Friday, August 10, 2007


Being Wrong Never Felt So Right

Being able to take losses without them damaging one's confidence is crucial to the success of traders. Hence, "Cut your losses quickly" is perhaps one of the best-known rules of Trading.

While most Traders understand that they must take small losses to avoid blowing up their accounts, I believe the same Traders typically do not realize the mental capital which is derived from cutting losers early. This may be because there tends to be a stigma attached to buying and selling the same stock in a short time frame (unless, of course, the trade is planned as a daytrade), especially if it is sold for a loss. So while the Trader knows that he has cut a loser quickly and preserved his capital (mental and $$$), he often still feels a lingering pang of doubt, disappointment about being "wrong," and even anger at himself (and sometimes at the mysterious They, the PPT, or an analyst). After being cut quickly, the stock will often reverse, and foment even more mental discord.

These feelings, like most, with practice can be overcome. They must be overcome.

See, the least understood benefit of always cutting losers quickly is that it puts the Trader in control of the trade, and dispenses with emotions. Sadly, many traders would rather blame the loss on the market maker, or the Fed Chairman, or a short-seller, rather than assume complete and total control of their trading.

"The correct way to control positions is to only hold them once they prove to be correct. Let the market tell you your position is proven correct, but never let the market tell you that your position is wrong. You, as a good trader, must always be in command of knowing and telling yourself when your position is bad."

"The market will tell you when your position is a good one to hold. Most traders do the opposite of what is correct by removing positions only when proven wrong. Think about that. Your exposure and risk is much higher if you let the market prove you wrong instead of your actions removing positions systematically unless or until the market proves your position correct."

The above two paragraphs, lifted from Phantom of the Pits, succinctly illustrates my point. An example of this mentality in action is not removing a trade before a stop is hit, even when a Trader knows or strongly suspects the stop will be hit. For most, it is easier to allow the stop to be hit and then blame the loss on their strategy or someone or something else. If this mentality can be avoided, Traders will doubly benefit from cutting losses before they balloon.

Gerald Loeb, in The Battle for Investment Survival writes, "Losses must always be 'cut.' They must be cut quickly, long before they become of any financial consequence. After the elimination of a stock in this manner, the transaction must be, in a sense, forgotten. It must be left out of future consideration so completely that there is no sentimental bar to reinstating the position at higher level, either very soon or any later date, if the purchase again seems strongly advisable."

Loeb describes the double-benefit of cutting losers quickly: it allows one to preserve capital, and is a natural mechanism by which a Trader can stay in control of the trade, and by extension, his emotions.

What Traders will discover upon mastery of this skill is the profound realization that controlling trades is much easier than controlling emotions. Attemping to bridle one's emotions while letting trades run free is the exact wrong way to approach losses.

The Phantom says "It's okay to be wrong small but never okay to be wrong big if you expect to trade in the long run. . . .Learn to be wrong, fast." I will add to those words of wisdom, "Take control of your trade before your emotions have to."


Lone star Fucks LEND

Nice AH's action.

LEND Accredited Home Lenders announced in filing that Lone Star would fail to satisfy the conditions to the closing of the tender offer (8.91 +2.78) -Update-

Lone Star informed the Chairman of the Special Committee of the Board of Directors of the Co that, in light of the drastic deterioration in the financial and operational condition of the Co, among other things, as of today, the Company would fail to satisfy the conditions to the closing of the tender offer. Accordingly, Purchaser does not expect to be accepting Shares tendered as of the end of the current offer period ending at 12:00 midnight, New York City time, on August 14, 2007.


Biggie Smalls: Victory


Closing Comments

We are not done going lower. If you are just tossing dollars into the market, prepare to lose a few hairs, over the next few weeks.

I am hearing lots of rumors, from multiple sources, regarding hedge fund liquidations. I can tell you there is still significant headline risk, specifically with GS.

Because of this belief, I am prepared to short the financials, especially into rallies. As you know, recently, my favorite enemy is LAZ. Without doubt, I feel LAZ will be hitting new 52 week lows, in short order.

Despite weakness in the brokers, the market managed to recover and post decent gains in a number of sectors, namely defense and tech.

Also, some banks/brokers went nuclear on the shorts, specifically OPY, CORS, LEND, FMR, LNC and even LAZ.

With my money, I will continue day trading, like a degenerate OTB guy, while creating effective hedges.

The choppiness of this market should not be explored by stupid fucktards. Meaning: Most of you "internet leeches" have no business trading and should find a real job.

Finally, it's worth noting insane moves in some of the industrial names, such as CMCO, MLI, CTB, IESC, LECO, PCR, UIC and ETN. Also, NTRI made an impressive rally off its God forsaken lows.

Top picks: Short LAZ/Long MVIS.

UPDATE:16:05 GS Goldman Sachs' Alpha Fund drops 26% in 2007, people say - Bloomberg (180.50 -1.75) -Update-


Fly Sell: CENX

I sold 4,000 CENX @ $46.20.


Fly Sell: LAZ

I sold short 2,000 LAZ @ $39.17.

UPDATE: I sold short 2,000 LAZ @ $39.95.

UPDATE II: I sold short 3,000 LAZ @ $40.72.

Disclaimer: If you sell short LAZ because of this post, Bernanke will do an emergency hike in interest rates. And, you may lose money.


Will We Rally?

This is a tough call.

I do not believe intelligent investors want to stay long, going into the weekend. As you know, Monday morning can spell doom for the planet, via sub prime loans.

However, there is meaningful strength in tech and select basic material stocks. In short, I feel comfortable being short the homebuilder/financials, while being long beaten down basic material stocks and tech.

