Sunday, August 17, 2014

Even A Permabear Doomster Can Be Bullish About the Short Term Outlook for U.S Stocks - 8/17/14 and 8/24/14

As the title of this blog indicates, I am a doom and gloomer in regard to the future we are leaving for our grandchildren to inherit. However, in regard to the U.S. stock market, over the next couple of days, I am a raging bull. The reversal in the market on Friday after the fake news story about Ukraine attacking a Russian convoy has me convinced that the U.S stock market will be going higher over the next couple of days.

So if I am right, it is appropriate for active traders to get long the U.S. stock market. However, it is so unusual for me to be bullish, that this post may serve as a contrary indicator. 

If the stock market is indeed headed up on Monday and Tuesday, it still makes sense to have stops in place. There is so much turmoil in the world that bad news could derail the bulls. But at least for now, the bulls seems to be in control of the market.

8/22/14 Update

The fact that 1) the news out of Ukraine today, and 2) Janet Yellen was not as dovish as expected during her presentation at Jackson Hole, did not lead to a big down day, makes me bullish for next week as well. "Be long or be wrong" at least in the short term. The magnetic pull of round numbers should lead to a good run to 2000 for the S & P. However, no change in my long term permabull doomster stance., although after being bullish two weeks in a row, I may have to temporarily let my membership in the the permabull club lapse.

The Information on this blog is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. YOU SHOULD NOT MAKE ANY DECISIO upN, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED ON THIS BLOG WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A PROFESSIONAL BROKER OR COMPETENT FINANCIAL ADVISOR. 

Friday, August 8, 2014

The 10 Year U.S Treasury Note at 2.37 percent as a Safe Haven Investment? Really?

There are lots of investments that make sense as a flight to quality during a time of crisis. And there is no question that over the last few days, buying U.S Treasury Notes and Bonds has been a very profitable trade. However, for anyone with a time frame of more than 60 days, this is a total head scratcher. Given that the Fed wants 2% inflation, QE is proposed to come to an end in a couple of months, and fed funds are likely to be increased next year, buying the 10 year note at these levels seems like a bizarre investment to take "risk off".

Looking to park some money in these times of turmoil. Why not take a look at gold mining stocks that pay a reasonable dividend. Given that we are close to the cost of production for gold, there is not a huge amount of downside risk, and the upside could be quite significant.

For those that are looking for a short term trading idea, consider shorting the SPX four minutes before the close today, and closing out the position 5 minutes after the close. This tactic is based on the assumption that traders will not want too much risk over the weekend and will sell off right at the close. Of course, then again traders may not choose to sell off at the close. Also please beware that even if this tactic works and you have a profit on your trade at the close, it is incredibly risky to be short over the weekend.. If we have a quiet weekend, the futures may go back up before trading starts on Monday morning.

8/16/14 Update
As a perma-bear, many of my investing/trading predictions posted in this blog have been painfully inaccurate. But dang I nailed the above. The market did go down on the close on 8/8/14, and it was a quiet weekend on the news front and the market opened up big on Monday 8/11

The Information on this blog is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. YOU SHOULD NOT MAKE ANY DECISIO upN, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED ON THIS BLOG WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A PROFESSIONAL BROKER OR COMPETENT FINANCIAL ADVISOR. 

Monday, August 4, 2014

Why I Am Not Shorting Facebook

The majority of the analysts covering the social media space are missing the main story, and that is that social media sites simply do not offer terribly compelling advertising opportunities. A significant portion of the advertising spending they are pulling is coming from advertisers utilizing media allocation models. However, if an advertiser is allocating 10% of their media spend on social media sites, a rise in the views of the social media sites will not lead to a proportionate increase in advertising revenue (at least during the current fiscal year). The potential ROI from advertising on the social media site varies, but the site that is generating the most dumb money from advertisers is probably Twitter. For most businesses, Twitter advertising is too expensive to pay-out.

Most of the social media sites are great shorting candidates. However, there are two that I would stay away from shorting, Facebook and Linkedin.

I am not going to short Linkedin because there is the potential for them to ramp up their revenue from employment recruitment activity. I doubt that this potential revenue source justifies Linkedin's valuation, but it is outside my main thesis in regard to advertising revenue potential being overvalued on the other social media sites.

The other social media site that I would not short is Facebook. While I am dismissive of the advertising opportunities on Twitter and some of the other social media sites, I am a Facebook advertiser. Further, I have money in my budget to advertise on Instagram if Facebook ever launches advertising availability on Instagram. So, I am literally waiting to throw my company's advertising dollars at Facebook via Instagram, once there are opportunities to do so. Given that Facebook has an opportunity to create another huge revenue stream if they can figure out how to monetise Instagram, my suggestion is to be wary of shorting Facbook

The Information on this blog is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED ON THIS BLOG WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A PROFESSIONAL BROKER OR COMPETENT FINANCIAL ADVISOR.