Friday, September 14, 2007

Low volume trading - Jewish NewYear

Thursday and Friday are holy days to Jews, so I think that is affecting trading.

Next week should be a strong week especially with options expiration squeezing shorts

Low volume trading - Jewish NewYear

Thursday and Friday are holy days to Jews, so I think that is affecting trading.

Next week should be a strong week especially with options expiration squeezing shorts

Tuesday, September 11, 2007

Stopped out of TRID

We are out of TRID for th emoment. I will get back in under $14

Sunday, September 09, 2007

The Week Ahead

Japan is struggling.
The Nikkei dropped 2.1%. It was no doubt rattled by the weak US market, but I think it was more rattled by the combination of a weakening dollar and a GDP revised to a negative 0.3% for the quarter. A weakening economy with a strengthening currency is not a good thing.
In fact, the Nikkei is down 14% in the past 6 months.

The reality is that Japan depends on dollar denominated exports and currency fluctuations affect earnings. The yen has risen ~5% in 1 month, and that reduces the value of repatriated earnings.

Asian stocks all suffered: South Korea (down 3.7%), Singapore (down 2.6%), Australia (down 2.1%)

That is really why the pullback is happening.

But the US markets may respond to the weakness without much thought.

Look, we are heading to a recession. The first wave is already hitting lenders and homebuilding related sectors. The next wave will hit retailers and consumer products. But the waves will break up after that.

So there are several ways to play this
1. Option straddles to bank on the volatility
2. Exit
3. Contrarian investing: invest in companies that do well in downturns
4. Invest in 'recession proof' stocks (healthcare, food, oil, etc)
5. Stay multinational - growth in emerging countries will continue

I favor #3, #4, and #5. Most of our stocks are taking advantage of global oil demand, ongoing healthcare demand, global infrastructure demand. Only 2 stocks buck this trend: TRID and NUAN. Of these, TRID is th eonly one exposed to a sudden and significant slowdown in consumer spending.
TRID is an investment in two things: massively undervalued growth and global TV demand.

I think most people have flown and some weak hands may move yet. But I am buoyed by the low volume selling on Friday. Big money already got out, and it will return as we get close to earnings season. The Fed will add some turmoil, but fundamentals will show that certain sectors remain strong.

Also, be aware that this week is a Jewish holiday (Thursday is the Jewish New Year). There are a lot of Jews on Wall Street and many will be out of work. A slow day Thursday preceded by some moves Wednesday (buying or selling).

Friday was a pretty big down day, and the most interesting thing was the low volume. Most stocks traded ~50% of normal volumes. That’s actually a positive sign – it means that most people are sitting on their shares and are not interested in selling.

Another interesting thing is that half of our stocks were flat or up. The usual stocks hit us hard: TIE and TRID.


AMX - Down 2%
ATW – Up 2%. Hit a new 52 week high
CLB – Flat
HOLX – Up 1.8%
IMA – Down 1%
MICC – Down 5%. Timing sucks.
MDR – Flat and hit a new 52 week high. They were downgraded to neutral. Also, there is a split this week which will possibly lead to some lesser exuberance (aka lower price) post-split
NOV – Flat.
NUAN - Flat and hit a new 52 week high. Also, note the NUAN/GOOG partnership and the NUAN licensing in Vista. The sector is document scanning (yes, NUAN is more than voice recognition). It generated $70M last year. Imagine the returns when Vista royalties kick in.
http://www.businessweek.com/technology/content/sep2006/tc20060907_732714.htm?chan=top+news_top+news+index_technology
PCP – Down 2%. We also got a $0.03 dividend ($30 total). Barron’s suggested that PCP is ripe for slower growth due to recent strong growth driven by momentum investors. Yes, the price moved up because of sudden interest, not because of a doubling of earnings or the fact that they keep beating estimates by 10%+ or are forecast to keep growing earnings 60%+ and P/E is ~22.
TIE – Down 3.5%. Moved like all titanium producers.
TRID – Down 3.5%