Archive for August, 2015

Bernie versus Donald….What versus How.

Sunday, August 30th, 2015

August 31, 2015

You know from my Post of May 18, 2015,  “An Endorsement for Bernie “I am ready to stand beside Bernie Sanders and declare myself a Democratic Socialist, even though Social Capitalist ( leave no one behind ) is probably a closer description of my leanings.   Today, the label Socialist doesn’t mean nationalizing everything from newspapers to industry.  It means recognizing we still have some roads we need to travel  before everyone feels the playing field is level and everyone has a fair shot at ” The American Dream “.

The problem is that the middle income class ( not to mention the disadvantaged class  ) feels that the playing field is even far less level than before and Congressmen are so totally immersed in becoming millionaires and protecting their seats that Congress  it is incapable of acting to head off a class confrontation down the road.

Enter from stage right and left;  Donald Trump and Bernie Sanders.

We all know Trump considers himself “influence”  proof when it comes to billionaire or lobbyist money.  And, we know that Bernie Sanders exudes an air of  totally incorruptibility.  They both seem to be firebrands , anxious to right the systemic ills of our society.

A word about Donald.  He has always impressed me with his energy and his “can do ” attitude.  Yes, he’s beyond conceited and has a fresh mouth. Childish ….yes, Petulant….yes, Feisty….yes, but  I don’t believe he has a mean bone in his body.  That’s why we can laugh at his remarks.  Maybe he doesn’t seem ” Presidential “.  But, I don’t care about his aura if he can get the right things done in a timely fashion.  The country is tired of grid lock!  And, believe me, the situation in Washington is closer to offering the next President a ” Gordian Knot ” to  untie rather than a simple case of gridlock to untangle..

A word about Bernie…The big concern is that he will be unable to change what he wants to change.  The President has less power than one would think.  A lot of his proposed changes would really need to start at a local grassroots level.  Does he have the energy to create waves that will float Congress off its present foundation ?

In my opinion, immigration is not the most important issue facing us.  Build a wall and then start work on reform of existing laws… without delay.

The big issue is how to get Congress to act against itself by un-tieing itself from the purse strings of the ultra wealthy 1%.   I’m talking excessive wealth.  So excessive, that Congressmen and their staffs  are becoming increasingly corrupted by billionaire backed lobbyists and by  financial help being  offered directly …with conditions..   The ultra wealthy are using their wealth to double down on Congress to gain an even bigger edge.

It seems the right wing  billionaire class are not concerned that..

1- 400 families control more wealth than the 150 million American taxpayers who account for the entire bottom half of our national income structure.

2- That in 1965 CEO pay was roughly 21 times that of the average hourly worker.  Today, that multiple has expanded to 231 times.

3- In 1980, getting an education was 500 times less expensive than it is today.

This group fails to see the implications of a 1% society,  pretending the fault lies with those who are jealous of their success.

I suppose its human nature for this Group to suppose they are safe and can ignore history.  This is the 21st century…nothing can happen !

Billionaire financial influence  must be challenged by the introduction of Bills that will force congressmen  to vote against their narrow self interests under the close scrutiny of an aware electorate.

Either Donald or Bernie may very well be the one who will need to confront the lobbyist ooze that is attempting to  seep under every congressional door  and from there  into every nook and cranny in Washington and beyond.

The question is HOW ( specifics ) does Sanders or Trump see himself being able to  free Congress from the tentacles that bind it to the ultra rich. Whoever  has  the best ideas on HOW to do this is the one I would vote for.

Richard Maurice Gore

 

About Apple

Tuesday, August 25th, 2015

August 25,2015

Apple offers a very clear illustration of the difference between ” specific risk + market risk“…AAPL versus plain “ market risk “… SPY.

They say almost everyone who invests owns AAPL one way or another, either  directly or through a 401K plan or whatever. Spy is almost 4% AAPL. You can count me in AAPL  both  via SPY, and direct share ownership .

Until last week I was asking myself  why I didn’t invest even more in AAPL.  It didn’t take long for the answer to arrive!

The AAPL picture compared to other growth stocks is very compelling.  A PE Ratio of +/- 10, wonderful !…  Price / Earnings to projected growth ( PEG….0.82 ), wonderful !….Free Cash Flow Yield 12.987% versus 2% for the 10 year Treasury, wonderful !….Return on Assets 20.5%, wonderful! ….lots of cash for possible dividend increases, debt pay down and stock repurchases, great !

The problem arises when you consider that all these numbers are based on the past.  But, ” Mr Market”  is more like a sales manager… interested only  in tomorrow’s result.  That’s where the trading price arrives from.  Differing opinions about the future. .  Who is right ?  Who has an edge ?. The risk  is that your opinion about APPL’s future may be incorrect.

In moving from past absolutes to future estimates ….

Q. Just how dependent is AAPL  iPhone sales on China’s growth ?

Q. Taking it one step further, just how dependable is China’s stewardship of its own economy ? Will there be sufficient buyers to meet Apple’s  China and southeast Asia sales and margin  estimates ?

