Why hasn’t this gone to nothing yet?Can anyone explain this to me?
And what of the nonsense that the price going to $2 meant bankruotcy was going to be avoided? WHo are these Cramer-lovin fools, and how do we make them go away?
The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. ~Jesse Livermore
According to the CFTC weekly data for the week ended Tuesday, net shorts in the euro fell by 38% from last week's record high and are now at a 6 week low. Net shorts in the pound moved up a touch to just shy of its record high. Net longs in the Australian$ rose to the most since May '08 and net longs in the Canadian$ rose to the highest since Nov '07. Gold new longs fell to a 4 week low. Net longs in crude rose 14% and are just 12k contracts from a record high dating back to...
read more »
May 27th, 2009 at 11:34 am
I was thinking the same thing today. I think the answer is: because up is down and down is up in this bizarre time period we’re in right now. I almost expect it to double in the coming days.
May 27th, 2009 at 11:36 am
Ask Geithner!!
May 27th, 2009 at 11:41 am
It’s not at 0 for the same reason AIG isn’t at 0.
think about it.
May 27th, 2009 at 11:42 am
GS buying GM ??? Perhaps they are waiting for a kick-save? Maybe Prince All-Wally will come in??
Denial, I guess. A lot of HY and common are going to go to zero in coming years, as holders watch, transfixed.
May 27th, 2009 at 11:49 am
Why isnt AIG at 0?
Why is GM not at 0??? Why is GM still in the DOW???
Why is C still in the DOW???
May 27th, 2009 at 11:49 am
answer: professional stockbrokers and fund managers. (present company excepted of course.) those guys will not sell a position no matter how badly it performs. don’t get me started!
actually, wrong. they *will* sell a position if they can double down on the loss. “hey, you made $10K in tax loss credits!” “yeah, but i lost multiples in value — including after you bought the position you just sold!”
in 2007 i went into my broker’s office — this is one of those high end brokers that has since been absorbed into the banking industry — and announced to my brokers “if they *can* f–k it up, they *will*.” (meaning the bush administration and the sec.) the brokers didn’t know what i was talking about. but i made them pare back my equities position by half. in 2008 they were laughing — and then they didn’t laugh — and then they were on the street.
before the crater came i had closed my account with them and am now with a local bank wealth management group (they provide a fiduciary relationship, which is essential as you get older) whose philosophy is “you can’t beat the index.” actually no, i doubt that — in a bubble/bust mechanism timing is everything — but i also don’t doubt that unless you run your portfolio by yourself, or you review your portfolio every week, the pros will take the credit for every bubble and act totally amazed in every bust. they are there for the marketing and nothing else, and they will never off their commissions!
don’t get me started!
May 27th, 2009 at 11:51 am
Shell game.
May 27th, 2009 at 11:51 am
Leftback, are you saying HY is High Yield? Would you touch any of the Muni-bond funds like ORNAX, NHMAX or NEFZX? Broker keeps pushing these things to me as “generational buys”, but they fell about 80% over the last year or so and he has been pumping them most of the way down.
What are you doing these days? I’m just sitting in mainly cash and with my IRA money I am in mainly Emerging Market / global mutual funds and some Janus funds (Forty, Contrarian). I still have a decent stake in IAU (GOLD), but since I got in it at the high (close to $1,000 oz) I’m just trying to get back to even on it.
May 27th, 2009 at 11:51 am
I’ve always been told ‘it is due to arbitrage’.
Ned (the shell answer man)
May 27th, 2009 at 11:52 am
beating the index should never be the goal of anyone. that’s as foolish as it gets.
May 27th, 2009 at 11:54 am
Bizarro market. So-called “investors” still in denial? Maybe anyone still left at this price is of the thinking that they’re holding a cheap call option? In other news, looks like we are getting the end-of-month mutal fund mark-up treatment this week. The confidence number gave them a reason to run this thing up and now they’ll make it levitate the rest of the week so they can say, “Three positive months in a row!”
May 27th, 2009 at 11:56 am
Oh my god Jdamon33,
ORNAX,
you are kidding right? it’s a high yield muni. The defaults could wipe you out. Oh wait… your broker probably told you muni’s don’t default right?
that fund has barely kept pace with far lower risk muni’s even this year!!! be careful man, your broker is about to school you and get his fees along the way.
if you want muni’s buy PZA and use a stop loss. Muni’s could absolutely blow up at any moment.
You made a good trade in WFC, stick to your own ideas, they sound a lot better than your brokers.
May 27th, 2009 at 11:57 am
drollere, I too am fed up with the brokerage industry. I tried several times to get completely out of the market at the end of 2007 and then early in 2008 only to be sucked back in with the “aren’t you in it for the long term” mantra. Well, sure as sh*t I am if I know that I will be up 10% annualized for 40 years, but these idiots have a better chance of losing me 10% a year than making it.
I am debating as to whether or not Etrade, Ameritrade or Scottrade would be the best place for my money. Seems local banks wouldn’t have the brainpower needed to navigate these waters, but maybe I’m wrong on that one.
May 27th, 2009 at 11:58 am
And why people play the Lottery knowing their chance is 1 in 70 Million?
Here are some ideas:
(1) It is all about the short cycle never stopping. Covering requires buying, and opening requires selling, and the continuing shorting cycle until 0.1. Needless to say the covering is making money and the short opening will make in a day or 2.
(2) The key behind trading GM is not to be the last one out the door. A daily trading volume of 15-20% of the floating shares means that it the domain of high frequency traders with inclination to run by the cliff.
(3) This happens with almost every single bankruptcy, only when the music stops you see the 0.1/share. Nothing special about GM.
May 27th, 2009 at 12:08 pm
Jdamon: I agree with ben. Sell the munis and any HY bond funds. Default rates and yields are all going higher.
Ameritrade is backed by a Canadian bank (TD), so that’s my preference.
What am I doing? Not much. Piles and piles of cash. A small amount of IG corporates via a fund.
Long the 2-year and short the 10-yr. A few dividend stocks (VLO, COP) and commodities ETFs (DBA).
