THEY CAN GNAW THROUGH STUCCO!!!
People Think
They’re Cute
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Apr 18th, 2013
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AGENDA
 WELCOME!
 ADMIN NOTES
QUOTE OF THE DAY
OPTIMISM GAUGE
CHARTS OF INTEREST
SO WHAT’S UP WITH: THE “MYSTERY SUBJECT”
A CLOSER LOOK AT: MX
 DAVID’S CORNER
SWAPS AND SPREADS
LEE’S COMMENTS
 QUESTIONS/COMMENTS
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“NOTES”
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QUOTE OF THE DAY:
If I’d just tried for those dinky singles…..
….I could’ve batted around 600!
Babe Ruth
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Optimism Gauge
As of: 4/18/2013
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Measuring Our Economy
Indicator
Current Value
Prior/Metric Value
Current Value
-0.632
-0.678(Revised)
+1.0
Chicago Fed National Act Index
(3 Mon Mov Av)
0.09
0.28(Revised)
Unemployment
7.7
7.9 (Revised)
+.50
361,250
358,500(Revised)
-.50
ECRI Weekly Index
6.2
6.2 (Revised)
+.50
Conf Board Leading Indicators (NEW)
94.7
94.8
-1.0
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
51.3
(Expansion Line = 50)
54.2
+.50
Economic Capacity Utilization
78.5
78.3(Revised)
+.50
Stock Market Moving Averages
Weekly Data Points
>50-day MA/>100-Day MA
St Louis Fed Financial Stress Index
Weekly Jobless Claims (4Wk Mov Av)
University of Michigan Sentiment - Final
ISM Manufacturing
S&P Case-Shiller 20 City Comp Index
N/A
-.50
+.50
146.14
145.95 (Revised)
+.50
Last Update: 4/18/2013
Total
+1.75
Measuring Our Economy
READING AS OF: 4/18/2013
Economic
Optimism
Index
45
65
35
NOTES/COMMENTS
CURRENT READING: 59.1%
PRIOR READING: 67.7%
75
BIAS: SLIGHTLY BULLISH
8 OF 13 INDICATORS POSITIVE
25
85
59.1%
15
95
Current Reading
POSITIVE AS OF: 8/17/2012
Prior Reading
TREND - DOWN
Charts of Interest!
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“HEADLINE” DATA
Source: NAHB/Wells Fargo
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BUT REALLY A “TALE OF 3 CITIES!”
THE HEADLINE!
BUT A REALLY
IMPORTANT
METRIC
Source: NAHB/Wells Fargo
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CONSUMER “GOODNESS”
Source: EIA
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The ZEW Study
Center for European Economic Research
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Source: EIA
Monthly Data
Up to 350 financial experts
Survey of expectations for the next 6 months
Done for: Eurozone; Japan; Great Britain; U.S.A.
Very respected publication
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The ZEW Study
Source: EIA
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The ZEW Study
Source: EIA
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CREDIT BAROMETERS
IN THE
“SAFE” ZONE
Source: Chicago Fed
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2 GOOD NUMBERS
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2 OUT OF 3 IS GOOD
Over 1M –
High since
2008
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SO WHAT’S UP WITH: THE MYSTERY SUBJECT?
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LET ME TELL YOU A STORY
ABOUT WHY PEOPLE DO THINGS
BECAUSE AFTER ALL….IN THE VALLEY OF THE BLIND
THE ONE-EYED MAN IS KING… OR SO HE THINKS!
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IT’S AN OLD STORY
ENTHUSIASM
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






THIS WILL WORK FOR ME
WHY SHOULDN’T I ?
DON’T UNDERSTAND – DON’T TRY
“THEY” SAY SO
RUMOR IS FACT
I BELIEVE…….YES!!!
NOW’S THE TIME!
I’LL DO IT
TIME TO BRAG
GO FOR MORE
SO MANY JOIN ME – GETS EVEN BETTER
DISILLUSIONMENT
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
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
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THE STORY CHANGES
THE SPELL IS BROKEN
THERE ARE EXPLANATIONS
FINGERS POINT
BLAME, CONSPIRACY
CAN’T BE WRONG…CAN I?
WHY DID I DO THAT??
IT LOOKS GREAT
SIMPLE….RIGHT?
COMPLICATIONS …CAN’T BE!
WELL…THERE WERE
SOME UPS AND DOWNS
DON’T CONFUSE ME WITH DATA ….
I’LL BE FINE
WHAT THE HECK?
..OR NOT
SEE..I’M
OK
EPITAPH:
 It is all so easy until it’s not
 You just think you know things –they are not as they appear
 Understanding is the key
 Adapting to change is difficult
 You must adjust to the facts
THE END!
WELL ….THERE’S A MORAL TO THE STORY
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YOU ARE ALWAYS “BEING SOLD”
LIMITS ARE YOUR FRIEND
WARNINGS ARE JUST THAT
LOOKING BACK IT WAS ALWAYS SO OBVIOUS
YOU WILL BE TEMPTED
WHERE WAS YOUR PROCESS?
IS THE ONE-EYED MAN REALLY A KING?
SO WHAT’S GOING ON WITH GOLD?
SO WE’RE TALKING ABOUT GOLD
BUT YOU KNEW THAT!
SO WHAT’S GOING ON WITH GOLD?
OUR LITTLE STORY TELLS A TALE OF MISUNDERSTANDING
BUT THERE ARE SOME PERTINENT
THOUGHTS, ANALYSIS, & POSSIBILITIES
Source: Business Insider/ETF Trends
SO WHAT’S GOING ON WITH GOLD?
SOME THOUGHTS
 The price pattern is broken when demand no longer outstrips supply
 The declining price, in turn, further reduces price
 And so on….
 Fear “arrives”
Source: Business Insider/ETF Trends
SO WHAT’S GOING ON WITH GOLD?
SOME ANALYSIS
Gold is a commodity
In the past we “pegged” it to something – now it’s difficult
It’s not the ultimate currency – AS ONCE THOUGHT
Subject to many forces in a global economy
Will probably continue to trend down until we have a strong
external influence
 The reasons gold has gone up may continue to pull it down:
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



