The major market index (DOW, S&P500, Nasdaq Composite) had a short rally since a week ago. The three major index are now at their first resistance level.
While there are many Bulls in the market saying that the market have somewhat bottom, I personally do not believe it is. The market diarrhoea is not over yet. If this is a normal pull-back, I would agree with the notion that we have reached a bottom. However, this is not a normal pull-back. This is a systemic problem that affect not only the US financial market but also the global financial market. In the meantime, let's watch what happens next.
In the coming weeks or months, I foresee more bad news. These news should include more credit card defaults, more private education loan defaults and worse - the credit swaps defaults (a US$45 trillion industry - as per Moneynews.com).
The latter are basically insurance policies that buyers of mortgage securities (CDOs) bought against a mortgage default. Banks and hedge funds 'wrote' this insurance, a highly leveraged speculation. Now that the mortgages are defaulting, the sellers are saying they don't have the capital to make good on the insurance - as per Moneynews.com.
Currently, a number of financial and housing stocks seem to offer good setups for shorting.
- PersianCat (Millionaire-in-progress)
Wednesday, March 26, 2008
Monday, March 17, 2008
QQQQ - Intraday Play
After buying BSC Put, the market turned to the worse. I also played the following:
- Buy to open QQQQ Mar 42 Put @$0.52 (when the stock is around $42.67)
- Sell to close QQQQ Mar 42 Put @0.82 (when the stock is around $42.16). Profit = 57.7%
PersainCat (Millionaire-in-progress)
BSC - Intraday Play
Heard from CNBC on last Fri (pre-market) that BSC was pursuing financing from the Feds through JPM. Apparently they had liquidity problems. This kind of news typically offered a significant jump in the stock prices.
A quick assessment at that point of time, offered 2 possibilities:
A quick assessment at that point of time, offered 2 possibilities:
- The market takes the news positively since the Feds and JPM were extending a life-line and end BSC liquity problems. The stock gapped up. (Probability = unlikely)
- The market takes the news negatively (Probability = likely). The stock gap down at opening hour. From here it offered some other possibilities. One, after gapping down, it stabilises it will not go beyond the first 5-min candle. Two, after gapping down, the market is still digesting the impact of the news. It later either goes down further or go up and close the gap.
So I waited and watched the market made its move. In a 5-min chart, the first candlestick formed was long, then an inside bar was formed. CNBC (I considers them as cheerleaders) could not provide anything positive about the event. I was ready to play my move then - Playing the Inside Bar strategy (even before 10am EST).
- Bought BSC Mar 45 Put @$4.00 (when the stock was around $51.00). The Bid/Ask spread was huge then.
- Sold BSC Mar 45 Put @$16.00 (when the stock is around $31.00) within 30 mins. Profit = A Cool 400%.
PersianCat (Millionare-in-progress)
Wednesday, March 12, 2008
Bullish Engulfing Pattern - Market Reversal?
Worm... Worm ... Worm...
It has been a week since my three computers were infected by worms. 2 of the computers are back in action. One is still down. Had to reformat the harddisk, etc ......
At my handholding sessions yesterday, I shared that the market was trying very hard to test the Jan 08 low and trying to find an excuse to bounce back. That Jan 08 level had not been breached by the DOW and S&P500 index. For Nasdaq Composite index, the Jan 08 low was broken. Prior to yesterday's move, the indicators were showing an oversold market. Since Jan 08 low is a strong support level I do expect some bounce before the level can be broken by the DOW and S&P500 index.
With yesterday's strong bullish close, a bullish engufing pattern is formed in both the DOW and S&P500. Should the market ends higher today, it would confirm a reversal is in play. Whether will be a short or long rally, it is yet to be seen. However, the market is still in a downtrend.
I close my MET last Friday @$1.20 (Loss of 24.2%).
Currently, I have not been playing as much as I would like to since I have been distracted by the handholding sessions that I am now conducting. However, I must admit that I am enjoying conducting those sessions.
It has been a week since my three computers were infected by worms. 2 of the computers are back in action. One is still down. Had to reformat the harddisk, etc ......
