51 and at 2.87. If the stock breaks up through resistance at 2.51 then it will probably continue higher to 2.87. The 200-day moving average is at 4.61. This will also act as resistance. The stock has broken out of its long-term downtrend and is looking more positive recently. If the stock can form new support above 2.30 look for a rally to previous highs. The stock is neutral according to the Stochastic Indicator (64.07).
Good luck.
Regards,
Naz
U.S. troops hit hard by declining dollar
By Scott Schonauer, Stars and Stripes
European edition, Sunday, December 7, 2003
If you’re an American living in Europe, this is not exactly the best of times to buy pizza in Italy, shop for porcelain in Spain or swig a Pilsen beer in Germany.
The good old days — way back last year when a buck would buy more than a euro — are gone.
And if some expert predictions come true, the exchange rate will not get better any time.
Lorenzo Codogno, a senior economist for Bank of America in London, expects the dollar to get weaker in the next quarter. He said it could fall to $1.25 against the euro, adding that it might be more than 12 months until one dollar equals one euro.
“I think the trend is well established,” he said. “The next quarter or possibly the second quarter we’re going to continue to see a weak dollar or even weaker.”
That is not good news for people who shop beyond the base perimeter.
The dollar hit new lows against the euro last week, and the poor rate couldn’t happen at a worst time — the holidays. The dollar hit a record low against the euro for the sixth straight day on Friday on weaker than expected U.S. job data. The exchange rate was at $1.2087 against the euro on Friday, according to the European Central Bank.
The rising euro and the falling dollar has U.S. servicemembers stationed in Europe paying more for just about everything off base, from drinks at the bar to souvenirs at tourist hot spots.
It is changing the way many military personnel and their families are spending their money this holiday season. Some are shopping less in town, keeping traveling to a minimum and buying more at the base commissaries and exchanges.
“You just can’t shop off post anymore,” said Spc. Emmanuel Gomez, who is assigned to the Bamberg, Germany-based Battery C, 1st Battalion, 33rd Field Artillery Regiment. “When I first got here, the currency was still marks. I’d go off post all the time, for everything.
“Now, I can find it cheaper at the [post exchange]. If I see something I want and they don’t have it at the [exchange], I just won’t buy it.”
Marine Lance Cpl. Josh Cheney, a member of the Rota, Spain-based Marine Corps Security Force Company Europe, said he can’t help but notice the exchange rate getting worse.
“It affects us quite a bit,” Cheney said. “We definitely notice it.”
Spc. Chris Robinson, Battery A, 1st Battalion, 33rd Field Artillery Regiment in Bamgerg, has skipped shopping out in town.
“I never go off post to buy anything, things are just too expensive,” he said.
But Americans aren’t the only ones suffering.
European business owners who depend on American customers are feeling the pinch.
Alfonso Lara is the manager of a gift shop just outside the main gate to Naval Station Rota. The store sells Spanish-made items, from swords to matador figurines. He said business is down 30 percent.
“The situation is like crazy,” he said. “The rate is changing so often.”
In the spring, when the base served as a stopping point for ships and troops heading to the Middle East in preparation for the war in Iraq, business boomed. Now, air traffic at the naval station airport has slowed and so has the number of American customers passing through the shop.
On a Friday afternoon, the store was empty. He said other stores in town also are trying to weather the dipping dollar.
“Everyone is like, ‘Please don’t go down,’” Lara said. “You have set prices and you can’t change them that often.”
The falling dollar, however, isn’t all doom and gloom for everyone.
U.S. military and civilian personnel are getting a nice cost-of-living stipend to make up the higher cost of living overseas. Plus, Americans stationed at European installations are flocking to post exchanges and commissaries.
Commissaries have seen a 5.4 percent increase in sales this fiscal year in Europe compared to the last, Christine Frey, financial manager for the Defense Commissary Exchange Agency at Kapaun Air Station in Germany. Commissaries sell some products from Europe, but the grocery stores are mandated to sell them at cost.
“For us, it has been an extremely good year,” Frey said.
Navy exchanges have seen a slight increase in sales this year, mostly due to the war. However, the weak dollar is not helping.
More than half of the Navy Exchange System’s workers in Europe are locals. The Navy exchange stores in Europe have lost $1.5 million in payroll expenses in a nine-month period this year because local-national workers are paid in euros, said Gary Shirley, NEX European district manager in Naples, Italy.
Because the prices are fixed worldwide at Navy Exchange stores, Shirley said it is difficult to recoup what is lost.
“We just don’t make that much money,” he said. “We’ve basically had to eat it.”
So, what’s the reason for the weaker dollar, especially when there are signs that the U.S. economy is making a turn around? Numerous factors can influence the exchange rate, and theories differ on which is more dominant. If you put 10 bankers in a room, you would likely get 10 different opinions, Codogno said.
He blames the deficit, trade wars and the threat of another terrorist attack for the lower dollar. He predicts an exchange rate of $1.25 against the euro might be the peak.
“Then, there will be some stabilization,” he said.
Americans living in Europe can only hope.
http://www.estripes.com/article.asp?section=104&article=19126
Tis the Season to Counterfeit
By Sean Gallagher, Baseline
December 5, 2003
Chairman William Killgallon of toymaker Ohio Art is expecting his company's stocking to be filled with lumps of counterfeit goods this holiday season.
Killgallon isn't happy about it. Ohio Art, which sells about $37 million worth of playthings such as Etch-a-Sketch tablets and the Betty Spaghetty family of dolls, has spent millions over the years battling counterfeiters. His expensive conclusion: he can't win.
Copy cats in China and elsewhere in Asia have "gotten so good, they can knock off a product in 30 days, right down to the packaging," says Killgallon, who has found Etch-a-Sketch rip-offs on toy retailer shelves throughout the U.S. next to his own product.
The counterfeiters keep getting more sophisticated. The same product lifecycle management technology that allows manufacturers to rush products to market and react to demand quickly helps of knock-off artists clone products quickly.
As if that's not frustrating enough, try building systems to combat counterfeiters. The choices:
Hire brand protection outfits such as Boston-based GenuOne Inc. and Isotag Technologies of Addison, Texas, which cost hundreds of thousands per year;
Throw professionals at the problem, using investigators and lawyers to hunt down counterfeit traffickers, paying them hundreds of thousands or even millions of dollars per year;
Accept fakes as the price of admission in a global economy, spend nothing upfront and hope it won't hurt sales.
The last may be as effective as the first two. Despite spending millions on technology and manpower and some anecdotal success, manufacturers can't quantify their efforts' impact on the bottom line.
