Mar

17

Mad Money Stocks for Tuesday

Teresa Lo @ 7:17 PM | | Leave a Comment

MRK, SGP and TUP were added today. The Booyah list is comprised of featured and game plan stocks mentioned by Jim Cramer on Mad Money. The stocks are listed in alphabetical order below. Click on the headers to sort by column.

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Mar

17

Greenspan: No Perfect Model of Risk

Teresa Lo @ 2:54 AM | | 3 Comments

Former FOMC Chairman Greenspan wrote a lengthy article in today’s Financial Times:

greenie.jpgCredit market systems and their degree of leverage and liquidity are rooted in trust in the solvency of counterparties. That trust was badly shaken on August 9 2007 when BNP Paribas revealed large unanticipated losses on US subprime securities. Risk management systems - and the models at their core - were supposed to guard against outsized losses. How did we go so wrong?

The essential problem is that our models - both risk models and econometric models - as complex as they have become, are still too simple to capture the full array of governing variables that drive global economic reality. A model, of necessity, is an abstraction from the full detail of the real world. In line with the time-honoured observation that diversification lowers risk, computers crunched reams of historical data in quest of negative correlations between prices of tradeable assets; correlations that could help insulate investment portfolios from the broad swings in an economy. When such asset prices, rather than offsetting each other’s movements, fell in unison on and following August 9 last year, huge losses across virtually all riskasset classes ensued.

The most credible explanation of why risk management based on state-of-the-art statistical models can perform so poorly is that the underlying data used to estimate a model’s structure are drawn generally from both periods of euphoria and periods of fear, that is, from regimes with importantly different dynamics.

Also by Greenspan: The Roots of the Mortgage Crisis

Mar

16

Observations and Stocks for Monday

Teresa Lo @ 2:58 PM | | Leave a Comment

24k.jpgThe market has had that certain end-of-the-world quality to it of late. Yet, if we step back to contemplate events for a moment, perhaps we’re just too close to the day-to-day action to see that the drama unfolding is not unlike The Circle of Life from The Lion King.

Or, if you prefer a different analogy, the births and deaths of stars might be a better fit: Gold is a red giant, while Bear Sterns, the icon for the financial services industry, is a supernova. Homebuilders are black holes. And perhaps tech stocks are back to the nebula phase, awaiting re-birth.

Nothing ever dies. It just gets recycled. John Pierpont Morgan has been dead for a donkey’s age, yet the firm that bears his name stepped in for Bear Sterns late Friday like they did during the Crash of 1929, much as J.P. himself had done during the Panic of 1907. It is tradition.

Check out the articles listed in the media digest below. These are historic times.

CLICK HERE to read Market Strategy and Trading Ideas for Monday.

And the Winners Are…

The stock scan conducted after the close on Friday found 10 winners and 226 losers.

The winners are listed in alphabetical order below. Click on the column headers to sort the list. Our scan criteria incorporates price movement, range and liquidity (500,000 shares on the day, 20-day average of 1.5 million).

Ticker Close Change Sell Buy ToSignal
AEM 80.05 2.63% 71.24   -11.01
COG 53.41 4.75% 47.67   -10.75
EGO 7.5 2.60% 6.76   -9.91
FTI 58.3 0.25% 51.93   -10.93
GG 45.59 1.78% 40.54   -11.07
HL 12.72 6.96% 10.5   -17.44
KGC 26.84 0.54% 23.56   -12.22
SDS 68.06 3.20% 62.67   -7.92
SLW 19.38 0.83% 17.02   -12.17
TWM 89.66 3.45% 81.69   -8.89

Get your All Access Pass to our research and find out which ones to buy, sell or hold.

