Shanghai Traffic at Night

SHIBOR

What the Hell is SHIBOR and why should I care.

Perhaps some of you know what LIBOR is because it directly tied to your mortgage rate or home equity loan. SHIBOR = Shanghai International Offered Rate. This is the standard interest rate Chinese banks offer each other.

Here’s the problem – China is the White Knight – that is supposed to come to the rescue of everything from European debt to the future growth of the world’s economy.  American companies are counting on China for cheap labor and future customers. – Here’s the problem almost no one is talking about –  Interest rates in China have significantly increased in the last week, few days.

The source I referenced above is often over the top and glorifies Ron Paul. But I think they have a point. Their headlining a blip to 9% rates today. That number is accurate according to the SHIBOR main web site.  I can’t find many major financial sources as alarmed as the original source. However I know China’s interest rate hikes this year are a major major concern for every investor. [Google "China Rate Hikes"]

Bottom Line - This is yet another reason to say - its NOT a time to have unprotected long assets. When China’s interest rates become a topic on financial channels markets will melt down quickly

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KISS & Stocks

(Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Index Percentage Volume
Dow -0.66 Down
NASDQ -0.67 Down
S&P 500 -0.65 Down
Russell 2000 -0.81 -

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Technicals, Fundamentals & Analysis

  • Volume was pathetic yesterday. In technical language – The big light volume rally on Tuesday was not confirmed . In English – Bulls thought they had something going, but retreated with heir tails behind their legs.
  • Fundamentally, Fed met and Bernanke gave no indication of more QE (liquidity) So bulls ran for cover.
  • The dominate traders out there are the High Frequency Traders ( this is a must read link if you are a short term trader) that make up the vast majority of the pathetically light volume @ 60+% each day. These traders with their mega computers & algorithms skim and scam the rest of us. (see link above) They distort volume, especially on the more active equities. In some was they do balance each other out, but they also create major distortions in short term trading.  Long term fundamentals will rule – A company/sector/market is going to move up faster because it is growing faster than others.
  • Major Lesson I learned. From topic – “The Silver Lining(Investors first mentioned this on 6/17 and it was concluded yesterday) = too many investors were buying Put positions. (betting markets were going down)  Everyone was on one side of the trade so there were few left to sell and because of the technical imbalance we had what is called a “short covering” rally. The following is a link to the chart of the Put to Call ratio. Lesson – When the number of Puts get too high (unless its Enron or some obvious impending doom) short term players can make some quick money by going long.
  • The McClellan Oscillator (MO) chart fell to +15.35 ( below -30 = somewhat overbought, above +30 somewhat overbought ) From yesterday – The MO has been unable to get above the +30 to +50 range for 6 months. So it sure looks like our four day rally will run out of room very soon. There is a series of lower highs on the MO chart that s very bearish in the long term. MO right nowNeutral
  • $USD The Dollar rose  +o.34% yesterday. ( +/- 0.50 is a significant move and the dollar is usually a contrarian indicator)  The trend since May 1 is bullish for dollar and bearish for stocks For stocks short term trend = Neural

  • Reading The Tea LeavesShorter term – From yesterday –  ”MO shows we’re technically entering overbought territory. Advantage bears. Can’t help thinking all those put positions were the reason for the rally. Now that the # of Puts is back to normal, we are close to overbought, and only a week and 1/2 of Fed money remains to juice stocks the bears case should gather momentum.” MO now neutral, and momentum with bears.

  • Reading The Tea LeavesLonger Term - No change – See May 20th blog.

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Paul’s Corner

Your Stock List

Your Stock List 4 certainly took it lumps with the end of the bull run that we enjoyed since last September. Selecting stocks at the end stages of a  bull run is often difficult and your chances of making money is slim.  It’s time to retire this beaten warrior and start researching a new “Your Stock List”

[Editors note - See/LINK to POSITIONS Section of Blog (scroll down to bottom) for May 20th recommendations on YSL and the list of stocks]

Kindly make your suggestions to Barr for review. CPHD and ABC should remain from YSL 4 so we need 12 to 14 new stocks for the list.

HGSI screens have produced an interesting list of quality growth stocks that have ignored this correction. For your review, a few charts with excellent credentials.

SBH – Sally Beauty Holdings, Inc., together with its subsidiaries, engages in the distribution and retail of professional beauty supplies. The company operates in two segments, Sally Beauty Supply and Beauty Systems Group.

