Thursday, December 31, 2009

All You Need Is Love

Appropos of nothing in the investment world, but still a nice way to end the year.

Fascinating Graphic. Do You Remember?

The N.Y. Times has a great graphic showing what was hot, what we thought, what we said, etc. over the past ten years. Wonderful presentation.

Wonderful Video!

Jobs Number this A.M.

Building on the positive Chicago PMI report yesterday, jobless claims came in better than expected this morning. The number is still distressingly huge, with implications that cannot be good, but the trend seems to be a reduction in the numbers of jobs lost.  The number of initial claims is the lowest since the summer of 2008.  It is important to remember that an object in motion needs to slow down before it can go into reverse.  So a slowdown in the employment slide is an essential first step to future actual gains. 

We're far from out of the woods, but these numbers are better than a poke in the eye with a sharp stick.

Wednesday, December 30, 2009

Great Video

For all of you who have watched 'It's a Wonderful Life' every year, here is a special version that puts all the dismaying events of this past year in even sharper focus. Enjoy, cry, be enraged.

Channeling Casey Stengel

Casey Stengel was the legendary manager of the New York Yankees who, late in his career, was tapped to manage the New York Mets, when they were a new franchise.  At the time, the Mets were setting records for futility, leading Stengel to famously remark, "Can't anyone around here play this game?"

I am reminded of that comment when I hear news reports like the ones we're getting about airport security.  While I'm not normally a fan of N.Y. Times columnist Maureen Dowd (a little too snarky for my taste), I think she nailed it in her colmn this morning.  Here's an except:

If we can’t catch a Nigerian with a powerful explosive powder in his oddly feminine-looking underpants and a syringe full of acid, a man whose own father had alerted the U.S. Embassy in Nigeria, a traveler whose ticket was paid for in cash and who didn’t check bags, whose visa renewal had been denied by the British, who had studied Arabic in Al Qaeda sanctuary Yemen, whose name was on a counterterrorism watch list, who can we catch?

Click here for full column.

Is this Obama's "Nice job, Brownie" moment?  What do you have to do to get fired by the U.S. government?

What is the Contrarian Stance for 2010?

Admit it: these days, everyone wants to be seen as a 'contrarian.' Makes it look like you're not a moron just running with the herd.  With that in mind my anecdotal take on what I'm reading and hearing is that 1/3 of professionals think we're headed down in 2010 in a possible double dip.'  A second third think we'll just muddle through with blah numbers on growth and employment. The last third are saying 'giddyup!'

Which leaves us with the question:  what really is the contrarian stance for 2010?  Is there one?

Some Positive Data Points

I've cautioned recently that short term data points can be misleading and it may not be wise to put too much stock in any one bit of information the government spews out.  That said,  this morning gave the optimists some fresh meat to chew on.  The Chicago PMI (Puchasing Managers Index), which measures economic activity in the Chicago region came out with a better than anticipated reading of 60.0. This was an increase from the month earlier reading of 56.1. (For those unfamilar with these PMI inidices, 50 is 'break-even.' That is, a reading above 50 indicates that business conditions improving and a reading of below 50 suggests deterioration.)  All of the sub-components of the Index registered above 50 for the first time in a long time. We've come a long way in this regard: the index reading last January was an abysmal 31.4%.

Some perspective:  The Index is increasing at it's most rapid pace since January 2006. In addition, the employment index rose above 50 for the first time in two years.  Jobs?

Again, I don't want to read too much into these numbers, but it is hard to spin them into a negative picture.  Perhaps the surprise in 2010 will be the strength of the rebound in the economy.

Tuesday, December 29, 2009


Just a heads up.  Our Amazon trade: while profitable, in hindsight I sold too soon.  It was strictly a valuation call.  Upon further review, as the football refs say, I think the estimates are way too low. It now appears that Amazon is on its way to being for broad retail what Apple managed to become for mobile entertainment. So perhaps it's not as richly priced as many now perceive.  At these levels, though, one must tread carefully.  So we're tip-toeing back in.  In small increments.

Your Economic Life is in This Young Man's Hands

Yes, this is the future Fed Chairman, young Benny Bernanke! Love the sportcoat; Mad Men goes geek.

