Bull Pen - Fall 2006

[Birchtree]

Go back and take a peek at the Dow movement in 2003. There is so much liquidity available and we are way undervalued. Haven't you ever seen the Dow do 400 points in one day - how about 400 points back to back? You just don't realize the power when it wants to leave everyone sitting in realestate and frozen. I'm fully loaded and ready to go.

 

[Fivetears]

That was some good Satur-evening reading; something to ponder upon

 

[Griffin]

- The Fed releases it's number's on Tuesday and the market cosolidates a little further with a initial negative gut reaction. This forms the base drop for the handle of the cup and handle formation. This provides the base for the next rally.

Apparantly, lack of sleep is catching up to me....The FOMC meeting is Wednesday.

 

[Griffin]

Go back and take a peek at the Dow movement in 2003. There is so much liquidity available and we are way undervalued. Haven't you ever seen the Dow do 400 points in one day - how about 400 points back to back? You just don't realize the power when it wants to leave everyone sitting in realestate and frozen. I'm fully loaded and ready to go.

Birch, I would like to see a 2003 type run up, but that rally was fueled by two years of a large highly volatile bear market, driven by rapidly changing geopolitics.

An extended high growth rally from here would be a lot more like 1999 then 2003. It would lead to an extended pullback, eventually. Given your buy and hold strategy, a more stable growth pattern, would be more advantagous for you (why pay tomorrow's prices today, right?) or would you consider going into capital preservation mode at the breakdown point?

 

[Birchtree]

Griffin,

Was that a cyclical bear market or the harbinger of a secular bear market? The answer makes the difference in investment strategy. We have just completed 21/2 years of a base over base formation - building a solid foundation for the next mega bull market leg. Financial assets have not kept pace with other sectors - and may be ready to play catch up. I'll be constantly looking for the top - but until it arrives I'm ready to ride this mega secular cycle.

Dennis - permabull #1

 

[Griffin]

Griffin,

Was that a cyclical bear market or the harbinger of a secular bear market? The answer makes the difference in investment strategy. We have just completed 21/2 years of a base over base formation - building a solid foundation for the next mega bull market leg. Financial assets have not kept pace with other sectors - and may be ready to play catch up. I'll be constantly looking for the top - but until it arrives I'm ready to ride this mega secular cycle.

Dennis - permabull #1

Dennis, your talking about the late nineties all over again. Can I assume your expecting a 25%-35% growth rate for the next two to three years?

If so, do you think the retirement of the baby boomers will effect this?

 

[Griffin]

Todays money flow:

G - 28.33%
F - 17.78%
C - 15.00%
S - 11.11%
I - 27.78%

Most of the defensive money went from G to F, while others started moving back in but left a healthy chunk in the G. So while it looks like a fairly even day - I would actually call it the start of an aggressive move back into stocks.

I had planned on getting back in the market today, but the move in the 10 year bond yield looked like an opportunity to play it defensive for another day and maybe score a penny (I moved to the F), and get a slightly better buy in tomorrow. Now we have had three straight days of wobbling just under May's high, with no real aggressive move up or down. I was expecting some weakness in a post options week, and to see the bulk of it today. If those 76% bears don't materialize tomorrow, then I don't expect them to materialize at all. Friday's volume was fairly heavy, so there is a lot of short money sitting on the sidelines. Could it be that the smart money is going to get caught leaning the wrong way?

 

[Griffin]

Could it be that the smart money is going to get caught leaning the wrong way?

The smart money got there down day and came back strong.

I moved back into the "I" for tomorrow night (missed the opportunity today).

 

[Pilgrim]

Headline on Marketwatch Tuesday Evening:
Amaranth investors bail out

The giant hedge fund announced it has lost 5 billion dollars, half its assets. Apparantly, it was heavily leveraged in natural gas and the collapse in prices for gas and oil now underway caused the massive losses. Do you suppose this is the only hedge fund that couldn't resist the ever upward spiral in commodities and leveraged themselves to the hilt? Best to stay nimble; a key feature of the hedge fund world is that they keep their dealings secret - no one will know that one is collapsing until it happens. If a domino effect is in the cards and panic follows, fleeing stocks for a period will be advisable. This will eventually set up an excellent buying opportunity but we'll need the best the board has to time the moves.

from CNN:

"Amaranth's reported loss comes on the heels of MotherRock L.P.'s closure last month after that hedge fund suffered major losses in the natural gas market."

