Stock Market for March 2009

[davidslane]

There are so many folks here talking about buying options (JDH included).

But the premiums are outrageous.
You can't really make any money right now guessing on either a big rise or drop.
Might as well just buy a 3x ETF and at least not worry about losing all of your option premium on the time decay.


If you think the market will rally, sell some puts and rake in those high premiums. Just make sure you have the money to cover them if the market goes down.




One note: everyone and their mother is expecting a bear market, oversold rally. It's not a contrarian call at all.  Some very big name bears have dumped their shorts. The reason the market keeps going down is because everytime it rallies, people think the oversold rally is here and they sell into it and then some new shorts come on.

We may not be able to have an oversold rally until we see a capitulation collapse first, maybe to 5900 on the DOW.

Then we may see a 25% rally. I'm just not sure what gold will look like. It may rally with a collapse and then collapse with a market rally.




But, I'm still 100% in gold and silver miners and just planning on holding them (with some buying and selling on dips and rallies) for 3 to 4 years. Gold miners were some of the only stocks to make money from 1930 to 1933 and I think we're at 1930 right now.

[Croaker]

JDH,

     Talk about getting on a roll.  Very educational write up, at least for me. Helps clear the head and re-think/re-tool the plan for the future. 

DSL,

      I hope your right about Gold and Silver. Because I am betting on it also.

[sidewinder]

Alright everyone you gotta see this video it's too funny.  I know you all love Rick Santelli on CNBC and watch every morning.   John Stewart got a little miffed when he did not show up for his show.  (I only listed to CNBC for entertainment purposes)

http://www.realclearpolitics.com/video/2009/03/05/stewart_rips_cnbc_after_santelli_cancellation.html

[JDH]

Sidewinder: I debated about putting a link to the video in my weekly commentary; thanks for sharing it; I thought is was quite funny as well.

Davidslane: Obviously you are correct about the options; they are a pure gamble.  The premiums are silly, but I would never use real money to play them; I only play with I won't miss if they go to zero.  My real money is in gold and silver stocks, which will be volatile, but a six months to a year from now will, I believe, be much higher.  I will continue to buy on dips.

As for everyone expecting a bear market rally, I don't know; I wonder if anyone has any suggestions on how to measure that sentiment.  No-one was buying this week, which makes it hard to believe people are expecting a rally.  However, if everyone expects it, there may be some buyers at the first sign of it, which of course will be the time to close out the long positions, because I agree with you, we will probably see 5,900 on the Dow long before we see 10,000.  Time will tell.

[MetalMeister]

RM,

Statements like yours below do not help.  Stick with facts and we'll all be a lot better off on this forum.

Obama did not inherit this from Bush alone.  Ludicrous.

The housing bubble was Democrat, solely, caused, in the beginning, and then taking advantage of by the lending institutions.  Everyone with a functioning brain stem, in the world, knows this now but the media still tries not to mention it and assess ownership correctly because of their bias.  Community Reinvestment Act alone, along with Democrat lawsuits did this housing mortgage bubble.  A Democrat invention.

As for the rest of the financial inheritance, Republicans and Democrats, IN CONGRESS (INCLUDING CLINTON AND SUBSEQUENTLY BUSH), alike are responsible for the rules and regulations, or lack thereof, that allowed the derivatives market to go unbridled and built on top of the housing market.

Bush is so convenient to use as a whipping boy.  An easy scapegoat.

The blame game needs to stop.  Just the facts please. 

If we stick with facts here then we can have an non-incendiary discussion on how we got in this mess. 

But just facts, please.

Stop the political blame game.

Nothing personal intended...!   

The fact is, Obama inherited a total shitstorm from the last presidency--economy being at the eye of the shitstorm.

[MetalMeister]

You know, one of the things I am most proud about, from my University days, is that I got an A+ in Plato Dialectic and I was not a philosophy major.  The teacher told us the first day that only 4 A's would be given out and 4 F's.

