Birchtree's Account Talk

[Wizard]

Re: Birchtree's account talk

Enduring This Selloff: Stick To Your Plan
Related Stocks: IIF

The market is getting crushed, all the themes I think are important for the next few years are really getting hit and I am hiding under my desk!

http://etfinvestor.com/article/11071

He works for Cramer you think he is going to say sell? :worried:

Consider the source.

 

[The_Technician]

Re: I recently bought me a new cilice before they go up in price due to demand.

I tend toward a longer term horizon in my objectives - that way being a cycle rider has its moments of clarity. The Technician doesn't want me to lose any money - and I won't unless I do an IFT. My balance is like the waves of the ocean - riding in and out.


Then maybe your individual plan doesn't match the day to day trade plan of the majority of the board.....you may want to consider that in the future....

 

[Birchtree]

Re: Birchtree's account talk

The Technician,

What you fail to realize big man is that there are many others that are not members that are seeking ways to manage their own accounts. We seem to have many guests that view the board and they are learning just like me. I certainly don't know everything but I've been investing money a long long time. Now you don't know that when the Dow gets to 17,000 and you're all happy that I might take a detour - stick around and find out - I'll be right here with the Wizard. Take care

 

[Birchtree]

Did the big man go on vacation - he can use the rest.

The GOP says the tax cuts, first enacted in 2003, have created 5.2 million jobs since August 2003 and bolstered tax revenue by nearly 15 percent last year. According to the White House, the cuts have helped spur growth by keeping $880 billion in taxpayers' pockets during the past five years. I know as an investor that I've been helped.

We are now starting to fit the pattern of a midcycle slowdown. After the Fed raised rates sharply in 1983-84, growth slowed significantly. And after it raised rates through 1994, growth slowed to just a 1% annual rate in the first half of 1995. Those are encouraging precedents: The stock market rose strongly in both 1984 and 1995 once it became clear the Fed would stop raising rates and the economy wouldn't fall into recession. Both times, the economy went on to experience exceptionally long expansions.

Unlike the great 1990s bull market, which was sustained by a wave of new technology, this one has the feel of an old-fashioned economic boom, the type investors saw in the 1950s and 1960s. What many thought would be a limited rebound created by Chinese industrial demand has turned into a long-running story as once unloved sectors such as commodity producers and oil drillers continue to thrive. Helping fuel the U.S. stock surge are once skeptical investors, who are now funneling money into the market in the hope of getting in on a lengthier boom.

World-wide economic growth is one reason to believe the economy has entered a phase of secular, or long-running growth, not just a temporary cyclical upswing. Cost-cutting of the last bear market, the changing economics of oil and lower interest rates are all important factors. I think many board skeptics will continue to be surprised at the strength of the economy and markets globally.

http://www.WSJ.com/onlinetoday

 

[Birchtree]

Did Whimpy borrow my cilice?

Going forward I am currently a fan of large stocks (C fund) even though many other investors remain wary of calling a turn in the market. There have been several occasional rallies in big caps in recent years and they have been overtaken by smaller competitors as the economy again revved up. This may be the occasion when large caps finally break open. They are underloved and underowned. However, it should be pointed out that small companies can take advantage of opportunities to sell overseas just as well as large companies, thanks to the Internet and economic globalization. Small caps are now on a 7 year out of 8 years of an outperformance run - it's probably time to reflect. What the market is paying for is rising return on equity and improving earnings - what sector will lead the next leg up is the question? My money is primarily on the large caps for safety and leveraged to 100%.

 

[Birchtree]

Inter-global mixture.

Of the total 2040 member issues of the NYA, there are 350 foreign company components. Amazingly, half of the highest 50 capitalized compnents of the NYA are foreign companies. We are joined at the hip.

While reviewing some technical analysis graphs I discovered that the CBOE only total (equity and index) options call-put ratio 10 day EMA is currently 0.91. The current ratio is at its lowest level since December 1994 when the ratio reached 0.90. Of course, the current ratio could go lower, but it is at historic lows and would have to be rayed very bullish. It seems all the extremes are historic these days. Remembere what happened to the SPX in 1995 - up 34%. Snort.

