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goldminingXpert (29.56)

I've gone nearly all-in short

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August 03, 2009 – Comments (89)

Enough talk, either the market goes down, or I do--with the newsflow as greviously bad today as it is--FBI raids on major banks just HAVE to be bullish, right?, and an inexplicable 4-digit S&P print, I can't resist any longer. This rally is like last year's... which ended badly--I got short that one too soon, but in the end, fundamentals prevailed and my account balance went from -5% to +60% on the year last fall. I've done it again. I'm virtually all in short via Dec puts on a variety of things and a massive Euro short/long dollar position.

As the economy has gotten markedly worse in the past month and investors more brazenly foolish, it is now virtually unavoidable that the 666 bottom will fall. I'm raising my odds that we will see 666 go down from 80% to 95% and I'd place even money on whether 500 on the S&P holds up next year. We've just rallied 50%... why not go back down 50%? (My short positions only need us under 900 by December to pay nicely).

89 Comments – Post Your Own

#1) On August 03, 2009 at 3:01 PM, brickcityman (< 20) wrote:

I'm with you... I'm going to keep some long side stuff til the bitter end (and hopefully add to once prices come down), but my general theme lately has been to take profits and start plowing money into inverse ETFs.

 

The media (and I'm sure more than a few CAPS) will call this dumb, but to me the balance of the scale is to the downside.  What could possibly create much more upside?  (unfortunately I've been asking that question for the last few weeks).

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#2) On August 03, 2009 at 3:08 PM, InflationSilver (99.95) wrote:

I would have to firmly disagree, but to each his own...

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#3) On August 03, 2009 at 3:09 PM, goldminingXpert (29.56) wrote:

This feels like buying stuff in March. Everyone said I was nuts to be buying... American capitalism was collapsing (note: I was buying at S&P 720-740)--didn't catch 666. Now it's a new bull market, GDP will be growing at 5% a year, Obama is an economic guiness. Well, no. And I feel even more alone shorting here than I did buying near the bottom.

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#4) On August 03, 2009 at 3:15 PM, outoffocus (23.20) wrote:

This market looks so much like teh idiot phase I was talking about. Lotta idiots ready to go all in in hopes the S&P will hit 1500 or 2000.

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#5) On August 03, 2009 at 3:15 PM, mustbepatient (29.53) wrote:

GMX, with all due respect, going all-in on options is virtually guaranteed to wipe you out if you do it enough times, because eventually you will be totally wrong.  Risk management is crucial for long-term returns.

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#6) On August 03, 2009 at 3:17 PM, binve (< 20) wrote:

GMX, I added to shorts this morning too (and just picked some more ultrashorts in Caps).

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#7) On August 03, 2009 at 3:17 PM, givmeabreak (29.33) wrote:

What day on "The Market is about to crash" are we on now?

Good luck gmx, I respect anyone who gambles with real money. I just prefer MLB, NHL, WNBA, and NBA. Sometimes spot plays and parlays on NFL and NCAA.

 

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#8) On August 03, 2009 at 3:23 PM, anticitrade (99.66) wrote:

If your right, goldmingxpert, I am sure you will not feel lonely very long.  However, I remain optimistic.  I don't believe any small $ investor can consistantly have an advantage calling short term moves in the market.  So if I am going to be wrong roughly *half the time, I will choose optimism since it's its own reward (less than half because in the long term the market is bullish).

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#9) On August 03, 2009 at 3:33 PM, Rebkong1 (< 20) wrote:

your Early GMX

 

i hope you dont have the margin police after you...you will eventually be right..but timing is everything 

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#10) On August 03, 2009 at 3:37 PM, jstegma (29.36) wrote:

I'm not sure all-in is the best idea, but I agree the market is showing irrational exuberance.  It's extremely volatile right now.  You want to leave yourself some margin for error.

You have a very good point about if it can go up 50% in a few months it can go down 50% almost as easily.

I don't think we'll see 500 on the S&P though and probably not even 666 again.  666 was a panic.  That's the only reason the market has been able to rally 50% since then.  It never should have been that low in the first place.  750 maybe, but 666 was absurd at the time.  

That said, I think 1000 is too optimistic.  Way too optimistic. 

 

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#11) On August 03, 2009 at 3:38 PM, leohaas (32.94) wrote:

How come you feel alone? Plenty of bears here at CAPS!

I admire a guy who puts his money where his mouth is.

I am not gonna say: "Good luck" because if you are right, a lot of people will be hurting. Badly.

For the uninformed, you may wanna point out the buying puts is not the same as shorting.

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#12) On August 03, 2009 at 3:43 PM, goldminingXpert (29.56) wrote:

Mustbepatient--yup. I don't plan on doing this many times in my life... but this is a once-a-decade sort of opportunity.

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#13) On August 03, 2009 at 3:53 PM, MattH42004 (30.53) wrote:

All in with puts? And December puts at that. Well, I'm sure you've done your research. I've been watching the March 70 puts on the SPY for a while now. They keep looking better and better on a risk/reward basis...But I'm damn sure not planning to go all on them anytime soon...

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#14) On August 03, 2009 at 3:58 PM, goldminingXpert (29.56) wrote:

The VIX is creeping back up due to the collapse of the levered ETF complex... I like buying puts when the Volatility is low, thus I felt compelled to get off my hands and start buying. Plus, I came back relaxed and carefree from my summer-long vacation and the more you examine this economy, the more doomed you realize it is.

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#15) On August 03, 2009 at 4:09 PM, ayekappy (< 20) wrote:

My all-in puts on Whole Foods and Radioshack in April  for May did not go well.  Then again I was an idiot for not betting against the obvious GM decline... then I'd have been okey even with this market surge.

