understanding the psychology of behavior

Here are a few interesting articles that have caught my eye…

“Worldwide Demand for Freight… New freighter sales are pushing Boeing’s 2006 order book, which now stands at 904 planes, closer to 2005’s record orders of 1,002 aircraft. For the first time new freighter jets make up 17% of Boeing’s total aircraft sales, boosting the commercial airplane backlog to a record $154 billion.” (article)

Due to high fuel costs, aircraft are being built with more and more lighter material like TITANIUM. “The aerospace market, in particular, is driving the increased demand for the lightweight metal.” (article)

So there stills is a boom in airplane manufacturing, and more of those planes will be using titanium.
Good plays here are TIE and ATI… i like TIE, management bought a lot a shares a few months ago, and think it is currently over sold and a nice entry point.

The housing data was without a doubt good. 2 days in a row good housing data came out suggesting a recovery in housing. Was housing really bad… imo… no, but was it a drain on GDP… yes. Does a recovery in housing change the opinion of the Fed, i do not think it does. The reason is because pricing still DECLINED. As such the housing recovery right now does not affect inflation. Again, PRICING DECLINED.

Housing may not strain GDP, as it is currently doing, but it will not push up inflation, so the Fed will not act on it. The Fed has been very clear that it will not cut rates, but for whatever reason CNBC keeps saying they were planning on cutting.

What I did like about today, imo it very positive for financials, is the break out in the 10yr yeild. The 10yr is pushing up to where it should be going (the fed fund target). This is causing the flattening of the yeild curve, and it just may go back to a rightward sloping curve. (good stock plays for this are COF and AIG… take advantage of the weakness)

Also, get out of housing stocks now. The low 10yr has kepted mortgage rates very low, but now mortgage rates should start to rise w/the 10yr. This will cause a greater strain on housing purchases (due to the higher mortgage cost), and keep the housing sector flat to negative.

A correction may be coming soon. I recently started shorting the QQQQ via put buying, but I’m waiting until the end of Dec. before entering the full trade.

I’ll post more about this later, but the leading indicators… that I noticed as leadering during this rally are/have broken down.  1. Biotech and 2. Emerging Markets (ie India and Tailand.

But the market has a history of drifting upward from now until the end of the year.

More on this later.

1. Immaculate conception… i guess it happens more than people think. (article) Does that mean the hardcore religious right think this is all the work of the devil showcasing the coming of the anti-Christ? :)

2. Fucken French   There is now a term for the attitude their behavior causes… “Paris Syndrome” (article)

3. Why is it that important religious places always cause conflict? (article)  I wonder how things would be if the greater concept was the progression of man within a society, rather than religion.  The American experiment is probably the closest thing to it.  Although an important component to any society is discipline, and religion provides that.  (Too many people in this world are not strong enough to think for themselves, so they need the structure of religion. Unfortunately it is those same individuals who create the conflict as per the beliefs that ’saved’ them.)

(I guess that includes me too… yahoooo)

Time revealed its Person of the Year… YOU. (article)

At first I thought this was bullshit, but the more and more I think about it, it is absolutely correct.  The internet have allowed the traditionally viewed as ‘little’ people… well… matter.  The masses make up that undercurrent of relevance, that only the most seasoned publishers, marketers and Ad personalities can create.

I will argue we still are in the early stages of this, and a consolidation of minds has yet to be truly attempted.  However, there is evidence that indepentant voices will always remain, even after a consolidation.  Case in point, Danny Sullivan created SearchEngineBlog.com… he later sold it and worked for a bigger company. I guess he got pissed at them and quit, then started a new shop called SearchEngineLand.com. (Sucks to be the owners of SearchEngineBlog.)

Silvestre Reyesa, a Texas Democrat, said al-Qaeda was a predominantly Shia organisation. The opposite is the truth - al-Qaeda professes a form of Sunni extremism. Mr Reyes is a long-time member of the House Intelligence Committee and is set to become its new chairman in January. (article)

Is every political figure that comes out of Texas stupid? or do they just like acting stupid?

