Weekly Macro and Earnings Preview 6/18-6/22

Previewing the week ahead following Greek elections which took place yesterday afternoon/evening, we are in for an interesting week:

The S&P is currently forming an inverse head and shoulders pattern with key levels marked in the picture. The white horizontal line would be my ultimate upside target to break out of the range (roughly 1,277) and possibly hit new highs in the coming weeks. Buy the rumor, sell the news. I am still bearish, but anything could happen. People were on edge waiting for Greece and their elections, now that that is over with and the “good” party won, there could be some short term euphoria, how long will that last? I’m thinking a couple days, maybe hours?

For macro news this week, we have a few announcements (Graphs obtained from Bloomberg):

Monday:

-10:00AM EST NAHB Housing Market Index Prev: 29 Consensus: 29

    NAHB measures present sale of new homes, sale of homes expected in 6 months, and the traffic of buyers in new homes. The graph below shows the index is at a fove year high, but still bumping along the bottom.

Tuesday:

-8:30AM EST Housing Starts

     -Starts Prev: .717M  Consensus .720M

     -Permits Prev: .715M Consensus .736M

These numbers are the starts of building/excavating of a new home. As we can see below since the housing bubble burst, this is down almost 75% from the peak. Any increase in this number is generally bullish for equities.

 Wednesday:

-12:30PM EST We get the announcement from Ben Bernanke and the FOMC about the Fed Funds Target rate. Prior and Consensus is 0-.25% which should stay in place until late 2014 as stated in several months prior.

Thursday:

-8:30AM EST Jobless claims Prev: 386K  Consensus 383K

   -Notice below slight uptick in claims these past few weeks as equities more down, these charts are known to be highly inversely correlated.

-9:00AM EST Flash PMI Manufacturing Index Prev: 53.9 Consensus 53.8

   -This is a new indicator, releases about a week before the actual results, gives a general preliminary reading on US manufacturing for the month.

-10:00AM Existing Home Sales Prev: 4.62M Consensus 4.57M

     -Keeps track of the home resale market (homes that are previously constructed, then sold) the graph below shows how we still have not bottomed yet, but in the process of doing so..hopefully..

-10:00AM EST Philadelphia Fed Prev: -5.8 Consensus: 0.5

   -Highly correlate with ISM manufacturing, anything negative signals contraction, chart below shows last couple readings have ticked below 0.

-10:00AM EST FHFA House Price Index  Prev: 1.8% Consensus: 0.6%

   -This week we get a slew of housing numbers, so watch these carefully, any sign of an uptick could be reversed down drastically, I still believe we have not hit bottom yet. This measures price of single family homes from data obtained from Fannie Mae and Freddie Mac.

-10:00AM Leading Indicators Prev: -0.1% Consensus: 0.0% 

     -Index of 10 economic indicators showing overall economic activity.

Preview of Earnings for the week ahead:

Tuesday:

Adobe

Barnes and Nobles

Discover Financial

Fedex

Jefferies Group

Jabil Circuit

Wednesday:

Bed Bath and Beyond

Red Hat

Thursday:

Carmax

ConAgra

Oracle

Rite Aid

Friday:

Darden Restaurants

Carnival Corporation

Lets take a look at Discover (DSC)

The last few earnings reports have been fairly good, net income up 20% y/y. Comparing this to Visa (V), we can see that there is slight underperformance, but Visa has a wider market, their profit margin being up 10% y/y while DSC is about flat. I am bullish long term the credit card/debit card companies, people are generally using more plastic than paper today, so these companies will profit and that they have.

Below is a YTD performance of DFS, V and the S&P 500.

Notice the broader market is up 6% while DFS is up nearly 38%. Surprisingly, I still think that this has room to run, with a solid growing income stream and a 1.2% yield, I would be a buyer here before the report, even if it does surprise to the downside. Yearly EPS of 4.40 trading at 33.00 = a very low and cheap p/e multiple. I would not be surprised in the coming months to see some aggressive buying into DFS up toward the low-mid 40’s.

