Tuesday, January 11, 2011

1/11/11 Bait And Switched!



I saw her today at the reception
In her glass was a bleeding man
She was practiced at the art of deception
Well I could tell by her blood-stained hands

How do investors end up chasing stocks at the top, only to sell them at the bottom?  A college degree is not required (a handicap, no doubt, in most cases) to sell cars, nor is one required to sell stocks.  The only prerequisite is an understanding of human nature.

68 comments:

  1. read the first part, was all set to type "human nature", when I saw that you'd already answered the question.

    My newest foray into alternative investing: weekly options, will post more once I've gotten a decent set of results.

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  2. Moved my stops up on half of my RAS to $2.29. I'm unfortunately still holding my SPY puts and TYP, but I'm only down 10% on the puts and 3% on the TYP.

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  3. OK, call me crazy. LEXVF @ 1.02. 10K shares.

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  4. so your kicking around the bone yard, good luck bro!

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  5. that's cool.

    had a long chat with Dutch yesterday, the new site is almost a go, will have an entire section on bone yard trades, it'll be worth it to take a couple fliers I think.

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  6. INTC announces after the close Thursday. JPM before Friday open.

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  7. Haven't made a move in 5 trading days.

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  8. Stopped out of my SWC short, flat. Long ICO and stalking RLD which has its lock period ending today.

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  9. CADC - Coming back for an add, hoping for $4.25-ish.

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  10. Ah, here comes gold playing catch-up...

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  11. 2nd: Don't know what you are apprehensive about with this market. Just buy your favorite Indian Internet company or Chinese solar play or junior mining company the backbone of this rally.

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  12. CADC - Some crazy dipshit just sold me a bunch of shares @ $4.42!

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  13. "Haven't made a move in 5 trading days."

    Might be time to pay the doctor a visit!

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  14. Make sure he's a gentlemen though, you don't want to wind up in the hospital with a punctured intestine when a simple walletechtomy should do the trick!

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  15. CP- Yikes. What the hell was that?

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  16. GMO - I think I smell $10 in the not too distant future...

    PAL - Still flying!

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  17. Mark - What the hell was the CADC move? Somebody panicked and dumped their shares!

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  18. RB- Please shoot me an email when CLNE gets off the floor. If it's after 2053, don't bother. I should be dead by then.

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  19. MDW, these low priced stocks make me very nervous, but you should look to try and get involved here.

    Some very smart people associated with this company. Have a small position if was not going away would be larger.

    Long MDW, RBY

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  20. CADC - I participated as assistant surgeon this morning, one of several. The prognosis is good.

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  21. T3D- How long have you had MDW?

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  22. CLNE, snooze as of late. I think LT WPRT is going to be be better say 2-5 years.

    HAHA, 2-5 years, the world may end in 2012 so I going to have more fun between now and than just in case the Mayans are right.

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  23. MDW, today @ .9725. I should of bought a few days ago at .84. I have been following for a few years.

    I think Pierre Lassonde (?) is involved in this company. He may be one of the smartest in the business. Very spec Mark, but would not be surprised if a major gets involved soon.

    gotta jump

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  24. Thanks T3D...Me too, but to the dentist. That screaming you will all be hearing is coming from me.

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  25. CSCO - Even through all the recent market weakness, CSCO kept inching up...

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  26. Just bought VXX at $35.38 for 6% of my portfolio. Will explain my thinking soon, once I sit down to eat my breakfast. :)

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  27. jesse or anyone else > whats the put/call ratio looking like now? this market appears to have changed at least temporarily in the way it trades. it can't hold any morning strength. it's at least going sideways for now.

    FD: only long is RAS. short QQQ through TYP and long SPY puts.

