MarketVVizard's Market Thoughts

Top 470. Nov 10, 2003 1:20 PM

» MarketVVizard - Re: Talkers Talk Doers Do -- Re: NVLS Closing on $44...

In response to message posted by Jas_Jain:

Oh WOW -- I now have my very own resident taunter!!! Couldn't live without one of those... but I guess I deserve it considering the history of this board smile

Ugly close. Low volume. Somewhat high put/call. Seems like a lot of complacency out there. NVLS from $45 would have been a lot nicer than from $42. Jas, you must be a genius.

By the way, when did I NOT do something I said I would do? I said I would love to short from $44, but my discipline, not my indecision, kept me from doing so. Again, if I make mistakes, I regret them and learn from them. But I do not look back at everything in retrospect and see "what coulda / shoulda/ woulda". That drives most people insane. My reasons for not shorting NVLS when it hit $41, $42, $43, $44, and $45 were all the same, and still remain.

Heck, I could have made 40+% this year by buying the nasdaq and sitting on my hands all year. Does this mean it was a mistake NOT to do so? I also could have bought soy beans, shorted the dollar, bought AskJeeves call options, or God forbid even Kirk's newsletter! In fact, maybe you should go subscribe to Kirk's newsletter RIGHT NOW!!!

Best of luck to you.

-- posted by MarketVVizard

Top 471. Nov 10, 2003 2:06 PM

» Kirk - Re: Re: Talkers Talk Doers Do -- Re: NVLS Closing on $44...

In response to message posted by MarketVVizard:

Said to Jas:

In fact, maybe you should go subscribe to Kirk's newsletter RIGHT NOW!!!

No! Please anything but that... I don't want to pay huge capital gains taxes that would occur. I'd have to change into a market timer and call a top if the great bear Jas Jain capitulated and became bullish!

-- posted by Kirk

Top 472. Nov 11, 2003 6:27 AM

» MarketVVizard - Re: Re: Re: Talkers Talk Doers Do -- Re: NVLS Closing on $44...

In response to message posted by Kirk:

The other thing I still can't figure out is why Jas thinks he is NOT a market timer? He is a self proclaimed options expert for crying out loud, there are no options trades (even with leaps) that are NOT market timing trades. But even worse, he has talked about "numerous trading opportunities" as the price of his underlying stock fluctuates! I'm still waiting for his definition of market timing and how these numerous trading opportunities fit into it... I won't hold my breath. I think there may very well be a job for him at Putnam (masters of retrospective trading!)

In all seriousness though, I prefer to short when my own sentiment indicators show extreme bullishness. The price does not matter to me. If the stock is falling but put/call is rising and the bears are dancing in the street I generally don't like to open a new short position. Sometimes this actually preserves my wealth. But sure, I could also be out of the market when the next big crash occurs (instead of being short for example). So far for me anyway, market timing has made me a fortune, and I have no plans to change my style. But that doesn't mean my style fits anyone else's personality or ability. If you are more comfortable doing something else, and it makes you money, by all means, go for it. I tell people all the time that if they have tried something and failed, they need to take another approach. Most people will do better giving their money to a professional manager with a proven track record than doing it themselves.

-- posted by MarketVVizard

Top 473. Nov 11, 2003 6:45 AM

» MarketVVizard - Michael Belkin

From a, gasp, market timer! [Note: NIKKEI down another 300 points overnight]
Bears Run Amok in Market Prophet's Vision

By Jon D. Markman Managing Editor, MSN MoneyCentral 10/23/2003 07:04 AM EDT Click here for more stories by Jon D. Markman

Rumors of the 2003 market rally's imminent death have been greatly exaggerated in recent months. But according to one analyst with an enviable track record, the end days are finally here, and it's time to prepare for a sickening plunge into December and beyond.

The doomsayer is Michael Belkin, one of the few investment analysts who has emerged from the recent boom, bust and reboom with his reputation not just intact, but aglow.

