ebook essays pieces of the puzzle
Tuesday, September 21st, 2010
a kick in the gut

I hadn’t looked at the price of the Gabelli Utility Trust (GUT) in some time, and when I saw it I allowed myself to think for a second that the drop must have been in response to the pix in which I pointed out the price support it was receiving from its fake dividend.  The decline in the stock actually appeared a few weeks after that edition, the news marker from Bloomberg above showing the proximate cause.

So, the fund considers a change in its distribution policy and the stock drops dramatically?  The release shows why:  “The Board of Trustees also believes that the excessive premium at which the Fund shares trade relative to net asset value is not likely to be sustainable.”  That caused the premium to drop from a stratospheric 70% to a mere 25%.  I am completely befuddled by situations like this.  A fund returns capital instead of income, providing an illusory yield, and it gets bid up.  Who does the bidding and why?  I sense shenanigans, because the only other explanations are that people are stupid and the market is grossly inefficient.  I’d give anything for a master trade blotter on this one, to see what’s really been going on.  (Chart:  Bloomberg terminal.)

the fifty

Over the weekend, StockTwits released a beta of the StockTwits 50, a “weekly list representing the stocks with the strongest fundamental and technical characteristics.”  That’s according to the “about” page, which gives the components of the screen as earnings growth, positive surprises, momentum, and technical setup.  I’m generally not fond of such lists, especially those for which I don’t understand the “how” in more detail, but I’m always interested in what plays in the market and why, so I’ll keep an eye on this concept and see how it develops.  It’s a screen, not a portfolio, as you can see from the industry concentrations, and it performed as you would expect out of the chute, given that the list was made to order for the type of market day it was yesterday.  The group outperformed by more than a percent, with volume about 25% above normal on average.   Both numbers were skewed by the IBM bid for Netezza (NZ), but that doesn’t account for all of the incremental difference.

As for the “extra” part announced in the section heading:  If you are a subscriber to the email notifications for pix and want to get some more data items on the inaugural week’s components, send me an email and I’ll forward a spreadsheet to you.

peeping tom

Sometime when you have an open screen and a little available attention (perhaps during a boring conference call), flick on the SharpCharts Voyeur from StockCharts.com.  Every once in awhile a chart will pop up that had been chosen at random among those created on the site by its users.  You’ll see quite a number of bad-looking charts — not the pattern, but the pure visual mess that someone has created by layering indicator after indicator on one canvas.  You do get a sense of the range of things that folks are looking at, will be reminded of what has happened to some stocks that have fallen from your radar screen, and every once in awhile you’ll say, “Now, isn’t that interesting?”

distorted groups

In observing the online market discourse, it’s notable that there is a heavy concentration of dialogue in certain kinds of stocks.  Whatever’s working, of course, but also certain industries get more than their fair share of attention year after year.  Looking from site to site it’s interesting to see how industries and sectors are broken down.  At times they are a mish-mash of sectors and industry groups, with distortions from the real underlying weights in the economy or the market, and companies of some heft being ignored altogether.  It’s true that we shouldn’t be held to old definitions in our analysis (see the quote below), but they shouldn’t be arbitrary or whatever is popular.  Users of many sites get a distorted sense of the importance of certain kinds of companies by virtue of the attention and classification that they receive.

the problem with definitions

“Definitions pin things down, they limit the prospects for creativity and diversity.” — Ian Stewart, Letters to a Young Mathematician.  (For some thought on the tension between the needs for classification and creativity, check out the postings on conceptual categories and where we draw the lines.)