At my handholding sessions yesterday, I shared that the market was trying very hard to test the Jan 08 low and trying to find an excuse to bounce back. That Jan 08 level had not been breached by the DOW and S&P500 index. For Nasdaq Composite index, the Jan 08 low was broken. Prior to yesterday's move, the indicators were showing an oversold market. Since Jan 08 low is a strong support level I do expect some bounce before the level can be broken by the DOW and S&P500 index.
With yesterday's strong bullish close, a bullish engufing pattern is formed in both the DOW and S&P500. Should the market ends higher today, it would confirm a reversal is in play. Whether will be a short or long rally, it is yet to be seen. However, the market is still in a downtrend.
I close my MET last Friday @$1.20 (Loss of 24.2%).
Currently, I have not been playing as much as I would like to since I have been distracted by the handholding sessions that I am now conducting. However, I must admit that I am enjoying conducting those sessions.
Wednesday, March 05, 2008
Position update
Closed my QQQQ position at breakeven yesterday. The stock was doing well and my options was doing well too (made more than 30% unrealised gain). However, at the last hour, the stock rebounced with vengeance. I do not like the way it moved so fast and furious in such a short time. Furthermore, the stock is near its 52-week low. Will I believe the stock will break the 52-week low, I am not playing it at the moment. Let it retrace back before shorting again.
PersianCat (Millionaire-in-progress)
PersianCat (Millionaire-in-progress)
Monday, March 03, 2008
Market Back On Track
The market was down for the last 2 sessions. With a confirmation candle in the major index, the market is back on track to continue with its down trend.
Bought the following on last Friday:
Bought the following on last Friday:
- QQQQ Mar 42 Put @$0.64 (when the underlying stock is at $43.19)
- PersianCat (Millionaire-in-progress)
Wednesday, February 27, 2008
Play ONE contract only !!!
I have seen many novice traders lose all their capital, irregardless whether their capital is US$5,000, US$10,000, US$50,000 and even US$100,000. Most lose them within a year of trading. One of the main reason why they lose capital so fast is because they over-trade or others call it lack of money management. Basically, they trade too many contracts in any one trade.
To all novice traders, my advice to them:
PLAY ONE CONTRACT PER TRADE at any one time.
The rationale is very simple. If you are a novice trader, the tendency for you to play a good trade and make money is less than you playing a bad trade and/or lose money. If you play just one contract and lose $50 per contract, then you lose only US$50. If they you play 10 contracts, the loss is multiplied by 10, i.e. US$500. Some would argue, "Yes, but if I make, I would make 10 times i.e. US$500". Yes, that is true, but like I said, tendency is that you make more bad trades and good trades in the novice stage.
So in the novice stage, my recommendation is always, play one contract at a time. When you have gain confidence (which needs to be built up) and play more good trades than bad, then increase the contract size incrementally. e.g. 1 additional contract at a time.
You play small, win small and lose small.
Following this simple rule requires discipline and patience. Both of these assets are important for traders.
- PersianCat (Millionaire-in-progress)
To all novice traders, my advice to them:
PLAY ONE CONTRACT PER TRADE at any one time.
The rationale is very simple. If you are a novice trader, the tendency for you to play a good trade and make money is less than you playing a bad trade and/or lose money. If you play just one contract and lose $50 per contract, then you lose only US$50. If they you play 10 contracts, the loss is multiplied by 10, i.e. US$500. Some would argue, "Yes, but if I make, I would make 10 times i.e. US$500". Yes, that is true, but like I said, tendency is that you make more bad trades and good trades in the novice stage.
So in the novice stage, my recommendation is always, play one contract at a time. When you have gain confidence (which needs to be built up) and play more good trades than bad, then increase the contract size incrementally. e.g. 1 additional contract at a time.
You play small, win small and lose small.
Following this simple rule requires discipline and patience. Both of these assets are important for traders.
- PersianCat (Millionaire-in-progress)
News Bytes - U.S. in Recession
Rogers: U.S. in Recession, Will Get Worse (MoneyNews.com – 26 Feb 08)
The United States economy is already in recession and is set for a further slowdown with the dollar expected to remain under pressure, investment guru Jim Rogers said on Monday.
