01 October 2009

A Flyby of Two Airline Stocks

Audit Integrity recently released a list of 20 companies likely to go bankrupt in the next year. Two companies on the list were domestic carriers, AMR, parent company of American Airlines with an eponymous ticker, and Continental Airlines, ticker CAL.

Around the time I read this list, the Financial Times posted a quick profile on the foreboding future for U.S. airlines. The FT name-checks both CAL and AMR, but singles out US Airways as the most vulnerable:

US airlines’ strategy can now be reduced to one word – survival. Overheads and staff costs have been pared to the bone. Every financing option has been sought and, for some airlines, exhausted. Money was first raised against the good aircraft, then the old aircraft and finally less dependable assets such as spare parts and rights to landing slots (as Delta did last week, as part of a fund raising). Vendors, from the aircraft manufacturers to maintenance companies and credit card partners, have been tapped for financing support. Finally, helped by buoyant share prices, Continental, American Airlines and US Airways have issued equity.

But industry revenues per passenger are down about 20 per cent on last year, while domestic capacity is down by a 10th, notes Creditsights, and still shrinking. Oil at $65 a barrel is only just tolerable. At the very least, airlines need corporate travellers to return. But to address the problem of shrinking sales and high fixed costs, ticket prices must also rise. Unfortunately, business spending returns only slowly. It took years for prices to start rising after the downturn following September 11 2001.

So the breathing space bought by fresh funds, which in turn appears to have helped propel the latest market rally, is merely that. Up by two-thirds in three months, the sector is being treated as a long-odds bet on economic recovery, but long-term problems of debt and overcapacity remain. Substantial pension payments and debt refinancing must be met in the next two years and there is little slack left to absorb a rise in the oil price or a weak recovery.

For example, US Airways – the most domestically focused, and with perhaps the most marginal route network – has barely any fuel hedging in place now. Should the winter prove particularly harsh, liquidation or consolidation will be the only realistic options remaining. The latter will be good for the industry, if not for the forced mergees, but only slowly and after considerably more pain.

Here are some charts of AMR and CAL:

Of course, it seems that since the airlines were deregulated a few decades ago, they've been as adept at burning jet fuel as they are at immolating shareholder wealth. Why should the next twelve months be any different?

These charts aren't the most compelling shorts I've come across, but like nearly every other equity right now, both AMR and CAL look overextended.

3 Chansons

23 September 2009

Two Poppy Songs

Greg Kurstin, a.k.a. Geggy in the 90's and the Bee in the 00's, is the common thread in these songs. First up is Geggy Tah's single, "Whoever You Are" which received significant radio play during my time living in St. Louis with a car that featured a fully-functioning AM/FM radio, but a busted tape deck. Following that is The Bird and the Bee's "I Hate Camera" in a live clip, and then in a fan-made video featuring the album version.

22 September 2009

Janjuah Is Calling for 550 on the S&P

RBS' Chief Credit Strategist, Bob Janjuah, is back making some bold bearish pronouncements, found via Zero Hedge and this now dead link on Pragmatic Capitalist:

I do however think that we are VERY MUCH in the tail end of the correction of the Oct 07 to Mar 09 bear move, where S&P lost nearly 60% from peak to trough, and where the correction from the Mar low would, at 1120, represent the 50% retrace. Once what I assume is a bear mrkt correction finishes, over the next month or so, I expect the Bear to return with vengeance and I retain my call for NEW LOWS in equities. That’s 550 S&P!!
Okay, here are some meatier excerpts that go beyond the bold 550 call:

HISTORY tells us that this will end in failure, with ugly consequences, the net result being MORE DEBT that needs to be repaid thru vicious spending cuts & higher taxes, a (monetary) inflationary BUST and/or a currency shocker - to be swiftly followed by a longer term Debt Deflationary bust. So, in 1 line, all I think is certain - if you think like me - is that the longer the current bubbles persist & the bigger these bubbles are blown up, the BIGGER the explosion will be when it all goes POP. And realistically, I am talking weeks/moths, NOT qtrs/years. YOU may be smart enough to 'get out' of risk in time, but the overwhelming majority will not. And at that time, there will be NOBODY left to bail us all out......