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  28. Mark,
    You are actually going to have to email me. i took that dog off my watchlist. Why mess with a company on the forefront of our inevitable change from crude to natgas for transportation. I'm stalking the REALLY IMPORTANT stocks that can change our lives and usher in a new social revolution! Of coarse I am talking about yoga pants, huge overpriced purses and facebook dating sites. You have to be on the cutting edge of this market to get the big pops.
    bob

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  29. Looks like this is just a classic gap fill and it will close out at year highs today. That's my call. Not trading it though.

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  30. INTC/CSCO @ 21/20.88 newSubmitted by 2nd_ave (5141 comments) on Tue, 01/11/2011 - 14:40 #77540
    As proxies for cash. There seems to be a floor under these two.

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  31. I'm going to stretch my authority here and claim recent weakness has been partly a result of profit taking ahead of a new earnings season?

    Some folks like to sell ahead of such events, does this theory sound plausible?

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  32. TOF: the equity put-call ratio $CPCE is standing at 0.7, up from 0.4 a few days ago. It is very volatile on daily basis, though...

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  33. cp - Yes, absolutely. I'm closing many short puts. Will probably re-short many as the volatility pops. JAG, IBN, TTM look interesting.

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  34. GMO - I'm three cents away from a beautiful day!

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  35. Now back to VXX. First, check out the ^VIX chart and note that it was trading at $17.61 on Dec 10 and it closed on Jan 10 at $17.54. So it has been flat for a month now, while S&P rose from $1240 to $1270 over this time period. So my first claim is that ^VIX has reached an intermediate-term bottom, and further upside in S&P will have little if any impact on ^VIX. So if one could buy ^VIX now, it would be a SURE way of making money, since when the pullback eventually arrives, it *WILL* rise by at least 50%, with 30 being a very conservative target.

    So let's think further: how can we buy ^VIX will least damage? VXX has shown a horrible performance since the summer. But don't be so quick to dismiss it now. Since Dec 10, VXX dropped by only 6% (because, as I claimed before, ^VIX has reached a bottom), which is much less than a drop we would see in February 2011 at-the-money puts one could buy on SPY.

    So compared to market put options, VXX has a very small time decay and a huge potential upside. Now, VXX has large daily swings, and so by trading a little around the core position, one could easily offset the time decay in VXX. Hence, I just bought a core position of 500 shares of VXX and placed buy limit orders for 100 shares at $35, $34, and $33 as well as sell limit orders for 100 shares at $37 and $38. If any of my buy limit orders get triggered, I will place a sell limit order for the newly acquired bunch of shares $1 higher. This will be my new VXX money pump!

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  36. While I was typing the previous message, VXX dropped to $35 and hit my buy limit order for 100 shares. So I just placed a sell limit order for these 100 shares at $36 and also a new buy limit order for 100 shares at $32 (in addition to the ones at $34 and $33).

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  37. After my discovery of the VXX money pump, I am no longer interested in playing TWM now (which has the same volatility decay as VXX in a flat market but will suffer much more than VXX if a new leg up starts in equities). So I just placed a sell stop limit order for my 1500 shares of TWM at $11.95/$11.90, just below the all-time low for TWM achieved last week.

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  38. In fact, I decided to do a lateral move from TWM into VXX right now, selling all my 1500 shares of TWM at $12.21 and buying 500 more shares of VXX at $35.03. So now I have 1100 shares of VXX, for about 12% of my portfolio.

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  39. GMO - Bingo, someone wanted those shares I absconded while the world was collapsing a couple days ago. Back to house money in the accumulator.

    http://www.youtube.com/watch?v=1Cin0QzuEss

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  40. Since I now have a twice larger position in VXX than the one I opened initially, I decided to double the size of my sell limit order at $36 to 200 shares.

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  41. Imbalances...

    BUY- BAC/C/WFC/JPM/AA/DD/GM/AKS

    SELL- None.

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  42. Buy-and-hold into FSELX newSubmitted by 2nd_ave (5142 comments) on Tue, 01/11/2011 - 15:56 #77545
    ...

