Sell Gold Miners – They're Levered to the Gold Collapse Catalyst

Gold prices should suffer a setback if the Federal Open Market Committee (FOMC) dot-plot economic forecasts show Fed-member expectations for rate hikes this year. The market has priced out that possibility and therefore would have to adjust to it, which I believe results in a sharp move higher for the dollar and a collapse in gold prices. Gold miners are naturally levered to gold prices, as their profitability depends on it. Thus, I have taken a short position in the recently enriched Market Vectors Gold Miners ETF (NYSE: GDX). I suggest holders of the GDX sell it now. See the full report: Sell Market Vectors Gold Miners ETF (NYSE: GDX) - Levered to Gold Collapse Catalyst.

DISCLOSURE: Kaminis is short GDX. Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

A Catalyst is Coming to Crush Gold

Wednesday’s Federal Open Market Committee (FOMC) meeting is expected by many to serve gold well, but I believe a surprise is in store. The market expects the Fed to pause its rate tightening in March, which is good for gold. But the market has not accounted for the Fed dot-plot forecasts, which I expect are likely to show Fed expectations for 2 to 3 rate hikes this year. Over the course of the last several months, the market has whittled its own expectations down to one or none for the year. Thus, a contrasting and conflicting message from the Fed could reignite the dollar and crush gold. See the full report on the Catalyst Coming to Crush Gold. Article interests SPDR Gold Trust (NYSE: GLD)

Precious Metal Securities	03-15-16 Intraday
SPDR S&P 500 (NYSE: SPY)	-0.4%
SPDR Gold Trust (NYSE: GLD)	-0.2%
iShares Gold Trust (NYSE: IAU)	-0.3%
iShares Silver Trust (NYSE: SLV)	-0.3%
Direxion Daily Gold Miners Bull 3X (NYSE: NUGT)	+3.3%
Direxion Daily Gold Miners Bearish 3X (NYSE: DUST)	-3.0%
Market Vectors Gold Miners (NYSE: GDX)	+1.2%
Market Vectors Junior Gold Miners (NYSE: GDXJ)	-0.7%
Goldcorp (NYSE: GG)	+0.5%
Newmont Mining (NYSE: NEM)	+0.7%
Randgold Resources (Nasdaq: GOLD)	+1.5%
Barrick Resources (NYSE: ABX)	+2.6%
Yamana Gold (NYSE: AUY)	-2.8%
Gold Fields Ltd. (NYSE: GFI)	+0.8%
Silver Wheaton (NYSE: SLW)	-0.2%
Coeur Mining (NYSE: CDE)	-2.0%

DISCLOSURE: Kaminis is short GDX. Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article should interest investors in precious metals stocks: Goldcorp (NYSE: GG), Agnico-Eagle Mines (NYSE: AEM), Allied Nevada Gold (AMEX: ANV), AngloGold Ashanti (NYSE: AU), AuRico Gold (NYSE: AUQ), Aurizon Mines (AMEX: AZK), Barrick Gold (NYSE: ABX), Brigus Gold (AMEX: BRD), Charles & Covard (Nasdaq: CTHR), Claude Resources (AMEX: CGR), Commerce Group (OTC: CGCO.PK), Compania Mina Buenaventura S.A. (NYSE: BVN), DRDGOLD (Nasdaq: DROOY), Eldorado Gold (NYSE: EGO), Entrée Gold (AMEX: EGI), Exeter Resource (AMEX: XRA), Gold Fields (NYSE: GFI), Gold Reserve (AMEX: GRZ), Gold Resource (Nasdaq: GORO), Golden Eagle Int’l (OTC: MYNG.PK), Golden Star Resources (AMEX: GSS), Great Basin Gold (AMEX: GBG), Harmony Gold (NYSE: HMY), IAMGOLD (NYSE: IAG), International Tower Hill Mines (AMEX: THM), Jaguar Mining (NYSE: JAG), Keegan Resources (AMEX: KGN), Kimber Resources (AMEX: KBX), Kingold Jewelry (Nasdaq: KGJI), Kinross Gold (NYSE: KGC), Midway Gold (AMEX: MDW), Minco Gold (AMEX: MGH), Nevsun Resources (AMEX: NSU), New Jersey Mining (OTC: NJMC.PK), Newmont Mining (NYSE: NEM), North Bay Resources (OTC: NBRI.OB), Northgate Minerals (AMEX: NXG), NovaGold Resources (AMEX: NG), Richmont Mines (AMEX: RIC), Royal Gold (Nasdaq: RGLD), Rubicon Minerals (AMEX: RBY), Seabridge Gold (AMEX: SA), Solitario Exploration and Royalty (AMEX: XPL), Tanzanian Royalty Exploration (AMEX: TRE), Thunder Mountain Gold (OTC: THMG.OB), U.S. Gold (NYSE: UXG), Vista Gold (AMEX: VGZ), Wits Basin Precious Metals (OTC: WITM.PK), Yamana Gold (NYSE: AUY), Coeur d’Alene Mines (NYSE: CDE), Endeavour Silver (NYSE: EXK), Hecla Mining (NYSE: HL), Mag Silver (AMEX: MVG), Mines Management (AMEX: MGN), Silver Standard Resources (Nasdaq: SSRI), Silver Wheaton (NYSE: SLW), SPDR Gold Trust (NYSEArca: GLD), Market Vectors Gold Miners ETF (NYSEArca: GDX), iShares Silver Trust (NYSEArca: SLV), ProShares Ultra Silver (NYSEArca: AGQ), ProShares Ultra Short Silver (NYSEArca: ZSL), Great Panther Silver (AMEX: GPL), Silvercorp Metals (NYSE: SVM), Paramount Gold and Silver (AMEX: PZG), Pan American Silver (Nasdaq: PAAS) and First Majestic Silver (NYSE: AG).

