Beginning Fidelity National Finance

I started a position in Fidelity National Finance, FNF, yesterday at $19. This is a play on the refinancing boom that the government is trying to push through very hard, but this play should also get steam from the fact that there will be a significantly large volume of foreclosure sales in the near and intermediate term.

FNF is essentially a title insurer, so what they are concerned with is not home prices falling or rising, but only how many transactions (title change/tranfers/new titles issuance) occurs. And going forward the volume should rise, it has little room to fall right now.

Good pieces on this here,here and here

Long FNF is trading account

Limit order for Mosaic and thoughts on the crazy mkt rally

I set up a limit order at 43 for Mosaic in my trading account. Right now I only hold Gold (a pretty big chunk actually) via the double long DGP ETF. I am severely cash strapped in my trading account because of which, at this point, I am unable to load up on things that I like. But then again the market is excessively over-priced (30-40x PE is really really bad given the economic data points that we have) at this point and so not being in the market right now may not be such a bad thing.

As the market gets cheaper (once the Fed dollar printing dries up) I would like to start building core positions in names I like and then trade around them. I think this is a style most suitable for my kind of investing and leaps and bounds better than a buy and hold strategy. Remember that whenever we (atleast my generation and those in their 45s) talk about the merits of a buy and hold strategy we are only taking into account the past 2 decade and a half, and that was a bull market period. Alter your start points and the buy and hold merit arguments go pooooof .

Long DGP in trading account

Edit/Update: In regards to the excessively over priced nature of the market right now, here are some stats via Zerohedge which goes to show how overbought the market is right now (quoted in green below):

1. Fully 84% of the stock market is now trading above the 50-day m.a.; financials are running 26% above their 50-day m.a. in a gap we have not seen in 20 years.
2. It’s not just the banks that are hoarding cash – so are portfolio managers (ah yes, the proverbial “dry powder” … or maybe, just maybe, cash has become an integral part of money management): According to Morningstar, almost 30% of diversified US stock funds now have more than 5% of their assets in cash; for the entire fund industry, the cash-stash stands at a 5.9% share compared with 4.2% a year ago.
3. According to Moody’s, the ratio of companies having their credit ratings cut versus the number being upgraded (an indicator of declining credit quality) has reached its highest level since 1983.

But the equity market is somehow up 27% in march on pure sentiment. Sigh

Profit taking

I took some profits today by selling ESI, ITT Educational Services, for a 10% gain in just about 5 days. I am holding onto my double long gold ETF DGP, waiting for the market to realize the implications (read hyper-inflation) of the monthly-trillion-dollar-printing-bonanza by the Feds.

For now it seems the market is super technical in nature, it is following Technical analysis to a T. And it would be really unwise to go against this current prevalent technical trend, atleast for now. But come earnings season (Apr 4th) HMMMM, that is when the cat comes out of the bag.

Disclaimer: Long DGP in trading account

Buy stocks now

We are rallying, based on a hyper flawed plan by our revered Treasury secretary.
Some easily identifiable flaws in the plan are here.

In short it is more of the same old story of piling Wall street-risks-gone-bad onto US tax-payers. On top of that wall street traders who usually suffer from some severely acute form of short term amnesia (recent wall street trading philosophy: forget all long term indicators, data points about the recession/economy but lets focus on that one thing, Geithner today, baltic dry index last week, china hoarding commodities and preparing a surge a week before that and so on, which though bad/meaningless, atleast sounds nice), immediately go bonkers and gung-ho on the bull side and thus shit like bank of america, citigroup, morgan stanley are up 15%+.

The other shitty basket also known as REITS are also surging, again for no real reason in particular, well essentially based on a spin that home sales increased month-over-month by about 5% (in reality they are down 4.6% YOY!!!). These are prime short candidates based on their huge debt, problems with their revolving credit lines, secured debt facilities and the immensely tight credit market. Goldman Sachs has an extremely bearish outlook on the REITs and rightly so. I myself will try and short these in the next couple of days, primarily via shorting the IYR ETF.

Long gold

I am back into the market in my trading account. With the Fed announcing 300 billion buy of treasuries (1 trillion net), hyperinflation combined with the depression of first degree is well on its way. The gold ETF spiked almost immediately. There are two gold ETFs : GLD and DGP, DGP is the double long ETF version of GLD.

I got into DGP at about 20.6 as a pure trade, though long term gold is where all the smart money is getting BIG positions in. Hedge fund czars John Paulson as well as David Einhorn are getting into gold, via bloomberg. as the money printing continues unabated by all major economies. Paulson bought a 11.3% stake in a gold miner Anglogold Ashanti, while Einhorn is buying the ETF GLD.




Zero hedge also has an interesting piece on this money printing.

