The Monthly Stock -- Performance Update

As of yesterday's close:

The Monthly Stock -- Catching Up

I know you all thought this blog was dead, but I'm still here. It's time to name "The Monthly Stock for:

April: HOGS

May: TWGP

June: RNR

July: YONG

August: GFA

September: AEL

October: AMED

These seven stocks will replace KHD, MTW, HDNG, ESV, IAG, OIS, and MON.

These trades will take effect at Monday's open.

ATP Update

Time to jump back into Theme 5 (short China)

At tomorrow's open:

Buy FXP

Strike Three for Little Timmy?

    Treasury Secretary Tim Geithner will get another opportunity tomorrow morning to "try" to ease the public's skittishness with our economy...specifically, the financial sector.  I have a very bad feeling that this may be the last strike for our Doogie-Howser look-a-like.

     His first strike came when he had to sheepishly admit that he failed to pay over $34,000 in taxes, yet he still felt he deserved to run the institution that demands we pay ours.  Yet the President stood beside him and assured us, he was the right man for the job.

     Strike two came just a few weeks into the new administration when Geithner was expected to deliver all the details of how he/they were going to save our financial institutions.  The plan was short of details, and the market tanked in response.

     Tomorrow morning, "Little Timmy", as I like to call him, will get an opportunity to try again at laying out "the details".  This time, he has had an additional month to prepare his remarks.  Unfortunately, I believe he is doomed to fail.  I believe the market is looking for the perfect plan, a magic bullet, if you will.  Any opportunity to pick apart "the details" or lack thereof, is inevitable.  Anything short of perfection will be a bad sign.  Details of what Geithner will be laying out tomorrow have already been released.  It's already being viewed with skepticism in the media.  Basically, the government would offer loans to private investors (hedge funds and smaller banks) to buy up the troubled assets at the bigger banks.  I see two immediate problems with this plan.  First, and most obvious, who would want to buy assets (with borrowed money, nonetheless) that are virtually worthless and have very little chance of providing a return?  Second, what healthy institution would want to accept government money (to buy bad loans) in the face of Congressional shenanigans like 90% taxes on bonuses?  Meanwhile, the US taxpayer is out another TRILLION dollars to fund this plan.  Have you found any good Tea Parties to attend this year?

     Will Geithner be able to deliver tomorrow?  You'll find your answer in the market's reaction.  Personally, I believe Geithner's stock will fall even farther tomorrow.

 

The band is playing somewhere, and somewhere hearts are light,

And somewhere men are laughing, and somewhere children shout;

But there is no joy in Wall Street— Little Timmy has struck out.

China's Unemployed

I just wanted to post a couple pictures I came across tonight on the web.  For those who believe Chinese growth will continue at double digit rates...you're not seeing the big picture(s)...

Thousands of unemployed Chinese graduates flock to a job fair in Wuhan, central China's Hubei province on March 7, 2009. China vowed to help train one million graduates in the next three years to boost their qualifications, and promised loans to business that hire graduates, as unemployment continues to grow. (STR/AFP/Getty Images)

Thousands of job-seekers flock to a job fair in Hefei, Anhui province, China on March 1, 2009. At least 20 million of China's 130 million migrant workers have become jobless after tens of thousands of labor-intensive export-oriented factories closed due to the global financial crisis, and job training schemes for migrant workers are springing up around China, Xinhua News Agency reported. (REUTERS/Jianan Yu)

Aggressive Trader Portfolio Update

Despite the market's recently-found strength, the mostly negative ATP is still up nearly 30% on the year.  We had been hiding out in cash with several of the themes awaiting better prices.  I feel like we have finally reached some great buying levels on a couple of the themes.  So at tomorrow's opening prices, we'll be moving off the sidelines in Themes 1 and 5 and buying:

FAZ and SRS

Short Term Market Outlook

For those of you following my articles at Seeking Alpha, or my posts here at my blog, you know that I am fairly bearish on the market.  In my government-TSP account (which has very few investment options), I have been hiding out in the G-Fund (like a Money Market Fund) since January 2008.  Because of that, I have avoided most of the heavy losses in this market.  In my IRA accounts and trading account, I have been mostly short the market, short banks, short real estate, and long gold (off and on).  I'm filling you in on my personal account movements as it sets the tone for what I'm going to tell you in the next few paragraphs.

