Follow up on EK

On Friday afternoon, after it plunged 60%, I bought EK. I am usually not prone to buying individual companies in my opportunistic portfolios for clients unless we're buying a basket, sector portfolio, or some special situation. EK fell into the third category.Viewing the remainder of this article requires a Subscription

Buying an individual stock

For the first time in a long time, I bought an individual stock in a global opportunistic portfolio focused on ETF's - but it's not for lack of discipline. The portfolio we discuss in this newsletter is an opportunistic portfolio, and sometimes the opportunities are in individual names.Viewing the remainder of this article requires a Subscription

Can’t look away

Up 300, down 300. It seems almost pointless to point out that the percentage swings on a daily basis, let alone intra-day basis, are so extreme that anyone trying to trade in the pockets is getting stopped out.Viewing the remainder of this article requires a Subscription

Financials are leading the way

Bank of America is once again a single digit stock. With continued uncertainty with its mortgage holdings, earnings that are not organic but rather accounting gimmicks, and unknown exposure to sovereign debt, BAC is just an example of the financials as a whole, and investors are moving away.Viewing the remainder of this article requires a Subscription

Some highlights…

The week was chock full of news, so  quick recap might be in order:

	Monday Open	Friday Close	Change
S&P 500	1343	1316	-2.01%
Gold	1545	1590	2.91%
Oil	95.59	97.58	2.08%
10 year yld	2.95	2.91	-1.36%

Our role as investors is always to look forward.Viewing the remainder of this article requires a Subscription

Portfolio Summary – Update to our service!!!

In an effort to bring more actionable ideas to the forefront, we are going to publish a weekly Portfolio Summary. This summary will include an ETF portfolio so that readers can have access to and can track which ideas we implement and how. We purposely do NOT include portfolio weightings.Viewing the remainder of this article requires a Subscription

WFC and XLF

I haven't liked the banks in a long, long time. Earlier, I wrote about how the markets will struggle to sustain any bounce if the financials don't participate. And now, I see that Wells Fargo, WFC, is trading down 1.5%.Viewing the remainder of this article requires a Subscription

Break-point

I have been negative on a lot of asset classes for a long time, but it was always part of a larger process of getting back to some normalization (earnings, geopolitics, etc.). I have been hesitant to call a top, because quite honestly, I am not sure anyone can do that effectively.Viewing the remainder of this article requires a Subscription

Quick note

As the markets hover down around 1-1.5%, I just want to point out the the financials are not providing any strength, nor are the recent performance leaders such as NFLX.Viewing the remainder of this article requires a Subscription

All talk – Updated

I'm just watching these for now, but the mean-reversion investor in me can't help but think that this performance divergence can't last forever. I'm talking of course about NFLX and NOK.Viewing the remainder of this article requires a Subscription

Light volume, everyone is waiting

At least one wait is over: The Verizon iPhone is out, looks good, already rumors of the next generation coming out in June. No opinion whatsoever on the technology, but I do think there’s an element of buy the rumor sell the news in Apple and Verizon. But honestly, there are other things I’m more focused on.

The market is flat, but oil and silver are up 2%. I can’t complain since energy and precious metals are my biggest concentrations. Supervalu (SVU) is off by 11+% and everyone is interpreting the numbers in his/her own way: if you want to see inflation, you’ll look at the statements that discuss the increase in cooking oil prices, if you want to see deflation you’ll hear that even with promotional sales, SVU could move enough product. In the end, I don’t think this is a big “tell”. The better run supermarkets are moving products and holding prices relatively steady, even passing along some increases (take a trip to Costco on a Saturday to see some flow).

On the other side of the Atlantic, investors await the Portuguese bailouts that are coming. Australia in the meantime is facing storms of all kinds, natural and a decrease in net exports. Why? My thinking is that the Chinese lies about growth will prove false, and the coming Chinese slowdown will continue to pressure the AUD downward, along with industrial commodities. Should be net dollar positive.

