Trade
*****
Sell 100 GS @ 116 vs. cost @ 74.79 (55.1% return)
Buy 1000 FAS @ 8.50
Sell 1000 FAS @ 8.9914 (5.81% return)
Positions
*********
+100 FAZ @ 9.34 vs. cost @ 17.02
+2000 UYG @ 3.75 vs. cost @ 2.00
Markets
*******
My stop was filled on GS on April 15th because I wanted to snag a sizeable profit and stick to my guns. Yes, GS is trading @ 122+ but discipline cannot be compromised. Besides, the trade was done on margin and that required me to ensure I managed my stops. I bought at 74.79 with an initial stop @ 70. Once I was comfortably in the green, I loosened the grip on my stops and let the winner fly.
There has been a theme of pre-announcing earnings results by financial firms this quarter. Thus far, the firms have all beaten consensus. With Citi scheduled to release tomorrow morning (-$0.33), one could hypothesize that a timely release signifies disappointing results. I will not be the one to make that hypothesis, but it is intriguing. JP Morgan's results topped estimates and I believe JP has the highest quality and most sustainable potential. They actually increased their loss provisions across the board.
I mentioned to a colleague today that the S&P500 was being supported by technology and that the Dow could catch up in a late day rally. I've seen a trend on the eve of a major financial firms' earnings release: Market rallies strongly in anticipation and sells off post release. I thus bought 1000 FAS @ 8.50 and placed a buy stop order @ 8.99. The move netted 5.81% returns, but I saw an opportunity and took it. Alas! The move was much stronger than I anticipated and FAS is trading @ 9.40.
Afraid to lose or afraid to lose out? I'd take the latter.
Live from Queens - Does Citi follow its predecessors?
TM
Thursday, April 16, 2009
Tuesday, April 14, 2009
Woeful Retail Sales Stamp Out Rally
Positions
*********
+100 FAZ @ 10.51 vs. cost @ 17.02
+100 GS @ 118.59 vs. cost @ 74.79, stop @ 116
+2000 UYG @ 3.46 vs. cost @ 2.00
Markets
*******
Goldman's surprise pre-announcement couldn't continue to provide a boost to the overall market as March Advance Retail Sales falls 1.1% vs. an expected 0.3% rise. It appears likely that my sell-stop on GS at 116 will be filled today. I do believe that Goldman has plenty of upside, but in this market I'm going to stick to my guns and snag a 50%+ gain if I must. Goldman sold $5B of its shares at $123 to help fund their anticipated repayment of the TARP funds. Many more financial will be reporting 1Q results later this week and next and if the market is disappointed with Goldman's performance, we'll see how the others fare. Goldman was saved by its fixed income revenue/profit, however. Both investment banking and equity numbers took a bath quarter-over-quarter and year-over-year. Perhaps the stop wont be filled...who knows?
Deflationary fears were buffeted as PPI #s were negative. CPI is slated for release tomorrow and the negative numbers are expected to appear again. March Housing Starts & Permits are also set to be released and the expectation is for modest improvement in starts and an unchanged reading in permits. Severe negative surprises in these indicators will not bode well for stocks in light of the recent selling pressure. We have seen consecutive months of gaining sales paces and mortgage applications (bulk or course due to refinance apps) and the equity rally depends on continued improvement.
The Dow is now trading at its intraday low, -153.08 @ 7,904.41 and the S&P is off more than 2.5% @ 840.72. Intel reports 1Q results after the close and the tech heavy NASDAQ is off more than 1.5%. News of a government stake in GM, in lieu of bankruptcy, has allowed GM to join C as one of few gainers on the day.
Live from Queens,
TM
*********
+100 FAZ @ 10.51 vs. cost @ 17.02
+100 GS @ 118.59 vs. cost @ 74.79, stop @ 116
+2000 UYG @ 3.46 vs. cost @ 2.00
Markets
*******
Goldman's surprise pre-announcement couldn't continue to provide a boost to the overall market as March Advance Retail Sales falls 1.1% vs. an expected 0.3% rise. It appears likely that my sell-stop on GS at 116 will be filled today. I do believe that Goldman has plenty of upside, but in this market I'm going to stick to my guns and snag a 50%+ gain if I must. Goldman sold $5B of its shares at $123 to help fund their anticipated repayment of the TARP funds. Many more financial will be reporting 1Q results later this week and next and if the market is disappointed with Goldman's performance, we'll see how the others fare. Goldman was saved by its fixed income revenue/profit, however. Both investment banking and equity numbers took a bath quarter-over-quarter and year-over-year. Perhaps the stop wont be filled...who knows?
Deflationary fears were buffeted as PPI #s were negative. CPI is slated for release tomorrow and the negative numbers are expected to appear again. March Housing Starts & Permits are also set to be released and the expectation is for modest improvement in starts and an unchanged reading in permits. Severe negative surprises in these indicators will not bode well for stocks in light of the recent selling pressure. We have seen consecutive months of gaining sales paces and mortgage applications (bulk or course due to refinance apps) and the equity rally depends on continued improvement.
The Dow is now trading at its intraday low, -153.08 @ 7,904.41 and the S&P is off more than 2.5% @ 840.72. Intel reports 1Q results after the close and the tech heavy NASDAQ is off more than 1.5%. News of a government stake in GM, in lieu of bankruptcy, has allowed GM to join C as one of few gainers on the day.
Live from Queens,
TM
Thursday, April 9, 2009
Financials storm ahead
Positions
*********
+100 FAZ @ 10.90 vs. cost @ 17.02
+100 GS @ 124.52 vs. cost @ 74.49, Increase stop to 110
+2000 UYG @ 3.50 vs. cost @ 2.00
Markets
*******
Pre-announced earnings from Wells Fargo that doubled the consensus have put a huge bid into financials and probably plenty of short covering as well. Borrow at zero, lend at stressed levels...seems like a simple plan to profitability. Tomorrow equity and bond markets are closed in observance of the holiday, but key financial earnings reports next week will set the tone. Credit spreads are widening across the board in the face of this strong rally and that should make the bears excited.
The spike at the close of trading was impressive and was led by financials. I placed a stop on GS @ 105 earlier in the week because I wanted to hold GS through the earnings report. Now it looks as if the stock will be able to hold that level (joke). A very, very interesting week lies ahead.
