Wednesday, October 31, 2012

Increasing Fixed Income Share

If anybody is following my trades, they should've noticed that I'm buying more fixed income tools lately. There are some changes in my life, and I'm increasing share of fixed income in my portfolio. I don't have money to buy hundred grand lots of bonds, so the obvious choice is to buy closed-end funds.
I prefer muni bonds, but they are way too popular now, and prices are to high. I'm trying to buy high-yield muni funds on drops, and also some high quality corporate bond funds.
Buys in October:
Invesco Van Kampen Trust for Investment Grade Municipals (VGM)
Invesco Van Kampen Municipal Trust (VKQ)
First Trust High Income Long/Short Fund (FSD)
Nuveen Investment Quality Municipal Fund (NQM)
Helios Multi-Sector High Income Fund (HMH)
Disclosure: I am long NQMVKQVGMFSDHMH.
Additional disclosure: Positions can change any time.

Thursday, October 25, 2012

Tablets Are Coming

I didn't believe it. To me, tablet is a bad computer, no keyboard, no big storage, you can't see two applications on the screen at the same time. Unfortunately, as an IT professional, I made a big mistake. I thought that everybody is thinking like me. They are not.
Most people (even most IT professionals) use PC in one window mode. I have no idea how they manage it, especially when you need to look at two applications at once. But they do. Most people are not good with a keyboard (I can type with 10 digits, they don't). And most people don't care where they keep their data. Whether it a hard disk or cloud storage, doesn't matter. Data is there somewhere, that's it.
So, for the most people, tablet is a very good tool. Much smaller than a computer, much cheaper to maintain, much more reliable. Every Windows user I know had to completely reinstall OS every 2-3 years, or pay hundreds of dollars to somebody to do it, because of viruses and other malware. It's not a problem with tablets, not for now. Probably not for future either, because tablet OS, be it iOS or Android, based on much more reliable UNIX or Linux kernel.
Another plus of a tablet: it's portable. It weighs below 2 pounds, very thin, battery works for many hours. You won't find laptop computer as portable.
Until lately, I thought that tablets are not going to get into enterprise. Boy, was I wrong! They are popping everywhere! The most unexpected place? I went to the dealership to service my car. Half a year ago advisers still had PCs on their desks with some terminal software. Now they have Samsung Galaxy 10.1 tablets. With a keyboard and a stylus. And they don't look unhappy with this change!
Does it mean death of PCs? No, of course not. Mainframe computers are still around, so will be PCs. There are a lot of applications which need more resources and options than tablets can provide. PCs are going to be in the enterprise for a long time. But their share will be diminishing. PCs at home? Honestly, I don't know. They might hold on for a while. But eventually they are going to become a niche product.
OK, what does it mean for investing? Paradigm shift. PC related companies are dead. Dell (DELL), HP (HPQ) are black holes. The whole PC infrastructure is not investable. Forget about Microsoft (MSFT).
There is a big question about Intel (INTC). It's going to lose a lot of sales of low end chips, used in PCs. But it's also going to sell more server chips, because tablets require cloud infrastructure. And all talk about ARM CPUs in the server is remaining just talk, for now. I'm going to hold my position for a while.
Cloud related companies should be just fine. First of all, it's VmWare (VMW) and Red Hat (RHT), which create software used in cloud infrastructure. Google (GOOG) and Amazon (AMZN) will be fine too, they provide clouds. Of course, it's not the main source of income for either of these companies. As for tablet manufacturers, it's a big question. Apple (AAPL) is a winner on retail front, but it has a lot of moving parts and company is way too big now. Other tablet manufacturers, like Samsung, HTC and Acer, are not listed on US exchanges. ARM holding (ARMH) is a winner here, because every tablet (and every smartphone and almost every smart device) has ARM based CPU inside. I am not sure about other component manufacturers.
One remaining question is software. Who is going to be a leader here?
Disclosure: I am long ARMHINTCVMWRHTGOOG.
Additional disclosure: I have no positions in DELL, HPQ, MSFT, AAPL. Positions can change any time.