This is not the time to put your balls on the cutting board.


Lunchtime Thought

Fuck those lazy fucktards from LAZ.


Fly Buy: CENX

I bought 4,000 shares of CENX @ $44.78.

Disclaimer: If you buy CENX because of this post, the next time you swim in the ocean, a jelly fish will bite your face. And, you may lose money.


Sector Spotlight: Semiconductors

Sorry (not really) for the late post. I was busy plotting evil trades.

Anyway you slice it, today is a major victory for the bulls, averting what looked liked guaranteed death this morning.

Now, don't get carried away and declare a bottom, like some sort of hatfucking goat milker. For all we know, our terrific bankers will surprise us with more blow ups, come Monday.

For the time being, there is no debating the strength in the semi's. Right now, SNDK, QLGC, SSTI, SIRF, NVLS, KLIC, MTSN, CMOS, AMKR, AMIS and KLAC are off to the races.

In short, it looks like we have a short covering rally, across the board.

With my money, I want to chase down the death spiraling basic material stocks, namely CENX and RS. And, buy MVIS on a dip.

I will not close out my short positions, yet. Instead, I will add more longs and utilize my "calculator brain" to scalp a few intra-day trades.


Oh, Boy, We're Fucked

Fed adds liquidity; futures hang out in the depths of hell.

Enjoy the pep talk.

Thursday, August 09, 2007


Update on Eubel, Brady & Suttman

If you recall, on 8/1, I alluded to the amount of damage Eubel was doing to their clients accounts. It is my opinion, their losses will beget more losses, as other fund managers smell blood in the water-- via shorting their large holdings.

In short, they're getting lit the fuck up.

Shorting MCCC, HK, SEAB and RLI has worked like a charm.

My point: Do some research on hedge funds in trouble and identify the ones who will be forced to make liquidations. Within the troubled funds' positions, consider shorting the ones that are illiquid. It's an evil game, I know, but it works.

To help find "fucked funds," go to


Onyx: Evil Steets


Closing Comments

If you have limited resources (money, you dumb fucks), it makes little sense to hold positions overnight. Instead, why not take advantage of the wild intra-day swings, then go flat by the close?

As for me, I do not have the luxury of going 100% cash. So, I have been buying OEX puts and shorting those lazy fuckers from LAZ. And, I've been buying SRS. Just in case the world is round, I have been nibbling at CENX.

Essentially, the goal is to slow down the volatility, at least in my world. Many of my "core positions" have been raped and killed. What can I do, cry?

Fuck that.

Like anything else in life, if it doesn't rape and kill you, it makes you stronger.

With regards to the current tone of the market, it is God awful. Moreover, I fear the worst case scenario (unraveling of the yen carry trade and major U.S. bank going insolvent) may come to fruition. To take advantage of such "fun times," I am swapping my shitty dollars for yen, via FXY.

As for tech:

Everyone is professing staying long tech. I'm sorry. I have too many bad memories of being "tech wrecked," than to put much credence into that philosophy.

However, it's worth noting, there was incredible strength in a number of tech names today, especially semiconductors.

Look, I'm no economist and do not play one on the internets, but this whole sub prime shit is going to affect consumer spending, particularly luxury items-- as the Wall Street fuckers lose it all.

With my money, I want to remain flexible, via scalping day trades, and staying short financials, while nibbling on the basic material stocks (into weakness)-- just in case.


Fly Buy: CENX

I bought 3,000 CENX @ $46.

Disclaimer: If you buy CENX because of this post, you will forget your wife's birthday. And, you may lose money.


Late Day Thought

Get ready for "The Great Depression, part II."



Fly Buy: FXY

I bought 5,000 shares of FXY @ $ 84.41.

Disclaimer: If you buy FXY because of this post, your dollars will transform into yen. And, you may lose money.


The Market is Holding Up Great: Thanks CNBC


Fly Sell: LAZ

I sold short 2,000 LAZ @ $40.25.

Disclaimer: If you sell short LAZ because of this post, discarded family members will gravitate towards you. And, you may lose money.


Natty, Biotech and Food

It looks like natural gas is making its annual run. As you know, hurricanes have been non-existent, thanks to "reverse global warming." Nonetheless, it makes sense to bet on at least one home wrecker.

Now, you can fuck around and buy UNG (natty etf) outright. Or, take a shot with some volatile natural gas stocks, such as NGAS, NGS, GMXR, ARD, TXCO, BEXP, SWN, RRC or GGR.

As for biotech:

I hate the sector. As you know, biotech stocks are like little ticking time bombs, waiting to blow off your arms, via FDA denial. However, there is notable strength in the sector. If you want to fuck around and play Doctor, RIGL, NSTK, BVX, EMIS, GERN, NXTM, LMNX, NKTR, AOB, ALNY, CRA, NBIX and MYGN have momentum.

Finally, when the market shits the shower, investors drink and eat, like piggish gluttons.

Within the food and beverage sector, CASY, WFMI, HANS, JMBA, ALCO, TXRH, HAIN, MFW, RUTH, PNRA, MSSR, RUBO, IHP, COSI, LNY, DEG and YOCM look great.



My voodoo Doctor has asked me to take down the "Golden Bull." He said "the sub-prime shit is messing with the bulls head, take it off now or else the moon will crash into the sun."

Needless to say, I removed the "Golden Bull."

If it's any consolation, it did help VMI go higher.

That's all I can say, regarding this matter.


Fly Sell: VMI

I sold 3,000 VMI @ $78.80.


