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geokills said:

• Random thoughts...
  
  Citigroup (C) could make a good short here.  I attempted to purchase the September 15 puts (for $0.17) as my first excursion into options trading, but realized that I hadn't filled out the necessary paperwork to enable option privilages on my account.  Whoops...

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Whoops indeed.  If I had been able to make that trade, I would be up over 450% in one weekend's time!  Those September 15 puts are now trading for $0.95 a piece.  Damn.

With the weakness in financials, I am still going to do something by adding to my Goldman Sachs (GS) position today.


Edit:  Made two purchases on Goldman, at $145 ... and again right before the close at $132.  They will report their quarterly results this week and they probably won't be pretty - but shares have taken a huge hit, so I am betting that most of the downside has been priced in.

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geokills said:

Edit:  Made two purchases on Goldman, at $145 ... and again right before the close at $132.  They will report their quarterly results this week and they probably won't be pretty - but shares have taken a huge hit, so I am betting that most of the downside has been priced in.

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Wow, just wow.  What a wild day.  I'd have to say this was my most exciting day in the stock market. 
From being down almost $3,000 at one point, I finished the day up $1,000.
Those are better than 10% swings in a day given my invested capital! 

I used some of the strength today to build up my cash, since this market is just so darn dicey right now.  There has even been speculation that real-life bona-fide TERRORISTS may have been responsible for some of the short-selling brutality that was beating down the last two investment banks (Goldman Sachs and Morgan Stanley).  The idea of course, would be to force the downgrade of these bank's credit rating by slamming their stocks, thereby fulfilling the negative feedback cycle of willfully putting a financial company out of business in the way that Lehman Brothers or AIG experienced earlier in the week.  Some crazy stuff indeed, and a little scary!  Read the article I've included at the end of this post for professional commentary that may better explain these issues.

• Goldman Sachs (GS) - Sold 30 shares at $110
  
  These are the 30 shares I picked up yesterday at $105.  If I were a little more spry, I could have picked them back up below $90 midday, but I had taken a lunch break away from my desk and missed the opportunity.  I was at my desk when I saw the stock revisit $95 towards the end of the day, right before it was leaked that the treasury department is in talks with congress about setting up a Resolution Trust Corporation, which would be able to remove the bad assets from our banks, thereby allowing them to maintain good credit ratings and lend again, thereby lubricating the financial landscape with capital once again.  Of course, as soon as that news broke, the market took off like a rocket, and Goldman was promptly trading around its highs of the day again (~$115).  That would've been a nice trade, but given the wild swings, I was hesitant to throw my capital in, and that's OK.  Of course, now that we have new rules in place that have eliminated naked short selling, as well as the confidence beheld by the government's intention to temporarily assume our banking system's bad assets (though this will take time to work through), Goldman Sachs looks even more like a screaming long term buy.  If it can revisit the $100 level, I will load up... but in the midst of today's craziness, I stand by my decision to lighten up for a quick $150 profit - even if its a drop in the bucket compared to the $1,245 I am currently down on this position!
  
  
  
• National Oilwell Varco (NOV) - Sold 23 shares at $54.10
  
  In early morning strength (likely a short squeeze), I decided to reduce my exposure here.  I still like NOV for the long term, but in keeping with my above comments about how crazy and unpredictable this market has become, I thought it prudent to take advantage of the 5% move to the upside, and sell these shares for a 23% average loss.  With the way things were going, had the treasury not stepped in, we could have faced a serious CRASH of massive magnitude, and that is something I want to be prepared for, with lots of cash!  If NOV falls below $50, I will aim to repurchase these shares.
  
  
  
• McDonalds (MCD) - Close position at $64.01
  
  Again, with the idea of a potential crash in mind and continued volatility, I want to shore up my cash reserves.  This position was closed for a 17% average gain, not too shabby!  I still believe MCD will be a stable company to own, but given its relative strength over the past month, I do not want to get greedy, and I figure that locking in these gains to build up my cash was a wise move.  If shares retrace their move and fall back below $60, I will look to repurchase.
  
  
  
• Deere (DE) - Sold 20 shares at $61
  
  Just trimming back the position here.  With fears of global recession, the perception shadowing heavy equipment manufacturers such as Deere is very negative.  These shares were sold for an average loss of around 25% and that is OK.  Sometimes it is OK to sell down.  Afterall, if things change, you can buy 'em right back!  So what if you miss a few points?  Better the peace of mind, having a hoard of cash on the sidelines during unpredictable times like these, than gambling with all your coin in attempts to catch the bottom.

Discretionary Portfolio as of 9/18/2008:

• 37.7% Cash
  
• 9.1% Walmart (WMT)
  
• 9.0% Goldman Sachs (GS)
  
• 8.5% Proctor & Gamble (PG)
  
• 7.7% Altria (MO)
  
• 6.2% National Oilwell Varco (NOV)
  
• 5.8% CPFL Energia (CPL)
  
• 5.1% Freeport McMoran (FCX)
  
• 4.5% Deere (DE)
  
• 3.4% Apple (AAPL)
  
• 3.1% Schering Plough (SGP)

With that, I would like to share an article that I believe eloquently captures the sentiment of the day and the past week. 
For those who are wondering what in the hell is going on, peep this:

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No More Ganging Up on Stocks
By Jim Cramer
RealMoney.com Columnist
9/18/2008 8:38 PM EDT

We know that today's action was ridiculous. But it was ridiculously bullish, and
now we are going to see the real impact of the re-enforcement of one part of the
old short-selling protection from naked shorting. Oh, and let's hope that the story
The Wall Street Journal is reporting right now, that the SEC wants a temporary
shorting ban, isn't true, that would be ludicrous.

