Wednesday, January 08, 2014

Closing Comments

This choppy market environment is good for trading special situations. However, one must be fast and get ready to sell sooner than later. I would rather trade in a trending market. Now some comments on today's trading:

One of my tweets went viral today. It was a funny picture called Fed Deflation that I got from a poster on my IV message board.

Here are a number of stocks I traded:

BIIB broke out within a base below the highs. Can it go all the way? Great company got rec'd today

BORN  Cup with handle move? I can not confirm any financial info about this China stock. Some message board posters are saying that the company has net assets way above the share price. Will the ghost of Ben Graham confirm this? If not don't trust a message board poster. Strictly a hit and run small mo mo trade.

QIHU This company has a great track record of several years of 100% plus growth. The only problem is that some people are questioning the company's finances calling them a fraud. Subsequent to the allegations of fraud the company has taken several steps to regain investor credibility. It popped a ledge within the base today and conceivably could run to the old highs and more. We shall see if the base continues or if QIHU can go for the brass ring.

YELP Great grower broke out the past day or so.

Next some comments on Doug Kass posts:

RDN His recommendation looks great on the charts. After a huge run it has consolidated nicely and is close to breaking out of a base. Look at those tight Bollinger Bands.

As for Doug's compelling surprises for 2014, I'm having some trouble with his first prediction of slowing growth and stagflation. Here is my conundrum.

1 - I do not know if the economy will slow down or not in 2014. But if it does, that will put the Fed back into the position of "pushing on a string" in order to keep the economy alive.

2 - We all know that on a historic basis the amount of pumping that the Fed has done with QE, the monetary base, etc., is greater by several standard deviations than any time in history. Just look at a chart on the web and compare it to Milton Friedman and Anna Schwartz long term money supply chart in their seminal work "A Monetary History of The USA."

3 - Despite the enormous pumping, the economy is still growing at a sub par pace and unemployment is off the charts because of the abnormal amount of so called "discouraged workers." Our unemployment stats are absurd. We all learned about the discouraged worker affect years ago in college. But, the numbers have changed by historic proportions. The percent of discouraged workers is way beyond anything we have seen - At least in my lifetime.  All things being equal, we are easily over 10% unemployment.

4 - Bernanke has made his case that 1937 USA type deflation or a 1989 Japan post bubble economy was his fear. Hence the enormous pumping to avoid deflation and get the economy going. Now that the economy is barely growing on its own, If the economy slows and the Fed keeps pumping, all things being equal, why would there be stagflation? There would be less demand.

5 - I understand that outrageous amounts of money lead to inflation during ordinary times. But if there is no demand pull inflation now with some growth, where is the demand pull inflation going to come from if there is no growth? How is the money going to get from the banks to the people who need it? I can see the money still going into stocks, if the Fed keeps pumping. also housing and any vehicle that big money can leverage into with low interest rates. But don't we need economic growth for inflation? There certainly is no wage push at this time.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.
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