Is the stock market going to tank?

[iceman]

Next time you get smoked, I won't even say I told you so.

hah, I call bullshit on that.

[powder11]

I agree L2S has gotten perma-bearish but I'm a bit sympathetic to that because the general economy is complete shit imo .

making money on doom & gloom is the new bubble. when the herd is cheering bad news, the pendulum is going to swing.

[4matic]

And I only have to go back a few pages to hear you crying.

Cry? How so? Because I actually play the game and admit my mistakes, losses and positions? You otoh don't even play. I'd have more respect if you took an active roll but you don't. 63 pages and not one trade. All you do is complain.

[BDKeg]

I have a nice piece of software I wrote that follows form 4s and insider purchases...works 80-90% of the time and usually hit 5-20% gain within a few days to a few weeks on each pick, even in this kind of market.

[skiballs]

^^^ Hi Bernie

[LeeLau]

making money on doom & gloom is the new bubble. when the herd is cheering bad news, the pendulum is going to swing.

That's part of why i covered GRPN. Borrows were getting too easy. Too many retail investors in on the trade lemming-like.

[4matic]

That's part of why i covered GRPN. Borrows were getting too easy. Too many retail investors in on the trade lemming-like.

You nailed it.

[liv2ski]

making money on doom & gloom is the new bubble. when the herd is cheering bad news, the pendulum is going to swing.

What cheering??? I guess you guys could take my reality based observations as cheering, but I am pretty far from being happy about what I see going on. The only think that makes me happy about this entire shit show, is that it is going to take years longer to finally fuckin blow up than I originally thought it would.
My wife is a teacher for San Diego Unified School Dist. She came home last night and told me the superintendent had send out a email memo that the district was officially insolvent yesterday. This is after two years of lay offs and 40 kid per class room now being common. Her districts issues are just the tip of the iceberg here in CA. This shit does not make me happy, as I see how it adversely effects peoples lives. Just because I am not a bull market shrill, doesn't mean I am not without compassion for all the shit I see coming and the people who are hurting because of bad and non sustainable choices that have been made by our leaders over the last 50 years.
And speaking of the market, I know you guys are all master stock pickers, but when most money managers don't beat the index averages, I wonder how much your up in earnings in the last 10 years. Look at this article: http://seekingalpha.com/article/1191...ed-performance While a pitch for how cheap stocks are today, I see the charts as how empty the returns have been. But have fun with it. I will wait for the occasional days when a 3X short ETF gives me a year of your bull side returns.

[Benny Profane]

Don't waste it Liv. There are geniuses here after a big up day, but strangely silent on the down.

[Benny Profane]

[iceman]

One of the more interesting things right now is action in the VIX. Personally, I think this is an over watched indicator and it is a short month but its virtually collapsing the last few days. Another strong rally and VIX will just fall apart.

Edit 12/02: VIX fell almost 8% this morning. Stunning.

The VIX is the square root of the par variance swap rate for a 30 day term initiated today. Note that the VIX is the volatility of a variance swap and not that of a volatility swap (volatility being the square root of variance). A variance swap can be perfectly statically replicated through vanilla puts and calls whereas a volatility swap requires dynamic hedging. The VIX is the square-root of the risk neutral expectation of the S&P 500 variance over the next 30 calendar days. The VIX is quoted as an annualized standard deviation.

I'm smart enough to know I'm not smart enough to know what this actually means. Can you guys just tell us what you're buying and selling and skip some of the theory, please?

[4matic]

I'm smart enough to know I'm not smart enough to know what this actually means. Can you guys just tell us what you're buying and selling and skip some of the theory, please?

VIX in simplest terms represents the value of near the money SPX options with 30 days till expiration. The higher the VIX the higher the option premium or risk premium and the anticipation of a large percentage move (either way). Although, up trending markets tend to make the VIX decline because traders are less inclined to buy "insurance." It was never meant to represent potential for a decline. As a contrarian indicator? "When the VIX is high. You buy!"