Next I want to look at a 100% domestic name, Darden Restaurants (DRI) all of their 1,860 restaurants which are composed of Red Lobster, Olive Garden, Longhorn Steakhouse, The Capital Grille and Bahama Breeze are located in the US. If you are a long the US dollar, this is a great way to hedge against international growth, as well as obtain a 3.3% dividend yield while you wait. Since these tend to be more of luxury restaurants, comparing them to Consumer Discretionary is the best indicator. They have outperformed nearly 2% YTD, while the XLY dividend yield is less than half of DRI’s. I can’t stress steady income streams enough in the amount of risk we are seeing recently, especially with Europe. Buy Darden to get 100% out of European exposure.

Last, looking a name I will be actively trading this week, Rite Aid (RAD).

Not looking at fundamentals here, but strictly a short-term trade if I can get it for the right price. Markets will probably flush down a bit this week on a flat week last week (futures drifting lower as I type Sun. evening). 1.00-1.10 looks to be where I want to enter, hoping for a pop up.

I will probably be back into the 3xDirexionETF’s again this week, broke even twice on TZA last week, and a great hedge. Downside to watch in the spoo is 1,323 (6/8 close) that would be our pivot, then 1,311.    1,300 held very solid last week, but that may not be the case this week.

Catch me on twitter @peter_eller10 for daily updates.

Tsipras or Samaras?

Markets were on cruise control this past week ahead of the all-important Greek Elections which take place tonight. The ultimate question is will there be a Grexit or not? What will happen to the Euro? We won’t know for sure once whoever gets elected but knowing of their ideology toward fiscal/monetary policy it seems that this is what COULD happen:

-Alexis Tsipras, probably the most feared man to the Greek citizens fight now, all for Greece leaving the EZ, left wing (liberal) party member and pro-Drachma. If he wins, we could see markets react sharply to the downside initially in electronic trading Sunday night into Monday.

-Antonis Samaras, more of a calm and collective to the citizens, wants to keep the country together, stay in the EZ, pro-bailout, right wing (conservative) party.

Who I want to win is Tsipras, what the Greek citizens want to see is change. Yes, they want to stay in the EZ and keep the currency, but sometimes departing and starting again might be the best thing. Tsipras wants to get job growth back and is all for getting growth back to the public sector to battle the 20%+ unemployment.

Who will probably win is Samaras, so many Greeks are all for sticking together and fighting through the battle, whether it means several rounds of bailouts, more funding, and higher taxes. They are biding their time until full on Armageddon will hit their country, no one will come to the rescue and they will default, it is inevitable.  

What choice would you make? The first round of exit polls begin at Noon eastern, it should be one for the history books. 

Could this fix US/European deficit spending?

Welcome back guys, and what a crazy past couple weeks we have had. The macro data that I posted 2 weeks ago really put the markets in a tailspin. We saw the S&P 500 go from 1,318 on May 25th down to an intraday low of 1,267 on June 4^th. The unemployment numbers that came out on June 1^st fell way short of expectations, less than half of what major economists and analysts had expected (69K v. 150K). That was not the only reason, Europe was still crashing daily on concerns of Greece, Spain, Portugal, Italy. Government bond yields were soaring, investors were not sure if they would be solvent within a short period of time.

Though just this past week, we saw a big reversal. With Europe out of the picture, and England not trading for a few days due to the Queen’s Jubilee that kept the markets fairly quiet. Lack of US macro data and light volume also gave us the 180 reversal many were probably looking for.

This Saturday we learned that Spain got a 100B Euro bank bailout (equivalent to 1.5T dollars in terms of percentage of GDP). We have known for a while now that things there were in pretty rough shape, the EU was meeting and there was speculation something would get done. I can say that this is not fixing the problem but putting a band-aid on yet another seeping wound. You teach a man how to fish, you can’t keep giving him fish, he will always come back for more without working. This was Spain’s problem; they had a fiscal crisis, no one wanted to negotiate, so they got a bailout. What will happen next? More bailouts?

We, as humans need to act intelligently and figure out the problem. The citizens voted for these people to not beg for more aid, but put in endless hours to protect the good of the people. Government in Spain, Greece, and the US have not done their job, it is time to throw them out. With the Greek elections next weekend, I expect to see some major reform happen, if there is no fiscal plan, I’m just plainly saying they will go bankrupt. Germany basically has had them and the rest of the insolvent countries on life support for quite a while now, and they want no more.  

