Year: 2014

Margin and Cash

Hamilton

Margin Debt Surges In December - STA WEALTH - Google Chrome_2014-01-28_13-41-50

This is an interesting website that you may wish to visit every now and then ( www.stawealth.com) . This chart is freely available on this website so I am reproducing it to alert you to its existence. It is an excellent website.         Shown here are 1. Margin debt, that is how much money is borrowed against stock as collateral and 2. The net credit balances of mutual funds etc. The first has never been higher and the second never lower. Both are expressions of an unbelievable bullish outlook on the market. And, by the way, the correlation between the margin debt and the stock markets, say the Dow or the S&P is readily apparent.

What we are still missing is a good chart of the number or value of stocks that have been bought back. My understanding is that over the past 12/13 years the total for buy-backs is now running at $3.1 trillion, which, by the way, is about three times as much as the entire assets under management in the Canadian mutual fund business. Some things just keep on going un till, of course, they stop.

AC.A, Air Canada

Hamilton

ac.a jan 27 2014

We know that buy-and-hold does not work (anymore?). We also know that owning airline stocks has NEVER worked. Ergo if it does by chance work that is because it was a trade and you were lucky. A ten-bagger in a little more than two years is lucky indeed. We are now at the nice 50% retracement Fibo level, to the tick almost, and we would let caution prevail again by getting out, now. See more detail below;

ac.a s jan 27 2014

OTC, Open Text

Hamilton

otc jan 26 2014

This one looked pretty ripe at the $70 level. Here we are $40 to $50 higher, all in just a year and a bit. This is now a sell in our opinion. Friday it traded in the opposite direction to the market, going up about 10%. A number of things contributed to the gain, most importantly the announcement after the close on Thursday of a 2 for 1 stock split. The extra share will be paid as a dividend which is tax efficient for a lot of investors. Feb 7 is the date of record for this event so you have another week or two to figure out if a dividend is preferable to capital gains in your individual case. The stock is trading at a 40x p/e multiple and the RSI is above 80%, but most importantly the stock is climbing vertically. We have no idea what enterprise information management systems are but we suspect that they behave much like that double-dekker plane that falls back into its own exhaust fumes once the momentum is lost. The logical target is about $50, after the split that is $25.

Natgas, HNU update

Hamilton

See our post of April 18, 2012,  under Natgas, HNU and Gas. The last one we could not find anymore, it is the Claymore ETF but the two others will suffice. Here are today’s charts;

Natgas jan 24 2014HNU jan 24 2014

There may well be a lot more to go, but we do not like the speed at which things have gone up recently and also we do not like the DJ Titans Gas 30 index. So we recommend stepping aside. On both you have easily doubled your money in just under two years, which, using the rule of 72 amounts to a return of 36%, compounded per annum. Note that the RSI and the MACD are not confirming the higher prices. Also, on the futures, there is a fairly large premium on the front (spot) contracts but that quickly turns around when you go out further in time (backwardation) all of which points to lower, not higher prices in the future.