Thursday, August 18, 2011
08/18/11 When The Rough God Goes Riding
I was flabbergasted by the headlines
People in glasshouses throwing stones
Gaping wounds that will never heal
Now they're moaning like a dog in a manger
It's when that rough god goes riding
And then the rough god goes gliding
There'll be nobody hiding
When that rough god comes riding on in
And it's a matter of survival
When you're born with your back against the wall
Won't somebody hand me a bible
Won't you give me that number to call
When that rough god goed riding
And then that rough god goes gliding
They'll be nobody hiding
When that rough god goes riding on in
Riding on in
When that rough god goed riding
When that rough god goes gliding
There'll be nobody hiding
When that rough god goes riding on in
Riding on in
There'll be no more heroes
They'll be reduced to zero
When that rough god goes riding
Riding on in
Riding on in
Riding on in
No place to hide? Ironically, the one place to 'hide' is buy-and-hold. Treasurys won't save your ---. Gold won't save your ---. Cash won't save your ---. There are only two asset classes that have withstood the test of time- stocks and real estate. I've held on to both through several downturns and/or market shocks. There's something about 'holding' that (a) keeps you from losing your head, and (b) allows you to fully participate in recoveries.
Call it hiding in plain sight. Or keeping your eyes wide shut. If you want to accumulate the kind of wealth needed to retire, stick to stocks and real estate, and don't try to time either one.
Subscribe to:
Post Comments (Atom)
I'm Mr. Bearish but HPQ looks like a screaming buy right here. under 7 PE at the 26.75 AH price.
ReplyDelete2009 low 25.70. I am convinced i am going to get a position.
ReplyDeleteWhile S&P is nowhere near a good level for buy-and-hold (800 would be a safe level, for I believe S&P will stay below 800 only for brief periods of time over the next few years), some individual charts do look good for buy-and-hold. HPQ is one of them, CSCO is another one. MON is one of my favorite -- it looks like the stock has bottomed out ALREADY and is just waiting for a good time to start rallying to new highs.
ReplyDeleteCan anyone tell us what has been the problem with HPQ lately? Are they just going through a phase of business restructuring on the way to new great opportunities like CSCO is, or are they just *hoping* for new business like Sun did, while being on a steady road to oblivion? The reason I don't like high-tech firms (and Buffett doesn't like them either for the same reason) is that it is very difficult to prevent competitors to bypassing you in new inventions. And that's why I really like the miners -- their business is very simple (dig out good stuff and sell it), and as long as good stuff is going up in price, the miners will do well.
See what I mean? At what point will sidelined traders stop thinking about buying and actually do it?
ReplyDeleteCalpers, down $18 Billion at one point this week, claims to have added to their positions. Risk positions, they didn't specify, it sounded as though.
ReplyDeleteDavid- If Sun and Oracle paid/are still paying you (bonuses, no less) to stay home and blog about being paid to stay home, I can understand why you hesitate to invest in the sector.
ReplyDeleteCP- Down $18b at one point this week? And that was prior to today's close?
ReplyDeleteWell Dave Its all a risk. ASSus may wipe HPs butt,yet I like R/R here.
ReplyDeleteRoBear -- where do the businesses of ASUS and HP overlap? How important is this overlap for HP?
ReplyDeletePotential Targets:
ReplyDeleteS+P Short term target
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1926808&cmd=show[s237471733]&disp=O
S+P Bolinger Band target which I've spoken about since I joined the board in December.
http://stockcharts.com/c-sc/sc?s=$SPX&p=M&st=1981-01-01&en=(today)&i=p81824825021&a=123837285&r=661
S+P weekly target
http://stockcharts.com/c-sc/sc?s=$SPX&p=W&yr=14&mn=0&dy=0&i=p12677734260&a=200866104&r=925
Monthly NYA target
http://stockcharts.com/c-sc/sc?s=$NYA&p=M&yr=18&mn=0&dy=5&i=p11682348704&a=213366018&r=473
momo stock on the weekly:
http://stockcharts.com/c-sc/sc?s=$SPX&p=W&yr=2&mn=2&dy=0&i=p35665165827&a=159450661&r=635
David i was making a joke. Don't they both make pcs and lap tops? HP is bigger though. They dominate printers, They are the major reason CSCO is doing so bad by aggressively taking business from CISCO's core area of IT infrastructure and all joking aside they have BRAND recognition and loyalty. Personally i hate HP software and how it takes over a computer, but i guess mom and pop like that stuff. In the windows operating world they are Best In Breed. NO?