Chipotle (CMG) - Uncertainty Not Worth the Price

Chipotle Mexican Grill (NYSE: CMG) dropped 5.4% in after-hours trading after reporting its earnings. The company beat Wall Street expectations on the bottom line by 22 cents, but reported lower sales than expected and warned about a pork shortage that would affect its sales moving forward. The company also missed expectations for comparable store sales, and comparable sales are expected to moderate in pace significantly in 2015. The stock was valued richly heading into its earnings report. Thus, these new issues, which threaten to continue to drag on operational results this year, should cause investors to reassess and relocate capital. See my report on Chipotle (CMG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

McDonald’s (MCD) - Why the Run is Done at $100

McDonald’s (NYSE: MCD) run to $100 has been impressive, but it could end abruptly over the next few days. My reasoning has little to do with the round number, and a lot to do with an imminent event that I believe could remind investors of the reason why the stock was a dog of the Dow to begin with. While MCD has had a nice run since hiring its new CEO, it’s now show me time and the precedent isn’t good. See my full short report on McDonald's here.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

The Prisoner’s Dilemma Dictates Selling Twitter Now

In my article, The Art of Valuing Twitter, I suggested that investment analysis incorporates both art and science. I made a point that the reason many analysts could not understand Twitter’s (Nasdaq: TWTR) flamboyant gains since its IPO was because of their inability to see the artistic beauty in TWTR. Take note, though, that my report late last year recommended finally selling the shares then because of what was to come in early 2014. Today, I’m looking good, because the stock is being cut at the knees by the very scientific factors I suggested in late December, and the disruption they are causing to the artistic argument. Investors now face the prisoner’s dilemma, whereby each is more likely to sell the stock out of fear that the others will first, which would cost them capital.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Twitter

Twitter (TWTR) shares soared in 2013, gaining 42% since its public open and 145% from its IPO price of $26 per share. This year, the stock has been facing formidable headwinds of increasing and intensifying analyst opposition. TWTR is down now about 10% year-to-date and by the same amount since I recommended investors sell the stock on December 27, 2013. Today alone, it’s lower by 5.6% as of the hour of scribbling here. I expect the shares to correct further heading into the company’s first earnings report for many reasons, but mostly because of fear of one another.

Chart at Yahoo Finance

The latest reason for decline is that yet another analyst has issued a negative view. Cowen & Co. analysts today initiated coverage of Twitter with an “Underperform” rating and price target of $32, or 43% short of the current price. I don’t know about you, but I would call that a sell-worthy expectation, because I do not see the benchmark stock market crashing this year!

For Twitter, the valuation has never made sense to most analysts. However, it makes some sense in one respect. Take note that while Twitter trades at a significant premium to its peers in terms of price-to-sales ratio, its sales growth far exceeds those rivals as well. Importantly, Twitter’s sales outlook for 2014 exceeds the company’s intrinsic sales growth rate. Still, on a relative basis, Twitter’s P/S-to-sales growth ratio shows a premium valuation to peers.

