Built By Advisors For Advisors GOT TO KNOW THE FACTS!!!
Transcript of Built By Advisors For Advisors GOT TO KNOW THE FACTS!!!
Built By Advisors For Advisors
GOT TO KNOW THE FACTS!!!
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BIGFOOT INVESTMENTS OPEN FORUM
Apr 11th, 2013
WELCOME!
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AGENDA WELCOME! ADMIN NOTESQUOTE OF THE DAYOPTIMISM GAUGECHARTS OF INTERESTSO WHAT’S UP WITH: TRADING SYSTEMS A CLOSER LOOK AT: LUV DAVID’S CORNERSWAPS AND SPREADSLEE’S COMMENTS QUESTIONS/COMMENTS
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“NOTES”
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QUOTE OF THE DAY:In investing – the winner is not the person with the
most “hits”…..
Doug Short
…it is the person with the fewest errors!
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Optimism Gauge
As of: 4/11/2013
Indicator Current Value Prior/Metric Value Current Value
St Louis Fed Financial Stress Index -0.666 -0.646(Revised) +1.0
Chicago Fed National Act Index (3 Mon Mov Av) 0.09 0.28(Revised) -.50
Unemployment 7.7 7.9 (Revised) +.50
Weekly Jobless Claims (4Wk Mov Av) 358,000 355,000(Revised) -.50
ECRI Weekly Index 6.2 6.5 (Revised) +.50
Conf Board Leading Indicators (NEW) 94.1 93.9 +1.0
University of Michigan Sentiment - Final 78.6(Final – Mar 2013) 77.6(Final-Feb 2012) -.25
Monthly Retail Sales (Adjusted) 416,990 416,070 +.50
NFIB Small Business Sentiment 89.5 90.8 -.50
ISM Manufacturing 51.3(Expansion Line = 50) 54.2 +.50
Economic Capacity Utilization 79.1 79.3(Revised) +.50
Stock Market Moving Averages Weekly Data Points >50-day MA/>100-Day MA N/A
+.50
S&P Case-Shiller 20 City Comp Index 146.14 145.95 (Revised) +.50
Total +3.75Last Update: 4/11/2013
Measuring Our Economy
NOTES/COMMENTS
CURRENT READING: 67.7%
PRIOR READING: 67.7%
BIAS: MILDLY BULLISH
9 OF 13 INDICATORS POSITIVE
TREND - Neutral
EconomicOptimism
Index
15
25
35
45 65
75
85
95
67.7%
READING AS OF: 4/11/2013
POSITIVE AS OF: 8/17/2012
Current Reading Prior Reading
Measuring Our Economy
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Charts of Interest!
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Federal Reserve Slides
LATEST DATA ( REPORTED APR 2013) COMPARED TO PREVIOUS
Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.
Source: Federal Reserve
GDP FORECAST
Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.
Source: Federal Reserve
UNEMPLOYMENT FORECAST
Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.
Source: Federal Reserve
INFLATION FORECAST
Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.
Source: Federal Reserve
FOMC PARTICIPANT ASSESSMENTS
Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.
Source: Federal Reserve
Built By Advisors For AdvisorsSource: BLS
Maybe Not All Bad!
Looking at the long-term!
Current data
A CLOSER LOOK AT THE CURRENT EMPLOYMENT STATISTICS (CES)
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LOOKING AT THE “RAW” DATA
Source: dShort
Built By Advisors For AdvisorsSource: dShort
S&P Inflation Adjusted!
“EVEN” with 1997
Built By Advisors For AdvisorsSource: FRED
How Low Can You Go?
Built By Advisors For AdvisorsSource: Calculated Risk
Gnawing Reality!
Built By Advisors For AdvisorsSource: Business Insider
Of Tulips and Bitcoins!
Built By Advisors For AdvisorsSource: Business Insider
Aug 2012 = $10
If You Believe – Go Mining – Have Been $250 each!
Bitcoin Bounces Back After Crashing Nearly
60% - Closes at $200 (4/10/2013)
Built By Advisors For AdvisorsSource: Business Insider
Your “Wallet”! Your “Money”!
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AN ASSESSMENT Virtual Currency has a BAD SOUND First in win – last in lose Not really that liquid It will lose its “pure” purpose Like Bearer Bonds – Once gone they’re gone - Estimated 10% have been stolen NO stable exchange rate NO physical nexus THE GOVERNMENT WILL BE WATCHING
TULIPS ANYONE?
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SO WHAT’S UP WITH:UNDERSTANDING A TRADING SYSTEM
THE PRICE IS FALLING!
