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I bought a few shares of bac @ $13.89 with a target of $30. I was incorrect with my bank stock plans, or I would've snagged up some shares a lot earlier. My Ford play has been working out just like i'd hoped, so i'm not crying about it. I'll try to check out the others you're wondering about in a bit.
Well, for indices, I have around 1200 for the S&P and 11,000 for the Dow as of now. That's until a new P&F pattern/reversal forms and then i'll go from there.
Those stock picks FXC and Amed look great and have a lot of pop potential. I'm very, very bullish for the next 2 or so months and then i'm of the opinion that stocks will retreat heavily in Oct or Nov. Could run on through the holiday and into H1. I think H1 of 2010 is going to be very, very poor economically.
Are there fundamental reasons for your bullishness over the next couple of months? It seems that the market has had such an incredible advance for the past few months already, without taking but one breather... I just can't rationalize a market that goes up in such a straight line! Take a look at AIG, FRE, & FNM; these three are a trio of the most speculative names out there and they are all up HUGE today (AIG up over 60% after trading flat for the last month!?). That to me seems to indicate an extreme lacking of fear and - to be frank - recklessness derived out of complacency that the market's momentum will continue.
I just can't stomach buying anything up here at these levels for more than a quick trade - and even that I'm having a hard time with.
I picked up 75 shares of Direxion Daily Financial Bear 3X (FAZ) this afternoon as a hedge against my BAC position, which is up nearly 7% as I write, and now nearly 43% above my average cost basis (comprising nearly 17% of my portfolio). I decided to hedge the BAC position rather than sell part of it, as I believe in the BAC story for years to come and am aiming for this one to become a long-term winner (and therefore carry a lesser tax burden when I do sell).
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-------------------- ┼ ··∙ long live the shroomery ∙·· ┼ ...╬π╥ ╥π╬...
AIG being up 60% probably had more to do with a short squeeze, than investors actually going long with big money. I can't imagine anyone in their right minds putting big money into AIG! I could be wrong, but can't see it.
As far as the markets rising on up, one thing i've learned through this whole mess is to never get in the way of money, or the trend. No matter what your thoughts are. The trend is your friend. I really don't see anything fundamentally (as of now) that could get in the way of this bull market until the end of September. A Non Farm scare could would definitely do it, but I don't see that coming, YET!
it seems like this upwards run may purely be a result of stimulus money. start locking in profits and watch out for a drop. when will the big banks start selling to lock in their own?
Quote: August 4, 2009 Isn't Anyone Watching the Fed?
Fed Chairman Ben Bernanke is a man who knows how Washington works and uses that knowledge to great effect. His appearences on Capital Hill are always worth watching. He sits politely with his hands folded in front of him playing the bashful professor while one one preening congressman after another makes a fool out of himself. In contrast, Bernanke looks modest and thoughtful, faithfully upholding the public's trust. But things aren't always as they seem. The Fed chief is sticking it to the American people big-time and no one seems to have any idea of what's really going on. Former hedge fund manager Andy Kessler sums it up in a recent Wall Street Journal article, "The Bernanke Market". Here's a clip:
"By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn't put money directly into the stock market but he didn't have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn't go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market."
What does it mean?
It means the revered professor Bernanke figured out a way to circumvent Congress and dump more than a trillion dollars into the stock market by laundering the money through the big banks and other failing financial institutions. As Kessler suggests, Bernanke knew the liquidity would pop up in the equities market, thus, building the equity position of the banks so they wouldn't have to grovel to Congress for another TARP-like bailout. Bernanke's actions demonstrate his contempt for the democratic process. The Fed sees itself as a government-unto-itself.
Over at Zero Hedge, Tyler Durden did the math and figured that the recent 45 per cent surge in the S&P 500 had nothing to do with the fictional economic "recovery", but was just more of the Fed's hanky panky. Durden noticed that the money that's been sluicing into stocks hasn't (correspondingly) depleted the money markets. That's the clue that led him to the truth about Bernanke's 6 month stock rally.
