Spreadbetting Magazine v35 by Financial-Spread-Betting.com

DE ED C IT 14 IO N The e-magazine created especially for active spread bettors and CFD traders

Issue 35 - December 2014

The Rise of the Dollar Profit from the US currency’s fight back! www.financial-spread-betting.com

THE UK’S ONLY FREE ONLINE FINANCIAL MAGAZINE! JIM MELLON ON THE MARKETS

ZAK MIR INTERVIEWS DAVID CRACKNELL

ROBBIE BURNS ON HOW TO PLAY THE SANTA RALLY

MARIA PSARRA OF PRIME WEALTH GROUP ON MASTERING POSITION SIZING

AND MUCH, MUCH MORE - PACKED FULL OF TRADING IDEAS FROM ALL OUR CONTRIBUTORS!

Feature Contributors Robbie Burns aka The Naked Trader Robbie Burns - The Naked Trader has been a full-time trader since 2001 and has made in excess of a million pounds trading the markets. He’s also written three editions of his book, “Naked Trader” and the “Naked Trader Guide to Spreadbetting” and runs day seminars using live markets to explain how he makes money. Robbie hates jargon and loves simplicity.

James Faulkner A true stockmarket anorak, James Faulkner began investing in the stock market in his early teens. James is a devotee of the PEG-based growth investing model pioneered by Jim Slater in his seminal book, The Zulu Principle, while also being t1ps.com’s resident economic ‘guru’. James is an Associate of the Chartered Institute for Securities & Investment and holds the CISI Certificate in Investment Management.

Jim Mellon Entrepreneur and former fund manager, Jim Mellon, is worth an estimated £850m according to the Sunday Times Rich list. With a substantial international property portfolio and interests in a variety of companies Jim is a highly experienced and successful investor.

Samuel Rae Having completed his Economics BSc Degree in Manchester, Samuel Rae quickly discovered that the retail Forex industry was for him. His personal trading style combines classic candlestick analysis with a simple, logical and risk management driven approach to the financial markets - a strategy that is described and demonstrated in his best selling book, Diary of a Currency Trader.

Richard Gill SBM Editorial Director Richard Gill, CFA, is a smaller companies specialist with an investment philosophy focussed on cheap growth companies operating in booming sectors. He was a judge at the 2013 and 2014 Small Cap Awards.

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Editorial List EDITORIAL DIRECTOR Richard Gill

Foreword Although we may not strictly be past the finishing line, it can be said that many of the big threats in 2014 simply did not happen. I am sure that most will be deferred by the “smart money” to 2015, but I think that if I rattle through them readers will get something of an idea of what I am angling at.

EDITOR Zak Mir CREATIVE DESIGN Lee Akers www.cfdmedia.co.uk COPYWRITER Seb Greenfield EDITORIAL CONTRIBUTORS Robbie Burns Filipe R Costa Simon Carter James Faulkner Samuel Rae Dave Evans Andre Minassian Paul Wynter Jim Mellon Maria Psarra

Disclaimer Material contained within the Spreadbet Magazine and its website is for general information purposes only and is not intended to be relied upon by individual readers in making (or refraining from making) any specific investment decision. Spreadbet Magazine Ltd. does not accept any liability for any loss suffered by any user as a result of any such decision. Please note that the prices of shares, spreadbets and CFDs can rise and fall sharply and you may not get back the money you originally invested, particularly where these investments are leveraged. In comparing the investments described in this publication and website, you should bear in mind that the nature of such investments and of the returns, risks and charges, differ from one investment to another. Smaller companies with a short track record tend to be more risky than larger, well established companies. The investments and services mentioned in this publication will not be suitable for all readers. You should assess the suitability of the recommendations (implicit or otherwise), investments and services mentioned in this magazine, and the related website, to your own circumstances. If you have any doubts about the suitability of any investment or service, you should take appropriate professional advice. The views and recommendations in this publication are based on information from a variety of sources. Although these are believed to be reliable, we cannot guarantee the accuracy or completeness of the information herein. As a matter of policy, Spreadbet Magazine openly discloses that our contributors may have interests in investments and/or providers of services referred to in this publication.

For instance, yet again, there has been no Eurozone implosion – for the third year in a row. This is despite the fall of Espirito Santo and the allegedly precarious position of Italy. In terms of price action, there was also no stock market crash – despite serious attempts at staging this in January, August and October, and of course no recovery for precious metals and mining stocks. It is now over three years since the bubble burst in this asset space, and unless or until we see inflation this ain’t going to happen either. Closer to home and London real estate may not be rising any more, hurt by mansion tax fears and stamp duty realities, but so far no great unwinding either, with the FTSE 100 starting near 6,750 for 2014 and likely to finish close to this level as well. This is despite the fact that there has been no interest rate rise, even in the face of confused forward guidance from Bank of England Governor Mark Carney. But at least he was immortalised by being described as an “unreliable boyfriend” this year. Nevertheless, one would not want to be complacent over the events during 2014 and what may happen next year. The geopolitical situation may not have taken points off indices in the way that was expected, but it is difficult to see how Putin / Ukraine can be solved without our 21st Century Napoleon saving face and trying to save the Rouble by initiating a fully fledged conflict. ISIS may not have the shock value it had during the summer, however, its activities are an ever present danger to stability in the Middle East and beyond. That is not to say that there were no surprises for 2014. While it was anticipated by some that the fracking phenomenon could be a negative force for the oil price, the Saudis/OPEC taking on the threat by maintaining production and causing a price collapse was a curve ball. It is also deflationary and will surely be a growth booster as well, when competitive currency devaluation and near zero interest rates really have not worked. What may be working in this respect is the Japanese attempt to bring inflation into its economy by weakening the yen. However, we may need to get to this time next year in order to ascertain whether the Three Arrows policy was really enough to end a 25 year post bubble state of flux. Finally, 2014 has been a year of changes for Spreadbet Magazine, with most of them being positive. We hope you continue to enjoy what is regarded as one of the best financial publications around in the New Year. In particular, I thank the Editorial Director Richard Gill for all his good work, and patience. A Happy Christmas and Prosperous New Year to all our Spreadbet Magazine readers. Happy Trading. Zak

December 2014 | www.financial-spread-betting.com | 5

Contents

Three Small Cap US Dollar Plays James Faulkner of t1ps.com looks at three small cap stocks set to benefit from the strength of the US dollar.