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  43. ATNI - Made slightly more on that trade than I reported earlier, forgot to include the dividend I expect some shorty paid for the privilege of taking obscene liberties with shareholder value.

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  44. David, David, David,
    Long the VXX? Shorting it is the only play with this. I even owned it during the flash crash and was unbeleviablly dissappointed with the returns. I think a better strategy if you want to play volitility is to Use a method called Gamma Scalping which could create the money pump. Gamma scalping works on all stocks that chop around in a range. Could even work on VXX, but I don't see a range. The basic Idea is to buy a straddle with a three month strike in a choppy stock like FCX, RIMM ect. then after a predetermined time say every three days sell short or go long the required amount of stock or contracts to bring your position back to gamma neutral. If the stock chops you make money in both directions and the straddle gives you black swan protection and does not limit your gains in euphoric periods. Also you could do this at the close of the trading day. I would do this, but the strategy ties up too much margin.
    Bob

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  45. Re: Buy-and-hold into FSELX newSubmitted by 2nd_ave (5143 comments) on Tue, 01/11/2011 - 16:19 #77552 (in reply to #77545)
    No technical analysis. I just think all of the companies below will do quite well in a recovering economy.

    FSELX:

    Top 10 Holdings (53.22% of Total Assets)
    Company Symbol % Assets YTD Return %
    Marvell Technology Group, Ltd. MRVL 10.28 -2.65
    Intel Corporation INTC 8.24 8.38
    Micron Technology, Inc. MU 5.52 -30.02
    Broadcom Corporation BRCM 5.46 47.28
    Applied Materials, Inc. AMAT 4.56 -6.46
    Intersil Corporation ISIL 4.20 -12.39
    Advanced Micro Devices, Inc. Co AMD 4.12 -22.42
    Texas Instruments Incorporated TXN 3.94 14.85
    QUALCOMM Incorporated QCOM 3.48 5.12
    Amkor Technology, Inc. AMKR 3.42 -1.82

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  46. Bob, VXX did not go through the roof during the flash crash because investors realized that this was a technical fluke and hence VXX *futures* did not jump nearly as much as VIX (the spot price). However, if we do get a normal correction any time soon, then both VIX and its futures (VXX) will spike up. During the brief correction in January 2010 VXX spiked 20%, and during the larger correction in May 2010 VXX spiked 86%. I believe VXX will be higher than the current level during the depths of the next pullback, whenever it comes. So I just need to not get shaken out of my position in the meantime.

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  47. And in the meantime, I believe I'll be able to make some bucks scaling in and scaling out of VXX.

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  48. Naturally, when VIX reaches 25 I'll close all of my VXX position and will start scaling into a VXX short position, since shorting VXX when VIX rises above 25 is another guaranteed winning trade.

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  49. So if my plan is to scale completely out of VXX when it rises 20% from the current level (i.e., reaches $42), I just added sell limit orders for 100 shares of VXX all the way up to $42, with $1 increments. This will still leave me with some VXX at $42, and I'll just place a sell stop order under remaining VXX at, say, $40 when VXX rises above $42.

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  50. Metals - Look at it this way, with all the capital flowing into these mining companies, at some point the price of metals should remain relatively stable for some period of time once everything's said and done.

    Just don't get caught without a chair when the music stops!

    I still think we've got quite a ways to go. To survive, a rat must chew.

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  51. Oh, so Japan announced they're joining China in buying into the European financial aid program.

    That's smart of them, buying when there's blood in the streets should help keep their currency from rising.