ReplyDeleteIf this test of the lows holds then I think we're setting the stage for a rally to 1,260. I'd like to see a drop to 1,090 on a close and then a bounce up to 1,120 the next day...but a close above 1,120 with a bounce to 1,150 the next day works too...As such if we dip to 1,110 to 1,120 I might buy a little in case it pops back up the next day.
ReplyDeleteI'm thinking the following work best:
TZOO
MMYT
FAS
CMI
DECK
BTU
ARGN
My thinking is I want to focus on stocks that have dropped >50% in the past month like TZOO.
ReplyDeleteI think it'll be Hit 'n Run trading. Look for a quick 20-25% before she rolls over again.
I need to find a stock screener that screens for sub 25 rsi and a waterfall (not a 1-2 day decline) decline of 50% or more over the past month.
HP - Selling laptop and desktop business, buying something else, I didn't catch the detail.
ReplyDelete2nd - "CP- Down $18b at one point this week? And that was prior to today's close?
Yes, they said they were down $18B and so, were putting new money to work Monday and Tue. I assume the interview was done yesterday.
Jesse - Let me know what you find because I'm thinking the same exact thing. I'm actually thinking the better return on our money would be a long BGU...a move from here to 1,250 would give us a 9.6% return...BGU after including some decay should yield a return of 27%. It's a safer method as you don't have the individual equity risk
ReplyDeleteIt's the same old same old. Slightly different audience, perhaps. The 'reasons' are different, although it matters not what they are. The point is they run the same play over and over again, and investors get screwdoodled (copyright shark) time and again.
ReplyDeleteInvesting in stocks means risk, aka prices move both ways. Investing in real estate means risk. That's why you reap the big bucks over time.
Yet each time prices drop, it invariably elicits an emotional reaction that causes x% of investors to bail. Every ----ing time.
It's not as if I don't experience the same emotions. I've learned to control my reactions- anyone can. Then you begin to look forward to the same old same old- b/c you know you'll handle it appropriately.
As a bear, I'd want to see a less volatile day in the S+P that stays within 1120-1150. This would be the kind of action I'd want to see for continuation. I wouldn't want us to see go much lower.
ReplyDeleteWatching Syria coverage on CNN now. Just awful.
TOF- Its gonna be all about former momo high flyers hit the most on a percentage basis.
ReplyDeleteThe smartest guys in the room drove them to nosebleed levels. The smartest guys in the room exited at the top. The smartest guys in the room will re-enter for a 20-50% retracement move before exiting once again.
These are the same guys who tip us off 2-6 sessions before a major market collapse.
VHC is another one to keep an eye on.
My greatest fear is not highway bandits, I have a "ferocious" Chihuahua. No, my greatest fear is waking up some morning to find a European bank has failed. Said another way, perhaps that equates to not waking up to a new nominal record gold price?
ReplyDeleteOk, Ok-
ReplyDeleteThe market is really overrated. Let's talk about something much more important.
How in the world did that douchebag end up with Robin Gardener in Aruba?
Supposedly, she had a boyfriend back home. Eros.com?
Just reading an article on the NY Times called "To Those Who Have Lost Faith in Investing"
ReplyDeleteIt is a pro buy and hold stocks long term article. What is amazing is how negative almost all the comments are on here. If this is indicative of the general population, then buy-and-hold should absolutely prosper over the next number of years as the pendulum swings back.
http://bucks.blogs.nytimes.com/2011/08/15/to-those-who-have-lost-faith-in-investing/?nl=your-money&emc=your-moneyemb1
By the way, this market loves the W pattern. We have seen the W pattern in several bottoms: Summer 2010, November 2010, between February and July 2011, last week....my suspicion is we see a W bottom again this year as a precursor to a rally.
ReplyDeleteBB- Well said. Investing=Faith is indeed the whole enchilada in one phrase. Absent faith, why bother being in the market to begin with?
ReplyDelete" What is amazing is how negative almost all the comments are on here."
ReplyDeleteWhat is amazing is the response you see after EVERY and ANY article, whether it be finance, entertainment, politics, sports, or even weather.
Any article I have read online over the past couple years- the response is utterly appalling. 10% supportive, 90% negative.
Just take a minute and post a "realistically un-positive" post about a stock on the yahoo message boards. There is simply no counter argument. There is nothing but hatred. It is simply disgusting and disturbing.
This is exactly what makes blogs like this so AMAZING.
ReplyDeleteWent through a bunch of charts and i am perplexed. May I say that something is propping up the indexes. Looking at individual stocks I would think the market would be much lower. X is 27 bucks? Hp is there. Csco 15. There seems to be some fuzzy math.
