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Friday, December 9, 2022


Whipsaw Wednesday – Buffet Bashes Bulls

Well, you can't say I didn't tell you so

Yesterday's post was all about what total nonsense the move up was and, per usual, the whole thing was taken away in the futures, where retail investors have no chance to profit from it.  Of course, this market isn't being run for your benefit and if you wait for Cramer to tell you what to do, then you are pretty screwed (and more so if you listen to him).  Yesterday our boy Jim fell off the wagon and declared victory for the Bulls saying: "The bears must be stunned and confused, flummoxed even" and made fun of those of us who worry about "facts" and "fundamentals" as we trade.  "Every argument the bears had for selling," Cramer said, "has been totally rebuffed by this great market."  Cramer, you are not just an idiot, you are a dangerous idiot!

As the more rational David Fry points out in his "Spin City" post: 

So we got a healthy bounce today but it didn’t undo Friday and Monday’s collective damage. We were a little short-term oversold and a bounce shouldn’t surprise even though economic and company news wasn’t great. But, the “better than expected” spin was in for retailers which frankly was laughable. And, golly, banks reported losses on credit cards were slowing (maybe because Chucky’s not shopping?) which was seen as a positive. Homebuilders disappointed (oops, scratch that)… a “worse than expected” report was spun positively because more single family homes were built. I wonder about that since there are too many of them, aren’t there? But that’s the way things are these days.

What a stark contrast between a sane and insane take on yesterday's action.  In Monday's post we targeted a drop to Dow 9,100, S&P 980, Nasdaq 1,950, NYSE 6,400 and Russell 550 and in my 9:48 Alert to Members yesterday I set the bounce targets at Dow 9,200, S&P 986, Nas 1,946, NYSE 6,400 and RUT 555 but noting they were rough numbers that I was eyeballing on the fly, following our 5% rule.  Those levels were beat across the board but on such low volume that I called an audible and we stayed bearish, taking aggressive short positions like the DIA Aug $93 puts at $1.50 which, unfortunately, didn't make our double down target of $1 but should do well this morning.  We also took short shots at COF, HPQ (backspread), RTP (looking very good this morning!), SRS (our old friend), RTH and a bull play on DUG, which is an ultra-short on oil so still bearish

At 12:38 I said to Members: "Just like plate spinning, they have so many balls in the air and if just one of them falls (dollar pops, oil falls, copper drops, Yen rises, China falls, news turns sour, companies lower guidance, banks fail…) the whole act can collapse all at once….  " but the plate spinning was so masterful that we didn't want to overdo it and I said to Members at 3:02: "So far, we haven’t done much of a breakout over our bounce levels but we are over and you have to respect the move today – even if you don’t believe in it." and my 3:26 Alert to Members called for a neutral stance on our DIA covers as we were already very bearish with our new picks (and we really don't have any longs that aren't massively covered already). 

It looks like we'll be back to testing our breakdown levels this morning and it's at least another 1.5% if we get through those and then we'll see what kind of bounce we get from there.  The futures really got hit hard this morning and I said to members in morning chat: "Lots of fun and games overnight.  Still holding our breakdowns so far but the suckers aren’t buying what GS was selling yesterday and don’t forget you get to a point where GS gives up and exits the game.  Look for signs they are turning negative like one of their major shareholders (Buffett) dissing the market or GS downgrading a Dow/commodity component like AA….   "

Indeed GS did downgrade AA (of course I knew that already) and of course Buffett did write an Op-Ed column in the NY Times in which the Oracle of Omaha said:

Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects.  For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itselfWith government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.

To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory… Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.

Niether Buffet nor I are predicting gloom and doom for the economy.  We are just pointing out that it's a little early to be shooting for a market "recovery" especially when you consider that the levels chartists are targeting for recovery are based on getting back to levels that were based on TOTALLY FALSE EARNINGS!   The financials should never have been worth 25% of the S&P because 75% of their earnings were stolen from future quarters and based on totally false accounting assumptions.  The land held by homebuilders was never worth 100% more than it is now – that was a bubble and XOM never had $5Tn in reserves as that was another bubble and the gold miners weren't really going to get $2,000 an ounce for gold (without massive inflation) nor were the copper miners going to sustain $400 copper, simply because it's not economical to use it at that price. 

GM couldn't sell cars without losing $20,000 per vehicle and AIG wasn't making any money at all, they were just booking 100% profits for writing policies they thought they would never have to pay but (funny story) it turns out they were wrong and they have now lost 13,000% of those profits with a potential of 1,000,000% more liabilities on the books.  Believing the market is going to race back to anywhere near those kinds of valuations is just as dumb as believing that 2001 was a good year to get a bargain on a sock puppet that sold pet food because "it was bound to come back."  IT'S OVER – DEAL WITH IT!