Odd, but the first thing I wondered when I went to Wikipedia and read the allegory of the cave, a minute ago, was who fed these people and cleaned up their sh*t and pi*s all their lives...

That is why I am a pragmatist, I guess... 

While I'm at it I will just add that the printing presses are getting all heated up.  If you are all worked up watching stocks and bonds you may not see the government steal you hard earned savings with a printing press.  While historic, it truly is becoming a sad day for ALL humanity. 

I am starting to get angy and that's not good.  I will wait until I see more than 100,000 in washington seeking justice to comment further. Waiting to see what we are made of and what we have become. 

see Plato's allegory of the cave for more understanding.

 

[ArsenalFan]

I have been expecting a rally too.  I agree that everybody and their brother is expecting a rally and I also agree that this is why it may not happen until a large capitulation "whoosh" day to the downside.  Would you put it past those in government to get everyone excited for this Thursdays mark to market speech only to disappoint like no other??  I think that Friday could be the capitulation day we are looking for.  Monday could be the start of the rally.

[Bottomfeeder]

JDH...I think the indicator that really caught my eye, was the little break in the UUP, on a HUGE negative volume spike.  Dollar goes down markets generally seem to go up, also your commentary.  Check it out.  I think Gold/Silver comex is gonna get whacked on MTM changes.

I read Pinetree Capitals financial results for quarter and year end last night and saw that they took something like 492M in losses for the year of which only 9M were realized!  The result created a NAV of like 1.50, still.  The other benefit was HUGE return in taxes that created something like 97M POSITIVE (MTM) to their bottom line.  That Sheldon is a smart son of a gun.  Poised for major growth ahead!!  My back up the truck if you will.

JP Morgan Chase did the same thing to end 2008 and has largely taken their hits (write downs), still have  their credit card exposure though.

This makes Pinetree a screaming buy for me in a couple few days, as others might react or look at those results as being negative.  Not me.  They are gonna show some serious growth in thier assets and finqncials going forward, long term.

Hmmm...I wonder if the bigger banks could have something like this in store for them, creating huge returns?

Follow the money, early.

[MetalMeister]

SW, Great video!!  I posted it far and wide.  Kudlow is the only one I watch on CNBC now.

Bear Market rally.  I think we will see 3000, maybe 800 before 10,000 in the year 2029.

Here is why:

I just finished watching CSPAN broadcast from Thursday's Senate Banking Committee.  The questioning was brutal.  Senators want to know where the money went.  Then I am casually reading some GATA news and up pops this article from WSJ:

http://online.wsj.com/article/SB123638394500958141.html

Top U.S., European Banks Got $50 Billion in AIG Aid

The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.

Among those institutions are Goldman Sachs Group Inc. and Germany's Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter.

Money has just been given away to prop up banks against losses.  Most of that money is gone and the problem was not fixed.  Not even really attempted to be fixed.

We are about to witness the Great Banking Collapse.

I don't know why they mention the $300 billion figure with AIG counterparties because derivatives are 60 trillion to 1 quadrillion depending on how the dominoes fall and what you read where...

Sidewinder: I debated about putting a link to the video in my weekly commentary; thanks for sharing it; I thought is was quite funny as well.

As for everyone expecting a bear market rally, I don't know; I wonder if anyone has any suggestions on how to measure that sentiment.  No-one was buying this week, which makes it hard to believe people are expecting a rally.  However, if everyone expects it, there may be some buyers at the first sign of it, which of course will be the time to close out the long positions, because I agree with you, we will probably see 5,900 on the Dow long before we see 10,000.  Time will tell.