To truly thwart fakes, companies preemptively put people where counterfeiting might occur. Toss in the vagaries of international intellectual property law and corruption among local officials and pursuing offenders is a challenge at best, hopeless at worst
"We spent a lot of money on going after [counterfeiters]," says Killgallon. "And we can't do anything about it in China. It's a mess. Even if you can get the courts there to shut down, say XYZ Company, they just change their name to ABC Company and go back to doing the same thing next week."
Killgallon says Ohio Art controls the supply chain for its Etch-a-Sketch by using a limited number of U.S. component suppliers as the exclusive source of materials for its Chinese assembly plant. If the plant were to order more materials from the raw materials provider than required, Killgallon would hear about it.
Although Killgallon says Ohio Art has a long-standing relationship with its Chinese manufacturer "built on mutual trust," he admits he can't prevent other manufacturers in China from copying his product, despite patents and trademarks. "And (U.S.) Customs has been little help," he says. "They've never stopped a shipment [of counterfeit product] for us yet."
At least Ohio Art isn't alone. Counterfeiting is rampant in the toy and game industry, especially overseas. The Toy Industries of Europe(TIE) trade association estimates one of every 10 toys sold in Europe is a fake.
http://www.eweek.com/article2/0,4149,1404978,00.asp
Turk, unfortunately they are not female monkeys, LOL. Glad you did well with GTVCF. I expect it to go higher, so I'm still holding my position.
Good luck.
Regards,
Naz
Mr. Turk - trades and new monkey pick DBBD....................
Dumped IVAN @$3.46-$3.50 this morning for a small loss. Even though one of my sources is expecting good news, the stock issued a technical sell signal on Friday, so I'm out for now.
Also dumped the rest of my SCON @6.50-6.53 and IMMU @5.20-5.26. Stocks that are not acting well, I'm selling out of prior to year end.
DBBD - In @$0.57-$0.60. Rolled over IVAN proceeds into DBBD. Here's another one on the OTC Bulletin Board that I'm hearing rumors of positive developments. Stock is currently trading almost 3 million shares or over 4 times its daily average and has hit a new 52-week high at $.70 cents.
Current holdings include GTVCF (hit my first target of $1.50 right at the open), NVI (average down to $2.23 at the close, its having a nice move today as well) WITM, HEC, DBBD, and a sizeable QQQ short position @35.73 average.
Good luck.
Regards,
Naz
DC100 - Online Brokers................................
This online broker is a division of Ameritrade. I have several clients who use their service and love them. Cheapest commissions in the industry bar none. First 20 trades every month are free, with a sliding scale thereafter based on activity of $3, $2, $1 per trade.
There are conditions such as no IRA accounts, corporate accounts, etc. Must be an individual or joint account with online experience to trade. But you trade long, short, options, etc.
http://www.freetrade.com
Good luck.
Regards,
Naz
Designer, Turk - GTVCF........................................
While out on the town last night doing the holiday season version of 'O Come All Ye Skirts' , with one of my Amazing Commercial Trading Monkey's, he indicated he had received late word that the vending in the Brazilian gold deal is signed. Look for an announcement next week.
Wouldn't be surprised to see $1.50 - $2.00 stock price next week.
Good luck.
Regards,
Naz
Weekly Momentum, Sentiment, Strength & Technical Indexes........
The DJIA put together its second consecutive week of gains as strong economic reports pushed most of the major averages to new 52-week highs. Of note was the trading action of the S&P-500 on Monday, which saw the index break through 1060. This represented a move through a significant resistance area and is a bullish indication going forward. A close below the 1060 level in the coming week would cause traders to re-evaluate the short-term direction of the market. For the week, the DJIA gained 80 points (+0.82%) and closed at 9862. The NASDAQ struggled for most of the week as it lost 23 points (-1.17%) to close at 1937. For the year the DJIA is up 18.4% while the NASDAQ has gained 45.9%.
Momentum Index: The Momentum Index is neutral at +1. Breadth was positive as the NYSE Advance/Decline line gained 1062 units for the week while the number of NYSE stocks making new 52-week highs outpaced the new lows on all five trading days. The percentage of NYSE stocks above their 200-day moving average eased to 87.7%, from 88.2%, while those above their 50-day improved to 72.5% from 70.6%.
Sentiment Index: The Sentiment Index is a neutral 0, unchanged from last week. VIX remained bearish at 16.30, up a touch from last week's 16.23. Readings under 20 are regarded as bearish signaling excess complacency in the options pit. The percentage of bullish investment advisors remains bearish at 56.8% down from last week's 58.3% reading. For the week ending 12/03/03, U.S. equity mutual funds had inflows of $2.6 billion compared to inflows of $2.1 billion the previous week.
Strength Indexes: All of the Strength Indexes showed slight improvement but remain in bearish territory. The percentage of Dow (DIA) stocks under accumulation rose to 43.3% from last week's 40.0%. The NASDAQ-100 (QQQ) moved to 28.6% from 25.5% while the S&P-100 (OEX) climbed to 42.4% from 38.4%. Readings under 50% indicate that the majority of the stocks in the index are under distribution, a short-term bearish condition.
******************
TECHNICAL OPINION - DOW JONES INDUSTRIAL - 12/05/2003
Daily Opinion: HOLD
Friday's very Bearish (down) bar with near average volume (104% of average) suggests a possible move lower.
Short-Term Opinion: HOLD
On a short-term technical basis, the trend is Bullish (up) and the index is above its 50-day moving average at 9710.65 which also confirms its Bullish (up) trend. The index is extremely overbought according to the Stochastic indicator (80.36).
Long Term Opinion: OUTPERFORM
On a long-term technical basis, the index (INDU) is trading above its 200-day moving average which implies it is in a positive trend.
The index has support at 9850.01 and 9500. If the index breaks down through support at 9850.01 then it will probably continue lower to 9500. The index will meet resistance at 9903.57 and 11141.52. If the index breaks up through resistance at 9903.57 then it will probably continue higher to 10200. The 200-day moving average is at 9030.11. This will also act as support. The index is extremely overbought according to the Stochastic Indicator (78.92).
******************
TECHNICAL OPINION - NASDAQ COMPOSITE - 12/05/2003
Daily Opinion: HOLD
Friday's Bearish (down) day suggests a continuation lower on the next day.
Short-Term Opinion: HOLD
On a short-term technical basis, the trend is Neutral (sideways) and the index is above its 50-day moving average at 1919.21 which also confirms its Neutral (sideways) trend. The index is neutral according to the Stochastic indicator (63.99).
Long Term Opinion: OUTPERFORM
On a long-term technical basis, the index (COMP) is trading above its 200-day moving average which implies it is in a positive trend.