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#16) On August 03, 2009 at 4:26 PM, DownEscalator (< 20) wrote:

I started taking short positions in early June because I thought the rally then was ridiculous (and I called March as a good buying time).

Barring something unexpected, on Friday I'm selling out the rest of my long positions that are up big right now.  There is absolutely nothing concrete behind the mid-late July bubble.

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#17) On August 03, 2009 at 4:35 PM, StopLaughing (< 20) wrote:

The first basic and most fundamental rule is to stay on the right side of the trend. There is no indicator of the upward trend rolling over here.

The market could correct as it hits resistance. However, so far this run it will hit and then bounce a couple of times, then ease thru and run along the resistance and then take off again.

The Fed could strengthen the $. However, they are just slowing it down not turning it. 

China is draining stimulus. However, it is not in their interest to crash their market. Ours will follow theirs. If China can remove some inflation without crashing their market then the US might. 

I have some faith in Bernanke. I have no faith in the Dems spend and tax approach. However, that is taking a few hits.

I think the market will run to about 1160. It may correct from time to time but until the MAs and other long term indicators say the market has turned I am likely to stay long.  I am not going to fight the trend or try to pick the actual day of a top. 

Dec.  puts may be a pretty decent approach. And buying them on a big up day is smart.  However, Obama part of the stimulus is just starting to hit now. It should be a while before the market drops a lot. There will be some periodic profit taking but the trend is still up for now.

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#18) On August 03, 2009 at 4:44 PM, whereaminow (35.15) wrote:

You print trillions. You give it to foreign bankers and investment houses.  They put it in the market.  The market goes up.  What did we expect would happen?  That they would put it in their mattress?  That they'd spend it on Starbucks coffee? I can't see how this is so hard to figure out.  Stagflation here we come.

David in Qatar

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#19) On August 03, 2009 at 4:48 PM, kaskoosek (89.44) wrote:

I've jumped from the balcony.

 

Would anyone care to follow? 

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#20) On August 03, 2009 at 4:48 PM, synergize (30.13) wrote:

short positions should be smaller than the long positions. long-term, the market grow at GDP growth rate of roughly 5% to 6%, in addition to dividend yield of 2% to 3%.

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#21) On August 03, 2009 at 4:49 PM, SolarisKing (< 20) wrote:

I don't think i've ever made a correct call, so you might be right, because i think you're wrong.

I do understand though that you are considering things like the VIX and Dec puts.

My guess is over 1160, because that's what GS said, and folks will ride it to there if for no other reason. Over because GS doesn't want to appear too right. Not to break 1220?

and i haven't the faintest idea WHEN. Perhaps as the next earnings leak? Or as soon as the next round of banks goes down? or another county pulling 'a Jefferson'?

My down target on this leg is only 960? though i think that Christmas is going to hurt some peoples feelings. If Christmas is bad, then 700 here we come.

Again, let me reiterate, i'm always wrong.

GV gave me good advice when he said 'buy in with 20%, and 5 targets. Never let your last money go early', or something to that effect.

Good luck.

-solaris

 

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#22) On August 03, 2009 at 4:50 PM, prose976 (< 20) wrote:

You're all missing the point.  The market we're in is based on the dollar.  The dollar is dropping in value.  Thus, the number of dollars needed to keep the S&P or any company at a comparable level of valuation increases.  S&P 1000 may just be a bottom, based on dollar valuation.

Your puts will expire and you'll go down with this ship because of inflation/devaluation.

I'll give you that there will be 3% - 10% adjustments around 1000, but there will be no drastic drops to bring everything back down to March lows or lower.

The market was way oversold at that time, and there has been a ton of money on the sidelines in bonds, treasuries and precious metals.  Those dollars go back into equities when the bonds, treasuries and precious metals flatline or reverse course.

There is no money in a ruined market.  Market "forces" (i.e. the investment banks), realize this.  China realizes this.  Dollars are better off in the marketplace than anywhere else, because the market is composed of companies that consume, manufacture and provide services.  Bringing the market back down will not drive the price of anything back up.  Prices will then stagnate and deflation is a more likely result, resulting in a prolonged economic "winter" during which everyone (consumers, business, etc.) will hybernate.  This is not good for anyone.

Big Money is not in the business of hoarding money, resources, etc. Big money is in the business of moving money, taking cuts from billions of consumer-based and business-based transactions.  Stop the steady flow and Big Money suffers.

You're thinking like an individual investor:  buy puts, cash in when it crashes, and then you'll be loaded when the rest of us are SOL.  Big money doesn't want just a few of us to spend, and to use credit.  Big money needs the whole machine moving...all the consumers earning, spending, using credit.  If not, then everything shuts down.

Just my humble opinion.  I'm frustrated I didn't hit 666 either, but I believe your best move (rather than puts or shorting), is to buy the sensibly priced equities right now, and buy them as they fall in price.  This way you build positions and collect dividends.

This is also a combined defensive/offensive strategy that keeps you in a great postion no matter which way the market moves short term.  

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#23) On August 03, 2009 at 4:52 PM, SolarisKing (< 20) wrote:

OTOH, the more i think, the more i think you are probably right, and i wasted my time writing the above post, just to be proven wrong again.  :-)

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#24) On August 03, 2009 at 5:09 PM, ctojeira (39.36) wrote:

Wow.  Good luck.  It sucks being on the wrong side of a rally like this.  I hope you don't get squeezed out of your position.  I've been there before... not a worse feeling in the world.

While things are irrational right now, they can get a whole lot more irrational before turning.  Going 100% short is the most dangerous thing you can do in a market like this.

I sincerely wish you the best of luck.  Hate to see a man lose all his money in the market.