[ArsenalFan]

Having a look around at some of the forums out there and I can tell you that its pretty scary what I am seeing.  Lots of anti-semetic statements, talk of guns and ammunition, safes with gold in the basement, revolt, revolution.  Wow!  I think the internet age is having an incredible impact on peoples sanity.  Does anyone really think things will cascade to anarchy? Please post with your observations and opinion. I am starting to question whether I should be buying a gun again.  Sold the 12 guage used for bear protection last year and by the sounds of some it may have been a mistake.  For the first time in the last 2 years I actually thought about purchasing some physical gold (you win yellowcaked!)  I know there are alot of educated folks on this board and your opinion is greatly appreciated.  I live in Canada by the way, not that it may matter in the end.  Signed...confused.

[sunseeker]

BF.
Your insight on PNP was very much appreciated. I'm still in there.

SW
Liked the video too. 

GTLA

[MetalMeister]

ArsenalFan,

You knew I would weigh in...    And I gave it a tag of Worst Case Scenario so people can comment on it and not mix it with the regular thread.

Two years ago I did not have a thought in my brain about how bad things can possibly get.  About the same time I got on this forum I joined another forum www.silverstockreport.com and while much of that forum was about silver and gold (and some on uranium), there are some very smart people on there who were talking about end game economic theories based on the world currency being meaningless and inflated and the peak oil thories, credit and banking stuff, etc, etc.  That was very early 2007 and they were predicting all of this happening.  Well, it's happening to a degree right before my eyes.  What did I do?  I kept reading both the contrarians and the optimists.  I am very much a pragmatist.  They were talking about massive bank and derivative failures, on that forum in 2006, long before you every heard anything about it in financial media or let alone mass media.  They were also talking about societal disintegration.  So I reached the point where I had read enough of their posts and started researching on my own.  I have become a believer that it is all too possible.

If you have been reading the news, it is becoming all too common where cities are laying off some police and firemen.  Nothing deadly, at least not where I live.  Just did a Google search:

http://www.google.com/search?hl=en&client=firefox-a&rls=org.mozilla:en-US:official&hs=qb4&q=layoff+police+and+fire&start=10&sa=N

http://multimedia.boston.com/m/21860149/police_fire_layoffs_coming_to_new_bedford.htm

States and huge cities all over the country have huge deficits.  We all know what has happened in California.  When unemployment goes up and tax revenues go down there is a propensity for increase in crimes rates.

I called my Dad the other day and asked him what crime was like during the Great Depression.  He said not too bad.  But then most people lived on farms in those days or farms were close and the food delivery systems were local rather than huge public companies.

Check out the first chart on incarceration:

http://www.justicepolicy.org/images/upload/00-05_REP_PunishingDecade_AC.pdf

And this graph just goes to 2000.  Inmate population is now around 2.3 million.

So what am I theorizing?

Our society has changed and dramatically in just 80 years.  We have the highest standard of living in the entire world as well as the highest incarceration rate.  What happened?

Moral decay. 

My hypothesis:  If we do not get out of this world economy, and soon, we will become a virtually lawless society.  Things like this are already happening in poor countries around the world.

Get the gun back.  Move to the country.

If you study the possibility that the other world countries may decide to not purchase our debt anymore than overnight we will be a second or third world country, unable to purchase oil in the quantities we need.  Our society exists only because of oil and the belief that the dollar is a safe haven (cash is king).  More and more articles are appearing around the world questioning why buy the dollar?

When cash is no longer king and oil cannot be purchased, society will degrade overnight.

I'm not saying it's going to happen but I am preparing for it.

Having a look around at some of the forums out there and I can tell you that its pretty scary what I am seeing.  Lots of anti-semetic statements, talk of guns and ammunition, safes with gold in the basement, revolt, revolution.  Wow!  I think the internet age is having an incredible impact on peoples sanity.  Does anyone really think things will cascade to anarchy? Please post with your observations and opinion. I am starting to question whether I should be buying a gun again.  Sold the 12 guage used for bear protection last year and by the sounds of some it may have been a mistake.  For the first time in the last 2 years I actually thought about purchasing some physical gold (you win yellowcaked!)  I know there are alot of educated folks on this board and your opinion is greatly appreciated.  I live in Canada by the way, not that it may matter in the end.  Signed...confused.

