Not The Jump I Expected

I expected a massive short squeeze this week, peaking today on Options Expiration day.

I like the continued growth in our stocks, don't get me wrong. But I expected more sizzle.

I am looking to get out of HOLX and IMA in the next 6 weeks - they are not moving the way I want.

I also plan to invest our remaining cash next week (I held off expecting a surge this week and then a pullback next week).

Big Movements for TRID and MDR

TRID crossed the $15 mark (almost hit $16) and MDR is up to $52+

TRID is a short squeeze in process. My personal account will be added to (thinking $20 the calls). A shame that this happened a few days after we exited, but there ya go.

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MDR continues to grow. I like MDR and want to buy back in, but I do think they are trading too high above their moving averages. FWLT, a play on similar market forces, is less frothy.
Comparing fundamentals of MDR vs FWLT:
Quarterly Revenue growth: 60% vs 35%
Gross Margins: 19% vs 15%
Operating margins: 10% vs 10%
P/E: 22 vs 29
Forward P/E 20 vs 20
P/S: 2.2 vs 2
Next quarter growth expectations: 22% vs 40%

Finally I understand the drop in MICC

MICC has such a great business model. The one thing that everyone uses is a cell phone, and cell phone usage in small countries is vital to the economy.

Before I bought AMX I toyed with GLDN (East European cell phone infrastructure). AMX is a fairly large carrier now (128M subscribers), so I suspect that growth will slow. That makes me want to look for another, smaller carrier with more upside growth potential.

I like MICC because it serves markets nobody else serves, because it is incredibly profitable, and because it could be a takeover target.

So why did the price collapse recently?
Turns out some auditors left the company, leaving MICC temporarily at odds with NASDAQ rules. That should be handled soon.

Understanding The Fed Rate Cut

Yesterday the Fed cut interest rates 0.5%.
Not only is this the first rate cut in 4 years, it is a big cut.

It has sparked a rally which in turn will trigger a bull run by virtue of a short squeeze. So watch the next 4 weeks for a big rally.

So why the cut now?

All is not well on the horizon. I've mentioned before my belief that a recession is inevitable in 6 months, and now it seems that the Fed thinks the recession will hit hard.

That's the need part. The ability was provided by softening inflation. Which seems strange to say.
* Commodity prices flat in non-dollar terms - Yes, commodity prices are up substantially, but a lot of that comes from the 10%+ drop in dollar value.
* The Fed ignores oil and food, commodities that are rising in price. The Ethanol boondoggle has made wheat and corn prices surge, for example.
* Near term likelihood of falling rent prices
* Labor price pressures moderating - Workers are struggling in Detroit, atthe airlines, and on construction sites.

Dropping interest rates will tend to puff up inflation, but the Fed is counting on staying ~2% thanks to some softening inflation and falling demand.

In the short term, the rate cut will have the usual unintended consequences. Shorties will get hurt, for example, and that will push the market up more. The impact on the dollar is unclear, but there will be one.

In the long term, however, we are now at the end of the business cycle. The US economy will be weakening.

Buying NUAN

NUAN 200 shares @ 18.22
FWLT 100 shares @ 126.2
MICC 50 shares @ 73.85

Sold MDR at 50

Per sell directions, we sold MDR at $50

I wasn't paying attention.

ATW down, Incredibly low volume trading in general

ATW is down on no news.

In general, most stocks are showing some sell off as folks worry about a rate cut by the Fed tomorrow.

LiveRocket Week 37 Performance - Up 0.7%

Ok, we got blasted by TRID and MICC. MICC is doing well and I expect volatility.

As much as I love TRID, they have cost us ~8% of performance overall. I still think it was a good calculated risk to buy 1000 shares when they updated their financials to get out from the options overhang. Sadly, they dropped from ~$19 to ~$14 since then. I will keep my eye on them - a company growing as much as they are and priced as low as they are will eventually rise.

This week will be dominated by the Fed. I think they are caught. Keeping rates flat signals to Wall Street that the Fed is in charge. But looking out 6 months, the Fed may see signs of a recession that they need to head off.

I think a trade deficit self-correction is happening. A weaker dollar (down another 1.5% in August) makes US exports more attractive. Indeed, a consumer slowdown will - in addition to a weaker dollar - slow down imports. A more balanced trade deficit (ignoring oil) will reinforce the broader economy.

The stock market will benefit from a stabilizing trade balance (at least psychologically). So will a credit crunch in other countries. A meltdown in Germany and Russia will drive a flight to dollars.

I want to add a bit to our NUAN position, possibly add WFR and FWLT and keep ~$10,000 in cash.

AMX – Up 3.3%. No news.
ATW – Up 0.7%
CLB – Up 4%. New 52 week high.
HOLX – Up 1.3%
IMA – Up 2.8%
MDR – Up 3.3%. 2:1 split and hit a new 52 week high before pulling back
NOV – Up 2.9% and hit a new 52 week high
NUAN – Down 2.7%. Turns out Philips has been dumping 2.5% of NUAN shares (~4.6M). It was a private placement. Philips’ sale is small to them ($80M) and it’s part of an inherited investment. I don’t see this as a pronouncement about NUAN’s potential.
In fact, at these low levels, I will add to our position.
PCP – Up 3.2%.
MICC – Down 8.8%
TIE – Up 3.1%. They also signed a tasty 10 year contract to supply titanium for airplane parts to UTC (Pratt & Whitney engines) As usual, the stock barely budged.