Heyer Capital, LLC

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

Archive for October 2007

Quote of the Day

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” …increasingly, the only way the government can get new credit into the system is to buy the risk away from the market.”

http://www.minyanville.com/articles/MA-fre-fnm-pmi-mgic/index/a/14693

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Written by heyercapital

October 31, 2007 at 12:21 pm

Peak Oil

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These notes were from a presentation at a Peak Oil conference, so we’re decidedly getting one angle of the issue. http://peakwatch.typepad.com/ASPO_Houston_10-07_cnelder.pdf

I think it’s just inevitable that demand growth is faster than supply growth. We won’t ‘run out’ of oil, it’s just that it won’t get to market quick enough to meet demand “at low prices.” Worse, gov’t will start to overreact and lash out with political pandering (excess taxes & distribution controls) which just further mucks things up.

The Saudis, Chavez, and Putin won’t be the problem; it will be our legislatures and neighbors.

Written by heyercapital

October 31, 2007 at 6:46 am

OSK – Oshkosh Truck Cup with handle

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OSK recent carved a cup with handle that caught my eye, but it had the classic signs of caution.

First the chart. Click on it to make it bigger.

OSK -  Oshkosh Truck Cup with handle

Note nice uptrend in the stock in the months prior to the stock forming the consolidation. (Lesson: look for relative strength) There’s a hiccup at the bottom of the base at Pt A. Usually I like to a nice smooth curve. I’ll live with a “v” shape now and then, but having a pattern interruption like this is a yellow flag.

Let’s zoom in on the handle, since that’s where the action is.

OSK Cup with Handle

The handle started forming at point B, on Oct 1. The stock had advanced in the prior few week, but had hit some resistance and started moving sideways. The typical buy point from this pattern is when the stock resumes its advance and moves above that point B by at least 10 cents. We see on Oct 22 it tried to press higher at Point C, and came within 20 cents of the proper buy point, but just couldn’t muster the horsepower. It has since rolled over, and investors that jumped the gun anywhere in that handle are now down perhaps $3-$6 per share.

It’s important to note that while volume was muted in the handle (between B and C), which is proper, trading volume did not accelerate on the breakout day. If a stock is going to power higher, it’s better to have an increase in trading volume to validate the move higher.

Written by heyercapital

October 24, 2007 at 9:09 pm

Market thoughts

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The downturn the past couple days has given the bears a little to whet their appetite. Toss in some rather high AAII bull poll numbers (contrarian), and we looking at a reversal or failed test of the new highs?

Interestingly, trading volume on these down days has been well below average. Gentle distribution, waiting for a rebound? That goes in the bullish column.

Stocks on the Move list has remained fully populated lately (though the stocks moving up list has several stocks barely making the cut.) Mildly bullish.

Distribution day count is low. Mildly bullish.

IBD 100 and other market leaders getting creamed. Bearish.

Avg market fall between Oct 3 and Nov 6 in years ending in a 7, since 1897: 16%: Bearish.

Commodity markets and China under pressue. Aren’t they the same thing? Bearish.

Volatility (inverse of liquidity) much much lower that the summer swings. Either way.

Credit spreads screaming tighter. Depends if we’re just returning to normal, or throwing cares to the wind and dollars to the bond market.

On balance, we’re near all-time highs (in dollar-denominated prices) and your “worried” level is high and your personal trading desk is a DEFCON 3?

Filter out the noise. Let your prices show you where to lean.

By the way, I’ve closed out my TRAK position, but an up day in an ugly market means I need to stay ready to dive back in. Besides, I need to give you yet another opportunity to laugh at all the money I leave on the table for the other guys.

Written by heyercapital

October 3, 2007 at 3:48 pm

compensation for risk

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I’ll give the hat tip to Bennet Sedacca for putting it so succinctly: “If you are not being compensated for taking risk (including credit risk), do not take risk.”

All too often investors look at the percentage returns of an investment and pay scant attention to the risks. By risk, I don’t mean the nonsense of Sharpe ratios, etc., but true risk: permanent loss of capital.

The nature of the markets is the figurative Black Swan. Unexpected things happen. Regularly. A recent example was this summer when a hedge fund manager at a major Wall Street institution said that their computer models predicted that a particular market event wouldn’t happen for a million years. It happened three days in a row for them.

Understand what happens to the best laid plans of mice and men.

Written by heyercapital

October 2, 2007 at 2:33 pm

Posted in Austrian Econ