October 16, 2008
Veteran Traders Disquieted
U.S. Stocks Drop Most Since Crash of 1987 on Recession Concerns
“The S&P 500 has tumbled 38 percent in 2008 as losses and writedowns from mortgage-related investments at financial firms worldwide topped $640 billion. The U.S. stock benchmark is valued at 11 times estimated 2008 profit for its companies. When that price-to-earnings ratio sank to 10.9 on Oct. 10, the index was the cheapest compared with the multiple using trailing profit since June 1985.”
You’ll find a lot of armchair gurus claiming to have caught every turn in this market, but they’ll never once show you a trade confirmation.
Cat: | Time: 11:03 am (utc+8) Comments (15)
Very Zen-like as if to embody the full spirit of a Daoist blogger…
October 16th, 2008 at 1:43 pm
I’m no guru but I’ve always wanted to be a maven since scion is out of the question. Probably have to settle for bon vivant at best, most likely grumpy old douche nozzle. I started scaling into these last week and will continue to do so as lows are tested:
BAC, MS, GE (I can’t resist), XOM, DD, PM, KMP, KMR, FCX.
October 16th, 2008 at 2:40 pm
@Cap: You’re too goy to be a maven anyway. The schlemiels buying nowadays will either be vindicated in time or turn out to be true putzes. (I suspect it will be the former, but many think I’m meshugge.)
October 16th, 2008 at 4:16 pm
Rather than just visit today, thought I’d add my 2d-worth.
Interesting comment re “traders market”. I noticed a lot of stocks having set up very well yesterday, performed badly in practice.
Consequently, worst day for me in many a month. Very odd, or is something else at play? Probably all these folks scaling in as lows are tested!
Me? Not a maven, more of a plodder – not exciting, just predictable (on 15min charts anyway).
October 16th, 2008 at 5:44 pm
@nim: Thx for the comment. Given the dark cloud that formed on the 14th, I think a lot of people were looking to short the 15th, but there surely weren’t a lot of “easy” spots to get in.
October 16th, 2008 at 6:41 pm
nim – had the exact same feelings as you – except that i mainly short. most of my setups were shot on the big gap down, but enough triggered.
what do they say, takes two to make a market?
question for chairman, or anyone else; OIL (ETF) to me looks like a better buy for several month hold than DIA/SPY; agree/disagree?
October 16th, 2008 at 7:10 pm
So far, the best thing I have done is nothing.
October 16th, 2008 at 9:06 pm
@bob: The weekly trend in Crude is down (ditto with DJI/SPY of course) so I’d avoid them all as long trades. Getting long certain stocks in the Buy & Hope portfolio makes perfect sense to me here, but you know how tricky “valuing” stocks is.
@Hudson: The really smart ones say this is no time to bottom pick but then a month or two later when things are higher they will claim to have bought just now (don’t ask for a confirmation slip though
).
October 16th, 2008 at 9:09 pm
I’ve been finding a few good Dummy spots here-and-there (short side) and doing a bit of intra-day trend following on some of the ETFs (SPY, GLD, XLE, etc..). I’m no trading guru for sure, but I’m holding my own on most days.
However, I sucked so bad yesterday, that I fired myself at the end of the day. I need to hire a new trader in 20 minutes.
October 16th, 2008 at 9:51 pm
thanks chairman, i actually was looking @the monthly rather than the weekly (since it’s for my longer term account).
and, i’m in now for 900 shares below 44. let’s see how it goes.
keith – everyone makes mistakes, it’s how you trade afterwards that counts. i’ve actually built into my trading that i’ll make a certain number of mistakes (i don’t do exclusive dummy stuff) on my trades. but if i make more – or i make a stupid one (not holding a stop), i’ll shut down.
October 16th, 2008 at 10:49 pm
I nominate Bill Cara as the Putz of The Year
Cara 2008.09.21
http://billcara.com/archives/2008/09/week_in_review_38_20080921_1.html
Very few of you it seems, and very few of the ââ¬Ågurusââ¬Â as well, agree with my opinion that the 2007-2008 Bear market is over. You probably also wonââ¬â¢t agree with my opinion that the next few years will be much like the period from 1974 through mid-1982. But thatââ¬â¢s not the problem we face today. This emergency legislation in Washington is.
Cara 2008.09.24
http://www.billcara.com/archives/2008/09/caras_commentary_community_cha_198.html
As the broad market lifts today, donââ¬â¢t be so hesitant to buy. Follow Buffett, although look for the shares in the Accumulation Zone since last week of the non-financial companies. But even in the Financials, Goldman Sachs and Royal Bank of Canada ought to do well. The values exist.
