Assessing Risk

Right now the market is on edge over these “bubble stocks.” The indices do not show the stress, but it is there. Truth be told, these bubble stocks are alluring because of the amount of selling that has taken place in them over the past 3 months. We’ve been programmed to believe “all will be well” and whatever sold off will come back. I do believe this time is different, but the same, however. It’s different in that FEYE and SPLK are not coming back, not for years anyway. It’s the same because we’ve seen bubbles pop before (2000, 2008) and the process is something to keep in your memory.

When assessing risk, first, I look to the leaders: AAPL, QCOM, SNDK, MSFT and GOOG. If those are doing alright, I move on up the risk ladder. Stocks like TWTR, FB, MU and Z come to mind.

If those are doing well, I then travel inside of the sewers to see what the rats are doing. Names like CRTO, FEYE, CSLT, SPLK and CRCM come to mind. If you happen to work for one of these rat infested companies, I feel for you. Your jobs are woefully insecure and your stock options are under-water. You pretty much have nothing to look forward to and your CEO is a loser. That being said, everyone should be assessing risk, at all times, in order to get a feel for the market.

Are you investing in your trading business or winging it? Not to toot my own horn, but the services of The PPT, 12631 and After Hours with Option Addict are of immense value and will help novices and experts alike in trying to decode this junkyard of a market.

For example, right now overall market breadth is at 38%, a paltry number.

However, if I were to look under the hood and examine breadth on an industry by industry basis, a tool available in The PPT, I see that Banks, Machinery Tools, Automakers, Auto-dealerships, Airlines and Semiconductors are all strong. Couple that with the fact that biotech looks to be finding a floor here and TWTR is actually up, I’d say there is a good chance this market firms up soon and sprints higher into the bell.

I just posted a screen inside of The PPT, scouring for insider buying. While many of you get frantic over insider selling, most of the time it’s meaningless rabble. The jobs for most insiders are ephemeral, regular moonlighters. People have mortgages, brats in college, demanding battle axes who like to shoppe 24/7, gambling afflictions etc. An insider, mind you, sells for a hundred different reasons, but buys for only one.

Remember that for as long as your pathetic organic shells last on this diseased planet.

Here are a few stocks that have been under accumulation by insiders.

Oh, one last thing, don’t just accept this data on face value. It has been generated by computers and is subject to error. Also, in some cases, large blocks of stock have been purchased by others companies, as is the case with WES (APC bought a chunk). Do your due diligence first.

WES
PKY
OPK
SD
HLF
VMW
SCTY
AGCO
NRP
BXMT

And here are some stocks that have crushed over the past 3 months with some insider activity.

PBYI (they were wrong!)
OLED
MDRX
VPRT
AMRS
BAXS
ALQA
TTPH
SNTA
AMSC
LIOX
HDY
KBIO
AEGR
HNSN
LEI

Let me know if anything pops out. Get to work.

If one of you little trollops mentions my foray into high beta tech again, I’m gonna punch your ears off. I don’t mind differing opinions. Truly, they can be thought provoking. Not to isolate one person’s comments and toss him onto the BBQ grill, but I have a bone to pick with “I AM JESSE LIVERMORE.”

First of all, the stupid name suggests he’s some sort of wannabe short seller, based upon the assumption that he thinks he’s Jesse Livermore– ergo, the name choice.

After I posted my buy of SLCA, which is +2 from my cost basis, JESSE “fucked face” LIVERMORE had this to say:

jesus christ, the object is to buy LOW and sell high, not the other way around Fly.

What the fuck does that even mean? I guess he assumes I shouldn’t buy stocks when in a roaring bull market, because, ummm, stocks are trending the fuck higher?

He continues, after being called out on the carpet for the dog that he is:

Certainly not when the weekly RSI is at 80, which is what SLCA is at now.

Or when a stock is up 98% since the SPX bottomed in early Feb. And insiders are dumping the stock like crazy.

This is the exact same thing you did w/WDAY, YELP, FEYE, SPLK etc. Chased big winners.