Live from the Masters - I wish
TM
*********
+100 FAZ @ 10.90 vs. cost @ 17.02
+100 GS @ 124.52 vs. cost @ 74.49, Increase stop to 110
+2000 UYG @ 3.50 vs. cost @ 2.00
Markets
*******
Pre-announced earnings from Wells Fargo that doubled the consensus have put a huge bid into financials and probably plenty of short covering as well. Borrow at zero, lend at stressed levels...seems like a simple plan to profitability. Tomorrow equity and bond markets are closed in observance of the holiday, but key financial earnings reports next week will set the tone. Credit spreads are widening across the board in the face of this strong rally and that should make the bears excited.
The spike at the close of trading was impressive and was led by financials. I placed a stop on GS @ 105 earlier in the week because I wanted to hold GS through the earnings report. Now it looks as if the stock will be able to hold that level (joke). A very, very interesting week lies ahead.
Live from the Masters - I wish
TM
Wednesday, April 8, 2009
Financial resiliance - speaking too soon?
Positions
*********
+100 FAZ @ 17.36 vs. cost @ 17.02
+100 GS @ 117.15 vs. cost @ 74.79, stop @ 105
+2000 UYG @ 2.83 vs. cost @ 2.00
Markets
*******
Despite a near 3% downturn to start this holiday shortened week, many financials have exhibited impressive resilience. Jim Cramer perhaps sparked a fire when he announced a buy on Citi, and Goldman Sachs was up most of yesterday on rumors that the company is in talks with the Government to give back the TARP money post stress testing. GS couldn't hold onto the gains into the close, but the run was impressive. During this downturn, any negative commentary from key figures (George Soros, Analyst Michael Mayo) would have pulled the rug from under financials.
The risk-reward profile in being long financials is attractive, given the 6 month hammering. Even though many analysts and pundits are still calling for Armageddon, missing out on a financial rally would be costly to money mangers. I think financials are holding ground because of next week's earnings calendar and the dearth of economic data this week. GS reports on Tuesday, 4/14 and the consensus has risen to $1.698. C reports on Friday, 4/17 and the consensus is -$0.339. Other financials are expected to report as well and just this morning, Oppenheimer lowered its view of Q1 MS loss and said that Bank of America would need a capital raise of nearly $37B by year-end.
Pulte Homes agreed to buy Centex in a $1.3B deal. The deal is the first for the battered home building industry and would create the largest US homebuilder by market capitalization and volume. Yes - I know, market capitalization doesn't mean too much to financials and home builders, but this will likely keep both companies afloat for the duration of the downturn.
Live from Queens,
TM
*********
+100 FAZ @ 17.36 vs. cost @ 17.02
+100 GS @ 117.15 vs. cost @ 74.79, stop @ 105
+2000 UYG @ 2.83 vs. cost @ 2.00
Markets
*******
Despite a near 3% downturn to start this holiday shortened week, many financials have exhibited impressive resilience. Jim Cramer perhaps sparked a fire when he announced a buy on Citi, and Goldman Sachs was up most of yesterday on rumors that the company is in talks with the Government to give back the TARP money post stress testing. GS couldn't hold onto the gains into the close, but the run was impressive. During this downturn, any negative commentary from key figures (George Soros, Analyst Michael Mayo) would have pulled the rug from under financials.
The risk-reward profile in being long financials is attractive, given the 6 month hammering. Even though many analysts and pundits are still calling for Armageddon, missing out on a financial rally would be costly to money mangers. I think financials are holding ground because of next week's earnings calendar and the dearth of economic data this week. GS reports on Tuesday, 4/14 and the consensus has risen to $1.698. C reports on Friday, 4/17 and the consensus is -$0.339. Other financials are expected to report as well and just this morning, Oppenheimer lowered its view of Q1 MS loss and said that Bank of America would need a capital raise of nearly $37B by year-end.
Pulte Homes agreed to buy Centex in a $1.3B deal. The deal is the first for the battered home building industry and would create the largest US homebuilder by market capitalization and volume. Yes - I know, market capitalization doesn't mean too much to financials and home builders, but this will likely keep both companies afloat for the duration of the downturn.
Live from Queens,
TM
Monday, April 6, 2009
Changing Rules As We Play The Game
Positions
*********
+100 FAZ @ 17.03 vs. cost @ 17.02
+100 GS @ 114.47 vs. cost @ 74.79, stop @ 105.25
+2000 UYG @ 2.89 vs. cost @ 2.00
Markets
*******
Respected financial sector analyst Michael Mayo gave his gloomy view on financials and the sector is the worst performer on the S&P500 today. Asians markets continued to rise, and European shares were up most of the day led by banks. Mayo's comments called the FASB accounting relaxation "window dressing." The FASB is purportedly an independent board with a duty to provide investors fair, timely, and accurate information to make economic decisions. Nothing about their relaxation was independent as the FASB was heavily swayed by Congress and banks. In what other realm can we change the rules as we play the game?
Regardless, the change is in effect, and our European counterparts are not following suit. Equity markets are breaking a 5 day winning streak and the VIX (all about buying puts - "fear gauge") climbs back above 40. This is a very light economic data week due to the holiday shortened period. Next week kicks off earnings season for the first quarter and we'll get to differentiate between facts and earlier bank CEO claims of early 2009 profitability.
GS reports 4/14 and the consensus is for EPS of $1.62.
Live - Monday from wet n' wild Queens,
TM
*********
+100 FAZ @ 17.03 vs. cost @ 17.02
+100 GS @ 114.47 vs. cost @ 74.79, stop @ 105.25
+2000 UYG @ 2.89 vs. cost @ 2.00
Markets
*******
Respected financial sector analyst Michael Mayo gave his gloomy view on financials and the sector is the worst performer on the S&P500 today. Asians markets continued to rise, and European shares were up most of the day led by banks. Mayo's comments called the FASB accounting relaxation "window dressing." The FASB is purportedly an independent board with a duty to provide investors fair, timely, and accurate information to make economic decisions. Nothing about their relaxation was independent as the FASB was heavily swayed by Congress and banks. In what other realm can we change the rules as we play the game?
Regardless, the change is in effect, and our European counterparts are not following suit. Equity markets are breaking a 5 day winning streak and the VIX (all about buying puts - "fear gauge") climbs back above 40. This is a very light economic data week due to the holiday shortened period. Next week kicks off earnings season for the first quarter and we'll get to differentiate between facts and earlier bank CEO claims of early 2009 profitability.