ReplyDeleteRB- After trading for as many years as I have, I have no idea how the indexes are calculated. On a day when an index is down 1%, I scroll through hundreds of charts, and I can't find anything down less than 2%. Same thing with today.
ReplyDeleteThat's why I think it is a TOTAL suckers game to short the indices in these times. Short individual names. Its worth the significant extra effort.
Sadly, everything that I wanted to BUY yesterday was down well over 10% today. Much more than the S+P loss.
"Sadly, everything that I wanted to BUY yesterday was down well over 10% today. Much more than the S+P loss."
ReplyDeleteWe must have the same watch list!
Yahoo Board - Populated by juveniles mostly, it seems. Some ignorant adults with juvenile tendencies.
ReplyDeleteShorting - Individual names are better, sure. Go for the jugular on the weakest. BAC, C in finance?
I'm not short or hedged but am 50% cash now. Looking to pick up at lower prices. Actually, I am thinking we are in the first phase of a new bear market. That is the danger and I am exposed with oil, mostly.
ReplyDeleteHate to post and run, but...
ReplyDeleteJesse- How weak is it that the USA JUST NOW calls for Assad to leave. Pathetic.
Gardner...who knows, but let me give you a crazy thing that just happened here today.
Cops go to a Hotel to question a dude about a stabbing. He barricades himself and his girlfriend in. Swat team standoff shit. almost 20 hrs. later they haven't heard from the dude who was always in contact. Cops snake a camera into the room and get a picture of the dude on the floor and not moving. So they bust in and the dude is DEAD!!
So the obvious question is...WTF was the chick doing??? Waiting until their check out date?
That might put the whole Aruba thing into context.
Mark - If you ever do figure out how women think, lets the rest of us in on the secret! ;)
ReplyDelete"So the obvious question is...WTF was the chick doing???"
ReplyDeleteObviously less of whatever killed the dude.
Scanning all sectors after today....not one sector is up except gold. Not one.
The best shorts are those that are the most volatile and have the largest price moves in the shortest time. Get cranked up on coffee or mountain dew and take the ride. BAC? C? Too big, thick and slow moving. Very liquid, but very slow.
I'm short TSCO, ULTA, ROC, INFA. Took 1/2 profits on INFA at 48.
No longs, about 50% cash.
I would like to take initial profits on the remaining shorts and then set stops and go do something fun. Hopefully tomorrow. Getting close on ULTA.
When the MA's cross upward and there are some good long set ups I will get long big time. In the meantime the BB arrow points down.
Good luck everyone.
FF
BEXP - This one has been one hell of a ride...
ReplyDelete"TOF- Its gonna be all about former momo high flyers hit the most on a percentage basis."
ReplyDeleteJesse -- which momo stocks are you watching? I'd like to watch them as well. Thanks!
Let's see how well technical patters work out now. Starting about 11:30am EST today, S&P futures were making lower highs but always bouncing off the support at 1130. This looks like a wedge pattern, which supposedly should break to the upside. If it doesn't and instead breaks to the downside tonight, then tomorrow will be another one hell of a down day...
ReplyDeleteOh no! The futures just broke through their 1030 support level and are tanking quickly, down to 1120 already -- we are definitely testing 1100 tomorrow...
ReplyDelete2nd_ave -- wouldn't it have been great if you sold CSCO at 16.50 and bought gold at 1665? Gold is up to 1865 now... I think it would REALLY be financially rewarding for the folks here who don't trust gold and haven't done due diligence on it to actually do it. Actually FIGURE OUT how US budget deficit/surplus drive the gold price up or down. These are VERY long term trends and they are TOTALLY predictable. Gold will keep going up as long as US has a budget deficit. It's as simple as that. And predicting when US will stop running deficits is much easier than timing stock market, right? So getting out of the gold bull market will also be easy.
ReplyDeletebroken record: both europe and futures looks sick
ReplyDeleteDavid,
ReplyDeleteI would disagree - it is not a simple negative relationship between gold and the US deficit. Otherwise, how would you explain the fact that gold went down for 20 years in the 1980's and 1990's while the US continued to have deficits.
There are a lot of factors at play here and I agree the deficit is one of them. But you also need to look at dollar valuation, supply / demand fundamentals, mining costs, etc.
For example:
According to the “Gold Demand Trends – Second Quarter 2011” published by the World Gold Council, the global gold demand for the second quarter of 2011 dipped by 17 percent y-o-y in volume to 919.8 tonnes but rose 5 percent in value to US$44.5 billion, delivering the second highest quarterly value on record.