Stock	Price-to-Sales  ttm	’14 Exp. Sales Growth	P/S-to-Sales Growth
Twitter (Nasdaq: TWTR)	60.4X	77%	0.8
Facebook (Nasdaq: FB)	20.8X	36%	0.6
LinkedIn (Nasdaq: LNKD)	18.0X	43%	0.4
Google (Nasdaq: GOOG)	6.6X	16.4%	0.4
Yahoo (Nasdaq: YHOO)	8.7X	2.3%	3.8

Twitter does not earn a profit yet, so we cannot compare it to peers on a P/E or PEG basis. And this brings us to the main reason why I expect Twitter to “underperform” in early 2014. The company will finally report earnings for the first time in its young history. While I expect its forecasts were conservative when it came public, I’m not sure the company can live up to recently built in exceptional investor expectations. That upcoming EPS report will mark the first true trial of Twitter on the public scene.

Even so, Twitter is facing other trials today. First of all, “window dressing” is no longer helping the stock, as the close of the year ended that reason for public fund managers to buy it. Having done so in 2013 would have allowed managers to list the famously flying stock as one of their own successful investment decisions. They do this, hypothetically speaking, in order to attract new inflows of investment capital.

Secondly, investors who had enjoyed big paper profits through 2013, can now take those gains and put off paying taxes on them until next year. Given the stock’s amazing gains through 2013, investors had a lot of capital at stake, and the time value of money dictates delaying such tax payments on capital gains.

Without Street analysts’ support and without capital flow favor, what reason does an investor have to carry TWTR into earnings? The “prisoner’s dilemma dictates that shareholders will shed their shares now out of fear that other investors will before them and drive the stock lower.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Microsoft Missed its Moment to Defend Against Apple & Google

Microsoft (Nasdaq: MSFT) might have seen the writing on the wall sooner regarding the migration of web browsers to mobile, but I believe it missed its moment to defend its market share. Microsoft’s development of its tablet, Surface and Surface Pro, may be more indicative of its failure to act quickly enough to counter Apple’s (Nasdaq: AAPL) market share stealing mobile operating system than reflective of progressive innovation. Where it stands now, it has also fallen far behind Google’s (Nasdaq: GOOG) Android system in mobile. As a result, I think Microsoft (Nasdaq: MSFT) will continue to shed market share over time and could become relegated to a shrinking PC market and enterprise segment, unless it can reinvent the reinvented. So, despite the stock’s post earnings pop, I would use recent strength to sell MSFT shares and put the money to more active use. However, let’s put things into proper perspective. This is still a company that just earned over $20 billion in revenues last quarter, and which has various other businesses besides its Windows business. In other words, it has the resources and the current market presence to affect its fate, despite being late to mobile as I suggest.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Microsoft

Apple (AAPL) was able to disrupt two industries at one time when it developed its iPhone, and later, the iPad. Developing innovative electronics that attracted demand from competing mobile phone makers was the obvious win, but what it accomplished and perhaps stole out of the arms of Palm (Hewlett-Packard (NYSE: HPQ) acquired) and Blackberry (Nasdaq: BBRY) turned out to be much bigger than just that. While students, writers and technical & professional Americans use computers for all sorts of calculations, documentation and other work, a great many more people use them just to surf the web and now to meddle in social media as well. As a result, mobile computing devices have been eating into the sales of personal computers and laptops.

Microsoft was late to the game in developing a competing operating system for mobile devices, and many of its partners in PCs and laptops, the Dell’s (Nasdaq: DELL) of the world, missed the boat as well. But while investors have prepared the hanging tree for the lynching of Dell, they are not yet ready to count the PC perennials including Microsoft, Intel (Nasdaq: INTC) and others out just yet. Certainly, I can agree that there remains serious question about whether the tablet can unseat the laptop, especially as innovative laptop makers adapt to meet the competition. In my view, this is the best thing working in favor of Microsoft in its defense against the tablet, and not the possibility of other tablets incorporating Microsoft’s system for mobile. Microsoft’s “tablet PC” or “PC in tablet form”, the Surface is really just one of those new innovative laptops, but for Microsoft to keep share, it needs other laptop makers to pick up after its lead. Obviously, it would also help if mobile adopted Microsoft’s system, which is not entirely out of the question, though certainly stalled by Microsoft’s late start. I’m concerned it may just be too late.

Chart at Yahoo Finance

Based on my long-term premise, which I believe is reflected in the performance of the stock leading into its more recent pop, I think the stock should still be sold here. It’s my view that the steep climb would better represent Microsoft’s successful challenge to Apple and Google in mobile operating systems (not Surface sales alone), and I do not think we are there yet. According to research firm IDC, Microsoft’s first quarter sales of tablets represented just 1.8% of segment sales. Meanwhile, Samsung and Google posed the most significant challenge to Apple this year.

