Soros on the market; all eyes on Friday
By Rob | May 9, 2008
Thursday was a non-event type of day, after the decisively bearish Wednesday. Friday will be a key day. Since April, upward momentum has been good, however, oscillators are overbought and oil is causing trouble to the economy. Volume is down.
BOOK: I am also reading Beating the Market, 3 Months at a Time: A Proven Investing Plan Everyone Can Use (Hardcover)
Soros: Market Will Retest Its Lows
Stocks are currently in a “a bear market rally,” and will probably retest their lows of earlier this year, George Soros says.
![[George Soros]](http://s.wsj.net/public/resources/images/HC-BZ289_Soros_20070124110137.gif) |
| Soros |
“I think we’ll retest the lows, depending on what measures the authorities take,” Mr. Soros said in an interview with The Wall Street Journal Wednesday. He made similar comments later that day in a discussion at the Council on Foreign Relations in Washington. “We may go beyond” those lows, he said.
But he also said the worst has now passed for the credit markets and spreads between yields and risky bonds and Treasurys will not return to their highs of a month ago. “The acute phase of the credit crisis, or financial crisis, is abating,” said Mr. Soros. Mr. Soros, chairman of Soros Fund Management which advises the Quantum funds, is one of the world’s most famous and successful hedge fund investors. “The markets are breathing a sigh of relief but the fallout in the real economy is only now beginning.”
In his latest book, “The New Paradigm for Financial Markets,” Mr. Soros argues that the current credit crisis conforms to his longstanding view that markets drive fundamentals, instead of the other way around, producing bubbles and crashes– a dynamic he has dubbed “reflexivity.”
The book argues the subprime crisis has triggered the bursting of a “super-bubble” that has been building for 25 years. Prior crises, from the 1987 stock market crash to the emerging markets crisis of 1997 were merely “testing events,” he writes. Because the authorities successfully averted catastrophe in those events, they encouraged consumers and investors to believe markets were fundamentally self-stabilizing and built up even more leverage, he wrote.
Mr. Soros’ latest book is his third to predict disaster; prior books did so in 1987 and 1998. In the interview Mr. Soros acknowledged he sounds like the “boy who cried wolf,” but noted, “The third time, the wolf really came.”
Mr. Soros said how the U.S. comes out of the current period is highly uncertain because it depends a great deal on how investors and policy makers respond to the depth of the threat. He called it “inconceivable” that the U.S. would avoid a recession that lasts at least into next year. He noted house price declines are accelerating, and said nothing policy makers can do can slow that down much.
It’s quite possible the U.S. could “muddle through” after next year, he said, with 1% to 2% growth for the decade and rising unemployment. But “there are many ways for it to work out.”
Mr. Soros withdrew from active investing in 2001 with the departure of his partner, Stanley Druckenmiller and his hedge funds were converted to an endowment fund run by outside managers, mostly tasked with managing the assets of his philanthropic foundations. But he returned in August, 2007 by establishing a macro account of his own.
He said that while he has been mostly bearish on U.S. stocks and Treasuries, he moved to a neutral position earlier this year when he sensed a bear market rally might be in the offing. He returned to a short position on both, but too soon, he said. He has also been long stocks in China and India, but has been hurt by the dramatic selloffs in both this year. “We are not making money this year. We are slightly in negative territory.”
On the dollar, “we are moving towards neutral. We have greatly reduced our short position. It’s not clear which way it’s going.” He said its depreciation to date is in effect exporting the U.S. slowdown to other countries.
In his remarks to the Council on Foreign Relations, Mr. Soros said, “I personally think we have the acute phase of the financial crisis largely behind us. The authorities have as their mission to stop the system from falling apart and providing liquidity at all costs. They’ve done it and have passed several thresholds. That is a source of reassurance that the system is not going to fall apart. But the damage that has been done to the financial system has to affect the real economy, and that is only starting to be felt.”