I promise I’m not going to go all Peter Schiff here but the US does have its share of fiscal issues as well. If the tax cuts do not continue through ’13 we could basically see catastrophe in the stock market. The problem is we spend too much, and as we continue to spend like we do, debt will continue to grow higher than GDP and we MAY end up like Greece, Spain etc. The thing is, the US treasury market is still in high demand right now, telling bond buyers that our debt is safe. We don’t know of a plan or what the plan is to cut out spending down over the next few years but something has to be done.

My plan is to simply say: ok we messed up, we need to cut spending right now AND increase taxes. Yes, both need to be done, but this will not last forever, maybe only a few years, enough to balance the budget and decrease debt to a more desirable level; below 100% of GDP. Install a flat tax rate; simply put everyone is paying the SAME RATE on EVERYTHING. So, this would solely depend on your income (those who make more pay more, those who make less pay less). I would impose this on consumable goods, federal, state…anything with a tax, quick and easy. As the national debt (hopefully) goes down and the budget (again hopefully) gets balanced, the rate can be adjusted. Also, to encourage consumer spending, I would use 1 day a month as a tax holiday.

We cannot keep growing our debt, here or in any other country, it will eventually become unattractive to creditors. Those creditors who bought will lose over time, they have a chance at not being repaid. The most honest way is to default, clean up and start over again. Yes, it will hurt but it WILL get better. Inflation is the more dishonest way, too much liquidity flooding the system would harm anyone who was not involved directly in the default (bondholders, gov’t employees) by decreasing the value of their savings.

Off that topic now, as far as US equities/oil/dollar this is what I’m seeing the setup this week:

-Thursday I bought TZA, sold Friday midday to close out position flat

-TZA is Direxion x3 bear on the Russell 2000, so it trades inverse to the market x3 (if the S&P was down .5% this would be up 1.5%)

-I did not want to go in short over the weekend, was thinking something big might happen this weekend which did.

-ES_F futures opened up 1% Sunday Evening

-I believe rally won’t sustain, and will fade throughout the week (need to hold 1335 in the ES_F short term resistance, then 1,363 is next up)

A look at ES CL and 6E

Macro data out this week could also make a significant difference in what happens:

Tuesday:

-7:30AM EST NFIB Small Business Optimism Index Prev. 94.5 Consensus 94.2

-8:30AM EST Import and Export Prices Export Prev. 0.4 % Consensus 0.1 %

Import Prev. -0.5 % Consensus -1.1 %

-2:00PM EST Treasury Budget Prev. $59.1 B surplus Consensus $-125.0 B deficit

Wednesday:

-8:30AM EST Producer Price Index Prev. -0.2% Consensus -0.6%

-8:30AM EST PPI less food + energy Prev. 0.2% Consensus 0.2%

-8:30AM Retail Sales Prev. 0.1% Consensus -0.2%

   -Less autos: prev. 0.1% Consensus -0.1%

   -Less autos and gas prev. 0.1% Consensus 0.4%

-10:00AM EST Business Inventories Prev. 0.3% Consensus 0.3%

Thursday:

-8:30AM EST Consumer Price Index Prev. 0.0% Consensus -0.2%

   -Less Food + Energy Prev. 0.2% Consensus 0.2%

-8:30AM EST Jobless Claims Prev. 377K Consensus 375K

Friday:

-8:30AM EST Empire State Manufacturing Prev.  17.09 Consensus 13.8

-9:15AM EST Industrial Production Prev. 1.1% Consensus 0.0%

   -Capacity Utilization Prev. 79.2% Consensus 79.2%

   -Manufacturing Prior 0.6% Consensus -0.3%

-Michigan Consumer Sentiment Prev. 79.3 Consensus 77.5

No big earnings news out this week, but will be fully trading and watching markets.

Catch me @peter_eller10 on twitter for updates.

Big week for macro data

Hope you all had a great long weekend, but its time to get back to work, and what a week this is going to be; 3 jam packed days of macro data that could throw markets anywhere.

Lets look at what has happened so far in the last couple weeks:

We saw the starting of a downward trend at 1,360; since then we have lost nearly 60 handles, and the pattern looks to continue for some time. We had a big explosion to the upside to start off 2012 and in my opinion that plethora of buying will probably continue after a slight pause, I’m just not sure when or how much we can regain.