Company	Tablet Sales (Units)	Q1 2013 Share	Q1 2012 Share
Apple (AAPL)	19.5 Mln.	39.6%	58.1%
Samsung (OTC: SSNLF.PK)	8.8 Mln.	17.9%	11.3%
AsusTek (OTC: ASUUY.PK)	2.7 Mln.	5.5%	3.1%
Amazon.com (Nasdaq: AMZN)	1.8 Mln.	3.7%	3.6%
Microsoft (MSFT)	0.9 Mln.	1.8%	NA
Other	15.5 Mln.	31.5%	24.1%

According to YCharts, Microsoft’s trailing 12-month P/E ratio and price-to-sales ratio are higher than they have been in two years time, and the company still has an important question to answer. Thus, I believe post earnings fervor took hold of the stock and took it too high too quickly in terms of valuation. Given my well-documented renewed concerns about the global economy, even if the company’s market share were not being threatened, I would not favor a historically high valuation now. Therefore, I would sell MSFT here and put capital to other use.

More WSG work on: Technology, Stocks and our Editor's Picks.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Colorado Shooting Impacts Movie Business

Twelve people are dead and 58 wounded and traumatized. There’s no earthly value assignable to human life, and this article is in no way meant to overlook it. Our love and prayers are with the families of those lost and the survivors forever changed.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Colorado Shooting and the Movie Business

Like the rest of the nation, theater operators have been profoundly impacted by the tragic events of last Friday morning, July 20, 2012. From the moment James Eagan Holmes entered that theater with his weapons and evil intent, the economics of the movie business changed. I know it seems insensitive to consider economic issues now, but the shareholders of these publicly held companies need to know what has changed and what has not with regard to their own personal financial security.

A similar event occurred overseas a decade ago, but it did not affect the way American theater operators do business. It was in Moscow, Russia, where terrorists entered a theater with conventional weapons and held 850 hostages while making political demands. In that case, it was actually the heavy handed actions of Russian authorities which were directly attributed to the deaths of many movie goers and militants alike. A chemical substance was pumped into the theater to subdue the assailants, but it killed many of them along with hostages. The casualties of that siege were 39 militants and 129 hostages. Strangely, the incident had absolutely no effect on the operations of the American movie house. What happened in Aurora, Colorado, however, could change things forever. At least it should, because in the days of CNN and the Internet, we can be assured that this event has planted a seed within the minds of the enemies of our State, including al-Qaeda.

The immediate economic aftermath of the horrific event produced an outsized decline for the stocks of movie house operators. The shares of the S&P 500 Index fell 1.0% Friday, but the shares of movie houses fell more. Cinemark Holdings (NYSE: CNK), which owns the theater where the atrocity occurred, fell 4.6% in Friday trading. The shares of its peers suffered as well, with Regal Entertainment Group (NYSE: RGC) down 4.4%, IMAX (NYSE: IMAX) off 1.6% and Carmike Cinemas (Nasdaq: CKEC) down 2.3%.

The most obvious and initial impact of the shooting would be a decline in “out of home” movie viewing across the nation. However, that is not likely to be a lasting result, affecting the current quarter perhaps and then fading sharply over each following period. Of course, there will be some people who will not attend a film for a long time or even forever because of the shooting, but that will be a miniscule portion of the population.

For the next few weeks, though, other forms of entertainment might benefit at the cost of the movie houses. Entertainment providers that could benefit would include the likes of Disney (NYSE: DIS), Six Flags Entertainment (NYSE: SIX), Cedar Fair (NYSE: FUN), Boyd Gaming (NYSE: BYD), Penn National Gaming (Nasdaq: PENN), MGM Resorts (NYSE: MGM) and International Speedway (Nasdaq: ISCA). Still, I don’t think it will be a meaningful difference, and general economic softening could very well undermine the entire sector.

In New York City, halfway across the country, the police chief placed officers at every theater showing The Dark Knight Rises. The action was meant to protect against “copy cat crime,” but really just served to reassure citizens of their safety. What it also did was preserve the profits of Time Warner (NYSE: TWX), which owns Warner Bros., the producer of the Batman film that still grossed $161 million over the weekend. Still, movie production companies like Time Warner are at risk this quarter, as are Lion’s Gate Entertainment (NYSE: LGF), DreamWorks (Nasdaq: DWA) and NBCUniversal, which is owned by Comcast (Nasdaq: CMSCA) and GE (NYSE: GE).

