Biderman’s Market Picks 2/04/2013

Feb
04
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Biderman’s Market Picks model portfolio was basically unchanged both last week and pretty much for the month of January. And yes, the S&P500 surged over 5% last month. So while we did indeed miss the big gain, at least we did not lose much portfolio value. Safety in this rigged environment is much more important to me then maximizing the last dollar of gain.
 
TrimTabs Investment Research is reporting that in January a record $77 billion poured into all equity mutual and exchange traded funds based in the US. The prior record month was February 2000, followed by January 2000. In fact five of the past nine biggest months for inflows occurred at stock market tops.
 
The new money started flowing the first trading day of January. Very few remember that December had across the board outflows. To me that means that the late 2012 higher tax avoidance selling of stocks and early recognition of income to avoid higher 2013 payroll taxes has been the source of most of the January flood.
 
Regardless of where the money is coming from, such a huge inflow if it continues will keep boosting stock prices. The key question obviously is will this inflow continue? I admit that I am surprised that hefty inflows continued last week. Therefore, now that we are into February, I will be watching to see if the inflows continue. Probably on Wednesday or Thursday I will be doing a blog video as to how flows are doing so far this week.
 
A refresher, the house has an advantage in all markets, and the house in the stock market is the public companies. They know much more then you or I or any analyst about what is really going on in their companies and, what’s more, it costs public companies nothing to “print” and sell new shares. Therefore, it is significant that corporate buying is slowing and corporate selling increasing. Net, in January companies sold more share then they bought, but not by a lot. I expect that trend to continue, and I will be reporting on that. What drove down stocks at prior flow peaks was a surge in net corporate selling. Will that happen? I think so, but I am waiting for the facts before acting.
 
The third leg of what is important to me after supply and demand of cash and shares of stock is the overall economy. To pat ourselves on the back, the Bureau of Labor Statistics originally guessed that 600,000 payroll jobs were created between September and December and then last week revised that number to 740,000. TrimTabs original estimate was 701,000 new jobs over that same four months, less then 6% from the revised BLS number. That said, I am expecting that year over year growth in withheld income and employment taxes in February will be slowing as a great deal of what would have been first quarter 2013 income was recognized late December. Some of the withholding taxes from that December income was paid in January, which is why I have to wait until early February to determine current wage and salary trends.
 
To summarize, I continue to say what I have saying all month. The stock market is toppy and could keep rising a bit, but then again might not. Therefore, I am maintaining the current holding ratio of 19% gold, 18% inflation protected securities, 19% long stocks, 37% short and 7% short the Yen. Next week, as of right now, I am considering adding to gold and lightening up on inflation protected securities. If the price of gold stays in the high 1600′s per ounce, then I will replace the 6% holding I sold back last fall at much higher prices.
 
We did well with selling the Short Euro ETF and replacing it with the Short Yen ETF. Unfortunately FB sold off after its quarterly report indicated that margins were hurt. However, margins being hurt due to large investments in future activities is not that much of a long term concern for me. So a drop right after I added it to the model portfolio is not that much fun, I will continue to maintain FB as a 1% holding.
 
The model portfolio shows that TTFS was down a tick last week. However, since TTFS did not trade last Friday, its net asset value closed over 1% higher then the last trade, therefore, TTFS was actually higher in value last week. For the record, I am the portfolio manager of TTFS and head of TTFS’ subadvisor.

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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