GS reports 4/14 and the consensus is for EPS of $1.62.
Live - Monday from wet n' wild Queens,
TM
Thursday, April 2, 2009
Mark-to-Model
Trade
*****
+100 FAZ @ 17.02
Positions
********
+100 GS @ 114.34 vs. cost @ 74.79
+2000 UYG @ 2.89 vs. cost @ 2.00
Markets
********
Changes to mark-to-market accounting rules have caused another big rally with breadth. Nasdaq turns positive for the year and Jim Cramer calls the end of the depression. Mark-to-market accounting rules have required toxic assets to be valued at less than 20 cents on the dollar even if the holder was planning on holding-to-maturity. Nonetheless, the relaxing of the rules gave a big boost to financials as the Tier-1 Capital ratio becomes relevant again. US factory orders rose for the first time in 7 months as well. With great exception to the labor market, we have seem many positive economic data indicators (existing/new home sales, pending home sales, durable goods orders, construction spending, factory orders).
So this seems like a perfect time to get short financials. FAZ is a 3x leveraged financial short and I believe that financials still have a rocky road ahead. If I am wrong, the position will be overpowered by my long positions in GS and UYG. Markets are paring some gains, but all indices are up greater than 2%.
Live from the turn
TM
Wednesday, April 1, 2009
Few More Positive Signs
Positions
*********
+100 GS @ 108.34 vs. cost @ 74.79
+2000 UYG @ 2.63 vs. cost @ 2.00
Markets
*******
Markets rushed to quick 1.5% losses as labor market woes dominated headlines. Prior to the open, the ADP private labor market report showed an expected loss of 742,000 jobs for March - greater than expected. This indicator, intended to be a harbinger of the official Nonfarm Payrolls report, has mixed predictive ability. Futures were off more than 1% at the open in coincidence with weaker European stocks.
Trio of Positive Economic Data
******************************
March ISM Manufacturing: 36.3 vs. 36 consensus, prior 35.8 (Less than 50 is contracting)
February Construction Spending (MoM): -0.9% vs. -1.9%, prior -3.5
February Pending Home Sales: 2.1% vs. 0.0%, prior -7.7%
The picture is far from rosy, but improvement in capital spending and some signs of life in the housing market turned the markets around in a hurry. The employment picture is weak - ok that's a gross understatement. Home builders aren't likely to be going on many caviar packed corporate retreats in Dubai either. However, manufacturing and the housing markets (except builders) have shown tentative signs of improving. Any positives are good for the markets, but a trio? Let's see if this abrupt turnaround today has any staying power. Financials rallying again today in advance of tomorrows meeting with the FASB (Financial Accounting Standards Board) to discuss easing of rules regarding valuation of illiquid securities.
Live from Queens
Keep the left arm straight and think happy thoughts
TM
*********
+100 GS @ 108.34 vs. cost @ 74.79
+2000 UYG @ 2.63 vs. cost @ 2.00
Markets
*******
Markets rushed to quick 1.5% losses as labor market woes dominated headlines. Prior to the open, the ADP private labor market report showed an expected loss of 742,000 jobs for March - greater than expected. This indicator, intended to be a harbinger of the official Nonfarm Payrolls report, has mixed predictive ability. Futures were off more than 1% at the open in coincidence with weaker European stocks.
Trio of Positive Economic Data
******************************
March ISM Manufacturing: 36.3 vs. 36 consensus, prior 35.8 (Less than 50 is contracting)
February Construction Spending (MoM): -0.9% vs. -1.9%, prior -3.5
February Pending Home Sales: 2.1% vs. 0.0%, prior -7.7%
The picture is far from rosy, but improvement in capital spending and some signs of life in the housing market turned the markets around in a hurry. The employment picture is weak - ok that's a gross understatement. Home builders aren't likely to be going on many caviar packed corporate retreats in Dubai either. However, manufacturing and the housing markets (except builders) have shown tentative signs of improving. Any positives are good for the markets, but a trio? Let's see if this abrupt turnaround today has any staying power. Financials rallying again today in advance of tomorrows meeting with the FASB (Financial Accounting Standards Board) to discuss easing of rules regarding valuation of illiquid securities.
Live from Queens
Keep the left arm straight and think happy thoughts
TM
Monday, March 30, 2009
Bears are back?
Positions
********
+100 GS @ 100.45 vs. cost @ 74.79
+2000 UYG @ 2.47 vs. cost @ 2.00
Markets
********
Markets closed off their intraday lows, but still fell approximately 3% across the board as automaker/bank woes resurfaced. The Fed's PPIP (Public-Private Investment Program), announced last week, combined with better than expected economic data (existing/new home sales, durable goods orders) added to a global market rally last week. Enthusiasm faded on Friday and markets across the globe fell on Monday.
The Pee-PIP, as it is so elegantly know in Washington, is a great idea in theory, but fails to address a primary concern. First of all - I ask how this is any different than the idea that Hank Paulson's team came up with at the onset of the TARP (Troubled Asset Relief Fund Program). The idea is great. Remove toxic asset from the banks' balance sheet and the banks will lend! The challenge is going to be pricing. Is the government (taxpayer) going to overpay for the assets relative to the private sector? Will banks sell assets they believe may recover in value for such fire-sale prices? No one truly knows how to value these assets and we hope the bids match the offers.
Regardless, we have seen sharp declines in equity markets over the past 2 sessions, but equity futures are pointing to small gains. Asian markets are generally higher after their woodshed beating on Monday. Is this the start of a bigger downtrend? Let's see how the economic data plays out. We have data tomorrow on nationwide home prices, Chicago area manufacturing, and consumer confidence. Friday's labor market report is expected to show continued large losses (-660k jobs) and a surging unemployment rate of 8.5%.
Hard to think happy thoughts,
TM
********
+100 GS @ 100.45 vs. cost @ 74.79
+2000 UYG @ 2.47 vs. cost @ 2.00
Markets
********
Markets closed off their intraday lows, but still fell approximately 3% across the board as automaker/bank woes resurfaced. The Fed's PPIP (Public-Private Investment Program), announced last week, combined with better than expected economic data (existing/new home sales, durable goods orders) added to a global market rally last week. Enthusiasm faded on Friday and markets across the globe fell on Monday.