The more lasting issue for these companies might come in added costs to keep customers comfortable moving forward. Some of it could be forced by reactionary legislation. I expect we will find more movie attendants within theater showing rooms, adding to the cost of labor for theater houses. Also, we might find airport style metal detectors at the door to help customer comfort levels. Still, I’m not sure if the Aurora event will be the catalyst for the broad adoption of these cost increasing measures, except by legislation. A movie house could differentiate itself as the safe place to watch a film with family by doing so. If a strategy like that worked to take market share, new industry standards would be adopted. This lasting cost impact could destroy market value for the stocks mentioned, because if it becomes necessary, it will more likely destroy economic value than add to it. What we should do is examine what societal flaws might be disturbing the peace within our nation to get to the root of the matter.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Homebuilder Shares in My Dog House

The title here highlights the truth, which is that the housing market remains pitiful. The National Association of Home Builders (NAHB) reported its Housing Market Index (HMI) Monday. The inherently biased industry trade group promoted the news of its one point gain for the month of June, over a revised lower prior month result. On that news, the SPDR S&P Homebuilders (NYSE: XHB) gained 2% Monday, with the shares of major builders Toll Brothers (NYSE: TOL), PulteGroup (NYSE: PHM), Lennar (NYSE: LEN), K.B. Home (NYSE: KBH), D.R. Horton (NYSE: DHI) and Beazer Homes (NYSE: BZH) up between 1.9% and 4.1% on the day. However, the absolute value of the index continues to reflect a dire situation for most home builders and remains hard for me to celebrate.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Homebuilder Sentiment

The HMI improved to a mark of 29, up from 28 for May, revised from 29 at its initial reporting. The NAHB’s chairman said the gain was “reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today’s low prices and interest rates.” The economy is stagnating, though, with unemployment holding high and new labor data reflecting a stalling. Consumer confidence has hinged on fear around the European situation and stock market volatility. Economic activity has been tangibly impacted by lighter European buying and its impact to the global economy. Housing’s spring selling season has fallen short of hopes, based on the housing data flow to date.

The HMI report showed current sales conditions improved, with a relative component measure rising two points to 32. That’s the highest it’s been since April 2007, but it’s still poor. Builders’ views for the next six months were unchanged in June, with the component index measuring it remaining at a mark of 34. The most telling statistic is the measure of prospective buyer traffic, because it’s not based on hope or a subjective opinion, at least not as much as the other data points. Prospective buyer traffic was unchanged, and the index measuring it was stuck at a morbid mark of 23.

Regional results were mixed with the Midwest measure up five points to 31 and the West up four points to 33. The Northeast measure fell two points to 29 and the South dropped two points to 26. Please take careful not of this next point. Each of these numerical measures is deeply short of the breakpoint mark of 50, where delineation occurs between builders’ opinions of good and poor conditions. So, I ask you, how poor must housing market conditions be if the index measuring it is 20 points short of breakeven? I think I've made my point...

This article should also interest investors in home builders NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO) and Orleans Homebuilders (AMEX: OHB).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Home Builders Have Peaked Near-Term

On January 23rd I wrote Time to Take Profits in Happy Homebuilders, and the stocks promptly added to their gains on the same hopeful speculation that has lifted them since October. However, the housing data flow since has not been supportive of the flaky follow-through. I suspect reality is finally sinking into the heads of housing longs now though. Thus, I expect an outflow of short-term trader capital will be followed by mass exit from the group before long. In fact, I believe the near-term peak has just been set. In my opinion, there has been a mismatch of capital and fundamental drivers that is about to be set straight, and in my view, that’s bad news for the shares of builders.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Home Builders Peaked Here

As an economic prognosticator, I’ve often been early with bold contrarian and always independent and unbiased views, but not often wrong. In early 2011, I saw the set-up for a housing stock rally, and I issued a call to back up the truck for the industry’s shares. However, I backed away from that call late in the year, admittedly leaving a lot of profits on the table for those who may have been following along. My reasoning for the withdrawal was macro-driven, as I do not like what I see developing globally on many fronts. Briefly, I must disclose that my less than prosperous near-term view for the U.S. economy is based on: the impact of European economic recession (20% of U.S. exports) spreading beyond its borders; a less than helpful if not destructive effort from Washington D.C.; a dangerous circumstance of misplaced power in the hands of just recently negligent rating agencies; stubborn unemployment despite what the government is reporting; and a long-concerning and finally occurring Iran event. Over the longer term, I have great concern about the value of fiat currency globally and also geopolitical stability.