Trading the range-bound market from the short side whenever there is a big rally in equities.
Presently I am as cautious as I have been at any time since September. Waiting for a summer rally in Treasuries.
May 27th, 2009 at 12:11 pm
Why isn’t GM $0.00? Because markets are efficient. It’s true, there’s a hypothesis and everything.
May 27th, 2009 at 12:17 pm
Here is a story from across the pond about a financial skipping a debt payment. Bradford & Bingley is a sort of UK version of Countrywide. Remember that the problems always begin in the credit markets. There is going to be another flight to quality in the debt markets, and spreads are gong to widen again, sooner or later.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFX8MT.iiS8o&refer=home
May 27th, 2009 at 12:19 pm
ben22 Says:
May 27th, 2009 at 11:52 am
beating the index should never be the goal of anyone. that’s as foolish as it gets.
Ben:
You are going to do very well in time…I very much enjoy reading your thoughts…very well grounded and appropriate…
May 27th, 2009 at 12:23 pm
Bruce,
thanks a lot. that was a nice compliment.
May 27th, 2009 at 12:32 pm
Not to pump you up too much ben, but if you are indeed as young as I understand you to be, then you are wise beyond your years. It’s tough to swim against the tide at that tender age, keep it up! I’m a bit older and appreciate your perspective as given here. Thanks
May 27th, 2009 at 12:34 pm
“you can’t beat the index.”
as a small independent professional money manager you can beat the index. It is easy and hard at the same time–all it requires is a lot of work-which is the reason clients are paying a manager, and as well talent , caring and concern and the ability to pull the trigger and think out of the box not to mention a buy and sell discipline. A good dose of ethics helps too.
May 27th, 2009 at 12:37 pm
ben 22: Franklin411’s anti-matter
May 27th, 2009 at 12:37 pm
Here’s a question: since it’s NOT $0.00, why WOULDN’T you short it right now and make $1.18/share?
May 27th, 2009 at 12:41 pm
MBS are blowing out again. This trip Through the Looking Glass is almost over, reality is calling:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aw90LMfkBOeU&refer=home
May 27th, 2009 at 12:41 pm
I asked this very question on these very threads when GM announced a massive issuance of new shares with a reverse split to follow of 100-1
does not make sense- because GM has essentially told the shareholders they will be wiped out completely- shares did take a hit the next day- but it would seem a ZERO value would have been the result from the announcement
May 27th, 2009 at 12:45 pm
It is an option on a miracle.
May 27th, 2009 at 12:47 pm
notes from acrossthecurve on mbs:
“On a market note one dealer reports that mortgages are getting “smoked” amidst heavy selling. That is a function of convexity also.”
“Market participants report very heavy paying by convexity based accounts which is the reason for the very long caption for this post. In my years in the bond market the crazed convexity crowd was always the last in for the trade. When they appear the trade is nearly over and it is time to go in the other direction. By definition,they often sell the lowest prices and buy the highest.
So maybe, just maybe,we are nearing a bottom after a brutal move.”
May 27th, 2009 at 12:52 pm
Karen, are you suggesting that you think MBS are going to improve near term??
May 27th, 2009 at 1:02 pm
leftback @ 12:41
If long term rates rise, but short term rates stay low, that would argue for more adjustable-rate mortgages in which the interest rates are based on short-term rates. The politicians will probably like this idea, because it will push the problems out into the future. Pushing problems into the future is what politicians do best.
May 27th, 2009 at 1:03 pm
It has to do with shorts, in my opinion. Since stock is very hard to borrow, shorts are plagued with constant buy-ins. This leads to shorts being unsure they will be able to keep their position and they a less likely to initiate new positions. In a fair market stock would always be able to be relent and a reasonable risk adjusted interest rate. 100% is not fair price for practically taking no risk. Shares should be able to be relent if desired. Any attempt to restrict people from using markets at fair market rates is manipulation.
May 27th, 2009 at 1:11 pm
LMAO. They just mentioned on Bloomberg that option call volume is exceeding put volume 3:1. What they failed to mention is whether they are buying or selling call options. I think sell because the price of the puts are too high.
May 27th, 2009 at 1:12 pm
DL: I take your point. Although anyone taking on an ARM right now would be asking for trouble as most of them would be written relative to LIBOR or the 10-year, which are anyone’s guess over the next five to ten years.
My best guess is that we are seeing a move back into Treasuries beginning here, the 5-year auction went well, and when people think about the problems coming down the pike in munis high yield and prime MBS we will see even more of the flight-to-safety trade. This in turn should lead to a summer rally in the $ and to commodity weakness.
May 27th, 2009 at 1:14 pm
onlooker,
thank you as well, I’ll be 29 in Sept.
May 27th, 2009 at 1:15 pm
I also thought a lot of the ARM’s were written basedon LIBOR.
May 27th, 2009 at 1:17 pm
karen,
very interesting observation on MBS.
May 27th, 2009 at 1:20 pm
That’s options on GM (oops).
May 27th, 2009 at 1:24 pm
There has been a pronounced short squeeze in lower quality credit in recent weeks. The selling today may be an indication of profit taking by those who engineered/traded that rally. More interesting bear market phenomena.
May 27th, 2009 at 1:34 pm
Brett Steenbarger on the subject of the “SLP” and TICK values:
http://seekingalpha.com/article/139875-is-program-trading-especially-slp-affecting-trade-in-the-stock-market
May 27th, 2009 at 1:39 pm
@DL: Got PPT?
May 27th, 2009 at 1:41 pm
the free daily updates at stocktiming.com are exceptional so far this week. here is tuesday’s, then click on wednesday… http://www.stocktiming.com/Tuesday-DailyMarketUpdate.htm
May 27th, 2009 at 1:44 pm
The 10-year at 3.60. This is not going to be allowed to continue much longer.
May 27th, 2009 at 1:45 pm
Good one, karen. Thanks for sharing.
