Where are the Trolls?
Funny thing today: None of the Trolls showed up.
Its astonishing (but not surprising): Let the Dow rise 30 points on sub par volume, and they are out in full voice. Today, not a peep out of them.
You know I love debate, but have little patience for someone who posts 6 of these in a day:
Looks like that correction call is a loser!
When is the market gonna crash?
You must be embarrassed by that call!
Ironically, the trolls and nasty emails -- you should see the crap I get from a sub-section of Real Money subscribers -- are a great source of data for me.
Over this past weekend, I had a conversation with a friend who runs a nice sized hedge fund -- he was short and getting very nervous. "I'm about to lose my whole year's gains on this trade." He's a hotshot trader living the fast NY single life, dating underwear models (and losing his hair).
I told him my email hostility meter was spinning out of control, and that's a bad sign for the markets! Herb Greenberg always says that a sign he knows he's onto something when the reaction is fierce and obnoxious. Monday night, I laid out the full case to him for why the topping process was in full force, and why he absolutely shouldn't throw in the towel and "get forced in." He doubled up on Tuesday, buying NDX puts and betting short on SPX (I assume futures).
I rarely give unsolicited advice like that to traders -- it screws with their heads -- but he was reaching out and I wanted to make sure he didn't panic himself into something foolish.
Here's the email I got after the bell:
"B - Thanks for making me focus on my discipline and my methodology. I bet too large and it was dumb
...snip
Tell your troll buddies thanks! I covered just enough shorts today to pay for my next Ferrari. You should sell THAT as a service -- you will make a mint!
So all you Trolls out there: Kevin -- the balding guy in the red F430 spyder with the Victoria Secret's model sitting next to him -- says muchos gracias!
~~~
Kev, I know the Trolls would want to say Your Welcome.
Wednesday, September 06, 2006 | 11:37 PM | Permalink
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This was supposed to launch last nite -- but it glitched!
Consider this a belated launch
Posted by: Barry Ritholtz | Sep 7, 2006 6:53:59 AM
:-)
http://www.immobilienblasen.blogspot.com/
Posted by: jmf | Sep 7, 2006 7:07:43 AM
On Tuesday, I added incrementally to my DIA (Oct 115)puts. I thin that I was the only person who purchased puts that day. I figured I'd average in to cover the red that I have experienced. Purchasing them felt like going to a diner where no one else was eating. So I picked up a to go order! Your blog and a few others (Bill Cara (billcara.com), Tim KNight (tradertim.com) and Robert Colby (robertcolby.com)) have been wonderful supports to my not thinking that I've not lost my mind.
Here's a word that I found in the Economist Editorial (08/05 - 11) that I wanted to share--it has market implications at times, and I'm sure that many of the bears (I'm agnostic!) have felt this way over the last 6 weeks or so: "In chess they call it a Zugzwang, the position that arises when your next move, any next move, is liable to lead to disaster."
Posted by: Leisa | Sep 7, 2006 7:38:39 AM
LOL, How do I get a job at this hedge fund? I work hard and love Ferrari's!
Posted by: N N | Sep 7, 2006 8:06:22 AM
Me too!
Posted by: Frank Rizzo | Sep 7, 2006 8:35:29 AM
Hi All-
Your comments/wisdom/suggestions welcome on the following.
My wife and I are in some ways your typical investors, in other ways not. The “not” part is that we have a financial advisor who took us on as a favor to a mutual friend. We have a nice nest egg, but nowhere near the minimum this guy usually takes on. He’s an old pro, a decent sort and has given good advice. His fees are reasonable (flat 1%) and he actively manages the portfolio with discipline. We are well-diversified in a pile of mutual and bond funds (currently 75/25) in equities. Without an overly aggressive posture, we have had returns slightly above those of the market for the two years we’ve been with this advisor.
My question is this:
I have nowhere near the professional experience or education of many of the posters on this site. I think what I do have is a good layman’s understanding of economics and the basics of the market, and more importantly, a certain ability to (a) know what I don’t know and (b) pick out the smart guys in the room. Like say Barry Ritholtz for example. In other words, my BS detector has served me well in this world. Also, as Clint Eastwood said, “A Man’s Got to know his limitations.”
