Archive for
July 13th, 2008
by OptionSage - July 13th, 2008 11:48 pm
Black Hole: a region of space in which the gravitational field is so powerful that nothing, not even light, can escape its pull after having fallen past its event horizon. The term "Black Hole" comes from the fact that, at a certain point, even electromagnetic radiation (e.g. visible light) is unable to break away from the attraction of these massive objects. This renders the hole’s interior invisible or, rather, black like the appearance of space itself.
If it ever felt like the market had a black hole, now might be that time! An inescapable magnetism with vampiric tendencies is exhausting the patience and energy of the most steely and experienced stock market traders. In the depths of the gloom and amid the contagion of panic, solace and wisdom can often be found in the words of those who have seen it all before, long before any of us had begun to even dabble. The following quote is from Remiscences of a Stock Operator:
"And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money."
Having dipped a little toe in the water this week only to find blood-thirsty sharks hiding under the surface, this quote serves the purpose of reminding not just the reader but the author of the imprudence of ignoring market sentiment. But words tend to be poor descriptors of raw sentiment. Instead pictures have a habit of conveying the heart of an issue. And perhaps, this chart of Fannie Mae in freefall suffices to illustrate the current market…
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by Phil's Favorites - July 13th, 2008 8:52 pm
While we’re on the weekend topic of "bailouts," and a bailout by any other name is still a bailout, here’s a fascinating article on the recent failure and bailout of Bear Stearns, and another perspective on what really transpired. Courtesy of Ellen H. Brown, author of Web of Debt and many other books, including Forbidden Medicine, and the bestselling Nature’s Pharmacy. - Ilene
The mother of all insider trades was pulled off in 1815, when London financier Nathan Rothschild led British investors to believe that the Duke of Wellington had lost to Napoleon at the Battle of Waterloo. In a matter of hours, British government bond prices plummeted. Rothschild, who had advance information, then swiftly bought up the entire market in government bonds, acquiring a dominant holding in England’s debt for pennies on the pound. Over the course of the nineteenth century, N. M. Rothschild would become the biggest bank in the world, and the five brothers would come to control most of the foreign-loan business of Europe. “Let me issue and control a nation’s money,” Rothschild boasted, “and I care not who writes its laws.”
In the United States a century later, John Pierpont Morgan again used rumor and innuendo to create a panic that would change the course of history. The panic of 1907 was triggered by rumors that two major banks were about to become insolvent. Later evidence pointed to the House of Morgan as the source of the rumors. The public, believing the rumors, proceeded to make them come true by staging a run on the banks. Morgan then nobly stepped in to avert the panic by importing $100 million in gold from his European sources. The public thus became convinced that the country needed a central banking system to stop future panics, overcoming strong congressional opposition to any bill allowing the nation’s money to be issued by a private central bank controlled by Wall Street; and the Federal Reserve Act was passed in 1913. Morgan created the conditions for the Act’s passage, but it was Paul Warburg who pulled it off. An immigrant from Germany, Warburg was a partner of Kuhn, Loeb, the Rothschilds’ main American banking operation since the Civil War. Elisha Garrison, an agent of Brown Brothers bankers, wrote in his 1931 book Roosevelt, Wilson and the Federal Reserve Law that “Paul Warburg…
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by Phil's Favorites - July 13th, 2008 7:54 pm
In case you were wondering, here’s another article, courtesy of Trader Mark, discussing where at least some portion of our gas dollars are going.
We’ve discussed this many times in the past [Jan 21: A Tour Through the Middle East] and as I wrote in January
While we wring our collective hands about how the infrastructure companies are going to lose all their business as crude drops from $100 to $75, and projects will be cancelled due to their rich customers actually giving a rat’s behind if crude is $100 or $75 let’s take a look at reality. I noticed a story in the NY Times this weekend on Saudi Arabia - so I’d like to overlay that with just a snapshot of what is going on in some of the other countries in this part of the world - the Kuwaits, the Oman’s, the Abu Dhabi’s, the Qatar’s….