May 27th, 2009 at 1:47 pm
Its going to take a lot more institutional shenanigans to shake my shorts out. This whole little headfake from yesterday and today smells like an attempt to frustrate the weaker shorts and shake them out. Of course, a couple of Johnny’s get snickered in along the way and add to the short covering spike, but ultimately, I still see some large dumping going on here… once again, the bonds tell the story.
Just a quick observation.
May 27th, 2009 at 1:50 pm
Breaking news: GM Debt exchange offer fails. BOOM!!!
May 27th, 2009 at 1:53 pm
Its the Govie auction that has this goose cooked.
The TLT Cliff Dive is on.
May 27th, 2009 at 1:55 pm
@YY,
Are you the same YY that posts at ZH?
If so, you have had some great posts there recently.
This is all starting to feel a lot like last year all the sudden. Anyone else getting that sense? I also agree, the best thin to watch right now are the bonds. That 3.6 on the 10 year cannot last much longer. I doubt BB will me waiting very long from today to do something.
I had to stay home early today to get a part on the hot water heater fixed. I heard btwn CNBC and Bloom several money managers recommend the following:
Tech
Materials
Energy
Perhaps it’s a good time to take gains off the table in these areas.
Saudi oil minister says $75 oil, this would go well with the 5 wave up pattern that seems to be tracing out since the march low in OIH
May 27th, 2009 at 1:56 pm
BAM!
Look at that.
May 27th, 2009 at 1:58 pm
sorry about all the typos, was watching the market plunge while i was writing.
May 27th, 2009 at 2:00 pm
well, i don’t think the market it down for the count… love to buy back the sso i sold yesterday… lots of data on the table tomorrow…
May 27th, 2009 at 2:01 pm
Isn’t this the month for mutual fund redemptions? They have to give 30 days notice if they want their money.
May 27th, 2009 at 2:04 pm
Leftback re. commodities ETFs.
———-
I’m even weary of commodity ETFs because all those I “due diligenced” are NOT limited liability.
And with today’s perma-fraud, it scares the hell out of me.
May 27th, 2009 at 2:04 pm
karen,
I don’t either, still thinking this pushes up above the 200 days which has been my same target for some time 965-1k. What a great market to trade.
May 27th, 2009 at 2:05 pm
AmenRa,
You might be thinking hedge funds?
May 27th, 2009 at 2:06 pm
3.66% on the 10-yr. Can hardly believe what I am seeing. Especially as I am short !!
May 27th, 2009 at 2:06 pm
Why …..
Accepting reality and reflecting it properly would set a bad example. What if it caught on? That would make a freaking mess.
May 27th, 2009 at 2:06 pm
A new era is upon us with these 2 major headlines in our national paper:
Shariah comes to Canada
GM’s bond swap fails; bankruptcy is next step
May 27th, 2009 at 2:08 pm
@ karen and b22:
Would you two be willing to concede on a SPX close below 878?
May 27th, 2009 at 2:09 pm
ben22: The 200DMA is now SPX 934. Time marches on and the triangle is closing (875-900-934).
A major breakdown is coming. Wonder which market it will be?
May 27th, 2009 at 2:09 pm
@ben22
Wrong institution. My bad. But it’s what helped push the markets lower toward the end of Feb.
May 27th, 2009 at 2:10 pm
leftback Says:
May 27th, 2009 at 1:24 pm
There has been a pronounced short squeeze in lower quality credit in recent weeks. The selling today may be an indication of profit taking by those who engineered/traded that rally. More interesting bear market phenomena.
comment:
—————
Has BoA finished raising new capital. This morning, it still looked like they had a little more to go. Maybe they finished??
May 27th, 2009 at 2:11 pm
AmenRa @ 1:50
Wow. GM might go into bankruptcy. Who could have seen that coming?!
May 27th, 2009 at 2:13 pm
@ I-Man
I’m thinking 877.52 which is the turnaround/reversal price on the 3LB. 2h45min left to see if it can happen.
May 27th, 2009 at 2:13 pm
don’t know why any body still has GM stock. or why any body would still have the bonds either. unless they have some sort of derivative or insurance to pay them when the company goes bankrupt next week. or maybe they need a loss (why they need that i wouldn’t know, there are so many opportunities for this else where too). this was a foregone conclusion for at least a month now.
May 27th, 2009 at 2:13 pm
I-man,
I suppose it depends. I’d need to see it happen first and then check all the internals to see how it happened. I still think way too many people want to sell this rally, pundits can hardly get out how skeptical they are.
Lefty,
up above the 200 day. DL reminded me the other day that average has dropped. It would only be fitting people pile in right at the top pushing it above there. What a great sell signal it would be, almost too good.
May 27th, 2009 at 2:13 pm
I tried to short IYT today (transport index). Couldn’t borrow the shares. Tried to short XHB. Same thing. What is going on here?
Finally, I had to settle for a short in FDX.
May 27th, 2009 at 2:14 pm
DL Says:
May 27th, 2009 at 2:11 pm
AmenRa @ 1:50
Wow. GM might go into bankruptcy. Who could have seen that coming?!
reply:
————–
I always thought accounting gimics would carry them through. In the past, whenever they announced financial troubles, they always said “OK now” without changing much structurally. I just assumed they got creative with the rules. I guess that will only work for so long.
May 27th, 2009 at 2:14 pm
@DL
Not the MSM or Kudlow. It’s all about the green shoots!!!
May 27th, 2009 at 2:16 pm
@ hobo,
David Faber did a nice segment on CNBC on that today. I think they have raised ~75% of what they needed according to the “stress test”. Soon enough Ken Lewis will say “we are well capitalized and we are meeting the requirements of the stress test, which included higher losses than occured during the depression.”
He (Faber) also noted what a killing BlackRock and some others made as they just bot the preferreds at .30/$1.00 and as part of the conversion to common were then paid .80 or so on the $1.
May 27th, 2009 at 2:21 pm
AmenRa,
I’m not sure what impact hedge fund redemptions will have this quarter. Psychology is shifting the longer this countertrend rally goes on. In February the days seemed far darker and it was winter.
We’ll have to watch and see.