Position Update: MVIS

Microvision, Inc. at Canaccord Adams 27th Annual Global Growth Conference

Listen here.


Fly Sell: LAZ

I sold short 2,000 LAZ @ $40.88.

Disclaimer: If you sell short LAZ because of this post, your garage door will break. And, you may lose money.


Fly Buy: VMI

I bought 3,000 VMI @ $77.60.

Disclaimer: If you buy VMI because of this post, your tap water will turn brown. And, you may lose money.


Sector Spotlight: Homebuilders

Isn't it odd that our real estate market is destroying the world? Apparently, investment banks around the globe have exposure to sub-prime, which is why I'm short LAZ.

Keep an eye on FXY (yen). As that fucker goes up, the "yen carry trade" unravels.

Being that we are down a quick 180, there is room for a bounce. However, it's worth noting, leadership sectors are deep in the red. I would not bet on a full recovery, today.

There is minor strength to be found in tech, specifically software related names. Moreover, there is notable momentum in RACK, RTEC, SNDA, KLAC, RNOW, NVDA, LIOX, MFLX, MVIS, SNDK, LVLT, KNOT, ELOY, ICGE, CSCO, FFIV, GGBM and LORL.

Additionally, some of the retailers are enjoying strength, notably PLCE, ZUMZ, CPWM, GPS, SCVL, LF, JCG, UA and BBY.

Basically, there are places to hide.

Finally, I'm amazed to see strength in the homebuilders. Crazy people are buying BZH, MTH, OHB, RYL and TOL. I'd stay away from the homies. The only reason they are up is due to short covering. Beware.

NOTE: For a trade, I am buying more CENX (into weakness) and shorting LAZ (into strength).

NOTE II: Whoever brought LLNW public should be arrested and stoned.

Wednesday, August 08, 2007


Quick Alert: Off to Buy Food

I'm not talking about a little bit of food. I'm going on a solo late night $500 shopping spree for grub; mainly because I hate people next to me, while I'm looking at the frozen food section.

Plus anyway, I don't care for lunch meat, too many nitrates. As you know, the lazy lunch meat fuckers go home early.

Oatmeal forthcoming.



Bush - Glycerine


Closing Comments

Look you, when markets whip saw around like this, the playing field is leveled. It's the great equalizer.

Unless you have material information on BSC's balance sheet, you have been guessing, like a fucktard, just like everyone else. Both great and retarded investors have been getting poleaxed.

Sometimes, when the market "queer's out" like this, the best thing one can do is go play golf or tackle football (with no equipment), while the market settles down.

As you know, "The Fly" is making up on lost ground-- with several terrific trades (LEH, VMI, GS, short LAZ, etc).

Over the last few days, while in "mountain hell," I had a chance to figure out the paradigm we are in. As a result, "The Fly" is able to operate freely, "banking coin" along the way--like some sort of "bank magician."

In short, I want to sell into absurd rallies and short financials. To hedge my shorts, I am bulking up on basic material stocks, namely CENX and RS.

Furthermore, I am trimming down non-core positions, leaving more capital available to trade. In my opinion, the best way to play the market, until November, is to make short term trades.

Finally, beware of false rumors, as overly aggressive hedge fund managers use the power of the megaphone (CNBC) as a conduit.

Top pick: Short LAZ.

NOTE: This is huge.


Late Day Thought

Sub-prime lenders are gay.

UPDATED LATE DAY THOUGHT: LAZ-tard shit the shower.


Fly Sell: LAZ

I sold short 3,000 LAZ @ $43.35.

UPDATE: I sold short 3,000 @ $42.25.

Disclaimer: If you sell short LAZ because of this post, your only son will break Barry Bonds' homerun record, via taking stronger steroids. And, you may lose money.


Position Update: MVIS

Why sell MVIS?

Perhaps you are destitute for money, and could give two fucks and a gay donkey about Picop or green lasers.

When investing in micro-cap stocks, be prepared to feel the back end of the blade, should the market fuck itself.

This stock, like others, was marked down, due to a short term over supply.

Why own the stock?

Well, in short, MVIS has the goods and the leadership to offer a unique investment opportunity. Don't you get it, you dumb fucks?

This stock will be 30 bucks, once they get those little Picop's inside MOT cellphones. They have momentum and will be announcing new partnerships, near term.


What do you think will happen to the stock price, if MOT took down 10% of the shares, at these levels? Or, if GOOG partnered with MOT to make the "G-phone" with a Picop inside?


Position Update: MCHX

I am 75% out of this fucker. Despite what my brain tells me, my gut is telling me to run--prior to earnings.

I started selling a few days ago, once it broke $13. Enough is enough.

I had to draw a line in the sand somewhere.


Fly Buy: SRS

I bought 1,000 SRS @ $99.59.

Disclaimer: If you buy SRS because of this post, your local store will run out of oatmeal. And, you may lose money.


Special Message for Shorts Sellers


Fly Sell: LEH

I sold 5,000 LEH @ $65.01.


Fly Sell: VMI

I sold 3,000 VMI @ $84.35.



UPDATE: Shh, it never happened. As you know, my voodoo Doctor prohibits the display of the "Golden Bull," for more than 2 hours.

Need I say more?


Fly Buy: VMI

I bought 3,000 VMI @ $81.15.

Disclaimer: If you buy VMI because of this post, your refrigerator will break down. And, you may lose money.


Sector Spotlight: General Market

I come back from mountain hell, and HANS (a core position of mine) "mushroom clouds" the shorts, including Herb "the Bearshitter" Greenberg. This is how life is supposed to be. I saw this one coming, many many months ago. Java Monster is a game changer. Moreover, HANS is destined for $70, in my opinion.

