Equities, Technicals, Economics, CPI, Networking and other Assorted Off the Wall Thoughts…
It has been a few weeks since I posted. I have been traveling a lot (27k air miles so far in 2013) and have not found the time to write. Here are some random thoughts I have been collecting over the past a few weeks.
Equities: The market does not feel long to me. I know it has been making highs and I knew the trade was to be long through the end of year kabuki theater drama from US politicians around the fiscal cliff. With that non-sense out of the way and the long trade exhausting itself as we moved into March, we are transitioning to hard data points and so far; not so good. I cite as examples ORCL, BSFT and FFIV. FFIV is the most recent data point. Two days prior to the pre-neg, FFIV was upgraded 2X, initiated with a BUY and had a positive call. One of the upgrades said “positive checks that indicate healthy demand in core markets, traction in security, a new product cycle” and the positive call said “expects F5 to report solid Q2 results and provide strong Q3 guidance…Q2 results to be roughly in-line with analysts’ consensus estimate and at the high end of the company’s guidance.” Here is a link to my FFIV chart. It is based on a 10Y weekly, but I reduced the range to 5Y to highlight the details. If I knew nothing about the company I would focus on the second fall to the 50 Fibb within 18 months. This indicates to me a lot hot money in the stock on both sides, but ultimately it is a series of lower highs and now trading at the support level. I think you can own it long here for a bounce, but the position must be small. The risk is guidance when they report on April 24, which leads to my Q1 2013 earnings thesis.
As Q4 closed out and CNBC had their fiscal cliff ticker going, I think a lot of sentiment went on the long side for Q1. Meaning, CxOs were thinking that Q1 had to be better because we avoided the fiscal cliff and spending (CAPEX) was restrained in Q4. With the fiscal cliff kabuki theater behind us, Q1 would be better, at least on the bookings side and we would fly through the air pocket created in Q4.
I do not think Q1 spending was better and in my view the risk is not in the results, but rather in the guidance for Q2. I think CxOs drained backlog to make Q4 numbers and hoped Q1 would be better on the booking side to replenish backlog, but this did not happen. I think companies will report in line with a few misses here and there, but the guidance will not be broadly supportive of higher multiples. If I was a portfolio manager with the market making highs, I would bet against Q2 guidance.
LONGs: BSFT and AMT
SHORTS: US Treasuries. As for my short USTYs, I am getting killed, but the position is small.
Technicals: I am off GOLD, but I think I am going to short right here as 1300 is more likely than 1800. Here is a link to my GOLD chart. GOLD put the 150MA in play this week and the 200MA is highlighted below. GOLD is at 1580 on the weekly close, if it sees >1540 and puts >1520 in play, we are going to the 61 Fibb at 1437 real fast and if there are margin calls, I can see 1300 quickly, which will bring in new buyers. As for the SPX, we are right at the top and the new economy better be emerging and guidance for Q2 better be supportive or we will lose gains over the last run up. Here is a link to my SPX chart.
Economics: I read this piece on ZH. I went to the EIA website to the look at the data myself. Here is the link to the EIA chart. I really do not know what to think about the total sales of gasoline by refiners chart. Is this reflective of the economy? Does it reflect improving MPG of the US automotive fleet? Many public transportation fleets have been converted to CNG, is that in these numbers? Are we driving less? Environmentalists must be happy, but investors in green technologies must be unhappy.
CPI: I am attaching a piece sent to me by a friend (who wrote a much longer economic rant that he will not let me repost). This is a Bill Gross piece on CPI from October 2004. It is an interesting read (almost 9 YEARS ago) with a summary that says “The CPI as calculated may not be a conspiracy, but it’s defiantly a con job foisted on an unwitting public by government officials who choose to look the other way or who convince themselves that they are fostering some logical adjustment in a New Age Economy dependent on the markets and not the marketplace for its survival. If the CPI is so low and therefore real wages are in the clack, tell me why U.S. consumers are resorting to hundreds of billions in home equity takeouts to keep consumption above the line. If real GDP growth is so high, tell me why this economy hasn’t created any jobs over the past four years? High productivity? Nonsense, in part – statistical, hedonically created nonsense. My sense is that the CPI is really 1% higher than official figures and that real GP is 1% less. You are witnessing a “haute con job” can one ay those gorgeous models, will lose their makeup, add a few pounds and win up resembling a middle-aged Mom in a cotton skirt with better things to do than to chase the latest fad or ephemeral fashion. If those Moms are holders of government bonds based upon a benign outlook for inflation, they ha better cash some of them in, especially at today’s 4.0% yield for 10-year Treasuries.” Here is a link to my 10Y chart of UST1OY yields. No surprise, Mr. Gross was correct and the question after reading the NFP on Friday is where are we going from here and I suspect the an indication of the truth will be found in Q2 guidance.
Networking or that SDN Thing: I will be at ONS 2013 in a week and I am speaking at a few financial conferences in NYC about SDN and networking in May. Expect a heavy dose of SDN and networking posts over the coming weeks. I will also post some thoughts on earnings and some American Civil War related posts. One hundred and fifty years ago, my fourth great grandfather was beginning a campaign that would lead him to GettysburgPA on July 3.
* It is all about the network stupid, because it is all about compute. *
** Comments are always welcome in the comments section or in private. **