The Wall Street Bailout explains the stock market crash, the worst stock market crash since 1929 - who's to blame, and how to profit from the stock market crash!
Monday, October 27, 2008
Tuesday, October 21, 2008
Stock Market Commentary 10/21/08 - Not Bullish, But Maybe Constructive...
For starters, here's a very funny video, lyrics re-written by a member of our live stock market chatroom.
While Tuesday certainly wasn’t a bullish day for the stock market, I’m going to go out on a limb and call it a constructive day. Although there were pretty big losses at the end of the day, and a lot of the selling came in the last hour again, volume was even lighter than it was on yesterday’s up move, and the wild swings, although still there, seem to be calming down a bit. I take this as people starting to come to terms with the situation, and starting to make slightly more rational decisions regarding their investments, rather than the massive panic buying and panic selling that has been the 800 pound gorilla in the room for the last few weeks.
That’s not to say things are getting any better from an economic standpoint, or that this market won’t see any more panic buying or selling, as we are still at extreme levels from a number of perspectives, but the action this week does hint at some form of resolution being worked out for the market. That is something to be optimistic about, as is the fact that at the time of this writing, AAPL is up 10% in after hours trading, and YHOO is up better than 5%.
The VIX didn’t gain much back after yesterday’s nearly 25% haircut. That’s another reason to be optimistic about where this market seems to be going. A nice, orderly consolidation/ pull back would be in keeping with our thinking that the markets are trying to stabilize here.
The Dow fell 231.77, or 2.50 percent, to 9,033.66, on even less volume than Monday, when the volume was relatively light compared to recent sessions. While anything can still happen as the market digests all the economic news that has been thrown at it recently, we can see the swings getting more & more narrow in range, and the daily chart shows a bit of a triangle formation starting to set up.
The Standard & Poor's 500 fell 30.35, or 3.08 percent, to 955.05. On the daily chart you can see the same ascending triangle pattern forming, but below is the hourly chart, which shows what looks like pretty solid support right around 950.
The Nasdaq composite index shed 73.35, or 4.14 percent, to 1,696.68. the 15 minute chart shows a slight breach of an intraday double bottom, but the after hours trading in AAPL & YHOO would seem to indicate a higher open for the index, barring any real turnarounds.
Light, sweet crude fell $3.36 to settle at $70.89 barrel on the New York Mercantile Exchange. USO fell nearly 5% on the day, but is holding above recent lows. We could see a consolidation here, which would probably be a healthy thing.
Gold fooled us last night, metals looked very nice yesterday and took a hit today. However gold didn’t break the recent lows either, and if it does, the September lows aren’t far off either.
Our portfolio stocks remain light into what is still a very choppy market. We are going to keep things pretty light until this thing stabilizes a bit more, and will continue to trim losses and take profits wherever applicable. As such we are going to add one new short to the TBT list to compliment our one long, which we are raising the stop on to greatly reduce the downside exposure after a weak close today. We are very optimistic about the way this market is acting, and are hoping that we will see some of the best tradin conditions of the year in the next month or two, but patience will be required. There are some really nice setups in the watchlists above for intraday trading purposes tomorrow, of which there should be plenty. Have a great evening, see you tomorrow.
While Tuesday certainly wasn’t a bullish day for the stock market, I’m going to go out on a limb and call it a constructive day. Although there were pretty big losses at the end of the day, and a lot of the selling came in the last hour again, volume was even lighter than it was on yesterday’s up move, and the wild swings, although still there, seem to be calming down a bit. I take this as people starting to come to terms with the situation, and starting to make slightly more rational decisions regarding their investments, rather than the massive panic buying and panic selling that has been the 800 pound gorilla in the room for the last few weeks.
That’s not to say things are getting any better from an economic standpoint, or that this market won’t see any more panic buying or selling, as we are still at extreme levels from a number of perspectives, but the action this week does hint at some form of resolution being worked out for the market. That is something to be optimistic about, as is the fact that at the time of this writing, AAPL is up 10% in after hours trading, and YHOO is up better than 5%.
The VIX didn’t gain much back after yesterday’s nearly 25% haircut. That’s another reason to be optimistic about where this market seems to be going. A nice, orderly consolidation/ pull back would be in keeping with our thinking that the markets are trying to stabilize here.
The Dow fell 231.77, or 2.50 percent, to 9,033.66, on even less volume than Monday, when the volume was relatively light compared to recent sessions. While anything can still happen as the market digests all the economic news that has been thrown at it recently, we can see the swings getting more & more narrow in range, and the daily chart shows a bit of a triangle formation starting to set up.
The Standard & Poor's 500 fell 30.35, or 3.08 percent, to 955.05. On the daily chart you can see the same ascending triangle pattern forming, but below is the hourly chart, which shows what looks like pretty solid support right around 950.
The Nasdaq composite index shed 73.35, or 4.14 percent, to 1,696.68. the 15 minute chart shows a slight breach of an intraday double bottom, but the after hours trading in AAPL & YHOO would seem to indicate a higher open for the index, barring any real turnarounds.
Light, sweet crude fell $3.36 to settle at $70.89 barrel on the New York Mercantile Exchange. USO fell nearly 5% on the day, but is holding above recent lows. We could see a consolidation here, which would probably be a healthy thing.
Gold fooled us last night, metals looked very nice yesterday and took a hit today. However gold didn’t break the recent lows either, and if it does, the September lows aren’t far off either.
Our portfolio stocks remain light into what is still a very choppy market. We are going to keep things pretty light until this thing stabilizes a bit more, and will continue to trim losses and take profits wherever applicable. As such we are going to add one new short to the TBT list to compliment our one long, which we are raising the stop on to greatly reduce the downside exposure after a weak close today. We are very optimistic about the way this market is acting, and are hoping that we will see some of the best tradin conditions of the year in the next month or two, but patience will be required. There are some really nice setups in the watchlists above for intraday trading purposes tomorrow, of which there should be plenty. Have a great evening, see you tomorrow.
Friday, October 3, 2008
Monday, September 29, 2008
Wednesday, September 24, 2008
An Urgent Message From Secretary Hank Paulson
Dear American:
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.
Yours Faithfully Minister of Treasury Paulson
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.
Yours Faithfully Minister of Treasury Paulson
Tuesday, September 23, 2008
If only I was in the Senate, what I would have asked Paulson & Bernanke...
I’m almost embarrassed to admit that I spent most of my day glued to cnbc… not that I was looking for investment advice or anything, but I really wanted to see how Paulson, Bernanke, and Cox pitched their bailout plan to the Senate committee, and I wanted to see if any of the senators in the committee asked any of the questions that I would have - actually only one question really, namely:
“Why, if you guys are the ones who allowed this to happen in the first place, telling us the entire way down that everything was fine, the economic system was strong, take a long term outlook, etc, should we have enough trust in you to fork over 700 billion - that’s right - BILLION - dollars, on your word that it will now fix what you told us all along wasn’t broken? And if it doesn’t work, aren’t we at the same place we are at right now, minus nearly a trillion dollars?!?!
Oh and by the way, Hank, how much do you stand to lose if your old firm, Goldman Sachs goes under, and how does that play out in your scenario about forking over this money to you ASAP without investigating the situation?
Oh and one more thing - why is it, that the hard working, tax paying members of my district, many of whom just saw their net worth cut by substantial amounts listening to the likes of you clowns, and the clowns on CNBC telling them to buy & hold, that the economy was still sound, have to bail your old buddies out of their bad investments? Has Goldman, or Merrill, or any other broker, bank, or fund ever bailed them out of a bad investment? Doesn’t it specifically say, right from the terms of use on Goldman’s website that:
“No determination of suitability has been made; not all risks are disclosed; private advisors should be consulted: The fact that GS has made the data and services provided on this Web site available to you constitutes neither a recommendation that you enter into a particular transaction nor a representation that any product described on this Web site is suitable or appropriate for you. Many of the products described on this Web site involve significant risks, and you should not enter into any transactions unless you have fully understood all such risks and has independently determined that such transactions are appropriate for you. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or complete discussion of the risks which are mentioned. You should neither construe any of the material contained herein as business, financial, investment, hedging, trading, legal, regulatory, tax, or accounting advice nor make this service the primary basis for any investment decisions made by or on behalf of you, your accountants, or your managed or fiduciary accounts, and you may want to consult your business advisor, attorney, and tax and accounting advisors concerning any contemplated transactions.
No liability for content; no liability arising from use: Goldman Sachs shall have no liability, contingent or otherwise, to the user or to third parties, or any responsibility whatsoever, for the failure of any connection or communication service to provide or maintain user's access to this service, or for any interruption or disruption of such access or any erroneous communication between Goldman Sachs and user, regardless of whether the connection or communication service is provided by Goldman Sachs or a third-party service provider. Goldman Sachs shall have no liability, contingent or otherwise, to the user or to third parties, for the correctness, quality, accuracy, timeliness, pricing, reliability, performance, continued availability, completeness or delays, omissions or interruptions in the delivery of the data and services available herein or for any other aspect of the performance of this service or for any failure or delay in the execution of any transactions through this service. In no event will Goldman Sachs be liable for any special, indirect, incidental or consequential damages which may be incurred or experienced on account of the user using the data or services made available herein, even if Goldman Sachs has been advised of the possibility of such damages. Goldman Sachs will have no responsibility to inform the user of any difficulties experienced by Goldman Sachs or third parties with respect to the use of the services or to take any action in connection therewith.”
Doesn’t that pretty well state that “Hey, you’re on your own here pal, and if you screw up, we’re not going to take any responsibility whatsoever to bail you out, so do your homework before investing your money.”? So Hank, why is it that if they make it abundantly clear that while they made billions of dollars on the backs of the hardworking members of my district but clearly state that they will not back up their bad investments, why is it that the taxpaying members of my district should be liable to bail them out?”
Now that’s what I would have asked, and while there were a few questions that did touch on those subjects, most were sidestepped with the kind of stuttering genius one would expect from ole Hank. Not once did we really get a clear answer from anyone on anything, except the fact that we were all in really big trouble and we needed to approve this little loan yesterday or we’re all going down fast. And sadly, most of the senators there have little to no idea as to how the markets really work, and therefore weren’t really in a position in the debate to call these guys out on anything.
Meanwhile, the markets were holding up surprisingly well throughout most of it. At it’s high, the Dow was up over 100 points, and the NASDAQ was up about 20 points at the days high.
But by the last hour of trading the heavy selling started again. Although the volume has been very light over the past two days, the fact that many investors are simply sitting o the sidelines until this whole thing plays out, especially with the newly imposed ban on short selling (discussed in this weekends market outlook). All market averages dropped better than a percent on the day when it was all said & done, not a single one of them with any viable support before last weeks lows.
Now this looks like quite a bearish situation to me, and our bearish outlook on this market has served us well, I seriously doubt you’ll find many out there posting the kind of gains that we have of late in this market, and looking at our portfolio versus the market overall for the year it’s pretty clear that buy & hold is no longer a viable option.
That said logic has certainly been sparse to non existent as of recent months, so a big move to the upside cannot be ruled out here. As such we are going to add one new long to the mix to keep the portfolio a little more hedged while remaining light and with a bias to the short side. The commodity rally didn’t follow through into today, but we are still looking at many oil, gold, and silver (congrats to stock market chat room member art for a great trade on SIL today, while I’m on the topic of silver) to provide good trades to the upside at some point in the next few days, possibly after a bit more consolidation. All were overbought coming in, and some profit taking is a fairly healthy thing as we see it. There are a number of nice setups both long & short listed in the watch lists above for potential intraday trades tomorrow, but remember to keep a close eye on things, the reversals can be fast and unforgiving if you are complacent. That said there are plenty of great opportunities out there, and we’ll keep doing our best to find them for you. Have a great evening, happy trading!
Quote of the Day
"I'm not concerned about all hell breaking loose, but that a PART of hell will break loose... it'll be much harder to detect."
George Carlin (1937 - 2008)
“Why, if you guys are the ones who allowed this to happen in the first place, telling us the entire way down that everything was fine, the economic system was strong, take a long term outlook, etc, should we have enough trust in you to fork over 700 billion - that’s right - BILLION - dollars, on your word that it will now fix what you told us all along wasn’t broken? And if it doesn’t work, aren’t we at the same place we are at right now, minus nearly a trillion dollars?!?!
Oh and by the way, Hank, how much do you stand to lose if your old firm, Goldman Sachs goes under, and how does that play out in your scenario about forking over this money to you ASAP without investigating the situation?
Oh and one more thing - why is it, that the hard working, tax paying members of my district, many of whom just saw their net worth cut by substantial amounts listening to the likes of you clowns, and the clowns on CNBC telling them to buy & hold, that the economy was still sound, have to bail your old buddies out of their bad investments? Has Goldman, or Merrill, or any other broker, bank, or fund ever bailed them out of a bad investment? Doesn’t it specifically say, right from the terms of use on Goldman’s website that:
“No determination of suitability has been made; not all risks are disclosed; private advisors should be consulted: The fact that GS has made the data and services provided on this Web site available to you constitutes neither a recommendation that you enter into a particular transaction nor a representation that any product described on this Web site is suitable or appropriate for you. Many of the products described on this Web site involve significant risks, and you should not enter into any transactions unless you have fully understood all such risks and has independently determined that such transactions are appropriate for you. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or complete discussion of the risks which are mentioned. You should neither construe any of the material contained herein as business, financial, investment, hedging, trading, legal, regulatory, tax, or accounting advice nor make this service the primary basis for any investment decisions made by or on behalf of you, your accountants, or your managed or fiduciary accounts, and you may want to consult your business advisor, attorney, and tax and accounting advisors concerning any contemplated transactions.
