Actionable Ideez: WYNN

I haven’t been engaged much in this name since selecting it in iBC’s stock picking contest, AND WINNING. Tonight on the stocktwits stream, though, I saw the ticker and recalled that I had a fantastic chart that lead to much profit making.

Here it is:

A few things about the chart:
— I had to stretch these lines out from where I had them set previously (last time I charted it) and I enjoyed seeing the latest candle, a hammer. It’s a weekly chart, so the hammer needs to maintain or turn into a stronger reversal candle. However, the hammer is there, suggesting that at least today, the bulls showed up in defense.
— The lines actually stretch back to the beginning of ’09, so this is over 2.5 years of channel trading.
— Support was found by the bulls stepping in to defend the 50MA and take it back up to this trendline

I wouldn’t pay much attention to the top of the trendline, as it’s been violated a few times. Though you could favor ChessNWine’s “mattress” theory in terms of taking profits, etc. Better, I’d love to see the market permit adding longs here and this candle stick (yes, pun intended), suggesting WYNN may trade back up towards $160/shr, providing beautiful risk/return, with a stop on entry < trendline at about $135, give or take.

Lastly, I'd like to say that Chess has denied my invitation to 1v1 poker play at the beautiful WYNN, dinner for the wynner at SW Steakhouse. He's cited his "sore shoulder" as reasoning, though I told him I'd buy him a massage for the match.

http://chivotrades.com @chivotrader facebook.com/chivotrader

For three weeks now, I’ve been watching melt up days that just will not span the extent of my book. The disassociation between sectors is aggravating. On days where the Dow and S&P skyrocket 2.5%, I’d love to see the Nas up more than fucking 1.3%. Sure, I was able to grab some gains recently in stocks like ARUN, MT and a shortsale in CRM. But today I was thrilled to perhaps have the opportunity to lighten up on two stocks I’ve yet to sell any of: GSVC and MU. Both are trading very close to my average cost, and I want to raise more cash by selling some off. Unfortunately, these fuckers were both down 1% on an otherwise green day. Noteworthy gains, though unrealized, were had today in FFIV, CENX, SCHN, SLB and what remains of MT. I even saw GDX trade up, a noteworthy item, seeing it trade opposite to GLD. I made add’s in both today, sitting at 50% and 40% positions respectively. I intend to build them up, accompanied by SLW/RGLD and a smaller GDXJ than GDX. On the inflation note, I intend to author a small piece regarding why oil may be a better hedge than gold. Fuck it, I may just spill the beans now: practicality. That said, I intend to build some positions to accompany SLB, all centered around oooooooooool. On the topic of silver, however, AGQ now accounts for a larger position than I’m comfortable with, and my average price sits at a Mt. Everest like $152/share, despicably higher than today’s close. It’s a problem and I’m working on it.

I do find solace in the fact that I had the propensity not to short, at least. I’ve had some important dealings to take care of, and with them pending on my agenda, I’ve been unable to really sit down and focus. So, I’m still building my short list. And my oil list. And I’m trying to author that post I just mentioned.

Today’s trades include: +AGQ, +GDX, +GLD. I cannot wait to gtfo (portions) of MU, GSVC and AGQ.

Last bit of relevant market information: I hope that The PPT‘s reaction in score to today’s events is telling as to what’s forthcoming in the markets. Take that as you will.

A Few Words Regarding Inflation

Inflation is the most misrepresented phenomena in Economics. Today, it’s most often considered a rise in prices, specifically those used in the measure of inflation: CPI. Most of the population of modern day economists are Keynesian in nature, and this definition allows them to validate easy money policy to fight deflation, no matter the circumstances. This, however unfortunately, confuses cause and effect.

Rising prices is the effect of inflation, the cause being an increase in money supply. Let me be more specific: Inflation occurs when the increase in money supply is too rapid, unsupported by the specie backing the money or productivity in the economy. That is to say that inflation is not always bad. For example, should the amount of USD circulating the economy increase, backed by an increase in gold (if we were on the gold standard), then inflation is good. Likewise, if the increase of money supply is concurrent with productivity (and thus, demand), then inflation is good. This misunderstanding is why Milton Friedman proposed that inflation is a phenomena constantly occurring. That we no longer operate on the gold standard, and thus have money backed by nothing but faith, nor do we respect when demand is not increasing, still raising the supply of money, is why inflation’s presence is permanent.

If the assumption is accurate that inflation is always present, then it’s simply a matter of diagnosing where it’s currently being exhibited. This is another reason why the CPI is a misrepresentation of inflation. Inflation can be seen in arenas of the economy not taken into account by the CPI. Likewise, it can be exported outside of the country, where CPI would ignore it again. Indeed, as America’s productive capacity has dwindled over the last half century, the supply of money has not. This lead to Americans looking to purchase goods produced outside of our borders, exporting inflation (more money) to the nations that produced the goods we purchased. Moreover and more recently, as of today, I reckon that inflation is still present and higher than ever, thanks to recent monetary policy. The malfunction of the CPI would never report it, but take a look at this chart (and recall that yields move inverse to prices):

It is my belief that inflation is present in unprecedented amounts, being exhibited in the fixed income markets. As it’s hidden afar and domestically in treasury markets, the CPI may not acknowledge it. But the potential energy of the money created over the last half century is high, and inflation is ready to pour out all over the economy. The worst part is, the federal reserve is continuing the same policies that have led us down this path of dollar devaluation, despite the dollar being worth 4.6% of its value in 1913. It is of my opinion that the Fed caused the dot com bubble by positioning interest rates too low around 1999. To cure the recession (read: bust) caused by malinvestment and misallocation of resources, they lowered rates even more. This caused the housing bubble, another recession (read: bust). As a side note, I’d like to state that I believe the housing bubble is one thing, the near full collapse of the financial system was an exaggeration of the housing bubble caused by immoral behavior. Getting back to my point, the Fed has since decided to attempt to fix the housing bubble by lowering rates, yet again. Unfortunately, the increase in money supply goes hand in hand with lowering rates, as they’re both “easy money policy.” As I’ve already explained, this is inflation at its very core (no pun intended). Likewise, inflation is always present, it’s just about determining where it’s present in the economy. The final frontier is when inflation presents itself in the value of our currency, perhaps forming a bubble, but definitely destroying whatever faith still exists in the USD.