A repeat of Japan’s 1990s experience is “the pessimistic extreme” he told the audience. Japan had “a real estate bubble and a financial system loaded down with bad debt. The big difference between Japan and us is here, the losses are being recognized, written off. Some of the writeoffs may turn out to be excessive.”
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Topics: Soros, money managers | 1 Comment »
The Bear Couldn’t Stand Being Quiet for so Long
By Rob | May 8, 2008
“If you expect nothing and are prepared for anything, you should never be surprised.” Brian
“Practice does not make perfect in trading or anything else; perfect practice makes perfect. Training must gradually build competencies and correct deficiencies in a manner that sustains a positive mindset and optimal concentration and motivation. ”
Dr. Brett
Kirk said it best today: ” If you wanted to find a reason to sell, it wasn’t difficult. You could pick your poison: 1) another record high in oil, 2) weak home sales, 3) a huge increase in consumer borrowing, 5) a pullback in boomer spending, 6) trouble brewing in the housing bailout, 7) a new SEC reg to force disclosure of more losses and tragedy in Myanmar. ”
THE DOLLAR 1998- PRESENT
An interesting post by reader at Worden tells how he believes that the 200 day moving average is now serving as resistance for higher prices: I took a look at how SPY acted in the last bear market. It was apparent that the 200-day moving average acted as overhead resistance in that bear market, so I went to a daily chart with a 200-day moving average and was amazed by what I saw. The periods of interest (tantamount to sell signals) are Nov 00, early Feb 01, May 01, Dec 01, Jan 02, Mar 02 and Dec 02. To generalize, if the SPY price gets close to its 200-day moving average, look out below! Of the above events, the trickiest one was the Dec 01, Jan 02 and Mar 02 combination which comes across as a triple top. By May 03, it was obvious we had a different animal–one that snorts rather than growling. Anyhow, take a look at the SPY and its 200-day moving average right now.
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Dennis Gartman, George Soros, Mark Faber and solar
By Rob | May 7, 2008
What is wrong with people who are stuck in the past? A reader was mad at me, because solar stocks are going up. What am I suppose to do? I don’t see this as a fad, I see it as a way of life, a way of survival. Yes, solar stocks went up a lot, but the world is going THAT way and not everyone has bought solar yet in order to call this a bubble.
I see entire futuristic cities built on solars, specially in the Southern Belt. I see the sun energy as one of the three main energies that we would continue to use more and more this century. So act accordingly. Recommendation: Here is a good book to learn more about solar investments
Also, my friend Dennis Gartman today said that buying gold is a crapshoot and “What we have this morning is a bounce, a technical bounce, led we suspect by some buying of gold by Indians who see gold now as cheap and who have a propensity to buy gold for the Akshaya Tritiya holiday there,’ said Gartman. The Latest book with a foreword by Dennis Gartman
Also, do you know that George Soros is trying to buy an entire Italian soccer team. Well just today we pulled out of his offer and shares of Roma halted trading. Guess where they will open tommorow. 
Here is The Latest book from Soros 2008
Last, Mark Faber agreed to my dollar-rally hypothesis as well: ” The U.S. dollar may rise against world currencies for the next two or three months, sending commodity prices and stocks lower. The U.S. economy is in a recession but that doesn’t mean the whole thing is going to fall apart.”
INVESTMENT IDEAS: China, Mexico, Malaysia and Taiwan are the only countries on a short term basis that are not overbought.
GOLD: Mr Gartman does not like gold, however, Goldman this morning argued: ” We remain bullish on gold prices over the next 12 months. We believe that the pullback in gold equities
caused by declining gold prices, as the US dollar strengthened versus major currencies, provides great buying opportunities. We recommend investors to buy Barrick Gold (ABX) given its leverage to gold prices, best in class project pipeline and strong exploration/prospect development track record. Lord Wallie says: avoid gold, while the dollar rally in the next 1-2 months.