Disclaimer : Long DGP in trading account

Broad ETF trackers

For the layman/unsophisticated trader one quick way to gauge the market performance on a given day is by using the broad ETF trackers for each sector, kind of gives you a feel about which sectors of the market are performing (or not). Heres the list:

Consumer Staples : XLP
Consumer Discretionary :XLY
Energy : XLE
Financial : XLF
Healthcare:XLV
Industrial: XLI
Materials: XLB
Technology: XLK
Utilities: XLU

A blow to dividend investors?

Dividend stocks have been the staple for many an investor and huge number of investors have a bulk of money locked up in dividend blue-chips for a stable passive income source post retirement.

But has the carnage that is the S&P 500 now re-written the play book on dividend investing?

Via Zerohedge:

We do see that the equity culture is not dying as much as we would have thought, but insofar as the stock market can generate cash flows, the ability to do so with consistency is in question. Wells Fargo became the latest to cut its dividend – by 85% to a nickel per share in a move that will save the bank roughly $5 billion per year. So far this year, the amount of dividends that has been cut has totaled $40.78 billion (financials now represent 11% of total dividend payouts, down from the 2006 peak of 30%). In less than three months, the dividend cuts have already exceeded the $40.6 bln in all of 2008. According to S&P, dividends are on track to decline 23% this year, the most since 1938. According to the folks at S&P, the sharp curtailment of dividends (but the yield is 3.1%!! Hey – ever heard of a ‘value trap’?) is the equivalent of a 26% pay cut to the average retiree.

Most of the blue chip dividend players till 07 were the big banks, GE etc and we all know where they are today. Even JNJ which was holding up somewhat and logically is the one dividend stock I will buy if my life rested on it (servicing to the baby boomers as they retire will not go out of fashion too soon) has been pummeled.

The market is changing fundamentally and so is the decade old play book.

Out of the market

Got frisky and sold off AXYS (talked about yesterday here) at 40.xx, for a 10%+ish gain in 2 days. I think we will re-test the S&P 741 support today. Will it hold, will it break who knows?? Russian roulette .


Just to keep things in perspective here are the major support/resistances of the S&P in this bear market:

• 660: the low of the year,
• 741: 20 day moving average (right where we are now)
  
• 800: 50 day moving average

Well we also have a 1000+ number as the 200 day moving average for the S&P, but right now this is not even worth talking about.


Disclaimer: 100% cash, no positions in trading account

Profits in the bear rally for a retail trader

The current market is a range bound one and its likely to remain so for some time. Its essentially a bear market in which we sometimes get bounces off some extreme lows before hitting some form of resistance and start a downward spiral again towards a support or create new low , once the support/new low is reached RINSE AND REPEAT.

So in essence its a trading market, best visited with hedges, and NOT an investment market. Anyone who tells you blue chips/solid names are cheap so BUY BUY BUY, please let them know that they'll be cheaper next week (JNJ anyone).

I have a very small, well tiny actually, trading account with Tradeking. Usually it is a day trading account and I seldom hold more than 4 positions at a time (not by rule more by forced compulsion else the fees start eating into my profits). Well by friday I was 60-65% cash, while holding on to my old favourite name china fire, cfsg. I follow this stock with diligence and it has with great consistency traded in the 6.2-7.3 range in the bear market. So I got in at 6.2ish a week earlier (I like to trade in and out of this name) and by tuesday I was out at 6.9ish. GAH!! By wednesday the bear rally had set in and its now at 7.7!! So thats a 10% profit instead of 25%ish one. sigh :(

Not to worry I did manage to get into AXYS technology on wednesday in the 35s. AXYS is a favourite motley fool name, a stellar company but the stock has been decimated over the past 3 months (80ish in nov around 25 going into this week).

Anyway AXYS put themselves up for sale on wednesday with a target price of $60 and voila I am up 10%+ on the position. I didnt sell it today, which might backfire as tomorrow is friday and could be a sell-off day as S&P is hovering round its big resistance at 741. I have a sell order at $45 and will be happy to get out at that price (notice the beautiful 25 to 40 jump in 2 days after the "buy us" announcement)

Tomorrow is a big day, if we can hold on to the gains of the past 2 days then we CAN/MAY make a run towards 800 on the S&P, thats where our major resistance lies if we can go north from here.


On the watchlist, waiting for pullbacks:

1. MOS below 39, another stellar run company in the agro/fertilizer sector that has been brutalized (used to be cheap,screaming buy at $100 5 months ago).
2. JRCC, another commodity name,a coal company, below $10, ideally below $9. (used to be a screaming buy at $40 5 months ago).
3. Short LasVegas, I mean the LV casino names (Las Vegas and their casinos/hotels/resorts along with Trump in Atlantic city have been wiped out really by the economic downturn) like Las Vegas Sands,MGM grand, Wynn resorts, when we inch closer to the 800 resistance or break 741 as we start moving down again.

In the meantime continue watching Cramer vs Stewart while drinking Kool-Aid.

Disclaimer: Long AXYS in trading account