… because perhaps I think most of us still are very inward looking as Americans and do not realize what is truly going on in this globe. I keep returning to the theme of this transfer of wealth - each day we become more of a debtor nation and our wealth is being transferred out. Only to return to buy our assets from beneath us (and not just banks). If not with imports (to Asia) than with the "great tax" that is petrol. A "tax" on all of us, and our country as a whole. Instead of devoting resources to stop taxing ourselves, we just give lip service or misguided pushes into corn ethanol of all things. We just don’t seem too worried about it, because it’s a creeping problem - it’s incremental, like erosion (or inflation). I would like to highlight we are in a global economic ‘competition’, but there seems to be very little awareness of this from ‘leadership’. Thankfully, we have some of the most financially innovative institutions to lead us through this…. errr, wait. Never mind that. But that’s neither here nor there as an investor; I’ll let others argue about the implications - I have my views, but I am just trying to make money off the trends. But I do have to say, it is interesting to see an over reaching national vision proposed by many of these "3rd world" countries ‘leadership’ - something we used to do here… but I guess you need money to do…
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by Phil's Favorites - July 13th, 2008 7:12 pm
Yes, Government action time. Brought to you by Trader Mark.
It’s Sunday night in socialist America - that can only mean one thing. It’s government time! They are starting even earlier than Bear Stearns (BSC) bailout Sunday. Another night of hitting refresh on CBSMarketwatch to watch the actions one after the next.
WSJ: Treasury to Issue Statement Supportive of Mortgage Giants
- Treasury officials this evening are expected to announce several measures aimed at shoring up confidence in Fannie Mae and Freddie Mac, according to people familiar with the situation.
- The Treasury announcement is likely to discuss the availability of a line of credit for the companies if needed and an indication that the government might buy equity capital in the companies in a pinch, these people said.
- The Fed is expected to make a separate statement regarding the near panic that has slashed the value of Fannie and Freddie shares by nearly half over the past week.
- All told, the announcements, crafted during a series of weekend discussions, represent a broad attempt by the federal government to do everything it can short of an actual intervention to prop up the two stockholder-owned, government-sponsored companies, whose operations are vital to the functioning of the U.S. housing market. (key words = prop up)
- Monday’s markets will bring a big test of the two companies’ financial health when Freddie Mac is due to sell $3 billion of short-term debt. An unsuccessful sale could be a major blow to investor confidence.
- Treasury officials and other regulators have been calling potential buyers of the debt over the weekend to gauge their interest and urge them to participate, according to people familiar with the matter. ("free market" baby)
The past year has been amazing to watch China move to capitalism, and America move to socialism. The NYTimes chimes in
- Alarmed about the sharply eroding confidence in the nation’s two largest mortgage finance companies, the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac and also lend to the companies to meet their short-term funding needs, people briefed about the plan said on Sunday. (now that’s a "free market" solution if I ever heard of one. Remember, we are all about free markets on the way up but they are not enough on the way down - that’s intervention time!)
- As part of the plan, the administration will also call on Congress…
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by Phil's Favorites - July 13th, 2008 6:19 pm
Mish on the latest in the Paulson and Fannie Mae rescue mission. If it sounds like all of Paulson’s recent statements were conflicting with something else you thought you had just read, that’s because they were. (Click here for the Fannie Mae theme song.) - Ilene
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by Phil's Favorites - July 13th, 2008 12:53 pm
Cramer, Greenberg the CNBC clique. Is Patrick Byrne’s story about the short sellers looking more and more probable?
July 11th, 2008 by Mark Mitchell
Excerpt: "Three years ago, Deep Capture reporter and Overstock CEO Patrick Byrne gave a famous conference call that he titled, “The Miscreant’s Ball.” His thesis was simple: Some short-selling hedge funds collude to destroy public companies by spreading misinformation, orchestrating government witch hunts, filing bogus class-action lawsuits, and, most egregiously, selling billions of dollars worth of phantom stock.
