We added a fifth blog to RealMoney this week, from Cody Willard, who¿ll add his unique perspective on the markets to those of Rev, Jim Cramer, Steve Smith and Tony Crescenzi. And once again this weekend, we'd like to share the "Best of the Blogs" with TheStreet.com readers. These posts best captured the intent of these blogs, which is to provide intelligent discussion on the issues each writer sees as most pressing that day.
Now, let¿s take a look at
on tasty unknown stocks,
on what¿s priced in,
asking four questions and
here for information on
where you can see all the blogs -- and readers' comments -- in real time.
Cramer's Blog: Commodities Present Problem for Analysts
Originally published 4/10/2006 9:21 AM EDT
Today it's Prudential's turn to capitulate on the commodities markets, with John Tumazos going from sell to hold on
This is another tough one for an analyst. Newmont's been missing numbers, not finding enough gold and probably needs to do an acquisition to replenish the mines.
But the problem with these pesky commodities stocks is that the numbers are all sensitive to the commodities, and no analyst can stay negative and keep raising numbers. That was the flaw in Tumazos' sell rating. The "rigor" of Wall Street is that when you have a sell-rated stock, you are supposed to be taking numbers down, not up.
As we get closer to the reporting dates of these companies, you are going to see more and more upgrades. There is an embarrassing plethora of sells and holds in the group, because after 15 interest rate hikes, you are supposed to get a slowdown; you aren't supposed to get a ramp up. But that's the pre-BRIC (Brazil, Russia, India, China) playbook, and we're in uncharted waters here.
That means this group still has an upsurge coming.
I don't know if I agree with the lead headline in the Financial Times today: "Commodity Prices Set to Soar." Haven't they been soaring already? But you can bet that they have done enough soaring that the estimates will be beaten handily, even more, perhaps, than the oil companies' numbers. (More on those later.)
At the time of publication, Cramer had no positions in the stocks mentioned.
Rev Shark¿s Blog: Unknowns Tastier Than Overanalyzed Apple
Originally published 04/13/2006 11:49 AM
The bulls are taking advantage of the thin trading and pushing up the market. Breadth isn't great and volume is thin, which is a bit worrisome, but if you have a quick trigger finger, this makes for some good trading. Chips are at the high of the day and technology is leading, which I like to see following the earnings reports last night.
Lately, I've been receiving a lot of email from readers asking me my opinion on
. My answer is that I don't have an opinion. The stock doesn't interest me. It is so heavily followed and analyzed and dissected and debated that I see no way to make any money on it.
One of the hallmarks of my trading style is that I strive not to become emotionally involved with a stock. I don't feel any loyalty toward them even when it's something like
(ERS:NYSE) that has made me some big profits. I find that spending a large amount of time trying to figure out a stock like Apple is a waste of my time. I can find hundreds of better opportunities where there is greater clarity, a better edge and bigger potential.
Just because a stock is heavily followed by the media or pundits doesn't mean it makes for a good trading vehicle. In fact, heavy analysis is most likely a negative when it comes to trying to make money. It is in the stocks that are under the radar where the individual trader has a real edge.
So I don't spend more than a few seconds considering a stock like Apple. I do spend my time on things like
Five Star Quality Care
(GIGM:Nasdaq) and dozens of others that most people never heard of. That is where the greatest potential lies, not in the Apples of the world, which are so painfully familiar to us all.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider BTU, Empire, Five Star Quality Care and GigaMedia 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.
Cody Willard¿s Blog: Pricing What's Priced In
Originally published 04/13/2006 10:08 AM
What's priced in?
That's really the big question here in my mind as we enter earnings season in gusto. Even the most permanent of the permabears (which apparently will run rampant on Wall Street until we either truly enter an echo-bubble that will suck them all into its inflation or until we collapse into a dire depression and they can all declare victory as we line up together at the soup kitchen) have to know that the first quarter of 2006 was one of record profitability and booming fundamentals throughout the market.