Media Digest

  • Welcome to the new gold rush (Cover article in The Globe and Mail)
    Sheldon Sturrey, owner of Collectibles Canada in Winnipeg, figures that interest in gold has risen tenfold over the past year. “A lot of people are even thinking about converting RRSP money.” If that sounds like the late stages of hysteria, consider that Tony Ma, president of Vancouver Bullion and Currency Exchange in Vancouver, believes that buyers of gold now outnumber sellers by a ratio of 5 to 1. Some will buy a mere ounce, in the form of a coin or a wafer. Others are serious. “We have people who come in almost every day with cheques for $50,000 or $100,000,” Mr. Ma said. “It is not unusual now.”
  • Stars are aligned to keep gold aloft
    Despite the record prices, bullion is still nowhere near its all-time high on an inflation-adjusted basis. (That would be its 1980 high of $840, which is equivalent to about $2,150 if adjusted for U.S. consumer inflation). Many other key commodities – most notably oil and copper – have either approached or exceeded their inflation-adjusted highs. No wonder, then, that many experts see considerably more upside for gold. National Bank Financial chief economist and chief strategist Clément Gignac yesterday reiterated his forecast that gold will reach $1,500 an ounce within the next 12 to 18 months, while others see an even more bullish future.
  • Even at a grand, Munk likes gold’s legs
    “Being the industry leader, it’s a good place to be,” he said. Mr. Munk wouldn’t be drawn out on just how high he thinks gold can go - “only fools and liars make commodity price forecasts,” he said. Others have been more brave. Former Goldcorp Inc. chief executive officer Rob McEwen has predicted gold will hit at least $2,000 an ounce by 2010. Yamana Gold Inc. chairman and CEO Peter Marrone recently said gold could reach $1,500 an ounce by year’s end.
  • Race to Rescue Bear Stearns
    Bear Stearns sought and received emergency funding from the Fed and J.P. Morgan for an initial period of 28 days amid a liquidity crunch. Despite the bailout, the firm’s shares tumbled 47%. Bear and its advisers hope to find a potential buyer within the next few days, but the firm’s value is hard to assess.
  • Builders Receive Default Notices
    Two massive Las Vegas projects involving home builders Toll, KB Home and Lennar received default notices on about $765 million in debt. The builders have each missed an interest payment in recent weeks and are in negotiations with lenders.
  • Commodity prices and the Fed
    [Editor: You couldn't give bonds away in 1981, yet now, they are buying in the face of negative interest rates!] The yield on the 2-year Treasury fell yesterday to 1.5%. It’s impossible to imagine that the average inflation rate over the next two years could be less than 2%, meaning that the real interest rate– the nominal rate minus expected inflation– has become unambiguously negative. . . . If there is no inflation over the next two years, you’d actually pay more in dollars to buy this security than you will receive back in coupons and principal. With inflation, you may make a nominal gain, but you’re guaranteed to end up with less than you started in real terms.

Mar

16

Mad Money Stocks for Monday

Teresa Lo @ 2:32 PM | | Leave a Comment

MRK, SGP and TUP were added today. The Booyah list is comprised of featured and game plan stocks mentioned by Jim Cramer on Mad Money. The stocks are listed in alphabetical order below. Click on the headers to sort by column.

Read more

Mar

14

How did your portfolio fare this week?

Teresa Lo @ 10:40 AM | | 1 Comment

As quarter-end approaches, investors are bracing for account statements to hit the mailbox in a few weeks. Not us.

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This chart compares our model U.S. Core Portfolio against the S&P 500 on a total return (dividends reinvested) basis. Our portfolio is up again this month.

Performance was generated by two factors:

  1. Appropriate portfolio construction ensures that the investor receives the full benefits of diversification. Read more in Build Your Own Investment Portfolio.
  2. Dynamic asset allocation ensures the portfolio is rebalanced weekly in response to current market conditions.

14-portfolio2.gif

Our portfolio experiences low volatility of returns compared to an undiversified portfolio, making it easy for an investor to stay the course.

14-portfolio3.gif

Of late, the S&P 500 Index has frequently experienced weekly performance of -4% to -6% while our model portfolio rarely experiences -2% weeks.