By the way, thank you Woodshedder and Danny for the guest blogging. Both of you did terrific work, despite numerous spelling and grammatical errors.

First thing I did this morning, aside from the usual cleaning routine, is call my voodoo Doctor and tell him to "fix" this MVIS shit. As you know, I don't like looking at MVIS, below $5.

As for the market:

I'm not convinced the sub-prime horror show is finished. This may be the part of the movie where the dumb blonde chick or muscle bound jerk off is allowed to walk freely, in the woods, prior to having her/his head sawed off. While I was away, I bought LEH and GS, near the lows. I may trade out of them today.

Just in case the horror show in my head doesn't pan out, I bought some CENX. As you know, both RS and CENX are "mountain goat cheap."

Finally, it's worth noting, the sectors that were beaten up the most, brokers, homies and metals, are outperforming the market. At this point, I'd avoid both the homies and brokers and go long some metals, such as KALU, RS, CENX or PCU.

NOTE: The following video was a bit prophetic. Props to Danny for making it.


Fly Buy: CENX

I bought 4,000 CENX @ $47.33.

Disclaimer: If you buy CENX because of this post, the next time you go on vacation, the hotel fuckers will charge you twice. And, you may lose money.


The Important Matter of Mountain Vacations

So, I get back from the middle of nowhere, a place where rich folk pretend to be "earthy," prior to peeling off in their fucking SUV's, to find out I've been "fuckfaced." Meaning: I checked my online bank account activity and discovered those hotel fuckers charged me twice. No big fucking deal. What's a few thousand bucks between enemies?

In addition to that, I must have spent a few thousand shares of MCHX (fully aware of its depreciative mood) on that God forsaken mountain, while being attacked by "jungle bugs."

In short, mountain vacations are for pussies or retards. I mean, really, if you are from the city and could care less about the fucking planet, why bother sucking in all that fresh air, while playing Daddy "Dick-fiddler" Nature?

Furthermore, vacations in general, with the exception of family trips, are for lazy assholes, who feel a constant need to "reward" themselves--typically for being debt ridden losers.

Really, if you are banking less than 750k a year or have a net worth less than 1 million, with no kids, you have no business taking your fat face on a vacation.

For what?

So that you may sip on some pina colada's and make believe you are "Joe Tropics," God of the sand & waves?


Instead of burning 5k on a vacation, get to work you lazy fucks.

As for my recent picks:

Fuck you, I'm the one losing money here. As you know, I run on a different clock than most of you retards. You are not supposed to buy what I buy-- just watch and shut up. Some of you fuckers are new and have only been "lucky" enough to "check out" my recent "cool" picks. However, I'll have you know, "The Fly" tends to get very hot and a little cold--every other summer.

Keep in mind, I'm the guy who was buying RIMM @55, telling those NTP and PALM fuckers to go eat pig cock, while spitting at CNBC for panicking everyone out of the stock-- at the lows. Aside from that, I told you how many fat fuckers ate dinner at BWLD, and how to "milk farmers" via LNN or VMI. Don't forget, I caught a $13-16 move on MCHX, the first time around-- and HANS $28-44 (still long), NTRI $43-74, EQIX from $55, GME from $6, AAPL from $50, etc. Or, how about my HLYS's short suggestion?

My point is: I'm better than you, particularly guys who profess "super cycles" or "general advice givers."

As for MVIS:

Lots of reasons why the stock tanked, which I'll get around to--whenever I feel like it.


Back From Vacation

Details forthcoming.

May first tier blogging commence, while third tier "fill-ins" go back to oblivion.

Tuesday, August 07, 2007


Update: Hillary says "Boners" to Ratigan

I must be in third grade. How did no one notice this or think it was funny?

HAHAHAHA, homeboners, boners. Seems like the thing to do. Freudian slip, perhaps?.


Closing Comments

Sheeeite--was today ever boring. I've had more excitement painting a still-life. 300 point swing? Sure. I still had a monster day, Dow up 30 or 130, and I hope you all out there had the same. I am glad that Bernanke did what he did. Can you imagine in hindsight if he had acknowledged the problem as "fucked" how nuclear holocausted we'd be right now? I say, give the man some credit--the dow did end up after all.

After the close, we have PCLN exploding up 16.5%, while FLR and MDR both force the shorts to put the lotion on the skin at hose-point. They are up 4 and 9 percent, respectively. I hope that portends well for FWLT as it too is up AH, because they both annihilated estimates. CSCO beat but the stock isn't reacting AH, I say it goes up tomorrow (update, now up 2.2 %, 2x UPDATE: up 6.5%). GTRC and TRLG were both down, but now they are up fractionally, proving that even the sub-prime musician is alive and well (UPDATE 7:30: TRLG and GTRC are now down, but they both did miss estimates, so it was more surprising they were up at all. When I wrote this they were down, but at time of posting, they were up. They now appear to be down for good.)

Among the stocks having their stubby shelaylay handed to them, are LEAP down 15% (sub-prime phones, told you I didn't vouch for them), HLYS down 28% (vis-à-vis sub-prime shoes, not CROX), and MDRX down 5% (UPDATE 7:30: now flat.) I tried to short HLYS after I saw how fucked they were, I saw the whole thing. 500 @ 17.50, lowered my bid to 17.10 when it was still 17.40, just trying to get a fill, I knew this thing was gonna be so fucked. They were out of shares, I got nothing. WTF shit is that?


