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Mad Hedge Fund Trader Profit Spurts to 59%
The performance of the Mad Hedge Fund Trader?s Trade Alert Service is still going ballistic, reaching the heady height of 59% for the year.
I know some of your saw your faith challenged when, at one point, the stock market was looking at five consecutive down days last week. The red ink all disappeared when the November nonfarm payroll delivered shockingly positive numbers, thus delivering one of my best up days of the year.
Including both open and closed trades, 24 out of the last 26 consecutive Trade Alerts have been profitable.
The Trade Alert service of the Mad Hedge Fund Trader is now up 59.76% in 2013. November came in at a stunning +11.58%, while the December month to date record now stands at +3.68%.
The three-year return is an eye popping 114.77%, compared to a far more modest increase for the Dow Average during the same period of only 32%.
That brings my averaged annualized return up to 38.3%.
This has been the profit since my groundbreaking trade mentoring service was launched three years ago. It all is a matter of the harder I work, the luckier I get.
I took profits on my long position in Citigroup (C), which just achieved a major upside breakout, and then rolled the capital into the Financials Select Sector SPDR (XLV). I cashed in on a short position in the Treasury bond market (TLT). I?ll go back in on the next rally. I also took profits on short positions in the Japanese yen as it approached new lows for the year, then doubled up again on a subsequent rally there.
I caught the entire 10% move up in Apple (AAPL) with a major long position. Higher levels beckon. My remaining long positions in the Industrials Sector Select SPDR (XLI) are contributing daily to my P&L, thank you very much. An aggressive position in the Japanese online giant, Softbank (SFTBY), also turned profitable, playing on the Japanese economic revival.
This is how the pros do it, and you can too, if you wish.
Carving out the 2013 trades alone, 74 out of 89 have made money, a success rate of 83%. It is a track record that most big hedge funds would kill for.
My esteemed colleague, Mad Day Trader Jim Parker, has also been coining it. Since April, his own performance numbers have just come back from the auditors, revealing that he is up a staggering 279%.
The coming winter promises to deliver a harvest of new trading opportunities. The big driver will be a global synchronized recovery that promises to drive markets into the stratosphere in 2014. The Trade Alerts should be coming hot and heavy. Please join me on the gravy train. You will never get a better chance than this to make money for your personal account.
Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011 and 14.87% in 2012. The service includes my Trade Alert Service and my daily newsletter, the Diary of a Mad Hedge Fund Trader. You also get a real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. Upgrade to Mad Hedge Fund Trader PRO and you will also receive Jim Parker?s Mad Day Trader service.
To subscribe, please go to my website at
www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.
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McDonalds (MCD) Shares Down, Economists Say Stimulus Winding Up, And More
Markets were headed slightly higher on Monday morning despite a survey released that showed economists are expecting the Federal Reserve?s stimulus plan wind down in 2014. The National Association of Business Economists said that in their November survey showed that the majority of economists believe that the Fed will begin tapering their stimulus plan early next year. The survey encompassed a total of 51 economists and 62% of them believe that the Fed will begin cutting back the bond-buying program within the first three-months of 2014. Of all the economists there were 30% that believe the Fed will begin winding down in the second-quarter of 2014. Overall 90% of those surveyed believe that the Fed will wind down their program next year. The survey also showed that economists are expecting the U.S. economy to pick up steam and grow at a 2.8% annual rate next year versus the 2.1% annual rate this year.
Shares of Sysco were sky rocketing over 13% after the company announced that they will be purchasing US Foods for nearly $3.5 billion. The company will pay roughly $3 billion in common stock and $500 million in cash. They will take on $4.7 billion of US Foods debt. This totals the entire deal at $8.2 billion. When the companies combine, this will enable Sysco to increase their leverage on selling and distributing goods. They currently hold about 18% of the United States food distribution market and once the deal is done they are expected to hold a staggering 25%. The buyout deal has been approved by both of the companies boards. Sysco estimates that the entire deal will be fully completed by the third-quarter of 2014. They also expect this acquisition to immediately boost the companies profits once they adjust for costs and related expenses. Bill Delaney, Chief Executive of Sysco, said that the industry will remain competitive. ?It is a very dynamic market, there are 15,000 to 16,000 distributors out there, and more nontraditional competitors.? However with their new purchasing power, combined with innovation efforts and the cost saving capabilities the new merger will provide them with, they will do well, Delaney said.