When risk assets top out - level, timing - is always difficult to predict. I think its weeks/months away, and I very much think we are in the deep tail of the risk asset rally. I know a lot a smart folks who think this can go higher and for a bit longer then I think, and I can see the argument. But nearly all the folks who I respect and have talked to for a long time agree that if it goes on for much longer then it will end in a terrible mess.

Fresh Live Weakerthans

Aside, from the recent Weakerthans show at the Music Hall of Williamsburg:

Plea from a Cat Named Virtute, not from the recent Brooklyn show:

14 September 2009

Inaugural Trams (Live)

This is a video of SFA performing Inaugural Trams at their Highline Ballroom show on 9/11. Their 9/12 show at Hoboken's Maxwell's which I attended did not have the light show, but was far more intimate. But nobody's posted any videos from the Jersey show, so this'll have to do.

11 September 2009

Indicies March Higher as the Dollar Declines

I recently examined the NASDAQ trendline in not one but two posts. The downward trendline that began in late '07 was recently breached during the last five days of bullish market irrationality:

The next chart shows the NASDAQ's incredible bullish march since March. A trading channel seems to have developed. With that in mind, here's my textual annotation from the chart:

The NASDAQ could conceivably trade in this channel. The RSI readings are short-term and medium-term overbought. But shorting the market since March has proven very painful. The fundamentals may still suck, and corporate insiders are selling their shares at astronomical ratios, but I think the weakness of the dollar is helping push the indices higher.

So let's take a look at some charts for the almighty dollar:

The bearishly-inclined, like yours truly, believes there is limited upside to the equity markets right now, but the risk is a cheaper dollar will push the indices higher. The dollar's downward move does look a bit overdone in the short-term if you take into account the RSI readings. But the dollar could fall significantly further to levels seen in the first half of '08.

Saw Doctors

It's been nearly a year since I traveled to Ireland. Perfect time for some Saw Doctors, then.

10 September 2009

04 September 2009


I came across this intriguing blog today, newsfrom1930.blogspot.com. It reminded me of a classic book from the Great Depression, Oh Yeah?, that I've had since childhood. Oh Yeah? in 1931 presented quote after oblivious quote from politicians and businessmen who believed in the early-30's version of green shoots. News from 1930 likewise captures the day-to-day reportage from 80 years ago that eerily parallels much of what is happening today. It's a fascinating work in progress, even though we know what happens.

Here's a link to News from 1930's amusing mission statement and an excerpt:

Q. Okay, why are you doing this blog? Are you saying we're in for a replay of the 30's?

A. How did I know you were going to ask me that? No, I don't think things are going to get as bad as in the 30's.

Q. So you're an optimist.

A. Well, that's only mildly optimistic. I mean things in the 30s got really, really bad. For example, between 1929 and 1932, the number of cars produced declined from 4.8 million to 1.2 million ...

Q. Okay - that's pretty bad, but it's only one industry ...

A. Looking at the economy as a whole, GDP went down by 40% and unemployment went from around 3% to 24% ...

Q. Wow! That is really bad.

A. It's actually even worse than that, because back then many more people worked on farms. When you take out farm workers, unemployment hit 37% - an almost unimaginable level for us today ...

Q. You must be a blast at parties ... Well then, if you don't think we'll repeat the 30's, are you saying, in Mark Twain's words, that history won't repeat but it will rhyme?

A. Hey! I wanted to use that line!

Q. Sorry. Well, do you think that?

A. Yes. I believe 1929-1930 has a couple of important similarities to 2008-2009. First and fundamentally, there was a big buildup of debt leading up to both. This was followed by a couple of major economic problems, including many banks running into trouble and a loss in perceived wealth by lots of people. These problems in turn have deflationary implications since they lead to less credit and spending ...

Q. Could you get to the second point before I fall asleep?

Click this to read the rest.

03 September 2009

The NASDAQ Downward Trend Is Intact

I recently asked which NASDAQ trendline will prevail?

Looks like the overhead downward trend has prevailed:

Click on the image to enlarge. You'll see the NASDAQ has fallen below its recent steep upward trendline.

The Gray Lady and I See Eye to Eye

The Gray Lady sums up my market point-of-view just about perfectly.

