I was happy to hear from readers that have followed some of my trades and made a substantial return from getting into GE and PGH in March and riding it up till now.Even my mother-in-law followed my advice to make a 44% return in four months.Now I am telling mom to take the return to the bank and liquidate your positions to return to cash.That is exactly what I did last week.I sold my two positions to take a healthy return and sit on cash for the moment.
I asked the GTBP traders and some trusted advisors for their thoughts on where the market is likely to go this week, month and for the remainder of the year.The replies were as diverse as you can imagine, but you might find some insight and cautions that might help you for the remainder of the year.The following was the email exchange:
From: Rob Guerriere [mailto:
] Sent: Monday, June 08, 2009 11:46 AM To: 'Keith Nash'; 'Pereira, Alicia'; 'Roger Berkowitz'; 'Mark Flanagan'; 'Glen Eichman' Subject: market - today - summer - rest of the year
I just got back from a supply chain conference mainly focused on the retail industry, UConnect by the GS1 (folks who invented the bar code). I am now a bit concerned about market over-optimism. There were only 1/3 of the attendees as last year. The networks who transact the business documents said that transactions are still way down. If you look to retail sales as a leading indicator, I don’t see a rebound. I was entertaining at restaurants in Orlando and they were empty. Florida economy must be really suffering.
Energy has been a good place to be over the last couple of months. Inflation is coming back and the dollar is falling from its highs. That is why I like(d) PGH, a canroyal gas and oil company (one of Alicia’s picks), and it has a steady dividend that was already cut earlier in the year. However, there is an overabundance of nat gas on the market and I believe that oil prices might top out here with the economy in a slowing recession but still possibly spiraling down. UBS also downgraded them on Thursday from Buy to Neutral.
So on Friday, I have sold off all of my shares in PGH and GE, and I am back in 100% cash. The risk to being in cash now is that the stimulus money still has yet to hit the market and if the S&P breaks through 1K, a lot of folks with money on the side line, late to get in, will jump in and continue to drive the market north. There are also more traders shorting retail stocks now, like TGT and BBY. When they cover it keeps driving up the price unrealistically. I think BBY is a good short if you can catch it. Or any specialty retailer, like Whole Food Markets, that folks are cutting from their budget.
What do you think? Are you trading?
I am thinking of setting up a private fund to invest in short-term receivables utilizing The Receivables Exchange and new industry information that is coming available from supply chain networks. Does it sound of interest?
All the best,
Rob
From: Keith Nash Sent: Monday, June 08, 2009 2:16 PM To: Glen Eichman; Mark Flanagan; Pereira, Alicia; Rob Guerriere; Roger Berkowitz Subject: Re: market - today - summer - rest of the year
Rob, I remember when you declared the 'bottom' back in March. I was sceptical then and remain so now; my own view is that the recent run-up has been a classic bear market rally a la 1929-1933. I've been buying long-dated LEAP PUTs on the various indices.
I see no reason for optimism, no positive change in the macro-economic environment (quite the opposite!), and no real change in gov't policy (which perversely seems intended to maximize suffering). Bernanke's insane QE program doesn't seem to be working as yields are rising on longer-termed treasuries - and we've got a LOT more borrowing to do.
Do I foresee TEOTWAWKI? No. But things could get unpleasant. Nevertheless, it's a wonderful world that has kittens and pretty girls in it!
But hey, what do I know? I'm just a hick from Arkansas! LOL
Consider this quote from J K Galbraith's depression book (larger quote below): "Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. "
"The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. (Not only were a recorded 12,894,650 shares sold on 24 October; precisely the same number were bought.) The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. The Coolidge bull market was a remarkable phenomemon. The ruthlessness of its liquidation was, in its own way, equally remarkable."
John K. Galbraith
From: Glen Eichman [mailto:
] Sent: Tuesday, June 09, 2009 3:41 PM To: 'Rob Guerriere' Subject: RE: market - today - summer - rest of the year
Hi,
Yes trading.
I have two small trucking companies who have said business is good and improving. A year ago they were forecasting doom.
I think the whole thing was way overdone on the downside and still some tremendous values out there. Good yields, good earnings comparisons, etc. As a rule, don’t fight the tape and don’t over think.