In fast food news, shares of McDonald?s (MCD) were dropping after the company announced weaker-than-expected sales in November. The company said that worldwide sales at restaurants open at least 13 months were up 0.5%, which missed the 0.6% analysts were expecting. In the United States, same-restaurant sales were down 0.8%, which missed the 0.3% gain analysts had been expecting. This was partially attributed to an increase in competition and weaker customer traffic, the company said. Shares were falling over a percentage point on Monday.
That?s all for the day.
All the best,
Jack Aubrey, Oakshire Financial
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03/08/13 -- Unemployment Rate Sinks to 7.7%, American (AMR) Revenue Up
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01/23/13 -- Google (GOOG) Searches On the Rise
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The Best Opportunity To Profit From Gold In 15 Years
After steadily returning an average of 18% a year for the past decade, gold is headed for its first annual loss since 2000. All told, gold prices have fallen over $450 an ounce since January -- a 27% decline in just under 12 months.
In part, the gold market is suffering thanks to the economic recovery. Since gold is usually seen as a "safe haven" investment, an improving economy puts downward pressure on gold prices. Other headwinds include low inflation rates... surging equity values... and an overwhelmingly bearish sentiment facing commodities altogether.
Before I go any further though, I want to note that it's never a bad idea to devote at least a small portion of your portfolio to precious metals. Since these assets are generally insulated from rising price levels, metals like gold are a good way to hedge against inflation risk.
But gold bullion is not the subject of today's essay. Instead of touting the monetary benefits of the world's oldest currency, I want to tell you about one of the most overlooked (and misunderstood) areas of the gold market...
I'm talking about gold stocks.
"Gold stocks" is a financial synonym for gold mining companies -- the guys who get paid to physically pull the yellow metal out of the ground. Since miners earn their paychecks by selling the gold they produce, gold stocks have historically moved in tandem with gold prices.
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BAML: Here Comes the Consumer
Will the wealth effect from financial asset and home price appreciate finally assert itself this coming year? Bank of America Merrill Lynch economists give us four reasons why that might be happening:
We see four reasons to expect healthier consumer spending.
First, the worst of the tax shock is over. Both payroll and upper-income tax rates rose at the start of
this year, and we think the negative impact on spending growth should be fading.
Second, consumers have made considerable progress in cleaning up their
balance sheets, reducing debt burdens and accumulating wealth. Households
have gained $16.1 trillion in financial wealth and $3.0 trillion in housing wealth
since their respective troughs (Chart 2).
Third, firing has continued to decline as seen by the drop in jobless claims, although some of this may reflect people
exhausting their benefits. This supports current income but also helps
expectations about future income growth.
Finally, as the labor market tightens, wage growth will improve, although that is more likely in 2015 than in 2014. The
consumer still faces challenges, but we think the tides have turned.
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Monday links: changing views of art
?Tis the season. Ben Carlson at A Wealth of Common Sense ranks Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere as one of the ?best books I?ve read in 2013.?
Quote of the day
smithy Salmon, ?Art is not an investment in the way that the S&P 500 is, and all direct comparisons of the two have a way of invidiously changing the way we look at and think about art in general.? (Reuters)
Chart of the day
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This Year?s Trash, Next Year?s Treasure?
My friend Larry McDonald is out with a year-end piece at Forbes that looks at a very interesting phenomenon we often see each December ? once the tax-selling pressure abates from losing stocks in one calendar year, they can often go on to become the following year?s grand slams?
Yet those who bought fear at the end of 2012 were handsomely rewarded. From mid-August 2012 to the end of December, shares of Best Buy were off some 43%, while First Solar FSLR shares were torched, off 33% from their March 2012 highs heading into year end. The most pain was felt in Hewlett Packard HPQ, which collapsed over 60% from February 16th to December 26th 2012, off 30% in the 4th quarter alone. These 3 stocks were up on average 90% in the first half of 2013. We say ?buy fear.?
What about 2011? The ugliest sector, no one wanted to own in the 4th quarter of 2011 was the financials. The space was off nearly 25% in 2011, 17% in the 2nd half of the year. Bank of America alone was off 32% from Sept 1st through year end. Over the next 12 months, investors fell back in love with the financials, up 27% on the year, BAC surged 100%.