Rogers, who co-founded the Quantum Fund with billionaire George Soros in the 1970s, said the housing and automobile sectors were in a situation "worse than recession" with soaring energy and food prices hitting consumer spending.
"They (the U.S. central bank) are printing money and are trying to prevent the recession — they are putting on Band Aids," he said ahead of an investor conference in Dublin.
Rogers said the central bank was making the "same mistakes" Japan did in the early 1990s before its credit-inflated bubble economy burst.
"The Japanese did it and the Japanese still have not recovered 18 years later," he said.
"As long as the (U.S.) central bank and the federal government keep making the mistakes, you will have a longer period of slowdown and it will be perhaps one of the worst recessions we have had in a long time in America," he said. Rogers said the dollar was set to "go down a great deal" adding he hoped to get out of all his dollar holdings at some stage this year.
Rogers reiterated he preferred investments in the agriculture sector in the light of tightening supplies worldwide.
"Inventories for food are the lowest in 40 or 50 years. I don't see where the supplies are coming from," he said.
"Agriculture is still the best place to be, maybe (also) silver, maybe palladium," he said.
The United States economy is already in recession and is set for a further slowdown with the dollar expected to remain under pressure, investment guru Jim Rogers said on Monday.
Rogers, who co-founded the Quantum Fund with billionaire George Soros in the 1970s, said the housing and automobile sectors were in a situation "worse than recession" with soaring energy and food prices hitting consumer spending.
"They (the U.S. central bank) are printing money and are trying to prevent the recession — they are putting on Band Aids," he said ahead of an investor conference in Dublin.
Rogers said the central bank was making the "same mistakes" Japan did in the early 1990s before its credit-inflated bubble economy burst.
"The Japanese did it and the Japanese still have not recovered 18 years later," he said.
"As long as the (U.S.) central bank and the federal government keep making the mistakes, you will have a longer period of slowdown and it will be perhaps one of the worst recessions we have had in a long time in America," he said. Rogers said the dollar was set to "go down a great deal" adding he hoped to get out of all his dollar holdings at some stage this year.
Rogers reiterated he preferred investments in the agriculture sector in the light of tightening supplies worldwide.
"Inventories for food are the lowest in 40 or 50 years. I don't see where the supplies are coming from," he said.
"Agriculture is still the best place to be, maybe (also) silver, maybe palladium," he said.
Monday, February 25, 2008
News Bytes - Recession Could Be Long and Severe
Recession Could Be Long and Severe - Key Reagan Adviser (extracted from MoneyNews.com 23/2/08)
Martin Feldstein, chairman of President Reagan’s Council of Economic Advisers, says that evidence is mounting that a recession began in December or January.
And unlike many economists who say any recession will be mild and brief, the Harvard economist wrote that there is a good chance it will be long and severe.
That’s largely because Federal Reserve interest-rate cuts are having little effect, he argued this week in The Wall Street Journal. "If a recession does occur, it could last longer and be more painful than the past several downturns because of differences in its origin and character,” Feldstein wrote.
The recessions of 1990-91 and 2001 lasted only eight months, and even the deeper recession of 1981 was over in 16 months.
"But these past recessions were caused by deliberate Federal Reserve policy aimed at reversing a rise in inflation,” Feldstein wrote.
"A key cause of the present slowdown and potential recession was not a tightening of monetary policy, but the bursting of the house-price bubble after six years of exceptionally rapid increases,” he wrote.
"The principle cause for concern today is the paralysis of the credit markets,” Feldstein wrote.
"Credit is always key to the expansion of the economy. The collapse of confidence in credit markets is now preventing that necessary extension of credit.”
It’s not just banks that are cutting back on extending credit, Feldstein notes. It’s also bond markets, hedge funds, insurance companies and mutual funds.
"Securitization, leveraged buyouts and credit insurance have also atrophied,” Feldstein wrote.
As a result Fed rate cuts just can’t jumpstart the economy like they have in the past. "Monetary policy may simply lack traction in the current credit environment,” according to Feldstein.
