Sep 28, 2010

Short-term: 3 yellow, 1 red – overbought
Intermediate-term: 3 green, 1 yellow – uptrend continues
Stock targets: 75% swimming, 18% neutral, 7% sinking

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Sep 24, 2010

Markets dropped a bit on meh volume

Short-term: 2 yellow, 2 red – seriously overbought and now deteriorating a bit
Intermediate-term: 1 green 3 yellow – still indicating up but now deteriorating
Stock targets: 73% swimming, 18% neutral, 9% sinking –

How much more upside can there be now that all stocks are on the same side of the boat? On the other hand, how much downside will there be if no one sells? Everything seems to indicate that this is the end of this leg up. But my indicators have not done well for the last 3 weeks. Probably wise to take profits on any cyclical good news type stocks. International and defensive commodities still look good — but everything really needs a pullback here.

Sep 21, 2010

Markets continue to have anemic volume with the only trading seemingly done by computers reacting to old news events. In today’s case, “news” that is over one year old. Indexes have broken thru resistance. It has brought in nothing from the sidelines.

Short-term: 2 yellow, 2 red – extremely overbought
Intermediate-term: 3 green, 1 yellow – upward trend expected to continue
Stock targets: 70% swimming, 20% neutral, 11% sinking – extremely unanimous/correlated

More of the same with the indicators. Seemingly no reason to sell now and no reason to buy and the boat just looks plain dangerous with stocks all expected to do well. This is increasingly looking like a pure consequence of inflation – ie money from the Fed’s daily debt monetization is going into the markets to boost asset prices.

Well no thank you. If inflation it is, then I will buy silver, gold, and ag commodities thank you very much. International – esp ex Europe and Japan is still looking OK too.

The reason I’m not updating the indicators daily is precisely because the story really isn’t changing. The reason I’m continuing to update them at all is because I still believe that if the story DOES change, then the indicators will do something to give me a heads up.

Sep 16, 2010

Short-term: 3 yellow, 1 red – overbought, due for a drop, so what
Intermediate-term: 3 green, 1 yellow – no sign of anything but continued up
Stock targets: 61% swimming, 24% neutral, 15% sinking – getting close to extremely one-sided

Markets continue to drift higher on zero volume. I understand that short-selling has been basically banned – and it is unwise to short anyway when the Fed/dealers are simply creating buy money from thin air. But this market is very seriously primed for a massive and overdue external news shock.

That said, zero-yielding assets (eg commodities) are looking great here. Is this what the early stages of hyperinflation look like?

MegaCap International

I’ve been trying to figure out how to pull together info on international stocks since that is where the vast majority of my portfolio will be invested for the foreseeable future (like decades). I’m gonna split them into three groups — megacaps (market cap over $50 billion); large cap (market cap $15-50 billion); and mid/small.

Megacap stocks are mostly moved by institutional/ETF index money. There is little point in a minnow doing fundamental research here since everyone else is – and the sheer money flow of ETF’s and such renders it pointless anyway. My main criteria for picking the megacaps below is “what other big money – apart from indexers/ETF’s – owns these stocks”. If they have a good track record – low risk and high returns and low trading/turnover – then it seems reasonable that these megacaps will slightly outperform their megacap peers. The main value of megacaps is a)instant diversification with only a few names and b)no need to pay a pseudo-index manager and c)in this credit environment, the mega get credit and the small get shafted. These stocks are grouped by broad sector – and within each sector ordered by preference. To create a diversified international portfolio, pick one from each sector.

Tech/Telco:
Taiwan Semiconductor (TSM) – the 800lb gorilla of semiconductor manufacturing. Yields 3.7%. In this credit environment, it has a huge advantage since it now requires $3 billion to build a semi foundry. And tech is in a bit of sweet spot now with mobile, cloud computing, smartphones, tablets, etc all merging. Tech can grow and it has been 15 years since the last tech revolution.

America Movil (AMX) – dominant cellular provider in Latin America. Yields 1%. It is using its dominance (and resulting cash flow) in Mexico to expand throughout the continent and now has 190 million subscribers. Reasonable growth prospects. If LatAm currencies appreciate v the dollar; then there is big financial leverage.

Canon (CAJ) big in optics, semiconductors, printing, etc. Highly cyclical businesses and suspended its dividend in 2008. It has strongly outperformed the Japanese market and its survival of both a deflationary home economy and declining-price/margin businesses makes it a potential monster going forward.

Finance
Standard Chartered (STAN – London; SCBFF on pinks) – dominates “former British empire” banking. Yields 1.6% . Specializes in trade/corporate/private banking — not commercial/mortgage lending – so a healthy balance sheet. Will be able to take advantage of weak competitors in its core area – East Asia, Indian Ocean, Middle east, and Africa. Biggest risk is potential sovereign debt defaults – ate a few billion with Dubai. But a combo of diversified high growth areas – and the ability to mint money with a global yield curve makes this worth looking at.

Health
Novartis (NVS) – combines one of the only drug companies with a good new drug pipeline and one of the biggest generics businesses. Yields 3%. The patented drug business is disappearing globally. Socialized medicine does not reward innovation – and emerging markets don’t respect intellectual property. But NVS is gonna be one of the 2/3 survivors in both patented and generic drugs. They have been using hefty cash flow to diversify into specialty health and other businesses. Their stock price is not at all reflective of their underlying business. It has simply been dragged down by the entire industry. Once the “empty pipeline” companies start dying, the survivor stocks should rally as the industry becomes oligopolistic. And healthcare is both very depression-resistant and has great growth potential in emerging markets.

