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Or you can now use TapaTalk again!Birchtree's Account Talk
- Thread starter Birchtree
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Birchtree
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A point to remember is that the CBOE put-call ratio is still the most impressive sentiment barometer; both its five-day and 25-day averages are at extremely high levels of 94% and 98% respectively. The 25-day figure is close to the reading near 100% that occured around the market's important intermediate tren bottom in late April/early - May.
There is an almost 95% chance that large-cap names will lead the market as they are almost dirt cheap by historical standards. There most likely will be a major change in market-cap leadership over the next year or so. Get your C fund while it's cheap.
Birchtree
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Frankly it is difficult for me to believe that 951 people have viewed this account talk since yesterday - you think that is possible? Nah
Anyway, this is from the WSJ and is for the S fund lover in you.
While the major stock indexes have been muddling along for months, below the market's surface, shares of small and midsize companies continue to climb.
Some experts warn that things are getting over-heated for shares of these kinds of companies. But as long as the economy-now experiencing the aftereffects of Hurricane Katrina - continues to show strength, these stocks could outperform. The Russell 2000 Index, which tracks shares of companies with a median market value of $600 million, reached a high in early August, tacking on gains of 1.8% so far this year to a rise of 73% since 2003.
Behind the excitement: Earnings growth has been better for smaller companies than for those with multibillion-dollar market capitalizations. The median earnings growth rate for companies in the small-cap stock index has been 28% in the past four quarters, compared with growth of 21% for larger stocks. Revenue growth for these modest companies has been 16%, compared with 12% for large-cap stocks. And earnings and sales growth have been rising for smaller stocks recently, while such growth has been slowing or stalling for larger companies.
A big part of the small-stock rally is simply catch-up. Small stocks began the decade at very inexpensive levels compared with large stocks, which were all the rage during the bull market that ended in spring 2000. They have made up for lost ground ever since. The placid trading environment of the past year also has helped since investors tend to flee to larger, more stable companies in periods of tumult in the market, and take a gamble on smaller companies in less volatile periods. These companies also have been doing well because they have found it easier to borrow money at low rates. Smaller companies, including those with less than pristine credit ratings, have found investors and banks eager to lend to them during the past three years, amid a rally in the junk-bond market and a global search by investors for higher-yielding debt. That has helped them issue debt with low interest rates, as well as refinance existing debt, cutting borrowing rates and improving the health of their balance sheets.
Investors have been catching on. So far this year, investors have added $240 million to mutual funds focusing on small stocks. In comparison, large-cap stock mutual funds have seen a net withdrawal of $53 billion. Since shares of smaller companies have fewer shares available to be traded compared with larger stocks, rising interest in these stocks has helped push their prices higher. So much money has flowed into small-cap funds that 14% of all existing such mutual funds have closed their doors to new investors, compared with 3% for large-cap funds and 7% for midcap mutual funds. Still, small stocks tend to do better in the initial period after a recession, not when a recovery is long in the tooth, as it is now. And historically, small stocks have traded at price earnings multiples that were as much as 20% lowrer than those of their larger brethren to reward the larger companies for their stability, generally stronger balance sheets and presumed ability to weather economic downturns. But today, the Russell 2000 trades at about 16 times expected per-share earnings for the next 12 months, about the same multiple as the S&P 500 index.
Birchtree
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All that has stock-market pronosticators increasingly worried that too many investors are piling into small and mid-cap stocks. Because they are more thinly traded, any exodus from small and medium size stocks could be painful for investors.
Larger companies often can produce better sales and profits compared with smaller companies when the value of the dollar falls, making their products cheaper. But the dollar's weakness may be giving small and midsize companies a hidden advantage. About 90% of the stock investments of foreign institutional investors are directed at large-cap stocks. Weakness in the dollar that leads to wariness about U.S. stocks is more likely to affect larger stocks in the next year. That is part of the reason some say the small-stock surge will continue as long as the economy continues to grow. Everyone thinks the small-stock cycle has gone on long enough, but these stocks aren't overvalued yet, and the Federal Reserve may not be able to slow the economy enough to hurt these companies. Some will be surprised by the strength and durability of this economic recovery and thus of the sustainability of small-cap leadership.
