Birchtree's Account Talk

[Birchtree]

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Here is another example of my contrarian approach. Back in 1999 and into 2000 when everyone it seems was riding the Nasdaq Composite Index up from 2000 level to the 5048.62 level, this fool missed the whole tech-stock bubble. The reason was that I refused to succumb to the hype - and I refused to get involved. Do you know how difficult it was to maintain that posture - and to be all alone while doing it. I wasn't making much money. Well I made some but not enough that I'd want to tell anyone about. I stayed with the boring sp500 type stocks and some small value type stocks. If I had invested $10,000 in a technology mutual in 1997 it would have been worth close to $50,000 at the peak. $10,000 in an sp500 fund would have provided close to $15,000. The rest is history - I had a broker offer to help me make some money in tech - I told him no thanks, but to remember that every dog has his day and mine was coming. These cycles just last a long time somtimes - searching for the extremes. That time frame should be year end 1997. So you see it's not easy being a contrarian - going against the best and brightest on the Street. And I have other examples to demonstrate my approach - but no grand standing - I am who I am and I spend my money where I see opportunity. It's hard to find someone to help pay taxes at the end of the year. I think this cycle will show the C fund to be the outperformer. Yes it will probably take a few years - but I have capital and I have time. I now even have a Frog that I can monitor and hopefully use as my own contrary indicator. And I have a back up that I can also use as a contrary indicator, how can I possibly lose in this sweet situation?

Dennis

 

[Dogdaddy]

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Hey Dennis:

This Op-Ed piece from today's NY Times might cloud up your "rose colored glasses" a bit...interesting reading, and some of the reason why I don't share your optimism for the current Economy. I will continue to be bullish in spurts, but not permanently..I'm into capital preservation. In my opinion, There are too many really smart people worried about our current economic policies.

http://www.nytimes.com/2005/06/26/opinion/26kristof.html?ex=1120449600&en=23495ba5cead82af&ei=5070&emc=eta1

Regards/Nick

 

[Guest]

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Nick, I didn't realize you could link to a NYT article. Thought they required registering. Thanks.

 

[Birchtree]

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Hi, Dogdaddy,

I read the article - but will pass on the free login. There were some good points in the article - made me take off more than my rose colored glasses. There are a lot of smart people who worry - but generally the are educated on the liberal side of economics. Someone like myself needs to at least be aware of the erroneous view points that are preached - keeps me in proprer balance with the important issues of our times, national times not the NY Times. Thanx for thinking about my welfare - I'm waiting for DMA to take me by the hand and guide me into reality.

Honestly, there will be bearish commentary all the way up in this bull market and economic expansion. It's necessary to try and shake the pillars of this bull market. And that's what I like - the more doom and gloom the better I feel. Again, the bull market likes to take as few people with it as possible on the upside, but everyone on the downside. Heck, I even like the pain caused from a 300 point correction - give me more- just don't make it a 900 point banger. Ferdinand can smell the fresh money that will be coming this week. There is however something out there in the future that this omnipotent market sees that I don't. But I have confidence it will have a positive outcome.

Perhaps the Chinese will buy all our dept and then provide us forgiveness because we are dumb capitalists. Look at Vietnam, they are doing today exactly what we had in mind for them 30 years ago. They are becoming capitalists with many self employed small businesses - and we are their leading trading partner - I eat their shrimp every 2 weeks.

But on a dear personal note - and here go my manners again - I don't think my pet bird (lemmon ) would stoop to even consider leaving any droppings on a most highly liberal rag like the NY Times. Now you know me well enough to know this was on the way - right? Or did you intentionally set me up for the play, gotta watch you SOG types all the time. Now you know I'm only punning, right? I do however know whata bull would do with such a prestigous publication, though. Give me Barrons or give me TWSJ. Take care

Dennis

 

[pyriel]

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I wonder what am I? Contrarian? Bullish? Bearish? Or just plain naive? Been here more than a year now and I still don't know how to read and analyze those chart.There are alot ofsmart people here that talks about yield curve or show places to goto read upand get smart with the market but Istill don't get it (somehow)...One day, I will get there. But for now, everybody's input is important to me and that is what is keeping meafloat. :^