The Dow was NEVER worth 14,000 and the S&P was NEVER worth 1,500 and (yes, I'm going to say it) the Shanghai composite was NEVER worth 6,000.  So please pundits – stop targeting these numbers.  YHOO was once $300 a share and we've accepted that it's not likely to get back there, what is this fixation with getting back to market highs that have proven to be based on a total falsehood, on earnings that were not only reversed but were clawed back to erase half of this decade's earnings.  It is a market that has cost the US government $11Tn to bail out so far.  Do we even want S&P 1,500 if it costs the US government $1Tn per 100 point gain per year?  That's the question Warren and I are asking – at some point, you need to step back and figure out what it is we are trying to accomplish here.   The bubble popped, long live the new bubble may not be the right attitude for the second decade of the century.

Just in case you miss the news today, a series of car bombings killed 75 (so far) and injured 300 in Baghdad today (remember that place, we're still there) and it's been a long time since there's been a "terror premium" on the markets so let's keep tabs on that as Ramadan approaches, as that seems to be bombing season and we should probably stick with at least 55% bearish covers into each close for the duration.  The Nikkei dropped right back to the 4% line we discussed at 10,200 but this time finishing at the low of the day.  The Hang Seng dropped 350 points (1.7%) and also finished near the day's low and, more significantly, under 20,000 for the first time since July 23rd.  The Shanghai Composite was much worse, falling 4.3% with another slew of companies halted at their "limit down" levels of 10%.  That JPM analyst from yesterday must be ashamed of herself.  Quick – what was her name?  See, you don't remember and she doesn't care how many billions of dollars she tricked investors out of yesterday because her massive bonus check is in the mail!

"Unless you're a day-trader, why would you want to hold stocks in view of lingering uncertainties over Chinese stock markets?" said Yuanta Securities head of sales trading Riga Saito. "Yesterday's trade volume in Shanghai was a low 123.23 billion yuan (US$18.03 billion), a drastic reduction from July 29's record high of 302.82 billion yuan. This shows investors are still very cautious, afraid they'll lose money if they buy at these levels," said Guosen Securities analyst Tang Xiaosheng.  Take note US traders – this is good advice!!!

Europe is off about a point ahead of the US open, which also looks to be down about a point and all we're going to be doing today is taking our short profits and watching our levels to see what holds.  There's no sense in being greedy in this market so we are not looking to ride things down if the market is going to hand us huge one-day gains.  There is always tomorrow to trade and, chances are, we'll learn something between now and then!

Be careful out there. 



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Phil – Ok…so yesterday’s request for "another GMCR/X/OIH (when it was at $108)" returned results that were positive in the first 30 minutes of the market….except I got greedy and didn’t sell.  Now I’m down huge (where have we heard that before) but luckily I didn’t spend all of my portfolio trying to make some last minute expiration premiums….so an improvement in behavior.

Let’s give it another shot.  I’m not going to get $1 for the ERY $19 puts.  Any other suggestions for "easy pickings" in terms of SELLING some out of the money calls or puts….and hopefully collecting at least the 33% time decay between today and tomorrow…or better yet, keeping 100% of the premium by letting the option expire?

Do you think they used up their STICK at lunchtime?

Debate- interesting how disagreement with Obama among leftist is healthy debate but disagreement with Obama from the right is "fear mongering" and mob action.

DIA- into the close- 1/2 cover with Sept 93’s again?

Phil / anyone following IBN,
IBN – I doubt it goes below $25 until the global markets correct 10-15% – the widely expected & awaited correction since early July that everyone (sane) seems to be waiting for – especially in the US markets. Till that happens, $30 is a nice key level with low $30s also being the 50 DMA. See chart below

Aug DIA 93 puts- in at .72- out at .90. Goodenuf!

Couple of interesting tidbits for CEOs buying shares…..TMRA CEO bought 10K @ $6.  TBBK bought 100K at 5.75 outright.

In fact, TRMA CEO has been buying like crazy.

Here are all too real examples of the rational, "healthy debate" that is typical of the Left …
Those damn conservatives …

Amazing how easily the bears give in – Mr stick wins again

CERS back at 2.88?

Is it me or is the quietest close ever?

From the "old salts" on the board, on a scale from 1-10, how difficult is this market to trade in comparison to the past?

