Posts Tagged ‘short interest’

Goldman’s Hit List: Bear, Moody’s, NatCity, PMI, WaMu And Capital One

Goodfellas’ Hit Scene 

 

Goldman’s Hit List: Bear, Moody’s, NatCity, PMI, WaMu And Capital One

Courtesy of Tyler Durden

As Bruce Krasting disclosed yesterday, Goldman’s Josh Birnbaum "slipped" when disclosing the firm’s prop equity positions, in listing the companies his firm was actively shorting. We hope none of these were naked shorts as that would not reinforce the case of prudent risk management by Goldman’s discount window-accessible hedge fund (in other words, the entire firm). Today, via the full exhibit list, we learn that in addition to Bear Stearns, in July 2007 the firm, via Josh, was also actively shorting a variety of other mortgage-related firms at the Structured Products Group via puts, which in addition to Bear, included Moody’s, National City, PMI, WaMu, and Capital One. The firm only had a micro S&P long offset. As the list demonstrates, the firm had a big delta short in fins offset with no financial longs, thus refuting Josh’s testimony that this was a "hedge" when in reality this was nothing than a directional short bet on fins. What is more troubling is that Josh was planning on expanding the list to a whole slew of other firms, and specifically competitors, most of which eventually going under: including Lehman, Merrill, and Morgan Stanley.

We are confident that sooner or later AIG made the list, if not so much on the equity short side, as long CDS. If anyone wants to make the conspiratorial case that Goldman may have had the upper hand on these firms by knowing their liquidity situation and profited from it by shorting them as each bank in turn experienced a bank run, this could be a good place to start. It also begs the question if Dodd’s worthless bill has anything to see about predatory practices by Wall Street firms which actively short each other, potentially leading to a destabilization of the system.


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SEC Charges Goldman Sachs With Fraud On Subprime Mortgages, Paulson & Co. Implicated

SEC Charges Goldman Sachs With Fraud On Subprime Mortgages, Paulson & Co. Implicated

Courtesy of Zero Hedge  

Washington, D.C., April 16, 2010 — The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.

The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party." 

Kenneth Lench, Chief of the SEC’s Structured and New Products Unit, added, "The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress."

The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.

According to the SEC’s complaint, filed in U.S. District Court for the Southern District of New York, the marketing materials for the CDO known as ABACUS 2007-AC1 (ABACUS) all represented that the RMBS portfolio underlying the CDO was selected by ACA Management LLC (ACA), a third party with expertise in analyzing credit risk in RMBS. The SEC alleges that undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. hedge fund, which was poised to benefit if the RMBS defaulted, played a significant role in selecting which RMBS should make up the portfolio.

The SEC’s complaint alleges that after participating in the…
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Short Interest At Lowest Levels In Over 2 Years

Short Interest At Lowest Levels In Over 2 Years

Courtesy of Market Folly (and Bespoke)

Thanks to the fine folks over at Bespoke as always for flagging this data. We now see that short interest in the S&P 1500 is at the lowest levels since February 2007, sitting currently at 6.6%. Take it for what it’s worth:

Short Interest 0831 

Market Folly

 


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SENTIMENT UPDATE – INVESTORS ARE COMPLACENT

SENTIMENT UPDATE – INVESTORS ARE COMPLACENT

Courtesy of The Pragmatic Capitalist

Earlier this week we mentioned the sharp change in short interest over the prior months.   I wrote:

Much of the fuel for the 50% rally in the S&P 500 has come from short covering.  The general skepticism surrounding the recovery has actually resulted in price gains.  But as the rally gets long in the tooth we could be seeing signs that short covering will have a much smaller impact.

The huge declines in short interest are a sign of capitulation in short selling.  The bears have been truly slaughtered during this bull run.  The change in short interest should be viewed as a contrarian indicator at this juncture.  This is also a clear sign of a major change in investor sentiment.

In addition to major changes in short interest, this weeks AAII poll displayed a remarkably bullish reading of 51%.  We haven’t seen a reading this high since May 2008 just after the government intervened in Bear Stearns and the market rallied.  At the time, everyone was bullish and was declaring that a recession was off the table and a second half recovery was a near certainty.  Of course, when everyone is on the same side of the boat, it’s wise to either move to the other side or simply jump off.  The bullish side of the trade, in terms of sentiment is incredibly crowded.  Positive sentiment can remain high for extended periods of time and can be a major driver in higher prices, however, these environments make for very poor risk/reward scenarios.  If any element of doubt or uncertainty creeps into the market we could easily see a sharp and dramatic correction.

AAII

 

 


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RUNNING OUT OF FUEL FOR THE RALLY?

RUNNING OUT OF FUEL FOR THE RALLY?

Courtesy of The Pragmatic Capitalist

Much of the fuel for the 50% rally in the S&P 500 has come from short covering.  The general skepticism surrounding the recovery has actually resulted in price gains.  But as the rally gets long in the tooth we could be seeing signs that short covering will have a much smaller impact.  Bespoke Investment Group reports:

Following July’s leg higher, it seems that traders on the short side have cut and run.  As shown in the chart below, the average stock in the S&P 500 had 4.97% of its float sold short as of the end of July.  This is the lowest level since January 30th, and marks a decline of 17% from the peak levels in July 2008.  Bears will cite this number as proof that investors are crowded on the long side.  While bulls would probably prefer to see higher levels of short interest, they are likely to note that short interest still remains high from a longer-term perspective.

bespoke

Source: Bespoke

 


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WAS IT JUST A SHORT COVERING RALLY?

