Biderman’s Market Picks 12/24/2012

Dec
24
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Happy holidays to all, and to all of you a better 2013 than 2012. Certainly I hope that for our model portfolio. Biderman’s Market Picks model portfolio dropped another 1% last week and is down 2.4% so far in December; 3.3% since we began at the end of May. The 2.4% model portfolio decline compares with a 1.2% gain in the S&P 500 for the month. Our model portfolio has been hurt by the market run up that has been assuming a fiscal cliff deal. However, without a deal, I am presuming the market will sell off to the benefit of our model portfolio.
 
As I have been saying since the election, without a deal the US economy enters into a recession in January. Even with a last minute deal, the US economy will slump as taxes go up by at least $140 billion. Remember, to me a recession is lower after tax income year over year, net of inflation. Actual wages and salaries, before inflation have been growing by about 5%, or a $300 billion annual rate, since the week after Hurricane Sandy.
 
As with many weather related disasters, net worth gets dinged while incomes go up due to rebuilding. In addition to rebuilding, incomes are also rising due to many getting paid bonus and discretionary income in 2012 rather then wait for 2013′s higher taxes. Therefore, wage and salary growth is probably no more then $200 billion absent Sandy and tax related income gains. Higher 2013 income taxes of $140 billion to as much as $500 billion will obviously devastate the economy.
 
Presumably a recession will impact stock prices, regardless of what the Fed does. Earnings expectations are plummeting. The Wall Street Journal ran a story that mortgage rates are as low as they can go due to banks unwilling or unable to lower rates even more given their origination and servicing costs. That says to me the real estate boomlet that started this past summer is probably ending and that too will hurt the 2013 economy.
 
I know recently we talked about adding to longs such as Apple this year-end, as

AAPL is down 11% so far in December. However, given all of the uncertainty and greater likelihood of going off the cliff, I think just sitting still and not adding to longs makes the most sense.
 
Gold has been weak, down 3.4% in December. However, a great deal of the gold selling seems to have been forced liquidations by some hedge funds. So while gold might weaken if the market does fall in January, longer term gold should be an essential part of every investors’ long term portfolio given all the global money printing. Similarly, inflation protected bonds are an important holding.
 
The shorts should do better assuming that we do go over the cliff. But in reality who knows what will happen given the nitwits in charge of Congress and our incredibly ineffective president. As I have said before, I predict that Barack Obama will go down in history as the worst fiscal president ever.

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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