Truly, today was the most nerve racking day in years. Early this morning I was on this site telling everyone the market was going to zero. Now, I am here telling you I covered my shorts and went long Citigroup Inc. [[C]] .
Amazingly fucktarded.
Let me recap:
The government may set up an RTC facility that will eat all of the losses on the banks’ balance sheets, which will enable them to lend again.
Long story short, this is a fast market and you have to adjust accordingly, else lose it all.
At first, I was skeptical of the rally, when we were up 100. However, once I heard that an RTC fund may be set up, I ran for cover, like a little bitch.
All in all, I sold 95% of my [[SKF]] , in the low 120’s. I sold 95% of my [[SRS]] in the mid 80’s to mid 90’s. I covered my entire Legg Mason, Inc. [[LM]] , AXA (ADR) [[AXA]] , Pzena Investment Management, Inc. [[PZN]] , PacWest Bancorp [[PACW]] , Fifth Third Bancorp [[FITB]] and Vulcan Materials Company [[VMC]] short positions.
Then, I reversed course and bought truckloads of Citigroup Inc. [[C]] , [[ROM]] , [[UYG]] and Freeport-McMoRan Copper & Gold Inc. [[FCX]] .
Long story short: today was mind numbingly nerve racking. However, as always, I intend to end up on top.
NOTE: I bought more than 100,000 C today.
NOTE II: This morning, I was up another 10%. Then, as things reversed, I was down 8%. Then, I went long and ended down a mere 2%. Just another day at the office.
Off to drink myself stupid.
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“NOTE: I bought more than 100,000 C today.”
I am proud son. May I interest you in a little GS?
I am just happy to be a daytrading moron on days like this. Like the Tampa Bay Rays-one day at a time.
P.S. This ain’t the end of the volatility both up and down. Just prior to 10/19/87 we went through these gyrations. Just saying.
The beginning of the end?
Fly, any thoughts on what an RTC esque program does for the auction process for WaMu? I caught a “godly” 40% pop in the position today and am thinking that this program allows them to drive a harder bargain for the sale of the company.
also, are you going to play this as a tradeable rally, or just buy select names (the big banks with the most garbage on their balance sheets)?
Cool. The banks can lend again.
To whom? For what?
There’s nothing out there to soak up gobs of credit, other than the US government. The consumer is still beat down and in need of income, not more debt.
Fly,
That is sick shit…one for the history books…STRONG…
this RTC was a great magicians trick up the sleeve…maybe it will work…the toolbox has revealed another tool in its arsenal….
I think if people thought this RTC shit was real then the dollar should be getting hammered along with gold, which isn’t happening.
What’s this shit about covering shorts due to new reporting on short positions … any truth to it, and was that the catalyst for the short covering along with the RTC talk?
Glad to see you switch course. In past reversals, you’ve been stubborn and ended up flying to Romania the next day. Regardless, you nailed the downtrend up into midday.
Fly, if you a chance tonight, it would great to hear your game plan for the short term.
Thank you.
Does this mean LEH can come out of bankruptcy…
No matter what you think of Kass, he writes a very good piece below.
==================
Kass: Blame the Blamers
By Doug Kass
RealMoney Silver Contributor
9/18/2008 11:59 AM EDT
URL: http://www.thestreet.com/p/newsanalysis/investing/10438109.html
This blog post originally appeared on RealMoney Silver on Sept. 18 at 8:37 a.m. EDT.
“We believe that to err is human. To blame it on someone else is politics.”
— Hubert Humphrey
Several weeks ago, I wrote an op-ed column in the Financial Times that spelled out my view that short sellers shouldn’t be restricted in their activity and shouldn’t be blamed for the abuses in lending, credit formation and in the growth of the unregulated derivative markets that got us into the mess that we are in today.
Indeed, history has shown — Enron, Tyco (TYC) , Sunbeam and so on — that market participants should be attentive in listening to the analytical warnings of the short-selling community.