In the months that followed “The Miscreants Ball” presentation, a clique of journalists with close ties to short-selling hedge funds and CNBC’s Jim Cramer (himself a former hedge fund manager), set out to sully the reputations of Patrick and everyone else who sought to expose short-seller crimes.
Cramer pal Joe Nocera, who is the New York Times’ top business columnist, wrote that Patrick’s crusade against hedge funds that sell phantom stock was “loony beyond belief.” CNBC contributor and Marketwatch columnist Herb Greenberg, formerly an editor with Cramer’s web publication, TheStreet.com, labeled Patrick the “worst CEO in America” for taking on the shorts (ie., the same shorts who are now paying Herb for “independent” financial research). Fortune magazine’s Bethany McLean, who has yet to write a story that was not sourced from a small group of short-sellers connected to Jim Cramer, suggested in an article titled “Phantom Menace” that Patrick should be fired from Overstock for speaking out against the problem of phantom stock.
At the time, I was the editor of the Columbia Journalism Review’s online critique of business journalism. The attack on Patrick was like nothing I’d seen before, so I decided to write a story about the media’s coverage of short-sellers and phantom stock. When Herb Greenberg and Joe Nocera got word of this, they both called my editor demanding that he kill the story. Cramer sent a public relations goon to delay the story. Then a short-selling hedge fund, Kingsford Capital, appeared in my offices and offered to pay my salary…
…But Jim Cramer is talking. No doubt to distance himself from the growing scandal, he went on CNBC today and said precisely what Patrick Byrne said three years ago. Noting that short-sellers are colluding to take down Lehman, he said the problem is “the need to be able to get a borrow and see if you can find stock….. no one is even calling…
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by Phil - July 13th, 2008 7:14 am
I generally hate reprinting old articles as it takes time and space away from my current rants - but this one is very, very important.
Back in November we started talking about how to solve the housing crisis and, by January, I had a formal proposal to put housing back on track as well as to bring down the price of oil from the then-shocking $85 a barrel. While some of my ideas have found their way into some of the housing legislation that is being kicked around, what’s coming out of Congress is a bunch of dilluted trash that has the stench of compromise on it when what we need in this time of crisis is determination - not dillution!
My housing program will accomplish the following and can be enacted with a penstroke TOMORROW at an annual cost of 1/2 of what the governent has already spent in the 6 months bailing out BSC ($30Bn) and "stimulating" the economy ($160Bn). My program is non-inflationary, will restore the value of the dollar, stop home foreclosures, restore AAA ratings for the morrgage insurers and other lenders. I have a plan that will pay for itself after the first year at an initial monthly cost of less than what this country is spending on oil every 3 days.
Read this over and, if this makes sense to you, send it to your friends AND Congresspeople. If you are the friend and this makes sense to you, send it to your friends and Congresspeople. Let them know if you are a Republican or Democrat and let them know you want action. This is an election year, it’s our best chance as "THE PEOPLE" to actually have our voices heard. Let them know we are mad as hell and we’re not going to take it anymore BEFORE our government spends another $100Bn bailing out the banks while ignoring the actual families in crisis who are at the root of this problem.
If this idea makes sense to you, go to the Free Site, where I’ve backdated it to Friday for immediate availability and feel free to send it to others but please also use the Digg or StumbleUpon or Delicious buttons in order to put it into wider circulation. There are so many ways to "fix" our problems, what we are suffering from in this country is a crisis of leadership, which is causing a crisis of confidence - let’s do something about it:
Original article of 4/16/08:
200 years…
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January 7th, 2009 2:20 pm
Somber Thoughts for the New Year
Will There be a Recovery?
Courtesy of PAUL CRAIG ROBERTS writing at CounterPunch
Economists will scoff at the question in the title. But that’s because they are trying to fit the present into the past.