 

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#25) On August 03, 2009 at 5:26 PM, JibJabs (89.52) wrote:

Mucho cajones, hombre. Quick question: do you foresee inflation and, if so, would that threaten your move?

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#26) On August 03, 2009 at 5:32 PM, anticitrade (99.66) wrote:

GMX,

I wonder how many people have seen your score, read your blogs, and made investment decisions accordingly. 

Allthough most of the previous comments make it fairly obvious, this is a gamblers play, and a gamblers play based on EGO and not on money.  I say ego and not money because ego is the best explanation for an individual investor "going all in" on the bet that he is smarter than everyone else.  If it was a gamble on money, there would be careful evaluation of the risks weighed against the potential returns.

That said, GMX has an incredible score on Motley Fool.  He has a strong history of being right.  But I fear he has increasingly allowed emotion to start making his big calls. 

Good luck to you!

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#27) On August 03, 2009 at 5:37 PM, TMFJake (43.58) wrote:

You're laying it on the line.  Should be interesting.  :) Good luck!

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#28) On August 03, 2009 at 5:48 PM, robstuck (< 20) wrote:

when all is said and done, the stock market reflects the economy. that being said, while the stock market has gone up, the question is whether it went up too much. it dropped a lot based on panic, but who is to say where the bottom is? 

while it may have been correcting itself after an unprecedented panic, it has risen for a month straight on nothing but bad news.

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#29) On August 03, 2009 at 6:01 PM, goldminingXpert (29.56) wrote:

Lots of comments--this one sums up the question several people have.

Mucho cajones, hombre. Quick question: do you foresee inflation and, if so, would that threaten your move?

I do forsee inflation, but not now. Just as we got a commodities pump last summer than ended in tragedy, we are again seeing a pump in oil... not so much in other stuff... but it isn't being driving by supply and demand, it is being driven by A) dollar weakness and B) fear. There's way too much supply of many commodities, and where there are in fact shortages (sugar), the price has spiked accordingly. In glutty commodities such as natural gas, the price as stayed in the dumps.

The Euro and Pound have gone into what appears to be parabolic blow-offs--the Pound simply can't rise four cents a day (as it has done the past two days) for very long... The dollar is crazy oversold and likely to get a bounce on techincal reasons alone stopping the limited and narrow price increases we are seeing in a few areas dead in their tracks. On the whole of it, deflation is still clearly ruling, just look at house, car, boat, art, etc. prices and look at employment rates, hours worked, and wages paid, and you'll see that the economy is contracting and that the velocity of money is sharply falling. Barring something exceptionally unusual, we won't get inflation this year out of this set-up.

Also worth noting, there was severe inflation throughout the 1970's and yet the S&P went absolutely nowhere producing horrific returns.

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#30) On August 03, 2009 at 6:07 PM, DeerHunter73 (73.08) wrote:

Good to see you back GMX. Your going all short now and how funny I've been long since March when i said the S&P would break 1000. Look what happened today and i wasnt even here to sell anything today. Oh well i will set it to sell tomorrow. Ive made in the last 3 months roughly 25000 on this bear market now ill sell and wait for the big plunge and buy back. Look for the S&P to have a correction to 950 then spike by end of year to 1100+

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#31) On August 03, 2009 at 6:13 PM, EatYouLunch (27.80) wrote:

I agree on SP500 is topping out around 1000. However I would not go all in short until I see a major reversal signal.

Commodities are going up this time because of

  1. China is still stockpiling and growing (well, may be Chinese version of credit bubble is forming, but they don't have debts like US)

  2. USD value is losing to many major currencies

  3. Goldman Sachs ? 

 

 

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#32) On August 03, 2009 at 6:25 PM, toopersent (81.99) wrote:

China wont be stockpiling forever.  GMX is right in some aspects, the commodity markets are way overbought right now because of fear.  Oil supply isn't going anywhere, certainly not enough to warrant the huge gains its been raking. 

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#33) On August 03, 2009 at 6:26 PM, jason2713 (< 20) wrote:

I'm with GMX, although I'm not going  "all in" on shorting.  I started shorting interest rates and the dow just recently.  I agree with GMX, I just can not see this sustaining.  People are spinning the news to how they like it.  I thought we'd hover around 8300-8500 for the summer, well we did that until July when earnings came out, which I also expected.  I got out last week and started shorting with about 30% of my porfolio, while 30% is still in equities, and the rest is cash waiting for the crash (if it comes).  I may cash out my remaining 30% of equities here shortly and put a bigger stake in shorting, but I haven't decided yet.  I guess we'll see if we are right, or we get burned lol!

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#34) On August 03, 2009 at 6:31 PM, DaBronxBull (30.47) wrote:

i hate when so many agree, it's as if they read these blogs.

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#35) On August 03, 2009 at 6:47 PM, dexion10 (27.71) wrote:

I salute you GMX - although I must say I'm looking forward to the next time that I can be 50% net long because being net short has been a dreadful experience for me... Bears have to be much more patient than bulls and the percentage gains always favor bulls.

 

Bears can make a max of 100% and often settle for 30% while bulls can make 100 or 1000% so easily in a bear market.

 

I must say I am envious of the bulls and the multi-baggers that were bought all the way up from march

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#36) On August 03, 2009 at 6:54 PM, MGDG (35.44) wrote:

I think Prose said it best. "Big money needs the whole machine moving...all the consumers earning, spending, using credit. If not, the whole machine shuts down"

This is inherently the problem with a continued Bull Market. All of the consumers will not be spending because there are too many without jobs, income or available credit. The well oiled machine we call Capiltalism will not be running on all cylinders until we put paychecks in people's pockets and make credit available to those that need it.

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#37) On August 03, 2009 at 7:01 PM, robstuck (< 20) wrote:

i think it will top 1100 then go back down to 957 then back up to 1345...