UA – Under Armour, Inc. develops, markets, and distributes performance apparel, footwear, and accessories for men, women, and youth primarily in the United States, Canada, and internationally.

HOC – Holly Corporation, together with its subsidiaries, operates as a petroleum refiner in the United States. It produces light products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, specialty and modified asphalt, liquid petroleum gas (LPG), carbon black oil, and gas oil/intermediates

CRS – Carpenter Technology Corporation engages in the manufacture, fabrication, and distribution of specialty metals primarily in the United States, Europe, the Asia Pacific, Mexico, and Canada.

TUP- Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products.

HS – HealthSpring, Inc., through its subsidiaries, operates as a managed care organization in the United States. It focuses primarily on Medicare, the federal government sponsored health insurance program for the U. S. citizens aged 65 and older,

RBN -  Robbins & Myers, Inc., together with its subsidiaries, supplies engineered equipment and systems for various applications in energy, industrial, chemical, and pharmaceutical markets worldwide.

CROX - Crocs, Inc. and its subsidiaries engage in the design, development, manufacture, marketing, and distribution of footwear, apparel, and accessories for men, women, and children.

FOSL – Fossil, Inc. designs, develops, markets, and distributes fashion accessories worldwide. It offers a line of fashion watches under its proprietary brands, such as FOSSIL, MICHELE, RELIC, and ZODIAC; and through licensed brands, including ADIDAS, BURBERRY, DIESEL, DKNY, EMPORIO ARMANI, MARC BY MARC JACOBS, and MICHAEL KORS.

FTO – Frontier Oil Corporation, together with its subsidiaries, engages in refining crude oil and marketing refined petroleum products. It purchases crude oil to be refined and markets the refined petroleum products,

OME – Omega Protein Corporation processes, markets, and distributes fish meal and fish oil products in the United States. It produces and sells various protein and oil products derived from menhaden, a species of wild herring-like fish found along the Gulf of Mexico and Atlantic coasts. (Just added to the Russell 3000 index)

ZAGG – ZAGG Incorporated designs, manufactures, and distributes protective coverings, audio accessories, and power solutions for consumer electronic and hand-held devices.

Disclaimer, no buy or sell recommendation is made for any stock listed in this post. Understand?

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Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500.

NLYAnnaly Capital Mgt. Ultra high dividend stock. Bought on a dip over a month ago. This stock  is up almost 5% since purchased and has a dividend of @ 13.5%

TZAETF that is 3 times short small cap stocks Sold remaining TZA near open at 38.30 for -5% loss. When you add in the rest of the recent TZA trades +8% & +4% total = @ +2%

Mea CulpaSelling TZA yesterday was probably a big mistake.

From yesterday -The short term player in me wants to sell this position (futures are down so TZA will rally at open) and buy back in at a better point. The long term investor wants to hold onto this. I’m leaning short term. I’m influenced far too much by short term trading blogs and almost all of you want something to buy and hold. You’ve repeatedly told me you “have a life “ and don’t have time to watch things on daily basis.

Like many of you I believe in DIVERSITY. I have a portion of my portfolio in long term holdings (mostly dividend stocks) and have protected them by owning some ETF’s that short the markets SDS & TMZ. I have discussed this in the blog and with many of you that have my email address. SDS & TZA are insurance for potential price falls. I will continue to protect my long positions until further notice.

Investors has gone over Dividend Stocks over the past couple of months and when I have the time I’ll compile this and put it into one section and post it the POSITIONS Section ASAP.

Repeat Strategy remains

  • Short any rally - Investors411 will use TZA (3X short small cap stocks) and SDS (2x short S&P 500 more conservative) Will buy more TZA or SDS near open.
  • Sell long positions into any rally -

Disclosure - I own NLY, & TZA as well as a group of dividend stocks – I buy all stocks mentioned in the hypothetical Investors411 portfolio.

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Look for an enlightened Paul’s Corner every Tuesday & Thursday and the always informative comments section every day.

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The Fed has moved from an expanding money supply to a neutral – No QE #3. Congress is threatening to contract the money supply. “We [the USA] need to grow at this point more than anything else.Investors411 outlook will remain negative on the USA unless the Fed and/or congress return to more pro growth policies and/or Euro defaults are solved.

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Longer Term Outlook

Neutral/CAUTIOUSLY BEARISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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