Up 0.3% on the day. Metals generally positive and China-related negative. TNH retraced and EGLE continued up. Japan was surprisingly mixed given the sell-off in Tokyo yesterday. JEQ was actually up, but it is a CEF so will diverge from the underlying market somewhat. It is stranger when the ETF (EWJ) diverges, but it may be better to think of index funds which trade when their underlying market is closed as a continuation of trading rather than a reflection of what happened in the underlying market earlier.
My one trade today was to short Pulte Homes (PHM). The stock has been steady even after a bad earnings report and lowered outlook. Despite cutting back on new constructions, they have a large inventory of land and houses. Writing this down helped sink earnings this quarter. Next quarter they are forecasting a lost even before write-downs. They also have mortgages on their books — I was looking for info on delinquencies and reserves against them in their 10-Q, but didn’t find it. Probably safe to assume delinquencies are rising, though by how much? The stock has been in an uptrend since June, but is reaching a longer-term downtrend line. I think the fundamentals augur a fall. Was also influenced by WSJ article on vacant homes.
Am wondering about my China positions. Though believe the long-term economic story, it seems it could take a while to digest the stock market gains from last year. There have been several articles recently about the bubbliness in Chinese markets and government attempts to rain in it. Is this a sign its time to get out or the proverbial wall of worry that markets are said to climb on. May prune selectively.
Long: jeq jof lmc auy slw nto nxg hbmff jagnf ffhl egle aob xsi mca tdf kf uahc ff ntlrf sunw tnh
Short: jcg, phm
Trades: shorted phm
WSJ article on vacant homes. Rate at 2.7%. Before 2006 never above 2.0%. Poured cold water on decline in existing homes for sale reported recently.
Economist article on bubbliness of Indian markets. Possible short.
Economist article on financial stability. Basically said investors may or may not be underestimating market risk. Didn’t feel spur to any particular action.
Economist article on China Life. Big run-up in share prices, perhaps for a reason. China in a nutshell?
PHM and decided to short
Hours spent on market: 1.5
Positions most worried about: China
Positions most sanguine about: Japan, XSI
Biggest market worries:
Thinking about: scaling back China investments
Outlook ( up-flat-down surety rating: 1-5 reasoning):
US: up 1
Japan: up 4.0
China: up 1.0
Silver: up 2.5, industrial, china demand
Gold: up 2.5,dollar weakness, china demand
Zinc: up 3, LME warehouse stock declines
Real life: fairly productive day, though no research breakthrus
Previous night sleep and exercise: 7 hrs, soccer on Sat
Mood: a little anxious about pace of research and trading performance