 

I think the celtics will win in the 4th quarter by 1 point from a 3 by ray allen, then go on to lose to the cavs by 12 points and the cavs will win it all.

 

do you know how retarded this all sounds? the people who think they are so smart as to guess the short term gyrations in the market are ignorant. the market does what it wants, and often times behaves irrationally.

GMX why don't you swap some insurance w/ someone in case the market goes up. yah more derivatives thats what we need. At least its his money he's being reckless with and not someone else's.

 

this site is about investing, not gambling. Only a monkey goes all in on a bet. investing is about steady returns, saving your money, and compounding, above all compounding.

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#38) On August 03, 2009 at 7:01 PM, rofgile (99.30) wrote:

You're shorting the market too early.


Here's Future Rof from the Q3/Q4 2009:

"Remarkably, earnings are beating expectations for the second quarter in a row, across the board.  The manufacturing sector saw the best turn-around, as new orders rapidly grew due to low inventories.  Consumer sentiment was higher, as housing prices hit bottom combined with with renewed hirings from the companies (led by manufacturing), and higher portfolio values made consumers feel more secure.  The automarket continued a come-back led by cash for clunkers, and the beginning of stimulus projects has stirred a minor boom in construction. S&P reaches 1100, DOW 11000 - And holiday spending is really great".

Perhaps you are right GMX - but, be careful!  We are still down 40% from the peak of the market, and it sure looks like things are getting better to me in the economy.  I feel like the door for shorting the market already closed a while back.

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#39) On August 03, 2009 at 7:10 PM, pastordisaster (< 20) wrote:

Stop reading KD or you're going to end up broke. Ask me how I know.

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#40) On August 03, 2009 at 7:13 PM, Bays (30.22) wrote:

No offense, but havent you been short since March?

How do you even have money left?

I just remember all those "The Market is about to crash" blogs.

Sorry if I'm wrong here.

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#41) On August 03, 2009 at 7:16 PM, StopLaughing (< 20) wrote:

Actually the correlation between the S&P and GDP is not as strong as many people assume. The market and the economy can diverge for some time.

In this current case GDP is a poor measure of the strength of the economy as GDP includes government spending and is also distorted by Mark to Market accounting.

To me both Oil and the S&P are primarily driven by the movements in the $. The strength of the $ is not always directly or strongly correlated with economy in the short run.

At this point investments in the market are really speculations about movements in the $ which is controlled at least in part by both the Fed and the Administration.  As the $ drops money flows into the market. The Chinese etc. are buying T-Bonds but on the very short end so they do not lose a lot from inflation.

They are accomodating the inflation in an attempt to get their export flows moving again. They can not switch thier economy from an export based one to an domestic consumption one fast. That will take years.

They can't make that transition any faster or better than Germany could. If they tried they would create massive unemployment for themselves.

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#42) On August 03, 2009 at 7:21 PM, realsplita (< 20) wrote:

We are going to grind higher and then we might fall to the 875-900 range but we are not going to see those depression levels again. To much money on the sidelines+Government Stimuli+Overall better outlook from just about everyone will push the market higher. BEST BET just ride this rally out sell when you have made good money and sit on a cash after. Nobody ever got hurt taking a profit regaurdless of how much you make.

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#43) On August 03, 2009 at 7:46 PM, VExplorer (29.79) wrote:

I'm in short. Major reason: I'm working for big Co (member of SP500) which is in perfect shape according to the market. But we are waiting for new layoff wave. So, I should create the hedge.

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#44) On August 03, 2009 at 8:11 PM, goldminingXpert (29.56) wrote:

No offense, but havent you been short since March?

I was long in March. Went flat when S&P got up near 800. Started shorting with about 20% of my capital in May. Got frustrated and tuned out of Wall Street in late June after taking sizable but not terrible losses. Returned from vacation on Friday. Shorted in size today.

There's a difference between saying the market is about to plunge and betting on the market...  hence the first sentence of this post "Enough talk, either the market goes down, or I do"

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#45) On August 03, 2009 at 8:42 PM, topsecret09 (38.43) wrote:

  I sold almost all of my stock today at a nice profit. I am now 80% cash... This was the Meredith Whitney / Intel rally wasn't It ?    http://blog.trade-radar.com/2009/07/weekly-review-meredith-and-intel-rally.html    I'm with you GMX.........

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#46) On August 03, 2009 at 8:52 PM, cwlawrence (< 20) wrote:

I just got in to a position in a 3X bear ETF (NOT FAZ) and am 25% cash.

I am debating cashing out on my longs, but think I will hold on and reap the dividends, pick up more shares when we make a bounce again.

I have to say though, there have been a lot of bad calls coming from the Bears over the last month or so (a lot of gloating by the bulls too). I suppose that is a good indicator of an upcoming drop.

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#47) On August 03, 2009 at 10:07 PM, rexlove (99.54) wrote:

You're taking a huge risk here GMX. You got to realize the markets can get very emotional sometimes. Just as they went way oversold in March to 666 - they can also have a big swing the other way. 1100-1200 S&P is not unreasonable. I think you may be jumping the gun here. Earnings season is not over and some continued good earnings can drive this market further.

LOOK at Ford today. That was big. One of my best picks in my real money portfolio. Hey CAPS - why no preffered's?

You can't be serious about going below 666 again - are you? Things were looking so bleak earlier in the year - things have definately turned around. What possible bad news could drive the market down to that level again?  

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#48) On August 03, 2009 at 10:16 PM, goldminingXpert (29.56) wrote:

LOOK at Ford today. That was big. One of my best picks in my real money portfolio. Hey CAPS - why no preffered's?