I need to start thinking more seriously about the S fund durability - myself. I will update the oceanic and tugboat accounts tomorrow - they both look good.
coolhand
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I've been expecting the s&p to outperform small/mid caps for the last few months, but that just hasn't been the case. It did show some life in the past week or so, but that doesn't constitute a trend.
I'm just guessing here, but since these are growth type companiesI suspectfolks arechasing the potential higher returns. The housing markets probably peaked or has at least become a somewhat riskier play so maybe more of that capital is finding its way intostox.
Last week I decided not to play the "C" fund as it just hasn't given the best bang for the buck. However, we can still buy more shares with a given amount of money for that fund vice the "S" fund so that should be taken into consideration as well.
Birchtree
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Here is the oceanic account update for last week - it should be remembered it was only a four day week. The current value is $953.5K with a gain of $26K on the week. I'm presently locked into my tugboat C fund with a gain of $.80. That works out to about a gain of $24K from an original price of $12.60. That does not include any gains from allocation dollar cost averaging.
Today was an energy correction give back day and I would suspect I gave back half my gains from last Friday. It portends to be a long week - got some dividends headed my way to be reinvested - that's always a small pleasure. Someone said today that the gov wants to buy 100,000 trailers for relief victims - might make a few dollars on my Fleetwood position. Just happen to own this company for the recreational vehicle play.
Absolutely no one is daring to mention even the remote possibility that perhaps the Fed would consider reducing rates some - I'm happy to get a pause - but if they drop like they did after 911- here comes the bull trapping the mighty shorts - and all those professionally managed hedge funds.
Birchtree
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Many investors have been flocking to mutual funds that focus on small-capitalization stocks, but fund managers are increasingly turning away potential shareholders. Small stocks are now in their sixth year of outperforming their larger peers and over the past five years assets in small-stock mutual funds have more than doubled to $291 billion as of june 30 from $140 billion in June 2000.
But in roughly the past 11/2 years, 32 actively managed small-stock mutual funds closed to new investors, bringing the total number of small-cap funds shuttered to new investors to 79. That means roughly 14% of all small-cap funds are now closed to new investors, compared with 3% of large-cap and 7% of mid-cap funds.
With small-cap funds, the concern is that many small stocks can be relatively illiquid. If a fund manager needs to get out of a large position, it may be difficult to unload if there isn't enough volume. How high will the bean stalk grow - just remain on guard if and when the transition starts so you don't stay too long - that's my plan.
I also see where Elliot Wave people have turned bullish -need to dig a little deeper.
Birchtree
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Managing a portfolio is like tending a garden. A gardener thinks about incremental improvements - harvesting some fruit and sowing a few seeds at any given time, but not plowing under the whole garden every year.
Typically, when everybody is on one side of the boat, you want to be on the other side. What often happens when investors get too bullish on a sector (small - caps) is that all the good things that can happen are reflected in prices, while none of the bad things are. That can be a recipe for disappointment.
Everyone is thinking about oil prices and possible inflation - read on. The sudden jumps in oil prices in the 1970s came anid already high levels of inflation, and provoked the quick and sizable interest-rate increases by central banks fearful of a run-away wage-price spiral. Officials at the Fed and other central banks have studied those shocks closely, and many have concluded that the sky-high interest rates were the primary cause of the recessions that followed.
After the first oil crisis in 1973, the US federal funds rate peaked at 13% in May 1974, up from 5.75%. As the Iranian revolution unfolded some years later and oil prices soared again, the federal-funds rate went from 6.5% at the start of 1978 to a peak of 20% in May 1981. Severe recessions ensued both times. This time, amid the lowest rates of inflation in decades, the Fed kept trimming its funds rate until it reached a 46 year low of 1% in June 2003. It has been gradually raising the rate since June last year, with the latest increase in August bringing it up to 3.5%, in a trend that is widely expected to continue. Instead of oil prices driving monetary policy, policy may now be driving oil prices. The Fed overstimulated the economy in 2002 and 2003. That had nothing to do with oil prices. But one consequence of the overheated economy was a rise in oil use and its price. Now the ratcheting-up of short term interest rates may result in a slow down in the next six to nine months. Another reason I'm staying 100% C fund.imported post
Birchtree---
You're right. Another quick note. I don't believe that the C fund has'nt had any kind of real rally this year. I believe the C fund as a whole is undervalued. But I'm cautious untill next month. If the market takes another dive like earlier last week, then the C fund will be grossly undervalued and ready :^.
