Thursday, August 15, 2013
08/16/13 The Bottom Line
We all need the occasional reminder. In the Fall of 2007, we were all 'targeting' DJIA 10000 (it was around 13k at the time). A -25% drop appeared to be the worst case scenario. When the DJIA finally hit 10000, I went long. Way too early. The Dow would drop another -33% from there.
It's easy to forget the emotions we experienced during the last crash. I recall blogging on a daily basis the mental strategies I used to stay sane. One I used often was to focus only on the closing balance each day- that was the bottom line. Any time spent bemoaning the 'losses' suffered 'to date' was a meaningless distraction-> it would only add needless insult to injury, and keep us focusing on the best move forward.
I bring it up now not in expectation of an imminent crash, but because it's wise to review the past before the shit hits the fan.
Subscribe to:
Post Comments (Atom)
"I went long. Way too early."
ReplyDeleteYep, me too. And, I didn't hear many "experts" screaming "BUY!" then, either.
"then" meant bottom.
Delete10K share starter AH's.
ReplyDeleteBSBR - I guess we could call this a higher low. Looks like a hammer?
ReplyDeleteI love it on the chart and especially on a market day like this.
DeleteNo, sorry, it's an inverted hammer. Why do I always do that?
DeleteI do like the chart as well.
Shame on me but I also like NES chart.
DeleteHow about the TVIX chart?
DeleteVIX - 200SMA is 14.72
ReplyDeletecan't remember where, but i swear i've heard this story before:
ReplyDeletehttp://finance.yahoo.com/blogs/breakout/walmart-earnings-miss-exposes-collapsing-economy-davidowitz-142435260.html
Wasn't it just last quarter?
DeleteAll U.S. retail has pretty much been bad - how about the poor weather and the payroll tax cuts?
DeleteIn the UK, retail sales are above forecast because the weather has been good.
"the weather has been good."
DeleteYep, the economic weather hasn't been quite so bad as we're being led to believe?
Pre-scripted?
ReplyDelete"The best performing sectors are the Materials and Financials sectors, up 0.00% and 0.00% respectively."
Added 20K shares @ .925
ReplyDeleteOut @ 1.04
DeleteI read the Q&A this morning. Didn't like the tone of the answers.
DeleteTOF- Didn't it seem they were saying the securitization market was not a priority?
Whatching this trade, either a big player is getting in or covering.
DeleteHow proactive is this, Meyers is "hoping" his units are providing customer service:
Deletelet's just say we convinced a family of incoming freshmen or first year college student that to finance their daughter or son, Monogram is the best, most cost-effective, most flexible, most understandable financial tool for them. And then, we hope that our units provide really good customer service and the product execution is seamless for them.
FMD - Alright, just picked up some trading shares @ $0.93, should'a just bit in pre-market but oh well.
ReplyDeleteWho is it that's trying to scare everyone so much, we should be listening to them carefully (know your enemies).
ReplyDeleteThat's my wife...but she's angry at everything.
DeleteAngry as in spoiled, or angry as in disoriented? I generally fit the latter, unfortunately. ;)
DeleteMark - THat's right about the securitization market. Not a good thing...there should be some lending partners signing on but the IRS overhang is a big problem and people are selling first and asking questions later. i did the same...some sold for a 15% hit at $1.01. Live and learn and move on.
ReplyDeleteSo you're out now?
DeleteRandom thoughts:
ReplyDelete"The Ps lost close to 1 ½% of their value. This action has them breaking down out of their sideways range.
The Quack was hit even harder. It lost nearly 1 ¾% of its value. This action has it breaking down out of its short-term sideways range--all the way to the bottom of its previous range.
The selling was nearly across the board as suggested by the broad based Rusty. It lost close to 2%. Like the other indices, it too broke down out of its range.
One thing that I have been concerned about lately is the fact that previously strong sectors have been losing momentum. This really played out on Thursday. It is a case of, "the bigger they are, the harder they fall"--Biotech, Retail, Health Services to name a few. And, there's plenty more. As mentioned recently, we could see shorting in these previous high fliers. This is especially true now that they have begun to crack.
Bonds banged out new lows. Stop me if you heard this before: it's not the absolute rate that bothers me, it's the delta in rates. They need to stabilize-and soon. When Bonds can't get a bid when the market is tanking, it suggests a liquidation type of market. Someone needs to raise cash soon, selling even bonds.
