Gone with the wind tax credits

 

Sewell Avery, chairman of Montgomery Ward:
the last businessman to tell the government, "Fuck you."
Arrested in 1944 for defying Franklin Roosevelt's executive order.

"Siemens  to shed US jobs over wind tax credits threat," says the Financial Times.

Siemens is set to cut more than 600 wind power jobs in the US in response to regulatory uncertainty over the future of wind tax credits that has buffeted the renewables industry and threatens thousands of jobs. ...

Local politicians blamed Congress for holding up a renewal of the tax credit.

Maybe you have to be over a certain age to find anything strange about this. Little by little, we've become accustomed to industries, businesses, and jobs that depend on what the federal government will buy or subsidize. We're slouching toward state capitalism.

That, however, is a theme for our other blog, Reflecting Light. The subject of Ghost Money is investing.

There's a lesson here for investors: don't imagine you can simply hitch a ride on the federal government's latest fad. While the Fall of the House of Wind probably won't even scratch the paint on Siemens, a huge international company, that isn't necessarily the case for smaller companies engaged in -- for instance -- green energy, in response to Washington's calculated vote buying. The same will apply to next year's purple energy.

Maybe you think you can time your play so you're there when the dollars that formerly belonged to taxpayers fall from the ceiling, and be out of there when the rain has passed. Perhaps that's no greater risk than many others you can be exposed to in the markets. But you'd better be nimble.

The government giveth. And the government taketh away.

Keywords: [Siemens] [wind power] [government subsidies]

Ghost Money's author does not claim to know what he's talking about. He is not an investment advisor. This site is for entertainment, if it can even manage that.

When the chips are down

Intel (INTC) continued its downward slog after we bought it. What to do? 

We doubled down and bought the same number of shares again.

Yes, the chip maker is going through a soft patch, lowered its guidance, all that. Tablets are the stage of the rage, and INTC is conspicuous by its absence in that quarter.

No company is bulletproof. But step back and look at the view from space. INTC reportedly has 80 percent of the market for PC and server chips versus 20 percent for AMD. (Whatever happened to Taiwan Semiconductor? Must have dried up and blown away.)

Ghost Money is generally leery of tech companies. We're not smart enough to understand what many of them do, and the Latest Thing can quickly spill its te and become the Last Thing. We make an exception for a few big, big tech companies that are seasoned by survival through many of the inevitable market cycles, that spend on research and development like the day of judgment draws nigh, that have huge economies of scale, clean-sheet financials, and management that seems to look farther out than the next quarter.

Oh, and that pay you to hang around till the next time they blow the doors out with a profit boom. At the price for our second tranche of INTC, the annual dividend was 3.78 percent. You look at the dividend history and see a long record of steady or increasing dividends.

Being able to buy an INTC on sale is one of the advantages of having a Chinese wall between an ultra-conservative retirement account, however modest, and a trading account. Knowing the retirement account is safe (except from inflation) steadies the nerves.

Keywords: [INTC] [chip makers] [AMD]

Ghost Money's author does not claim to know what he's talking about. He is not an investment advisor. This site is for entertainment, if it can even manage that.

A carton of one egg, please, and make it a small one

By looking at Europe, particularly Southern Europe, as a market with the characteristics of developing countries, Unilever has transitioned from seeing the debt crisis as a temporary event to seeing it as a trend to which it had to adjust its strategies. So now in Spain, it sells its “Surf” detergent in packages that are good for five loads. In Greece, it sells mashed potatoes and mayonnaise in small packages. And in Great Britain (!), it’s implementing the same strategy. Because people are running out of money. And it’s been successful.

-- Wolf Richter (tip o' the Homburg to Zero Hedge) 

We're keeping this edition of Ghost Money short. Ink doesn't grow on trees, you know.

What a small day it's been. Half woke up, put on a slipper, brushed teeth using first three rows of bristles. Half dozen Cheerios in a drop of double-skim milk. Put on monocle, read half a newspaper article.

Walked partway to the car for morning commute to work, turned around and returned. Shoe leather doesn't grow on trees, you know. Sorry, Boss, new normal and all that, you'll just have to take the will for the deed.

Uh ... uh ... sorry, half lost in thought. Maybe a glass of small beer will help? Tried it once, words came pouring out a dozen to the sixteen. Might be too much for this mini-posting. Words don't grow on trees, you know.

Keywords: [small] [smaller] [infinitesimal]

Ghost Money's author does not claim to know what he's talking about. He is not an investment advisor. This site is for entertainment, if it can even manage that.

Target for today: Intel

We put in a buy limit order for Intel @ $25. We've researched the company and what's not to like? Until recently, only the price. But @ $25, we have a deal.

Only it hasn't hit the mark so far today. At one point we looked and it was orbiting $25.09. Why not just change the order to $25.09? What difference does a few pennies make in buying a modest number of shares? In terms of cash, very little. But the more experience we acquire in the market, the more we are fixed on (1) price and (2) discipline -- aside, of course, from fundamentals.