40 Currency Corner

14 18 25 30 53 56

Samuel Rae, author of the best selling book “Diary of a Currency Trader”, on why he doesn’t trust the US dollar.

The Best of the Evil Diaries Highlights of what infamous short seller Simon Cawkwell (aka Evil Knievil) has been trading and gambling on in recent weeks.

Fund Manager in Focus Filipe R. Costa examines why Andrew John Hall, the oil market king, has been so successful.

Mellon on Markets Read the latest thoughts and trading ideas of multi-millionaire investor and entrepreneur Jim Mellon.

Should You Follow Analysts’ Consensus Recommendations? Filipe R. Costa examines an unconventional way of using analyst expectations in order to beat the market.

Something About the Markets Andre Minassian, CEO at www.clevergamesuk.com, asks how far the bull market will go.

Robbie Burns The “Naked Trader” Robbie Burns gives advice on how to play the “Santa Rally”.

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The Return of King Dollar

Zak Mir’s Monthly Pick

James Faulkner of t1ps.com on how the US dollar has come back with a vengeance!

SBM editor Zak Mir takes a technical and fundamental look at US property search firm Zillow.

48 08

Zak Mir Interviews David Cracknell David Cracknell, former Political Editor of the Sunday Times, is Zak’s interviewee this month.

58 64 70 74

School Corner - Position Sizing Maria Psarra, Head of Trading at Prime Wealth Group, explains why size does matter, in the third of her trading education articles.

Binary corner Dave Evans of binary.com examines trading opportunities in the US dollar.

Paul Wynter on Art In a new feature on the alternative side of investing, Paul Wynter of Londonart.co.uk takes a look at some of the new faces to hit the art scene.

Technology Corner SBM’s resident technology specialist, Simon Carter, takes a look at the hot gadgets to blow your bonus on over the Christmas period.

Book Review: The UK Stock Market Almanac 2015

Markets In Focus

SBM’s Editorial Director, Richard Gill, CFA, reviews an ideal Christmas stocking filler.

The major markets movements in November.

December 2014

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Zak Mir Interviews

ZAK MIR INTERVIEWS

DAVID CRACKNELL

This month Zak interviews David Cracknell, former Political Editor of The Sunday Times, who is currently head of his own public relations firm, Big Tent Communications. Zak: According to your Wikipedia entry you were one of the founder editors on Sunday Business with Jeff Randall in 1998. This was just before the Dotcom Bubble and the explosion of online sources of information such as Bulletin Boards. Is the rationale behind Sunday Business actually still valid, or are we actually mired in an era of information overload regarding the financial markets? David: I guess the fact that Sunday Business went out of business says it all really! But, seriously, the rationale behind it was simple: great scoop-getting journalism combined with the kind of interesting – as opposed to worthy but dull – features that business people wanted to read on a Sunday. It was a brilliant product and perfect for its time, but also ahead of its time. The FT Weekend/ ‘How to Spend It’ didn’t exist then in its current form and we had started all those luxury market features way back then. Yes, we had pieces on, say, the best home humidor, or ‘best wines under £3,000’ or whatever; but on the front pages we broke big stories. Randall came from the Sunday Times Business Section and everyone on that paper had an entrepreneurial spirit - and took a risk to join SB - and we all went on to be city, business or political editors elsewhere.

If SB was around now still I am sure it would have adapted to the times; it would have had its austerity period like every other paper and would have given bankers a hard time where they deserved it. But it also would have taken an intelligent detailed approach; it wouldn’t have defended any wrong doing. Indeed it would have probably been leading the way in exposing excess, ridiculous lending and dodgy dealings. We were always big on whistle-blowing scoops from City insiders. Zak: You were political editor of the Sunday Times during the Blair / Brown years, which crowned your journalistic career (until you became a columnist at Spreadbet Magazine). Did getting so close to the corridors of power change your perception of the world of politics? Are you more or less of a cynic regarding the alleged sleaze in Westminster? David: Of course, but just like the City, politics is full of individuals so it is hard to generalise accurately. My main concern was being a good journalist, not being partisan, and getting the story. I wanted to be Woodward and Bernstein.

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David Cracknell

There had been the cash for questions story in the 1990s when I was a cub reporter - although that was confined to just a few people – so I didn’t turn up at the Palace of Westminster on my first day and expect the standards of a convent. I was always more interested in the psychology of politics more than policy or scandal: how people operated in politics to get up the greasy pole, what alliances were being formed behind the scenes, the egos, how people stabbed each other in the back, how some individuals hated their party or cabinet colleagues more than their political opponents. The Blair-Brown years were fantastic for that, I loved it. At one point I was getting all these high-level cabinet documents leaked to me – because one camp wanted to discredit the ideas of another camp. They even had a cabinet meeting to discuss who was leaking all this stuff to the Sunday Times. Great fun. These days these insights into how politicians and journalists think and operate is highly useful of course in my current role as a PR and reputation management consultant. Zak: An event in which the world of politics and finance collided in a very explosive way was at the time of the financial crisis as the banks were bailed out.

The irony now over 5 years later is that the High Street is peppered with so called “challenger” banks who appear to simply have joined a cosy cartel. Was the bailout an expensive mistake / panic measure? Or was there an ulterior motive? After all, most MPs are from a legal background, and the banks are the best paymasters to the legal profession. It is almost impossible to successfully sue a bank even now – hence all the PPI and many other scandals. David: They did let some institutions fall, but the failures were so widespread and the culture of irresponsible lending endemic it did feel like the world was about to end. Remember the queues outside Northern Rock? One of my first consultancy roles was advising Ron Sandler at Northern Rock where he had been appointed by the Treasury to turn it back around. I saw the figures; it didn’t take a rocket scientist to work out there was too much lending, ridiculous risk and not enough in the savings accounts. I certainly don’t believe in any conspiracy that MPs got together with their lawyer and banker mates. Critics always say MPs are out of touch and irrelevant; no more so than to the City.

December 2014

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Zak Mir Interviews

Things may have changed now, the bankers have to pay attention to what Parliament is saying; but six or seven years ago it seemed to me that while financial clients may have paid for financial PR or CSR engagement consultants, a lot of them wouldn’t pay for government relations advice. That has certainly changed now! Zak: Since 2010 we have been governed by a Conservative-led coalition government, propped up by the Lib Dems. When they came to power the economy was still reeling from the aftermath of the financial crisis. Since then the UK has become one of the strongest economies in G7. Despite wobbles on Austerity and tax policy could it be argued that the past four years have actually been a great example of political partnership? Since then the UK has become one of the strongest economies in G7. Despite wobbles on Austerity and tax policy could it be argued that the past four years have actually been a great example of political partnership?