The index has support at 1919.21 and 1841. If the index breaks down through support at 1919.21 then it will probably continue lower to 1841. The index will meet resistance at 1966.87 and 2100. If the index breaks up through resistance at 1966.87 then it will probably continue higher to 2100. The 200-day moving average is at 1669.84. This will also act as support. The index is slightly overbought according to the Stochastic Indicator (68.51).
******************
TECHNICAL OPINION - S&P 500 ($INX) - 12/05/2003
Daily Opinion: HOLD
Friday's very Bearish (down) day suggests a continuation lower on the next day.
Short-Term Opinion: HOLD
On a short-term technical basis, the trend is Bullish (up) and the index is above its 50-day moving average at 1042.39 which also confirms its Bullish (up) trend. The index is extremely overbought according to the Stochastic indicator (75.72), so look for a possible pullback.
Long Term Opinion: OUTPERFORM
On a long-term technical basis, the index ($INX) is trading above its 200-day moving average which implies it is in a positive trend.
The index has support at 1053.79 and 990.36. If the index breaks down through support at 1053.79 then it will probably continue lower to 990.36. The index will meet resistance at 1063.65 and 1196.61. If the index breaks up through resistance at 1063.65 then it will probably continue higher to 1196.61. The 200-day moving average is at 969.41. This will also act as support. The index is extremely overbought according to the Stochastic Indicator (79.05).
Regards,
Naz
Turk, glad you're able to relieve all that pent up tension.
Make sure to save some of that energy for your supermodel girlfriend later on tonight when she stops by in between her 2nd and 3rd jobs .
Regards,
Naz
designer, in the wedding card, just say the gift is a form of medevil art and not two people screwing from behind like lab monkeys .
Regards,
Naz
designer, thank you sir. Appreciate the gesture. I'll take it with me and drink it in the car on the way out tonight to loosen me up .
Might even help my usually erratic driving .
Hope you are still holding on to GTVCF. More to come.
Regards,
Naz
Sell US equities, buy the US dollar!
Friday, December 05 - 2003 at 17:30
My position for the next month or so is to liquidate US equities, and to go long on the US dollar and bonds.
Short term, commodities including gold, equities and the Euro seem to be somewhat overbought, while the US dollar and bonds are becoming oversold. Therefore, my bet for the next month or so is to liquidate US equities, and to go long on the US dollar and bonds.
What worries me most at present is that even I, a skeptic, can't find any good reason why stock markets around the world would decline significantly.
That's not to say there aren't a lot of issues that concern me and which I shall discuss below. But if central bankers around the world are prepared to print money and to flood the system with unlimited liquidity at the first sign of weakness in the asset markets, then it is difficult to make a very bearish case for either US real estate or US equities in dollar terms.
We know Mr. Bush wants to be re-elected at any cost, and that therefore, over the next 12 months, he and his lackeys at the Fed and the Treasury will only take economic policy measures that are designed to keep the American public happy with 'circus and pane'. This economic policy was practiced for centuries by the Roman emperors and was designed to keep the lower classes of society in good spirits and obedient.
In the US, we no longer have gladiators, taken prisoner from foreign lands, pitted against wild animals in public arenas, but we have Hollywood, which produces movies where the villain is usually a Vietnamese, Chinese, Japanese, Eastern European, Arab, Italian or Latino, and we have the money printing press, which allows individuals to speculate on stock and futures exchanges and in real estate or to gamble in casinos.
Moreover, 'pane' is distributed in the form of rising budget deficits, which boost personal disposable incomes temporarily, but obviously not in the long term. Noteworthy is that the average household tax rate collapsed over the last 18 months as a result of the tax cuts and is now at one of its lowest levels since the Second World War! Therefore, unless the economy can grow strongly over the next few years and boost the government's tax revenues, tax increases in future are only a matter of time.
I have been careful to say that, given the present central bank policies, it is difficult to make an overly bearish case for either US real estate or US equities in dollar terms. The US Federal Reserve Bank can, if it continuously floods the system with liquidity, keep asset markets up, but what it cannot do when it follows such policies is control the value of the US dollar against foreign currencies and its purchasing power.
As was the case in the Roman Empire, 'circus and pane' economic policies undermine the value of a currency and, if pursued long enough, eventually lead to a total loss of its purchasing power. However, and this should be noted, such policies can give the majority of investors the illusion of wealth as asset markets appreciate, while the loss of the currency's purchasing power is hardly noticed.
This is particularly true of a society that has a very large domestic market, where 90% of the people don't have a passport and therefore know little about what is going on outside their own continent, and where the import prices of manufactured goods are in continuous decline because of the entry of China, as a huge new supplier of products with an extremely low cost structure, into the global market economy.
What better economic paradise could a society wish for than an environment in which assets such as stocks and properties appreciate, while consumer goods decline in price?
The basket of goods a household can purchase increases in such an environment, not only because the household's wealth rises every year, but also because of the price declines of the goods that make it up, such as is the case for office and computer equipment, cellular phones, furniture, cars, consumer electronics and household appliances, all of which have steadily declined in price in recent years.
It's no wonder that people feel so optimistic about the future of equities, as is evident from the Investors Intelligence Sentiment Index for Stocks, which has been hovering recently at its highest level since 1987, and that there are more stocks reflecting this widespread optimism, being above their 30-week moving average, than at any time since 1997.
The question is, to what extent is this widespread optimism justified, and how much of this 'bright outlook' for the economy and corporate profits, and the belief that the Fed will continuously support asset markets through liquidity injections, has already been discounted by the surge in stock prices that we have seen over the last 12 months?
As I have explained on numerous occasions in the past, I respect the predictive power of the markets. After major lows, stocks, commodities, and currencies frequently rise strongly while the fundamentals still look horrible. At that juncture, no one understands why the markets are rising; only much later does it become clear why the markets went up, because by then the fundamental conditions have taken a remarkable turn for the better.
Conversely, when prices begin to sell off while the 'news' is still extremely favorable - as was the case in the spring of 2000 for the US stock market - it is usually a signal that conditions are about to deteriorate. Therefore, I personally pay a lot of attention to the 'market's action' because, more often than not, the market is better informed than all the economists, analysts, and strategists combined.
However, there is one exception to this, admittedly very general, rule. If, following a stock market bubble, prices retreat sharply and the monetary authorities (in the case of the US, the Fed) attempt to cushion the decline or to re-ignite the bull market by pumping excess liquidity into the system, then stock prices can shoot up again without any, or with only very little, support from the fundamentals in the real economy.
In such a case, stocks rise strongly, and sometimes even reach new highs in nominal terms, purely due to the excessive liquidity that pours into the system.