Can you truly buy fear at this time of year and hold through 2014? If so, your top sector candidates are the gold miners, down an astounding 53% on the year. But ? Larry says to check out how the bond market is treating the paper of any disparaged equity you?re thinking of buying first.
Source:
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My Top Pick In Clean Energy Is Also One Of The Safest
The appeal of clean energy stocks is evident. Billions of dollars are at stake as the world tries to wean itself off fossil fuels.
There can be little doubt that clean energy will account for at least 20% to 30% of our total energy picture a few decades from now. But the road is bound to be bumpy. The sudden plunge in solar stocks in 2011 and 2012 -- not to mention their remarkable rebound this year -- highlights just how risky these clean energy stocks can be. Indeed, many investors have concluded that they just can't stomach that degree of risk.
But there is a better way: a focus on companies that already derive significant revenue streams in support of clean energy projects. These stable firms don't own breakthrough technologies, but they are helping the industry pioneers to scale up their production. And in light of the long-term future for clean energy, these firms face robust growth potential.
My favorite pick in this group: Spain's Abengoa (Nasdaq: ABGB), which derives more than $10 billion in annual sales by helping construct clean energy power plants, water desalination systems, biofuel production facilities and highly efficient energy transmission networks.
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Mixed Signals Make This Tech Stock A Short Candidate
I am a firm believer in using both technical analysis and fundamental research as stock picking tools. Many investors mistakenly specialize in one discipline or the other rather than a mixture of the two.
Market technicians are often guilty of reaching the conclusion that all the fundamental information is already inherent in the price of a security, therefore researching fundamentals is redundant. At the same time, hard-core fundamentalists believe that technical analysis only charts the past and thus cannot help with projecting the future.
I have found both of these sentiments to be correct and to be wrong at the same time. All the fundamental information about a stock is inherent in its price. However, studying price alone will not increase your odds of making a winning trade.
Knowing fundamentals while ignoring the technical picture may provide a reason for the stock movement, but does not confirm that price will move in any specific direction. Focusing solely on the technical picture will tell you what has happened and what may happen. But there are no guarantees or statistical tests that have uniformly proven much of traditional technical analysis works to provide an edge.
So what's an investor to do?
The answer is to use both fundamentals and technical analysis to choose stocks. If both disciplines agree on a particular stock, that stock becomes a strong candidate to add to your portfolio or to short. When there is disagreement, a short-term trade often presents itself.
Today's trade is an example of a classic case of fundamentals and technical analysis disagreeing.
The stock is Camtek (Nasdaq: CAMT), an Israeli designer, developer and manufacturer of automatic optical inspection (AOI) systems. AOI systems are computer-driven systems that inspect electronic components for defects at the manufacturing level. The company also makes products for the printed circuit board industry.
Additionally, it is in the advanced stages of developing a digital 3-D printing system called the GreenJet System. This printer is intended to be used for the disposition of solder mask on circuit boards. The first commercial sales of this product are slated to take place sometime in 2014.
Camtek, which has a market cap of about $150 million, posted solid results for the third quarter with revenue of $21.7 million and operating cash flow of $3.1 million. It ended the quarter with a cash position of $20.3 million.
Shares soared higher late last month on rumors that the company was launching the 3-D printer system. It turns out the company will only be testing the system with a client at the start of 2014. Profits are only expected should the testing produce positive results, and then not until the tail end of 2014.
While there is certainly nothing wrong with the known fundamental health of Camtek, the technical picture paints a clear short selling opportunity.
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The ?Perfect? Jobs Report
Last week we were down four days straight on the S&P 500 going into the Friday non-farm payrolls report and the bears were finally feeling some breathing room. The jobs report print sucked all that oxygen out of the room as stocks erased just about the entire drawdown in eleven seconds after getting the number from BLS.
Here?s my friend Dynamic Hedge:
Jobs and Taper
The employment report surprised by adding 203,000 jobs dropping the unemployment rate to a recovery low 7.0%. The report could not have thread the needle more perfectly. It was high enough to produce a sentiment boosting headline and low enough to stave off an undiscounted December taper. And we wonder why people love conspiracies.
?and the chart (S&P 500 futures) ? as juicy a conspiracy theory as you?re gonna see:
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Testimonial
Greetings from the great white north. I am a BIG fan of yours and have rejoined your Trade Alert Service for another year. You have friends around the world you have yet to meet. Enclosed is a token of my appreciation. Thanks a 100 trillion!
