Wanted to post a link to a chart I've created comparing the 1970's on the Dow versus our current timeframe. So, please check it out here. I'll post my explanations later this week in another post.
Please note, the chart is a very rough comparison. Let me say that again...a very rough comparison. :-)
Oh, and pay special attention to how the Dow flirted with the 1,000 level back in the late 60's and 70's and how we are flirting with the 11,000 level now.
Later Trades,
MT
Tuesday, April 12, 2005
Monday, April 11, 2005
Echo Bubbles?
I have a great little treat for everyone coming this week. I have been performing further studies on the 1969 - 1975 market versus the current market we are in. I'll post a great chart possibly Monday of my research.
To give you a brief hint of what my study is pointing to...I'll leave you with this: We should see an explosive move occurring within the next few weeks. In fact, my bet is on this week or the very next week of this move occurring.
Also, someone posted an anonymous comment on the A Moment of Clarity post. I wanted to thank that person for pointing out the errors in my article. I was blending the business cycle dates and stock market cycle dates together. The person also made a great comment in regard to echo bubbles. And provided some great examples. So, thank you for your comments!
The first time I ever heard the echo bubble term was back in the early 90's. The news was all a buzz in regard to Japan and how several economists believed Japan was experiencing an echo bubble. I was just a young pup back then so girls were my focus instead of the market ..thus I have no idea why I remember that discussion...but I did. In fact, I haven't heard that term written or spoken since...until the anonymous poster brought the term back to my attention.
So, are we in an echo bubble? I believe so. Stay tuned for the chart I'll post this week to explain why I believe we're in an echo bubble.
Later Trades,
MT
To give you a brief hint of what my study is pointing to...I'll leave you with this: We should see an explosive move occurring within the next few weeks. In fact, my bet is on this week or the very next week of this move occurring.
Also, someone posted an anonymous comment on the A Moment of Clarity post. I wanted to thank that person for pointing out the errors in my article. I was blending the business cycle dates and stock market cycle dates together. The person also made a great comment in regard to echo bubbles. And provided some great examples. So, thank you for your comments!
The first time I ever heard the echo bubble term was back in the early 90's. The news was all a buzz in regard to Japan and how several economists believed Japan was experiencing an echo bubble. I was just a young pup back then so girls were my focus instead of the market ..thus I have no idea why I remember that discussion...but I did. In fact, I haven't heard that term written or spoken since...until the anonymous poster brought the term back to my attention.
So, are we in an echo bubble? I believe so. Stay tuned for the chart I'll post this week to explain why I believe we're in an echo bubble.
Later Trades,
MT
Monday, April 04, 2005
Brief Update
Between a sick daughter, taxes, and daylight savings time...I haven't had time to write a post this week.
Just wanted to share a few thoughts on the markets. In my previous post, I discussed my bet on oil/gas stocks being soft and going long the Dow. Funny how oil/gas stocks surged and the Dow dropped even further. But, that's what the market does...makes it tough on ya.
This week will prove to be a key week in my Dow trade. I have placed a line in the sand and if the market doesn't live up to my plan...I'll have to adjust the plan. Meaning, by my plan the Dow should begin a turn and reverse very soon. In fact, if I do not see the Dow begin an advance this week...I'll get worried. Not until then.
In fact, based on the data I'm seeing...oil/gas stocks are where my worries are. I wanted...no I needed to see a continued soft spot for these stocks. The Goldman Sachs call....all that changed. I'm seeing new equity highs due to that call. Something I didn't think would come until the first quarter numbers begin to come out. If we continue to see strength in these stocks heading into earnings...the earnings announcements may prove to be an intermediate top in this sector. And I really hate to say that considering the long-term fundamentals of the sector. So, watch out...if you're not in this sector...it may pay to wait several months before stepping a toe in.
Pay attention out there. Things could get interesting.
Later Trades,
MT
Just wanted to share a few thoughts on the markets. In my previous post, I discussed my bet on oil/gas stocks being soft and going long the Dow. Funny how oil/gas stocks surged and the Dow dropped even further. But, that's what the market does...makes it tough on ya.
This week will prove to be a key week in my Dow trade. I have placed a line in the sand and if the market doesn't live up to my plan...I'll have to adjust the plan. Meaning, by my plan the Dow should begin a turn and reverse very soon. In fact, if I do not see the Dow begin an advance this week...I'll get worried. Not until then.
In fact, based on the data I'm seeing...oil/gas stocks are where my worries are. I wanted...no I needed to see a continued soft spot for these stocks. The Goldman Sachs call....all that changed. I'm seeing new equity highs due to that call. Something I didn't think would come until the first quarter numbers begin to come out. If we continue to see strength in these stocks heading into earnings...the earnings announcements may prove to be an intermediate top in this sector. And I really hate to say that considering the long-term fundamentals of the sector. So, watch out...if you're not in this sector...it may pay to wait several months before stepping a toe in.
Pay attention out there. Things could get interesting.
Later Trades,
MT
Thursday, March 31, 2005
A Moment of Clarity
Just a brief update on what's been going on in my trading mind. I've been spending lots of time digging through websites, newspapers, old magazines, data tables from obscure economic sites, and books...books....books. Trying to wrap my mind around just where we are in the market cycle. But, I've only shared with you, my reader, the information I have found. Information that I believe is important in meandering through this confusing market. I have failed to share with you my true insights as to what this information means to me as a trader. What I'm going to do with this information. Truth be told, I couldn't share my insights because I was still processing the information through this slow brain of mine.
But, today, all that changed. Someone asked me after reviewing the business cycle chart posted on Sunday and Monday what I thought this meant for the market going forward. That was a great question and maybe because someone else asked me instead of myself...I was actually able to answer. Something I have not been able to do for about a month of processing. After answering the question...I received a moment of clarity. You know, when everything you have been trying to put together just clicks. So, I wanted to share my answer with you.
Part 1 of the reply to the question:
Part 2 of the reply:
After writing those two replies my moment of clarity has come to this:
How's that for putting it out there? Could I be wrong? Yes! Any number of things could derail this plan of mine. The number one thing being Greenspan and a 50 basis point rate hike. But, trading is about putting a plan together and taking action. Then adjust as the action unfolds.
One last item. If there are any long-time readers of my blog...you're probably asking why I'm trading out of my systems so blatantly. I promised not to do that after the President Election fiasco. And you're right, I am breaking my promise. But, not how you think. My system trading has evolved and will continue to evolve. This is part of it. I will share more with you in coming posts.
Later Trades,
MT
* Note: the Dow lost over 40% in the 1974 - 1975 Bear Market from the 1973 all-time high.
* Note: the WLI is the Weekly Leading Index and the FIG is the Future Inflation Gauge. For an explanation of these indexes please check out ECRI's website and even read the great book, Beating the Business Cycle.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
But, today, all that changed. Someone asked me after reviewing the business cycle chart posted on Sunday and Monday what I thought this meant for the market going forward. That was a great question and maybe because someone else asked me instead of myself...I was actually able to answer. Something I have not been able to do for about a month of processing. After answering the question...I received a moment of clarity. You know, when everything you have been trying to put together just clicks. So, I wanted to share my answer with you.
Part 1 of the reply to the question:
Thanks for the reply. Take a peek at another article I wrote, Canary in a Coal Mine. In the article, I'm attempting to paint the picture that we're in a boat similar to the 1970's. In particular I feel we're very similar to the 1973 - 1974 time frame. If you notice on the business cycle chart the contraction that followed the 1973 expansion lost approximately -9.33% in the Dow. I could see us losing about that much this time.
In fact, take a strong look at the business cycle chart. Take notice of just the 1969 peak through the 1973 peak. The 2001 peak through the current 2005 expansion is almost mirror image. What also has struck me lately is the similarity in the way stocks performed during those time frames. If you remember the late 1960's was the time of growth stocks. I believe small caps did very well (although I have yet to find performance statistics to support this). Then tough times and all that was left was the Nifty Fifties in the early 70's that then proceeded to finally kowtow to the bear in the 73 - 74 bear market.
Check out the Nasdaq composite and S&P 500 monthly charts and notice the strong sell-offs from the 2000 high. The Dow's plunge was relatively mild during the bear . In fact, during this recent expansion we almost hit new all-time highs in the Dow. The only difference between the 73 market and now is the 73 market did indeed hit all-time highs in the Dow before plunging into the bear.
Based on just this information...looks like tough times ahead.
Part 2 of the reply:
Another point I'd like to make in regard to the 1973 - 1975 contraction that
took the Dow down almost 10%. The Dow actually went lower than the 9.33%
figure. That's just where the Dow stood at the 1975 trough in relation to the
1973 peak. I figure we'll see something similar...in fact we've already
dropped almost 5% from the March closing high of 10,940.55 in the Dow.
What I'm trying to wrap my mind around is just exactly where we are in the
comparison. Is the March closing high the climax of this recent expansion?
