Articles from Jun 2006

Victor Niederhoffer the greatest speculator

Victor Niederhoffer the self proclaimed greatest speculator in the history of speculation is blaming Fed Chairman Bernanke for his recent losses. The first rule in speculation is, you are responsible for your own losses. Time to read Chapter 5 of The Education of a Speculator

Victor Niederhoffer : Daily Speculation

A much better example of the disaster of central planning is the recent month’s destruction of wealth set off by the coordinated set of plans to jawbone the economy and inflation down set off by the Fed Open Market Meeting of May 10, 2006. It started with an attempt to show that inflation was rampant, the public didn’t get it, and the markets needed a dose of tightening to bring things back to proper order. The attempt was imposed from above based on the vision of a single personage, who coordinated a series of staged speeches about how vigilant the Fed was and how concerned about the failures of the knowledge of individuals they were. The loss of wealth that it set off was in the 3 to 4 trillion range as all emerging markets, Asia, Europe, and Latin America declined 10 to 20% in lockstep from a 45 trillion or so base. By June 29, 2006 it was all over. The last open market meeting emphasized how restrained inflation was, how the Fed would be guided by markets in the future, and how the tightening might be near its end. The world markets recovered an average of 5% from their most recent lows, and will undoubtedly move back to their former levels in the due course of reasonable time, like a few months. But what deadweight costs, what frictional costs, what individual hardship and poverty was created by it all.

What fools these central planners must think we are. What arrogance of power Khrushchev, Mao, Fred Lee and Ben Bernanke displayed in trying to consolidate power about them. What stooges the media and other bit players in the debacle were as they fanned the flames of total economic Armageddon as if puppets in a performance.

Let the story of this recent disaster in centralized planning, this superposition of the vision of a single leader for the wisdom of the market, this attempt to consolidate power behind a single voice (possibly engendered by the pretty woman transgression), serve as a vivid, and compact episode in the US of why market based solution, and pluralism, and suffering the consequences of failure are so necessary to the common good. And let us learn how to profit from such orchestrated forays in the future.

Stocks on the move

Some interesting stocks on my watchlist for today. Some of these have good earnings.

BVX,Bovie Medical Systems
CGPI,Collagenex Pharmaceuticl
CLDN,Celadon Group Inc
EGY,Vaalco Energy Inc
EZPW,Ezcorp Inc Cl A
IBCA,Intervest Bncshs Cp Cl A
ININ,Interactive Intelligence
LBIX,Leading Brands Inc
LVS,Las Vegas Sands
MEK,Metretek Technology Inc
NGA,N Amer Galvanizing & Coatings
TLG,Target Logistics Inc
ZUMZ,Zumiez Inc
ZVXI,Zevex Internat Inc

Market picks the winner in Google v/s Microsoft war

GOOG,Google and MSFT,Microsoft Corp rivalry is now as legendary as Coke v/s Pepsi. Going by the market reaction so far Google seems to be clear winner. Keep GOOG on your radar. When the market regains its footing GOOG will be the clear winner if it continues to hold on to its relative strength.

On the other hand MSFT may be headed for more trouble. If the market is a discounting mechanism, it is clearly signaling the new Microsoft Vista product is headed for big time trouble. Looks like New Coke debacle in making.

Google continues to be the innovator. Every week it continues to roll out new products and features. It has institutionalized a creative culture, while Microsoft has been a laggard. MSFT has seen recent management changes due to failure to launch product on time.

Microsoft is very good at making lot of noise and threatening others but has seldom been successful in recent times. Take the ipod example. Microsoft vowed to kill it and launch rival digital music service when it was launched. What happened to it. It has been talking about Google for years and has nothing much to show.

Microsoft will be a single digit stock if its Microsoft Vista fails to take off.

What is moving counter to trend

I just ran some scans to look at what is moving counter to overall market weakness.
MA, Mastercard Inc, the recent IPO has been up since its IPO. Considering our addiction to credit cards, this looks like a long term winner.

BKD, Brookdale Senior Living Inc. (Brookdale) is the third largest operator of senior living facilities in USA.

There is no one sector dominating the list, but some stocks with excellent earnings and sales growth like HSR,Hi-Shear Technology Corp.