A few seem to be coming to their senses — in certain cases from surprising corners. For example, here is an email exchange I had with Ben Stein (for whom I now have newfound respect) last night:
Ben Stein: I am bound to say after all this time that you understood this so much better than I did, especially the mentality on Wall Street that would lead to this that it is profoundly humbling.
Doug Kass: Thank you, Ben. My Grandma Koufax would call you a “mensch.” My constant proddings were not meant to be ad hominem attacks against you but rather to deliver my analysis and underscore my sense of foreboding that was based on my analysis of the abuses and egregious risk taken in the credit, housing and derivatives markets.
Some observers, like Bloomberg’s Michael Lewis get it.
Others recognize that the blame lies squarely on the shoulders of regulators, borrowers (and lenders), banks (did the shorts tell Citigroup’s (C) Chuck Prince to “keep on dancing?”), brokerages (did the short sellers OK obscene compensation packages in the “heads I win, tails I win” culture on Wall Street in which those monies earned were withdrawn out of the firms while levering their capital to 32-1?) and The Three Stooges of 21st Century Finance (who reside in the Administration, Treasury and Federal Reserve and proved, once again, to be reactive not proactive). All of these players gleefully and drunkenly drank from the bowl of credit excess over the past decade, believing in another new paradigm (and uninterrupted growth) for the housing and credit markets, but failed to have a vision of the dangers associated with their careless risk-taking and lack of due diligence.
“If they can get you asking the wrong questions, they don’t have to worry about answers.”
— Thomas Pynchon, Gravity’s Rainbow
From my perch, it seems far-fetched to blame short sellers for the general lack of regulatory scrutiny and enforcement, the absence of risk controls and a continuum of reckless management decisions at the world’s leading financial institutions (banks, brokers, hedge funds, private equity, etc.), all of which have combined to create a Black Swan event that has resulted in a credit market gone amok and a shadow banking system often under the radar of regulators.
Increasingly this week, however, all too many seem to be suggesting that the short sellers are the root of all evil and are to blame for a plunge in share prices (especially of a financial-kind). Indeed, SEC Chairman Cox instituted new short-selling rules last night, which included a requirement to disclose daily short positions, and some institutional investors, like CalStrs’ CIO Christopher Ailman, are not permitting their investment holdings to be loaned out to short sellers, citing clear evidence that short selling is the root cause of the decline in the shares of leading investment banks.
Here are some of my reasons why the current popular game of blaming short sellers is misplaced:
* I simply can’t accept the basic assertion that there is currently a great deal of naked short selling going on. Yesterday, I undertook an experiment and tried to borrow 250,000 shares of Morgan Stanley (MS) from my prime broker (one of the very institutions that is complaining about short sellers!); it took less than three seconds. Every other financial on the SEC’s list is readily available to borrow, so why the heck would anyone illegally short without a borrow?
* Short interest in the publicly traded investment banks has dropped in the last month. (For example, Morgan Stanley’s short interest has dropped by 3 million shares in the last month, to 45 million shares, and stands at a low 2.8 short interest ratio, and at only 4% of Morgan Stanley’s float.) According to Short Alert, from early July to late August (the most recent data available), the short interest in the 34 companies classified as Investment Banking Brokerage by S&P dropped from 9.42% of all shares outstanding to only 7.55%, for a 20% decline. So not only are critics of short selling wrong that shorting has increased, but it appears that covering by the short community served to provide stability to the markets.
* Fails-to-deliver from naked short selling account for a small percentage of market capitalization, according to the Depository Trust and Clearing Corporation. Currently, fails are about 31,000 positions daily (including both new and aged fails) out of an average of 54 million new transactions processed every day by the National Securities Clearing Corporation. In dollars, fails-to-deliver-and-receive amount to only about 1.4% of the daily volume.
* Short selling (or buying of protection) is now rampant in the credit default swaps area, an unregulated market that the very investment banks who are complaining about short sellers pushing their shares down have argued to keep unregulated!