ASSET MANAGERS: I like Janus (JNS) with best considering improving AUM, however, Eaton Vance (EV) and T. Rowe Price (TROW) are already close to 30% up since March-31. However, wait for the hedgies such as Och Ziff (OZM) and Fortress Investments (FIG) to start recovering soon.
OIL: These are Goldman’s favorites in the sector: Halliburton (HAL), SLB, DO, RIG, PDE. We believe HAL has EPS upside from rising North America drilling activity, multiple expansion potential and is more levered to natural gas. We also favor deepwater drillers (PDE, RIG, DO) given our expectation for strong supply/demand fundamentals well into the next decade and rising dayrates.
THE MARKETING GENIUS BEHIND THE BEATLES
The Beatles were good. Their management team was even better. Read this story below and notice how when they toured and decided to enter the US, they first went to US corporations, to help them jump-start the publicity effort, the fuel behind any pop success. A win-win event.
” Irvine Robbins, who co-founded Baskin-Robbins died at the age of 90. While the company advertised that it offered 31 flavors, in fact it has created more than 1,000 flavors, according to its Web site. Why would anyone want to keep. When the Beatles were to arrive in the United States in 1964, a reporter called to ask whether Baskin-Robbins was going to commemorate the event with a new flavor. Robbins didn’t have a flavor planned but quickly replied, “Uh, Beatle Nut, of course.”
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Topics: Dennis Gartman, Mark Faber, money managers | 1 Comment »
Stocks that may be leaders, Jim Rogers again, and Lehman’s May Outlook
By Rob | May 6, 2008
If you want to know how to make $money in May, you need to answer the question: Which one is going up - commodities or financial and tech? However, the best traders never predicts, they react.
My friend Jim Rogers, ex-Soros fund manager, was on TV today. He is more often right, then wrong. I call him the ultimate long-cycle investor. Key points:
- buy Chinese and Taiwanese stocks.
- the dollar rally may hold for an year because everyone was so negative on the dollar; he is not selling dollars at the momet but waiting to do so later
- Commodities are far from a bubble, the rally will continue with metals such as nickel, zink and even silver appreciating further. The last commodities boom took place when India and China were not developed, but now they want to participate in it. In addition, most of the population STILL does not own this asset class, which means it is NOT OVERBOUGHT.
This is a chart of the strongest stocks since 3/11. Taken from Bespoke Research, I want you to go down and research all the stocks who you think might have a shot at being leaders. Some of the familiar names are AAPL and FSLR, no doubt, these are the century’s innovators. Maybe you can find yourself some more, go try this now.
LEHMAN’S TAKE ON THE MARKET FOR MAY 2008
• The current cycle may share some similarities with 1998, when stocks
rallied led by Tech and rate-sensitive sectors at the expense of cyclicals and
commodities.
• In our view, the full response to the 325 basis points of easing since last September
has hardly been felt in the equity market. Ergo we stay long stocks.
• We also continue to suggest long positions in interest rate sensitive sectors. We
believe US banks and general retailers have yet to factor in the round of Fed
easing fully. To download Lehman’s May Outlook see here: lehman may 2008
FIREFOX -MUCH BETTER BROWSER THAN INTERNET EXPLORER
I am always tryin to bring more value to my readers and if you feel I do the same for you, click on the Google adds below ( i may make a few cents :)) . So, I used to use Internet Explorer until it kept crashing and i discovered Firefox. At work, I use Firefox and Internet Explorer. Most of the time, Firefox is twice as fast, and twice more interesting, when you add all the cool little add-ons. Here is a great article detailing the “6 best add-ons for Firefox” : http://www.makeuseof.com/tag/6-excellent-firefox-extensions-made-to-save-you-time/
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Solar stocks, movies and the weekend ahead
By Rob | May 2, 2008
The market did good this week, and if you had researched some of the good stock ideas i generated here in the previous posts- you did well too. When i come back tomorrow I will post more detailed review of what looks good in the market. So check back here by Monday.