The situation has turned into a vicious cycle.
"The lack of confidence in asset prices also translates into a lack of confidence in the creditworthiness of other financial institutions, impeding the extension of credit to those institutions,” according to Feldstein.
"And because financial institutions do not even have confidence in the value of their own capital and in the potential availability of liquidity, they are reluctant to make new lending commitments,” he wrote.
Martin Feldstein, chairman of President Reagan’s Council of Economic Advisers, says that evidence is mounting that a recession began in December or January.
And unlike many economists who say any recession will be mild and brief, the Harvard economist wrote that there is a good chance it will be long and severe.
That’s largely because Federal Reserve interest-rate cuts are having little effect, he argued this week in The Wall Street Journal. "If a recession does occur, it could last longer and be more painful than the past several downturns because of differences in its origin and character,” Feldstein wrote.
The recessions of 1990-91 and 2001 lasted only eight months, and even the deeper recession of 1981 was over in 16 months.
"But these past recessions were caused by deliberate Federal Reserve policy aimed at reversing a rise in inflation,” Feldstein wrote.
"A key cause of the present slowdown and potential recession was not a tightening of monetary policy, but the bursting of the house-price bubble after six years of exceptionally rapid increases,” he wrote.
"The principle cause for concern today is the paralysis of the credit markets,” Feldstein wrote.
"Credit is always key to the expansion of the economy. The collapse of confidence in credit markets is now preventing that necessary extension of credit.”
It’s not just banks that are cutting back on extending credit, Feldstein notes. It’s also bond markets, hedge funds, insurance companies and mutual funds.
"Securitization, leveraged buyouts and credit insurance have also atrophied,” Feldstein wrote.
As a result Fed rate cuts just can’t jumpstart the economy like they have in the past. "Monetary policy may simply lack traction in the current credit environment,” according to Feldstein.
The situation has turned into a vicious cycle.
"The lack of confidence in asset prices also translates into a lack of confidence in the creditworthiness of other financial institutions, impeding the extension of credit to those institutions,” according to Feldstein.
"And because financial institutions do not even have confidence in the value of their own capital and in the potential availability of liquidity, they are reluctant to make new lending commitments,” he wrote.
Friday, February 22, 2008
12 Steps To Financial Disaster
The following are extracted from FT.com - stating Prof Roubini's 12 – steps to financial disaster. The full article could be found in: http://blogs.ft.com/wolfforum/2008/02/americas-economy-risks-mother-of-all-meltdowns/
Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.
Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had “reckless or toxic features”, argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks’ ability to offer credit.
Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The “credit crunch” would then spread from mortgages to a wide range of consumer credit.
Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.
Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.
Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.
Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a “fat tail” of companies has low profitability and heavy debt. Such defaults would spread losses in “credit default swaps”, which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.
Step nine would be a meltdown in the “shadow financial system”. Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.
Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.
Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.
Step 12 would be “a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices”.
Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.
Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had “reckless or toxic features”, argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks’ ability to offer credit.
Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The “credit crunch” would then spread from mortgages to a wide range of consumer credit.
Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.
Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.
Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.
Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a “fat tail” of companies has low profitability and heavy debt. Such defaults would spread losses in “credit default swaps”, which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.
Step nine would be a meltdown in the “shadow financial system”. Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.
Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.
Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.
Step 12 would be “a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices”.
Thursday, February 21, 2008
U.S. Market Holidays 2008
1 Jan - New Year's Day
21-Jan - Martin Luther King, Jr. Day
18-Feb - Presidents' Day
21-Mar - Good Friday
26-May - Memorial Day
4-Jul - Independence Day
1-Sep - Labor Day
27-Nov - Thanksgiving Day
25-Dec - Christmas Day
Early Closures (1:00pm):
28 Nov - Day After Thanksgiving
24 Dec - Christmas Eve
21-Jan - Martin Luther King, Jr. Day
18-Feb - Presidents' Day
21-Mar - Good Friday
26-May - Memorial Day
4-Jul - Independence Day
1-Sep - Labor Day
27-Nov - Thanksgiving Day
25-Dec - Christmas Day
Early Closures (1:00pm):
28 Nov - Day After Thanksgiving
24 Dec - Christmas Eve
Wednesday, February 20, 2008
How The Markets Really Work
Rajan, a good friend of mine alerted me of a 9-mins video that could be found in http://www.brasschecktv.com/page/187.html. It is a good, simplified and comical perspective of how the markets really work. The issues mentioned include the sub-prime issues. Watch and enjoy.