Q What about the emergence of the Chinese smart phone manufacturer XIAOMI, which has announced the introduction of its smart phone to 10 new countries this fall. It has been reported Xiaomi’s Mi3 is almost 60% cheaper than the iPhone 5C …and better,  with a larger, sharper screen and a camera with higher density pixels.  Plus, Xiaomi’s pricing policy promises to be very aggressive in the emerging markets it has targeted.

Just considering the above, how do you think these factors could impact Apple’s numbers going forward.?…Still wonderful ?

The answer, for me,  is to give Apple the respect it deserves by owning some, and then, calculate at what price I want to acquire many more shares.

For me, it means that however much I want to own AAPL, its best to let it come to me and offer me a pitch I can swing at.  It means I should never let AAPL  account for more than 5% of my investment funds  and that I should buy it with a ” margin of safety ” in mind.  For instance, Morningstar says buy AAPL at $80 per share which is 20% off its Fair Value estimate and almost 30  % below this morning’s opening price of $111.07.  After yesterday, I’m not that confident this is impossible!

I am not strong on patience, so I’ll probably own 25 shares just to feel I am not being left behind !

SPY is also priced looking forward, but when you buy SPY you are buying the USA.  Its much easier to own SPY because SPY ‘s future is much easier to predict and the risk is not as compounded by facts you don’t know, you didn’t know.

At present, the yield of the 10 year Treasury is 2.09%.  The forward earnings yield of SPY is 7% ( 1 year out ). Which would you rather own ?

Richard Maurice Gore

 

 

Your Choice !

Monday, August 24th, 2015

Early AM….August 24, 2015

Awoke to see Dow futures down over 600 points with SPY and Nasdaq down big time as well.

What to do ?!

As many of you know, I am committed to a timing model on SPY.

SPY’s price relative to it’s 200 day moving average ( at month end ) determines how I react to sell offs.

SPY penetrated it’s 200 day moving average support on August 20.

Why wouldn’t I sell SPY ( and stocks acquired in the positive SPY environment ) the day of the crossover instead at month end ?

Here is  back tested data ( Courtesy of ETF Replay )  going back to January 3, 2000.

Sell day of crossover…..60 trades…..14 winners……46 losers.

Sell at Month End……   6 trades………5 winners…….1 loser

No one can deny this sell off has been ferocious.  BUT……..the market has been churning for 7 months and it seemed as though which ever way it broke,up or down,  would be a doozy.  I said in an Archived Post that Apple was my canary in the mine.  But, it still cost me $5,000 to bury my canary !

I have been saying in Posts that China looked like a Black Swan masquerading as a Dragon.  And, yes, Dragons are dangerous.  But, not being in the SPY model and not feeling my every equity sale should be tied to it, I’ve lightened up considerably,as I informed you.and have  more than 70 % of my funds in cash for deployment.

The big question for me  is….how much blood needs to be in  the street before I begin to buy ?  Reminds me of the time in high school that I caught a fly ball but didn’t know which base to go to with my throw.  Only this time I’m not day dreaming !

The answer for me is…. to recognize how difficult it is to pick market bottoms…..if the present situation persists, and SPY is under water on August 31,  I’ll prune almost all my remaining positions   back to ground level and then wait for SPY to cross its 200 day moving average to the upside before I re-deploy.

Richard Maurice Gore

 

 

China

Monday, August 17th, 2015

August 17, 2015

My Post August 2….” Black Dragons aren’t dangerous …right ? ”  The answer is they are not dangerous unless the Dragon is really a Black Swan masquerading as a Dragon.  If last week was any indication,  I can swear my hand was pecked  to the tune of about $5,000.  Keep an eye on that Dragon because if China goes, a lot of market value is going with it.

So,  with October just over the horizon and the overall market treading water for the past seven months, with SPY support at $204 and $ 198, I’m continuing to keep a low profile with slim positions across the board and a ready reserve of dollars  to  deploy.  Although I am a bull, I must enter the market at prices that allow me to consider myself sitting pretty.

I don’t have any Chinese investments, nor emerging market Asia investments because of the impact China can have on these economies. China is too opaque for my money.  They , Germany and Japan are attempting to gain an advantage over us by creating or allowing currency disequilibrium to make our exports more expensive to them and their exports to us priced just right.  I can accept this from Germany and Japan because they are attempting to reignite their economies and we see this as ultimately beneficial for our exports.

But, China is a different story.  Their currency manipulation seems more a crisis reaction to mismanagement.  I find it more than a coincidence that Macao is such a prominent site for gambling.  The Chinese love games of chance and it wouldn’t surprise me that their stock market and real estate market is grounded on a bedrock of speculation well beyond our present perception.  This could be the Black Swan for this bull market.

Prediction;  Interest rates will not be increased tomorrow.  The possibility of  additional negative news of an emergency  in China could make the dollar even stronger, trigger a big cap sell off and lead directly to a USA recession.