Also, the NYA $weighted MCO below -100 has occured three times since 2002; in each case, final price bottom did not occur until up to 8 weeks later; MCO posted -107 last week. I don't think we are going into a major bear leg down. Damage has been inflicted upon the bullish case over the past few weeks, but damage has been inflicted before over the past three years, and the market recovered after the cleansing process concluded. Snort.

 

[Spaf]

Re: Birchtree's account talk

Dennis,
We use to have a farm. And, our neighbors had a bull farm. My neighbor always walked or drove around with a sawed off .410 pistol. I asked him what was the .410 pistol for? He said it was for wild dogs! Wild dogs I asked? He said-Yes! The dogs would jump at the tails of the bulls and latch on and wouldn't let go! That is unless they got shot with the .410 he carried.

So, the moral of the story is once ever month or so, put in a IFT for i.e., 1% G, and 99% C and switch back the next day. You get rid of the dogs!
How's dat for a solution!......:blink: ........Spaf
[Please disregard if in violation of the pending permanent personal permibull permit]

 

[Birchtree]

Re: Birchtree's account talk

Spaf,

Now that is exactly what my strategy will be when the SPX reaches 1700 and the Dow is at 17,000. In the meantime I get to buy all the way up - always looking for the top.

Dennis -permabull#1

 

[Birchtree]

Finally some character from the BULL.

This rally has the potential to be more than a reflex rally - providing one goes against concensus opinion of a retest of the lows. As a contrarian I'm not waiting for the retest to do some buying tomorrow. The market has corrected enough to bring me in for good pricing. I had several issues lined up to go out the door, but they all accelerated today except one. The stock is AZR (Aztar Corp) currently being chased by several gambling company suitors. It will go tomorrow with a nice profit and the funds will be redistributed among about ten other stocks. A couple of those will be new to the fold, but most are already owned and I'm simply increasing my position. I'm aware of the possibility of a SPX retest back to 1245 in the next couple of months - but to miss this rally is just too risky. The greater risk is being out not being in. I'm currently down a little over $100,000 but certainly managed to get a nice chunk back today - so this permabull is going to add some manure to the pile and hope for green dollars. I'm still of the silly opinion that the C fund will begin to outperform the other funds in the second half - in the meantime I wait and let the market come to me - I'm a planner, not much of a chaser - that way I get the wall flowers that are left sitting at the dance.

 

[Birchtree]

Did some buying today for fun times ahead

I noticed that Luxemboutg steel manufacturer Arcelor SA Friday agreed to a $16.6 billion merger with a Russian steel manufacturer in an effort to block Mitall Steel. That probably mean that Mitall will be searching for another takeover replacement - I own several steel companies and they are welcome to their choice of any as long as they pay a premium.

This afternoon I sold my Aztar and reinvested the funds including my profit into some other positions: I bought Goodyear, NL Ind, Ryerson Tull, Commercial Metals, Hercules, Lubys, Olin, CNH (Case Newholland), and ABB Ltd. I have a few more I will probably buy next week.

 

[Birchtree]

Re: Birchtree's account talk

The end of month rally failed to work at the turn of last month April/May. The lack of a rally broke a string of 11 straight monthly gains. Over the last 64 months, prices have rallied from five days before the end of month through the first two days of the new month 46 of the 64 times or 71.28% of the time. Could work this time with those odds from such an oversold level. Wednesday will bring the smart money back in - what direction is open. I'm holding the line with a plan for the future - being aggressive not defensive.

 

[Birchtree]

Is there more to go after a three year run?

I'm keeping an eye on my international fund - not in any hurry to make changes at this time. After all the small caps are on a 7 year outperformance and the internationals may also be in a secular move along with commodities. Investors lately have been sending the lion's share of their mutual-fund investment dollars overseas, as international stock markets have outperformed the U.S. Net investments in foreign stock and bond funds topped $72 billion in the first quarter, compared with a little more than $20 billion for funds that invest in U.S. stocks and bonds. Now, there are signs that trend may be turning around. Money going into U.S. stock funds in April is expected to exceed flows into foreign funds - the first time in nearly a year.

