So today we are obviously selling down a lot and there must be more fear right now than there was yesterday afternoon.If panic builds and we do have a modern day crash, that should set the stage for a rally, dead cat or otherwise, which would be a chance to then lighten up. Selling along with the panicked is a bad idea.
In my post on greenfaucet yesterday I mentioned that the stage was set for a strong finish depending on the Fed news. I used that to sell my Bank Of America at $29.22 after having first bought it in 2002.
I don't like big mergers and I don't understand why they did not wait a day and make an offer on a discounted stock price after the Lehman kablooey. That the market was the same as it was two months ago yet BAC was up 50% from that time seemed like a gift to me so I took it.
Very few companies are permanently damaged. Taking GMO action is a bad idea.
On a related note I am going to be on CNBC 30 minutes after the close to talk about, go figure, the financial sector.
11 comments:
Roger,
I have been a big fan of your site but, you let me down on your interview on the closing bell with Maria. Everyone knows there are problems in the market but, you were given a chance to hammer Christopher Cox and the elimination of the uptick rule and you said nothing. I believe Cox is either stupid or corrupt for not fixing this already. It appears you didn't understand the pension funds restricting short sales on their accounts containing GS and MS. Margin is required for the sellers. I believe all you need is scurities in a street name for them to be able to be borrowed and traded short. You had an opportunity to speak out and all you did is confuse the issue. Roger I was very disappointed in your outing. Better luck next time.
I am sure MER was pushing for the bid sooner rather than later not knowing whether their CDO hedges with AIG would hold up this week.
rural meyer, try reading your hypothecation agreement. only shares owned on margin can be lent to facilitate short sales.
Hello Rog,,whats shakin??
By now i'm sure you have visited the vix blog and seen the
VIX:IRX chart and comment, with the ratio '''over 170,,a historical number by any means,
i am totally amazed that there are any investors left..
Mac
Any type of shorting, whether the shares are legitimately borrowed or not, should be stopped. It is a unhealthy type of speculation which increases volatility and can decimate otherwise decent companies and their shareholders. Also, it's something that is used mainly by day traders and pros and not average long term investors. Roger, I understand your position to hold some doubleshort in a portfolio to offset equity losses at certain times, but couldn't it also be acceptable just to hold less equities and a bit more cash at such times?
I think that that the segment of the US economy that makes a living from speculative investment is simply too large to be supported by the kind of returns that should be expected into the future. (I am the type that is happy with boring 8% returns). There are too many people employed in this sector who should instead be doctors or engineers or teachers. Also, there is among investors a sense of entitlement to high returns that borders on the romantic.
One of the few people who makes sense to me in this market, apart from Roger of course, is Marc Faber. His view is that the failure of Lehman is a favorable event for the economy going forward. He also said in a recent interview that the financial sector is far too large and absorbs too much money that should have gone into "real economic activity".
link to the interview on bloomberg:
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vvgfympvyYsU.asf
Jim
Jim,
sorry, not with you on this. Hot money is part of the system and are a source of liquidity.
a few paragraphs down in probably any story about the "new" short sale rules you will see that market makers are no longer exempt from naked shorting. in trading through a market maker you hope they can commit capital to get the trde done. no naked shorting will impede that for buy orders; not good.
i believe in 2 way markets, period. if someone is too speculative, whatever that means, and they are bad it they will be wiped out soon enough and if they are good at you will care very much about what they say--well I will anyway.
sorry.
No problem, maybe I am being too idealistic in thinking that the purpose of the stock market is not just to make money for traders, but to reward good companies and help them prosper. But I guess that high velocity destruction of bad companies is part of this equation too. I just wish things could slow down a bit. And I find it really weird that some people are smart enough to make money on the way up and on the way down.
Can anyone quantify what part short sellers are playing in the current destruction of AIG, possibly at taxpayers expense? AIG does a big part of its business in Asia (the company was actually founded in Shanghai) where as we all know reputation is paramount. They're quickly losing that reputation and will probably not recover from that, at least in Asia, anytime soon.
On a different note, I bought GE at $30 a month ago (now at $23.39), partly an infrastructure play, not realizing how big a part GE capital plays in their revenue stream - I though it was 20% and now the media is saying 50%. I'm thinking this was a mistake, not only for the financial exposure, but the realization that we may be on the verge of a global slowdown in the next year. I think GE is a good company apart from its financial arm, and I expect a rally soon but I am starting to doubt I will break even in the next few years.
Jim
Roger,
I thought your appearance on CNBC was fine; it certainly shows the pressure she is under to "keep it moving, keep it short and drill for something that might sound bold and dramatic when excerpted." Thoughtfulness need not apply.
I think you're absolutely right, shorts are a necessary part of the market and the calls for its prohibition reflect the lack of understanding of what is going on. (Seriously, where do these folks think the stock goes when a short sells it? Is there some imaginary doofus out there who is buying up all this "quality" at discount prices? If there are too few buyers for ... well, anything ... the answer is not "preventing the price from changing", but I think this is what those seeking the end of shorting are really asking. I usually sell options short, but many times my "ask" is never hit. Prohibiting shorts is the equivalent of "requiring longs" and it's a plain bad idea.)
Anyway, good job with Maria - hopefully you'll have additional chances on something less than a "lightening round" chair.
R in NY
thanks Rick. however the "lightning round" aspect of this never goes away. From watching a lot and appearing a little I think I've developed a pretty good internal clock about how long i can go before getting interrupted...or maybe not.
I think your sense of her timing is fine, I'd just rather you appeared in other forums which are more truly conversational.
When you get there, I'm thinking Charlie Rose level of discussion. (He is booked for now, but as your rep grows, I look forward to that level of discussion.)
R in NY
wouldn't buy calls on that one but thank you.
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