Tuesday, August 30, 2011
One article is published on SeekingAlpha.com today:
- 5 Reasons Emerging Markets May Not Live Up To Expectations: The widely expected growth of emerging markets could be already baked into the price, and investors will suffer if these markets fail to deliver.
Saturday, August 27, 2011
Wednesday, August 24, 2011
Monday, August 22, 2011
One article is published on SeekingAlpha.com today:
- One More Thing Investors Need To Know About REITs: Low interest rates are not the only thing that determines the fate of REITs. They depend on functioning capital markets to stay afloat.
Saturday, August 20, 2011
Friday, August 19, 2011
RIMM, the most desperate hi-tech company, the loser in the the smart phone war, the orphan of the patent enclosure, rallied 20% from its bottom and stayed there when S&P 500 dropped another 5% this week. Considering it is still 65% off its May top, its latest strength is deafening. This is the so called "Garbage Effect" I wrote before. I've also predicted this to happen months ago in a tweet.
In short, the "Garbage Effect" is that a rising tide lift all boats. But garbage is lifted first than any boats, because garbage is the lightest stuff. If RIMM is rising, it means the tide is about to turn. Buy garbage to profit from the tide's reversal. Big caps and quality names will move much slower and will be lagging far behind.
Thursday, August 18, 2011
While all the comments are negative to my latest SeekingAlpha article "Why Market Peak May Have Passed for Gold and Its Miners", Barron's posted a blog that provided another piece of evidence on the flagging demand for gold "Global Gold Demand Drops In Q2 As ETF Investments Fall". This is really an interesting experience.
One article is published on SeekingAlpha today:
- Why Market Peak May Have Passed for Gold and Its Miners: Gold miners’ diminishing return on asset (ROA) could indicate flagging demand for the precious metal.
Saturday, August 13, 2011
The Sector Rank Spread made an all time high this week, though we only have less than four month history. It is an encouraging sign that the tendency of sector rotation edged up which signified that the bull market may still have legs.
Friday, August 12, 2011
One article published on SeekingAlpha.com today:
- Hide in the Semiconductor Industry's Thick Pile of Cash With This ETF: By our calculation, semiconductor companies are hoarding a thick pile of cash that is equal to 21% of their stock prices. That’s where investors want to hide when future is uncertain.
Thursday, August 11, 2011
The S&P 500 recovered all its yesterday's loss, while the Big Money Index only recovered a fraction of that. As a result, the negative divergence between S&P 500 and BMI keeps going. This is a more encouraging sign that the market may have bottomed.
Wednesday, August 10, 2011
As mentioned before, the Big Money Index is now a lagging indicator, meaning if there is any negative divergence between BMI and S&P 500, the market may follow S&P 500 and it usually marks important turning point of the market. As of today, there is a tiny negative divergence: BMI made a lower low but S&P still held above its most recent lows. If it prevails, S&P 500 will turn here and move up. Anyway, it is still developing. Investors want to pay close attention to it down the road.
Readers of my SeekingAlpha articles may be familiar with the simple long XLE / short XLF strategy I've been advocated for months. As the pair XLE:XLF is now on the long term up trend line, forming a double bottom and bouncing up, it may be a good time to load up the pair. Nonetheless this is a pure technical call trying to time the market.
Monday, August 8, 2011
Barron's reported that "AIG is planning to sue Bank of America to recover more than $10 billion in losses that the insurer incurred over mortgage-backed securities". Pieces of proof are just piling up for a double dip mortgage crisis.
Saturday, August 6, 2011
Friday, August 5, 2011
As a nice follow-up of yesterday's post where I mentioned the widening OIS-Libor spread, this morning Bank of American reported that its Fannie, Freddie exposure may be worse than anticipated. This sounds a lot like a double dip mortgage crisis. I believe it is the unknown unknown that alarmingly but quietly drove up the OIS-Libor spread and is not covered in the media and embedded into investors' mentality, necessary conditions for a perfect storm.
Thursday, August 4, 2011
The stock market is like a rubber band. When stretched, it either snap back or is broken. I think it's broken today though many think today is capitulation. Hopefully I'm wrong.
One piece of news concerned me is European banks collapsed today and European Central Bank restarted its bound buying program. I noticed that the TED spread and the OIS-Libor spread both widened significantly lately, which usually means there is a major credit risk down the road. European banks could be it and as far as I know it isn't covered in the media and is beyond imagination of most investors --- necessary conditions for a perfect storm.
Many investors are still hoping for QE3 that, they think, will save the world. But if there is a major risk down the road, the Fed will be careful to save its few bullets, if not the last one. It may take a couple more crashes like today before the Fed jump in. Investors want to act after, not before, the Fed, because the market drops fast, very fast.
Barring QE3, there isn't anything I can imagine that will turn over the economy. Then investors have to be patient to wait for an organic recovery which will be signaled by an exhaustion round bottom. Count years, not days, for this.