I’m always looking for smart, interesting people to follow on Twitter. Twitter recently started to suggest new people to follow .

I gather various statistics including Following, Followers, Listed, Tweets, Follow Cost 1, Follow Cost 2, and % Replies for every suggested person. I have a “Goldilocks” theory for managing Twitter. You can’t follow too many people or too few. You can’t tweet too much or too little. And you absolutely must engage with people.

If you follow too many people, you’re not really reading your stream. If you follow too few it shows that you’re using Twitter as a broadcast medium. If you overtweet you will flood and clutter my stream — this is a dealbreaker for me no matter how good your other stats are. If you undertweet I’m going to lose interest in you. If you don’t engage enough with people, I won’t follow you.

My own statistics currently look like this:

@maoxian 120 (# of people I’m following) 3676 (# of people following me) 182 (# of lists I’m on) 5154 (# of tweets I’ve made) 4.09 (Follow Cost average updates) 12.10 (Follow Cost recent updates) 85% (% of my tweets that are replies — very high engagement)

Here are 35 people Twitter suggested I follow with my notes for each:

@nickfenton 170 1413 46 5352 6.50 4.81 10%
LIMITED ENGAGEMENT
@Dasan 1630 2877 100 14408 16.34 3.74 15%
OVERFOLLOWING, LIMITED ENGAGEMENT
@atask 331 2307 118 7202 8.10 3.97 24%
@BreakingNews 248 1806315 27815 38444 32.43 23.44 (nuclearx2) 0%
OVERTWEETING, ZERO ENGAGEMENT
@upsidetrader 267 9008 428 28399 32.87 (nuclear) 8.75 53%
OVERTWEETING (but good engagement)
@agwarner 597 3738 154 11801 9.88 331.67 (nuclear) 65%
OVERFOLLOWING, OVERTWEETING (but good engagement)
@TheKirkReport 344 4622 283 4358 7.45 16.28 0%
ZERO ENGAGEMENT
@raykwong 16318 19860 727 9965 12.38 28.64 (nuclear) 15%
OVERFOLLOWING, OVERTWEETING, LIMITED ENGAGEMENT
@pkedrosky 313 52067 1415 27658 22.32 34.41 (nuclearx2) 29%
OVERTWEETING
@aiki14 289 3602 214 15906 29.51 213.89 (nuclearx2) 60%
OVERTWEETING (but good engagement)
@CMEGroup 4501 756827 1157 8392 11.67 22.47 (nuclear) 5%
OVERFOLLOWING, OVERTWEETING, LIMITED ENGAGEMENT
@BloombergNow 16 11541 1093 4679 22.28 65.45 (nuclearx2) 0%
UNDERFOLLOWING, OVERTWEETING, ZERO ENGAGEMENT
@ericbolling 268 7433 370 3416 4.20 7.91 40%
@hedgefundinvest 253 4051 238 2597 4.79 15.98 15%
LIMITED ENGAGEMENT
@stinson 1525 2052 135 20445 20.08 12.71 40%
OVERFOLLOWING (but good engagement)
@Prospectus 689 1395 48 9992 7.99 10.81 50%
OVERFOLLOWING (but good engagement)
@fundmyfund 140 2906 121 10336 18.07 1.71 53%
@IRON100 3677 4742 135 25936 30.91 (nuclear) 15.87 65%
OVERFOLLOWING, OVERTWEETING (but good engagement)
@zerobeta 356 1057 72 8084 10.05 15.60 35%
@tickerville 1273 4641 196 4760 5.40 5.24 55%
OVERFOLLOWING (but good engagement)
@DougKass 291 9918 381 1161 2.10 3.30 10%
LIMITED ENGAGEMENT
@shitmydadsays 1 1557691 40544 126 0.34 0.11 0%
UNDERFOLLOWING, UNDERTWEETING, ZERO ENGAGEMENT
@felixsalmon 596 7753 687 7632 11.09 2.90 20%
OVERFOLLOWING, LIMITED ENGAGEMENT
@zerohedge 148 9221 817 13942 24.16 258.54 (nuclearx2) 0%
OVERTWEETING, ZERO ENGAGEMENT
@WeeklyTA 22 5234 362 12538 18.55 16.59 10%
UNDERFOLLOWING, LIMITED ENGAGEMENT
@taniabranigan 409 1454 140 1960 5.01 9.69 10%
LIMITED ENGAGEMENT
@infoarbitrage 189 4582 375 4434 4.86 4.11 10%
LIMITED ENGAGEMENT
@TodayTrader 136 7234 269 8735 15.74 2.11 37%
@nelderini 374 2173 172 7496 6.18 25.82 (nuclear) 45%
OVERTWEETING (but good engagement)
@bondscoop 428 1203 84 3189 3.96 2.81 65%
@SlopeOfHope 5 3719 112 405 0.4 0.3 0%
UNDERFOLLOWING, UNDERTWEETING, ZERO ENGAGEMENT
@alaidi 70 6254 447 19.43 90.28 (nuclear) 10%
OVERTWEETING, LIMITED ENGAGEMENT
@sentimentrader 187 4392 201 699 0.62 0.24 10%
UNDERTWEETING, LIMITED ENGAGEMENT
@BarackObama 718166 4855827 94599 857 0.68 2.46 0%
OVERFOLLOWING, UNDERTWEETING, ZERO ENGAGEMENT
@ReformedBroker 813 2620 186 5760 10.95 23.16 (nuclear) 15%
OVERFOLLOWING, OVERTWEETING, LIMITED ENGAGEMENT