No liability for content; no liability arising from use: Goldman Sachs shall have no liability, contingent or otherwise, to the user or to third parties, or any responsibility whatsoever, for the failure of any connection or communication service to provide or maintain user's access to this service, or for any interruption or disruption of such access or any erroneous communication between Goldman Sachs and user, regardless of whether the connection or communication service is provided by Goldman Sachs or a third-party service provider. Goldman Sachs shall have no liability, contingent or otherwise, to the user or to third parties, for the correctness, quality, accuracy, timeliness, pricing, reliability, performance, continued availability, completeness or delays, omissions or interruptions in the delivery of the data and services available herein or for any other aspect of the performance of this service or for any failure or delay in the execution of any transactions through this service. In no event will Goldman Sachs be liable for any special, indirect, incidental or consequential damages which may be incurred or experienced on account of the user using the data or services made available herein, even if Goldman Sachs has been advised of the possibility of such damages. Goldman Sachs will have no responsibility to inform the user of any difficulties experienced by Goldman Sachs or third parties with respect to the use of the services or to take any action in connection therewith.”
Doesn’t that pretty well state that “Hey, you’re on your own here pal, and if you screw up, we’re not going to take any responsibility whatsoever to bail you out, so do your homework before investing your money.”? So Hank, why is it that if they make it abundantly clear that while they made billions of dollars on the backs of the hardworking members of my district but clearly state that they will not back up their bad investments, why is it that the taxpaying members of my district should be liable to bail them out?”
Now that’s what I would have asked, and while there were a few questions that did touch on those subjects, most were sidestepped with the kind of stuttering genius one would expect from ole Hank. Not once did we really get a clear answer from anyone on anything, except the fact that we were all in really big trouble and we needed to approve this little loan yesterday or we’re all going down fast. And sadly, most of the senators there have little to no idea as to how the markets really work, and therefore weren’t really in a position in the debate to call these guys out on anything.
Meanwhile, the markets were holding up surprisingly well throughout most of it. At it’s high, the Dow was up over 100 points, and the NASDAQ was up about 20 points at the days high.
But by the last hour of trading the heavy selling started again. Although the volume has been very light over the past two days, the fact that many investors are simply sitting o the sidelines until this whole thing plays out, especially with the newly imposed ban on short selling (discussed in this weekends market outlook). All market averages dropped better than a percent on the day when it was all said & done, not a single one of them with any viable support before last weeks lows.
Now this looks like quite a bearish situation to me, and our bearish outlook on this market has served us well, I seriously doubt you’ll find many out there posting the kind of gains that we have of late in this market, and looking at our portfolio versus the market overall for the year it’s pretty clear that buy & hold is no longer a viable option.
That said logic has certainly been sparse to non existent as of recent months, so a big move to the upside cannot be ruled out here. As such we are going to add one new long to the mix to keep the portfolio a little more hedged while remaining light and with a bias to the short side. The commodity rally didn’t follow through into today, but we are still looking at many oil, gold, and silver (congrats to stock market chat room member art for a great trade on SIL today, while I’m on the topic of silver) to provide good trades to the upside at some point in the next few days, possibly after a bit more consolidation. All were overbought coming in, and some profit taking is a fairly healthy thing as we see it. There are a number of nice setups both long & short listed in the watch lists above for potential intraday trades tomorrow, but remember to keep a close eye on things, the reversals can be fast and unforgiving if you are complacent. That said there are plenty of great opportunities out there, and we’ll keep doing our best to find them for you. Have a great evening, happy trading!
Quote of the Day
"I'm not concerned about all hell breaking loose, but that a PART of hell will break loose... it'll be much harder to detect."
George Carlin (1937 - 2008)
Monday, September 22, 2008
Stock Market Commentary 9/22/08
From the weekend market outlook:
“It just seems to me to be way too similar to your average hail mary play in football - with their back to the wall the losing team just chucks something up there, as far out as you can get, then looks to the heavens and hopes for a miracle. In some rare cases when the smoke clears the losing team comes up with that miracle, but in most cases they don’t. In any case the fans of the team throwing the hail mary always cheer the loudest right when the ball gets chucked up in the air, and my fear is that the strength we saw from mid-Thursday until Fridays close was nothing more than the cheer for the chuck.
It would stand to reason that this ban on the short sales in the financial sectors is going to make an already volatile and shaky sector even more so. If funds and traders can’t hedge their long positions with shorts they are going to be forced to unload the shares more frequently and quite possibly causing sharp sell offs, and on the other hand you will not see the huge short covering rallies when these battered financial stocks muster up a rally, or announce some news that sends it flying, because there are no longer the ready made buyers that short covering creates. And while this is just my opinion, I think as a result of this we’re going to see a lot less volume in the financial stocks as lots of would be investors will take their money elsewhere, especially funds and big money.”
That scenario seemed to play out about as expected, for the broader market as well as just the financial sector. While it is a bit disheartening and depressing to think about the implications on the economy if this “hail mary” play doesn’t work, it does put a smile on my face getting to say “told ya so” to the idiot policymakers who thought that banning short selling was going to be the answer to the selling in the financial stocks.
Monday also market another very bullish day for commodities, particularly oil, which was at one point up over $25 a barrel. Even with it backing off it’s highs a bit, Monday was the biggest one day gain in crude oil in history. Gold and silver both also posted some nice gains on the day, our weekend long watch lists were loaded with commodity plays, and they are again tonight.
The Dow fell 372.75, or 3.27 percent, to 11,015.69. The end of last week marked the Dow's best two-day point gain since March 2000, so some selling was to be expected, but on this scale it was not a healthy pullback. Although volume was low, this was probably due to a lot of traders just not playing due to these new rules, especially in the financial sector. We did find a little round number support at 11,000, so perhaps that will hold, but that would probably be temporary.
The Standard & Poor's 500 index fell 47.99, or 3.82 percent, to 1,207.09, and the Nasdaq composite index fell 94.92, or 4.17 percent, to 2,178.98.Both erased all of Fridays gains and then some, and look like they want to at least retest last weeks lows.
The Vix also did what we expected, stating that the pullback that ended the week was a potentially bullish setup, and it looks even more bullish now. It feels like we were getting close to the kind of panic selling that would be needed to hammer out a bottom before the rumors started flying last week sending the market flying as well, and we are thinking we will retest last weeks highs on the Vix at some point soon.
Our portfolio stocks once again navigated the market changes very well, closing the last profitable long position and getting into some new short positions this morning. We are still bearish on the overall market after today’s showing, but the volatility of late has to be respected, so we are going to remain somewhat hedged, so are adding a new long to trigger in case we get another reversal. There were a few more shorts in the watch lists above than longs, but oil and precious metals were looking nice and should provide some nice trading opportunities over the next few days. We are truly into “uncharted” territory here, and it should be fun to watch this whole situation play out. Thanks for watching with us, have a great night.
Quote of the Day
"The most beautiful thing we can experience is the mysterious. It is the source of all true art and science."
Albert Einstein (1879 - 1955)
“It just seems to me to be way too similar to your average hail mary play in football - with their back to the wall the losing team just chucks something up there, as far out as you can get, then looks to the heavens and hopes for a miracle. In some rare cases when the smoke clears the losing team comes up with that miracle, but in most cases they don’t. In any case the fans of the team throwing the hail mary always cheer the loudest right when the ball gets chucked up in the air, and my fear is that the strength we saw from mid-Thursday until Fridays close was nothing more than the cheer for the chuck.
It would stand to reason that this ban on the short sales in the financial sectors is going to make an already volatile and shaky sector even more so. If funds and traders can’t hedge their long positions with shorts they are going to be forced to unload the shares more frequently and quite possibly causing sharp sell offs, and on the other hand you will not see the huge short covering rallies when these battered financial stocks muster up a rally, or announce some news that sends it flying, because there are no longer the ready made buyers that short covering creates. And while this is just my opinion, I think as a result of this we’re going to see a lot less volume in the financial stocks as lots of would be investors will take their money elsewhere, especially funds and big money.”
That scenario seemed to play out about as expected, for the broader market as well as just the financial sector. While it is a bit disheartening and depressing to think about the implications on the economy if this “hail mary” play doesn’t work, it does put a smile on my face getting to say “told ya so” to the idiot policymakers who thought that banning short selling was going to be the answer to the selling in the financial stocks.
Monday also market another very bullish day for commodities, particularly oil, which was at one point up over $25 a barrel. Even with it backing off it’s highs a bit, Monday was the biggest one day gain in crude oil in history. Gold and silver both also posted some nice gains on the day, our weekend long watch lists were loaded with commodity plays, and they are again tonight.
The Dow fell 372.75, or 3.27 percent, to 11,015.69. The end of last week marked the Dow's best two-day point gain since March 2000, so some selling was to be expected, but on this scale it was not a healthy pullback. Although volume was low, this was probably due to a lot of traders just not playing due to these new rules, especially in the financial sector. We did find a little round number support at 11,000, so perhaps that will hold, but that would probably be temporary.
The Standard & Poor's 500 index fell 47.99, or 3.82 percent, to 1,207.09, and the Nasdaq composite index fell 94.92, or 4.17 percent, to 2,178.98.Both erased all of Fridays gains and then some, and look like they want to at least retest last weeks lows.
The Vix also did what we expected, stating that the pullback that ended the week was a potentially bullish setup, and it looks even more bullish now. It feels like we were getting close to the kind of panic selling that would be needed to hammer out a bottom before the rumors started flying last week sending the market flying as well, and we are thinking we will retest last weeks highs on the Vix at some point soon.
Our portfolio stocks once again navigated the market changes very well, closing the last profitable long position and getting into some new short positions this morning. We are still bearish on the overall market after today’s showing, but the volatility of late has to be respected, so we are going to remain somewhat hedged, so are adding a new long to trigger in case we get another reversal. There were a few more shorts in the watch lists above than longs, but oil and precious metals were looking nice and should provide some nice trading opportunities over the next few days. We are truly into “uncharted” territory here, and it should be fun to watch this whole situation play out. Thanks for watching with us, have a great night.
Quote of the Day
"The most beautiful thing we can experience is the mysterious. It is the source of all true art and science."
Albert Einstein (1879 - 1955)
Sunday, September 21, 2008
Stock Trading Ideas & Stock Market Comentary For 9/22/08
Watchlists
Long - SUTR, SIMO, BIOD, KKD, INSP, OZN, KRY, SYMX, TNE, LMC, GSI, MEE, KBR, NCMI, VRSN, PSEM, STEM, SDXC, INFN, ENOC, GTLS, SMOD, WATG, MF, SPSN. LOGI, RRGB, SHM, BIIB
Short - ARGN, WDFC, HRLY, MATW, LNCE, HEI, RAH, CHH, TTC, ODP, ANDE, SWC, RGR, TGT, WMT, PCG, CEDC, G
Market Outlook
So I have to admit in scanning around looking for trades and trying to make sense of what will certainly be a historic week in the stock market, I am very torn between what I’ve been taught over the years about technical analysis, and historical new events, rules, and actions that may be skewing the data.
On the one hand, the last two days of this week had all the makings of a major reversal for the market. We saw panic selling, huge losses, a VIX spike above 40, followed by a strong reversal that had volume, and had follow through into the next day. On the other hand, my bullshit radar is flashing a bit more than usual, partially because of Friday being quadruple witching options expiration day, but mostly because of the historic announcements that sparked the rally in the first place.
Now on one hand, in researching this Resolution Trust Corporation, it sounds like at least a more reasonable option than a government takeover that translates into trillions of dollars for taxpayers. It still doesn’t account for all the bad outstanding home loans out there, or solve many of the other underlying problems that still haunt this market, but it might be a step in the right direction. I posted an explanation of the RTC in the market outlook on Thursday, for anyone who wants there is a good explanation of it on wikipedia.
What gets me is the ban on short selling imposed by the SEC, and the overall desperation that this whole thing stinks of. It just seems to me to be way too similar to your average hail mary play in football - with their back to the wall the losing team just chucks something up there, as far out as you can get, then looks to the heavens and hopes for a miracle. In some rare cases when the smoke clears the losing team comes up with that miracle, but in most cases they don’t. In any case the fans of the team throwing the hail mary always cheer the loudest right when the ball gets chucked up in the air, and my fear is that the strength we saw from mid-Thursday until Fridays close was nothing more than the cheer for the chuck, that we may have put ourselves in a position to pull a miracle out somehow. I would love to think that we could, but have to entertain the possibility that we can’t, and try and figure out what will happen and how to profit if not. That is the dilemma I am struggling with at the moment.
It would stand to reason that this ban on the short sales in the financial sectors is going to make an already volatile and shaky sector even more so. If funds and traders can’t hedge their long positions with shorts they are going to be forced to unload the shares more frequently and quite possibly causing sharp sell offs, and on the other hand you will not see the huge short covering rallies when these battered financial stocks muster up a rally, or announce some news that sends it flying, because there are no longer the ready made buyers that short covering creates. And while this is just my opinion, I think as a result of this we’re going to see a lot less volume in the financial stocks as lots of would be investors will take their money elsewhere, especially funds and big money.