Zero Hedge: "Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts!
Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount. Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer whose net equity was almost negative on March 31, could regain some semblance of confidence and would go ahead and max out his credit card. Alas, as one can see in the money multiplier and velocity of money metrics, U.S. consumers couldn't care less about leveraging themselves any more."
So, the magical "Green Shoots" stock market rally was fueled by a mere $400 billion from the money markets. The rest ($2.3 trillion) was main-lined into the market via Bernanke's quantitative easing (QE) program, of which Krugman and others speak so highly.
Wouldn't you like to know if Bernanke sat down with G-Sax and JPM executives and mapped out the details of this swindle before the printing presses ever started rolling?
So, how long can this kind of fakery go on before our creditors grow weary of dealing with chiselers and stop buying US Treasuries altogether? Here's a piece from Friday's Wall Street Journal on that very topic:
"Shaky auctions of Treasury notes this week reignited concerns about whether the government can attract buyers from China and elsewhere to soak up trillions in new debt.
“A fuse was lit this week when traders noted China's apparent absence from direct participation in two Treasury bond auctions. While China may have bought Treasurys just before the auctions, market participants read the country's actions as a worrying sign that China and other foreign investors may be ratcheting back purchases at a time when the U.S. is seeking to fund a $1.8 trillion budget deficit.
“This week alone, the U.S. deluged the bond market with more than $200 billion in record-size sales. The U.S. has had little trouble finding buyers in recent months. But that demand is fading, and the Treasury market has become volatile."
Uncle Sam is goosing the bond market just like he is the stock market. Take a look at Treasury's latest bit of chicanery which was stuffed in the back pages of the Wall Street Journal back in June:
"The sudden increase in demand by foreign buyers for Treasurys, hailed as proof that the world's central banks are still willing to help absorb the avalanche of supply, mightn't be all that it seems.
“When the government sells bonds, traders typically look at a group of buyers called indirect bidders, which includes foreign central banks, to divine overseas demand for U.S. debt. That demand has been rising recently, giving comfort to investors that foreign buyers will continue to finance the U.S.'s budget deficit.
“But in a little-noticed switch on June 1, the Treasury changed the way it accounts for indirect bids, putting more buyers under that umbrella and boosting the portion of recent Treasury sales that the market perceived were being bought by foreigners." ("Is foreign Demand as Solid as it Looks, Min zeng)
Nice touch, eh? So, someone doesn't want you and me to know when foreign demand drops off a cliff, so they just bend-and-twist the definitions so they meet the Fed's requirements. How's that for transparency?. Apparently, Bernanke et al. don't believe the Chinese have translators who can make sense of all this subterfuge. That may be a miscalculation, however, given recent rumblings from the Orient.
But, perhaps, Bernanke knows that foreign demand for Treasuries will dry up and has made other plans to stabilize the dollar already. Maybe he worked out an agreement with the banks that if he pumped up the stock market--which he has--and built up the banks equity position--which he has---the banks would return the favor by buying up the lion's-share of Treasuries.
This is from Bloomberg (August 3):
"U.S. lenders bailed out by the government are returning the favor by stepping up purchases of Treasuries, helping to temper a rise in borrowing costs.
“Bank holdings of U.S. government securities are up 15.6 per cent from a year ago, almost double the average annual growth rate of about 8 per cent since the Federal Reserve began tracking the data in 1973, according to the Greenwich, Connecticut-based trading and research firm MKM Partners LP. Purchases may accelerate as lenders look for places to park rising deposits as sales of federal agency debt of companies such as Fannie Mae and corporate bonds slow." (Bloomberg)
One hand washes the other. Funny how that works.
So, the bottom line is that the dollar is increasingly balanced on the rotting scaffolding of Bernanke's buyback programs (Quantitative Easing) and the circular purchases from collaborating banks that are concealing their backroom dealings with the Fed.