 

[Birchtree]

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Pyriel,

Nothing happens over night - especially trying to get a handle on the large world of the markets. It's just to big and complicated. I see you are getting some good practice using your pistols, and eventually practice makes perfect. Do you iron as part of your laundry chores - I do all the ironing at my house - as soon as the wife hears me getting the ironing board out she's heading for her closet to get something that needs tidying up - I do it because she looks so good when she wears something I've ironed. Now washing, polishing, and waxing her car I do for love.

 

[tsptalk]

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Mike wrote:

It all just sort of feeds on itself. When I carry on regular discussions with people here about what's happening, that motivates me to read more to stay on top of things in order to offer useful insights. This leads to a more advanced level of knowledge for everyone involved, which *hopefully* will lead to better investing decisions.

Same here. I've learned a lot myself since starting the site. I get questions everyday via email and it makes me stay on my toes, researching andkeeping up with things.

 

[Dave M]

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<<Look at Vietnam, they are doing today exactly what we had in mind for them 30 years ago.>>

I think this is the first time I have heard an average Joe say this. It has been my opinion for a long time -- we went over there in hopes of setting up an export economy geared toward the western consumer markets, like South Korea. It really is the only thing that makes sense.

Did you arrive at this conclusion independantly, Dennis?

Dave

 

[Birchtree]

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Hi Dave M,

I honestly don't know if that was an independent thought or not, so much stuff is filtered in my readings these days I wouldn't know who to give credit. Col. Hackworth might ring a bell.

 

[Birchtree]

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Now for a short comment on the markets - I hope Teknobucks is right about the interest rate pause. So much has happened in the last 2 months - that I hope the Fed is concentrating on our low inflation prospects and slowing economy and not wanting to hammer the housing sectors - they will cool by themselves.

The Dow needs to hold support at 10,251, which is the 61.8% Fibonacci retracement level of the rally off the April 20 low (10,000) to the June high (10,656). The Dow is currently at 10,290.78. It unfortunately did manage a break below the 200 day SMA which is the simple moving average of 10,454. It managed to do the last Thursday when oil reached $60. Program selling begot panic selling. Any way this 200 SMA level is viewed by many traders as a bull versus bear market barometer.

There continues to be historically low volatility levels as documented by the VIX indicator - it has hardly moved during this down draft. I'm still bullish amid this recent carnage because the economy is only slowing, it is not yet declining. With the yields on the 10 year so low there are very few alternatives to stocks. I would not be at all surprised to see the Dow shoot up past the 200 day SMA amid the two positives of a drop in crude prices and a pause in Fed rate hikes. I'm ready for lift off again.

Dennis

 

[Birchtree]

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The DJIA closed today at 10,405.63, we are now only 49 points or so from going back over the 200 day SMA. The question now is has DJIA of 10,454 become resistance? If momentum can penetrate this level then more volume may develope and push this puppy up to the 6/17 high of 10,656. If that happens we will have clarfication from the Fed by then and direction of what the future may hold. Perhaps both the DJIA and the DTA will be set to confirm each other with new all-time highs. The DJUA is already making new all-time highs. All three component indexes confirming each other would be a classic Dow Theory Confirmation for a continuation of the primary trends moving to even more new highs. If the Dow could show strength like the transports did today - we would be at new all-time highs over 11,723 by 9/30/05.

The previous all-time closing high for the Dow was in 1/14/00. The next high was achieved on 3/7/05 at 10,997 or close to it. We are not that far away from the necessary confirmations to get an outright bullish buy signal. The primary non-confirmation by the DJIA of the DTA was when the latter made an all-time high of 3872.17 on 3/8/05, while the DJIA failed to confirm thisall-time high. That may be about to change in the near future. The transports moved up 85.07 points today to close at 3480.91. this is a 2.51% gain and was the outperformer of all the other indexes. Time is the only sure variable - but I got some time available - and some money to do some work with. Ready for lift off - heck been ready for 2 months.