Examples of such stock price increases, which were based purely on monetary easing moves by central banks, can be found in the German hyperinflation period of the early 1920s, in Latin America in the 1980s, and, more recently, in Zimbabwe. In all these cases, stocks and real estate rose sharply in nominal terms, while economic conditions remained largely depressed or even deteriorated.
I do concede, however, that in all these cases of excessive money creation, there was at least a temporary - albeit brief - improvement in business conditions because of the illusion of wealth that people had when additional paper money suddenly flooded the system and lifted asset prices in nominal terms.
The reason business conditions only improved temporarily was that while the asset inflation boosted consumption for a while, it also at the same time rendered the production of domestic goods uncompetitive because of the inflated price level. In an environment of rising consumption but uncompetitive domestic industries, imports surge, ant that then leads to soaring trade and current account deficits and a collapse in the currency.
Once currencies collapse, the market imposes some discipline on the system, which manifests itself in tighter monetary conditions and soaring interest rates. This situation, which leads to mini-crises, is then usually remedied by the central banks printing even more money, with the result that the unfortunate cycle of rising asset prices in nominal terms leading to higher consumption, but weak production, low employment, and renewed currency weakness, continues for several years until hyperinflation eventually leads to a total collapse of these systems.
I have been careful above to describe the purely monetary-based stock and real estate inflation as a rise in prices in nominal terms. This is so, because in all these cases (Germany in the 1920s, Latin America in the 1980s, and now Zimbabwe) the asset price increases were more than offset by the weakness in the currency of the country that was pursuing such desperate monetary policies, with the result that, over time, these assets actually deflated - not because of a collapse in the domestic price level, but because of a collapse in the currency against other sounder paper currencies whose supply wasn't increased at the same rate.
Now, I am not suggesting that we have already reached in the United States the economic conditions that plagued Germany during its hyperinflation period in the 1920s or those that prevailed in Latin America in the 1980s, which were characterized, as just explained, by soaring domestic asset prices but collapsing currencies and, over time, by deteriorating economic conditions that were repeatedly interrupted by very brief bouts of strength - namely, when the currency depreciation was so sharp that these countries - competitive positions improved temporarily. But there certainly are, in the US, some symptoms that are pointing in that direction.
What concerns me most going forward is that in the present optimistic atmosphere and amidst very high valuations for US equities any slight disappointment could lead to a sharp market sell-off. The potential reward in holding equities at present does simply not compensate sufficiently for a large number of risk factors.
Interest rates could rise more than is generally perceived, cut short the housing and refinancing boom, and could combined with the end of the stimulative impact of the tax cuts lead to flat or even lower consumer spending.
The recent poor performance of retail stocks such as WalMart and Best Buy seems to support this concern. Another danger for financial markets would be soaring oil and other commodity prices – not a totally unrealistic assumption considering Asia's rising appetite for oil and other resources, and tensions in the Middle East. In fact, increased geopolitical tensions are already apparent in trade disputes and in belligerent comments by China over a proposed referendum about independence in Taiwan.
But my principal concern relates to the Fed' monetary policies should renewed turbulence disturb financial markets at some point in future. For sure the money printing press would be turned on at full speed – as always in times of crises in the past - and therefore, further dollar weakness is only a matter of time.
And while I am not sure that the ECB would wish to have an even stronger Euro, it should be clear that such monetary policies should lead to a loss of purchasing power of the dollar against hard assets such as real estate in countries with current account surpluses (the Asian region), commodities including gold and now especially also silver, as well as oil.
http://www.ameinfo.com/news/Detailed/31849.html
Turk - NVI...................................................
BTW, besides being skirt chasing Friday its Happy Hour! There are no limits on the amount of posts at this point.
NVI has been around since 1990. I'm not aware of any bk or name changes in their past. From a trading standpoint, I'm not as concerned about where they have been but where they are going .
Please Turk, only use your memory sparingly, otherwise you'll end up with a migrane .
Regards,
Naz
Designer, I see. Although your activity on the surface sounds more like it should be reported on Schedule E if you are offsetting expenses against your revenues. You would not be afforded LTCG treatment.
As for the 'lucky' part, I can't argue with you Bluto .
Perhaps you can design some erotic furniture for Dimension and his blushing bride to be as wedding gift .
Regards,
Naz
Crimbsta, LOL. Yes, I have a 'speculative long' option with my brokerage house . Its used on whiteknuckle trades only.
Regards,
Naz
Dimension, I've got just 2 words for you......................
'Prenuptual Agreement'
http://10-best-legal-services.com/prenuptial-agreements.html
Seriously, congrats on your pending nuptuals my friend. She is a very lucky young lady.
Let me know if you change your mind about 'skirt chasing Friday's', LOL. As a married man, you are prohibited from actually catching any skirts (unless you role play with your wife), however, you are permitted to pass along any 'hot' prospects .
Good luck.
Regards,
Naz
February gold making a session high at 407.70, up 3.50. HUI +6.88 at 252.53.
The daily cycle oscillators are hesitating here, and if they cross, then Wednesday was THE HIGH for the next several weeks at least.
Regards,
Naz
NVI - taking a speculative long position @2.30.................
NVI (National Vision) has a total of 518 optical stores with 399 of them in U.S. Walmart stores, 37 in Walmart stores in Mexico, 58 in Fred Meyer stores and 24 on military bases.
National Vision is also adding hearing aid stores in Walmart. They have revenues of $247 million with EBITDA of $24.9 million. The Book Value is $2.11 and they have $0.60 in cash per share. For the last 2 years there have been only insider purchases. There are only 5 million shares outstanding and a 4.10 million in the float. Former unsecured creditors were issued stock at $5.00 per share. One of those creditors sold out their 700,000 shares position. They also have $105 million in debt, which they are servicing and have paid off an additional $4.5 million recently.
On no news, NVI has moved considerably higher on increasing volume. Currently trading 422,000 shares, volume is running 12 times the norm. Looking for NVI to move to the $5.00 level in the near-term.
Regards,
Naz
designer, you little wisenheimer, LOL. Gainskeeper is the industry standard. However, they have a superior online product called Gainskeeper Pro with additional bells and whistles.
http://www.wolters-kluwer.com/frameset/?NRMODE=Published
You might be better off setting up two accounts if you plan on becoming a more active trader. One account you would leave as personal between you and your wife for longer term holdings in order to capture the more favorable long term capital gains rates. Establish a separate entity for short term trading you can use to avoid wash sale rules and enables you to write off ordinary and necessary business expenses.
Just a thought.