So let’s take a look at a few of the averages and a commodities and try to make some sense of the past week, keeping in mind that at some point that hail mary pass will come down, and as this plays out we may have to adjust our game as the rules of this one change.
The Dow gained just under 779 points in the last two days of the week, yet still closed slightly red for the week. The weekly chart shows the record volume on the week, quite a switch from a few weeks prior when there was record LOW volume. On the weekly chart we can see the 10 ema has as been a tough level to break for the dow, and is currently just below that. To the downside it looks like 11,115 is a pretty valid area for support, as it has dipped below a few times we have yet to have a weekly close below.
The NASDAQ composite on the weekly also shows the huge volume spike in the week, and unlike the Dow the Nasdaq closed with a slight gain. On the weekly chart we also have that 10 ema as a ceiling above, and on the daily we can see a retreat from the 50 day sma. We also have some double bottom support just below Fridays close, and while the daily chart doesn’t look as strong as it does on a few other averages, the weekly looks better than the Dow or S & P.
The Russell 2000 looks the strongest of the indexes, posting a very impressive 2 day gain to end the week. We are however looking at triple top resistance right around the years highs. This should be interesting to watch, a break up above would make for a nice bullish breakout on this 2 day chart.
The VIX finally spiked above 40, along with the panic selling that characterized Wednesday afternoon into Thursday morning. While it pulled back quite a bit in the last day and a half of the week this has the makings of a very bullish setup on the daily chart, all we’re missing is the breakout.
Oil hit new multi month lows earlier in the week before rallying back to close back over $100 a barrel again. I’m amazed that I just paid $3.65 a gallon for gas yesterday, I never thought I’d see it that low again for awhile there. There are a number of oil & gas stocks looking very bullish here, and the precious metals and other commodities don’t look half bad either.
Gold also had a very bullish week with a huge day on Wednesday where it gained over 10%. There were a number of very nice looking individual gold stocks as well, with quite a few making our watch lists for Monday to the long side.
Our portfolio stocks put up some great numbers this week, with 30%+ gains in SLM short, 20%+ gains in ARTC long, and ININ long, ADCT short, and CLMS short all providing us some great gains. On the week we only took two losses, HANS short and QSII short, both were kept small, 5% and 8% respectively. I can’t wait to see what can be done once this market gets this whole ordeal behind it, which I sense one way or another it will. In the meantime we’re keeping things relatively hedged in terms of long to short, and are going to stay away from the financials for the most part, at least until we see what the early part of next week brings. For the quick & nimble there are still lots of opportunities abound to get nice movements in day trades, and there are a number of nice setups that could have the momentum to make some big mopves on Monday listed in the long, and a few stocks that didn’t look very strong in the rally that could drop hard if the market takes a turn for the worse. In any case, it’ll be interesting to watch this all play out. Thanks for watching the show with us, see ya Monday.
Have a great evening, happy trading!
Quote of the Day
"I never guess. It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts."
Sir Arthur Conan Doyle (1859 - 1930)
Long - SUTR, SIMO, BIOD, KKD, INSP, OZN, KRY, SYMX, TNE, LMC, GSI, MEE, KBR, NCMI, VRSN, PSEM, STEM, SDXC, INFN, ENOC, GTLS, SMOD, WATG, MF, SPSN. LOGI, RRGB, SHM, BIIB
Short - ARGN, WDFC, HRLY, MATW, LNCE, HEI, RAH, CHH, TTC, ODP, ANDE, SWC, RGR, TGT, WMT, PCG, CEDC, G
Market Outlook
So I have to admit in scanning around looking for trades and trying to make sense of what will certainly be a historic week in the stock market, I am very torn between what I’ve been taught over the years about technical analysis, and historical new events, rules, and actions that may be skewing the data.
On the one hand, the last two days of this week had all the makings of a major reversal for the market. We saw panic selling, huge losses, a VIX spike above 40, followed by a strong reversal that had volume, and had follow through into the next day. On the other hand, my bullshit radar is flashing a bit more than usual, partially because of Friday being quadruple witching options expiration day, but mostly because of the historic announcements that sparked the rally in the first place.
Now on one hand, in researching this Resolution Trust Corporation, it sounds like at least a more reasonable option than a government takeover that translates into trillions of dollars for taxpayers. It still doesn’t account for all the bad outstanding home loans out there, or solve many of the other underlying problems that still haunt this market, but it might be a step in the right direction. I posted an explanation of the RTC in the market outlook on Thursday, for anyone who wants there is a good explanation of it on wikipedia.
What gets me is the ban on short selling imposed by the SEC, and the overall desperation that this whole thing stinks of. It just seems to me to be way too similar to your average hail mary play in football - with their back to the wall the losing team just chucks something up there, as far out as you can get, then looks to the heavens and hopes for a miracle. In some rare cases when the smoke clears the losing team comes up with that miracle, but in most cases they don’t. In any case the fans of the team throwing the hail mary always cheer the loudest right when the ball gets chucked up in the air, and my fear is that the strength we saw from mid-Thursday until Fridays close was nothing more than the cheer for the chuck, that we may have put ourselves in a position to pull a miracle out somehow. I would love to think that we could, but have to entertain the possibility that we can’t, and try and figure out what will happen and how to profit if not. That is the dilemma I am struggling with at the moment.
It would stand to reason that this ban on the short sales in the financial sectors is going to make an already volatile and shaky sector even more so. If funds and traders can’t hedge their long positions with shorts they are going to be forced to unload the shares more frequently and quite possibly causing sharp sell offs, and on the other hand you will not see the huge short covering rallies when these battered financial stocks muster up a rally, or announce some news that sends it flying, because there are no longer the ready made buyers that short covering creates. And while this is just my opinion, I think as a result of this we’re going to see a lot less volume in the financial stocks as lots of would be investors will take their money elsewhere, especially funds and big money.
So let’s take a look at a few of the averages and a commodities and try to make some sense of the past week, keeping in mind that at some point that hail mary pass will come down, and as this plays out we may have to adjust our game as the rules of this one change.
The Dow gained just under 779 points in the last two days of the week, yet still closed slightly red for the week. The weekly chart shows the record volume on the week, quite a switch from a few weeks prior when there was record LOW volume. On the weekly chart we can see the 10 ema has as been a tough level to break for the dow, and is currently just below that. To the downside it looks like 11,115 is a pretty valid area for support, as it has dipped below a few times we have yet to have a weekly close below.
The NASDAQ composite on the weekly also shows the huge volume spike in the week, and unlike the Dow the Nasdaq closed with a slight gain. On the weekly chart we also have that 10 ema as a ceiling above, and on the daily we can see a retreat from the 50 day sma. We also have some double bottom support just below Fridays close, and while the daily chart doesn’t look as strong as it does on a few other averages, the weekly looks better than the Dow or S & P.
The Russell 2000 looks the strongest of the indexes, posting a very impressive 2 day gain to end the week. We are however looking at triple top resistance right around the years highs. This should be interesting to watch, a break up above would make for a nice bullish breakout on this 2 day chart.
The VIX finally spiked above 40, along with the panic selling that characterized Wednesday afternoon into Thursday morning. While it pulled back quite a bit in the last day and a half of the week this has the makings of a very bullish setup on the daily chart, all we’re missing is the breakout.
Oil hit new multi month lows earlier in the week before rallying back to close back over $100 a barrel again. I’m amazed that I just paid $3.65 a gallon for gas yesterday, I never thought I’d see it that low again for awhile there. There are a number of oil & gas stocks looking very bullish here, and the precious metals and other commodities don’t look half bad either.
Gold also had a very bullish week with a huge day on Wednesday where it gained over 10%. There were a number of very nice looking individual gold stocks as well, with quite a few making our watch lists for Monday to the long side.
Our portfolio stocks put up some great numbers this week, with 30%+ gains in SLM short, 20%+ gains in ARTC long, and ININ long, ADCT short, and CLMS short all providing us some great gains. On the week we only took two losses, HANS short and QSII short, both were kept small, 5% and 8% respectively. I can’t wait to see what can be done once this market gets this whole ordeal behind it, which I sense one way or another it will. In the meantime we’re keeping things relatively hedged in terms of long to short, and are going to stay away from the financials for the most part, at least until we see what the early part of next week brings. For the quick & nimble there are still lots of opportunities abound to get nice movements in day trades, and there are a number of nice setups that could have the momentum to make some big mopves on Monday listed in the long, and a few stocks that didn’t look very strong in the rally that could drop hard if the market takes a turn for the worse. In any case, it’ll be interesting to watch this all play out. Thanks for watching the show with us, see ya Monday.
Have a great evening, happy trading!
Quote of the Day
"I never guess. It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts."
Sir Arthur Conan Doyle (1859 - 1930)
Friday, September 19, 2008
The SEC's List of Banned Stocks For Shorting and Wording On Temporary Short Sale Ban
UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 RELEASE NO. 34-58592 / September 18, 2008 EMERGENCY ORDER PURSUANT TO SECTION 12(k)(2) OF THE SECURITIES EXCHANGE ACT OF 1934 TAKING TEMPORARY ACTION TO RESPOND TO MARKET DEVELOPMENTS
The Commission is aware of the continued potential of sudden and excessive fluctuations of securities prices and disruption in the functioning of the securities markets that could threaten fair and orderly markets. In our recent publication of an emergency order under Section 12(k) of the Exchange Act (the “Act”),1 for example, we were concerned about the possible unnecessary or artificial price movements based on unfounded rumors regarding the stability of financial institutions and other issuers exacerbated by “naked” short selling.
Our concerns, however, are no longer limited to just the financial institutions that were the subject of the July Emergency Order. Recent market conditions have made us concerned that short selling in the securities of a wider range of financial institutions may be causing sudden and excessive fluctuations of the prices of such securities in such a manner so as to threaten fair and orderly markets. Given the importance of confidence in our financial markets as a whole, we have become concerned about recent sudden declines in the prices of a wide range of securities. Such price declines can give rise to questions about the underlying financial condition of an issuer, which in turn can create a crisis of confidence, without a fundamental underlying basis.
This crisis of confidence can impair the liquidity and 1 See Exchange Act Release No. 58166 (July 15, 2008). See also Exchange Act Release No. 58190 (July 18, 2008) (“Amended July Emergency Order”). See also Exchange Act Release No. 58572 (September 17, 2008).
1
ultimate viability of an issuer, with potentially broad market consequences. Our concerns are no longer limited to the financial institutions that were the subject of the July Emergency Order. As a result of these recent developments, the Commission has concluded that there continues to exist the potential of sudden and excessive fluctuations of securities prices generally and disruption in the functioning of the securities markets that could threaten fair and orderly markets. Based on this conclusion, the Commission is exercising its powers under Section 12(k)(2) of the Act.2 Pursuant to Section 12(k)
(2), in appropriate circumstances the Commission may issue summarily an order to alter, supplement, suspend, or impose requirements or restrictions with respect to matters or actions subject to regulation by the Commission if the Commission determines such an order is necessary in the public interest and for the protection of investors to maintain or restore fair and orderly securities markets. In these unusual and extraordinary circumstances, we have concluded that, to prevent substantial disruption in the securities markets, temporarily prohibiting any person from effecting a short sale in the publicly traded securities of certain financial firms, which entities are identified in Appendix A (“Included Financial Firms”), is in the public interest and for the protection of investors to maintain or restore fair and orderly securities markets. 2 This finding of an “emergency” is solely for purposes of Section 12(k)(2) of the Exchange Act and is not intended to have any other effect or meaning or to confer any right or impose any obligation other than set forth in this Order.
2
This emergency action should prevent short selling from being used to drive down the share prices of issuers even where there is no fundamental basis for a price decline other than general market conditions. IT IS ORDERED that, pursuant to our Section 12(k)(2) powers, all persons are prohibited from short selling3 any publicly traded securities of any Included Financial Firm. Similar to the Amended July Emergency Order, we are providing a limited exception for certain bona fide market makers. We believe this narrow exception is necessary because such market makers may need to facilitate customer orders in a fast moving market without possible delays associated with complying with the requirements of this Order. IT IS THEREFORE ORDERED that, pursuant to our Section 12(k)(2) powers, the following entities are excepted from the requirements of the Order: registered market makers, block positioners, or other market makers obligated to quote in the over-the-counter market, in each case that are selling short a publicly traded security of an Included Financial Firm as part of bona fide market making in such security. In addition, we are providing an exception to allow short sales that occur as a result of automatic exercise or assignment of an equity option held prior to effectiveness of this Order due to expiration of the option. IT IS THEREFORE ORDERED that, pursuant to our Section 12(k)(2) powers, the requirements of this Order shall not apply to any person that effects a short sale in any 3 The definition of “short sale” shall be the same definition used in Rule 200(a) of Regulation SHO and the requirements for marking orders “long” or “short” shall be the same as provided in Regulation SHO.