You can't be serious about going below 666 again - are you? Things were looking so bleak earlier in the year - things have definately turned around. What possible bad news could drive the market down to that level again? 

WooHoo! Ford beats by a touch in the face of a massive government stimulus. Wow! 

You're a hardcore bull... you're going to have to learn for yourself what drives the market back below 666 since your ideology blinds you to the facts presented by posts from Ultralong and others here that have already explained why the market is going to tank once this "happy" period ends and we return to reality-time.

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#49) On August 03, 2009 at 10:16 PM, NoMoeMoney (< 20) wrote:

Wait till the end of August when people get over their vacation hangovers. This market will tank soon, seems to have followed the Great Depressions time line rather well (they had a huge 5 month rally too) Its becoming more of a suckers bet everyday. Hey, if the bulls can make money, great, but you better be ready to run when the tide turns.

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#50) On August 03, 2009 at 10:54 PM, TMT33 (< 20) wrote:

I think you're way too early. At some point reality will set in, possibly in the Fall- Sept/Oct. The market could hit 600 in the future, i.e. 15X $40 eps but I think it's a little ways off. Right now there are enough "green shoots" to keep the hopeful bulls going. Housing is seasonal, comps will turn down starting with Sept. Earnings misses will start this quarter or next.

JMHO.

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#51) On August 03, 2009 at 10:54 PM, rexlove (99.54) wrote:

I dont think Ultralong has ever said the market is going tank. I don't know his exact words - but he has stated he's short term bearish and long tern bullish. Look at the list of stocks in his CAPS portfolio. He did not close his ultralong positions. A 10% pullback here is not unreasonable - i'm totally expecting it. But as I said the market is emotional and prone to extremes. This market could easily go up another 10% here. I'm just saying taking a huge bet one way or the other is a huge risk here.

I don't see how you can downplay Ford. What stimulus did they get? They turned down TARP. Cash for clunkers couldnt have contributed to the bottomline yet. That extra $10 in my paycheck each week wouldn't have made me go run out and buy a car.  

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#52) On August 03, 2009 at 10:55 PM, RVAspeculator (30.21) wrote:

GMX,

Did you get out of the:

 "August QQQQ 38s for 87 cents. First big options trade I've made ".

Im hoping you rolled those to a later month at some point before now.  IV decay can be a beatch.   I like what you are doing with the December's better than that boatload of front month ones you bought back in July.  

Front month puts are like hand grenades.  If you are going to play puts at all you need to use a small portion of your capital and go out a few months so you have a chance.

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#53) On August 03, 2009 at 11:24 PM, checklist34 (99.73) wrote:

I'll wager any stake you like that the S&P doesn't go under 500, anything.  Name any car ever made, anything, anything, anything, and I'll go 100:1 odds. 

GMX, you are obviously very smart, and you obviously have a knack for something or you wouldn't have gotten to #1 on the CAPs game at one point.   

And, as you are smart, you must clearly realize the folly of your budding permabearish ways.  You had the crash to end all crashes last year, an epic, slaughterhousing, full capitulation, mega-crash.  And youw ere up 60%.  I am, and I am not exxagerating, up 180% SINCE LATE DECEMBER/EARLY JANUARY WHEN THE s&p WAS JUST 10% LOWER THAN HERE by being basically straight-long on beaten up stocks.  60% makes 180% only if you get it almost 3 times.  So 3 epic once in a lifetime crashes leads a talented short position to match my 7 month long return with a 10% market move.  

Permabear is a statistically, historically, mathematicaly losing game.  It wins only sometimes.  Shorting a market still well below its historical price/sales, price/book, or price/ebitda levels is absolutely not the best time to pull this stunt.  Its a position that attracts basically only people who feel intellectually isolated. Feeling isolated when intellectual is a FREAKING easy thing to be in this society, so I'mnot casting blame.  But I recommend a goodhard drunk...  you're in college in Colorado... At Boulder?  You can't even tell me there isn't a heck of a party to attend there even in the summer.  Heck when I was in college and people needed pot it always came from there.  Grand party central, USA.  I'm just jealous that i'm not that age, I'm not at all being condescending.  

I think we should start a hedge fund.  We could have alot of fun arguing over who was right.  I'll get legally drunk, and thens toned if anybody has a bag, and we'll take one of those online IQ tests.  You beat me sober and you can be in charge, otherwise I get a 51% vote.  Thats a pretty safe bet, you've called me an idiot several times...  You're destined to win, right.  :)   I'm j/k, sort of, in that I didn't mean that to be insulting.  I'm just suggesting that you play the odds a little more and the ego a little less.  I like to assume I'm dumb, bet with statistics.  I always thought thats why people kept them (stats), so we'd have a better idea of which batter was likely to get a hit given 20 tries. 

I'm short an unholy mob of calls on the SPY front-month.  eek!  we'll see how those go.  I'm willing to pull the plug and run for the hills with a loss if need be.   I did it in may...  only to have the market crash back to profit level shortly thereafter.  oh well.  win some, lose soem.

 

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#54) On August 03, 2009 at 11:26 PM, guiron (22.39) wrote:

There's a difference between saying the market is about to plunge and betting on the market...  hence the first sentence of this post "Enough talk, either the market goes down, or I do"

Yeah, but your online reputation is likely worth a lot less than the very real cash you stand to lose.

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#55) On August 03, 2009 at 11:38 PM, checklist34 (99.73) wrote:

robstock said:

do you know how retarded this all sounds? the people who think they are so smart as to guess the short term gyrations in the market are ignorant. the market does what it wants, and often times behaves irrationally.

 That, my good man, is wisdom in print.  The market was cheap last fall when Buffet said to buy.  It went 33% lower, meaning it had to come back 50% to get even.  The market was expensive in 1995.  It went MANY TIMES higher, before ultimately going lower.  