David: My client was actually Stuart Wheeler, the founder of modern spread betting in the UK and IG Index. He became a supporter of UKIP when it was more or less solely a party campaigning for a referendum on EU membership, which seemed such a pipe dream only a couple of years ago. Stuart asked me purely as a ‘hired gun’ to help Nigel with some media training and message discipline during the 2009 European elections when UKIP came second. I did it for the challenge and it was good fun. I’m not a UKIP supporter nor have I ever voted for them. But I like Farage and I don’t think he is a bad person. He is actually liked by a lot of journalists and I remember we took Peter Oborne for a drink and turned him into a bit of Nigel fan. The criticism of UKIP of course at the time was that they were a ‘one policy party’, a ‘pressure group’; I guess whatever you think of their politics that can’t be levelled at them now. They have become a lot more professional at communications for sure, and that has been helped by the hiring of Express journalist Patrick O’Flynn.

David: Well there would be a few people in No.10 who would agree with that! Both the Conservatives and Lib Dems have claimed their share of the credit. Success, as they say, has many fathers etcetera. But you only have to look at the Red Book and the details of the recent Autumn Statement to see that that it is equally arguable that the Osborne budgets have been putting skinny jeans on a generously flanked gentleman, whose middle-aged spread will continue to spill over the top and it is difficult to see how we can avoid further years of pain. We are getting the economic growth but the tax receipts are weak so until we get some significant wage increases it’s hard to see how we can avoid more government cuts. As a political partnership the Coalition has been relatively workable, although there have been consequences for both parties – aside from the rise of UKIP – in that the parliamentary Conservative party has lost its cohesion and discipline, and the Lib Dems have haemorrhaged public support. I suspect we will see more coalition after May and for another five years at least. Zak: After The Sunday Times you founded Big Tent Communications, a PR and reputation management company, making you one of the most powerful people in your profession. Amongst the CEOs, presidents and prime ministers you have advised in your prestigious career, I believe one of your clients was a certain Nigel Farage. How much of the rise of UKIP and Nigel Farage can be attributed to Big Tent?

Zak: As we have seen from the examples of the banking bailouts, immigration policy, the EU and the City, politics and finance are closely intertwined. It may be the case that for the General Election in 2015 we shall be treated to an explosive mix both of parties, policies and outcome. For instance, the vagaries of the first past the post system could lead to combination of Labour / SNP, Conservative / UKIP, or indeed an unfathomable combination of all parties. We could have an early EU exit, a freeze on immigration, a Mansion Tax, higher NHS spending or a random assortment of all of these and many more contradictory policies. How much of an economic influence do you think the Election could have on UK stocks, the housing market and business sentiment?

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David Cracknell

David: I always find that a difficult question. It’s like those market reports that say nothing helpful like ‘The FTSE cautious as the Chancellor gets to his feet’. I mean, apart from the big calendar announcements, I don’t believe traders study the political pages much. But I can’t blame them; most political journalists aren’t interested in the City or business and don’t want to really understand it. That said, the markets and the City hate instability so the first thing they will want to see after May 7th if no one wins an overall parliamentary majority is a quick – or at least professional and credible – start to coalition talks. We have already seen how Osborne has manipulated the housing market, with help for first time buyers and cutting stamp duty. As to stocks, it will depend how much emphasis there is from the winning party or parties on saving; but of course what really matters for the markets is not so much who is in No.10 as what (the unelected) Mark Carney says about interest rates. Zak: Sticking your neck out, what is your favoured outcome for the 2015 General Election, or do you just go with the bookies?

I think it’s sad when you see a lot of people at these free ‘get rich quick’ Fx seminars who have blown their accounts several times already, heading into the markets without any risk management, trading plan or even a stop loss. Very sensible and successful people get into trades like this too. Get rich slowly, is my motto. Trade well, and everything else will follow.

“critics always say mps are out of touch and irrelevant; no more so than to the city. thinGs may have chanGed now.”

David: More of the same. Tory-led Coalition. I can’t see Ed Miliband in No.10. I think UKIP will do very well, but the trouble for them is their support is diluted so it will be hard to turn into winning actual seats in Parliament at the general election. Zak: Since leaving the Sunday Times you have entered the world of stock trading and have developed your own way of supplementing your income and “enjoying” yourself with shares. Do you think that there have been advantages to entering this arena later in life than many in the market who begin in their teens and 20s? David: It just seems obvious to me that day trading, or let’s say short timeframe trading, is not the thing to do when you first start out. I always say it’s like trying to play the violin at grade 8 level, why would you try to do that from the off? Why not start by learning a few chords on the guitar, a few Beatles numbers say, and then progress to harder markets. A lot of equities are not nearly as volatile as currencies and you can have fun discovering new small AIM companies and making them your favourites.

I’m actually writing a beginner’s book called ‘Middle Aged Spreads’ with a brilliant technical analyst chap called Zak Mir, you may have heard of him? Zak: (laughs) ha, ha, who?

December 2014

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The Best of the Evil Diaries

THE BEST OF THE

Evil Diaries

The man the Daily Mail dubbed “The King of the Short Sellers”, Evil Knievil (aka Simon Cawkwell) is Britain’s most feared bear-raider. He mostly famously exposed the fiction that were the accounts of Robert Maxwell’s Communication Corporation, an event which helped to earn his pen name.

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The Best of the Evil Diaries

A big man with a bigger reputation, Evil Knievil famously made £1 million by short selling shares in Northern Rock during its collapse. He also uses his knowledge and experience to buy shares, often resulting in the same devastating effect. Three times a week Evil provides his thoughts and musings on the markets only at theevildiaries.com. He doesn’t just deliberate about the financial markets on The Evil Diaries, but also comments on politics, current affairs, which horses/sports bets are his latest favourites, with the occasional film and book review thrown in for good measure. Here we take a look back on the highlights of Evil’s diaries in the month of November.

3rd November 2014 I bought Flow Group (FLOW) at 40p since I was told to. One has to believe that their domestic heating technology works (look it up) but if it does and there is a competitive advantage this share price has much further upwards to go. I last week had a session with a residential property developer who is centred on South East England. He’s got lots to move and has appointed Foxtons (FOXT) to do the necessary. I remarked that Foxtons’ modus operandi is at best ill-mannered. He replied that that did not bother him since they are better at moving stock than other agents. Well, I cannot argue with that. Still, the quieter agency times in which we now live must surely take the share price down from the current 160p. Even if Foxtons suddenly caught a dose of good manners.