From all the articles/blogs I've read and the gurus I follow, I have felt for the last three months that this market would bottom out with the DJIA at around 5750-6250 and the S&P in a range of 575-625.  I'm still not sure when I think this bottom will occur.  I've said all along that I felt our economy (housing, jobs, consumer demand, etc) would not recover until 2011.  The stock market tends to lead the economy by 6-9 months during normal recessions.  Of course, this is NOT a normal recession, which makes timing a market bottom very difficult.

Based on these soft targets for a bottom, I started moving some retirement funds from the cash side to the long side when the Dow hit 7200 about two weeks ago.  I started with a 30% position, leaving 70% in cash.  Being realistic about my bottom-calling ability made me realize that I would miss a potential up move if I held out until I got the 6000 and 600 levels I was looking for.  An initial 30% position would allow me the ability to make some money if the market did go higher, and also give me the flexibility to add more exposure if the market continued lower, as it did.  As the market continued lower over the last two weeks, I moved my long position to 40%, then 55% at the market low.  This leaves me with a 45% cash position now.

It had become very clear to me that this market was VERY oversold on a short-term basis.  I feel like this market has a small vacuum of time to make a very substantial short term rally.  All the bad news from the  last earnings season is in the past.  The market was VERY oversold.  Tax refunds should be arriving soon which may find its way into the market.  Americans have suddenly started to save instead of spend.  The market is representing a short-term value.  For these reasons, I feel that the market could see a very nice rally between now and the beginning of the next round of earnings.  If you haven't heard this before, you need to write this down and post it next to your trading desk.  THE BIGGEST RALLIES HAPPEN DURING BEAR MARKETS.  Not only are they big rallies, but they happen quickly.  I'm going to put out another target for the market in this post.  That target is an S&P 500 at a level of 875-925 by mid-April.  I'm talking about a five-week move of about 35% (or about 20% higher from here).

Now for the bad news.  Simultaneously with this move, you will see everyone jumping on the idea that the market bottom is in, the economy is surging, and all problems are now in the past.  DO NOT BE FOOLED!  This market is still very sick, and has a long way to go before our problems are behind us.  The bottom line is that our economy has been fueled by easy credit and excessive debt since the 80's.  Our economy is trying to correct itself back to normal.  Unfortunately, our government is throwing money it doesn't have at the problem (our kids' future taxes).  Congress is trying to tax and spend our way back into the easy-credit, high-debt lifestyle that we have become spoiled with.  THIS WILL ONLY PROLONG THE PROBLEM!!  If we continue to nurse this problem with "band-aid" stimulus packages instead of letting Capitalism work like it was intended to, we will end up like Japan.  (Expect 20-30 years of subpar growth).  I honestly feel like that is the path we are headed towards.  Let's not forget, that prior to the First Great Depression (yes I did say the First), the DJIA topped out in 1929 at 386.1.  It bottomed out 3 years later at 40.56 (about 90% lower).  It took a full 25 years for the market to regain what it lost in 3 years.  Although I do not think our market will lose 90% of its October 2007 peak, I would not be surprised if it takes more than a decade to see the DJIA back at the 14,000 level.

I'll end this rant with the thought that my original forecast of DJIA @ 6000, and S&P @ 600 may actually be a bit too high.  I won't be lowering my forecast, but I won't be surprised if we blow through those levels a bit.