3
publicly traded security of any Included Financial Firm as a result of automatic exercise or assignment of an equity option held prior to effectiveness of this Order due to expiration of the option. Finally, to facilitate the expiration of options on September 20th, options market makers are excepted from the requirements of this Order until 11:59 p.m. on September 19th when selling short as part of bona fide market making and hedging activities related directly to bona fide market making in derivatives on the publicly traded securities of any Included Financial Firm. IT IS THEREFORE ORDERED that, pursuant to our Section 12(k)(2) powers, the requirements of this Order shall not apply, until 11:59 p.m. on September 19, 2008, to any person that is a market maker that effects a short sale as part of a bona fide market making and hedging activity related directly to bona fide market making in derivatives on the publicly traded securities of any Included Financial Firm. This Order shall be effective immediately and shall terminate at 11:59 p.m. EDT on October 2, 2008, unless further extended by the Commission. By the Commission. Florence E. Harmon Acting Secretary
4
Appendix A This list, prepared on a best efforts basis, includes banks, insurance companies, and securities firms identified by SICs 6000, 6011, 6020-22, 6025, 6030, 6035-36, 6111, 6140, 6144, 6200, 6210-11, 6231, 6282, 6305, 6310-11, 6320-21, 6324, 6330-31, 6350-51, 6360-61, 6712, and 6719.
To view the list of all the stocks affected by the ban click here...
To keep up with our stock picks and market commentary, chat live and watch nightly stock market videos click here...
The Commission is aware of the continued potential of sudden and excessive fluctuations of securities prices and disruption in the functioning of the securities markets that could threaten fair and orderly markets. In our recent publication of an emergency order under Section 12(k) of the Exchange Act (the “Act”),1 for example, we were concerned about the possible unnecessary or artificial price movements based on unfounded rumors regarding the stability of financial institutions and other issuers exacerbated by “naked” short selling.
Our concerns, however, are no longer limited to just the financial institutions that were the subject of the July Emergency Order. Recent market conditions have made us concerned that short selling in the securities of a wider range of financial institutions may be causing sudden and excessive fluctuations of the prices of such securities in such a manner so as to threaten fair and orderly markets. Given the importance of confidence in our financial markets as a whole, we have become concerned about recent sudden declines in the prices of a wide range of securities. Such price declines can give rise to questions about the underlying financial condition of an issuer, which in turn can create a crisis of confidence, without a fundamental underlying basis.
This crisis of confidence can impair the liquidity and 1 See Exchange Act Release No. 58166 (July 15, 2008). See also Exchange Act Release No. 58190 (July 18, 2008) (“Amended July Emergency Order”). See also Exchange Act Release No. 58572 (September 17, 2008).
1
ultimate viability of an issuer, with potentially broad market consequences. Our concerns are no longer limited to the financial institutions that were the subject of the July Emergency Order. As a result of these recent developments, the Commission has concluded that there continues to exist the potential of sudden and excessive fluctuations of securities prices generally and disruption in the functioning of the securities markets that could threaten fair and orderly markets. Based on this conclusion, the Commission is exercising its powers under Section 12(k)(2) of the Act.2 Pursuant to Section 12(k)
(2), in appropriate circumstances the Commission may issue summarily an order to alter, supplement, suspend, or impose requirements or restrictions with respect to matters or actions subject to regulation by the Commission if the Commission determines such an order is necessary in the public interest and for the protection of investors to maintain or restore fair and orderly securities markets. In these unusual and extraordinary circumstances, we have concluded that, to prevent substantial disruption in the securities markets, temporarily prohibiting any person from effecting a short sale in the publicly traded securities of certain financial firms, which entities are identified in Appendix A (“Included Financial Firms”), is in the public interest and for the protection of investors to maintain or restore fair and orderly securities markets. 2 This finding of an “emergency” is solely for purposes of Section 12(k)(2) of the Exchange Act and is not intended to have any other effect or meaning or to confer any right or impose any obligation other than set forth in this Order.
2
This emergency action should prevent short selling from being used to drive down the share prices of issuers even where there is no fundamental basis for a price decline other than general market conditions. IT IS ORDERED that, pursuant to our Section 12(k)(2) powers, all persons are prohibited from short selling3 any publicly traded securities of any Included Financial Firm. Similar to the Amended July Emergency Order, we are providing a limited exception for certain bona fide market makers. We believe this narrow exception is necessary because such market makers may need to facilitate customer orders in a fast moving market without possible delays associated with complying with the requirements of this Order. IT IS THEREFORE ORDERED that, pursuant to our Section 12(k)(2) powers, the following entities are excepted from the requirements of the Order: registered market makers, block positioners, or other market makers obligated to quote in the over-the-counter market, in each case that are selling short a publicly traded security of an Included Financial Firm as part of bona fide market making in such security. In addition, we are providing an exception to allow short sales that occur as a result of automatic exercise or assignment of an equity option held prior to effectiveness of this Order due to expiration of the option. IT IS THEREFORE ORDERED that, pursuant to our Section 12(k)(2) powers, the requirements of this Order shall not apply to any person that effects a short sale in any 3 The definition of “short sale” shall be the same definition used in Rule 200(a) of Regulation SHO and the requirements for marking orders “long” or “short” shall be the same as provided in Regulation SHO.
3
publicly traded security of any Included Financial Firm as a result of automatic exercise or assignment of an equity option held prior to effectiveness of this Order due to expiration of the option. Finally, to facilitate the expiration of options on September 20th, options market makers are excepted from the requirements of this Order until 11:59 p.m. on September 19th when selling short as part of bona fide market making and hedging activities related directly to bona fide market making in derivatives on the publicly traded securities of any Included Financial Firm. IT IS THEREFORE ORDERED that, pursuant to our Section 12(k)(2) powers, the requirements of this Order shall not apply, until 11:59 p.m. on September 19, 2008, to any person that is a market maker that effects a short sale as part of a bona fide market making and hedging activity related directly to bona fide market making in derivatives on the publicly traded securities of any Included Financial Firm. This Order shall be effective immediately and shall terminate at 11:59 p.m. EDT on October 2, 2008, unless further extended by the Commission. By the Commission. Florence E. Harmon Acting Secretary
4
Appendix A This list, prepared on a best efforts basis, includes banks, insurance companies, and securities firms identified by SICs 6000, 6011, 6020-22, 6025, 6030, 6035-36, 6111, 6140, 6144, 6200, 6210-11, 6231, 6282, 6305, 6310-11, 6320-21, 6324, 6330-31, 6350-51, 6360-61, 6712, and 6719.
To view the list of all the stocks affected by the ban click here...
To keep up with our stock picks and market commentary, chat live and watch nightly stock market videos click here...
Historic Ban On Short Selling By The SEC - Markets Rally!
The U.S. Securities and Exchange Commission on Friday banned short-selling in 799 financial companies, "to protect the integrity and quality of the securities market and strengthen investor confidence," according to a statement from the SEC. SEC Chairman Christopher Cox said: "The commission is committed to using every weapon in its arsenal to combat market manipulation." The ban expires Oct. 2.
Thursday, September 18, 2008
What IsThe RTC? Resolution Trust Cormpoation Explained...
With all this talk of the RTC type bailout for struggling savings & loan businesses sparking a massive rally in the stock market on Thursday, I just thought I'd explain what exactly the RTC is... from wikipedia:
The Resolution Trust Corporation was a United States Government-owned asset-management company charged with liquidating assets (primarily real estate-related assets, including mortgage loans) that had been assets of savings and loan associations ("S&Ls") declared insolvent by the Office of Thrift Supervision, as a consequence of the Savings and Loan crisis of the 1980s. It also took over the insurance functions of the former Federal Home Loan Bank Board. It was created by the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), adopted in 1989. In 1995, its duties were transferred to the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation.
Between 1989 and mid-1995, the Resolution Trust Corporation closed or otherwise resolved 747 thrifts with total assets of $394 billion.
The Wolf, or the Resolution Trust Corporation (“RTC”), pioneered the use of so-called “equity partnerships” to help liquidate real estate and financial assets which it inherited from insolvent thrift institutions. While a number of different structures were used, all of the equity partnerships involved a private sector partner acquiring a partial interest in a pool of assets, controlling the management and sale of the assets in the pool, and making distributions to the RTC reflective of the RTC’s retained interest.
The RTC used equity partnerships to achieve a superior execution through maintaining upside participation in the portfolios. Prior to introducing the equity partnership program, the RTC had engaged in “bulk sales” of asset portfolios. The pricing on certain types of assets often proved to be disappointing because the purchasers discounted heavily for “unknowns” regarding the assets, and to reflect uncertainty at the time regarding the real estate market. By retaining an interest in asset portfolios, the RTC was able to participate in the extremely strong returns being realized by portfolio investors. Additionally, the equity partnerships enabled the RTC to benefit by the management and liquidation efforts of their private sector partners, and the structure helped assure an alignment of incentives superior to that which typically exists in a principal/contractor relationship.
The following is a summary description of RTC Equity Partnership Programs:
Multiple Investor Fund (“MIF”)
Under the MIF Program, the RTC established limited partnerships (each known as a “Multiple Investor Fund” or “MIF”) and selected private sector entities to be the general partner of each MIF. The MIF structure contemplated the following:
* The RTC conveyed to the MIF a portfolio of assets (principally commercial non- and sub-performing mortgage loans) which were described generically, but which had not been identified at the time the MIF general partners were selected. The assets were delivered in separate pools over time, and there were separate closings for each pool.
* The selected general partner paid the RTC for its general partnership interest in the assets. The price was determined by the so-called Derived Investment Value (“DIV”) of the assets (an estimate of the liquidation value of assets based on a valuation formula developed by the RTC), multiplied by a percentage of DIV based on the bid of the selected general partner. The general partner paid its equity share relating to each pool at the closing on the pool. The RTC retained a limited partnership interest in the MIF.
* The MIF asset portfolio was leveraged by RTC-provided seller financing. The RTC offered up to 75% seller financing, and one element of the bid was the amount of seller financing required by the bidder. Because of the leverage, the amount required to be paid by the MIF general partner on account of its interest was less than it would have been if the MIF had been an all-equity transaction.
* The MIF general partner, on behalf of the MIF, engaged an asset manager (one or more entities of the MIF general partner team) to manage and liquidate the asset pool. The asset manager was paid a servicing fee out of MIF funds, and used MIF funds to improve, manage and market the assets. The asset manager was responsible for day-to-day management of the MIF, but the general partner controlled major budgetary and liquidation decisions. The RTC had no management role.
* After repayment of the RTC seller financing debt, net cash flow was divided between the RTC (as limited partner) and general partner in accordance with their respective percentage interests (the general partner had at least a 50% interest).
Each of the MIF general partners was a joint venture among an asset manager with experience in managing and liquidating distressed real estate assets, and a capital source. There were two MIF transactions involving over 1000 loans having an aggregate book value of slightly over $2 billion and an aggregate DIV of $982 million .
[edit] N-Series and S-Series Mortgage Trusts
The “N-Series” and “S-Series” programs were successor programs to the MIF program. The N-Series and S-Series structure was different from that of the MIF in that (i) the subject assets were pre-identified by the RTC—under the MIF, the specific assets had not been identified in advance of the bidding—and (ii) the interests in the asset portfolios were competitively bid on by pre-qualified investors and the highest bid won (the RTC’s process for selecting MIF general partners, in contrast, took into account non-price factors).
[edit] N-Series
The N-Series structure contemplated the following:
* The RTC would convey to a Delaware business trust (the “Trust”) a pre-identified portfolio of assets, mostly commercial non- and sub- performing mortgage loans. (The “N” of “N-Series” stood for “nonperforming.”)
* Pre-qualified investor teams competitively bid for a 49% interest in the Trust, and the equity for this interest was payable to the RTC by the winning bidder when it closed on the acquisition of its interest.
* The Trust, at its creation, issued a “Class A Certificate” to the private sector investor evidencing its ownership interest in the Trust, and a “Class B Certificate” to the RTC evidencing its ownership interest. The Class A Certificate holder exercised those management powers typically associated with a general partner (that is, it controlled the operation of the Trust), and the RTC, as the Class B Certificate holder, had a passive interest typical of a limited partner.
* The Class A Certificate holder, on behalf of the Trust, engaged an asset manager (sometimes referred to as the “servicer”) to manage and liquidate the asset pool. The servicer was paid a servicing fee out of Trust funds. Typically, the servicer was a joint venture partner in the Class A Certificate Holder. The servicer used Trust funds to improve, maintain and liquidate Trust assets, and had day-to-day management control. The Class A Certificate Holder exercised control over major budgetary and disposition decisions.
* The Trust, through a pre-determined placement agent designated by the RTC, leveraged its asset portfolio by issuing commercial mortgage backed securities (“CMBS”), the proceeds of which went to the RTC. Because of the leverage, the amount required to be paid by the Class A Certificate Holder on account of its interest was less than it would have been if the N-Trust had been an all-equity transaction.
* Net cash flow was first used to repay the CMBS debt, after which it was divided between the RTC and Class A Certificate Holder at their respective equity percentages (51% RTC, 49% Class A).
Each of the N-Series bid teams was a joint venture between an asset manager with experience in managing and liquidating distressed real estate assets, and a capital source. There were a total of six N-Series partnership transactions in which the RTC placed 2,600 loans with an approximate book value of $2.8 billion and a DIV of $1.3 billion. A total of $975 million of CMBS bonds were issued for the six N-Series transaction, representing 60% of the value of N-Series trust assets as determined by the competitive bid process (the value of the assets implied by the investor bids was substantially greater than the DIV values calculated by the RTC). While the original bond maturity was 10 years from the transaction, the average bond was retired in 21 months from the transaction date, and all bonds were retired within 28 months.
