I don't know if you ever trusted WallStreet to begin with, but this graph might help to explain my frequent sarcastic comments towards these so called "experts" :)

"At the top of the market, they urged investors to buy or hold onto stocks about 95 percent of the time. When stocks stumbled, they stayed optimistic. Even in November, when credit froze, the economy stalled and financial markets tumbled to their lowest levels in a decade, analysts as a group rarely said sell."

So is the fact that these guys have finally started putting quite a few more "sell" ratings out there a sign that things might get better? Not quite sure yet, but one thing is clear- trusting the BS analyst reports from major investment banks is a very dangerous thing to do...

An interesting point though, is that research from smaller boutiques seems to be of somewhat better quality, so next time pay more attention to smaller names (like Sterne Agee etc) rather than the "big boys"

"The actual investment recommendations coming from a sales desk can tell a different story from analysts' publicly released research. To gauge what clients are actually hearing from their investment managers, the investment-tracking firm First Coverage collects buy and sell recommendations from about 1,000 analysts that serve independent and midsize firms.

At the end of January, 34.5 percent of the recommendations seen by First Coverage were for a sell or short call. That was up from 24 percent in December 2007. At the height of the market crash, in October and November, the proportion of sell calls reached about 45 percent. "

Excerpts above are from the full article in NYT...

"The world is round and the place which may seem like the end may also be only the beginning." Ivy Baker Priest

As you might have already guessed it- it's that time of the year again! The most recent round of Strategy Lab has finally come to its torturous (as measured by the amount of fresh gray hair I've accumulated since last August) end. And thus it's time to recount some of the successes, acknowledge some pretty obvious mistakes and say the final "good-byes" to all of my readers out there.

First of all I wanted to thank all of you who supported my posts over the last twelve months with your votes, emails and fair or sometimes emotional critique. I simply can't stress enough, how privileged I feel to have been able to share my investing ideas here at Strategy Lab over the past twelve months. Given the predominately warm feedback from many of you, I hope that you have somewhat enjoyed my commentary, and that you might even keep visiting my blog in the future.

By the time the final results are calculated on Friday, I expect that my portfolio might show a slightly positive return of maybe 1-2% over the last two rounds (negative 8-9% in the Round 18) vs. market's decline of nearly 40%. On any other occasion, I would be the first one to quickly shrug off the talk of beating the market by being barely "in the green" as a typical Wall Street "happy talk". Unfortunately, the reality of last year's collapse makes me feel slightly less sarcastic than usual.

Simply couldn't resist reposting this one. It simply has too much of a entertainment value to pass up. You rarely see anyone being so aggressive with the interviewer :) I might not agree with him on most days about the "buy commodities for the long term" mantra but I definitely agree with him that Geithner has no clue at this point.

P.S. Frontier energy "FTO"- the smallest one of the US refiners keeps popping up on most of my screens. They have run up quite nicely but any dips could be an opportunity to reload.

It's getting a bit spooky in here! Tomorrow could be a very interesting day in my opinion for two reasons:
1. Markets are really playing with fire by testing repeatedly the support levels from last November. Remember, the more frequently you test the support levels- the more likely they are going to fail
2. Tomorrow is also a very important day for many former LBO (leveraged buyout's targets).

Friday the 13th marks doomsday for many leveraged companies as they prepare to confirm to lenders whether or not they have breached covenants on their debt.

Most companies financed with riskier loans are given 45 days from the end of a quarter to confirm that they have met covenants. Debt specialists and private equity funds expect on Friday to mark the point from which a flood of covenant breaches will start coming through.

As an example Charter is expected to file Chapter 11 imminently ... The question now simply seems to be- what kind of damage will this do to the already struggling banks? According to FT:

Creditors face much bigger losses in the case of a default.

Senior lenders to leveraged buy-outs will probably recover only 51 per cent to 70 per cent of their invesment, according to Fitch Ratings, compared with 70 per cent to 90 per cent on previous estimates.