Bob
Vancouver, Canada
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December 9, 2013 ? Quote of the Day
?China has been doing everything right for the last ten years. Our government is made up of ?C? students that were political science majors, whereas, the Chinese government is made up of PhD?s that were educated at Cambridge and Harvard,? said one Washington observer.
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What a Difference a Decade Makes for Investors
Run, don?t walk, to read the related story from the latest issue of Fortune Magazine about how much has changed for investors from 2003 to 2013.
Source:
A decade of markets, mayhem, and investing (Fortune)
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Tales from Stratton Oakmont
I showed a lot of initiative, and I stayed late. I was now in Armani suits, Ferragamo shoes, Valentino ties. I would stay all night. I would adjust my hours to call potential customers at home. All you had to do was get past the wife. The guys were more relaxed to talk at home. They were willing to listen a little more.
Danny offered to buy a car if I opened up 30 accounts in a month. I ate dozens of Quaaludes, pounded my clients, and got the 30 accounts ? but two wound up not paying. So Danny said, ?I?ll lease you whatever sports car you want.?
I picked a red Porsche 911 ? I still didn?t have a driver?s license.
All of us brokers who started in the 1990′s on Long Island or in NYC can relay similar stories to this one, although the majority of brokers did not work for The Wolf at Stratton Oakmont. Stratton, the firm Jordan Belfort founded on the North Shore of LI is history?s most notorious boiler room, the Ground Zero of cold-calling fraud, the place where it all began. It didn?t last long, but the legends you?ve heard are almost all true.
Josh Shapiro returned home to Long Island from the Marines at 22 and wanted to make some money. It was 1993, there was no such thing as internet brokerage and the markets were booming. The telemarketing brokers of LI were in their heyday, dialing for dollars with no competition, little regulation and nothing to stop them.
Today in the New York Post, Josh tells his tale of working for Jordan Belfort at Stratton?
Read the whole thing:
Welcome to my life working for the real ?Wolf of Wall Street? (NYP)
More on The Wolf of Wall Street here
The Reformed Broker
Joshua Brown is a New York City-based financial advisor at Fusion Analytics. Josh helps people invest and manage portfolios. Clients range from individuals to corporations to retirement plans to charitable foundations.
_____________________
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?Why Bother?? Will investors take the wrong lessons from 2013?
Thinking back on a great year for investing in the US stock market but a hard year on market participants overall.
US stocks went wild this year but almost nothing else kept pace ? any attempt to hedge or diversify now looks have been anywhere from futile or foolish here at year?s end.
Consider:
The Global Dow Jones Index is up about 20% on the year, but the Global Dow ex-US is only up 9%.
Why bother with international exposure at all?
Long-term Treasurys are down 15% this year and their corporate bond counterparts are down 7%. Munis, agencies and mortgage-backeds are all in the red, REITs are flat.
Why bother diversifying at all?
There are only 40 stocks in the S&P 500 that have a negative return on the year. There are more stocks in the S&P 500 with gains of over 60% YTD.
Why bother hedging at all?
The US stock market has spent over one full year above its 200-day moving average and hasn?t been negative for a calendar year since 2011.
Why bother being tactical at all?
In hindsight, there was only one way to ?win big? this year and ?beat the markets?: Buy and hold, long and strong, US stocks only. More importantly:
No bonds, no shorts, no hedges, no diversification, no tactics.
No wonder trillions have been pouring into the passive products of Vanguard, iShares and State Street. It?s the only game in town! Investors are now preparing for the coming Battle of 2014 by exaggerating the posture and behavior that?s worked for 2013. This is called the Recency Effect ? believing the environment we?ve just been in is somehow a permanent one, extrapolating the just-was to construct an outlook for the soon-to-be.
They do it every year.
Many will throw away the portfolio playbook that didn?t give them the best of all possible results this year. Diversification is broken. They?ll move their chips into position solely on black, after all the roulette wheel just landed on black the last ten times ? it?s practically a can?t-lose proposition.
At this time of year I?m more interested in whatever hasn?t worked. The good news is that there?s plenty of that around (via Capital Spectator, through Nov 2013):
***
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Sunday links: history of bubbles
?Tis the season: the Daniel Kahneman classic Thinking Fast and Slow is on sale for the Kindle.