[edit] S-Series
The S-Series program was similar to the N-Series program, and contained the same profile of assets as the N-Series transactions. The S-Series was designed to appeal to investors who might lack the resources necessary to undertake an N-Series transaction, and differed from the N-Series program in the following respects:
* The S-Series portfolios were smaller. The “S” of “S-Series” stands for “small” -- the average S-Series portfolio had a book value of $113 million and a DIV of $52 million, whereas the N-Series average portfolio had a book value of $464 million and a DIV of $220 million. As a consequence, it required an equity investment of $4 to $9 million for investor to undertake an S-Series transaction, versus $30 - $70 million for an N-Series transaction.
* The S-Series portfolio was not leveraged through the issuance of CMBS, although it was leveraged through a 60% RTC purchase money financing. It should be noted that in the N-Series program where CMBS were issued, the servicers/asset managers had to be qualified by debt rating agencies (e.g., Standard and Poors) as a condition to the agencies’ giving a rating to the CMBS. This was not necessary in the S-Series program
* Assets in the S-Series portfolios were grouped geographically, so as to reduce the investors’ due diligence costs.
There were nine S-Series transactions, into which the RTC contributed more than 1,100 loans having a total book value of approximately $1 billion and a DIV of $466 million. The RTC purchase money loans, aggregating $284 million for the nine S-transactions, were all paid off within 22 months of the respective transaction closing dates (on average, the purchase money loans were retired in 16 months).
[edit] Land Fund
The RTC Land fund program was created to enable the RTC to share in the profit from longer term recovery and development of land. Under the Land Fund Program, the RTC selected private sector entities to be the general partners of 30-year term limited partnerships known as “Land Funds.” The Land Fund program was different from the MIF and N/S-Series programs in that the Land Fund general partner had the authority to engage in long-term development, whereas the MIFs and N/S-Series Trusts were focused on asset liquidation. The Land Fund structure contemplated the following:
* The RTC conveyed to the Land Fund certain pre-identified land parcels, and non/sub-performing mortgage loans secured by land parcels.
* The selected general partner paid the RTC for its general partnership interest in the Land Fund. The winning bid for each Land Fund pool would determine the implied value of the pool, and the winning bidder, at closing, would pay to the RTC 25% of the implied value. (The land fund investors were given the option of contributing 25%, 30%, 35% or 40% of the equity for commensurate interest, but all chose to contribute 25% of the equity.)
* The Land Fund general partner could, at its discretion, transfer assets in Land Fund pools to special-purpose entities, and those entities could then borrow money collateralized by the asset to fund development. Furthermore, a third-party developer or financing source could acquire an equity interest in the special purpose entity in exchange for services or funding.
* The general partner was authorized to develop the land parcels on a long term basis, and had comprehensive authority concerning the operation of the Land Fund. Costs to improve, manage and liquidate the assets were borne by the Land Fund.
* Net cash flow from the Land Fund was distributable in proportion to the respective contributions of the general partner (25%) and RTC (75%). If and when the Land Fund partnership distributed to the RTC an amount equal to the RTC’s “capital investment” (i.e., 75% of the implied value of the Land Fund pool), from and after such point, net cash flow would be divided on a 50/50 basis.
Land Fund general partners were joint ventures between asset managers, developers and capital sources. There were three land fund programs, giving rise to 12 land fund partnerships for different land asset portfolios. These funds received 815 assets with a total book value of $2 billion and DIV of $614 million.
[edit] JDC Program
Under the JDC Program, the RTC established limited partnerships and selected private sector entities to be the general partner of each JDC Partnership. The JDC program was different from the MIF, N/S Series and Land Fund programs in that (i) the general partner paid only a nominal price for the assets and was selected on a “beauty-contest” basis, and (ii) the general partner (rather than the partnership itself) had to absorb most operating costs. The JDC Partnership structure contemplated the following:
* The RTC would convey to the limited partnership (the “JDC Partnership”) certain judgments, deficiency actions, and charged-off indebtedness (“JDCs”) and other claims which typically were unsecured and considered of questionable value. The assets were not identified in advance, and were transferred to the JDC Partnership in a series of conveyances over time.
* The general partner was selected purely on the basis of perceived competence. It made payments to the RTC in the amount of one basis point (0.01%) of the book value of the assets conveyed.
* The general partner exercised comprehensive control in managing and resolving the assets. Proceeds typically were split 50/50 with the RTC. Operating costs (except under special circumstances) were absorbed by the general partner, not the JDC partnership.
JDC general partners consisted of asset managers and collection firms. The JDC program was adopted by the FDIC and is still in existence.
The Resolution Trust Corporation was a United States Government-owned asset-management company charged with liquidating assets (primarily real estate-related assets, including mortgage loans) that had been assets of savings and loan associations ("S&Ls") declared insolvent by the Office of Thrift Supervision, as a consequence of the Savings and Loan crisis of the 1980s. It also took over the insurance functions of the former Federal Home Loan Bank Board. It was created by the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), adopted in 1989. In 1995, its duties were transferred to the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation.
Between 1989 and mid-1995, the Resolution Trust Corporation closed or otherwise resolved 747 thrifts with total assets of $394 billion.
The Wolf, or the Resolution Trust Corporation (“RTC”), pioneered the use of so-called “equity partnerships” to help liquidate real estate and financial assets which it inherited from insolvent thrift institutions. While a number of different structures were used, all of the equity partnerships involved a private sector partner acquiring a partial interest in a pool of assets, controlling the management and sale of the assets in the pool, and making distributions to the RTC reflective of the RTC’s retained interest.
The RTC used equity partnerships to achieve a superior execution through maintaining upside participation in the portfolios. Prior to introducing the equity partnership program, the RTC had engaged in “bulk sales” of asset portfolios. The pricing on certain types of assets often proved to be disappointing because the purchasers discounted heavily for “unknowns” regarding the assets, and to reflect uncertainty at the time regarding the real estate market. By retaining an interest in asset portfolios, the RTC was able to participate in the extremely strong returns being realized by portfolio investors. Additionally, the equity partnerships enabled the RTC to benefit by the management and liquidation efforts of their private sector partners, and the structure helped assure an alignment of incentives superior to that which typically exists in a principal/contractor relationship.
The following is a summary description of RTC Equity Partnership Programs:
Multiple Investor Fund (“MIF”)
Under the MIF Program, the RTC established limited partnerships (each known as a “Multiple Investor Fund” or “MIF”) and selected private sector entities to be the general partner of each MIF. The MIF structure contemplated the following:
* The RTC conveyed to the MIF a portfolio of assets (principally commercial non- and sub-performing mortgage loans) which were described generically, but which had not been identified at the time the MIF general partners were selected. The assets were delivered in separate pools over time, and there were separate closings for each pool.
* The selected general partner paid the RTC for its general partnership interest in the assets. The price was determined by the so-called Derived Investment Value (“DIV”) of the assets (an estimate of the liquidation value of assets based on a valuation formula developed by the RTC), multiplied by a percentage of DIV based on the bid of the selected general partner. The general partner paid its equity share relating to each pool at the closing on the pool. The RTC retained a limited partnership interest in the MIF.
* The MIF asset portfolio was leveraged by RTC-provided seller financing. The RTC offered up to 75% seller financing, and one element of the bid was the amount of seller financing required by the bidder. Because of the leverage, the amount required to be paid by the MIF general partner on account of its interest was less than it would have been if the MIF had been an all-equity transaction.
* The MIF general partner, on behalf of the MIF, engaged an asset manager (one or more entities of the MIF general partner team) to manage and liquidate the asset pool. The asset manager was paid a servicing fee out of MIF funds, and used MIF funds to improve, manage and market the assets. The asset manager was responsible for day-to-day management of the MIF, but the general partner controlled major budgetary and liquidation decisions. The RTC had no management role.
* After repayment of the RTC seller financing debt, net cash flow was divided between the RTC (as limited partner) and general partner in accordance with their respective percentage interests (the general partner had at least a 50% interest).
Each of the MIF general partners was a joint venture among an asset manager with experience in managing and liquidating distressed real estate assets, and a capital source. There were two MIF transactions involving over 1000 loans having an aggregate book value of slightly over $2 billion and an aggregate DIV of $982 million .
[edit] N-Series and S-Series Mortgage Trusts
The “N-Series” and “S-Series” programs were successor programs to the MIF program. The N-Series and S-Series structure was different from that of the MIF in that (i) the subject assets were pre-identified by the RTC—under the MIF, the specific assets had not been identified in advance of the bidding—and (ii) the interests in the asset portfolios were competitively bid on by pre-qualified investors and the highest bid won (the RTC’s process for selecting MIF general partners, in contrast, took into account non-price factors).
[edit] N-Series
The N-Series structure contemplated the following:
* The RTC would convey to a Delaware business trust (the “Trust”) a pre-identified portfolio of assets, mostly commercial non- and sub- performing mortgage loans. (The “N” of “N-Series” stood for “nonperforming.”)
* Pre-qualified investor teams competitively bid for a 49% interest in the Trust, and the equity for this interest was payable to the RTC by the winning bidder when it closed on the acquisition of its interest.
* The Trust, at its creation, issued a “Class A Certificate” to the private sector investor evidencing its ownership interest in the Trust, and a “Class B Certificate” to the RTC evidencing its ownership interest. The Class A Certificate holder exercised those management powers typically associated with a general partner (that is, it controlled the operation of the Trust), and the RTC, as the Class B Certificate holder, had a passive interest typical of a limited partner.
* The Class A Certificate holder, on behalf of the Trust, engaged an asset manager (sometimes referred to as the “servicer”) to manage and liquidate the asset pool. The servicer was paid a servicing fee out of Trust funds. Typically, the servicer was a joint venture partner in the Class A Certificate Holder. The servicer used Trust funds to improve, maintain and liquidate Trust assets, and had day-to-day management control. The Class A Certificate Holder exercised control over major budgetary and disposition decisions.
* The Trust, through a pre-determined placement agent designated by the RTC, leveraged its asset portfolio by issuing commercial mortgage backed securities (“CMBS”), the proceeds of which went to the RTC. Because of the leverage, the amount required to be paid by the Class A Certificate Holder on account of its interest was less than it would have been if the N-Trust had been an all-equity transaction.
* Net cash flow was first used to repay the CMBS debt, after which it was divided between the RTC and Class A Certificate Holder at their respective equity percentages (51% RTC, 49% Class A).
Each of the N-Series bid teams was a joint venture between an asset manager with experience in managing and liquidating distressed real estate assets, and a capital source. There were a total of six N-Series partnership transactions in which the RTC placed 2,600 loans with an approximate book value of $2.8 billion and a DIV of $1.3 billion. A total of $975 million of CMBS bonds were issued for the six N-Series transaction, representing 60% of the value of N-Series trust assets as determined by the competitive bid process (the value of the assets implied by the investor bids was substantially greater than the DIV values calculated by the RTC). While the original bond maturity was 10 years from the transaction, the average bond was retired in 21 months from the transaction date, and all bonds were retired within 28 months.
[edit] S-Series
The S-Series program was similar to the N-Series program, and contained the same profile of assets as the N-Series transactions. The S-Series was designed to appeal to investors who might lack the resources necessary to undertake an N-Series transaction, and differed from the N-Series program in the following respects:
* The S-Series portfolios were smaller. The “S” of “S-Series” stands for “small” -- the average S-Series portfolio had a book value of $113 million and a DIV of $52 million, whereas the N-Series average portfolio had a book value of $464 million and a DIV of $220 million. As a consequence, it required an equity investment of $4 to $9 million for investor to undertake an S-Series transaction, versus $30 - $70 million for an N-Series transaction.
* The S-Series portfolio was not leveraged through the issuance of CMBS, although it was leveraged through a 60% RTC purchase money financing. It should be noted that in the N-Series program where CMBS were issued, the servicers/asset managers had to be qualified by debt rating agencies (e.g., Standard and Poors) as a condition to the agencies’ giving a rating to the CMBS. This was not necessary in the S-Series program
* Assets in the S-Series portfolios were grouped geographically, so as to reduce the investors’ due diligence costs.
There were nine S-Series transactions, into which the RTC contributed more than 1,100 loans having a total book value of approximately $1 billion and a DIV of $466 million. The RTC purchase money loans, aggregating $284 million for the nine S-transactions, were all paid off within 22 months of the respective transaction closing dates (on average, the purchase money loans were retired in 16 months).
[edit] Land Fund
The RTC Land fund program was created to enable the RTC to share in the profit from longer term recovery and development of land. Under the Land Fund Program, the RTC selected private sector entities to be the general partners of 30-year term limited partnerships known as “Land Funds.” The Land Fund program was different from the MIF and N/S-Series programs in that the Land Fund general partner had the authority to engage in long-term development, whereas the MIFs and N/S-Series Trusts were focused on asset liquidation. The Land Fund structure contemplated the following:
* The RTC conveyed to the Land Fund certain pre-identified land parcels, and non/sub-performing mortgage loans secured by land parcels.
