Wednesday links: anxiety and complacency

Quote of the day

Daniel Drezner, “In going for the short-term gain, China is inviting a long-term containment policy.” (Foreign Policy)

Markets

Bearish sentiment is at a five-month low.  (Bespoke)

Still no signs of anxiety in the volatility markets.  (SurlyTrader)

QE2 complacency is increasing risk relative to reward in the equity market.  (TheStreet)

The public is still wary of the “hair-trigger moves” that the equity market makes.  (Tech Ticker)

Taking a closer look at ETF short data.  (FT Alphaville)

Managers are optimistic about emerging markets, but think they are overvalued.  (beyondbrics)

Despite a huge rally, Turkish equities trade at a discount to the overall emerging markets.  (beyondbrics)

You want more local currency emerging market bond ETFs?  WisdomTree has got them!  (IndexUniverse)

Strategy and Tactics

How to deal with trading multiple accounts with different time frames.  (SMB Training)

Why the actions (and reactions to) of brand-name hedge fund managers matter.  (The Reformed Broker)

How much weight should we put on the coming “golden cross” in the S&P 500?  (Trader’s Narrative)

David Varadi, “Our desire for simple rules for trading, and simple laws for describing our world come at the expense of the reality of what the market actually is—anything else is a childhood fairy tale.”  (CSS Analytics)

On the benefits of comparing and contrasting stocks within and across industries.  (AR Screencast)

Wall Street

Wells Fargo (WFC) the least bad big bank.  (Street Sweep)

Hedge fund, FrontPoint frees itself from Morgan Stanley (MS).  (Bloomberg)

In retrospect, bailed out firms engaged in all manner of bad behaviors.  (Big Picture)

Foreclosure-gate

Mortgage bondholders, including its own affiliate, are suing Bank of America (BAC) to take back bonds.  (Bloomberg, Clusterstock, Dealbreaker, Calculated Risk, naked capitalism, NetNet, ibid)

Why Wall Street is so freaked out by the put-back issue.  (NetNet)

Off Wall Street

How cash for investment yields a fast track to a green card.  (Daniel Gross)

Once again, how is it legal for Congress (and their staffers) to trade on material non-public information?  (Kid Dynamite)

Economy

Five arguments against QE2.  (Econbrowser)

The global economy will only really rise again when the corporate zombies that stalk the world are finally nailed to the stake.”  (The Psy-Fi Blog)

Why looking at the growth rate of economic indicator, like the ECRI WLI, can be misleading.  (A Dash of Insight)

Why we should pay attention to austerity plans in Britain.  (Atlantic Business also Credit Writedowns)

Are robots going to put us all out of work?  (Free exchange)

China

How to do a Chinese IPO.  (The Reformed Broker)

A great deal of confusion about whether China has  halted the shipment of some rare earth metals to the US.  (NYTimes, CNBC also Zero Hedge, Clusterstock)

On the attraction of a “strangle” on the iShares FTSE/Xinhua China 25 Index ETF (FXI).  (Barron’s)

Why China resists currency reform.  (Curious Capitalist)

Who is getting the short end of the stick when China buys US Treasury bonds?  (CBP via Money Game)

Technology

Comparing iPad to iPhone growth.  (Asymco)

The war between broadcasters and cable has spilled over onto the Internet.  (Slate)

kaChing becomes wealthfront, loses its social media cache.  (TechCrunch, Investment News)

Just Because

Any post that mentions Johnny Fever of WKRP in Cincinnati fame is worth a link.  (Infectious Greed)

Seinfeld” brings economics alive.  Brilliant.  (The Economics of Seinfeld via Free exchange)

Thanks for checking in with Abnormal Returns. For all the latest you can follow us on StockTwits and Twitter.


Wednesday screencast: compare and contrast

Compare and contrast.  Sounds like something you would do in school.  However it is useful to compare and contrast stocks.  Even within an industry, one thinks might be homogenous, there can be important differences.  That is the case of the large financials and specifically with Bank of America and Goldman Sachs.  The two companies have very different profiles going forward.  On the other hand comparing companies across industries can help highlight key differences.  Market cap aside, there are two no different companies than ExxonMobil and Apple.  The contrast helps highlight the drivers of the companies and their stocks.  In today’s screencast we highlight two posts that compare and contrast some high profile stocks.

Items mentioned in the above screencast:

Bank of America (BAC) and Goldman Sachs (GS) are two big financial stocks, but their prospects could not be more different.  (Lex)

Daily charts of Bank of America and Goldman Sachs.  (Finviz, ibid)

So what if Apple (AAPL) eclipses ExxonMobil (XOM) in market cap?  (YCharts Blog)

Daily charts of ExxonMobil and Apple.  (Finviz, ibid)


Tuesday links: a game of mistakes

Quote of the day

The stock market is a game of mistakes. You make them, you pay for them, you learn from them, and you try not to make them again.”  (Market Folly)

Markets

Four conditions that indicate the stock market should be higher.  (Trader’s Narrative)

Why aren’t gold market timers more bullish?  (Marketwatch)

It doesn’t take much to spark a rally in an oversold market.  The case of the US dollar.  (AR Screencast)

Markets hate uncertainty.  The case of Bank of America (BAC).  (Felix Salmon)

Chinese stocks have experienced a textbook breakout.  (Barron’s)

China still hearts US Treasuries.  (EconomPic Data)

