Tuesday, September 28, 2010

Updated Position (long and wrong suits me still)

While this post updates my current position, I've been firing in and out and increasing/decreasing numerous names lately. The below list will not likely remain current for any length of minutes.

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A note to email subscribers - I have no idea how or why the June 4th Butterfly Punch post was just delivered. I have fat fingers, certainly, but I wasn't anywhere near a page that could have caused this. Apologies.

Back to NFLX, I have not attacked short since my weekend post, but I did manage to bag a minor flash-crash of success hedging with AAPL instead (from into yesterday's close to a minute into today's open). I'm not particularly bearish on AAPL (not yet!), but it is such a strong name that to trade it short (at this point in time), you really have to cover on a slice lower. Until something more fundamental begins to disturb the stock, slice-lows will be nothing more than the latest buy-opp. This was the point I'm making in NFLX (if you trade it short, cover on any significant slice), but with Netflix I am looking to get myself long again on such a slice; not the case for me with AAPL (I'll let the entire investing universe make the further money on that one. And I'm keen to get short with a core holding there once I can justify it technically; call me a fool).

And a quick note to traders ripping gains lately by jamming the leadership names long. Yes yes, you are genius, but don't stop to remind yourself of that. Those very super intelligent trades you've been scoring move through you, not from you. I say this because self adulation in this game leads to a whack on the skull. Kisses.

Rock on - 7PM!

Total Position: Currently 3.43-to-1 net-long, 95% invested

Currently Long (according to size):
ULTA (7.3%); WLL (7.2%); VPHM (7.1%); CRM (7.1%); TRW (7.1%); NTGR (6.8%); BVN (6.7%); ORCL (6.6%); EWS-Singapore (5.6%); RJI (4.3%) MCP (trading frequently, now light w/ 4.1%); RLD (added yesterday, thin and will not hold w close below 17.60, 4.1%); QLIK (thin, added today, 3.6%)

Currently Short: QID-long (Nasdaq 100 2x's-short, added today, 6.9%); HK (6.1%); DISH (5%)
Note: Inverse ETF (QID) currently weighted @1.65 x's towards long/short calculation

Futures: no current position

Sunday, September 26, 2010

Netflix (slicing up the inefficiencies and preying on the blood of others)

It's tough to find an empty stretcher at the NFLX short ward this weekend.

I'm suffering myself, but fortunately only the slightest of flesh wounds; having taken one brief shot so far on Thursday. Take note of the carnage in here, however - a chorus of unhappy moans fills every corner; stacks of sliced ham to heights only occasionally seen.

I'll likely be shorting this name again very soon.

Not that I think Netflix is over-valued. I look at Comcast and I see a company overvalued. Sure sure sure, your NFLX chart has gone parabolic and every cell in your chord screams at the ridiculousness. Fine. But this whole game is ridiculous. Varying degrees of lesser and greater senselessness.

But that's really why we're here (don't forget your roots young man!). Inefficiencies in the marketplace - that's your bread and butter, right? Sanity is your true enemy. If the markets became sane, the computers would get all the fun (instead of only 95% of it). Leave the wet mop conventions for more normal people. Around here ridiculous is a term for just getting started.

The Netflix market-cap this weekend is $8.5B. Comcast is valued at $52B. Think about that a moment. You're young enough to not pay for cable anymore - you tell me which is more ridiculous. If the market were to value NFLX at only 1/3rd of where Comcast is (currently) priced, then NFLX trades at $332/share. Yes yes, Comcast provides access and services, on top of delivering content, but Netflix has more than half the number of subscribers as Comcast already, and their customer base is growing light years faster. Comcast sells content at unsustainable prices. Seriously, how long will how many pay $70/month to watch TV?. Comcast is essentially delivering content at 15-year ago long-distance phone rates. Cable-TV margins are heading the same direction as the telephone - much much lower. Between Netflix and Comcast, it is the boring old Comcast which is ridiculously valued.