My point is that you have to be careful and consider all of the factors in pricing.
At the current time, risk is high of a pullback in gold due the escalating rise in gold prices. Perhaps it could double from here before it happens or perhaps it could happen today, but it will happen and you need to look at all factors to try and determine if it is simple a pullback or something more serious.
David - Unfortunately, I have no conviction buying a rock because to me a rock is a rock and it has no fundamental value. It won't pay me dividends and it won't grow earnings over time. I'll never be able to get around these issues. It's just me...
ReplyDeleteIn the midst of all the gloom, a positive article on Marketwatch:
ReplyDeleteNo bear market, no recession, smart bull says
http://www.marketwatch.com/story/no-bear-market-no-recession-smart-bull-says-2011-08-19?link=MW_story_popular
On CNBC yesterday, they kept blaming the machines for the big market swings, but it turns out the short selling ban may have contributed as an unintended consequence:
ReplyDeleteFrance relaxed a ban on selling banks short, trying to calm index futures traders concerned the rule would keep them from exchanging contracts when they expire today.
Investors who are short index futures that include bank shares can replace the holdings with new contracts, according to the AMF, France’s financial regulator. Speculation the ban would prevent that may have contributed to volatility yesterday, when European stocks plunged the most since March 2009.
http://www.bloomberg.com/news/2011-08-18/france-eases-ban-on-short-selling-as-index-futures-expire-amid-stock-slide.html
Let's watch how the market does a couple of weeks after the retest of the lows, which are in order right now.
ReplyDeleteIf we don't stay higher then I think odds are high we're in a 1937 type decline, which makes sense since back then we also had a recovery off a deeply sold off market and one in which world governments were under the impression that things had gotten better and so they began tightening/cutting debt, which turned into a disaster for the markets. In that market, each bounce quickly turned into another selloff and over the course of 3.5 months the market dived 39% and in another 4 months it was down 48% and the selloff was over. If that happens again, boy I would love it as I could get my favorite stocks at far lower prices...
For now, though, let's see how the test of 1,100 does. I'm going to focus on sitting on cash during this down draft and watch how prior lows hold while scanning for my favorite stocks that I want to buy and hold.
ReplyDeleteI think odds are decent we head into a 1937 style selloff...lots of people are still in stocks holding out hope that things are ok and that this is just another 2010 style panic selloff. Not many are expecting a repeat of 2008
In 2009 we were able to get PIR and SCSS at under $1. I'd love to see opportunities like that again.
Guys- we've seen this movie. I'm pretty confident I know the ending. There's no double-dip down the road. There's no market crash down the road. In fact, we're generally moving UP the road. Relax.
ReplyDeleteIn fact, we buy-and-hold guys should just take the next two weeks off. Turn off the financial news, enjoy the 'Summer's Almost Gone' time of year.
ReplyDeletelocals went short out of the shoot, s&p, and they have gotten run over...commercials have been big buyers since the open, must be opex related.
ReplyDeletelooking to get in short, es, @33
closed short from 33, 3 full points...done trading for the day
ReplyDeleteTalked with MOG yesterday. Still a big buyer of HEK. God only knows how much he has now. I'd guess 5M shares.
ReplyDeleteCraig- Too funny!!! Good point :)
jb- Where do you get your info re 'locals' v 'commercials,' how reliable is that data, and how good an indicator is it of smart money?
ReplyDeleteFast market. Don't blink.
ReplyDelete2nd - traders audio, live from the s&p pit. they call out all of action so it is solid info.
ReplyDeleteI think it helps some, of course when they call out "goldman buys XXX", we don't know why they are buying, they could be covering a short, they could be adding to a position, they could be arbitraging, they could be hedging, etc, etc
I use it to help some with confirming entries - as an adjunct to the price action I am seeing on the DOM and T&S
Looks like there is enough volume for this to hold.
ReplyDeletehttp://www.tradersaudio.com/index.html
ReplyDeleteJB- Why do I hate the HPQ CEO so much? I know nothing about him really.
ReplyDeleteMark - Leo is a strange bird, completely flopped at SAP, gets canned then the next thing you know he is tapped as CEO of a mega-tech. I think he is a smart guy but a pretentious a**hole
ReplyDeletesuper high risk strategy, something hpq needed to do years ago, ala IBM, I would be interested in buying if they become a teenager, break up value has to be in the high 20's
It appears central banks value rocks, and the US supposedly has tons of the stuff under lock and key.
