Birchtree's Account Talk

[Birchtree]

Re: Birchtree's account talk

"We are currently very close to eclipsing the peak in long-term bearish sentiment during the 2000-2003 market meltdown, which I find astonishing given that the S&P 500 is 115% higher from October 2002 bear market lows and is making new record highs daily. While bullishness has rebounded recently, I would have to see a string of readings in the high 50s - low 60s before becoming concerned. We are just now getting back to more normal bull market levels in most gauges of investor sentiment.

I still see no signs of excessive optimism in our markets, outside of the Chinese ADRs. Moreover, U.S. stock mutual funds have seen outflows for modt of the past five years; domestic ETFs have recently seen improved inflows, and there has been an explosion in low correlation/negative correlation U.S. stock strategies; the quantity of research that caters to these funds has soared; permabears pundits are more popular than ever, there have been huge spikes in gauges of investor anxiety over the last couple of years on relatively mild market pullbacks; a fairly large chunk of the general public generally hates U.S. stocks and says it won't ever invest in them again; public short selling is more popular than ever, short interest on the major exchanges has exploded higher this year; S&P futures traders remain positioned near historically short levels; the mainstream press obsesses with what is wrong and what could go wrong; investors seem to always price in the worst case scenario immediately rather than the most likely scenario; and long-term investors are denigrated (I like that), while day-trading is championed as a crash is always seen as just around the corner.

I continue to believe that overall investors sentiment regarding U.S. stocks has never been worse in history with the market at records, which bodes very well for further outsized gains." From Gary at Between the Hedges

 

[Birchtree]

Re: Birchtree's account talk

The NYSE breadth MCSUM is showing positive divergence as the internal strength is breaking above the down trend line. This momenyum is usually followed by positive price actions. The oceanic made $16K yesterday - good for me because that's all I made all darn week. Insider sell/buy ratios are most oversold since 2003. Means that insiders are selling less and buying more. Liquidity and supply/demand measures are the best indicators pointing to a year end rally. Money market funds have seen the largest-ever infusion of cash. And the blessed hedge funds can be a source of liquidity if they cover the shorts in the S&P 500. Could this be the out of the blue parabolic week going forward.

 

[Uptrend]

Re: Birchtree's account talk

The NYSE breadth MCSUM is showing positive divergence as the internal strength is breaking above the down trend line. This momenyum is usually followed by positive price actions. The oceanic made $16K yesterday - good for me because that's all I made all darn week. Insider sell/buy ratios are most oversold since 2003. Means that insiders are selling less and buying more. Liquidity and supply/demand measures are the best indicators pointing to a year end rally. Money market funds have seen the largest-ever infusion of cash. And the blessed hedge funds can be a source of liquidity if they cover the shorts in the S&P 500. Could this be the out of the blue parabolic week going forward.

CNBC is reporting:
"Everyone knows third-quarter earnings are going to be lousy," said Alec Young, market strategist at Standard & Poor's. "It's not going to be about results, but about guidance."

Don't you think underperforming 3rd quarter results are going to shake the market?

 

[Birchtree]

Re: Birchtree's account talk

The surprise may be that earnings aren't that bad. They never are - everyone just thinks the worst.

 

[hessian]

Re: Birchtree's account talk

CNBC is reporting:
"Everyone knows third-quarter earnings are going to be lousy," said Alec Young, market strategist at Standard & Poor's. "It's not going to be about results, but about guidance."

Don't you think underperforming 3rd quarter results are going to shake the market?

Responding with only basic reasoning (yes, another newbie), but: my take is that weak/poor/uncertain Q3 earnings are already well known/expected & therefore are already part and parcel factored into the market's current prices.

Birch, would you agree? If yes, then, having already seen the nice recovery, should we not expect Q4 to be just a continuing ride upwards? (Only question being how wild a ride will it be?)

 

[Birchtree]

Re: Birchtree's account talk

Think positive - Dow 15,900 by the end of year. Money flow still looks good. A 45 degree angle of ascent is indicative of a strong trend. Watch the VIX drop back to 14 when the herd steps in to buy - it'll be get me in at any price.

 

[12%ayear]

Re: Birchtree's account talk

Think positive - Dow 15,900 by the end of year. Money flow still looks good. A 45 degree angle of ascent is indicative of a strong trend. Watch the VIX drop back to 14 when the herd steps in to buy - it'll be get me in at any price.

Oh boy, a permabull cheerleader.

 

[Birchtree]

Re: Birchtree's account talk

Hessian,

You need facts not hyperbole. The nation's trade deficit narrowed in August as U.S. exports rose for a sixth consecutive month, a sign that strong demand for American goods and services may help offset troubles in the housing and credit markets. The gap between exports and imports was $10 billion narrower than in nAugust 2006. The surprising strength of exports led many economists to raise their estimates of third quartergross domestic product. They had expected exports to remain flat. The $10 billion year to year drop in the trade deficit, roughly speaking, translates into a full percentage point increase in the annual rate of GDP growth for the third quarter. Some have raised their estimate of third-quarter growth to 3.3% from 2.7%. The implication that's most important is that trade's contribution to third-quarter GDP is so large as to more than offset the negative contribution from housing. I think earnings will be a positive surprise and are not discounted in the market. Economist are keeping a close eye on consumer spending because it accounts for more than two-thirds of GDP, while net exports are 11% of the tally. So far the consumer is hanging tough. I'm inclined to stay fully invested - in this environment you can miss a really big day sitting on the Lilly Pad. Be right and sit tight.