Was the record company earnings in the last quarter of 2004 the peak? If so, I
believe the NBER will mark December 2004 as the peak for this current business
cycle expansion.
But, it does concern me that we haven't hit a new all-time high in the Dow. And
also concerting is the noticeable strength in the WLI from the ECRI. Along with
the somewhat flattening of the FIG. It could just mean the current expansion
has another year to go especially if inflation begins to stall here.
After writing those two replies my moment of clarity has come to this:
- I believe we will see a new all-time high in the Dow this year. In fact, it could even be as early as May. This new all-time high will mark the peak of this current expansion and the bear will take us down much like the bear took down the 1973 all-time high and corresponding business cycle peak. 2006 could prove to be a great year to begin shorting the market.
- I believe oil/gas stocks will continue the soft patch they are currently in. But, this will be short-lived. Oil/gas stocks are now in the sweet spot for investing. Almost a win-win situation. If oil comes down as it has been doing this week...the oil/gas stocks will surge due to their earnings potential in the coming quarter. If oil stays down...the market and this economy (our expansion) will continue to do well...thus setting us up for another run-up in oil prices down the road. Thus, benefitting the oil/gas stocks and their earnings potential even more in the coming quarters.
- When I refer to oil/gas stocks, please note I'm referring to the US land drillers and some oil service stocks. Despite the positive press on the oil tankers...please be careful there. The tankers are facing a new ship supply wave coming in the next 3 to 4 years. In fact, 10,000 ocean-going tankers are due, more than 8,000 new containerships and at least as many standard bulk carriers. Plus, remember, in 1974 despite high and rising oil prices...oil tankers were taking a beating due to fuel costs and oversupply. And yes, I'm talking my book...I am long US Land drillers and a few oil service companies.
- And yes, I'm long the Dow as of 2:00pm Central time today, Wednesday March 30th.
How's that for putting it out there? Could I be wrong? Yes! Any number of things could derail this plan of mine. The number one thing being Greenspan and a 50 basis point rate hike. But, trading is about putting a plan together and taking action. Then adjust as the action unfolds.
One last item. If there are any long-time readers of my blog...you're probably asking why I'm trading out of my systems so blatantly. I promised not to do that after the President Election fiasco. And you're right, I am breaking my promise. But, not how you think. My system trading has evolved and will continue to evolve. This is part of it. I will share more with you in coming posts.
Later Trades,
MT
* Note: the Dow lost over 40% in the 1974 - 1975 Bear Market from the 1973 all-time high.
* Note: the WLI is the Weekly Leading Index and the FIG is the Future Inflation Gauge. For an explanation of these indexes please check out ECRI's website and even read the great book, Beating the Business Cycle.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Monday, March 28, 2005
Cumulative Knowledge (03/28/2005)
I'm a recent fan of Stephen Vita's Alchemy of Trading blog. What I most admire about the blog is Stephen's ability to write several posts daily, encompassing what all of us traders are feeling, while keeping it fresh and new. The conversations with hedge fund friend, Anthony from Brooklyn, are priceless.
On to the notes...
Inflation effects farmers too. Read here. Despite a banner 2004, farmers are being squeezed due to higher steel, energy, and fertilizer costs. Plus, banks are tightening the reins on lending money to farmers. With irrigation equipment costs rising 20%...farmers are opting out until prices hopefully decline. This hurts LNN and VMI. Despite the rising inflation, farmers still can't resist new tractor purchases.
China has doubled steelmaking capacity since 2000 and now accounts for about 30% of the world's total. In fact, China has become a net exporter of steel for the past few months.
The FAA is expecting the US to exceed 1 billion airline passengers by 2015 from a current 688 million in 2004. Most of the growth will come from regional/commuter airlines and international flights to Latin America. In fact, Latin America travel is slated to grow at a 5.5% annual rate. Read here.
US Drilling hit a 19-year high. Read here. Note most of the growth came from land drillers in North America. The Texas PetroIndex rose to 167.4 in January. Note the 43% increase from the 2002 low versus the 70% increase from the June 1999 low to the August 2001 high. Still more to go? Perhaps that's why Karr Ingham is forecasting the index will reach 182 by December 2005. Nothing like an economist laying it on the line.
For the last time...there is INFLATION! For the past few months I have come across more people than I care to count that do not believe we're in an inflationary environment. BALDERDASH, BALDERDASH, BALDERDASH! Possibly Greenspan's recent federal bank brick has hit most of these people in the heads to realize what's going on. If not, maybe this article on tuition cost increases will help. Reason for the tuition hike? Rising employee benefit costs, utilities, software, and hardware. Yes, software and hardware costs are rising. Have been for the past year. Wage inflation? Yes, via employee benefit costs. Do you realize it costs some teachers in Texas $1200/month to insure their family for healthcare alone? And if it doesn't cost the teachers...its costing the district and/or the state.
Rents low and House payments high? Read here. The differential is at its biggest since 1994 and by some accounts the biggest since the 70's.
Two-thirds of US adults are overweight or obese. Up to 30% of US children are overweight. Childhood obesity has more than doubled in the past 25 years. Childhood diabetes has increased 10-fold in the past 20 years. In other words, life expectency gains could fall dramatically. Read more here.
Speciality hospitals have nearly tripled in number since 1997 according to the Texas Hospital Association. Of the 100+ speciality hospitals...nearly half are in Texas. This article must scare the bonkers out of physicians.
Arizona has won approval from the EPA for a proposed $2.5 billion oil refinery. This would be the first oil refinery built in the America in almost three decades.
Finally a word about the recent American Business Cycle chart I posted on Sunday. You should seriously check out the chart. Notice the most recent expansion/contractions. Definitely it seems the cycles are getting longer. I wonder if that has to do with the greater experience the Fed has with playing with rates in order to govern the business cycle? Anyway, here's a few tidbits from the chart...
And that's it from the TaylorTree where I wonder just what these financial shows are doing to my state of mind. Did I just use the word BALDERDASH?!? Thank you Jim Rogers. :-)
Later Trades,
MT
On to the notes...
Inflation effects farmers too. Read here. Despite a banner 2004, farmers are being squeezed due to higher steel, energy, and fertilizer costs. Plus, banks are tightening the reins on lending money to farmers. With irrigation equipment costs rising 20%...farmers are opting out until prices hopefully decline. This hurts LNN and VMI. Despite the rising inflation, farmers still can't resist new tractor purchases.
China has doubled steelmaking capacity since 2000 and now accounts for about 30% of the world's total. In fact, China has become a net exporter of steel for the past few months.
The FAA is expecting the US to exceed 1 billion airline passengers by 2015 from a current 688 million in 2004. Most of the growth will come from regional/commuter airlines and international flights to Latin America. In fact, Latin America travel is slated to grow at a 5.5% annual rate. Read here.
US Drilling hit a 19-year high. Read here. Note most of the growth came from land drillers in North America. The Texas PetroIndex rose to 167.4 in January. Note the 43% increase from the 2002 low versus the 70% increase from the June 1999 low to the August 2001 high. Still more to go? Perhaps that's why Karr Ingham is forecasting the index will reach 182 by December 2005. Nothing like an economist laying it on the line.
For the last time...there is INFLATION! For the past few months I have come across more people than I care to count that do not believe we're in an inflationary environment. BALDERDASH, BALDERDASH, BALDERDASH! Possibly Greenspan's recent federal bank brick has hit most of these people in the heads to realize what's going on. If not, maybe this article on tuition cost increases will help. Reason for the tuition hike? Rising employee benefit costs, utilities, software, and hardware. Yes, software and hardware costs are rising. Have been for the past year. Wage inflation? Yes, via employee benefit costs. Do you realize it costs some teachers in Texas $1200/month to insure their family for healthcare alone? And if it doesn't cost the teachers...its costing the district and/or the state.
Rents low and House payments high? Read here. The differential is at its biggest since 1994 and by some accounts the biggest since the 70's.
Two-thirds of US adults are overweight or obese. Up to 30% of US children are overweight. Childhood obesity has more than doubled in the past 25 years. Childhood diabetes has increased 10-fold in the past 20 years. In other words, life expectency gains could fall dramatically. Read more here.
Speciality hospitals have nearly tripled in number since 1997 according to the Texas Hospital Association. Of the 100+ speciality hospitals...nearly half are in Texas. This article must scare the bonkers out of physicians.
Arizona has won approval from the EPA for a proposed $2.5 billion oil refinery. This would be the first oil refinery built in the America in almost three decades.
Finally a word about the recent American Business Cycle chart I posted on Sunday. You should seriously check out the chart. Notice the most recent expansion/contractions. Definitely it seems the cycles are getting longer. I wonder if that has to do with the greater experience the Fed has with playing with rates in order to govern the business cycle? Anyway, here's a few tidbits from the chart...
- Average expansion is 4.06 years.