* The selected general partner paid the RTC for its general partnership interest in the Land Fund. The winning bid for each Land Fund pool would determine the implied value of the pool, and the winning bidder, at closing, would pay to the RTC 25% of the implied value. (The land fund investors were given the option of contributing 25%, 30%, 35% or 40% of the equity for commensurate interest, but all chose to contribute 25% of the equity.)
* The Land Fund general partner could, at its discretion, transfer assets in Land Fund pools to special-purpose entities, and those entities could then borrow money collateralized by the asset to fund development. Furthermore, a third-party developer or financing source could acquire an equity interest in the special purpose entity in exchange for services or funding.
* The general partner was authorized to develop the land parcels on a long term basis, and had comprehensive authority concerning the operation of the Land Fund. Costs to improve, manage and liquidate the assets were borne by the Land Fund.
* Net cash flow from the Land Fund was distributable in proportion to the respective contributions of the general partner (25%) and RTC (75%). If and when the Land Fund partnership distributed to the RTC an amount equal to the RTC’s “capital investment” (i.e., 75% of the implied value of the Land Fund pool), from and after such point, net cash flow would be divided on a 50/50 basis.
Land Fund general partners were joint ventures between asset managers, developers and capital sources. There were three land fund programs, giving rise to 12 land fund partnerships for different land asset portfolios. These funds received 815 assets with a total book value of $2 billion and DIV of $614 million.
[edit] JDC Program
Under the JDC Program, the RTC established limited partnerships and selected private sector entities to be the general partner of each JDC Partnership. The JDC program was different from the MIF, N/S Series and Land Fund programs in that (i) the general partner paid only a nominal price for the assets and was selected on a “beauty-contest” basis, and (ii) the general partner (rather than the partnership itself) had to absorb most operating costs. The JDC Partnership structure contemplated the following:
* The RTC would convey to the limited partnership (the “JDC Partnership”) certain judgments, deficiency actions, and charged-off indebtedness (“JDCs”) and other claims which typically were unsecured and considered of questionable value. The assets were not identified in advance, and were transferred to the JDC Partnership in a series of conveyances over time.
* The general partner was selected purely on the basis of perceived competence. It made payments to the RTC in the amount of one basis point (0.01%) of the book value of the assets conveyed.
* The general partner exercised comprehensive control in managing and resolving the assets. Proceeds typically were split 50/50 with the RTC. Operating costs (except under special circumstances) were absorbed by the general partner, not the JDC partnership.
JDC general partners consisted of asset managers and collection firms. The JDC program was adopted by the FDIC and is still in existence.
Wednesday, September 17, 2008
We told ya the stock market was gonna crash.....
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We weren’t fooled…
Well, it’s nice to be right when most of the market is wrong. After yesterdays rally to end the day on AIG news, many were (again) calling for a bottom in this market, and looking for a rally to play long. But we didn’t buy it, staying with a very short heavy portfolio, despite the plethora of pretty charts and irrational exuberance out there. We were rewarded today.
The market had one of it’s worst days in history, and it wasn’t even the worst day of the week. This is really turning into a historic event, and I must say, it is nice to be on the right side of it and making money while most of the people who were calling for a market bottom are wondering what happened. Thank you for sharing it with me. I mentioned the other day that I felt like we were witnessing something historic, and I still think we are, and things are finally starting to show signs of a capitulation, which anyone who has been following us for awhile will know we have been calling for since January, stating that until capitulation came, we were in for a choppy, illogical market with a bearish bias, a slow bleed if you will. I was called a sadist in the chat room today, and that made me chuckle. I am the furthest thing from a sadist, and am probably cheering for a bull market louder and harder than anyone else out there, but I am a realist. We make money for anticipating, not for cheering, and we anticipated what this market was going to do and did very well today as a result. And I am actually happier about the fact that we may be seeing that capitulation that we have been waiting on for so long, and perhaps we can start to anticipate, rather than just cheer for, a bull run in this market. Let’s take a look at some charts:
The Dow lost another 450 points on the day, and is now below almost every valid point of support, including the 2006 double bottom that has been mentioned as a downside target multiple times. The next real support we can see is at 10,000, and to be honest, the sooner we could get there, the better and sooner we can probably get this sell off over with and start in on a nice bull run.
On the Nasdaq we haven’t violated that mid 2006 low yet, and actually have a double bottom with a 2005 low, so that will serve as our next downside target, right around 2010.
The S & P lost close to 5% again on Wednesday, and from a support standpoint, looks like we have a long way to go, with the next real price support level coming in at around 1080 or so. That’s not to say we won’t bounce before that, but things do seem due to get worse before they get better, and that could be the point where they start to get better.
The VIX is finally starting to act the way we would expect it to, spiking up near it’s late 2007 and early 2008 highs. As mentioned many a time here, we are looking for it to get over 40, even of only for a brief period of time, before we really consider a sell off to be the capitulation selling characteristic of a solid oversold bull run.
Gold went on an absolute tear today, gaining over 10%, while a number of gold stocks posted gains of twice that or better. Actually, there was a watch list of gold stocks posted at around 10 am EST in the chatroom, none of them gained less than 10%, with a few over 30%. This is about as bullish a chart as you’ll find on a day like today, and as you might expect, there are quite a few gold stocks in the long watch list tonight.
Last night we called for a bounce in oil, and we got that too. We’re looking for a retest of $100 a barrel on crude in the next day or two, as this oversold bounce looks like it has some legs.
As mentioned our portfolio stocks had a great day, with all of our shorts posting nice gains, and one of our two longs fighting the tape and posting a very impressive one day gain as well. The rest of the week promises to be very volatile, with bailout news, investors digesting all this selling in the market, and options expiration on Friday, just to throw another wrench into the mix. As such we are holding off on any new end of day portfolio stocks in favor of intraday plays, and to that end there are a number of nice setups listed in the watch list. We are also locking in profits almost across the board, as there is a good chance of a huge sell off followed by a massive short covering rally tomorrow, so we are going to make sure we are positioned to profit no matter what. It should be another interesting day tomorrow, and we will continue to do our best to keep you on the right side of this historical market. Have a great evening, happy trading!
Quote of the Day
"There is no nonsense so gross that society will not, at some time, make a doctrine of it and defend it with every weapon of communal stupidity."
Robertson Davies
We weren’t fooled…
Well, it’s nice to be right when most of the market is wrong. After yesterdays rally to end the day on AIG news, many were (again) calling for a bottom in this market, and looking for a rally to play long. But we didn’t buy it, staying with a very short heavy portfolio, despite the plethora of pretty charts and irrational exuberance out there. We were rewarded today.
The market had one of it’s worst days in history, and it wasn’t even the worst day of the week. This is really turning into a historic event, and I must say, it is nice to be on the right side of it and making money while most of the people who were calling for a market bottom are wondering what happened. Thank you for sharing it with me. I mentioned the other day that I felt like we were witnessing something historic, and I still think we are, and things are finally starting to show signs of a capitulation, which anyone who has been following us for awhile will know we have been calling for since January, stating that until capitulation came, we were in for a choppy, illogical market with a bearish bias, a slow bleed if you will. I was called a sadist in the chat room today, and that made me chuckle. I am the furthest thing from a sadist, and am probably cheering for a bull market louder and harder than anyone else out there, but I am a realist. We make money for anticipating, not for cheering, and we anticipated what this market was going to do and did very well today as a result. And I am actually happier about the fact that we may be seeing that capitulation that we have been waiting on for so long, and perhaps we can start to anticipate, rather than just cheer for, a bull run in this market. Let’s take a look at some charts:
The Dow lost another 450 points on the day, and is now below almost every valid point of support, including the 2006 double bottom that has been mentioned as a downside target multiple times. The next real support we can see is at 10,000, and to be honest, the sooner we could get there, the better and sooner we can probably get this sell off over with and start in on a nice bull run.
On the Nasdaq we haven’t violated that mid 2006 low yet, and actually have a double bottom with a 2005 low, so that will serve as our next downside target, right around 2010.
The S & P lost close to 5% again on Wednesday, and from a support standpoint, looks like we have a long way to go, with the next real price support level coming in at around 1080 or so. That’s not to say we won’t bounce before that, but things do seem due to get worse before they get better, and that could be the point where they start to get better.
The VIX is finally starting to act the way we would expect it to, spiking up near it’s late 2007 and early 2008 highs. As mentioned many a time here, we are looking for it to get over 40, even of only for a brief period of time, before we really consider a sell off to be the capitulation selling characteristic of a solid oversold bull run.
Gold went on an absolute tear today, gaining over 10%, while a number of gold stocks posted gains of twice that or better. Actually, there was a watch list of gold stocks posted at around 10 am EST in the chatroom, none of them gained less than 10%, with a few over 30%. This is about as bullish a chart as you’ll find on a day like today, and as you might expect, there are quite a few gold stocks in the long watch list tonight.
Last night we called for a bounce in oil, and we got that too. We’re looking for a retest of $100 a barrel on crude in the next day or two, as this oversold bounce looks like it has some legs.
As mentioned our portfolio stocks had a great day, with all of our shorts posting nice gains, and one of our two longs fighting the tape and posting a very impressive one day gain as well. The rest of the week promises to be very volatile, with bailout news, investors digesting all this selling in the market, and options expiration on Friday, just to throw another wrench into the mix. As such we are holding off on any new end of day portfolio stocks in favor of intraday plays, and to that end there are a number of nice setups listed in the watch list. We are also locking in profits almost across the board, as there is a good chance of a huge sell off followed by a massive short covering rally tomorrow, so we are going to make sure we are positioned to profit no matter what. It should be another interesting day tomorrow, and we will continue to do our best to keep you on the right side of this historical market. Have a great evening, happy trading!
Quote of the Day
"There is no nonsense so gross that society will not, at some time, make a doctrine of it and defend it with every weapon of communal stupidity."
Robertson Davies
Monday, September 15, 2008
Stock Market Crash! How To Make Money In This Crazy Stock Market...
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In one of the most interesting days in the history of the stock market, the Dow Jones saw it’s largest one day drop since the terrorist attacks of September 11, 2001, and the sixth largest drop in its history, percentage-wise. The sell off was fueled by Lehman Brothers declaring bankruptcy after 158 long years in business, Bank of America acquiring Merrill Lynch, another troubled investment firm, and AIG, the nations largest insurance company, dropping over 60% on the day, and almost 80% in the last 5 trading days, due to growing concerns about their ability to stay in business.
All the market averages are at or damn close to their 2008 lows, and with the Fed rate cut (or no cut) decision coming tomorrow, things should only get more interesting and more volatile as this whole situation unravels. Grab some popcorn because this is going to be one heck of a show. I get the feeling that one day I’ll be telling my grandkids about living through this, if we’re still around by then. Let’s take a look at a few charts.
The Dow is now at it’s lowest closing low of the year after dropping just over 500 points today, on big volume. We still have the July intraday lows that may provide a little downside support, and below that our target will be the 10,600 area from the 2006 double bottom. We may see an oversold bounce tomorrow, particularly if big money likes the fed decision, and on any upside moves our resistance levels will be 11,100, then 11,175, then 11,285.
The S & P is at its lowest levels of the year, on a closing or an intraday basis. We have to go all the way back to 2005 to find any kind of a hint of price support, which looks to be coming in at 1170ish, then again at around 1135.
The Nasdaq has yet to violate its 2008 lows, so we have a little price support close by, which may or may not hold with all the messes out there. The summertime lows are 2165, then the January lows are 2155, but we are looking for an eventual break down below that level.
As one might expect, the financial ETF, XLF, took a tumble today, although it still has quite a ways to go before hitting it’s July lows. We are expecting it to get there at some point, probably sooner than later.
As one might also expect, the VIX spiked up above 30 today. This could mean that capitulation may finally be upon us, and if we get that kind of panic selling it could mean we could get all this uncertainty over with and finally start to hammer out a bottom to work with.
Gold gained a fair amount today, possibly on speculation of a rate cut that would further de-value the dollar. But gold stocks on the whole didn’t rally too much, which could be an indication that people just don’t want to buy stocks at this point, making yet another strong argument that we may finally be getting closer to a capitulation.
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Our portfolio stocks had a very nice day. We came into the day 2:1 short to long, and added another short this morning. As to be expected, all our shorts did very well, and of our two longs, only one looks in danger of getting stopped out for a loss, ININ. We like the way our portfolio is positioned here, and are going to see how this all plays out before adding new stocks to trigger. We are going to lock in some profits on some of these short positions, just in case of a big bounce tomorrow on some fed cut or other news related event, and have put a number of nice setups in the watch lists for intraday trading purposes tomorrow. As mentioned over the weekend, this is not the market to buy something and go golfing for the day, things must be watched carefully, as while this can be a very rewarding market for the nimble and smart, it is unforgiving for the complacent. That said, let’s make some money!
