RE: Energy Minister cutting off Strategic purchases. (I made up the last part.) I’m only guessing, but why else would $WTIC plummet and XLE rise faster than the S&P 500 this week?"

Why would XLE rise while $WTIC was sinking ? Fundas dont jive here.

I have been looking for high quality-high yield investments after reading the Grantham piece last week. If the Japanese raise rates and the carry trade unwinds then will emerging market bonds get hit like equities or will they benefit?

I am new to bond fund investing but it seems that there is little downside to buying a 4 star fund like JPMorgan Emerg Mkts Debt C (JEDCX) at this juncture. Hoping to get feedback from the seasoned investors on the blog. TIA.

Top 10 Holdings
Company % Assets
Brazil Federative Rep 12.25% 7.26
Russian Federation 12.75% 4.59
BANCO CENTRAL DE LA REPUBLICA ARGENTINA 4.23
Gazprom Intl Sa 3.63
US TREASURY NOTE 3.01
Chile Rep 7.125% 2.96
Gazstream S A 144A 5.625% 2.77
United Mexican Sts Mtn Be 8.3% 2.76
MORGAN STANLEY 2.67
Guatemala (Republic Of) 8.125% 2.33

IBKR down 1.43 at 29.87!

What happend to all the people who did'nt get their IPOs filled?

Actually, Kudlow's signature phrase is "right on business, right on America." Right-wing, get it? Oh how we all laughed and laughed.

This is setting up as a very interesting week for the dollar and PMs.

ECB meets. Everbank opines “will not raise rates this week, but prepare markets for a June hike.“

BOE meets and looks to raise rates. Everbank’s Chuck Butler goes “out on a limb” and writes in the Daily Pfennig BOE will “hike 50 BPS!”

Congressional Subcommittees meet on Wednesday to discuss the yen and renminbi. Hmmm.

Fed meets this week. Anticipate rates stay unchanged, but what will be in the statement?

Good luck and good trading!

I thought a while about some of the things Grantham said... I dunno if I could bring myself to do it, but the most contrarian thing in the world you could do - with a soft housing market, soft newsprint market and the Loonie high against the dollar - would be ABY.

Chart is not constructive here, but books are certainly good.

Bill,

Do you have an Accumulation Zone price range for IKBR? Or is it way too early to have an opinion?

2nd_ave

This is the first time in history Buffett has gone on the record specifically stating that he would not Buy and Hold.

http://tinyurl.com/ysyakw

http://iamamazing.wordpress.com/

Leisa -

Kirk's most amazing attribute, to me, is his small % of losing trades year-in, year-out. And, how eclectic his screens! Also, his technology quite immpressive.

ZackAttack:

Fyi, contrarian investors, Benj Gallander and Ben Stadtlmann(Contra the Heard - 5yr return 29%; 10yr return 23.4%) have an 8.7% portfolio weighting of ABY-N/A-T as of april 12, 2007.

regards,

joey

Leisa and/or Jock

Would either of you be willing to fill in the blanks ... who is Kirk? And elaborate if you will ...

npmg. Just google Charles Kirk. He maintains a blog which highlights the activity in his small portfolio on a yearly basis.

Charles Kirk of the Kirk Report

http://www.thekirkreport.com/

Good Article on Book Building vs Auction IPOs

http://weber.ucsd.edu/~vcrawfor/Finegold06Essay.pdf

Thank you for the replies to the "Kirk" enquiry.

I have a few thoughts of my own re some info on this blog from Friday and the WIR but too busy rebalancing the portfolio right now to make a thoughtful comment.

I guess the traders are dissappinted that IBKR didn't pop. This reminds me somewhat of the Clearwire (CLWR)IPO. By waiting a few weeks I was able to pick up CLWR 50% off its high. So, I'm hoping that IBKR falls to $20. Conversely, I regret missing Mastercard (MA) using the same approach. I like all 3 of these companies as investments at lower prices. A few years from now I'll know if my approach works.

Fred

Fred

re: Jeremy Grantham
Grantham's firm is an advisor to a couple of Vanguard funds: Vangard Explorer and Vanguard US Value. Explorer is closed to new investors, but US Value is still available.