Richard Maurice Gore

 

About Iran,

Thursday, August 13th, 2015

August 13, 2015

Nobody asked me , and since  very few will probably  read this, I thought I’d chime in on the proposed Agreement with Iran, if only to clarify my own thinking..

To me, the whole idea of signing a political  agreement with Iran is a non starter.  Why?….Because Iran is a religious state , not a secular state.

How can the USA believe it can arrive at a ” workable ” political solution with a country run by religious zealots who have never come close to repudiating their assertion that we are the Great Satan.  A country which  refuses to release the few USA hostages it is holding…. as a sign of good faith. That is a “tell” on the eagerness of our government to reach an agreement. … Ridiculous!

We are fooling ourselves if we think in terms of politics. Instead, let’s think in terms of religion. Do you believe  there is any possibility for a religious settlement with a fundamentalist Muslim regime ???

Starting with Abraham, more deaths and killings in history go back to governments run  by  God’s will,  and that trail ends at Iran’s doorstep.

If,  we are the Great Satan, exactly what is binding them to the terms of any agreement made with the devil ???

If an oath made under duress ( sanctions ), is no oath at all, ( Richard II , Peasants Revolt of 1381),  and if,  under their religion, any undertaking is non binding without first invoking the blessings of Allah,  how   can we possibly believe  they will consider themselves  bound by the terms of this  agreement. My  perception is that  their ongoing  purpose will be to deceive and not comply… by any means possible.

Them fooling us is far too big a risk for us to take for whatever short term emotional relief it gives our leaders.  The Israelis understand precisely what’s at stake,  and as close to Iran as they are geographically,  they see less risk to themselves if nothing is done.

And…everything else aside … I don’t have too much faith in our  performance oversight many  thousands of miles away, if we can’t even  keep people off the White House lawn!

No, it seems to me that our government officials will once again misread the situation,  just as they failed to see China and Viet Nam were enemies for two thousand years and that when the chips were down, the Vietnamese felt far more strongly about being Vietnamese than being Communist .. Who among our so called  ” Best and the Brightest ” understood that and took that tack. And, lots of costly perceptions since then including, but not limited to invading Iraq.

Looking back it seems we learn ONLY from our mistakes.  I don’t credit anyone in our present government with a precise understanding of the outcomes. And with the ” flash crash ” penalties of the digital revolution shrinking the world while multiplying the potential for sudden gigantic  loss, I’d rather slow it all down and do nothing…at Iran’s sanction expense.

I truly believe that if we sign this Agreement, Iran’s Ayatollahs will alter their opinion of us.  In their eyes, we shall have evolved from the Great Satan to the Great Stupid Satin.

We need proposals that make us strongly believe we are  safe and we need the hostages thrown in as a sign of good faith and a statement from the head Ayatollah repudiating their assertion we are the Great Satin.  Without that …let’s wait for the sanctions to unseat their religious government and replace it with a secular regime.

 

Am I missing something ?

 

Richard Maurice Gore

 

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About Cecil…..

Wednesday, August 5th, 2015

Can’t focus on the market when an outrage like this happens.

Too much talk about legality and not enough talk about morality.  Too much talk about conservation practices and not enough talk about reverence for life. What a beauty he was !

And don’t give me  that crap about misplaced sensitivity to animals while people are suffering.  So, why can’t we worry about both people and animals ?

When I hear Walter Palmer’s explanation about  the” alleged”  illegality of his transgression, as if it were some misunderstanding,  I don’t hear any sympathy whatsoever  for Cecil.  Palmer doesn’t understand what the fuss is all about.  He just doesn’t get it . I want him to get it !

I wouldn’t be a bit surprised if Palmer  had ” experiences”  with little animals when he was a young boy. And, for him,  trophy hunting is a legally safe alternate outlet for other dark impulses within him.  That he needed to shoot Cecil with an arrow so that the kill experience could be prolonged by 40 hours says a great deal more.

Serial killers like BTK need souvenirs to re-live the experience.  So too do trophy hunters.

If I were allowed  to pronounce sentence on Palmer ,  the souvenir I would deliver would be to brand his forehead with a  ” C ” so that for the rest of his life he would be forced to explain and re-explain why he  lured Cecil from the protection of a preserve to a makeshift ” hunting farm ” .

 

Richard Maurice Gore

Month End…The Buy Survives

Sunday, August 2nd, 2015

August 2, 2015

Once again SPY ( S&P 500 Index ) has survived….900 uninterrupted days returning an accumulated 79.99 %.

SPY closed July 31 at $ 210.50, 2.53% above it’s 200 day moving average price of $209.48 and 6.7% above its 52 week mid-range price of $197.35.

SPY’s  20 day moving average price  is $209.48 and it , ( SPY’s 20 day moving average price ),  has crossed under it’s 50 day moving average price of $209.61,  reflecting this week’s happenings in China.

Whew ! It turns out that wasn’t a Black Swan sighting…it was a Black Dragon sighting !  Black Dragons aren’t dangerous….right ?

Richard Maurice Gore