- PersianCat (Millionaire-in-progress)
- PersianCat (Millionaire-in-progress)
Friday, February 15, 2008
News Bytes - Greenspan, BRKA
Greenspan Speaks (Schaeffer Research - 15 Feb)
Former U.S. Federal Reserve Chairman Alan Greenspan was addressing energy execs at a CERA conference in Houston, saying the U.S. economy was on the verge of recession, warning that conditions would "continue to erode until housing prices stabilized," MarketWatch reported. In conclusion, Greenspan noted that the housing-market woes were still far from a bottom.
Warren Buffett Portfolio Changes (Schaeffer Research - 15 Feb)
Berkshire Hathaway (BRKA) disclosed it was accumulating shares of Kraft Foods (KFT) , gathering an 8.6% stake by the end of 2007. The billionaire also revealed a 1.5-million-share stake in drug maker GlaxoSmithKline (GSK) , amongst others, while reducing stakes in Iron Mountain (IRM) and Ameriprise Financial (AMP).
Bernanke Speaks (www.thestreet.com 14 Feb)
Federal Reserve Chairman Ben Bernanke on Thursday offered a bleak economic outlook for the near term and signaled the central bank's willingness to continue to cut its target rate.
Bernanke expects a period of sluggish growth, followed by a "somewhat stronger pace of growth starting later this year" as the tax rebates and interest rate cuts begin to impact the economy, the Fed chief told the Senate's Committee on Banking, Housing and Urban Affairs. He noted the Federal Open Market Committee's aggressive rate cuts to battle tight interbank lending market that have resulted in a 225 basis point drop to the federal funds rate since September to its present 3%.
Bernanke said further cuts in homebuilding and related activities are likely, as is more-expensive and less-available credit straining the economy. Additional subprime writedowns also appear likely in the short term. And while the chairman doesn't expect a "rip-roaring labor market," the Fed will be looking to see if it stabilized at current levels.
"It is important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further," said Bernanke.
Bond Insurers Getting the Heat (www.wsj.com 15 Feb)
The clock is running out for bond insurers to save their triple-A credit ratings.
In congressional testimony yesterday, New York Gov. Eliot Spitzer gave a three-to-five-day time frame for the bond insurers to raise much-needed capital or find other ways to resolve their problems.
Bond insurers -- relatively obscure companies that insure the principal and interest payments in the event of default -- have emerged as the linchpins of large swaths of the financial markets, ranging from municipal bonds to short-term securities backed by student loans. With investors worried that potential downgrades will lead to massive write-downs in their holdings of securities guaranteed by the insurers, regulators have been trying to rally banks to help rescue the insurers.
FGIC Corp., the third-biggest bond insurer by amount of insured debt outstanding after MBIA Inc. and Ambac Financial Group Inc., has already lost its top-notch triple-A rating from all three major ratings firms, indicating that the banks so far have failed to devise a way to raise enough capital to save its status. Moody's Investors Service cut FGIC's triple-A financial-strength rating by six notches to A3, with a warning that it could be cut to the lowest investment grade level of Baa if FGIC's strategic and capital plans had "an unfavorable outcome."
FGIC is closely held by mortgage-insurer PMI Group Inc., which owns a 42% stake, and private-equity firms Blackstone Group Inc. and Cypress Group, each with 23%.
The forays of FGIC, Ambac and MBIA into the risky business of insuring complex mortgage-related securities have put them on the hook for potentially billions of dollars of claims as the housing market stumbles.
The Moody's downgrade -- which could prompt money-fund managers to unload their FGIC-insured holdings -- is more severe than the downgrades of FGIC to double-A in January by Fitch Ratings and Standard & Poor's.