To keep this game going, Bernanke will have to keep juicing the market while the banks use the $850 billion in reserves (which the Fed has provided in the last year) to keep purchasing US sovereign debt.
Is anyone in Congress watching or is this shell game going to go on forever?
-------------------- "There are a thousand hacking at the branches of evil to one who is striking at the root." -Henry David Thoreau Strike The Root
Geokills. I wouldn't even consider purchasing any other stocks besides the 2 I own. Really, the only reason I bought bac was, because I saw a resistance breach and the P&F chart looked nice. Meridith Whitney's upgrade to the sector had me thinking as well.
I'm staying hedged in anticipation of the inevitable correction (and the fact that I'm heading on vacation during the end of the month). I can't say it's been the best move for my portfolio over the past few weeks. Fortunately, BAC is keeping me nice and green! Even WMT is finally on the move after months upon months of stagnation.
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-------------------- ┼ ··∙ long live the shroomery ∙·· ┼ ...╬π╥ ╥π╬...
If stocks continue to slide and can put in a close around 9200 in the Dow, that will put in a big time bearish reversal pattern. If they can go higher from here and close at around 9450, that will be a big time bullish breakout pattern. Looks like this week will tell a tale one way or the other. At least from a technical standpoint.
I'm on the road this week, and in keeping with vacation time my portfolio remains more or less fully hedged, for better or worse. While I plan not to take much (if any) time actively trading, I did want to share these li'l gems.
Doug Kass guest host on Squak Box yesterday. "Playing Both Sides Now"
"It's going to go a lot slower than people think because this time the U.S. government is acting much more like Japan did in the early 1990s, which was very slow to shut down the insolvent [Japanese banks]. We are giving blood to the dead, rather than giving blood to the living. If we do that, they have less incentive to [sell] assets, create a market and move on."
"One of the advantages of being old is you realize, every solution creates its own problem."
"{The necessary} laws already exist. Forget more regulation. Just enforce the ones we already have. All that more regulation can do ... is make it harder to enforce, because I am going to have to spend a year figuring out what they mean."
"We're not inventing anything new. We're just reliving. One hundred years from now this will all just be history. It's just like reading about World War I. It happened over there, a whole bunch of people got hurt and some died. It was a great tragedy. But it will just be history. We're just living history and it's just going to keep repeating itself in variations."
Also check out Warren Buffet's Op-Ed in the NYT from Tuesday: The Greenback Effect
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Monday - $33.85 Tuesday - $33.97 Wednesday - $37.69 Thursday - $47.84 <this was the first day I thought to short AIG, good thing I waited one more day> Friday - $50.23
Monday, August 31st - 10 green days in a row or will the streak end?
AIG is up 114.47% in the past two weeks.
AIG closed at $13.14 on July 31st, up 282.27% for the month of August.
Quote: Yrat said: are investors piling their money into institutions they know the government won't let fail, because they know another collapse is coming?
It seems to me that investors are piling their money into whatever's lagging behind because they're afraid of missing the remainder of the rally that is not to be. They're all nuts and will go down in flames. IMHO, anyone that has put money into U.S. equities (with a long term outlook) near the peak of this rally (Dow 8500+), will get seriously burned because of a poor entry into their investments. U.S. equities are near the 50% retracement of the bear market. They will not be able to continue on through that resistance. Ku plunk is right around the corner.
Well that was a nice vacation! I haven't really done anything with my portfolio in weeks, and because I was hedged various short positions, the overall value is just about where it was when I left.
But now that I'm paying more attention, I realize that this market is getting increasingly hard to game. As Hotnuts pointed out, the S&P has retraced ~50% of the move to its lows, while the up move in stocks has been justified by the fact that the rate of decline in various indicators (such as employment, housing & corporate earnings) is decelerating... So even though most of these indicators are still deteriorating, they are not deteriorating as fast as they were over the past year. This shows relative improvement, and as investors often aim to use stocks as a forward pricing mechanism, some measure of increased investment and upside seems reasonable.