May 27th, 2009 at 2:22 pm
holy crap the 10 yr note is at 3.68%. picking up the red phone to BB: “EMERGENCY”
May 27th, 2009 at 2:23 pm
Jdamon33 fyi .. sourcecode of an email from me to me
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Hi Greg,
Now is the time for all good men to come to the aid of their country.
Later,
Greg
May 27th, 2009 at 2:23 pm
@ DL:
I’ve had such a hard time borrowing ETF shares to short that I have stopped trying. So frustrating to map out a trade and then go to put it on and you cant borrow the shares.
I just stick to the inverse ETF’s now.
(I dont short individual stocks BTW.)
May 27th, 2009 at 2:23 pm
@ben22
Those who couldn’t get out then most likely are viewing the current gains in the market as an opportunity to exit.
May 27th, 2009 at 2:27 pm
@stocktiming.com: “But … pay attention to the 6014 resistance level. On May 8th, 11th, and May 20th, the NYA tested the resistance 3 times. In all three cases, the NYA was unable to rise above that January 6th benchmark. This rally will not be able to continue unless the NYA can break above its 6014 resistance.”
i love graphical description (sorry, “technical analysis”). it always has one of three important insights to offer:
1. “it can’t go higher/lower until … it goes higher/lower!”
2. “if it doesn’t stay the same, it’s gonna change!”
3. “if it changes faster than it changed before, look out — it’s got momentum!”
the best part is you can draw lots of lines (i love lines!) until the lines don’t fit. and then? you draw new lines!
May 27th, 2009 at 2:28 pm
AmenRa,
That’s way too rational a thought process. You might be smart enough to think that way but that’s not the average investor, by a long shot.
May 27th, 2009 at 2:29 pm
3.70%…. unbelievable. You knew this would happen one day, just didn’t know when….
Someone in Beijing is getting burned badly and they are on the phone to Tiny Tim and Helicopter Ben right now…!
May 27th, 2009 at 2:31 pm
drollere Says:
May 27th, 2009 at 2:27 pm
the best part is you can draw lots of lines (i love lines!) until the lines don’t fit. and then? you draw new lines!
comment:
————–
Rude cynic. I just like to think of them as magic charts. They can explain anything if you try hard enough and sound convincing. Lines really make them look cool, though.
May 27th, 2009 at 2:36 pm
@Hal: “[being a professional independent money manager] requires is a lot of work — which is the reason clients are paying a manager — and as well talent , caring and concern and the ability to pull the trigger and think out of the box not to mention a buy and sell discipline. A good dose of ethics helps too.”
that’s a spectacular marketing speech. but even if it were (or for you, is) true, there is one problem: it’s the *market*.
the market can be timed, but most safely only on structural and secular trends. trying to profit on the weekly ups and downs or on individual stocks is a fool’s game in the long run. people on this blog have been predicting a market tumble (“look out for the rising wedge!”) for a month now. in other words, they’ve been wrong four weeks in a row.
May 27th, 2009 at 2:36 pm
I wonder what is going to happen to mortgage rates after this week’s bond market action? Not pretty…
May 27th, 2009 at 2:36 pm
3 year weekly tnx chart.. sorry if the link doesn’t work. i have a subscription.
http://stockcharts.com/h-sc/ui?s=$TNX&id=p45236901427&def=N&listNum=1
May 27th, 2009 at 2:38 pm
karen
The chart works for me; no subscription.
Thanks
May 27th, 2009 at 2:41 pm
Ok speech over. Let the carnage resume.
May 27th, 2009 at 2:41 pm
Onlooker, uh-oh, that’s too bad it works : ) now you all will be inundated with my charts. lol.
May 27th, 2009 at 2:44 pm
@karen
I was able to see it also. The Full Stochastics is screaming.
May 27th, 2009 at 2:46 pm
you guys should get used to TA being dominant the longer the bear market goes on. This always happens in long bears, TA dominates and fundamentalists get tossed out.
May 27th, 2009 at 2:48 pm
here is the 30 for fun: http://stockcharts.com/h-sc/ui?s=$tyx&p=W&yr=3&mn=0&dy=0&id=p45236901427
and the price view: http://stockcharts.com/h-sc/ui?s=$usb&p=W&yr=3&mn=0&dy=0&id=p45236901427
okay, i’ll quit now : )
May 27th, 2009 at 2:49 pm
I love those stockcharts charts karen… gotta get me some of that.
On TNX… tells me that there is alot more room to the upside on that chart.
May 27th, 2009 at 2:50 pm
karen
Bring ‘em on! I’m all eyes!
May 27th, 2009 at 2:54 pm
@ karen:
Is that where you’re getting your 60 min charts?
May 27th, 2009 at 2:55 pm
@ben22
the monthly 3LB for SPX had a turnaround/reversal on 1/31/08 and hasn’t looked back since.
May 27th, 2009 at 2:56 pm
“Why hasn’t this gone to nothing yet?Can anyone explain this to me?”
I believe it’s a function of day traders. And like someone else said, it’s a lotto ticket if somehow GM avoids bankruptcy.
May 27th, 2009 at 2:56 pm
http://quotes.ino.com/chart/?s=CBOT_TY.M09&v=dmax
re: GM,
one could make the argument that the Transfer Agent has a fiduciary responsibility to boost the bid to discourage these certs going out the door, by the bale, to be sold on FleaPay as wrapping/T Paper ‘novelty’ gifts..
May 27th, 2009 at 2:59 pm
I-Man, yes. you can get 1,5, 10, 15, 30, 60, daily, weekly, and monthly. along with 10 million other tricks.
May 27th, 2009 at 3:01 pm
OT: Moody’s says that the US debt is stable. Didn’t they fail to downgrade the banks before it was too late?
May 27th, 2009 at 3:02 pm
Is the FED losing its grip on the treasury market? If this continues, can we put to bed the PPT idea?
May 27th, 2009 at 3:04 pm
@hope, i put it to bed a long time ago..