The Pee-PIP, as it is so elegantly know in Washington, is a great idea in theory, but fails to address a primary concern. First of all - I ask how this is any different than the idea that Hank Paulson's team came up with at the onset of the TARP (Troubled Asset Relief Fund Program). The idea is great. Remove toxic asset from the banks' balance sheet and the banks will lend! The challenge is going to be pricing. Is the government (taxpayer) going to overpay for the assets relative to the private sector? Will banks sell assets they believe may recover in value for such fire-sale prices? No one truly knows how to value these assets and we hope the bids match the offers.
Regardless, we have seen sharp declines in equity markets over the past 2 sessions, but equity futures are pointing to small gains. Asian markets are generally higher after their woodshed beating on Monday. Is this the start of a bigger downtrend? Let's see how the economic data plays out. We have data tomorrow on nationwide home prices, Chicago area manufacturing, and consumer confidence. Friday's labor market report is expected to show continued large losses (-660k jobs) and a surging unemployment rate of 8.5%.
Hard to think happy thoughts,
TM
Friday, March 27, 2009
First signs of selling pressure
Positions
*********
+100 GS @ 108.98 vs. cost @ 74.79
+2000 UYG @ 2.80 vs. cost @ 2.00
Markets
*******
Markets have seen their quickest technical bull market since 1938. A technical bull market is a 20% rally off lows. We've seen a 21% move since the 12-years lows set on March 9. Today's selling is not at all surprising, given the profit taking and weak personal income and spending economic data. After disappearing from the face of the earth, Tim Geithner has been a regular on Capitol Hill. I believe the government/treasury has done plenty for markets. All of these programs, some highly suspect, will take time to impact markets if they do at all. There have been a lot of opportunities to buy into this rally, but it just doesn't feel like it is truly sustainable.
On March 4th, I suggested a bunch of longer-term trades and they have performed better than expected. This emphasizes the fact that most industries will rally or crash together. In one-way trending markets, industry diversification is useless. Over longer periods of time, you may find it somewhat useful. View those March 4 trade ideas:
http://tradefear.blogspot.com/2009/03/lack-of-conviction.html
Summary:
UYM @ 9, trading @ 13.24
UCO @ 8, trading @ 9.52
SSO, DDM < 20, trading > 20
STLD @ 8.97, trading @ 9.37
FCX @ 32.41, trading @ 42.01
Live from Queens
TM
*********
+100 GS @ 108.98 vs. cost @ 74.79
+2000 UYG @ 2.80 vs. cost @ 2.00
Markets
*******
Markets have seen their quickest technical bull market since 1938. A technical bull market is a 20% rally off lows. We've seen a 21% move since the 12-years lows set on March 9. Today's selling is not at all surprising, given the profit taking and weak personal income and spending economic data. After disappearing from the face of the earth, Tim Geithner has been a regular on Capitol Hill. I believe the government/treasury has done plenty for markets. All of these programs, some highly suspect, will take time to impact markets if they do at all. There have been a lot of opportunities to buy into this rally, but it just doesn't feel like it is truly sustainable.
On March 4th, I suggested a bunch of longer-term trades and they have performed better than expected. This emphasizes the fact that most industries will rally or crash together. In one-way trending markets, industry diversification is useless. Over longer periods of time, you may find it somewhat useful. View those March 4 trade ideas:
http://tradefear.blogspot.com/2009/03/lack-of-conviction.html
Summary:
UYM @ 9, trading @ 13.24
UCO @ 8, trading @ 9.52
SSO, DDM < 20, trading > 20
STLD @ 8.97, trading @ 9.37
FCX @ 32.41, trading @ 42.01
Live from Queens
TM
Monday, March 23, 2009
Toxic assets
Positions
*********
+100 GS @ 106.37 vs. cost @ 74.79
+2000 UYG @ 2.67 vs. cost @ 2.00
Markets
*******
Global surge - equities across the globe are soaring on the Treasury's plan to purchase toxic assets. The plan is certainly not without flaws/kinks, but it has sparked a big rally. The Fed's plan to purchase "Long Dated" treasuries and MBS spurred initial optimism last week. Two things to note...
1) When did 2yr-10yr treasuries become longer term?
2) Is this rally sustainable?
Regardless - I predicted a while back that the Geithner plan would have a seismic impact on the markets. So far, so good, but I see too much bearish sentiment to defend my earlier statement. It is possible that we have seen the bottom, but we've all be faked out before.
I was very encouraged to see February Existing Home Sales shoot up 5.1% month-over-month today. Chalk it up to steep, and I mean steep, discounts. Let's see some momentum in the housing markets and maybe then we can talk about the worst being over. Forget about the labor markets. 7% unemployment is going to look good 1-2 years from now. The natural rate of unemployment probably has shifted higher.
An unrelated aside.
Why do the best people always get treated so poorly?
Live from passion free land,
TM
*********
+100 GS @ 106.37 vs. cost @ 74.79
+2000 UYG @ 2.67 vs. cost @ 2.00
Markets
*******
Global surge - equities across the globe are soaring on the Treasury's plan to purchase toxic assets. The plan is certainly not without flaws/kinks, but it has sparked a big rally. The Fed's plan to purchase "Long Dated" treasuries and MBS spurred initial optimism last week. Two things to note...
1) When did 2yr-10yr treasuries become longer term?
2) Is this rally sustainable?
Regardless - I predicted a while back that the Geithner plan would have a seismic impact on the markets. So far, so good, but I see too much bearish sentiment to defend my earlier statement. It is possible that we have seen the bottom, but we've all be faked out before.
I was very encouraged to see February Existing Home Sales shoot up 5.1% month-over-month today. Chalk it up to steep, and I mean steep, discounts. Let's see some momentum in the housing markets and maybe then we can talk about the worst being over. Forget about the labor markets. 7% unemployment is going to look good 1-2 years from now. The natural rate of unemployment probably has shifted higher.
An unrelated aside.
Why do the best people always get treated so poorly?
Live from passion free land,
TM
Friday, March 20, 2009
The Soviet Union of America
Positions
*********
+100 GS @ 97.57 vs. cost @ 74.79
+2000 UYG @ 2.51 vs. cost @ 2.00
Communist, Oh I meant Markets
*****************************
America the communist. Seems strange to say. How is it that this administration has received so much blind support (me included)? If we continue in the direction we are going, the facelift that is given to Wall Street will render America useless. America, "the land of the free," has been the destination of capital for quite a while. Understandably, lawmakers are upset, but Robin Hood isn't taking their undeservingly absurd pay and distributing it to homeless shelters. Okay - so I am a bit vexed by this whole thing. I apologize. Congress needs to take a quick look in the mirror and regulators should follow.