Source: AAII
TRADING OR TRADING SYSTEM?
TIME IS YOUR FRIEND….IMPULSE IS YOUR ENEMY Jack Bogle
THE PRICE IS FALLING
1• INVESTING TRUISMS
2• THE BASICS
3• MARKET/STOCK DYANAMICS
4• INDUSTRY CONSIDERATIONS
5• FIRM SPECIFIC FACTORS
DISCUSSION TOPICS
THE PRICE IS FALLING
1 INVESTING TRUISMS
TRUTH #1 – AT SOME POINT A STOCK’S PRICE WILL FALL
TRUTH #2 – DO NOT OVERREACT TO PRICE FLUCTUATIONS
TRUTH #3 – NEVER BECOME EMOTIONAL ABOUT A STOCK
TRUTH #4 – NEVER FALL IN LOVE WITH A COMPANY
THE PRICE IS FALLING• THE BASICS2
THE BASICS ARE ESSENTIAL ENTRY PRICE IS NOT ALWAYS AN EXIT FACTOR
ONCE YOU BUY A STOCK – “STAND ON YOUR HEAD”
COMPANY FUNDAMENTALS MATTER
FUTURE PROSPECTS ARE CRITICAL
DECISIONS MUST BE NON-EMOTIONAL
RECURRING THEMES ARE IMPORTANT
MARKETS HAVE IMPACT
INDUSTRY MATTERS
FIRM-SPECIFICS WARRANT CONCERN
PRICE PAID IS NOTA PRIME FACTOR IN SELLING
REASONS TO SELL AREREALLY THE SAME AS BUYINGCOMPANY FUNDAMENTALS
NEED TO BE REVIEWED OFTENALWAYS CONSIDER THE NEXT
STEP FOR A COMPANY REMEMBER THE “BUGGY WHIP”EMOTIONAL DECISIONS
ARE USUALLLY WRONGCOMPANIES FOLLOW PATTERNSKNOW THEM!MARKETS HAVE IMPACT BUT
DON’T AFFECT ALL STOCKS EQUALLY – KNOW THE DYNAMICSINDUSTRY MATTERS – SOME
SAY UP TO 50% OF A STOCK’SPRICE IS RELATED TO SECTORFIRM-SPECIFICS ARE CRITICAL-
THINK AIRLINES
THE PRICE IS FALLING
3 MARKET DYNAMICS
TRADING ON MARKET WEAKNESS BY ITSELF NEVER A REASON TO SELLTAKE A LONGER-TERM PERSPECTIVE ON THE COMPANYKNOW THE STOCK VERSUS THE MARKETBE AWARE OF PRICE/VOLUME INCONSISTENCIESEXTREME VOLATILITY IS USUALLY A NEGATIVEHAVE AN EXIT STRATEGY
THE PRICE IS FALLING
3 STOCK DYNAMICS
THE TECHNICALS CAN NOT BE IGNOREDOFTEN MORE OF A “TRADE” THAN A “POSITION”SHORTER HORIZONS IF NOT A TRADER – DON’T OVERREACTFUNDAMENTALS CAN “DRIVE” TECHNICALSTHEY CAN BE SUBJECTIVE IN A SENSE THEY ARE LAGGING INDICATORSWE ARE NOT TECHNICAL TRADERS
THE PRICE IS FALLING
4 INDUSTRY CONSIDERATIONS
SECTOR/INDUSTRY FACTORSSTRUCTURAL CHANGES DO OCCUR SECULAR PATTERNS CAN BE TOUGHBE AWARE OF CYCLICAL TRENDSREGULATORY CHANGES MEAN THINGS INDUSTRY LIABILITY ISSUES GET EVERYBODYCOMPETITOR ANNOUNCEMENTS CAN MOVE STOCK PRICESFRANCHISE DAMAGE IS HARD TO OVERCOME PRICING POWER AFFECTS MARGINS
THE PRICE IS FALLING
5 FIRM-SPECIFIC ISSUES
THINGS GO WRONG EXTRAORDINARY EVENTS
Natural Disasters Product Recalls Product Liability
EARNINGS REPORTS Don’t “Bet” on earnings Don’t Overreact – Listen/Read Bad Earnings Take a Quarter to Recover
MANAGEMENT ISSUESAUDITOR CHANGESBUY OR BUY/OUTPRICE CAN’T GO UP ANY FURTHER!?PRICE MOVING DOWN
THE PRICE IS FALLING
CONCLUSIONSBIGGEST PROBLEM FACING INVESTORS: EMOTIONSCREEN MONTHLY CAN CATCH LAGGARDSSTOCK PICKING GETS MORE CRITICAL AS MARKETS MOVE UPTO BE SUCCESSFUL TRADING PLATFORMS MUST:
Be quantifiable Avoid interpretation Be consistent/repeatable Test expectancy Specify exact entry/exit points Have a reasonable level of complexity Be explainable Have disciplined users
STAY RATIONALE
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A CLOSER LOOK AT: LUV
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Enters Portfolio
Southwest Airlines Co. (LUV)Southwest Airlines Co. operates passenger airlines that provide scheduled air
transportation services in the United States. As of December 31, 2012, the company operated 694 aircraft, including 606 Boeing 737 aircraft and 88 Boeing 717 aircraft. It served 97 destinations in 41 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 6 near-international countries, including Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, and Bermuda. It also sells frequent flyer points and/or credits and related services to business partners participating in the
Rapid Rewards frequent flyer program, including car rental agencies, hotels, restaurants, and retail locations. The company was founded in 1967 and is
headquartered in Dallas, Texas.