Most independent researchers build careers as all-bull or all-bear, but not this guy. Operating out of a home office on Bainbridge Island in the Puget Sound near Seattle, Belkin writes a $36,000-per-year weekly report on equities, bonds and commodities for leading managers of mutual funds, pension funds and hedge funds worldwide. The report rises above the straitjacket of specialization to treat the global landscape holistically as an interlocking economic, political and social system.

Two weeks ago, Belkin abandoned his yearlong (and initially very lonely) bullish posture and put on the fur. He expects the broad market indices to sink significantly through the end of the year, led by cyclical industrial stocks, and does not see much of a recovery on the horizon for 2004.

Belkin's Street Cred Why take him seriously? He's been right about the last few major swings.

In mid-1999, he advised clients to buy into the Nasdaq bubble through the first quarter of 2000, noting that the Federal Reserve had printed so many billions of dollars to battle a nonexistent Y2K problem that money would spill into stocks and fuel a boom.

On March 2, 2000, he turned around and advised clients to bail out of tech stocks and buy U.S. government bonds, contending big market indices could get cut in half.

A month later, after the Nasdaq had plunged 1,000 points from its March 20 peak, he stunned clients who thought the worst damage had already been done by proclaiming the tech-heavy index would sink at least another 65%.

In November 2002, with the Nasdaq having fallen about 70%, he turned full circle and advised clients to aggressively buy the most-volatile tech and gold stocks and sell low-volatility defensive stocks and bonds.

In an interview last week, Belkin said everything that made him bullish last November now makes him bearish. His forecasting model, which consists of a nonlinear set of probability distributions, shows equity markets in every developed country around the world "wanting to turn down." At the same time, he sees emerging markets such as Brazil, Chile and China "turning up in parabolic fashion."

The way Belkin sees it, we're "at the end of a liquidity bubble." Liquidity is analyst-speak for money, particularly dollars that the Federal Reserve prints and pushes into banks in a variety of ways for a variety of economic, political and social purposes. ("When the Fed makes new money, it's like counterfeiting, only it's legal," he quips.) He learned long ago that it made sense to buy into a liquidity bubble while it's happening, but that you needed to be able to identify its final days and get out a little early.

Belkin's Bearish Case He defines major bubbles as excessive deviations from stocks' 200-week trend, while major crashes entail reversion to their 200-month trend. That's not information you can use to daytrade, but it helps with the big picture. And the big picture, in his view, amounts to this:

In March 2000, his prediction for a 65% decline for the Nasdaq was predicated on a belief that it would sink to its 200-month (or 16.5-year) average.

In October 2002, the Nasdaq rebounded off that level, which was around 1180.

In November 2002, his belief in a Nasdaq rally to 2280 was predicated on a belief that it would rise to its 200-week moving average at that level amid a business-cycle bounce.

Now he thinks the index will fall short of his predicted move because private-sector credit growth is declining sharply despite the Federal Reserve's neutral-to-slightly-stimulative stance.

What's with the number 200? Nothing magical, he says, except that it has worked to define levels of support and resistance in every major bubble and crash he has studied over the last 100 years. A bear market bounce in a stock index or commodity from its 200-month average to its 200-week average, he says, is relentless, takes about a year and ends with low volatility -- all characteristic of the recent U.S. rally.

Belkin abandoned his Nasdaq 2280 target because he noticed that money-supply growth had begun to contract as credit markets froze up -- an event that, in his words, has "drained the economy of bubble fuel."

In July, the three-month annualized rate of growth of money had reached a peak of 14%. But money-supply growth two weeks ago had fallen to 1%, and last week, according to Federal Reserve data, it actually turned negative.

Fed data show that banks are dumping their holdings of government bonds right and left; their Treasury holdings have dropped $100 billion since July. Commercial lending has gone nowhere since July, and real estate lending has slowed dramatically. (A newsworthy example of the latter was a report last week that The New York Times had put off building its new headquarters tower in Manhattan for a couple of years because its development partner was unable to obtain financing.)