Having said that, one cannot be fighting deflation and inflation at the same time. Deflation is the real boogieman and if we are through that phase then we will see expansion and good times before the inflationary b.s. begins. Hopefully the inflationary b.s. begins because that means we made it through the real problem, deflation. Inflation will come, but the whole thing is going to take some time.
Oil is about right. Nat gas is in oversupply.
{NOTE} Attached is a report from the equity research department from Raymond James that summarized said that if the market continues sidewise they expect another leg up, more than most investors expect.They think the correct call is to be cautious but not bearish.If we do see another leg down that breaks the S&P level of 870, then we could see a drop to 830 or more.
For those of you not familiar with the Raymond James equity research group, they have long been winners and contenders of the WSJ stock-pickers portfolio game.Another report that Glen attached for me was a strong buy report for BAC with a 12 month target of $27.
Glen.
Performance is not a guarantee of future results
Past performance may not be indicative of future results.
R. Glen Eichman, CFP
Raymond James Financial Services
President, Integrated Asset
Integrated Asset is independent of
Raymond James Financial Services
Securities offered exclusively through
Raymond James Financial Services
Member FINRA/SIPC
167 N. Commerce Way Suite 110
Bethlehem, PA 18017
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From: D. Carter Smith
Sent: Wednesday, June 10, 2009 9:03 PM To: Rob Guerriere Subject: Re: FW: market - today - summer - rest of the year
Rob, thanks for sending this conversation. It is encouraging to get a take from the retail environment, and especially as an indicator, regardless of weakened bias. The market is something we all watch and look for predictability it is safe to say. It does effect me all the time even if I am hedged in pairs (which have changed from a contrarian approach lately). Often one side outpaces the other, and the market is very much a catalyst.
I was thinking about the overall market this week and especially today after oil moved above 71. Energy stocks certainly have been movers over the past quarter, but feel that if the energy prices rise it will get in the way of a recovery... among other things too. A recovery to me means a bullish market, good economy reflected in the market. In my opinion we have seen more of a pullback then expected in the market. Nice call back in March, and I thought that 830 in the S&P was the pullback we would see. I say pullback and not reversal because there seemed to be much negative bias in the middle of March still. Now it is a restoration of where we should be, considering the government action, and the market correcting itself. Interesting in this move to see commodities up 20% in May alone. There are signs of economic strength in China.. and they consume so much creating demand. Granted we have borrowed so much from them, and our Deficit is something like 189 billion!! That's ludicrous speed, and mark that as a bias towards still be in a negative bias for our overall market. Loans are still tight, and there is a continued weak market. Mortgage apps are at 4 months lows. All stats I know, but also know there are signs of recovery and stabilization, but it seems regional, in my opinion. For example the Fed reported 5 of 12 of their districts noting the downward trend moderating. It just seems to me, in my opinion, that there is too much happening, and in theory that the recession is not the problem, but rather has exposed the problems. Inflation now is in play as well.
The quote by John Galbraith is great.. much appreciated. Here is one as well that I read the other day and found interesting.
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. - Thomas Jefferson
So some rambling thoughts, but I am hoping to participate in some shorting sometime in the near future. And .. as an American expect 2010 to be more a bullish year overall. We'll see.
David
From: Roger Berkowitz Sent: Thursday, May 14, 2009 10:23 AM To: Rob Guerriere Subject: Re: sell khd
Investment wise, I have been staying mostly in cash. I bought a lot of IMAX in January around 4, so I have done well with that. Imax and Uluru are my biggest positions. Obviously Uluru has been disappointing, but there is a small chance that will still work out.
If it does, the stock should jump soon. But it depends on them raising money in the next week or two and it is unclear whether or not that will happen. If it does, it should jump.Otherwise, I am watching this bear market rally wondering how long it will go for. I am fairly certain there is no significant upside in the long term, which does not mean there won't be another leg up, but the numbers just won't be there.
Long term, we need to raise taxes. Savings will go up. Services will go down. But mostly, as ok as I think the US will be, the world is in shatters. I think the Euro zone may just have to break up. I see so many possible catalysts for a huge drop that I want to be as much in cash as possible.
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