So because I lost money over the past month, I should discontinue the methods that have made me successful over the past 18 years? Moreover, he cites insider selling, which has been proven to be absolutely nonsensical bearish points about any company. And, lastly, of course, he cites my losses in The Four Horsemen of Financial Disaster.

Oh, by the way, there was an insider direct purchase the other day.

He’s not finished:

marcus,

““Up 98%” – so don’t buy a stock because other have been buying it?”

No, you exercise some patience and buy strong stocks on pullbacks. Not when it’s massively overbought.

And did you really think I was using cloud/saas internet stocks as comparable “peers” to a drilling supplier? Those were merely to illustrate Fly chasing big winners at highs instead of waiting for an entry point with a good risk/reward and defined downside.

And lastly, you mad bro?

Ok, here’s the thing that pisses me off about his whole train of thinking.

1. He believes in bullshit like RSI’s and how stocks that are going up should “breathe” and go down, as if it were that easy. Look at any major winner over the past 100 years and bear witness to their breakneck ascension into the stratosphere. Understand that scores of people, who thought just like you, shorted NFLX from $60 to 100 and AMZN from $60 to 100 and CMG from $60 to 100, only to get their fucking space helmets crushed into tiny pieces and their brains strewn out–all over their living room floors.

Rule #1: don’t assume to know anything. You are a pleb and the market kills people like you every single day, even the real Jesse Livermore.

Rule #2: don’t attack me for averaging up on a stock that is working for me, in a sector that’s highly profitable and should continue to do well for the next decade–literally.

Lastly, I’m not married to these stocks, as demonstrated by my willingness to cut losses rather quickly as of late. I’ve sold out of about 6 stocks for small losses and held one giant position for a mammoth sized win. The net result has been a +10% advantage to the good over the past month. If SLCA reverses on me, I will sell it. I certainly do not need a sermon about the tenets of investing and how I might comport myself should things go awry. Don’t assume anything, Mr. Jesse Livermore. I’ve been eating the livers of people like you for over a decade now and will continue to do so until your brokerage account assets have been depleted into pixie dust–a dream, a fantasy, a nightmare.

In light of the recent surge in both EMES and HCLP, I doubled my position in SLCA. This is an average up and my position is now ‘super-sized.’ For the record, I have two super sized positions now: JAZZ and SLCA.

My dream is to see an oil derrick on every street in America, outside the local diner, movie theatre and of course elementary school. We need to teach our children how to create jobs, via horizontal drilling and subsequent dumping, mind you, of potentially (lol!) lethal toxic run-offs.  But that’s neither here or there.

Right now, the good men in the Bakken and Permian Basin need sand for their drilling programmes. SLCA is always polite enough to oblige, for a small gentlemanly fee of course.

I LIKE THE SHARES HERE OF SLCA, FOR THE WIN, AND FOR GOD AND COUNTRY.

Amen.

I took a starter position in TEDU, largest IT education company in China.

Here are some of the reasons why I like it.

Goldman has a $20 target.

It’s trading at its IPO price.

It’s trading 13x 2015 numbers.

They just beat estimates.

They have $2 in net cash.

And, it’s trading about 1x sales.

Granted, everything reported is suspect, because it’s a Chinese based company. However, the partial sale of XON and the full liquidation of CNQR freed up earmarked “risk capital” for me. Therefore, I took a shot with TEDU, a speculative Chinese lottery burrito stock priced absurdly cheap.

Target: $13.

I doubled my position, making it overweight. Basis has been upped from $138 to $140, as a result. I am looking for $175 on this one.

Biotechs look good.

I sold off more of XON, lowering it to a standard sized position. It was my largest holding and extremely overweight. I also sold out of CNQR for a 2.5% loss. It appears momo stocks are receiving the hammer of death again. I have no interest in holding through another maelstrom of IT hatred.

With these sales, along with last week’s sales, my cash position is about 25%.

Very few stocks look attractive this morning. I will bide my time and choose my next moves very carefully.

I see the traffic stats. Most of you mongrels pester me with your audience, then shoot over to Chess, OA and a little RC. However, a certain Mr. Caine Thaler, trained mathematician, supreme long term investor, long time tabbed blogger of iBC, gets little recognition for his services.