"A Denver-based analyst said rumors were circulating that another, larger New York-based hedge fund could be in a similar situation."

 

[Fivetears]

I wonder if these Hedge Fund opportunities turn out to be just another Pyramid Marketing scam of investors, like in the late 70's early 80's. Who got left holding the bags then? :notrust:

 

[Pilgrim]

I wonder if these Hedge Fund opportunities turn out to be just another Pyramid Marketing scam of investors, like in the late 70's early 80's. Who got left holding the bags then? :notrust:

I don't know but it is worrisome. I thought hedge funds were originally created to be a private game for a handful of very rich people. In return, they were lightly regulated and allowed to operate with very little disclosure. Now we read that a public pension fund in California was one of Amaranth's investors and will lose money. I don't know when public pension funds started investing in these things, but anything that allows public investments ought to be fully regulated and subject to complete disclosure. It seems every ten or fiftenn years we have some major scandal and financial blowup, always because a few rich people rigged the game, drew in the herd, and fleeced everyone in sight. If commodities continue to fall rapidly and a series of funds go under, it will get very ugly very fast.

 

[Birchtree]

Don't worry about the hedge funds, they are big boys. And usually they are deserving of anything they collect. If a few drown that's not a problem.

 

[Griffin]

Don't worry about the hedge funds, they are big boys. And usually they are deserving of anything they collect. If a few drown that's not a problem.

I'd worry, this is eeriely familiar to the S&L crap. Hopefully, enough folks will remember that and will avoid this hedge fund garbage.

Onto the Money flow

G - 7.92%
F - 4.17%
C - 3.33%
S - 7.29%
and the winner is
I - 77.29%....WOW

Congrats to those that moved in yesterday...

When deciding which fund to use, I have a graph of the differences between the price of the S and I. While you would think that there is no relationship between the two....the difference actually forms a channel and is fairly reliable at predicting the turning point when either edge of channel gets pressed upon. This chart has had the S-fund as outperforming the I for sometime and has not quite hit the turning point (it may be there after today) However, after today's move, I believe we are well positioned to make some significant gains with the I.

 

[Fivetears]

I agree with both your's and Birch's replies. Public pensions have no business in the hedge pit (without everyone’s direct knowledge) and sure.... it's the mega rich getting pipe-cleaned. However, it's that group of people employing the little guy in some way, shape or fashion. It's sure to have some severe collateral damage, or impact. :notrust:

I don't know but it is worrisome. I thought hedge funds were originally created to be a private game for a handful of very rich people. In return, they were lightly regulated and allowed to operate with very little disclosure. Now we read that a public pension fund in California was one of Amaranth's investors and will lose money. I don't know when public pension funds started investing in these things, but anything that allows public investments ought to be fully regulated and subject to complete disclosure. It seems every ten or fiftenn years we have some major scandal and financial blowup, always because a few rich people rigged the game, drew in the herd, and fleeced everyone in sight. If commodities continue to fall rapidly and a series of funds go under, it will get very ugly very fast.

Don't worry about the hedge funds, they are big boys. And usually they are deserving of anything they collect. If a few drown that's not a problem.

 

[Griffin]

Everywhere there is a Bear.

Check this article out:

http://www.decisionpoint.com/TAC/YOUNG.html

I did not calculate the money flow, but a quick skim suggests a few folks are already taking profits.

This is turning into a Mexican standoff. The contrarian move, is to stay bullish, there are just too many Bears.

Over the past couple of weeks, we have seen a trend of light volume = green, high volume = red. Today we have very light volume and were going nowhere. What will heavy volume bring?