Regards,
Naz
Dimension, we've broken a hair below the 20. I've noticed that tests of the 50 day cycles on the NAS have recently been getting considerably shorter:
http://stockcharts.com/def/servlet/SC.web?c=$COMPQ,uu[l,a]daclyyay[pb50!b20!f][vc60][iUb14!La12,26,9...
This is one more reason for my bearish stance this month. I'd welcome your take on this technical issue.
BTW, a mug is for commoners. I'll need to be paid with a frosted, imported cyber stein, LOL.
Good luck.
Regards,
Naz
Busted, looks like the bounce was a fakeout . You've probably done well if you've already traded out of NVLS on the bounce.
Looking for the NASDAQ to retest its 50 dma around 1920 next.
Good luck.
Regards,
Naz
Turk, congrats on TGAL. I see its doing well for you today. I just want to make sure you are making enough WAMS to keep your supermodel girlfriend happy .
Good luck.
Regards,
Naz
designer, it is not permissible for rednecks to summarize their capital gains and losses on Schedule D. You need the typing and spelling practice, therefore you must itemize all of your trading transactions .
Seriously, you must itemize all of your trades unless you have been approved by the IRS to be designated a "trader in securities", or are set up as a trading entity like myself. I established a trading corporation for myself.
http://www.irs.gov/taxtopics/page/0,,id%3D105556,00.html
The reason individuals must itemize all your trades is because they are subject to wash sale rules.
Wash Sales
You cannot deduct losses from sales or trades of stock or securities in a wash sale.
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:
Buy substantially identical stock or securities,
Acquire substantially identical stock or securities in a fully taxable trade, or
Acquire a contract or option to buy substantially identical stock or securities.
If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.
If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities. The result is your basis in the new stock or securities. This adjustment postpones the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities begins on the same day as the holding period of the stock or securities sold.
Example 1.
You buy 100 shares of X stock for $1,000. You sell these shares for $750 and within 30 days from the sale you buy 100 shares of the same stock for $800. Because you bought substantially identical stock, you cannot deduct your loss of $250 on the sale. However, you add the disallowed loss of $250 to the cost of the new stock, $800, to obtain your basis in the new stock, which is $1,050.
Example 2.
You are an employee of a corporation that has an incentive pay plan. Under this plan, you are given 10 shares of the corporation's stock as a bonus award. You include the fair market value of the stock in your gross income as additional pay. You later sell these shares at a loss. If you receive another bonus award of substantially identical stock within 30 days of the sale, you cannot deduct your loss on the sale.
Options and futures contracts. The wash sale rules apply to losses from sales or trades of contracts and options to acquire or sell stock or securities. They do not apply to losses from sales or trades of commodity futures contracts and foreign currencies. See Coordination of Loss Deferral Rules and Wash Sale Rules under Straddles, later, for information about the tax treatment of losses on the disposition of positions in a straddle.
Losses from the sale, exchange, or termination of a securities future contract to sell generally are treated in the same manner as losses from the closing of a short sale, discussed later in this section.
http://www.irs.gov/publications/p550/ch04.html#d0e11224
Hope this helps.
Regards,
Naz
Good morning all - GTVCF +34% .............................
One of my Amazing Commercial Trading Monkeys has been told that a European fund is buying GTVCF this morning as they are expecting a $3 to $5 share price in the near-term.
Its now a 3 bagger for me and those that bought when I first posted about the stock a couple of weeks ago.
Turk, you sold too soon !
Regards,
Naz
"Could the Stock Market Crash? Everyone Says 'No.'"
December 4, 2003
Market Wrap Up with Martin Goldberg
Congratulations to the traders who rode this market rally up from what Larry Kudlow refers to as “the mother of all bottoms”. The rally appears to be in full bloom and stockowners are happy. Any one suggesting that a crash is possible would be dismissed as a nut case. Yet that’s exactly what I am going to suggest in this article. So you may want to dismiss me now and move to the technical analysis section below.
Once again, nobody cares that stock investing consists of owning shares in businesses. No one cares that any purchase of a business should be viewed as an investment, and should provide earnings, growth prospects, and dividends to justify the purchase. Today’s market is speculative and prices are being determined purely by happy feelings and emotions. There is a gigantic discrepancy between intrinsic values of most companies’ stocks and their stock market prices. In many companies, wealth continues to be transferred from its shareholders to its management via stock options and share buybacks of stock market-overpriced businesses. Shareholders don’t have a clue or even care. At the margin where prices are being determined, shareholders are not shareholders at all. Consider two of the top performing stocks of this year, Cisco and Amazon.com. An average share of Cisco changes ownership every 5 months or so, and the average share of Amazon.com changes hands every month! Imagine any company that is under new ownership every month! Under these “hot-potato” share-trading schemes promoted by Wall Street and practiced by many well respected money managers, would the shareholders care about the long-term prospects of the company? Of course not. Most are only trying to roll triple hearts at the slot machine.
I believed that throughout this rally, the stock market has had the potential to crash. It hasn’t yet, but when the market does crash, it may crash in a devastating manner. You should consider the question of, “If the market goes down, HOW would it go down?” The questions that are explored in the mainstream financial media, TV, and Internet, deal with IF and WHEN the stock market can go down. They rarely explore the question of, HOW it may go down? How far, how fast, how devastating? The dumbed-down public does not consider this question because in their collective minds, we have already seen the answers to these questions in the stock market from March of 2000 to October of 2002. The answers in their minds are VERY far, PRETTY fast, and by in large, NOT TOO devastating. By in large, they think we are now in a new bull market.
But the facts are that the market is valued similarly to October 1929, Wall Street chicanery is at peak levels, consumer debt is at record levels, corporate debt is at relatively high levels, the dollar is plunging, and the trade deficit is rising along with the Federal budget deficit. The Federal budget deficit doesn’t scare any one any more. Why? The public remembers how it was extinguished in the late ‘90s. They are thinking, “No problem. If it was paid off before, we can do it again”. What very few people think about is the fact that the elimination of the deficit was largely a result of capital gains taxes that the government enjoyed from the late 90s stock market bubble. They don’t see this as an, (aha’ hem), “one-time event”. The current Federal budget deficit can only be extinguished again if we can manage to create a bigger stock market bubble than before. My money says it can’t. In the absence of another stock market bubble we will have to pay the money back. This will have to be achieved through the sweat equity of our children and us or from inflation, which will dilute (reduce) our wealth.