Amity Shlaes on Infrastructure

On the Bloomberg site today, Amity Schlaes, author of the controversial book about FDR and the Great Depression, "The Forgotten Man," has an interesting take on the Obama stimulus and infrastructure spending.  Worth a read.

Monday, December 28, 2009

List of Lists: Top Tens for 2009

For those of you with far, far too much time on your hands, here's a link to a really fun list of TOP 2009 Lists. Have fun!


Chinese economy is set to overtake Japan as number two in the world. (link to Telegraph article) Many think that current statistics out of China are works of fiction but one cannot deny the fact that this behemoth is growing; and when 1 billion plus grows, that's a lot of GDP my friends.

Apple Part III

Thomas Weisel raised their target on Apple to $250. Shorts will be scrambling over the next few weeks.  Our target is looking clearer and clearer. See previous post from last week.

Thursday, December 24, 2009

An APPLE in Every Stocking

Well, as we now know, Apple closed a smidge over $209.  What with holiday sales (gottta be great) worldwide iPhone rollout (huge) and a new product announcement in Q1 (tablet?  TV?) it seems to me that the usual first quarter weakness is likely to be brushed aside or lightly felt as the stock powers its way to $240+ by March/April.

And to all a good night!

On Donner, on Blitzen, on iPhone....

Santa read my list:  Apple is breaking out to new highs. A close above $207 and we could march up to $240.

This Morning's Data

Two data releases this morning for market participants to obsess on: jobless claims and durable goods.  Let's look at the jobless numbers first. You'll be reading that jobless claims dropped a bit, signalling some minor good news.  I don't want to be the Grinch in all this, but we want to bear in mind that these are pre-Christmas numbers.  Employers are usually loathe to lay folks off right before the holidays, so we won't get a real read on whether the employment situation is stabilizing or improving til after the first of the year.  Until then, just chill on these stats; they're just cable channel time filler.

Durable goods rose .2%, but that was less than the .4% expected by economists (BTW: durable goods are things that are too big to fit in your SUV and designed to last longer than a fashion season. Think aircraft, trucks, refrigerators...)

Bottom line on all this is that we are in a period where the data releases really mean very little.  If you want to take a dogmatic, pre-convinced position, you can spin them either negative or positive.  The fact remains, in my opinion, that the jury is still out on whether we see a recovery next year, or a double dip. 

Thus, for our conservative (and I don't mean politicallly--not that there's anything wrong with that!) Smart Income clients we remain broadly and caitiously positioned, with a focus on acheiving high current income.   Interest rates have begun to creep up and we have tried to nimbly move some of our bond positions to keep things stable.

On the more aggressive end, Active Trading accounts are still largely fully invested, with regular ongoing repositioning to hopefully keep on the right side of the market trend.  I expect this rally to continue through year end, as folks who have been on the sidelines finally capitulate and join the 'party.'  As always, though, I am ready to pull the trigger and head for the hills if things take a turn for the worse.  But that seems increasingly less likely over the very near term.

Wednesday, December 23, 2009

Some Wise Thoughts on Trading

Dan Fitzpatrick is a sharp technical analyst and trader who writes for the website and has his own site, (I subscribe to both) He recently posted this on the Real Money Silver site and I thought it was worth passing along.

"Embrace the notion that you will never catch it all. A common mistake made by untested traders is becoming increasingly excited as their stocks move higher and higher. They regret not buying more when the stock was lower. They then pile in to "make up" for their initial conservatism.  At some point, they've got a massive position in a stock that has been running...but their cost basis is near the current price. It is too high! At that point, any pullback in the stock creates panic. They've turned a good trade into a bad one.

If you continually prune and trim winning positions (and never tolerate losing positions), you'll always be on the right side of the risk curve. Learn to take some profits on the way up, even though you stand the chance of regretting your adherence to risk management.

Men, strive to trade like a woman, not like a jock.

Most women hate to lose money. Men tend to treat losing money as an affront to their manhood. They'll tolerate big losses because they think it's macho to do so. Actually, it's stupid to do so. But then...there is not much difference between machismo and stupidity, is there? The best traders respect the risk they are taking. The worst traders ignore it.

Those of you who are pilots know this saying well: "There are old pilots. There are bold pilots. But there are no old, bold pilots."  Trade to make money. If you want to prove your manhood, join the UFC and challenge Chuck Liddell. will never get it all. Strive for the middle 80%."

Thanks, Dan.  Good stuff!