Wal-Mart (WMT) borrows at record low rates.  (Bloomberg)

Why are physical producers interested in backing physical metal ETFs.  (FT Alphaville also Jim Jubak)

Where are the equity fund inflows?  (FT Alphaville)

How many more mini-Flash Crashes can the market handle?  (Points and Figures)

The investors who have a big stake in the reflation trade.  (The Reformed Broker, NetNet)

Strategy and Tactics

Why increased granularity can help in building timing models.  (World Beta)

Trading isn’t just about what to buy and when, but also “how much.”  (StockTwitsU)

Why using active managers complicates the asset allocation process.  (Capital Spectator)

Why individuals don’t take advantage of the insurance-like aspects of options.  (Options for Rookies)

How to play earnings season on a stock-by-stock basis.  (Barron’s)

Even if you could, “why would you want to invest like Harvard“?  (Bucks Blog)

Companies

Is JC Penney (JCP) acting on the behalf of themselves or shareholders?  (ValuePlays)

Talk about doubling down…Harrah’s Entertainment is coming back public.  (WSJ, Dealbook, Distressed Debt Investing, Street Sweep)

Wall Street

Citigroup (C) still has a lot of work to do and the Feds keep selling shares.  (YCharts Blog, Street Sweep)

A slump in trading revenues hits Goldman Sachs (GS) where it hurts..the pocketbook.  (Street Sweep, ibid)

Foreclosure-gate

A call for sanity on foreclosure-gate.  (HousingWire)

Citibank, Bank of America and GMAC have resumed some foreclosures.  (Calculated Risk, ibid WashingtonPost, WSJ)

If “the first rule of mortgage lending is you don’t foreclose” why are we having so many of them?  (Rortybomb)

The two parts of the mortgage mess.  (Atlantic Business)

Technology or (Apple News)

Philip Elmer-DeWitt, “Fully 60% of Apple’s (AAPL) quarterly sales now come from two products — the iPhone and the iPad — that didn’t exist three years ago.”  (Apple 2.0)

Apple (AAPL) is on its way to become the world’s largest company by market cap.  (Lex also 24/7 Wall St.)

Steve Jobs vs. Google (GOOG).  (WashingtonPost, Apple 2.0)

Apple plans to keep its “powder dry.”  (Bloomberg, Asymco)

Global Economy

How might QE2 affect the rest of the world?  (Free exchange)

China raises interest rates.  (WSJ, FT Alphaville, Bloomberg, Points and Figures)

The PBoC has been “behind the curve on interest rates.”  (China Financial Markets also Credit Writedowns)

Brazil still wants your capital, just on their terms.  (Money Game also FT Alphaville)

Mind and Markets

How to tell when a CEO is lying.  (peHUB)

How being “a little miserable” can improve creativity.  (The Frontal Cortex)

Thanks for checking in with Abnormal Returns. For all the latest you can follow us on StockTwits and Twitter.


Tuesday screencast: reversal of fortune

It doesn’t take much to spark a reversal in an oversold market.  Today, the case of the US dollar.  News that the People’s Bank of China had raised its benchmark rates by 25 bp sparked a rally in the US dollar and a sell-off in just about everything else.  However the seeds of a reversal in the dollar had been brewing for some time now.  Sentiment had gotten very gloomy about the US dollar.  In addition all the talk about QE2 has been giving traders and investors alike all the fundamental fodder they needed to push the dollar lower.  Who knows how long the reversal in the dollar will last, because little has changed on the fundamental front.  But traders should recognize that even in long term uptrends (and downtrends) reversals can occur with little pretext and are often strong enough to shake out weak position holders.  In today’s screencast we look at the recent reversal in the US dollar.

Items mentioned in the above screencast:

The effect of China’s interest rate move on global markets.  (Guardian)

Why the US dollar may be poised for a reversal.  (Data Diary)

The US dollar recently found support.  (StockTwits FX)

Daily chart of the PowerShares DB US Dollar Index Bullish ETF (UUP).  (Finviz)


Monday links: shoddy IPOs

Quote of the day

Courtney Comstock, “So we know Bridgewater is killing it this year, but have absolutely no idea how they’re doing it.”  (Clusterstock also Dealbreaker)

Markets

You’ll know the rally has gone too far when you start seeing “shoddy Asian IPOs.”  (Bloomberg, Money Game, WSJ, Barron’s)

A stunning turnaround in the amount pension funds allocate towards equities.  (WSJ)

Just as things got too bearish in late August, expectations about QE2 may be getting traders a tad too bullish.  (AR Screencast)

Market valuations provide room for an upside surprise.  (ValuePlays also Big Picture)

The spread between the 10-year and 30-year Treasury bond has hit a record.  (Crossing Wall Street)

Dividend stocks are riskier than you think.  (Money Game)

How the Fed may be facilitating a bubble in the emerging markets.  (FT)

Breaking down the “bubble” in emerging market bonds.  (Barron’s)

Tough times for short-sellers in a world filled with M&A activity.  (The Reformed Broker)

How have momentum funds done of late?  (Insider Monkey)

Why financial television glosses over midcap stocks.  (The Reformed Broker)

Strategy and Tactics

How hedge fund ownership affects a stock’s liquidity risk.  (All About Alpha)

Claims that ‘stock picking is dead‘ are great for value investors.  (Market Folly)