7th November 2014 About four weeks ago I bet against Ed Miliband being the next prime minister and, minded to press this bet, yesterday got hold of a political journalist who, much to my surprise, confirmed that it might be possible to ditch Miliband before the next election and/or find a Labour win in May 2015 leading to a prime minister determined by coalition considerations and where the result is not Miliband. So who follows? My correspondent asserted the runner to watch is Yvette Cooper who has cleverly positioned herself somewhere dead central in the Labour Party. However, he said that there is the little problem of the fraudulently financed wedding ceremony that she and Ed Balls had in 1998 in a hotel in Eastbourne. The night porter originated this story and the manager confirmed it: basically guests were charged £100 for the night instead of the probable going rate of £35. The surplus was applied to the cost of the reception. Had guests known that they were paying for the ceremony through a deception they might have had a different attitude towards attending. I presume that it was Balls who arranged this since he has shown himself devoted to deception when in government and subsequently. But it sticks to his wife.

5th November 2014 All right-thinking citizens are on tenterhooks awaiting Nu-Skin (NYSE:NUS)’s announcement of results before the New York opening this afternoon. This colossal scam closed at around $50 last night. The management can of course try it on again by way of concealment. But they can’t do it forever. Perhaps today is collapso day.

off with his ‘ed?

10th November 2014 Governor Carney has again warned on interest rates. This is not because he wishes to promote a philosophical abstract but because he thinks it is going to happen. This is contrary to the views of some (who regard such rises as far into the future). So it’s coming. To suppose that it will necessarily come after the general election is without historical support since the forces that compel a rise can’t understand dates such as May 2015.

December 2014

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The Best of the Evil Diaries

Over the weekend I caught up with the state of play surrounding Alibaba, lately floated as BABA on NYSE. Investors are not holding shares in this venture but in effect rights to profits. This means that they cannot vote to change the conduct of the management who are, in any event, held under the thumb of the Chinese government, the most manipulative behind-the-scenes operators by far in the entire world. All this makes Alibaba a high risk investment. However, it is a brave bunny who stands in the way at current levels - now around $115.

14th November 2014 I had paid 24p for GCM Resources (GCM) on Tuesday simply on the longish term argument that they may prove ridiculously cheap. Therefore the results that came late on Wednesday and which merely reflect the fruitless pursuit of the licensing deal that matters have little or no bearing on matters. When I reminded readers of Cazenove’s £10+ target price for GCM from some ten years ago I did not deceive myself or readers into thinking that any such figure now applies. Further, and in the light of the fact that GCM has to go on spending money just to keep the show on the road, there has to be some dilution when a funding placing is completed. However, I am still persuaded that, one day, the Bangladesh government will license GCM to develop Phulbari. 24p will then be seen to be ridiculously cheap. In a sense I feel a bit of a Charlie in declaring that interest rate rises can come sooner than we expect only to be trumped in spades by Governor Carney that there will be none until next October. Well, he may be very confident but I ask how he can possibly know.

19th November 2014

But I tipped Ladbrokes (LAD) on the long tack. This business has lost its way and should be put out of its misery ere long. Now 122p. Incidentally, The Commander, 47 Hereford Road W2 offers terrific catering nowadays. It is The Debonair One what owns this joint.

21st November 2014 African Minerals (AMI) has been, not particularly surprisingly, suspended. Some will hope for a miraculous reconstruction. But it looks like an almost certain goodbye GCM Resources (GCM) yesterday jumped on an RNS advising that GCM had almost entirely been approved by an OECD examination. Well, if one reads the RNS, it is clear that, on all material points, GCM is completely in the clear. That all noted, I sold out my position acquired perhaps ten days ago since I would be surprised if there were any more news in the near future. But, long term, things are looking up for GCM. Or so it seems to me. I caught up with my pal who works in seriously expensive London property and he assures me that prices are continuing to crater. So I am staying short of Foxtons (FOXT). They are bull market operators and a bull market is what they are not going to get for a long long time.

28th November 2014 Finally, I shorted 2.5m Thomas Cook (TCG) about two years ago at around 15p and got a touch of the retreats such that I closed at 25p. Given that Thomas Cook subsequently got to near on 190p I had a lucky escape: it was simply that my self-preservation urge kicked in. However, Wednesday’s figures support the view that my original approach was correct. In rough terms, Thomas Cook is now valued at £1.7bn in contrast to tangible net asset value of minus £2.7bn. That gap of £4.4bn is enormous and relies upon the banks’ support on a very accommodating basis. Perhaps they will stand by their debtor. And then again they might not. Thomas Cook now stands at 120p. That is high risk. Further, the departed CEO, Harriet Green, knows which side her bread is buttered.

The Debonair One (aka Jim Mellon) hosted the Titec lunch yesterday. I am honour bound not to reveal anything of what was said and am unbribable probably through lack of imagination on my part or offers to break this undertaking.

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December 2014

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Fund Manager In Focus

fund manager in focus

Andrew John Hall The Oil Market King

Given the explosion in volatility in the oil market in recent months and the severe routing the oil price complex has endured, this monthâ&#x20AC;&#x2122;s Fund Manager in Focus is Andrew John Hall â&#x20AC;&#x201C; a legend in the oil markets.

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Andrew John Hall

Hall is perhaps the most successful trader in the oil arena and one who has made billions in profits for the firms he has worked for. Wall Street calls him “the God of crude oil trading” and some simply call him “God”, as he has been on a hot streak for over 30 years. What is the secret of his success? Well, that’s a tough question, but if we needed to summarise his style in just a few words, then Philip Verleger’s (an energy consultant) description is very instructive: “As one of my clients [Andrew Hall] once told me, he has three gears: long, longer and really long!”

On the one hand you need conviction to pull the trigger, but on the other hand this very conviction can keep you in a losing position for too long. Others believe that this is just a cold streak and that Hall needs time for his views to, once more, come to fruition.

Buying, buying and buying even more has been a killer strategy for the past 30 years. Hall believes oil demand is growing at a much greater pace than its supply, and when that happens prices can only go north. Such a simple rule, taken from any basic economics textbook, has yielded him enviable profits and a reputation that is almost untouchable. However, with such a reputation always comes detractors, there’s always someone waiting for you to slip… And, of course, as with any trader, Hall is no exception. Nobody is infallible.