From commodities (did you read that Wall Street Journal article about
swing in fortunes? Amazing!) to cell phones (even punching-bag
raised forecasts today -- how many vendors have to raise projections before the permabears come to terms with the continued boom in cell phones?), it's going to be a fun batch of earnings calls to listen to.
Therefore it simply must be a great time to buy stocks. Right? Right?! Ah, if only it were that easy. Sure, we almost all know that the fundamentals were great in the first quarter. We almost all know that. You with me?
When everybody knows something, that means it's likely priced in. And that's a major near-tem concern for this bull. I don't want to step in and get all aggressive about buying stocks when it's clear how strong the fundamentals are.
To be sure, I sure wouldn't want to go net short with this economy so strong, but I've had a strategy of getting aggressively net long when the stock market becomes convinced that the fundamentals have turned sour. It's sort of a lesser version of Baruch's old "Buy when there's blood in the streets." Of course, the conclusion of his statement is "Sell to the sound of trumpets."
And if all the Street is aware of the booming fundamentals and the small-cap index is already up double digits this year and the average stock is up huge (per Bob Marcin's chart of such), I can sure hear a clarinet or two, if not a trumpet.
In other words, I think it's possible that some of the great news that we're about to hear from the companies on their conference calls is already priced in. And that's certainly not a set-up that I want to be aggressively net long into. So I plan to remain cautious though still bullish and net long as we enter earnings season. That plan will certainly change as the data points, the prices and the calendar move from here.
Steve Smith's Blog: My Four Questions
Originally published 04/12/2006 11:09 AM
I'm looking for a way to make my daily soup without having to eat too many bitter herbs tonight -- though I do love that horseradish.
I have my own four questions:
Is the consumer really done, and if so, is it because higher interest rates are making those with ARMs uncomfortable reclining in their own homes?
This morning's data from the MBA showed a 5.5% decline in mortgage applications and a 9% decline in refinancing. Charts of homebuilding stocks are looking tired, but this is a big ship that won't turn on a dime, so I might look at some longer-term plays, such as going long a put calendar spread or selling call spreads to pay for some long puts. I'm also still looking for a reason to get long some retailers such as
. It looks like I might need to wait until $50 before pulling the trigger.
Is the bull market in commodities in the early or late innings?
I don't really care. Either way I have a tough time being long-term bullish as raw materials do not generate earnings and even the finished products are subject to the price/demand curve and have some form of a replacement product. Selling historic highs, or buying lows, presents a reasonable probability. I'll be looking at shorting some gold and the related companies. Or at least consider selling grandma's silverware when I can get $13 an ounce.
Will biotech and drugs regain their growth status?
I'd like to start picking away at some longer-dated calls in
iShares Nasdaq Biotech Index
, but I'm just not sure at what point price and volatility levels will come down enough to represent an attractive entry point.
Will that rotation into big-caps ever occur?
Should I just start selling
iShares Russell 2000
puts in hopes that the small-caps keep floating to new highs or will that mark the top?
Unfortunately, I have no answers at this point. But why should today be any different than any other day?
Tony Crescenzi's Blog: Liquidity Update
Originally published 04/13/2006 10:37 AM
Liquidity indicators point to continued economic expansion, although the indicators have turned slightly over the past few weeks and could be hinting at an eventual slowdown. It is a bit early on this call, however.
M2 has increased at a 6.7% pace over the past three months, an acceleration when compared with the 4.7% pace over the past year. Commercial paper issuance reached its highest level in more than five years a month ago and was up 17% from a year earlier at that time at $1.712 trillion, but there was a plunge of $48 billion over the past week that bears watching. Similar decreases have been seen in past years at that time, reducing the importance of this. By law, CP must be allocated toward short-term uses such as inventory investment, so the strength suggests confidence in future sales.
Commercial and industrial loans reached their highest level since May 2001 last week, up $122 billion, or 13% vs. a year ago to $1.085 trillion.
Bank credit reached an all-time high this week, at $7.723 trillion, up $653 billion, or 11% vs. a year earlier.
Corporate bond issuance has also been strong, with weekly issuance at $17.5 billion last week year-to-date, according to IDEAGlobal. That's above normal weekly issuance of about $12 billion.