Pattern recognition and the long history of technical analysis.  (FT)

More on building a tactical asset allocation model.  (MarketSci Blog)

What are “asymmetric volatility expectations”? The case of Google (GOOG). (VIX and More also Bespoke)

Companies

There is a big spread between what bloggers and analysts are forecasting for Apple (AAPL) quarterly earnings.  (Apple 2.0, ibid)

The case for CME Group (CME).  (Points and Figures also WSJ)

Why analysts are cautious on Netflix (NFLX).  (Bloomberg)

Mind and Markets

In trading don’t confuse activity with accomplishment.  (Chicago Sean)

Justin Fox, “So why haven’t finance academics and practitioners paid more attention to Mandelbrot’s warnings?”  (Reuters)

Wall Street

Securities lending from the bank’s perspective: heads I win, tails you lose.  (NYTimes, Big Picture)

How the state of the commercial real estate market represents “tranche warfare.”  (The Reformed Broker)

The ways in which Goldman Sachs (GS) is a cult.  (naked capitalism also WSJ)

More municipal defaults are coming.  (Lex)

Economy

“..if anyone tells you they have a clear view on what is going to happen to the econo-world from here, walk away briskly.”  (Ultimi Barbarorum)

Bill Hester, “If we use Japan as a template, it’s difficult to be optimistic about quantitative easing providing meaningful stimulus to the economy.”  (Hussman Funds)

“This is a Fed Chairman who is very dissatisfied with the depressed state of the US economy, and who is not afraid to say so.”  (Gavyn Davies, FT)

What are higher commodity prices telling us?  (Buttonwood)

What is the Fed going to try and accomplish with QE2?  (Econbrowser also Modeled Behavior)

Industrial production and capacity utilization come in below expectations.  (Calculated Risk, Pragmatic Capitalism, Economic Intersection)

Canada is poised to put on pause its monetary tightening.  (The Globe and Mail)

Foreclosure-gate

How much is foreclosure-gate going to cost the big banks?  (Curious Capitalist)

A mortgage bond scandal FAQ.  (Felix Salmon)

Technology

Why Groupon is no eBay (EBAY).  (TechCrunch)

How many operating systems can the smartphone market support?  (NYTimes)

Market share vs. profit share:  which matters more?  (Asymco)

There is no shortage of demand for shares in hot, private companies like Facebook and Twitter.  (WSJ)

Thanks for checking in with Abnormal Returns. For all the latest you can follow us on StockTwits and Twitter.


Monday screencast: cautionary signs

Just as the market got a bit too bearish back in August, it now seems that market participants have gotten a tad too bullish.  The precipitating event seems to be the expected launch of another round of quantitative easing.  However with the market seemingly overbought, valuations back in line and signs of froth overseas it may be time to take a look at taking some money off the table.  That doesn’t mean a market, like this one that is demonstrating a great deal of momentum can’t move higher.  It can.  It just means that on the margin it may be time to start reducing your risk profile.  It has been a good six weeks.  As Howard Lindzon notes it pays sometimes to “protect the ball.”  In today’s screencast we look at some cautionary signs for the stock market.

Posts mentioned in the above screencast:

Panic rarely pays.  (AR Screencast)

Daily chart of the SPDR S&P 500 (SPY).  (Finviz)

The market is overbought, but that doesn’t mean it can’t go higher.  (Money Game)

The market is no longer undervalued.   (Morningstar)

For any number of reasons the market has gone too far, too fast.  (Pragmatic Capitalism)

Todd Harrison, “Everybody is waiting for QE2 to bail them out, but how many people are waiting to sell on that news?” (Tech Ticker)

Have we exported a market bubble?  (The Reformed Broker)

Don’t forget to “protect the ball.”  (Howard Lindzon)


Sunday links: taking losses

Thanks again to everyone who responded to our survey.  One common response was that readers wanted to have more structure to the linkfest.  This is our initial attempt at categorizing the links.  If you have any comments and/or suggestions please feel free to contact us.

Quote of the day

Phil Pearlman, “Every winning trader that I know habitually takes losses quickly before they become outsized.”  (Phil Pearlman)

Markets

Equity sentiment at week-end.  (Trader’s Narrative, The Technical Take)

The past twelve years in one (real yield) chart.  (Crossing Wall Street)

Roben Farzad, “Frontier investing can be rewarding but perilous.”  (BusinessWeek)

Cotton climbs to a 140 year high.  (WSJ)

Putting the is in the transportation stocks, especially railroads, into perspective.  (StockCharts Blog)

Why financial stocks haven’t fallen much in the face of foreclosure-gate.  (Felix Salmon also Money Game)

The bull market in gold, in one chart.  (Pragmatic Capitalism)

Taking a look at the market’s big winners year-to-date.  (WSJ)

Tactics

Stock picking isn’t dead.  The case of Google (GOOG).  (The Reformed Broker)

David Merkel, “Management teams that cut corners in financial reporting will cut corners elsewhere, and deliver negative surprises to you.”  (Aleph Blog)

Hubris doesn’t pay.  David Tepper likely took a hit this past week on his big bank positions.  (Zero Hedge)

Looking at the options market prior to an earnings announcement can help gauge reactions to the news.  (InvestorPlace)

Wall Street

Banks, like the airlines, have never made money.  (Big Picture)

Wall Street never learns.  (Reuters)

Economy

Why worry about low inflation?  (Atlantic Business)