Disclosure- As a semi-active, but reluctant trader, I have most of my retirement $$$ in Vanguard Mutual Funds, including US Value.

https://institutional.vanguard.com/VGApp/iip/IWELearnMore?FW_Activity=LearnMoreViewActivity&FW_Event=ManagedFundsEvent&IIP_INF=WZxxxxxAdList&advisorId=282

You're next adventure has got to be the Bahamas Fund. I am interested/curious. Can you give us more info and/or arrange a presentation in Toronto, or better yet at Mattise (w/o May 26 would be ideal.)

"He maintains a blog which highlights the activity in his SMALL (emphasis added)portfolio on a yearly basis."

Yeow! That's a zinger, Horatio!

Bill,

On Friday I posted a negative comment on the IBKR IPO, anticipating a near-term sell-off. My perception was based on the market's presentation of the IPO, not the company itself. I don't question the value of IBKR or it's inclusion in the Cara 100 - it's simply a matter of price for me. After noodling this one I've decided that the chart this week may end up looking like someone playing a yo-yo walking downstairs. Should this happen by Friday, I've also determined my entry point(AZ): $27, give or take a few cents. I'll be happy to average down at least once from there and hope to net 10% in the near term on IBKR, before this market craters. I think this a sensible plan in a crazy market. If I miss this one, there will surely be opportunities to follow.

Good morning, Bill.

SLW surpassing 12.21 high touched in September. I want to call it a clean triple (or quadruple) top breakout, but the volume not quite there. Still half the session to go though.

Broad etf indices, the plain and simple ones, continue to be a compelling way to invest in willing to make tactical adjustments, I think.

If you consider the Russell family of domestic cap/style choices there are six in total. Four of the six beat the broad mkt. Two laggards are large value and small value. Midcap was the sweet spot, cira 10percentytd vs 6.5 for the russell 3000.

And, if one uses regional intl choices the numbers get better. Two of the three major developed intl regions (asia less japan,europe) have returns 9-14 percent. The only laggard is japan. If one wants to add more risk but not be overwhelmed with choices there are the emerging regions: latin america, india, russia and china. Personally, I think latin america, alone, is worth it.

I do not follow my own advice, but it strikes me that if one wants to beat the total mkt this is an easier way to do it. Smaller universe of choices; easier to follow; bigger net; and better odds. Call it a quant extra light model.

Jasper - You DO have to look at composition of the regional and country ETF's. For example, EEM is mostly Asian tech, not much Latin America in there. EEW (Mexico)has a huge % telecom; EWZ (Brazil) is 25% oil. They're often not as broad (or representative of the country/region) as you might think. Composition can be checked at eftconnect.com

Kirk's portfolio size is less important than the % growth he put up, particularly 2000 to 2004. Also, he's a seeker, and passes on LOTS of good sources and ideas. By the time he is OUR age, I bet he'll be rich, and a legend.

Dear Bill,

I bought the KRY at $4.10 this morning on the drop and turned it around 1/2 hour later at $4.24, so I'm a happy camper. However, I would like to hold it into the permit approval, and I am hoping that you can help me make sense of this mornings KRY story and perhaps help reconcile it with Gordon's comments at the Latin American thing.
In other words, what's the truth about this deal?

Chris

Hello Bill,
When you lunch with Randall and Ray later this week I was hoping you could ask a question for me? I would like to know if WGDF has signed a contract with LA County landfill for aggregate cover for the "garbage" and if they have a contract yet to deliver aggregate to the bay area? My rough calculations show WGDF may realize a savings of about 25 bucks per gold ounce with the sales. I think Randall mentioned in the BMO presentation they could sell the aggregate for 20 cents a ton or so.
Thank you,
Tom

ESI - ITT Educational not the ESI on the Toronto Ex.

Take a look at this beauty that I am watching to short when it levels off for a while.
M/W/D rsi is 93/90/91. Trades at 34 P/E, 1.8 PEG, 50x Price to book, 5.5x price to sales, but ROE is 145% and eps growth is 46%. Argus had a top value on this of around 94 and now it is around $102 and moving up like a rocket. Need to wait for the fuel to spent and starts to drop back to earth.