- PersianCat (Millionaire-in-progress)
Former U.S. Federal Reserve Chairman Alan Greenspan was addressing energy execs at a CERA conference in Houston, saying the U.S. economy was on the verge of recession, warning that conditions would "continue to erode until housing prices stabilized," MarketWatch reported. In conclusion, Greenspan noted that the housing-market woes were still far from a bottom.
Warren Buffett Portfolio Changes (Schaeffer Research - 15 Feb)
Berkshire Hathaway (BRKA) disclosed it was accumulating shares of Kraft Foods (KFT) , gathering an 8.6% stake by the end of 2007. The billionaire also revealed a 1.5-million-share stake in drug maker GlaxoSmithKline (GSK) , amongst others, while reducing stakes in Iron Mountain (IRM) and Ameriprise Financial (AMP).
Bernanke Speaks (www.thestreet.com 14 Feb)
Federal Reserve Chairman Ben Bernanke on Thursday offered a bleak economic outlook for the near term and signaled the central bank's willingness to continue to cut its target rate.
Bernanke expects a period of sluggish growth, followed by a "somewhat stronger pace of growth starting later this year" as the tax rebates and interest rate cuts begin to impact the economy, the Fed chief told the Senate's Committee on Banking, Housing and Urban Affairs. He noted the Federal Open Market Committee's aggressive rate cuts to battle tight interbank lending market that have resulted in a 225 basis point drop to the federal funds rate since September to its present 3%.
Bernanke said further cuts in homebuilding and related activities are likely, as is more-expensive and less-available credit straining the economy. Additional subprime writedowns also appear likely in the short term. And while the chairman doesn't expect a "rip-roaring labor market," the Fed will be looking to see if it stabilized at current levels.
"It is important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further," said Bernanke.
Bond Insurers Getting the Heat (www.wsj.com 15 Feb)
The clock is running out for bond insurers to save their triple-A credit ratings.
In congressional testimony yesterday, New York Gov. Eliot Spitzer gave a three-to-five-day time frame for the bond insurers to raise much-needed capital or find other ways to resolve their problems.
Bond insurers -- relatively obscure companies that insure the principal and interest payments in the event of default -- have emerged as the linchpins of large swaths of the financial markets, ranging from municipal bonds to short-term securities backed by student loans. With investors worried that potential downgrades will lead to massive write-downs in their holdings of securities guaranteed by the insurers, regulators have been trying to rally banks to help rescue the insurers.
FGIC Corp., the third-biggest bond insurer by amount of insured debt outstanding after MBIA Inc. and Ambac Financial Group Inc., has already lost its top-notch triple-A rating from all three major ratings firms, indicating that the banks so far have failed to devise a way to raise enough capital to save its status. Moody's Investors Service cut FGIC's triple-A financial-strength rating by six notches to A3, with a warning that it could be cut to the lowest investment grade level of Baa if FGIC's strategic and capital plans had "an unfavorable outcome."
FGIC is closely held by mortgage-insurer PMI Group Inc., which owns a 42% stake, and private-equity firms Blackstone Group Inc. and Cypress Group, each with 23%.
The forays of FGIC, Ambac and MBIA into the risky business of insuring complex mortgage-related securities have put them on the hook for potentially billions of dollars of claims as the housing market stumbles.
The Moody's downgrade -- which could prompt money-fund managers to unload their FGIC-insured holdings -- is more severe than the downgrades of FGIC to double-A in January by Fitch Ratings and Standard & Poor's.