Quote of the day
Morgan Housel, ?If the history of bubbles teaches us anything, it?s to be humble.? (Motley Fool)
Chart of the day
HYG Total Return Price data by YCharts
US corporate bond spreads are at a six-year low. (Sober Look)
Markets
The trend remains intact. (Dynamic Hedge)
High dividend stocks are expensive. (Mebane Faber)
The January effect is shifting to December. (StockCharts Blog)
There is still plenty of room for investors to shift from bond to equity funds. (Horan Capital)
Futures traders continues to cut gold positions. (The Short Side of Long)
Strategy
Should you settle for mediocrity in investing? (NYTimes)
Why risk-adjusted returns matter. (Oblivious Investor via @monevator)
A review of Bonds Are Not Forever: The Crisis Facing Fixed Income Investors by Simon Lack. (Aleph Blog)
Exchanges
There is a bear market in stock splits. (Jason Zweig)
Stock exchange listings keep shrinking. (Unexpected Returns)
ETF stats for November 2013. (Invest With an Edge)
Wall Street
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Sunday links: history of bubbles
?Tis the season: the Daniel Kahneman classic Thinking Fast and Slow is on sale for the Kindle.
Quote of the day
Morgan Housel, ?If the history of bubbles teaches us anything, it?s to be humble.? (Motley Fool)
Chart of the day
HYG Total Return Price data by YCharts
US corporate bond spreads are at a six-year low. (Sober Look)
Markets
The trend remains intact. (Dynamic Hedge)
High dividend stocks are expensive. (Mebane Faber)
The January effect is shifting to December. (StockCharts Blog)
There is still plenty of room for investors to shift from bond to equity funds. (Horan Capital)
Futures traders continues to cut gold positions. (The Short Side of Long)
Strategy
Should you settle for mediocrity in investing? (NYTimes)
Why risk-adjusted returns matter. (Oblivious Investor via @monevator)
A review of Bonds Are Not Forever: The Crisis Facing Fixed Income Investors by Simon Lack. (Aleph Blog)
Exchanges
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Top clicks this week on Abnormal Returns
Thanks for checking in with us this weekend. Here are the items our readers clicked most frequently on Abnormal Returns for the week ended Saturday, December 7th, 2013. The description reads as it does in the relevant linkfest:
Ten buys (and sells) from the ultimate stock pickers. (Morningstar)
There?s never been a better time to be an individual investor. (Jason Zweig)
Meet the world?s biggest investor in hedge funds. (Dealbook)
European markets are rolling over. (The Short Side of Long)
A must-read piece from James Montier on why there is nothing new in investing. (GMO)
Seven reasons from Doug Kass why the market is overvalued. (Pragmatic Capitalism)
Ten themes for 2014 from Rich Bernstein. (Business Insider)
Simple models work better. (Mebane Faber)
2014 stock performance will have nothing to do with 2013. (Mark Hulbert)
Wall Street strategists have not yet jumped on the market bandwagon. (The Reformed Broker)
What other stuff you may have missed on the site this week:
What books Abnormal Returns readers purchased in November. (Abnormal Returns)
Simplify your investing to avoid ?opportunities for failure?. (Abnormal Returns)
Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.
The post Top clicks this week on Abnormal Returns appeared first on Abnormal Returns.
Abnormal Returns
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need moar corporate welfare
McDonalds did $27 billion in worldwide sales in 2012, finished the year with $15 billion in shareholder?s equity and over $2 billion in cash.
The company had $5.5 billion available to return to shareholders in the form of stock repurchases and dividends last year.But they?d like their US employees to receive financial assistance from taxpayers and the government.
Pigs.
Read Also:
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Saturday links: nothing new under the sun
?Tis the season and for the budding entrepreneur on your list check out Hatching Twitter: A True Story of Money, Power, Friendship and Betrayal by Nick Bilton, an Economist book of the year.