“Buying, buying and buying even more has been a killer strategy for the past 30 years. Hall believes oil demand is growing at a much greater pace than its supply, and when that happens prices can only go north.” It is fair to say that with oil prices on the slide, the last few years led him and his investors into some deep losses. Some believe this is the end of a legendary trader, a man who was not able to perceive a changing reality in the oil market and was wedded to his view – a common trait amongst almost all fund managers.

A stunning start Hall is actually a native UK citizen, being born in Bristol, the son of a former British Airways pilot instructor. He studied Chemistry at Oxford and soon started working in the oil industry. In 1969 he landed a job at British Petroleum. The early 70s were busy times in the industry as the Arab oil embargo changed the supply forces completely, giving price power to OPEC. This environment provided a major learning opportunity for Hall and sharpened his interest in the financial dynamics behind oil prices. Hall further progressed his studies, heading towards one of the best business schools in the world, INSEAD, in France, where he earned an MBA. It was after INSEAD that, in 1981, Hall travelled to New York to run BP’s trading operations. His work was so well recognised that Tom O’Malley (chairman of refiner PBF Energy Inc.) made him an irrefutable offer to work at Phibro to trade in the oil market. The team Hall headed traded a few, very large long positions in oil and was, to put it bluntly, very successful. More than 30 years later, O’Malley and Hall are still partners. While Phibro was successful, the company changed hands several times.

December 2014

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Fund Manager In Focus

In 1981 the venerable trading house Salomon Brothers acquired it. Then, in 1997, Travellers Group acquired Salomon and became the ultimate owners of Phibro. Later, US banking giant Citigroup were to become the owners of the profitable trading unit. However, with the onset of the GFC in 2008, Citi was forced to turn to the US government for a bailout due to the $28bn in losses accumulated in the subprime arena. The US government bailout changed everything and Phibro changed hands once more, this time being absorbed into the commodity-trading unit of Occidental Petroleum. It has been reported by Bloomberg that between 1997 and 2008, Phibro accumulated more than $4bn in profits, being profitable in every single year and in more than 80% of the quarters. That is a stunning record for Hall.

A controversial style One of the hallmarks of Andrew Hallâ&#x20AC;&#x2122;s success is a thread common to many hugely successful fund managers, that of going against the crowd.

Indeed many investors used to say that anyone who disagrees with him is just plain wrong, so knowledgeable is he about the oil market. He anticipated the run up in oil prices to 2008 and, perhaps more importantly, its subsequent crash, grabbing a bonus of $100m in both 2008 and 2009, when the Street was just sinking â&#x20AC;&#x201C; no mean feat! But, as with all real life stories, nothing lasts forever. Prolonged hot streaks almost inevitably turn into a cold one. In the last couple of years Hall has been unable to make a profit, principally as he failed to anticipate the major revolution that is going on in shale oil drilling. This new technology has resulted in the US achieving the highest oil output in almost 30 years and to be recognised as one of the countries with the largest reserves of oil in the world â&#x20AC;&#x201C; a stunning turnaround from just a few years ago when shale oil drilling was unheard of. Many analysts believe the US will, amazingly, become oil self-sufficient in just a matter of years, indeed already producing 84% of its domestic consumption during the last year.

OIL PRODUCTION CHART

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Andrew John Hall

“It has been reported by Bloomberg that between 1997 and 2008, Phibro accumulated more than $4bn in profits, being profitable in every single year and in more than 80% of the quarters. That is a stunning record for Hall.” As with the tech revolution, the new technology in shale drilling is going to change the paradigm, and so called “peak oil”, many people believe. With the US Federal Reserve boosting the money supply now for more than five years, Hall predicted that global demand would pick up again, and with it the demand for oil would also increase, pressing prices towards $200/barrel. But, five years after the synchronised global downturn, the US economy is still growing just mildly, while Europe is not growing at all. At the same time, investors are concerned with China and other emerging markets. This international macroeconomic scenario has not been favourable to Hall’s long positions in oil. But, the real problem for him is the development in the fracking technology applied to shale drilling, which allowed for a huge expansion of oil production. Until just a few years ago, exploring shale oil was unfeasible. It was known that the US had large reserves of this type of oil, but the costs to drill it were so high that production was commercially unprofitable at the then oil prices. With the advent of a new technology known as fracking, which consists of a hydraulic fracturing of the rocks where the oil resides, the costs for this unconventional way of drilling oil declined to make it economic at prices around $100/barrel. This of course led to a rapid increase in oil production. The more optimistic studies not only predict the US to attain self-sufficiency in oil consumption, but also to become a net exporter. Many analysts believe that oil prices are likely to decline over the next few years. The rationale behind this is very simple: with what was once unreachable oil now being drilled, its supply is increasing and in sync with a slowing economy, thereby pressing oil prices down. Hall’s own fund management company Astenbeck Capital Management (with O’Malley being his partner) has seen assets under management decline from $4.8bn at the beginning of 2013 to $3.4bn in May of this year (as reported by Bloomberg).

Even after the shale revolution, Hall has kept his bold long bet on oil, going against everybody else, and mocking those who believe the shale revolution will change the paradigm forever and lead to cheap and abundant oil and gas. While many analysts predict oil prices to be near $75 over the next five years, he insists in oil being at greater prices, as high as $150. Hall believes that shale drilling still faces many political, environmental and technical challenges across the globe which will delay its development. He has thus gone all in against the shale revolution and has been buying long-date future contracts on oil to be delivered in 2019. While it pays to be a contrarian under certain conditions, the introduction of new technology may change the dynamics of the oil market, as happened with the technology revolution during the 90s. As always, people tend to mock those who stick to conservative ideas, as they believe they just don’t understand what is going on. To many, Hall is now a dinosaur, one who used to be an avid hunter, but is now fast becoming out-dated.

The other side of the coin… While Hall may seem bold in his actions, remaining resolutely long in the face of current price action, there are some important issues that may, ultimately, have him win out in the end again. The technology revolution initiated in the 1990s allowed for material changes to many industries – travel, media etc., and which increased productivity and changed the way consumers behave, but the final profits for many of these dot-com companies are non-existent. It seems that Hall is applying this same reasoning to shale drilling. He points out that the shale production is a contingent one, meaning that it depends on one important factor and that is, of course, the oil price.