Fortunately I never make decisions based on valuation, common sense, or silly things like that. My accounts would be heavily short Comcast and that position down 6.9% this quarter. And Comcast is low-beta. Common sense trading in higher-beta names would have carved me out of existence many years ago. I'm still standing, stooped over and favoring both knees, precisely because I learned not to focus on such traps. All stocks are over-valued by my measure. I distrust each of them with an equally open mind.

And while old age isn't the greatest gift for 200%+ performance years, it does help to reduce the draw-downs. You learn early on that history has a way of repeating, but over time you see it for yourself. I might have been about your age when Radio began its run to over $500/share in the 1920's; on it's way to under $15 within three years (split-adjusted; RCA split 5-1 in 1929 and traded below $3/share in 1932). The auto stocks savaged shorts for a generation before finding gravity. Lorillard smoked several hundred percent before your parents ever took up smoking. Zenith, Wang, Diners Club, Radio Shack, TCBY, US Robotics, Iomega and endless other bad stocks were passing out straight jackets well before Yahoo bested $250/share, catching your attention. By the time Qualcomm nailed $1,000/share, it had all been seen a thousand times before - before the shorts were ultimately proven correct.

So sure, go ahead and short NFLX. You know you want to. And from what I can tell (at this particular time, for this particular moment), the beast is going to slice downward. Not because it is out of control, over-valued, or anything else warranted by logic. This is simply a (likely) spot where a lesser or greater amount of shakeout is set to take place. A short-term and simple, conventional shake-out.

I'm all for shorting NFLX here, right along with you - but I'm more interesting in getting back long again. I'll be covering about the time you start cheering. I'm excited to finally see: 1.) the table is finally set (what with CNBC now paying hourly attention to an $8B company coincident to signs of distribution within an otherwise very strong tape; all of this on Friday) and 2.) NFLX is truly truly a beast. Why wouldn't I want to be long that?

Point #2 doesn't guarantee the stock hasn't already made its all-time high and it won't Radio its way now into oblivion. Don't accuse me of pretending to know. But when something is this powerful, if it is not because the game itself has misfired dramatically (high frequency trading shooting the moon for no appropriate reason?) then the stock is going to go higher still, ultimately, and usually then higher again after that. The quality of the pullbacks will suggest whether or not there are more highs to fire. At least I have that. I can gauge this from the behavior of the shake-out (assuming we even see one in here). For one thing, if the first slice is dramatic (which is preferable in fact), it should almost always mark a short-term low. Subsequent lows then will be above that first low as the name consolidates and tightens, before eventually starting upward again (re-crowding meat wagons with a new round of heroes who've went and sold short).

Presently, over 20% of the float on NFLX is short. While that concerns me some (calling into question whether this name will ultimately Yahoo the shorts above $300 before dying-off (typically, the higher the short-interest, the more likely that shorts are correct; it is generally smart money that places large short positions. The far more populous 100-share crowd is not capable of swallowing 20% of the float on a mid-cap stock - big money is obviously involved, and big money tends to be thorough with homework)...while this high short-interest concerns me, it also makes for fireworks. So if I ride the NFLX Brahma and keep my head from free from fence posts, bull horns, etc., then ultimately it doesn't matter whether 200 or 300/share is ever achieved. I'm going to find a way to prosper.

There will be fools on both sides of the NFLX tape now, watch. And the potential is good that a high percentage of traders lose vs. gain (longs + shorts combined). When something is so volatile that there are losers en masse, on both sides of the tape, I want to be a part of it. I want the other side of all that pain.

As always, and especially now - don't do what I do. Forget any Earn While you Learn mantra for this play. Only the court jester, and a good one at that, can spit on the king's feet and have him laughing. But he has to read the mood perfectly.

Leave NFLX for me (and perhaps the Fabulous Fabrice!)...to make all the money ;).

Beast out.

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Friday, September 24, 2010

Updated Position (smaller, longer)

Pared back significantly here today, increasing net-long exposure at the same time. We've seen some choppy (toppy?) sessions lately but internals are severe-positive early today; implies the we will not reverse this session, but close somewhere near the day high.

That might be another full percent or more, for all I know. Thus the change of hats.