Investing
A must-read piece from James Montier on why there is nothing new in investing. (GMO)
Cliff Asness? top ten pet peeves. (Financial Analysts Journal)
Shots fired. Buffett?s alpha is not all that. (Frazzini, Kabiller and Pedersen)
A high frequency trading bibliography. (Themis Trading)
Technology
The epic rise (and fall) of Demand Media ($DMD). (Variety)
The rise and fall of Blackberry ($BBRY): an oral history. (Businessweek)
A profile of Marissa Mayer one year plus into running Yahoo ($YHOO). (Vanity Fair)
Business
Comparing Europe?s Ryanair to America?s Southwest ($LUV). (flightfox via @thebrowser)
Merck ($MRK) is in hot pursuit of the next Ambien. (New Yorker)
Startups
How to become an angel investor. (WSJ)
Don?t start a company, kid. (Big Nerd Ranch)
On the value with sticking with struggling investments. (A VC)
Eighteen lessons for founders on raising money. (Medium)
Robots
Delivery by drone is not a big joke. (Farhad Manjoo)
Do we really want robots occupying more of our personal space? (FT Alphaville)
Google ($GOOG) wants to be a player in robotics. (NYTimes)
2014 is going to be the year of the ?Internet of things.? (Quartz)
Content
How a Gawker editor identifies viral content. (WSJ)
How to burst your own ?filter bubble.? (Technology Review)
A list of reasons why our brains love lists. (New Yorker)
On the economics of ghostwriting. (Priceonomics Blog)
Health
Walk faster, people. (Well)
Are allergy shots a thing of the past? (NYTimes)
Health care spending is slowing. (James Surowiecki)
Food
Does intermittent fasting help you lose weight? (WSJ)
How to get the most out of your bowl of pho. (Medium)
The 20 best craft breweries of 2013. (Paste)
Movies
The 13 best movies you didn?t see in 2013. (Wired)
The Coen Brothers movies ranked. (Slate)
How binge-watching Netflix-style will change our culture. (New Republic)
The highest grossing movies in the US are declining in quality. (Priceonomics Blog)
Excerpts
An excerpt from Scott Adams? How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life. (BoingBoing via @timharford)
An excerpt from Glen Berger author of Song of Spider-Man: The Inside Story of the Most Controversial Musical in Broadway History. (Slate)
Love and Math: The Heart of Hidden Reality by Edward Frenkel is a book about ?mathematical love.? (Farnam Street)
Ben Bradlee Jr.?s The Kid: The Immortal Life of Ted Williams looks to be the ultimate biography of the greatest hitter. (Slate, WSJ)
An interview with Malcolm Gladwell author of David and Goliath: Underdogs, Misfits, and the Art of Battling Giants. (Knowledge@Wharton)
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Barchart.com's Chart of the Day - Micron Technologies (MU) for Dec 6, 2013
The Chart of the Day is Micron Technologies (MU). I found the stock by sorting the New High List for frequency, and then used the Flipchart feature to review the charts skipping over those that didn't have positive gains for the last week and month.
It provides semiconductor memory solutions. The company's memory solutions serve customers in a variety of industries including computer and computer-peripheral manufacturing, consumer electronics, CAD/CAM, telecommunications, office automation, network and data processing, and graphics display. The company's mission is to be the most efficient and innovative global provider of semiconductor memory solutions.
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Dave Landry's Market in a Minute - Friday, 12/6/13
Random Thoughts
It was yet another mixed day in market land.
The Ps sold off fairly hard, losing nearly ?%. This action keeps them in a shorter-term trading range. Again, they haven't changed much in around three weeks. Longer-term they still look okay. They remain in an uptrend and they only appear to be consolidating.
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chart.com's Chart of the Day - Cepheid (CPHD) for Dec 5, 2013
The Chart of the Day is Cepheid (CPHD). I found the stock by sorting today's New High List for frequency, eliminating the stocks that haven't had positive gains for both the last week and month. I used the Flipchart feature to review the charts. Since the Trend Spotter signaled a buy in 10/18 the stock gained 13.57%.
The Company develops, manufactures and markets microfluidic systems that integrate, automate and accelerate biological testing. Their systems are miniaturized instruments that analyze complex biological samples in a disposable cartridge by combining molecular biology with microfluidic technology that processes small quantities of liquid, typically using components fabricated with computer chip technology. These systems rapidly perform all of the steps required to analyze complex biological samples.
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Sears (SHLD) Up, Jobs Up, Spending Up
Markets were headed higher on Wednesday after the number of unemployed Americans reached a five-year low. The Labor Department reported that the unemployment rate fell to 7.0%. They also said there was an addition of 203,000 jobs in November. A level this low in unemployment has not be seen since November 2008. The data surpassed economists expectations of November jobs increasing only 180,000 and the unemployment rate to fall to 7.2%. September and October jobs were upwardly revised 8,000 new positions. During the month of October there were government employees who were counted as unemployed due to the partial government shutdown. With the increasing amount of positive economic data continuing to roll out, some speculate that the government may start finally pulling back on the Fed?s bond buying program. Eric Stein, co-director of the Global Income Group of Eaton Vance Investment Managers, said, ?The U.S. labor market is still far from healed, but it certainly is moving in the right direction. The number puts December on the table, but it isn?t a certainty,? when referring to the Fed?s possible bond tapering.
