Is the stock market going to tank?

[4matic]

I don't "trade" often but I allocated 10% of capital to the markets Thursday and Friday putting me at about 50/50. I'll buy more stock in smaller increments if we continues lower. Quality companies have value.

I bought shares of BRK.B on Thursday at $74.05 and some RPMGX for $50.05.

On Friday morning when the market was melting I bought shares of JPM at $40.05 and more BRK.B at $73.35. I also felt the market had skewed some recent trends so I bought for speculation TBT at $39.70 (inverse bond) and USO for $35.99 (long oil futures etf).

As of this morning the trade is up 1%. The bond and oil trade is short term, especially the oil. I hope to hold all the other positions for a long time.

I always place orders "at the market" and my executions were amazingly good. That's usually a bad sign for your trades.

I wanted to buy EEM (emerging markets) but just didn't want the additional risk. Maybe Monday!

The stock market has always been dangerous.

Here's what I think happened. Very similar to the 87 crash which was also exacerbated by Nasdaq market makers:

http://thestockmasters.com/node/2203

As it turns out, no smoking gun was found in yesterday's 1,000 point decline:

(CNNmoney) It wasn't a goof. It wasn't human error. Rather, it was an instant that displayed the hazard of new markets that handle billions of dollars' worth of trades each day.

During yesterday's fast-moving midday market, NYSE specialists -- who oversee trading in individual stocks -- used their authority to call a momentary time out. The idea was to bring together buyers and sellers, and get their prices more in line with each other.

It happened in five Dow stocks, including 3M (MMM, Fortune 500) and Procter & Gamble (PG, Fortune 500), according to the NYSE, and in a good number of the listed stocks. The NYSE did not have a tally of exactly how many.

Years ago, when the NYSE dominated trading, such "time-outs" worked well at stabilizing stock prices.

But today, the NYSE accounts for only about 25% of the volume in its listed stocks. The rest comes from computerized markets run by private companies -- and some of those systems did not take a time out yesterday.

"The rest of the markets are free to trade around us," said NYSE CEO Duncan Neiderauer, "and that's what they did."

So, as the NYSE paused for a minute or two at about 2:40 p.m. ET, the off-exchange computers kept searching to execute trades. They hit the best bids still standing, which in many cases were far below the prior price.

And in some cases, the off-exchange computers found no bids at all. When that happens, market-making computers see a zero bid, then offer a penny higher to capture the trade and collect a commission -- hence the trades of just one cent for several stocks, including Accenture (ACN), Boston Beer (SAM), Exelon (EXC, Fortune 500).

"Computers are looking for the best bids. The real best bids shut themselves down," one trader told CNNMoney.com.

"You had penny prints. The bid was zero. The algorithms were designed to penny the bids," said another trader.

The NYSE argues Thursday's sudden plunge shows its model is best suited to maximize market stability.

"Yesterday's experience clearly demonstrates the value of retaining an element of human judgment in the market," said NYSE spokesperson Ray Pellecchia.

But the role of human judgment has been rapidly diminishing in the securities marketplace, placing individual investors at risk of such an instant market meltdown happening again

[L7]

The argument is that all of this churning of money that benefits no one but the churners will move off shore if we regulate it too much,

You know a few years back this shit was being used by Canada's big banks to justify why they should be allowed to merge into much fewer but much bigger entities. Otherwise they could never keep pace with the big boys and our financial system and currency would surely suffer was how they tried to spin it.

They were shut down and told to suck it up and try to do things better instead of bigger. (Our system is far more regulated than the US system I believe). Funny thing is that as the big boys crashed and burned because of their money churning, do nothing, profit sucking bullshit our system stayed relatively one of the most stable in the world.

Funnier still. At one point during the crisis one of our biggest little banks found itself among the world's top 10 in assets purely by virtue of holding their full albeit tiny value while worldwide other banks took huge asset hits.

Bigger isn't better unless you're a fat cat CEO just trying to further balloon a ridiculous bonus formula.

Good point on the boomers end game and can't/won't afford another equity hit.

Had an interesting conversation this morning in regards to this last generation in north america and perhaps europe. A lot of emphasis in the last couple of decades has been to train our brightest to be financial and business gurus and maybe lawyers.

So our brightest and most ambitious have focused on new exciting ways to exploit an already overworked financial system. Meanwhile in India and Asia and perhaps others their brightest have been encouraged to become engineers, technologists and those that generally figure out how to make better stuff.

I give the edge to the countries building enough stuff to still allow feeding on their financial systems. Instead of countries producing way too many people trying to feed on fewer people creating things.

