Archive through April 14, 2008

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lafee

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Post Number: 829
Registered: 04-2003

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Monday, April 14, 2008 - 09:53 am:

The US dollar jumped in value over the weekend. The EURUSD opened up @ 15681 from a close of 15808 - a large weekend gap to be sure. The G7 meeting, the most likely cause.

Although, I don't think much was said about how to stop the US dollar slide - traders seem to thing they will do something.

The EURUSD is currently trading @ 15720. I bought in @ 15700. I think if we can hold the this mornings low today we might have an inflection point and a long term long might be feasible. I have a very short stop on this trade - just below the intraday low. I will not move my stop and see what happens.

If the EURUSD can close the gap this afternoon, Wall St could get dangerous tonight.

Cheers Lafee

Don't ask an academic if what he does is relevant

ody

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Post Number: 2331
Registered: 10-2006

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Votes: 0


Monday, April 14, 2008 - 10:57 am:

REPEAT: DON'T BE COMPLACENT ABOUT E.G. MACARTHUR COAL

On Thursday last I expressed misgivings about this stock, which because of its impressive graph and the colossal rise in coal prices one might expect to go UP. It had, however, fallen from Wednesday 9th April, and on bad news, which is why I drew attention to it. I was asked whether I was joking.

Well, no, I was not: this is just the sort of stock which one might over-confidently buy on the basis of past performance and the recently announced rise in the prices of various kinds of coal, without taking into account the state of the company itself.

Anyway, at this moment the price is something like $12.62. On the 9th, it was $14.06. Size of fall: 10.24%.

This does not imply, of course, that it may not go up again. But in my experience, once a company has been flavour of the month and has been bid up high, the price often falls if either the price has been bid up on the expectation of good news (in this case the price of coal), or if bad news is announced about the company. In the case of MCC, we have both of these operating at once: the good news and the bad news are both out, and as the market is once again in gloom, it is quite possible that the price will fall yet further before it turns around again. In any case, the fall has been about 7% since my warning, so if I HAD been joking I would by now feel quite guilty. As it is, my warning seems to have had point to it. Given the announced price rises for coal, the fall might, of course, not last that long.

But as I said before, it is not just a matter of taking advantage of coal prices, but of finding the right stock(s).
This one has shown significant volatility before, as it has both (a) great promise, and (b) significant difficulties.

rdumas

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Post Number: 1316
Registered: 11-2006

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Monday, April 14, 2008 - 12:29 pm:

Hi Ody,

Re MCC. This is one of those instances where the FA and TA paints a slightly different picture for an investor on the suitability of a stock for investment purposes. As can be seen from the chart below MCC has been trading in a channel since early October 2007 with the 4 week EMA consistently above above the 10 week EMA and the 10 week EMA consistently above the 30 week EMA. This shows a good Weinstein stage 2 phase for the stock and hence eminently tradeable from a medium to long term perspective.

The fact that it is trading in the upper half of the bull channel shows its current strength. Note that the RSI has moved away from its overbought level and is back around the 51 level.

From an FA perspective the earnings in December 2006 Interim report were 22.64 cps which dropped to 7.21 cps in December 2007 Interim report which obviously was not a good sign. This reduction in earnings growth didn't substantially affect the share price too badly at the time as I suspect that the market believed in the longer term view for coal.

The June 2008 final report also shows a reduction in earnings. Throughout the period from December 2006 through to now the P/E value for the stock has been through the roof. As of yesterday MCC's P/E value was 108.29 compared to the group average industry P/E being a mere 13.68 !!!!

The forecast earnings for June 2009 are expected to be massive and this will bring the P/E and PEG figures for the stock down to more normal and safe levels.

So, it would appear from all of the evidence that the stock is extremely well liked by the market and this love of the stock is based purely on the high expectations that the market has for the company from a future perspective. The danger of course is that if the earnings in 2009 don't meet expectations then there is a HUGE potential for the stock to absolutely TANK big time !!!!! At the risk of once again being accused of agreeing with (you know that is a very nasty trait that we exhibit) I must say that your warning 'DON'T BE COMPLACENT ABOUT MACARTHUR COAL' is based on very sound reasoning.

resillent1

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Post Number: 419
Registered: 10-2006

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Monday, April 14, 2008 - 01:06 pm:

Lafee

The Taleb link you provided is very good. He is a very interesting thinker.

I noted he answered a question about Warren Buffet's success.

Buffet’s own perspective on his successes was given in a speech in 1984 originally aimed at rebuking efficient market theory. Does it also rebuke Talebs perspective that his results are just a random outcome?

http://www.tilsonfunds.com/superinvestors.pdf

Cheers

(Message edited by Resillent1 on April 14, 2008)

lafee

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Post Number: 830
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Monday, April 14, 2008 - 01:55 pm:

Hi Resillent

All Taleb is saying is that he cannot be certain that his results are not random. That given the amount of market participants over the years it is 'possible' that a Warren Buffett could emerge from luck alone.