First, the bear-market-rally is overdone, with corporate insiders selling their shares:

“The people who know are getting out early,” said Art Cashin, the director of floor operations at UBS, who said his “gut feeling” about the markets prompted him to sell some stocks last week. “This rally’s a little long in the tooth.”

On Friday, the research firm TrimTabs reported that insider selling had grown to $6.1 billion in the month of August through last Thursday, its highest levels since May 2008 — when the Dow Jones industrial average was floating above 12,000, compared with just over 9,500 at Friday’s close.

The ratio of insider selling to insider buying also soared in August, to about 30 to one, its highest levels since the firm started keeping numbers in 2004.

Second, trash stocks, i.e. financials, led this horseshit rally:

Analysts say that financial stocks are looking even frothier as trading in a handful of big banks has come to dominate the action on Wall Street. The KBW Bank Index, which tracks two dozen national and regional lenders, has surged more than 150 percent since early March.

Shares of the troubled insurance giant American International Group have quadrupled. And Citigroup, Bank of America and Wells Fargo, while still down sharply from their record highs, have been some of the rally’s biggest winners.

Third, the overwhelmingly bullish sentiment in the market offers up a contrarian indicator. Other technicals, like the Elliot Wave folks, are also questioning the rally:

Just before stocks turned around in early March, only 2 percent of investors were optimistic, according to the Daily Sentiment Index, which measures the mood of small traders and is run by Jake Bernstein, an independent market analyst. Now, the index shows that about 89 percent are feeling bullish. Investors were equally cheery when the Dow hit its record high in October 2007.

Robert Prechter, president of Elliott Wave International, a technical analysis firm in Gainesville, Ga., cut his negative outlook on stocks in late February. “Now,” he wrote in an e-mail message, “we are firmly back on the bear side.” Investors might be embracing greed once again, but Mr. Prechter said he doubted the stock indexes could replicate the remarkable gains of the past five months.

And fourth, Doug Kass is calling the top:

The hedge fund manager Doug Kass, who declared in March that stocks had skidded to a “generational bottom,” said last week the rally had run its course.

Like other investors who expect the markets to falter, Mr. Kass said he believed the economy was not heading toward a quick or easy recovery. Companies have made themselves look profitable by slashing costs, but he said they are not going to rake in more money in the months ahead as long as weakened consumers stay in hiding.

“I think we’ve seen the high for the year,” he said. “There’s a time to hold ’em and a time to fold ’em. And I think we’re at that point.”

Then there's Paul Tudor Jones, whom Bloomberg reported is calling bullshit on Goldman Sachs' call that the market and economy are in recovery mode:

Paul Tudor Jones, the billionaire hedge-fund manager who outperformed peers last year, is wagering that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery.

Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and market selloff. The firms oversee a combined $15 billion in so- called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.

“If we have a recovery at all, it isn’t sustainable,” Kevin Harrington, managing director at Clarium, said in an interview at the firm’s New York offices. “This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.”

30 August 2009

Which NASDAQ trendline will prevail?

You know I believe the downward trend will finally prevail.

Eno, Clarkson, & an Aston Martin

18 August 2009

The Magazine Cover Indicator Strikes Asia

As I write this, the Asian markets have continued to fall.

12 August 2009

Bearish Projections Come Out of Hibernation

A few weeks back, I wrote that the market was incredibly overbought. Well, that was back when the S&P closed at 954.58. The market continued to surge higher and get even more overbought as it surged past 1000, tagging 1015 last Friday.

The market's downward action this week has worked off some of that overbought condition, and some tremendously bearish near-term projections have come out of hibernation.

The first one appeared in a Marketwatch headline from earlier today:

But one market technician believes trading volume in recent days on the S&P 500 Index is a sign that the broad market gauge will test last month's lows, then likely fall under its March low either next month or in October.

The decline in volume started on Friday and suggests the S&P 500 will make a new low beneath its July 8 bottom of 869.32, probably next week -- on the way to a test during September or October of its March 6 intraday low of 666.79, said Tony Cherniawski, chief investment officer at the Practical Investor LLC, a financial advisory firm.

"In a normal breakout you get rising volume. In this case, we had rising volume for a while; then it really dropped off last week," said Cherniawski, who ascribes the recent rise in equities to "a huge short-covering rally."

The S&P has rallied more than 50% from its March lows, briefly slipping in late June and early July.