To sum up, expect another 20% to the upside over the next month, followed by more pain to the downside.  It should go without saying that timing the market is a dangerous activity.  For those who think it is impossible, you're not a trader.  For those who study the market, keep a keen eye on money movements, and STUDY, STUDY, STUDY, you can make money in a market like this.  Of course, I could be way off-base, but I'm willing to put my thoughts out there for your consumption, and yes, I am trading my accounts based on these predicted movements.

TMS Performance Update

As of close 9 March 2009:

	TMS	S&P500
1 Month	-24.90%	-22.23%
3 Months	-16.01%	-24.77%
6 Months	-51.53%	-44.75%
12 Months	-57.15%	-47.69%
*Inception	-58.82%	-55.70%
* 1 Oct 07

 

The Monthly Stock for March 2009

Just a quick post to let you  know I'm updating the Monthly Stock Portfolio with this month's stock pick.  As I've mentioned in the past, I'm not crazy about this portfolio anymore.  I set it up to instill a little discipline into what had become what I considered too much trading.  What I have discovered is that the criteria I set to limit trading has become a detriment to my ability to make smart informed trades.  Despite the lackluster performance, I will continue these picks for at least the rest of this year.  At the end of 2009, I will make an assessment, and I may start a new Monthly Stock Portfolio from scratch.  What I'd like to do is a Monthly Theme, similar to the Themes you see in the Aggressive Trader Portfolio.  But until then...

As of tomorrow's open, we are dropping Hercules Offshore (HERO) and adding Excel Maritime Carriers, Ltd. (EXM).  Despite HERO's awful 95% plunge since it was first recommended, I am not crazy about offloading this stock at this point.  But according to my sell criteria, HERO must go.

EXM is in another scary sector, dry bulk shipping.  These stocks were flying high in 2008, as commodity prices soared and shipping rates peaked.  But in late July, deflation set in and commodity prices pulled back, as did shipping rates, and profits for the shippers.  So why a shipper in this deflationary climate?  Given the criteria set forth for this portfolio, I know that this stock will be held for at least a year.  I'm not sure the deflationary cycle will be over in a year, but I do know that the shippers will not go away.  Some of them may be gobbled up by others, but the shipping industry cannot just vanish.  Global trade will happen, and picking up a shipper at these prices may be a nice move for this portfolio going forward.

With that said, here are some of EXM's fundamentals:

PEG Ratio = 0.03 (Miniscule)

Estimated Sales Growth Nxt Qtr = 117%

ROE =  37%

ROA = 10%

Insider Ownership = 4%

To recap, at tomorrow's opening price, the following moves will be made for The Monthly Stock Portfolio:

SELL HERO

BUY EXM

ATP Update

Requested by a reader, here's a snapshot of the current ATP portfolio as of tonight's close.  The portfolio started with a fictional $1,000,000.   I'm still not sure if it is able to be clicked on and opened or not  yet.

Aggressive Trader Portfolio Update

Just two months into the new year and we're cruising nicely with this year's Themes.  Eight of our nine themes are up an average of 57%, with one theme down modestly:

Theme 1 (Short Banks):  Up 100%

Theme 2 (Short Oil):  Up 143%

Theme 3 (Short Tech):  Up 13%

Theme 4 (Long Gold):  Up 24%

Theme 5 (Short Real Estate):  Up 37%

Theme 6 (Short China):  Up 31%

Theme 7  (Short Euro Banks):  Up 69%

Theme 8 (Short Consumers):  Up 39%

Theme 9 (Short Toyota):  Down 10%

Total portfolio return since January 1st, 2009:  Up 49.54%

If you remember, we made a couple counter-theme trades a couple weeks ago.  We went long oil and short gold temporarily.  Both of those moves paid off nicely.  We've already exited (and reversed) the long oil play, and now I'd like you to make the same trade with gold.  Effective at tomorrow's open, we'll be making the following change in Theme 4:

Sell DZZ

Buy DGP

Aggressive Trader Portfolio Update

Just a quick note to let you know about one change I'll be making for the ATP tomorrow morning.  The little switch we made going counter to my Themes (Long Oil and Short Gold) have both paid off.  I told you this would be a short term trade.  As of tonight, the ATP is up 39% on the year.  Oil has corrected back up far enough for me to get out of the UCO trade.  Gold has retreated a bit, but I think there is a little more to play out in that pullback.  Therefore, at tomorrow's open, we will:

SELL UCO

BUY SCO

HOLD DZZ

Stay tuned for further updates, as well as The Monthly Stock for March.

