Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Archive for June 2007

a hold at the 50 day

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As the market made its recent retracement, the S&P 500 found important support at its 50 day moving average.

Why? My guess is foreign buyers that are tired of our low yielding Treasury bonds. Other market commentators note that there is an enormous amount of credit (what we used to call money) flowing in from overseas. Our dollar exchange rate may be very low in the eyes of those overseas, and therefore it makes our dollar-denominated assets look cheaper to them.

As the market dipped to the 50 day line, it reached a spot of traditional institutional buying or support. Maybe those traditions extend across the oceans.

Now that the 50 day line has acted as support, it will be very important for the SPX (S and P 500) to find support there again if it retraces lower. If support fails where it once held, I suspect that would be quite a negative tell on the market.

Oh, and congratulations to those who own index funds that are just now getting up to the price level of seven years ago. What about dividends? Let’s talk inflation while we’re at it.

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Written by heyercapital

June 15, 2007 at 3:24 pm

Getting closer to your food

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After a few days of thinking about it, we hopped in the car and raced to the “pick your own” strawberry farm. We’d been there several times before on the kid’s field trips during pumpkin season, but not for strawberries.

We got there about 6:00pm after the kids had been outside all afternoon in the pool, chasing the neighbors, or sunning in the deck chairs. So let’s just say that a half hour of working in the fields left the kids pink and tired. And with strawberry juice dribbling down their face. As an honest man, I did offer the guy at the scale the chance to weigh the kids before and after the picking. He grinned and said it was part of the experience.

So each kid held their own little quart basket. Parents got the flat tray like the old tool trays with a handle across the top. One of my favorite sayings is that each mouth to feed comes with two hands to help. Those little hands are much closer to the ground than ours. I think Hannah and Becky netted about 2:1 what Amy and I could pick. Jeff? Oh, well. Let’s just say we put four strawberries in his quart basket and told him to see if he could stay in our assigned row. He didn’t get all the way to other side of the field, though I’ll admit I was the one that was supposed to watch him.

We kept a good rhythm – no Becky, they have to be red all the way around, not just on top. Jeff, no that’s not a snake; that’s an irrigation pipe. Pretty soon our flats were filled. Good thing they were just a dollar per pound. I think this abundance might cure us of the ability for a quart of strawberries to disappear in a day at our house. By the time we work through 15 lbs of strawberries the novelty will have worn off. – “Strawberries and ice cream again. Awwww, Dad. Do we have to?”

Someone commented, “I didn’t know they grew like this. I thought they were bushes.” We do need to get closer to our food and know who grows it. I guess just getting the kids to see that food comes from the ground – the honest-to-God bounty of the earth and sweat of our brow – and not the shelf is a little victory in itself.

Godspeed,

Brian

Written by heyercapital

June 14, 2007 at 10:09 am

Exchange traded funds (ETF) for sector investing

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A question came from a reader: What do you think about a energy sector mutual fund?

All else being the same, I prefer ETFs over sector funds if only because I have intraday liquidity. If the sector spikes up 5% midday on a climax run, I want to be able to take some off the table; converse is true, if it’s down 5% mid-day on a capitulation I can initiate a position rather than waiting for whatever price one gets at the end of the day. If it’s down 5% and floating around the 50 day, I can take a position and hopefully pick up some cushion if it rebounds to just down 2% on the day. If I had a fund, I only get the price at the end of the day, resulting in paying a higher price for the sector exposure.

When capital is at risk in the markets, having control of it seems to be prudent.

Also, in sector investing there are only so many stocks within a group to buy. (As opposed to a general assets manager that can buy stocks in any sector or valuation, depending on how attractive it is.) There’s not a lot of ways for a sector-restrained manager to add value and pay his fees with excess returns. One trick is to take more risk than the index (leverage, weighting higher beta stocks, etc.) When it works, great. Odds are the return differential will not be worth giving up control.

That ETF in question had 24% of its assets in one stock. The return of the ETF and that stock were the same for the past three months. Be aware (Not beware) of how the tail wags the dog.

Written by heyercapital

June 5, 2007 at 8:38 pm

Posted in charting, stock ideas