- Average contraction is 1.08 years
- Average gain in an expansion is 64.39%.
- Average loss in a contraction is -3.51%
- The current expansion is working on 3.42 years...just shy of the average.
- And the current gain under this expansion is a paltry 7.53%. In fact, the last time we had an expansion 3 years or greater and below an 8% gain was back in 1973. In 1973 we had a 3 year expansion coupled with a 5.57% gain.
And that's it from the TaylorTree where I wonder just what these financial shows are doing to my state of mind. Did I just use the word BALDERDASH?!? Thank you Jim Rogers. :-)
Later Trades,
MT
Sunday, March 27, 2005
Quick Post - Business Cycles
This chart reflects the peaks and troughs of the American Economic Business Cycle from 1919 - Present. Along with the performance of the DJ-30 during those times. But, please note that the 2001 - present is estimated since the NBER hasn't released data since the 2001 trough.
I wanted to get this out to you before I head out for the day. My daughter woke up this morning ready to hunt eggs and hasn't stopped yet. We're heading over to my aunt's house for a great Easter lunch and even more egg hunting for the little ones. I'll post commentary to follow the Business Cycle Chart later tonight or tomorrow. Interesting stuff!
Enjoy!
MT
I wanted to get this out to you before I head out for the day. My daughter woke up this morning ready to hunt eggs and hasn't stopped yet. We're heading over to my aunt's house for a great Easter lunch and even more egg hunting for the little ones. I'll post commentary to follow the Business Cycle Chart later tonight or tomorrow. Interesting stuff!
Enjoy!
MT
Monday, March 21, 2005
Cumulative Knowledge (03/20/2005)
I'll admit...I've been lazy this weekend. After figuring out some pretty complicated programming stuff late Friday night at my day job...I decided to relax and kick back over the weekend. So, I watched TV, read some books, put off doing my taxes, and took my daughter to see the Robots movie. The movie was pretty good. Would have been really cool if we could have seen the Imax DMR version of the film. Still good nonetheless.
One thing I caught up on this weekend was Cramer's Mad Money show on CNBC. Were you like me and caught yourself rubbernecking to the show? It felt like I was watching a traffic accident in progress. But, in the end...the show works. Why, I have no idea. But, there is some value. If you can get past the corny highjinks, preachy tone, and bald headed crystal ball...the show comes alive when the viewer interaction begins. Granted it's a somewhat one-sided interaction...but interaction nonetheless. In fact, I believe the show's approach shares more in common with us bloggers than we care to admit.
Now on to the notes...
And Jaloti, I'll work on getting my weekly posts out there a bit earlier than my always erratic late Sunday/Monday night postings. :-)
Have a great week!
Later Trades,
MT
One thing I caught up on this weekend was Cramer's Mad Money show on CNBC. Were you like me and caught yourself rubbernecking to the show? It felt like I was watching a traffic accident in progress. But, in the end...the show works. Why, I have no idea. But, there is some value. If you can get past the corny highjinks, preachy tone, and bald headed crystal ball...the show comes alive when the viewer interaction begins. Granted it's a somewhat one-sided interaction...but interaction nonetheless. In fact, I believe the show's approach shares more in common with us bloggers than we care to admit.
Now on to the notes...
- Almost 47% of U.S. food dollars will be spent in restaurants in 2005. In fact, the U.S. restaurant industry is projected to set a sales record of $476 billion in 2005. Could this be a boon for greasetrap cleaner DAR?
- Need a job? Looks like a nationwide shortage in ultrasound field technicians. And a growing demand for Veterinarians.
- Increased crop production raises land values, which pushes out livestock. So, if farmers are doing well with crops then they'll turn more land over to farming and less to cattle thus boosting crop production and limiting meat production.
- Annual farmland price survey data from Iowa State University shows the average price for Iowa farmland surged 15.6% to $2,629/acre in 2004.
- Top Oil producers in Texas here.
- Texas ranks first in the U.S. for new corporate offices and expansions in 2004. Second on the list is Michigan. Last time Texas was first was back in 1992 when tied with North Carolina. Read here.
- According to the Mortgage Bankers Association, more than 32% of mortgages are now adjustable.
- Prisons are normally big landowners in the state they reside. Why couldn't they sell some of that land to satisfy the large state government budget crunches? Looks like Texas is already doing just that. Read here.
- Did you know there's a 20% drop in household spending in apparel, decline of 18% in spending of food away from the home, a decrease of 10% on food at home, and 16% drop in owned housing for the ages of 49 - 59 years old? If spending drops for pretty much everything for these 49 - 59 year olds...what spending categories see increases? Healthcare is up 23%, reading material up 32%, and a small increase in entertainment spending. This research was performed by the BLS and obtained from the Economic Beat Column by Peter Francese at Barron's. What age bracket does the current glut of Baby Boomers reside? Ages 47 - 54 years of age.
- An aging population means sluggish growth in output per person. Business profits will be pressured as profit growth is weighed downward and pension obligations rise. Plus, an influx of new workers, a.k.a...the Echo Boomers, and you've got a decrease in the average productivity of the employed labor force as happened in the 60's and 70's when the Baby Boomers entered the labor pool. A decrease in average productivity means higher unit labor costs and thus higher prices.
- The fall of GM? Is GM a great buying opportunity? Or time to get out while the Titanic is sinking and the band plays on? Me? I'm avoiding GM altogether and watching the auto parts group. It's way too early to buy them right now...but another bad year like 2004 and things might get interesting. Already Japan and China are courting Delphi due to their low cost high quality manufacturing process. Could it be out of line that one of these countries buy a company like Delphi? I'm not smart enough to know. But, will continue to watch the group.
- I've studied many trading styles. But, I'll be the first to admit...Elliot Wave has always been placed on the back burner for me. The reason? I don't like anything that changes the past. In essence, subjective viewpoints are tough for me to trade. I come from a programmer's background...junk in = junk out. If your input data can change on you then what is the validity of your output data? I fight this all the time in system development. So, to choose Elliot Wave techniques where counts can change based on something new happening...well...I didn't need something else to aggravate my system mind. This interview with Glenn Neely from Real World Trading changed all that. In fact, I have added this guy's book to my reading list. I'll be honest, I learned a lot from this interview. I like the guy's use of "violent" price action to end the old trend and start the new. I have used "violent" price actions in my trading systems to identify new long term trends so it's nice to see another viewpoint on this pattern. The guy forecasts a bottom in 2015 and then we'll see the most spectacular stock market advance in the history of mankind. In fact, the Glen goes on to predict all sorts of things from a reduction in government overhead, huge efficiencies in our medical systems, third world industrializations, gold still in a secular bear market that will potentially bottom in 2010, a period of deflation, and the 2002 lows in the SP500 & DJ30 will not be broken for the next 50 - 100 years. Please read more here.
- Another great interview by Real World Trading...this time with Aaron Schindler. Aaron worked with Monroe Trout (one of the Market Wizards). I like his use of inter-market relationships in his trading systems. He gives a brief example of China and oil. The interview also covers some great backtesting topics similar to what GalaTime is currently doing with his covered call system. His comments on trying to be as quantitative as possible in your trades is great advice.
- And finally, a good laugh. This article, though a bit out there, probably does shed some truth on the recent housing boom. The Testosterone versus Estrogen magazine covers highlighting the different manias (tech vs credit) had me laughing out loud.
And Jaloti, I'll work on getting my weekly posts out there a bit earlier than my always erratic late Sunday/Monday night postings. :-)
Have a great week!
Later Trades,
MT
Monday, March 14, 2005
Canary in a Coal Mine
Sudden changes in population have historically contributed to inflation. For example, the Black Death in England was a leading factor in the wage inflation of those times. In 16th century England, a population expansion fueled inflation due to the increased demand for goods and services. Thus, anytime a segment of the population expands significantly from a prior generation...be on the lookout for inflationary pressures.
The Baby Boomers were born between 1946 - 1964. They started college from 1964 - 1982. And assuming a five year average to complete their scholastic studies...they graduated in 1969 - 1987. While these figures provide insight...what we really need is to capture the center of the bell-shaped curve in this demographic segment.
Let's take the median of when the Boomers were born and that would be the 10th position in the yearly series which is 1955. These Boomers started college in 1973 and finished in 1978. Okay, we have a pretty good start here. But we still need to capture more of the meat in that bell curve. Try to find the heart of the demographic surge we really need to capture the standard deviation. But, that's too hard for this old country boy. I'm going to keep it simple and assume 1/3 from the median value both ways would give us what we need. With that in mind, we would obtain the following information:
Baby Boomers born: 1951 - 1958.
Baby Boomers Start College: 1969 - 1976.
Baby Boomers Finished College: 1974 - 1981.