About the only thing that glimmered was Gold. Well, Silver and Gold and some other Metals and Mining. It has been tough to jump aboard these stocks lately due to their recent fake out. The good news is that if this is the real deal, we should have plenty of opportunities along the way.
So what do we do? With the market breaking down out of its sideways range, it's starting to look a little ominous. Those who bought in the range in anticipation of higher prices are now faced with a loss. This is known as overhead supply. If the market goes straight back up, then they will breathe a collective sigh of relief and keep on holding. On the flip side, the longer and further the market stays below the range, the more inclined these individuals will be to sell. And, this selling can beget even more selling. In light of all of the above, I'd certainly avoid the long side for now with the exception of areas waking up such as the Metals & Mining. Although things look a little ominous, I wouldn't run out and short just yet. As a pullback player, the market-or, at least individual areas--will have to bounce a bit to create setups. So, get ready to get ready on the short side just in case. Aforementioned previous high fliers could provide some wonderful opportunities soon.
Best of luck with your trading today!"
MY note: Bonds AND stocks selling may not be a liquidation market. Stocks are (or were) at all time highs (except the Q's, they were at multi-year highs)and bonds aren't that far off their highs (the low for TLT being in the mid 80's and the high in the 130's) so where do you go? Bonds are in a downtrend and stocks are at their highs. It may be that traders/investors are just pulling in their horns and waiting for a few things (and summer low volume) to shake out some opportunities. It may be that the grown ups are selling LT bonds and stocks and buying the short end to take advantage of the rising yields for the time being. TOF, that Yahoo link was like watching the old CNBC.
BTW: This may be the time to look at commodities and related securities again. Miners, drillers, oil co's, etc.
ReplyDeleteshippers
DeleteWe need a "LIKE" button so I can LIKE Second's commentary for this post. Spot on.
ReplyDeleteFBSS - A tiny little bank just up the road from me in a very upscale community (DC suburban "Farming" community where every little girl owns one or two dressage horses and a large indoor riding ring).
ReplyDeleteFMD and YRCW, in hindsight two of the most speculative stocks out there, are down 50% in one month. i'm taking this as an omen. i am finally on 2nd's side.
ReplyDeleteIt does give one pause, but you are still very young TOF. When you get into your 50's and 60's which is where I think 2nd comes from (and mine) your risk appetite becomes more muted.
DeleteThat said, if you do not bet you cannot win and if you loose all your chips you cannot bet.
Interesting times!
yeah man i took a big hit on this FMD relative to my peak. i don't know how but i'm still up about 40% this year and i think it's wise to take a break at this point. don't want to pull a round tripper!
Deletemy bad on the FMD call fellas. just a horrible outcome.
There is wisdom in these words.
DeleteI think the shot across the bow on FMD was when the CONgress actually found a compromise on student loans. I sold that day. TOF was absolutely right until that happened. Higher rates for federal loans was the catalyst.
DeleteCC - nah man it's all about the IRS audit. the whole conf call centered on it. its a huge risk hanging over their heads. for all we know they could be forced to file for bankruptcy protection around this issue because if the IRS wins their case in saying the company didn't legally sell the trusts they held then the refund they received ($195 million) would have to be forfeited. if this does happen the company doesn't have the $$ to pay this. if this is upheld in the appeals process then the company has the risk of running into the statute of limitations on a refund (3 years) whereby even if they won the case in court the appeals process would potentially invalidate the refund and they would be SOL because the statute of limitations would say they couldn't file for the refund bc too much lime lapsed.
Deleteby the way, who's words were filled with wisdom? certainly not mine!?
T3d, but that never precludes your words from being wise.
DeleteI hardly think a statue of limitations would be an issue since the filings have been timely?
DeleteThis latest gap was the IRS deal. Look at the chart. The closing high was July 24th. Congress hinted at a deal on July 22nd and a couple days later came to an agreement. That was the top. Big O signed it on 8/6. Surely the IRS audit dropped it below support, but it was already done.
DeleteCP - according to my old boss, a tax partner at a public accounting firm, the IRS could be playing games with them whereby they delay it enough so statute of limitations pass (this window actually just passed) and if they get a favorable ruling then the company would not be able to file an amendment because the window of time to do so will have passed. it's a very risky issue and the company could potentially file for bankruptcy to protect them against the risk. its a risk i'm no longer willing to take. like T3D said "if you loose all your chips you cannot bet." similarly, if the company loses all their money they can't make loans and they're done.
