Birchtree's Account Talk

[robo]

Re: Birchtree's account talk

Birchtree,

My brokerage acount is now open. I'm using money in one of my Traditional IRA accounts, because someday I will have to pay taxes on it anyway. If I make a lot of money I can even help Fund my own Social Security/Medicare. Ha! Decided to leave my Roth's alone. I'm going to be using the Ultra Profunds so I can have the most fun. PermaBull and PermaBear my friend. ( 2X or -2X ) Don't worry, I don't need this money for retirement. Big Losses or Big Gains. I'll let you know at the end of the year how I did. I just need more positive trades than negative and lets not forget trading costs. I might go to the 1X Funds later, but for now it's PermaBull or PermaBear; lets doudle up??? Have a good one my friend....Have you read Henry's latest comments?

http://www.profunds.com/profiles/ultra.asp

 

[Birchtree]

All this gloom and doom noise tonight is great - give me more

I'll say it again for "Pig-Pen". There has never been a time where the A/D line and price simultaneously topped together before a major market decline has taken place. There has never been one time in 80 years where a major top in equities has taken place without the A/D line diverging with price. The A/D line is the back bone of technical analysis and as long as the NYSE A/D line continues to make new highs ahead that just forces the final termination point of the current longer term sequence that further out in time. I think the market displayed good resilience today - all one needed was energy related issues to stay afloat. With the Dow now only a little over 400 points away from all-time highs, the market will continue to frustrate the many who have been looking for a pullback for one reason or another. At some point participants will have to make a decision - I suggest close your eyes and hold your nose and just jump in.

The Dow price pattern has been one of a consolidation forming a basing or platform structure, not one of topping. If the Dow is going to make new all-time highs in this sequence from the October bottoms, building a base just below what has been overhead price resistance at the 11,000 level, would make good structural sense in order for something important like this to be achieved.

When looking at the 4-year cycle tops of 1966 and 1994, in all 3 cases the market rallied out of a 4-year cycle low in October and charged ahead for 3+ years, ultimately gaining more than 60%. I thnink we placed this 4-year low a year early in October'05. If I'm wrong and the 4-year cycle bottoms this year it might turn out like 1998, very short, sharp, and scary, but followed by new bull market highs.

 

[Spaf]

Re: All this gloom and doom noise tonight is great - give me more

I suggest close your eyes and hold your nose and just jump in.

The market broke free of being range bound. However, it got assaulted by the Fed, then by the bonds, housing, and a spike in oil. In all this, it has held above the support level. The money flow was declining, but today it started to reverse direction. Relative strength is about midway/high from overbought/sold levels. From what I hear, the economy is good and corporate earnings are good too. Any rate increases, should already be figured in.

The jokers are rates and oil, both give jitters and caution. However, they have been with us for years. I see there is water in the pool to jump in, hopefully no one will pull the plug.

Rgds, and be careful!................ ....................Spaf

PS: TSP-Walsmart has sold out of bear traps, from what I hear!

 

[Birchtree]

More companies go for stock buybacks

By Matt Krantz, USA Today, 3/23/06

SPX companies snapped up a record $340 billion of their own shares in buybacks last year. In the fourth quarter alone, companies bought $104 billion of stock, blowing away the old record of $82 billion.

Stock buybacks occur when companies use excess cash to purchase their publicly traded shares. It takes shares off the market and means remaining shareholders end up owning a larger piece of the company. Sixteen consecutive quarters of higher earnings have built firms' cash levels. The resulting buyback binge has:

Outstripped dividend growth. The 77% jump in buybacks dwarfed the 11.5% dividend increase last year. Firms spent 73% more on buybacks than on dividends.

Driven down shares outstanding. Buybacks lowered outstanding shares for 266 members of the S&P in 2005, and 80 of those saw the number of shares fall 4% or more.

Companies' earnings per share get an artificial boost from the drop in outstanding shares (EPS). 52 profitable SPX companies posted 16.2% EPS growth in the fourth quarter as they reduced their share counts 4%. Without the buybacks, EPS would have gained 11.5%.

S&P expects buybacks to be strong in the first quarter. Just this week JP Morgan Chase said it will buy up to $8 billion of its stock.

 

[Birchtree]

Re: Birchtree's account talk

From Merrill,

The capex-over-consumer theme appears to be alive and well. Conditions will remain favorable for solid growth in capital spending even if the growth rate of personal consumption spending slows. One reason is that corporate balance sheets are in excellent shape and the cost of capital is very low. Another is that the capital stock is well-below optimal levels, which means that companies need to invest. The areas that appear to be benefiting already from capital spending growth are industrial machinery and the energy complex. A slowdown in the business cycle will restrain the pace of fixed investment, as it has in the past. However, the steady increase in the capacity utilization rate indicates that capacity pressures are building. Another straw in the wind: the jump in the book-to-bill ratio for industrial machinery has soared in the past couple of months.