Belkin believes that the Bush administration essentially "rented the 2003 recovery from Wal-Mart" by cutting taxes and mailing out rebate checks, and now faces an "involuntary deleveraging process" that will feed into weaker corporate results, softer economic statistics, worsening unemployment and, eventually, a sharp decline in real estate values.

In his Oct. 12 report to clients, he warned that "deleveragings are not low-volatility events -- a financial market dislocation in the fourth quarter is likely." And in his Oct. 19 report he upped the ante, saying that "the contrast between bullish equity-market psychology and deteriorating private-sector credit conditions is bizarre," concluding: "The point of a bear-market rally is to make everyone bullish again just before the market does its next swan dive."

Control the Damage With 'Chicken Longs' How will you know if he's right and not just another dour crank? Until now, every 5% decline in the broad averages this year has been met with buying at some identifiable level of support.

Back in August, it was the 960 area for the S&P 500, while in September it was the 1000 area. The next time the market sinks below an area of supposed support -- e.g., the 1015 area for the S&P 500 -- and stays below it for more than a couple of days, it could be lights out for the buy-the-dips crowd. And then a real liquidation could ensue.

It's worth noting for the record that while the Nasdaq hasn't reached its 200-week moving average quite yet, other indices and stocks are very close: For the Dow Jones Industrial Average, the 200-week moving average is at 9789; for chip giant Intel (INTC:Nasdaq - commentary - research) it's at $32.81; for ExxonMobil (XOM:NYSE - commentary - research) it's at $38.44.

Meanwhile, stocks that are the most extended above their 200-week moving averages after a year of rally -- and thus most ripe for a reversion to the mean -- are all the major homebuilders, such as Centex (CTX:NYSE - commentary - research), Toll Brothers (TOL:NYSE - commentary - research) and Pulte Homes (PHM:NYSE - commentary - research); gold miners such as Newmont Mining (NEM:NYSE - commentary - research); casino supplier International Game Tech (IGT:NYSE - commentary - research); and security-software maker Symantec (SYMC:Nasdaq - commentary - research).

In his latest report, Belkin told clients to shift from buying dips to selling strength to "avoid having egg on their faces during a fourth-quarter downturn." For mutual fund managers obligated to be long, he recommended they overweight defensive consumer stocks such as Colgate-Palmolive (CL:NYSE - commentary - research) and Procter & Gamble (PG:NYSE - commentary - research). He calls these "chicken longs" because he believes they will fall less than market benchmarks in a broad downturn -- although they probably won't provide positive returns.

Belkin's Long Picks for Damage Control* These names shouldn't fall as far as market benchmarks in a broad downturn Stocks Oct. 20 Price Volume Procter & Gamble (PG:NYSE) $95.98 2,973,000 Colgate-Palmolive (CL:NYSE) 57.37 1,900,100 Church & Dwight (CHD:NYSE) 35.20 65,700 Dial (DL:NYSE) 22.00 501,100 PepsiCo (PEP:NYSE) 48.15 2,759,700 Coca-Cola (KO:NYSE) 45.61 4,271,800 Nike (NKE:NYSE) 63.85 1,386,200 Ashland (ASH:NYSE) 36.74 212,000 Amerada Hess (AHC:NYSE) 52.78 353,200 Wrigley (WWY:NYSE) 55.97 423,300 Unilever (UN:NYSE) 57.25 3,763,700 Hershey Foods (HSY:NYSE) 75.84 305,400 ConAgra Foods (CAG:NYSE) 23.49 2,404,700 McDermott (MDR:NYSE) 7.00 769,600 Hospitality Properties (HPT:NYSE) 37.01 191,000 Teco Energy (TE:NYSE) 14.05 948,900 AES Corp. (AES:NYSE) 8.25 1,103,900 FedEx (FDX:NYSE) 72.59 1,415,400 United Parcel Service (UPS:NYSE) 68.75 2,470,400 *Longs are expected to outperform the S&P 500 over the next one to three months, but are not expected to generate absolute positive returns. Source: MSN Money

