Big Upping*

Discussion in 'Trading' started by stonedinvestor, Oct 29, 2008.

  1. My inbox is full. My emails overwhelming.

    How stoney; how did you nab the first big move in the DOW in your 3 Times A Charm thread? And how did you nail the second in your Libor Led Rally Thread?? and why the hell have you not posted so far this week!!!????

    Monday was funny and kind of disheartening what seemed like a lazy day of base building turned into a last ten minute free fall-- had that fall been with volume all bets would have been off. Thank God it had none.

    There was another bit of depression that set in on Monday, that valuations really were not as cheap as we all thought they were. How can you fall 40-50% and not have cheap valuations? That would seem illogical, but there the gloom and doomers were out in force telling us that somehow with the market where it is now we still had a PE of 19 or so.... in other words all that stock price damage and earnings had fallen just as much! That is the crux of the situation now... just where do we sit in terms of PE??

    In discussing this with other investors we have decided to treat each stock specifically meaning it is our belief that the extreme shortfalls in financial earnings weighs on the PE average more than their steep stock declines. This is complicated stuff but my basic thesis is that when you combine all the banks and brokers their stks may have gone from $50 or $70 to $11 or $12... but their earnings have reversed completely going from say a $300 mln gain all the way PAST zero to a $300 mln loss... as such the arrow goes past zero whereas the stk price stops presumably somewhere above zero.... so in that sense the PE is skewered higher. For this reason we separate out the financial stks and deal with each purchase withing the guidelines of their historic PE spread AND only use the stks that have really showed moderate decline in earnings and outlook... if you can buy a stk at or beneath it's lowest PE point AND they have not had a hiccup of royal flush in earnings... well then you cannot be guaranteed success but you can at least go to sleep knowing you have done all you can do as an investor.

    Our big purchase in the last thread was Blackrock... and the theme there was that BLK would move with the market and since we had predicted a two thousand point move, it ought to do pretty good but also because they are one of the few stks that will benefit from all this fallout. I will go into more detail here in a little bit. I will also touch on our other picks-- did you all buy AMZN when it dipped to $49 as instructed?? What's up with ADM etc. and where do we stand now.

    Now before we get all nervous that half of our 2K advance took place in one day and the move is halfway over let's subtract that 200 point Monday last 10n minute foolishness and peg yesterday as closer to a 600 point move which makes more sense to me. So 1400 More to go!!!


    - The wavers always like to have it both ways so although the length of the 4th wave down measured to DOW 8,700 & Predictions of the 5th wave reaching 6,700 was freakin me out... there was always the 10% chance we talked about in our prior thread of a Truncated Wave 5.
    Meaning the 5th wave can REVERSE any time and it did. Most think this is due to the Election and I agree to an extent-- remember our headline REPUBLICANS BUYING! Well the higher the market goes from here the better for McCain. As well we were the FIRST IN PRINT TO POINT OUT that the Plunge Protection team was in the market buying stocks and if that turns out to be true... why would they stop now as we head into the election? It's hurtful to think of the market this way but anything is possible.
    On top of all of this thought we have the FED meeting and a near certainty of 1/2 point cut and I think a good possibility of 3/4....

    When we take a step back and examine the span of time between our three threads-- we could argue that the market has drawn a line in the sand at DOW 8000. That mark is the discount mark for everything we know now. The secret is to know nothing more. I'm afraid when the AIG money runs out or when Paulson comes back top the Senate for MORE money we will go through another death spiral... but for now the blinders on on and the old green DOW 10,000 hat is back out of the closet. Can it be another 10K celebration? Won't that be the lamest ever?

    I'm holding on dearly to the fact that on Oct 13 we had a similarly huge move- that was but 2 weeks ago - and so if we can say the TWO BIGGEST MOVES IN 69 YEARS BOTH HAPPENED IN THIS TWO WEEK SPAN.... How can that not be a direction changer and then a follow through day! ~ stoney

  2. Why Blackrock?

    Moodys and S&P have let us down. Who will fix everything now? Who knows these credit instruments inside out? - Blackrock!

    Blackrock's independent evaluations of risk are now the defacto standard for the market!

    In a little known transaction last spring Blackrock was called in to fix a troubled $20 billion portfolio of mortgage backed securities. Working with UBS, Blackrock managed to get the portfolio sold for $15 billion... That got people's attention.

    It's safe to say Blackrock knows CMO's- (Collateralized Mortgage Obligations) because they helped invent them. 25 years ago Larry Fink was Mr. CMO, he pitched CMO's in 1983 while working as a bond trader at First Boston, he pitched it to Freeddie he's Mr Fixit.

