Category: Articles

If only this picture was true.

At least when it came to trading.

So far, this year has been a trader’s dream come true.

I’ve made trades each and every trading day of the year, but the only problem has been that there is no trading on Saturday and Sunday.

On top of that, you’ve got those pesky holidays.

The past couple of years I welcomed some of those pesky holidays.

But for a really large part of the 2007 to 2014 period I was actually upset whenever there was a day off from trading.

It’s nice to feel that way again. Continue reading “Wouldn’t that be Great?”

Visits: 16

I don’t know what it is about 2017, but whatever it is, I want to be dealt in on it.

While a 1.3% increase YTD on the S&P 500 isn’t necessarily the kind of thing that legends are built upon, it’s far, far better than the first 10 days in 2016.

I don’t like to project very much, especially if that means counting and spending money that you don’t really have, but 2016 ended being up such a nice year when compared to the already good S&P p500 performance, that I am beginning to salivate about the prospects for 2017.

That’s probably not a really good idea.

What I especially like is that I’ve had a trade in each of the 6 trading days to date.

That’s a pattern that I would really love to continue.

Today’s early rollover of the Cliffs Natural Resources puts in the face of commodity strength is something that I hope to be doing a lot of, much as was the case with Marathon Oil in the latter half of 2016. Continue reading “Deal Me In”

Visits: 8

I wasn’t really expecting to spend much money this week.

What I really wanted was to replicate last week and to do that for the remaining 51 weeks of 2017.

Back in the days when I did initiate lots of new positions, if you go all the way back to 2015, it always seemed as if money was burning a hole in my pockets or that maybe I believed that cash was only good to wipe one’s butt.

That’s pretty far from the truth, but that’s what it looked like and that’s what it felt like, even though I know myself pretty well.

So no one was more surprised than me, after having toiled hard to raise cash reserves for about a year and finally getting to a point that I felt was good enough to be prepared for whatever awaited, that within 30 minutes of the opening bell I had already opened 2 new positions.

I’m still of the mindset that I would like to see my existing positions get used on a much more frequent and regular basis through the sale of calls, but I just couldn’t resist this morning. Continue reading “Spending Money”

Visits: 12

There’s really no reason to be surprised, but I woke up this morning realizing that earnings season has to be starting soon.

As if it ever really ended.

What really makes things different this quarter is that Alcoa, even though it has now been out of the DJIA for a little while, is no longer the official/unofficial start to earnings season.

The official start of earnings season honors went to JP Morgan after Alcoa left the DJIA, but Alcoa still came first.

No more.

This week, earnings start for real on Friday morning, with JP Morgan getting things started and Alcoa doesn’t announce  until a full 11 days later.

It’s a whole new world order.

 I was greeted this fine snowy Sunday morning with a very nice Tweet.

What was also very nice was not having to write an article in a rush to meet an unclear deadline in order to get potentially time sensitive material posted.

Or, for that matter, writing it at all.

My response to the Tweet was that 300 of those articles was enough and so I then did what was the only seemingly natural thing. Continue reading “It Really Shouldn’t Come As a Surprise”

Visits: 11

Following a pretty good day today, where we really did come close to the mystical 20,000 level of the DJIA,. there was a big surprise after the closing bell.

The surprise that came can give you just a little idea of how well anyone really knows what’s truly going on.

If you were following the market today, you may have noticed that national retailers were really strong.

In fact, I took the opportunity to sell some calls on a couple of lots of Macy’s shares that have been sitting around uncovered for the past week or so.

I like to at least consider selling calls, even if the strike price isn’t something to really make me salivate, as long as the shares are moving strongly at the time.

That described Macy’s, as it was more than $1 higher earlier in the trading session.

While I didn’t think about selling calls on Coach, Kohls, nor Abercrombie and Fitch, they too were all strongly higher during the day.

You may also remember that I sold calls on The Gap, yesterday.

Then a funny, well maybe not too funny thing happened after the close.

The bottom fell out as Macy’s and others reported the not so good Christmas sales news.

Sales stunk.

Not only did sales stink, but guidance was moved lower.

How could that be? Especially as the economy is supposedly heating up?

So we await tomorrow’s Employment Situation Report and will be left to wonder, if the news continues to be good, just where people are spending their money.

The obvious answer is that they’re doing it on Amazon or they’re just not spending it on old fashioned things like sweaters and place settings.

Maybe they’re spending it on streaming data plans. Continue reading “Santa Steals Away Joy from Retailers”

Visits: 10

 What a way to start the new year.

Not even close to the way 2016 started, but then again, 2016 wasn’t all that bad.

Right?

For a little while it looked as if 2017 was going to start off with a major disappointment as the market decided to do something that it hadn’t done for a while.

In fact, it hasn’t really happened since we accepted the fact that we were getting someone very unexpected as our new President.

What happened today was that the stock market actually followed oil, again.

That was the story for most of 2016 and the story worked out pretty well, as long as you didn’t sell your oil losers in 2015, or repeatedly went back to the literal and figurative well in pursuit of the gains.