"Perfectly legal."
~When Obama was asked if people should be going to jail his response was that the activities were perfectly legal.
Economics 101 - Incentives. Take away incentives and mediocrity will reign.
This crisis occurred do to excessive risk taking and slightly lax regulation. Apparently, the government wants to have their cake and eat it too. When booming, they sat back and relaxed. You cannot have reward without risk. If you didn't understand the risks, well who did, then maybe you have to suffer the consequences. I know many companies will not be able to give back the TARP money, but many will choose to do so even if they cannot afford to. This will prolong the recession, cause more pain, AND reduce productivity.
Well done! I say "well done."
Equities trading is underway (unchanged), with few catalysts today before Bernanke's speech.
Who voted for these guys?
*********
+100 GS @ 97.57 vs. cost @ 74.79
+2000 UYG @ 2.51 vs. cost @ 2.00
Communist, Oh I meant Markets
*****************************
America the communist. Seems strange to say. How is it that this administration has received so much blind support (me included)? If we continue in the direction we are going, the facelift that is given to Wall Street will render America useless. America, "the land of the free," has been the destination of capital for quite a while. Understandably, lawmakers are upset, but Robin Hood isn't taking their undeservingly absurd pay and distributing it to homeless shelters. Okay - so I am a bit vexed by this whole thing. I apologize. Congress needs to take a quick look in the mirror and regulators should follow.
"Perfectly legal."
~When Obama was asked if people should be going to jail his response was that the activities were perfectly legal.
Economics 101 - Incentives. Take away incentives and mediocrity will reign.
This crisis occurred do to excessive risk taking and slightly lax regulation. Apparently, the government wants to have their cake and eat it too. When booming, they sat back and relaxed. You cannot have reward without risk. If you didn't understand the risks, well who did, then maybe you have to suffer the consequences. I know many companies will not be able to give back the TARP money, but many will choose to do so even if they cannot afford to. This will prolong the recession, cause more pain, AND reduce productivity.
Well done! I say "well done."
Equities trading is underway (unchanged), with few catalysts today before Bernanke's speech.
Who voted for these guys?
Wednesday, March 18, 2009
Markets Love Fed's Liquidity Drive
Positions
*********
+100 GS @ 105.94 vs. cost @ 74.79
+2000 UYG @ 2.91 vs. cost @ 2.00
Markets
*******
Today was all about the Fed and their plan to keep mortgage rates low through treasury/agency buying. This has caused an enormous rally in treasuries (10yr Treasury Rate -40bp today). Equity markets obviously liked the news that had been speculated, but not confirmed. The S&P500 briefly crossed 800 and financials continue to surge as expectations that the worst is over surface. Let's not forget about the huge short squeeze in Citi and other stocks. A very common trade on the street has been to short the common stock and go long preferred shares. These traders have been crushed and have had to close out their shorts - aiding/causing the large rallies.
Economic data is likely to stay weak for some time, but markets are finally seeing the light at the end of the tunnel. I'm still not sold that we are done with the negative, but it is not easy to get short into this market right now. Funny - it was impossible to get long just a week ago.
Watch out for profit taking. Wouldn't be a surprise to see selling soon.
Live from balmy Queens,
Everyone is thinking happy thoughts
TM
*********
+100 GS @ 105.94 vs. cost @ 74.79
+2000 UYG @ 2.91 vs. cost @ 2.00
Markets
*******
Today was all about the Fed and their plan to keep mortgage rates low through treasury/agency buying. This has caused an enormous rally in treasuries (10yr Treasury Rate -40bp today). Equity markets obviously liked the news that had been speculated, but not confirmed. The S&P500 briefly crossed 800 and financials continue to surge as expectations that the worst is over surface. Let's not forget about the huge short squeeze in Citi and other stocks. A very common trade on the street has been to short the common stock and go long preferred shares. These traders have been crushed and have had to close out their shorts - aiding/causing the large rallies.
Economic data is likely to stay weak for some time, but markets are finally seeing the light at the end of the tunnel. I'm still not sold that we are done with the negative, but it is not easy to get short into this market right now. Funny - it was impossible to get long just a week ago.
Watch out for profit taking. Wouldn't be a surprise to see selling soon.
Live from balmy Queens,
Everyone is thinking happy thoughts
TM
Tuesday, March 17, 2009
So Far, So Good
Positions
*********
+100 GS @ 96.57 vs. cost @ 74.79, stop @ 86
+2000 UYG @ 2.40 vs. cost @ 2.00
Markets
*******
So far, so good. A sizeable equity market rally yesterday fizzled in the final minutes of trading and we are set to test this outcome again. U.S. equity markets have been positive for nearly the entire day and we are currently looking at greater than 1% gains across the board. Better than expected housing starts and building permits today may have sparked the rally, although absolute levels remain near historical lows. Frankly, any deceleration in deteriorating fundamentals is a positive sign to me.
I couldn't have been more incorrect to dump 1000 C @ 1.62 only 5 days ago (trading > 2.40). However, I did replace the position with 2000 UYG @ 2.00 (trading > 2.30). I wanted significant exposure to financials, and I wanted a longer term view. I just couldn't justify the risk and in this marketplace, I decided to err on the side of caution.
With 20 minutes to the closing bell, it looks like we have extended gains and hopefully wont see a repeat of yesterday's last minute sell-off. We've seen a large bounce from our lowest levels of this recession and I plan to hold onto a few positions and wait on the sidelines for more ideal entry points.
Sadly, I'm not reporting live from the Golden State
TM
*********
+100 GS @ 96.57 vs. cost @ 74.79, stop @ 86
+2000 UYG @ 2.40 vs. cost @ 2.00
Markets
*******
So far, so good. A sizeable equity market rally yesterday fizzled in the final minutes of trading and we are set to test this outcome again. U.S. equity markets have been positive for nearly the entire day and we are currently looking at greater than 1% gains across the board. Better than expected housing starts and building permits today may have sparked the rally, although absolute levels remain near historical lows. Frankly, any deceleration in deteriorating fundamentals is a positive sign to me.