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WAS IT JUST A SHORT COVERING RALLY?

Courtesy of The Pragmatic Capitalist

The light volume, poor breadth and quick surge in the market over the last three days has a lot of people calling this nothing more than a short covering rally.  I went back and looked at the list of the S&P 500 stocks with the highest short interest to see how they’ve performed over the last three days.  The results are pretty good.  The average stock on the list has returned 10.5% over the last three days with none of them turning in a negative return.  The S&P is up 6% over the same period.  The Nasdaq 100 is up 5% and the Russell 2000 is up 7% over the same period which would imply that beta has had little to do with the overall return of these names and that this has indeed been a short covering rally.

si1 - short interest

 

 


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Phil's Favorites

How high above the 200-day can the S&P 500 get?

 

How high above the 200-day can the S&P 500 get?

Courtesy of 

The big news this past week is that the S&P 500 got way out ahead of its 200-day moving average – more than 11% above, in fact.

Michael wrote about how shitty of a timing signal this measure is here, if you haven’t read it yet you CANNOT miss it.

In the meanwhile, Jon Krinsky notes that while we may be stretched based on recent history, i...



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Zero Hedge

Netflix Burns A Record $19 Million Per Day As Growth Slows; Q1 Forecast Disappoints

Courtesy of ZeroHedge

Two quarters ago, when Netflix subscriber growth hit a brick wall and US subs actually declined, we asked  "is the Netflix growth juggernaut finally dead?" because in its Q3 letter, Netflix said it will add 26.7 million customers in 2019, fewer than it added last year, and the first annual drop in growth this decade.

Then, last quarter, the juggernaut appeared to find yet another "second wind", with the stock surging after the company reported its Q3 ...



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Kimble Charting Solutions

Hang Seng Index Double Topping At 2007 Highs?

Courtesy of Chris Kimble

Could the Hang Seng Index be “Double Topping” at its 2007 highs? Possible, yet not proven!

The Hang Seng Index attempted to break above its 2007 highs at (1), only to see a key reversal pattern take place the following month.

After the reversal pattern, the index has created a series of lower highs, just below falling resistance.

So far this month, the index is attempting to break above falling resistance, where it could be created a bearish reversal monthly pattern at (2).

What would it take to prove that a double top was i...



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Insider Scoop

Earnings Scheduled For January 21, 2020

Courtesy of Benzinga

Companies Reporting Before The Bell
  • Halliburton Company (NYSE: HAL) is projected to report quarterly earnings at $0.29 per share on revenue of $5.11 billion.
  • TAL Education Group (NYSE: TAL) is estimated to report quarterly earnings at $0.09 per share on revenue of $839.96 million.
  • Signature Bank (NASDAQ: ...


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The Technical Traders

Using the copy-paste formula in the Forex market

Courtesy of Technical Traders

In Forex there are many techniques available to boost up the profit factors. However, as there are millions of people trying to make a profit it is not easy to get the right tricks. There are many brokers offering high leverage trading account to the interested traders. They also provide useful insight into the market so that the traders can make a decent profit. In fact, some brokers often sell signals to their clients so that they can start earning money in the early stage of their careers.

At present, this method has earned a huge following as many investors don’t like to spend time staring at the chart. In this article, we are going to try to bust the myth about this infamous technique...



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Members' Corner

The War on All Fact People

 

David Brin shares an excerpt from his new book on the relentless war against democracy and how we can fight back. You can also read the first, second and final chapters of Polemical Judo at David's blog Contrary Brin.

The War on All Fact People 

Excerpted from David Brin's new book, the beginning of chapter 5, Polemical Judo: Memes...



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Chart School

SP500 Kitchin Cycle Review

Courtesy of Read the Ticker

The biggest known news date in the next 18 months is the US Election. The biggest unknown news date is when the US believes it is in a economic recession.

The Kitchin Cycle is still working.

We must conclude the major 900 period low is now in, and we are now in a up swing, which may top out ate 2020 or late 2021. Any future top out may only generate a 10% to 20% correction, of course this can be deemed very mild. This is expected, but the expected does always play out. 

Rolling the dice to get '7' does not always work. Post US elections seasonal's aligned with a poor start of the decade seasonal trends, add on high global recession risk, add on a stock market slump tends to occur in the years ending 9,1,2,3,4 (like 1973, 1...



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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Digital Currencies

Cryptos Have Surged Since Soleimani Death, Bitcoin Tops $8,000

Courtesy of ZeroHedge View original post here.

Bitcoin is up over 15% since the assassination of Iran General Soleimani...

Source: Bloomberg

...topping $8,000 for the first time since before Thanksgiving...

Source: Bloomberg

Testing its key 100-day moving-average for the first time since October...

...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

Reminder: We are available to chat with Members, comments are found below each post.

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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