Wow! Do these numbers freak you about just a bit? Back in 1969 thru 1981, the United States experienced a significant rise in young adults. I don't have the numbers on hand but I'm guessing probably a 20 million plus increase compared to levels from the prior generation. Granted all boomers did not attend college. But, from the years 1969 thru 1981, Boomers were flooding the US economy in more ways than one. Amazing that 1969 was the beginning year of when the glut of Baby Boomers turned 18 as well as the beginning tough times for the US Equities market. Equally amazing is that 1981 was when the majority of Boomers had finished college and flowed into the system. By that time the US had absorbed this new generation and the worst in numbers was behind them. In fact, the rapid expansion in commodities during the 70's due to these boomers coupled with a large, energetic, and young workforce....is it any wonder that 1982 was the start of the 18 year long bull market?
On to the Echo Boomers. You know, the kids of the Baby Boomers. I've written about them in past articles. These little darlings make up 1/3 of the US population just like their parents make up the other third. They already spend $170 billion per year. First to grow up with computers at home, cellphones, and the Internet. They also drink less, smoke less, and break the law less than prior generations. Teen pregnancy is also way down. These Echo Boomers were born from 1976 - 1995. Will attend college from 1994 - 2013. And will finish college in 1999 - 2018. The median year an Echo Boomer was born is 1985.5 and 1/3 both ways provides the following breakdown:
Echo Boomers born: 1982 - 1989.
Echo Boomers Start College: 2000 - 2007.
Echo Boomers Finished College: 2005 - 2012.
If the Baby Boomer numbers were amazing...these numbers should make the hair on the back of your neck stand up. Interesting bit of data in that the year 2000 marked the beginning of the glut of Echo Boomers into adulthood and at the same time the end of the 18 year bull market. Are we destined to follow the same fate from 2000 - 2012, when the Echo Boomers flood into adulthood as the 1969 - 1981 timeframe when their parents did the same? To answer that I performed some research at the local library.
I found several Business Weeks from the 1970's time period. The conditions described in those magazines mirror our current conditions. I figured 1974 was a great time period to study because we are 5 years past the beginning of the Echo Boom flood into adulthood. And 5 years past the same period in Baby Boomer history would put us in 1974. Here's what I found in the 1974 issues:
Keep in mind this was a 1974 Business Week. Kinda scary, huh?
Are we at the start of the next Bull market? Or will we be forced to spend until 2012 to absorb these young rascals into our US economy? Time will tell...but keep an eye on your faithful canary in the mine shaft. :-)
Later Trades,
MT
The Baby Boomers were born between 1946 - 1964. They started college from 1964 - 1982. And assuming a five year average to complete their scholastic studies...they graduated in 1969 - 1987. While these figures provide insight...what we really need is to capture the center of the bell-shaped curve in this demographic segment.
Let's take the median of when the Boomers were born and that would be the 10th position in the yearly series which is 1955. These Boomers started college in 1973 and finished in 1978. Okay, we have a pretty good start here. But we still need to capture more of the meat in that bell curve. Try to find the heart of the demographic surge we really need to capture the standard deviation. But, that's too hard for this old country boy. I'm going to keep it simple and assume 1/3 from the median value both ways would give us what we need. With that in mind, we would obtain the following information:
Baby Boomers born: 1951 - 1958.
Baby Boomers Start College: 1969 - 1976.
Baby Boomers Finished College: 1974 - 1981.
Wow! Do these numbers freak you about just a bit? Back in 1969 thru 1981, the United States experienced a significant rise in young adults. I don't have the numbers on hand but I'm guessing probably a 20 million plus increase compared to levels from the prior generation. Granted all boomers did not attend college. But, from the years 1969 thru 1981, Boomers were flooding the US economy in more ways than one. Amazing that 1969 was the beginning year of when the glut of Baby Boomers turned 18 as well as the beginning tough times for the US Equities market. Equally amazing is that 1981 was when the majority of Boomers had finished college and flowed into the system. By that time the US had absorbed this new generation and the worst in numbers was behind them. In fact, the rapid expansion in commodities during the 70's due to these boomers coupled with a large, energetic, and young workforce....is it any wonder that 1982 was the start of the 18 year long bull market?
On to the Echo Boomers. You know, the kids of the Baby Boomers. I've written about them in past articles. These little darlings make up 1/3 of the US population just like their parents make up the other third. They already spend $170 billion per year. First to grow up with computers at home, cellphones, and the Internet. They also drink less, smoke less, and break the law less than prior generations. Teen pregnancy is also way down. These Echo Boomers were born from 1976 - 1995. Will attend college from 1994 - 2013. And will finish college in 1999 - 2018. The median year an Echo Boomer was born is 1985.5 and 1/3 both ways provides the following breakdown:
Echo Boomers born: 1982 - 1989.
Echo Boomers Start College: 2000 - 2007.
Echo Boomers Finished College: 2005 - 2012.
If the Baby Boomer numbers were amazing...these numbers should make the hair on the back of your neck stand up. Interesting bit of data in that the year 2000 marked the beginning of the glut of Echo Boomers into adulthood and at the same time the end of the 18 year bull market. Are we destined to follow the same fate from 2000 - 2012, when the Echo Boomers flood into adulthood as the 1969 - 1981 timeframe when their parents did the same? To answer that I performed some research at the local library.
I found several Business Weeks from the 1970's time period. The conditions described in those magazines mirror our current conditions. I figured 1974 was a great time period to study because we are 5 years past the beginning of the Echo Boom flood into adulthood. And 5 years past the same period in Baby Boomer history would put us in 1974. Here's what I found in the 1974 issues:
- Several articles discussing rising oil prices and the talks of a bubble in those prices.
- Rising commodity prices. In fact sugar, orange juice, silver, oil, cotton, and gold were the best performing assets in one issue.
- Another article discussed rising oil prices and the fact that solar, wind, and more importantly the Canadian Tar Sands would kick in to fulfill the demand. Especially because the oil's recent price now made mining the Tar Sands a viable option.
- Escalating higher education costs. Enrollment levels were increasing to levels never seen while state budgets were being cut. A situation that is happening now with our colleges.
- A real insightful article on oil tankers and the surprise that everyone is having in their declining market conditions. With oil prices at all-time highs...why would their market be so bad the article asks. The article goes on to say several company CEO's placed orders for new tankers several months ago and now wish they could cancel those orders. Rising fuel costs and oversupply were the factors blamed in the tankers poor market conditions.
Keep in mind this was a 1974 Business Week. Kinda scary, huh?
Are we at the start of the next Bull market? Or will we be forced to spend until 2012 to absorb these young rascals into our US economy? Time will tell...but keep an eye on your faithful canary in the mine shaft. :-)
Later Trades,
MT
Thursday, March 10, 2005
System Test Questions
Kaushik from the GalaTime blog asked for my thoughts on his recent Covered Call system tests. First, I'd like to say I'm honored by Kaushik's request. GalaTime is part of my daily reads. Kaushik covers the options trading arena and uncovers some interesting information in the options data he mines. And being a fellow Texan doesn't hurt. :-)
So, check out his site and in particular his recent Covered Calls articles...part I, part II, part III, and part IV. You'll find my comments in part IV of the series.
One last thing, sorry again for failed postings this week. This has been a very busy week at my other job. Hopefully after tonight, things will slow down a bit and I can get back to market research and blogging.
Until then...
MT
So, check out his site and in particular his recent Covered Calls articles...part I, part II, part III, and part IV. You'll find my comments in part IV of the series.
One last thing, sorry again for failed postings this week. This has been a very busy week at my other job. Hopefully after tonight, things will slow down a bit and I can get back to market research and blogging.
Until then...
MT
Monday, March 07, 2005
Very Sorry
Planned to write a nice little post on market history and boomers but encountered several problems at work that had to taken care of. Sorry about this. I hope to resolve everything in time tomorrow to write the post.
Thanks for your patience.
MT
Thanks for your patience.
MT
Nothing new
Sorry for no post this weekend. But, just got back from a trip to the Big D.
There were no new system buy or sell triggers this week.
Expect a new Cumulative Knowledge post tomorrow.
Later Trades,
MT
There were no new system buy or sell triggers this week.
Expect a new Cumulative Knowledge post tomorrow.
Later Trades,
MT
Thursday, March 03, 2005
Warren Buffett, the Greatest Trader?
It's about time someone wrote about how Warren Buffett truly achieves his eye-popping returns. Jim Altucher is the author of the new book, Trade Like Warren Buffett. I casually flipped through the book the other night at Barnes & Noble. A very thorough work Altucher has done and someday if I can catch up on my reading...I'll have to buy and read.
In the mean time, RealWorld Trading interviewed Altucher about Buffett and his new book. Read it here.
What I like most about the trading style Altucher outlined is Buffett's use of categories (Workouts, Generals, and Controls) to allocate his trading assets. The best part? While everyone thinks of Buffett as a long-term investor...50% of his profits came from the Workouts category. A category whose performance he described as "predictability coupled with a short holding period, produces quite decent annual rates of return." I guess, forever might not be his favorite holding period after all.
