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Computer Task Group Inc. Message Board

commandor58 73 posts  |  Last Activity: May 2, 2016 12:27 PM Member since: Dec 7, 2005
  • Reply to

    Within ISM's April Index

    by commandor58 May 2, 2016 10:54 AM
    commandor58 commandor58 May 2, 2016 12:27 PM Flag

    Continuing on this theme, the DXY got as low as 92.57 and new 1+ year low. However, 92.57 is very close to last August's low of 92.62-so really making a double bottom. In the short run, I do think the DXY is going higher, as the FED has been stingy with monetary aggregates the last 3 weeks, sending commodities lower for a time.

    After a few weeks of soft macro data, the FED will be "forced" to add liquidity in size again as soft macro data and falling commodity prices will stir deflationary fears. Net/net I think the market is setting up for a very strong 2ndH-to new highs-as a weaker $ filters through the economy positively around the world such that one benefit will be increasing earnings estimates for the Dow 30 and S&P 500 for 2016 and 2017-those estimates are still falling now.

  • commandor58 by commandor58 May 2, 2016 10:54 AM Flag

    Exports were at 52.5, up from March's 52 and at an 18 month high-the weaker $ is starting to help mfgrs. Also of note, Euro-zone GDP was higher than the US, .6% vs .5% and the Euro-zone's April Mfg PMI was higher than the US, 51.7 vs 50.8-so the weaker Euro all last year and into early this year did what it was supposed to to.

    Now the the shoe is on the other foot, the US has the weakening currency, so with a time lag, US mfging is going to pick up. This trend will favor industrials and tech as long as that tech is not old tech selling into the enterprise space in direct competition with the cloud. As an example not to buy, BRCD warned today. However, the stuff to buy is the continued build out of broadband both wireline and wireless.

  • Reply to

    Another way to show the FED has "eased"

    by commandor58 Apr 12, 2016 11:58 AM
    commandor58 commandor58 Apr 29, 2016 12:02 PM Flag

    Should the DXY stay below 94-next big resistance area is 92.50 (8/15 intraday low)-we should see "evidence" that the US economy is getting stronger. With the reflation trade (higher commodities) providing financial relief for many companies and countries, their increased casfhflow should lead to higher "spend" soon-perhaps some hiring.

    At this time the Atlanta FED has 2ndQ GDP up 1.8%, which is below consensus of 2.5%, but better than the 1st Q. By the 3rd Q, GDP should be greater than 2%. Soon, I should see coincident indicators, like steel production, RR car loadings ,trucking indexes etc, turn up to follow higher commodity prices. When that happens, small cap tech should get the excitement that gold/silver are getting now as the psychology around small cap tech is similar today as it was around gold/silver stocks last Dec/Jan.

    The rest of the world may not care until Aug/Sept, so there will still be lots of time after many of these companies report 1stQ numbers that maybe bleak. But most of my research suggests that; at least for the broadband buildout theme, both wireline and wireless; that capX spend will be getting stronger each Q over Q this year.

    As has been my theme for over a year, the FED has to "back" the whole process by increasing monetary aggregates. Since the FED has net/net not the last 3 weeks, I think prudent to raise cash net/net with the ideas that the S&P 500 could roll over back under 2000. Then, after a few bad macro numbers, the FED will be back in the game of adding liquidity.

  • Reply to

    Another way to show the FED has "eased"

    by commandor58 Apr 12, 2016 11:58 AM
    commandor58 commandor58 Apr 29, 2016 9:17 AM Flag

    DXY hit 93.18 this morning a nine month low-however it is not because the FED has been adding lots of liquidity. It is more of many traders got caught on the wrong side of the trade when the BOJ did nothing-expecting the Yen to go weaker, but now forced to cover sending the Yen stronger. Also, the Eurozone printed some good GDP numbers today-strengthening the Euro.

    It light of that, I will take more gains on gold/silver today as gold is having trouble breaking above the March high of $1288. The lower DXY will be good for tech stocks later in the year, so I have been buying PCTI, KTCC and VIRT because of the strong KCG earnings.

  • Reply to

    Nominal GDP

    by commandor58 Apr 25, 2016 1:23 PM
    commandor58 commandor58 Apr 25, 2016 4:38 PM Flag

    Consistent with the theme, that if interest rates are forced, by bond vigilantes, to normalize once inflation becomes a problem (3% or otherwise) bond losses will be massive.