[4matic]

I disagree that regulation will move it offshore. On the contrary. I believe NYSE is the big winner here because they have always had the best execution system for small investors.

[Benny Profane]

The stock market has always been dangerous.

Yeah, but not like this. They broke a record the other day.

I disagree that regulation will move it offshore. On the contrary. I believe NYSE is the big winner here because they have always had the best execution system for small investors.

This is our only hope right now, just as, when the shit hits the fan, Greek style, everybody runs back into our wings for safety. When I hear pundits talk down our deficit and predict hyperinflation armageddon, Zimbabwe style, I can't seeing it happen yet. So many others have to fail first. Trust and safety from it is priceless.

[liv2ski]

When I hear pundits talk down our deficit and predict hyperinflation armageddon, Zimbabwe style, I can't seeing it happen yet. So many others have to fail first. Trust and safety from it is priceless.

You know Benny, That is likely a very astute call. What do you think, we have until about 2012

[Benny Profane]

No. I'm thinking 2018-20.

[dapesche]

No. I'm thinking 2018-20.

Benny, I'm curious to know your rational. looking forward to it.



My gut tells me that the the answer is ... whenever China is ready.

The questions are:
1) How quickly can China create a domestic economy that is not dependent on exports?
2) How quickly can Asia become relatively self sufficient?
They will still need resources [Russia/Canada/Aus/Brazil]
Will they still rely on the US consumer buying cheap shit at walmart
3) At what point will China float the renmindi?
Prices at Walmart may not be as attractive
Imports start to look a lot cheaper in China
4) When does the Chinese consumer begin to spend a 2-3% more annually?

There is a massive global economic imbalance right now.

Maybe when the US starts manufacturing more goods back home, maybe then you'll see some solid job growth, and potential inflation. Right now, any inflation is still a result of stimulus money.


INTERESTING FACT FOR THE DAY
link: http://www.sprott.com/Docs/Marketsat...0Weakness.pdf:

While we have written ad nauseam about the excessive debt issuance by the United States, we found a recent update written by United States Government Accountability Office (GAO) to be particularly instructive. The update noted the US’s budget deficit equivalent to 9.9% of GDP in 2009 - the largest since 1945 - and stated that without significant policy changes the US government would soon face an “unsustainable growth in debt”. This was not news to us. It goes on to state, however, that using reasonable assumptions, “roughly 93 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs by 2020.”8 This is news! In less than ten years, using reasonable assumptions, there will essentially be no money left to run the US government - 93% of all tax revenues the US government collects will go to pay social security, Medicare, Medicaid and the interest costs on their national debt. This implies no money left over for defense, homeland security, welfare, unemployment benefits, education or anything else we associate with the normal business of government. And the US government is rated AAA!?

Who is the GAO?
link: [ame]http://en.wikipedia.org/wiki/Government_Accountability_Office[/ame]
The Government Accountability Office (GAO) is the audit, evaluation, and investigative arm of the United States Congress. It is located in the legislative branch of the United States government.


I'm not a trying to excite fear, just passing on info.

[Benny Profane]

Well, I was just throwing out the timing I would think was somewhat linear after the Euro finally settles and Japan finally deals with it's sad situation. I'm thinking that we will remain the safe sanctuary until then, kinda like the last resort theory. You're right, China is now our Detroit, but, at the same time, the new version of "It's Different Now", because, much of the western world sort of weirdly assumes that the powers that be over there can actually control the economy to the point that they will have a soft landing within the international finance and trading environment. I don't think so. All of this talk of them calling in their loans is absurd. They're our pathetic banker, and we're their Trump, for the time being.

[liv2ski]

4matic wins the BIG BALLS Award today

[4matic]

4matic wins the BIG BALLS Award today

Heh.. Thanks. It's early though. DAXI closing above 6000 is pretty positive. SP can rally to 1180 unchallenged. I sold USO (oil) @37.05. Didn't like the action.

Still long: JPM, BRK.B, RPMGX, and TBT. Up about 4% on the trade.

I may sell some International MIEIX and Treasury hedged PTTRX. Although, a weaker Euro with backstopped debt is bullish Euro equity.

At the beginning of the year one of my themes was currency re-alignment. We got it.. And this also might explain the weakness in Chinese equity.

A little to quiet for comfort right now.

[LeeLau]

you played the dead cat perfectly 4matic

[liv2ski]

Heh.. Thanks. It's early though. DAXI closing above 6000 is pretty positive. SP can rally to 1180 unchallenged.
A little to quiet for comfort right now.

Still hanging on 4matic? Pretty much out of the long end except for a Brazilian Fund I own. Bought SDS at $33 on 5/19, sold today at $35. Looks like it may be time to trade this every few days and ride this market down.
Your thoughts guys?