Also take note of the use of demographics in his trading. Buffett saw potential in a Gillette due to 3 billion people shaving everyday, thus a small blip in earnings would not impact the overall trend. Of course, other factors come into play. As Buffett is quoted...
Enjoy the interview!
MT
In the mean time, RealWorld Trading interviewed Altucher about Buffett and his new book. Read it here.
What I like most about the trading style Altucher outlined is Buffett's use of categories (Workouts, Generals, and Controls) to allocate his trading assets. The best part? While everyone thinks of Buffett as a long-term investor...50% of his profits came from the Workouts category. A category whose performance he described as "predictability coupled with a short holding period, produces quite decent annual rates of return." I guess, forever might not be his favorite holding period after all.
Also take note of the use of demographics in his trading. Buffett saw potential in a Gillette due to 3 billion people shaving everyday, thus a small blip in earnings would not impact the overall trend. Of course, other factors come into play. As Buffett is quoted...
- "The investor of today does not profit from yesterday's growth."
- "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
- "Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised."
Enjoy the interview!
MT
Monday, February 28, 2005
Cumulative Knowledge (02/27/2005)
I've written earlier about the Federal Reserve Chairman history. Read here. As we get closer to Greenspan's closing months as Fed Chairman...we are sure to be bombarded with hype, worries, gloom and doom as we play musical chairs with our nation's top economists. Thought it would be interesting to see what happened to the DJ-30 a month before, the month started, and one year after a new Fed Chairman begins his/her tenure.
Marriner Eccles (starting month: February; 1936 - 1948)
DJ-30 January 2, 1936 close: 144.10
DJ-30 February 3, 1936 close: 150.60
DJ-30 March 2, 1936 close: 154.10
DJ-30 February 1, 1937 close: 186.60
Thomas McCabe (starting month: April; served: 1948 - 1951)
DJ-30 March 1, 1948 close: 168.10
DJ-30 April 1, 1948 close: 177.60
DJ-30 May 3, 1948 close: 179.50
DJ-30 April 1, 1949 close: 176.30
William McChesney Martin (starting month: April; served: 1951 - 1970)
DJ-30 March 1, 1951 close: 252.80
DJ-30 April 2, 1951 close: 246.60
DJ-30 May 1, 1951 close: 260.70
DJ-30 April 1, 1952 close: 267.20
Arthur Burns (starting month: February; served: 1970 - 1978)
DJ-30 January 2, 1970 close: 809.20
DJ-30 February 2, 1970 close: 746.40
DJ-30 March 2, 1970 close: 780.20
DJ-30 February 1, 1971 close: 877.80
G. William Miller (starting month: March; served: 1978 - 1979)
DJ-30 February 1, 1978 close: 774.30
DJ-30 March 1, 1978 close: 743.30
DJ-30 April 3, 1978 close: 751.00
DJ-30 March 1, 1979 close: 815.80
* note Miller did not serve a full year.
Paul Volcker (starting month: August; served: 1979 - 1987)
DJ-30 July 2, 1979 close: 834.00
DJ-30 August 1, 1979 close: 850.30
DJ-30 September 4, 1979 close: 872.60
DJ-30 August 1, 1980 close: 931.50
Alan Greenspan (starting month: August; served: 1987-current)
DJ-30 July 1, 1987 close: 2409.80
DJ-30 August 3, 1987 close: 2557.10
DJ-30 September 1, 1987 close: 2610.97
DJ-30 August 1, 1988 close: 2130.51
Overall, the beginning of a Federal Reserve Chairman's tenure is much ado about nothing. Sure, there was Greenspan's awful performance leading to a -12% decline in his first year as Fed Chairman. But, by and large, most end their first year better than they started. In fact, based just on the numbers above...it looks as the first year of a Fed Chairman is a good thing for the market. Of course, I'm leaving out Benjamin Strong (1914-1928) and Ronald Ransom. My time series does not go back 1914 nor do I have Strong's starting month. And, I cannot find anything for Ronald Ransom's tenure.
Roger Nusbaum posted a blurb about Tom Dorsey's statement that almost every stock that reaches $90 then goes to $100. When I read this I just had to test the idea. The problem was a test of this type requires a time series that is not split-adjusted. Because, stocks that do get to $90 and follow on to $100...are most likely to split their stock...forever removing their original stock price from stock market history. Unless, as I said before, you have access to data pre-split. Despite not having this type of data...I figured there would be enough ETF's and possibly REIT's that did not split to provide some sort of test of the idea. To find out the results of the test, please read Roger Nusbaum's post and the comments posted here. Then follow on to Anumati's blog on his review of this type of confirmation bias at work. Anumati does a great job summarizing this type of bias here.
Let me say one more thing in regard to the $90 to $100 statement above. I do believe the results would improve by including those stocks that have split in the sample. But, is it a tradeable idea? That's a whole different ball game. My test was just to see if $100 was reached. There's many other things to consider in trying to turn the idea into an actual system. And I'll leave it at that.
A great post on gold by Donald Luskin from SmartMoney.com. Two best parts of the article are the following:
Indonesia is considering withdrawing from OPEC. Believes they are a net importer of oil and thus, no longer eligible. Read here.
Very interesting interview with Dennis Gartman here. I love his mention of Mark Twain's cat theory of investment. I absolutely love that theory! For those of you not familiar with it...here it is from Dennis himself:
An interview with Fox's Cashin guest, Wayne Rogers here. Nothing too insightful here but fans of the show might find it interesting.
Here's a news item that caught my eye. Tobacco growers may see a landfall of cash if the government decides to end the tobacco quota program. This could potentially cause domestic growers to get out of the tobacco business and prohibit new entrants into tobacco. I have no knowledge of this business...but pay attention to this sector due to my system investment in DMN.
Looks like the housing bubble is being primed again by the government. Read here. I don't think we need to worry about the housing bubble collapse until the government begins imposing rules to limit buying. I guess, that won't be anytime soon. Speaking of housing, here are some interesting statistics I've dug up:
Have a great week!
MT
Note: I'll post my system performance tomorrow. There were no system triggers for buys or sells this weekend.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Marriner Eccles (starting month: February; 1936 - 1948)
DJ-30 January 2, 1936 close: 144.10
DJ-30 February 3, 1936 close: 150.60
DJ-30 March 2, 1936 close: 154.10
DJ-30 February 1, 1937 close: 186.60
Thomas McCabe (starting month: April; served: 1948 - 1951)
DJ-30 March 1, 1948 close: 168.10
DJ-30 April 1, 1948 close: 177.60
DJ-30 May 3, 1948 close: 179.50
DJ-30 April 1, 1949 close: 176.30
William McChesney Martin (starting month: April; served: 1951 - 1970)
DJ-30 March 1, 1951 close: 252.80
DJ-30 April 2, 1951 close: 246.60
DJ-30 May 1, 1951 close: 260.70
DJ-30 April 1, 1952 close: 267.20
Arthur Burns (starting month: February; served: 1970 - 1978)
DJ-30 January 2, 1970 close: 809.20
DJ-30 February 2, 1970 close: 746.40
DJ-30 March 2, 1970 close: 780.20
DJ-30 February 1, 1971 close: 877.80
G. William Miller (starting month: March; served: 1978 - 1979)
DJ-30 February 1, 1978 close: 774.30
DJ-30 March 1, 1978 close: 743.30
DJ-30 April 3, 1978 close: 751.00
DJ-30 March 1, 1979 close: 815.80
* note Miller did not serve a full year.
Paul Volcker (starting month: August; served: 1979 - 1987)
DJ-30 July 2, 1979 close: 834.00
DJ-30 August 1, 1979 close: 850.30
DJ-30 September 4, 1979 close: 872.60
DJ-30 August 1, 1980 close: 931.50
Alan Greenspan (starting month: August; served: 1987-current)
DJ-30 July 1, 1987 close: 2409.80
DJ-30 August 3, 1987 close: 2557.10
DJ-30 September 1, 1987 close: 2610.97
DJ-30 August 1, 1988 close: 2130.51
Overall, the beginning of a Federal Reserve Chairman's tenure is much ado about nothing. Sure, there was Greenspan's awful performance leading to a -12% decline in his first year as Fed Chairman. But, by and large, most end their first year better than they started. In fact, based just on the numbers above...it looks as the first year of a Fed Chairman is a good thing for the market. Of course, I'm leaving out Benjamin Strong (1914-1928) and Ronald Ransom. My time series does not go back 1914 nor do I have Strong's starting month. And, I cannot find anything for Ronald Ransom's tenure.