Every casual stock market participant is now bullish. Everyone KNOWS that the stock market is going up. Greenspan will continue to keep any crash from happening. Corporate management will continue with the positive press releases that “beat-by-a-penny”, and are “better-than-expected”. Mark Haynes, and Joe Kernan will continue to joke, and Sue Herrera will continue to smile. Stimulus-induced government economic data will continue to be positive (yet unsustainable). William O’Neil will continue to tout the speculative favorites in spite of irrational valuations, and Investors Business Daily (IBD) followers will continue to bid these stocks up. Merrill Lynch and others will continue to issue analyst upgrades, and the public will continue to listen to them and gap up these stocks. In short, the game will continue! (Nasty but truthful e-mails from Wall Street analysts about suspect companies will not continue though!)
Overvaluation, chicanery, and everybody thinking alike suggest to me that all the ingredients for a stock market crash are in place. The only thing missing is the catalyst, and there are a variety of potential ones on the horizon. The risk (of a crash) greatly outweighs the marginal gains that can be made at this point.
What most people are thinking is typified in the Charles Schwab commercials:
“The market has changed and this time we’re going to change with it.”
I think Schwab’s use of “change” is code language for knowing that the rally will end and Schwab investors should know when to bale out when they see market weakness. There is a serious risk that this will not be possible, though. Almost every one is thinking the same thing at the same time. When the time to exit arrives, the hatch may be too small to let the public out in time. There is every reason to believe that a crash may ensue.
There are additional reasons for a crash such as an overactive public. Momentum investing has never been more popular with the public than it is now. Chat boards are once again ablaze with the number of postings from the “lunatic fringe”. Momentum-based IBD has raised the price of its Monday issue (with the “IBD 100”) to $2.00. There is a 2-hour radio call in show here in Philadelphia on a station catering to the elderly that consists of mostly momentum-based stock trading. The radio program also promotes a $15/month web site, where “investors” can get stock tips that “make money” from a local stock personality (with a New York accent). I’ve noted similar radio programs elsewhere. Now there is a TV commercial where an actor appearing as a typical citizen complains, “All the ideas I give to my broker, he should be paying me!” The Yahoo! Finance home page is loaded with momentum-based technical analysis articles. New mutual funds are once again starting up. Once again CNBC plays at the local bistros. The game has become easy again.
More reasons a crash can occur: Visions of 1929 and 2000. Margin debt is again on the rise as it was in 1929 and 2000. It rose to $26 billion in July. This debt, which is secured by the stock shares purchased on margin, represents additional potential energy in fueling a crash. Just curious. I wonder how many shares of insider’s stock were sold to buyers who were using margin? There’s a lot of insider selling and negligible insider buying. (Of course, all of these insiders are simultaneously trying to diversify their personal portfolio holdings. What a coincidence!)
The NASDAQ is like a shark. If it stops swimming, it will suffocate. Without any resemblance to fair deal valuation, the primary reason people are buying and are long the NASDAQ is simply because its going up (swimming). Once the NASDAQ stops going up, there will be no reason to buy and/or hold these stocks. The shark will suffocate. (So far the shark has devoured many value-minded stubborn short sellers. It’s been like the first hour of Jaws, so mind your stop losses.)
Finally, additional fuel for a rapid stock market crash may be provided by the potential public outrage from scandals involving mutual fund crime. So far no one cares about such trivia because after all, everyone is getting rich “on paper” in the stock market. When the market changes, everyone will be outraged. Remember Enron?
All this smells like fish to me. The public and its short memory are being set up again!
In summary, the stock market is set up in a similar manner as in 1929; however unlike 1929, most people have 2000 fresh in their minds. A lot of people all thinking the same thing at the same time. It’s a formula for a devastating crash. Remember what legendary trader Jessie Livermore said in the 1930s:
“The biggest stock market gains are made by the public on paper…and that’s where they stay.”
If you take issue with this article, send me an e-mail. I’m very interested in the logic behind being long this market. (But please, spare me the “Wall of Worry” cliché. I’m just not in the mood.)
NASDAQ Fan Pattern Update
With the identification of the fan pattern last Monday, I suggested shorting the NASDAQ on weak rallies with a stop loss at 2,010. Technical Analysis of Stock Trends indicates,
“The rule is that when the third Fan line is broken downside, the high of the Intermediate Correction has been seen”.
On Wednesday at about lunchtime EST, the NASDAQ broke through its previous high of 1,992, and barely made it to 2,000 before reversing and closing down 19 points on the second highest trading volume in the last six months. So by reaching 2,000 it would seem that the Fan Pattern was violated. Yet as I write this, the NASDAQ is right around the L-3 trendline. So was the L-3 trendline violated? Was the fan pattern broken? I think the answer is that it was not. I will reference Dr. Alexander Elder in Trading for a Living, Page 88, “How to Draw a Trendline”.
“Most chartists draw a trendline through extreme high and low points, but it is better to draw it through the edges of congestion areas…Those edges show where the majority of traders have reversed direction. Technical Analysis is poll-taking – and polltakers want to track opinions of masses, not of a few extremists. Drawing trendlines through the edges of congestion areas is somewhat subjective…”
That is why I subjectively suggested setting the stop loss at 2,010 and not a few ticks above 1,992. I figured that there would be a lot of “ballyhoo” as NASDAQ 2,000 approached, including some short stop losses kicking in, and momentum players buying at what seemed to be a breakout to new highs. So with the afternoon reversal on very high volume, I think that the apparent break of the L-3 trendline was merely measuring the opinions of “a few extremists”. If NASDAQ 2,010 is broken, decisively, I’ll throw in the towel. Until that time, the “Fan Pattern” remains valid in my view.
For ready reference, I have updated last Monday’s “Fan Pattern” NASDAQ chart below.
Today’s Market
All three indices were up only marginally today. Considering that the most popular brokerage (Merrill Lynch) upgraded the most popular stock (Cisco), this was a moral victory for the NASDAQ bears. The NASDAQ rallied toward the end of the day, probably on rumors that Intel would “up” their sales and earnings guidance at their mid-quarter update. They did not, and Intel is selling off in after hours trade. The more speculative small caps and smaller NASDAQ stocks under performed the broader market, indicating that some fast money may be leaving. The 10-year note finished up 8/32 to yield 4.37%. Gold was down $0.60 per ounce. Let’s see how the market reacts to the positive economic data tomorrow.
http://www.financialsense.com/Market/daily/thursday.htm
Laboring Under Illusions
As of Friday, December 5, 2003
AHEAD OF THE TAPE
By JESSE EISINGER
Friday will be a nice test of how much good economic news is priced into the stock market.
The Bureau of Labor Statistics puts out the employment report for November, with economists expecting that the non-farm payrolls will show a jump of 150,000 for the month. That's not bad. Any higher number would start lowering the unemployment rate. As it is, economists expect the rate to stay flat at 6%.