Wednesday, October 24, 2012

Still Going Down

I can't say anything good about this market. The direction is clear: down. Good news are ignored, bad news crush market.
Technicals are bad. Nasdaq Composite broke under 3000 yesterday and confirmed it today. And this is the only index that matters. Even S&P 500 is not that important, and Dow Jones doesn't matter at all.
Earnings season isn't that bad. Yes, several tech dinosaurs missed earnings. Who cares about IBM (IBM)? Or Microsoft (MSFT)? Even Intel (INTC) is not that important (and I still have long position in it, my bad). Google (GOOG) missed, but they are trying to turn company in the new direction now. They might succeed. But what a row of great earnings! ARM (ARMH), Facebook (FB), VMWare (VMW): that's new tech for you. Or such companies as DSW (DSW), Polaris (PII)? Never mind. Stocks are popping up after earnings report and then everybody forgets about them.
They say it's about elections. New idea on Wall Street is that Romney is bad for stocks. OK, why the $@&$ they spent many billions supporting him?
Doesn't matter. Nobody knows the future, I don't know what is going to happen in January. But for now, market direction is down.
Maybe I will buy some protection. Not sure. But most probably I will increase my position in successful stocks, like PII and FB.
Additional disclosure: I don't have any positions in IBM or MSFT. Positions can change any time.

Wednesday, October 10, 2012

I Don't Like This Tape

Head and shoulders pattern in Nasdaq Composite worked. Now we have another technical level: 3050. This support level is working since mid-August. But I don't think it's about technicals this time.

We had a good rally. Everybody hated it, so it worked. Now some people are liking it. Scary. Jim Cramer thinks that we are going to see a rally in "anointed" stocks into the year end. Maybe. But most obvious patterns usually don't work, just because everybody expects them.

What I don't like is the action. For the last three months, sell-offs have been stopped in the end of the day. This week it didn't happen. Earnings season started, nothing exceptionally bad is reported, market is still in red. That's very bearish.

Several things are widely commented on, and comments are all wrong, from my perch. Yes, QE3 started, and it wasn't expected. Well, we had a rally after that, but QE3 itself is not big enough to trigger a big rally. Yes, Europe is not going to fall apart any time soon. But they are not taking any decisive actions either. So there is no good catalyst for a rally right now.

We still might have a good rally in the year end. It might be triggered by election results (if Romney wins, somehow he is considered good for business, I've no idea why). It might be triggered by window dressing by funds, they missed most of the year's rally. In both cases I will be selling some of my positions. On the other hand, if current bearish action continues, I'll be tempted to by something. I prefer to buy low and sell high, not the other way around.

Monday, October 1, 2012

Back From Vacation

I am back. I really needed this vacation, couple of bad decisions right before it is a good illustration. It was idiotic to cover short position in Red Hat (RHT) calls. I was afraid of a big move after earnings report, but report happened after options expiration.
I almost ignored market when on vacation. Market ignored me as well, my overall portfolio hardly changed in the last two weeks. The only surprise: sharp (for the asset class) rise in the value of muni bonds and associated closed-end funds. Can't complain, I have sizeable position in them. But profits are made to be taken, so the first order of business today was to close position in Invesco Van Kampen Trust for Investment Grade Municipals (VGM). I am not fond of CEFs trading at a big premium.
It's hard to understand current market. Why Google (GOOG) is up more than 150 points (25%!) in two months? Maybe this position is in need of some trimming...
Among other things, there is a head and shoulders pattern in all major indices. It looks especially good (or bad, your choice) in Nasdaq Composite. If it works, index can go down to 3040. An obvious play is to buy $67 QQQ puts. I am not sure I'm doing it though. Risk / reward ration is not too good and I want to spend several days to get a feel of the market better.
Disclosure: I am long RHTGOOG.
Additional disclosure: I have no positions in VGM and QQQ. Positions can change any time.