    If I have the numbers correct, there is currently about $48 trillion in government debt outstanding with an average interest rate of 1.38%, the all-time low yield was 1.29% earlier this month-of course over $7 trillion of the debt carries negative interest rates. The problem, if interest rates were to move up .5% or 50 BPS, the losses on those bonds would be $1.6 trillion. Most bonds are held by banks and other financial institutions and bought with leverage. Once interest rates start to rise, if too quickly, bond owners will have to sell to cover their "margin" calls as their equity is getting wiped out as interest rates rise (bond prices fall). If the central banks don't step in, with QE measures, there will be a self reinforcing selling loop until markets clear-2008-9 all over again.

    All securities derive their value off of government-so called risk free bonds. Once that market breaks, then all other market, especially those that use debt to prop up their prices-like stocks and real estate-will get hammered. Central banks are trying to get more inflation to stave off deflationary forces and increase nominal GDP. The huge job, which I don't think they will be able to do, is to get inflation higher, but slow it down to some level that does not cause interest rates to normalize.

  • Reply to

    Nominal GDP

    by commandor58 Apr 25, 2016 1:23 PM
    commandor58 commandor58 Apr 25, 2016 1:56 PM Flag

    So trade accordingly, I don't see anyway out, but for 12-24 months or until inflation gets high enough-forcing interest to normalize, most assets prices are going higher. It will be matter of catching the shifts of pessimism and optimism around each sector that will determine one's success.

  • Reply to

    Nominal GDP

    by commandor58 Apr 25, 2016 1:23 PM
    commandor58 commandor58 Apr 25, 2016 1:51 PM Flag

    With world debt so high, as a % of GDPs, interest rates can't go up too much to fast because of:
    1)Assets prices would fall
    2)Debt servicing would be more difficult-perhaps setting off a self reinforcing negative loop like we had in the "Great Recession".
    Also, the FED can't "tighten" relative to the BOJ and ECB because that will send the DXY up, putting downward pressure on commodity prices with all its world deflationary implications. So, the world has have increasing amounts of added liquidity (leverage) to service its current debt, keep asset prices flat to higher and then generate GDP and job growth. However, keep in mind, less and less GDP growth is realized for each amount of new debt.

    So the FED has quit a balancing act. It doesn't want to add liquidity too fast, but it must "keep up" with the BOJ and ECB to keep the DXY from going back up, but enough to get nominal GDP up to the 4-5% area to keep asset prices up.

    So, this why I'm bullish on the "reflation trade" as the FED has to keep assets prices up, nominal GDP up because not enough nominal GDP and/or falling assets prices will lead to a self reinforcing negative sales loop-a deflationary depression. But this is a game of re-arranging the chairs on the Titanic. As some point in time, when inflation gets to 3%+ sustained in the US and Euro-Zone, (3% is my arbitrary figure at this time-it could be less or it could be more), interest rates, instead of being negative in absolute and real terms, will "normalize" and get back to positive real rates of 2.5-3% real rates above each countries 10yr bond.

    For example, if inflation gets over 3% in the US, the 10yr will go from today's 1.9% to 6%+. At that level, bonds loss 20-25%, stocks will loose more, real estate collapses, the budget deficit would get over $2 trillion/yr putting the US at risk of not being able to service its debt, the $ falls, so the US imports deflation, sending interest rates even higher.

  • commandor58 by commandor58 Apr 25, 2016 1:23 PM Flag

    World debt levels have increased dramatically since the 1960s-especially at the government level. Part of that dynamic was the US going off the gold standard in 1971-mostly because of the financial pressure of the Vietnam War and the implementation of the "Great Society" programs. In essence, without the gold standard, politicians "discovered" every increasing deficit spending to "buy" votes. The problems, above and beyond the moral and financial hazards, is that in the last 20 yrs or so more debt has led to less and less GDP growth. The problem is so acute now, that any "whiffs" of deflation puts industries, governments and individuals at risk of being able to service all that debt. The great recession was all about servicing debt backed by real estate. So, since 2009, central banks have provided extraordinary amounts of liquidity to prevent any more outbreaks of falling asset prices. That changed, July/Aug 2014, when the FED got half way through its QE taper. Implications? The world got use to certain levels of added liquidity from the FED, but with the FED's balance sheet and monetary base now shrinking, the DXY shot up-tightening financial conditions around the world-unleashing deflationary forces (falling asset prices) in commodities. After the December rate hike and the resulting fallout, the DXY double topped at 100.51 in December, and has been down net/net ever since at the FED realized their mistake. So where does that leave us?

  • Reply to

    Question 181 for Commandor

    by bodybag2006 Apr 16, 2016 12:29 PM
    commandor58 commandor58 Apr 22, 2016 11:44 PM Flag

    BB06, by the way, I bought 3000 PCTI in the mid $4.50s near the close today as well. Dividend announcement after the close makes for a nice yield.