Among his top shorts are the homebuilders, which he called "so overowned, overvalued and undershorted they're like Yahoo! at the top, but with fundamentals that are deteriorating every second under your eyes." Others on his list for short-sellers are cyclicals such as machinery makers Ingersoll Rand (IR:NYSE - commentary - research), Cummins (CUM:NYSE - commentary - research); chemical makers Eastman Chemical (EMN:NYSE - commentary - research) and Hercules (HPC:NYSE - commentary - research); Internet service or hardware providers such as eBay (EBAY:Nasdaq - commentary - research) and Cisco Systems (CSCO:Nasdaq - commentary - research); and retailers such as Kohl's (KSS:NYSE - commentary - research) and Sears (S:NYSE - commentary - research).

Belkin's Short Picks Homebuilders figure prominently on this list Stocks Oct. 20 Price Volume Kohl's (KSS:NYSE) $51.58 6,431,400 General Electric (GE:NYSE) 28.78 16,078,700 Amgen (AMGN:Nasdaq) 61.89 18,340,112 MedImmune (MEDI:Nasdaq) 28.64 9,029,221 W.W. Grainger (GWW:NYSE) 45.75 903,400 Weyerhaeuser (WY:NYSE) 59.32 540,400 International Paper (IP:NYSE) 39.65 1,585,600 Millipore (MIL:NYSE) 40.45 878,400 Waters (WAT:NYSE) 28.14 1,221,800 Computer Sciences (CSC:NYSE) 39.69 646,100 Electronic Data Systems (EDS:NYSE) 21.33 1,970,300 Paccar (PCAR:Nasdaq) 78.30 712,500 Navistar International (NAV:NYSE) 41.30 748,000 Eastman Chemical (EMN:NYSE) 32.86 399,800 Hercules (HPC:NYSE) 10.23 588,500 Power-One (PWER:Nasdaq) 10.95 809,826 Toll Brothers (TOL:NYSE) 34.44 512,800 Omnicom (OMC:NYSE) 75.14 1,340,400 Monster Worldwide (MNST:Nasdaq) 25.28 1,195,286 Baxter (BAX:NYSE) 29.43 1,890,000 Medtronic (MDT:NYSE) 46.17 3,740,200 Raytheon (RTN:NYSE) 28.15 1,719,000 Micron Technology (MU:NYSE) 12.85 11,466,100 LSI Logic (LSI:NYSE) 9.41 3,603,300 Cisco Systems (CSCO:Nasdaq) 21.08 31,688,559 eBay (EBAY:Nasdaq) 56.60 12,423,137 Source: MSN Money

Naturally, one hopes Belkin has it wrong this time. But you have to admit that he does have the hot hand. I'll check in with him later this year as we learn whether his guidance was right, wrong or perhaps just early.

-- posted by MarketVVizard

Top 474. Nov 11, 2003 7:04 AM

» Jas_Jain - What IS Market Timing and What IS NOT -- Re: Talkers Talk

In response to message posted by MarketVVizard:

--

"The other thing I still can't figure out is why Jas thinks he is NOT a market timer? He is a self proclaimed options expert for crying out loud, there are no options trades (even with leaps) that are NOT market timing trades. But even worse, he has talked about "numerous trading opportunities" as the price of his underlying stock fluctuates!"

Most technicians have a fundamental problem with distinguishing between PRICE-ONLY based specualtion, or trading, and using a TA-based timing signal as to when to enter and exit trades.

Let me explain what I do with options.

1. I enter a trade strictly based on price (valuation).

2. I do not use any type of stop-orders. I reduce my exposure strictly based on how much risk I am willing to take if things go against me.