I will begin to follow the people in bold above on a trial basis. If their tweets are generally interesting, informative, or funny, I’ll continue to follow them. If they bore me or are single-minded, then they’ll get the boot.

I’ll add the new people that Twitter suggests to me to this post with the same kind of analysis from time to time.

………………….

Next batch:

@illuminantceo 2011 2239 130 8169 14.41 27.71 (nuclear) 20%
OVERFOLLOWING, OVERTWEETING, LIMITED ENGAGEMENT
@TheEconomist 43 324264 18508 2154 1.81 12.12 0%
UNDERFOLLOWING, ZERO ENGAGEMENT
@daytrend 161 2598 145 13860 21.29 99.23 (nuclearx2) 11%
OVERTWEETING, LIMITED ENGAGEMENT
@steenbab 2 8818 336 10710 9.55 0.67 0%
UNDERFOLLOWING, ZERO ENGAGEMENT
@dafowc 467 649 50 7478 15.20 71.69 (nuclear) 58%
OVERTWEETING (but good engagement)
@optionmonster 186 10065 451 7997 9.05 18.68 5%
LIMITED ENGAGEMENT
@aimeenbarnes 1459 2494 158 5340 9.34 8.67 32%
OVERFOLLOWING (but good engagement)
@tomkeene_ 953 5740 334 5070 9.98 6.10 20%
OVERFOLLOWING
@bespokeinvest 68 1372 124 1085 2.19 3.35 0%
UNDERFOLLOWING, ZERO ENGAGEMENT
@ZipperTheory (protected tweets, automatic disqualification)
@downtowntrader 142 2543 151 4962 5.66 7.31 16%
LIMITED ENGAGEMENT
@jimcramer 91 86693 1510 4400 5.06 60.99 (nuclear) 0%
UNDERFOLLOWING, OVERTWEETING, ZERO ENGAGEMENT
@christinelu 1996 14262 1084 37294 33.60 25.82 (nuclearx2) 37%
OVERFOLLOWING, OVERTWEETING (but good engagement)
@chartly 47 6136 274 2571 5.29 19.32 0%
UNDERFOLLOWING, ZERO ENGAGEMENT
@dvolatility 677 2024 132 14996 21.58 2.641 (nuclearx2) 11%
OVERFOLLOWING, OVERTWEETING
@smbcapital 92 4643 268 2640 4.27 14.94 24%
@lonniehodge 50679 48715 1183 16260 17.75 40.23 (nuclear) 15%
OVERFOLLOWING, OVERTWEETING, LIMITED ENGAGEMENT
@GE_Anderson 436 1077 129 8847 10.98 15.30 45%

………………….