    Comments by VZ, PLXS and CLS all suggest wireless capX spending was flat to down the 1st Q y/y, but will be up each Q sequentially this year and up y/y for the rest of the year. Now these are big macro numbers and so there is not a direct relationship to PCTI, but does increase the odds that PCTI will see some of that increased CapX spend-hopefully, with new products and services get an increasing share. Since wireless build out is still only in the 4th or 5th inning, 5G testing will start next year, the combination of: antennas, analytics and services should be good businesses to own over the next 1-2 years.

    If current mgt doesn't increase sales and earnings, another company or financial buyer will buy out the business, at a higher price, to get higher returns out of those businesses.

  • Reply to

    Question 181 for Commandor

    by bodybag2006 Apr 16, 2016 12:29 PM
    commandor58 commandor58 Apr 22, 2016 7:55 PM Flag

    Yes, IBD publisher is basically a "momentum" guy. However, on stocks that I have a high conviction on I have "core" shares and "trading" shares. The "core" stay in the portfolio and the "trading" shares go when the RSIs get get over 70.

    Since it my view that negative interest rates are a license for fiscal stimulus, whomever wins the White House will increase spending for:
    1)Infrastructure
    2)Defense/security
    3)Pet projects
    4)In the case of Trump, probably increase tariffs as a negociating tool

    Given that stock ownership, as a % of the population, by Americans is at a 19 year low (52%) according to Gallup (2007 it was 65%), the odds of the market melting up in the next 18 months increases as a bullish "consensus" will permeate market psychology when it "understands" that worldwide monetary and fiscal stimulus is going to lead to large S&P 500 earnings increases for 2017 and 2018.

    Although I'm cautious for the next few weeks to a couple months-DXY relative strength and the risk of large Chinese Yuan devaluation-S&P 500 2500-3000 is in the cards over the next 18 months.

  • Reply to

    Question 181 for Commandor

    by bodybag2006 Apr 16, 2016 12:29 PM
    commandor58 commandor58 Apr 21, 2016 9:33 PM Flag

    M2 flat last two weeks, DXY double bottom around 93.90 the last few days-looks to be heading back up over 95 to me-which will take stocks and commodities down. Time to take gains on high (greater than 70) RSI stocks.

  • Reply to

    Question 181 for Commandor

    by bodybag2006 Apr 16, 2016 12:29 PM
    commandor58 commandor58 Apr 20, 2016 2:45 PM Flag

    On a different subject, much has been made recently of China' s improving number/outlook etc. It is my view that the March improvement is:
    1)Coming off a very slow FEB when the country was shut down for 10 days of holidays
    2)Seasonal bump as real estate suppliers-steel, cement, copper industries-ramping up for their spring/summer building season that is benefiting from government stimulus

    What I'm getting at is the sustainability of China's "rebound"-I have doubts. All the while the PBOC has been injecting massive liquidity-which should be sending the currency down but the government is keeping it up to make the shorts cover. Bottom line, I expect the run of "positive" macro-data out of China to disapate by June/July. At that time, PBOCs continuing liquidity injections and soft macro-data should put pressure on China to devalue their currency down to 7.25-7.50/$ vs about 6.50 today.

    That would export deflation around the world and shock the current reflation trade into a massive "grab for liquidity" sell off. I'm net/net raising cash-only buying stocks that are absolutely cheap that will benefit from long lasing themes-such as wireless and broadband build outs.

    I'm probably a couple months early in my concern, but it suits my notions of reward/risk. Of course, if the FED continues to add liquidity in all the monetary aggregates I look at, I will be inclined to buy more that I would have.

    If I'm correct on China, the policy responses will be more central bank easing and fiscal stimulus-putting the reflation trade back in play-but the S&P 500 may start from a level 200 points below from whatever levels it was at just before the "deflation" scare.

  • Reply to

    Another way to show the FED has "eased"

    by commandor58 Apr 12, 2016 11:58 AM
    commandor58 commandor58 Apr 19, 2016 12:03 PM Flag

    DXY got under 94 today-getting close to the 9 month low of 93.63 of 4/12/16. Stocks, commodities getting a bid, while bonds are selling off-all consistent with my view that the FED has to ease. Reinforcing the "ease' view is continuing soft macro-econ data. Today was soft housing starts and permits. Going back last week, retail sales for March were very soft with 9/13 catagories down y/y.

    Given the strong run up since 2/11-I think it prudent to take gains on stocks with RSIs over 70.

    But could be a buyer on Friday if the monetary aggregates show more FED easing.