In a separate report released on Friday by the Commerce Department, it showed that consumer spending was up in October. Spending increased from a 0.2% rise in September to a 0.3% increase in October. This followed a slight 0.1% gain in wages and salaries. Personal savings was down to 4.8% from September?s 5.2%. The increase in spending was attributed partially to purchases of long-lasting items such as vehicles and non-durable goods, like clothing and utilities. Consumer spending accounts for nearly 70% of economic activity. Russell Price, a senior economists at Ameriprise Financial Inc. said, ?People are feeling better, that?s a positive for the holiday season. This year I don?t see the same strong fiscal headwinds ahead of us to impede our momentum.?
Shares of J were up on Friday morning after the company announced that they would be spinning off their Lands? End clothing portion of the business into a separate company. They will do so through a distribution of the stock to the company?s shareholders. This announcement was first made public in October when Sears said they were thinking about separating both Lands? End and the Sears Auto Center into separate companies. The auto portion was not mentioned in the announcement. Brian Sozzi, an analyst with Belus Capital Advisors, said, ?It makes you question the value of what Sears is sitting on. It may have to continue dismembering itself to stay alive today and shrink from the inside out.? He continued to say that the move shows that the Sears was not able to attract a buyer willing to pay the right price for Lands? End.
That?s all for the day.
All the best,
Jack Aubrey, Oakshire Financial
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Why Did Buffett Spend $3.4 Billion On Exxon? Here's Your Answer
Every quarter, many of us in the investing world eagerly anticipate the SEC filings that the world's largest (and greatest) investment managers are required to file.
There is no single 13F that is more eagerly anticipated than that of Berkshire Hathaway's (NYSE: BRK-B) Warren Buffett.
The Oracle of Omaha isn't just one of the greatest stock pickers the world has ever seen. He is also one of the most selective. He seldom makes a significant new addition to his portfolio, usually instead preferring to add to existing positions or buy nothing at all.
So when he makes a big purchase of a new stock, it's kind of a big deal.
In the most recent quarter, Buffett revealed a rare new portfolio addition: Exxon Mobil (NYSE: XOM) -- for a cool $3.4 billion. Even for Buffett, that's a big purchase.
Investors have been scrambling to answer two questions: Why is Buffett was buying Exxon -- and why now? Buffett has been familiar with Exxon for decades, so what's changed about the company that merits a $3.4 billion investment from Berkshire?
It certainly isn't because Exxon's stock price has dropped:
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Is It Time To Buy This $1 Billion Game Changer?
With stocks at all times highs, we're starting to hear a lot of experts tout that equities are trading at "premium valuations" -- which is financial lingo meaning stocks are expensive relative to their underlying earnings.
While those pundits are partially correct, there's more to the story...
The recent rally has pushed the price-to-earnings ratio (P/E) ratio for the S&P 500 from 13 in 2011 to its current value of 16. While the move is dramatic, valuations are still nowhere near the soaring levels we normally see during most market bubbles. For example, before the 2001 "Dot Com" collapse, the S&P's P/E ratio reached 46.1 before crashing back down.
So while the recent rally is impressive, there's still little reason to believe we're nearing a "market crash" similar to that which we experienced in 2001 and 2008... Until that starts to change, we remain bullish on stocks.
Sure, many stocks have become expensive, but a few remain absolute bargains. For example, certain small-cap stocks still have plenty of upside potential when compared to the broader market.
No, I'm not talking about fly-by-night penny stocks -- I'm talking about companies that are on the ground floor of a promising new trend or technology. These companies are poised for explosive growth and can deliver impressive profits to investors in years to come. In today's issue, I'd like to introduce you to one such company, which is trading at bargain prices after a recent selloff.
Is It Time To Buy This $1 Billion Game Changer?
SodaStream International (Nasdaq: SODA), the manufacturer of homemade soft drink machines and one of Andy Obermueller's favorite game-changing stocks is down 26% since June... is now the time to buy?