Waiting for Intel to come to us @ $25 on the nose is discipline. Saying oh, the bleedin' 'ell wiv it and re-bidding at $25.09 isn't. So maybe it gets away from us. In the long run, not chasing stocks will do us more fair than owning Intel today.

Keywords: [Intel] [price] [investment discipline]

Ghost Money's author does not claim to know what he's talking about. He is not an investment advisor. This site is for entertainment, if it can even manage that.

A milli-second opinion

Charles Hugh Smith believes the current stock market is manipulated through computerized trading, particularly high frequency trading (HFT), which he calls a "gigantic skimming operation."

The first and most important thing to understand about the U.S. stock market is how few humans are actually involved in the decision to buy or sell large blocks of shares. Machines do most of the trading. ...

HFT is a gigantic skimming operation that exploits tiny differences in the bid/ask prices of stocks to buy and sell millions of shares for slivers of profit that are multiplied by millions of shares traded in seconds. ... Other computers are programmed by math-wizard "quants" to trade momentum and technical signals.

In other words, unless you're a robot (not that there's anything wrong with that), you aren't pitting your skill against other investors or traders. It's no longer a game of skill at all. Market moves are down to computers' ultra-fast reflexes. They can be in and out of a position a dozen times (or a hundred times for all we know) in the second it takes for you to click "Buy" or "Sell" in your trading platform.

Hang on. The securities market is as regulated as any business on earth. The government is keeping its hawk's eye on things to protect you, friend. Oui?

Smith says non.

The second important thing to know about the stock market is that central banks and governments intervene as buyers to trigger rallies and put floors under declines. As noted above, huge buying of futures triggers opening rallies. It is a poorly kept secret that central banks or officially sanctioned but cloaked "plunge protection teams" are doing the buying.

Once again it is relatively easy to steer the market because humans and computers alike are keyed on certain well-known technical signals. For example, if the 200-day moving average of the SPX is 1,300, and the index dips down to that level, computers are programmed to sell if it breaks below that support level or buy if it spikes above it.

But wait! There's more!

The third thing to know about U.S. stock market is that their operations are opaque, invisible, and hidden from the citizenry and non-Elite human traders. How much of the market volume is computers skimming via HFT can only be estimated. Official buying to spark rallies or stop declines dead in their tracks is also hidden from the citizenry. 

The idea that the government's financial black ops runs a "plunge protection team" is almost an article of faith in alternative commentary sites such as Zero Hedge. By definition, proof must be elusive, but Ghost Money doesn't rule it out.

In our view, that does not condemn the individual investor to be sucked into a whirlpool and disappear. Ghost Money assumes, as its subtitle -- investment in a world gone mad -- says, that the context has changed. The game is to work within the system to make money, even if the system is crazy. After all, the stock market has always been irrational, blown hither and yon by winds of fear and greed, fantasy and bias. The trick has been, and still is, to use jiu-jitsu against the "big" players.

Whatever causes them, ultra-fast computers or government stealth traders, the numbers on the screen are the numbers on the screen. You can still buy and sell at your chosen price points. Ghost Money agrees with Smith that it would be healthier if the market were about shares of companies rather than programmed formulas, and maybe one of these days we can welcome reforms. We think it makes no sense to huddle in your tent meanwhile when there are still opportunities to profit.

The fourth and last thing to know about U.S. stock markets is that this skimming and intervention have left the markets extremely vulnerable to collapse. Official but secret intervention is called the "Bernanke put," meaning that the Fed will intervene to keep the market aloft, regardless of what is happening in the real world of the global economy. ...

Since HFT and quant trading robots are programmed to buy and sell at commonly-known technical signals, if certain levels are broken to the downside, the selling will quickly avalanche as trading machines issue sells.

But markets have always paid fanatical attention to technical indicators. We once asked a professional trader what was the big deal about a 200-day moving average, or a 50-day moving average. Why are their "signals" more important than a 198-day or 55-day moving average? His answer: no reason at all, except that institutional traders (and many individuals) are focused on those numbers. When the averages are broken, on the upside or downside, traders react en masse, not to the market but on how they assume other traders will react. (Keynes said the stock market is a beauty contest in which you choose, not the contestant you think is most beautiful, but the contestant you expect the other judges to find most beautiful.)

So it's hard to see why computers buying or selling at pre-selected signals presents the individual with any greater dilemma than has always been part of the playing field.

As for the chance of HFT/quant-generated super crashes, the market has been fairly good at creating those on its own without manipulation by anyone other than individuals and traditional money management firms. Let's assume that the risk is now greater for such events. Ghost Money says you should always keep a cash stash to take advantage of them by buying at distressed prices! The wise virgin keeps her lamp trimmed and burning.

Keywords: [HFT] [plunge protection team] [technical signals]

Ghost Money's author does not claim to know what he's talking about. He is not an investment advisor. This site is for entertainment, if it can even manage that.