Posts by Jeff Macke
- Jeff Macke at Breakout15 hrs ago
Five years after a real estate bubble popped in epic fashion, it seems Americans are looking to get back in the trade. According to a recent Gallup poll, 30% of us say real estate is the best long-term investment. Gold and stocks were ranked as the second most popular investments at 24%.
The results are a far cry from the peak popularity of housing back in 2002, but are still eye-popping in light of the magnitude of the housing collapse just 6 years ago. In the attached clip Yahoo’s Phil Pearlman says America’s passion for investing in whatever seems to be rising at the moment may have given us collective amnesia, but other forces are at work as well.
“Part of this is confirmation bias,” explains Pearlman. Most people didn’t sell in 2007. Those who managed to hang on are still in tangible possession of a physical asset in the form of their house. Intuitively any asset that managed to survive the last decade of craziness in America can’t be all bad, can it?
A Contrarian Indicator
- Jeff Macke at Breakout18 hrs ago
Human beings may be apex predators with senses we can’t begin to articulate, but we are simply terrible at calculating odds. We wager too heavily on underdogs, line up like sheep to play Powerball and have collectively built one of the glitziest cities in the world right smack in the middle of the Mojave desert by playing games with odds openly stacked against us.
Couple that with our insatiable desire to feel smarter than our peers and you have the primary motivations for trading glorified penny stocks. Jonathan Hoenig of CapitalistPig marvels at the gullibility of otherwise savvy individuals.
“Maybe it’s an ego trip or something, but people love the idea of owning 10,000 shares of a terrible $2 or $3 stock.” Hoenig says in the attached clip. Like most born traders Hoenig sticks to probabilities. As he sees it, if a stock has managed to drop below $4 a share there’s probably a very good reason, and it’s not the foolishness of every single other person in the stock market not understanding the fundamentals as well as you do.
Making the list today as measured by your Yahoo Finance Ticker searches are...
Goldman Sachs (GS): The vampire squids crushing it on earnings, sending the stock higher today. Lloyd's boys were able to beat street estimates due to strong investment banking and investment management results. Despite today's bounce, being Masters of the Universe doesn't pay as well as it used to; Goldman's shares are down some 20% for the year. Even today's rally is tainted by the fact that net income actually shrank year over year. More humiliating still, Goldman actually resorted to cutting compensation to help goose the numbers.
After looking poised to suffer a major breakdown on Monday, stocks have spent the last couple sessions trading in a manner best characterized as being somewhere between irrational terror and inexplicable euphoria. At this point all the bulls and bears can seem to agree on is that the market seems just a little crazy.
When the world of finance starts speaking in the language of self-help it's time to tune out your emotions and study the charts. National treasure and friend of Breakout Louise Yamada of LY Advisors is here to tell us what the technicals are saying about the market's mental health.
“4,000 for the Nasdaq (^IXIC) is critical because that was the February low,” explains Yamada in the attached video. “If you really go below that on a sustainable basis you’ve been in a lower floor for the first time in this progression.”
She’s referring to the entire five-year rally since the famous lows made in March of 2009. Obviously such a dramatic trend break would be troubling to bulls.
Shares of RadioShack (RSH) have been getting hammered lately, even by its standards. The stock is down more than 20% in five days and today we found out why. According to the Wall Street Journal RadioShack management is in tense negotiations with lenders over the company's plan to close as many as 1,100 of its 4,300 US stores.
RadioShack announced its store reduction plan in March when it revealed a $191 million loss for the holiday quarter. The plan was the closures would allow the company to focus on its new prototype stores. Now lenders are claiming RadioShack's credit aggreements only allow the company to close 200 stores without agreement from debt holders.
Activist investing has come a long way since Gordon Gekko was explaining the merits of greed to shareholders of the fictional Teldar Paper in 1987. Then it was all about “greenmail” and hot tips but today activist investing is characterized by billionaire investors lecturing CEOs on the art of creating shareholder value.
In the attached clip Jason Trennert of Strategas says the activist investing trend is still picking up steam. “Activist strategies within the hedge fund complex have been among the best performing. As a result they’re attracting enough capital so that it really matters.”
With less than two hours to go in the trading session on Tuesday it looked like we might be watching the death throes of the five-year old bull market. The S&P500 (^GSPC) was down over 1%, the Nasdaq (^IXIC) was collapsing below support at 4,000 and there seemed as if the last of the dip buyers had finally run out of cash.
Just when all seemed lost the market staged one of the snapback reversals that have been the defining characteristic of 2014 thus far. Cynics would suggest there was something artificial (read: “rigged”) about the start of the rally but that didn’t make it less impressive. Paul Schatz of Heritage Capital says yesterday wasn’t the bottom for stocks in the big picture but says the trading set-up clearly favors the bulls.
“It’s a trading bottom,” opines Schatz in the attached video. “To me it’s pretty clear: if you close below the lows of the reversal day you’re clearly wrong and you get out but I think there’s enough indication to at least warrant a trading rally.”
Hope springs eternal as stocks came roaring back from steep mid-day losses yesterday. Is the worst behind us? Maybe, but I doubt it. Picking exact lows and peaks is a sucker's game. Your job is to manage your emotions and look for opportunities. Here are three things you need to know and a strategy to handle the pain:
1. The selling will probably get worse. So far the fact that the tech and social media stocks have been pole-axed without taking the broader market with them is impressive, but it probably won't last. Selloffs don't end until the idea of a "rotation" is replaced with panic. We aren't there yet. Running away from a tech selloff by getting long shares of a bank stock is like running away from an oncoming train. The S&P500 is every bit as at risk as the Nasdaq, like it or not.
2. For the S&P 500 (^GSPC), Purple Crayon Support doesn't come in until about 1,740. That's about 3.6% lower and where we bottomed in February.
- Jeff Macke at Breakout3 days ago
On December 9th of last year the U.S. Treasury sold its final 31.1 million shares of General Motors (GM) stock, coming just a year after Treasury announced plans to exit its 500 million share position in the once bankrupt car company. According to a timeline created by NPR, the Treasury department sold out less than one month before GM executives linked a faulty ignition switch to 31 crashes and at least 13 fatalities.
Treasury’s decision to dump its entire stake in GM allowed it to avoid $262 million in potential losses.
Nine days later in New York former SAC trader Michael Steinberg was convicted on multiple counts of insider trading shares of Dell. Steinberg will be sentenced later this month and is facing up to 85 years in prison. Steinberg’s crime was trading based on a chain of evidence including ex-employees and an analyst with a different firm who reportedly had close ties to the company.
- Jeff Macke at Breakout4 days ago
Earnings season only started last week but according to John Butters of FactSet much of the suspense is already ruined, at least in terms of what we expect to hear from particular sectors. In the attached clip, Butters says that the ten major sectors will be split evenly between winners and losers but the spread between the have and have nots will be huge.
“Your top performers are going to be the telecom services sector with growth of about 24.5% and the utility sector with growth of about 6.7%. They’re really the two standouts when it comes to growth this quarter.”