Birchtree
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I'm not a believer in the return of higher inflation so that interest rates need to go up.
To be sure, the jump in energy prices made for some outsized headline CPI and PPI figures for August, and more of the same is in store for September. Overall year to year CPI growth rose to 3.6% from 3.2% in July, and it may surpass 4% in September (if it does, that would be the highest reading since 1991). However, core producer and consumer price indexes recorded downside surprises for August, much as they have been doing since spring. Core PPI was flat for August, and the year to year trend dropped from 2.7% to 2.4%. Core CPI was equally muted, and the year to year rate stayed at 2.1% which is very close to the Fed's implicit target. All that is to say that, even though energy prices have jumped by more than 20% in the past year, there is very little evidence of any pass-through to core consumer prices. With the rise in energy prices likely to slow consumer demand, the longer run trend in Core CPI still points to the downside.
Are ya'll aware that Chinese companies are building energy refinery capacity and infrastructure pipe lines in Saudia Arabia? Why not invite them to come help us.
Birchtree
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I see where the Chinese just placed orders for 2,600 Boeing aircraft - where are they planning to go?
These are a few technical comments from Michael Ashbaugh of Market Watch.
"The S&P carved out a "lower high" six sessions ago at 1243. That means a close under 1201 in the coming days or weeks would mark a new "lower low", placing the S&P's long-term uptrend in question. So that defines the fallback position - the areas where you would begin to reconsider the overall market outlook.
Yet conversely, it's worth noting that the indexes have beeb face to face with serious overhead, and to this point, they haven't sold off hard from resistance. When challenging multi-year highs, it isn't unusual for an index to need three or four separate attempts at resistance. In fact, that's what you would ordinarily expect.
Take everything together, and from a strictly technical standpoint, the recent consolidation hasn't threatened the primary uptrend. To this point, the pullback still looks like an orderly consolidation...." Go Gators!GGreg
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ou81200 wrote:
Yeah, it is only up 2.09% YTD
Birchtree
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That's why as a contrarian the C fund is my sweet wall flower getting ready to really bloom - the S fund is starting to relinquish outperformance and money will slowly shift away after a six year run. The contest now will be between the C and I funds going forward.
coolhand
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Birchtree wrote:
Time to sit back and wait. I suspect the I fund will havetrouble taking offbecause of a strengthing dollar; this assumesthat the rate hikes continue to the eoy.
The C fund is the value play. We can buy a lot more shares of those than either the S or I. LT and IT still look bullish to me.
Birchtree
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From the WSJ-
Energy-based exchange-traded funds have grown in popularity, but not all energy ETFs are created equal. Exchange-traded funds resemble index-tracking mutual funds but trade on an exchange like a stock. An energy ETF, like a mutual fund focused on energy, offers exposure to a variety of oil and gas-related stocks without the risk associated with owning individual stocks.
There are three ETFs designed to track the broad U>S> energy sector, and while they are similar in many ways - for example, industry giants Exxon Mobile Corp., Chevron Corp. and ConocoPhillips account for the top three holdings in each of the funds-there are also fundamental differences among them.
The Energy Select Sector SPDR Fund, known as a "spider" holds 29 large oil and gas companies in the S&P 500 - far fewer than the other funds. Its holdings don't include small and mid-cap securities, but underweights some large-cap companies relative to the Standard & Poor's 500-stock index. The energy SPDR is considered the purest play on large-cap energy stocks. The fund is also the least expensive of the bunch. The shares trade at about 12.5 times prospective earnings of the underlying stocks, weighted by their representation. The fund deducts 0.25% of assets to cover expenses each year.