  • Reply to

    Question 181 for Commandor

    by bodybag2006 Apr 16, 2016 12:29 PM
    commandor58 commandor58 Apr 17, 2016 10:58 PM Flag

    Only when buying, at the end of the year, to take advantage of tax-loss selling My "mechanics" are more along the lines of buying RSI's below 30 and taking gains when RSI's get above 70. Given recent strength in gold/silver stocks (RSIs above 70)-I have been taking some gains.

  • Reply to

    ADTN CC

    by commandor58 Apr 13, 2016 3:47 PM
    commandor58 commandor58 Apr 17, 2016 10:55 PM Flag

    After what are expected to be soft 1st Qs, PCTI and MRVC are my favorites. WSTL has been "bottoming" in the $1.13-$1.15 area for weeks, any positive news sends it back to the $1.40s-where it spiked a few months ago. However, I'm looking to hold all these stocks for the next 12-18 months, in anticipation of 50-200% moves.

  • commandor58 by commandor58 Apr 13, 2016 3:47 PM Flag

    Comments made during ADTN's CC, suggest US broadband buildout is being led by T and VZ. This is good news for:PCTI, WSTL, MRVC, FNSR, LITE, NPTN, OCLR, MIFI to name a few. CAFE spending will not peak this year but will in 2017 or 2018. I'm looking for, at least, a 2 year ramp of wireless and wireline capX spending. Micro-cap tech has alot of companies that have been left for dead-doubles and triples are in the cards for some of them over the next 12-24 months.

  • Import prices, y/y x-fuel, were down 2.5% in March vs running over 3% most of last year. It has been my view that because the US has been importing deflation of 3% or so most of last year the the real FF rate was 3.25%-3.50%. With import prices less deflationary, the real FF rate has moved down 50 BPS.

    As the year progresses, if the DXY continues down and oil prices continue up, the US will not be importing deflation, but inflation. So if interest rates rise less than import prices the real FF rate will go down-better for the economy and better for world GDP growth-which the IMF marked down again today.

    This is all part of the "reflation trade" which should should put a bid under: industrials, materials, technology money center and regional banks. Money will come out of: bonds, utilities, consumer non durables.

    Picked up some PCTI, the other day at $4.60 or about 2X cashflow for this year. PCTI, along with a number of other micro-cap tech should have very good returns-up 30-50%-starting later this year.

    I get a kick out of Trump-just in the face of: political correctness, the press, republican establishment etc. He is the political Harry Callahan "Dirty Harry, Clint Eastwood movies" of our day. Good for him, the status quo needs to be shaken up.

  • Reply to

    Bill Gross's comments

    by commandor58 Mar 30, 2016 2:01 PM
    commandor58 commandor58 Apr 11, 2016 9:05 AM Flag

    Forgot to add MU

  • Reply to

    Bill Gross's comments

    by commandor58 Mar 30, 2016 2:01 PM
    commandor58 commandor58 Apr 11, 2016 8:57 AM Flag

    I have been buying: HUN, RF, ONB, PCTI, KTCC, WSTL, MIFI, DGII, MRVC, HLIT, KTOS, KVHI, CTG, TAHO, AUY, ADTN

  • Reply to

    Bill Gross's comments

    by commandor58 Mar 30, 2016 2:01 PM
    commandor58 commandor58 Apr 10, 2016 2:28 PM Flag

    I think interest rates are very close to bottoming-worldwide. Higher interest rates will be good for banks-especially regionals. If the FED continues on the path of adding liquidity, it is OK to raise the FF rate later this year because inflation will be moving higher, inflationary expectations will move higher, commodities will move higher and with increased fiscal spending world and US GDP estimates will start going up vs what will be a very weak 1st Q.

    With a lower DXY, I like materials, industrials, tech especially small cap tech, oil, NG, gold, silver the whole reflation trade.

    Ultimately, I am expecting, over the next 12-18 months, for the S&P 500 to get to 2500 and if inflation stays below 3% in the US and euro-zone, it will allow central banks to continue to "ease", governments to continue to fiscally stimulate-sending the S&P 500, in a buying panic to get to 3000 in 2018. The justification being earnings expectations of $150 X 20 PE.

    Money will come out of bonds, into inflation hedges of which stocks are, until interest rates get to high. In my view, at this time, interest rates will normalize (real interest rates for 10yr bonds of 250-300 BPS) when inflation gets above and sustains above 3% in the US and the Euro-zone.

    In in view, it is all on the FED. If they add enough liquidity for a long enough time: stocks, the US and the world economy will all get stronger. It is my view they can keep adding liquidity until there are no more negative interest rate bonds, currently around $7.5 trillion, trading and then have another 3-9 months of "easing" runway.