Economic environment
ETF holdings
New/revised estimates (think Goldman Sachs)
Cyclical pattern
Source: Business Insider/ETF Trends
SO WHAT’S GOING ON WITH GOLD?
OTHER FACTORS:
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Failed technical levels
Bank of Japan actions
U.S. Dollar
Margin Calls
Piling on by hedge funds
Momentum/Model based trading
FOMC minutes suggesting earlier rise in rates
Source: Business Insider/ETF Trends
SO WHAT’S GOING ON WITH GOLD?
POSSIBILITIES:
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Large hedge funds moving out of gold
Federal Reserve sales
Central Bank selling
Cypress unloading gold reserves
Source: Business Insider/ETF Trends
SO WHAT’S GOING ON WITH GOLD?
WILL IT STAY DOWN?
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Depends on your macro view
Depends on your definition of “investing”
World debt burdens are a threat
Fiat currencies erode faith
Secular trend still in place
Gold supply is getting more limited
Emerging market buying?
Recent sell-off is very technical
Weaker dollar on horizon with debt issues
Large short positions could trigger covering
Source: Business Insider/ETF Trends
THREE SLIDES TO THINK ABOUT
HISTORICAL RELATIONSHOP BETWEEN GOLD/INFLATION
RATIO OF GOLD TO INFLATION
Average
3.33
Source: FRED
Now
6.84
GOLD DOES NOT CORRELATE WELL WITH INFLATION DATA
Source: FRED
GOLD AND THE STOCK MARKET (S&P 500)
Source: FRED
A CLOSER LOOK AT: MX
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Enters Portfolio
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MagnaChip Semiconductor Corp (MX)
MagnaChip Semiconductor Corporation designs and manufactures analog and mixed-signal semiconductor
products for high-volume consumer applications. It operates in three segments: Display Solutions, Power
Solutions, and Semiconductor Manufacturing Services. The Display Solutions segment offers source and
gate drivers, and timing controllers that cover a range of flat panel displays used in liquid crystal displays
(LCDs), light emitting diodes (LEDs), 3D and organic light emitting diode televisions and displays, notebooks,
and mobile communications and entertainment devices. The Power Solutions segment develop,
manufactures, and markets power management solutions, including metal oxide semiconductor field effect
transistors, power modules, analog switches, LED drivers, DC-DC converters, voice coil motor drivers, and
linear regulators. This segment offers its products for a range of devices, including LCD, LED, 3D televisions,
smartphones, mobile phones, desktop PCs, notebooks, tablet PCs, and other consumer electronics, as well
as for industrial applications, such as power suppliers, LED lighting, and home appliances. The
Semiconductor Manufacturing Services segment manufactures various products comprising display drivers,
LED drivers, audio encoding and decoding devices, microcontrollers, touch screen controllers, RF switches,
park distance control sensors for automotives, electronic tag memories, and power management
semiconductors. This segment offers semiconductor manufacturing services to fabless analog and mixedsignal semiconductor companies. MagnaChip Semiconductor Corporation provides its products and
services to consumer electronics OEMs, subsystem designers, and contract manufacturers through a direct
sales force, as well as through a network of authorized agents and distributors in the United States, Korea,
Taiwan, China, Japan, Hong Kong, and Macau. The company is headquartered in Seoul, South Korea.
Source: FinViz.com, April 2013
MagnaChip Semiconductor Corp (MX)
POSITIVES: MagnaChip is a leading designer and manufacturer of analog and mixed
signal semiconductor products. These chips are a main driving force behind touch
solutions for mobile phones and PC applications.
Possible concerns: The company has a high receivables rate. As a percentage of
current assets it’s sitting around 35.88%
Sources: PR Newswire, February 2013
Seeking Alpha, February 2013
ENTERS PORTFOLIO 4/1/2013
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Trade Data
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Performance
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April 2013 Stock Picks
Industry:
Semiconductors
As of March 28, 2013 - Subject to change.
Dow Tech Index
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Dow Semiconductor
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FINVIZ SUMMARY
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Schwab Earnings Report
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Nasdaq.com 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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CREDIT ANTICIPATES – EQUITY CONFIRMS
SWAPS AND SPREADS
RATE
PRIOR
CURRENT
Libor/OIS
14.55
14.00
Euribor/Eonia
.133
.130
DTCC Repo
Index
Agency
.209
.193
MBS
.228
.208
Treas
.202
.180
High Yield
Federal Reserve
Currency Swaps (ECB)
USD million
2-Year Swap Spread
4.87
4.78
7 Day
505
1,200
Open
7,551
7,551
.146
STATUS*
.150
*Note: Status
Status
As Of: 4/17/2013
= No impact
= Negative Impact
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LEE’S COMMENTS
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UNDERSTANDING EMOTION IN THE MARKET

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
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
Source: Gartner Research
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UNDERSTANDING EMOTION IN THE MARKET
Source: Gartner Research
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QUESTIONS & COMMENTS
THANKS FOR JOINING US!
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