ReplyDeleteIt's probably whatever Saudi Arabia thinks is most important, and they had made agreements with the US to accept $USD as payment(ie: world reserve currency) for their oil and in return the US would guarantee military security for the Saudi's?
Into the picture steps China, looking to get a piece of the pie to secure their energy future.
Consider that gold has been money for thousands of years throughout history, nothing else has. Should we anticipate the complete demise of the dollar within our lifetime? I wouldn't think so, the dollar has been commercialized throughout the world, it's an exchange medium that people still call money, and that's not likely to end soon.
The problem with the dollar is it's not gold backed, and hence can be printed to infinity should someone decide to do so. The US government has amassed unsustainable levels of debt, is stuck in bipartisan gridlock, and as a result of economic turndown, has resorted to buying it's own debt. Should the obstacles to economic recovery be overcome, will it still be possible for the US to pay principal and interest on the debt?
Ask not what you can do for your country, ask what other forms of currency alternatives are available should the US become insolvent and forced to print? How's that balance sheet looking, is further shareholder dilution down the road likely? Hoe long have non-asset backed global currencies been under manipulation and to what extent? Why does the currency of the world's second largest economy not trade in the free market?
Just a few ideas, I think it unwise to discount gold as a worthless rock unless you choose to completely discount monetary history.
Aside: I see the ATF is promoting gun runners...
We have P confirming today boyzz. All's well.
ReplyDeleteThis is SF, Mark. Dude approaches chick and asks if she's working. 15 minutes after entering the motel he realizes the chick is a dude, stabs her. Chick overpowers the dude and kills the dude in self-defense. Sees the KCBS truck parked outside and being the local grade school principal, needs time to find a way out.
ReplyDelete2nd - I sure miss living in The City, never a dull moment.
ReplyDelete"The problem with the dollar is it's not gold backed"
ReplyDeleteDon't get me wrong though, I'm not saying the dollar must be asset backed b/c I believe that would insert too much rigid discipline into the system and tend to peg currencies should the world decide to go in that direction (look what a unified currency has led to in Europe).
No, I believe that all currencies should be traded in the free market and foreign governments should not play the game of buying the debt of other governments in order to intervene in the currency market. I think it's fine for a government to print their debt away, this is a form of taxation. Get rid of the special interests built into our taxation system and let our government buy their own debt in order to fund government spending programs.
This is why I think Bernanke has the right ideas, the $USD has been artificially pumped up by foreign governments intent on funneling employment opportunity from the US into their own countries. They shouldn't be allowed to buy our debt.
"The chick is a dude, the local grade school principal."
ReplyDeleteNot that there's anything wrong with that! ;)
CP- Tell that to the first dude.
ReplyDeleteJB - Do you miss the dudes or the dudes dressed as chicks?
ReplyDeleteJust trying to get my arms around the primary attributes you miss living in the city. Actually, I would enjoy living on telegraph hill, but I wouldn't have sufficient room for my outdoor toys.
CP - I miss all the characters. Lived in the upper filmore and worked south of market back when south of market was rough, not all yuppy like it is now.
ReplyDeleteOkay, so has something good happened today, or are we just continuing the whip saw?
ReplyDeleteI have the feeling I missed something...
Today is OPEX so expect the unexpected, or some such thing.
ReplyDeleteCP- Interesting take on currencies.
ReplyDeleteTOF- COOL was the play.
ReplyDeletedamnnn HPQ below 2009 lows.
ReplyDeleteMakes sense to me since all anyone is buying is Apple nowadays.
Financials rolling over here.
ReplyDeleteMy suspicion is too many people got into shorts. Really not much more to it than that.
ReplyDeleteThat's why rallies are sharpest in bear markets. Shorts too scared to hold on for long periods of time.
ReplyDelete"Tell that to the first dude."
ReplyDeleteRings a bell. This reminds me of the time I was driving into the parking lot up the long drive and noticed a tennis shoe lying near the center of the pavement.
Thirty minutes or so later, a colleague noticed the same shoe and thinking it was suspicious, stopped to investigate. He found a deceased transsexual in the bushes beside the driveway.
True Story: "Finally, though, it seems a trial date is set: March 16, 2000, one year and three months after the beaten and bloody body of Fuller was found barely hidden beneath some brush outside the entrance to the Tokyo Electron Corporation in Southeast Austin."
http://www.weeklywire.com/ww/02-21-00/austin_xtra_feature.html
You don't need room for your outside toys. Plenty of chicks and pigs on the streets at all hours.
ReplyDeletedudes - if we lose this rally then we're in store for a lot of pain next week.