Cara 2008.09.28
http://billcara.com/archives/2008/09/week_in_review_39_20080928.html
Today, I will address why I think the 2007-2008 Bear has ended and why prices will now start to work through a series of higher highs and higher lows, which is the definition of a Bull market. I know that most people will disagree with my perspective, not because of analysis, but due to their manifest anger at politicians, government and regulators who allowed the situation to become such a crisis and to apparently decide to have the very perpetrators fix the problem and, worse, financially benefit for their misdeeds.
People ought to be upset. But they also need to maintain a level head and go about their business. The rest is out of their control.
Cara 2008.10.02
http://www.billcara.com/archives/2008/10/daily_report_for_thu_oct_02_20.html
As you know, my portfolio weightings are 40% long stocks, 40% short puts, and 20% gold and silver stocks. If the market tanks following this weekend, or on Friday if the House votes during the market session to reject the bail-out bill, those short puts may get exercised unless you carefully select deep out-of-the-money strike prices. If you do get goldminer stocks put to you, you ought to continue to hold those.
The latter point is important because if there is a market shock in the days ahead, the required action by monetary authorities will be so extreme that ultimately gold prices will soar. So, if you do have to raise cash, do so in the defensive stocks that get put to you.
If you do get stock put to you, you would immediately have to sell some of that stock, but you will end up with a portfolio that has a lower cost basis. On the other hand, if the market rallies hard through next week and beyond, you can hold those short puts to expire worthless, meaning your income is significant. You can then roll over the cash into more short puts or some new long stock positions, depending on your need for income.
But avoid Treasuries and also corporate debt unless it is well backed and carries a convertible feature.
Cara 2008.10.10
http://www.billcara.com/archives/2008/10/caras_commentary_community_cha_210.html
My mailbox is overflowing with letters from buy-and-hold traders who are being sold out of under-margined accounts by their broker. Fingers are sometimes pointed my way. In response, all I can say is that had these people followed the most basic lessons I wrote in ââ¬ÅLessons from the Trader Wizardââ¬Â, their financial losses and grief could have been avoided.
Cara 2008.10.11
http://www.billcara.com/archives/2008/10/daily_report_for_sat_oct_11_20.html
I will not write a Saturday Report today because the financial system is finished. What happened yesterday illustrates that markets no longer work as value discovery mechanisms. But, yes, I will cover Fridayââ¬â¢s destruction in Sundayââ¬â¢s Week In Review, and I will also attempt to answer your fears and concerns.
Moreover, I will restate why the system is broke, what surely needs to be done to replace it, and why many of the key people in charge today ââ¬â the central bankers and the Wall St bankers who have been recruited into the Office of the Treasury Department — must not be allowed to make the most important decision in the history of the world.
For now I will just publish the automated portion of my Report. Since it is the peopleââ¬â¢s capital ââ¬â your portfolios, your Funds, your pensions — that has been destroyed over the past one, two, four, and 52-weeks, it is important that you face up to your naïveté and/or your denial. Trust me; your banker is never going to make that statement.
Cara 2008.10.12
http://www.billcara.com/archives/2008/10/week_in_review_41_20081012.html
As to the capital market; I am now 45% invested in short puts in the shares of select high-quality Cara 100 companies (see my list of 36) plus 30% long the shares of some of these companies and 25% long gold futures. This is a bullish, but cautious stance. With the historically high extremes of volatility, however, the only chance to be successful is to trade positions on an intra-day basis.
Cara 2008.10.16
http://www.billcara.com/archives/2008/10/caras_commentary_community_cha_214.html
Yes, averaging down is a strategy, aided by tactics like long calls and short puts, that every professional trader worth his or her salt practices at cycle bottoms, regardless of their time horizon. The reality is that at points of trend and cycle reversals, nobody can pick the precise bottom, so we develop and execute strategies and tactics that take us from Bear to Bull.
I started the process two or three weeks ago.
October 17th, 2008 at 12:36 am
RE: what The Piker said about Mr. Cara
Egos sometimes get in the way of sound investment strategy.
October 17th, 2008 at 12:52 am
bob- thnks for yr take. Better set-ups on the short side early on today – ABX twice and AEM.
keith – Bob’s right. Keep at it and try to learn from yr mistakes. I keep a log where all my blunders are set out in all their glory. If you see that you repeat a mistake – you know there is some aspect of yr trading you need to work on. Go on -give yrself a chance:- hire yourself out again!
October 17th, 2008 at 7:15 am
The Piker,
Thanks for the Cara round-up… I used to read him regularly, I knew there was a reason i quit.
October 17th, 2008 at 1:12 pm
Wow, Cara certainly covered all of his bases and basicaly makes it pretty much impossible for him to be wrong on any front!
Interesting take.
October 18th, 2008 at 10:36 am
Back into GE @ 19.03.(a moth to the flame) Yesterdays time and sales showed huge programmed buys at exactly 19. No stops this time. so far so good. I figure its Buffett down 4% after yield. With this volatility, any suggestions on a correct stop price? I’d say 18.