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

Why governments are so bad at implementing public projects

 

Why governments are so bad at implementing public projects

Around the world, government officials fail often at implementing policy and public sector projects. Here’s why. (Shutterstock)

Courtesy of Andrew Graham, Queen's University, Ontario

As Canada’s federal government starts looking for a replacement for its failed payroll system and the Ontario provincial government launches yet another major shake-up of its health-care system, it’s ...



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Zero Hedge

IMF Discreetly Preps Massive Aid Package For "Day After" Maduro's Fall

Courtesy of ZeroHedge. View original post here.

The International Monetary Fund is reportedly making plans for the "day after" embattled President Nicolas Maduro's fall, according to Bloomberg. Though there's been little momentum in military defections following US-backed opposition leader Juan Guaido's offer of amnesty to any army officer that switches loyalties, Washington sanctions have effectively strangled state-owned PDVSA's access to global markets. News of IMF maneuvering also comes amidst fresh reports the US is amassing aircraft, troops and armored vehicles on the Venezuelan border under the pretext ...



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Kimble Charting Solutions

Gasoline bullish breakout could fuel higher prices, says Joe Friday

Courtesy of Chris Kimble.

Are we about to pay much higher prices at the gas pump? Possible!

This chart looks at Gasoline futures over the past 4-years. Gasoline has become much cheaper at the pump, as it fell nearly 50% from the May 2018 highs. The decline took it down to test 2016 & 2017 lows at (1). While testing these lows, Gasoline could be forming a bullish inverse head & shoulders pattern over the past few months.

Joe Friday Just The Facts- If Gasoline breaks out at (2), we could all see higher prices at the gas pump. If a breakout does...



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Insider Scoop

10 Stocks To Watch For February 15, 2019

Courtesy of Benzinga.

Some of the stocks that may grab investor focus today are:

  • Wall Street expects PepsiCo, Inc. (NASDAQ: PEP) to report quarterly earnings at $1.49 per share on revenue of $19.52 billion before the opening bell. PepsiCo shares rose 0.2 percent to $112.82 in after-hours trading.
  • NVIDIA Corporation (NASDAQ: NVDA) reported upbe...


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ValueWalk

Global Quality Edge Fund: Tail-Risk Hedging Strategy

By Jacob Wolinsky. Originally published at ValueWalk.

Global Quality Edge Fund presentation titled, “Tail-Risk Hedging Strategy.” How to leverage the end of the business cycle without exposing our fund to permanent capital loss?

Alexas_Fotos / Pixabay

Objective:

  • Understand the current convergence between business cycle and the long term debt cycle.
  • Empathize the benefits of Tail Hedging as a means to shield from capital loss. We began implementing this strategy in Q4-2018 to protect the fund from significant market downturns, similar in sca...


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Biotech

Cancer: new DNA sequencing technique analyses tumours cell by cell to fight disease

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

 

Cancer: new DNA sequencing technique analyses tumours cell by cell to fight disease

Illustration of acute lymphoblastic leukaemia, showing lymphoblasts in blood. Kateryna Kon/Shutterstock

Courtesy of Alba Rodriguez-Meira, University of Oxford and Adam Mead, University of Oxford

...

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Chart School

Weekly Market Recap Feb 10, 2019

Courtesy of Blain.

A good week for the bulls once again as a very overbought market essentially went sideways to help work off some of those near term extreme conditions.  The S&P 500 stalled exactly at the 200 day moving average after a frantic rally the past month and a half.  It was generally a quiet week with lowered volatility as the word “patience” continues to have the investor class in a happy daze.

In economic news, ISM Services fell from 58.0 in December to 56.7 last month, below economists’ expectations of a 57.4 reading. A reading above 50 indicates an expansion in activity.

For the week the S&P 500 gained 0.1% and the NASDAQ 0.5%.  That is 7 up weeks in a row.

Here is the 5 day weekly “intraday” chart of the S&P 500 … ...



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Digital Currencies

People don't trust blockchain systems - is regulation a way to help?

 

People don't trust blockchain systems – is regulation a way to help?

Using blockchain technology can feel like falling and hoping someone will catch you. Nicoleta Raftu/Shutterstock.com

Courtesy of Kevin Werbach, University of Pennsylvania

Blockchain technology isn’t as widely used as it could be, largely because blockchain users don’t trust each other, as research shows. Business lea...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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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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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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