I couldn't have been more incorrect to dump 1000 C @ 1.62 only 5 days ago (trading > 2.40). However, I did replace the position with 2000 UYG @ 2.00 (trading > 2.30). I wanted significant exposure to financials, and I wanted a longer term view. I just couldn't justify the risk and in this marketplace, I decided to err on the side of caution.
With 20 minutes to the closing bell, it looks like we have extended gains and hopefully wont see a repeat of yesterday's last minute sell-off. We've seen a large bounce from our lowest levels of this recession and I plan to hold onto a few positions and wait on the sidelines for more ideal entry points.
Sadly, I'm not reporting live from the Golden State
TM
Sunday, March 15, 2009
Huge test this week
Positions
********
+100 GS @ 98.55, increase stop to 86
+2000 UYG @ 2.00 (longer term holding)
Markets
********
US equity markets soared last week in a much needed and expected bear-market bounce. The Dow and S&P both rose more than 10% on the week and the S&P crossed some key levels. This week is going to be very important for directional trade. I was asked last week if the huge 359 point rally in the Dow was just another one-day headfake, and I correctly predicted the start of a much stronger move. However, fundamentals remain terrible and we are likely to see contracting economic data this week. Are the shorts gone? Probably not - and it might be the best time to get short. I'm still not sold on the 100% doom and gloom and Geithner's plan, if ever released for heck's sake, will likely cause a seismic shift in perceptions. This could be for the better or the worse, but it should have a lasting impact.
Short sellers are likely facing a positively skewed probability curve - likelihood of small frequent gains, and possibility of huge losses. I personally would like to test this week. Let's see how the market reacts to negative economic data. Last week we generally had better than expected data. I was hoping for downtrodden data to see if the momentum could hold in the face of adversity.
Monday we will get a look at NY State Manufacturing and nationwide Industrial Production. Both are expected to contract, but both are expected to show improvements. I'm not looking for home runs here. If the markets perceive that the worst is over, good things are likely to happen. I don't think we are there yet, and thus this is a big week for me. Can we hold onto the momentum or is last week going to look like a mere hiccup in the long-run.
Live from the amazingly beautiful Golden State,
TM
********
+100 GS @ 98.55, increase stop to 86
+2000 UYG @ 2.00 (longer term holding)
Markets
********
US equity markets soared last week in a much needed and expected bear-market bounce. The Dow and S&P both rose more than 10% on the week and the S&P crossed some key levels. This week is going to be very important for directional trade. I was asked last week if the huge 359 point rally in the Dow was just another one-day headfake, and I correctly predicted the start of a much stronger move. However, fundamentals remain terrible and we are likely to see contracting economic data this week. Are the shorts gone? Probably not - and it might be the best time to get short. I'm still not sold on the 100% doom and gloom and Geithner's plan, if ever released for heck's sake, will likely cause a seismic shift in perceptions. This could be for the better or the worse, but it should have a lasting impact.
Short sellers are likely facing a positively skewed probability curve - likelihood of small frequent gains, and possibility of huge losses. I personally would like to test this week. Let's see how the market reacts to negative economic data. Last week we generally had better than expected data. I was hoping for downtrodden data to see if the momentum could hold in the face of adversity.
Monday we will get a look at NY State Manufacturing and nationwide Industrial Production. Both are expected to contract, but both are expected to show improvements. I'm not looking for home runs here. If the markets perceive that the worst is over, good things are likely to happen. I don't think we are there yet, and thus this is a big week for me. Can we hold onto the momentum or is last week going to look like a mere hiccup in the long-run.
Live from the amazingly beautiful Golden State,
TM
Thursday, March 12, 2009
Follow through at last in a huge way
Returns
*******
Total Realized @ 14.7%
Sell 2000 C @ 1.62 vs. cost @1.60, return = 1.25%
C is too risky for me. Financials are risky, but I like the market leaders (GS) and ETFs only. Therefore: S 2000 C @1.62 and Buy 2000 @ 2.00. This slashed my returns from 17% to 14.7%. Remember I am calculating returns on an outlay/proceeds basis, not based on total capital.
Positions/Trades
****************
+100 GS @ 95.85, cost @ 74.79
Buy 2000 UYG @ 2.00
Follow-Through
**************
US equity markets have shown remarkable resilience. With just 22 minutes left to the close, we are looking at our first 3-day winning streak in quite some time. Markets have reacted positively to better than expected February retail sales numbers and a less than expected cut in GE's credit rating. February retail sales excluding volatile auto components rose 0.7% vs. a -0.2% consensus. Big deal right? Yes - January retail sales are typically overstated due to the impact of gift cards (sales counted when cards are used, not purchased) and to build on January's positive month-over-month is very encouraging.
Mark-to-market talks today reminded me of Geithner's February 8th testimony on his bank rescue plan and I was listening to the talks holding onto my chair and screaming, "Not again!" FASB Chairman Robert Herz told a House panel the agency "could have the guidance in three weeks." Are you kidding me? Three weeks? What the heck are you doing? Is there a more pressing need to address? Tim Geithner - do you know?
Nonetheless, markets are soaring with the Dow up 247pts, S&P500 up 30pts, and NASDAQ up 54pts. Asian markets should get a huge boost from the US short-squeeze 2 days ago and follow-through today. Tomorrow's economic plate is light, and thus earnings/guidance/unpredictable events should drive trading activity. I did predict 7 handles on the Dow/S&P by Friday's close - Let's just say I'm hoping we hold on tomorrow.
Live from Queens
Thinking happy thoughts
TM
*******
Total Realized @ 14.7%
Sell 2000 C @ 1.62 vs. cost @1.60, return = 1.25%
C is too risky for me. Financials are risky, but I like the market leaders (GS) and ETFs only. Therefore: S 2000 C @1.62 and Buy 2000 @ 2.00. This slashed my returns from 17% to 14.7%. Remember I am calculating returns on an outlay/proceeds basis, not based on total capital.
Positions/Trades
****************
+100 GS @ 95.85, cost @ 74.79
Buy 2000 UYG @ 2.00
Follow-Through
**************
US equity markets have shown remarkable resilience. With just 22 minutes left to the close, we are looking at our first 3-day winning streak in quite some time. Markets have reacted positively to better than expected February retail sales numbers and a less than expected cut in GE's credit rating. February retail sales excluding volatile auto components rose 0.7% vs. a -0.2% consensus. Big deal right? Yes - January retail sales are typically overstated due to the impact of gift cards (sales counted when cards are used, not purchased) and to build on January's positive month-over-month is very encouraging.