3. The trading is strictly based on PRICE. For example, NVLS is not not as attactive a short at $30 as it would be at $50 over the next few months. Therefore, I will add short at $50 if I have risk tolerance at that level and will lighten my short position at $30. At $20, I might exit entirely depending upon other stocks being more attractive.

4. The price of a stock at an absolute level is the #1 reason for a trade and at relative level, to other stocks, is #2 reason.

I USE NO TA. Market Timing means using TA to determine the time to trade.

Price-only based trading is NOT Market Timing.

Jas

-- posted by Jas_Jain

Top 475. Nov 11, 2003 10:24 AM

» MarketVVizard - Re: What IS Market Timing and What IS NOT -- Re: Talkers Talk

OK. Whatever...

smile

So buying stocks when they hit a PRICE is not "timing" because you didn't use a chart? Ah ha. And you don't use stops, you just get out when you decide you don't feel like losing any more? Hmmmm, not sure about that...

Another person who missed the technician discussion.

-- posted by MarketVVizard

Top 476. Nov 11, 2003 12:24 PM

» Jas_Jain - Re: Re: What IS Market Timing and What IS NOT -- Re: Talkers Ta

In response to message posted by MarketVVizard:

OK, VViz, whatever. I should know better than to argue with a technician. To a technician all trading is Market Timing.

Market Timers are gutless. Only a market Timer would sell short at $40 and cover at $41, for example. Only a Market Timer would say that he would short at $44 and wouldn't do it when the price reaches $44. On the other hand, a Market Pricer would excecute a trade when the price reaches his target. Market Pricer will never make a short-term trade that he would get out because the stock went up or down by small percentage. I can go on to list the differences but it is a waste of time to argue with a Market Timer. Market Timers have each other to waste time on.

You keep doing what you have been doing.

Jas

-- posted by Jas_Jain

Top 477. Nov 11, 2003 3:36 PM

» Jas_Jain - P/C Ratio Xtreme High, Time to Cover Short and Go Long?

Total Put/Call Ratio 0.96

Index Put/Call Ratio 2.10

Equity Put/Call Ratio 0.73

I am scared holding so many long-term naked calls. ;-)

How many Market Timers hold long-term naked calls on the most momentous of the Momentum stocks? Not one. It takes lots of guts and skill; no Market Timer that I know of has either. Maybe, VViz is an exception.

Jas, the Market Pricer

-- posted by Jas_Jain

Top 478. Nov 12, 2003 6:44 AM

» MarketVVizard - Ford

Haven't seen it in writing, but an analyst mentioned yesterday that Ford had pension obligations that exceed their market cap. Their debt was downgraded today. They are barely making any profit now, and once they have 2 or 3 retirees collecting benefits to every active worker you can stick a fork in them. Toyota just surpassed them as the #2 car maker.

Reuters
RPT-S&P cuts Ford to BBB-, outlook stable
Wednesday November 12, 8:53 am ET

LONDON, Nov 12 (Reuters) - U.S. auto giant Ford Motor Co.'s (NYSE:F - News) long-term credit ratings were cut by one notch on Wednesday to BBB-, one notch above "junk" grade, by rating agency Standard & Poor's, which assigned a stable outlook.
S&P also lowered its ratings on related entities including financing arm Ford Motor Credit Co. and car rental unit Hertz Corp to BBB- with a stable outlook.

The group's short-term ratings were also lowered, to A-3 from A-2, S&P said in a statement. It said Dearborn, Michigan-based Ford had around $180 billion of consolidated debt outstanding at September 30.

"Ford's profitability and cash flow remain poor, and S&P believes that only limited improvement will be achievable over the next few years," said S&P analyst Scott Sprinzen. "Ford's global automotive operations are expected to be nominally breakeven on a pretax basis in 2003, before special items. However, the year-to-year improvement over 2002 is magnified by a significant reduction in accruals for warranty and recall expenses and by the exclusion of a large charge related to further restructuring actions needed in Europe."

-- posted by MarketVVizard