There has been a lot of great analysis done by bloggers who are very insightful. Sure, I could provide this type of in-depth analysis, but I run an ass-kicking factory, not a soup kitchen. Besides, I hate soup--it is the non-oated red-headed stepchild of oatmeal. Anyway...

Chris Perrune-ha has good thoughts here, echoed by my boy Doc Kong nyaa and mentioned again thusly.

They all hilight the lack of new highs vs. new lows, as we all know it is the mojo stocks that lead the market. Viz., having once high-flyers breakdown is bad no matter what the dow does. Also startling is the fact that pundits globally are ignoring the hidden problem--worthless patent portfolios--there will be billions in write-downs.

I think it is to early to tell--either we are in a powerful bullmarket with strong earnings and global growth, or the credit market will scare everyone into poverty. I still adamantly believe it's part A, but like many, I wonder how far the markets can go with lagging leaders. This leads to my new hypothesis:

New leaders.

Maybe the growth of copper, aluminum, the oil services, and the other natural resources have been fully included in the price now. I think it because it is SO FUCKING LOGICAL that these stocks have huge growth, it may be a crowded bet. People are profit taking on huge gains, and at the same time bidding up new stocks. VLO had been hot for years, provided you can calculate a crack spread, but AMZN just recently got bid up. Garmin had to channel for a year before it exploded northwardly. Perhaps new leaders aren't that hard to find.

There are plenty that combine good fundamentals and straight growth, rather than economically sensitive growth. I'm talking CMG, NILE, AMZN, GOOG. You got your global infrastructure CAT, MDR, FWLT, ABB, ITRI, VMI, LNN, and many others. Global product growth--alcohol, jewelry, luxury goods. Healthcare may not be en fuego, but there are ownable names. MVIS. Go watch wallstrip for some ideas.

On a final note, correct me if I am wrong, but the Financials haven't led this market in some time. Banks, investment banks basically all Financials have been a limp dick for like 7 months now. Hell, I knew people expected Armageddon when Realty Income hit 23--I knew expectations were low. That stock has ZERO leverage on anything, signs only triple-net leases to places like taco-bell, and pays a higher-than-treasury MONTHLY dividend. They have paid this dividend, as I have mentioned, for over 234,938 consecutive months. If the Fins could rally, my god, it would be the mother of moasses. Don't forget, there still is basically record short interest on the NYSE.

Ultimately, I would wait for more confirmation from the indices as well as leading stocks before making any power moves.


Maybe Mr. Market is a Chubby Chaser

Well well well....

It looks like we've moved to back to the "sex with lights on" phase of the relationship with Beulah, the fat market hag.

Maybe her *personality* really is genuine. Maybe she is not just after your money.

I liken today's action to make-up sex. You know, when you have a good fight, and then you get it on, and everything is just peachy, for a while. Yeah, that's right, this market is grudge-humping the shorts.

I saw good action today in FMCN, LNN, VDSI, PRFT, CPHD, SWHC, KO, and many more.

As for the dark side of things, the indexes all closed right at the downtrend line. More closes above this line will make me really want to be long again, although I have a feeling we will need a re-test of lows.

Followers of William O'Neill are now looking for a follow-through day. If you subscribe to WON's timing strategy, then you know the first day we can have a follow through day will be Thursday.


How To Position AFTER the FED


^The man's an academic, it is his job to make you frown.

I could give a shit, because I have punching-fist action Bernanke ready.

So what's it gonna be?

Cautionary Statement?

Maybe he'll just be honest


So You Want A Conspiracy Theory

Recently, the volatility in the markets has again prompted copious amounts of discussion concerning the Plunge Protection Team.

While I do not subscribe to that brand of crazy, I have spent some time watching the Term Investment Option from the U.S. Treasury. This plan allows the U.S. Treasury to invest their excess cash balances by auctioning the cash through competitive bidding for a fixed rate and term.

In essence, almost everyday, the U.S. Treasury makes available to borrow billions of dollars. As the billions are typically paid back within 3 - 12 days, it makes me wonder what an investment bank might be able to do with a $20 billion cash infusion, especially on days when the shorts have hammered their stocks to the ground.

Here is the background information on the program.

And here is a link to recent auctions. This shows the dollar amount that is being loaned out, and the rate paid.

Anyway, something for you conspiracy theorists to churn about.

Aside- I see MVIS is trading up today. Looks like I'll get to stick around and indulge my power trip for another day or so.


Talk Amongst Yourselves

I've got a meeting this morning.

I will be back later to entertain and astonish.

In the meantime, talk amongst yourselves. Do not forget that Fly can occasionally break away from his "mountain retreat" to check the internets. Anyone who is disparaging his character, whilst he is on vacation, will be severely brutalized, I'm sure.

Monday, August 06, 2007


Alert: CNBC is still gay

There was a headline on CNBC, you know the one that pops up with *CNBC alert* on both sides, and it was so stupid, I just blacked out.

The blackout delayed my lambast, but as part of my never-ending mission of hilighting professional stupidity or "petarded punditry," I will now attempt to expound upon this horseshit of an alert I saw.

It read: "Analysts say that diversified banks face less risk"

*CNBC ALERT:* Analyst looks up definition of "diversification." Hilarity ensues.

What is that shit? Thanks for explaining the rally in banks today, you clown-shoe cat fucker.

Did he just not, on national TV, merely define diversification? Is that it? What is this, the Ayn Rand objectivism hour? Subjective feelings--they don't matter--here is reality independent of man's wishes--Nearly 100% of murders are the result of homicide. Breaking news?

I can hear them responding now..."At CNBC, we are proud to report *the facts.* We feel it is our duty to....blah blah blah." Great, thanks--meaningless, sweeping generalizations.

