I quit trading today, right after the grains closed. When I saw the opening numbers in the S&P, I immediately sold my puts. I gave back a lot of money on those puts(yet still made money), and didn’t want the trade to affect my thinking. I immediately put that put money into selling more spreads in corn, wheat, and beans. I legged on the bean spread, buying November,o8 first. My plan was to sell May on any rallies or strength. I saw strength and was able to capture a real wide spread. I pulled 4 cents out of the beans by the close. My wheat spreads were easy, as there was a not much wheat for sale, and prices were up on big volume. I put on my corn spread in one chunk. That’s why I like the corn market…you can sell a couple of million bushels in one whack, and only move the market a quarter cent. Those corn guys have deep pockets, that’s for sure. Although corn is boring, anyone with an IQ of 60 or above should be able to make a decent profit all of the time if they’re careful. After I put on my spreads, I started selling some more Countrywide, (CFC). I sold it on the market strength, hell the S&P was up 20 points, and CFC was up 6 cents. I sold a nice block of CFC after I hit the bid on an uptick. CFC’s down ~ $o.10-$0.21 right now, while the DJIA is up 320 points I’m so short Countrywide that it hurts. That stock is such a dog, in fact it’s paper won’t be worth using as a bird cage liner down the road. My average price is so over the market that I could withstand a $7.00 rally and still make decent money on the trade.
As far as general market conditions are concerned, except for the grains, I’m in a state of total confusion. I know the reasons for these moves, but I don’t know the extent of what’s happening. Oil is shaking out the longs, and I don’t know how low the oil will go, so I’m totally wary of that market right now. The sudden rally in the stocks, made me sell puts and give away 1/2 of my profits. If I were smart, I would probably be buying more puts. I’m confused with the dollar’s direction right now. It’s consolidated it’s value here for the past few days, and I don’t know if a spike against the Euro is imminent. There will be short covering, that’s for sure, the question is when.
I’m pretty confused about interest rates right now. I don’t have a clue, and my crystal ball is cloudy. I’m staying totally out of the bond market, either side. The spreads are too tight as the curve remains messed up. There’s no easy money in the bond market right now.
I expected this slump in gold, but don’t have a clue on how far it will go, how long it will last,, or if we’ve passed the top of the market and it’s in full scale retreat. I’m staying out of metals until I get a handle the trend.
In fact, I think I will stay out of everything, save my short CFC, and my huge grain spreads. I’m really maxed out on the size of my trades because I hit the maximum limit of contracts a speculative individual can put on for his own account. Oh well, all of my grain positions are spreads, so I’ll sleep well at night.
I need to buy a grain elevator. All of my big boy grain buddies own one and are able to use the elevator to open a hedging account and exceed the legal limits, legally. Of course, those guys don’t do much hedging, but they use the elevator to put on 2000-3000 contracts in a day. They spread it all, and make good money on the carry.
I’m looking at the numbers right now, and my eyes are starting to glaze over. It’s probably time to relax awhile and keep an eye on my spreads, and on CFC. I might, or might not take tomorrow off.
Today was a good day, profit wise. I covered my puts and spent the cash(although less cash than if I covered them two days ago) on grains. I got maxed out in the grains(which is a good thing). I stayed away from copper, which is also a good thing.
Jeff
Hi Jeff,
Congratulations on your short sale profits, and hopefully those grain spreads will work out well. CFC looks terrible, down on a huge up day.
My portfolio came back fairly decently, some stocks roaring back. Being broadly short going into another potential Fed easing in December doesn’t sound very appealing to me, but being selectively short seems to be working well for you.
I positioned my portfolios a little more aggressively just before the lows, and that’s starting to work out. To mitigate the risk when the market pulls back again, I’m still looking for a good point to place another short ETF or two in the portfolio - both for the protection and the non-correlation for re-allocation purposes.
Have a peek at Starbucks and tell me what you think. There’s huge money flow going into the stock - $5B and the stock barely budged. I suspect a share buy-back by the company, but it could be some big institution(s) taking a large position. This valuation level isn’t bad for such a strong brand. I also bought Harley Davidson for the brand around $52, and Home Depot I still think is a steal at $28 - though it will take a little time to get out of its funk. Mattel is another beaten up growth stock I like. The latter three I own, and they’re averaging almost a 3% yield between them. I don’t really care about the dividend all that much for income - but others do and helps make the stocks attractive. When you can get growth companies and strong brands at these prices and yields, you’ll generally come out ahead.
My Biovail trade is not terribly exciting, but it’s above water for the time being.
Let’s see how far this rally goes. How far and fast can tell you a lot about general conditions.
Cheers,
George
Comment by allocator — November 29, 2007 @ 6:01 am
SBUX doesn’t look too friendly on the 6 month chart. I wouldn’t want to be trying to pick the bottom, and would wait for it to start going up before I bought some. SBUX is a strong brand, and has very high margins. I wouldn’t want to be shorting this stock.
Comment by masteroftheuniverse — November 29, 2007 @ 7:29 pm
It’s not going to give you great joy as a quick trader. But I could see it becoming a steady riser from around here back into the 30’s - assuming the market doesn’t melt down.
Bummer - A stock I held until very recently was taken over today - Axcan Pharma. I can pick’em, but I can’t cook’em. Damn. (See my post on this and related things). The key is cash. You have a lot of cash on a balance sheet and someone’s going to take a run. The cash represents flexibility and value if you run it, or financing if you want to flip it. I frequently look for stocks whose stock price is covered by 25% or more of net cash and equivalents. Axcan was one of these.
Cheers,
George
Comment by allocator — November 30, 2007 @ 5:47 am