While I liked the setup still for housing stocks when I made that early call, I just could not (and cannot) see our economy, which is of course tightly tied to housing, avoiding the significant stumbling block being laid before it today. The economic data we’ve seen reported over recent weeks has contrasted with the modestly hopeful reports seen through the holidays, and housing data has been notably negative of late, in my view.

The latest bit of bad news came on the pricing front. Standard & Poor’s with Case Shiller reported their Home Price Index for November at the close of January. The index’s 20-City Composite and 10-City Composite both showed 1.3% month-to-month price decline, though seasonal factors certainly came to play. On a seasonally adjusted basis, the 20-City Composite still fell 0.7%, and that was worse than economists foresaw, given their consensus forecast for a 0.4% drop, based Bloomberg’s survey. Another good measure of prices which removes seasonal issues comes through the comparison against the prior year. On that scale, the 10 and 20-City composites posted -3.6% and -3.7% declines against the prior year period. This is not indicative of a recovering housing market.

The housing hounds will tell you that the data measured was old, and that the spring selling season might finally show progress beyond unique individual market segments. Take note that this is the essence of speculation. Long hopefuls have looked toward the seasonal opportunity every spring, and though it’s true that eventually we’ll have a good season. I’m just not seeing it happen in a big way this year, given the economic and other developments that are clearly unfolding.

The unemployment rate was reported lower for January. In the past, I’ve pointed out the weaknesses of this data point. While many of the usual issues likely remain, real improvement is also likely occurring. There are demographic factors playing into the participation ratio decline, and it’s also likely that the red tape of the process of getting or keeping government benefits are helping to reduce the unemployment rate but not helping folks nor the economy. Long-term unemployment remains excessive and too many Americans are working part-time jobs instead of full-time. Still, economic growth spurs demand for employment, and eventually, despite long-term productivity gains that have made many jobs irrelevant, we were going to have to see demand for people improving.

However, it’s not today that I’m worried about, but tomorrow. I see the hiring trend coming under pressure as we move forward. With 20% of American exports selling into the depressed European market where recession appears to be taking hold, there will be weight to bear by our economy. The last thing our vulnerable economy needs today is a setback like Europe, and the crisis remains at risk of expanding and exploding.

Secondarily, and less predictably, an Iran event has never been more likely than it is today. Most seasoned investors will tend to discount the geopolitical event against the fact that very few such happenings have disrupted the American economy. I would beg to differ though, while pointing out the “Saddam Selloff” of the early ‘90s, and noting that Iran is a much greater tinderbox with its crosshairs already attuned to U.S. interests across the globe. Also, some will say this is impossible to predict and must be left out of the equation. I disagree once again, and argue that such trivializing is both negligent and dangerous to capital interests. While too many will blow this factor off today, I point out that notation of facts with regard to the developments around Iran clearly indicate that the probability of a messy war is increasing almost on a daily basis now.

With this kind of scenario playing out, why would cyclical sectors be a wise destination for capital, outside of that allocated to day trading? And so, I reiterate that it is not today which is guiding my decision, but tomorrow that I’m planning for. With that said, money still moved into the homebuilders for reasons I outlined in my article early last year. Stocks, especially well beaten cyclical ones with cheap valuations, tend to precede operational gains. The current economics of housing remain horrible, whether we measure builder sentiment, home prices, New Home Sales (fell in December), Housing Starts (fell in December) or Pending Home Sales (dropped in November). Yet, the housing stocks are still acting as if the data has its modest positive tone that preceded the latest releases, based on some interpretations.

The SPDR S&P Homebuilders (NYSE: XHB) is just pennies off its 52-week high of $20.39, with the latest lift coming off the monthly employment report. Toll Brothers (NYSE: TOL) likewise marked its high last Friday on the jobs data. In fact, homebuilders K.B. Homes (NYSE: KBH), PulteGroup (NYSE: PHM), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH) and Hovnanian (NYSE: HOV) are all trading at or very near their 52-week high, with for most, important gains coming over the last several months. The money is still running into homebuilders obviously, but I believe this is precisely the moment to reconsider. For some, money is already leaving, with NVR (NYSE: NVR) and Comstock (Nasdaq: CHCI) off 52-week highs recently touched. I think this is a sign of an exhausted run. Some investors are now waiting for a strong sign of real estate market recovery. If, in its place, an economic stumbling block presented itself, I would expect the sector would deflate swiftly. The risk, at this point, seems especially weighted against long positions. I would exit long positions and consider taking a relative short position on the most volatile and sensitive of names, or the XHB to reduce company specific risk.