So… Although I am not accumulating firearms and salt pork, I am firmly on the side of Barry and others who point out that this market ain’t got no legs.
But what to do?
On the one hand, we are well-diversified and have even tweaked the allocations a bit towards a more defensive posture.
On the other hand, the idea of just sitting here waiting for the correction is rather annoying.
On the other, uh, foot, as a non-trader active or otherwise, anything I could do (like calling the broker and getting more into cash) seems dangerously close to market timing.
All comments other than those making reference to my mother appreciated.
Thanks.
Amur
Posted by: Amur | Sep 7, 2006 8:35:41 AM
The NYSE topped by my measures on August 23rd. The Nasdaq topped on August 8th. I've only seen one move like this on the Naz in the last ten years and it was 1/3 to 1/11 of 2006. That move had the same characteristics.
Now, I'm not outright calling the market manipulated but there were basically two or three days where Naz prices were jammed through the roof. 8/15-17. Was it a contrived event to shove the shorts? I don't know how or why but I am highly confident those days and days since were extremely manipulated. Prime the pump to draw in buyers? Similarly, I believe the 1/3-11 days were pump priming days for a blow off rally where money was distributed. I can actually this but I can't say exactly how I do. But if you saw what I was looking at you'd be extremely suspicious of what the motives were in those moves.
That is not to say we cannot get a "real rally" start to develop but this is NOT a real rally. I hate to sound all conspiratorial because I'm generally not that type but some shenanigans are definitely taking place.
For that reason alone, I believe your thesis will be borne out. I believe the cycle lows will be on October of 2007 though. That is an extremely rough estimate and I surely wouldn't trade on that but it is based on time series work and cycle theory work. So, maybe you won't be on the cover of BusinessWeek this year but maybe next.
Posted by: BDG123 | Sep 7, 2006 8:42:04 AM
August NOT September
Posted by: BDG123 | Sep 7, 2006 8:48:20 AM
NAZ loses 36 points in 1 day for a Ferrari ... nice trade .....how about the 150 points up the previous 4 weeks , what did he lose then
Posted by: BB2 | Sep 7, 2006 8:58:03 AM
as he commented though ,
he bet " too big and it was wrong " , ,,,,,,and then doubled up......... trader or gambler ? .....glad he made the $$$$$ but he didn't follow his discipline the second time either
Posted by: BB2 | Sep 7, 2006 9:01:40 AM
Yesterday and todays declines can be attributed to only one thing...the lunar eclipse which occurs today Sept 7 across the world. (but be cognizant of the very rare, every 1500 years, saturn jupiter mars T square working in the background which will bring this market to its knees this year. (crash !)
Posted by: FarmerMoonBeams | Sep 7, 2006 9:06:27 AM
and for the record , I'm net short 15% on a beta-adjusted basis ........ not taking shots at you BR , but think your buddy 's way too aggressive for any shop
Posted by: BB@ | Sep 7, 2006 9:10:42 AM
Great post. Thanks for the insight too on the conversation between the market players.
Posted by: Josh | Sep 7, 2006 9:16:32 AM
Amur
Sounds to me like you have an itch that must be scratched. I suggest you take a small % from your nest egg and open a trading account. If you believe we are in for a correction, as I do, you can do one of the one following depending upon how risk adverse you are: purchase an ETF that is inverse to the NAS, or short the QQQQs; or, if you really wanna let your hair down, you can purchase some index puts.
I can tell you that I moved nearly all of my 401k account to cash/bonds after last Friday's rally because September is historically the worst month of the year for the market. October ain't too great either. Not sure what will happen over the next two months, but I will be long again before November 1st. If you have enough patience to wait for market extremes, the biggest problem I have found with market timing in the 401k is the limitation to EOD trades.
Bon Chance
Posted by: Tim | Sep 7, 2006 9:17:31 AM
Ah, September.
The humidity is fading and the air is turning crisper and cooler. The days are growing shorter. The Homies are issuing their Q3 warnings and their stocks are falling like autumn leaves.
It's my favorite time of year.