My predictions for some of the many informative alerts that will surely grace tomorrow's screen:

"CNBC ALERT:* New study by BSC finds markets may have systemic risk. "

Thankfully, a new derivative Hedge Fund has been formed to find a way around the pesky issue. Tuning in live, this is Michelle Caruso-Cabrera-Colostomy-Bag.

"CNBC ALERT:* OTM calls found to be composed entirely of premium, financial markets collapse as investors debate the true value of time"

And finally:

*CNBC ALERT:* Bernanke agrees sub-prime woes, "may or may not affect businesses materially."

It's crazy out there.


Closing Comments

Channeling, channeling...

Today was powerful good, on the surface, but if you believe Friday people were just selling into the weekend fear, this may just be short covering due to the lack of Armageddon. I will be pissed if every Friday until BSC’s next earnings is like 12-31-1999. Will time itself cease to exist? Will every quote be wrong? Only on every Monday for the next month shall we know. Alternatively, Cramer could tell us, for he, at least temporarily, proved to be the bottom when he made his frenetic rant. Maybe the “people are losing their jobs” thing was about Specter.

What a bunch of worrywarts. 282 is a hell of a short cover, but there may be many more like it, as short interest on the NYSE is near an all time high.

It sure feels like that was the bottom, but I have a real hard time believing that with at least another month of negative press, we will rally significantly. I think we retest, then, it could be back to old times. I also think there is undoubtedly a fair amount of sector shifting going on out there.

I was really surprised by the action in NIHD. China telecoms were weak, as was VIP, but that stock boldly broke a very strong uptrend, after good earnings. It has been a good tell of emerging markets, and it was mangled worse than Trump’s hair in a wind tunnel. I hate to bite a bit, but this bit is worth plagiarizing, as it sums up what I've noticed the past few weeks perfectly regarding the action in the CTCMs of the world:

Gary,* sez:

“… I am keeping a close eye on emerging market economies as a significant deterioration in growth there would likely lead to another downleg in U.S. stocks. I do not expect that to occur this year, but I do believe the overowned and hyped emerging market stocks have likely already begun a multiyear period of underperformance relative to developed markets. As well, I continue to believe commodity and the most economically sensitive U.S. stocks will underperform over the intermediate term. Stocks that can grow at relatively high rates, notwithstanding slower global growth, will finally be awarded higher valuations for the first time in years. This new trend is likely just in its infancy.”

I tend to agree with his sentiment--the commodity stocks and those dependant on the people of the region using more in Latin America, India, and China, in general, have not held up as well, and I agree they may be subject to a broader pullback. International growth is still mandatory in the port, but just shift more exposure to growth that isn’t as commodity or economy related. Hmm. I still think stocks like FWLT, ABB, and MDR, are good, luxury things like LVMH are fairly inelastic, DEO, and I'm sure countless others. Other goods can be found in high-quality tech stocks, healthcare, and staples. You have to cherry pick here. Of course, still like ATK.

All the growth stocks like CROX, CMG, LEAP, AAPL, and so on that have been hit in the last few days, I still think are good to go. I cannot vouch for LEAP, but the others are very buyable on dips. There is some concern that NAND prices will kill AAPL’s margin and that this is under discussed, so I suppose that bears watching. I plan to own AAPL for years though, so you can go eat a big red candle on that one.

*(As an aside, I have successfully convinced at least 10 people that the name “Gary” is indeed short for “Richard.” Aged 15 – 35. When the say no it isn’t, then I say, “well, what is Gary short for?” Then, they assume, “Gee, it does seem as if it must be short for something.” All of a sudden, Richard sounds logical. It all stems from and old inside joke. Proof of my debating skills, or gullibility of the masses? Or more proof over thinking is bad?)

UPDATE: Wynn kicks shorts in the balls with a boot.

UPDATE 2.2: The following stocks beat:
NILE (nice pick rage), NVTL, ASEI, CUTR, JCOM, LOCM

UPDATER III: The following stocks are oops-poopin:


Evening Chart Chomping


Fo' Tha Record...

I was up at 6 am, contrary to speculation. I watched Beulah, and I had a great post all set up about the relevant news of the hour. Many a rumination on how Bob Nardelli sucked, how oil was a sell, my short ZOLT attempts (they were out), and so on.

Then I was like, "why even post this?"

You know damn skippy the futures would have no relevance to anything. Nardelli is a faggot. Jimmy Cayne-status fired the failure, sucks to be him. I would have started "The futures look set to open flat to lower..." Why post comments when undoubtedly by the time I finish proofreading, the market has changed to the tune of 50 points? So that is my formal excuse and commentary on the situation.

Oh, and I'm buying FWLT into earnings, so please refer back often to make fun of me if it blows up in my extremely good-looking face.

Other than that, I am not buying or selling this dip aggressively. I'm going to let it pass. Sit on your hands, or else you may commit seppuku, as I don't see the back and forth action stopping until traders come back in the fall.



The Calvary Has Arrived

Is the fix in?

GS, LEH, and BSC all trading up, especially after S&P says all big 5 brokers' liquidity is sound. S&P also says that the market is over-reacting to the Bear Stearns outlook.

Could this mark a near-term bottom and the start of a tradable bounce?


Update from Fly's Vacation

Fly sends his disgust, direct from the mountains of Romania.


Power Trip


I am reveling in the glory of being the first "guest" blogger to ever post during the week, and not have the swift hand of Fly swoop down and smite me.

I have no Quick Alerts for you. I have no Sector Spotlights.