Looking at Earnings reports from last week, Home Depot reported a surprisingly good quarter; margins looked pretty solid, with operating income at its highest since Q2 last year. Same with Deere, which doubled its net income from last quarter, but the rally was stalled by the overall market. Going forward after this report, DE could be well into the 90’s the fundamentals are getting cheap now and surprised me.

On the other hand, AAP reported what I thought would happen. This quarter was great, but their comments on the second quarter were very bleak. Shares plunged over $20, but have since recovered about $7 of that back. I would look to buying AZO instead.

As I previously stated, this is going to be a huge week, here is what is going on, all EST:

      Tuesday:

·        9:00AM Case Shiller 20-City Index   Prev: -3.5% Exp: -2.8%

·        10:30AM Dallas Fed Manufacturing Prev: -3.4 Consensus: 3.0

      Wednesday:

·        7:00AM MBA Mortgage Index  Prev: 3.8%

·        10:00AM Pending Home Sales   Prev: 4.1% Exp: -1.0%

      Thursday:

·        7:30AM Challenger Job Cuts Exp: 11.2%

·        8:15AM ADP Unemployment Report  Prev: 119K Exp: 145K Forecast: 165K

·        8:30AM Jobless Claims  Exp: 370K  Forecast: 365K

·        8:30AM Continuing Claims Exp: 3.265M  Forecast 3.25M

·        8:30AM GDP 2^nd estimate Q1  Prev: 2.2% Exp: 1.9% Forecast: 1.9%

·        8:30AM GDP Deflator 2^nd estimate Q1 Prev: 1.5% Exp: 1.5% Forecast: 1.5%

·        9:45AM Chicago PMI Prev: 56.2 Exp: 57.5 Forecast: 55.0

·        11:00AM Crude Oil inventories Prev: .883M barrels

      Friday

·         8:30AM Non-Farm Payrolls Prev: 115K Exp:155K Forecast: 175K

·         8:30AM Non-Farm Private Payrolls Prev: 130K Exp:172K Forecast: 185K

·         8:30AM Unemployment Rate Prev: 8.1% Exp: 8.1% Forecast 8.0%

·         8:30AM Hourly Earnings Prev: 0.0% Exp: 0.2% Forecast 0.1%

·        8:30AM Average Workweek Prev: 34.5 Exp: 34.5 Forecast 34.5

·        8:30AM Personal Income Prev: 0.4% Exp: 0.3% Forecast: 0.2%

·        8:30AM Personal Spending Prev: 0.3% Exp: 0.3% Forecast: 0.2%

·        8:30AM PCE Prices-Core Prev: 0.2% Exp: 0.2% Forecast: 0.2%

·        10:00AM ISM Index Prev: 54.8 Exp: 54.0 Forecast: 53.0

·        10:00AM Construction Spending Prev: 0.1% Exp: 0.5% Forecast 0.0%

·        2:00PM Auto Sales Exp: 5.0M

·        2:00PM Truck Sales Exp: 6.0

Here is how the week will shape up with earnings reports, not much going on:

Tuedsay: DryShips (Which I still own and will go into detail on)

Thrsday: Canadian Imperial Bank

               Ciena

               Joy Global

               Vera Bradley

   

DryShips is one of the names I have been long now for about 6 months basically on a bargin hunt at 2.00. After announcing the backlog of orders from their substantial stake in OceanRig the stock has done rather nicely, but pulled back. I still believe that the growth is there, they are back to making money, while increasing their cash and accounts receivables to respectable levels.

Last quarter, they reported a small loss, after a very nice net income of 25M. I am expecting another beat here, but could just break even or be a smaller than anticipated loss. I will continue to hold this as a long position for now. Trading at 3x sales, this is a bargin to me. I am a big believer in dry bulk shipping to be the 1^st thing to rebound when we do get a substantial recovery, and while I wait, as I have said above, they have a sizable stake in an oil driller.