Despite this justification, there is no doubt that stocks have decoupled from the real economy (i.e. Wall Street is seeing the world much differently than Main Street), where serious headwinds of reduced personal and corporate earnings, continuing lower employment and higher savings rates have weakened a consumer that is typically responsible for some 70% of our service based economy. While many companies have been looked upon favorably for "deteriorating less quickly" on account of the job cuts and related cost savings they have realized over the last quarter, these cuts create some measure of restriction on future production growth and profitability, at least until the companies begin hiring again.
There is also a theory that money inflow into the market is beginning to stagnate, as investors who sold during the collapse have now re-entered the market during the wild ramp we've seen over the past several months (the fear of being in the market has effectively been replaced by the fear of being out and missing gains). The ability to invest on margin has been vastly reduced and company 401k matching programs are being cut. If these factors cause the stream of money flowing into the market to dry up, we can expect to witness a market that doesn't really go anywhere, since regurgitated money will simply rotate from one sector into another as investors sell one stock to buy another, but without additional new capital to expand their portfolios.
Add to all of this our massive government debt and the potential for high impact geopolitical events, and it seems that there are so many moving parts in this machine that the ability to time a wide array of investments is becoming increasingly difficult. This is not to say that I don't want to be in the market at all, but I want to be extra cautious as there are so many factors at play that can have a serious impact on stocks. I will try to lean-down and concentrate my portfolio into the ideas that I have the most conviction in, maintaining high levels of cash and being opportunistic with shorter term trading as both my time and the technical landscape permits.
With that in mind, I have closed my position in Walmart (WMT), slightly down from my average basis but flat after dividends. This retail behemoth has been stagnating for ages, and while I still believe it is one of the best run retailers with the most pricing power and the greatest ability to cut costs while providing stressed consumers with value oriented inventory; I want to build up cash and I'm tired of waiting around for this giant to move.
I am also looking to initiate a short sale in Amazon (AMZN), as the stock has been trending down for six weeks now and is getting ready to bump up against an area of resistance around $85. There is some support near $77, and if we get a nice sell off, I would look to cover the position between $71 - $77 for a profit of 9 - 16%. Because there is a convenient down-trending line on the chart that should serve as resistance, I can easily define my risk just above $85. With a planned entry of around $84.65 and a stop just above $85.10, this leaves me with around 0.5% downside risk on the trade. Pretty good setup if you ask me, although I may not get my entry price today as the stock has peaked out just under $84. If the trade does not execute today, the execution and stop limits will need to be modified slightly and I may simply abandon the idea if I can't get in by Monday.
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-------------------- ┼ ··∙ long live the shroomery ∙·· ┼ ...╬π╥ ╥π╬...
Quote: There is also a theory that money inflow into the market is beginning to stagnate, as investors who sold during the collapse have now re-entered the market during the wild ramp we've seen over the past several months..
The rally was driven by the Fed's decision to increase the monetary base by $1 trillion.
Fed chairman, Bernanke knew the liquidity would come out in the equities market thereby building the equity position of the banks so they won't have to grovel before Congress for yet another bailout.
Now that the increase has slowed I would expect this bear market rally to slow along with it. And I expect Phase II of the recession to commence before the year is out.
We haven't seen the crash yet although some think we are almost out of the woods.
We are in the eye of the storm. And that is the most dangerous place to be because people get complacent. They go outside and play instead of preparing for the back half of the storm.
It's an interesting investing climate that's for sure!
-------------------- “The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.” -- Rudiger Dornbusch
insider selling/buying ratio hit a whopping ratio of 95x this week. week before that it was 62x, while in august it was 31x. are those in the know bailing out before the second half of the storm?
-------------------- "There are a thousand hacking at the branches of evil to one who is striking at the root." -Henry David Thoreau Strike The Root
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