Making the case for humility in economics.  (NYTimes)

Has the Fed painted itself into a corner?  (naked capitalism)

Foreclosure-gate

Felix Salmon, “In other words, the housing market, which was broken before, is even more broken now.”  (Reuters)

Who suffers?  Just about everyone.  (Megan McArdle)

Why did some servicers use “robo-signers“? (Calculated Risk contra naked capitalism)

Modern finance collides with the legal system.  (WSJ also Big Picture)

Why is the administration sitting on its hands when it comes to foreclosure-gate?  (Baseline Scenario)

Mind and markets

Jason Zweig, “Why do powerful people with so much to lose push so hard to squeeze out a little more gain for themselves?”  (WSJ)

How the use of language affects how we “read” the news.  (The Psy-Fi Blog)

RIP, Benoit Mandelbrot.  (TED Blog, NYTimes)

Technology

Why Twitter is massively undervalued compared to Facebook.  (TechCrunch)

Eric Savitz, “Don’t be surprised when the iPad blows past the Mac, the iPod and the iPhone to become the most important product in Apple’s arsenal.”  (Barron’s)

Why Google should buy Foursquare.  (SAI)

Joe Nocera, “At bottom, “The Social Network” is a movie about obsession.”  (NYTimes)

Just Because

Cool photo tour of Chicago, the derivatives capital of the world.  (Chicago Sean)

Thanks for checking in with Abnormal Returns. For all the latest you can follow us on StockTwits and Twitter.



Top clicks this week on Abnormal Returns

Thanks for checking in with us this weekend.  Here are the items our readers clicked most frequently on  Abnormal Returns for the week ended Saturday, October 16th.  Where applicable the description is as it reads in the relevant linkfest.

  1. Market timers are not buying into the rally.  (Marketwatch)
  2. What happens when bond investors realize they missed the equity rally? (The Reformed Broker)
  3. Some lessons from the past decade we have yet to learn.  (Big Picture)
  4. Don’t be bullied by advisers who say market timing is a “myth.”  (ROI)
  5. What part of don’t fight the Fed do you not understand?  (Tech Ticker)
  6. Some of the most bearish market commentators are changing their tune.  (The Reformed Broker)
  7. Value wins over the past decade.  (Beating Buffett)
  8. How letting your unconscious brain work on a problem may lead to the best decision.  (The Frontal Cortex)
  9. One model’s look at the future for gold.  (Crossing Wall Street)
  10. The equity market is showing some notable divergences.  (Afraid to Trade)

We also had a number of items on Abnormal Returns this week:

  1. ARTV with Joe Weisenthal, redux.  (Abnormal Returns)
  2. On the challenges of integrating sentiment measures into an investment process.  (AR Screencast)
  3. The market (for now) is discounting the foreclosure crisis.  Should it?  (AR Screencast)
  4. Is China’s stock market just playing catch-up or is there more to it?  (AR Screencast)
  5. What is the unusual activity in the VIX telling us about the market?  (AR Screencast)
  6. The emerging markets infrastructure theme is a debt story as much as an equity story.  (AR Screencast)
  7. Happy fifth blogiversary to ourselves.  (Abnormal Returns)

Per usual, there are now a number of ways to follow Abnormal Returns including:  @ARupdates, free e-mails:  AR ClassicAR Energy, AR Options, the Abnormal Returns widget, our daily screencasts, and Abnormal Returns TV.


Friday links: bullet bonds

Technology and energy are driving this rally.  (Ticker Sense)

Michael Kahn, “The short-term trend will remain up as long as the liquidity pumps are working, but investors should not assume that the buy-and-hold strategy is back from the dead.”  (Barron’s)

What part of don’t fight the Fed do you not understand?  (Tech Ticker)

The 30 year-10 year Treasury spread keeps getting wider.  (Bespoke)

Bonds look to have put in a top here.  (Dragonfly Capital)

Is oil poised to break out of a long trading range?  (chessNwine)

The premium for China A-shares has been erased.  (beyondbrics also IndexUniverse)

“Bullet” bond ETFs make planning bit more precise.  (WSJ)

Vanguard’s success sparks an “ETF price war.”  (Bloomberg)

Are physically-backed metal ETFs a good idea?  (ETFdb)

The case for the Barclays ETN S&P VEQTOR (VQT).  (VIX and More)

Bruce Berkowitz vs. David Einhorn on St. Joe Company (JOE).  (Market Folly also naked capitalism, Clusterstock, Dealbreaker)

The for-profit education sector is just getting crushed.  (The Reformed Broker)

The permabear to English translation guide.  (Big Picture)

On the (profitable) use of forward looking earnings estimates.  (A Dash of Insight)

Step one in building a tactical asset allocation model.  (MarketSci Blog)

Trend following and Gene Fama’s blind spot.  (Au.Tra.Sy blog)

Methodology+Plan+Execution.  (Crosshairs Trader)

On the challenges of integrating sentiment measures into an investment process.  (AR Screencast)

The market “wakes up” to the implications of foreclosure-gate.  (WSJ)

Congress won’t let the too-big-to-fail banks to get torpedoed by foreclosure-gate.  (NetNet also Big Picture)

Bernanke lays out the case for QE2.  (Bloomberg, FT Alphaville, Atlantic Business)

Has the market overshot on expectations for QE2?  And what Bernanke should do.  (Money Game, Daniel Gross)