Given how much good news we've already had, it would be a good guess that stock markets are unlikely to react much either way. Right now, the psychological, if meaningless, barriers of 10000 on the Dow and 2000 on the Nasdaq seem to have more import, improbably enough.
If the jobs situation is better than expected, with more jobs and a downtick in unemployment, that will simply confirm the view that the economy is on better footing than even the most sanguine bulls thought a few months ago. Investors seem to be expecting a slightly above-forecast report. The employment component of the Institute of Supply Management survey of the manufacturing sector for November rose above 50, indicating that manufacturing companies were hiring, not firing. But if true, that is likely to be a temporary phenomenon.
If the report is worse than expected, there will be explanations found and rationalizations given. One such explanation is that the grocery strikers in California and other strikers accounted for about 63,000 workers who stayed off the job in November and are skewing the figures. Employers hired perhaps 10,000 to 15,000 replacement workers, so the net effect from the strikers is roughly 50,000.
Indeed, the strikers might have thrown off the November numbers. But should that truly be considered a one-off? Perhaps labor tension is rising. Well, that will materialize in a serious way only if companies don't start spending some of their strong profits to hire workers and raise wages.
The reaction of the bond market is harder to predict. Should the report come in stronger than expected, will this shake the bond market from its seeming complacence about the improving economic picture? Not likely. The bond market seems content to believe that the Fed will hold off until midyear at least to raise rates and that deflation is still a real possibility.
http://online.wsj.com/article/0,,SB10705746216246400,00.html?mod=mkts%5Fmain%5Ffeatured%5Fstories%5F...
Companies Race to Issue Debt Before Interest Rates Climb
By AARON LUCCHETTI
Staff Reporter of THE WALL STREET JOURNAL
For many corporations, today's hot financial strategy can be summed up in three simple steps -- ready, set, borrow.
Confounding the usual holiday-season slowdown on Wall Street, companies large and small have lined up to issue new bonds out of fear that the surging U.S. economy will soon force interest rates higher, making new borrowing more expensive.
The race against rates has led to a lucrative string of deals for Wall Street and a stocking full of new bond issues for investors. In the past few days, U.S. companies with investment-grade ratings have issued about $7 billion in debt. That follows $25 billion of offerings in the week ended Nov. 21, just before Thanksgiving, the highest weekly total of the year.
"We're seeing a flurry of activity, and it has to do with companies' expectations that rates are going to rise in 2004," says Diane Vazza, head of global fixed-income research at Standard & Poor's. "It's not a question of if rates will go up, but when."
Of course, long-term interest rates remain low and the Federal Reserve hasn't yet budged from its commitment to keep rates low for a "considerable" period.
But with strong U.S. economic numbers -- including the bombshell 8.2% gross-domestic-product growth number in the third quarter and November's brisk manufacturing survey, "we are quite certain that rates are going up," says Scott Hetzer, senior vice president and treasurer at Dominion Resources Inc., a Richmond, Virginia, energy producer. "If you're going to be raising debt, you don't want to wait."
On Tuesday, Dominion's Virginia Electric & Power sold $430 million in seven-year notes and 12-year bonds. Early in the day, the company had decided to issue $400 million, but the offering, led by Lehman Brothers and Deutsche Bank, drew heavy investor interest, leading the company to increase the deal's size.
"Now was the right time to do it because if you don't get it done by mid-December, you really have to wait until the second week in January," Mr. Hetzer says, referring to the upcoming holidays.
Companies also relish getting their deals done while investor demand remains healthy. High-yield corporate-bond mutual funds have attracted net new money from investors in nine of the past 10 weeks, according to AMG Data Services, of Arcata, Calif.
In a sign of investors' continuing enthusiasm for the offerings, investment-grade corporate bonds yielded 1.98 percentage points above comparable Treasurys late last month, down from a 3.16 point spread in October 2002, according to Moody's Investors Service. The gap between more speculative junk bonds and Treasurys also has dropped, to 4.03 percentage points from 7.54 points, indicating that investors see declining risks in corporate bonds. Overall, corporate bonds have risen about 8% this year and high-yield bonds are up about 20%, while Treasurys have gone nowhere.
"There's a good old-fashioned yield chase in progress," says Chris Whitman, head of North American debt-capital markets for Deutsche Bank. He says investors have passed up cash and lower-yielding Treasurys in favor of higher-yielding corporate debt, especially as companies' credit outlook has improved.
Still, there are signs that companies may not have too much time before investors back away. Pacific Investment Management Co., or Pimco, the largest bond-fund manager with $350 billion in assets, published a paper on its Web site recently arguing that corporate bonds are overpriced (see the paper). The paper, by Pimco managing director Chris Dialynas, argues that increased global demand for U.S. corporate debt has led to a "deterioration in creditworthiness of corporate America" and a "much more risky corporate-bond market."
Among those acting now, financial-services company CIT Group Inc. and the North American financing arm of auto maker Toyota Motor Corp. this week issued $750 million apiece in bonds, while General Electric Co.'s General Electric Capital Corp. unit sold $400 million in four-year notes and CMS Energy Corp., Commerce Group Inc., HBOS Treasury Services and Precision Castparts Corp. also completed deals.
"Typically, we wouldn't be very active issuing debt in December, but this year is unique," explains Glenn Votek, CIT's treasurer. "Rates have been at historically low levels" and investors are still buying, keeping rates low for issuers.
In general, early December isn't a popular time for corporate-bond issuers, says James Merli, head of the global debt syndicate at Lehman. Usually, companies would rather issue bonds by Thanksgiving and wait until the new year to add new debt to their balance sheets. This year, though, more companies "are coming around to the view that rates are going to be higher," he says.
Even if the Fed holds off on raising short-term rates, longer-term interest rates, now about 0.25 percentage point below their August levels, still have room to move higher, he says.
To be sure, some other explanations exist for the busy spell. The year generally has been strong for corporate issuance because many companies were distracted by governance issues in 2002, and December bond issuance is often skewed toward the beginning of the month since many bankers are on holiday later in the month.
Some corporate-bond issuers also aren't so concerned with interest rates because they hedge their rate exposure using financial instruments such as swaps and derivatives, says Deutsche Bank's Mr. Whitman. Toyota, after issuing fixed-rate debt this week, for example, swapped this exposure -- as it has with other debt issues in the past -- for floating-rate instruments less tied to interest rates. "A low interest-rate environment is not what was driving the deal," says Marcy Morita, funding manager at Toyota Motor Credit Corp. The company's issuance this week was part of continuing financing of auto purchases for customers, she adds.