The question now seems to be simply- who is next and how much will it cost. Or may be the upcoming Valentine's Day will work it's charm once again, all of sudden the "evil" bankers realize that changing covenants on outstanding debt is a much easier way to retain some value for most of these LBO loans. Let's call this February 14th- the "fall in love with the bankers day!"

Stay safe out there and cheers, skepticalcapitalist@gmail.com

I have already stated my opinion- now let's the Comedy Central voice their- I haven't laughed this hard in quite a while...

P.S. What in the world was this WFC write off about? I am assuming it is related to the BAC and Citi prefs downgrade? Starting to get a little worried about my 1% exposure to BAC's prefs :(

We are gearing up for a major move ladies and gentleman. Look at the chart below. The major triangle that SPY has been playing with for a while is now nearing it's conclusion. Direction is really unclear at this point. The majority of the economic data, in my opinion, has been better than expected over the last few weeks but the "no real plan" Geithner's plan is making everyone worried about banks...

chart is from finviz.com

As I've mentioned before, a number of my screens over the last several weeks seems to have been dominated by healthcare and refining names. Many seem to have wondered why refiners? Easiest way to answer- this chart from Bespoke Investment Group. Basically- margins are expanding quite rapidly which would mean that VLO, TSO, SUN and FTO are more or less printing money right now.

source: bespoke

Some of the most prominent technicians have turned bullish according to Bloomberg

"Feb. 24 (Bloomberg) -- Elliott Wave International Inc.'s Robert Prechter, who advised shorting U.S. stocks three months before the bear market began, said investors should end that bet after the Standard & Poor's 500 Index tumbled to a 12-year low.

He warned of a "sharp and scary" rebound for anyone still wagering on a retreat, according to this month's "Elliott Wave Theorist." Short selling is the sale of borrowed stock in the hope of profiting by buying the securities later at a lower price and returning them to the shareholder."

"The S&P 500 has sunk 52 percent since its October 2007 record as financial firms worldwide posted $1.11 trillion in credit-related losses and the U.S., Europe and Japan fell into the first simultaneous recessions since World War II. In July 2007, Prechter advised shorting U.S. stocks, saying "aggressive speculators should return to a fully leveraged short position." He has now reversed that call.

Prechter's recommendation follows the advice of JPMorgan Chase & Co.'s U.S. equity strategist Thomas Lee, who today issued a "trading buy" recommendation on the S&P 500. The index fell to 743.33 yesterday. Lee set a "short-term" forecast of 800."

For whatever it's worth - I am actually in agreement this time but based on two different indicators- preferred stocks and discounts on closed-end funds. Below is my logical sequence

With all the scary headlines and "expert opinions" out there, it is quite difficult for one person to summarize all the possible outcomes for the economy and various investment choices out there. The graph below is by far the best effort I have seen to systematize all of them in one neat graph. I found it in Allianz's (parent of Pimco) earnings presentation this morning ( disclosure I own some AZM sub debt).

The world economy is now faced with 4 very distinct alternative scenarios (which by the way change after each substantial government action) and thus your asset allocation change accordingly every time you perceive we are heading to a new "final" scenario. In my opinion we are now in the process of moving from "Japan" scenario to the "Yes We Keynes" one.

Source- Allianz.com

Yes, I believe that contrary to the popular rhetoric, most recent moves by the Obama administrationare directly responsible for the latest slump in equities... Just when it seemed as the market has stabilized- two nuclear bombs have been dropped that sent indices tot the new lows.

Yesterday it was healthcare and large multinationals, today defense and oil and gas... Not sure what to expect next. Pretty much every sector has been hammered so take your own pick :) I am thinking industrials are a good target as soon as GM and Chrysler are pushed into bankruptcy...

Don't even know what to say, I was hopeful but most recent moves by Obama and Co are scaring the hell out of me...

He needs to replay this video several times- source -Bespoke...

Stay safe out there if you can. It is not an easy thing to do, that's for sure...

Below are the charts from Finviz on healthcare and defense...