Latest Articles

06.21.10
Battle of the Titans

Last week we discussed the long-term prospects for gold. On Thursday (6/17) gold made a new all-time high. Although we think gold is a “crowded” trade (i.e. too many of our best friends love the metal already), there are periods when the obvious also makes sense and this is probably one of them. A less obvious play is Google.

06.21.10
Hoarding Cash

Meanwhile, corporations in the U.S. are still hunkering in the foxhole and hoarding cash. The Federal Reserve reports that the nonfinancial companies are holding a record $1.8 trillion, up 26% from a year ago, which represents 7% of total assets. This means they are still in self-preservation mode, which is good for bond buyers, but not equity holders. If we are buying a company with the goal of equity appreciation, we want the company to be putting cash to work for growth.

06.21.10
Global Sign of Relief

The global financial system has been on red alert since February, when news first surfaced of the possibility of a Greek default. Over the past week, however, the Dollar Index has come down from its recent peak, which suggests an easing of the flight-to-quality mentality and, therefore, improved global liquidity conditions. Moody’s recently commented that overall, European banks have sufficient capital to handle the Club Med crisis.

06.21.10
Home on the Range

In SpearChat this past Monday one subscriber cited several bearish technical elements (moving averages) and wondered why we were not bearish, as well. While it is certainly human to get bearish when the market is down, and at times that attitude is appropriate, when the major indices are likely to be in a trading range, a bearish attitude at the lows gives one a perfectly wrong sense of timing.

06.21.10
Home on the Range - Summary

The month of May was a disaster for the U.S. equity indices, but June is starting to look a bit better. We think the crisis in the euro will reprise, but the temporary respite from the drama has spawned some welcome relief. 
 

06.11.10
Silver and Gold Lining

After a credit bubble, the assets that were inflated (real estate, equities, commodities) will experience deflationary pressure. But gold has been rallying. As the stock market peaked in October 2007, gold was breaking out, moving above its 2006 high of $720/oz.

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Updates

06.18.10
Pause That Refreshes II

On Thursday the Dollar Index fell .6%, but it was not enough of a catalyst to spark a continuation of the rally. Rather, the market needed to digest Tuesday’s triple-digit move. We expected 1-2 days of consolidation and the market may now be ready to travel higher.
 

04.30.10
Second Wind

The Dow was up 122 points on Thursday, mostly due to a lack of follow through in the Dollar Index rally. The Dollar Index was down 0.4% on speculation that an agreement between the IMF, the EU and Greece is nearing completion.

03.26.10
+2.7% vs. the S&P's +0.6%

So far this week the Best 4 Quants Model Portfolio has a return of +2.7% vs. the S&P's +0.6%. Since Inception 3/14/2003 the model has a return of +292.7% vs. the S&P 500’s +40.1%.

03.24.10
350 points shy of our target.

The Dow pushed up to 10,888 on Tuesday, and now stands about 350 points shy of our target.

 
We reversed our bearish hedge in the small caps. It is always valuable to look for low risk entry opportunities, such as we did with TZA, the bearish small cap ETF. But a low risk entry is only low risk because there is a nearby level at which one can place a logical stop. Traders must be willing to take those losses. Otherwise, why bother putting stops in? Almost all large trading losses were at one time small losses that someone did not take.

03.19.10
Self-organized criticality

Yesterday we discussed the state called “self-organized criticality,” which is a market condition that occurs after “super-exponential” rallies, i.e. when the market rises much faster than normal. When one considers the speed of the rally off the March low worldwide, the global equity market is probably in that state right now.

03.17.10
What are Bubbles?

Bubbles are produced by the phenomena of ‘herding.’ Herding is a technical term used in the modeling of investor decision-making by behavioral finance experts that reflects the human tendency to buy assets that are going up and sell assets that are going down. Herding is an example of behavior that contradicts the ‘efficient market hypothesis,’ as it may at times lead to bubbles and crashes.

03.16.10
The beauty of leverage. A 17.5% gain.

Yesterday we wrote that if the financials can put in a sideways consolidation, that would be bullish for a continuation of the general rally. That appears to be what is happening. Financials closed well, but the morning weakness took out our stop in FAS. We closed the second half of the position for a 17.5% gain. That is the beauty of leverage.

03.16.10
Why we sold FUQI

In SpearChat we had a question about why we sold FUQI given that it has a high short interest (about 40% of the float). The answer is...

03.16.10
Why we use the 200-ema

We also had a question about why we use a common technical indicator like the 200-ema. The implication was that with a common indicator, one would get only common results. Our answer is...

03.02.10
Pick #5 reaches 9%

Pick #5 reaches 9% for the week. Consider selling if you have reached your threshhold.

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