The funds with the biggest positions just aren’t selling, they want you to beg for their shares

Al Franken ???   C’mon Phil, the guy is a nut job !  That’s who you are quoting …. I told this to Johnny Mac and he said "you cannot be serious !).  Oh right, Franken stole an election and is now a Senator (what a country).    What does Jesse The Body Ventura think ?
Is it the photos that make you respond as you do; that you can’t just dismiss the unassailable evidence of the lunacy on the Left vs. your unfounded comments about the right ?
When you get a bunch of conservatives running around w/ Obama Hitler signs and paraphenalia, please do let me know (and make sure its not some lone Aryan Nation nut).
Sorry for dropping the bar on the possibility of healthy discourse, but facts are stubborn things.

I cannot believe a 997 S&P close … what a joke.  9281 Dow.
Will we get ’em on Thurs & Friday ?

Phil-  I did sell some USO calls…..at $39 strike actually when USO was at about $38.25…..can never catch the top or bottom though…as we found out with SRS.  I also sold some DIG calls and DUG puts…around the same time. 

I was just checking to see if you might have any suggestions on non-oil stuff.

Note Caps reaction to a rational discussion on politics is exactly what Franken points out in his book as typical, immediately dropping the bar to the most sickening possible denominator to drown out any possiblility of heathy discourse.
How can their be discourse with people who want to end freedom and capitalism by providing universal healthcare….

Speaking of healthcare since we are after trading hours….NPR had a nice piece on the Spanish ‘universal’ healthcare system…here is the link.

Its only going to get worse in this country for every class except the uber rich, might as well get free health care. 😉


Debate- Al Franken? Have you no shame? Pu-lease.
If you don’t play nice I am going to start using Rush Limbaugh.

Did i say free!! oops

Pharm, to put it simple, those system (in their ideal form) are "comunist" meaning all people are equal, so there is a lot of complains because waiting and other issues. Expect in the waiting line to find bill gates, a dosser and why not Obama…
Overall is good. But maybe you are not ready for a communist system… hahahah 😀
I’m joking but at  same time I’m saying true
PS: So we have to get ready for a recession: http://www.dossergame.co.uk/  LOL  was selected "game of the year 2008" isnt ironic? 😛

So that was all about oil then ? Big draw – oil up – stocks up. Has no-one learnt last years lesson ? It seems the stock market has now completely decoupled from the economy. Lots of interesting talk about how China is collapsing from a parabolic rise similar to the S&P  Lots of commentators on Seeking Aplha have turned bullish , which is usually a bearish sign however everyone in the market is far too irrational for that. They want the market to rise and turn a blind eye to all the coming problems. So up we’ll go. Phil seems to be hedging his bets by having both bullish and bearish comments he can quote from. But the overall physcology appears to be buy,buy,buy because its going to go up. Just hope I’m not in it when the crash comes

Guys, I think it’s time to switch off the incessant bear hope because it is obvious that fundamentals aren’t at play and aren’t going to be for awhile.  Either
A) Money is coming in from somewhere at all pullbacks, or
B) There is no fear to panic sell into drops.
If 180pts in a day when everyone was thinking a pullback was inevitable and long overdue wasn’t enough to get a proper correction started, what is?  Especially when you consider days like today when the market rocketed higher on what appears to be bullish news for energy.

Cab someone explain this staement for me ?
"As energy demand starts to increase, that’s good for the economy, at least initially," said Mike Zrembski, senior commodities analyst at OptionsXpress.
"In the past, traders would view higher energy prices as a negative for corporations, since their input costs increase," he said, adding: "It’s only recently that they see it as a positive."

Hey you guys always assume because I’m bearish I trade bearish. Its all right to be sure of being bearish and to state that opinion but in trading its also ok to be hypocritical and trade with the bulls. Sure I short as well because I want to build a position for when I’m right (I have to be right sometime) but untill then I’m biased to where the markets momentum is.

Not ready for communism/Spider     WELL DONE  !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Sorry to be scarce. Tho David prob prefers when Im not around. Despite the crying, ADI turned out fine – tho I capped my gain by selling Aug 27.50 calls and will likely be exercised – exorcising ADI from my folio. Lol. And, again, big props to someone here for BPOP. BQWJZ cashed huge and I’m letting some ride with house money. Back to the beach!

Communism / socialism breeds slackers. It is the opposite of what JFK famously said. Slackers say "what can my Country do for me, not what can I do for my Country."  They want everything given to them. The government "owes" them. They do not want to break a sweat to do anything as long as the government is there for handouts. With high taxation of those that work hard, there is no incentive to do well. This is why communism and socialism will never succeed compared to a capitalist society.