Posted by: Craig H | Sep 7, 2006 9:18:32 AM
Amur. I know many people in your situation, and it probably describes all of us bears to some extent. I would tell your financial adviser that you are bearish and let him know you want to reduce your exposure to equities pronto.
I suppose there's a line between market timing and being a prudent long term investor, but it's not always clear where that line is...
Posted by: Detroit Dan | Sep 7, 2006 9:20:02 AM
"On Tuesday, I added incrementally to my DIA (Oct 115)puts. I thin that I was the only person who purchased puts that day."
Leisa,
I bought a boatload of puts on Tuesday, to add to a fleet I already had. I am probably evenly long and short right now. Puts are in homebuilders and mortgage lenders. Just out of curiosity, why do you buy puts on DIA and not small caps? Don't small caps always fall more in a situation like this? I also put some money in Profunds Ultrashort small cap fund, it goes up 2% for each 1% fall in the Russell 2000. Of course, if you're timing is off, you get double the whack too. There're no short-term trading restrictions on that fund.
Posted by: Bob_in_MA | Sep 7, 2006 9:27:15 AM
Sincere thanks to Josh and Craig H. Worthwhile ideas to follow up on. I think I subconsciously realize that I'm being a bit too passive here. Time to get more defensive.
Thanks guys.
Also, it amazes just how much boosterism there is in the financial sector. Yes, I know that there is an incentive for these guys to be perma-bulls, but even our financial advisor--- by all accounts smart, sharp and honorable (and not on commision) goes on about how earnings have never been better yadda yadda yadda. And the dining room of the Titanic was lovely.
Just don't see what sustains this beast into the year to come.
Again thanks much.
Amur
Posted by: Amur | Sep 7, 2006 9:49:13 AM
"I suppose there's a line between market timing and being a prudent long term investor, but it's not always clear where that line is..."
To be or not to be, that is the question, and a damn goo one at that. I am long term and sometimes get caught up in the short term noise.
I love this board because it keeps me grounded in reality and prevents hasty actions by confirming my convictions.
Posted by: me | Sep 7, 2006 10:09:24 AM
I should have bought some index puts Tuesday. I didn't watch things throughout the day, but based on the deltas and where things were Friday, the highs should have pushed the prices down to my limits. The order almost cleared Friday, and the indices went quite a bit higher on Tuesday. You can often spot a manipulated rally by the put prices failing to drop enough. My other puts from the last two weeks were already worth more than I paid for them yesterday.
Posted by: jkw | Sep 7, 2006 10:25:31 AM
heh...nice closing line to that post, barry.
Posted by: j d ess | Sep 7, 2006 10:34:08 AM
Bob...I buy dia/spy puts because I feel like there is more room for them to drop given the weakness already experience in the other indices. I'm still waiting for the shoe to drop in dia/spy, although I acknowledge that they will likely hold up better. I also have som BAC/WFC puts....WFC has 20% mortgage portfolio. BAC, with MBNA, credit card exposure. They both continue to rise and I'm in the red.
Posted by: Leisa | Sep 7, 2006 10:53:27 AM
Sweet story, Barry. I love stuff like that.
I got chased out of long positions in BUD, SUNW and the QQQQ yesterday. Short biotech now. There's a good sized 2B top developing in the $OEX that has certainly gotten my attention of late.
Posted by: David | Sep 7, 2006 11:52:19 AM
Leisa,
What is your favorit SPY or DIA put at this time? I was looking at the SPYXX Dec. 130's. Should have bought them Fri at 2.20 now they are 3.60 or so.
I am looking to buy 100 contracts or so of the SPY puts. Dec?, Nov? Oct? expy? Thoughts anyone? Trying to hedge a 70% long equity portfolio.
Posted by: JDamon | Sep 7, 2006 11:55:42 AM
I'm so short the market I could walk through doorways without opening the door. Now's my time to make some money with the Profunds "short" plays like URPIX. Thanks, trolls!!
I'm booking a Greek Islands cruise and renting a house afterwards on the Amalfi coast next year to celebrate.
Posted by: OldVet | Sep 7, 2006 12:23:48 PM