Next batch:

@ChinaGeeks 85 539 76 880 4.25 20.63 25%
@davesgonechina 292 729 81 4862 4.57 15.12 35%
@hblodget 247 15926 1085 2569 2.22 20.58 20%
LIMITED ENGAGEMENT
@BuyOnTheDip 2692 4308 155 8907 13.02 28.88 (nuclear) 35%
OVERFOLLOWING, OVERTWEETING (but good engagement)
@Nouriel 18 18642 1240 290 0.51 0.55 0%
UNDERFOLLOWING, ZERO ENGAGEMENT
@firstadopter 79 2010 104 1177 1.74 2.35 5%
UNDERFOLLOWING, NEXT TO NO ENGAGEMENT
@ericjackson 619 2418 109 12906 10.29 34.49 (nuclear) 32%
OVERFOLLOWING, OVERTWEETING (but good engagement)
@carney 1822 5008 257 5333 4.30 12.23 35%
OVERFOLLOWING, (but good engagement)
@Fullcarry 291 941 67 4413 7.98 18.07 75%
@HamzeiAnalytics 30 17535 369 28516 58.67 46.51 (nuclearx2) 5%
UNDERFOLLOWING, OVERTWEETING, NEXT TO NO ENGAGEMENT
@zortrades 150 2409 169 10831 18.45 31.51 (nuclear) 44%
OVERTWEETING (but good engagement)
@limlouisa 794 1088 121 879 2.09 1.82 0%
OVERFOLLOWING, ZERO ENGAGEMENT
@kevindepew 380 1023 42 2942 4.58 10.28 18%

………………….

Next batch:

@WSJ 124 380281 17460 18155 14.76 24.27 (nuclear) 5%
OVERTWEETING, NEXT TO NO ENGAGEMENT
@IBDinvestors 687 7396 411 2732 5.07 7.81 0%
OVERFOLLOWING, ZERO ENGAGEMENT
@TheStalwart 542 3537 194 15636 17.61 73.15 (nuclear) 70%
OVERFOLLOWING, OVERTWEETING (but very good engagement)
@ChinaBizWatch 41082 41832 1145 7230 19.70 25.26 (nuclear) 0%
OVERFOLLOWING, OVERTWEETING, ZERO ENGAGEMENT
@alansmurray 232 6280 444 2609 2.87 2.63 0%
ZERO ENGAGEMENT
@wefollow 4 554559 9347 12 0.02 0.03 0%
UNDERFOLLOWING, UNDERTWEETING, ZERO ENGAGEMENT
@AlephBlog 80 631 58 1362 8.51 21.77 (nuclear) 75%
UNDERFOLLOWING, OVERTWEETING (but very good engagement)
@RaginCajun 208 1475 68 1773 1.60 9.86 37%
@chessNwine 1661 1564 71 3626 9.99 19.69 60%
OVERFOLLOWING (but good engagement)
@klukoff 1380 829 90 752 0.91 4.83 10%
OVERFOLLOWING, LIMITED ENGAGEMENT
@markmackinnon 1156 7388 602 3587 6.58 4.24 0%
OVERFOLLOWING, ZERO ENGAGEMENT
@smssearsBarrons 271 2210 122 3492 6.64 12.89 13%
LIMITED ENGAGEMENT
@AdamMinter 84 939 129 1840 3.43 2.72 20%
LIMITED ENGAGEMENT
@andrewrosssorkin 1095 296004 1748 0.47 0.43 47%
OVERFOLLOWING, UNDERTWEETING (but good engagement)
@VIXandMore 47 2897 127 2549 2.14 8.94 0%
UNDERFOLLOWING, ZERO ENGAGEMENT
@blackChinahand 129 302 46 4.76 1313 2.38 10%
LIMITED ENGAGEMENT
@afraidtotrade 95 3102 204 1619 2.66 1.48 7%
LIMITED ENGAGEMENT
@frankyu 929 1529 120 4575 3.76 3.25 28%
OVERFOLLOWING (but good engagement)
@calculatedrisk 238 5803 3463 6.49 7.55 0%
ZERO ENGAGEMENT
@herbgreenberg 101 1392 93 1028 1.19 6.34 70%
@ToddStottlemyre 408 3718 119 6503 9.56 0.75 47%
@AnneMarie2006 38 3200 201 7663 10.07 0.21 60% ABANDONED ACCOUNT
UNDERFOLLOWING (but good engagement)
@TraderFlorida 20 2984 217 19277 31.14 241.34 (nuclearx2) 0%
UNDERFOLLOWING, OVERTWEETING, ZERO ENGAGEMENT
@JeffreyLin 254 1149 62 7371 8.71 19.66 39%