 

[Griffin]

Euozone, futures and Japan are all down, I am currently 100% in the I fund. At this stage of the game, you have to ask your self if you believe the current breakdown is going to be a consolidation (it stays within the current channel) or a pullback (it breaks below the current channel).

Personally, I am of the mindset that I am going to play this as if it is a consolidation. But, if I see any stops broken, I'll bail.

Current status of the funds -
G - Tech is indicating that the payout will be Monday
F - Room for a another positive day maybe two before it hits the top of it's channel.
C - Is about 1% from the bottom of it's channel - it would take an unusually bad day for the S&P to cross this gap in a single day but it is possible, either way, I would expect it to be close enough to the bottom of the channel by the end of the day, that no significant further loss would occur if this is a consolidation. My Stop is 1305
S - Is about 1.4% from the bottom of it's channel - similar situation as the C. My Stop is 563 on the DWCP
I - Has already got a lock on a -1.0%+ for today maybe more if the Eurozone continues down. The EFA is currently about 1.8% from the bottom of it's channel and will likely need two to three solid days down. However, we did not get a FV last night in the I, so the total loss pending for the I could be upwards of 2.1%. My Stop is 66 on the EFA

Lately we have seen some very quick turn arounds and given that the channels for both the S and the C are fairly narrow, I would expect a bottom to for within approximately 2 days. I don't want to miss the play back up.

So, the way I am going to play this is a one day run to the G (for the penny - hopefully). Since the I is lagging the US market, I will pop back over to the S or C. Monday I will be looking to see which is closer to the bottom of the channel and target that. Then at the first indication of the completion of the bottom of the channel I will move back into the I, unless a stop is hit.

I do want to mention that the DAX and the CAC40 have similar chart patterns to the S&P and are within their channel's. However, the FTSE is to the down side of the upward trend and has been running sideways, while Nikkei, has the beginnings of a downward trend developing.

 

[Show-me]

Euozone, futures and Japan are all down, I am currently 100% in the I fund. At this stage of the game, you have to ask your self if you believe the current breakdown is going to be a consolidation (it stays within the current channel) or a pullback (it breaks below the current channel).

Personally, I am of the mindset that I am going to play this as if it is a consolidation. But, if I see any stops broken, I'll bail.

Bingo! Well said, the consolidation has been looming and this could be the catalyst that tips the scale.............or not. lol At any rate we have to ask ourselves how much we are willing to risk. Capital preservation!:nuts:

 

[FundSurfer]

G - Tech is indicating that the payout will be Monday
...
So, the way I am going to play this is a one day run to the G (for the penny - hopefully).

I don't think this should impact your plan since it is a small percentage but you missed the penny. The penny will get paid this evening. See the link below:
G-fund Thread

You are looking at longer term channels than I am. Short term channels show the opposite. C&S near the top and I near the bottom. I'm going to probably ride this out. The bottom could fall out and change my mind, time will tell.

 

[Pilgrim]

Looks like another down day for US stocks. If that holds, and its 2 in a row, it will be tempting to jump in before deadline today looking for a rebound. But remember: attention right now is on the housing market and existing home sales will be announced at 10 am Monday morning. If that number comes in low, it will be a black day. If it is a little high, we might get a real nice relief rally.

So, do you feel lucky??

 

[Griffin]

I don't think this should impact your plan since it is a small percentage but you missed the penny. The penny will get paid this evening. See the link below:
G-fund Thread

You are looking at longer term channels than I am. Short term channels show the opposite. C&S near the top and I near the bottom. I'm going to probably ride this out. The bottom could fall out and change my mind, time will tell.

Fundsurfer:

I think we are looking at the same channels, the relative position (near top/near bottom) are what you said. However, I calculated the percentage to the bottom using the equation: %drop = (current price - bottom of the channel (which is the same as the stops, I mentioned))/current price.

What prices would you use for the SPX, DWCP and the EFA for the bottom of the channel?

Thanks for the G-fund calc info. I was never sure if you count the weekends or not. Did you back test the 6 day formula?