Birchtree's Account Talk

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So many companies and so much cash. The corporate cash coffers have been building incredibly as many of the companies are running leaner and meaner. And, with the cash they have earning little to no interest, they are better off buying a company as a strategic acquisition - I have a number of roses ready for sale. We should see more announcements of M&A activity as prices soar. Because the markets are always changing and evolving all I can do is sit and wait for the knock on the door.
 
I would suggest that everyone be prepared for a continuing strong market and continued outperformance of everything risky. What ever the stock market does over the next few weeks, corrects or trends higher, one thing that continues to be reinforced by the price action is that bears are going to suffer a lot more pain during 2013 because this bull market is far from over. It's starting to feel like 1995 all over again. The market didn't see even a minor correction in all of 1995. The Dow rallied nearly 60% in 1995 alone. As recent corporate events illustrate, not only does good earnings news move the market, but, increasingly, dividend news is moving share prices. This year so far I've seen 47 dividend increase announcements with many more on the horizon I'm sure. I certainly expect more news related to increased dividends and share buy backs. I think going forward that large cap, higher-dividend paying stocks are going to outperform over the next several years. My oceanic account is probably 90% small cap and my tugboat (TSP) is 100% large cap so I'm set for any leverage. The question I now have is did we just finish an Elliott Wave 3 of 3 of 3 mode? The full wave 3 had a target at 2007 highs. Even though this bull is now four years old it is still a relatively young bull market. "In the bigger scheme of things, it's even possible we are now only in 1 of a larger scale 5." We should see solid signs of panic buying as the shorts scramble to cover and mom and pop say get me in at any price. If this bull results in a bubble for stocks I'll take it and add more to continue to build generational income streams. Every day I'm getting closer to my margin availability and then I graze. Snort.
 
On 10/9/07 the SPX was at 1565.15 - we should surpass that level by the end of the week. The VIX will most likely drop back into the 12 zone. Will the ECB drop its interest rate on Thursday - my bet is yes. Consolidations are perfectly normal, necessary, and unavoidable within the strongest bull markets - this one will happen probably in June. Corrections keep bull markets healthy. They are sparked by extremely unbalanced sentiment and overbought technicals and we are not there yet.
 
Oh this could be real sad - what if stocks still have a long, long way to go for a long, long time, and we'll understand the reasons only later - too late for most to make money on it. Birinyi is looking for this bull market to rack up 162-210% gains from the March 2009 lows. This bull market has the strongest start of any in history. The real point is, don't get rattled, don't get shaken out, this is a long term rally. It is vital to understand that you aren't likely to be able to predict when or what will cause a trend to end. So cluck away if you are so inclined - the G fund has plenty of room available.
 
Yes, I like it. One of the primary reasons I can't wait until I have margin access so I can buy my happiness all the way to where any top may reside. There is so much cash that is going to be seeking a warm spot in the manure pile.
 
You've talked about the great large & small cap rotation, I would like to know when you think this transition will revert back.
 
JTH said:
You've talked about the great large & small cap rotation, I would like to know when you think this transition will revert back.
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The outperformance of the large caps may have already started - especially with the dividend payers. Everyone is searching for yield and income. Small caps have had a wonderful 11 year run and it may be time for large caps to take control as the market moves higher into uncharted territory. Of course I've been saying this for at least the last two years.
 
clester said:
Interesting article. Especially since I like to use the RSI. He cherry picked a little though to show how it didn't work. He assumed you would sell as soon as it hit 70. But he made a good point. You can't just use indicators.
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The interesting thing about 70 RSI readings in this bull market is that it has rarely stopped individual stocks from moving higher if they're in the right type of bullish pattern. The RSI readings often get well in to the 70's if not the lower 80's. This is not normal behavior, and shouldn't be looked upon as such, since normally, 70 will stop stocks dead in their tracks. You don't bet against the trend in place once you get even a drop below overbought conditions.
 
A few words from my WSJ. "For the Dow's rally to move up to a B grade - to at least the 80th percentile - in terms of gains and duration without an intervening decline of 20% or more, it would need to rise to 14973 and last another five weeks, until April 9, 2013. To get an A, the Dow would have to more than double from current levels, to 29774, in a little over four more years. The longest bull market lasted about 12 1/2 years from June 13, 1949 to Dec. 13, 1961. To match that, the Dow would have to hit 39054 by Sept. 13, 2021."
 
BAC is catching fire today giving me nice profitability not to mention the rest of the banking herd - stress tests will show plenty of liquidity and dividends will be cut loose.

"If you look at the equity market when we were at the same point back in 2007, two key sectors - housing and financials - were clearly rolling over. This time, the homebuilding sector is taking off and the financial sector seems to be putting its big issues behind it."
 
Birchtree said:
BAC is catching fire today giving me nice profitability not to mention the rest of the banking herd - stress tests will show plenty of liquidity and dividends will be cut loose.
Click to expand...
The stress test sounds like a good reason to add some protection - puts - just in case.
 
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