[powderwhore]

Feel pretty smart after moving assets to safe havens three weeks ago. Now just waiting for a bottom to get back in.

[jayfrizzo]

Now just waiting for a bottom to get back in.

I love getting in bottoms. Finally this thread got interesting.

[Rontele]

Europe is proving once again that they are incapable of taking decisive action and that nobody is really in charge. These knee-jerk reactions to perceived problems such as short-selling are not helping either. I think today's moves just underscore worldwide lingering uncertainty that Europe could push the whole house of cards back into a liquidity crisis (ala 2008). Somewhat disconcerting as domestic economic indicators have improved and the country could be well into a recovery (though that seems in doubt). Also underscores the need to look at allocations in your account every quarter and adjust accordingly (I don't day trade).

[Toadman]

Feel pretty smart after moving assets to safe havens three weeks ago. Now just waiting for a bottom to get back in.

Yeah, I wish I had put my money under the mattress too.

[LeeLau]

Still hanging on 4matic? Pretty much out of the long end except for a Brazilian Fund I own. Bought SDS at $33 on 5/19, sold today at $35. Looks like it may be time to trade this every few days and ride this market down.
Your thoughts guys?

Take that motherfucking goldman sachs in the ass - July 150er puts liquid as all can be.

My grandpa TIPs are todamoon

I'd add some Elliot Wave and wasabi candlestick mumbo jumbo but I don't believe in any of that anyhow

[liv2ski]

July 150er puts liquid as all can be.

Lee what are you talking about? This http://seekingalpha.com/instablog/10...ts-take-a-look

[grrrr]

Some fan must have mooned the market.

[LeeLau]

Reggie's rants are quite good. I'm long July 150er GS puts. They have decent volume relative to other GS puts. Does that make more sense?

[LeeLau]

Damn - 300 pips move in euro in less than 2 hours. Don't see that too often. Now that's a dead cat bounce

[liv2ski]

Reggie's rants are quite good. I'm long July 150er GS puts. They have decent volume relative to other GS puts. Does that make more sense?

OK, got it. I have never bought puts being an ETF jong. I spent some time reading up on it though and think I get it. To be sure, say you bought your put when GS was $145 a share and it cost you $9 a share for the option. Your strike price is $150, so when the option expires in July and say GS is at $120, then $150-120+9=$21 a share profit?
Thanks for the insight. I now know enough to be dangerous

[LeeLau]

The puts increase in price as GS goes down so basically its a way for me to make $ as GS's stock price goes down but to limit my downside (ie there's a maximum i could lose). I bought the puts when they were out of the money ie when GS was more then $ 150.

There's a lot written about options which i won't repeat but basically their value is tied to the price of the underlying share, the volatility of the share and the time remaining in the option.

Basically i just wanted a very binary outcome bet that those cocksuckers would go down hard and had been making small bets against GS for about a couple of years (ie buying out of the money puts on them from time to time and losing my money on those bets) in the hope that one bet would pay off - & hopefully this is it

[4matic]

Still hanging on 4matic? Pretty much out of the long end except for a Brazilian Fund I own. Bought SDS at $33 on 5/19, sold today at $35. Looks like it may be time to trade this every few days and ride this market down.
Your thoughts guys?

Oh yeah, I sold the long oil and short bonds short term trades for 4 points profit I should have bailed the whole trade on Mondays gift but as of todays close I'm probobly down 1-2% on the rest of the trade. BRK and JPM are holding up ok. I bought these for long term plays but should have taken the gift that Monday the 10th was. I bought some IBM today and added to my mutual fund positions for a total reallocation of about 15% of equity. I was glad we ended on the lows today because of an additional 3% allocation. There is now broad support below the market so a turnaround could happen at anytime but support levels really mean nothing in this kind of market. Right now we are at the February lows.. I'm currently at 50/50 and will go to 80/20 Stocks/Income if we head lower. It could be the end of the world but I really expect sideways to down for the next several months. "Buy in May and get Slayed"

IBM is trading at 6 times 2011 earnings. SP5000 is at something like 12 times.

Was I greedy? Yes.. Was I wrong? To early to tell. I will buy more stock on big down days. Good luck!

[4matic]

OK, got it. I have never bought puts being an ETF jong. I spent some time reading up on it though and think I get it. To be sure, say you bought your put when GS was $145 a share and it cost you $9 a share for the option. Your strike price is $150, so when the option expires in July and say GS is at $120, then $150-120+9=$21 a share profit?
Thanks for the insight. I now know enough to be dangerous

Buying premium now is VERY risky. You want to buy premium when the VIX is low.