May 27th, 2009 at 3:05 pm
@hopeImwrong
It’s not just the Fed. It’s the US Treasury and primary dealers also. I don’t necessarily believe in the PPT but someone out there can put a floor to prices or start a short squeeze.
May 27th, 2009 at 3:07 pm
PPT is powerless. People think they have way more influence than they really do.
May 27th, 2009 at 3:07 pm
@ Ra
But only temporarily bro- no one can fight the tape continuously.
As Macke said long ago…
“They can make it jump, but they cant make it fly.”
May 27th, 2009 at 3:12 pm
@ AmenRa exactly my point. Are these guys smoking “Green shoots”?
May 27th, 2009 at 3:22 pm
@b22 2:07
Maybe we ascribe more power to them than we should, but they are not “powerless.” Timing is everything and somebody, be it a loose confederation of MM’s, primary broker dealers, etc. have caused a lot of pain because they have defended prices a important inflection point, especially after hours. I agree with I-Man, the power of the PPT is limited, but in the right circumstances, it can have a huge effect.
May 27th, 2009 at 3:25 pm
I-Man,
If this keeps up tomorrow, you think we bounce again at 880/875 or do we finally bust through?
May 27th, 2009 at 3:28 pm
Looks like they’re powerless right now with the Dow down -160 & S&P down -15
May 27th, 2009 at 3:29 pm
Cursive,
Re: PPT,
When the credit deflation hits you will see exactly what I mean when I say they are powerless. Suppose I should have made the comment more clear. The bags of credit they hold will not be big enough to stop what will happen. This is why I describe them that way.
May 27th, 2009 at 3:29 pm
@Cursive
That depends on how bad Durable Goods and Jobless Claims are tomorrow morning.
May 27th, 2009 at 3:29 pm
I would argue that the PPT is essentially all facets of our government. The bailouts/stimuli/funds and mortgage rate manipulations are all designed to protect something or someone from plunging at the expense of others who are on the other side of the trade. And while opaque, these are the actions that they have taken that we know about. What about actions we’re unaware of?
May 27th, 2009 at 3:33 pm
Here’s an odd stock for you that I could never figure out: LG
http://stockcharts.com/h-sc/ui
My br in law works there and they were loving the run up while the market went down (stock in 401K). I told them they should guard against having very much company stock for all the usual reasons, and it seemed like a really good time to take some money off the table. But of course nobody wants to sell a rising stock, and the damn thing ran up another 25% from there. You can see it ran way up (interrupted by a big fall in Oct) and now it’s come back down in a bloody free fall since the peak late last year.
I haven’t asked them what they did about it. I hope they took some gains, but I doubt it. I kind of hate to ask now. They’re still better off than having been in the broader market, but I don’t know where it’s going to stop falling. It seems like it was a momentum trade based on some pretty good fundamentals, but it’s just a smallish local gas company, for God’s sake, not high tech or biotech or any such thing.
Very interesting.
May 27th, 2009 at 3:35 pm
Ah Cursive…
I-Man a not fore tell. Only watch- an position.
But here’s my best crystal ball shot:
On SPX one cannot deny the symetrical triangle consolidation pattern… marked now by lower highs, but NOT lower lows… 878 is the line I am watching. These things are usually continuation patterns, and as the Mistress will be quick to point out, the current trend in the daily TF is up.
This one doesnt smell like continuation to me based on market breadth, but I-Man is usually wrong, so he deals with that and accepts that its a likely possibility.
I would say we definitely test 878 tomorrow, as for bounce or breakdown, I cannot say. All I can say is I have no reason to bail on my QID, or my SRS, or my FAZ.
@ Left:
At some point, there is a bid for TLT. When shall it be?
May 27th, 2009 at 3:36 pm
@AmenRa: Something tells me that both will come in “better than expected”.
May 27th, 2009 at 3:38 pm
@b22 3:29
Agreed. The PPT can’t stop this deflationary tsunami. But, they do damage otherwise good trades all the time. Moreover, the fear of further punishment has the knock-on effect of scaring shorties out of trades on unexpected news (witness yesterday).
May 27th, 2009 at 3:39 pm
3.72% for the 10 yr note!!
May 27th, 2009 at 3:41 pm
@Manwich
Just wait until the numbers come in after GM files for bankruptcy
May 27th, 2009 at 3:43 pm
Onlooker,
While it is a bad idea to have a lot of company stock in a 401k (see Bank of America employees) there is one hell of a strategy for some older folks that did it over an entire career known as Net Unrealized Appreciation. I run across this situation all the time here in DE with 25+ year Du Pont employees.
Most people don’t know how it works.
May 27th, 2009 at 3:44 pm
“What about actions we’re unaware of?”
good point- but if we are unaware of the actions then they cannot impact our decisions
speaking unaware of things- durable goods and intial claims tomorrow- I am of the opinion info will be worse than expected-
anyone care to comment?
May 27th, 2009 at 3:46 pm
Cursive,
I think we are basically on the same page with PPT then.
May 27th, 2009 at 3:49 pm
one of the most exciting days in the long bonds in weeks.
ahab,
Worse than expected doesn’t matter anymore. If the numbers of either show any sort of deceleration in the decline from YoY or MoM then it’s a green shoot. During a powerful countertrend rally like this everyone goes back to embracing the good they can find and the feeling of optimism.
Just my best guess, we’ll know in not so many hrs.
May 27th, 2009 at 3:52 pm
@ahab 3:44
I’ve converted to the school of “it’s whatever the market makers want it to be.” What the hell precipitated today’s sell-off? Nothing. The increase in existing homes inventory did nothing all morning. The 10-yr. was already in the basement since last Friday, what was so different today? I no longer believe that news drives the market. It is often used to explain market movement, but I don’t think it matters much. I’d rather be a fly on the wall at some of these proprietary trading firms. They know were they want to take the market, until they can’t and then it is an ugly, raging beast.
May 27th, 2009 at 3:55 pm
I am optimistic that the data will confirm that all is not well in pleasantville
May 27th, 2009 at 3:56 pm
@ Cursive…
If you really wanna get crazy… maybe its the trends that move the news.