Hi-Shear Technology Corp. designs and manufactures pyrotechnic, mechanical and electronic products for the aerospace industry, national defense and other applications. Its aerospace products are primarily used in space satellites and satellite launch vehicles, exploration missions, strategic missiles, tactical weapons, advanced fighter aircraft and military systems. Satellites, missiles, weapon systems and other space vehicles require substantial stand-by power to perform certain timing-dependent functions such as separation, cutting and deployment. Hi-Shear designs, markets and manufactures pyrotechnic power cartridges/initiators that have a high-energy output. These power cartridges are hermetically sealed electro-explosive devices that are compact, lightweight, environment and corrosion resistant and operate with ultra high reliability. The power cartridge provides the energy to operate the separation devices, pin pullers, thrusters, actuators and cutters. These devices are used to open satellite doors, deploy solar panels, booms, communications antennae, missile fins, and in driving stage separation on many of today's major launch vehicles.

Update: Why this stock is up 144% in 42 days

AEHR,Aehr Test Systems
AFFM,Affirmative Insurance Hldgs Inc
AP,Ampco-Pittsburgh Corp
AXR,Amrep Corp
BIOV,Bioveris Corp
BKD,Brookdale Senior Living Inc
CHMP,Champion Industries Inc
CITP,Comsys It Partners Inc
CMRO,Comarco Inc
CRN,Cornell Corrections Inc
CSPLF,Canada Southern Petroleum Ltd
CUP,Peru Copper Inc
CUTR,Cutera Inc
DAKT,Daktronics Inc
EGY,Vaalco Energy Inc
EMIS,Emisphere Technologies
FBNW,Firstbank Nw Corporation
FRNS,First Avenue Networks Inc
HSR,Hi-Shear Technology Corp
IMCO,Impco Technologies Inc
LQDT,Liquidity Services
MED,Medifast Inc
MEK,Metretek Technology Inc
MOV,Movado Group Inc
MOVI,Movie Gallery Inc
OMNI,Omni Energy Services Cp
OPLK,Oplink Communications
ORNG,Orange 21
PSS,Payless Shoe Sources
SGMO,Sangamo Biosciences Inc
SIMC,Simclar Inc
SMSI,Smith Micro Software Inc
UFPT,Ufp Technologies Inc
WILC,G. Willi-Food International Ltd

Stocks are undervalued relative to bonds

The earnings continue to be robust according to Zacks data.

Rates have generally eased back down over the last month, and they yield curve is still basically flat, but with a bit of an upward slope. This sort of a yield curve is consistent with moderate positive economic growth going forward. The earnings yield on the S&P 500, based on 2006 earnings remains well above the yield on the ten year t-note (6.63% versus 5.05%). This indicates that stocks are undervalued relative to bonds.

Interest rates as the denominator in the valuation of equities are obviously important, but so is the denominator, Earnings. The earnings picture remains very robust, both for this year and next.

Full-year earnings estimates are rose slightly last week. During the past seven days, estimates were raised on 89 S&P 500 member companies and lowered on 71 companies. Over the last month a total of 870 estimates for this year have been raised versus only 626 that have been cut (ratio of 1.63). For next year, 775 were raised while only 502 were cut (ratio of 1.78). While the ratios are down for both years, both remain at extremely high levels, indicating virtually no chance that earnings are about to collapse.

Bernanke says I am man enough

Bernanke has the typical manliness problem. Challenged to prove his manliness about inflation fighting capabilities, first he tried the pretty women strategy by trying to woo Maria Bartiromo, now he is trying the second strategy of a manly roar. So now we are headed for a Bernanke induced recession?

The May to October period has some bearish seasonality and there is a long history to it. Summer was holiday time in early Wall Street days. Today which hedge fund would like to sell in may and go away. But this correction will play out till October and then there will be typical end of year rally.
There are also many followers of the Presidential cycle theory who believe that the market dips in second term as the president has no more incentive to keep the market humming and the stimulative policies of previous years run out of steam. Deficit resulting from earlier years action is curbed by higher taxes. This sets the stage for next presidential election.

Stocks up 50% or more in a month

MED,Medifast Inc

Stocks with all time high volume

EWO,iShares MSCI Austria Index Fund ETF
GNLB,Genelabs Technologies
ONI,Oragenics Inc
REV,Revlon Inc
RS,Reliance Steel & Alum Co

Obsession with weekly picture

Ignore the weekend commentary and trade your method. Every weekend there is an overdose of market analysis and projection for future week. Lot of time it is written very persuasively. It also makes lot of sense when you read it because the writers use the old trick of the trade, write something which reinforces immediate beliefs.