Cam Hui, “Just remember this: QE2 can only supply more liquidity to the system, not solvency.”  (Humble Student)

The Fed is the biggest seller of volatility out there.  (FT Alphaville)

No inflation on the CPI front…yet.  (Bloomberg, EconomPic Data, Capital Spectator)

Looking back over the past year on who made the right call on the economy.  (Bonddad Blog via TBP)

Tensions brewing as the US dollar continues to weaken against emerging currencies.  (WSJ, Money Game, FT Alphaville, Curious Capitalist)

China should directly fund US infrastructure spending.  (China Financial Markets)

Very interesting.  The death of the IPO. (Institutional Investor)

With earnings out Google (GOOG) may soon pass Microsoft (MSFT) in market cap.  (SAI also NYTimes, AllThingsD, GigaOM)

John Sculley on Steve Jobs.  (Cult of Mac)

Putting Gawker Media into some perspective.  (Rational Irrationality)

There are now a number of ways to follow Abnormal Returns including:  @ARupdates, free e-mails:  AR ClassicAR Energy, AR Options, the Abnormal Returns widget, our daily screencasts, and Abnormal Returns TV.


Friday screencast: shifting sentiment

Sentiment means different things to different people.  The typical use of sentiment is as a contrarian indicator.  There are some long-standing measures of investor sentiment like those from AAII and Investor’s Intelligence. With the explosion of the social web others are being devised to harness the collective intelligence of investors from various sources.  However making the leap from an extreme sentiment measure to trade is more difficult than it appears on the surface.  Most traders realize that trends can last longer than anyone expects and that sentiment can remain extreme for long periods as well.  In short, sentiment like any indicator requires a more nuanced approach.  In today’s screencast we examine a few recent posts that help illustrate the use of sentiment.

Posts mentioned in the above screencast:

Individual investor sentiment is getting a tad too bullish.  (Pragmatic Capitalism)

What do you get when you aggregate “financial sentiment“?  (the research puzzle, Sentigo)

“There is a big difference between discovering a method to measure close to real time collective sentiment and its relationship to market behavior and exploiting it for market gains.”  (Phil Pearlman)


ARTV with Joe Weisenthal, redux

Last night we had the chance with Joe Weisenthal, Deputy Editor of Business Insider, on StockTwits TV.  You might remember that we had Joe on our show previously.  We enjoyed the exchange so much we decided to have him appear on a more regular basis.  This time around we discussed foreclosure-gate, the gold trade, accountability for dramatic market predictions and the need to keep your investing, ideology-free .  You can view the show in its entirely below:

Some posts mentioned in the above video:

The devastating report on Bank of America that everyone is talking about.  (Clusterstock)

There is absolutely no reason for the government to sell its gold now.  (Money Game)

Guy who predicted Dow 5,000 gives embarrassing explanation for why he blew it.  (Clusterstock)


Thursday links: dash to trash

What happens when bond investors realize they missed the equity rally? (The Reformed Broker)

Signs that the market is getting overbought.  (Fund My Mutual Fund, Trade the Odds)

The VIX is oversold.  (Daily Options Report also Globe and Mail)

Back month VIX futures are “capitulating.”  (VIX and More)

Are we setting up for a “dash to trash” for the rest of the year?  (Lex)

The market (for now) is discounting the foreclosure crisis.  Should it?  (AR Screencast)

Junk bonds continue to demonstrate strength.  (Trader’s Narrative)

What should we think of noticeably negative TIPS yields?  (Street Sweep, Zero Hedge)

The toxic asset trade one year later.  (Pragmatic Capitalism also Felix Salmon)

A synthetic approach to corporate bond investing.  (FT Alphaville)

It is not obvious that one should buy ETF fund of funds.  (Capital Spectator)

Why are there so many ETF settlement fails?  (FT Alphaville)

How quantitative finance can move from HFT to investing. (For the Win)

Key takeaways from the Value Investing Congress.  (ValuePlays)

The short case for St. Joe (JOE) from David Einhorn.  (Money Game, Dealbreaker, Market Folly)

The stock trader’s worry inventory assessment.  (The Crosshairs Trader, StockTwitsU)

James Altucher, “Why do bears seem smarter than bulls?”  (CNBC)

Where did Warren Buffett’s alpha go?  (Insider Monkey, ibid also Term Sheet)

The scandal brewing in the mortgage bond business.  (Felix Salmon)

Why some sort of systematic resolution to the foreclosure crisis needs to happen.  (Tech Ticker, Big Picture)

A foreclosure fraud linkfest.  (Big Picture)

More foreclosure links:  (WashingtonPost, NYTimes, Free exchange)

Do we really want “total war” when it comes for foreclosures?  (NetNet)

Are the worst of bank failures behind us?  (Daniel Gross)

A closer look at the PPI.  (EconomPic Data)

What CSX (CSX) is telling us about the state of the economy.  (Fund My Mutual Fund)

24 scary facts about the US economy.  (Crossing Wall Street, ibid)

Retirement ages are going up whether you like it or not.  (Economist)

Switzerland rocks the wealth charts.  (EconomPic Data, Money Game)

Poland is attracting hot money.  (beyondbrics)

Ethanol (and corn farmers) gets a big break from Washington.  (Lex, NYTimes)

Private equity firms are back their old dividend recap ways.  (WSJ)

An extended profile of activist hedge fund manager Bill Ackman.  (Reuters)

Why the US doesn’t need to sell its gold hoard.  (Money Game)

San Francisco as an ETF hub.  (SFGate)

Yahoo! (YHOO) is in play.  (WSJ, Crossing Wall Street, Dealbook, MarketBeat)

Why a Yahoo! deal is unlikely and a bad idea.  (Term Sheet, GigaOM, Marketwatch)

IT understands that the iPad changes everything.  (Asymco also Apple 2.0)

There are now a number of ways to follow Abnormal Returns including:  @ARupdates, free e-mails:  AR ClassicAR Energy, AR Options, the Abnormal Returns widget, our daily screencasts, and Abnormal Returns TV.