This month the VIX has been skewed because December is a short month (only twelve trading days till expiration.) By nature it can't be a manipulated index but it's also not a perfect index because we now have weekly, monthly, and quarterly options.

I don't trade options because of all the math involved, It's too easy to be right and wrong at the same time.

[4matic]

What cheering??? I guess you guys could take my reality based observations as cheering, but I am pretty far from being happy about what I see going on. The only think that makes me happy about this entire shit show, is that it is going to take years longer to finally fuckin blow up than I originally thought it would.
My wife is a teacher for San Diego Unified School Dist. She came home last night and told me the superintendent had send out a email memo that the district was officially insolvent yesterday. This is after two years of lay offs and 40 kid per class room now being common. Her districts issues are just the tip of the iceberg here in CA. This shit does not make me happy, as I see how it adversely effects peoples lives. Just because I am not a bull market shrill, doesn't mean I am not without compassion for all the shit I see coming and the people who are hurting because of bad and non sustainable choices that have been made by our leaders over the last 50 years.
And speaking of the market, I know you guys are all master stock pickers, but when most money managers don't beat the index averages, I wonder how much your up in earnings in the last 10 years. Look at this article: http://seekingalpha.com/article/1191...ed-performance While a pitch for how cheap stocks are today, I see the charts as how empty the returns have been. But have fun with it. I will wait for the occasional days when a 3X short ETF gives me a year of your bull side returns.

Sorry to hear about your wife's school district. But, like I've said, how does that really affect IBM? What's happening in govt has some affect on multinationals and macro risk but corporate earnings are at record levels and stock multiples are historically reasonable. MSFT has a forward PE of 8 and $40 billion in the bank. Yeah, it's a dog and I own it but with a 3% yield I feel it's safer than a bond. Same with BRK. The reason i own these two is because I'm not a great or even a good stock picker. It's because I feel like I won't wake up down 30%.

I said a couple posts ago that I was underperforming the SP500 this year. Hardly claiming "genius" status. I did have a good day Friday because Junk Bonds performed well and I gained .2% on the SP. I have a forward plan because I think next year will be similar to this year price wise.

Also. I didn't make a trade for almost 8 years. Market returns were fine and I don't need the stress. After 2008 I was forced to take action. I didn't want to. Since then I've probably made 100 or more trades and it's helped me outperform by a few percentage points the last 30 months with a lower risk profile. I screwed up this year and got sidetracked by other opportunities so right now I'm sitting with a very high beta mix overweight small and mid-cap. IF we get a rally extension small and mid will outperform as they did yesterday and this week.

And, what if you make your 3x leverage trade and you're wrong? If you lose "a years worth of gains" in one day what do you do? You have a better chance in Vegas betting on black.

I like my chances right now:

"Kevin Pleines at Birinyi Associates, Inc. notes that this week’s 7.4% surge in the S&P 500 SPX is the index’s strongest week since the start of the bull market in March, 2009.

It also marks only the 12th time since 1962 that the S&P has risen more than 7% for the week.

Even better, for market bulls, the market averages a gain of 2.7% in the month following such surges, and 5.7% over the following three months.


"

[liv2ski]

I don't know whether ANY rational tool could provide any semblance of guidance in these zombie markets. I mean, let's think about all that happened this week:

1) S&P downgrades 37 banks

2) China's PMI falls off a cliff

3) US unemployment decreases but only because people are leaving/falling out of the labor force

4) World's central banks in desperation pull a co-ordinated move

And the rest of the news is mainly bearish to downright frightening when you think about it i.e. over-leveraged European banks unable to borrow USD short-term etc.

And what happens - RISK ON!

Does not compute.

"Danger Will Robinson, Danger"

[Benny Profane]

Birinyi is the anti Roubini.

Ironic that the market is barely positive after 11 months of turmoil. Who's really making money with all of that churning?

[liv2ski]

Birinyi is the anti Roubini.

Ironic that the market is barely positive after 11 months of turmoil. Who's really making money with all of that churning?

