Chart o? the Day: Bond Fund Flows are Hilarious

[Thierry Martin]

Random Thoughts


Tuesday was a bit of the good, the bad, and the ugly.

The Quack sold off a tiny bit. So far, it only appears to pulling back from its recent persistent breakout from a base.

The Ps sold off fairly hard but were able to recover to close off their worst levels. For the day, they lost a little around 1/3%. This action keeps them stuck in a sideways range. Net net, they haven't made any progress since mid-November. This isn't the end of the world but as a momentum guy, I'd sure like to see new highs.

The Rusty probed into its prior breakout levels before recovering. Nevertheless, it still ended down around ?%.

The Rusty reflected what happened internally. The selling was fairly broad based.

The Banks got whacked pretty hard. The Regionals still look pretty good here-so far they only appear to be pullback back. However, any additional weakness would be concerning.

There was some ugliness out there. Krispy Kreme Doughnuts got whacked over 20%--I think they found out that I was on a low carb diet.

[Thierry Martin]

What jumps out at you from the FactSet chart below? I?ll tell you the first thing I noticed was how we?re still treating the Financial sector like a little bitch.

We?re giving the financials virtually no benefit of the doubt on their forward earnings multiple for the year ahead.

The banks are expected to be growing their earnings by 11.5% in 2014 according to the consensus, that?s faster than the S&P 500′s expected earnings growth rate of 10.8% and a better pace than what?s expected for five other sectors (Industrials, tech, Staples, Healthcare and Utilities). In addition, many of the large bank stocks haven?t even come close to recovering in share price from 2008 (the XLF is still down 45%) while they have done a ton of work repairing their balance sheets and digging deep for operational efficiencies.

In addition, the banks will be the beneficiary of a steepening yield curve if and when rates creep up in the coming year. They make a ton of money as that process happens, margins expand meaningfully.

And yet ? we?re rewarding that set-up with the lowest multiple in the markets, lower than what we?re giving the utilities for god?s sake.

That?s quite a disconnect.

[Thierry Martin]

Stuff I?m Reading this Morning?

Brokers have sold more than $20 billion worth of non-traded REITs and have racked up hundreds of millions in private placement commissions so far this year. Probably because these were the best possible investments for their clients. (InvestmentNews)

?Our investment team has a combined 138 years of experience.? Yeah, okay. (ResearchPuzzle)

How foreign stocks can help reduce a portfolio?s volatility. (RickFerri)

Seven reasons why Kass is Kautious. (PragCap)

Why REITs have acted terribly this year, up just 2.2% in 2013. (Morningstar)

My book, Backstage Wall Street, available at Amazon

[Thierry Martin]

?Everybody has a plan until they get punched in the nose,? said former heavyweight champion, Mike Tyson.


go to the Mad Hedge Fund Trader's website

Highly recommended, unconventional trading service:

Trading Coach Sam Johnson demonstrates the #1 Passive Income Strategy for Traders

[Thierry Martin]

The Chart of the Day is Cybernoics (CYBX). I found the stock by sorting today's New High List for frequency, then used the flipchart feature to review the charts. Since the Trend Spotter signaled a buy on 10/11 the stock gained 35.36%.

They design, develop and market medical devices for the treatment of epilepsy and other debilitating neurological disorders using a therapy, vagus nerve stimulation. The company's initial target market is epilepsy, the world's second most prevalent neurological disorder, which is characterized by seizures. Vagus nerve stimulation with the Cyberonics NCP System was approved for use as an adjunctive therapy in reducing the frequency of seizures in adults and adolescents with medically refractory partial onset seizures.