Has there ever been a better time to get the InVivo advantage? Get your All Access Pass to our model portfolio and much more; it’s only $50 a month…

Mar

14

The CPI Slugfest

Teresa Lo @ 9:05 AM | | Leave a Comment

The trading day has barely begun, but I think the videos of the day are in:

  • Market Task Force
    A look ahead of today’s CPI numbers, with Peter Yastrow, MF Global; Dennis Gartman, The Gartman Letter; CNBC’s Steve Liesman & Rick Santelli
  • Consumer Price Index
    February CPI numbers are unchanged, with Jack Bouroudjian, Brewer Investment Group; CNBC’s Rick Santelli & Steve Liesman

In case you missed it, I added two interesting stories late last night:

  • Fake fears over Ethiopia’s gold
    Ethiopia’s national bank has been told to inspect all the gold in its vaults to determine its authenticity. It follows the discovery that some of the “gold” it had bought for millions of dollars was gold-plated steel. The first hint that something was wrong reportedly came when the Ethiopian central bank exported a consignment of gold bars to South Africa.
  • Remarks by Mark Carney, Governor of the Bank of Canada
    What began in securities linked to U.S. subprime mortgages has spread to a broad range of structured assets, conventional credit markets, and, to a lesser extent, equities. As a consequence, some of the world’s largest financial institutions have recorded substantial losses, the cost of borrowing has increased, and the availability of credit has decreased. More than seven months on, the end is not yet in sight, although it is safe to say that we have reached the end of the beginning of this turmoil. This is not because the dislocations in markets have eased; in fact, strains in financial markets have intensified recently, but rather because we are entering a new phase where policy-makers and market participants have a better understanding of both the shortcomings in the current financial system and what needs to be done – by both groups – to address them.

Mar

14

What’s the Story? OXY, HUM and JCP

Pete @ 8:30 AM | | Leave a Comment

We have been posting the winners of the Keynesian Beauty Contest daily for some time, a daily stock scan that incorporates price movement, range and liquidity.

The scan is the first cut. As Teresa has said in the past, stock trading is also a seasonal activity: at the firm, they traded “story” stocks with volume, stuff that was “in play”, the bubbles of the month. They didn’t pick the stocks; the market did it for them. Once the game was over, they moved on to other ticker symbols.

Today we will look at the ’stories’ behind of a few stocks that recently made it onto the list. As usual, we applied our analytics to the daily chart along with the widely-watched 50-day and 200-day moving averages. The pink/cyan dots provide potential entry/exit signals while the price bars are colored red/yellow/green to identify relative performance.

13-oxy.gifOccidental Petroleum Corporation (NYSE:OXY) was on the winner’s list:

  • Wall Street firms still have a rating of “Outperform” on OXY according to Reuters.
  • Occidental Petroleum signs deal with Abu Dhabi
    “Occidental Petroleum Corp. has signed an agreement with Abu Dhabi’s International Petroleum Investment Co. to work together on hydrocarbon-related investments, the company said Monday.”
  • Top Five Large-Cap Stocks: March 12
    “Our buy rating for Occidental has not changed sine November 2003. In January, the company reported that earnings for the fourth quarter of 2007 rose 56%, driven by strong earnings from its Oil and Gas segments. Net income increased to $1.45 billion, or $1.74 per share, from $930 million, or $1.09 per share, in the fourth quarter of 2006. For full-year 2007, the company’s worldwide oil and gas production averaged 570,000 barrels of oil equivalent (BOE) per day, an increase of 4.6%.”

13-hum.gif
Humana Inc. (NYSE:HUM) was on the loser’s list:

  • Wall Street firms still have a rating of “Hold” on HUM according to Reuters.
  • Pressure Drop: Insurers’ Stocks Fall as Health Costs Rise
    “As of yesterday’s close, Humana was off 40% since the beginning of the month, partly because the company incorrectly predicted how much its Medicare members would spend on drugs. WellPoint is off 33% on concerns that health costs incurred by its members are rising faster than the company’s revenues.”