Even though there wasn’t too much evidence that the rise in oil prices was actually tied to increasing demand, the stock market just looked at a year of slowly, if not steadily increasing oil prices, as a good thing.

Who would have guessed? Continue reading “Let the Partying Begin”

Visits: 23

A couple of years ago I finally realized that I like earnings season.

Visits: 9

(A version of this article appeared on TheStreet)

My guess is that if you asked people to describe the face of the individual most tied to the idea of destroying capitalism you would evoke images of Marx, Lenin or Castro, men of distinctive features and great bluster who made no secret of their disdain.

Ask me and I see a man who is softly spoken, clean shaved, spares the bluster, lacks distinct or memorable features, although possesses a distinctive laugh and has greatly benefited from the system he is destroying. I see Jeff Bezos as the anti-capitalist who is methodically destroying the foundations that allowed the United States to thrive.

First, let’s acknowledge that Amazon (AMZN) is an American success story. Financed by family funds and embracing technology as none had before, it survived an era that many did not and turned a concept into reality that has subsumed retailing, forcing retailers to create online shopping strategies.

Amazon will report its earnings on January 30, 2014. While I don’t invest with items such as P/E, in mind, I know enough that Amazon’s P/E of 1414 puts to rest the derisive comments about it being a non-profit. But I also know that no one believes in the axiom “we make it up in volume” more than Amazon, which had a 0.19% profit margin last year, compared to a sector average of 9.5%. Of 20 national retailers, only four had profit margins lower than Amazon; JC Penney, Sears Holdings, Best Buy and Aeropostale.

And that is precisely the problem. That is how Amazon is killing capitalism in its methodic march to eliminate competition, beginning with the already wounded. As the saying goes, “the market can stay irrational longer than you can stay solvent.” Bezos, though, isn’t being irrational, as demonstrated by competitors that are slowly melting into irrelevancy. With size comes power, in this case pricing power, which to a degree has been supported by an asymmetric application of sales tax collection requirements. In essence, indirect government support undermining existing capitalist structure in support of a venture evolving toward a monopolistic or market controlling position.

At a time when consumer discretionary spending doesn’t appear to be consistent with an expanding and improving economy price sensitivity remains an important motivator and Amazon maintains its advantage by aggressive pricing at the expense of margins. With over $70 billion in revenues it trails Wal-Mart, but exceeds the combined revenues of Sears, JC Penney and Kohls, while matching Target’s revenues. The latter two companies have scarce cushion in their profit and operating margins to withstand further erosion by an energized Amazon, ready to continue decreasing its margins, as it has done over the past 3 years.

AMZN Profit Margin (Quarterly) data by YCharts

Don’t get me wrong. I am a capitalist through and through and believe that competition is what drives us forward, while other systems are left to the ash heaps of history along with the dodo. The same fate should befall businesses that simply can’t compete on the basis of that blend of price and quality that appeals to varying segments of the population.

Competing against Amazon, however, is somewhat like the Aztecs being faced with gunpowder propelled projectiles.

Admittedly, I shop Amazon and will probably continue doing so even as it increasingly loses the sales tax advantage it held over brick and mortar retailers. However, it is now that next phase, as that artificial pricing advantage disappears, that Amazon can only do one thing to maintain its position. It has to further reduce its profit margins.

While Bezos may not be acting irrationally, investors may be accused of doing so, particularly in light of margins. Most any other retailing CEO would have been shown the door with performance such as Amazon delivers. However, it’s share price that talks and you can’t argue with a P/E of 1414, except that it’s 1414. The realization that profits and return on equity are important concepts is currently suspended as there is implicit buy-in from investors that the strategy of driving the competition out of business is a sound one in anticipation of even greater share appreciation rewards. Clearly the vision of near monopolistic existence has its perceived reward.

While Amazon may not solely be to blame for the woes at JC Penney (JCP) and Sears (SHLD), it may not be entirely coincidental that JC Penney and Sears profit woes began in earnest at the time that Amazon’s own profit margins began decreasing in 2011. Amazon is undoubtedly a contributor not just to those growing losses, but also to the degradation of the shopping experience as so graphically illustrated in a recent series of articles by Rocco Pendola. When you can no longer compete on the basis of price and are unable to generate sales revenues and cash flows, the only recourse remaining is to cut costs.

Fewer employees, bare shelves and lack of facilities maintenance are the natural next stages. As predictable as the “Five Stages of Grief,” except there may be no end stage healthy resolution in sight.

While Bezos is on a path that endangers capitalism, his continued success may really jeopardize Amazon’s own shareholders whose fortunes are predicated on a model that history has shown can’t be sustained. Eventually, profits and not promises, are the engine that drive companies and their stocks. Sooner or later, cash flow is no substitute for profits.

If you want to see capitalism saved, the answer is a plummeting Amazon share price and subsequent investor pressure to increase profit margins, restoring balance to the retail sector and giving the likes of JC Penney and Sears the ability to dodge those projectiles.

Visits: 5