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Sunday, August 13, 2006

cheap stocks

recent market activity has proven to me that it is a good environment for value investors - especially for many technology stocks that are selling at unprecedented low prices – some are even lower than what they were in 10/02.

affx, opwv, cree, vrsn, cybx, cogt and wbsn are such stocks that i believe are extremely undervalued if you view them in a 2-3 year time frame. cybx, in my opinion, will be bought by a larger medical device maker if the stock does not recover soon. wbsn is extremely cheap if you value the stock with ev/fcf (enterprise value/free cash flow) ratio. wbsn will generate enough cash in the next 3-4 years to retire all the outstanding shares if we assume the same level of cash flow and zero growth. wbsn itself may pass the rapid growth stage but if you simply value it as a cash cow, the current stock price is still an absolute steal. i believe the stock is in a distribution phase – value players are replacing the original growth crowd thus the stock price may be very volatile in short term. the company itself is using the extra cash to buy back shares.

investors are fleeing from high-beta stocks (mostly bio and tech stocks) to play defensive in a possible economic slowdown. the market’s focus is on anything negative. sooner or later people will change their mood from fear to greed and realize that things are not as bad as they thought and start to buy stocks again. i have no idea when this will happen but it will probably happen sooner than most of us predict.

Thursday, August 03, 2006

more trading

the day's not over yet, but having a good day, supplemented by some good trading. bot some abax, woof, prxl, shld, ir, ep, lvs and one other one i think for a trade this morning about 10 my time; all worked out well except for lvs, which i think i'll try again tomorrow because the analysts will come out in force and defend that one i think. anyway, netted after everything about 300+, risking about 30k in capital. i'll take that any day, because that combined with my expected gains in my 'regular' portfolio should help me do well in the future. am certainly learning when to buy, what to buy, and when to sell on the short-term trading stuff. today's gains are interesting, in that why are so many buying in front of the mega-huge, spectacular jobs number tomorrow that will !determine! the fed's course next week which will of course dictate the future course of human history? could something somewhere have been leaked? makes me wonder sometimes.

Tuesday, August 01, 2006

quite a day

today was a dreadful day for stocks, but i had a very good day due to trading well. decided to buy 500 of sct in the premarket at 4.60, which was a fine move since it finished at about 6.84. also traded it all during the day, making quite a bit doing that as well. also traded well in avci and cvo. so my regular portfolio was pretty much crushed today, but thanks to the trading i had a really nice up day. hopefully stocks can at least stabilize starting tomorrow; although that's probably the best that can be hoped for with the employment data on friday and the fed next week. have no idea what they'll do, but i think it's obvious that the fed needs to quit raising rates immediately; meaning no rate hike next week.

Friday, July 28, 2006

trading update

to follow up from the trading the other day, was a mixed bag, with it all settling out at either a very small gain or loss - didn't bother to figure it exactly; wasn't really worth my time since it's immaterial. anyway, lost a bit on wire, selling at basically 36.50. lost some on ups, selling at about 68.50 or so. also lost a little on gm, selling at just over 32. however, did very well with wns, selling at almost 25; and did well with cymi too, selling at about 36. today, saw that rack issued forward guidance that wall street didn't like - although i think it was less than a 5% shortfall - and the stock was getting murdered, down about 38% - yes, 38%. so that looked ridiculous to me, and i bot quite a bit at about 21.33 - since i was having a great day otherwise so i could afford to risk some. and plus, after sending it down almost 40%, how much lower could it go? so i figured it would bounce before the close - NO, it didn't. was down over 40% at one point, but was patient and sold it at about 21.20. just thinking about it really astounds me - they reaffirmed full-year guidance but lessened the current quarter a bit - like i wrote less than 5% i think - and it gets slashed nearly 40%. that's insane. so it'll probably be down again on monday and then i'll buy some for a trade probably on tuesday about 10 my time - that's when i'm looking for a bit of a bounce back.

Wednesday, July 26, 2006

finishing my thought

to finish my thought, i'm thinking the market won't melt down today like it has in the recent past. am thinking that instead of finishing down about 100 and 30, like it has recently, that buyers may come in and steady the indices. am betting that some end of the month money will come in and do some buying - especially in the last hour of the day.

trying some trading

am trying some short - term trading today on the weakness, which is actually fairly strong weakness, imo. am thinking that, although the averages may not finish green today, they will be higher than they are now - about 40 down on the dow and 19 down on the nasdaq.

to that end, bot some wire at about 37 off their good results; bot some ups at about 69.40 thinking that the selling might be getting overdone down here; bot some gm at about 32.50 off their surprisingly good results; bot some wns at 21.50 off their ipo; and bot cymi at about 34.25, also thinking the selling may be a bit overdone here.

Monday, July 24, 2006

the yield curve continues to behave in a way that suggests the need for further interest-rate hikes has fallen sharply. in particular, the yield spread between three-month t-bills and 10-year t-notes, the spread found in most studies to have the best correlation with future economic activity, remains inverted, at negative 4 basis points (t-bills are yielding more than 10-year notes). that is just two basis points away from a five-and-a-half-year high. the inversion, which tends to only occur during times of economic weakness, strongly suggests that the bond market sees any future interest-rate hikes as unnecessary. we'll see..........

Tuesday, July 18, 2006

almost, but not quite, sayeth the fed funds futures

are we there yet? almost, but not quite, sayeth the fed funds futures.

fed funds futures prices have done a pretty good job at predicting what the fed would do over the last four years. when the funds rate held steady during 2003 and the first half of 2004, that's exactly what the market anticipated. the futures prices also perfectly anticipated the timing and magnitude of the rise in interest rates during the second half of 2004 and first half of 2005.

the market was a little surprised that the fed continued with the tightening as far as it did during the past year. looking forward from either 7/1/05 or 1/3/06, the market was expecting one less hike in the funds rate than actually materialized over either 6-month period.

the near-term yield curve implied by the fed funds futures contracts has flattened even further since january. the market now seems to be betting on one more rate hike out of the remaining fomc meetings for this year, but no more.

many traders seem to view an august rate hike to 5.5% as a little more likely than not. and hopefully, that will be it.

another reason for the fed not to tighten in august

further reason for the fed to pause at its 8/8/06 meeting was just delivered by the national association of home builders, which released its monthly housing market index for july. the index fell to 39 from 42 in june, its lowest level since 12/91, a huge decline from a year ago when it stood at 70. we'll see..........this weakening of the housing sector, combined with other data suggesting a weakening in the u.s. economy, provide ample justification for a fed pause. is the housing market as bad as these data suggest?