This level of stupidity from our leaders is very troubling… very troubling.

Ed (the CEO) has been continuously saying PALM is a software company. But how could anyone possibly believe this when they had no control of their OS. Well a few weeks back there was an interview w/some PALM execs that suggested they would get control of their OS back from Access. Yesterday it became a reality… GOOD.

Access has done very little with the OS, pretty much just letting it collect dust.

I just hope PALM has already been working on a new interface and will have a product out sooner rather than later. I’m guessing the new UI will be in their next CDMA version Treo. (Or I’m hoping they could allow the OS to be updated even on the 680s and 700 series… that would keep user loyalty, especially on a seamless upgrade.)

PALM has a tough challenge ahead of them, especially if they view themselves as software company. I write this because of Apple. I never viewed RIMM as a competitor to what PALM does. (I personnelly think RIMM’s hardware/software is not at PALM’s level, even their newer devices.) Apple on the other hand is very good at an easy to use closed system interface with quality hardware and complimentary software. This, IMO, attacks PALM strategy going forward. If PALM truly wants to compete with this (really only the consumer level) they have to make their devices as easy to use and integrated w/Macs and Apple systems (ie iTunes) as the Apple phones. This must be done… and I wish they did it before the Apple phones come out. But it does not look like they were able to.

PALM may have some great enigneers and marketing minds, but they need some execution strategists.

Productivity was good, not great. (if analysts did not revise their guidance higher it would of looked better) The Labor Cost growth may play more of a roll with the Fed though, increasing lower than expected.

“Productivity, the key ingredient to rising living standards, edged up at an 0.2 percent annual rate in the July-September quarter. That was better than the zero change that was first reported, but it was below analysts’ expectation for a slightly stronger 0.5 percent increase… The costs of wages and benefits per unit of output increased at an annual rate of 2.3 percent in the summer, a much slower advance than the 3.8 percent rate of increase first reported a month ago.”

Overall it was good. I do not think it merits a major move in the market, if anything it should maintain our current path upward, but i’ll see if that thinking holds up in about 45 minutes .

A lot of the smaller biotechs are being bid up today thanks to PFE’s lack of short-term pipeline, and heavy cash position.

PFE will mostlikely make a significant aqcuisition soon, but I do not think it will be a small biotech, especially not GERN. The most likely buyer of GERN is Merk. They already have deals in the works, and have an equity stake in the company. Also GERN’s pipeline is very very early stage. GERN does PFE no good.

My bets are on a mid-sized Biotechs, or a very late stage Bio w/a promising treatment and a management in desprate need of help. (Cough cough… DNDN… Cough cough)

DNDN may not need PFE for the short-term Domestic production and distribution of Provenge, but they will need PFE for international production and distribution. They could also use PFE to re-activate their pipeline activities, instead of letting their pipeline lay dormant and waste away! But then again, I doubt management is smart enough to sell themselves off, even for the right price.

PFE needs revenue past 2009, not a very promising small biotech many years away from an FDA decision.

A recent break of the chart pattern occurred (toward the upside) in NFI, and is making me think Sub-Prime lenders.

Looking at the chart, NFI did not break with conviction, but non-the-less the pattern is changing. If the Fed starts raising rates, NFI should go down. If the Feds drop or hold rates, NFI should rise. If NFI doesn’t shoot up, they pay a 18.4% dividend. I have been following NFI for some years now thinking the high dividend was a red flag onto itself, with the theory being ‘how could a subprime lender issue such amounts in the current environment?’. But they have yet to not give that dividend, so i’m assuming it is the real deal.

If your DD suggests NFI is too risky, then take a look at CCRT. One of the best (if not the best analysts in the financial sector), Tom Brown really likes CCRT. Here is his view. Also, when you look at the CCRT chart it looks like it is about to break out. The chart is linked here.

IMO, the best way to play this is… put x amount into this sector, buy 50% in CCRT and 50% in NFI (primarily for the dividend and recent breakout). I still view this sector risky, but the charts are saying now maybe a good time to nibble a bit here. (yes, i wrote nibble)