May 27th, 2009 at 3:56 pm
@call me ahab
“but if we are unaware of the actions then they cannot impact our decisions”
They may not impact our decisions but they can effect the outcome of them. And what about those who do know about them? That gives them an inherit advantage, doesn’t it?
May 27th, 2009 at 4:04 pm
@ I-Man
Yes, I’ve been reading more and more about Elliott Wave and social mood. Frankly, I used to dismiss it, but it’s growing on me. It helps that luminaries such as Mish or Todd Harrison believe strongly in it. BTW, I always appreciate your market view. I’m too simple-minded for EW, but you are in agreement with many about the symetrical triangle. I’ve got some reading to do tonight….
May 27th, 2009 at 4:11 pm
Pat G-
I am with you- I agree- the big players are the market makers- our only advantage is that we can get in and out quickly
May 27th, 2009 at 4:18 pm
GM’s not at zero BR cause there is still a glimmer of hope that they can return to the great company they once were, you know like back in 1950 or something.
On another note, Kudlow is interviewing Cheney tonite on his show. I was going to record it, but have decided just to punch myself in the face with a brick instead.
May 27th, 2009 at 4:18 pm
Cursive,
I have become convinced that while not perfect, Wave is the absolute best forecasting tool we’ve got.
May 27th, 2009 at 4:18 pm
@call me ahab
In and out quickly is not a game that I have either the time or the intellect to play. But I wish you luck. They say that buy and hold is dead. Not if you’ve looked at all the pieces and figured out most likely how the puzzle will look in the end.
May 27th, 2009 at 4:28 pm
Is anyone else hearing that tonight might be Macke’s last Fast Money?
May 27th, 2009 at 4:29 pm
You make them go away by reducing them to penury.
May 27th, 2009 at 4:34 pm
Y’know, I once knew a guy who made a bundle on one quick trade — ENE’s dead cat bounce. He bought a huge block at something like $0.18 and sold at something like $0.55 a day or two later, after which the thing went almost (but not all the way) to zero. Timed it perfectly. Strange stuff happens at this end of the market.
May 27th, 2009 at 4:47 pm
Pat G-
in and out doesn’t mean you can’t hold a position for a while- what I mean- if you are a large market maker buying huge blocks of stock- you can’t put your whole purchase in at one time- you build a position- let’s say the position is 1,000,000 shares of X corp- then the istitution will buy blocks of shares at a time- they ease there way in- but while they are doing it they are forcing the price up
you and I on the other hand can buy 100 shares of AAPL tommorow and sell the entire postion 1 year from now- in and out very easily
May 27th, 2009 at 4:53 pm
The move in the Treasury market this week was rather shocking in size and speed, and this is going to provide a new dislocation of the mortgage market – even if the 10-year stops dead right here and doesn’t go out to 4%. Higher rates are not going to help clear an already bloated housing inventory.
I suspect the equity market is going to sleep on it and then start selling off in the morning, especially if we see another reasonable size initial claims number. Sooner or later Treasuries are going to rally at these yields.
I was short the banks and short the 10yr today. It’s better to be lucky than good.
May 27th, 2009 at 5:03 pm
Cursive,
On your comment about trying to understand the market, I think it’s useful to understand complex systems (sorry for the jargon, but I think this is one area where 99% of the investment world get’s mixed up). A complex system is where there is a large number of inter-connected inputs for each output . The one really key problem with all complex systems is linking cause and effect — it’s often impossible. A simple example is dropping particles of sand into a pile. As the sand pile builds, it eventually collapses and then starts building up again as more sand is piled on. Where do you put the blame for the sand pile collapse. Was it that last sand particle that fell onto the pile, was it the precarious state the pile was in when that last particle fell. And why was the pile in a perilious state — it was the accumulation of all that happened before it. A more real world example is avalanche falls — the top researchers still can’t pinpoint why most avalanches happen exactly at the moment they do. The smallest of changes can have massive impacts.
In the market, there are millions of people making decisions based on all sorts of criteria … the least of which is that many are trying to anticipate what others will do rather than on any sort of fundamental issue or the massive herding of what tomorrow might look like. To try to find that one or two reasons why a market moved the way it did is almost always an error in thinking. The problem is that humans were never designed to deal with complex systems, so we are constantly trying ot find specific reasons (it’s the right process for dealing with everything else). And it’s usually the smartest people who are most determined to find those reasons.
I wrote an article on complex systems and markets last year and a reader sent me some information on Elliot Wave theory. Even though my original investment background was Buffett/Value, I was amazed at how EWT is really based on the ideas of complex systems (to some extent). The only problem I have with it is that it seems to place all emphasis on social mood as the general driver of markets and nothing on fundamentals. I think EWT about 80% right. But 80% right is about 80 times better than the usual CNBC commentary on markets.
Hope that helps. It has helped my investment results immensely over the years.
May 27th, 2009 at 5:07 pm
I-Man: I expect we will see the SPX 875-880 area next. Like you, I held my short positions overnight. The PPT will be too busy with the bond market to bid up equities. I have to assume there will be a rally in Treasuries soon.
May 27th, 2009 at 5:08 pm
Just a follow up to my overly lengthy comment … I’m not saying the market all randomness and can’t be figured out. Just that you have to be real careful trying to pigeon hole markets.
May 27th, 2009 at 5:11 pm
This is definitely NOT a green shoot. CR predicts 30-yr mortgage rates to move up to 5.6%:
http://www.calculatedriskblog.com/2009/05/mortgage-rates-moving-higher.html
May 27th, 2009 at 5:21 pm
@LB 5:07
I’m of the same opinion. Now, the bigger question, do you think it breeches 875/873?
May 27th, 2009 at 5:23 pm
@LB 5:11
Denniger all over it as well:
http://market-ticker.org/archives/1066-It-Is-Failing-ALL-OF-IT.html
May 27th, 2009 at 5:27 pm
@Mr Objective
All TA is about trying to identify the randomness in the market. All are based on price action in some form or another. I personally prefer candlesticks with MA’s, 3 line breaks, Williams %R and Slow Stochastics. I still do fundamental analysis on stocks I’m interested in. The fundamentals helps me choose a stock, the TA helps me choose the best time to get in.