Total Position: Currently 2.47-to-1 net-long, 69% invested

[Edit: just added 6.5% long ORCL, 26.99 ave. Accounts now 2.79-to-1 net-long, 76% invested]

Currently Long (according to size):
CRM (7.4%); ULTA (7.1%); VPHM (6.9%); NTGR (6.8%); WLL (6.8%); ORCL (6.5%); EWS-Singapore (5.6%); MCP (unloaded early and re-bot, 5%); RJI (4.3%)

Currently Short: DISH (7.2%); CROX (6.7%); HK (6%)

Futures: no current position; out of yesterday's Nov Crude Oil long, 75.18

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Tuesday, September 21, 2010

Updated Position (tight hold for now)

We did break above the trading ranges and I did scale into a market neutral stance. I'm not giving up on the long side, but checking slightly.

It's a very tradable market right now.

Total Position: Currently 1-1 net-long, 97% invested

Currently Long (according to size):
ULTA (7.3%); NTGR (6.7%); EWZ-Brazil (6.1%); MCP (6%); EWS-Singapore (5.5%); CXO (5.4%); IGTE (4.6%); CRM (4.4%); RJI (4.2%)

Currently Short: FSLR (7.3%); DISH (7.1%); CMCSA (7%); CROX (6.4%); DISH (5.2%); PXP (4.9%); QLGC (4.9%); TWM-long (Russell-2000 2x's-short, 4.8%); APOL (4.4%)
Note: Inverse ETF (TWM) currently weighted @1.65 x's towards long/short calculation

Futures: no current position

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Saturday, September 18, 2010

Lawn Ball Cahunas

While there are many more proponents speculating we'll see an upside break-out in equity trading ranges now, underlying technicals are improving, leadership stocks continue to behave very well (still!), while increasing in numbers and sentiment remains a Dostoevsky read or two from becoming anything terribly negative. Add to that, next year remains the 3rd year in the Presidential cycle.

I guess I'm not ready to retire just yet.

Fine fine, very well. And I don't want to paint scenarios. But a breakout above 1131 now (we kissed that level early Friday) would set the table all too typically for the Fast Money universe to spit out chicken bones, change their collective tunes and nod for further upside.

Sick Jesus - that day is one to pare-back core holdings and re-hedge aggressively; even if only for the near-term.

This is not to say we cannot break-out here and shoot the moon into 2011, if not the quarter-end in a couple of weeks - which is why it is best never to preach anything. But a blind squirrel who finds a nut still can't see the tracks and that is a squirrel worth paying attention to. I know I'm being an ass (underneath it all I love the lot of you), but I have to face it. I can only measure strength in a few ways and position myself accordingly. In terms of reading fortunes though - it is the losers who are best at predicting (albeit inversely). Be sure to tune into the financial media as we break-out to the upside. If the collective chime is "we're going higher!," and that chorus is led by anti-genius types marching to their new, upward beat (since somehow, suddenly, they can't take being on the wrong side - not for another minute!) - well then I'll be banging the sell button on that day; waiting for the end of the session if internals are severe-positive, or banging away throughout otherwise; since any 5-minute bar might mark the short-term high.


Sure sure sure, the market will remain overall positive and selling everything will not get my vote. I'm not turning bearish here, not by a long-shot. But hedging for freeway congestion on the back of these ducks makes perfect sense to me. Pull-up on the accelerator some and wait for the lane to open-up again. Slow to the actual speed limit (market neutral) if the radar detector begins flashing. If the market continues onward without a check, well then step it back up; accelerate again gradually while considering whether or not (or when!) to punch it. Or, in the event we get a sharp slice down before any break-out, I'll buy that set-up with both hands, as I expect it is the bears last hopeful gasp (the last time those pencils get sharpened and they project the potential downside) before they finally get stopped at higher levels. Or...

So boring. I can't wait for lawn bowling.