ReplyDelete2nd - I profess, I may have some deranged attachment with feeding animals. Yesterday I even went so far as to feed the grease worms living in the various mechanisms of my tractor. ;)
ReplyDeleteWow. Sleepy time. Nothing is even trading I follow. On that note....At the close!!
ReplyDeleteMark - Let's be patient and wait for this bear to really take a hold of this market...we haven't seen the buy and hold types panic...people are still calling bottoms and believe the lows are in. People are still saying we'll be 20% higher in a couple of years. We need those people wiped out before we can see a true bottom.
ReplyDeleteWhat do you guys think the downside is to HPQ? Usually when a company sells off this much there is a bounce but ultimately it sees lower lows. Is this the same as buying IBM back in 1994? Did you know that if you waited until the bottom was in and bought it after it rose 40% you would not only have gotten 12 times your money at today's prices but you would be getting an annual dividend of 25% on your money. I'm not saying HPQ will be the same but shit in a few months if it falls down to $15 or so then it could be a really good long term hold. Things will turn around there eventually...
ReplyDeleteIBM Dividends Per Year
ReplyDelete1994 0.25
1995 0.25
1996 0.295
1997 0.3875
1998 0.44
1999 0.47
2000 0.51
2001 0.55
2002 0.59
2003 0.63
2004 0.7
2005 0.78
2006 1.1
2007 1.5
2008 1.9
2009 2.15
2010 2.5
2011 1.4
Total Dividends $16.4025
Current Price + Dividends $177.4025
Return (from $14 in 94) 12.67160714
Annual Return 0.16110756
Long live the king. In a move that makes me tear up a little inside, Burger King is shelving its popular commercial mascot, The King. As of now, the King will no longer grace television sets with his antics, enticing consumers to make the quick trek to their local BK Lounge for a Whopper with cheese and some delicious french fries.
ReplyDeleteAccording to USA Today, the second-largest fast food burger joint is retooling its image again. This time, they're dropping the admittedly creepy King and his focus on teenagers for a more mom-centered, nutrition-based ad campaign. Critics (ok, specifically just me) call the decision "horsepuckey".
"I think this is a total disaster," said John Thorpe , the writer of this article and noted fast food enthusiast. "What other muted psychotic-looking commercial character is going to entertain me when I've had a few drinks and am slouching on the couch?"
Nonetheless, Burger King's new ads will roll out in the next couple of days. Le sigh.
"In a new ad campaign set to air this weekend," USA Today says, "Burger King will nationally roll out the California Whopper on Monday, made with what's arguably the gastronomic trend of 2011: guacamole. In a serious image twist, the entire commercial shows only the sights and sounds of the fresh ingredients being washed, sliced and diced. There are no words, just pulsating music."
Burger King's new menu will focus on whatever healthy options the fast food company can throw together, including the aforementioned California Whopper. Because, hey, any time you can add vegetables to a giant, greasy hamburger like the Whopper, you gotta go ahead and call it healthy.
(c) 2011 Benzinga.com. All rights reserved. This material may not be published in its entirety or redistributed without the approval of Benzinga.
12:14 (Dow Jones) Large, protective trades hit the tape in the SPDR S&P 500 ( SPY) ETF. Traders target put "spreads," selling Sept $98 puts to fund the purchase of Sept $108 puts. 200,000 contracts cross for a premium of $17M , with max payoff of about $83M should SPY settle at or below the $98 strike at next months expiry, says Trade Alert's Henry Schwartz . Options strategists said yesterday's spike in volatility drove up the price of puts relative to calls, and recommended the "spread" strategy to pocket more premium from selling out- of-the-money puts. SPY off a fraction at $114.35 . (christopher.dieterich@ dowjones.com)
ReplyDelete>>>>>>>>>>>>>>>>>>>>
Hedging downside risk? Perhaps its a little late for that?
Then again, when the VIX was at 25 and we were at 1,290 I remember reading that options traders were buying put spreads...
Hey, it worked for Hidden Valley. Just add some ranch dressing to those vegetables and it's all good, right?
ReplyDeleteThe demise of the King - Ill advised IMO, I bet they don't do it.
ReplyDeleteHPQ - I believe it will reach $30 in the near future. Island reversal play.
ReplyDeleteI've been buying stock in this downturn who had good results, but didn't get the benefit because of the overall market. These have held in well and are now generally up from where I bought them.
ReplyDeleteGot 1 more I'm trying to buy, but it's not coming down, so will probable wait as TOF suggests. Pretty much fully long now already, so good to keep some cash in case a better opportunity does present itself.