Do not bet with important money on the short term gyrations of the market.  Mr. Market lives to, and only to, make as many people look stupid as possible at any time.  

All we as investors can control is fair value.  Thats it, thats all.  Buy below it, sell at or above it, or if you're really up maybe even a little below it.  Thats all we can control.  Discern as best we can when things are cheap, and buy.  Then wait.  Cheap doesn't mean they can't go down more, they sure as heck can.  

Gas, meet matches.  Thats short term bets on market direction.  Dougie Kass has been as good as anybody through all of this, and the last 2 weeks have left his blogs on real money ... just dripping with pain, you can feel the pain as Mr. Market blows up even on him.  

I like to hedge and buy puts when I think a correction is coming, buy calls on SPY when I think a bounce is inevitable.  But even when I say "unholy mob", I  mean I could lose 1% in a bad case, I am too skeered to bet against Mr. Market, he does not need to listen to me, to Kass, to GMX, to reason, to reality, to anything.  His job is to foil the best laid plans...  and that alone is his job.  

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#56) On August 04, 2009 at 12:07 AM, mrindependent (52.05) wrote:

I cannot imagine the near term event that will cause the market to turnaround.  It seems clear that earnings season is a success (against easy to beat expectations).   The financial system is definitely ok.  The decline in GDP has probably ended for awhile.  Short term interest rates are completely unattractive as an alternative to stocks.  Commodities prices are in check.  I have a negative longterm outlook on the US economy, but I don't expect stock to tank anytime soon.

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#57) On August 04, 2009 at 12:19 AM, tonylogan1 (27.98) wrote:

GMX - I'd tell you what I think of SPY Dec puts, but I have heard GMX is a bet welsher (welcher?)

Hint: I don't like this bet.

I'm thinking of starting a new ID that ends in 73 to better stalk you. GRRRRR.

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#58) On August 04, 2009 at 12:38 AM, TMFRosetint (98.72) wrote:

Bracing for epic.

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#59) On August 04, 2009 at 12:48 AM, getrichdietrying (82.45) wrote:

People invest in emotion...

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#60) On August 04, 2009 at 1:04 AM, goldminingXpert (29.56) wrote:

Fine fine fine Tony. I won't wait until #1 and unleash the good post I had for you. It would have been so much better if you were patient, but I'll slap something together for you tomorrow.

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#61) On August 04, 2009 at 1:06 AM, goldminingXpert (29.56) wrote:

Well, this thread has sufficiently established the majority of the CAPS community, like the rest of the world, is unreasonably bullish. I hoped there'd be more community intelligence here, but alas, no.

I'm no permabear. I've stated this many times. I was long in late February before the market even bottomed at 666. I just think you're insane to be long now.

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#62) On August 04, 2009 at 1:18 AM, checklist34 (99.73) wrote:

gmx, you've repeatedly called for the market to go much lower than the march lows.  using the generic ill-concieved (please learn about m2m accounting and consider my 6 point list) p/e chart for the S&P.  Thats fairly well symptomatic of a permabear.

I offered my favorite car as a bet for S&P under 800, and name your ticket for 500, I mean name anything.  Current offer is the 500 ...I offered the car for 800 enough times and I wont' part with it now as its just too much fun to have.  

money where mouth is, i'm willing to publicly lose badly.  but i won't

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#63) On August 04, 2009 at 1:19 AM, checklist34 (99.73) wrote:

and i'm serious about the fund and the drunken IQ test.  :)

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#64) On August 04, 2009 at 1:27 AM, goldminingXpert (29.56) wrote:

Dude, what part of I'm not an permabear can you not read. Here, let me post the entirety of one of my blog posts from last fall (as it turns out, right at a market bottom.)

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=110465&t=01008631960540474609

" Red Thumb All Ultrashorts now

November 17, 2008 – Comments (17) | ADD RELATED TICKERS

You get huge points when the market turns north which is about to. Take QID. if QQQQ rises 10%, SPY also rises roughly 10%, while QID falls 20% scoring 30 CAPS points. There's a lot of ultrashorts out there--get thumbing."

If those are the words of a permabear, then yes, I am a permabear. However, they're not, and I'm not. The fact that you are blinded to the fact that your P/E ratio is based on M2M (market2myth) accounting will be unveiled painfully soon enough. Operating S&P earnings ratio is over 500... operating earnings is real earnings. During normal (non-fraudlent) times, operating earnings and the composite earnings you use are nearly identical, however during Enron-style accounting days (read today, when a bankrupt bank that the FDIC should seize like WFC maintains a $100B market cap), these diverge as people hide the losses under accounting myths.

 

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#65) On August 04, 2009 at 1:33 AM, BigFatBEAR (29.17) wrote:

I can't help but relate to what checklist34 is saying. That guy is old, and wise, like me. :P

I also can't help but think about how I've been playing poker the last 6 months, and how people go all-in with their (fake) money. To do it profitably, you have to A) know what you're doing and know the odds, and B) not do it that frequently...  if you wish to stay in the game.

I have a lot of confidence in you and think that you fit the bill on both measures.

But still, this looks like a high-risk, high-reward bet on a short-term (5 months) market movement. I'm hoping you get a better risk to reward setup for it than I do. On the off chance that you do lose a lot of your money to an insane market, what would be the longer-term consequences of that?

I would strongly dislike for you to be another dead bear, another guy who doesn't post any more on KD's forums, another ex-market player. When we're at the poker table in 2010, I sincerely hope you still have chips!

Of note - the index put to call ratio was only 1.07 today, down quite a bit from last week... 

I'll call you tomorrow, no doubt.