December 2014

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Fund Manager In Focus

“A reduction in oil prices makes fracking unfeasible, which leads to a reduction in shale production and a return to a tighter supply and higher prices. It is a vicious cycle.” While fracking made it feasible to drill the oil from the rocks, it is still a costly process. The same argument that analysts state in favour of a decline in oil prices actually goes against the shale oil production increase. A reduction in oil prices makes fracking unfeasible, which leads to a reduction in shale production and a return to a tighter supply and higher prices. It is a vicious cycle. In fact, the latest data on shale production may be in Hall’s favour as it points out that the peak in production may already be behind us.

Recent ructions in the oil market at the time of writing has resulted in numerous headlines that many shale oil producers are likely to go out of business soon. If the FED gooses markets again as a consequence of declining equity markets, then the supply/demand dynamics of the oil market are likely to change dramatically and once more set prices on a tear.

S&P V OIL CHART

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Andrew John Hall

Hall further adds that, while Russia and Saudi Arabia have huge oil reserves, the costs to drill the oil there are continuing to increase. Proof of this situation is the fact that the major oil companies have seen their capital spending triple in a matter of only a few years while production has slightly decreased. Perhaps Hall’s perpetual long bet is grounded in solid fundamentals and it is only his timing that is out.

Final comments The complexities behind oil production and supply are huge and if someone is able to comprehend this then it is certainly Hall. With over 30 years’ of experience, he has seen both booms and crashes in oil markets and has been able to deliver profits year after year.

With a track record of that calibre it is a bold individual who deems him “out-dated” and having lost his trading capacities. But, while we understand Hall’s arguments against the shale revolution, we still see various problems occurring on the oil landscape, and not just in the supply side. While the longer term may be bright for demand, there are increasing doubts for the near future as global growth continues to turn down. Oil prices generally have a high correlation with this and if deflation really does come to pass, we could see oil prices back in the $50-$60 price band. That could be devastating for Hall and would be a sad end to what has been a stellar career.

December 2014

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24 | www.financial-spread-betting.com | December 2014

Mellon on the markets

MELLON ON THE MARKETS

FAST FORWARD NIKKEI TO 20,000! Entrepreneur and financier Jim Mellon is a regular in the Sunday Times Rich List, with an estimated fortune of ÂŁ850m in 2014. With a substantial international property portfolio and interests in a variety of companies, particularly in the alternative energy and biotech sectors, Jim is a highly experienced and successful investor.

December 2014

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Mellon on the Markets

It’s been a hectic few weeks, what with launching my new book Fast Forward, which covers new technology, as well as addressing the august body of the Isle of Man Funds Association on the medium-term outlook for the markets. As I told them, anyone (i.e. me) who can call their dog ISIS, two weeks before another ISIS hit the news, may not be the most reliable of forecasters. But the good news is that the euro continues to perform to plan, as does the Nikkei. These, along with Gilead Sciences, were the big calls at Master Investor 2014 (Master Investor in 2015 is registering now and filling up fast!). On that front, I still like the two macro trades, but I think Gilead has risen enough for now.

In a world that is remarkably uncertain and beholden to the competing whims of central bankers, the surest bets I can see are against the euro, and for the Japanese market. The euro is an each-way – if Draghi gets his way and there really is a trillion euro QE bazooka, then the single currency goes down, but at least the economy has a chance of revival. If he doesn’t, then the euro goes down, along with the whole ship. But let’s be clear: nothing goes down in a straight line, and I feel that the euro could have a short-term bounce. The best way of playing this might be selling puts at the 1.29 or 1.30 level versus the dollar. Look to May 2015 as a target to get maximum premia for the trade.

EUR/USD 1 year chart. Source xe.com

United Kingdom On the subject of currencies, the reality of the huge UK trade deficit, coupled with the fact that austerity has been nothing of the kind, is beginning to impact on sterling. Cameron and Osborne are softening us all up to a lower growth trajectory, which is not surprising considering Euroland’s woes. So, sterling goes lower, but probably not by much. The UK stock market is cheaper than most, and its banks are not nearly as capital deficient as those on the continent, where most of the peripheral banks are effectively bust.

So I am not desperately gloomy on the FTSE, though it will probably take its cue from the US. There the market looks stretched, with breadth narrower, and small caps (as in the UK) taking a beating. What with margin debt hovering at all time highs, earnings being largely sustained by buybacks, and the strong dollar likely to affect international earnings, I would be cautious.

26 | www.financial-spread-betting.com | December 2014

Mellon on the Markets

Back to the UK, there is an election coming up next year and it won’t be the normal type. UKIP is making big headway, and could well hold, along with the unlikely bed partner of the SNP, the balance of power. Nigel Farage is speaking at Master Investor 2015 two weeks before the vote, which is another reason to book early – see below for tickets. If I had to guess, I would say that Ed Miliband goes before the election, and that Clegg gets wiped out, possibly down to 10 MPs.

Geopolitical flashpoints, like the poor, are always with us, but there are a particular abundance of them about at the moment. And though everyone hates gold and silver, it might be the time to up that insurance policy. Silver, in particular, looks very cheap, and I would be a buyer up to US $18 an ounce, for possibly $22 by year end 2015. The miners are also beginning to look attractive, and Condor Gold, of which I am a director, is attractive. The IFC has recently invested in the company. In terms of emerging markets, I would be generally cautious. A strong US dollar is not good for them, as so many have large dollar liabilities, way above the levels of 2008. In addition, many are commodity producers, hurt badly by falling iron ore and oil prices (e.g. Brazil). There are better things to invest in at the moment.

Stocks... No Eds are better than one

Macro... Japan remains my favourite big market. I think the Nikkei has 20,000 written all over it, perhaps even by end January. And having been a bear of the yen, I am not so sure now. Japan’s exports are not hugely price elastic, though exporters’ earnings benefit from a weaker yen. And if the yen weakens too much, fuel prices in yen may just start going up, hurting business. After all, since Fukushima, Japan is totally dependent on energy imports.

Fast Forward has a section on what to invest in, but here are a couple of stocks that might whet the palate for the book. Hewlett Packard, an old dinosaur, might just have something in its new push in memritsors, a type of resistor that allows for flash like memory to be almost exponential. Imagine a smartphone that can record every moment of your life and still have room to spare! In addition, I like Hitachi in Japan. A big, liquid stock, it is a leader in new transport systems and is a geared play on the Japanese market. Happy hunting! Jim Mellon

As the price of oil has been falling, it is creating a seriously wounded bear out of Russia. Even with the rouble’s fall, and the apparently low PE ratio of the Russian stock market, I still think it’s one to avoid, but watch this space as there will probably be a time to buy. Maybe when the tanks roll into Kiev?!