Jock,
The point I'm trying to make.... If you narrowed down your investment choices to just 12-15, including cash and bonds, used a tactical rotation strategy to only invest in 1-3positions at a time, and traded no more than 3x per year would you have less volatility and routinely beat the total market? Personally, if I can do this AND avoid big downturns, I would be a very content investor with more time away from the screen.

mogwai8myball,

SLW clearly breaking out...I think the smart play is to hold/add into it...

shark_attack

I hope this link helps re: your question on Bill's view on KRY: http://tinyurl.com/2weckc

Jasper - You might take a look here: http://advanced-stock-selection.com/winningversion2.htm

This uses a model to determine when you want to be in the market, then puts you into the broad ETF (or two) which have done best over the previous six months.

Anyone notice the weakness in the gambling stocks. Apparently there was an explosion in one of the casinos in Las Vegas. Most of the stocks are down ~2% and i'm seriously considering a small position in LVS, which I believe Bill has mentioned as a possible Cara 100 company...Anyone care to share there opinion?

onlineaces, I think LVS is getting punished for disappointing earnings more than anything else. It certainly will be interesting once the sellers are all gone and it stabilizes. Barry

Onlineaces,

WYNN reports after the close today. If it misses estimates like MGM and LVS did last week there could be another drop tomorrow.

Fred

Bill,

You've drawn my attention to MPEL and Macau. The opportunity is inticing. My question is going to sound a little or a lot naive, is there political risk of China "closing Macau" in the future because it is ideological offensive to them?

Fred

Interesting articles on Canadian Tax fiasco. (I'm long on some of the trusts, especially as CA$ is nearing equality with US$)

http://www.thestar.com/columnists/article/210685

http://www.canada.com/ottawacitizen/news/story.html?id=1b697b21-7572-48f7-9233-86e5380242c8

Jock-

Now that he (Kirk) has hit $1M in his trading portfolio (and I believe his LT Portfolio is there as well) he has started to share his ideas and methods more and more. I have written him about it and he acknowledged that this was all according to plan. Gotta love him for that.

Thanks Bill. I've been looking at Marsico Funds holdings and they certainly agree with your take on Macau.

Fred

MPEL down approx. 4% today. I added to my position.

Besides MPEL I find myself in the position Bill wrote of in the WIR....more or less outside the casino. When the storm comes I may go back in and play a slot or two.

Craig:
Same here. Added more MPEL.
Patiently waiting for AMZN to go below 60 in the next few days.

WYNN is up over 6% in the after market and going higher. Took a small position in LVS before market closed.

S&P's subdued action looks a lot like the set-up ahead of the Jan. 31 FOMC meeting. I wouldn't be surprised to see another hop-scotch move above ATH resistance (just like the Jan. release blew through the 1,420/25 area en route to 1,450+). Deja vu, a 100 point higher?

JML

ABB:
Since this company is Swiss, what market does it correlate to? Since it trades on the NYSE as well as other markets, how affected is it to a major downturn in the US market? Looks like it is trading sideways forming a cup w/handle. I did notice that it had a 1.39 Beta. That is interesting. stk

Commentary comparing the US market in 2007 to the Japanese market in the 1980s.

Excerpt:

Gartman explains: "Already trading at incredibly over-bought levels when it had risen from 4,000 in late '75 to 8,000 by the mid-'80s, in reality the rally had only just begun! From '83-'85, the Nikkei rose 8,000 to 18,000 ... and still the rally had only just begun! From '86-early '88, it rose from 18,000 to 28,000 ... and still the rally had only just begun, for in those last two years, the Nikkei moved from 28,000 to 40,000, with the last 7.000 points coming in the final weeks of '89!"
Gartman draws this moral: "We must remember that when markets go parabolic (and they do indeed go parabolic from time to time) it is important to remember one of our oldest trading aphorisms: that the final 10% of the time frame of a bull market can, and often will, encompass 50-75% of the price movement. We may be in that environment now. Things seem to want to go "parabolic." What may seem like insanity may be nothing more than history repeating itself once again."

Link:

http://tinyurl.com/yrpojs

Caution if going short.