The tomorrow, we also have the USDA report. Should be fun.

Can the market rally without the financials?

Or maybe a better questions is whether the financials can rally without securitization?

In a Massachusetts verdict, the court ruled that banks could not foreclose on homes for which they did not own the mortgage. Now, that could be huge. It means that securitization will need to be re-examined and repriced. It also means that homeowners have more time to fight foreclosure when it does happen. I’m not sure it’s a net benefit to the economy in the long term, as homeowners who fall behind now have increased protection and market clearing will take that much longer, but it does reduce the big banks’ power which might be a balancing positive. Not sure how it plays out, but it certainly doesn’t sound good for the big financials.

BAC, JPM, and WFC are all down 2-3%, while the XLF is down about 1.5%. With that headwind, and bad employment numbers, I’m just surprised we’ve held up so far.

My 2 cents on Facebook

I just can’t resist making a minor comment in the flood of articles (from the WSJ): “The interest, amounting to several billion dollars in an equity offering likely to be no more than $1.5 billion, is a sign of investor fascination with the closely held social-networking company despite a dearth of available information about its operations and financial condition.”

So investors are flooding into a high-flying company with virtually no information other than the name, in a structure that is disadvantageous to shareholders on every level, etc. etc. etc. Is Facebook a genius selling its equity into the high of this rally or is it a sign of better times to come? All the frustrated investors that didn’t get a piece of Google are no anxious that they might miss this chance. Fear of missing the upside tends to signal a top, not a bottom.

Adobe (ADBE)

I don’t usually write about individual company earning reports, but this one was special for me. Before we begin, let me mention that I don’t have any position in the stock, and am not discussing its investment potential per se.

What I am interested in is whether this is actually a sign of the times. Is the web making everyone a publisher and if so, what does that mean for the publishing industry as a whole? Is ADBE just one of the beneficiaries in a publishing-obsessed culture?

Twitter and Facebook, WordPress (and blogs in general) and Youtube, etc. have made everyone a publisher. Individuals, hobbyists, professionals, households, and corporations are all putting thoughts, information, CONTENT online and spreading it to the world. Google adwords is helping some monetize their publishing efforts, but overall, money doesn’t equal time any longer. As people spend more time creating information for free, the supply side of the information dynamic has blown away traditional publishing houses by driving down top line growth. Content used to be king. Then distribution. Now, just the tools for publishing.

I’ not really sure what the implications are going forward, and I have my own opinion on what happens when there is no privacy and room for foibles (WikiLeaks is a perfect example, namely, in the name of transparency, the day-to-day gossip and minutia will become threatening and force people to close-up, either through intuition or policy), but the business case is just as interesting. What happens to companies that do not publish? Can individuals afford to NOT control their on-line persona? Is the next step for individuals to spend ever greater efforts in marketing and controlling their publications? It should therefore not be that surprising to us that about.me just got bought out. The real question is who’s next.

OK, there are other things to look at

There are some funky moves happening in commodities and it will take time, perhaps even years, for all the dirty laundry to be aired and balance sheets to be cleared. At the center, of course, is JP Morgan (JPM) which has been rumored as getting squeezed in silver, while at the same time holding a dominant position in copper. One thing is for sure, there are big players afraid of revealing their hands.

Look at copper:

And now at silver:

And here’s just one of dozens of articles on JPM: this one from ZeroHedge.

Now if silver is going to squeeze higher, would that make copper the easier position to unload to cover any margin calls? Is JPM actually short, or just short against forwards from clients? In other words, is JPM getting squeezed on a timing issue or is it taking a prop directional position?

I have a long position in the precious metals and continue to see opportunity for them to be stores of value in a volatile time, but I’m not a big fan of the industrial inputs as I see a major slowdown coming. This might would put fundamental pressure on copper, which could result in a magnified move if indeed JPM gets squeezed as (if?) their silver:copper spread goes crazy.