………………….

Next batch:

@BillGates 52 1299397 47637 173 0.42 0.27 0%
UNDERFOLLOWING, UNDERTWEETING, ZERO ENGAGEMENT
@SellPuts 995 3597 386 18689 34.35 (nuclear) 19.78 44%
OVERFOLLOWING, OVERTWEETING (but good engagement)
@jsfalvo 172 1891 53 7898 10.82 101.19 (nuclear) 80%
OVERTWEETING (but good engagement)
@mrtopstep 15 2196 131 1787 3.17 49.43 (nuclear) 5%
UNDERFOLLOWING, OVERTWEETING, NEXT TO NO ENGAGEMENT
@SunriseTrader 324 1723 86 5302 9.43 2.30 39%
@Hedgeye 70 1184 89 1927 3.30 17.56 5%
NEXT TO NO ENGAGEMENT
@HCPG 35 1341 82 7996 15.96 10.22 65%
@coffeygrinds 928 2453 89 10864 12.15 18.66 42%
OVERFOLLOWING (but good engagement)
@theEquilibrium 124 1839 150 5717 9.05 2.86 50%
@StockAddict 90 1819 108 5561 11.08 35.70 (nuclear) 24%
OVERTWEETING
@FeedTheBull 681 2163 114 8840 9.14 2.22 15%
OVERFOLLOWING, LIMITED ENGAGEMENT
@wood83 345 2282 118 11869 10.07 11.28 50%
@rmack 1403 8452 694 6253 4.97 5.41 0%
OVERFOLLOWING, ZERO ENGAGEMENT
@JasonRaznick 588 1645 30 1932 2.12 12.83 47%
OVERFOLLOWING (but good engagement)
@AnneMarieTrades 88 1514 90 4396 14.85 8.23 45%
@johnwelshphd 42 4523 263 12233 26.14 (nuclear) 0.95 45%
UNDERFOLLOWING, OVERTWEETING (but good engagement)
@beijingdaze 230 661 76 5713 7.47 6.12 45%
@FTAphaville 8 5917 556 11862 14.04 18.28 0%
ZERO ENGAGEMENT
@interfluidity 829 1207 127 2336 5.02 0.75 65%
@BeijingAir 1 3511 141 13196 17.52 28.23 (nuclear) 0%
UNDERFOLLOWING, OVERTWEETING, ZERO ENGAGEMENT
@markminervini 2276 2272 63 587 2.78 8.9 0%
OVERFOLLOWING, ZERO ENGAGEMENT
@247WallSt 168 70688 914 12145 19.37 17.25 0%
ZERO ENGAGEMENT
@KevinMHughes 92 1790 146 11160 19.11 1.46 19%
LIMITED ENGAGEMENT
@jzcatrandom 354 1752 101 3363 4.29 0.14 33%
@stockguy22 212 5209 264 15324 31.08 (nuclear) 19.89 0%