Thursday screencast: foreclosure fatigue

Has the stock market divorced itself from the financials?  Given the performance of the market lately it seems that the foreclosure crisis is but a blip on investor radars.  The market as a whole is approaching the April highs while the financial sector is at best, plodding along.  For a market that has become obsessed with macro-type trades this action is interesting.  How this divergence gets resolved remains to be seen.  Investors need to keep an eye on the foreclosure crisis to watch for spillover into the general economy.  In today’s screencast we look the market’s glaring divergence.

Posts mentioned in the above screencast:

AAPL (AAPL) at a new high.  Bank of America (BAC) at a new low.  Seems about right.  (Howard Lindzon)

Daily chart of Apple and Bank of America.  (Finviz, ibid)

Financials hit a brick wall.  (Leigh Drogen)

Daily chart of the Select SPDR Financial ETF (XLF). (Finviz)

Why don’t the markets care about the foreclosure crisis?  (Ezra Klein)


Wednesday links: notable divergences

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Barry Ritholtz, “Just because Gold rallied does not mean you are obligated to miss the greatest equity rally in a generation.”  (Big Picture)

Market timers are not buying into the rally.  (Marketwatch)

Is the market overbought?  It depends.  (Dragonfly Capital)

The equity market is showing some notable divergences.  (Afraid to Trade also ETF Prophet)

VIX may be dropping, but the implied volatility of individual stocks is not.”  (Don Fishback also VIX and More)

Is China’s stock market just playing catch-up or is there more to it?  (AR Screencast)

The “stock picking is dead” meme garners another adherent.  (Money Game)

Don’t be bullied by advisers who say market timing is a “myth.”  (ROI)

Financials have room to raise their dividends.  (Crossing Wall Street)

Some ag-related stocks still have some room to run.  (Barron’s)

Lee Ainslie thinks big tech stocks are cheap.  (MarketBeat, Fortune)

Bill Ackman Q&A at the Value Investing Congress.  (Market Folly, Fortune)

Google (GOOG) is the 21st century GE (GE).  (Muckety)

Is the Value Line (VALU) franchise doomed?  (the research puzzle)

Some reasons why Microsoft (MSFT) SHOULD buy Adobe (ADBE).  (SAI)

Liquidity follows price.  (Ivanhoff Capital)

Are bear market funds truly a “win-win situation”?  (All About Alpha)

A long term look at the performance of leveraged ETFs.  (CXO Advisory Group)

If CSX (CSX) is reporting good earnings, how bad can the economy be?  (WSJ, Money Game, Pragmatic Capitalism)

TIPS-derived inflation estimates are back on the rise.  (Capital Spectator)

Inflation is coming, but when?  (Points and Figures)

Hard to get every state attorneys general to agree on anything, except the foreclosure fiasco.  (CNNMoney, Clusterstock)

Shocked to read that politics played a role in the lifting of the Gulf drilling ban.  (WashingtonPost)

Uncle Sam’s mysterious gold hoard.  (The Atlantic)

Ezra Klein, “State pension systems are a problem. But they’re not the problem right now.”  (WashingtonPost, ibid)

Betting on a Japanese default, or at least the fear of it.  (Fortune Finance)

How did the world get so old, so fast?  (Foreign Policy via pkedrosky)

No wonder DE Shaw is undergoing layoffs.  They made bad real estate bets at the height of the market.  (WSJ, Clusterstock)

“Following Warren Buffett without Warren Buffett’s temperament is a one-way ticket to the poorhouse.”  (The Psy-Fi Blog)

Charles Kirk, “Let me tell you a secret – the market has ALWAYS been manipulated to some extent AND always will.”  (Kirk Report)

Traders, StockTwits and the need for speed.  (Institutional Investor, ibid)

How letting your unconscious brain work on a problem may lead to the best decision.  (The Frontal Cortex)

There are now a number of ways to follow Abnormal Returns including:  @ARupdates, free e-mails:  AR ClassicAR Energy, AR Options, the Abnormal Returns widget, our daily screencasts, and Abnormal Returns TV.


Wednesday screencast: China comeback

China is much in the news of late.  Talk of the country’s growing economic heft is hard to escape.  However until recently its stock market was no great shakes.  Indeed compared to the rest of the BRIC countries since the market bottom in March 2009 the Chinese stock market has been a notable laggard.  Performing more in line with the US stock market.

Now that the Shanghai index is moving up once again how should we interpret it?  Some say China serves as a leading indicator of the US market now.  This might very well be the case, but Michael Pettis warns us that the Chinese stock market is still very much a work in progress.  Therefore reading too much into China’s stock market moves may be counterproductive.  In today’s screencast we look at the world’s third largest stock market.