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#66) On August 04, 2009 at 1:42 AM, goldminingXpert (29.56) wrote:

I invested everything I don't need to pay for my last year of college. So, if I lose it, I am broke when I graduate. Not the end of the world--as I'll start earning a nice income at that point. However, this is the equivalent of going all-in long right near 666... the sort of chance that just doesn't come along too often. I missed the bottom (I bought way too early), but hopefully I can catch the top (at least in the neighborhood of the top.) Between the VIX rising and the banks blowing up and the S&P running into the superhard resistance zone here at 1015ish, one's got to think if this puppy is going to turn, it happens here in the next week or two.

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#67) On August 04, 2009 at 1:42 AM, guiron (22.39) wrote:

Well, this thread has sufficiently established the majority of the CAPS community, like the rest of the world, is unreasonably bullish

I'm not really bullish, but going all-in short is a tightrope without a net. In my real portfolio I'm 70% long with a good amount of cash on the sidelines, but I'll take some profits this week and see how things go. I think we'll see a correction. Not sure anymore where it will meet resistance. I thought this earnings season would be worse than it turned out to be, but I haven't covered my shorts yet.

As I'm sure you know, the best investors are still wrong occasionally, and being wrong when you have all your money short in one basket is definitely putting a lot of faith in yourself in predicting a market move, more than I would think would be a good idea, but it's your money.

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#68) On August 04, 2009 at 1:46 AM, guiron (22.39) wrote:

I invested everything I don't need to pay for my last year of college. So, if I lose it, I am broke when I graduate. Not the end of the world--as I'll start earning a nice income at that point.

I guess that's OK, as long as you know this will be true (the income part). Anyway, your money. Although, you might get a better return by putting money down on a foreclosure in a good neighborhood.

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#69) On August 04, 2009 at 1:52 AM, checklist34 (99.73) wrote:

no, GMX, the equivalent of going long right near 666, in financials that were particularily beaten down (someone here on CAPs blogged about that, on march 2nd, and got 1 ONE rec, lol.  he's almost triple his money now) was shorting the NASDAQ IN 2000. 

Dude, we're NOT in a bubble, we're below long term average valuations via most metrics, we aren't up in 12 years.  This is not a glorious historic time to go short, statistically speaking.  I play the odds, its how I am, I always assume I'm not smarter than Mr. Market.   I hope to continue to always think that.

PERSPECTIVE, MAN, PERSPECTIVE.  down 33% is NOT a once-in-a-lifetime shorting opportunity, down 60% WAS a once in a lifetime buying chance.  Today, TODAY, up almost 3x my money, the price/book of my portfolio is like 0.8.  Thats not exactly bubble territory.  

S&P is at bigtime resistance IMO, I agree with that.  MASSIVE resistance at pre-lehman levels IMO.  too many people too pained by the dip to the march lows and ready to pull out even.  

Next time don't ride the dip to 930 or 880 (if we ever get back there, i don't consider it a given) and stay bearish.  FLOP, MAN, FLOP.  

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#70) On August 04, 2009 at 1:53 AM, guiron (22.39) wrote:

I sound like my father ...

I must be getting old ...

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#71) On August 04, 2009 at 1:55 AM, checklist34 (99.73) wrote:

GMX, WRT to your "dude" reply to me.  plz read my recent post on m2m accounting.  please, please, please.  and the rest of the thread.

you've been bearish and calling for a lower bottom as long as i've read your posts.  and, frankly, I think that is a sign of not really sitting down to think things through.  quit parading that silly p/e for the S&P chart around and crunch some #'s.  I blogged about that 2 or 3 times also.  ABout fiar value and valuations...  1100 = fair value.  i am often wrong.  but ... AND THIS IS CRITICAL...  the market dropping doesn't mean i'm wrong.  and the market rising doens't mean i'm right.  

 

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#72) On August 04, 2009 at 1:56 AM, checklist34 (99.73) wrote:

quiron, frankly i think that was some bleedingly good advice....

 

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#73) On August 04, 2009 at 2:04 AM, goldminingXpert (29.56) wrote:

ABout fiar value and valuations...  1100 = fair value.  i am often wrong.  but ... AND THIS IS CRITICAL...  the market dropping doesn't mean i'm wrong.  and the market rising doens't mean i'm right.

You're drunk aren't you? Maybe you'll make more sense when you wake up sober.

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#74) On August 04, 2009 at 2:11 AM, checklist34 (99.73) wrote:

no drinks this evening, GMX.  you should have one, though, or 5.  it can take the edge off a god complex, really.

bulls or bears often use "the market says i'm right" as justification, I simply offer that this is largely folly and time will inevitably reverse towards fair value, eventually.  1995 to 2001 was a long wait for many a bear i imagine...  

just take one of these bets.  what have you got to lose?  I can easily fund the beginning of the fund...  but, then, if I had 51% control I suppose it'd just be my fund, wouldn't it?

nite & thanks for the bantor

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#75) On August 04, 2009 at 2:19 AM, checklist34 (99.73) wrote:

In fact, I recommend 5 drinks at the local hooters.  Remember, Hooters girls, in essence, exist to be amicable hit-on objects for whomever walks in.  The key to getting them interested in a party at your place is to not hit on them.  Try something like a conversation about soup.

Life is very much like the 10th toy in this fable I invented long ago:  imagine a world in which there were only 10 toys.  Thats it, no Toys R Us full of endless selection, just 10 total options.  9 were epic, like a playstation 3 or a Wii or one of those Hot Wheels sets with a loop de loop.  The 10th toy was a yo yo.  

But now imagine that the yo yo factory burned down....  no more yo yos... just 100 left on earth not sold.

What would every rich kid in the country want more than anything else?  