Ho Ho Holy Mackeral!

Lots of green on the screen today as we coast into Christmas.  Did anyone, this time last year, think the market would be at this level in December 2009?  Anyone?  Anyone?  Certainly not me, I'll admit. 

What with the east coast getting hit last weekend and we here in flyover territory set for our dose tonight/tomorrow, one can only conclude that disruptive snowstorms are good for the market.  I'll be watching for some talking head on CNBC to make the correlation....

Posts will be limited over the next couple of days as I reconnect with Mrs. Proactive Investment Advisor and the two Advisettes.  For those of you celebrating:   have a Very Merry Christmas!!

Tuesday, December 22, 2009

The Disgraceful Senator Ben 'Taladega Nights' Nelson Shoots for New Heights in Legal Bribe Taking

This is too funny.  Hat tip to As they noted, if politicians had to display their sponsorships like NASCAR drivers, we'd have a much easier time figuring out who they represent.

Chesapeake Energy

I'd been watching the nightmare that was natural gas stocks for some time when, earlier this month, Exxon announced the purchase of XTO Energy for a hefty premium to its current stock price.  Overnight, many of the floating stories, the what ifs, the possibilites about natural gas were given a stamp of reality.  We jumped on Chesapeake Energy as we thought it would be a major benficiary of the new outlook for NG.

I bring this up now as I heard a very interesting take on CHK just now:  some observers were noting that there had been very little insider activity in CHK.  No buying, especially.  One talking head was asking if that was a troublesome sign.  The answer he was given was no; in fact it could be an encouraging sign--at least regarding a potential sale of the company.  If, indeed, insiders know that a buyer is sniffing around, you can be sure that their legal department has told them in no uncertain terms NOT to take any action--buying or selling.  So perhaps this 'quiet' is an indication that a deal may be in the works.  We'll see soon, I expect.

Update on a Trading Position: STEC

From the Better to be Lucky than Smart Department:  STEC

As reported this morning by STEC Inc initiated with a Buy at Broadpoint AmTech Research; tgt $23 . Broadpoint AmTech Research initiates STEC with a Buy and price target of $23 saying saying they believe STEC's first mover advantage will be sustainable for a period longer than market expectations. Competition is inevitable from HDD vendors, NAND suppliers and other entrants, and while competition is emerging, they do not expect any material impact in 2010 given qualification cycles of ~9 months, and see no real competition to STEC's flagship ZeusIOPS product. Firm notes STEC has declined by 67% from the September peak of $42.50 due to competitive concerns and near-term cloudiness in the EMC business. They view this pull-back as an excellent opportunity for investors to build positions. Catalysts include ramps at other tier one OEMs, EMC inventory issues getting resolved, and continued expansion of the enterprise SSD market.

Our cost basis is $12.37.

GDP Revised Downward. Economy Still Shaky.

Third quarter GDP numbers were released this morning and were revised downward to show a 2.2% growth in the third quarter.  This is the second downward revision in the Q3 GDP number.  (Makes you think that they're just using a magic eight ball to make these things up, no?)  Weakness seemed to be primarily due to lack of business investment and invenory build.

The pony in all this, as I've noted to some of you, is that at SOME point, businesses HAVE TO start rebuilding inventory.  That will create a tailwind in 2010, in the optimists view.  Also, as large corporations  continue to hold back on investing in new plant and equipment, cash continues to accumulate.  As noted in the LET'S MAKE A DEAL post below, that helps to create M&A conditions that could drive the market going forward.

Nevertheless, the net takeaway must be that, notwithstanding whether the glass is half full or half empty, the contents of the glass are pretty darn murky.

Monday, December 21, 2009

Let's Make a Deal--Part II

I just wanted to note, as reinforcement of the previous post, that both of these deal were all cash.  Sanofi-Aventis coughed up $1.9 billion and Bucyrus antred $1.3 billion.  It's often instructive to note whether the currency being used is company stock (which may indicate that stocks are richly valued) or plain cold cash (a reliable indicator of stock bargains).  The fact that it is cash being thrown around is definitely a positive.

Let's Make a Deal!

Two more pretty sizeable deals were annouced today. French drug maker Sanofi-Aventis announced it was buying household and personal care product maker Chattem (maker of Selsen Blue, Icy Hot and Gold Bond, among other venerable brands). S-A is paying a 34% premium to the current Chattem price, making this a very Merry Christmas indeed for Chattem shareholders.