Why I’ll Buy Gold
I believe that gold is a quality hedge of inflation. However, I do not believe it should be bought frequently or with a limited time frame. I do not believe it should be compared to, nor is it a substitute for equities or treasuries. Gold does not pay an income, like fixed income or a dividend does. Rather, I will invest in gold due to the central bankers around the world’s war on their own value of currency. Gold is the perfect substitute for fiat currency, because the assumption is that they’re both monies. Let’s recall the definition of money and its four qualities:
1) Medium of Exchange
2) Unit of Account
3) Store of Value
4) Standard of Deferred Payment

I don’t think anyone would argue as to the validity of any fiat currency, or gold, in qualifying as a money with respect to qualities 1, 3 and 4. But with regard to store of value, there are lots of arguments to be had. The key aspect of a store of value is that it must remain stable over time. In reference to fiat currencies, I believe that recent central bank policies make my argument for me. The example is simple: if at point x in time, there are y monies, and at point x+n where n is some amount of time there are >y monies, then that money’s stability is questioned. If this scenario recurs constantly throughout history, then that money’s store of value is severely diminished. Should anyone question my argument, then allow me to present another chart:

How stable does that look to you?

I’ll approach my investment in gold logically. That is, I have decided gold a quality investment based on how I’ve decided to profit from the possible choices policy makers have and the costs & benefits of each. My investment in gold has no timeframe and uses two assumptions as the principal foundation:

1) Past policy action: As explained above, the supply of money has been increasing far too long, and there exists an abundance of dollars around the world ready to drive up the prices of goods and show the true strength of inflation they possess

2) Future policy action: As explained above, Keynesian economists wearing central banker clothing have made it fully clear how they intend to battle recessionary forces; they intend to print, print and print. Helicopter Ben to the rescue, and his imitators world-wide that follow.

In my best Jim Rogers impersonation: “I don’t know when gold will trade higher, I just know that it will.”

I’d be happy to further argue my point of view or have any worthwhile discussions in the comments section, so please, let’s converse!

http://www.chivotrades.com @chivotrader facebook.com/chivotrader

Do not be scared by this deflationary vortex commentary, rather understand the true form of inflation. Do not confuse cause and effect, rather take advantage of the root foundation.

Inflation is simply an increasing money supply. This is believed by every heterodox economist in the world; that is, all the economists outside of Keynesian economists. Keynesians will tell you that inflation is simply rising prices, as measured by the CPI. However, rising prices are simply an effect of inflation. When money is created, too few goods are being chased by too much money, thus price goes up based on simple supply v. demand.

Right now, inflation is being exhibited in treasuries, mainly domestic. But when the extra created dollars start to flow into the economy elsewhere, true inflation will be felt. Whether they further contort CPI to conceal it is anyone’s guess.

I’m dip buying commodities as fund managers blow out. GLD, SLV, SLW, RGLD are #1, 2, 3, 4 in PM’s. Also look towards Oil stocks, as my next little blog will be about whether oil or gold is a better inflation hedge.

I’ve been kind of back and forth today, contemplating what to do. On the one hand, I don’t want to sell into such oversold levels, preferring to sell into a bounce. On the other, I wrote last week how much I wanted out of my longs and was never given the chance, leaving me with today. Luckily, I had 50% cash so the pain isn’t too bad. I covered my CRM short for +10% and lost 2.75% on my VXX intraday short. The reason I covered VXX is because it looks ugly as fuck. I’m not about to fall victim to major funds selling no matter the price, just to avoid potential ’08 losses. The fear is still fresh in the minds of managers from that time period. That said, I do have some positions performing nicely. ARUN is down less than 1% and FFIV/GSVC/MU are in line with the Naz, despite the beta. I’m still holding this garbage CENX, and SCHN, two plays I’m not going to sell down here, but would first buy more. Today I added AGQ and UUP. They kind of compete with each other, but the AGQ is small, able to be built upon, and the UUP large, thus my interests lie with an increasing dollar.

Do not expect this to be a 1 day event. Should a rally even occur, it will be sold into by lots of overhanging supply, including mine. I’m interested in getting out of some of these longs, but only at better prices, for I cannot envision selling these stocks at these valuations.

I’m also interested in shorting stocks. Namely, insurance companies unable to achieve pension plan required results, banks with poor balance sheets, companies dependent upon EPS numbers and companies with poor debt situations. CRM is obviously on my list, as is MET, M and ALL. While you may be interested in names heavily owned by institutions, looking to capitalize on forced liquidations, be weary of those with high short interests, as you’ll be shorting someone else’s cover.

In the end, I don’t feel like writing the 58,784th blog about the headwinds and tailwinds and the positives and the negatives, etc, etc, etc. All I care about is putting a plan into motion.

SELL INTO RALLIES, SHORT INTO STRENGTH, CREATE A BALANCED BOOK. LONGS AT ATTRACTIVE VALUATIONS, SHORT THE COMPANIES WHO WILL SUFFER FROM ECONOMIC DOWNTURN THE MOST.

Today I’m down 1.3%. I sit at 37% cash, 15% UUP, 48% Long (MU, GSVC, SCHN, FFIV, ARUN, CENX, AGQ)