Andy originally recommended SodaStream in September of 2012, back when the stock was trading around $35 a share. At the time, Andy thought the company's contemporary soda maker could compete head to head against major soft drink companies like Coca-Cola (NYSE: KO) and Pepsi (NYSE: PEP). As he said of SodaStream back then:
Unsurprisingly, the machines and the flavorings are flying off the shelf. I like the device because it has a variety of sugar-free options. And the stuff is actually cost-effective versus name brands like Coca-Cola and Pepsi (NYSE: PEP), after the cost of the machine has been recouped. For families that drink a lot of soda, these savings can be appreciable -- or at least perceived as appreciable -- which might push a consumer into the roughly $100 purchase.
Turns out he was right. Just 11 months after his recommendation, the stock had already soared over 80% in value...
But after the meteoric rally and ensuing correction, the question becomes... does Andy still like the stock?
The short answer to that question: yes. In his most recent report -- "The Top 5 Game-Changers of Tomorrow" -- Andy details his bullish case for SODA:
SodaStream is going places. It's going into homes, and heaven only knows where else it could end up. My guess is that restaurant chains will figure out a way to make exclusive signature sodas that include alcohol, which would elicit thousands of machine sales and a significant quantity of lucrative customized product.
What's next?
I predict that sooner or later SodaStream is going to be acquired.
It's just too little money for too rich of an opportunity. At today's share price, SODA is worth $1.2 billion. In an acquisition, let's put the sticker price at an even $3 billion. Coke has nearly $10 billion in cash and nearly that again in short-term investments! Pepsi has almost $8 billion in cash on the books, plus enough inventory on hand to come up with another $4 billion.
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Friday links: stop doing things
?Tis the season: Amazon Smile is giving $20 to your favorite charity when you buy a Kindle Fire HDX during the next week.
Quote of the day
Brad Feld, ?Sometimes you have to stop doing things to make more progress.? (FeldThoughts)
Chart of the day
S&P 500 breadth continues to deteriorate. (The Short Side of Long)
Markets
Market bellwethers are rolling over. (Charts etc.)
The case for REITs. (SurlyTrader)
Affluent investors are holding onto cash like a security blanket. (FT)
Options skew is elevated. (The Short Side of Long)
Hedge funds
Hedge funds are getting crushed in 2013 by the runaway S&P 500. (Bloomberg)
Seth Klarman and David Tepper are returning cash to investors. (II Alpha, ibid)
Investors are pulling money from Eddie Lampert?s hedge fund. (Dealbook, WSJ)
Sears Holdings ($SHLD) is spinning off Land?s End. (Reuters)
Strategy
Why we should expose ourselves to opposing viewpoints. (Above the Market)
Options selling has not been a rough road the past few years. (research puzzle pix)
Why current retirement withdrawal strategies need a rethink. (Rekenthaler Report, InvestmentNews)
Technology
Palantir is now valued in excess of $9 billion. (Businessweek, Bits)
AngelList is the Nasdaq of our generation. (Andreas Klinger via @mattermark)
There are too many damn messaging apps. (TechCrunch)
ETFs
How big a problem is index-frontrunning. (IndexUniverse)
A closer look at the Cambria Foreign Shareholder Yield ETF ($FYLD). (TheStreet)
Where investors put their money in 2013. (Focus on Funds)
Global
Spanish stocks are overvalued. (FT Alphaville)
South Africa is getting crushed by the reversal of the commodity cycle. (Sober Look)
The case for greater public investment. (Economist)
Economy
The November non-farms payroll report surprises to the upside. (Calculated Risk, Capital Spectator, Daniel Gross, smithy Salmon, Bonddad Blog)
How the Fed will read the NFP report. (Real Time Economics, MoneyBeat)
Rail traffic is chugging along. (Pragmatic Capitalism)
Corporate profits just keep on increasing. (Calafia Beach Pundit)
The evolving nature of men in the US workforce. (Political Calculations)
Earlier on Abnormal Returns
Simplify your investing to avoid ?opportunities for failure?. (Abnormal Returns)
What you may have missed in our Thursday linkfest. (Abnormal Returns)
Mixed media
Bitcoin fraud is a thing. (Dealbook)
American teens are still watching television. (The Atlantic)
What the Lightning adapter says about Apple ($AAPL). (Daring Fireball)
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