Also announced today: Mining equipment maker Bucyrus said it was buying the mining business portion of Terex. Both stocks jumped some 9% on the news.

These deals come on the heels of a number of other announcements in the past few weeks, highlighting an increasingly emerging story--one that may well be THE story for 2010. That is, the amount of cash corporations are currently sitting on. Record amounts. We've all read the stories, over the past 18 months, of downsizing and lack of business spending. This has enabled corporate America to amass a huge cash hoard. Many executives believe the 'safest' way to use that cash is not to hire workers back, not to invest in new plant and equipment, but to purchase already sound and thriving businesses. At hefty premiums to current share prices. And maybe they're not crazy. Warren Buffett, after all, just bought himself a whole damn railroad!

The important point is that large pools of capital exist, and they are being deployed, with a real and substantial upward impact on share prices. This is a far cry from 18 months ago, when we were seeing corporate shotgun weddings where one entity was taking over another at a distressed price.

Makes you go, hmmmm.

That Sound You Hear is Champagne Corks Popping... just about every health care oriented company in America. The passage of the 'landmark' health care legislation will prove to be the same as every other piece of congressional scamming in the past generation. In case you haven't noticed, every time Congress attempts to 'reform' an industry, they merely lay the new ground rules for the big players to just do more business in a better defined environment. Think of all the financial, energy and defense legislation since FDR. Complex congressional bills are mothers milk to entrenched players.

While I may despair for our Republic, this is very good news for just about the entire health care complex and we are seeing the continuation of already in-place rallies from UNH, WLP, ESRX, MHS, TEVA, DGX among our current holdings. Our patience over the summer has been rewarded.

So the rich get richer...(Wait, you didn't really think this bill was actually going to HELP ordinary Americans, did you? Ah, ha ha ha ha ha ha ......... Yes, that's a good one. Worthy of the 60th vote coming from a former comedian.)



Golden Slacks upgrades Mosaic from NEUTRAL to BUY this A.M. Trading clients should see a nice pop. If the global economy stays reasonably stable, I expect ag stocks to be among the best peformers in 2010. This is still a relatively unloved and underowned sector.

Sunday, December 20, 2009

The Perfect Christmas Gift For Your Favorite Member of Congress

Mosaic Company

Note to trading clients:

Interesting article in this week's Barron's about Mosaic, one of our holdings. Mosaic can sometimes be a frustrating position, as it tracks elements of the global economy that do not always get daily press. In other words, stories about mall traffic and unemployment stats are basically meaningless for Mosaic. But if we stay focused on the larger picture of global growth, the increase of the middle class in emerging markets and the pressure that puts on global agriculture, Mosaic looms large as a core holding to trade around going forward. As the article notes, the past year's global slowdown has caused farmers to defer/reduce purchases, which has put downward pressure on many fertilizer stocks. But Mother Nature will not be denied for long. At some point fields need to be renewed and refreshed.

Saturday, December 19, 2009

Always Carry an Umbrella

As an advisor who works with individual investors, I have learned to be sensitive to both direct and indirect signals that clients give when voicing their thoughts on the market. For the past month, without exception, all client feedback has had one main theme: 'The market makes no sense to me. Is it time to take more money off the table?'

This kind of drumbeating for retreat tees up conflicted feelings for experienced managers: on the one hand, individual investors are much smarter than the professional investor class give them credit. Individual investors are often closer to the real economy and see, hear and feel things that talking heads in the media bubble ignore. On the other hand, a well known dynamnic is the proverbial 'wall of worry:' as long as investors continue to be worried and cautious, it is less likely that they have positioned themselves as 'all in.' Metaphorically, the fire burns brighest after the last logs have been tossed in--yet also begins to die down soon thereafter due to lack of new fuel.

So where does that leave us now? Well, invested but worried. It may not be raining yet, but we'll leave the house with a sturdy umbrella every day in any case. Carrying the umbrella--and being willing to unfurl it at the first sign of rain--is probably the best course.

For those who are fearful: you are right to be so. The time to act will come soon. Just not this week. In fact, we may more likely see a final euphoric blowwoff before the next big decline.

In any case, I am totally agnostic on the whole matter and will let the market do the talking.