DeleteYeah, I guess I don't see why the company would need to file an amendment if they received a favorable ruling, I guess just I don't understand the situation very well.
DeleteI think you could argue that since there's $110M sitting "outside the bank", then this explains the market current cap, lends validity to the question CC has raised concerning Congressional student loans, and there's no discount on the IRS issue, implying a favorable ruling is anticipated?
DeleteAlso, well, I just lost my train of thought again somehow..... Something about hitting bottom on the student loan business, like have economies of scale begun or beginning to kick in going forward or has Congress placed a firm stick in the spokes?
Someone must run the congressional side of the loan program, is it a governmental agency or another institution such as JPM? Seems like since FMD has tools, they should have some value and put to use, or has big data managed to dwarf and diminish the value added?
Noticing the 200SMA is right at $1.10ish..... Coincidence?
TZA opener. $26.5
ReplyDeletei know part of my thinking is clouded by the debacle in FMD but i have a sneaky suspicion we could see a black XXXday very soon.
DeleteA number of times the market has faked me out this year, it's good at doing that. BIDU was one example among the list of a few others.
DeleteThis comment has been removed by the author.
DeleteI'm hearing the Righteous Bros.....you've lost that March 2009 feeling...
DeleteYou never bounce anymore everytime I buy your dips....
added $26.45. Can't shake black monday/tuesday/wednesday off my mind. definitely impacted by the hit to the port
DeleteI don't want to add to any emotional distress driven moves, but I've learned to listen when a lot of talking heads start sounding cautious. They may not influence me, but they influence a lot of retail investors and they start to gather group think steam.
DeleteSo I've been looking forward with a few things in mind.
1. Markets are acting toppy. This may be a fake out but it may be a transition off of all time highs (except Q's).
2. Rising interest rates.
3. LT bond downtrend and bonds AND stocks selling. Funky.
4. PM's off their lows and trending.
5. Fed jawboning on T's.
6. New Fed chair in January.
7. Markets test new Fed chairs (or old chairs have impeccable crisis timing)
8. Congressional mid term elections. Time to F with the markets.
I'm looking for opposing ideas.
CC - This is exactly what I'm thinking about fundamentally. but the bigger issue for me is the action in some of the risky stocks. look at this list:
DeleteSUNE
YRCW
FMD
NLS
FSLR
DANG
IMMU
YY
YELP
and then take into context the move in the past month on those internet stocks. everyone was piling into them and they got extremely frothy. Z, YELP, FB, GRPN etc.
YES. I may have been early with that thinking due to Big Dave's service, where we've been hand sitting as a result of the points you mentions. A lot of former high fliers have been slashed, sectors too except pm's/miners, etc. which were mentioned in today's Landry post.
DeleteSecond was right a bit ago when he warned of not giving gains back. Aside from Landry I have learned over the years to keep a close eye on Second's inner sentiment meter. It explains why he does so well at the casino. It's a natural gift.
yeah the other thing i can't ignore any more is the action of the prior leading stocks and sectors. GOOG, AMZN, XLF, XHB, microcaps (IWC) and small caps (IWM)...all below prior support levels, many of them on a gap lower. that looks to me like a breakdown in confidence across the board.
Deleteshorter term, today is OpEx right? what if all stocks are being pinned right now? what happens on Monday?
DeleteCould be just still rotation.
DeleteLike CC said above, commodities are acting well. The energy stocks are bouncing and appear to be putting in a final bottom. At least possible a final bottom - valuations are such that it would support this, plus you've got smart value guys like Buffet stepping into majors like SU.
My personal stocks are having a really good day today, but, as you know, I don't play much in the high-risk stocks.
I'm still worried. If we get a bounce it might be an opportunity to get short. Of course there is always the possibility the opposite is true. That gaps is a problem in my mind.
DeleteWhat I ask myself is, "do you think the Fed will just let bonds fall without some action or at least jawboning along the way?" Do you think they will let stocks sell off all at once with no action? Or the (somewhat) opposing view...will rising rates lead to inflation/stifle the recovery? I don't know, I'm just eye balling the alternatives.
DeleteBecause either way PM's, commodities and oil are telegraphing something along those lines. The benefit of those positions is they are physically in short supply/high demand, and as BB notes, forming bottoms/trending.
I wonder if the upcoming eurozone bailout vote in German Parliament has anything to do with recent weakness?
ReplyDeleteThere are plenty of moving pieces.