Source: FinViz.com, April 2013
Source: Morningstar, April 2013
POSITIVES: Preying on weaker competitors, Southwest has used the downturn to expand service offerings to Minneapolis-St. Paul, New York LaGuardia, and Boston Logan airports. If successful, these new markets will provide ample growth opportunities going forward.
Possible concerns: Airlines for America estimates that the tax percentage on airfare has tripled to roughly 20% of the price of a ticket today, up from 7% in 1972. Analysts don't expect the amount of taxation to decrease going forward, especially as the government contemplates ways to pay for increased security measures, so Southwest and the industry likely will receive a smaller share of future ticket proceeds.
Southwest Airlines Co. (LUV)
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ENTERS PORTFOLIO 4/1/2013Buy 4/1/2013 $13.29
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Trade Data
April 2013 Stock Picks
As of March 28, 2013 - Subject to change.
Industry:Airlines
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Dow Transports
Looking for stability
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Dow Airline Index
All airlines are not created equal
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FINVIZ SUMMARY
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VALUE LINE
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VALUE LINE
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DEUTSCHE BANK
Deutsche Bank upgraded Southwest Airlines Company from Hold to Buy and raised the
price target from $11.00 to $15.00.
Deutsche Bank noted, "We are raising our rating on Southwest shares from Hold to Buy as we now believe the company is well-positioned to meaningfully improve its pretax ROIC. We think the company has turned the corner on its AirTran acquisition
and should start to enjoy the fruits of various revenue (e.g. AirTran code sharing) and cost initiatives (e.g. growth of 737-800 inductions). Accompanying the P&L
improvement, we think there will be further debt pay-down and share buybacks. For the twelve months ended 9/30/12, Southwest's pretax ROIC was 7%."
RETURN ON INVESTED INCOMEAll Capital Invested: Long-Term
Debt; Common Stock; and Preferred Stock
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STANDARD AND POORS
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NED DAVIS RESEARCH
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THE CHARTS PLEASE!
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DAVID’S CORNER
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SWAPS & “SPREADS”
IGNORE AT YOUR PERIL
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SWAPS AND SPREADSRATE PRIOR CURRENT STATUS*
Libor/OIS 14.81 14.55
Euribor/Eonia .138 .133
DTCC RepoIndex
Agency .146 .209
MBS .155 .228Treas .138 .202
High Yield 4.87 4.87
Federal ReserveCurrency Swaps
(ECB)USD million
7 Day 300 505
Open 7,963 7,551
2-Year Swap Spread .17 .146 *Note: Status = No impact
Status = Negative Impact
As Of: 4/10/2013
CREDIT ANTICIPATES – EQUITY CONFIRMS
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LEE’S COMMENTS
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Source: Gartner Research
UNDERSTANDING EMOTION IN THE MARKET
PROCESS DESIGNED IN 1995 TO CYCLES IN THE TECH MARKET IDEA WAS TO EXPLAIN PRODUCT CYCLES AND DETERMINE IF A PARTICULAR TECHNOLOGY WAS “READY” SINCE THEN – APPLIED TO DIFFERENT INDUSTRIES COULD WELL BE APPLIED TO MARKETS GET’S TO THE HEART OF OVER-ENTHUSIASM POINTS TO PROCESS
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Source: Gartner Research
UNDERSTANDING EMOTION IN THE MARKET
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QUESTIONS & COMMENTS
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