All we need, all we have ever needed, is a return to the old rules, unless we
found out that there was a terrorist behind the destruction, as I postulated earlier
in the day.

The legal short-selling that has plagued us is about knocking stocks down.
Unfortunately, the SEC wizards still don't understand the uptick rule, more on
that in a moment, but now stocks have made up some ground and they can build
on those gains if hedge funds can't just recklessly short without borrowing, and
brokerage houses don't recklessly provide liquidity to buy puts without checking
first.

Let's use the case of Citigroup. This stock rallied hard, just like it did after the
SEC decided to enforce the law after July 15. Now you can see how important,
again, the enforcement is because even on the whiff of something that is good,
the resolution mortgage trust, you can cause a short-panic.

Remember, in this market what happens is that the shorts push stocks down,
and then when there is good news, the stocks come back. There really isn't as
much pure long-side activity as there is endless short-covering, true bear market
behavior where everyone gets whipsawed.

But the thing that will now be tough to do -- which is to gang up on a stock by
selling endless amounts short after buying endless numbers of puts and then
spreading endless rumors about the companies -- will be made harder to do
because the short-sellers have to take a break and find if they can borrow stock,
and borrowing's going to be tougher.

If you can slow the process down, what the uptick and the borrow rules were
intending to do, you can actually find real-life actual buyers. If you added the
plus-tick rule, the only people who would be able to bang down stocks would be
legit owners, and they are probably not wanting to do so if they just bought the
darned thing and did the work.

Now as everyone says, I have nothing wrong with short-sellers. I just have
something wrong with the incredibly ridiculous decision to get rid of these rules,
a decision, by the way, that was wholly supported by the brokerage industry,
particularly Dick Fuld, who had the temerity to scoff at me when I suggested
bringing back the uptick rule to him.

If we had put on these points and then had that plus-tick rule, the points will not
be so easily repealed as they were without it. Of course, all bets are off when
you have a Lehman failure and an AIG collapse, but with a resolution mortgage
trust, the brokers will not be as pressed for solvency and the shorting of them
will seem pretty dangerous again. It hasn't been dangerous at all lately,

So, a rally makes the rules better. They don't help that much in a selloff.

I think that one of the reasons why the rally had legs was because people were
afraid to short into it.

Why does this really matter? OK, let's go back to Citigroup.

Right now, the stocks, not the companies, are in charge. You bang down the
stock, the ratings agencies freak out and they downgrade and then the stock
gets banged down some more.

Fear of ratings-agency downgrades has driven this market, and the agencies are
simply reacting to the stocks, whether it be AIG or LEH or FNM or FRE. So, if you
can bang down the stocks, spread the word through the media that something is
wrong and panic people, the agencies downgrade you and it is over. That's what
these raids have been all about and we all know it.

By breaking the raids, you give companies a chance to raise capital as Citigroup
should, which then keeps the ratings agencies from downgrading good
companies and we restore some rationality.

Yep, it all starts with the stock. And if the stock isn't manipulated down, the
company can tap the equity markets and live to play again.

When the book is written on this era, what you will see is this: Cabals that
shorted stocks without borrowing the stock (legal) and then drove the stocks
down without plus ticks (legal), and then pull their money out of the banks and
brokers (legal) and tell the media about it (legal), which then causes the media
to report the redemptions and the runs on the banks (legal), which then causes
the ratings agencies to downgrade out of fear (legal), and then the companies go
belly up or get seized or nationalized (legal).

You break off the head -- the ability to knock down a stock by selling more stock
than there is stock outstanding (until yesterday legal) -- you give the capital
markets a chance to function and we don't wipe out whole great institutions that
didn't do anything wrong (MS and GS) even as others lose their independence
because of recklessness, although even those latter ones could have made it if
the rules had just been enforced.

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Without Conviction, You Will Get Slaughtered
By Jim Cramer
RealMoney.com Columnist
9/18/2008 6:57 PM EDT

At a certain point, it is too crazy. Consider that at one point last week Goldman 
was supposed to be buying Wachovia and at one point this week Wachovia's
going to buy Goldman, I mean come on! That Morgan Stanley could be at $11
and then at $22?
 
This is not any kind of market that I have ever seen before, except once, in
1987, right around the crash when stocks traded in 10-point increments. That's
right, 10 points, and we were trading without any knowledge of where things
were.

I once gave an order to buy Caterpillar with a $50 top and it was at $45! Sounds
like today!

Or how about Panera ? a stock heavily manipulated by the shorts. Here's a stock
that at one point was up 20 points from where it was before the change in the
SHO rules. It has finished up 10. So much for the downgrade last week.

I think that Sears could go up another 10 on the same rule.

This is powerful bear market action. Meanwhile, the new banks, the Pepsis and
the General Mills' go on their way up.

Oddly, the growth stocks, the Gileads and the Research In Motions don't do well;
probably owned by too many hedge funds.

There's too much happening right now. Unless you have ultimate and
tremendous conviction in what you own and are willing to buy it 25% lower
simply on the off chance that the market keeps going like this, then do not touch
this market.

It'a a live wire, a third rail of pain for when you get it wrong.

But if you have conviction, you might get a bargain beyond belief. Without
conviction, you will get slaughtered, of that I can guarantee.

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