Roger Nusbaum posted a blurb about Tom Dorsey's statement that almost every stock that reaches $90 then goes to $100. When I read this I just had to test the idea. The problem was a test of this type requires a time series that is not split-adjusted. Because, stocks that do get to $90 and follow on to $100...are most likely to split their stock...forever removing their original stock price from stock market history. Unless, as I said before, you have access to data pre-split. Despite not having this type of data...I figured there would be enough ETF's and possibly REIT's that did not split to provide some sort of test of the idea. To find out the results of the test, please read Roger Nusbaum's post and the comments posted here. Then follow on to Anumati's blog on his review of this type of confirmation bias at work. Anumati does a great job summarizing this type of bias here.
Let me say one more thing in regard to the $90 to $100 statement above. I do believe the results would improve by including those stocks that have split in the sample. But, is it a tradeable idea? That's a whole different ball game. My test was just to see if $100 was reached. There's many other things to consider in trying to turn the idea into an actual system. And I'll leave it at that.
A great post on gold by Donald Luskin from SmartMoney.com. Two best parts of the article are the following:
- If you'd held gold instead of dollars since 2000...the price of oil would be 5% cheaper instead of 50% higher.
- Luskin discusses just a bit about his public blow-up with Jim Cramer from RealMoney.com. For those of you unaware of the public fight between Cramer and Luskin's gold call...you can follow this EliteTrader thread for more info.
Indonesia is considering withdrawing from OPEC. Believes they are a net importer of oil and thus, no longer eligible. Read here.
Very interesting interview with Dennis Gartman here. I love his mention of Mark Twain's cat theory of investment. I absolutely love that theory! For those of you not familiar with it...here it is from Dennis himself:
- Mark Twain -- and I love this comment -- once said that a cat that sits upon a hot stove will never sit upon a hot stove again, nor upon a cold one either, because they all look hot.
- Also mentions baby boomers, railroads, producer companies, small local banks as investments, and more.
- Note: This interview was performed back in March 29, 2003
An interview with Fox's Cashin guest, Wayne Rogers here. Nothing too insightful here but fans of the show might find it interesting.
Here's a news item that caught my eye. Tobacco growers may see a landfall of cash if the government decides to end the tobacco quota program. This could potentially cause domestic growers to get out of the tobacco business and prohibit new entrants into tobacco. I have no knowledge of this business...but pay attention to this sector due to my system investment in DMN.
Looks like the housing bubble is being primed again by the government. Read here. I don't think we need to worry about the housing bubble collapse until the government begins imposing rules to limit buying. I guess, that won't be anytime soon. Speaking of housing, here are some interesting statistics I've dug up:
- Owner Occupied Housing increased 197% from 1970 to 1980 when the 80 million Baby Boomer generation were in their 20's.
- Rent Occupied Housing decreased -30% from 1970 to 1980 during the same time period.
- Owner Occupied Housing increased 18.3% from 1990 to 2000 while the nearly 80 million Echo Boomer generation were in their teens.
- Rent Occupied housing increased 7% during the same time period.
- One could concur that as the Echo Boomers age into their 20's that owner occupied housing could increase almost as much as the 197% increase that happened during the original boomers first home purchase buying spree.
- Almost 2/3's of the Echo Boomers live in California, Florida, and Texas.
- There is evidence the Echo Boomers are indeed late bloomers. Read here. I encourage all of you to read the article in full. But, if you get anything understand the following: The silent generation (Baby Boomer parents) considered their kids grown up at the age of 18. Baby Boomers do not consider someone an adult until age 26. Plus, high rent and housing costs have forced several echo kids into living with parents until enough money is saved for housing. And my speculation is many of the Baby Boomers second home purchases are for their Echo Boomer children.
Have a great week!
MT
Note: I'll post my system performance tomorrow. There were no system triggers for buys or sells this weekend.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Monday, February 21, 2005
Accumulated Knowledge (02/21/2005)
I'm changing up the content of the site a bit. I'll still discuss system trading and continue to post the weekly systems. And I'll continue to develop trading systems. In fact, I've been working on a research intensive trading idea for the past three weeks. Most likely, have another month or so in gathering the data for the system. Then I can start on actually processing the data. But, as far as the site...the frequency of posts and the actual content is going to change.
Due to time constraints, I'll switch from writing posts daily to weekly. Think of it as the beginning of a weekly newsletter. I will also focus more on the big trends that I believe will effect our investing lives over the next 10 years. More of a long-term view on the market and related factors. This will help me in gathering my thoughts on where we are headed. And hopefully, keep me focused on where the money will be made in the coming years. So, let's get started.
One investing theme I like to focus on is anything that involves forced increased spending. Recently the government is forcing the medical establishments hand in getting their records online. Here's a recent article on the governments push. Read here. The main stock I've been following that's taking advantage of this trend is Quality Systems Inc. (QSII). One reason for liking this company is their technology. Most companies in this sector are using some pretty old technology. Making their upgrade path an obstacle. QSII doesn't have this problem and could enable them to be out develop their peers. Here's some recent news on QSII's NextGen subsidiary here. With the likes of Kodak, IBM, Cisco, etc. all getting into this $60 billion a year market...watch out...it could get exciting. Add the 80 million aging baby boomers entering into the overburdened healthcare system and you've now got hospitals being forced to update their systems just for the sake of the numbers being processed through.
Just a wonderful interview on market history from Safe Haven here. John Taylor interviews Bob Hoye of Institutional Advisors. Some of the key points in the interview:
Speaking of bonds, bubbles, and long rates...read Jack's post on the Greenspan conundrum here. John Mauldin also provides some insight into the conundrum as well via Safe Haven.
Some stock picks from various advisors at the Orlando World Money Show from CBSMarketWatch.com. Read here.
Oil investors take note; the US rig count is near a 19-year high. Read here. Read here for the view that land drillers are considered undervalued to their deepwater brethren. And this article notes how the average offshore rig is 20 years old, it will take more rigs to recover oil at the same rate as now, and today's average well takes longer to drill and yields less oil/gas than a decade ago, all pointing to more rig building to come. Another article draws attention to the fact that no new refinery has been built in the US since 1976. I am long a land driller, so be forewarned.
Housing starts hit a 21-year high last Wednesday. The article points that rising rates will deflate the housing boom. I don't believe this will happen like people expect. I believe rising rates will at first inflate the housing boom even higher as investors scramble to lock-in the historical low mortgage rates. Something else will end up breaking housing's back. What that is...I don't know...but I believe everything is leading up to the tipping point in housing. Most likely just one small news item or event will be the trigger. Then we will all see it ever so clearly. But, until then...housing and land is hot, hot, hot. One thing to pay attention to is the 2nd home market. I think one very good proxy for this market is Jim Walter's Homes stock price. Notice the rocket-like rise in the past year of this home builder. When this building stock gets heated...you know the housing bubble is full-steam ahead.
And last but not least, one way to play the cash-rich oil company play is to go after what they might buy. A recent look through Monster.com provided the following clue. Back in the Y2K crunch, the majority of oil companies purchased SAP systems instead of upgrading their legacy systems. See an old article I wrote on the subject. Back then they didn't buy or upgrade to all the available SAP modules. Money and resources have been the issue. With the recent flow in cash coming back to the oil players...they just might decide to add to their SAP systems. I already know of one oil company doing just that. One thing to know is that most oil companies all follow the same line. Why that is...I have no idea. Maybe its the brother-in-law effect. Just kidding.
Anyway, back when Oracle bought PeopleSoft I really thought Oracle was buying into a declining business. The ERP sector is done. So, be careful in entering this sector. SAP sold off pretty badly due to the Orasoft fiasco. Everyone is waiting and watching what SAP will do or what some company will do to it (ie an IBM or Microsoft). Anyway, this lock on the cash rich oil industry just might be the ticket to increased earnings and attention. Note, I currently do not own SAP stock...but that could change at any time.
Ater reading this post and decide you need a little kick-back and relax time...check out the movie, Constantine. It's pretty good. Heck, I might have to go see it a second time.
Have a great and prosperous week!
Later Trades,
Michael Taylor
Weekly Systems
New System Triggers
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Due to time constraints, I'll switch from writing posts daily to weekly. Think of it as the beginning of a weekly newsletter. I will also focus more on the big trends that I believe will effect our investing lives over the next 10 years. More of a long-term view on the market and related factors. This will help me in gathering my thoughts on where we are headed. And hopefully, keep me focused on where the money will be made in the coming years. So, let's get started.
One investing theme I like to focus on is anything that involves forced increased spending. Recently the government is forcing the medical establishments hand in getting their records online. Here's a recent article on the governments push. Read here. The main stock I've been following that's taking advantage of this trend is Quality Systems Inc. (QSII). One reason for liking this company is their technology. Most companies in this sector are using some pretty old technology. Making their upgrade path an obstacle. QSII doesn't have this problem and could enable them to be out develop their peers. Here's some recent news on QSII's NextGen subsidiary here. With the likes of Kodak, IBM, Cisco, etc. all getting into this $60 billion a year market...watch out...it could get exciting. Add the 80 million aging baby boomers entering into the overburdened healthcare system and you've now got hospitals being forced to update their systems just for the sake of the numbers being processed through.