Like all mathematicians, save Einstein, Caine isn’t very flashy. He doesn’t lure you in with pornographic titles or astounding declarations of extreme violence. But he’s been killing the market, in his own way, for years.

He invests in long term ideas. Right now he is bullish on coal. Pay attention lads; he’s much smarter than you.

I asked him to summarize some of his recent winners. This is the spreadsheet he gave me.

If you’re looking for another go-to guy on iBankCoin, give Caine Thaler, master of the 9th floor, a chance. His track records demands recognition.

The ASCO conference is in full bloom today, with a slew of positive data coming out from a number of biotech companies. This is going to be a boolish day for biotechs.

YEAR TO DATE STATS:

Major Indices:

Dow Jones: +0.85%

S&P: +4.07%

NASDAQ: +1.58%

Industry Winners:

Marijuana: +263%

Semiconductor-Memory Chips: +44.3%

Gold: +30.5%

Aluminum: +27.19%

Trucking: +27.09%

Industry Losers:

Electronics Stores: -32.11%

3-D Printing: -22.93%

Home Furnishing: -20.19%

Food- Major Diversified: -17.64%

Advertising Agencies: -17.39%

Large Cap Winners (market caps over $5 billion):

VIPS +94%

QCOR +67%

RAD +65%

HSH +60%

TRN +59%

Large Cap Losers:

TWTR -49%

DDD -45%

SID -35%

VIP -35%

NBG -34.9%

Mid Cap Winners (1-5 bill):

ICPT +246%

ITMN +168%

FURX +146%

EMES +122%

SBGL +110%

Mid Cap Losers:

HIMX -55%

GRPN -50%

SINA -47%

NUS -46%

OIBR -45%

Small Cap Winners (under $1 billion):

CBDS +643%

MNTR +509%

FSPM +502%

ISR +369%

VRS +300%

Small Cap Losers:

DRL -82%

NIHD -81%

EDMC -80%

LIQD -78%

BODY -77%

ETF Winners:

JO +60%

CAFE +55%

DRN +55%

INDL +47%

TMF +42%

ETF Losers:

DGAZ -65%

UVXY -44%

TVIX -43%

KOLD -43%

RUSL -42%

Commodity Winners:

Coffee: +61%

Natural Gas +21%

Palladium +17%

Cattle +12%

Cocoa +11%

Commodity Losers:

Copper -8%

Coal -5.5%

Silver -3.5%

Uranium -3%

Lumber -2.5%

Currency Standouts:

Brazilian Real +9%

Indian Rupee +8%

Australian Dollar +5%

Chinese Yuan -2.5%

Foreign Indices:

Japan -10.2%

Hong Kong -0.96%

China -3.6%

Britain +1.4%

Germany +4.1%

France +5.2%

India +14%

Canada +7%

UAE Dubai +51%

Argentina +34%

Egypt +21%

Denmark +18%

Indonesia +15%

Taiwan +5%

Pakistan +17%

Vietnam +10%

Russia -10%

Turkey +17%

Italy +14%

Norway +10%

Spain +9%

Portugal +13%

Ireland +8%

Bonds:

Long Term Govt Bond +9.5%

TIPS +5.65%

MTG Bond +3.9%

Long Term Corp Bond +9%

Dry Bulk Index: -58%

Le Fly: -27.5%

Breadth stands at 38%. Shares of BLOX, SPLK, ECOM, SSTK, CRTO, IMPV and WDAY are cratering again, leaving you with a choice.

A. Do you take the leap of faith on the assumption that today is a one off event and the bubble stocks will recover on Monday?

B. Avoid them like the plague that they are, in favor for real businesses?

There is a parable tucked away in the decision you’re about to make. It’s the classic battle of Greed versus Ambition, mixed in with a little luck and timing.  Luckily for me, it’s an easy decision, since I am risk averse. I hereby extricate myself from the vagrancy of the market and seek to enjoy my weekend without the specter of monday morning ‘surprise sex.’

We might just be heading towards another PPT oversold signal. If that’s the case, this might be a good time to eat a sandwich and enjoy the show.