 

[Birchtree]

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I guess I'm the only one still standing looking for a surprise Fed pause today. Oh well, been wrong many times before. Still worth a shot though - at any rate we still rally from this point to get above the 200 day SMA to act as support.

The DTA was the outperformer again yesterday rallying up 32.97 to 3513.88 for a gain of 0.95%. The advance/decline line remains positive. The DUA is still near all-time highs and will probably not faulter soon.

There is a nice article by Mark Hulbert on cbsmarketwatch.com regarding timing buffs. He lists the 10 best timers over the last decade. Presently 9 out of 10 are in a bullish posture.

 

[Birchtree]

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I have to take a moment to release some over powering hostility I'm experiencing right now. And it's difficult to do without profanity.

The new leader of Iran - Mahmand Ahmadink should gag repulsively on the maggots his wife feeds him for dinner - for the next 444 days. What a scum bag.

 

[pyriel]

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Hahhahah Birchtree..... Oh no, not you.... I can't believe I am reading this from you. You are one of the most upbeat person I know in here... Tell you what, I'd talk to someone I know who knows someone he knows who knows someone he know etc. etc. to get the market moving again tomorrow.

 

[Birchtree]

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Pyriel,

Yes tomorrow is another day. The Fed made no mention of when they will finally end their hikes. They are apparently after the adjustable rate mortgage market to slow down the housing speculators, making payments on interest only. The economy continues to hum along and the 10 year bond rate is lower so some mortgages will end up being refinanced to a fixed rate. There are still some silver linings, I just have to look deeper. At least the Fed is not after me this time around.

I really don't like that Iranian dog.

I'm still bullish for the summer. Something good should happen, especially if the omnipotent marketis a discounting mechanism for the future.

 

[The_Technician]

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Punishing isn't it Birch.....I hope you don't lead the innocent little lambs down to a slaughter......your performance is being challenged and your credibility is suffering....

Time for a makeover yet???? I admire your bullishness up to the point of reality sinking in....you cannot be permanent in one direction in the market for it doesn't in reality go that way......you have to go bearish soon or eat those bullish words.....

Think about it....better safe than sorry...and right now the market pressure is against you will all the economy data going against the bulls.....



:dude:

 

[Birchtree]

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Greg,

I want you to know I appreciate the articles you have been posting - I don't need the health care stuff - that's my occupation, the finance stuff keeps the heart pumping. Teknobucks - thanx to you too. It's amazing how much I don't know. Just hope you don't wait too long to get on the train.

Greg unfortunately most participants who end up transfering funds into TSP won't utilize the most important and favorable service - the ability to participate in moving money around to maximize gains. They will seek refuge in the G fund - perhaps if some of us more outspoken dare devil investors show them the way they will learn that the risk is not that great.

I've been looking at a graph of the federal funds target rates and the crises that have occured in past Fed rate hike cycles. For those interested here they are: the Franklin National Bank failure in 1974, Fed rate was 10.5%. The First Pennsylvania Bank losses and the Latin America debt defaults of 1980, the Fed rate was 16.25%. Shortly after that the Fed rate hike peaked at 18.5%. The Continental Illinois National Bank near-failure, Fed rate was 10.75% in 1984. The Black Monday stock market crash in 1987, Fed rate was 6.50% Savings and Loan failures in 1988, Fed rate wasvery close to 10%. Mexico currency turmoil in 1994, Fed rate was 6%. The Asia and Russia currency disruptions and Long-Term Capital near collapse, Fed rate was 5.75%, the Nasdaq collapse, the Fed rate was 6.50%. A smoothed out curve shows that the trend has been to establish lower highs over time. If the bad boys go to 4.0% this time around in the cycle who pays the price. My suspicion is that something will flare up in the real estate sector, before they are satisfied. The Nasdaq collapse was in 2000.