    3 years later in 1986, Finks trading desk had grown out of control-

    "I lost $100 million in one quarter, and I didn't know why. And we made $130 million the quarter before, and I didn't know why we made so much money. So we should have been fired the quarter we made the money. The whole concept for BlackRock grew out of that experience at First Boston. I said, 'We are not going to live that again. We are going to have systems to analyze risk,'" .....

    As things have gone from bad to worse in the credit markets Blackrock, who's core business is 401K plans and managing money, began expanding their in house response team to crisis management. In 2000 the group got a name Balckrock Solutions.
    Companies don't understand what they own and Blackrock does. better than that Blackrock knows how to dispose of the assets- Take the Florida example. Back in November 2007 Florida was in a a panic, the Sate hat a boatload of Lehman mortgage backed crap on the books and there was a very real chance that schools would have to close and garbage would not be picked up. What's worse those that could began withdrawing their funds and in a blink the State's reserve fund had shrunk from $27 billion to $14 billion....

    "[County officials were] almost in tears, saying, 'I can't make payroll for teachers, firemen, police,'" says Barbara Novick, BlackRock's vice chairman and head of account management.

    Within days of being hired Blackrocks crack team had analyzed the books and by the end of December they had a plan in place to de leverage Florida. The garbage got picked up. Literally.

    Since that success many companies have reached out to Blackstone to analyze manage and dispose of toxic investments. Sure Blackrock has lost money from people pulling out of their managed funds but Blackrock Solutions profits has quadrupled. Currently BlackRock runs tens of millions of risk models a day, some 200 million risk scenarios are plotted out each week - everything from what happens if the U.S. starts defaulting on its debt to what happens if China stops buying it. This type of analytical power is what has drawn the world's most desperate companies to BlackRock. And one desperate stoned investor!

    BlackRock is not the only firm out there that can analyze risk. There are plenty of others with their own models and businesses aimed at helping troubled institutions of the world, among them Goldman Sachs. The trouble is, many banks don't want competitors to see their books.

    Here is BlackRock's edge: It's not an investment bank and it does not trade for itself, so it does not compete with its own clients. And while there are other independent managers that provide risk-assessment services, none of them analyzes as broad a range of securities as BlackRock. ~ si

    For a more complete read on BLK including two last paragraphs completely cribbed by me please consult- Can This Man Save The Market @
  3. Alright guys lets go over some of the recent picks to see how they are doing and lets talk about what to look for today and the rest of the week.

    1) EWZ my Brazilian play has reacted nicely,
    $28 to $29 entry prices yield $34 to $35 today with lost of upside. I will go into detail on Brazil at a later time.

    2) TRA had some of the nicer earnings inb the Ag field stk $16.06 to $19.22. Selling today.

    3) ORLY Earnings tonight! have held off buying until. Stk has floated up a bit from $20 to $21.34 to over $22... AZO was bought for me by my hedge fund after I expressed interest in O'Reilly that has gone from $100 to $115! It's depressing but you will be served well to follow the popular stocks. I hate doing that but it works. Watch ORLY's earnings tonight.

    4) FSYS Actually down a bit after yesterday which is shocking... big short position huge growth have not reduced earnings guidance a bit of a dangerous play here-- kind of stuck. Preying for the best- big earnings guide higher and a short covering rally... that will get us to $40 in a hurry... but alas we sit at $24-$25.

    5) AMZN- Boy we called that one just peeerrrrfect. $49 buy point and true elevation. Remember all the clues this stock gave us folks... we talked about it's reaction to earnings down 10% only to close flat as a sign there was some real mutual fund buying going on and this stk wanted to be a leader.

    6) ADM- A frustrating stock. A lot of the basic fundamental ideas behind owning this name are evaporating- less corn based diets less ethanol, etc... wondering about this pick... we had a bad entry point $18.75 and now only have a weak looking $20 despite so many upgrades... nervous may sell. MOS & MOO (the ag index fund) are similarly frustrating depending on your entry point which depends on ten minute intervals you are either nicely up or sort of stuck. Put me in the latter group.

    Ok what are we still looking at?

    SLV The Silver I share thingerooo... back to that $9.50 after a mini plunge shake out- God it looks good to me on a chart... Maybe today... why is buying a commodity so much scarier than buying a stock???

    CASINO STOCKS- Boy when LVS hit $4 I thought of closing my eyes and buying.... should have it's back to $6. Still it's the weakest of the bunch. PENN had good earnings and MGM today... that leaves WYNN as maybe the untapped play... of course it's up 18% today in sympathy to MGM's earnings... This seems risky when you can have lottery supplier SGMS that is not moving at all... but risky is where the $'s are made....