Consumer
British American Tobacco (BTI) owns big brand names in emerging markets. Yields 3% and company buys lots of shares so share price is always protected from downside. Tobacco is a huge cash cow business. Only risk is that governments also love this cash cow for tax revenues – but that ain’t new news.

AmBev (ABV) dominates beer and bottles Pepsi throughout Latin America. Dividends and buybacks are ad hoc – but very smart. Recession resistant – and still good growth potential in its markets.

Tesco (TSCO – London; TSCDY on pinks) dominant British food retailer and expanding fast internationally. Yields 4.3% One of only three globally feared retailers along with WalMart and Carrefour. Recession proof and excellent growth business in emerging markets. Still a bit dependent on UK.

Nestle (NSRGY on pinks) I didn’t realize how big this food company is and how many brands it owns. Yields 2.3% .

LVMH (LVMUY on pinks) is the one-stop conglomerate for luxury goods from champagne to fashion. Yields 2% . Is likely to have a tough few years in the West — but growth in Asia is serious.

Energy
BG Group (BG – London; BRGYY on pinks) is a large upstream gas company with significant LNG operations. It has large reserves of stranded gas from Kazakhstan to India to Egypt and now in Australia, Brazil and the US. Highly highly levered to natgas prices in consuming countries – but globally diversified so not like a US natgas company. Yields 1%

CNOOC (CEO) is a semi state-owned Chinese upstream oil company. Yields 2.6% I would normally view state-ownership as a risk – but CNOOC is likely to be the major beneficiary of the Chinese governments scramble to own oil resources around the world. And unlike the big integrateds, the money that the Chinese government spends doing this is not going to be taken out of CNOOC shareholders pockets. And the Chinese don’t give a rip about pollution/spills/etc in faraway places. Ugly way to invest but it is gonna happen and better that I profit from it than that the profits just go to sharks all round.

Sep 14, 2010

Spent the last few days repairing my freaking computer. Market volume is totally dead. There is no way I would short this market — and no way in hell I will buy it. This market looks like nothing more than the Fed and Wall St trying to create another asset bubble via their debt monetization – and pretending that that doesn’t really constitute inflation. The only thing worth buying is commodities and international. The US is now merely a kleptocratic fraud and anyone who has cash sitting around earning nothing in a bank is an idiot.

Short-term: 2 yellow, 2 red – Very overbought – but so what
Intermediate-term: 3 green, 1 yellow – no indications of a correction as trend-following stuff turns bull
Stock target: 51% swimming, 25% neutral, 24% sinking

Sep 9, 2010

Markets did nothing on no volume. Hello!!! Is anybody still alive?

Short-term: 1 green, 1 yellow, 2 red – overbought and looks like a turn down
Intermediate-term: 2 green, 2 yellow – trend-following stuff turning up
Stock targets: 39% swimming, 22% neutral, 40% sinking

I’m gonna go with the short-term indicators here. The move up over the last two weeks has been completely totally dead — and is now getting deader. Markets are overbought and due for profit-taking and I don’t think that a move down is gonna pull money in. There’s nothing on the sidelines. Little value in the markets. Retail investors are getting out. The economy is still not being priced in — and the government is now openly making up data. The move for the last two weeks has been about M&A rumors – but that’s a mug’s game.

Sep 8, 2010

Markets rose a bit on anemic volume.

Short-term: 3 yellow, 1 red – still overbought
Intermediate-term: 1 green, 3 yellow – still bouncing
Stock targets: 38% swimming, 20% neutral, 42% sinking – still diverging

Me – still confused

Sep 7, 2010

Markets gave back some of last week’s gains on low volume and Euro rumors.

Short-term: 3 yellow, 1 red – still overbought and weakness likely
Intermediate-term: 1 green, 3 yellow – bounce still in effect
Stock targets: 37% swimming, 18% neutral, 45% sinking – still diverging

My indicators are as confused as I am about this market. The moves last week were more a pulling-back of bearishness rather than an increase in bullishness. Today’s was more a pulling-back of bullishness rather than an increase in bearishness. As the market treads over the same territory that it has all summer, the bull/bear scenarios are becoming more known — but it seems that fewer and fewer investors care about either scenario. It’s like the movie Groundhog Day. Well not really but I like the metaphor. Narrow trading ranges like this do not persist but it seems to me that something external is gonna have to break the range. It will likely do so by either forcing money into the market or forcing it out of the market.

Gold and silver are looking strong – and overbought in the short-term. As are some ADR’s and foreign ETF’s. As are the yen and Swiss franc. This is one weird boring market. What is strong looks good for the longer run as well — but it needs a pullback that actually lasts longer than a freaking HFT bid/ask price. And the correlation of everything to everything else has got to end soon.

Sep 2, 2010

Markets rose on anemic volume. Tomorrow’s volume will be even lighter. Honestly, this is pure manipulation of the technical charts on known low volume days in preparation for post-Labor Day.

Short-term: 2 green, 2 yellow – bounce underway
Intermediate-term: 2 green, 2 yellow – bounce underway
Stock targets: 37% swimming, 14% neutral, 49% sinking – still deteriorating, still meaningless