* As to the rumor-mongering, one should not look at the short sellers, we (or more precisely the SEC) should look at the very investment banks that are complaining the most loudly about short sellers. Chinese Walls in brokerages have long fallen, as it is widely recognized that investment firms’ proprietary desks are shorting each others’ stocks (and pulling capital from each other), likely with information from their own investment banking arms. What if it turns out that Goldman Sachs (GS) was shorting Morgan Stanley and Morgan Stanley was shorting Goldman Sachs — and that they both were shorting Fannie Mae (FNM) , Freddie Mac (FRE) and American International Group (AIG) .
* Finally, where are the hedge funds making all this money shorting stocks (illegally)? The dedicated pool of short sellers (which stands at about $5.5 billion, or about 9% the size of Fidelity’s Magellan Fund) is simply too small to have a meaningful impact on the markets. Based on ISI data, most hedge funds tied to a long/shot strategy are relatively inactive, and many are liquidating out of fear of ever-greater losses and redemptions, which leaves us with the dominant quant funds that use algorithms, not fundamental security analysis or rumors, as their operating methodology. No doubt, some of these are shorting the weakness in financials based on their modelling.
In summary, the blame game is counterintuitive to the facts (above) and seems motivated by investors’ and financial managements’ rationalizing their poor investment and business decisions, many of which have caused unnecessary pain for a lot of Wall Streeters who have become victims of their senior managers’ misdeeds.
Our economic and financial system faces serious problems, but critics of short sellers are focusing on the wrong group.
Short sellers (and their analysis) are vital and integral to the financial system.
“Who watches the watchmen?”
— Juvenal
Now they say it is just in very preliminary talks, and nothing will happen until conmangress comes back into session. Shorts covered though.
My vix theory worked. Rally right at the reversal when vix topped at 42 today. I outlined todays trade like a surgeon on my post last night. Fast money needs to take a lesson from iBC, they called for reversal at vix 35. Lol.
Fly is right… Not a time for long term market sentiments. Play the short term trends. Market bottoming process takes a few months. If your not quick, u won’t make money. This is a day traders dream tape!
Aloha!
What a day!! Good call reversing course before you got crushed.
I think the market overreacted to the plus side today. That, and furious short covering. The government cannot just come in and wave a wand over a problem of this magnitude, especially when no one actually knows the size of it all. Even during the great depression, apparently, the government tried, to no avail, to avert the crash. I say we go back down tomorrow.
Damn, I was out running errands and the whole fucking world of finance went crazy. The devils are up to new tricks, a coporation to park all of the shit debt, you’ve got to be kidding me!
I coulda bought a nice new car with SKFie above 150, but it was a hedge after all and I did end the day green, but F this volatility – I move ever more into cash.
You bought $1.5 million in C?
I covered FED and Mi too.
Looking at my sheets, I have zero shorts now, with exception to REW, SKF and SRS.
However, I am 95% long now.
Go figure.
Oh, I covered GS at 104.
can someone explain, what the short time consequences of a RTC facility are? should we by now banks? who will profit the most?
Shorts
Rev Shark
9/18/08 2:39 PM EDT
Those shorts really must be amazingly powerful and clever. First they create a real estate bubble using a bunch of bad mortgage paper, then they force various financial institutions to buy the bad loans, then they make brokers use 30 to 1 leverage and then they cause the economy to slow while forcing government to run up the national deficit.
Banning short selling is likely to give us some short term support but I don’t think it is going to do much to solve our problems.
I wish I sold at 150 too. However, sometimes you need to forget about what could of been and focus on what’s going to happen.
Hindsight is 20/20.
FLY, What the FUCK is going on here?????, please explain to us, I sold 70% of my SKF, I still have 30% left over, should I keep this , or sell it tommarow???????
who said the PPT & GPPT had no bullets left?
nice move. gotta hand it to them
What to do about the Trillion$$$$ of once termed “A$$et$” “Off Book (Level III)” that have now turned dust (Liabilities)?