Posts mentioned in the above screencast:

China climbing the charts.  (Abnormal Returns)

A bull market in…China?  (Bespoke)

Comparing the BRIC markets.  (StockCharts)

China continues to forecast a strong US equity environment.  (Pragmatic Capitalism)

The Shanghai market isn’t really predicting anything.  (China Financial Markets)


Abnormal Returns Survey

Our fifth blogiversary got us thinking about ways in which we can improve Abnormal Returns.  In that spirit we are asking our users to help us by filling out a short and simple survey.  We are trying to get a better sense for how our readers use Abnormal Returns and how we can make it even better.  Above all what we need are your honest opinions.

We understand your time is valuable and we want to show our appreciation for your efforts to improve Abnormal Returns.  Those of you who fill out the survey in full and include your e-mail address will be entered into a book giveaway with three winners.   You can find the survey in its entirety here.  Once again, thanks in advance for your participation.  We look forward to your responses.

Update:  The survey (and contest) is now closed.  Book winners will be contacted by e-mail shortly.  Thanks for your participation.


Tuesday links: spousal safety

Consumer discretionary stocks continue to outperform the financials.  (Bespoke)

Why a 200 day moving average might work:  the market likes trends.  (Crossing Wall Street)

The move in the US dollar is overdone.  (Trader’s Narrative also Pragmatic Capitalism)

How much longer can gold and US Treasuries remain highly correlated?  (Can Turtles Fly?)

Where is the hoopla over the Dow’s ‘golden cross‘?  (WSJ)

If QE2 is a dud, the downside to equities is notable.  (TheStreet)

Mega caps and the need for “de-equitisation.”  (FT Alphaville)

Emerging market volatility has plummeted.  (Bloomberg)

What is the unusual activity in the VIX telling us about the market?  (AR Screencast)

Using a VIX-hedging strategy.  (Condor Options)

Covered call=short put.  QED.  (Options for Rookies)

Looking at the trailing performance of stocks vs. bonds on a number of different time frames.  (Systematic Relative Strength)

When a ‘no-brainer‘ trade backfires.  (Crossing Wall Street)

The trick is getting to the long term.  (Market Folly)

On the challenges of trading stocks in earnings season.  (Joe Fahmy)

Some defensive stocks are ‘value traps‘ in waiting.  (Street Sweep)

Notes from the Value Investing Congress.  (Market Folly also Felix Salmon)

Missed this last week.  Some new research on parsing 13-F data from hedge funds.  (All About Alpha)

Which would Warren Buffett buy today:  Microsoft (MSFT) or Apple (AAPL)?  (The Reformed Broker)

A closer look at the MLP ETF space.  (ETFdb)

Having Goldman Sachs (GS) on your resume still helps you when it comes to raising capital for your hedge fund.  (Bloomberg)

Ben Bernanke needs to start listening to some company conference calls.  (Jeff Matthews)

A primer on the foreclosure crisis.  (NetNet)

Barry Ritholtz, “There is simply no reason we should tolerate unlawful property seizure merely when it is done by banks. They are not the State, not the King, and not above the law.”  (Big Picture)

Mortgage servicers weren’t designed with mass foreclosures in mind.  (Rortybomb, ibid)

How to help the unemployment problem AND start remedying the mortgage fiasco.  (Daniel Gross)

Fannie and Freddie are in the crosshairs of the foreclosure fiasco.  (WashingtonPost)

Even Janet Yellen is willing to acknowledge the risk of bubbles from Fed easing.  (Reuters also WSJ)

Breaking down the Fed on the “hawk-o-meter.”  (MarketBeat, FT Alphaville)

Still no sign of hope from small business owners.  (Calculated Risk, Atlantic Business, Economic Intersection)

Lookout CPI, the ‘Google Price Index‘ is here.  (FT, FT Alphaville, Planet Money)

Rail traffic continues strong.  (Money Game, Calculated Risk, Value Plays)

The farm economy is booming.  (WSJ via TRB)

Municipal pension shortfalls are rampant.  (WashingtonPost)

The spousal safety net.  (Economix, Free exchange)

“Coming out of the crisis, emerging markets now account for a much greater portion of world GDP growth than they did ten years ago”  (FT Alphaville)

Wall St. bonus expectations have not changed.  (EconomPic Data also Felix Salmon)

Markets signals work.  A slew of new gold mines are opening.  (WSJ, Money Game)

Base metal ETFs, holding actual metal, are coming.  (WSJ)

Flashy start-up stakes aside, Mail.ru is still very much a Russian company.  (Lex, FT Alphaville)

Facebook and Zynga are fighting to keep their shares from trading.  (Bloomberg)

Too many VCs spoil the broth that is a startup.  (A VC)

There are now a number of ways to follow Abnormal Returns including:  @ARupdates, free e-mails:  AR ClassicAR Energy, AR Options, the Abnormal Returns widget, our daily screencasts, and Abnormal Returns TV.


Tuesday screencast: volatility vacuum

The VIX or the Chicago Board Options Exchange Market Volatility Index (VIX) has become a commonly used market indicator.  Most typically it is used as a ‘fear index’ especially in light of the massive volatility seen in the midst of the credit crisis.  However the VIX is also just as likely to be misinterpreted than used correctly.