I just relish the moments in time when the market sectors come to me - I wish it was more frequently. I don't chase - I simply accumulate and wait. I'm very close to pulling the trigger on a little profit taking - I will undoubtedly reinvest some of those profits in big pharma.

 

[Birchtree]

A global view

From Merrill.

The shift in the Bank of Japan's policy to reduce quantitative easing and introduce an inflation target of zero-to-2% has given rise to two opposing views about the outlook for the yen.

Bearish view: the policy change is a combination of nominal tightening (reducing quantitative easing) and real easing (the overnight call rate will be kept at zero as inflation increases, causing real rates to fall); the entire term structure of interest rates will lag the increase in inflation.

Bullish view: the working assumption is that the BoJ will follow the framework of other central banks when it comes to the inflation target that it adopted recently. That means the BoJ would want interest rates to be at neutral when inflation hits the target.

The recent experience of other central banks indicates that the rate normalization process begins before inflation rises too far. Although there is a risk that the bearish yen view will dominate in the short run, we believe that the change in policy should result in strength in the yen in the medium term. We expect the BoJ to boost rates by 25 basis points in the fourth quarter of this year and by the same amount in the first quarter of 2007; by the end of next year, the overnight call rate is likely to be 0.75%. We view the prospect of rate increases and the reduction in quantitative easing as a plus for the yen. When quantitative easing was introduced in various stages in 2001 and 2002, the yen experienced episodes of weakness. A reduction in quantitative easing should result in the opposite situation.

 

[shiftomnimega]

Re: Birchtree's account talk

I recently wrote up an article for a few of my friends just getting into TSP. One of the allocation possibilities I listed was 100% C Fund. I linked to your allocation thread and gave a brief description of why it's a good idea based on what I've read from your posts in the past. Hope you don't mind.

Your argument for all C is convincing, but just not for me. Maybe it's the right fit for one of my buddies.

 

[Birchtree]

Don't forget the dollar cost averaging

shiftomnimega,

Come on aboard the train - we still have available seating at a discount. If I can make $1.00 a year in the C fund I'm content - it's the accumulation of shares at a reasonable price that I'm after. If the C fund explodes over the next two years and surpasses the I fund well it's not my fault. You'll notice very few participants even know this fund exists and that's the way I like it - a small microcosm. I guess I'm just a contrarian bull - but I certainly have voiced the virtues of the C fund - only the dull and boring need apply. Good luck in your investing. And remember a wall flower makes a great investment.

Dennis

 

[FUTURESTRADER]

Re: Don't forget the dollar cost averaging

Birch...don't ya think the S fund will outperform the C in a bull market and underperform the C in a bear market, when you would want to be out of the C anyway??

shiftomnimega,

Come on aboard the train - we still have available seating at a discount. If I can make $1.00 a year in the C fund I'm content - it's the accumulation of shares at a reasonable price that I'm after. If the C fund explodes over the next two years and surpasses the I fund well it's not my fault. You'll notice very few participants even know this fund exists and that's the way I like it - a small microcosm. I guess I'm just a contrarian bull - but I certainly have voiced the virtues of the C fund - only the dull and boring need apply. Good luck in your investing. And remember a wall flower makes a great investment.

Dennis

 

[Gilligan]

Re: Don't forget the dollar cost averaging

Birch...don't ya think the S fund will outperform the C in a bull market and underperform the C in a bear market, when you would want to be out of the C anyway??

Thats why he's selling the C-train tickets at a discount!

 

[Wheels]

Re: Don't forget the dollar cost averaging

it's the accumulation of shares at a reasonable price that I'm after.

You'll notice very few participants even know this fund exists and that's the way I like it - a small microcosm.

Dennis

2 points. You've said many times that you are all about $ cost averaging but you've also claimed to have over 400K in your TSP account. At what point does $ cost avg. become moot? I'd rather net the largest return I can on the 400K than chase a good price on the few hundred I was purchasing. I am not a very sophisticated investor so maybe I am missing something.

Also, I am confused about your comment that only a few know about the C fund. As of Dec 31 2004 (I am sure there are more recent statistics available but I dug these up real quick) the C fund had about 63 Billion compared to the S which has 9 billion and the I which has 7 billion. Hardly a microcosm as you put it.

Dave
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[Rod]

Re: Birchtree's account talk

I'm still curious just how GOOG will effect the (C) once it joins the S&P 500 after Mar 31.

It's been a real drag on the (S) lately. Could be a good thing for the techs???

God Bless

 

[Birchtree]

High cappers are end steppers

Gentleman,

My microcosm are the TSPtalk participants - not the world of TSP investors.

