Friday, March 28, 2014

Markets and OCLS musing

Today there are exactly two markets that are down:  China and Taiwan; the rest are all up! Today is an upday, why I don't know -- could it be that inflation in Portugal is higher than anticipated, could it be that...really my point is that I don't know (call your broker he doesn't know either).  There is no rhyme or  logic to short term capital market movements -- that's why momentum traders did so well (at least until the high frequency traders got into the action), because there's inertia in the short term market movements.

My March favorite trade was Oculus Innovative Sciences (NASDAQ:OCLS) that was up 40% on the 14th of March.  On the 21th of March Facebook announced the acquisition of Oculus 3D a private company. I am certain dear reader than you can do simple math -- 14 is before 21, so a small med tech co with a market cap of USD 30 million saw massive trades a week prior (and a price increase of 40%) to Mark's making  an acquisition announcement of Oculus 3D -- can you say" insider trading".  OCLS was a stock with virtually no trading presence (10,000 share a day was a good day) on the 14th two blocks of 2 million and 2.5 million were traded (and several smaller traders occurred too later in the day -- maybe the unwind of a stupid position...).  Considering they bough the wrong company does this constitute insider trading?  This is not the first time that what appears to be "insider trading" hits the wrong company.  It happened a year ago, in this case the error is strange since OCLS is a medical device Co.  Anyway, don't know if the SEC will investigate.

On the longer side of the equation things are looking difficult; king Copper is off its high, rumours are that no steel plant in China is even breaking even -- Hong Kong real estate investors are bitching about the price reduction (they never complain when the market is up), and overall there is a general malaise in the market (despite being up for the day).  The reality is that long term investments in the capital market generates a half decent yield -- taking in consideration dividends (about 2% per annum) the market generates about 5% capital gain per annum -- taking arbitrary dates (Jan1, 2001),  It you employ a simple trading rules:  selling the downmarket and buying as soon as there is an upswing (about 7% per annum) -- the difference between 70% gain and 110% gain over 15 years is relatively small annual increase.

Anyway, market are up today -- Friday the 28th.  The economies of the OECD are not doing great (Q4/2013 was good for the US but poor for the rest: Europe was at 0.5% and Canada at 0.7%) -- obviously the raw material game has gone sideways (sic Copper), there are tension that need to be resolve (Europe's debt issue, China's over reliance on investments for growth and Russia's expansionist behaviour of late).  But again because there are massive problems it doesn't mean that these thing will be reflected in short term market movements!

(no position in OCLS or Facebook)


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