Most observers look for unusual activity in the VIX to identify market turning points.  For instance, in what was a pretty dull trading day the VIX plummeted.  This along with the structure of the VIX futures curve and its relationship to other indicators of volatility can help provide some clues to the market.  In today’s screencast a wrap-up of some recent commentary on the VIX.

Posts mentioned in the above screencast:

The VIX is plumbing depths not seen since April.  (Pragmatic Capitalism, Bespoke)

Daily chart of the iPath S&P 500 VIX Short-Term Futures ETN (VXX).  (Finviz)

An unusual collapse in the VIX.  (Don Fishback)

Adam Warner, “The VIX is exhibiting clear signs of complacency.”  (InvestorPlace)

Volatility has “joined the QE2 trade.”  (Data Diary)

What a low VIX:VXV ratio means for the market.  (Quantifiable Edges)


Monday links: a value decade

The market has moved ahead of any likely QE2.  (Econbrowser, Milk Trader, Pragmatic Capitalism, Money Game)

How the stock market performs the week of Columbus Day.  (Bespoke)

A wide variety of industries are hitting new highs.  (Ivanhoff Capital)

US financial conditions are back to normal.  (Calafia Beach Pundit)

Some lessons from the past decade we have yet to learn.  (Big Picture)

Where did all the idiosyncratic returns go?  (Zero Hedge)

A look at corporate bond performance.  (EconomPic Data)

At this point in time Americans are happy for whatever returns they get.  (The Reformed Broker)

Value wins over the past decade.  (Beating Buffett)

Taking a look at hedge fund performance for the year-to-date.  (Market Folly)

One model’s look at the future for gold.  (Crossing Wall Street)

The US dollar and the stock market.  (VIX and More)

PowerShares is closing ten ETFs.  (IndexUniverse)

Taking a closer look at the latest free ETF trading deal.  (IndexUniverse)

On the value of reading the footnotes.  (Street Capitalist)

Maybe this whole AIG (AIG) thing is going to work out.  (Reuters)

On the value of hedge fund disclosure.  (SSRN via the research puzzle)

What is going on with the corn crop estimates?  (FT Alphaville also Street Sweep)

Higher grain prices means higher cattle prices.  (Bloomberg, TRB)

Jeff Carter, “Poor regulation has lead to a dysfunctional marketplace.”  (Points and Figures, ibid, Deal Journal)

The foreclosure crisis is going to slow the housing recovery.  (Bloomberg, Business Insider also Rortybomb)

Don’t expect the Obama administration to crack down on banks over the foreclosure fiasco.  (naked capitalism)

How real GDP growth might affect the unemployment rate.  (Calculated Risk)

The Nobel Prize in Economics goes to a trio for their work in labor economics.  (NYTimes, Bloomberg, Scientific American, FT Alphaville, Free exchange, Marginal Revolution, Real Time Economics, Freakonomics, Economix)

Investing in infrastructure is a win-win.  (Ezra Klein)

The emerging markets infrastructure theme is a debt story as much as an equity story.  (AR Screencast)

Martin Wolf says don’t bet against America.  (Tech Ticker, ibid)

It’s good to be a Congressional staffer.  (WSJ, Felix Salmon)

There is little reason to carry a Blackberry these days when the iPhone and Droid are so good.  (Howard Lindzon)

Can Microsoft (MSFT) new phones salvage its mobile franchise?  (Bloomberg, GigaOM, WSJ)

Daniel Indiviglio, “If you don’t already contribute enough to your 401k to maximize your employer match, then you should.”  (Atlantic Business)

Interesting discussion about value investing techniques with Charles Kirk.  (Old School Value)

Great map of online communities circa 2010.  (xkcd via TechCrunch)

The view from Chicago on the use of social media by traders.  (Chicago Business)

A back door play on social media, via Russia, is coming public.  (Bloomberg, WSJ)

The view from Chicago on the use of social media by traders.  (Chicago Business)

The StockTwits iPhone app is here.  (StockTwits, TechCrunch)

Happy fifth blogiversary to ourselves.  (Abnormal Returns)

There are now a number of ways to follow Abnormal Returns including:  @ARupdates, free e-mails:  AR ClassicAR Energy, AR Options, the Abnormal Returns widget, our daily screencasts, and Abnormal Returns TV.


Monday screencast: infrastructure input

The emerging markets story is now a full blow investment theme.  The underlying strength in the economies of Brazil, India and China have been a salve for investors seeking economic growth in a world bereft of growth.  That being said there is still a great deal of work to be done to bring these economies up to developed nation status.  Not surprisingly analysts and investors focus on these infrastructure needs as an investment theme.

While many investors focus on companies that could benefit from increased infrastructure activity another way to play this theme is via debt as well.  A series of new funds now allow investors to purchase local-currency denominated debt in the emerging markets.  Like equities, this performance will be dependent on the continued success of these economies, but at least it provides another way for investors to access these growing markets.  In tooday’s screencast we note some of the options investors have in this area.

Posts mentioned in the above screencast:

Why are Brazil, China and India rebounding faster than the US?  (Real Time Economics)

The emerging markets infrastructure play.  (Fortune)

Weekly chart of the PowerShares Emerging Markets Infrastructure ETF (PXR).  (Finviz)

WisdomTree plans a Brazil bond ETF.  (IndexUniverse)

Daily chart of the WisdomTree Emerging Markets Local Bond ETF (ELD).  (Finviz)