iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,484 Blog Posts

Tick…Tick…Tick…

I want you to observe what happens to a stock when expectations are too high and that respective company fails to deliver:

(see FFIV, RAX, CRM, VMW for similar pain)

Like it or not, expectations are very, very high, for nearly every sector. Ask yourself a question: how lucky am I feeling?

According to management at several high profile steel companies, things are not too rosy. Same goes for tech, even though people seem to have forgotten that AKAM, INTC, AMZN and several other high profile names warned last quarter. Again, how lucky are you feeling right now?

This is what we do know to be fact.

The yen is knifing higher daily, much to my delight, despite the opposition of the Bank of Japan. Bonds are going up, again to my delight, as investors funnel into what they deem to be safe. And, finally, equities are grotesquely overvalued, based upon the laws of reason and mathematics.

Like I said, buying a basket of puts on the current dot-com-esque high fliers (CMG, FFIV, NFLX, CRM, VMW, CAVM, RAX, AKAM, AMZN) is indeud better than lotto.

Here is The PPT oscillator chart, as of yesterday (marked overbought as of yesterday for the 4th time this cycle)

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38 comments

  1. D Hydration

    First

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  2. Wall$treetKid

    Second

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  3. Rick

    Bronze medal

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  4. Po Pimp

    All I got was a Certificate of Participation.

    Shit.

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  5. WTF

    And I was just watching on the sidelines. With 50$ beer and 100$ hotdog.

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  6. Pete

    Oh man I cant wait to see this post.

    5th…

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  7. Grammar Police

    Again, how luck are you feeling right now?

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  8. Mr. President

    SHORT NFLX as of 2 days ago. Look at yesterday’s action during the banana-run.

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  9. sspiff

    The Glass is half full or empty. That was an excellent post. If we get S&P 2011 fowrard earnings in the $92 range the economy will need to be doing ok. That could lead to a 1400 SPX in 2011 with no QE. If foreclosures rise and the consumer economy cools earnings could be much lower. In that case I don’t think QE will help much and we could go much lower, say a 10 multiple on $75 SP earnings.

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    • checklist

      there are several situations, like gold, many stocks, where a straddle seems to be a prudent course of action… a bet that things will move. Problem is, I am not the only one thinking that and long dated volatility isn’t all that cheap.

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      • sspiff

        I sometimes use iron condors or double butterflys(they are cheaper) to lower the cost in high vol sitiations. I prefer directional trades when I feel I have an edge (not now).

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  10. WTF

    Time for REW?

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  11. AI

    its about to be a 5th time overbought this cycle……

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  12. Mr. Partridge

    AEM – you have to know Gold to play with it.
    I started long ago, ok very long ago.

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  13. checklist

    I am sure there were many calculations and hours of pondering behind it, but the move to 2.95 for overbought is perplexing to me. This up cycle has fairly interestingly… avoided the old overbought levels of >3 or 3.1 etc.

    For 2 cents related to the valuation of stocks, I sort of see a reasonably small number of grossly overvalued names (the ones you frequently talk about), but by and large most names are not exorbitantly priced at all as far as I can see.

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    • sspiff

      True. I see lots of reasonable valuations. My longs are mostly boring large caps now (INTC, COP, …). All have decent dividendsand stable-ish earnings. The higher beta plays seem overpriced. I am hedged with index put spreads. I worry now that the market will continue it’s climb with me underperforming.

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      • The Fly

        There is a divergence, which is interesting. On one hand, large cap offers good value. On the other, there is FFIV.

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        • checklist

          yes, exactly. several bone cheap insurance stocks (a sector that has a fair chance of becoming a takeover stomping ground), big pharma is cheap, big telecom yields almost 3x the 10 year, etc etc etc.

          But then we have the “CaNDIES” and the rest of this handful of dot-com-bubble-priced POS’s. Small a in candies because I don’t own apple, but its not that expensive.

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        • NSAID

          HA! ‘F’ FFIV

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      • Sam

        Join the club. Exact same strategy here. I get clobbered on melt-ups too.

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  14. SoupNazi

    17th

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  15. The_Real_Hmmm

    I remember in the beginning of 2009 when I had puts in PNC and every other bank was crashing to the ground except for them and then in 2 days the stock dropped 50%. That was a good time indeud.

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  16. jjjsix6

    Just when you thought it was safe “FLASH CRASH 2”.
    They said it couldn’t happen again.
    The streets will flow with the blood of the non-believers!
    You have been warned.

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  17. TheV.King

    22 …

    STEC is my next IOC…traded it 2X already today

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  18. Geoduck

    The upside down h&s jumps off the s&p chart. We go to 1220 before dropping back to 1125.

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  19. bubo

    Fly, you still believe in market reversal? Maybe just let go and change the strategy? Scot and others were right about this rally.

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