    I bought some Merrill Lynch under the assumption that I was nailing a 14% arb spread and eventually would wind up with BAC and it's high dividend... Well this turned out to be an embarrassing trade for me because (1) BAC has halved their div and I missed it and (2) Apparently for some reason I do not understand one must short the acquiorer BAC and go long the bought out- MER to make the trade work... I was reaching for a magical 14% spread closure... so after deliberations I'm taking MER off the block with a near $1.45 gain and rethinking the the trade. Hedge Fund is on their own looking at the same trade as well as a few other ARB plays so I may just wait for them to act and piggy back. Who needs to be first in this market?

    My mother has a weird way with stocks. Often she nails them but then she 100% refuses to sell and so we have a lot of round trips and tears... The other day she bought Honda! God bless her, up 28% since and on bad earnings to boot. japan's currency is controlling this market now and their's! Stks over there hurt by the rising yen are exploding now that there appears to be a secret effort to force the Yen down. maybe even more so than LIBOR, watch the Yen to Dollar ratios now...

    Can't explain it, I'm poking around the pile now... I hate to say this but Cramer pumped my favorite play BEBE! Of course I liked it at $11 last year but I really really like it at $7. Cramer may have ruined it by speaking out...

    NAT Gas- Folks you probably thought me crazy when I stuck my neckout and free caught GMXR and SWN and made nice change and dumped.
    They both retraced and now have started up again. GMXR caught a downgrade SWN is still a mighty idea- more on it later but getting back into SWN below $30 seems like a very good idea.

    Remember how we talked about buying stocks at the low end of their PE range who have not
    taken down earnings aggressively well URBAN OUTFITTER makes the cut in my book as well as TRUE RELIGION JEANS TRLG, so that little Retail three pack BEBE URBN & TRLG might be my big move for the week.. or that darn SLV!! So
    I 've got stuff to think about and so do you.
  4. Mecro


    Do you talk with yourself out in public also? Do they even let out in the public?
  5. People who walk behind me in public make money.
  6. You are surely the king of internet blabbering.

    Do you still write those long winded posts on BBWC?

    How much time do you spend typing up all that blabbering?
    Also what do you gain by it?

    I didn't read any of it.
  7. Oh fly I'm better than ever on BBWC! You must go read me over there too. The Internet has taken so much from so many it's nice to be able to give back. Surely the greatest aspect of the internet is the creating of the job Blogger. Now I can hold my head high when asked at party's " what do you do!"

    Ok shot an email off to the hedge fund regarding URBN.... I'm closing in on that one... there have been 3 three upgrades within this month. All point towards rather decent sales for this co... despite the headwinds of the worst x mas ever and a relatively high PE for the group URBN looks to be a play here and the chart has a very nice ability to bump up against resistance at $30... That's a ten dollar gain between now and the end of the year... pretty tempting. Although we would be buying before earnings which is risky. I also ran the line about SLV issuing securities based off their silver holdings which I unearthed... that bothers me... and I asked am I crazy to be looking at Silver-
    As well I tacked on a third question about re entering SWN- the gas play - and at the end of the note predicted a 3/4 move by the fed hoping to elicit a response there too... you can see why it is very hard to be my broker or adviser...

    Roth Capital Partners analyst Elizabeth Pierce had downgraded Urban Outfitters to "Hold" on Aug. 11, due to its expensive stock price. However, since then, the company's shares have fallen 34 percent as the company continues to perform well.

    "Based on our recent channel checks, we believe that the company is delivering on all cylinders in terms of differential product and a very rewarding/engaging shopping experience and therefore, we believe that (same-store sales) continue to run ahead of the company's modest low single-digit increases," Pierce wrote in a note to investors.

    While the stock is still relatively expensive compared to Urban Outfitters peers, Pierce said the price is warranted.

    "Urban Outfitters has been one of the few companies in the retail sector that has continued to post impressive results despite the challenging macroeconomic environment," Pierce wrote.

    .... Low end of PE scale and continuing to perform... tastes like chicken too!

    I got my kaChing hat on today folks.... I took a starter in Steel Dynamics STLD when the insiders bought $8.89 or so averaging up today... if anyone can help me on this one point: I believe lower scrap metal prices is GOOD for this company not bad. If I'm wrong please correct!

    As the managed care earnings continue to dribble in destroying all in their wake...we continue to watch WELLPOINT, they had some good numbers I thought with a lot of one time losses and there is an interesting thing happening with these companies... they are turning themselves into medical banks... offering those Health Plans that are tax free... quite an interesting and BIG industry change & I will post further on that soon. ~ stoney
  8. Oh each his own stoney.

    Happy Trades!

  9. ammo


    enjoying your murmurings stoney,thanks for sharing

    The 10 year return on the market (S&P) has turned negative- fallen below zero for the first time since 1937!!! It's really different this time!