Jim Mellon will be headlining the Master Investor 2015 show, to be held on Saturday 25th April in Islington, London.

December 2014

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Should You Follow Analysts’ Consensus Recommendations?

Should You Follow Analysts’ Consensus Recommendations? By Filipe R. Costa Before trading any financial asset, an investor should carefully examine its prospects in order to understand how it is currently being valued by the market. In the particular case of equities, we need to evaluate a company’s future prospects and come up with a single number that summarises the underlying fundamentals – the price. But sometimes it is not easy to ascertain value, either because we don’t possess the financial knowledge to come to a final figure (I hope that’s not the case) or because we don’t have the resources and tools to get all the information we need. That is the point at which financial analysts can make a difference. Analysts can fill the gap between what a trader/investor thinks an equity is worth, and what an equity is really worth. They are expected to add value by providing a service that involves conducting a thorough analysis on the companies they follow and by issuing trading recommendations. They are also supposed to be objective and form unbiased beliefs about equity prices, thus contributing to driving market efficient outcomes. Along with rational arbitrageurs, analysts help to steer prices towards fundamental values and ensure that any deviations away from them are just temporary. At least that is what last year’s Nobel Prize winner Eugene Fama hopes. It is also argued that, in contrast to “rational” professionals, individual investors are more likely to be affected by sentiment. When sentiment is high, private traders tend to ignore the risk profile of equities and buy them as if they had less risk than they actually do. This helps to push prices above fundamental values (and helps to create bubbles).

30 | www.financial-spread-betting.com | December 2014

Should You Follow Analystsâ&#x20AC;&#x2122; Consensus Recommendations?

December 2014

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Should You Follow Analysts’ Consensus Recommendations?

But, it could be argued, while individual investors get excited by emotions, other professionals operating in the market, such as analysts, professional traders and in particular rational arbitrageurs, who are able to spot mis-pricing in advance, are the opposing force who guarantee prices, (almost) always reflecting their fundamentals. This means that there should be no such thing as a bubble, because arbitrageurs would take huge short positions against the market and help drive prices back to fundamentals, right? Yes, it should be the case. But unfortunately / fortunately it doesn’t happen. Arbitrageurs and other professionals know that “markets can remain irrational longer than you can remain solvent”, as was well pointed out by John Maynard Keynes. Like you, these professionals are risk averse, and they don’t have a clue how long investor sentiment will remain high. They know that prices will have to come back down to earth, but they don’t know when that is going to happen. Before catching up with fundamentals, prices can just jump from the Moon to Mars or even to Jupiter, which means more money would be needed to keep short positions open until the irrationality vanishes. So, the efficient market hypothesis based on the idea that there must be someone counter-balancing the irrational individual is disproved. That invisible hand simply doesn’t exist!

According to the academic research, that is not the case either. While there are a fair amount of studies relating to sentiment and analyst recommendations, I came across one interesting study which not only relates the two but also gives some important practical strategies that can be used by SBM readers to make market-beating returns. In the study Corredor, Ferrer and Santamaria (2013) it was found that analysts are just as influenced by sentiment when issuing their buy and buy/sell recommendations as private investors are. Despite being professionals, analysts also become more optimistic when sentiment rises, just like individual investors do. The researchers also found that the optimism effect is greater for those equities that are more exposed to sentiment – those more difficult to value (small companies, non-dividend paying, with a lack of financial history, lack of earnings, lack of analyst coverage, low book-to-market-equity etc.) As a result of the above, the analyst optimism bias, which can be measured as the ratio of positive (or buy) recommendations to negative (sell) recommendations, increases with investor sentiment. How can investors make money from this?

“THE EFFICIENT MARKET HYPOTHESIS BASED ON THE IDEA THAT THERE MUST BE SOMEONE COUNTERBALANCING THE IRRATIONAL INDIVIDUAL IS DISPROVED.”

Taking all of this into consideration, we have found that: 1) markets are not as rational as some think 2) arbitrageurs don’t really drive prices to their fundamental value as their resources are limited, and 3) analysts can be just as influenced by sentiment bias as non-professionals. What is missing here is 4) how can we profit from it?

But what about analysts, do they provide valuable recommendations?

The researchers found that if you follow the analysts’ consensus recommendations when investing and then tweak them just a little bit, you could beat both the analysts as well as the market. All you have to do is to buy the equities with positive analyst recommendations that have less sensitivity to sentiment, and sell the equities with negative analyst recommendations that are more sensitive to sentiment. By accounting for the sentiment effect in analysts’ recommendations, you increase your profits. Behind all this is the fact that positive sentiment distorts prices, elevating share prices away from fundamental value.

One could argue that analysts contribute to filling the valuation gap by providing additional information about equities and issuing unbiased recommendations. Financial analysts should help us all take the right trading decisions by providing the insights on value which we lack. Unlike the individual investor who is influenced by sentiment – buying when sentiment is high and selling when it is low, contributing to the formation of bubbles – analysts are unbiased and objective in their valuations, right?

According to the above study, there are some strategies that are able to drive excess profits, that is, after adjusting for risk, they drive profits above those that you could obtain by buying the market. Put simply, it means there are some strategies that will help you beat the market.

32 | www.financial-spread-betting.com | December 2014

Should You Follow Analysts’ Consensus Recommendations?

“the more volatile an equity price is, the more sensitive it is eXpected to Be to sentiment.” But how do we measure sentiment sensitivity? There are several proxies for the sensitivity of an equity to sentiment, with the easiest of them being volatility. The more volatile an equity price is, the more sensitive it is expected to be to sentiment. So you can sort equities using price volatility, which is a measure relatively easy to compute.

The third strategy is much better than the above two and consists of shorting equities that analysts recommend to short – but only those more exposed to sentiment – and going long stocks recommended as a buy but which are less exposed to sentiment. In the four markets analysed, this strategy excelled. The beauty of all this is that you just have to tweak the analysts’ consensus in order to beat them!

The table below shows the excess returns (those above the market) for different strategies (in annualised monthly percentage). The benchmark strategy involves just building a portfolio, buying and selling what analysts recommend. The second strategy consists of shorting all equities with negative recommendations.