Foreign stocks already have had a three-year runup, with the MSCI EAFE averaging more than 25% annual gains - more than doubling the return of U.S. stocks. The worry now is that the biggest foreign-market gain may be in the rear-view mirror. Even if you predict the dollar's direction correctly, measuring its effects on the bottom line isn't simple. Some foreign companies are hurt by a falling dollar because it raises the sticker price of their products in the U.S., hurting their sales. Did anyone realize that 60% of FTSE revenues are in dollars, if the dollar sinks so does the FTSE.

One of the most straightforward strategies to play the dollar is to simply invest in U.S. companies with substantial sales overseas. We should be buying our own multinationals - they earn 50% to 60% of their profits offshore. When those companies translate those foreign-currency sales back into dollars, they benefit from the currency windfall.

Anyone interested in the history of a housing slow down and how that impacts the markets?

 

[Dave M]

Let Me Guess

There is money out there. It sloshes around seeking the best return. Stocks were hurting for a few years thus much of that dough went into real estate. Now that interest rates are rising and it is expensive to get in, it is a good time to get out and the money will flow elsewhere.

If rates rise high enough, it will go predominantly into bonds and fixed-income securities. If stocks look better, it will go there. These days with rates in the low end of the middle ground, stocks ought to benefit.

Am I close?

Dave

 

[Birchtree]

Stock fund investors get in the groove.

From the WSJ by Tom Lauricella dated May 25, '06.

Earnings beat S&P 500 during the past 5 years instead of lagging behind.

Study after study hsas shown mutual fund investors piling into stock funds at precisely the wrong time - as prices are peaking. But one new report suggests that in the past five years, fund investors actually may have gotten it right. From 2002 to 2005, the average stock fund investor earned 15.3%, while the S&P 500 index rose 14.4%, according to Dalbar Inc., a financial services consulting company. Over the five-year period through the end of 2005, the average stock-fund investor earned 1.6%, while the S&P 500 edged up 0.5%.

The good performance of stock fund investors over the past several years contrasts with the study's long term findings, which show investors lagging far behind the market. For the 10-year period ended Dec. 31, the average stock investor earned 5.8%. That was far behind the S&P, which gained 9.1%.

That gap in performance is partly because of investors piling into stocks just before the collapse of the tech-stock bubble. In recent years, many investoirs have been moving more money into international stock funds, which have far outpaced the S&P 500.

Louis Harvey, president of Dalbar, says the recent good performance by stock-fund investors compared with the S&P 500 may be owing to investors' hanging on after the bear markey and profiting from the recovery in stocks. Investors, on balance, didn't yank their money out, and "can take better advantage" of the bounce back, he said. As a result, stock-fund investors "are doing extremely well - the market is moving in their favor," "They certainly are behaving smarter,"

http://www.WSJ.com/onlinetoday

 

[Birchtree]

Re: Birchtree's account talk

A small blurb about my international fund. World and foreign mutual funds are sending mixed signals about where they think emerging markets might go, even as some advisers generally are cutting back on foreign stocks. Several funds, anticipating such declines, have scaled back on emerging markets in recent years, like the $87 billion American Funds' EuroPacific Growth Fund. So I guess we are being somewhat contrarian at this point - not all internationals are created equal.

 

[Birchtree]

My "house money".

Sometimes my appetite for stocks is fed by the "house money" effect. Like casino gamblers who get lucky early in the evening, the market's rise makes me feel like I'm ahead of the game and that I can afford to take a few extra risks. But all this can go into rapid reverse when stocks turn lower like last week and maybe again this week. Our confidence gets shaken, our cushion og gains begins to evaporate and we lose our appetite for risk. Only sometimes though. As we extrapolate the market's downward spiral, the outlook seems increasingly grim - and some folks panic and sell. I saw this sort of panic during the last bear market, with mutual-fund shareholders yanking a net $110 billion out of stock funds over the nine months ended February 2003. Their timing, of course, could hardly have been worse, with stocks rallying sharply in the months that followed. That was a 3000 point run up into February 2004.