SOLAR UPDATE: Over the course of the next few months, Congress is to debate several energy-related issues, which have risen in importance on Capitol Hill. While the US market is small - only about 10% of the worldwide market - the potential is enormous and its eventual growth is critical to the industry. There are bunch of companies I like here like SPWR, FSLR, STP, CSIQ. Let me know if I am missing a leader here.
BOOK: I am also reading Beating the Market, 3 Months at a Time: A Proven Investing Plan Everyone Can Use (Hardcover)
This Weekend at the movies: The IRON MAN
All eyes will be on “Iron Man” this weekend, and Marvel and Paramount are banking on the film’s
ferromagnetism to attract moviegoers in droves. Adapted from the popular Marvel Comics character of the same name, “Iron Man” stars Robert Downey Jr. as Tony Stark, a wealthy industrialist turned superhero. After being hijacked by terrorists, he fashions a high-tech exoskeleton, which he uses to escape captivity and eventually face off against the evil Obadiah Stane. “Iron Man” may not enjoy the same level of awareness or popularity of other comic franchises like “X-Men” or “The Incredible Hulk.” This weekend’s other new release, Sony’s “Made of Honor,” counter-programs against “Iron Man” with a female skewing romantic comedy staring Patrick Dempsey.
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Jim Rogers, market circulation and Goldman’s picks
By Rob | April 29, 2008
“All the panic looks like a bottom. I have bought in the last four to five weeks. I’ve been buying shares in China for the first time in a long time.” Jim Rogers, 04/29/2008
You want to see something cool? Look at railroads, particularly Union Pacific (UNP). That sucker is up 12% since April, due to the messed up rise in oil and how that relationship benefits railroads. Then check out Mastercard and Visa (V), both doing phenomenally well. At the same time we are getting a correction in the aggries like Potash (POT) and Monsanto (MON), oil, steel, and coal ETF (KOL). One of my favorite darlings Parexel (PRXL) is coasting along, but this is a future growth story that not many are aware of. At the same time this rotation is putting tech and financials in a much better position. RIMM, JNPR, VMW, and AAPL are continuing to do well. Solars are also standing up well. Those of you who missed on the dry-shipping rally at DryShips (DRYS) which went for 37% in April - took a breath today - the stock is down 5% and the rest of the dry-shippers are getting nailed too. Pay attention to Chinese internet’s - those are up a lot, specifically BIDU, SOHU, CTRP and SINA.
From Goldman’s report this morning:
It looks like metal stocks will continue to do well and the BRIC countries are have a lot more demand coming. Supply constraints in Chile (labor strikes and power) and Australia (mine floods) have significantly improved copper and met coal fundamentals. So I expect metal demand to recover in 2H08, followed by increased 2009 commodity prices. Two stocks I like here are Freeport McMoran (FCX) and Vale (RIO). However, those are currently correcting and will become a good buy in a few days, not right the moment.
On the Gold front Goldman put out this note that was quite puzzling this morning: ” We now expect gold prices to average $965 in 2008 ($910 previously) and $955 in 2009 (up from $870). We believe gold prices could test the $1200/oz level in 2H08 due to increased inflation pressures. We have lowered our 2010 gold forecast to $875 (from $940), factoring improving US macro economic fundamentals and a stronger USD. We have also increased our long-term gold price to $600/oz (from $550), reflecting improved fundamentals. ”
Solars: Goldman maintained its buy rating on SunPower (SPWR) at $104 and I agree here, we are going to go even higher, regardless of the problems SPWR is facing.
Last, 3 oil stocks that are expected to do well in the near term according to Goldman are : ConocoPhillips (COP), Valero Energy (VLO), and Frontier Oil (FTO). Conoco’s fundamental outlook in terms of comparative per share growth and ROCE is on-track to improve in coming years and that its shares are very inexpensive relative to other integrated oils. Valero and Frontier are recommended given our outlook for rebounding refining margins.