Friday's rise on the S&P 500 to a new yearly high was not echoed on the Nasdaq Composite Index, bringing more fodder to the bearish side, according to Cherniawski. "Whenever you have tops not confirmed by another major index, that's another sign something fishy is going on."

The second bearish projection appeared in the comments at Slope of Hope. The chart drew my eye, and soon enough, the host of Slope of Hope featured it in its own post. Here's SoH commenter Virginia Jim's handywork:

11 August 2009

Rural Alberta Advantage

The Rural Alberta Advantage first caught my ear while listening to the weekly CBC Radio 3 podcast. This three-piece from Toronto?!? has a catchy lo-fi pop sound that you may find enjoyable, so here are three examples of their work:

29 July 2009

Trashcan Sinatras - In the Music - Live in Japan

The Trashcan Sinatras have returned with a new record (soon to be available here in the States) and are touring starting right about now. Here's the title track, recently performed live in Japan:

22 July 2009

Superchunk Live at South Street Seaport

Superchunk live at South Street Seaport last Friday.

I first saw 'em play outdoors at Swarthmore in 1993. They still rock.

"Learned to Surf," off of the Leaves in the Gutter EP released earlier this year:

"Driveway to Driveway," off of 1994's Foolish:

"The First Part," an ode to foreplay (I believe), also off of Foolish:

And they closed the set with "Slack Motherfucker":

Or you can watch the last three songs together in this superior video:

Superchunk | NYC @ South Street Seaport Pier 17 | 17 Jul 2009 from UN:ART:IG on Vimeo.

As you may be able to tell, there were lots of different people videorecording this show and they kindly posted the results on YouTube.

21 July 2009

Word for Wednesday is OVERBOUGHT


I think I'm meeting the CanCon requirements considering how much music I post on this blog from up north.

I've been digging on the new Metric record. The Grey Lady just posted an article on Metric's Emily Haines and other DIY musicians who are eschewing the outmoded record label business model.

Here's the video for Gimme Sympathy, which has a Chinese fire drill much like Sloan's Losing California video, which is not available on YouTube.

17 July 2009

Nimbly Trading The S&P Next Week

The markets in general had a spectacular run this week. The major U.S. indices are extremely overbought according to RSI(2). However, that doesn't mean one should load their portfolio with puts or uber-short ETFs, take a week off, and then sell 'em for substantial profit. It's not quite such a sure thing...

I wrote the following on the above chart, but it's the key takeaway, so it's worth reiterating: Where will the S&P go from here? The previous three extreme RSI(2) events give us three possibilities: 1. S&P goes down; 2. S&P goes up; or 3. S&P goes sideways.

Let's take a step back, filter out some of the noise, and note the general S&P trends:

The market trend is still sideways, with the price action soon to bump into some nice overhead price resistance.

I'm holding nimble short positions right now, meaning I'm looking for some profit-taking opportunities if the market decides to become less overbought next week, but I'm ready to dump my shorts quickly if the S&P convincingly breaches the ~950-955 overhead resistance level. That would mean that sideways trend F is giving way to upward trend G.

15 July 2009

Update on the S&P Trading Outlook

This is the chart I made quite recently with my near-term outlook on trading the S&P 500:

And here is an updated version, with an educated guess as to what may happen to the S&P 500 after the initial excitement of some earnings beats gets priced into the market:

Gold Bust

My dour gold trade hasn't worked out quite as planned:

08 July 2009

07 July 2009

Coeur de Pirate

Listening to the 200th CBC Radio 3 Podcast this afternoon, I heard the lovely lilt of Coeur de Pirate. Grab a plate of poutine and enjoy:

06 July 2009

End of a Rangebound S&P 500?

Here is an up-to-date chart of the S&P 500 for the past three months:

The market has been trading within a 60-point range over the last two months. The S&P is currently heading toward the lower end of the range after last Thursday's 2.6% dump.

The questions for me are:

1. Does the convergence of the 200DMA line and the lower end of the recent trading range mean we'll see the S&P fall toward the ~880-level, fail to penetrate it, and perpetuate the rangebound trading action through the summer?

2. Or, on the other hand, if the ~880-level is convincingly broken, should I then pile into a healthy short position as the market breaks down yet again?