    A lot of what we are going through is very much like Japan's meltdown which they never recovered from... That's why the Fed seems so intent on creating inflation and not having to face deflation. Also JapN'S PEOPLE ONCE BURNT BADLY never went back and that's a big danger here. Japanese households own 6% in equities, among the lowest in both developed
    and developing economies.

    Chase private wealth had this note about the opposite view-

    The alternative point of view is that a collapse of this magnitude yields creative destruction, leaving in its wake lower valuations, more chastened financial institutions, more focused and cynical regulators, and a better foundation for investing. In the wake of the 1970s fiasco, efforts by regulators and the private sector to bring down inflation and address the U.S. productivity decline were slowly put in place. Both led to better markets that followed, when equities outperformed cash and bonds for the
    next 30 years. In the 1930s, the public sector created a broad range of safety nets and institutional separations of church and state to benefit workers, investors and companies; these efforts were successful as well
    over subsequent decades. And after the Depression of 1890's, triggered by
    a productivity surge and collapse in agricultural prices, the initial stirrings of government involvement with financial markets began, in
    contrast to the laissez-faire capitalism that preceded it. Markets recovered, but were met with the Panic of 1907, which itself created the
    impetus for establishing the Federal Reserve.

    Wow reaching back for stats on the 1890's!!! That's research above and beyond and jesus lets hope stocks don't go back to the prices of the 1890's... I like the points here though, it is in great contrast to all those bimbos on CNBC yelling about socialism and the end of free markets.... But I couldn't let that go without this little gem this has been reported no where else so I'm sort of breaking news now...

    THE United States of Switzerland? UBS
    announced that it will dispose of $60 billion in troubled assets to a special purpose vehicle. The Swiss National Bank ("SNB") will provide 90%of the SPV's financing. Ok so far....

    Most press articles focused on benefits for UBS
    (it's only 2%-3% of their total assets, so this operation does not do that much to change the context of whatever capital-raising or loss recognition may lay ahead).

    It was more interesting however where the SNB got the dollars, $54 billion is a ton of money. Once again according to JPM internal documents which I have seen- Unlike other Treasury and Fed operations, this one has been clouded in the obscure language of central bank press releases. The SNB appears to have gotten the dollars from the Fed through
    the "swap lines". In doing so, the Fed lent $54 billion to the SNB, which in theory posted the Swiss franc equivalent someplace in cyberspace as anoffsetting obligation to the Fed. But it did not (in the SNB's view) affect the Swiss money supply, since the money is not in circulation.

    Rut Roh That sounds uber shady. More....

    We've received conflicting information as to how long the Fed's swap arrangement with the SNB will last, with "insider" comments ranging from 6 months to 12 years (seriously). If it's 12 years, that gives the SNB all the time in the world to defer losses on the $54 billion, and then finance that smaller amount. But the Fed is unlikely to be in the business of providing 12 year work-out financing to foreign governments by expanding the U.S. monetary base. So let's assume that the SNB has to return the $54
    billion sooner than that. How will they do this; by issuing notes and bonds in domestic Swiss capital markets? Swiss capital markets are 120
    billion Swiss francs, so expanding them by a third appears to be a non-starter. Can the SNB print the money and buy dollars in the inter-bank markets? Sorry, but the Swiss monetary base is only 44bn Swiss francs;
    more than doubling it seems ridiculous to contemplate. What about funding
    the $54bn with a dollar bond issue, as some at the SNB suggested to us? Good luck: the largest dollar-denominated bonds issued by European countries are $1bn to $5bn, with the latter issued by Germany, whose GDP is
    7.5 times greater than Switzerland's. The SPV could sell assets today to crystallize SNB's loss, but it's a tough market for doing so.

    The bottom line is that the Swiss face challenges with banking sector liabilities having grown to 670% of Swiss GDP (b). The last shoe to drop from the Fed-SNB operations has not fallen yet. Some believe that the SNB
    will not take a lot of losses on the exposure; maybe, but the SNB announced that "the assets to be purchased include mainly debt instruments backed by U.S. residential and commercial mortgages", so we're not so sure about that. The Fed should be more clear about the rationale and process for financing troubled asset purchases from non-U.S. institutions. When the non-US institution being bailed out had an explicit strategy of building a
    book of thousands of offshore accounts for U.S. taxpayers that were undeclared to the I.R.S., and offering anti-surveillance courses for their
    bankers to detect/avoid U.S. customs agents and law enforcement officers (c), you'd think the bar would be even higher. It's been a very strange year.

    That folks is great writing & great info... With an eye on Iceland... one day lowers rates then 3 weeks later raises them to 18%!!! We must watch for news out of Switzerland. All of this sounds very bad. When the senate figures out that we are starting to bail out foreign nations as a whole, much less certain financials the S is going to hit the fan. ~ stoney
    #10     Oct 29, 2008