That's why it's important to remember your anguish from 2002 and early 2003. Your maximum stock exposure shouldn't be the amount you are content to hold today, but rater the allocation you can live with when things seem most dire. You simply have to plan your strategy and prepare ypurself psychologically for the inevitable temporary market declines. If we end up playing a retest I'm back in to pick up some more drillers - that's my opportunity.

 

[Birchtree]

Re: Birchtree's account talk

Sometimes the optimist in me says that, even if major indexes are in a 5% to 10% pullback, the worst is over. Before we start to panic and jump on the Wimpy and Wizard doomsayers' bandwagon, let's take a look at the facts, figures and trends. Blobal demand is strong, core inflation remains well contained and stock prices are attractive compared with expected profit gains. As long as world growth remains strong, so should stock prices.

The prices of stocks in the S&P 500 have fallen to 14.3 times forecast profits for the next 12 months from a ratio of 15 before the recent declines. To me that makes stocks drastically undervalued. If profits don't miss expectations, stocks could well rebound into new all-time higher highs. Yeh!

What is more, Fed officials have gone out of their way to indicate that they want to pause in their interest rate increases and see whether the delayed impact of their 16 previous rate boosts will cool the economy without further actions on their part. There is historic precedent for this move - and inflation usually cools down even more within a year. If the Fed is able to pause at its next interest-rate meeting, on June 28 and 29, or even if it indicates plans to pause when it meets again on Aug. 8, investors could take that as a sign that it is safe to bid stocks higher. How many times have I been wrong on this subject - start at 3.5%. But sooner or later the cycle turns.

 

[Birchtree]

New home prices are on the way down - but not in Florida.

DaveM,

Currently, mortage rates are roughly half a percentage point higher than they were at the start of the year, which has led to some moderation in the housing market. Indeed, in the first quarter of 2006, the housing industry directly accounted for only 7% of real gross domestic product, compared with 19% in the fourth quarter of 2005. If the stock of inventories and, especially houses is far out of line with demand, the cuts in manufacturing production and construction could be a deeper problem later in the year. The upside of slower growth, from a stock-market perspective, is that it could convince the Fed to hold off on raising interest rates. The risk? That inflation reafings continue to head higher. Then stagflation will once again enter into market vernacular, and that's not good news for anybody.

Housing starts have fallen at a 56% annual rate during the past three months. One useful leading indicator for housing sales and construction activity is the National Association of Home Builders housing market index. For May, that measure was 45, down from 51 the month before. The May reading was the lowest in 11 years. The May NAHB figure would be consistent with a move down in housing starts to just below 1.5 million units, 20% below the current level of 1.85 million. That suggests that the economy is probably no more than halfway through the downturn in housing starts. From a historical perspective there have been 10 housing down cycles in the past five decades. After housing starts peak, they tend to go down for about two years and by 42% inline with what the current NAHB index is signaling. The current cycle I think probably peaked in January.

The story is not confined to housing. In the past, seven of the 10 housing downturns forshadowed an outright economic recession. The lead time was long - about 20 months. The three housing downturns that did not precede a recession presaged a discernible slowing in overall economic growth within a year of the peak starts, on average. The moral of the story: slow growth belongs to the C fund. There may not be much protection in the I fund - it all depends on the Fed. Good trading this week and keep on balancing.

 

[Birchtree]

Spending some house money tomorrow - such a sacrifice.

I will be selling one of my more popular drillers tomorrow as a sacrifice to get funds to buy other sweet raspberries. There is a whole basket of raspberries to get - should be fun. I may let a pipeline go too - it's a deep basket to fill. I actually do enjoy playing in the bear patch - but one has to be quick.

 

[Birchtree]

Re: Birchtree's account talk

I decided not to pull the trigger today. I have two sales ready to go and twenty one buys lined up when the time is right. Looking forward to dollar cost averaging into my international around 6/09 as well as my small cap fund. So if international wants a lower price I'll standaside and patiently wait. I just couldn't look the gift horse in the mouth today - let'er run some more.