I could try and say the things that Fly would say, but what's the point? I would only fail miserably.

You are left with nothing but your own thoughts, and the ramblings of a 3rd tier guest blogger, on this most pivotal of market days. Look at the next few days as a preparation for the inevitable dark days when Fly, the Robin Hood of the Internets, departs the blogosphere with permanence, leaving us, the internets leeches, to stew in our own internets leech juice.

Sunday, August 05, 2007


Waiting Room

Well, I have been jamming my rickshaw all across the fine internets all day, and have come up with a couple of good things. I listened to CCs of AGN, CMG, ATK, and ALB, all good. Before I dish out savory investment platters, however, I want to make an analogy most magnificent that hopefully you can use to guide you over the next week, which is sure to be tumultuous.

Investing in stocks is akin to personal wealth. I hesitate to say your own wealth, because as Shed soundly noted, I may extrapolate incorrectly about others, based on things about myself. So, my analogy is to take any stock, turn it into a person and question, “Who is this person, and would I lend him/her my expensive car?” If you look at companies like people, it makes it easier to quantify whether or not they are a good investment.

Not all people are created equal, and neither are companies. Some people are loaded with debt, others aren’t, some are risk-takers, other’s paralyzed with fear, some lazy, plenty on drugs, others save to much, some too little, some have great jobs, others poor, and on and on. Those are the companies too, and like people, it takes many years of a cumulative action to be “rich” or “poor” or whatever. Viz., Rome wasn’t built in a day.

Ok, now that you know a little more what I’m alluding to, look at yourself. Perhaps you have notable increases in wealth over a one or two year period. You got a raise, you got a new account, you won the lotto, conversely, you were fired, you got sued, you got jailed for racing dogs, etc. If you look every day, there may be little relevancy, except on the day the news hit. The relevancy occurs after the cumulative effect of your actions becomes apparent, vis-à-vis your improved or impoverished situation.

Now picture someone buying and selling the stock of you, based on news, and how potentially petarded that is, as it may not take account of the bigger picture. Shed shed (haha) light on how my car got fucked. That day my stock was smacked. Of course paying two $1,000 deductibles sure blows, but it is “immaterial to my business,” and though a short-term reason to sell my stock, not a justifiable long-term one, like, say, a massive heroin addiction. Thankfully, I don’t think that’s gonna be an issue either. Maybe you can't grow your salary at 30% a year like some companies, but you're in charge of you're business, so you owe it to yourself to try.

SDB’s stock may have popped when he started, but it hasn’t turned out to be a colossal success of a site—yet—so his stock has been sold into the hype. Ragin got a job—stock was up big that day—then he quit—stock down, but analysts reitted their buy.

Maybe it has nothing to do with finances. If the CEO of a company has a personal problem that is getting in the way of achieving goals, that obviously should affect the business’s stock, but it won’t if no one knows until it is too late.

Using years as the metric, my stock, Ragin’s stock, SDB’s stock, are all fine and probably going a lot higher. However, on any day, you could take the information of the day, and use it to guide you to sell, or short my stock and that would definitely be a LT mistake. Puts new meaning to the phrase “selling oneself short.”

Nevertheless, yeah, a short trade of my stock the week of my car would have worked, but it is practically foolish to game much more than that. Then, to expect rationality on such a trivial, reactionary level is wrong. You need to find companies that are the equivalent of people you would feel comfortable borrowing your new M3. If you even look at the engine, it will kill you.

If you wish to succeed and don’t have institutional quality research (read a team of eggheads who are paid a lot to work 50 hours a week doing research on your investments) you practically have no choice but to invest for the longer term. In a LT perspective, subprime won’t matter nearly as much to the following companies as it will to other companies, which is why, even with financial Armageddon, these companies ought to fair well. I will review these more in depthly at my fan-freakin-tastic blog.

MVIS - HAH! Doesn’t even have earnings to lose, you Marcus Buster.
DEO / CEDC – Alcohol; the cause of and solution to all of life’s problems. Smirnoff vodka, Johnnie Walker Scotch whiskies, Guinness stout, Baileys Original Irish Cream liqueur, Captain Morgan rum, J&B Scotch whisky and Tanqueray gin. In addition, it also owns the distribution rights for the Jose Cuervo tequila brands in the United States and other countries. All the relevant ingredients for an Irish car bomb. Unfamiliar with CEDC? Get cho learn on, sucka.
LNN – Irrigation has nothing to do with subprime, and perhaps bridge collapse will spark waves of construction, resulting in increased demand for road barriers and such. Sales overseas.
BBBB – Software for schools, where students can manage schedules, download all documents from class, etc. Basically it’s a good product—the best kind. They have it at SDSU, and webct (which they own) at all the JCs here. This company retains 98% of it’s customers=predictable revenues, combined with growth. Entering k-12…Schools are probably not fucked by ARMs resetting.
FMCN - Hey, I didn’t say they were all gravy, just subprime free. I still maintain this should be bought on dips, although a restatement would be nice. Not holding my breath on this one. Is it offensive to remind people about the Orimpics? Or has that been totally discounted already by Buelah the fat market hag? I think the estimates will be raised for 2H08, after this company kicks the shiteloft out of earnings, into the Orimpics. If it misses, watch out Nancy.
GOOG - I am glad people hate on this stock, because having haters means others are jealous of your ability to ball out of control.

Of course, the patents for all these stocks are worthless, as the true intrinsic value ranges from .94 to 1.16.