Re: Silver Wheaton

If anyone is interested in taking a position, I respectfully recommend one series of the warrants - SLW.wt, trading on the TSE, expiring in Aug/09, which, amazingly, are trading at a discount to the shares at today's closing prices, respectively.
I selected the warrants for my holding of SLW, because of the leverage - a multiple of 1.42 to the share price.

regards all

joey

Melt down story:
Back in June of 2000, I sold everything; stocks in both my trading and retirement accounts. I was in cash. My neighbor across the street, a woman that had received a 400K inheritance placed all of it in the market in 1997. She had created a 1.4 mil balance by the end of 1999. When she heard that I had sold out, her comment was that I was going to incur capital gains on the profits. I told her that the market was turning into a Bear, but she was to afraid to sell because of all of the taxes she would have to pay. I sold my house about that time, but I saw her later at a party in the old neighborhood a year or so later. She had held on to her portfolio and now was sick about it and wondering what to do. She was heavy weighted in the techs. Those years were an amazing time. Anyone could make money, assuming they could click the sell button. stk

Bill, thanks for sharing what you have about IBKR. The link that JogyP leaves out one important dynamic.

Typical IPO underwriting syndicates get heavily short a stock at offering. That's right, they over-allocate and the shares go out the door already sold short. This is a dirty little secret, that not too many realize. I've spent a fair bit of time following the IPO market. If you dig deeply enough into the available research on the internet, you'll find out about it. That's what I did. The underwriters do this with impunity.

The key ingredient is the underwriter's overallotment. If the underwriters go out short, and the price pops and keeps heading higher ... no problem. If the underwriters go out short, and the price drops and heads lower ... also no problem. In the first case they just exercise the overallotment and use those shares to cover their short position. In the latter case, they don't bother with the overallotment and make money on the short. This is a win:win situation. If you doubt that what I'm saying is true, either (a) find someone inside the industry who will confirm this SOP off the record, (b) watch IPOs long enough. The overallotment needs to be exercised within a few weeks. For IPOs that are below offering price at that time, you will never see the overallotment exercised. Never.

What's interesting is how this overallotment gets used. Anyone who's even casually watched IPOs behvior in the aftermarket might notice that there is a whole shit ton of support right at the offering price. This is not a coincidence. Nor is it simply a bunch of sideline money waiting to jump in at a good price. It's the underwriting syndicate defending their offer price. They won't defend forever, but they will defend. I've seen it in real-time in level 2 quotes. For some reason, your underwriters are a lot less insistent upon hiding their identities via ECNs for a new offering. Just look at who's holding the line at the offer price of a new issue, and 99% of the time they are a member of the syndicate. Now, they may use some left-over interest from their book to buy some of those shares, but they're also covering short at the same time.

Now, taking the subject back to IBKR. Without knowing the dirty little details, I believe that the OpenIPO format doesn't operate similarly in this regard. Perhaps I'm wrong. Based on how quickly the priced dropped through $30.01 this morning, I'm fairly confident Hambrecht and HSBC were not very short at IPO. Maybe they don't play that game.

What caught me off-guard was the amount of interest in the bid process, as reported by IBKR. They had 2.5 bids for every one that was filled at $30.01. Seemed like a sure sign of interest to me. More likely that a lot of those bidders were expecting partial fills, and over-compensated. I agree with Bill that flippers were head over heels into IBKR. Check out the message boards on ipohome.com and you'll see the evidence. Now that the offering has broken, there is a lot of transfer of shares going on from weak hands to strong.

I was planning on holding my IPO shares for the long term. That break of offer price is a sure sign that we're headed lower. I'll sell now and buy back lower. Perhaps I'm just another weak hand.

Bill, thanks for the good "Dutch Uncle" post at 8:30 PM.

Stktrader, I've been raising cash, but not hurrying to do so in my taxable account. I figure a sale is an immediate (minimum) 15% haircut PLUS all my companies (unlike your former neighbor's tech stocks) are real companies with real earnings, paying real dividends, etc., etc. Still, thanks for the reminder!!

http://www.resourceinvestor.com/pebble.asp?relid=31481

gold fields, uranium, and even krystallex. all in one article! how could I not post the link here?:)

Hello all. I stumbled across this site a few weeks back and have thoroughly enjoyed following the posts. It is very difficult to find such respecful forum! I'm glad I stumbled upon your site Bill!

Wanted to comment on the IBKR IPO and something I noticed that may have had an affect on the recent action. As an IB customer, I was able to purchase shares through the IPO.

