The Fed's in, the quarter's over, rates are up and spring is here. RealMoney's bloggers were on the case last week, and once again we'd like to share the Best of the Blogs with TheStreet.com readers. As always, these posts represent the best our writers offer each trading day.
This week, read
take on telecom equipment,
on overcoming acrophobia for profit,
on trouble for cruise lines and
on a Fed president breaking an unwritten rule.
Cramer's Blog: Telecom Equipment's Come-Hither Shrug
03/28/2006 11:09 AM EST
What a shrug off of
! It's like nothing happened. The
, just back on fire. The
lapping up the new supply. The
advancing despite the pressure from
up nicely. This group is not quitting.
Now, we know a pullback is due, but doesn't this group feel so 1990s, when
became a market darling? Doesn't it feel like the money's going its way?
I keep coming back to where these stocks were when there was telco spending vs. where they are now. There's just so much reason to believe that a new spending cycle is in front of us and you have to put some money down in the group.
The one that seems most solid to me is Ciena, because Gary Smith, who runs Ciena, had been most vocal in saying there was no momentum when things were bad, and now is most adamant that things are good.
He seems like he is the most bankable of all. But I have to admit, the whole group just remains totally tempting.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider Oplink, Bookham, Avanex and Mindspeed to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
Rev Shark's Diary: Don't Let Fear of Heights Cut Your Profits
03/31/2006 9:31 AM EST
Acrophobia: noun, from the Greek "acro" meaning "summit," is an extreme, irrational or morbid fear of heights. The main cause of acrophobia stems from extreme fear of falling and being injured or killed.
Fear of heights is not an unusual phobia. The risks of injury or death are obvious should we slip and fall while greatly elevated, so there is nothing irrational about feeling some trepidation as we move higher and higher and it looks like it's an awfully long way back down to the bottom.
A fear of heights can be a good thing as far as keeping you safe, but investors have to be careful about assuming that just because the market is elevated they're in danger. We all know that the laws of gravity mean that sooner or later we will see some downside, but should we panic simply because we are at lofty levels?
One of the great things about being an individual investor is that you have a fantastic safety net readily available should your stocks start to slip, and it's just a few key strokes away on your computer: It is called selling. If your stocks start to fall you simply punch the buttons, move to cash and enjoy the safety of the sidelines.
For some reason, many market participants seem to feel that you have to sell into strength and that if you actually wait for some weakness to emerge before you sell that it will be too late. That is not the case. In fact, I have found in my own trading that I don't do as well when I try to anticipate a top. I'm better off to keep on holding while others anticipate that we are on the brink. The amount of gains I make by being late to the party usually more than make up for what I lose by not selling until there is an actual breakdown.
Most investors come into the market with the belief that the best approach is a value-oriented one. We should "buy low and sell high." So when stocks and the market are hitting new highs they are emotionally driven to sell. They want to redeploy their money into stocks that are "bargains," which, for most people, simply means "not at their highs."
The problem with this thinking is that for stocks to go higher and double and triple over time they have to trade at their highs. If you sell a stock when it hits a new high, how is it possible to hold any when it's doubling?
The same mentality applies to the market. Many folks are frightened and feeling bearish about the market because we are at multiyear highs. They are convinced that the best strategy at this point is to "sell high." Sure, it's a good idea as a function of prudent money management to lock in gains consistently, but don't assume the market is doomed simply because it is high.
at its highest point in five years, and that's a scary thing for many, but if you have been in the market long enough you know how often what seems extended becomes more so. That doesn't mean we shouldn't be careful, but it does mean we shouldn't automatically be negative at this point.
We have a flat start to the day. The personal income and spending data were market-friendly and perked the market up, but overseas markets were a bit soft and gold and oil are pulling back a little.
Steve Smith's Blog: Cruising for a Bruising
3/28/2006 10:41 AM EST
Two names we've talked about in the past,
Carnival Cruise Lines
, are back in the news. I first discussed them in late February as broken stock plays, then two weeks later noticed that there was heavy put action ahead of earnings reports. Last week, I actually thought it was worth a shot to buy some calls and look for a bounce in these names, as they appeared oversold and were hitting support levels.
But just when things were going well, the CCL April/May $50 call calendar spread expanded from 40 cents to 60 cents and the RCL May $45 calls increased from 40 cents to 60 cents in just the last three days. Then we had this morning's news from the Associated Press that a fire on a Carnival Cruise ship last week will shave about 4 cents to 5 cents off of its second-quarter and full-year earnings per share.
The shares of both companies are trading fractionally lower this morning. I mentioned in earlier posts that exogenous risks such as passenger safety -- from viruses to people disappearing overboard and, yes, fires -- could hit these issues. The charts are still holding support and some might say this presents an opportunity to buy a dip, but I would use this chance to disembark and find a more accommodating investment vehicle that provides a smoother ride.
Tony Crescenzi's Blog: Unusual Break in Fedspeak
03/31/2006 9:47 AM EST
Kansas City Fed President Hoenig spoke on the U.S. economy today and gave additional remarks about the interest rate situation. This is news in and of itself, because Federal Reserve officials normally adhere to a blackout period of one week before and after FOMC meetings. His remarks might indicate that the Fed is relaxing its unwritten rule in order to create greater transparency.
Hoenig described the economy as "rather robust" and said that the economy was moving closer to full capacity. These comments fit with the Fed's recent theme regarding its concern over "resource utilization," which the Fed says could boost inflation pressures.
With respect to monetary policy, Hoenig said that the fed funds rate might be at the upper end of neutrality. Such a remark needn't mean that the Fed is done raising rates, given that it could well take the funds rate above neutral before it is finished. Moreover, neutrality is considered somewhere between 3.5% to 5.5%, so there could a few more hikes ahead, at least theoretically.