[Peter518]

Interesting article on crude oil:

http://seekingalpha.com/article/124654-contango-quickly-disappearing-backwardation-and-uso-profits-next?source=email

Contango Quickly Disappearing: Backwardation and USO Profits Next?

[MetalMeister]

This article will make us all feel better about the stocks we own and uranium in particular... 

http://www.ritholtz.com/blog/2009/03/the-latest-blue-chip-penny-stocks/

The Latest Craze: Blue Chip Penny Stocks

Here’s a short list of only the highest quality, bluest of blue chip, penny stocks:

    * AIG (39 cents)
    * Citigroup (98 cents)
    * E*Trade (66 cents)
    * Fannie Mae (39 cents)
    * Freddie (39 cents)
    * Unisys (37 cents)

Given the trading volumes, you might think these were real firms or something!

Now, for the not-quite-penny stocks:

    * Ford ($1.83)
    * GM ($1.83)
    * Las Vegas Sands ($1.97)
    * MGM ($1.99)
    * CIT ($2)
    * Kodak ($2.50)
    * Bank of America ($3.15)
    * New York Times ($4.00)
    * News Corp ($6.15)
    * Xerox ($4.36)
    * International Paper ($4.22)
    * Alcoa ($5.55)
    * GE ($6.75)
    * Dow Chemical ($6.56)
    * Wells Fargo ($7.95)
    * Dell ($8.50)

It looks like American Express ($10.83) is one of the few double digit stocks . . .

[jjj000]

As for everyone expecting a bear market rally, I don't know

DOW 6300.  1996 support level.  The last rally was right off of 7500 at the 1997 support level.  If I block out all the talking heads and "fundamentals", etc., that is all that remains.  As occurred in the last cycle, I expect a deep mid-day gutting of  the market down to that '96 level, with a sharp counter V wedge rally to lead to a couple weeks worth of rally time.

I also expect this to curiously occur right around options expiry.  So either the bottom comes in Monday or Tuesday, and we then rally through 3/24 or so... or we bobble around at these levels for the next 2 weeks, and then hit 6300 around Fri 3/20- Tue 3/24.

That's how the bitter, cynical, jaded side of me sees things.

We'll see how OPEC supply cuts/oil prices affect things.  Last rise in oil spurred an overall market rally.  Which is kind of stupid, being that the oil price rise was due to supply cuts, not demand increase... but whatever... who cares about such things?

because derivatives are 60 trillion to 1 quadrillion depending on how the dominoes fall and what you read where...

Wow.  Are we really starting to use the term "quadrillion" now?  Crazy.  Had to happen sooner or later I suppose.  Talk about inflation

Contango Quickly Disappearing: Backwardation and USO Profits Next?

My charts say oil needs to break $50 first.  We're close.  If oil crosses above $50, I say it's on.

Here's a look at oil...

Pinetree... I would just suggest you chart out $WTIC instead (West Texas Int Crude) rather than USO.  USO is a little wonky I have found and doesn't track oil price exactly.  Neither does WTIC, but it is -much- closer day to day.  Generally you should see the same breakouts though... but the support levels may be more helpful with $WTIC (enter it into stockcharts with the $).


GLTA


P.S. - my last thoughts on Mr. President.  He may have "inherited" a crappy economy.  Sure.  But he and his 1-man Treasury Department are making it worse by the day.  I disapproved of the TARP.  I disapprove of the TALF even more.  His budget is a waste and a total reversal of his "going line by line to cut out waste" promise.  The most corrupt elements of the Republican party have now moved on... leaving the biggest offenders to weed out running the Dem party.  Hence, dickheads-- the whole stinking lot of them.  New blood is needed on both sides.  Term limits in Congress.  Enough said.