December 2014

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Zak Mir’s Monthly Pick

ZAK MIR’S MONTHLY PICK Buy Zillow (NASDAQ: Z): Above $100 Targets As High As $160 Recommendation Summary

Technicals

The last time I appeared on CNBC was a couple of years back. The recommendation I served up at the time (November 2012) was to buy Zillow shares under $30. From memory the target was towards $100. So given how the company – which can be regarded as the US equivalent of Rightmove (RMV) – currently trades at $118 a share, the idea was spot on.

Shares of Zillow have been displaying typical bull run tendencies for much of the past couple of years, especially since the November 2012 gap down towards the $20 level. Indeed, it was a gap fill reversal which turned the shares around from the start of 2013, after which the stock managed to remain above its 200 day moving average from that time until early October this year. The loss of the 200 day line was not too much of a surprise considering the way that, in the wake of the sharp July spike through $160, the post summer decline led to a brief move below $100 over the course of October and November.

The view now is that after a retracement from above $160 in July this year, it may be worth assuming the uptrend will resume from the $100 -$110 zone again. A recent comment from a fund manager, that the stock could hit a market cap of $50bn versus $5bn now, can only help the bulls in the near term.

However, it does look as though the November bear trap rebound from below the October floor at $98.15 and the subsequent higher low above $100 could deliver a new bullish phase. This is especially the case considering the way that the 200 day line is still rising at $113.65.

34 | www.financial-spread-betting.com | December 2014

Buy Zillow (NASDAQ)

â&#x20AC;&#x153;Shares of Zillow have been displaying typical bull run tendencies for much of the past couple of years.â&#x20AC;?

December 2014

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Zak Mir’s Monthly Pick

The typical scenario in such circumstances is that one could expect to see a near term gyration either side of this feature as further consolidation is required after the decline from 2014 highs. However, the expectation is that while the psychologically important $100 level is held, especially the $101.55 higher November low, the recovery argument is very much in the ascendance. A partial or even full retest of $160 plus 2014 resistance is expected well before the end of Q1 2015.

ZILLOW CHART

Recent Significant News 4th November (The Motley Fool) Zillow has already told investors revenue should be in the range of $87m to $88m, the midpoint of which represents 64% growth over last year. Meanwhile, Zillow’s adjusted earnings before interest, taxes, depreciation, and amortisation should be $14 to $15m, excluding around $7m to $10m in expected costs from to its pending acquisition of Trulia (NYSE: TRLA). Wall Street, for its part, will be looking for earnings of $0.08 per share on revenue of $88m. 5th November (Globenewswire) Zillow announced what it describes as an excellent third quarter with record revenue, traffic, mobile usage and Premier Agent advertiser revenue in what it said was turning out to be a transformative year. Spencer Rascoff, Zillow CEO, said:

“We continue to solidly execute on our strategic priorities for the year, and are experiencing positive momentum throughout all of our home-related marketplaces. We plan to continue to invest heavily in our brand, business and products to fuel our long-term growth and strengthen our leadership position.”

“Revenue increased 66% to a record $88.6m from $53.3m in the third quarter of 2013.”500,000.”

36 | www.financial-spread-betting.com | December 2014

Buy Zillow (NASDAQ)

Third Quarter 2014 Financial Highlights Revenue increased 66% to a record $88.6m from $53.3m in the third quarter of 2013. Marketplace Revenue increased 77% to a record $72.7m from $41.0m in the third quarter of 2013. Real Estate Revenue grew 86% to a record $65.6m from $35.3m in the third quarter of 2013. Premier Agent advertisers spent 87% more in the quarter compared to the same quarter one year ago. Mortgages Revenue grew 24% to $7.1m from $5.7m in the third quarter of 2013. Display Revenue increased 30% to $16.0m from $12.3m in the third quarter of 2013. 17th November (TheStreet.com) Zillow announced it would shut down its Agentfolio service two years after acquiring it. Agentfolio allowed home shoppers to share listings with specific parties such as friends or real estate agents and then allowed those parties to directly talk about the listings. Zillow will shut down the service on March 2, 2015, and will not accept new agent customers. “While there are hundreds of agents using the product daily, our customer base is unfortunately not large enough to continue supporting our loyal users,” the company wrote in a memo to clients. 19th November (Benzinga.com) Zillow shares gained more than six percent Wednesday after a hedge fund manager said the online real estate company could hit a value of $50bn. Michael Messara, senior portfolio manager Caledonia Investments Pty Ltd, made the comment reported by Reuters Wednesday at a conference in London. Zillow, with a current market capitalization of $5bn, expects to merge next month with competitor Trulia which has a market cap of $2.03bn. Caledonia, as of September 30, owned about 6.79m of Zillow’s 34.44m shares outstanding, according to its latest 13F filing. That’s up from about 6.5m on June 30. Caledonia also held 10.16m of Trulia’s 37.8m shares outstanding as of September 30. Zillow expects to acquire Trulia for about $3.5bn in a deal set for shareholder approval December 18.

Fundamentals In the post summer period there has not been a dull moment in terms of the newsflow at Zillow, as the company moves to consolidate its special position in the market. The reason for the intense focus here is, of course, the backdrop of a mooted $3.5bn merger with competitor Trulia, which should go to create a combined entity worth some $7bn. Interest going into the completion of this deal has been heightened by the backing of hedge fund manager Michael Messara, who has suggested that rather than the present $5bn market cap, Zillow could be worth as much as $50bn. This is an outstanding call, one which one might expect from a private investor talking their own book, but not from an entity rather higher up the financial markets food chain. That said, what we have seen from Zillow over the past couple of years and more is that the stock price and the fundamentals have certainly delivered the goods – as per my bull call on CNBC from below $30. This point was underlined in the aftermath of the Q3 update at the beginning of November where most of the key metrics were delivering either good or very good numbers. In particular, it can be noted that Premier Agent advertisers spent 87% more in the quarter compared to the same quarter one year ago. Such a jump really does back the idea that 2014 will prove to be a transformational year for Zillow, something which the tie up with Trulia can only improve on for 2015 as it gives Zillow both critical mass and synergies benefits. The message is, therefore, that while it may feel like the $50bn value call is a little ambitious over the near term, it could very well be that on a 3-5 year timeframe the idea is less pie in the sky than it currently appears. However, it is difficult to argue that when such big targets are placed on stocks, they do inspire sentiment and can in the best of situations become something of a self fulfilling prophecy. While the jury may be out on the best of expectations regarding Zillow, until we have visibility on the outcome of the Trulia integration, buying into the stock after a 50% plus retracement from the best levels of 2014 does not appear to be a risky proposition.

December 2014

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