30 October 2009

Slaughter of the Lows (Junk Stocks)

Well wasn't that different? What happened this morning fairly well predicted what happened in the afternoon. This is from about 10:20 http://bit.ly/42t2mk They were creaming risky stocks then and even more so as the day proceeded. The beta bears won by 180bps (VMO) , 163 bps (PMO), 162bps (large cap) and a whopping 386 bps (beta). Those numbers almost completely erased yesterday's beta bull run. Looking at some funds of interest on Tickerspy big losers were Oaktree, Oakmont and Elm Ridge. Non-tree themed losers included Soros, Deltec and Clinton. On their long portfolios from June. These guys are hedge funds and after over two years I am sure they all know how to hedge by now.

A real bad day for energy as oil went down today? Boo hoo. And banks as we await the end of CIT. But JPM, GE, C, BAC, AOC, Met, etc etc took major hits. Better to be a lessee than a lessor in this market for commercial real estate.

China Stocks down on decline in US consumer confidence. Waaa.

Whenever there is a selloff or a big rally , pundits try to correlate the action with some piece of news like GDP (yesterday) or consumer confidence (today). Or maybe it was just fear taking back what it lost to greed yesterday. Chinese stocks should have been fairly immune to the slaughter today (or the rally yesterday.) But as you can see, they actually got smacked around worse than the US average. As long as fear is in charge here, China stocks will suffer here as well. And in Shanghai and HK on Monday for sure.

Here are the safe(r) names

These are the names with High VMO and Low Beta. The place to be today. Not too many losers in this set. Hey there's GOOG! A safe stock!

Who are the risky names? CIT?

It won't surprise anyone that CIT is a low quality, high risk stock. Where's Waldo? Hidden with some of his friends.

Beta Bears are back.

But are they in charge? Reversing yesterday's squeeze high quality names are outperforming by 47 bps VMO, 172 bps Beta, 81 bps PMO and 45 Big Cap. So if you were a bear who hung in there yesterday you'd be feeling good by now. And you're probably a robot driven by different rules than people. Good on.

Chinese stocks are asleep

The jump in Shanghai last night didn't amount to much. HK did better. Chinese stocks so far are following the US trend viz. taking a breather after yesterday's squeeze on the beta bears. Probably a good day to get in a round of golf or ping pong.

29 October 2009

Massive Squeeze. Did you see it? Did you feel it?

The GDP number changed things, didn't it? Quien sabe? High Risk stocks crushed Low Risk by 108 bps (VMO), 146 bps (small vs large cap), 326 bps (PMO) and a truly shocking 416 bps (beta). That takes us back almost to where we were on Tuesday. Back in the BRS days at Nikko we bailed at 40 bps. So we would have been gone at 9:31. But one day does not a trend make.

If you recall we look at several interesting fund mgrs. in Tickerspy. Yesterday the bearish long-short portfolio was the only one in the green. Today? The only red. The mgrs that did well today were those who were slaughtered yesterday. The stock pickers with diversified portfolios were and always are in the middle of the pack.

I predict Shanghai will surge overnight

Action in the US markets for Chinese stocks has been an excellent predictor of overnight activity in China. Take my word for it.

As you can see broad gains. But not for BIDU?

It's 1997. What works VMO, Beta or Secret Sauce?

It's not 1997 although looking at the averages today they haven't made much progress since then. But they have moved a lot. You know what would have happened to a buy and hold investor. What about factor investors? Here are three charts showing three High Low portfolios since 1997. The Ford VMO factor tries to separate quality stocks from junk. But after twelve years no difference> Why? Investors sold their good names last fall because they could and then bought the weak names with enthusiasm this year, if they could. Of course the assumption of monthly rebalancing made the rebound almost as big as the tumble. In reality not many people had the fortitude or funds in March to make this happen.

The beta chart separates all stocks in the S&P 500 into those with Beta above and below 1. (The VMO bins only look at names in the top and bottom 20%). Well you can see that high Beta stocks did best over time. This worked because again the rules forced rebalancing even during steep market declines. Dividend payments are not included.

The final chart showing Test highs and lows uses a special combination of factors which I'd be glad to share with you if interested. It worked best. In a backtest. Secret sauce is always best.

3rd Quarter Results Rolling In - Leeb Capital

Enough 3Q 13fs have rolled in for us to start showing what various money managers were doing at the end of September (and the beginning of the bearish correction). Here are several charts for Leeb Capital here in NYC. You can see what they added and subtracted in 3Q. While not many new names lots of rebalancing going on. As for today Leeb is up with the market.

Chinese Stocks in America predict the Future

If you want to know what it going to happen in Shanghai tomorrow watch Chinese stocks here in the States today. It seems so easy.

It is the minute of truth and they are still squeezing

The low quality names that were trashed yesterday are making a solid recovery today. It happens. And as it's already 10:12 will (probably) keep on happening.

Squeezing the Lows

Short squeezing with Lows>Highs by 100bps. Minute of Truth will be at 10:05.
Or so.

High Risk vs Low Risk Portfolios Since Oct. 14

Here are three charts showing the performance of the Highs (low risk) and Lows (high risk) since Oct. 14. There's also a longer term chart showing an earlier hedged long Highs - short lows portfolio from September 25. As you can clearly see the trend towards caution has been firmly in place for over two weeks and really since the beginning of the month. The spread between the Highs and Lows is about 9% for the new portfolios. The long-short portfolio is up 6.7% this month. I compared that with the daily performance of the long portfolios of several famous hedge funds and money managers at TickerSpy.com. The best in Oct. has been Clinton, Archon, Stralem and Granthem - up 2-3%. It's been a tough month to be long. Oaktree, Elm Ridge and Criterion are down about 10%.

FYI Galleon's old portfolio lost 4.2% and ranked in the lower quartile; thus the need for the inside info from the brokers. There's a big stir today about brokers giving Galleon private non-FD'd scoops. I've seen no evidence in his 13fs that Raj did such a great job on the longside. Is it logical that all of his advantaged trades were closed out at the end of a quarter? Leaving only his longer term holdings? Doubtful.

Today looks like a bullish reversal at the open. Whether it lasts for more than a few hours or days...............je ne sais pais.

If you want to see the Highs and Lows, go to Tickerspy and search for Phoneranger or abslive.

28 October 2009

Selling Risk and Buying Safety. Again.

Who will argue that NWL and APOL weren't safe stocks before today? Who'd of thought that AIG and CIT would be big winners today? On the other hand, a few exceptions don't invalidate the rule. When investors are anxious, they carefully evaluate the economic trends, company fundamentals, fund mandate, etc and then they run like hell for the door. They've been running especially hard since the beginning of October. Our reference portfolio of risky stocks (high beta,low VMO) is down by about 13% since the beginning of the month while the safe stocks are down "just" 4%. The spread widened considerably over the last three days. Over the long run, high quality stocks outperform low quality stocks. I can't say the same thing for high vs low beta as the results are choppier. We'll put some long term charts up tomorrow for your perusal.

Otherwise buckle up, batten down, cowboy up and put your big girl pants on.

China had a bad night today

Even though Chinese stocks were actually up last night (SSE), they were hit hard today as investors fled to higher ground. The crowd at the China Growth Conference was huge. I couldn't even get a seat for lunch. Bad day all around.

Not a Goodday at Eton Park

Eton Park has a big slug of Goodyear. GT is now down 22%. Someone has to be selling the stock today. I doubt Eton Park could unload all their 15M shares today. Maybe they got out earlier. Maybe not.