OVERTWEETING, ZERO ENGAGEMENT
@wsmco 47 2968 104 16005 21.69 (nuclear) 13.90 60%
UNDERFOLLOWING, OVERTWEETING (but good engagement)
@DylanRatigan 132 13841 1212 2566 6.10 4.94 91%
@melissakchan 79 3369 277 683 0.98 8.54 25%
@cnnbrk 30 3285743 59827 4575 3.46 15.33 0%
UNDERFOLLOWING, ZERO ENGAGEMENT
@nytimes 198 2534908 44348 49507 39.25 45.03 (nuclearx2) 0%
OVERTWEETING, ZERO ENGAGEMENT
@traderstewie 111 2091 170 4483 10.91 15.83 50%
@TradingGoddess 29137 38241 416 23992 19.30 3.29 25%
OVERFOLLOWING (but good engagement)
@jdmarkman 310 2901 62 1021 1.42 0.23 0%
UNDERTWEETING, ZERO ENGAGEMENT
@NiuB 1905 1868 156 11622 13.82 13.01 6%
OVERFOLLOWING, LIMITED ENGAGEMENT
@SnoopyJC 89 1583 78 10196 16.13 3.92 40%
@klustout 809 16000 961 3415 6.44 2.27 5%
OVERFOLLOWING, NEXT TO NO ENGAGEMENT
@OptionRadar 71 1922 120 6039 15.85 19.45 30%
@moorehn 1182 4249 557 19741 31.59 22.24 (nuclearx2) 38%
OVERFOLLOWING, OVERTWEETING (but good engagement)
@ZMoose12 95 1307 117 17428 28.06 (nuclear) 19.03 85%
OVERTWEETING (but good engagement)
@tradingpoints 65 1397 113 3119 5.86 8.44 75%
UNDERFOLLOWING (but good engagement)
@MrTweet 230845 335639 5837 242 0.37 0.05 10%
OVERFOLLOWING, UNDERTWEETING, LIMITED ENGAGEMENT
@TheBHBgroup 595 1032 42 2431 3.83 0.43 83%
OVERFOLLOWING (but good engagement)
@financialtimes 43 165507 6973 12043 9.90 6.45 0%
UNDERFOLLOWING, ZERO ENGAGEMENT
@FuturesTrader71 36 3557 237 18786 40.84 43.89 (nuclearx2) 70%
UNDERFOLLOWING, OVERTWEETING (but good engagement)
@elliottng 4058 7487 477 10933 7.53 6.11 18%
OVERFOLLOWING, LIMITED ENGAGEMENT
@TheOnion 3 2321530 33334 5505 6.15 9.70 0%
UNDERFOLLOWING, ZERO ENGAGEMENT (RSS Feed)
@Attitrade 117 1093 77 5459 10.11 17.06 30%