Mark-to-market talks today reminded me of Geithner's February 8th testimony on his bank rescue plan and I was listening to the talks holding onto my chair and screaming, "Not again!" FASB Chairman Robert Herz told a House panel the agency "could have the guidance in three weeks." Are you kidding me? Three weeks? What the heck are you doing? Is there a more pressing need to address? Tim Geithner - do you know?
Nonetheless, markets are soaring with the Dow up 247pts, S&P500 up 30pts, and NASDAQ up 54pts. Asian markets should get a huge boost from the US short-squeeze 2 days ago and follow-through today. Tomorrow's economic plate is light, and thus earnings/guidance/unpredictable events should drive trading activity. I did predict 7 handles on the Dow/S&P by Friday's close - Let's just say I'm hoping we hold on tomorrow.
Live from Queens
Thinking happy thoughts
TM
Wednesday, March 11, 2009
Déjà Vu Follow-through
Realized Returns
***************
17% - attachment to follow
Trade Summary
******************
Sell 1000 UCO @ 7.65 vs. Buy @ 6.70
Buy 2000 C @ 1.60, stop @ 1.30
Markets are making an attempt at a two-day sustained rally, but consumer staple stocks are not cooperating and general sentiment is still very weak. Banks/financials again having a strong day with C, GS (leader), but well off the highs. Interest rates continue to decouple from equities. At one point the Dow in 2009 was down 30% and the 10yr treasury was up 75 basis points. Market optimism about suspension of mark-to-market (MTM) accounting rules is overdone and MTM rules must remain in effect to provide proper information to prospective investors. Risk-reward folks. You buy the risk, deal with the consequences.
Would be happy to see green across the board today, but it is looking more and more unlikely as we progress to mid-day. Tomorrow's retail sales number is the most important piece of economic data this week and the expectation if for a contraction month-over-month from January.
Live from Queens
TM
***************
17% - attachment to follow
Trade Summary
******************
Sell 1000 UCO @ 7.65 vs. Buy @ 6.70
Buy 2000 C @ 1.60, stop @ 1.30
Markets are making an attempt at a two-day sustained rally, but consumer staple stocks are not cooperating and general sentiment is still very weak. Banks/financials again having a strong day with C, GS (leader), but well off the highs. Interest rates continue to decouple from equities. At one point the Dow in 2009 was down 30% and the 10yr treasury was up 75 basis points. Market optimism about suspension of mark-to-market (MTM) accounting rules is overdone and MTM rules must remain in effect to provide proper information to prospective investors. Risk-reward folks. You buy the risk, deal with the consequences.
Would be happy to see green across the board today, but it is looking more and more unlikely as we progress to mid-day. Tomorrow's retail sales number is the most important piece of economic data this week and the expectation if for a contraction month-over-month from January.
Live from Queens
TM
Bear-market bounce, or 1 day spike?
DG said...
Do you think the rally today is a temp spike based on non-economic data?Kinda likea mini one day bubble....I mean Vikram Pandit had no choice but to say everything was fine and dandy right? Its not like he can tell everyone the sky is falling. Weren't Jimmy Cayne and Fuld saying the same thing way back when. I'm curious about your thoughts
March 10, 2009 9:49 PM
Response
*********
I've been writing a lot about follow-through over the past few weeks and believe that we'll see a bear market bounce (long overdue). Today's rally was just another statement from just another CEO who cannot possibly say that the world is ending. However, to me, it was powerful for 2 reasons.
1) Deferred Tax Assets (DTAs) - Citi has a very large portion of total asset in the form of DTAs on their balance sheet which would be used against future taxable income if they return to profitability. A bank's healthy is more frequently being measured by Tangible Common Equity (TCE) in this environment, and questions have been raised about the "quality" of Citi's TCE. If the bank truly exhibits a positive earnings quarter, this will greatly improve the viability of its TCE. Now we can question whether the earnings are "quality" and derived from continuing operations and not asset sales/discountinued operations. Let's crawl before we attempt to walk.
2) Banks can make money! A few notable financial institutions have announced positive early results in 2009 thus far and this is extremely encouraging. Deleveraging and risk reduction crippled banks, among others, in 2008 and perhaps we are seeing some signs of stability. Time will tell.
I see this as a bear market bounce, and believe that both the Dow and S&P500 close with 7-handles on Friday, March 13th.
TM
Do you think the rally today is a temp spike based on non-economic data?Kinda likea mini one day bubble....I mean Vikram Pandit had no choice but to say everything was fine and dandy right? Its not like he can tell everyone the sky is falling. Weren't Jimmy Cayne and Fuld saying the same thing way back when. I'm curious about your thoughts
March 10, 2009 9:49 PM
Response
*********
I've been writing a lot about follow-through over the past few weeks and believe that we'll see a bear market bounce (long overdue). Today's rally was just another statement from just another CEO who cannot possibly say that the world is ending. However, to me, it was powerful for 2 reasons.
1) Deferred Tax Assets (DTAs) - Citi has a very large portion of total asset in the form of DTAs on their balance sheet which would be used against future taxable income if they return to profitability. A bank's healthy is more frequently being measured by Tangible Common Equity (TCE) in this environment, and questions have been raised about the "quality" of Citi's TCE. If the bank truly exhibits a positive earnings quarter, this will greatly improve the viability of its TCE. Now we can question whether the earnings are "quality" and derived from continuing operations and not asset sales/discountinued operations. Let's crawl before we attempt to walk.
2) Banks can make money! A few notable financial institutions have announced positive early results in 2009 thus far and this is extremely encouraging. Deleveraging and risk reduction crippled banks, among others, in 2008 and perhaps we are seeing some signs of stability. Time will tell.
I see this as a bear market bounce, and believe that both the Dow and S&P500 close with 7-handles on Friday, March 13th.
TM
Tuesday, March 10, 2009
Banks lead the way
Positions
*********
+100 GS @ 82.36, cost @ 74.79, increase stop to 75
+1000 UCO @ 8.54, cost @ 6.70, stop @ 7.70
Markets
*******
An uplifting Citi memo essentially sparked a much needed 4% plus rally across the board. Why such a big move? First of all, this is an extremely oversold market. Markets have been pummeled since Tim Geithner's vague bank rescue plan on February 8th. Most banks have lost 40% since that day and the S&P500 was off 22% since the now infamous "bank rescue" announcement.
