31. July 2009 by Dan Walkow, CFA, CMT.

It would appear China is backing off buying US treasury bonds. China is the largest creditor to the US and, regardless of the rhetoric, have been concerned with the US dollar devaluation. They have been calling for a international reserve currency, this lack of buying at the bond auction is another signal that they are taking action. This from the WSJ today:

Shaky auctions of Treasury notes this week reignited concerns about whether the government can attract buyers from China and elsewhere to soak up trillions in new debt.

A fuse was lit this week when traders noted China’s apparent absence from direct participation in two Treasury bond auctions. While China may have bought Treasurys just before the auctions, market participants read the country’s actions as a worrying sign that China and other foreign investors may be ratcheting back purchases at a time when the U.S. is seeking to fund a $1.8 trillion budget deficit.

This week alone, the U.S. deluged the bond market with more than $200 billion in record-size sales. The U.S. has had little trouble finding buyers in recent months. But that demand is fading, and the Treasury market has become volatile. Many are selling in favor of riskier assets such as corporate bonds, stocks or even higher-yielding debt of other countries. This portends higher interest rates for the Treasury, and it may need to find alternative sources of cash like issuing more inflation protected Treasury bonds.

Tension on Wall Street trading desks began building late last week when the Treasury surprised the market with plans for a record week of sales. A Monday sale of $90 billion in Treasury bills with maturities of as much as a year went well. But China appeared absent from the following two sales, which totaled $81 billion of debt, traders say. Read more here.

Posted in Fixed Income | No Comments »

31. July 2009 by Dan Walkow, CFA, CMT.

If you have been selling stuff on Ebay or similar online services and have not been declaring the income on your tax returns you might want to pay attention!

The Canada Revenue agency is going after anyone who has sold more than $1,000 dollars USD a month online.

John Wonfor, national director of tax for BDO Dunwoody LLP, said the CRA is concerned only with professional e-commerce practioners, not individuals who may infrequently sell items such as used sofas just to get rid of them, usually at a loss. “You don’t have to pay tax on a loss and you can’t deduct it because it’s personal use property, so it’s a non event.”

Similar tax laws are being enforced in the USA.

Revenue Minister Jean-Pierre Blackburn said Thursday anyone who has sold products on the Web site could avoid audits, fines and penalties by voluntarily coming forward and declaring the revenue to the agency. See full story here.

Posted in Taxation | No Comments »

29. July 2009 by Dan Walkow, CFA, CMT.

The recovery rally in China has been nothing short of spectacular! However there are signs that the rally is long in the tooth with the recent IPO of China State Construction Engineering Corp surging 56% over its issue price. In addition we are seeing more and more concern over forced bank lending policies in China funding poor credits.

The stage is being for bubble like conditions and a correction at the very least would appear to be in the cards. This will have an effect on other markets around the world so plan accordingly.

As always, Jeremy Grantham of the investment management firm GMO writes a mean quarterly newsletter and he is very concerned about China at this point. Time to pay attention here.

Posted in Markets | No Comments »

28. July 2009 by Dan Walkow, CFA, CMT.

Posted in Uncategorized | No Comments »

27. July 2009 by Dan Walkow, CFA, CMT.

This one was a no-brainer. A few years ago I was in San Diego on a business trip and had a chance to visit Bosa’s show room displaying suites in their new condo building. As I chatted up the salesperson or should I say she chatted me up I could not help but think that how could one in their right  mind pay so much for so little. Nose bleed  prices! This was a short sale opportunity if I ever saw one.

Of particular interest was that some of the bigger players were Canadian real estate developers such as Bosa and Pointe of View Developments.

Well if you like them then you have to really like them now. Many are trading at half the price with several hundred in forclosure. Maybe time to sniff for a deal…

See the full article int he LA Times here.

Posted in Real Estate | No Comments »

26. July 2009 by Dan Walkow, CFA, CMT.

When stressed, studies show men tend to take on more risky bets and gamble whereas women, when stressed tend to pull back and control risk.

Generally speaking I think this to be true, as I reflect back over 30 years of working with investors. My own sense is that women could be a little more aggressive and men should temper the tendency to hit a home run on speculative stocks.

Most investors focus on the “investment return” side of the equation losing sight of the fact that investing is a two-sided coin where risk and return are joined at the hip.

Risk management is a crucial part of sucessful investing over the longer term, do you have a risk management framework?

For more on risk management and using a concept called “risk bucketing” sign up for our email newsletter . It’s free! Check the study out here.

——–Stressed out, dude? Don’t go to Vegas.

New research, to be published July 1 in the journal PLoS One, shows that men under stress may be more likely to take risks, correlating to such real-life behavior as gambling, smoking, unsafe sex and illegal drug use.