………………….

Next batch:

@baselinescene 13 3747 341 1093 2.10 0.57 0%
UNDEROLLOWING, ZERO ENGAGEMENT
@ARupdates 7 725 53 3241 15.97 9.96 0%
UNDEROLLOWING, ZERO ENGAGEMENT
@apextrader 82 1344 68 4965 7.91 1.49 26%
@jonah_kessel 447 828 534 4824 8.84 8.33 16%
LIMITED ENGAGEMENT
@mbusigin 389 440 26 4440 7.72 24.76 (nuclear) 55%
OVERTWEETING (but good engagement)
@cdixon 379 12145 1209 4047 3.27 11.00 44%
@jennygao 925 702 55 2226 3.50 1.69 24%
OVERFOLLOWING
@KeithMcCullough 45 1128 58 1113 1.86 6.34 0%
UNDERFOLLOWING, ZERO ENGAGEMENT
@sarahplusone 263 479 65 5891 10.26 8.76 53%
@Anal_yst 412 1516 112 7640 11.03 27.41 (nuclear) 60%
OVERTWEETING (but good engagement)
@Legacy_Trades 120 1469 64 1077 4.72 6.62 25%
@TechCrunch 818 1415536 29325 19238 15.29 11.25 0%
OVERFOLLOWING, ZERO ENGAGEMENT
@milktrader 156 1214 69 6361 11.08 6.06 25%
@dealbreaker 104 3752 254 3871 5.29 10.25 0%
ZERO ENGAGEMENT
@optstrategist 17 1760 102 481 1.20 1.96 0%
UNDERFOLLOWING, UNDERTWEETING, ZERO ENGAGEMENT
@ThomasCrampton 941 5319 806 5468 4.36 1.72 44%
OVERFOLLOWING (but good engagement)
@isaac 2430 16665 744 18719 13.93 12.29 0%
OVERFOLLOWING, ZERO ENGAGEMENT
@traderpsyches 390 1811 95 2577 3.19 4.02 24%
@gtotoy 99 1502 99 6040 7.87 11.51 11%
LIMITED ENGAGEMENT
@farwestchina 559 981 138 994 1.67 4.06 30%
OVERFOLLOWING (but good engagement)
@PIMCO 0 5615 15 0.03 0.12 0%
ZERO FOLLOWING (automatic disqualification), UNDERTWEETING ZERO ENGAGEMENT
@WSJDealJournal 150 4826 387 3063 5.26 6.09 0%
ZERO ENGAGEMENT
@Convertbond 4535 4644 200 12074 23.44 (nuclear) 15.21 21%
OVERFOLLOWING, OVERTWEETING, LIMITED ENGAGEMENT
@alea_ 60 896 105 9 0.03 3.04 0%
OVERFOLLOWING, UNDERTWEETING, ZERO ENGAGEMENT
@kunal00 86 3525 172 13211 16.70 14.12 25%
@Minyanville 284 2785 177 6579 7.71 59.96 (nuclear) 0%
OVERTWEETING, ZERO ENGAGEMENT
@chijs 608 2640 193 12439 10.68 16.81 40%
OVERFOLLOWING (but good engagement)
@greenfaucet 2007 2215 62 2936 4.05 0.86 0%
OVERFOLLOWING, ZERO ENGAGEMENT
@cmphku 195 522 67 481 3.76 9.01 5%
NEXT TO NO ENGAGEMENT
@ex_wirehouse 176 1107 40 4195 6.78 9.43 30%
@maggierauch 559 1234 116 3032 4.09 4.27 53%
OVERFOLLOWING (but good engagement)

………………….

Next batch:

@fonstuinstra 385 1110 82 11273 9.03 15.76 5%
NEXT TO NO ENGAGEMENT
@harmongreg 83 746 47 8585 16.48 289.74 (nuclear) 5%
OVERTWEETING, NEXT TO NO ENGAGEMENT
@MickHuckman 196 6802 322 4952 9.50 2.29 26%
@ivanhoff 54 798 28 2626 3.77 1.91 30%
@petenajarian 28 4485 200 1139 1.32 0.95 0%
UNDERFOLLOWING, UNDERTWEETING, ZERO ENGAGEMENT
@TamelaRich 769 1483 85 12661 16.07 4.81 80%
OVERFOLLOWING (but good engagement)
@Street_Insider 225 1971 130 6717 22.54 80.35 (nuclearx2) 0%
OVERTWEETING, ZERO ENGAGEMENT
@marissa_alex 208 1023 20 1627 2.12 0.76 37%
@iBankCoin4tw 5756 21281 38 2735 4.08 8.89 0%
OVERFOLLOWING, ZERO ENGAGEMENT
@datajunkies 3157 2934 107 697 1.74 0.08 0%
OVERFOLLOWING, UNDERTWEETING, ZERO ENGAGEMENT

OK, I’ve stopped recording them because they just keep coming and coming.

I occasionally look through the active ETFs to see if there’s anything I’m not following for my newsletter. VXX is very liquid but I don’t follow it. Maybe I should add it because it has trended (down) beautifully. Looks like another security that was “born at the right time,” just like these.

“The S&P 500 VIX Short-Term Futures™ Index TR offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500® Index at various points along the volatility forward curve. The index futures roll continuously throughout each month from the first month VIX futures contract into the second month VIX futures contract.”

(Click the chart to enlarge it.)

My readers tend to be both better looking and smarter than me. Back when I was shredding what little credibility I have by suggesting a bunch of “cheap” stocks when the old VIX hit 50, commenter Brian wondered if Campbell (CPB) wasn’t a better idea.