Come’on Phil, the oil is going to make CROCs…..

Hi, Pharmboy,
Are you still there?  Do you think it’s time to go long on MTXX?  If so, what do you suggest, sell puts, bull spreads, etc?  When do you think we’ll hear from FDA, days, weeks, months?
BTW, I have no positions in MTXX right now.

OIL = great analysis Phil.  Im not surprised with fake stats and fake reports coming from goverments (any) or organizations (any) or cooked banks books (any). What amaze me is how fast you figure there is something rotten. Like when we had the unemployment numbers some month ago, nice numbers, and the market sell into the news. There was something bad with the numbers… something about temporal employees for the 2010 census.
Comunism = well, i just mentioned because those system the base is all are equal or common and remark what I said: "in the ideal form" Of course, the reality is beyond that.  
Maybe i have to stop writing, because the idea was to make a joke (see the "hahaha" and smile in original post). Making fun about a common=equal=communism health system in a country who fight the comunist away. Seems the joke went wrong.

cwan – many of us are in MTXX from about 6.4 or so.  I am long them to a point.  Not sure if they will make it back to 20, but 9-10 would be nice.  I believe the FDA info is due in 90d, so sometime in Oct/Nov.  You want to scale, Sept Puts (1/4 sale) would work.  I sold calls a while back on the earnings, knowing they would be bad, and sold puts and bought back recently.  The lawsuits are the big issues right now, and that is what is holding them down (and may for years).

Sold my IYR covering some SRS.  Took advantage of the consistantly bogus AH pop.  I may be a bear but I gotta eat!

thank you Phil for some great reading, what would cause more inflation the top 3000 keeping their wealth or to redistribute it to the bottom 120m

Free market
Free to do whatever it is with accounting in this market

Phil, i find your last post very informative and further supports my disgust with the greed, inadequacies and injustices within our society.  Growing up I remember my  friends and parents friends who were worth millions,bigger houses, nicer cars, but they didn’t seem so different,  now i drive my children to friends who have 100’s of millions, some more, and the differences are astounding (pls. excuse my spelling -its late).   Further, from personal interactions, I dont think the top 5% get it, they are so removed from the  realities of life. As one said recently,  "i too had to cook breakfast for 4 children and then take them for a bike ride". Hello! How about cooking, bike rides, a job, a loss of a job, laundry, bills, mortages, schools, camps, health care,  the list does not end. Though, as my 8 yr old told me to day  the end is death. Finally, some relief!
on a related note, I drove over to the 4 seasons  (Exuma) , forlorn sight and actually eery.  Workers have told me that all outdoor furniture and some indoor, all soft goods, sheets comforters, towels, were taken to the local dump. Dump says everything was burned on orders.  Absolutely, disgusting.  This is a poverty stricken island.  Talk about social/ corporate irresponsibility. I am sickened.

MTXX/Pharmboy: Thanks!  I’m not familiar with that sector.  Thank you so much for all the information.

You definitely got it right. Without a middle class, there is no one to buy the goods that makes rich people richer. If you notice on talk shows – especially Fox, when anyone starts to make a point they don’t believe in – they get shouted down and don’t get to finish what they are saying. I think many people still believe Saddam had WMD and Obama is a Muslem.

Communism / socialism breeds slackers. It is the opposite of what JFK famously said. Slackers say "what can my Country do for me, not what can I do for my Country."  They want everything given to them. The government "owes" them. They do not want to break a sweat to do anything as long as the government is there for handouts. With high taxation of those that work hard, there is no incentive to do well. This is why communism and socialism will never succeed compared to a capitalist society.
RichardA  –
Comunism. We were discussing universal healthcare provision. How on earth can you equate providing universal healthcare with becoming communist? Perhaps this was just deliberately being silly.
Socialism. I agree that social benefits can risk disincentivising people to work or be productive. Again though, I don’t see how this applies to healtchare. Free healthcare won’t pay the rent or put dinner on the table or clothe you, so work is still required. And the poorest people can’t currently afford healthcare anyway, so the impact HAS to be zero on their incentive to work.

Well said Stevenparker – I like you your comments – always very sensible and to-the-point and I always find you agreeable and that is important when discussing political policy.

Now I hope someone is going to make me richer today but if not then there is always a movie like "Happy Go Lucky" (Mike Leigh) or "Miracle at Santa Anna" (Spike Lee) to stream from Netflix for a fixed $9 per month – and life goes on with our hopes and dreams – what would we do without them.

Oh and Phil.

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