In the past recoveries were routine, because recessions were temporary restraints resulting from the Federal Reserve putting the brakes on an overheating economy. By restraining the supply of money and credit, the Fed caused inventory buildup, layoffs, and a halt to price rises and union wage demands. With the economy cooled by unemployment, the Fed would take off the brakes. Interest rates would decl...
more from Ilene
January 6th, 2009 4:08pm
The alternative energy sector has been heralded by many as an investment opportunity in the US over the next four years. The rationale:
1. Fossil fuels are declining in supply and are environmentally destructive. While there are those who dispute this, there seems to be enough of a "green movement" that demands alternative energy.
2. Because fossil fuels are declining in supply, they will rise in costs,thus fueling an economic need for alternative energy solutions. This seems to be questionable of late, as gas prices have fallen sharply in the US.
3. US President-elect has made government investment in alternative energies a priority.
While there are scientific arguments for and against alternative energies, the "green movement" seems to be quite strong, suggesting strong consumer demand, and Barack Obama's stimulus plan suggest this the US government will look to feed this demand.
How can investors profit from this?
GEX: The Alt...
more from Goddess
By Andrew Wilkinson
January 7th, 2009 1:34 pm
Today's tickers: LAMR, WFC, HBC, MON & FDO
LAMR – Lamar Advertising – The fact that a recession is eating away at advertising revenue doesn’t seem to worry an investor today who sold a strangle on Lamar, which operates outdoor billboards in the U.S. and in Canada and Puerto Rico. The company’s share price is already well off its $44.48 peak and indeed has rebounded from an $8.69 low recently, which is possibly what this option investor has his or her eye on. The trade involved the simultaneous sale of July calls with a 17.5 strike and puts with a 12.5 strike for a gross premium of 4.50 per contract. Both contracts saw volume of 9,775 lots as the investor appears to be selling volatility, which currently registers a reading of 85%. Such volatility boosts the value of option contracts and in this case the invest...
more from Andrew
January 4th, 2009 8:16 pm
Let's start the new year with a new post and a new portfolio.
2008 was an amazing year for us with the portfolio up 725.49%. We have to be thankful for all this volatility! Let's hope 2009 is very good to us as well.
Thank you to everyone who participates in the comments in the optrader's section, we have a smart group of people, with great ideas.
Live portfolio and comments are only available to members of the swing trading portfolio.
To learn more about the swing trading portfolio (strategy, membership etc.), please click here
- Optrader
...
more from OpTrader
January 5th, 2009 1:37 pm
-“Volatility is lower evidenced by the VIX in the mid 40s. The chart indicates the same with narrowing of the bollinger bands and the formation of a symmetrical triangle. Volume has been extremely low for the most part due to the holiday season. I feel that we will go up to test the 9000 area. Note how the market reacts at that level to give you clues on further movement.”
The DOW closed last Friday 12/26 at 8515 and finished this week at 9035.
Middle East turmoil translated to a DOW drop of 32 points to open the week. It was a light volume affair primarily due to the holiday season.
Stocks rose Tuesday amidst a $5 billion capital infusion into GMAC. It now appears unlikely that GMs demise is imminent. The DOW posted a 184 point gain.
The market closed 2008 on a positive note with the DOW moving up 108 points. The VIX continued to drop and Initial Jobless Claims improved. 2008...
more from Robin Hood
December 20th, 2008 2:19 pm
As 2007 drew to a close, Phil predicted ‘Asian-style’ moves in US indexes and I wrote an article projecting 2008 would be a very difficult year to trade due to ‘unprecedented volatility’. As 2008 draws to a close it looks like both predictions were realized but pleasure does not necessarily accompany vindication. As John Maynard Keynes wrote:
“It is usually better to be conventionally wrong than unconventionally right”
In short, when you are right about bad news, little benefit is experienced because so many will have suffered whereas being wrong with the crowd means comfort in numbers.
As I watched CNBC’s Year in Review last night I was struck by how many times the commentators noted that nobody could have foreseen the carnage. In fact, many were anticipating a recovery in the middle of the year including Hank Paulson! When history judges such projections unfavorably, credibility quickly diminishes.&...
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About Phil:
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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