BIDU will come back to test $95, IMO, if the SPX falls below the 50SMA and retests the 200SMA
Robot went short yesterday @ S&P 1669
Whitehouse power station still has capacity to burn coal, largest single fossil fuel pollution source in district.
ReplyDeleteFMD - Our greed was out of sync with the time line for sure, but have we discovered something new about the risks? I guess the answer is yes.
ReplyDeleteman i hope for the people that didn't bail that they are the cooler heads and they will prevail. it's just way too much risk for me so i'm out. could the company win? absolutely. but if they sold those trusts off at $0 which I have a suspicion they did then it will be awfully hard for them to convince the judge hearing their case that they did it for a business reason and not a tax reason. that's the risk right now and i'm not willing to take it. it could take a year to find out and the stock could drift back up, but there's a chance they are forced into bankruptcy because of this...
DeleteYeah, I don't know what they sold or how much they got for it, perhaps the IRS doesn't value it quite the way FMD does and that could explain the snag.
DeleteThey got their cash from somewhere though(burning it too fast for me). Meyers is sticking around and the lights are still on, why would these guys stick around just to go down with the ship as opposed to leave and go start a new company?
Yeah, I guess it's too risky, really hard to gauge but if you jumped out then it's probably time for me to as well b/c I'm almost completely lost when it comes to understanding what it is, aside from just examining the simple fact that their model seems to have died years ago.... Perhaps the IRS intends on sticking a fork in it to finally put it down.
well i actually think they just basically gave the trust away for $1 or something like that to get the tax refund. i could be wrong on this but that was my interpretation of what went down back in 2009. if so the IRS can say they did that transaction for tax purposes only and not for a business reason. that's where it gets iffy. if there's an if then its time to split.
Deletethe thing about meyers: i don't know if you noticed but they dropped a nice little nugget in the filing from two days ago that i just saw (the one where they promoted some dude). he gets 1.1 million options that vest immediately. so that's why he's sticking around. plus the company pays him a hefty salary and covers his private jet expense. ugh...this is all making me ill. i'm just glad we got in at $1.20 or so and not $1.70.
LOL, my port reached a 52wk low today and the economy hasn't even crashed yet.
ReplyDeleteDRAM - +10%, Now we're back on a roll fellas, time to git long lil-doggy's!
ReplyDeletehttp://www.youtube.com/watch?v=f3w4oiBKY-E
ReplyDeletetwo weeks ago i spoke with a guy i play basketball with that is a pretty big broker here in the SD area. he works with buyers in the $1 Million+ range. he said at that time that things slowed down just a wee bit since the peak over the spring. since i spoke with him rates on the 10 year are up from 2.6 to 2.85...about 10% more. i'll be interested in seeing what he has to say in a few weeks.
ReplyDeleteYeah, me too.
DeleteCC Asked: "do you think the Fed will just let bonds fall without some action or at least jawboning along the way?"
I think the FED will intervene on behalf of special interest groups, why else would they ever make a habit of intervening? After all, without the special interest group circle jerk we'd all be dead, right?
from what i gather aren't they like 25%+ of the bond market? would they be just printing to buy their own bonds?
DeleteMaybe. They exchange term paper and print to pay it back with cheaper $$$. Stuff anyone else would go to jail for (or be killed in China).
DeleteBonds falling really aren't a bad thing and should be expected as the economy is improving. The economy is not that weak that it needs rates as low as they are.
Delete10 year at 2.85% is still cheap. Look at the TLT for example, prices are still higher (rates lower) than anytime in the last 10 years other than last year and the 2009 panic spike. They are still abnormally low and need to come up.
The other thing to remember is if the economy starts to turn down, rates will come back down. it is not like there is an inflation or overheated economy problems that needs to be hit with higher rates.
DeleteI agree, but that doesn't preclude the Fed from "refinancing" by transferring short term paper to long term. I did that. Used a zero % card to transfer some debt. My FICO score went down for using common sense. Go figure.
DeleteThe Fed does it and nobody says anything.
As I look back I think the recovery would have been faster if the fed had not penalized savers and had instead penalized the faulty risk takers that crashed the damn thing.
Yeah, maybe. The issue with that approach was the potential risk was another depression.
DeleteNot sure how high the chances of that were, but people (like Hussman and a few others) were saying a depression was possible at the time.
i think the "depression" would have ended due to normal biz cycles regardless. prices got so cheap that it was just a matter of time before people would buy.