The SPDR is also the oldest energy ETF - brought to the market by State Street Global Advisors in December 1998 - as well as the most popular. More than 13.26 million shares trade hands each day.
The iShares DJ U>S> Energy Index Fund-introduced by Barclays Global Investors in June 2000 - holds just over 50 stocks and is designed to track the performance of the Dow Jones U.S. Energy Sector Index. The fund, which includes stocks with a variety of market caps, doesn't hold all of the stocks in the index but instead invests in a representative sampling to produce returns that closely track the index. The iShares ETF trades at about 12.4 times prospective earnings of the underlying shares. Shareholders in this fund spend the most on fees-0.60% of assets.
The Vanguard Energy VIPERS, which came to the markey last September, holds the most stocks- about 130 - and consists of all the stocks in the broader Morgan Stanley Capital International, or MSCI, Investable Market Index. While large energy companies account for a big portion of the portfolio, the large pool of stocks gives this fund exposure to more small and mid-cap names. Generally, the fund holds all of the stocks in the index. The VIPERs trade at about 14.2 times prospective earnings of the underlying shares and carry the same 0.25% fee for expenses as the energy SPDR.
Merrill Lynch & Co. manages the Oil Service HOLDR, which is constructed slightly differently than an ETF but also is designed to track oil and gas drilling and equipment and services.
Birchtree
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A positive surprise from the last Fed meeting was that only seven of the 12 district banks requested a discount-rate hike. Some of the banks have been known to drag their heels in the vote that takes place in the weeks before the FOMC meeting, but in the past, they have always fallen in line on the day of the meeting. Things were different this time around.
For the first time, an investor can see light at the end of the tightening tunnel. When Fed Governor Olsen dissented, he wanted the Fed to pause. Dissents are very rare; they have happened at only five of the past 46 FOMC meetings dating back to 2000. When they do occur, they can signal a policy inflection point (that was the case in September 2002, when two voters wanted a rate cut but the Fed stayed on hold, only to cut by 50 basis points at the next meeting). Even if the Fed moves again on November 1, the Olsen dissent may pave the way for a more substantial re-write of the press statement; the wording might even omit "measured" and "accommodative". As long as the economic data remain sub-par and the run-up in energy and raw-material costs does not percolate through the pricing system, the Fed has no case to tighten beyond the November meeting. Unless, of course, the main aim is to take as much air out of the housing balloon as possible before AG steps down on January 31. Four percent is a nice round number and benchmarked against core inflation, it would leave real short term rates decisively in neutral territory.
Birchtree
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It would appear the smart money is heading overseas. As U.S. stocks muddle along, foreign markets are in the midst of their longest winning streak in nearly two decades. Stocks in Europe, Australia and parts of Asia are up 4.9% in dollar terms this year, according to one widely used measure, the Morgan Stanley Capital International EAFE index. By contrast, in the U.S. the S&P 500-stock average is up just 0.3%, and the Dow Jones Industrial Average is down 3.4%.
In fact, overseas markets are on pace to outperform U.S. investments for the fourth straight year - something that hasn't happened since back in the mid-1980s, when the Japanese economy was soaring. This time around, individual investors are playing a more significant role, joining the big institutional investors like pension funds that are the main players. Mutual funds that invest in international stocks had received net inflows from individual investors of $52 billion as of Sept. 21 putting them on pace for a second straight record year, according to AMG Data Services. Overall, net U.S. purchases of foreign stocks totaled $63 billion during the first seven months of 2005. That is up 33% from a year earlier and on pace to add up to the largest net purchases of foreign stocks ever. The returns are spurring some financial consultants to recommend U.S. investors put more into overseas markets than the typically suggested 20% of a stock portfolio, some say as much as 35% to 40%.
Despite the recent rally abroad, foreign stocks remain a bit cheaper than U.S. stocks, based on their expected earnings. Investors expect the dollar to weaken over the longer term against major currencies like the yen and euro, which encourages them to increase their exposure to nondollar stocks. A weakening dollar enhances foreign- currency returns for U.S. investors when those gains are translated back into greenbacks.Similar threads
