Buzz Bits: Bulls Grab the Reins
Your daily Buzz & Banter highlights.
What I... - Quint Tatro - 3:11 pm
What I Like
- Trading above break points.
- Shippers finally finding some love a la Dry Ships (DRYS).
- China momentum still acts well E-House (EJ), Global Source (GSOL), China Finance (JRJC)
- Cups forming handles a la: Baidu (BIDU), Google (GOOG), Apple (AAPL)
- Growing pessimism.
What I Don't Like
Ridiculously light volume.
Ascent Solar (ASTI) weakness on pending secondary.
What I've Done
Started Google (GOOG) in anticipation of a cup and handle break, with a stop below the 200 day.
Started Reliance Steel (RS) on the break confirmation, with a stop below $60.00.
Sold down more NASDAQ 100 (QQQQ) into strength.
What I'm Watching
Small Caps ETF (IWM) break point above $72.88 from February 1st high as add point on a close.
Emerging Market (EEM) break point above $147.85 from February 27th high as add point on a close.
A good close on Shengdatech (SDTH) for gappa potential.
Positions in DRYS, EJ, GSOL, JRJC, GOOG, ASTI, RS, QQQQ, IWM, EEM, SDTH
Bell Buzz - Todd Harrison - 2:51 pm
Are Blackberry's the new i-Phone? With Research in Motion (RIMM) up 160% since last summer, it may be safer to say that it's the old Apple (with a conscious nod to the acne above $140).
- Wal-Mart (WMT) will shape tomorrow's tape as, according to Professor Reamer, it's the new consumer proxy. $59 is the level of lore although, again, technicals are often a better context than catalyst.
- So, at my cousin Stephanie's wedding Saturday night, after the guitar player finished his snazzy rendition of Hey Jude, my brother and I started the "Na, na na na na na nah..." chorus and continued until 300 people joined in (arms waving in the air). We were laughing so hard that tears were streaming down our faces, which was particularly sweet as I watched my grandmother Dorothy sing and smile (and wave her arms) across the table.
- S&P 1405. S&P 1405. S&P 1405. And you thought technicals didn't matter? So it's said, there's a decent shot that they're self-fulfilling and work simply because so many traders are watching them. But that's a conversation for another time.
- Three parting thoughts. One, I'm happy the Monday's are almost in the rear-view (this one in particular). Two, tomorrow is counter-trend Tuesday, so keep that in mind as you pack it in for the evening. Three, I'll get my paws around this new schedule, which now includes being "hot" (read: live) for the final hour each day. Look at me, I'm A.D.D.? You betcha, and it's just entered an entirely new realm.
- Fare ye well into the bell, Minyans, and may peace be with you!
Crude ETF's - Ryan Krueger - 11:45 am
Nice article on May 10 from The Wall Street Journal on crude oil ETF's, however the 'Ville broke that sucker on April 9 on the Buzz. Big difference between owning an asset and an ETF that is often not as easy as they feel, huh? Perhaps a better and more telling clue in that story is how unimaginable that $111 clause was back in 2006 at $60 per barrel when it was launched.
As for where we are in the cycle for the CRB - to use the one with the longest track record - we have every reason in the world to believe we're short-term overbought but I have a hard time balancing that risk/reward guess versus the data I have showing if the bull run ended now (compared to the six other bulls over the past 250 years) we'd be breaking a record for the shortest. Using that data, we're not much more than halfway done in returns (puts the big "double" since 2001 in context) and one third in average length of time (21 years). And as I've said, in none of those other six did I find a couple billion new capitalists to feed.
But the rip cord underneath all the talk of $200 a barrel, etc., in my view (and now I'll shoot at my own longs) is that it severely underestimates capitalism's ability to innovate new answers at prices high enough to entice the smartest folks in the world to provide a different answer. I also think those predictions underestimate the 'poor' consumers who are more flexible and will make more changes than most of us ever give them credit for.
We aren't running out of oil, we're ran out of cheap oil which very faulty assumptions were based.
What would happen if... - Bennet Sedacca - 9:37 am
...We called Mr. Thain over at Mother Merrill (MER) and said sell your level 3 assets now.
If someone told me to liquidate my fund and all client portfolios, including institutional portfolios, I'm pretty sure I could be done by Wednesday.
It's funny. I just saw the following headlines:
- Merrill says it took another $5.2 billion in write downs.
Merrill says balance sheet write down happened since Q1.
Merrill balance sheet write down doesn't hurt income, CFO says.
Merrill Level 3 Assets came on balance sheet.
Merrill CFO says Level 3 increase didn't raise risk level.
Merrill CFO says 20% ROE is achievable.
OK, I'll stop. Let me tell you why this is disturbing. Since last year, Merrill has now written down $37 billion in capital. It has raised $17.9 billion. This is otherwise known as balance sheet destruction, folks. And the last round cost 'em 8 5/8% on a huge preferred deal (that is still under water I might add). The company also sold 30 year paper at +320 to Treasuries that quickly went to +350.
So tell me, how do you make 20% ROE on that model? You don't.
And what if someone said, sell your Level 3 stuff. By Wednesday. First of all, MER couldn't. Second of all, it would force others to do the same.
This is the sort of stuff that bothers me about the next couple of years. More later.
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