 

[hessian]

Re: Birchtree's account talk

Hi Birchtree,
Yes I do best with facts, and last response was most helpul (you're obviously aware limits many of us newbie's have on how to explain "facts" so that we're able to grasp/understand). You did good in explaining in lay terms. Thank You!
I'm realizing that perspectives differ, and often change, and are often due to time horizon of focus. For me capitol preservation is important, but needing to take risks too, so when to buy, when to sell (and buy more), is important. B&H isn't my game - but I needed to hear perspective that big losses are behind us hopefully (for awhile).
VR

 

[Birchtree]

Re: Birchtree's account talk

I think today I will let the market take care of itself - I'm going to go wash and wax my car. I did go back to 100% C fund this morning.

 

[Removed1]

Re: Birchtree's account talk

I think today I will let the market take care of itself - I'm going to go wash and wax my car. I did go back to 100% C fund this morning.

Birch,what mad

e you change allocation to all C? but none of I? TY

 

[Birchtree]

Re: Birchtree's account talk

I bought my DCA position in the I fund starting at $22.38 so I'm taking that profit and simply DCAing back into the C fund - today is shaping up to be a good price. Going forward for the rest of this year and next, the S&P 500 type stocks should outperform. No fear here.

 

[wv-girl]

Re: Birchtree's account talk

Birch,
You always talk about the NYAD charts and I have looked but (sorry to say) that I can't make heads or tails out of what I am looking at. It seems to be very volitle so could you splain what it says about todays action?

tia
Debbie

 

[Birchtree]

Re: Birchtree's account talk

Today was just a simple correction - probably initiated by the increase in the price of oil. No damage done with minimal noise. As long as the NYAD line remains above its 1% trend (200 day EMA) this directional indicator will tell you that we are still in a bullish market environment. The negativity today allowed me to walk away and go wash, polish and wax my car. She shines like a green emerald.

 

[Warrenlm]

Re: Birchtree's account talk

Birchtree, I'm wondering if you and a previous participant, Sarah, in past years, ever publicly debated your seeming differences in confidence about the domestic market. You predominantly buy the C fund and seem confident in the domestic market while she's stayed in the I fund. Much more than that however, she talks of having moved her portfolio into foreign stocks and precious metals since 2003 in the belief that the US is heading for a catastrophe. You've generously posted your "offshore" account's holdings, which I took to be US stocks. If there's a past exchange you can point me to, I'd like to read it.

 

[Birchtree]

Re: Birchtree's account talk

I've never been introduced to the "Goddess" and we've never had a conversation, but I'm sure she secretly lusts for the taste of Birch Beer. The domestic market is ready to play catch up to the rest of the internationals. The Mrs is fairly deep in the internationals but I plan to lighten that load over time during 2008. Besides, I try to keep a low profile.

 

[Steadygain]

Re: Birchtree's account talk

Birch, I've paid more than my share of taxes throughout my life and according to Turbo Tax - give 6 times more to Charities than the rest with a similar income. I'll get at least $4,000 a month with Social Security and therefore will probably have to pay huge taxes on every retirement dollar.

So any advise on how I can limit my losses?? Could I rollover the TSP to an IRA Swiss Account, buy a house in Panama (as everything there is tax free) and somehow make a direct link to their banks?? Anyway, you seem pretty knowledgeable so I'd appreciate some help.

 

[Birchtree]

Re: Birchtree's account talk

Everything you do in retirement will be impacted by your AGI (adjusted gross income) level - that sets your tax basis. Anytime you can roll to a Roth IRA you will be better off and so will any heirs. The first thing to do to reduce your AGI is to live off of savings for your first years of retirement. That way you can roll your TSP in increments to a regular IRA and then transfer into a Roth. The tax rules may be getting ready to change that will allow more folks to do a direct rollover to a Roth. You can prolong your social security and also prolong your annuity, that way you will not generate a 1099 until you are ready. Anything you have in capital gains is taxed at 15% but only on demand - that goes for qualified dividends also. If you can manage to keep yourself in the 15% tax bracket ($62,000) for married - your capital gains will be taxed at only 5% - that's 95% tax free. It does require forward planning. For example the Mrs. has her retirement in a defined contribution plan that will be available on demand and will give us a choice on our level of income. That might give you some ideas.

 

[Steadygain]

Re: Birchtree's account talk

Thanks a lot Birch. Will copy - paste - print. I may be over $62,000 on S/S and the VA Pension but will find a way to get that down if possible. With the house paid off and no other debt $62,000 should be more than enough until we're forced to draw on the rest. 95% Tax Free makes staying in the good ole USA a lot more appealing.

 

[Birchtree]

Re: Birchtree's account talk

A few interesting facts from TWSJ regarding the Shanghai Composite stock index - it's up 303% since the end of 2003. Recently crossing 6030 for a new all-time high. Stock markets in China are dominated by as many as 50 million individual investors, who are responsible for about 70% of the trading. That is the reverse of WSestern nations, where big firms set the tone. Chinese shares are expensive, by almost any measure, including a price-to-earnings ratio of 69 times last year's earnings on the Shanghai market, compared with 18 for the S&P 500 today. The market could go higher still as millions of new investors continue to sign up. Merrill Lynch & Co. estimates only about 22% of Chinese financial assets are in securities, far less than the U.S.'s 52% level. China has an 82% urban-home ownership rate and massive construction, real-estate industries. American homeownership, by comparison, has never topped 70%, according to the U.S. Census Bureau. One missing element: foreign investors. A quota currently limits overseas money managers to owning about 1% of China's market capitalization. Otherwise, money in the market is from domestic sources.