Total Position: Currently 2.1-to-1 net-long, 101% invested

Currently Long (according to size): EWS-Singapore (7.6%); CAT (7.3%);
ULTA (7.1%); OIL (7%); EWZ-Brazil (6%); IGTE (6%); NTGR (5.5%); CXO (5.3%); TRW (4.6%); CRM (looking to overweight again soon, 4.2%); RJI (4.2%); ARUN (4.1%)

Currently Short: APOL (7.5%); FSLR (7.2%); DISH (7%); CROX (6%); DISH (5.2%); CREE (5%);

Futures: no position

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Thursday, September 09, 2010

Listed in the US (Chinese US-only shares seeing nasty pattern)

After the US close on Friday, CSKI (headquartered in Mainland China) updated guidance and lowered numbers. The timing was laughable, as the report was delivered a little after 5AM in China, on a Saturday.

Given the fiduciary responsibility to shareholders, one must assume the company execs pulled an all-nighter at the end of the work-week to discover the disappointment - and went to press before breakfast; asap.

Concurrently, CSKI announced their CFO was resigning...for health reasons.

The market pictured a CFO with an unhealthy amount of pantyhose wrapped around his neck I guess, because it traded the stock down 30% in the after-market Friday; ahead of a 3-day weekend. Things were not any kinder on normal trading then Tuesday.

Now, this week, we see CAGC and FUQI have met similar fates, with SEC inquiries and auditor controversies throwing shares of these US-only traded Chinese companies to the lions.

Traders should read yesterday's article regarding the China Discount, by Ian Wyatt. But more important, understand that a pattern has developed and has hit someone hard three times now in as many days. Even if a Chinese name traded in the US is thoroughly above-board with all matters accounting, the market may very well reel these names lower; bracing for the potential wrecking ball that comes with uncovering fraud.

Since the Chinese solar names (traded in the US) began moving higher in early 2007 (and out-performing all other leadership in that rally year), I've been keen on trading leadership Chinese ADRs, ADS's and US-only listed names out of China; from a variety of industries. I assumed risk was deeper than normal and as such I avoided traded any of these unless in a clear uptrend. At the moment now however, given the developing pattern, I'm out of any individual Chinese issues trading in the US and will watch how this plays out from here.

This is unfortunate, since the Asian markets are leading again. But just as the US-traded Chinese names were capable of trading far higher than the corresponding Eastern indices in the past, these same plays can trade well below relevant indices going forward. They have seldom been directly linked.

They're great while they're going up, but it's Hell-to-pay once declining. This year's JKS has a tendency to become last year's CAGC. Good trading.

Updated Position (death blow pending)

Imminent September death-blows and foregone Hindenburg fireballs aside, the action in leadership stocks remains formidable, coincident to no one actually expecting a break-out of trading ranges to the upside.

I remain an idiot...

Total Position: Currently 11-to-1 net-long, 62% invested

Currently Long (according to size): EWS-Singapore (7.5%); OIL (7.2%);
ULTA (6.7%); ARUN (6.3%); EWZ-Brazil (5.9%); CXO (5.3%); TRW (4.7%); IGTE (4.4%); CRM (4.3%); RJI (4.1%); FFIV (3.8%)

Currently Short: DISH (5.2%)

Futures: In and out of November Crude long last 2 sessions (currently 15% long, from 76.56)
; relevant accounts

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Thursday, September 02, 2010

Updated Position (long long long)

The lost generation for investing continues and it is now universally accepted no one can make money in stocks anymore.

Fortunately for me,
I remain an idiot.

I let go TWM hedges at yesterday's open (Wednesday) and I'm not likely to shift away from a near fully-long stance ahead of today's close.

Translation: I'm naked now, a bed-of-nails office chair beneath ample, chum-bait flanks, tourist camera in hand...waiting for tomorrow's no-jobs report to bite me like it matters.

The fool is dead - long live the fool.

Total Position
: Currently 10.7-to-1 net-long, 60% invested

Currently Long (according to size): EWS-Singapore (7.4%); OIL (7%);
CRM (6.9%); ARUN (6%); EWZ-Brazil (5.9%); CXO (5.1%); TRW (4.7%); RJI (4.1%); ULTA (reports tonight, 3.9%); FFIV (3.8%)

Currently Short: DISH (5.1%)

Futures: no current position

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