- PersianCat (Millionaire-in-progress)
New Play - MET Put
Played the following yesterday:
- Bought MET Mar 55 Put @$1.65 (when the stock is around $58.03)
- PersianCat (Millionaire-in-progress)
Thursday, February 14, 2008
Position Update
Yesterday, the general market had another positive day (3 consecutive positive days. The charts showed that the market seems to start a rally and not testing the low of January 2008. Given the current market sentiments and looking at the charts, I closed all my positions yesterday with mixed results:
SPY - Bear Call Spread Feb 133/136 Call @$2.48 (Loss 65.3% 5 market days)
BSC - Bear Call Spread Feb 85/90 Call @$0.05 (Profit 57.1% 6 market days)
COF - Bear Call Spread Feb 50/55 Call @0.40 (Profit 64.3% over 7 market days)
- PersianCat (Millionaire-in-progress)
SPY - Bear Call Spread Feb 133/136 Call @$2.48 (Loss 65.3% 5 market days)
BSC - Bear Call Spread Feb 85/90 Call @$0.05 (Profit 57.1% 6 market days)
COF - Bear Call Spread Feb 50/55 Call @0.40 (Profit 64.3% over 7 market days)
- PersianCat (Millionaire-in-progress)
Position Update
Yesterday, the general market had another positive day (3 consecutive positive days. The charts showed that the market seems to start a rally and not testing the low of January 2008. Given the current market sentiments and looking at the charts, I closed all my positions yesterday with mixed results:
SPY - Bear Call Spread Feb 133/136 Call @$2.48 (Loss 65.3% 5 market days)
BSC - Bear Call Spread Feb 85/90 Call @$0.05 (Profit 57.1% 6 market days)
COF - Bear Call Spread Feb 50/55 Call @0.40 (Profit 64.3% over 7 market days)
- PersianCat (Millionaire-in-progress)
SPY - Bear Call Spread Feb 133/136 Call @$2.48 (Loss 65.3% 5 market days)
BSC - Bear Call Spread Feb 85/90 Call @$0.05 (Profit 57.1% 6 market days)
COF - Bear Call Spread Feb 50/55 Call @0.40 (Profit 64.3% over 7 market days)
- PersianCat (Millionaire-in-progress)
Monday, February 11, 2008
New Play - SPY
Played a Bear Call Spread on SPY last Friday.
SPY - Bear Call Spread Feb 133/136 @1.50 (when the stock is around 133.72)
- PersianCat (Millionaire-in-progress)
SPY - Bear Call Spread Feb 133/136 @1.50 (when the stock is around 133.72)
- PersianCat (Millionaire-in-progress)
Thursday, February 07, 2008
New Position Added - BSC
The market was volatile yesterday. It broke the previous day low but it rally back before it broke the same level again and end negative for the day. Anyway, I added another position again yesterday:
- BSC - Bear Call Spread Feb 85/90 Call @$1.85 (when the stock is around $84.90)
In the current volatile market, the credit spread play (above) would not make me too excitable seeing my position going from positive to negative to positive..... Since it also requires less monitoring, I am able to focus in preparing on some project which I am starting next week.
For those who celebrate Chinese New Year or its holidays, I would like to wish you "Gong Xi Fa Cai" and have a prosperous and profitable year.
- PersianCat (Millionaire-in-progress)
Wednesday, February 06, 2008
We have confirmation !!!
We have a reversal confirmation with a black candle yesterday. How to play? I would short if the market/stock goes below yesterday's low. The stop loss is Friday's high (or last week's high - whichever is higher) and the first target is January Low. I have to be careful though. In the current volatile market, crazy swings should be expected.
As for me, I have already started by playing the following yesterday:
As for me, I have already started by playing the following yesterday:
- COF - Bear Call Spreads Feb 50/55 Call @$2.20 (when COF is about $51.65)
- PersianCat (Millionaire-in-progress)
Tuesday, February 05, 2008
We might have confirmation candle today !
The futures were negative before market open. The ISM data released today was also below expectations and the futures react accordingly pushing the prices lower. It seems that this week is the week to go back to reality and continue the downtrend. If we close lower today, we would have the confirmation candlestick required to confirm a reversal after yesterday down day. Anyway, I have to be careful, as the market is very volatile these days and like to give mixed signals.
Since it is 2 weeks before expiry, I am considering to play one of my favourite strategies - at or in-the-money credit spreads. This strategy offered limited risk and limited profit. The sector to play is still the same - housing, financials, etc.
- PersianCat (Millionaire-in-progress)
Since it is 2 weeks before expiry, I am considering to play one of my favourite strategies - at or in-the-money credit spreads. This strategy offered limited risk and limited profit. The sector to play is still the same - housing, financials, etc.
- PersianCat (Millionaire-in-progress)