He believes that skills improve ones chances but that they do not guarantee success.

Cheers Lafee

Don't ask an academic if what he does is relevant

sway

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Post Number: 205
Registered: 12-2005

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Monday, April 14, 2008 - 01:58 pm:

ody wrote on Monday, April 14, 2008 - 10:57 am:
As it is, my warning seems to have had point to it

Ody, exactly what do you see about MCC's chart that justifies your negative view? It's exemplary if you ask me (wearing my 3 hats -Weinstein, Hull and Guppy and looking at the glass half full)
mcc

I thought you were a medium/long term investor? A 10% correction is a good opportunity to get in or top up.

Sway

lafee

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Post Number: 831
Registered: 04-2003

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Votes: 0


Monday, April 14, 2008 - 02:06 pm:

Resillent,

Victor Niederhoffer asserts that most hedge funds set up to utilize Grahams Value strategies have gone belly up. That Buffet is the exception in a long list of failures.

I do not know if he is right or wrong. His research is usually pretty robust.

Cheers Lafee

Don't ask an academic if what he does is relevant

resillent1

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Post Number: 420
Registered: 10-2006

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Votes: 0


Monday, April 14, 2008 - 02:30 pm:

Lafee

The article written by Buffet goes straight to the question of whether the results could be random and concludes it to be unlikely. Given the mind of the man it's worth considering his viewpoint.

But in general I agree that a lot of what is attributed to one thing or another is in reality often no more than just random outcomes.

Will check out the research you mention to get its perspective.

ody

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Post Number: 2332
Registered: 10-2006

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Monday, April 14, 2008 - 03:31 pm:

MCC (SWAY, RUDY)

My reservations about the stock are in essence as follows. I quote part of Rudy's post and comment:
-----------------------------------------------------
The fact that it is trading in the upper half of the bull channel shows its current strength. Note that the RSI has moved away from its overbought level and is back around the 51 level.

AGREED: NO PROBLEM THERE, IF ONE SEES THE STOCK PURELY WITHIN ITS OWN CHANNEL. BUT SEE BELOW. I DON'T REGARD THE STOCK'S OWN CHANNEL AS SELF-PROPELLING.

From an FA perspective the earnings in December 2006 Interim report were 22.64 cps which dropped to 7.21 cps in December 2007 Interim report which obviously was not a good sign. This reduction in earnings growth didn't substantially affect the share price too badly at the time as I suspect that the market believed in the longer term view for coal.

I THINK THE MARKET HAS BEEN STRANGELY UNCRITICAL OF THE STOCK. IT IGNORES: "FORCE MAJEURE" DECLARED BECAUSE OF ADVERSE CONDITIONS SOME MONTHS BACK; EARNINGS WHICH HAVE BEEN DROPPING; THE FACT THAT THE PRICE IS *VERY* HIGH, GIVEN SUCH FACTORS, EVEN THOUGH THE MARKET WAS STAKING JUST ABOUT EVERYTHING ON A HIGH COAL PRICE ALL ALONG.

The June 2008 final report also shows a reduction in earnings. Throughout the period from December 2006 through to now the P/E value for the stock has been through the roof. As of yesterday MCC's P/E value was 108.29 compared to the group average industry P/E being a mere 13.68 !!!!

THAT P/E IS TO MY MIND OUTRAGEOUS GIVEN EARLIER EVENTS, AND SHOWS THAT THE PRICE IS LARGELY BASED ON THE HIGH EARNINGS THAT ARE FORESEEN. BUT THIS IS A CASE, MOST LIKELY, WHERE "IT IS ALL IN THE PRICE", AND I THINK THAT THE MARKET HAS IN RECENT DAYS WOKEN UP TO THAT FACT. I GUESS THAT NOW IT IS/WILL BE SELLING THE STOCK ON THE FACT, AFTER HAVING FOR LONG SUPPORTED IT ON THE RUMOUR. THAT IS, THE FACT OF A HIGH COAL PRICE HAS NOW "CONFIRMED" THE HIGH PRICE OF BOTH THE COMMODITY AND THE STOCK, AND NOTHING BETTER CAN BE EXPECTED. AS, MOREOVER, THE EARNINGS HAVE BEEN A PROBLEM AND SOME PHYSICAL UNCERTAINTIES (WEATHER, TRANSPORT, ETC.) SURROUND THE STOCK, IT IS NOW, IT WOULD SEEM, READY FOR BEING JUDGED AS "PRICED FOR PERFECTION". HENCE, IF IT IS NOT SEEN TO BE SURE TO GO UP (WITH SUCH A P/E), THE CHANCES FOR A FURTHER FALL OR AT SIDEWAYS TRADING SEEM TO ME HIGH.

