- why there's nothing wrong with mimicking the big money;
- glimmers of hope for housing; and
- why it's time to stop oil manipulation.
FADS CAN Is Back in Action Posted at 1:33 p.m. EDT on Friday, May 27. They tried to keep Chipotle ( CMG) down, with worries about raw costs. Fifty-week high. There have been endless negative articles about Netflix ( NFLX) and how everyone is gunning for it. Just took out the 52-week high. Could there be more people saying negative things about the valuation of Salesforce.com ( CRM)? I don't' think so. Fifty-two week high this week. Can you believe the power of Amazon ( AMZN) after the quarter it reported? Sure, with gasoline at $4, you can. Deckers ( DECK) skipped a beat, but it has rejoined the bull market show and is moving past that last quarter as a supply chain problem in Europe. That's all it was. Apple's ( AAPL) finally getting jiggy, and even F5 Networks ( FFIV) is showing life after fellow data-center player NetApp ( NTAP) reported a stellar quarter. > > Bull or Bear? Vote in Our Poll In other words, the acronym FADS CAN is back in action, and there's nothing more bullish than having these high-octane leaders back in charge of the next move. I have been ridiculed as a momentum player by many. I have always rebelled at the characterization simply because what I am really about is realizing the leadership, understanding its valuation flaws, and then playing along with deep-in-the-money calls. It has been the right way to do it since the great bull market began in 1982, and I have made money with it continually. It is actually a more rigorous, limit-your-downside approach than any I have ever been able to come up with. There is simply nothing wrong with mimicking the big money. It is another tool in the arsenal the way price-to-book is for some or P/E/G rates are for others. It is ridiculed chiefly as a greater fool theory, but what you are really playing is the money-in phenomenon, recognizing that the highest-growth funds are good at marketing and that they get money in and put it to work without serious valuation parameters.
Constructive Talk From a Homebuilder Posted at 4:27 p.m. EDT on Wednesday, May 25. Housing prices were up in yesterday's Commerce Department sample. Housing prices are down in another survey today. Housing prices have been flat to down 5% over the last two years, simply bumping along the bottom. I think things are all over the place. But today, Douglas Yearley, the CEO of Toll Brothers ( TOL), is saying that the new cycle is ready to begin and that what matters is that new-home prices are going up. "Things are not as bad as the headlines say," Yearley told CNBC, and I believe that's a big change. This company's execs have been real negative. Now we are hearing that we have to start thinking about the six or seven markets that are distressed with foreclosures, and beyond that, things are looking up. The foreclosed housing is not infecting the new-home market, despite the need to put up more capital to buy a house. We know that Zillow has been endless in saying how bad things are, and that sentiment has been echoed by others. We know that Toll has been really talking negative endlessly, with Bob Toll famously saying a couple of years ago that the light at the end of the housing tunnel was an oncoming train. Today from Toll I heard that the light at the end of the tunnel is daylight. I am with Toll. I don't like the homebuilding stocks in general because of their poor balance sheets. But I do like Lowe's ( LOW) -- I own it for the Action Alerts PLUS charitable trust -- and I feel better about it after this interview. Same with Stanley Black & Decker ( SWK), another holding that's way off its highs.
Stop the Oil Shenanigans Posted at 9:45 a.m. EDT on Wednesday, May 25. No, I am not surprised that the Commodities Futures Trading Commission has charged a trading house and a couple of individuals with manipulating the oil market. I am surprised, however, that it took such a little amount of money to do so. The margins involved in controlling the futures and borrowing to corner even the cash market are surprisingly small. They are so small that we don't even know anything about these unknown individuals who were charged with cornering the market. I think that the buying, which created the impression of a shortage, shows that these markets -- so often mentioned as "too big to manipulate" -- are really small potatoes. One can only imagine what would happen if a couple of big guys got together to do the same thing, a logical presumption given that oil drove to $147 not long after this alleged cornering. The current regime of low margins and small amounts of storage of the commodity makes the oil market way too easy to manipulate. Plus, the regulators and the all-powerful exchanges are so pro-trading that they can't possibly have the national interests at heart. Not to mention the CFTC is undermanned -- you really have to have an obvious plan to be caught by them -- and the exchanges specifically promote more trading. The way you promote more trading is simply to keep margin requirements as low as possible to have even the smallest players make big trades, as evidently happened in this particular case. While no one wants to see this kind of activity, it is a total verification of what I've said endlessly here, and what the companies and principals in the oil business have said to me over and over again -- the oil market is way too susceptible to squeezes up by small players using margin. The lack of storage space and the huge amount of oil that can be hoarded by these players makes these markets totally unreliable. And to think that these little twerps boosted gasoline prices; you can only imagine what a couple of sizable hedge funds could do.