Some analysts predict the rush of new bond deals will cut into issuance in 2004. Jeffrey Rosenberg, head of credit-strategy research at Banc of America Securities, says that factor -- along with fewer bonds maturing next year -- could lead to a 10% decrease in corporate-debt issuance next year.
In coming months, bond deals likely will come from companies eager to expand internally or through acquisitions. That would be a major shift from this year, when companies largely tapped the bond market to save costs by refinancing debt at lower rates. In a peek at what might lie ahead, Sony Corp. announced plans to sell as much as ¥250 billion ($2.3 billion) in convertible bonds to finance key technology investments.
Companies "feel better about raising money for more strategic reasons," says Raj Dhanda, co-head of the global debt syndicate at Morgan Stanley. "The savvy corporate borrower" raises money as the economy picks up, he says, but while "rates are still low."
http://online.wsj.com/article/0,,SB107046491369663600-search,00.html?collection=wsjie%2F30day&vq...
MG, thanks. I think Dimension, Turk, Busted and daCrimbsta deserve all the credit for making this a cool board.
Glad you did well on the SCON trade. I'm still holding a 2/3's position after doing a little more profit taking.
I'll keep an eye on ACS, although I haven't traded a large cap from the long side all year. The Q's are as large cap as I get these days as I'm still net short at a 35.72 average.
Good luck.
Regards,
Naz
Garden Rose - ADL.............................................
Once something is left in the hands of governmental bureaucrats, there is no telling when they'll get around to rendering a verdict.
Hopefully, I'll hear something when a decision is imminent. If so, I'll pass along the info and likely recycle the trade.
Good luck.
Regards,
Naz
Dimension - A quick look at money flow erosion ...........
U.S. M-2 money supply fell $27.7 bln Nov 24 week
http://biz.yahoo.com/rf/031204/economy_fed_moneysupply_table_1.html
Highs for 2003 are in and we head lower into year end.
Don't forget to tip your cyber bartender .
Regards,
Naz
lonestar49 - WITM............................................
I take my trades one step at a time. Next target is 2.00, then 2.50.
I was merely pointing out WITM's PPS potential based on a comparative analysis with higher priced stocks with only a fraction of WITM's holdings.
However, WITM is an OTC BB stock, so a greater level of risk is always inherent with stocks that trade on that exchange. Be very careful and only invest risk capital you can afford to lose.
I realize I should be more careful when using phrases such as "load the boat". I'll make a point of refraining from using such language in the future.
Good luck.
Regards,
Naz
Dimension, ROFL. I don't think I want to take on your Orc.
An ice cold, refreshing cyber beer like the one in your picture will be just fine .
Good luck.
Regards,
Naz
Turk, load the boat on WITM..................................
You won't have to worry about sending Dimension anything since he won't be winning the bet, but I appreciate the offer .
Regarding WITM, very positive developments in the works on this stock. WITM's holdings are in South Africa in an area where more than 30% of the gold in the entire world has been discovered in an area called the Witwatersand.
For the sake of comparison:
GREAT BASIN GOLD (GBN - $2.41) is another company in the same Witwatersand area of South Africa with 1/10th the land holdings of WITM and
CENTURION GOLD (CGHI - $3.41) is yet another company in the same Witwatersand area of South Africa with a land holding of only 1.5% to 2% of the land holding of Wits Basin Precious Minerals (WITM). Based on this information alone, WITM should be valued much higher than its current price of $1.60 and when the rumored additional news breaks, we could have a gigantic winner on our hands!
Good luck.
Regards,
Naz
November Insider Stock Sales Hit 2-Year High
Thu Dec 4,12:16 AM ET Add Business - Reuters to My Yahoo!
By Joseph A. Giannone
NEW YORK (Reuters) - Stock sales by top U.S. corporate executives reached their highest level in more than two years in November, a bearish signal at a time when the stock market has surged amid strong growth in the economy and company earnings.
Last month corporate executives cashed in $4.5 billion worth of their own companies' shares, up 43 percent from October and nearly double the five-year monthly average, according to Thomson Financial's Insider Research, which tracks insider transactions.
Meanwhile 3,680 executives from 1,592 companies engaged in share sales. Both measures set five-year highs.
In recent weeks investors have been barraged by positive economic data and better than expected third-quarter earning reports, sustaining a rally in U.S. stocks. On Wednesday the blue-chip Dow Jones Industrial Average and the broader Standard & Poor's 500 Index reached 18-month highs, while the Nasdaq Composite Index briefly broke the 2,000 barrier for the first time in 22 months before pulling back.
Yet heavy insider sales could give investors pause, since top executives and directors are perceived as knowing their company's prospects best and therefore the figures can serve as a gauge of executive confidence.
Technology company executives sold $1.3 billion of company stock last month, the sector's highest level of profit-taking activity since early 2001. Finance sector sales reached $802 million, its highest in five years, while healthcare executives disposed of $580 million worth of shares.
Insider Research also observed that 56 companies so far in the fourth quarter have exceeded their highest quarterly volumes in at least five years. Among these companies were CBRL Group (Nasdaq:CBRL - news), Genzyme General Corp. (Nasdaq:GENZ - news), Nike Inc. (NYSE:NKE - news), Rite Aid Corp. (NYSE:RAD - news) and Sears, Roebuck & Co. (NYSE:S - news), Insider Research said.
Stock-buying activity last month also pointed to a waning of confidence. Insider purchases rose 67 percent to $105 million from October, well below the historical five-year monthly average of $172 million.
Moreover $42.98 were sold for $1 of stock purchased last month, the seventh straight month the sell-buy ratio remained in "very bearish" territory -- well above the $20 mark. Still that represents an improvement from October, when the ratio hit $59, its highest level in at least a decade.
Among those identified taking advantage of robust prices were executives at Fortune Brands Inc. (NYSE:FO - news), which saw its first insider sales since July and whose shares recently reached an all-time high.
And six XM Satellite Radio Holdings (Nasdaq:XMSR - news) executives combined for the biggest quarterly sales volume and their first disposals since late 2000. The company's shares surged 10-fold in the past year, Insider Research said.
Fourth-quarter activity at credit card issuer Capital One Financial (NYSE:COF - news) reached record levels, continuing a trend of increasing sales. Lee Enterprises Inc. (NYSE:LEE - news) insiders posted the biggest combined sale as its shares trade at record highs.
Meanwhile retailer Saks Inc. (NYSE:SKS - news), hovering near a 52-week high, saw its highest sales levels since 1999.
http://story.news.yahoo.com/news?tmpl=story&u=/nm/20031204/bs_nm/financial_stocks_insidersales_d...