DeleteHow about the concept of operating from the perspective that the monetary system is no longer a FIAT one, but has been replaced by one based on credit availability instead?
DeleteCANADA STOCKS-TSX hits three-week high, heads for weekly gain
ReplyDeletehttp://www.reuters.com/article/2013/08/16/markets-canada-stocks-idUSL2N0GH0PC20130816?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43
Not exactly following through on a collapse, is it?
DeleteORCL - Repeated island reversals, doesn't that kind of indicate the market thinks highly of a stock, when it repeatedly climbs back up to close the downside gap?
ReplyDeleteXHB - Looks like an H&S and yesterday it tried to fall through the neckline but came back up off it rather convincingly.
ReplyDeleteThree times now, it's come down to test that $28 level....
BSBR - Dang, I had a bid on that one at $5.78 and freakin' canceled it this morning....
ReplyDeleteA Kiss for luck and were on our way.
DeleteYeah baby
CP man, what's .04, buy if you like it.
DeleteSo true, LOL.... ;)
DeleteOperator could you help me place this bid.
ReplyDeletehttp://www.youtube.com/watch?v=FPu_G-T28iU
It's not time yet, to securitise....
ReplyDeleteWonder when it will be time to, if ever?
"i actually think they just basically gave the trust away for $1 or something like that to get the tax refund."
ReplyDeleteTOF, either they can or they can't do something like this, I don't know myself but wouldn't their accountants know the law?
Seems like they're either trying to pull one over on shareholders or they know WTF they're doing, just need to figure out which it is.
I'm still stuck thinking their business model was legislated to death, the tax liability is an issue as well, but if the business model is no longer intact then this thing IS most likely a goner unless they can reshape it into something that doesn't resemble a cash furnace.
CP - Yes but they were also desperate at that time...this $195 million injection saved them a lot of time to continue functioning and perhaps part of their hope was that the securitization market would return in a year or two and then they would be able to absorb the hit no matter what. remember back at the peak they were doing $200 million in net income annually. i don't know if this is what happened but it's certainly a possibility.
DeleteYeah fawk, that kinda makes sense. They were just buying time for their sinking ship and milking it along.
Deletei ended up buying and selling TZA twice...in a bid to make a little money back and edge back up to all time highs one trade at a time. holding TZA over the weekend. i think there's a chance we get a pullback on IWM to at least $94...that's a 7.5% drop and it would translate into a 20%ish gain for TZA. I think IWM will "outperform" SPY to the downside because the move up was fairly parabolic in IWM.
ReplyDeleteback to the bonds issue - lets say we do get a pullback of 10 to 15% or so...most likely bonds would come back, but i guess it comes down to how much of an impact it has on the housing market and people's perceptions. remember we were stuck in EXTREMELY low rates for like 18 months or so and there was this made rush to scoop up housing. i think with 10 year rates up about 100% it definitely will cause some hesitation on the fringe...there's no doubt about it. i don't know how much of an issue it is longer term but i think it could hang around for a while.
ReplyDeletemy best guess is we get a real range bound market for the next 14 to 16 months. and that range will tilt lower with 10% swings or so. my guess is we have seen the highs for 2013 and 2014 but we will get a sharp rally after that. maybe kind of look at it like a cup and handle forming.
When mortgage rates start to rise, you typically get an increase in housing activity as people move to lock in the lower mortgage rates. This can actually be pretty large - not sure what will happen this time. Usually when you get a mortgage rate quote (In Canada at least), it is locked for 90 days, so when rates rise, people want to move to keep this.
DeleteThe other key question is whether this increased activity will just bring activity forward or to keep the market moving. That will be the key.
What better way to force people to lock and close, then lower rates again to lure in the next batch?
Deleteyeah the surge in housing in san diego and other parts from speaking with realtors was very dramatic. i don't know if this is unsustainable or not...my hunch is it will be very similar to the activity surrounding that home buyer credit a few years ago: big spike followed by notable lull then gradual normalization. that kind of goes hand in hand with what i'm thinking about the market being in a trading range over the next 16 months or so.
DeleteFMD - Offed those shares in AH @ $1.01
ReplyDeleteTZA - Sold at $26.95 avg after hours. i'm thinking i will be able to pick it up around $26.4 on monday.
ReplyDeleteI appreciate the compliments, guys. New post.
ReplyDeleteCSH - Here's one that seems to be in a nice downtrend.....
ReplyDelete