And if you’ll allow me a rant before I go:
I have touched on this in the chat room a number of times recently, but it makes me utterly sick to listen to these “experts” and commentators on cnbc that go on TV and pimp whatever stock, commodity or sector that suits their interest at that moment in time, with blatant disregard for the fact that people actually do trust what they say and put their retirement money, or their children’s college money, or whatever, on what they say. Now I am without a doubt an advocate for doing your own research and taking responsibility for your own action, but being in the line of work that I am in, it really upsets me when I make a bad call and members get hurt on it. It does happen, it’s a part of the game, and while we always do our best to put ourselves in the least risky situations possible, in essence every stock trade has an element of chance to it, and everyone has a trade go against them from time to time. However we try our damndest to own up to a mistake, keep on the course, and move on to find the next winning trade. To be hinest, I hate making a losing pick for The Green Room more than I hate losing my own money, and trust me, I hate losing my own money. Watching this “oh the bottom is in” (which I must have heard a few dozen times last week), followed by the fear mongering, chicken little “the sky is falling” bs that they throw out there to try and get ratings, without even the slightest acknowledgement of a bad call that might have caused some poor retired couple to have to apply for jobs at the local Wal Mart instead of relaxing on a beach sipping a frozen drink makes me absolutely sick. Shame on you CNBC. That’s all for my rant, thanks for listening.
Quote of the Day
I've posted this quote once before, but I thought it appropriate after a day like today.
"The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger - but recognize the opportunity. "
John F. Kennedy (1917 - 1963)
Saturday, August 23, 2008
Stock Market Commentary and Investment Analysis 8/22/08
Before we get into the stock market commentary for the week, I'd like to share an absolutely hilarious stock market cartoon, with Beatles lyrics rewritten to capture the frustrations of many stock traders and investors in this tough market. Stop by our website, GreenRoomStocks.com, and let's all help each other's account from weeping gently.. enjoy! :)
Stock Market Commentary and Investment Analysis
Wall Street capped a volatile week with sharp gains Friday as oil prices tumbled and after Federal Reserve Chairman Ben Bernanke said inflation pressures are likely to moderate, and more rumors of Lehman Bros, this time that the company may be sold, and that seemed to resonate well with traders. The Dow rose 197.85, or 1.73 percent, to 11,628.06, near its highs of the session.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 14.48, or 1.13 percent, to 1,292.20, and the Nasdaq composite index rose 34.33, or 1.44 percent, to 2,414.71. However volume was frighteningly low across the board, part of which definitely has to be attributed to it being the last couple of weeks of summer, but still the anorexic volume of Fridays big move makes it pretty hard to buy into at this point, and with next week being the last week before Labor Day, it could get more volatile and potentially on even less volume.
The run-up Friday left stocks with mostly modest losses for the week that again saw a series of triple-digit moves in the Dow. The Dow is down 0.27 percent, the S&P 500 is off 0.46 percent and the technology-heavy Nasdaq is down 1.54 percent. The Russell 2000 index of smaller companies rose 12.35, or 1.70 percent, to 737.60. The Standard & Poor's 500 index finished down 6.00, or 0.46 percent, at 1,292.20. The Nasdaq composite index ended the week down 37.81, or 1.54 percent, at 2,414.71. The Russell 2000 index finished the week down 15.77, or 2.09 percent, at 737.60. Let’s take a look at a few charts:
As mentioned, the Dow made a 200 point move to the upside on Friday, bringing us right back to that all important line in the sand of the January lows and July double top. With volume as light as it has been, it is hard to imagine things going much further from here, and as we’ve seen time and time again anything is possible, so we are going to add one more long trade to the mix just in case. A weekly chart of the Dow is also attached, it gives a good gauge of the declining volume that has befallen the market here. Hopefully after labor day we see an end to this trend.
The Nasdaq gapped up Friday, and also put up a strong showing, gaining almost 1.5% on the day. However it was one of the lowest volume days of the year, and we have a convergence of the 10 and 200 day moving averages just above that have proven support and resistance points in the past, and again with volume as low as it’s been, it is hard to imagine pushing through without some more volume pouring in.
The S & P is above its January highs, but has a trendline that was defining the short term uptrend now laying just above. Also, you guessed it, volume was pathetically light on Friday.
Oil took another beating on Friday. Honestly, we thought we could see a slight pullback/consolidation on Friday, but the size of the drop was a bit surprising from where we were sitting. From the looks of things we could very well see a retest of last weeks lows, around $112 a barrel, but it is hard to imagine it going much lower here.
Gold also pulled back a little, but not nearly in the scope of oil. We also have some solid support coming in around $805, so look for a potential bounce in that area.
Financials rallied again, mostly behind the Lehman news, and some relatively favorable comments on Fannie and Freddie by Warren Buffet on Friday. However none of them held the days highs, and we are still not convinced that this bounce has much left to it. A heavy volume up day on Monday would change that thinking, but that is where we see it as of now.
In terms of our portfolio stocks Friday was mixed, as we have been playing pretty hedged, our longs did pretty well, and our shorts didn’t. However the shorts mostly underperformed the market, and still look pretty bearish on the daily and longer term timeframes. There are also a number of nice looking setups both long and short provided by the weeks volatility, and we have some pretty long watch lists, especially to the long side, for Monday. We are going to respect the bounce a little and add one new long play to the TBT list just in case it does have some momentum behind it, and will be in chat for the opening bell on Monday for the play by play. Happy trading!
Stock Market Commentary and Investment Analysis
Wall Street capped a volatile week with sharp gains Friday as oil prices tumbled and after Federal Reserve Chairman Ben Bernanke said inflation pressures are likely to moderate, and more rumors of Lehman Bros, this time that the company may be sold, and that seemed to resonate well with traders. The Dow rose 197.85, or 1.73 percent, to 11,628.06, near its highs of the session.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 14.48, or 1.13 percent, to 1,292.20, and the Nasdaq composite index rose 34.33, or 1.44 percent, to 2,414.71. However volume was frighteningly low across the board, part of which definitely has to be attributed to it being the last couple of weeks of summer, but still the anorexic volume of Fridays big move makes it pretty hard to buy into at this point, and with next week being the last week before Labor Day, it could get more volatile and potentially on even less volume.
The run-up Friday left stocks with mostly modest losses for the week that again saw a series of triple-digit moves in the Dow. The Dow is down 0.27 percent, the S&P 500 is off 0.46 percent and the technology-heavy Nasdaq is down 1.54 percent. The Russell 2000 index of smaller companies rose 12.35, or 1.70 percent, to 737.60. The Standard & Poor's 500 index finished down 6.00, or 0.46 percent, at 1,292.20. The Nasdaq composite index ended the week down 37.81, or 1.54 percent, at 2,414.71. The Russell 2000 index finished the week down 15.77, or 2.09 percent, at 737.60. Let’s take a look at a few charts:
As mentioned, the Dow made a 200 point move to the upside on Friday, bringing us right back to that all important line in the sand of the January lows and July double top. With volume as light as it has been, it is hard to imagine things going much further from here, and as we’ve seen time and time again anything is possible, so we are going to add one more long trade to the mix just in case. A weekly chart of the Dow is also attached, it gives a good gauge of the declining volume that has befallen the market here. Hopefully after labor day we see an end to this trend.
The Nasdaq gapped up Friday, and also put up a strong showing, gaining almost 1.5% on the day. However it was one of the lowest volume days of the year, and we have a convergence of the 10 and 200 day moving averages just above that have proven support and resistance points in the past, and again with volume as low as it’s been, it is hard to imagine pushing through without some more volume pouring in.
The S & P is above its January highs, but has a trendline that was defining the short term uptrend now laying just above. Also, you guessed it, volume was pathetically light on Friday.
Oil took another beating on Friday. Honestly, we thought we could see a slight pullback/consolidation on Friday, but the size of the drop was a bit surprising from where we were sitting. From the looks of things we could very well see a retest of last weeks lows, around $112 a barrel, but it is hard to imagine it going much lower here.
Gold also pulled back a little, but not nearly in the scope of oil. We also have some solid support coming in around $805, so look for a potential bounce in that area.
Financials rallied again, mostly behind the Lehman news, and some relatively favorable comments on Fannie and Freddie by Warren Buffet on Friday. However none of them held the days highs, and we are still not convinced that this bounce has much left to it. A heavy volume up day on Monday would change that thinking, but that is where we see it as of now.
In terms of our portfolio stocks Friday was mixed, as we have been playing pretty hedged, our longs did pretty well, and our shorts didn’t. However the shorts mostly underperformed the market, and still look pretty bearish on the daily and longer term timeframes. There are also a number of nice looking setups both long and short provided by the weeks volatility, and we have some pretty long watch lists, especially to the long side, for Monday. We are going to respect the bounce a little and add one new long play to the TBT list just in case it does have some momentum behind it, and will be in chat for the opening bell on Monday for the play by play. Happy trading!
Wednesday, August 20, 2008
New Stock Investing Tips and Stock Market Commentary!
The market actually looked more bullish that we had envisioned it, but not bullish enough for us to change our thinking on where we are headed in the days/weeks to come. We started the day out with more selling, helped along by terrible showings from mortgage giants Fannie & Freddie, and although they both ended the day with 20%+ losses, the financial etf (XLF) ended the day positive, bouncing off the double bottom we mentioned yesterday. So things are once again looking pretty mixed up, and we are preparing ourselves for more chop, keeping things even long to short, which has been working out incredibly well for us over the past few weeks now, and today was a great day with us cashing out of both a long and a short position, both with gains of over 20% in less than a week. Let's take a look at a few charts:
A few stocks to watch and some great closed trades that paid for my vacation!
After a great vacation I'm back, and will be putting out the best technical analysis videos on the web out again. We will be putting even more out on the website, along with great stock picks and live chat, take a free two week test drive today!
Monday, July 28, 2008
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Sunday, July 27, 2008
Free Stock Market Analysis Video - Stock Market Video Blog
After a week that started with financial stocks rallying and commodities such as oil and gold finally pulling back, it looks like we may be going back to normal here - see our site, http"//www.greenroomstocks.com for more free stock market analysis!
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Put another stock market roller coaster ride of a week in the books. What started as a potentially strong week for stocks, particularly the struggling financial sector on a decent Bank of America report, and government bailout news for mortgage giants Fannie and Freddie. A sharp pullback in the previously gravity free commodities certainly didn’t hurt anything either. But around mid-day Wednesday that all changed. We saw a peak and rollover of the financials and with it went the market.
Friday, and I will preface this with the fact that Fridays of late have been pretty horrific – I forget the exact number but it was something to the effect of since the bear market has started we have lost around 19% on the S & P index, with 14% of the losses taking place on Fridays. So that said, although Fridays bounce back was low volume and otherwise pretty lackluster, it could have been much worse given the condition of the market on Thursday.
From where we’re sitting here it appears the market, and financial stock bounce that began last week and carried into the early part of this week, is over. Although oil and gold did not have particularly strong days to close out the week, other commodities such as coal did, and on all the technicals do suggest that we’re nearing the end of this pullback, at least for the time being. (Keep in mind the coming election and the fact that often times oil will go down into election season, which may trump the technical signals here.)
That said, two of the four major indexes that we track held pretty major support levels, so the early part of the week could very well see some chop before a full resumption of the downtrend occurs. The Dow is still holding that trendline that I’ve been yapping about for about a week now, as well as the 20 day simple moving average, while the Nasdaq composite is still holding onto the 10 day exponential. All share a mixed signal of being short term overbought but long term oversold, adding to our theory that we could see a bit of tug of war before the trend is resumed.
Let’s take a look at a few of these commodities and market indexes to try and get an overview of where we’re at:
The Dow on a daily chart is holding the trendline and the 20 as mentioned. We failed to break out of the January lows that were violated in late June and now acting as resistance.
We have stochastics rolling down from a short term overbought condition caused by last weeks’ rally. Friday saw a slight gain, but it was on very low volume, even for a summer Friday.
Looking at the dow again, this time on a weekly chart, we can see more of the same and a little different. Notice the inverse effect of the stochastics, crossing up from an oversold condition caused by the big drop since late May, at the 50 week simple moving average. The 2008 lows that were just mentioned as resistance are also converging with the 200 week simple moving average, making that area that much more powerful in terms of resistance.
The S & P by comparison, does not look as good as the Dow. Although we had actually broken out from the prior 2008 lows for a couple of days, Thursday sent it shooting down through and below, and Friday it failed to get above any support levels, so we are now looking at lots of resistance overhead. MACD and stochastics are also both pointing the way down on this chart.
The Nasdaq looks a little better than the other market averages, but by no means bullish. Volume Friday was again very low, we are still overbought on the daily chart, but are holding most support here.
The gold index bounced off its 100 day simple moving average on Wednesday and after a few retests looks like we have some solid support at the 917 level. We do also appear to have some resistance in the 935-940 range.
Oil has now pulled back to the same 100 ay simple moving average where gold found support. Stochastics on all time frames show a now oversold condition that may attract some new speculators who were afraid to buy in when it was so extended. Again, keep n mind that it is coming into election season.
We had a very nice week in terms of our portfolio stocks, watchlist stocks, and chatroom calls. We are down to only a few open positions after taking profits in a couple of longs and one short, also stopping out of a short at an even trade. Not bad for such a choppy, mixed up market. The volatility, while many continue to whine about it, continues to give us more than our fair share of great intraday and short term swing trades. Airlines, financials, and commodity plays have been trading in such big ranges that those able and willing to get on for the ride can and have made some phenomenal trades.
As mentioned this is most definitely a stock pickers market, which suits our fancy just fine. We are adding two new short plays to trigger and one long for Monday in the end of day portfolios, and have a few dozen of our favorite trading setups listed in the quick pix watchlists above. Enjoy the ride, and happy trading!