Editor's Note: Article should interest investors in Investors Title (Nasdaq: ITIC), Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO), Simon Property Group (NYSE: SPG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

I See Questionable Drivers Behind 2 Big Chinese Stock Advances – Nasdaq: VALV and Nasdaq: KGJI

The most active stocks list Wednesday was volatile, with winners rising from 10% to 39% and decliners dropping from 9% to 42%. Chinese stocks led the list, you would think as the likely beneficiaries of favorably interpreted Chinese economic data, which was released Wednesday. However, my view of the real reasons behind two of the risers exposes what I believe are questionable drivers. So I say buyer beware.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers included: Nasdaq: VALV, NYSE: KKD, NYSE: ETE, NYSE: FF, Nasdaq: KIOR, Nasdaq: KGJI, Nasdaq: PBTH, Nasdaq: NEWN, Nasdaq: TAOM, AMEX: PAL, AMEX: BMJ, Nasdaq: SORL, Nasdaq: ALRN, Nasdaq: PPHM, Nasdaq: DYNT, Nasdaq: AFFM, AMEX: ALN, Nasdaq: CLNE, Nasdaq: BWOW, Nasdaq: SCMF, NYSE: GU, Nasdaq: SNFCA, Nasdaq: MDGN, Nasdaq: LBIX, NYSEArca: AGQ, Nasdaq: SPEX, Nasdaq: CHCI, Nasdaq: RGDX, Nasdaq: TSPT, Nasdaq: FPFC, Nasdaq: BKOR, Nasdaq: CRVP, NYSE: ITG, Nasdaq: TBSI, Nasdaq: LIME, Nasdaq: VTUS, Nasdaq: TOPSD, Nasdaq: BCAR, NYSEArca: ZSL, Nasdaq: BOVA, Nasdaq: OLCB, NYSE: OWW, Nasdaq: ADTN, AMEX: WGA, Nasdaq: PWAV, Nasdaq: AMTC, Nasdaq: CPSS, Nasdaq: CDTI, NYSE: TRU, NYSE: VR, Nasdaq: EONC, Nasdaq: BMTI, Nasdaq: ALTI, NYSE: YUM, NYSE: MAR, Nasdaq: ARTW, Nasdaq: OZRK, Nasdaq: ESBK, Nasdaq: EMMS, Nasdaq: FEIM, Nasdaq: FTLK, NYSE: GKK, Nasdaq: GFED, Nasdaq: IGTE, Nasdaq: LLEN, Nasdaq: MSW, Nasdaq: MFRI, Nasdaq: FIZZ, AMEX: UWN, Nasdaq: NFEC, Nasdaq: NTIC, Nasdaq: SLP, Nasdaq: UFPI, Nasdaq: WBNK, Nasdaq: WINA.

I See Questionable Drivers Behind 2 Big Chinese Stock Advances – Nasdaq: VALV and Nasdaq: KGJI

Shengkai Innovations

Wednesday’s most active risers was led by penny stock Shengkai Innovations Inc. (Nasdaq: VALV), which increased 39.5% on the day. Shengkai was mentioned in a China Analyst article as a leader among Chinese stocks in terms of ROE, with a reported 134.64% return over 12 months. The company was also noted to have a net profit margin of 69.42% over the same span. The wire was otherwise absent of reasoning for the rise in the stock. VALV makes ceramic valves, which it exports to the Asia-Pacific region, North America and Europe. Yahoo Finance has the float for this $58 million market capitalization stock at 8.0 million shares, so moving it was not so difficult. The listed P/E ratio on the stock is extremely low based on Yahoo data. However, we’re dealing with a small Chinese company here, so there are many unknowns about the industry, company and the opportunity. I would have been more interested in the stock and its move if the reason behind it were other than a PRish article.

Kingold Jewelry

Kingold Jewelry (Nasdaq: KGJI), another penny stock from China, benefited from a Street.com article listing it as 1 of 5 stocks insiders were snapping up. The article included Krispy Kreme Doughnuts (NYSE: KKD), Energy Transfer Equity (NYSE: ETE), FutureFuel (NYSE: FF), KiOR (Nasdaq: KIOR) and Kingold Jewelry (Nasdaq: KGJI). This stock is down significantly since last summer, and there must be a good reason for that wouldn’t you think? KGJI is off its high by 83% even after Wednesday’s 25% spurt higher. The founder of the company and its chairman may be a good guy who believes wholly in his company, and the stock does trade at a trailing P/E ratio of 4.7, which under normal conditions would seem cheap for a stock that sells into the expanding Chinese middle class.

