Biderman’s Market Picks 12/17/2012

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As we approach year-end, the stock market has been meandering around. So far in December Biderman’s Market Picks model portfolio is down 1.5% while the S&P 500 is down 0.1%. However, if it weren’t for the plunge in Apple, down 13% over the past two weeks, our model portfolio would be roughly unchanged in line with the overall market.
The easy way out for predicting the market through year-end is whither the fiscal cliff. Conventional wisdom has it that if we go over, the market plunges. On the other hand, most believe that if we have a deal in place before year-end, the market will soar. In my humble opinion neither is likely.
If we do not have a deal, the market will certainly drop, but is not likely to plunge just yet, given a zero interest rate environment that is enticing companies to buyback shares, thereby shrinking the float. Also it is hard to imagine those Portfolio Managers and traders who have made stock market fortunes over the past few years bailing out over night. And yes regardless if there is a deal or not, after the economy starts to crumble next year and net corporate buying turns into net corporate selling, then the big plunge will occur.
Meanwhile, if there is a deal, the real world impact will be negligible. The most likely case is taxes going up by a supposed (supposed because I doubt actual taxes paid will go up as expected) $100 billion +/- and spending, including entitlements, going down by a similar amount. A so-called $200 billion deal solves nothing, even as the full of bull politicians have press conferences hailing a $2 trillion 10 year package.
At best, a $200 billion “solution” would kick the can down the road a bit. Given that the current spending US budget deficit is over $1 trillion, if the actual deficit reduction was $200 billion, it would be cut a bit. However, if future entitlements are cut, and not current spending, then the deficit would cut would be at most 10%. Remember, even if tax rates are raised, given that people operate in their own self interest and not in the government’s, I would expect actual tax payments would go up by maybe half what is expected, as those with big income avoid next year’s hikes.
Indeed, ever since the election and Hurricane Sandy we have seen wages and salaries grow by about 4% after inflation, the highest rate since early this year. In my opinion some of the growth is due to Sandy rebuilding but probably most is due to the upper income types bringing forward next year’s income into this year.
As I said above, Apple lost 4.5% last week, Amazon also dropped 1.6% and Whole Foods 2.3%. However, popped 6.5% and TrimTabs Float Shrink ETF rose 0.6%. Our shorts were mostly down except for the big bank ETF short which rose a tad.
I will end this week talking about Apple. Apple is suffering from being the big winner for most of this year and being in the process of rolling out its new iPhone 5. Now that we and many others have sold some Apple stock to lock in profits, Wall Street analysts are cutting their ratings, which is further weakening the stock price. I personally and the model portfolio also will be adding to our Apple holdings starting after Christmas, when the tax selling period ends.

Charles Biderman
President & CEO, TrimTabs Investment Research
Portfolio Manager, TrimTabs Float Shrink ETF (TTFS)

Disclosure of Potential Conflicts of Interest & Trading Rules.
Biderman’s Market Picks (“BMP”) is a newsletter offered by TrimTabs Investment Research (“TTIR”). TTIR is not an investment adviser. Charles Biderman is the CEO of TTIR and the sole source of trading ideas and portfolio holdings of BMP. He offers his general market opinions as well as some of his own investment ideas and information on his actual personal investments. Mr. Biderman does not intend to, and has no obligation, to disclose his entire portfolio in BMP, or the performance of his portfolio.This arrangement may result in several potential conflicts of interest.TTIR also provides investment research to institutional investors on supply and demand for shares of stock, and data on money flows as well as economic trends. Some of the information in BMP will be available to other TTIR customers before BMP is published each week.

Mr. Biderman is also the CEO and portfolio manager of TrimTabs Asset Management (“TTAM”), a registered investment adviser and the sub-adviser to the TrimTabs Float Shrink ETF (“TTFS”). TTIR and TTAM are therefore under common control, and they share certain employees, but TTAM does not use TTIR data and research.

As the portfolio manager of TTFS Mr. Biderman personally makes portfolio decisions for the 100 portfolio holdings of TTFS, based upon a customized TTAM formula of float reduction, free cash flow generation, and leverage reduction, rather than fundamental analysis of a company’s shares. To mitigate any conflicts of interests, BMP will not include any stocks included in the TTFS portfolio. However, this means that users of BMP will not have the benefit of Mr. Biderman’s views on companies that are included in the TTFS portfolio.

While BMP may include suggestions for investment in specific securities, including TTFS, Mr. Charles Biderman may trade in any position held by the model portfolio in his personal and family accounts at any time. He may make recommendations for the model portfolio after or before purchasing or and selling the same positions from his personal and family accounts. Charles Biderman’s personal accounts differ in size and composition from the model portfolio.

The model portfolio will consist of ETFs, both leveraged and unleveraged, and liquid stocks.

The model portfolio assumes a starting date of May 29, 2012, of $100,000 in cash invested in securities at that day’s closing price. All future transactions are assumed to occur at the closing price. The model does not include deductions for advisory, brokerage, custody or other fees and expenses which typically apply to an actual portfolio. Such fees and expenses will reduce returns, and they will have a compounded negative effect on a portfolio’s performance over time. The performance of the model will be affected by market and economic events in addition to the investment and trading decisions of Charles Biderman. The model’s performance is not indicative of future results.


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