Brian was absolutely right, and to make amends for poo-pooing his comment, may I suggest pairing a Bagel-ful with your bowl of soup? It should take some of the sting away from the 1000 mg of sodium you’re ingesting.

Campbell Beats Bear Market as Consumers Seek Out Soup:

“Campbell controls about 70 percent of the $5 billion-a-year U.S. soup market.”

Bonus points to those who recognized the post title from the classic Seinfeld episode:

JERRY: There’s only one caveat — the guy who runs the place is a little temperamental, especially about the ordering procedure. He’s secretly referred to as the Soup Nazi.

ELAINE: Why? What happens if you don’t order right?

JERRY: He yells and you don’t get your soup.

ELAINE: What?

JERRY: Just follow the ordering procedure and you will be fine.

GEORGE: All right. All right. Let’s – let’s go over that again.

JERRY: All right. As you walk in the place move immediately to your right.

ELAINE: What?

JERRY: The main thing is to keep the line moving.

GEORGE: All right. So, you hold out your money, speak your soup in a loud, clear voice, step to the left and receive.

JERRY: Right. It’s very important not to embellish on your order. No extraneous comments. No questions. No compliments.

Here’s a monthly chart of the last 20-odd years of the Volatility Index. Readings of 50+ are rare and obviously mark extreme panic. Assuming you have cash and know what you’re doing, it’s probably not a bad time to buy good companies. May I suggest these ten:

• Altria (MO): ~$19
• Boeing (BA): ~$55
• Coca-Cola (KO): ~$51
• GE (GE): ~$23
• Johnson & Johnson (JNJ): ~$67
• McDonald’s (MCD): ~$60
• 3M (MMM): ~$66
• PepsiCo (PEP): ~70
• Target (TGT): ~$47
• Wal-Mart (WMT): ~$58

UPDATE: Many thanks to the people who stole this chart and linked back to the post. A pox on you bastards who stole it and didn’t link back.

My trumpeting of Ten Favorite Financial Stocks in August 2007 has been widely and rightly (though often cruelly) reviled. I learned my lesson: never post your investment ideas on the Internet. (Just kidding.) The lesson is: never buy stocks that are in a downtrend no matter how much they look like “bargains” on paper.

Earnings collapse, massive writedowns are taken, dividends are slashed or eliminated — what looks like a good solid business with a long and sterling reputation of dividend growth can be crushed in a matter of months. I know this now. Many kind commenters and emailers tried to tell me (most nicely) that I was an idiot to like the financials, but as usual, I went my own way and got my ass handed to me.

My old friend VIX is still excellent at pinpointing extremes in sentiment, but I should have been looking to buy the strongest stuff in a weak market (energies, materials, etc.), not terrible junk like the godforsaken regional banks. Older, wiser, poorer… the same old story.

Related:

A Good Time to Buy Financials? January 27, 2008 [YOU'RE A DOUBLE DUMB SUCKER, KID]
Discover the Chairman’s 10 Favorite Financial Stocks, August 1, 2007 [I'M A POOR SUCKER]

The Volatility Index (VIX) spiked up last week nearly hitting 40 — it’s been years since I’ve seen it up there. You’ll recall back on August 1st I wrote the now infamous post: Tip the Chairman and Discover His 10 Favorite Financial Stocks. I’ve been called a fool for it (not at the time of course, only by people with 20-20 hindsight), am personally sitting on large losses in many of the stocks picked, and I apologize to the many people who followed my suggestions and were, like me, subsequently buried.

The Regional Bank HOLDR (RKH) fell around 25% since I grew enamoured of it back in August. Last week its snap-back was both violent and dramatic. In any event, the RKH closed the week ending August 3rd, 2007 at 139.86 and last week (January 25, 2008) at 127.58, which is about a 9% drop. It’s a terrible feeling when you believe that “values” are on your side, that you’ve timed something right, and then it all goes in the crapper anyway.

Click to enlarge

A lot of my data is messed up (this drubbing obviously strained the system), but it looks like the worst intraday “tone” since July 2002. I don’t have much time to blog this morning, but here are ten “notable” intraday (15-minute) charts. The plunge had a lot more to do with the psychology of the market post-NovaStar than with China, in my humble opinion.