Solely based on technical analysis, I will possibly put on a trade for Coldwater Creek $CWTR this week ahead of its earnings report. Looking at 200 shares if I can get them under .85 that would be my target. I know it is a very small position, but I have had luck with this name in the past; last August buying before the move up above a dollar in September, made about $40. Right now, I am eyeing the .84-1.12 level for a very short term trading range.

Above CWTR

Next name I want to look at on a fundamental/technical basis is Vera Bradley. They are a designer, producer, marketer, and retailer of functional accessories for women. Their products include handbags, accessories, and travel and leisure items. As of January 28, 2012, they have Vera Bradley products through its 48 full-price stores, its eight outlet stores in the United States, seven stores in Japan, the website verabradley.com They also sell their products to 3,300 specialty retail stores.

I used to be bearish on these high end retail names, especially VRA when they went public in to ’10 moving in to the mid 40’s price range for the stock. They were trading at a huge premium compared to their sales and earnings, and after a couple bleak quarters, their stock has dropped more than 50% from its peak. In reviewing their last 2 quarters, they were very good and we could be in for a surprise to the upside here. In one year they have doubled their net income, which is one of the main things I look at, another is revenue increase by 30%, always good to see more sales=growth.

They have also cut their long-term borrowings by more than 50% in one year, liabilities are down substantially, so it is always good to see a company that can pay off debt. Cash/receivables are also increasing, another good sign.

Technical analysis shows a breakout above top level of resistance, along with trends and MACD. I have 0 on MACD around 31.5 so we could potentially see a pop toward there in the near term.

I will also be looking at Frontline (FRO) for a potential trade next week or before their report, also Teekay Tankers under 4.00 looks attractive for a trade. I will also be watching, not for a trade but a probable move up in Joy Global. Doing a quick chart comparison to their largest competitor Caterpillar, they are down 30% compared to CAT down 10%. Joy is also trading below October 3^rd 2011 lows right at a key support level of 60.00. Follow @peter_eller10 on twitter for updates I should be on all week.

Previewing the upcoming week

Welcome back everyone, it’s been over a month since my last post, been busy finishing up the last month of school, semester was good overall but not quite exceeding my expectations, win some, lose some. Let’s get down to business. We have been seeing this pattern of equities selling off and the dollar rallying after Fed interventions for the last 3 years now, and it seems like we are currently in that rut. Within the last month Operation Twist/QE3 ended and we have been seeing a bit of pressure on equities. The Euro this week broke below 1.30 and traded down near a 1.28 handle. We still have to remember that nothing in Europe is fixed and the US is not surrounded by a bubble; whatever happens overseas DOES affect us here.

This is what I foresee happening the rest of this month/this summer:

•         With corporate earnings relatively in line to beating estimates recently, the Fed probably believes that we are back in somewhat of a recovery
•         No more rounds of QE
•         We will see equities weaken and the Dollar rally, Euro could go below 1.25
•         Europe will continue to be a problem with yields still very high, Greece could leave Euro Zone as early as sometime this summer, worst case scenario

What got me a bit concerned was about two months ago when McDonald’s came out with their comps and mentioned slowing global growth, especially China. MCD stock is off about 10 dollars since this, took a huge hit this week, and will be interesting to watch under 90.00 if we get there. MCD is down 8.4% YTD and is one of the worst performing Dow 30 stocks thus far.

 Above (via ZeroHedge) is what I was talking about. Notice equities get a bit uneasy after the Fed stops intervening.

We have a slew of Macro data out next week, some of which will be market moving.

·        Tuesday, May 15^th:

o   8:30AM Retail Sales Exp 0.2% Prev. 0.8%

o   8:30AM CPI Exp. 0.0% Prev. 0.3%

o   8:30AM Core CPI Exp. 0.2% Prev. 0.2%

o   8:30AM Empire Manufacturing Exp. 8.4 Prev. 6.6

o   10:00AM Business Inventories Exp. 0.3% Prev. 0.6%

o   10:00AM NAHB Housing Market Index Exp. 26 Prev. 25

·        Wednesday, May 16^th:

o   7:00AM MBA Mortgage Index

o   8:30AM Housing Starts Exp. 680K Prev. 654K

o   8:30AM Building Permits Exp. 730K Prev. 747K

o   9:15AM Industrial Production Exp. 0.5% Prev. 0.0%

o   9:15AM Capacity Utilization Exp. 79.0% Prev. 78.6%

o   10:30 Crude Inventories Prev. 3.652M

o   2:00PM FOMC Minutes ßBig event

·        Thursday May 17^th

o   8:30AM Initial Jobless Claims Exp. 365K Prev. 367K

o   8:30AM Continuing Claims Exp. 3.25M Prev. 3.229M

o   10:00AM Philadelphia Fed Exp. 8.8 Prev. 8.5

o   10:00AM Leading Indicators Exp. 0.2% Prev. 0.3%

We also have a few earnings reports out this week, biggest ones to watch for:

·        Monday

o   Silver Wheaton

·        Tuesday

o   Home Depot

o   JC Penny

o   Pan American Silver

o   Saks Fifth Avenue

o   Valspar

·        Wednesday

o   Abercrombie&Fitch

o   Chico’s FAS

o   Deere

o   Limited Brands

o   Target

·        Thursday

o   Advanced Auto Parts

o   AutoDesk

o   Bon-Ton

o   Dollar Tree

o   The Gap

o   Ross Stores

o   Sears

o   Teekay Tankers

o   Wal-Mart

Looking at Home Depot before they report, I’m seeing a big sell here. They have performed very well in the past year, especially compared to Lowes.

Above, HD is up more than double, 36% compared to Lowes, 15%. Since people are not buying new homes but fixing them up, I can see why both have done well, but I am still not convinced this rally can continue, especially nearing ’07 levels. What I am most concerned about is their margins. Looking on a q/q basis, we have been seeing declining margins as shown below:

 Going forward, I still think they can be a very profitable business, but am worried investors might sell this off on just a slight miss. They have cut their costs drastically, but revenue has been declining since mid last year.

Next, looking at Deere, I can also see the same thing happening here. If it is true global growth is slowing, this is a name that will be directly affected. Revenue and income took a huge hit in Q1 ’12 down from 8.44B to 6.63B and 669M to 532M respectively.

Technical analysis shows DE as a sell

I also spotted a Death Cross (50day crossing below 100day) in this chart, could have the potential to cross under the 50% retracement 52wk hi-lo which is 75.26.

Next, looking at Target and Wal-Mart. WMT has been in the news recently with some bribery scandals in Mexico, seemed to be a one and done event, stock is up $2 from its low since then, but still more than $3 off it’s 52wk high. I’m a bit cautious here, and want to look more into buying TGT instead. TGT have performed about the same and has a strong chance to get toward 58-60 on a solid report. I like both names, but the potential for WMT going up here is lower, in my opinion. WMT is flirting with all-time highs, wile TGT at 60.00 was last seen in ’10 and still more than $10 off all-time highs from there. Below is a YTD performance of both names.

Last, looking at one of the stronger names for the last few years, but spotting some slowing growth is Advanced Auto Parts (AAP).  We all know the whole story here, less people buying cars, more fixing them up. In my previous posts, I have been a big fan of AutoZone from around 300, has done very nicely since last fall, but I’m seeing some red flags for both. Once again the issue is shrinking margins.

As shown above, there are 2 quarters in a row of revenue decline with net income almost being cut in half, while stock continued to rally. Would not be surprised to see a slight guidance cut for ’12; the stock has had a great run in the last 3 years, time to take some off the table.

Also, putting a big sell rating on Sears before their report; 4 quarters of negative growth and the last one losing 2.4B, not good at all.

That’s all for this week, catch me on twitter @peter_eller10 for more updates.

