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Random Thoughts


Remember, the week after the September expiry is historically negative.

  • Greetings from MVHQ, where it's been a heckuva nutty morning in the City of Critters. My apologies on the sparsity of my content today as we're putting some pieces of a very snazzy puzzle together behind the scenes. I know, I know--there's no crying in baseball and no excuses in the 'Ville, I'm just 'splainin' Lucy as we take another step in the journey through the financial fray.

  • After Friday's expiration (moment of silence please), I'm left with my March puts in the piggies, some January calls in the drillers and metals and a handful of special situations. In the interest of full disclosure, I had a slew of September paper that is now a distant memory.

  • The CRB continues to drift lower as it eyes levels unseen since the Summer of '05. While some eyes have shifted from inflation to deflation, we've yet to see the impact on stocks. Color me wrong, for now, with an open mind that we're a bit early on the equity ramifications.

  • Beetlejuice?

  • Sector work today? Commodity stocks (drillers, metals) and semiconductors stand out, albeit slightly, as breadth hands balanced at best. All in all, it's a rather slow fizz thus far as seasonably warm weather sweeps through the tri-state area. Brick Tamland is forecasting clear skies for the better part of the week so let's make hay while the sun shines!

  • "Keeping an eye on the financials. The BKX is registering a DeMark sell signal today on the daily chart. Prior daily sell signals, in April and last November, produced only brief pauses in the overall uptrend. But those were not accompanied by an active DeMark TD-Sequential sell signal on the monthly chart and the potential for a TD-Sequential sell signal this week on the weekly chart." Pepe Depew on today's Buzz.

  • What do Trent and Ruby have in common? Kids, philanthropy and genuinely kind souls. Stay tuned for information on how we're gonna take a giant step forward in helping a whole lotta children.

  • Levels of post-expiration lore? Same as she ever was, same as she ever was. NDX 1630, XBD 220, S&P 1330, BKX 114, TRAN 4400-4465 and XAU 120 ('06 low).

  • Remember, the week after the September expiry is historically negative. It's closed lower 15 of the last 18 years on the S&P 500. Monday closed lower 13 of the last 18 years. Of course, it could be worse.

  • Do you see the XAU stochastics (as they give Hoofy the wink) and does that "fit" with an oversold bounce in the CRB?

  • And will they benefit from a rotation from the "stochastically challenged" sectors such as the homies and financials?

  • Congrats to Hot Rod Lankford and the Auburn Tigers on a heckuva win. While I had a full weekend plate, this was one game that I started watching and couldn't turn off.

  • "Does the market have an iron jaw, or is it punch drunk? Do the bidders have an admirable stiff upper lip or are they pathetically whistling past the graveyard?" Minyan Michael Santoli

  • Will the $2 trillion in Adjustable Rate Mortages be an after-the-fact "DOH!" moment for the Matador Crowd?

  • And you thought critters were out of vogue!

  • Buzz, Buzz, Buzz from the Bennet...

    Bennet Sedacca
    September 18,
    12:01 PM

    In my mind, without a doubt, the most ridiculously valued asset class out there is REIT's. How do I spot over valuation? Well there are many ways and here they are, in no particular order of importance...

    • They are still parabolic, just as housing was. The interesting part is that while housing has gotten slaughtered, REIT's remain levitated. See the chart here.
    • They are trading about 100 basis points THROUGH, or below 10 year Treasuries. This equates to close to 150 through Fed Funds. Both ridiculous levels compared to the normalized 110 basis points above for the last 15 years. Incidentally, the highest spread was over 300 basis points ABOVE 10's.
    • Some of them, like Simon Property Group (SPG), are trading at 6 TIMES BOOK, when in the past they could be had for 1.2-1.5x book. That is a long way down for those counting.
    • The dividend yields are a joke on an absolute level, all things considered.

A more reasonable valuation, to misers like me, would be at 50% lower levels, or the approximate amount of the fall in housing shares from top to bottom. The fly in the ointment? There is an enormous short interest in IYR, equaling 11 days of trading volume, so this trade is crowded. While mostly a long side firm, we are in the avoid camp, but if we were a hedge account, we would be on the lookout for them to roll over or shorts to capitulate. Lastly, the convert market and straight corporate issues are ridiculous too. I would note a BBB rated 10 year Avalon Bay deal this morning at 100 basis points over 10's. No value there either. Not advice, just a cautionary note....


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