Citi, after the latest government rescue plan has been criticized for having a weak asset base. A large percentage of total assets are Deferred Tax Assets (DTA). DTAs are prior period tax losses that are used to reduce/eliminate taxes payable if the company should return to profitability. However, if a company with DTAs is not expected to regain profitability, then a contra-account, valuation allowance, must be increased as a direct hit to net income. So DTAs are only valuable if a company exhibits future profitability. News of Citi's apparent profitable start to 2009 was thus very uplifting and helped spark a global rally in equities.
Short-covering helped build large early gains and we'll see if the momentum can last throughout the session. No doubt, we'll see more negative economic data, more job losses, and deteriorating economic fundamentals. At some point, valuations will be discounting all future negative data and forecasts will be so weak that actual reports beat consensus estimates. At that point, we should turn higher for good.
Good luck calling it - Live from Queens
I'm still thinking happy thoughts
TM
*********
+100 GS @ 82.36, cost @ 74.79, increase stop to 75
+1000 UCO @ 8.54, cost @ 6.70, stop @ 7.70
Markets
*******
An uplifting Citi memo essentially sparked a much needed 4% plus rally across the board. Why such a big move? First of all, this is an extremely oversold market. Markets have been pummeled since Tim Geithner's vague bank rescue plan on February 8th. Most banks have lost 40% since that day and the S&P500 was off 22% since the now infamous "bank rescue" announcement.
Citi, after the latest government rescue plan has been criticized for having a weak asset base. A large percentage of total assets are Deferred Tax Assets (DTA). DTAs are prior period tax losses that are used to reduce/eliminate taxes payable if the company should return to profitability. However, if a company with DTAs is not expected to regain profitability, then a contra-account, valuation allowance, must be increased as a direct hit to net income. So DTAs are only valuable if a company exhibits future profitability. News of Citi's apparent profitable start to 2009 was thus very uplifting and helped spark a global rally in equities.
Short-covering helped build large early gains and we'll see if the momentum can last throughout the session. No doubt, we'll see more negative economic data, more job losses, and deteriorating economic fundamentals. At some point, valuations will be discounting all future negative data and forecasts will be so weak that actual reports beat consensus estimates. At that point, we should turn higher for good.
Good luck calling it - Live from Queens
I'm still thinking happy thoughts
TM
Monday, March 9, 2009
A small, tiny light at the end of the tunnel
Positions
*********
+100 GS @ 74.98, cost @ 74.79, stop @ 70
+1000 UCO @ 8.46, cost @ 6.70, increase stop to 7.70
Monday Morning Blues
********************
Asian market were crushed overnight as bank woes persisted. Weakness carried over to Europe and caused early gains to evaporate. US equities have had a seesaw session thus far as early losses turned to sizable 1% gains and back to flat again. No confidence, skittish buying.
Non-financial Acquisition
*************************
Big news of the day - Merck's $41B takeover offer for Schering-Plough (SGP) in pharmaceutical space. As expected, Merck's shares are taking a beating (-10%), and SGP's shares are up (+14%). This is a big deal for me personally and I don't have beneficial interests in either company. Acquisitions have dried up significantly (nearly zero) since their 2007 boom and this deal is encouraging. I'm not expecting a Butch Cassidy, gun-slinging type consolidation wave but when valuations are so attractive, it is hard for solid companies to resist these low-priced blockbusters. It is exactly this type of activity that I believe may help form an equity market bottom. Let's just say this is a good start, unless of course the deal falls apart or gets rejected. When enough non-financial companies take advantage of very low valuations, the retail investor may finally regain confidence to turn over their mattresses and slowly re-enter the market. Joblessness will continue and economic growth will stagnate, but much of this is already priced into this downtrodden market.
Live from Queens,
I'm thinking happy thoughts
TM
*********
+100 GS @ 74.98, cost @ 74.79, stop @ 70
+1000 UCO @ 8.46, cost @ 6.70, increase stop to 7.70
Monday Morning Blues
********************
Asian market were crushed overnight as bank woes persisted. Weakness carried over to Europe and caused early gains to evaporate. US equities have had a seesaw session thus far as early losses turned to sizable 1% gains and back to flat again. No confidence, skittish buying.
Non-financial Acquisition
*************************
Big news of the day - Merck's $41B takeover offer for Schering-Plough (SGP) in pharmaceutical space. As expected, Merck's shares are taking a beating (-10%), and SGP's shares are up (+14%). This is a big deal for me personally and I don't have beneficial interests in either company. Acquisitions have dried up significantly (nearly zero) since their 2007 boom and this deal is encouraging. I'm not expecting a Butch Cassidy, gun-slinging type consolidation wave but when valuations are so attractive, it is hard for solid companies to resist these low-priced blockbusters. It is exactly this type of activity that I believe may help form an equity market bottom. Let's just say this is a good start, unless of course the deal falls apart or gets rejected. When enough non-financial companies take advantage of very low valuations, the retail investor may finally regain confidence to turn over their mattresses and slowly re-enter the market. Joblessness will continue and economic growth will stagnate, but much of this is already priced into this downtrodden market.
Live from Queens,
I'm thinking happy thoughts
TM
Friday, March 6, 2009
Buy GS @ 74.79, stop-limit @ 70
Positions
*********
B 100 GS @ 74.79, stop-limit @ 70
+100 UCO @ 8.19, cost @ 6.70, increase stop to 7.50
The mysterious wall street leader has been unnecessarily slammed today. I've been waiting for an entry point and have a tight stop in place given the possibility that this could be the start of a bigger sell-off in Goldman. They are profitable and they cover short-term liabilities. In a prior trade, I correctly dumped GS in anticipation of their worse than expected 4Q earnings release and the stock soared to my dismay.
Live from Queens,
TM
*********
B 100 GS @ 74.79, stop-limit @ 70
+100 UCO @ 8.19, cost @ 6.70, increase stop to 7.50
The mysterious wall street leader has been unnecessarily slammed today. I've been waiting for an entry point and have a tight stop in place given the possibility that this could be the start of a bigger sell-off in Goldman. They are profitable and they cover short-term liabilities. In a prior trade, I correctly dumped GS in anticipation of their worse than expected 4Q earnings release and the stock soared to my dismay.
Live from Queens,
TM
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