This is just a useless smattering of picks to think about buying when the market starts to recover. There are hundred of these. They are tech, they are niche services, they are staples, they are infrastructure, they are defense. Mainly the people who give these co.s money are less dependant on the credit market, but you need to have balls of big steel to buy them. If your balls happen to be made of palladium, it's best that you just end your life right then and there.

Oh, and my 2¢ on the Fed:

I don’t believe they will change rates. The psychological response will be disappointment, and much like the May 11th 2006 meeting, the sell-off was worsened by the markets anticipation of Fed action. Having Cramer sound off doesn’t help, all that effectively did was make the Fed thanksgiving dinners more awkward. What could they say to make the markets forget about stearns the rally-ruining bear?

Maybe Fugazi was ahead of the curve with these lyrics that I think describe the situation well.


She Won't Be a Honey When the Money Runs Out

Boone presented a compelling argument that trading in the present market environment is like dating a fat girl, who fortunately has loads of personality. The dichotomy represented by the analogy is certainly interesting to consider. Yes, you don't really want to take this girl out and show her off to your friends, and when you get busy, you still turn the lights out. But at other times, she's a lot of fun and you get along really well.

Let me be clear-- This girl needs to be dumped, and with alacrity. And I promise that after you dump her, you are going to be ashamed that you didn't do it sooner. This fat girl wants only one thing: your money. And when she discovers the money has run out, she'll be gone quicker than those thugs who ripped off Danny's radio. And then you'll have to explain to your friends that Ms. Fatty dumped you.

Ahhh. So you see where I'm going with this. The money has ran out of this market, and as you have seen, its been like watching five fat girls all trying to get out through the same door. Hopefully, you were smart and beat them out. If not, you are doomed to watching their fat asses, while you decide when to make a break for it.

"Knowledge born from actual experience is the answer to why one profits: lack of it is the reason one loses." Gerald Loeb--The Battle for Investment Survival
How many of you reading this were trading during the 1980s? So when Bear Stearns says in a conference call that this is the worst credit environment they have seen in 22 years, what does that mean to you? Do you have the knowledge, born from actual experience, to trade in such an environment? I have a feeling that many traders do not truly understand why the credit market is blowing up. Forgive me if I insult your intelligence, but I have put together a cheat-sheet of sorts to help explain why we are where we are. Keep in mind I have over-generalized some aspects of this guide, and other aspects have been left out, or are hypothetical.

Long story short- many investors who bought these bonds will not be returned their principal. Investors are just now beginning to see the effects. In short, our fat girl, with loads of personality, has just realized that there will be no more easy money. How deep does the credit crunch reach? I think that it will affect everything within our economy- the consumer, the retailer, the small business, the large business, the banks, etc. However, what is more important than what I think is that you develop an honest realization of your level of experience in trading during this type of environment. If you fully understand Asset-Backed Securities, and you have a deep understanding of the ramifications a credit-crunch will have on the market, then maybe you can profit.

"Any way one looks at it, nothing is more difficult than succeeding in Wall Street, yet nothing is attempted by such a poorly equipped people or is considered as easy." - Gerald Loeb

This where you decide, sooner is preferable to later, if you are equipped to deal with what may occur over the coming weeks. Sure, the markets will bounce, but then what? What is your plan? How long will you watch the market fall before you sell everything? When will you decide to get short? At what point will you buy back in? Are you going to try and call a bottom, or wait for some sort of confirmation?

If you are feeling rather poorly equipped, consider looking back at history to guide your game-plan. You will find evidence which can paint both bullish and bearish scenarios. My experience tells me that sell-offs of the magnitude we have witnessed over the past two weeks typically take months to unwind. As I try to gauge just how far the market might fall before it rebounds, I begin to look at market fundamentals and macro-economic events. It is certainly a mess out there right now, as investors are filled with fear, uncertainty, and doubt. We all know how much markets like FUD.

"There is the greatest protection in all the world in the ability to shift capital quickly and at small cost." - Gerald Loeb

I assume that the majority of readers here are retail traders. Typically for a small fee, we can close out our entire portfolios, and for the same fee, re-establish the positions. We have a huge advantage over the hedge funds and institutions.

I encourage you to view incurring these small fees, from closing out positions, as insurance. If you want to trade in the coming years, you must not allow yourself to get washed out this year. No one can say for sure whether the credit crunch will cause a healthy 10% correction, or whether the market will enter a full-on bear phase. You are thinking, "But Mr. Woodshedder, the majority of companies have beat the analyst's estimates for Q3." Sure they have. But irrational markets work both ways. It is entirely possible the market may over-react to the downside.

So while Boone makes make a solid argument for not throwing the baby out with the bathwater, I think he is assuming that everyone out there is just like him: young, well-capitalized, smart, good-looking, with a background in finance and accounting. I am assuming that many of you are not equipped to fully understand what is going on around you (no offense). My mission here is to implore you to take stock (pun intended) of your experience, and develop a plan for dealing with the current market environment, being sure to include worst-case scenarios.

Finally, I understand that many readers here want some sort of advice from the weekend guest-bloggers. My advice to you is to raise cash, and begin a watchlist of stocks to get short on the next bounce.


Give This Man an Oscar

As you know, I'm on vacation. Don't expect another post from "The Fly," until Wednesday. Until then, I apologize for the sudden lack of quality offered by this site, thanks to Danny and Woodshedder.

Jog on.

NOTE: Cramer's patents are worthless.

Hat tip:
Barry the housing bear.

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DISCLAIMER: This is a personal web site, reflecting the opinions of its author. It is not a production of my employer, and it is unaffiliated with any FINRA broker/dealer. Statements on this site do not represent the views or policies of anyone other than myself. The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.