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Goldman has a few stock picks for you
By Rob | April 28, 2008
What a lousy day in the market, a? I think you’d have much more fun reading about my dating experiences last week, but here it comes:
Goldman initiated Visa (V) with buy and gave a $90 target. Visa is definitively one of the strongest-positioned companies we cover across both Data Processing and Specialty Finance, with unique brand value and processing scale that differentiate the company from its payment peers. Visa will report its first quarterly earnings report since its IPO after the close on April 28.
Potash(POT) was taken off the Convinction List at Goldman with negative consequences for the stock. Here is what Goldman said: ” Nevertheless, with an increasing focus on escalating food prices, we believe that much of the incremental positive news flow has occurred and near-term surprises may be more tempered and less lucrative for the stock. Macro issues such as a strengthening US dollar and political discussions of revisiting ethanol policies could have a transitory impact on the path of commodity prices and influence POT’s valuation. Furthermore, less aggressiveness on the pricing font could disappoint momentum investors. ”
Homebuilders are expected to still face more music this year. I estimate that home prices are also likely to decline a further 5%-10% from current levels on average. And I remain concerned that many builders have much more land than they need for years to come. However, Goldman believe that new home sales will fall 10-20% more. The might be right, but who can really tell for sure.
Hospitals are also starting to do well. At the close of the first week of hospitals’ 1Q2008 reporting, the group is up 12%, outperforming the S&P 500 by over 11.5%. Across-the-board appreciation likely reflects positive data points emerging from Health Management Associates and Universal Health Services, the first two hospital companies to report. Goldman likes Community Heath and LifePoint the best.
Two other stocks that kick ass are Bucyrus(BUCY) and Joy Global (JOYG) mining equipment manufacturers stand as major beneficiaries of the intensifying energy reinvestment cycle, with global coal companies’ cash flow forecast +30%+ in 2008-09
Last, the firm expects Akamai (AKAM) and Symantec to report good earnings. About Akamai: “In general, we view Akamai as relatively insulated from slowing economic conditions given its positioning in rapid growth markets. However, we are somewhat cautious on the company’s outlook given the “nice-to-have” nature of content acceleration in some areas of its market and signs of slowing advertising spending on a macro level. Our 12-month price target is $35.00. ”
Three keys to a long life: Eat less. Make family a priority. Banish stress. (Good luck.) Eating less is function of portion control.
Alavert is great for allergy control: Allergy season, for some of us, is here. My friends swear by Alavert, an over-the-counter pill. Don’t take it unless you really need it. The “adverse effects” detailed here will turn you off living.
New York taxis will be all hybrid. By 2012 all of New York’s 13,000 taxis will have to get at least 30 miles a gallon on the city’s streets. Hybrids are the only ones that can meet that goal. Today about 7.8% of the fleet are hybrids, 83% of which are the Ford Escapes. My own questioning of cabbies: They spend $22 for a 12 hour shift with a Ford Escape, but $45 with a Ford Crown Victoria. For more on The Greening of the Yellow Fleet.
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Monday morning
By Rob | April 28, 2008
For the week, the Dow gained +0.33%, the S&P 500 +0.54%, Nasdaq +0.83%, and the Russell 2000 +0.11%. Though we still have three more trading days in April, the S&P 500 has gained +5.7% for the month which would be its first monthly gain since October. Over the weekend, oil went to $120, showing no signs of slowing down. There are bunch of quantitative models that call for “sell-everything” situations when oil increase so dramatically over the short term. However, this week we expect the market to break through the 1400 level and continue making gains due to tax checks feeding into the economy and the relative undevalue-ness of US markets compared to Euro-markets.
The GPS Snitch lets you track cars and people: NetworkWorld magazine swears by this product. The GPS Snitch is a little (four inch) tracking device you put in a ritzy car, a memory-lagging grandfather, and in the box you’re shipping the Mona Lisa. It has GPS, a cellphone and a motion sensor.
