Fading End

Nice little sell of there at the end of the day. Breadth was 54%, led by gains in basic materials and consumer goods. It felt like the fast money was simply transferring from one retarded space to the next, out of biotech into oil and silver.

This is the 9th day since The PPT flagged OS, 13 points ago in TNA–when the SPY was a touch under $205. This cycle has been a complete winner.

Thanks for playing.

ANF is a deep value retail play down here. I am not bullish on the store, its products, or even the people who run it. I am bullish on the idea that some vulture will find them to be vulnerable and seek it exploit their free cash flow for their own nefarious means.

I added to ANF.

This is exactly what we want to see: weakness in biotech, strength in real companies. Even within healthcare, we are seeing lift in hospital stocks, like LPNT and HCA. This is good.

Oil stocks are running again, which is wholly retarded; but I’ll take it.

For the day I am only up 0.2%, mostly because JNS, BABA, MUSA and LVLT are down–alongside my biotech holdings. My little gasoline play, TA, is running like an Indian spirit again and GRUB continues to make new highs. Admittedly, with oil stocks up here and biotech down, this is a difficult momo tape to play. It is my opinion that both sectors should be avoided, in the interim, for other sectors. Let’s see how it plays out this week.

All I know is that while you toil away at work sharpening pencils for a living, Bill Gross is robbing the PIMCO bank vaults and depositing the money at JNS.

There is a good chance that limited beta trials for The PPT 2.0, aka Exodus, will begin today. First, we will permit tabbed bloggers and other employees of iBankCoin to use it, then friends, colleagues, and finally our enemies. We are fully cognizant of the fact that our enemies enjoy high quality financial software too and will not actively seek to destroy them, as long as they are good paying members of the service.

If you only knew the struggles and agony that I had to endure over these past 5 years, developing the world’s best analytic engine. One does not merely build financial software overnight and then launch it to the masses. It’s a painstaking process, especially since our algorithms are predictive–meaning they have utility and actual use, compared to the shit that is shoveled by our competitors. With the advent of Exodus, I am optimistic that we can raise enough funds to finally complete the Orbital Space Cannon (OSC), for offensive purposes only. We’ve had multiple delays due to Chinese government interference with the sale of their rare earths. However, we’ve recently acquired several mines, domestically, and have made significant progress towards going “online” with the OSC, with the full intent of vaporizing large swaths of malcontents and random persons of disinterest.

The market looks solid, early going. Very soon, all of the things you were worried about will coalesce and get dumped into the sea. I invite you to swim after it and look forward to seeing you drown.

Okay, lots of stuff to do today, people. Let’s be productive and quit slothing about the sofa. Get on the fucking phone and make some friends.

Listen to me you late Lucy’s: the biotech index comprises of 75% of the winners up more than 30% for the year, thus far. In other words, all of the spec money is being made in one fucking sector. Let me remind you, this is a sector without profits and in many cases revenues.

As per Exodus, have a look at the valuation of the biotech sector, compared to previous years.

The median price to sales ratio is now upwards of 29x. That’s fucking lunacy. Within the drug sector, the majors, the median PE is 40 and the median p/s is 7.69–taking into account all drug companies with caps greater than $5 billion.

Naturally, you’re inclined to disagree with me, as is the case during most euphoric runs. While it’s true, innovation and evolutionary change is transpiring in the biotech sector right now; it’s also true that many of these companies are merely in phase 1. In the past, a phase 1 company would be valued in the low $100-$200 million range. Now they’re worth in excess of a billion. Too much dumb money is abundant in this one space. Get out now, else lose your nuts in the great biotech collapse of 2015.

I am not calling for a market pullback. Instead, I think we will see a rotation out of biotech into stocks that are growing fast, but haven’t run yet.

Names that pop up in my screens include: SBNY, BIDU, BABA, GLW, PCLN, AAP, PACW, FB, CMG, MIDD, SWI–just to name a few.

A rotation out of biotech into tech, banks and retail would be healthy for a prospective bull market in 2015. Should we continue running up biotech like this, the eventual collapse is going to be worse and investor sentiment and subsequent washout will be exponentially more painful.

Directed by Carol Reed, in Britain, The Third Man is one of the best films ever made. Starring Citizen Kane alumni, Joseph Cotten and Orson Welles, the film paved the way for lots of ‘atmospheric’ films to come, including a classic made by Welles himself several years later, called Touch of Evil.

It’s classic film noir. Although Welles’ part wasn’t that big, it certainly had a profound effect on the movie (extra Harry Lime).

It’s worth noting that Welles rewrote much of his character’s part, responsible for the film’s most memorable moments (extra cuckoo clock).

Addendum: This is a superb short film, reenacting Orson practicing his lines for The Third Man.