But here’s the problem... Kingold sells gold jewelry, and as gold prices rise, its margins get squeezed and sales opportunities get limited. That’s why the stock is down over the last year in my view, and I think it’s a good reason. I would, however, look at this stock should gold prices indicate a longer term turn in trend lower. However, while I see gold backtracking off whatever high it sets Thursday, I don’t see it backing down far enough for jewelry retailers to become attractive long-term.

The remainder of the day’s upside list included: PROLOR Biotech (Nasdaq: PBTH), New Energy Systems (Nasdaq: NEWN), Taomee Holdings (Nasdaq: TAOM), North American Palladium (AMEX: PAL), Birks & Mayors (AMEX: BMJ), SORL Auto Parts (Nasdaq: SORL), American Learning (Nasdaq: ALRN), Peregrine Pharmaceuticals (Nasdaq: PPHM), Dynatronics (Nasdaq: DYNT), Affirmative Insurance (Nasdaq: AFFM), American Lorain (AMEX: ALN), Clean Energy Fuels (Nasdaq: CLNE), Wowjoint Holdings (Nasdaq: BWOW), Southern Community Financial (Nasdaq: SCMF), Gushan Environmental Energy (NYSE: GU), Security National Financial (Nasdaq: SNFCA), Medgenics (Nasdaq: MDGN), Leading Brands (Nasdaq: LBIX), ProShares Ultra Silver (NYSEArca: AGQ), Spherix (Nasdaq: SPEX), Comstock Homebuilding (Nasdaq: CHCI) and Response Genetics (Nasdaq: RGDX).

The leading losers list included: Transcept Pharmaceuticals (Nasdaq: TSPT), First Place Financial (Nasdaq: FPFC), Oak Ridge Financial (Nasdaq: BKOR), Crystal Rock (Nasdaq: CRVP), Investment Technology (NYSE: ITG), TBS International (Nasdaq: TBSI), Lime Energy (Nasdaq: LIME), Ventrus Biosciences (Nasdaq: VTUS), TOP Ships (Nasdaq: TOPSD), Bank of the Carolinas (Nasdaq: BCAR), ProShares Ultra Short Silver (NYSEArca: ZSL), Bank of Virginia (Nasdaq: BOVA), Ohio Legacy (Nasdaq: OLCB), Orbitz Worldwide (NYSE: OWW), ADTRAN (Nasdaq: ADTN), Wells-Gardner Electronics (AMEX: WGA), Powerwave Technologies (Nasdaq: PWAV), Ameritrans Capital (Nasdaq: AMTC), Consumer Portfolio Services (Nasdaq: CPSS), Clean Diesel Technologies (Nasdaq: CDTI), Torch Energy Royalty (NYSE: TRU), Validus Holdings (NYSE: VR), eOn Communications (Nasdaq: EONC), BioMimetic Therapeutics (Nasdaq: BMTI) and Altair Nanotechnologies (Nasdaq: ALTI).

The day’s earnings list included: Yum! Brands (NYSE: YUM), Marriott International (NYSE: MAR), ADTRAN (Nasdaq: ADTN), Art’s Way Manufacturing (Nasdaq: ARTW), Bank of the Ozarks (Nasdaq: OZRK), Elmira Savings Bank (Nasdaq: ESBK), Emmis Communications (Nasdaq: EMMS), Frequency Electronics (Nasdaq: FEIM), Funtalk China (Nasdaq: FTLK), Gramercy Capital (NYSE: GKK), Guaranty Federal Bancshares (Nasdaq: GFED), iGate (Nasdaq: IGTE), L&L Energy (Nasdaq: LLEN), Mission West Properties (Nasdaq: MSW), MFRI (Nasdaq: MFRI), National Beverage (Nasdaq: FIZZ), Nevada Gold & Casinos (AMEX: UWN), NF Energy (Nasdaq: NFEC), Northern Technologies International (Nasdaq: NTIC), Simulations Plus (Nasdaq: SLP), Universal Forest Products (Nasdaq: UFPI), Waccamaw Bankshares (Nasdaq: WBNK) and Winmark (Nasdaq: WINA).



Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.