I'm waiting and watching, with a small amount of money currently engaged in the market.

With these questions in mind, I have a couple of other annotated charts in the back of my mind.

Here is a longer-term chart of the S&P showing an interesting trendline I found. The red line shows support in late-January and early-February became overhead resistance in May and June.

On the chart below, we see another recent, related trading channel broken to the downside:

30 June 2009

Matt & Kim

Pitchfork pointed me to Brooklyn's Matt & Kim. My first impression is they've got that Beat Happening DIY-thing going, but with infectious energy. And they make good videos. Here are a couple:

24 June 2009

Ed McMahon's Legacy

On a more tasteful, serious note, I bet Ed said "Here's Johnny" during the golden toilet scene. And the lawyers flushed that line. No, really.

Speaking of flushing, the price of gold is swirling down...

Tim Knight at the Slope of Hope convincingly made the technical argument for going short gold in several posts. Here's the post that caught my attention:

I {Heart} GLD Short

Sorry to keep harping on this - - particularly to those who belong to the First Church of Precious Metals, but I'm just ga-ga over shorting GLD right here. It's (a) a clean trend break; (b) a terrific failed pattern; (c) has a clean-as-a-whistle stop; (d) a great risk/reward ratio.

Unfortunately, Tim closed out his GLD short just as I piled into some puts. I think he may have pulled the trigger too soon. Let's look at some charts (click on 'em to make 'em large and legible):

A fundamental reason for gold to fall is deflation.

Here's an updated annotated chart with my trading plan:

12 June 2009

Innocence Mission on PRISM circa 1995

Below is the Innocence Mission's appearance on a PRISM show featuring performances from the Chameleon club in Lancaster, PA. The band had recently released Glow, my favorite record of theirs, so enjoy.

11 June 2009

Throwing Back the Apple

This is Pale Saints, a shoegaze band signed to 4AD Records during the late-80's and early-90's. "Throwing Back the Apple" appeared on their 1992 record, In Ribbons.

Looking at AAPL, if I were long, I wouldn't be throwing back the apple just yet:

10 June 2009

Golden Crosses

Bloomberg ran a premature piece yesterday by Julie Cruz on the golden cross. What is the golden cross? Here's an excerpt that explains the phenomenon:

The Standard & Poor’s 500 Index is approaching a so-called golden cross that’s considered a buy signal by analysts who make predictions based on patterns in price charts.

A golden cross occurs when the 50-day moving average, which is currently at 878.04 for the S&P 500, rises above the 200-day moving average, which is at 918.33, Bloomberg data show. The formation implies further gains for the stock market, according to this type of technical analysis.

“If the S&P can hold above its 200-day moving average, the potential for a golden cross increases,” Mary Ann Bartels and Stephen Suttmeier, technical analysts at Bank of America Corp., wrote in a report to clients yesterday.

The U.S. benchmark index’s 50-day moving average has been below the 200-day moving average since December 2007. The 40-day moving average already went above the 150-day moving average in May this year, forming a so-called silver cross, according to Bank of America.

As much as I enjoy playing with technical analysis, I find I'm still quite skeptical of its reliability and predictive capabilities. So I fired up charts of the S&P 500 since 1980 and picked out the twelve golden crosses over the past 30 years.

I have attached and annotated those twelve golden crosses in charts below. I have marked the date of the golden cross with a purple vertical line, the next day's open price with a red/green line, and charted the next six months-or-so to see if the trade was profitable or not. Please click on the image to make it large and legible.

Before considering the success rate of buying the index at the open following the golden cross event, one should note one significant caveat: the bull market of 1982-1999 encompasses nine of the twelve S&P 500 golden crosses since 1980. That means there's already a positive bias on these results. However, the most recent three golden cross trades were post-1999, and were all very profitable.

Taking into account upwards of a six-month holding period for the trade, my quick-and-dirty analysis says that golden cross trades numbered 1, 3, 8, 9, 10, and 12 provided excellent returns. Trades numbered 6 and 11 provided good returns. Trades 2 and 5 had their moments but were mediocre. And trades 4 and 7 were craptastic.

From this admittedly small sample size, the golden cross S&P 500 trade looks pretty good, but with a one-in-six chance for craptastic results, is far from foolproof. Golden crosses can engender golden blunders.