What a week :)

Greetings! :) This has been a busy week. I have been writing a tax research paper for school that has been quite time-consuming. The analysis is quite interesting, but the statute that I was looking at turned out to be a lot older and require a lot more digging in the library than I had expected. Oh well..... It did give me some time though to have my mind wander a bit - so I have some new insights and hopefully you will find the following interesting.

Portfolio specific notes:

Portfolio is still getting trashed. The XLF hit all-time highs and my PUT options are basically worthless now and have less than 2-weeks till expiration meaning - very unlikely that they finish in the money. Gold is still getting crushed finishing around $455 this week. It looks like it could go as low $420 or even test the lower $400s due to the strong dollar and higher US interest rates. Here is the snapshot:


Planning on buying between 300 and 400 shares of NCTY pre-earnings. The other stocks in the Chinese Internet Sector (re: NTES, SNDA, SINA, SOHU), at least those that have reported so far have had mediocre releases. NTES is currently the strongest stock in the sector. Here are some of the related charts:


The9 (NCTY)




Shanda Interactivef (SNDA)




Sina.com (SINA)


Sohu.com (SOHU)



Netease (NTES)


Follow up notes - with the exception of NTES most of these stocks are below their 52 week average trading prices. I think it is interesting to compare the charts of SNDA and NCTY. SNDA was in a bidding war with NCTY for the World of Warcraft franchise and the marketing deal with Coca-Cola of China. The9 - although much smaller at the time - won World of Warcraft franchise first, and then the Coke contract.

Both are trading near 52 week lows, but it will be really interesting to watch both stocks reaction to Q3 earnings as both are direct competitors. SNDA is reporting on 11/9 and NCTY on 11/10. If SNDA has poor Q3 earnings it will be interested if NCTY rallies in response or also goes down. I don't really have any additional insight on this one at this point. We will know by next weekend what the story is for sure.

General Market Notes:

Market has had a great couple weeks here and looks like it could go higher - maybe in to 11K range if investors stay optimistic. This market action, especially the outperformance of two of the strongest sectors (re: Financials and Technology) have me extremely skeptical (as most readers know) in light of quickly rising interest rates. Given that I no longer have capital with which to bet on a decline in the price of either - I am going to just post a few charts of interest and continue to monitor the progress of both. At some point I expect a mean reversion. Whether that is next week or March though - I am not sure. :)

XLF Charts:


Interest Rates charts:


Bottom line is that the fundamentals (vis a vis earnings releases) and the economic data (re: government releases) still show a growing and healthy economy. Any sell-off in the markets so far has been mainly due to skepticisim about the sustainability of this growth and shaky guidance by some companies. As oil and gasoline prices continue to fall though, I could see this market retain its legs and make a further run.

Regards,

BG