"Once we believe in ourselves, we can risk curiosity, wonder, spontaneous delight, or any experience that reveals the human spirit."
E E Cummings (1894 - 1962)
Wednesday, July 23, 2008
Stock Market Investment Analysis - Stay On The Right Side Of The Trade!
Market Outlook
A dog day of summer...
From yesterday's market outlook:
“We do have that 11,700 ceiling just above on the dow, and volume is still fairly small, so tomorrow could see a morning pop followed by an afternoon selloff.”
Wednesday was pretty much what we were expecting – a low volume drift upwards with very little momentum or conviction in either direction. Actually a pretty characteristic mid-summer day for a change.
In terms of the market averages all had positive days, but all have the look of a ball that’s thrown in the air that is starting to run out of momentum and start it’s descent back to earth. The Dow came to within 2.5 points (On 11,700) of our upside target, before turning tail and heading back down. The Russell and Nasdaq composite averages also came to within less than a percent of major moving average resistance before turning back down.
The VIX continued to drop, bouncing off support right before our downside target mentioned in yesterdays outlook and video. It has found support at this level about 6 times in the past two months, and each time has gone up for the next few days following the retest, so that would certainly be a logical scenario.
Financials are looking toppy once again, although there were still a number of very strong smaller regional financial banks. This may be just short covering, but the charts rarely lie and they do look strong on a few.
It was a very nice day for the majority of our portfolio stocks. The only dull spot was a loss on our BIG short trade, but our gain on SIL, which was stopped out with our raised stop in the last few minutes of trading, more than made up for it. A few of the newly triggered stocks look very good here, we are playing it safe and raising stops wherever applicable, as this is just not the market to be taking big chances in. WE are going to add one new short to the mix tonight, and will see how the market acts tomorrow.
Thursday should be telling – and could go a number of different ways. It is completely feasible to see another low volume, low conviction day where nothing moves much. As we have seen recently a major selloff is can occur at just about any time, and there are certainly no shortage of reasons for it. Now we are in overbought territory, and in a bear market that’s about all you need. That said if we can break out above the 2008 January lows on the Dow, we could see a big rally.
Whatever the case there are a number of very pretty charts out there both to the long and short side, although more so on the long side. This is still very much a stock pickers market, and we have been picking very well lately. Last nights watchlists contained 6 stocks that gained 5% or better in the long watchlist (2 of them over 12%), and 4 that lost over 5% on the short watchlist. There are again a number of nice setups that could produce some big winners tomorrow, and we will be in the chatroom for the play by play, which should be interesting.
Have a great evening.
Quote of the Day
"The foolish man seeks happiness in the distance, the wise grows it under his feet."
James Oppenheim
A dog day of summer...
From yesterday's market outlook:
“We do have that 11,700 ceiling just above on the dow, and volume is still fairly small, so tomorrow could see a morning pop followed by an afternoon selloff.”
Wednesday was pretty much what we were expecting – a low volume drift upwards with very little momentum or conviction in either direction. Actually a pretty characteristic mid-summer day for a change.
In terms of the market averages all had positive days, but all have the look of a ball that’s thrown in the air that is starting to run out of momentum and start it’s descent back to earth. The Dow came to within 2.5 points (On 11,700) of our upside target, before turning tail and heading back down. The Russell and Nasdaq composite averages also came to within less than a percent of major moving average resistance before turning back down.
The VIX continued to drop, bouncing off support right before our downside target mentioned in yesterdays outlook and video. It has found support at this level about 6 times in the past two months, and each time has gone up for the next few days following the retest, so that would certainly be a logical scenario.
Financials are looking toppy once again, although there were still a number of very strong smaller regional financial banks. This may be just short covering, but the charts rarely lie and they do look strong on a few.
It was a very nice day for the majority of our portfolio stocks. The only dull spot was a loss on our BIG short trade, but our gain on SIL, which was stopped out with our raised stop in the last few minutes of trading, more than made up for it. A few of the newly triggered stocks look very good here, we are playing it safe and raising stops wherever applicable, as this is just not the market to be taking big chances in. WE are going to add one new short to the mix tonight, and will see how the market acts tomorrow.
Thursday should be telling – and could go a number of different ways. It is completely feasible to see another low volume, low conviction day where nothing moves much. As we have seen recently a major selloff is can occur at just about any time, and there are certainly no shortage of reasons for it. Now we are in overbought territory, and in a bear market that’s about all you need. That said if we can break out above the 2008 January lows on the Dow, we could see a big rally.
Whatever the case there are a number of very pretty charts out there both to the long and short side, although more so on the long side. This is still very much a stock pickers market, and we have been picking very well lately. Last nights watchlists contained 6 stocks that gained 5% or better in the long watchlist (2 of them over 12%), and 4 that lost over 5% on the short watchlist. There are again a number of nice setups that could produce some big winners tomorrow, and we will be in the chatroom for the play by play, which should be interesting.
Have a great evening.
Quote of the Day
"The foolish man seeks happiness in the distance, the wise grows it under his feet."
James Oppenheim
Thursday, July 17, 2008
How can you possibly blame the short sellers for the financial stocks losing!?!?!
Just because they blamed the short sellers for the drop in financials, doesn’t mean that the pain is over. Short sellers didn’t make the stocks go down, they simply profited from it.
And since I'm on the subject, I’m going to vent a little. For some self-masochistic reason I had cnbc on for the majority of the day in the office (usually find cnn or sportscenter more entertaining and informative) and was really disgusted at how they blamed the short sellers for the demise in the financials.
Now I have caught a bit of flack from people over the past few months for being too bearish, and while we have had a bearish outlook on this market for quite some time now, and have voiced that here as I feel it our responsibility to call things as we see them, and for one reason only. We feel it our responsibility to help the individual investors, because the "experts" mislead for their own gains at every turn. We have been bearish on the financials for months, and we, as well as a number of our subscribers have made some excellent trades shorting these bank and broker stocks.
So back to the point. Big business doesn’t care about us, the little guy – they care about profit margins and the bottom line. Have you ever missed a payment on a loan and had the late fee lifted because they felt bad for your financial situation? Or had to take a pay cut and had the bank lower the interest rate to help you out? Surely you haven’t – it doesn’t happen! Why hasn’t it happened? Because the almighty dollar is a lot more important than any individual person to these companies. When looked at in a big picture, that is exactly where this whole sub-prime mess and credit crisis came from – financial institutions trying to make money on the backs of individuals who they knew would have trouble making payments down the road.
So if banks and financial intuitions can profit from the potential demise of individuals, why should we, the individuals, be penalized and demonized for profiting from the potential demise of these financial institutions? They see opportunity, act on it, and get paid handsomely, so why shouldn’t we be afforded the same opportunity? I have heard it said that many people look at shorting stock as un-American, but isn’t NOT being allowed to short stock, to see an opportunity, and have the guts, brains, and resources to act on it, by definition, un-American? Life liberty and the pursuit of happiness right? Not to say that money can buy happiness but watching my money slowly drain away while these cnbc ANAL-ysts tell me to buy and hold would certainly make me pretty unhappy. We didn’t make the financials go down, the financials made themselves go down (and the rest of the market with it) by using shady business practices and making risky investments. I for one have no sympathy, and do not appreciate being a scapegoat for the irresponsible business practices of greedy, mismanaged and misinformed companies.
And since I'm on the subject, I’m going to vent a little. For some self-masochistic reason I had cnbc on for the majority of the day in the office (usually find cnn or sportscenter more entertaining and informative) and was really disgusted at how they blamed the short sellers for the demise in the financials.
Now I have caught a bit of flack from people over the past few months for being too bearish, and while we have had a bearish outlook on this market for quite some time now, and have voiced that here as I feel it our responsibility to call things as we see them, and for one reason only. We feel it our responsibility to help the individual investors, because the "experts" mislead for their own gains at every turn. We have been bearish on the financials for months, and we, as well as a number of our subscribers have made some excellent trades shorting these bank and broker stocks.
So back to the point. Big business doesn’t care about us, the little guy – they care about profit margins and the bottom line. Have you ever missed a payment on a loan and had the late fee lifted because they felt bad for your financial situation? Or had to take a pay cut and had the bank lower the interest rate to help you out? Surely you haven’t – it doesn’t happen! Why hasn’t it happened? Because the almighty dollar is a lot more important than any individual person to these companies. When looked at in a big picture, that is exactly where this whole sub-prime mess and credit crisis came from – financial institutions trying to make money on the backs of individuals who they knew would have trouble making payments down the road.
So if banks and financial intuitions can profit from the potential demise of individuals, why should we, the individuals, be penalized and demonized for profiting from the potential demise of these financial institutions? They see opportunity, act on it, and get paid handsomely, so why shouldn’t we be afforded the same opportunity? I have heard it said that many people look at shorting stock as un-American, but isn’t NOT being allowed to short stock, to see an opportunity, and have the guts, brains, and resources to act on it, by definition, un-American? Life liberty and the pursuit of happiness right? Not to say that money can buy happiness but watching my money slowly drain away while these cnbc ANAL-ysts tell me to buy and hold would certainly make me pretty unhappy. We didn’t make the financials go down, the financials made themselves go down (and the rest of the market with it) by using shady business practices and making risky investments. I for one have no sympathy, and do not appreciate being a scapegoat for the irresponsible business practices of greedy, mismanaged and misinformed companies.
Thursday, June 19, 2008
Stock Market Analysis 6/8/08
It was a rough week for the market. It had its share of contributing factors to help it along. We saw a big mess at Lehman Bros, yet another major financial institution at risk of crumbling under the mortgage and credit crisis. Friday, we saw news of Israel calling an attack on Iran “unavoidable” that sent oil prices skyrocketing, as well as a higher than expected unemployment report.
However, this market has been technical broken for some time now. The top of the bounce was identified two weeks ago, and those highs have yet to be broken by any of the indexes except the Russell, which made a brief trip above the May highs on Thursday, but quickly retreated.
Has the market finally taken all the bad news that it can handle? Was Friday capitulation – a giving up of the bulls and just throwing in the towel? While anything is possible the answer is probably not. As we have mentioned in a number of prior writings, the resilience of this market, and its ability to take a licking and keep on ticking so to speak, has to be respected. We have to give it a punchers chance, no matter how weak it may seem.
So that said we have seen nothing in the recent market action to change our overall view of the market direction – we should see a volatile market with frequent and large swings in direction, ultimately with a bearish bias that should eventually challenge the 2008 lows. I have heard some chatter about Monday being another “Black Monday” – or a repeat of the 1987 market cash where the Dow Jones Average lost over 22% in a day.
While that would probably be the best thing for this market, a few days of capitulation selling so that we could finally identify a market bottom and get a good bull run, given the recent market activity and the level of the vix, it seems unlikely.
We also saw the massive resumption of the uptrend in precious metals and of course, oil. We are expecting rise this to continue, at least in the short term. The US dollar is also looking like a retest of recent lows is all but inevitable.
Our end of day portfolios on the other hand, had a great week. We are playing the commodities run to the long side, and cashed out of a number of profitable long and short positions last week. We also have adjusted stops and covers, and have locked in gains and/or eliminated risk on a number of our still open trades.
With a slightly short heavy end of day portfolio, we are keeping an even number of stocks to trigger long and short to combat what we think could be a very choppy day on Monday, and will probably look to re-establish a bit more of a short presence during the week, depending on how things shake out.
Have a great weekend!
GreenRoomStocks.com
info@greenroomstocks.com
However, this market has been technical broken for some time now. The top of the bounce was identified two weeks ago, and those highs have yet to be broken by any of the indexes except the Russell, which made a brief trip above the May highs on Thursday, but quickly retreated.
Has the market finally taken all the bad news that it can handle? Was Friday capitulation – a giving up of the bulls and just throwing in the towel? While anything is possible the answer is probably not. As we have mentioned in a number of prior writings, the resilience of this market, and its ability to take a licking and keep on ticking so to speak, has to be respected. We have to give it a punchers chance, no matter how weak it may seem.
So that said we have seen nothing in the recent market action to change our overall view of the market direction – we should see a volatile market with frequent and large swings in direction, ultimately with a bearish bias that should eventually challenge the 2008 lows. I have heard some chatter about Monday being another “Black Monday” – or a repeat of the 1987 market cash where the Dow Jones Average lost over 22% in a day.
While that would probably be the best thing for this market, a few days of capitulation selling so that we could finally identify a market bottom and get a good bull run, given the recent market activity and the level of the vix, it seems unlikely.
We also saw the massive resumption of the uptrend in precious metals and of course, oil. We are expecting rise this to continue, at least in the short term. The US dollar is also looking like a retest of recent lows is all but inevitable.
Our end of day portfolios on the other hand, had a great week. We are playing the commodities run to the long side, and cashed out of a number of profitable long and short positions last week. We also have adjusted stops and covers, and have locked in gains and/or eliminated risk on a number of our still open trades.
With a slightly short heavy end of day portfolio, we are keeping an even number of stocks to trigger long and short to combat what we think could be a very choppy day on Monday, and will probably look to re-establish a bit more of a short presence during the week, depending on how things shake out.
Have a great weekend!
GreenRoomStocks.com
info@greenroomstocks.com
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