The ISM index rose to 53.8% in June from 51.4% in May. Prices paid fell to 50.5% from 58% in May, the lowest since 2/02. New orders, production and employment indexes all improved from May levels. The ISM has been over 50% for 25 straight months. I was actually worried it had gone below 50%, but the Fed probably knows all this data ahead of time when they meet. Standard and Poors looks for a 3.6% gain in the sp500 index on the year, buoyed by still sound economic growth, reasonable valuations and an end in sight to the current interest rate tightening cycle. Corporate earnings to rise 11% on average in 2005, expectations are for another double digit year in 2006. Back to the ISM a moment - this is the first time in 12 months that the index has increased. The weakest reading was in 6/03 at 50.4%.

The DJU index put in another new all-time high of 390.36, up 3.77 for a 0.98% gain, the strongest sector in percentage terms. The DTA was up 20.91 to 3508.07 a gain of 0.60% gain on Friday, working its way to the previous all-time high of 3872.17 on 3/8/05. The DJIA currently at 10,303.44 has a ways to go to reach the previous all-time high of 11,723 on 1/14/00. The last most recent peak occured on 3/7/05 at 10,997. The preceeding 900 point drop cost me $138,000 and I'm still on the come back trail from that one. This puppy can easily run up 1,400 points anytime - it went up 3,000 points in 2003. I think we are approaching a Dow Theory primary confirmation real soon. The Dow did hold support at 10,251 and should be ready to break through resistance at the 200 day SMA at 10,454. How I long for some of the good old days of 400 point moves to the upside.

The oceanic account this week has been doing fine, - I wish DMA was around so I could tell him I made good money on the week. I'll update the numbers on Monday when I get official look - It's a peeve I've developed - waiting. I did give back $26,000 last week. May have come close this week to getting all back. Can't wait to see what 7/5 brings to the table. Still looking for momentous lift off. Take care.

Dennis - stay away from the lamb place, please.

 

[Birchtree]

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The Technician,

Believe it or not, my performance is fine, and that's without Cialis. I've really not been around on TSPtalk long enough to establish any form of credibility at this point. I'd rather be sorry than safe - like back on 3/7/05 when I took a 900 point hit to the sterum. But sorry is only temporary - safe in investing seems to be a lifstyle. I plan to make a lot of money during the next 6-12 months - I'm talking 200 or 300 thousand. The market under the Dow radar just feels too good to turn and head down- no one sees this momentum coming - except those few that are grazing in the pasture.

 

[Birchtree]

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The sp500 companies derive 30% of their revenues from overseas. We need the dollar to ease back and find stability at a lower range. Those profits are now worth less when translated into dollars than they would have been last year. That's a direct result of the dollar's recovery this year. Because overall earnings for US companies in the sp500 have been growing more quickly over the past year than the index has been rising, the sp500 is trading at 17.7 times the past year's earnings versus 19 last June. That's about as low as the PE has gotten since 1996, and well below the 27 it carried five years ago when the tech stock bubble was just beginning to deflate. I just realized I can say anything and there is no DMA to call me out.

The sp500 is capitalization - weighted - that is the bigger a company's market capitslization, the bigger its share of the index. In other words, positive steps by its bigger stocks will have a disproportionate effect on it (index). The Value Line Arithmetic Index, an equal-weighted index of 1700 stocks, has risen by 68% over the past five years, compared with the sp500's 17% loss. This situation is setting up for a transition change. As a contrarian my opportunity would appear to be with the under performing C fund - and that is my 100% choice. Leveraged as deep as I can possibly get within reason. The S fund will still have gains but I don't believe it will be comparable to the last 2 months, a gain of $1.12. I'm sure someone out there had the good sense to back the truck up and load up. Take care

Dennis

 

[grandma]

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Birchtree Said: As a contrarian my opportunity would appear to be with the under performing C fund - and that is my 100% choice. Leveraged as deep as I can possibly get within reason.

`C' was 12.84 Friday at close. There has been quite a fluctuation over the past month w/ only 4 times it being <12.84. I am thinking I am willing to put a toe back here. Thant's not to say I won't be scared oo that committment, and cancel -