VIX: +64.22%

SPY: -3.91%

DIA: -3.75%

QQQQ: -4.11%

QID: +9.5%

GLD: -3.95%

TLT: +1.26%

EFA: -4.03%

EEM: -8.13%

FXI: -9.87%

From Legg Mason’s September 2006 Market Commentary (PDF):

The market correction from May 5 to June 13 put investors in a foul mood and helped trigger the first substantial monthly outflows from domestic equity mutual funds since February 2003. It also appeared to cause most investors to ignore two indicators—spikes in the volatility index (VIX) and back-to-back 9-to-1 up volume days—that have in the past signaled better times ahead for the market.

Once again this year, these signals have lived up to their reputation as harbingers of higher stock prices. The S&P 500 was up 7.7% in the three months following the latest VIX spike (6/13/06), right in line with its long-term average of 7.6%. The S&P 500 was also up 5% in the three months following the second back-to-back 9-to-1 up volume day (6/29/06). Unfortunately, many investors were so focused on the downside in the market that they missed the rally.

Some of us were thrilled (and putting a lot of money to work) in mid-June.

Here are the few (lightly edited) bits I found interesting in this week’s issue:

“Following Bank of China’s huge $10.2 billion IPO in June and a $10.4 billion offering by Russian oil company OAO Rosneft in July, the U.S. share of global IPO issuance fell to about 15%, or $16 billion, this year through August, down from 30% for the same span last year … A total of 1,070 businesses filed reorganization plans during the second quarter, the lowest quarterly figure since 1995″ — Jack Willoughby

“Americans own about 75 million dogs and 90 million cats, and annual sales of pet medicines is about $3 billion.” — Bill Alpert

“In options, a simple historical analysis of reversion to the mean shows implied volatility has averaged around 20% in any rolling three-, five-, 10-, 15- and 20-year period since options have been trading. Now we are hovering around 12%, a 40% discount just to the average. Even if we get back to the average, a lot of money can be made trading volatility. As implied volatility has been coming down near all-time lows, actual volatility has been creeping up … The two most mispriced assets right now are options, which are underpriced, and bonds, which are overpriced.” — Kyle Rosen, interviewed by Sandra Ward

“The popularity of the Dow Jones CDX index of 125 credit-default swaps has allowed it to become a barometer of credit-risk appetite that closely follows VIX. When investors believe a major change in credit risk is ahead, the CDX’s spread often responds more quickly than prices of cash bonds. Established only a few years ago, the CDX investment- grade index has rapidly become highly liquid and actively traded.” — Michael Mackenzie

“Assets under management at the Jacob Internet Fund peaked at about $300 million in 2000 and later plummeted to $10 million.” — Neil Martin

“Through Thursday’s close, the S&P 500 had logged an annualized total return of 8.67% for the prior 10 years. The same figure for the Dow was 9.44% and for the nearly comprehensive Russell 3000, it was 9.04%. In other words, the U.S. equity market over the prior decade did roughly what the long-term studies suggest it ought to do over extended periods, generating returns in the 8% to 10% range.” — Michael Santoli

Copyright © 2006 Dow Jones & Company, Inc.

The market is at a possible turning point. My trend-following system has a stop below last week’s low in many markets (including the S&P 500). If price trades below $123.55 in the SPY, the position put on in August 2004 will be stopped out.

Nevertheless, I’ve put quite a bit of money to work in the past few weeks since it pays to buy when others are panicky. I’ve mainly been buying stocks that I think have a large “margin of safety,” so I’m not too concerned about precise timing.

Since the market began to slide in May both the VIX and ISE Sentiment Index have indicated excessive pessimism. And happily the Investors Intelligence survey is also now indicating that sentiment has gotten very bearish. This is all good news.

The only trouble is my own sentiment indicator, which is constructed by surveying the popular media, shows no worries. This makes me worried. It’s not like early 2003, August 2004 or April/May 2005 when all the sentiment indicators said the same thing at the same time: Buy!