Just a wonderful interview on market history from Safe Haven here. John Taylor interviews Bob Hoye of Institutional Advisors. Some of the key points in the interview:
- Bob believes we're in a cyclical bull within a secular bear market. The cyclical bull began in 2002 and Bob believes the top occurred at the end of 2004.
- Bob believes a new financial era begins with a huge ramp-up of inflation in the old era stuff followed by a crash in those commodities that will then begin the setup for the new financial era. After a crash in the new financial era...a long contraction ensues. Every bubble Bob studied, the senior currency became strong. So, Bob believes the US Dollar will rise instead of fall.
- I like Bob's statement in Barron's that "the world is long inflation and short the dollar."
- Interesting that Bob found in every post-bubble the senior currency become strong and gold became strong. Which goes against what has been happening lately with the gold declining on dollar rallies.
- Believes we are in year 5 of a 20 year bull market for gold.
- Take note of his remarks on Jim Rogers and Rogers view on commodities being in a bull market.
- Also read the blurb on Kudlow, Rubin, and Summers.
- Overall, just a great lesson in economic history. An article to read again and again and save for the future."
Speaking of bonds, bubbles, and long rates...read Jack's post on the Greenspan conundrum here. John Mauldin also provides some insight into the conundrum as well via Safe Haven.
Some stock picks from various advisors at the Orlando World Money Show from CBSMarketWatch.com. Read here.
Oil investors take note; the US rig count is near a 19-year high. Read here. Read here for the view that land drillers are considered undervalued to their deepwater brethren. And this article notes how the average offshore rig is 20 years old, it will take more rigs to recover oil at the same rate as now, and today's average well takes longer to drill and yields less oil/gas than a decade ago, all pointing to more rig building to come. Another article draws attention to the fact that no new refinery has been built in the US since 1976. I am long a land driller, so be forewarned.
Housing starts hit a 21-year high last Wednesday. The article points that rising rates will deflate the housing boom. I don't believe this will happen like people expect. I believe rising rates will at first inflate the housing boom even higher as investors scramble to lock-in the historical low mortgage rates. Something else will end up breaking housing's back. What that is...I don't know...but I believe everything is leading up to the tipping point in housing. Most likely just one small news item or event will be the trigger. Then we will all see it ever so clearly. But, until then...housing and land is hot, hot, hot. One thing to pay attention to is the 2nd home market. I think one very good proxy for this market is Jim Walter's Homes stock price. Notice the rocket-like rise in the past year of this home builder. When this building stock gets heated...you know the housing bubble is full-steam ahead.
And last but not least, one way to play the cash-rich oil company play is to go after what they might buy. A recent look through Monster.com provided the following clue. Back in the Y2K crunch, the majority of oil companies purchased SAP systems instead of upgrading their legacy systems. See an old article I wrote on the subject. Back then they didn't buy or upgrade to all the available SAP modules. Money and resources have been the issue. With the recent flow in cash coming back to the oil players...they just might decide to add to their SAP systems. I already know of one oil company doing just that. One thing to know is that most oil companies all follow the same line. Why that is...I have no idea. Maybe its the brother-in-law effect. Just kidding.
Anyway, back when Oracle bought PeopleSoft I really thought Oracle was buying into a declining business. The ERP sector is done. So, be careful in entering this sector. SAP sold off pretty badly due to the Orasoft fiasco. Everyone is waiting and watching what SAP will do or what some company will do to it (ie an IBM or Microsoft). Anyway, this lock on the cash rich oil industry just might be the ticket to increased earnings and attention. Note, I currently do not own SAP stock...but that could change at any time.
Ater reading this post and decide you need a little kick-back and relax time...check out the movie, Constantine. It's pretty good. Heck, I might have to go see it a second time.
Have a great and prosperous week!
Later Trades,
Michael Taylor
Weekly Systems
New System Triggers
- Closing AATK (PennyLag) long position at Monday's Market Open.
- Closing DDDC (PennyLag) long position at Monday's Market Open.
- none.
Current Open Systems
| Symbol | System | Entry Date | Exit Date | Profit/Loss% |
| QQQQ | SimpleUp | 1/4/2005 | open | -1.58% |
| AATK | PennyLag | 1/5/2005 | open | -38.49% |
| HAUP | PennyLag | 1/7/2005 | open | -22.08% |
| DDDC | PennyLag | 1/18/2005 | open | +25.50% |
| DCTH | PennyLag | 1/24/2005 | open | -3.63% |
| APLX | PennyLag | 2/7/2005 | open | +13.55% |
| Total | -26.73% |
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Sunday, February 20, 2005
Monday, February 14, 2005
Peak Oil, Hospitals, and Market Wisdom
Ran across this rant over at EliteTrader today. Discussion is about peak oil, the sky is falling, I'm right, you're wrong. I always enjoy reading these types of discussions. The participants always get caught up in proving one's self worth and in the process give up some really good insight that could make you a buck or two in the market.
My father-in-law was in the hospital over the weekend and after spending a few hours there...I believe I saw a bit of the future. The hospital was different than most of the hospitals I've been to. They had a nice little restaurant, gift shop containing gifts you'd actually buy, and the entire hospital smelled like a beauty salon. It almost gave you the feeling you were in the mall. And with almost 80 million baby boomers coming into the age of aches and pains...I can see where hospitals will evolve from the traditional diagnose, treat, and release...to providing a level of service never seen before. I wouldn't doubt there would be a local Walgreens in the hospital, food courts, and possibly a movie theater in the future.
Some stats supporting this belief of mine are from a recent BusinessWeek article stating some 22.4 million U.S. households care for someone over the age of 65. In fact, the number of Americans expecting to care for an aged relative is up 25% from 1997. With more people and time spent in hospitals...the greater level of service and amnenities hospitals will need to provide.
Forgive me if hospitals already have these features in your neck of the woods. If so, please enlighten this backwoods boy from Texas. :)
For your information my father-in-law is okay...he passed his heart tests with flying colors. He was able to go home today and you can bet he's already feeling much better. But, please say a prayer or two for my Dad who is undergoing an esophagus test tomorrow morning.
I've recently made a purchase in the oil drillers sector and oil service sector. This is from my 5% of equity "play" money allocation. I've actually been beating my head against the wall for not doing this much earlier in the year...but part of the problem is all my money was tied up in my trading systems. And of course the other part was analysis paralysis. My arch nemesis. :)
Finally some words of wisdom since I seem to have none.
"The man who follows the crowd will usually get no further than the crowd. The man who walks alone is likely to find himself in places no one has ever been." -- Alan Ashley-Pitt
"Be extremely skeptical, and stay with what you know. The great success stores in life are people who figure out what they know, stay with it, put their eggs in that basket and watch it carefully." -- Jim Rogers (Managed the Quantum Fund to a 3,400% gain in 10 years)
"Someone's sitting in the shade today because someone planted a tree a long time ago." -- Warren Buffett
My father-in-law was in the hospital over the weekend and after spending a few hours there...I believe I saw a bit of the future. The hospital was different than most of the hospitals I've been to. They had a nice little restaurant, gift shop containing gifts you'd actually buy, and the entire hospital smelled like a beauty salon. It almost gave you the feeling you were in the mall. And with almost 80 million baby boomers coming into the age of aches and pains...I can see where hospitals will evolve from the traditional diagnose, treat, and release...to providing a level of service never seen before. I wouldn't doubt there would be a local Walgreens in the hospital, food courts, and possibly a movie theater in the future.
Some stats supporting this belief of mine are from a recent BusinessWeek article stating some 22.4 million U.S. households care for someone over the age of 65. In fact, the number of Americans expecting to care for an aged relative is up 25% from 1997. With more people and time spent in hospitals...the greater level of service and amnenities hospitals will need to provide.
Forgive me if hospitals already have these features in your neck of the woods. If so, please enlighten this backwoods boy from Texas. :)
For your information my father-in-law is okay...he passed his heart tests with flying colors. He was able to go home today and you can bet he's already feeling much better. But, please say a prayer or two for my Dad who is undergoing an esophagus test tomorrow morning.
I've recently made a purchase in the oil drillers sector and oil service sector. This is from my 5% of equity "play" money allocation. I've actually been beating my head against the wall for not doing this much earlier in the year...but part of the problem is all my money was tied up in my trading systems. And of course the other part was analysis paralysis. My arch nemesis. :)
Finally some words of wisdom since I seem to have none.