Friendship, College, Jobs

If you enjoy college, have a lot of friends and do well, don’t bother reading this. I just finished my 2nd year of college and I can say that I have to sit here for a while and think about what I actually learned. It is sad that some people actually have to pay close to $35,000/year to go to an institution and think they are learning something they could just go on the internet and read about. Don’t get me wrong, I think this will change next year when I start to get into my major classes, but honestly who is going to use skills they “learned” in their core intro classes the first 2 years later in life? The stuff is so boring, adding to the fact that the professors jam their views down your throat for 150 minutes a week. That could possibly be why people fail them and just don’t care. Me being a perfectionist, or something close to it, struggles in these courses which leaves me frustrated beyond all belief. There is no point to reading the Bible if you are a Finance major. I would rather be doing things to help me become better at my future career, like writing up blogs/tweets on equity analysis or just some fun finance facts that I enjoy. Same goes for any other major out there, I’m sure I can vouch for the GW bio students who work endless hours. Also, in the 2 years I have been here, though it is a small place of about 2,000 students, I still cannot seem to find anyone who likes things I do. There are a few who are very smart Finance majors, have outstanding gpa’s, tons of friends, but spend their weekends getting drunk. I don’t have anything against them, but I just want to be that person to, you know sip on a glass of wine on the weekends discussing some finance; relaxing. As many might know, I don’t have a lot of close friends because I fully believe that we are all acting out of selfish interests, so we need someone there to “help us out” to get to our final goal, being known, popular. There are a majority of people who care about their friends, and that is good too, but I just have different views on it. Think about this for a second, you could have all of the “friends” in the world, but what if you had no money, no job? Well then you would be just like the rest of the American scum on welfare. We have a very small percentage of Americans who work hard to carry the weight for others who are too lazy. “There are no jobs” is no excuse. Educate yourself. Find something. Your job is to look for a job, it is not handed to you on a silver platter. Read news stories at the public library if you are homeless, see where employment is sparking up, sign up, you may get lucky, you may not. Keep going. We can keep pretending or we can plow through it. Hard work is rewarding and don’t let anyone tell you different.

Two years later: Is investor confidence back?

Is investor confidence back? Some may think yes, but from what I am seeing is that people are still continuing to sit on the sidelines. After May 6th 2010, we saw what happens when humans are not on the other side of the trade and the computers take over. How are we supposed to trust the system? I am no expert in this, but from what I see day to day, events like this are still occurring, at a much smaller level, but this could make it worse, singling out investors. The 10% rule on the NASDAQ and NYSE have helped alleviate the situation to a point, but when they open back up a few minutes later, same thing happens again. Not only does this happen with equity, but commodity names as well. Remember last year this week, silver, gold, oil, all took a huge hit? That for sure was not retail getting out. I stand to stay skeptical and think this could happen again at any moment. I myself as a long term investor and part-time day trader was directly affected by erroneous prints that day. SEC Chairman Mary Schapiro four months later spoke out about this event saying, “high frequency trading firms have a tremendous capacity to affect the stability and integrity of the equity markets. Currently, however, high frequency trading firms are subject to very little in the way of obligations either to protect that stability by promoting reasonable price continuity in tough times, or to refrain from exacerbating price volatility” Another topic of concern is flash trading where participants can see orders fractions of a second before the other side. This is clearly unfair, even if it is 30 milliseconds, this could be a few pennies or a few million dollars, and it usually is the latter. The main issue here is money and not morals, the participants who see the orders early are paying a fee. The exchanges who still use it today say that it is necessary “to provide liquidity”. Looking at where we are today and how unstable the macroeconomic outlook is already, liquidity is certainly not needed. These firms want more liquidity, or volume for that matter to churn for profits. They want to keep collecting those fees, while hurting the retail investor in turn by getting them erroneous prices on trades. What I think will happen in a couple of years is that there will be no more human interaction on the exchanges, and that scares me. Watching CNBC, it seems like the NYSE floor gets quieter and less populated every day, except on IPO days. These exchanges rely on HFT to give them revenue, which is still very much active today, in asset classes other than equities. What I think happened is that HFT got the investors scared, they left equities, stocks basically trade on holiday volume or less daily, now HFT has taken over commodities and whatever else is left. This past week oil was down almost 10%, some of the trades 1.00 at a time, not human. The exchanges will go out of business and trading will all be done on computers. We are already seeing this in Chicago with the only open-outcry pits left are Cattle. A good piece-by-piece documentary called Floored explains from veteran traders’ point of view how electronic trading is taking over and causing price manipulation with the removal of open outcry. Some people down there for 20+ years are now out of a job or have now gone to the screens. It is not the same. It’s scary to think this is all happening right now, with little regulation, and for some people this is their net income, their wealth, and their jobs being affected. We cannot keep continuing to sit on our hands like the US Government/foreign government and their debt problems, it has been two years, and something needs to get done now.