May 27th, 2009 at 5:31 pm
@ Mr Obj:
Brilliantly said.
That is why many very intelligent and well educated people simply cannot make a dime in the markets… their desire to be right and figure “it” out is a major inhibitor to being “right” in the context of the market. For me, being “right” in the context of the market means only one thing: I’m making money.
We have a joke in the office about meeting with prospects and clients that are engineers… they are always the hardest to work with. Why? Because they always want to be right, and always want to know the reason behind a major market move, or more appropriately, a market strategy. Sometimes, the only reason is: because it is going up or down. Dont have to know “The Why”. Its irrelevant if our goal is to make money. Many intelligent people, not just engineers, just cant accept that. They have an innate desire to know why… all the time.
It’s like you said, a complex system, you can never know all the why’s and ins and outs. You must accept that if you want to take profits out of this game. Otherwise you’ll be on the wrong side of the trade more often than not.
The hardest thing for me in my trading is… “Do you want to be right… or do you want to make money?”
Ed Seykota nails it when he says everyone gets what they want out of the market.
May 27th, 2009 at 5:33 pm
@Cursive: Denninger has a way with words:
“By the way, this makes the payment for a $200,000 note at 5% worth only $170,000 at 6.5%.
Bluntly: Bernanke’s screwing around just cost you 15% of the value of your house IN ONE DAY.”
Sweet. Smoke that, Larry Kudlow.
“do you think it breeches 875/873?”
Not this time. 875 was strong resistance, and will be sticky on the way down as well.
May 27th, 2009 at 5:45 pm
@Mr. O
I would definitely take 80%! I agree with your rationale. One thing is for sure:
EWT > EMH
May 27th, 2009 at 5:49 pm
AmenRa,
Hopefully I wasn’t intrepreted as saying anything against TA. I wholeheartedly agree on having a method (such as TA) for timing an entry. As mentioned, I originally came from a pure value investing background. Yet I could see all these value investors buying when the price started getting in their range rather than sitting back and waiting for a (much) better entry point.
As an aside, for the last 3 years, I’ve been trying to tell every value investor that hadn’t they noticed that almost everyone was now a “value” investor? It was like some sort of “value” mania. Even Vic Neidorhoffer was telling people about how cheap equities were in April/08.
It’s like the world has yet (or maybe just starting) to catch on to the huge benefits of trading right now. It’s like how people didn;t initially notice the shift from momentum to value back in 2000.
May 27th, 2009 at 5:49 pm
@LB
Thanks for your insight. This damn triangle is killing me. I’ve got some homework to do tonight. I think I’ll resolve to take half of my position off. I’ve got tax deferred and after-tax accounts. Within an IRA, you have to be very careful about how many trades you can make. I’m waiting for the inevitable gully-washer that is to come and I don’t want to miss it.
May 27th, 2009 at 5:54 pm
Well, I’ll take the radio silence that nobody has heard about Macke. IF he IS leaving, I’m just curious about the back story. I think it would be related to his inarticulate moment from last week.
May 27th, 2009 at 5:56 pm
I-Man / Cursive,
Most people say Efficient Mkt Hypothesis makes sense because so few people make excess returns in the market … thus is must be efficeint. But it’s not efficiency that screws people up … it’s how deceptive the market it. And generally the smarter the person, the more deceptive it is to them. In football, a more deceptive team can usually beat a more powerful team (within reason).
I call it the Deceptive Market Hypothesis. The market will fool the most people most of the time.
May 27th, 2009 at 6:08 pm
@Mr Objective
I didn’t think you were saying anything against TA. Hell, I still have to learn EWT myself. I understand the premise of value investing.
I know the 10-K is the only earnings report that has to be audited, that you must read the footnotes in the Annual Report and read the Managers Discussion. When looking at the earnings report net cash minus short term debt should be increasing (because if they can’t pay short term debt they’re in trouble).
But I’m a hack so what do I know. Still in the learning phase.
May 27th, 2009 at 6:16 pm
@AmenRa
Just be careful with the 10-k, any truth that is in there is by accident. Now, I admit i will probably re-post this in another thread later, but here’s what you need to know about PPIP:
http://market-ticker.org/archives/1065-The-Looting-Has-Become-Brazen.html
May 27th, 2009 at 6:22 pm
@cursive — just curious, I don’t understand your comment about the number of trades you make in an IRA?
May 27th, 2009 at 6:24 pm
@Cursive
That’s why you must check the footnotes and managers discussion. What they leave out of the 10-K usually appears in them.
May 27th, 2009 at 6:56 pm
@I-man
I’ve been away all day on family matters…
But all I have to say is……….RESPECT! Your input makes sense…
May 27th, 2009 at 7:24 pm
I-Man Says:
“Do you want to be right… or do you want to make money”
classic one-liner for traders- and psychologically hard to break- it all comes down to understanding-that YOU MAY BE WRONG-
if you understand that- then that is one less reason you won’t lose your ass in the markets
May 27th, 2009 at 7:35 pm
http://www.bloomberg.com/apps/news?pid=20601009&sid=aeEBnXC73gOc&refer=bond
Schroder Cuts Gilt Holdings in Global Bond Portfolio
May 27 (Bloomberg) — Schroder Investment Management Ltd., the second-largest holder of U.K. government bonds among companies that make regulatory filings, cut the gilts in its global fund to “near zero” as Britain’s finances deteriorate.
…I can see why peeps might want to get out of the UK bond, but the US bond is a different story….
……Isn’t it?? That was sure some bond action today…….