Ok. So how far can this rally run ? Where are the resistance levels on the major indices ? Woodshedder get to work !
Once again, the RTC talk is just that at this point. All talk, and barely that. Nothing will happen on that front until after the elections, unless we have more end-of-the-world action (entirely possible) and congress is recalled to session.
Personally, I think we will have that end-of-the-world action before the elections, and congress will freak the fuck out. But that hasn’t happened yet.
Right now we have shorts getting flushed. I am wondering if this will create the dreaded “air pockets,” creating room for even bigger moves down.
Wait a minute, both The Fly and Ragin capitulated on the same day.
odd no?
Surely you didn’t put all that money in one company? A bank no less.
wow 100k? that looks like an “all in” bet but I know better. Didn’t realize you had 1.5 mil to drop one a single stock… but now it looks like you’ll have quite a bit more.
very nice.
I’m so so glad I sold my SKF today just before it took a dive quicker than Britney Spear’s career… or something, I’m not as good as you with the metaphors.
once the market digests that the government can’t possibly solve all their problems with some vague idea dropped on a gloomy afternoon, we are going back down so hard it will tear you a new one.
I say we go back down tomorrow.
AU: I owe you an apology. Didn’t see that kind of govt intervention coming. Aces.
To sum up this current economic situation we’re in and the solutions that have been proposed to solve the mess, I’ll borrow from another blog I read last night:
Financial Science Fiction
this is weird, I feel like it would be silly to hold over the weekend, but that’s exactly the reason I probably should. After all, if everyone else thinks that, that means they’re all going to wait until Monday, then buy. If that happens, all of a suddden, everyone wants to buy and everything goes up.
Ozark Hillbilly:
“Conmangress”
Sweet neologism, dude.
_________
Fly: Tsk!
_
Hopefully, we’ll prevail…
It is one of the few TRUTHS in economics that debt must be paid sooner or later one way or another. It cannot be erased. The current massive amount of bad debt is being partially transferred to the Feds and the national debt. Some of it is being paid for by the wiping out of equity in Bear Stearns, AIG, Lehman, and many other banks. Some of the debt is being taken care of by the home foreclosures. I agree with the government attempting to prevent things from getting out of control, but in a few years, AIG should be sold by the government.
You’re wrong. Be very wary of what’s going on here. Look how quickly you all jump to the 100% long side. VERY intriguing. Classic fake out.
is the “new dow component status” priced into Kraft, or is that likely to occur when it’s actually added and fund managers rebalance? when’s that 9/23 or end of month?
Party on, Wayne!
Party on, Garth!
Eggsactly!
OWNERSHIP SOCIETY (gov’t owned)
I see now that Comrade Paulson is meeting with the congressional bigwigs tonight. Surely to convince them that action must be taken before they go home to campaign.
I am writing my peeps in DC tonight. I have put that off for far too long, as I am sure most of us have.
Also, I have read some of the stories about this quasi-RTC. The stories imply that it would take the bad debt off of the banks’ hands. If that is really what Paulson wants, then sign me up for the Revolution. Fuck it. The RTC that dealt with the S&L crisis just liquidated assets that the government ended up with. The S&L’s failed first. Not like this BS they are talking about now.
I am more scared for my country than I am my trading accounts.
cramer is telling everyone to sell into the rally. that means we go higher. lol
Does that mean buy gold? when everything was going crazy and people were unloading money market, and banks and bank stocks, and the market was plummeting this week, they loaded up on gold like crazy and it launched $80 in a day…
But if this rumor is true and the plan works, it means paper is worthless, and the money goes to gold, but if they don’t find a solution and the plan doesn’t work, or if everyone sells on the news and panics, People want nothing to do with stocks and gold goes up…
win/win either way? or does the huge spike means people go out of gold and into stocks when market rallies, and if it doesn’t, it already made it’s move, and it’s over extended…
?
Anyone know where we can find that list of 799 financial stocks in which short selling is now banned?
God Bless America and its free market!
-DT
marketwatch.com has the list
.