2009 Aggressive Trader Portfolio Update

Still chugging along with great results!!

Theme 1:  (Short Banks)...Currently Long FAZ.  2009 Return =+116.0%

Theme 2:  (Short Oil to $25 then Long)...Currently Long SCO.  2009 Return = +85.35%

Theme 3:  (Short Tech)...Currently Long REW.  2009  Return = -2.4%

Theme 4:  (Long Gold)...Holding in cash, awaiting re-entry.  2009 Return = +10.9%

Theme 5:  (Short Real Estate)...Holding in cash, awaiting re-entry.  2009 Return = +36.8%

Theme 6:  (Short China)...Holding in cash, awaiting re-entry.  2009 Return = +31.2%

Theme 7:  (Short Europe)...Currently Long EFU.  2009 Return =+37.6%

Theme 8:  (Short Retail)...Currently Long SCC.  2009 Return =+21.1%

Theme 9:  (Short Toyota)...Currently Long TMSK.X.  2009 Return = -21.1%

Total Portfolio Performance = +35.1%

Now for some changes.  We've seen tremendous gains in Themes 1 and 2.  I believe those themes will continue to hold true throughout 2009.  But the recent (2009) bear resurgence has been severe, and we may be at a short-term turning point.  Therefore, effective at tomorrow's opening prices, we will Sell FAZ and SCO.  In addition, we will use the proceeds of the SCO position in a short-term reversal trade, by buying UCO.  In no way does this move take away from my stated prediction of an oil bottom at $25/barrel.  I still believe that price is in oil's future.  However, the dramatic sell-off we have seen in oil prices over the last two weeks, is telling me that the selling action has been too severe.  I do expect a short-term rebound.  A buy into UCO will take advantage of that.  In addition, I have clearly left my Theme 4 money (Long Gold) in cash for too long, and have missed a lot of the recent bull run-up.  However, I believe that bull run is due for a short-term correction as well.  Therefore, I will use the funds in that theme for a short-term play on a possible pullback in gold.  DZZ will be our method of capitalizing on that.  It will also be bought at tomorrow's open.  To recap:

SELL FAZ

SELL SCO

BUY UCO

BUY DZZ

The Monthly Stock Portfolio Update

Performance Since Inception (1 Oct 2007):

The Monthly Stock Portfolio:  -48.14%

The S&P 500 Index:               -45.51%

Here's a list of closed trades:

Ticker Buy Date  Buy Price  Sell Date  Sell Price  Return

EGO     1 Oct 07      6.12      10 Nov 08     5.20      -15.0%

DRQ     1 Oct 07     49.00       1 Jan 09     20.86     -57.4%

LNDC   31 Dec 07   13.41        1 Jan 09     6.59      -50.9%

ITRN    31 Jan 08    9.87         4 Feb 09     8.70     -11.9%

February 2009 Stock of the Month

At tomorrow's open, we'll be closing out ITRN and opening a position in China Information Security Technology, Inc. (CPBY).  CPBY is a small software company that provides security systems for the Chinese government in such areas as policework, border security, and surveillance.  Investing in China certainly involves some risk, but if the PEG ratio is even close to accurate, this one is a real bargain.  Here are the numbers:

Market Cap = 160M

PEG Ratio = 0.15

Qtrly Sales Growth est. = 77%

ROE = 32%

ROA = 15%

Insiders Own = 10%

Total Debt-to-Equity = 5.5%