"The man who follows the crowd will usually get no further than the crowd. The man who walks alone is likely to find himself in places no one has ever been." -- Alan Ashley-Pitt
"Be extremely skeptical, and stay with what you know. The great success stores in life are people who figure out what they know, stay with it, put their eggs in that basket and watch it carefully." -- Jim Rogers (Managed the Quantum Fund to a 3,400% gain in 10 years)
"Someone's sitting in the shade today because someone planted a tree a long time ago." -- Warren Buffett
Sunday, February 13, 2005
Accumulated Knowledge (02/13/2005)
Sorry for the lack of posts...but I've been doing some research on the local real estate market. And getting some much needed help and insight from Jack and his Old Merrill Pal over at Stocks and Bonds?. If you haven't checked out the Stocks and Bonds? blog...you owe it to yourself to do so. He covers a range of topics from stocks, bonds, real estate, the economy, market history, the list goes on. I'm not kidding in saying Jack has forgotten more than I will ever know. Check it out!
A recent interview from Valero's CEO, Bill Greehey. Looks like 2005 will be another bang up year for the company. I never got around to doing a complete study on the oil refinery business...but do know that the horrific narrowing of the crack spreads seem to be at the refineries back. In addition, any refinery that has taken advantage of heavy crude processing is in the sweet spot. Plus, I stop every day to grab a coffee from one of their Diamond Shamrock stores. :)
A comeback for IO? Their new seismic system sounds interesting. They just need the exploration market to kick into high gear. And to overcome the recent lawsuit.
I can't help but think there's more than a few opportunities presenting themselves in the heartlands these days. Read here on the recent initiatives to keep residents from blowing away. Combine this problem with the recent news here and here on Bush's aim towards cutting government subsidies for grain farmers and you've got a bottom in the making. Ya think?
Interesting article on School Reform and the turnaround background on the NYPD. Read here.
Looking for a good movie or two to see? You must check out In Good Company and Meet the Fockers. If you're a dad with a daughter...then you absolutely have to see In Good Company. Just be prepared to be pulled at the heartstrings. :)
Have a good week everyone!
Daily Systems
New System Triggers
Weekly Systems
New System Triggers
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
A recent interview from Valero's CEO, Bill Greehey. Looks like 2005 will be another bang up year for the company. I never got around to doing a complete study on the oil refinery business...but do know that the horrific narrowing of the crack spreads seem to be at the refineries back. In addition, any refinery that has taken advantage of heavy crude processing is in the sweet spot. Plus, I stop every day to grab a coffee from one of their Diamond Shamrock stores. :)
A comeback for IO? Their new seismic system sounds interesting. They just need the exploration market to kick into high gear. And to overcome the recent lawsuit.
I can't help but think there's more than a few opportunities presenting themselves in the heartlands these days. Read here on the recent initiatives to keep residents from blowing away. Combine this problem with the recent news here and here on Bush's aim towards cutting government subsidies for grain farmers and you've got a bottom in the making. Ya think?
Interesting article on School Reform and the turnaround background on the NYPD. Read here.
Looking for a good movie or two to see? You must check out In Good Company and Meet the Fockers. If you're a dad with a daughter...then you absolutely have to see In Good Company. Just be prepared to be pulled at the heartstrings. :)
Have a good week everyone!
Daily Systems
New System Triggers
- none.
- Closed MGF (BreakUp) on the previous Monday's open at +1.20% profit.
Weekly Systems
New System Triggers
- none.
- none.
Current Open Systems
| Symbol | System | Entry Date | Exit Date | Profit/Loss% |
| QQQQ | SimpleUp | 1/4/2005 | open | -0.66% |
| AATK | PennyLag | 1/5/2005 | open | -26.19% |
| HAUP | PennyLag | 1/7/2005 | open | -25.00% |
| DDDC | PennyLag | 1/18/2005 | open | +60.50% |
| DCTH | PennyLag | 1/24/2005 | open | -6.95% |
| APLX | PennyLag | 2/7/2005 | open | +13.98% |
| Total | +15.68% |
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Sunday, February 06, 2005
Weekend Update (02/06/2005)
Looking at another house on Monday. Wish me luck.
Have a good week!
Daily Systems
New System Triggers
Weekly Systems
New System Triggers
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Have a good week!
Daily Systems
New System Triggers
- Close MGF (BreakUp) long position at Monday's market open.
- none.
| Symbol | System | Entry Date | Exit Date | Profit/Loss% |
| MGF | BreakUp
| 1/19/2005 | open | +1.35% |
|
|
|
| Total | +1.35% |
Weekly Systems
New System Triggers
- Initiate APLX (PennyLag) long position at Monday's market open.
- Closed CARN (PennyLag) long position at +1.51% profit.
Current Open Systems
| Symbol | System | Entry Date | Exit Date | Profit/Loss% |
| QQQQ | SimpleUp | 1/4/2005 | open | -0.53% |
| AATK | PennyLag | 1/5/2005 | open | -24.60% |
| HAUP | PennyLag | 1/7/2005 | open | -8.77% |
| DDDC | PennyLag | 1/18/2005 | open | +30.75% |
| DCTH | PennyLag | 1/24/2005 | open | -0.03% |
|
|
|
| Total | -3.18% |
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Thursday, February 03, 2005
Interest Rates Article
Fantastic article on interest rate increases and their historical effects by Gary Carmell via Safe Haven. He puts together a pretty good "variant perception" of what could happen to the bond market this year. Not sure if I agree with his conclusion but his observations are hard to ignore.
Gary points out that only 4 out of 56 economists believe the 10-year Treasury security will end 2005 at 4.50% or lower.
His chart reflecting Japan's interest rates from 1983 - 2004 and U.S. commercial paper rates from 1921 - 1943 is pretty cool.
Gary has studied over 150+ years of interest rate history and offers the following:
Daily Systems
New System Triggers
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Gary points out that only 4 out of 56 economists believe the 10-year Treasury security will end 2005 at 4.50% or lower.
His chart reflecting Japan's interest rates from 1983 - 2004 and U.S. commercial paper rates from 1921 - 1943 is pretty cool.
Gary has studied over 150+ years of interest rate history and offers the following:
- During the first half of an economic expansion interest rates fall 67% of the time (56% since World War II) and increase 83% of the time (89% post WW-II) during the second half.
- As we transition to recessions rates have risen 80% of the time (70% post WW-II) during the first half and have fallen 97% of the time (100% post WW-II) during the second half of the recession.
- Thus, recoveries are aided by dropping interest rates and recessions are typically induced by higher rates.
- Between June 1857 and December 1945, the U.S. was in a recession approximately 44% of the time, or every 27 months with the average duration being 22 months.
- Since 1946 the recession frequency has dropped to 16%, or every 57 months with an average duration of 11 months.
- Our current expansion has lasted 37 months. If recent history is any guide, then we have approximately two years before our next recession.
Daily Systems
New System Triggers
- none.
- Closed FO (BreakUp) back on Tuesday's market open with a +4.88% profit.
| Symbol | System | Entry Date | Exit Date | Profit/Loss% |
| MGF | BreakUp
| 1/19/2005 | open | +1.05% |
|
|
|
| Total | +1.05% |
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.
Wednesday, February 02, 2005
Grandpa, Cotton, and the Fed Chairman
Usually, I post stock market information...but this link is about commodities. Cotton in particular. I've never traded the futures market. But, I do have a bit of a commodities bug in me. I believe I got it from my grandfather. A man I never met and from the stories told...a man I sure would've liked to have known. He was a cattle rancher and farmer...cotton being one of his favorite crops. I sure wish the new seed technologies would have been around when he was breaking his back in cotton. Read cotton article here. Key points below:
Later Trades...
- The Texas cotton harvest is expected to be 7.5 million bales, best since at least 1949. The United States, largely because of the Texas crop, expects a record, too. Worldwide, cotton harvests in many countries will hit records. "Nobody had a crop failure to speak of," says Shawn Wade of the Plains Cotton Growers, which represents West Texas growers.
- A decline in the water table and its quality could have a long-term effect on West Texas cotton growers.
- Genetic engineering of seeds has meant farmers can plant varieties that are drought-resistant or that can thrive in colder areas. The genetic engineering that produces such seeds is one reason U.S. cotton harvests have become more plentiful. "We used to have one seed, and now we have 5,200 varieties," says Candice Poteet, executive vice president of the Texas Cotton Association in Dallas, which represents cotton merchandisers. "If you're planting in an area prone to high winds, you can plant a hearty variety with a thicker stalk."
- That, plus technology such as irrigation, cotton strippers and chemical fertilizers, have helped turn cotton into one of the nation's most successful crops. "Today, we can harvest more cotton in one day than my daddy could in a whole season," says David Jones, 68, a cotton farmer who lives south of Lubbock.
- The USA is the world's largest cotton exporter; China, the largest importer.
- Martin Feldstein, Harvard professor & president of the National Bureau of Economic Research
- Glenn Hubbard, former head of Bush's Council of Economic Advisors
- Lawrence Lindsey, a former Federal Reserve Governor
- John Taylor, undersecretary of the Treasury for international affairs
- Ben Bernanke, fed governor
- Roger Ferguson, fed vice chairman
- Donald Kohn, fed governor
Later Trades...
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