EXTRA: There are several Welles films floating around youtube– free to watch. Having seen them all, I’ll be highlighting my favorites each week.

In my estimation, this is the best version of Jane Eyre ever made (1943).

https://www.youtube.com/watch?v=z8FNQ5J4qOI

Enjoy.

I am gonna keep this real short and concise for all of you booze hounds out there. In this business of ours, top producers are hard to catch. As an employer, you need to woo and pay a signing bonus in excess of 100% of a big producers trailing 12 month’s production to get him/her to jump ship. In other words, if you’re doing $2 million in annual gross production, you can look forward to a $2 million check, just to switch firms. This is part of the reason why your broker keeps switching firms every 5 years.

Like I was saying, top producers are hard to come by, which leads me to Janus Capital. Not only did Janus Capital land a top producer, hiring Bill “shut the fuck up while you’re in my boardroom” Gross, they got a living fucking legend.

Ten thousand years from now, men will be reading their children tales of Wall Street at bedtime, and Bill Gross will be in most of them. He was the man who raised ALL OF THE MONEY for bonds. He is a fucking machine, Rambo in the boardroom, stabbing out pikers for lunch and eating other whales for dinner.

Granted, analysts are skeptical about Bill’s divine powers to attract ALL OF THE MONEY to head on over to Janus. But these analysts, inherently, are pikers–losers who could’t make it in sales or trading.

It is my belief that JNS is going to absolutely destroy numbers, making a mockery of all the smaller men who bet against Bill. Time will tell, naturally.

This is a conviction buy and hold for me.

Pardon my eruption of joy this morning. It’s fucking snowing here on the first day of spring.

This is an orderly move higher, one that I believe can be bought. With some of the cash I have left, I added to my BABA position, making it a top 3 holdings. And, going against the grain, I started a new position in ANF. It’s a very small one. In short, I will likely add to this name over the next month. I am not a fan of their stores, as clothing of that sort is better suited for 13 year olds. Nevertheless, it is now trading at historically absurd levels. Bear in mind, despite their decelerating revenues, they are still free cash flow positive and can really become a cash cow with a few tweaks. This might become a private equity target before the year is over.

We’re gonna run these bastard grocery shoppers over with our Impalas, then hop out the fucking car and scream at them for fucking with our vehicle.

This is it folks: the biggest motherfucking rally of the year is about to resume. Everyone gets access to the harem (bring your own coke). Those heavily cashed up get kicked down the pyramid, head chopped off when they reach the ground.

Everyone else, REJOICE and BEHOLD a New World Order (Extra Grande Recursive Order of the Knights of the Lambda Calculus) is upon you, a perversion of capitalism that will serve as the dawn of equanimity when dealing with the pressures of how to properly dispose of all this fucking money we’re about to rake in.

I want you to get a few things through your thick skulls.

1. The market doesn’t give a shit about top line growth anymore. This is a mature bull market that demands bottom line growth and profits. If your stock isn’t pulling at least 25 million in free cash flow per annum, it will be dismantled.

2. Biotech is running because once drugs get approved, they are immensely profitable. Most of the time, small biotechs partner with giant firms and simply rake in a percentage of the cash for their r&d. Biotechs aren’t running because revenues are set to explode. They are running in the hopes of profits exploding.

3. If you’re buying any stock trading in excess of 15x sales, you are setting yourself up for failure.

4. Chinese companies cannot be valued based on American correlations. Since the entire nation of China is filled with liars and thieves, there is a very harsh penalty imposed on all chinese valuations, even the biggest firms like BABA.

5. If your stock missed earnings for 2 quarters in a row, it is dead money until they beat again.

6. Gross margins is what really drives stocks higher, not charts.

7. Unless you’re really good at entries, assume that all new purchases will be early. Buy in smaller increments and relish in sell offs when they present themselves, instead of dreading them.

8. Utilizing margin is an excellent way to blow up your accounts, if you suck. If you know what you’re doing, margin is par for the course. Be smart about it.

9. If your stock is somewhat illiquid, be patient and use limit orders. You’ll be surprised how much money you can save with limits over the course of a year. On the other hand, don’t be unrealistic about your prices. If a stock is trading 20.35 x 20.42, due to an illiquid situation, put the order in slightly below the bid in a weak tape to get done. In a strong tape, feel free to place the order slightly above the ask. You’ll be surprised to learn that some buyers are waiting for size on the ask to show up, in order to accumulate a position, and get done quick. Many times I’ve had orders sitting above the ask and my trading desk would call me to find out if I had more stock to sell. I’d simply ask how much the buyer wanted and give it to them or use that knowledge to my advantage by canceling the sales and executing buys instead, knowing someone was thirsty for stock. Get it? Good.