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  52. Bloomberg - Copper Rises Most in Four Weeks as Japan Plans to Buy European-Aid Bonds
    By Maria Kolesnikova -

    http://www.bloomberg.com/news/2011-01-11/copper-climbs-for-first-day-in-six-on-japan-plan-to-buy-euro-region-bonds.html

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  53. I'm re-balancing my portfolio, here is the new asset allocation:

    global equities: 50% (down from 67%)
    global bonds: 30% (up from 9%)
    commodities: 10% (up from 0%)
    spec plays: 5% (down from 10%)
    cash: 5% (down from 25%)

    My general thesis hasn't changed, namely you can't put the genie back in the bottle. Over the course of the next 10 years 3-5 "USA middle classes" will emerge (China 2x, India, Brz, etc), and those folks will buy stuff. Since unemployment is eminent I can't afford to just sit on cash so I'm investing in a bond ladder to spin off income, plus if I have too much $$$ just sitting around in the bank the wife will just continue to spend it... :)

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  54. Interesting JB. What bond fund are you in?

    Quietly please, my head is going to explode.

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  55. can't have that, so very quietly: two vanguard funds (total bond fund, target income fund), several fidelity funds including floating rate high income, floating rate bank notes, four in one index fund. still have a tad to allocate towards international bonds but I'm just starting my research.

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  56. Dave,
    Sounds good. Is this to hedge your long positions? let me know when you decide to go short vxx. I have been looking for an entry.Before the split I was short VXX from 20 to 13 ish. What is your exit or hedge strategy if vxx continues on its 10% lower every 10 day clip. Puts at a strike 10% less then today price might be a cheap insurance policy. Enough rambling about vxx.
    Good luck,
    Bob
    P.S. Check out GAMMA SCALPING. I believe you would have a talent for that type of trading.

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  57. Hmmmm...What's the yield average and is there any NAV protection...slipping into unconsciousness...

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  58. JB don't hand him over your secrets so easily until after he walks over, opens his wife's purse, and retrieves his testicles!

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  59. oh man, that's funny as hell CP!!

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  60. No can do CP. I'm a beaten man. Besides, she scares the crap out of me and I need to keep what little I have left.

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  61. Please god get to 5 o'clock...

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  62. Earnings Misses newSubmitted by teamonfuego (2338 comments) on Tue, 01/11/2011 - 19:26 #77561
    Looks like ACI is going to miss earnings. CAKE missed pretty badly too. AA beat bottom but not top line. I currently more long than short but I wonder at what point the market takes a breather. We have had some decent misses lately like BBY and NKE due to commodity/input prices rising. Margins are at all time highs and earnings rebounded sharply in 2010. But the business cycle is such that this level of earnings is unsustainable. I think that's why the market trades at a low to mid teens p/e because the e is probably inflated.

    Jeff Kleintop of LPL, an independent advisor worth listening to more so than GS/MS/etc, is calling for single digit gains in 2010 and has said that he doubts the CEO's will offer bullish outlooks in part because they are showing restraint in hiring people. So he implies that caution in hiring probably means caution in outlooks. After an almost 30% rise from the lows 6 months ago, it probably makes sense to be cautious as well. Yes we might do $90/share in 2011, but is it really sustainable? Commodity prices and food prices have been rising pretty sharply...at faster paces than back in 2008.

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  63. "I need to keep what little I have left. "

    You mean what little she allows you to keep.

    Okay, so go over there and start digging through her purse. If she asks you what the hell you think you're doing, tell her CP told you that's where you'd find your testicles.

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  64. Bob, I do have some long positions, the biggest one being in ECU.TO for about 30% of my port. So a part of the reason for going into VXX is indeed to hedge my long positions.

    "What is your exit or hedge strategy if vxx continues on its 10% lower every 10 day clip."

    I don't think it will, Bob. VXX decayed by 6% between December 10, 2010 and January 10, 2011, while VIX stayed flat. With VIX being at 17 now, I don't think it has any more downside left, and so it will just keep wobbling around the bottom until the correction comes. Thus, I think VXX will keep decaying at 6% per month until the correction comes, at which point it will jump up by at least 20% (just like in January 2010).

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  65. CADC - TSTC, Another Chinese reverse merger, was hit today with possible accusation of being a fraudulent operation. It's entirely possible this had some effect on today's downward action in CADC.

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