Now.  Do you think that anybody, and I mean anybody, ever went into the local Hooters and when the waitress asked how they were doing said 

"terrible!  I ordered groceries today online for delivery, because, I mean, I'm lazy and thats cool, it only costs like 5 bucks, and even I have 5 bucks.  But when the groceries came all the soup wasn't Campbells it was generic!  And that sucks!  I mean, the veggies in that generic stuff aren't even real they are like plastic shaped to look like veggies!"

Never happened, I don't think, except via me.  Delivered properly it can get the whole staff over to your apartment for a party.  

10th toy.  Something nobody has ever seen before.  Something memorable.  Dude with a new Lambo shows up, I'm not ever sure that could compete with a proper 10th toy delivery.  

Problem is, guys calling a reversal in the fortunes of companies afflicted by M2M accounting on March 2nd was absolutely 10th toy.  Guys calling for a pullback here is 2ND TOY, EVERYBODY THINKS WE'RE GETTING ONE, INCLUDING ME.  AND BASED ON HOW SUCKISH MY SHORT TERM HISTORY OF MARKET CALLING IS...   I wouldn't bet with me, frankly.  

5 drinks, hooters.  10th toy, soup.  Trust me.  

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#76) On August 04, 2009 at 2:51 AM, BigFatBEAR (29.17) wrote:

"5 drinks, hooters.  10th toy, soup.  Trust me.  "

ROFL

Best comment ever? I'd 'rec it.

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#77) On August 04, 2009 at 9:59 AM, ayekappy (< 20) wrote:

Apparently there is talk about FAS imposing stricter M2M rules later this year.  They are going to talk about it more later this month and will let the public hear the options etc.

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#78) On August 04, 2009 at 10:32 AM, Bays (30.22) wrote:

There's a difference between saying the market is about to plunge and betting on the market...  hence the first sentence of this post "Enough talk, either the market goes down, or I do"

Thanks for clarifying....

I agree... as there is very limited downside to shorting the market at this time.  Goodluck.

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#79) On August 04, 2009 at 10:37 AM, d1david (29.26) wrote:

Just to chime in, I agree with you on your bearish call...right now feels like 07 after New Century bit the dust and there were so many other cards left to fall down, yet everyone was buying buying buying.... its another repeat

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#80) On August 04, 2009 at 11:10 AM, kdakota630 (29.78) wrote:

GMX, mostly I'm with you and have been for a while.

However... I'm trying to be patient here with real money.  This is based on nothing but gut feeling (which has served me mostly terribly) and a couple of people that I follow... I WILL be going short again, but am trying my best not to be tempted to jump into the market until fall.  So far my patience has paid off.

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#81) On August 04, 2009 at 11:21 AM, Tastylunch (29.32) wrote:

goldminingXpert (99.98) wrote: I invested everything I don't need to pay for my last year of college.  That doesn't sound like you are properly managing your risk. Going "all in" is something Pro traders never do. That's a good way to end up in the poor house real quick.
 well good luck to you anyway, I think you are right about the "what" but I doubt you are right about the "when", I personally don''t see any catalysts to spark a major move down in the next couple months. I guess we'll see.

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#82) On August 04, 2009 at 2:06 PM, jason2713 (< 20) wrote:

What I see going on in the market is a bunch of "better than expect" earnings reports after tons of companies cut massive amounts of jobs, or competitors went out of business.  Shocker their earnings look pretty decent, but even when all the competitors go under, their earnings are still not that great.

I also see the gov't in bed with the big banks, and a lot of bad debt being hidden from the books...ultimately cooking their numbers up to be much better looking than they should. 

I also see a bunch of peopel who missed the March low (I hit it, but call it lucky..I'm up almost 44% over all) and the DJIA going absolutely love drunk with bullish investors and speculators.  This market is nuts to me, I just see nothing to sustain the current level.

I've since sold everything and cashing in my 44% gain, only to miss gold's run up (I sold at $955/ounce..I bought at $820/ounce)...so I missed the top by a bit.  I am 70% cash, 30% shorting the DJIA and shorting interest rates (I bought when 10 yr treasury at 3.2% with TBT, I bought DXD when the market went up 172points last week).

I'm taking at 3% hits so far on about 30% of my portfolio, not bad, not great but I can live with it.  The upside of my shorting far outweighs the downside, and I'll have cash to back it up.  I'm a newb to investing, but have poured tons of time and research in this.  Just giving my 2 cents :)  I agree completely with GMX though.

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#83) On August 04, 2009 at 3:05 PM, skeptic86 (93.59) wrote:

i agree that the market should head down from here. but i dont agree with going "all in". even if there is a 90% chance of if going down, there is still that 10% chance it could do the opposite. best of luck to you though.

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#84) On August 04, 2009 at 5:59 PM, goldminingXpert (29.56) wrote:

Tasty: I'm not recommending this strategy for others. I'm just going to be angry with myself if I don't triple or quadruple my money over the next year with the bear market depths so clearly looming.

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#85) On August 04, 2009 at 7:18 PM, isusan (< 20) wrote:

A belated welcome back GMX! Stop by the CiL when you can, some interesting discussions about the "top" there...

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#86) On August 04, 2009 at 9:32 PM, Bays (30.22) wrote:

gmx.... when can we expect your pitch for WNR?

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#87) On December 18, 2009 at 10:53 AM, pastordisaster (< 20) wrote:

How did this work out for you? Let this be a lesson for others.

 

RIP 

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#88) On December 19, 2009 at 10:45 AM, Bays (30.22) wrote:

Exactly.  I just hope the 56 people who recd this didnt follow. 

NO ONE can time the market.  Especially a kid in college.

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#89) On December 24, 2009 at 1:39 PM, shelchen12 (< 20) wrote:

Please come back and give us an update.

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