Shouldn't have done my Gold Puts (as David recommended), but Gold feels Nasdaq in 2000ish to me and I think there will be a large pullback coming, it's a matter of getting the timing right.
2nd, do you have a link to the San Fran story?
ReplyDeleteSo the question is: who is the IBM of today? Is it CSCO, HPQ, BAC, RIMM?
ReplyDeleteMy bet is BAC...If the housing market can just bottom out and start trending up slightly, we're talking about a business with the largest retail branch network, the largest mortgage business, and a top 5 investment bank...trading at 1/3 Net Asset Value and 1/2 tangible book value. I might start scaling into BAC next week regardless of what I think the market will do.
HPQ is beaten down this morning on the new yesterday. Here is how I plan to play it. I purchased 600 shares this morning at a price of 23.50. The stock has been dragging slowly up so I hope the price holds. If not, I have a stop loss at 23.05 and if it is hit I will re-enter at lower price. I am planning to sell November 25 calls at $1.69. So by November I hopefully will get some appreciation from the stock (dead cat bounce) + pocket the call premium. My best case scenario is HP reach $25 and is called away and I am up 3.20 per share. 15% in 3 month is not bad, another option is to buy September calls currently trading at 1.09. I think this is a fairly low risk opportunity unless we are in bear market and all bets are off. In this case the call premium provides some buffer for losses.
ReplyDeleteSGG - Hmmm....
ReplyDelete"I would disagree - it is not a simple negative relationship between gold and the US deficit. Otherwise, how would you explain the fact that gold went down for 20 years in the 1980's and 1990's while the US continued to have deficits."
ReplyDeleteGood point, BB. Let me correct my claim then, and paraphrase BC as best as my memory allows: gold goes up when the monetary base grows faster than the economy, and it goes down otherwise. I believe in 1980's and 1990's economy grew faster than monetary supply. Or am I mistaken about that too?
Hussman had a similar take on gold: it goes up when the amount of real goods and services in the economy grows faster than the amount of paper IOUs printed by the Treasury (which includes BOTH paper money and Treasury securities).
"David - Unfortunately, I have no conviction buying a rock because to me a rock is a rock and it has no fundamental value. It won't pay me dividends and it won't grow earnings over time. I'll never be able to get around these issues. It's just me..."
ReplyDeleteTOF -- gold has been viewed as a currency for thousands of years, and for the last few hundred years gold clearly measured the rarity of real goods and services. Do you really expect that the whole world will change its attitude toward gold WITHIN A YEAR? If you don't, then the logical thing is to invest into gold for a year, since all developed economies will obviously grow VERY slow over the next year ("Muddle Through" described by John Mauldin or "Seven Lean Years" described by Jeremy Grantham), while US deficit will be increasing by $1T per year (according to the CBO projections). US GDP will obviously not be growing by $1T per year, so gold will keep going up.
SVM - Starting to show signs of a rally?
ReplyDeleteDavid the basic fact is you still can't really measure the value of it...its based on intangible things in my mind. Can it go higher? Absolutely. But I still wont be able to tell if its undervalued...
ReplyDeleteYou can't measure the value of anything. That's the nature of markets. You might think something has extreme value and the next moment there is a big discovery or larger crop and the supply/demand equation is history.
ReplyDeletePrices have so many variables of which emotion is the most important. Explain emotion.
Explain how a stock like apple can fall after record earnings and super forward guidance.
Markets are emotional, they aren't fundamental, otherwise all good fundamentals would result in higher prices and we know that isn't true.
just look at the last few weeks. There are a lot of stocks you all are throwing out there as good values yet they are being sold with all the others and gold is going higher.
Gold, like stocks, oil, food, etc is worth what the market will bear and like all of them it's value is what you can sell or buy it for today.
If you simply must stick to valuing fundamentals, then it can't be any more difficult to sort through the lies government tells us about how much debt and obligations we all truly have over the lies corporate management tells us about their true value.
It's all BS.
I'm short TSCO today. Are they making less in profits today than a few days ago? NO, not likely. But I'm doing pretty damned well on shorting it. Why? Emotions.
I also suffered the same fear myself this AM as I held that short on the bounce. Emotions.
What is TSCO worth? Right now, about 50.40
Yesterday it was worth over 55. Did fundamentals change?
In that sense I agree with 2nd, although I have my limits and use a different system that limits my losses and locks in my gains. His holding is in knowing emotions will change...hopefully before he goes broke.