13-jcp.gif
J.C. Penney Company, Inc. (NYSE:JCP) was also among the losers:

  • Another [explicit] Jobs Report
    “Do not pay any attention to the unemployment rate. Fewer people working means that consumers have less cash to spend. Stay away from the retailers, particularly the mid-range stores like Kohl’s, J.C. Penney and Macy’s.”
  • Wall Street firms still have a rating of “Outperform” on JCP according to Reuters.
  • J.C. Penney Recalls Deep Fryers
    “Department store chain J.C. Penney Co. Inc. on Tuesday recalled Cooks Deep Fryers, saying a faulty heating element could cause overheating.”

We find what we expected along the investor sentiment cycle: news stories and analysts support and reinforce high stock prices, with the best news for those at new highs. See comments on Monsanto posted yesterday.

Mar

13

Observations and Stocks for Friday

Teresa Lo @ 4:39 PM | | Leave a Comment

13-mon.gifIn the midst of today’s roller coaster ride, Bank of America raised Monsanto (NYSE:MON) to a “buy” from “neutral” as “agricultural market developments once again point to a plethora of sustainable growth drivers. The bank, which raised its price target on the U.S. agricultural biotech company to $130 from $116, said with more reasonable valuation it sees an attractive entry point ahead of strong expected results for the second quarter. Banc of America sees a confluence of powerful drivers to support over 20 percent earnings growth beyond 2010. An industry-leading pipeline of new products and rising adoption of biotech traits in existing markets are some of the drivers, it said.”

Is it me, or is the ag sector in the “glowing good news” enthusiasm phase of the investor sentiment cycle?

For those in need of some brain candy, Eric Falkenstein is back on the air with a new blog and a new product: DefProb. It’s free right now, but check out the best-viewed-while-sober video introduction first.

While I was surfing Eric’s site, I saw the link to the following video of Patrick Geddes. He is so right. After dealing with traders for the past 10 years, I can tell you for sure that while trading is not rocket science, it turns out to be much more difficult than most people had originally imagined. There are probably several overlooked factors that makes it difficult for people to trade, and I’ll write a post about that next week.

And the Winners Are…

The stock scan conducted after the close on Thursday found 15 winners and 69 losers.

The winners are listed in alphabetical order below. Click on the column headers to sort the list. Our scan criteria incorporates price movement, range and liquidity (500,000 shares on the day, 20-day average of 1.5 million).

Ticker Close Change Sell Buy ToSignal
BIG 21.02 -0.61% 16.59   -21.09
CAT 75.67 0.63% 68.36   -9.65
EGO 7.27 3.03% 6.76   -7.06
GFI 16.43 4.65% 14.45   -12.05
GILD 48.49 1.36% 44.84   -7.53
IR 44.28 -0.49% 40.48   -8.57
KGC 26.39 3.32% 23.48   -11.01
LLTC 30.1 1.28% 27.78   -7.7
OVTI 18.05 -0.60% 15.92   -11.82
PMCS 5.08 -0.97% 4.47   -11.93
PSYS 33.18 -1.72% 30.57   -7.85
SAPE 7.2 1.71%   7.61 5.74
SLW 19.17 3.69% 16.42   -14.34
STLD 68.2 4.83% 58.15   -14.74
TS 49.89 2.30% 44.51   -10.79

Get your All Access Pass to our research and find out which ones to buy, sell or hold.