HFT for the win

[Brock Landers]

I'm smart enough to know I'm not smart enough to know what this actually means. Can you guys just tell us what you're buying and selling and skip some of the theory, please?

Ice 4M explained VIX pretty well, but you can also use it as a sort of fear gauge. Market sinks, fear goes up, VIX goes up (stems from option premiums increasing). As the market levels out or moves back up, VIX decreases. It doesnt necessarily have to happen- October was a strong up month but VIX came down only moderately because there is still fear out there (option premiums stay high)

I just shorted Red Hat (RHT) on Friday. I think its valuation is just way too high for a company growing at a moderate rate in an industry where there are fairly low barriers to entry and with their specific product, low barriers to entry. Growth has been tough in the past 3 years certainly among public sector but I think it will continue to tighten (see: San Diego teachers post above) which will hit growth numbers. Sure, in the long run it may be cost effective to implement new RHT infrastructure but in the short term, kids read old textbooks, adults use old legacy systems, and the cloud moves forward with Oracle or SAP throwing weight around.

Any of these reasons, I think, could impact the multiple for RHT so Im short. Im also long Halliburton stock. Taken a hit on that recently. Closed out of Anadarko which was a mistake. Earlier I had shorted Green Mountain and Netflix but closed out of both. Other than that, Ive just been buying FAS calls when the market sinks and FAS puts when the market rises. From day to day the amount of truly new information out there is fairly small, yet the moves are huge. Just doesnt jive.

[LeeLau]

iceman - technically what 4matic and brock said. To add to that VIX is sometimes thought of as an indicator of volatility. One of the times when wikipedia is pretty much bang on

Personally i tend to go pretty hard to conservatism when the VIX is high because i don't hang around in offices or screens too much during markets opening or closing (those are the times when trading and price swings get particularly frenetic).

Option prices do get pretty high when vix is high. 4matic remember that long MSFT sell calls strategy I talked about? Implemented it and it seems to return a nice yield so far but then its only 1 month and also the premiums seem to be high.

[LeeLau]

I don't know whether ANY rational tool could provide any semblance of guidance in these zombie markets. I mean, let's think about all that happened this week:

1) S&P downgrades 37 banks

2) China's PMI falls off a cliff

3) US unemployment decreases but only because people are leaving/falling out of the labor force

4) World's central banks in desperation pull a co-ordinated move

And the rest of the news is mainly bearish to downright frightening when you think about it i.e. over-leveraged European banks unable to borrow USD short-term etc.

And what happens - RISK ON!

Does not compute.

"Danger Will Robinson, Danger"

Failed german bond auction too. That's pretty remarkable and doesn't get mentioned enough. Sure the yields were pitiful but so are the US bond auctions yields and the US bond auctions don't fail. Good idea to gtfo risk

[liv2ski]

And the US bond auctions don't fail. Good idea to gtfo risk

Tough to fail when I am certain the PPT is backstopping the action. (To primary dealers: "you buy it, we buy it from you" wink, wink) Just waiting for US bond auctions/yields to go full Italian. 2012 or 2013 to buy TBT for the win.

[Benny Profane]

I love reading this guy lately:

http://interloping.com/

[Benny Profane]

http://www.youtube.com/watch?v=WA7rG...layer_embedded

[4matic]

4matic remember that long MSFT sell calls strategy I talked about? Implemented it and it seems to return a nice yield so far but then its only 1 month and also the premiums seem to be high.

With a 3% yield to boot..

Selling puts below 25 and calls above 27 on MSFT has been one of the best conservative strategies for YEARS. I've been reading this blog for a few months: http://www.fullyinformed.com/US-Stoc...-microsoft.htm. I really like the strategy.

The stock has to break out of the sideways channel at some point.

[LeeLau]

AMR up huge. There you go rational markets

[Toadman]

AMR up huge. There you go rational markets

It's the penny stock spammers/scammers driving the price up...Or maybe some bored Bond Fund vulture having some fun...