FF - I agree in the short / medium term emotions control everything. In the longer term though fundamentals win. Apple is higher than 5 years ago because they're making much more than then.
ReplyDeleteDang, look at little HEK holding in there.
ReplyDelete$42.42 - Silver keeps oscillating around this number.
ReplyDeleteI think the problem here is simple. Too many traders feel like I do right now. 'Why rush in here?'.
ReplyDeleteAJC say's BUY, BUY, BUY!!!!
ReplyDeleteYeah Mark, you kind of feel if you wait longer, you'll get better prices still. It's Pavlovian as it's worked so well.
ReplyDeleteBut, on the other hand, I wonder how many people are left to sell.
The real buy and hold types (like 2nd is now) didn't sell a thing during the 2009 crisis and won't this time. In fact, they keep doing their monthly Mutual Fund contributions as always.
A lot of the value guys believe things are really cheap and are not selling at these levels and in fact are buying or reducing hedges.
That leaves the hedge funds, macro guys, trend followers, quants, etc. to sell and I would think they mostly have based on their current expectations.
The other wild card is the economy and the news and who knows what will happen with that over the weekend!
Fleetwood:
ReplyDelete"Sweet, wonderful you
You make me happy with the things you do
Oh, can it be so
This feeling follows me wherever I go
I never did believe in miracles
But I've a feeling it's time to try
I never did believe in the ways of magic
But I'm beginning to wonder why
I never did believe in miracles
But I've a feeling it's time to try
I never did believe in the ways of magic
But I'm beginning to wonder why
Don't, don't break the spell
It would be different and you know it will
You, you make loving fun
And I don't have to tell you but you're the only one"
"But, on the other hand, I wonder how many people are left to sell. "
ReplyDeleteTrust me, there are plenty of people left...I can list many:
*The dip buyers from last week that believe this is just a retest
*The buy and hold types that think this is just a correction like 2010
*The long term buy and holders that see no recession or no repeat of 2008.
There are always more sellers. I'm watching to see if support levels hold here and I'm making my list...
We're still seeing dip buyers trying bid up the price up before the close or in today's case at the open and the more we see that the more confident I am that we are going lower. We still here the Doug Kasses of the world say that this is a dip that should be bought...we need those guys flushed out before a bottom can be made.
ReplyDeleteFlush away, flush away! Flush away into the bustling sewer world of Ratropolis.
ReplyDelete"There are always more sellers" - it didn't seem that way in March, 2009. There wasn't an event which triggered the rally. It just felt like there was no-one left to sell and once the buying started, cash came pouring in and drove the market higher.
ReplyDeleteI think it goes the other way as well. Get some good news and there are a lot of people on the sidelines waiting for the right opportunity to get in (sounds like what Mark is doing).
I see the March, 2009 low as a retest of the fall, 2008 low, so I agree it does make sense that we retest (and perhaps today was it, but that might be too easy). I just think if you take a step back from the markets and look at the businesses behind the stocks and value these businesses, people would want to buy them at current prices.
2nd - I understand your buy and hold philosophy. It works well in most cases but a very severe recession like the Great Depression. It is probably far fetched to say that we are in it at the moment but the situation is serious. Most developed economies are swimming in the sea of debt and it seems like the political will to devalue currency and add to government balance sheet is no longer there. After the financial crisis USA and Europe were akin to very sick patient attached to machines to stay alive. The patient got better but the machines are expensive to keep operating. So at the end of June the patient got disconnected from the machines and started choking again. Yes it is possible to put the patient back on those machines (QE and increase government spending) but there might be no political will to do so or the political will might show only when the patient is convulsing hard (S&P 900 or so). It took 20 years to recover from the "Great depression" type of slide.
ReplyDeleteCapital preservation is critical since as we all know there is a point of shrinking portfolio from which it is too hard if not impossible to recover.
It means to me is that if S&P starts dropping below the recent low of 1100 or so I will have to go into capital preservation mode which to me means selling partial positions at a loss and buying shorts. I know the market can turn and we would not likely end up in a 'Great Depression' type of world but some macro events (banks crashing, governments overburden with debt, gold at all time high) are not giving me 100% confidence there. Somebody has to pay for the excess of the last 20 years and all the bailouts and we can only go so far by kicking the can down the road. It might just be the economy that will end paying for it.
After much thought, I believe 2nd has been possessed by John Bogle
ReplyDeleteSat on hands today. No trades. Still long.
New post. Don't confuse me with the Bogle Boy.
ReplyDeleteSuspend Your Disbelief!
ReplyDeletehttp://www.robertsinn.com/