Media Digest

  • Fake fears over Ethiopia’s gold
    Ethiopia’s national bank has been told to inspect all the gold in its vaults to determine its authenticity. It follows the discovery that some of the “gold” it had bought for millions of dollars was gold-plated steel. The first hint that something was wrong reportedly came when the Ethiopian central bank exported a consignment of gold bars to South Africa.
  • Remarks by Mark Carney, Governor of the Bank of Canada
    What began in securities linked to U.S. subprime mortgages has spread to a broad range of structured assets, conventional credit markets, and, to a lesser extent, equities. As a consequence, some of the world’s largest financial institutions have recorded substantial losses, the cost of borrowing has increased, and the availability of credit has decreased. More than seven months on, the end is not yet in sight, although it is safe to say that we have reached the end of the beginning of this turmoil. This is not because the dislocations in markets have eased; in fact, strains in financial markets have intensified recently, but rather because we are entering a new phase where policy-makers and market participants have a better understanding of both the shortcomings in the current financial system and what needs to be done – by both groups – to address them.
  • If at first you don’t succeed
    [Editor: Interesting sentiment, eh?] Third time lucky? The credit markets almost seized up in August, December and again this month and on each occasion the Federal Reserve has led a rescue attempt. Ben Bernanke’s latest effort led to a bout of euphoria on Wall Street, with the S&P 500 index managing its biggest one-day increase in over five years on Tuesday March 11th. The trouble is, every time the Fed has doused the flames somewhere in the credit markets, they have flared up somewhere else soon afterwards. Owing to the unusually complex nature of this crisis, that may well happen again.
  • Miners Top MBAs as Metal Boom Makes Geologists Scarce
    [Editor: There are signs all over...] Brittan Jones passed up a $100,000- a-year job at a mining company last December when he finished his degree in geology. The 24-year-old Canadian said he’s confident he’ll get a better offer.
  • Hedge fund deleveraging
    Funds have been forced to deleverage as prime brokers have required more collateral to invest in the likes of mortgage-backed securities, which have been hammered of late. . . . Flows into hedge funds slowed to trickle in December and January, according to Vincent Deluard, analyst at Trimtabs Investment Research. He says hedge funds showed inflows of $2.9 billion in January and $2.8 billion in December, compared with regular monthly flows of $20 billion to $30 billion at the beginning of 2007.
  • Credit squeeze hits three more hedge funds
    Drake Management, a $12bn New York manager, wrote to investors in its three hedge funds on Wednesday offering them the choice of winding up the funds after about half asked for their money back. Global Opportunities Capital, a €560m ($870m) Amsterdam hedge fund, said it would block withdrawals until the end of the year to prevent firesales of shares in small Benelux and German companies. It also emerged that Blue River Asset Management, a Colorado-based hedge fund manager specialising in municipal bonds, was to shut its main fund after nearly 80 per cent losses, even after raising $110m for a fresh fund.
  • Levitt Says Carlyle Capital’s Woes Not Systemic Problem
    Former Securities and Exchange Commission chairman Arthur Levitt talks with Bloomberg’s Matt Miller in New York about the near collapse of Carlyle Group’s mortgage-bond fund, the private-equity firm’s reputation and the outlook for a real, versus an implied, government guarantee of Fannie Mae and Freddie Mac.
  • Brazil Takes Big Bite of U.S. Meat Industry
    Brazil’s JBS plans to acquire two more U.S. meat-packing companies will give it about 30 percent of the American market. The news is shaking up American meat packers.
  • Give over
    Paying taxes is, for most people, both unavoidable and irksome. But how much hard-earned pay is taken by governments varies considerably across the world. Among the rich countries of the OECD, Germans shell out the most, with a worker earning an average income giving 43% of their gross pay to the state, with nearly half of that going towards social security. Workers in Poland hand over nearly 25% of their wages to social security; whereas Australians pay nothing at all directly. Mexicans and South Koreans enjoy the lightest taxation by some way.
  • Dennis Gartman Remains Long of Gold, Short of Stocks
    Dennis Gartman, an economist and editor of the Gartman Letter, talks with Bloomberg’s Betty Liu about the outlook for gold, which traded at $1,000 an ounce for the first time in New York as credit-market turmoil spurred demand for bullion as a haven from falling stocks and the dollar.

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