The forecast earnings for June 2009 are expected to be massive and this will bring the P/E and PEG figures for the stock down to more normal and safe levels.

YES - BUT THOSE EARNINGS ARE KNOWN TO BE WHAT THEY ARE ASSESSED AT AND MEANWHILE PEOPLE HAVE A LONG WAIT, AND PLENTY OF TIME TO CHANGE THEIR MINDS ABOUT THE QUESTION WHETHER THE PRICE WILL/CAN RISE FURTHER.

ody

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Post Number: 2333
Registered: 10-2006

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Monday, April 14, 2008 - 05:24 pm:

BUFFETT and his followers

When you read Buffett it all seems actually very simple, and this has seduced huge numbers of followers. In truth very few that I have come across, either in reading about them or personally, have been remotely as successful as he, so I think that one really must conclude that IN PRACTICE "being a Buffett" is not nearly as easy as it seems. Indeed, if it were, there would be many KNOWN followers around whose wealth closely matches his own.

My own conclusion is that his results are not "luck" - they are far too consistent and good for that - but that Buffett's own capacities are quite extraordinary, and that his writings cannot be used as some sort of manual that will inevitably make one succeed like the master. And, unfortunately, in the hands of his less skilled followers, the results are often little short of disastrous.

Roger Montgomery of Clime is one of these fanatical followers. He invested heavily, for his fund, in some stocks bought on Buffett principles (he sounds like an absolute clone about what he does). One of his elite choices was Credit Corp. Instead of selling that with a good profit in it, as some of us lesser mortals did, he kept it as a huge holding, and of course there is now very little left of that money.

It was probably not his only grotesque miscalculation, for the price of his fund is a far cry from what it used to be. Of course, like a true "value investor", he maintains that the fault was not his, and indeed that his choice is not shown to be wrong. His explanation: the company misled its shareholders. I THINK he is still holding the stock, which is also typically what Buffett fanatics tend to do. As Buffett himself generally manages to extract value over the very long term, they think that the same will happen in their case.

Having seen a lot of this happen over the years I would immediately quit any fund (if I owned one) managed by a self-proclaimed Buffett follower. This says nothing against Buffett of course - his results speak for themselves. But for some reason (I haven't worked out what it is), his devotees usually are not only not nearly as good, but often quite poor investors - full of dogmatic beliefs and erratic actions which they'd better be without.

I may exaggerate: my comments are largely based on prominent acolytes who over the years here in Australia have acted in the kind of way that Montgomery does. I know at least one stockbroker who also buys (for private use) stocks that have a tendency to disappoint, which are then kept for years on end in the belief - usually mistaken - that they will automatically come back up again. So if you want to follow Buffett, I think you'd better be sure you are as bright as the man himself, or you have to be able to read between the lines in order to find some things that he has omitted to state (possibly unintentionally) but which are a vital ingredient for success. I think that the latter is a real possibility, as his gifts can't be pure magic, while yet his followers - often not actually stupid, and inclined to do very literally what he appears to instruct - just don't manage to imitate his results. Quite the contrary, in several cases.

lafee

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Post Number: 832
Registered: 04-2003

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Monday, April 14, 2008 - 05:29 pm:

Just purchased some puts on the DAX. The US$ has reversed somewhat. Looking bearish for equities tonight. Will look to short DOW again.

Cheers Lafee

Don't ask an academic if what he does is relevant

captain_chaza

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Post Number: 3144
Registered: 02-2003

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Monday, April 14, 2008 - 05:36 pm:

Ahoy Officers Lafee and the Resillient ONE

The only quote I can take onboard from Cdr. Warren Buffet is

"If you play poker and you don't know who the SUCKER IS?
then YOU ARE THE SUCKER!"

His words, Not Mine!
I am not that clever

Salute and Gods' speed

"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.

"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893

"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897

ody

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Post Number: 2334
Registered: 10-2006

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Monday, April 14, 2008 - 05:38 pm:

MCC: ADDITION

My quoting some of the statements that Rudy made was purely because they were useful to me in what I wanted to argue, as I was asked to explain, by Sway, what my objections actually were. So my quotations were not used to imply that there was anything wrong with the conclusion of Rudy's post, and I should have made that quite plain. At the risk of being accused of backslapping I quote that ending here:

"So, it would appear from all of the evidence that the stock is extremely well liked by the market and this love of the stock is based purely on the high expectations that the market has for the company from a future perspective. The danger of course is that if the earnings in 2009 don't meet expectations then there is a HUGE potential for the stock to absolutely TANK big time !!!!! At the risk of once again being accused of agreeing with (you know that is a very nasty trait that we exhibit) I must say that your warning 'DON'T BE COMPLACENT ABOUT MACARTHUR COAL' is based on very sound reasoning."

philr