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Thursday, January 18, 2007
Deconstructing Barron's Roundtable
Today was a good day. All my portfolios went up. The NASDAQ got clobbered. My AAPL puts went up, since Apple had blow-out earnings and still managed to fall hard. And IBM announced great earnings this evening, only to have its stock get whacked. Having stocks fall on great news makes my day.
But enough about me. Let's make today about the Barron's Roundtable, where a dozen market "experts" talk about - - invariably - - how much higher the market is going to go.
I love Barron's dearly, mainly because it had the good sense to give my start-up (Prophet.net) the "Best of the Web" award four years in a row. But I take issue with their roundtable for a couple of reasons.
One is that they tend to have the same clowns back each year, including the singularly nauseating Abby Joseph Cohen. I don't think the fact she is so physically unattractive to me would grate so much if she weren't so bullish all the time. Oh, by the way, here's the roster:
Art Samberg, Chairman and CEO, Pequot Capital Management, Westport, Conn.;
John Neff, Retired portfolio manager, Vanguard Windsor Fund; managing partner (retired), Wellington Management, West Conshohocken, Pa.;
Marc Faber, Managing director, Marc Faber Ltd., Hong Kong;
Scott Black, Founder and president, Delphi Management; portfolio manager, Delphi Value Fund Boston, Mass.;
Meryl Witmer, General partner, Eagle Capital Partners, N.Y.;
Oscar Schafer, Managing partner, O.S.S. Capital Management, N.Y.;
Archie MacAllaster, Chairman, MacAllaster, Pitfield MacKay, N.Y.;
Felix Zulauf, Founder and president, Zulauf Asset Management, Zug, Switzerland;
Fred Hickey, Editor, The High-Tech Strategist, Nashua, N.H.;
Abby Joseph Cohen, Chief U.S. Investment Strategist, Goldman Sachs, N.Y.;
Mario Gabelli, Chairman, Gamco Investors Inc., Rye, N.Y.;
Bill Gross, Founder and chief investment officer, Pimco, Newport Beach, Calif.
The second thing is that Barron's shows the tables of how the past picks of these experts have fared. That's just fine, except for the fact that for the one or two members who actually have the gonads to offer bearish opinions, their picks are shown as negative values if they do well. In other words, if a short suggestion goes from $100 to $50, the column showing the percentage performance is -50%. I imagine 95% of the readers skim the % column and, seeing the negative numbers, figure the person who made the call it a nit-wit.
The proper thing to do would be to show the true return so that people are comparing apples to apples. This is just example 5,739 of how the world hates bears. They can't even give credit where credit is due.
Oh, there's a third thing I don't like about how Barron's shows this information. They don't even show the average return for the picks! Some people have five picks, others ten, others three.........but they don't bother to show the average return. Is that idiotic, or what? I mean, how is anyone supposed to judge how decent these overpaid people are?
Well, Tim to the rescue. I've punched in the results for the roundtable picks of 2006. And I have - gasp - actually computed the average returns of the picks. They are, in descending order, as follows:
Meryl Witmer: 60.26%
Oscar Schafer: 34.36%
Art Samberg: 30.7%
Scott Black: 28.55%
Marc Faber: 27.86%
Felix Zulauf: 27.38%
Mario Gabelli: 20.16%
Fred Hickey: 18.18%
Abby Joseph Cohen: 17.55% (pfftt..)
Bill Gross: 17.3%
John Neff: -8.6%
Archie MacAllaster: -13.25% (go get 'em, Archie!)
Keep in mind two things. First, these people are, by and large, paid millions and millions of dollars. Second, the market was up about 18% last year. So hottie AJC got paid a bundle for doing.........ummmm..........well, I'm not sure.
I would also add that the results for the roundtable's mid-year picks are also available. Fred Hickey - - just about the only bear in the group - - scores a nearly 20% gain on his picks (and the market went straight up during the second half of last year!) Whereas all three of Abby Joseph Cohen's picks fell in price, averaging a nearly 12% drop. Nice going, Abs. Way to earn your millions!