After making my bids, I notice that IB informed me I would need to have sufficient funds in my account to cover the shares by 4:00 PM ET on 5/4 (the day of the ipo). Could this have created an incentive for people to oversubscribe to the IPO (with funds they didn't really have) with the intentions of immediately selling? From what I understand, I could have bought many more shares than I could really pay for, as long as I dumped them before 4 PM ET.

I'm not sure if anyone else noticed this or if this is not necessarily peculiar? Seems that in a traditional IPO a broker would not grant someone shares without the funds (or margin) to immediately purchase them.

I am new to the IPO world so please excuse my novice observations.

With that said, I believe IBKR is an excellent company that, with more name recognition amongst the masses (non pros or active traders) will mop the floor with some of these traditional brokers. A lot of people will soon realize how overpriced their brokerages are when word gets out. Etrade/Fidelity/etc must be very concerned with how they will stay competitive with this cost structure, right??

BillySundance, as a customer I agree wholeheartedly with you about Interactive Brokers. Very fine trading platform, and prices are good. Access to world markets and products is also very good.

I don't think the settlement of IBKR shares had anything to do with flipping. What they were saying (if I understand the details correctly) is that settlement for the IPO was T+1. Now I'm not sure, but if you were allocated 200 shares with cash in your account of $5000, at the end of the day you would owe $6002. If you sold the IBKR shares for $33, that wouldn't settle for T+3, so you would enter a margin call. If you sold something else to pay, that wouldn't settle for T+3, and you would again enter a margin call. Depending upon the severity of the call, I'd guess they could do all sorts of nasty things.

Leads me to a funny story. I noticed today that I got no leverage against the IBKR shares I bought in my IB account in the IPO. I started a chat session with a rep there to find out when the shares would be marginable. Was told 30 days. IPOs are not generally marginable for 30 days. I asked if it was an SEC, Nasdaq or house rule (was told SEC). I said that it didn't show a lot of faith in their company though, which is true. They should give you same as cash margin on those shares, right? Except, from a risk management perspective that'd really cause problems if they did pull a Refco.

postscript.

The SEC is well aware of what I described above with the syndicate overallotment. I'm sure BB&B has convinced them that this is required for market stabilization. Having never participated in an underwriting syndicate, there may be some truth to that.

http://ftp.sec.gov/divisions/corpfin/guidance/ci111400ex_regs-k_sss.htm

I went back and looked at the IBKR S-1, and Hambrecht did give themselves this language, although I'm not entirely sure how they would be confident to defend excessive naked short selling without a green shoe option. That's why they make the big bucks ;)

>>
Short Sales, Stabilizing Transactions and Penalty Bids

In connection with this offering, the placement agents may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and

purchases to cover positions created by short sales. Any short sales made by the placement agents would be naked short sales. "Naked" short sales are any sales made by the placement agents that the placement agents cannot cover through exercise of any option. The placement agents must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the placement agents are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the placement agents in the open market for the purpose of pegging, fixing or maintaining the price of the common stock.

These activities by the placement agents may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, the placement agents may discontinue them at any time. These transactions may be effected on The NASDAQ Global Select Market, in the over-the-counter market or otherwise.
<<

cb-

I do not have the same takeaway you do about Jeremy Grantham. I read all his writings. I have a folder full of them back to 1998.

Emerging Markets debt is not his preferred strategy now. That is a small slice of his fixed income portion of his global balanced accounts. If he has an emphasis on anything it is Cash, US High Quality Equities and Emerging Markets EQUITIES where he says there is still some value despite the huge runup of the last few years.

Technical 'attention' drawn to the volatility expansion patterns on MANY of the big dog ETFs today. This predicts price expansion but not direction.

A few include EWZ, EFA, EEM, GLD, IWM, DIA, SPY and more. If these break, I'd expect the bulls to defend them...the question becomes the viability of 'second entry'.

I think Grantham would argue that there is always equilibrium 'value' but as for price...

Ron-

Yes. Big believer in mean ol' mean reversion, me.

Regarding US High Quality, note also that Grantham thinks their "value" here is RELATIVE. He doesn't consider them cheap, but they are trading on parity with market valuations, where normally they would be trading at a premium.

This run has elevated some of their prices though....