May 27th, 2009 at 7:43 pm
@Whammer 6:22
Because IRA rules prohibit margin and option trading, it is essentially a ‘cash’ account and all trades must follow the T+3 settlement period. If you do not follow this rule, you will get a nasty call from your broker informing you that you have been classified as a pattern day trader and they suspend your account if you try it again. Basically, you have to wait 4 days from the date of a purchase before you can sell. However, once you sell, you can re-purchase. It always 4 days from the date of purchase. Now, you can try “synthetic day trading” by using smaller portions and rolling these so that you always adhere to T+3 settlement period rule. The IRA limitations on margin and option trading are also one reason I use inverse ETF’s rather than shorting. It’s the rules that are here to “protect” “investors”.
May 27th, 2009 at 7:47 pm
@Amen Ra
OK (wink). Sorry, just a jaded ex-corporate auditor. If you read very carefully and are very skeptical, you can find a few nuggets. But, seriously, management is actively trying to tell you as little as possible and to create a Potemkin village of how their company works. I’ve read your posts and it is obvious you are not one to be hoodwinked easily (not that they don’t try).
May 27th, 2009 at 8:01 pm
@Cursive
I was just thinking about a post over at ZH had about one the TBTF institutions. Under Goodwill there was an amount “Other” that had an asterisk. That asterisk led to a footnote. The footnote described the amount as “Other” also. LMAO.
May 27th, 2009 at 8:04 pm
GM isnt zero first off because there isn’t a borrow (that’s right, none) on the stock. But it’s actually more a reflection of the amount of dumb money in the market. When the UAW announced their new GM stake yesterday, and said it had long term value, the stock immediately popped, as if hordes of individual investors watching CNBC at home simultaneouly hit the buy button on etrade, oblivious to what a bankruptcy means or that it was even looming. Back in the tech bubble days our equity traders called them Iridiots for similarly overpaying for Iriduim. And even months after Enron filed, chat rooms were filled with speculation on Enron’s comeback. But after 153 posts, this is way off the current point.
May 27th, 2009 at 8:12 pm
cursive @7:43 –
that is funny, dude
and,
AmenRa@8:01 -
a pefect “desert”
May 27th, 2009 at 8:53 pm
Not that anyone will ever see this……(a lot like my blog):
A while back, I made a spreadsheet that can calculate what price an issue should close at for the total of all options to have their lowest intrinsic value. It has not proved to be useful, but anyway…….
The lowest intrinsic value price for GM Jun options would be $3.47
If GM goes to zero tonight, the counter-parties will have to cough up $305M for Jun.
and
$11M for July
$50M for Sep
$10M for Dec
$577M for Jan 10
$37M for Jan 11
Total= $990M (GM’s market cap is $702).
Attention all shorts and put buyers:
No one cares when you get your nuts torn off and handed to you. So, beware of “Breaking News”.
May 27th, 2009 at 8:57 pm
My other thought on GM’s stock:
It’s an Audacity of Hope thing.
May 27th, 2009 at 8:59 pm
mark @8:43 -
can you send me that spreadsheet?
May 27th, 2009 at 9:08 pm
@mark mchugh
They have a similar result at http://www.optionpain.com/MaxPain/Max-Pain.php
It’s the $3.00 strike for option max pain.
May 27th, 2009 at 9:16 pm
@AmenRa 8:01
Exactly. The ole circle jerk from Wells Fargo, circa March 2009. Thanks for the laugh.
May 28th, 2009 at 9:43 am
just now on the announcement of the sweetened offer
Mark Haines of CNBC “GM stock is worth buppkiss”
maybe the stock .. but the hard assets have value* .. hell the dirt under the factories have value**
how do you get your hands in the tillbox?
sidenotes:
* provided the bankruptcy*** rules in America relieve holders of dues
** maybe not with Americas factory history of dumping
*** maybe thats the root problem
May 28th, 2009 at 9:49 am
Wes,
I uploaded the spreadsheet here:
http://acrossthestreetnet.wordpress.com/files/2009/05/options-analysis-gm-rename-to-xls.doc
note: it must be downloaded and the extension changed to XLS.
Thanks for the optionpain link (didn’t realize I was trying to re-invent the wheel).
“Breaking News” – this is the part where I say, “I told you so”
May 28th, 2009 at 10:14 am
*** Private Profits / Public Losses
BR – what page is this eras pet phrase in BN1.0?
May 28th, 2009 at 10:38 am
*** I’m wondering IF .. stockholders were bound legally* to corporation problems …
the To Big To Fail / To Big To Fight situation that exists in the Wall Street created world …
and the responsibility of the SEC like bodies to investigate / prosecute / incarcerate
would .. not happen in the 1st place / self curtail / pay for itself if it does
sidenote:
* financially (personally) beyond the loss of cash in stock only
May 28th, 2009 at 1:20 pm
mark,
why do you believe that such a tool has little value?
re: “It has not proved to be useful..”
May 28th, 2009 at 7:08 pm
MEH,
There’s a couple reasons I say that:
1) The spreadsheet makes the assumption that the trading public only buys options and the “house” only sells them (obviously that’s not real life), so it ignores a potentially very large skewing factor.
2) In many cases, out of the money options were purchased months before at prices very different than the current price (example: someone who bought 45 calls when a stock was at 50 three months ago, now at 30). I think it’s darn near impossible to factor those kind of profit/loss scenarios when you’re trying to figure out which direction a stock should move when it gets close to expiration.
I had hoped to determine price movement close to expiration and I would have considered 65% accuracy or better a success. In fact, 65% accuracy on sizable moves in the last few days of option trading would probably put me on my own private island.
Unfortunately, I have found it to be about as accurate as a coin flip in determining both size and direction of moves (probably for the reasons above). That kind of accuracy puts you in a cardboard box on a steam grate.
So, it was back to the old drawing board….
‘
May 28th, 2009 at 8:45 pm
mark,
I hear ya, thanks for the explain..
I try to keep it simple when looking at those things–volume & OI help, also, the pricing disparities between strike prices..and, as always, i-rates.. 4 starters..
June 4th, 2009 at 12:46 pm
You can look at this a number of ways:
1. The market isn’t rational – this is the difference between reality and irrationality
2. Some people aren’t paying attention
3. Some people are betting that govt will provide a return
4. Some people may not know they have share (inheritances)
5. For some who own a few shares, its too much effort to cash them out