My TSP account is currently pushing up against $460,000 - and it didn't get that way by pistol shooting. Fortunately, at my tender age I don't do anything in a hurry - if I can pull $50K a year in this account with growth and dollar cost averaging contributions then I'm satisfied. I am positioned at 100% C so if this fund starts to explode I get blasted into space. I remember some of the years past when C fund was fun. Here we go: 1993 - 10.13%, 1994 - 1.33%, 1995 - 37.41%, 1996 - 22.85%, 1997 - 33.17%, 1998 - 28.44%, 1999 - 20.95%, and then three down years that were simply excellent for dollar cost averaging. 2003 was another great year. When we have periods of volatility you have to learn to endure the pain with patience. Those percentages by the way are all gains.

When does dollar cost averaging become moot - never. Even today if I moved my account to the G fund, I would let my dollar cost averaging to continue to buy the C fund - and if we were in a recession type scenario I'd keep on buying until the pain started to really feel good.

Why the C fund now? Growth has been the worst-performing equity style for six and a half years. My play is that again the large-cap growth sector could have a few good years ahead. The SML funds have been in outperformance mode going on at least eight years - and I'm now starting to peel profit in this area and redistribute to international.

If the Fed along with an inverted yield curve are successful in slowing down the economy you want to be deep in the high cappers my friends. At some point because I am a position trader I will move out of the C fund - but that hopefully is many moons from now - and I'll probably do it slowly as I am with my small cap fund. It is very difficult to pistol shoot when you are dealing with nickles and dimes - never mind the copper. I'm getting ready to preempt a takeover stock that I have and cash out with a $55K sum that will have to be reinvested - any ideas?

Frankly, I'm looking for a 1995 repeat - and even if I get that kind of upward momentum again I will still pay attention to my trusty dollar cost averaging. You take care and don't forget "Live Free or Die".

 

[FUTURESTRADER]

Re: Birchtree's account talk

Birch and all,

I was hasty in my judgement...C outperformed S in the bull market years of '96, '97, '98...more due diligence required on my part.

As for your 55k, Birch, how 'bout a managed futures account??...now that is LOTS of fun. Oil, gold, silver, short, long, options, strangles, spreads

 

[Birchtree]

My "slick" riding days are long gone

Futurestrader,

That environment is too fast for me - I'll be adding to big pharma, some banks, maybe some E'trade (ET), Eaton, Insteel, dull as mud. But those dividends are the spice of life with most stocks - and again I dollar cost average them every three months no matter what the price - leave everything to fate. And I still have multi-thousands of shares of my small cap fund left - actually owned by my wife - just in case I'm premature after this eight year run - it's never easy taking anything off the top - but then it's all in the sacrifice. Nice to hear from you - take care and keep building.

Dennis

 

[Birchtree]

Re: Birchtree's account talk

Check these SPX earnings growth chart

http://www.chartoftheday.com/20060310.htm

 

[Birchtree]

Son of Seabiscuit

Check this out for April

look for Dines on seasonality.

http://www.thebullandbear.com/articles/2006/0306-dines2.htm

 

[dell]

Re: Birchtree's account talk

Birctree: You might want to take a look at Genworth Financial (GNW). They pay a reasonable dividend and predictions are for solid growth. If you want to gamble with a couple of k, you might want to trade sugar commodities or look for companies that seel sugar. Predictions are for sugar to outperform oil and precious metals, but I would not (obviously) gamble anymore than I was willing to lose.

Dell

 

[Rod]

Re: Birchtree's account talk

Predictions are for sugar to outperform oil and precious metals, but I would not (obviously) gamble anymore than I was willing to lose.

Dell

Yes, sugar is definitely America's "newest" addiction alongside oil.

 

[Birchtree]

Looking for Ponce de Leon and his Fountain

This novice reader of the charts lately has been seeing some growth opportunities pop up out of the sound application of some sweet smelling bull manure.

The Wilshire 5K and the NASDAQ breakouts of recent are only marginal and could actually be a head fakeout - but certainly needs to be respected just in case it's real. The Wilshire has placed bottoms above bottoms all the way back to June'03 - same pattern exists for the R2K. The NASDAQ Composite took out its' 5 year weekly high of May'02 - and has impressive bottoms above bottoms seen since August'04. The MCO has penetrated the tops below tops trend line to the upside. The MCSUM is also trending higher from its zero line. This market is coiled and ready to join Spring. Goodness, I hate to sound too bullish, but if you are not in the game you are about to be left at the station. Got to keep a close eye on the DJU index and I'm predicting we will have a Primary Dow Theory confirmation of a new bull market sometime before the next two weeks of trading are completed. And my money is where my mouth is - actually been thinking of doing a little selling but am hesitant and will wait.