So there you have it. The experts. The bulls. The unjustly rewarded. How these people can to be in such positions of authority is quite beyond me.
at 1/18/2007 13 insightful comments 
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Wednesday, January 17, 2007
When Great News Doesn't Help
After the market closed today, tech bellwether Apple, Inc. announced not just great earnings, but Oh My God blowout earnings. And how did the market react after hours? Well, both Apple and the NASDAQ fell. GLOBEX is down too. When stocks soften on amazingly great earnings, that's a good sign for us ursine types.
Some indexes pushed to lifetime highs intraday today, but ran out of steam. I do not see any sensational, obvious, the-world-is-coming-to-an-end type pattern. If the market falls, it's going to do so simply because there are no more Greater Fools. As for the S&P 500, shown below, it needs to break below 1,400 before things get interesting.
The Russell 2000 seems to be consolidating right now. I am hoping the current consolidation is similar to the prior one, both of which are shown in light blue highlighting here.
And check out the Transports - aren't trendlines amazing? The prices did a perfect about-face.
My AMLN short - so far, so good. It's down to $40 in after-hours trading. This is a sharp looking graph.
Bear Stearns has had an ungodly amazing run. Again, this isn't a slam-dunk bearish pattern, but more of a "this is stretched to the max" situation. But some maxes can out-max themselves, as we painfully know.
The same logic holds true for Goldman Sachs.
I rarely mention Nvidia, but puts on this stock could benefit greatly from any general downturn in tech stocks, given its huge runup.
Lastly, a suggestion for a buy (or calls)......Oil Services (OIH). My view is that the drop in crude prices has had its run. Take a good look at how strong volume has been recently, in the midst of the stock consolidating in the upper 120s. Stop-loss price on this one would be $125.80, in my opinion.
at 1/17/2007 10 insightful comments Links to this post
Tuesday, January 16, 2007
Earnings Season Begins
Earnings season is upon us again. So our chances of turning the corner downward appear briefly once more. Unless earnings are, on the whole, not up to expectations, Dow 13,000 seems all but inevitable.
Intel (INTC) is down after-hours, in spite of hitting expectations. And Rackable Systems (RACK) is getting completely clobbered:
My colleague Michael Kahn wrote this morning, "The rally rumbles on and quite honestly we are out of new ways to say that this should not be happening." Well said. The NASDAQ Composite is above even the high water mark of its channel. This rally is based on the same sensibilities as late 1999/early 2000. Just insane.
The S&P 500 is much the same story.
Of particular concern is the Dow Transports. Just take a look at how swiftly it has managed to retrace back to the descending trendline. I have a feeling it could pierce above this, which would weaken the bearish argument further still.
Looking at more history of the $TRAN, you can see how prior breakouts preceded substantial moves upward.
ANDE, mentioned in this space before, remains a good speculative bullish play. It all depends on the stock pushing above the neckline you see drawn here.
BP, which has been much in the news lately, looks like it is forming a tremendous top.
CCJ, although not in any crystal clear pattern, is a short I entered today. It seems to have a very good risk/reward profile.
And Cigna (CI) may have formed an important double top. As always, you must use stop-loss orders!
A short idea I haven't offered here before, I don't think - symbol GEF.
Now GOOG is interesting. It matched a lifetime intraday high today, but actually fell a little bit. Is this a double top? Or does it simply proceed a rush to $600 when they announce their earnings? I certainly don't know.
McKesson sports an interesting pattern with those Fib Fans as a backdrop. Might be a triple top here.
As for MLS, shown below, I'm not saying buy or sell. It's simply a fascinating study in how, once higher highs/higher lows are broken, the trend shift can be devastating. Because it completely morphed into a series of lower highs/lower lows. Fascinating stuff.
at 1/16/2007 7 insightful comments Links to this post