Perception is selective. So when market is gloomy, bearish commentary sounds very good and similarly in bullish market, bullish comment reinforces beliefs.
Do a simple test, go back and read not this weekend commentary , but read the commentary of week ago for Baron or any other expert on market. You can then see compare it to market action. Market does not change from weeks to weeks. Much of weekly commentary is noise.

The weekend is a good time to have fun and forget about markets.

Stocks up 50% or more in a month
As I said earlier IFO, Infosonics is heading for climax top. Look at the volume, it again had a all time high volume.

MED,Medifast Inc

All time high volume
Trouble brewing for HOM,Home Solutions Of America. After a long run of 600% in a year, the all time high volume is clearly signaling trouble time ahead.

AAWW,Atlas Air Worldwide Holdings Inc
AOG,Aurora Oil & Gas Corp
CITP,Comsys It Partners Inc
CPT,Camden Property Trust
HOM,Home Solutions Of America
JSDA,Jones Soda Co
RAME,Ram Energy Resources Inc
REV,Revlon Inc
UWN,Nevada Gold & Casinos

Forbes Gold Cover

The contrary covers work better on general interest magazines which rarely put business stories on cover.

IFO, InfoSonics Corp- A ten bagger joins the database

IFO, InfoSonics Corp. is one of the largest distributors of wireless handsets and accessories in the U.S. and Latin America. This stock is up 1049% as of yesterday. It has gone up from 2.63 to 30.33 in a year. It has tripled in less than 6 weeks. The stock has only 6.766 million shares outstanding.

I have followed and traded this stock for last 149 days once it entered my radar due to significant sales/ earning/price appreciation. It appeared in my comments and scans here, here , here , here, here, here, here, here,here,and here.

The meat of the move on this one is over now. It has entered runaway climax territory and is also on the all time high volume scan today.

A good stock with a catalyst will move to its own tune irrespective of the market direction. When stocks enter many of my lists I am open to buying them irrespective of market direction.

Stocks up 50% or more in a month
IMCO,Impco Technologies Inc

Stocks with all time high volume

Notice the three ETFs on this list. Defensive stocks in healthcare sector are attracting attention.

AOG,Aurora Oil & Gas Corp
BWCF,Bwc Financial Corp
CMBC,Community Bancorp Inc
GDX,Market Vectors Gold Miners ETF
HOM,Home Solutions Of America
IAI,iShares Dow Jones US Broker-Dealers Index Fund ETF
IAU,iShares COMEX Gold Trust ETF
IXJ,iShares S&P Global Healthcare Sector Index Fund ETF
LECO,Lincoln Electric Hldgs
LORL,Loral Space & Communications Inc

NOTE: To understand these list and philosophy behind them read following posts
The logic behind monitoring all time high volume
Why study stocks making 50% or a move in a month everyday
How I use the stock with extreme volume signal
How I trade momentum stocks
Tops or bottoms- it's a stock pickers market
How to find good stocks

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Relentless Fed

The Fed has been relentless in raising interest rates. There are several models which use interest rates to predict future market direction. One popular one was "three steps and stumble" which now no one talks about.
At what interest rate level does market become vulnerable. According to Ned Davis research when discount rates rise to 6% or higher it is a sell signal. So by that model we have more time before we tumble.

The market is basing and stabilizing here. Even if this market is set for fall as most are predicting now, it will do so after the bulls gore some more bears.

Stocks with all time high volume

ADCT,ADC Telecommunications Inc
CRME,Cardiome Pharma Corp
FTI,Fmc Technologies
KLD,iShares KLD Select Social Index Fund ETF
LORL,Loral Space & Communications Inc
MIR,Mirant Corp
NRG,Nrg Energy Inc
RAME,Ram Energy Resources Inc
WSTC,West Corp

Stocks down 50% or more in a month

DHB,Dhb Industries Inc
DOVP,Dov Pharmaceutical Inc
EGI,Entree Gold Inc
ERS,Empire Resources
ESCL,Escala Group Inc
INTN,Intac International
IOTN,Ionatron Inc
NBIX,Neurocrine Biosciences
NTMD,Nitromed Inc
THLD,Threshold Pharmaceuticals