In contrast, stressed women moderate their behavior and may be less likely to make risky choices, the study found.

Posted in Investor Psychology | No Comments »

25. July 2009 by Dan Walkow, CFA, CMT.

Ever feel that you get the raw end of the stick when you trade stocks? When it comes to the quality of fill prices the the odds are stacked against you unless you understand how the system works.

Did you know that stock exchanges “sell” information where sophisticated traders and their computers “can see the order flow” in advance? They can see you coming!

These days the hot thing is computer assisted or “black box” trading systems which analyze order flow and take advantage short term fluctuations in the market.

These are known as “Algo systems” and are used in Canada and the USA by institutional players who, with these “rapid fire” computer trading systems, can clip a few points at the expense of unknowing traders and especially individual investors.

Individual investors, to be successful, have to understand that at any point in time there are professionals and moreover computer systems on the other side of the trade who can see you coming!

Here is a recent piece in the New York Times which explains how it works;

It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices.

It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets. More here.

Posted in Markets | No Comments »

23. July 2009 by Dan Walkow, CFA, CMT.

Far be it from to to critique Jim Cramer but I have seen enough of this kind of marketing over the years to agree with Henry Blodget over at Clusterstock.

As he notes on Cramer’s marketing spin:

It’s a personal note from “Jim Cramer.”  And it uses the oldest sleazy investment marketing tactic in the book.

What’s that?

Cherry-picking.

In an attempt to get you drooling about how much money you’ll make if you pony up and buy a subscription, the letter describes a few amazing calls Jim has made in recent months.  Goldman Sachs!  Nike!  GE!  What the letter doesn’t do, of course, is describe all of Jim’s terrible calls.

This is what many newsletters (and investment managers) do: Tout their good calls and igore their bad ones.  And they do it because it works.  But for anyone who takes their advice and clients seriously–as Cramer purports to–it’s misleading and sleazy. 

Cramer is not alone here. Without trying to get into the same boat of selfless self- promotion , if you don’t know who the pooch is at the poker table, hire a pro such as Seabank Capital or some other reputable fee-based investment manager who does not have any incentive or bias to promote a product or service….

Posted in Investor Psychology | No Comments »

22. July 2009 by Dan Walkow, CFA, CMT.

Per comments made by Dick Bove, Bank Analyst! Since the financial crisis erupted last year, the U.S. government has invested roughly $200 billion in more than 621 financial institutions to prevent the U.S. banking system’s collapse.

More than 30 banks have repaid over $70 billion, but the bailouts have been heavily criticized for supporting some of the institutions that caused the crisis in the first place — and doing so at taxpayers’ expense.

Goldman’s payments to the government suggest the opposite, banking industry analyst Richard Bove of Rochdale Research argued Wednesday.

“The government is making a great deal of money on its investments,” Bove wrote in a note to clients. “It is increasingly apparent that this may have been the best use of taxpayer ‘funds,’ from an investment standpoint, in the history of the republic.”

Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 160.67, +0.87, +0.54%) said it paid $1.1 billion to redeem warrants the U.S. government received when it invested in the firm through the Troubled Asset Relief Program, or TARP.

In June, Goldman repaid a $10 billion preferred-stock investment of $10 billion from TARP. During the eight-month term of the investment, the firm noted that it also paid $318 million in dividends on those securities.

Including the cost of redeeming the warrants, Goldman said it paid $1.418 billion to the government, which works out to an annualized return of 23% for U.S. taxpayers. More here.

Posted in Economics | No Comments »

21. July 2009 by Dan Walkow, CFA, CMT.

If history is any guide when investor sentiment is bearish, as it is now, markets tend to mark higher climbing a wall of worry.

According to a recent survey by Merrill Lynch here are a few take-aways:

•   The latest readings from last weeks AAII survey show that small investors remain overly bearish.
• In terms of asset allocation, investors remain fairly risk averse.  Bonds and cash are still heavily favored while requities remain an underweight.  This likely represents a scenario where investors remain under invested in stocks and over invested in risk averse assets.
• Alternative assets are more of a mixed bag.  Commodities overall remain in no mans land.
• Gold and oil both remain neutral holdings for most fund managers.
• There is no conviction; investors finding lots of excuses to do nothing.  Everyone expecting a further modest equity correction; surprise for investors would be summer rally or a real summer crack in markets.
• Meanwhile, individual investors remain fairly bearish.  The latest AAII bullish poll came in at 28% which is a level that has generally favored the long equity trade.

As alwaus, it rarely pays to be in the majority when it comes to investing. This market has a ways to go yet.

Posted in Investor Psychology | No Comments »