It will send you alerts when it detects movements. And you can ping it and ask it “Where are you?” Or you can have it report regularly — as often as every few seconds. You track it over the Internet via Google Maps on your PC or laptop. The gadget costs $400 and you pay every time you ping it. NetworkWorld’s reporter tested it on his wife when she went shopping. His wife (who knew) was still amazed to have her husband tell her precisely where she’d just been. You can learn more at GPS-Snitch and at BlackLine GPS which has some other neat GPS products.
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Monday morning
By Rob | April 21, 2008
For the week, the Dow rallied +4.25%, the S&P 500 +4.31%, Nasdaq +4.92%, and the Russell 2000 +4.78%. 95% of the stocks closed the week with a gain. The top performing sectors were oil & gas, mining, brokers, shipping, farm products, agricultural chemicals, internet, railroads, tech, heavy construction, banking, trucks, healthcare, and semiconductors. The laggards were airlines, resorts & casinos, diagnostic services, and medical equipment. We also saw a major flight away from safety as investors dumped Treasuries.
SOLARS: Goldman this morning gave their solar top pick in China: STP. The firm also released its Pair trade idea: long STP, short TSL: STP is our top pick in the sector given its enhanced scale, solid order pipeline, and strong financial position. Among our Neutral-rated stocks, we are most cautious on TSL due to concerns on overexpansion, downside risk to margins and potential disappointment in 2H08 earnings.
However, Goldman Sachs America likes SunPower (SPWR):
“We continue to see firm industry pricing for 2008 and therefore believe that industry fundamentals will be strong as solar companies sell more megawatts and drive costs lower. While SunPower’s financial model is a bit of a black box given the limited disclosure on megawatts sold, ASPs or cost per watt, we continue to like the shares as we anticipate them driving strong results in a robust solar market.”
This below is from Warren Buffet’s interview for Fortune Magazine:
What should we say to investors now?
The answer is you don’t want investors to think that what they read today is important in terms of their investment strategy. Their investment strategy should factor in that (a) if you knew what was going to happen in the economy, you still wouldn’t necessarily know what was going to happen in the stock market. And (b) they can’t pick stocks that are better than average. Stocks are a good thing to own over time. There’s only two things you can do wrong: You can buy the wrong ones, and you can buy or sell them at the wrong time. And the truth is you never need to sell them, basically. But they could buy a cross section of American industry, and if a cross section of American industry doesn’t work, certainly trying to pick the little beauties here and there isn’t going to work either. Then they just have to worry about getting greedy. You know, I always say you should get greedy when others are fearful and fearful when others are greedy. But that’s too much to expect. Of course, you shouldn’t get greedy when others get greedy and fearful when others get fearful. At a minimum, try to stay away from that.
By your rule, now seems like a good time to be greedy. People are pretty fearful.
You’re right. They are going in that direction. That’s why stocks are cheaper. Stocks are a better buy today than they were a year ago. Or three years ago.
But you’re still bullish about the U.S. for the long term?
The American economy is going to do fine. But it won’t do fine every year and every week and every month. I mean, if you don’t believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It’s a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market.
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Oil at $117?
By Rob | April 18, 2008
Oil is at $117. The global markets are going to have to crack up if it keeps going this way. S&P 500 is facing stiff resistance at 1400; on top of that it is completing a pattern known as reverse head and shoulder. I think next week we are going to see some interesting battle between the bulls and bears, because oil with push inflation high, however, at the same time our wages are not moving, in fact declining if we measure them in euros. So things are not looking good, however, this is partly why they say ” Buy when there is blood on the streets.” Today was a great day for internet stocks and aggries such as MON, MOS, POT, and DD. I would continue to expect those sectors and solars to do well during the year. This weekend I will take a look at homebuilders and asset managers, however, I suspect things are little bit overbought at the moment. By the way, it is 70 degrees out here in Boston, and I am going out on a date with a 10. So when I come back tonight/tomorrow, lets continue talking about what looks good in the market. Love, Rob
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