Thursday, June 21, 2007

Yeah, We Do.........

I've been mixed up with computers a long time - - since 1979, actually. And I've been involved in electronic communities since 1981. Yes, you read right. I've been doing this a while. And I've learned a few things along the way.

One thing I've learned is that there tends to be an inverse correlation between how a person presents themselves (when they can hide behind a facade) and how they really are. This applies particularly to personal appearance. A shining example of this appeared in last Sunday's New York Times, which profiled a number of serious electronic gamers with their avatars. Here's a particularly painful, poignant example:


So the enormous mass of protoplasm on the left is the human. And the svelte, strong, serious warrior on the right is his representation of himself in the virtual world of Everquest.

Now, if you read this blog at all regularly, you really have no reason not to do the free sign-up for BlogLog, since it's a kick to see who your fellow readers are (savvy, witty folks, by and large; with at least enough good sense to swing by here once a day). But I am highly confident that no one reading my blog looks like this.


My caution yesterday was very well founded. In fact, it was spot-on. The market opened. It farted around a bit, then it fell hard. And I closed out my DIA and RUT puts at huge profits.

Then I bought calls. But........because I'm an idiot......I sold them shortly thereafter for breakeven. Then they spent the day going up 20%, so that was about $8,000 down the toilet. Like I said: an idiot.


But tomorrow is - at last - the big day. That's right - it's Blackstone day. Apparently the demand for shares in BX is about seven-fold oversubscribed. Nothing would be more poetic than the market taking a fall tomorrow. As for BX, I guess it's almost certainly going to close well above its offering price. I guess. But there's something about this offering that I think is rather pivotal in the world of investor psychology.

Anyhoo, my intuition is that tomorrow is that we're going to resume the fall. Perhaps even taking out Wednesday's lows.


One of my favorite real estate shorts now is Kilroy (KRC). If this stock can break its neckline, this is a honey of a pattern. Quite large.


If the market is on the weak side after the opening bell tomorrow, I think some 3M (MMM) puts are probably one of the best places to take advantage of any downside action.


I've mentioned Micron (MU) as a long a number of times. This is a great little pattern, with a volume swell to boot.


It's been quite a week. Let's see how Blackstone day treats us. See you after the close. Oh, and this is me. For real.

54 comments:

JakeGint said...

Agree on MUUUUU. Not so sure on your Blackstone thesis however.

One thing you've not spoken much about is the fact that these monstrous private equity cabals are sucking the supply out of the stock market thanks in part to Messrs. Sarbanes and Oxley.

This dearth of supply is part of what's buoying a market with too much liquidity sloshing about.

Couldn't the market's enthusiasm for the BX deal just be a reflection of their interest in keeping a stake in those companies that are being taken off market by said behemoths?

Moreover, couldn't the interest in BX reflect an overall market interest in private equity further spurred by the twin bonuses of current dividends and 24-7 liquidity?

No, Tim, Blackstone is not just any firm... they are the GS of PE's... there are reasons they've huge demand for their stock, and I believe a "bubble mentality" is the least of it.

Tim Knight said...

Haven't you just defeated your own argument? The idea is that private equity firms are gobbling up equity, thus decreasing the supply (which is an argument that, for me, doesn't hold much water, since the percentage of supply being retired is a very small single percent). And yet these guys are turning right around and FLOATING MORE EQUITY into the market.

So - bang - the argument is dead.

Chris said...

For now, I'm buying bonds.

b.healed said...

could the dow be the start of a cup-with-handle? i hope not cause i am primarily short...probably extremely dumb, but there i am none the less...though i like the idea of MU and will probably place an order

Market Speculator said...

Buying bonds? Are you insane? You better be buying 3mo treasuries...wow you are going to get BURNED!

Keep that duration ultrashort.

Desi said...

Hi Tim, like the blog.

I won't enter MU until I see how it reacts to $14 zone...but enjoy the heads up.

Have been giving this some thought and been looking at the handles achieved by $DJI major components. The question everyone has to ask here is...is the index lagging or have some components overshot?

For the time being my money is on a lagging index. Next week should be veeeeery interestink! It will be educational to see the effect of higher European interest rates now that we've (foolishly?) bound tighter to them...

Time will tell.

TOMTHETRADER said...

10X oversubscribed will open at 35.00+ top 36.0 and the insatiable appetite of the world for eqities is just beginning. AVNX FTEK ANDE and the list goes on and on of chip stocks and public newbies who will drive the last leg well past 15,000. I knew it would happen and so did all of you ..the stock shortage you never dreamed about ...the underowned Joe six pack stocks going parabolic...say it ain't so ...we rallied with Investors Intelligence at highs and not even oversold..if we go for it here it could be an ugly end of month for the Bears and an ugly Fall for the Bulls.

http://www.ttthedgefund.blogspot.com

Tom

24/7

Vic said...

Closed my positions when I saw that the bears could not push the IWM below its 50ma. Volume was not impressive to the upside. But I guess price is what pays us not volume. Tim the mustache looks jolly good on you!

John said...

Tim, buying calls? Seriously? In what? The recent volatility has been nice- cover the shorts then buy calls. I did that in ALB and a couple of others.

jason said...

tim,
i just wanted to say that i really enjoy reading your daily thoughts. i look foward to them each evening. i trade commodities so you are my lone excursion each day into stocks and index's. hope you keep it up.

Tim Knight said...

"Tim, buying calls? Seriously? In what? The recent volatility has been nice- cover the shorts then buy calls. I did that in ALB and a couple of others."

$RUT - - which is just about the only index which isn't a BLATANT RIP-OFF (how do the S&P guys get away with it?!?!?!?)

Anyway. Yeah. I bought 'em. Went up 20%. After I sold 'em at $0 profit. Idiot.

Desi said...

Tim...I find myself trading more and more overseas. Don't know about you, but I punish the greedy by shifting money away from 'em.

Sounds like its time for TOS and co. to start nibbling at some monopolies...? lol

Cyl said...

Tim,

I'm really flattered. You of all people should be able to recognize the grainy quality of my built-in laptop camera. I updated my avatar to a recent shot I took from my MacBook Pro to reflect my personality.

Thanks again for the compliment.

Did you get my email regarding the new prophet charts on the Investools website?

--Cyl

Desi said...

Chris...I've been tracking bonds too.

Looks like some traction here.

Market Speculator said...

My avatar is real...that turtle crept up onto the beach at Hualalai in front of the Members Grill...the Four Seasons is incredible there, now only to buy a house there....

SOX made an incredible move, wow...the SOX moving into new high territory, this bull looks like its got something left.

JakeGint said...

Tim says:

And yet these guys are turning right around and FLOATING MORE EQUITY into the market.

So - bang - the argument is dead.


Okay, you are a trader/tech geek and certainly NOT an investment banker, so you're forgiven for your erroneous conclusion.

Blackstone is "floating" about five billon of new equity into the market, sure. A drop in the bucket. Are you familiar with how a leveraged buyout company works?

For every dollar of equity, Blackstone will marry two to five dollars of debt to take down more Sarbanes-Oxley fatigued supply.

You can do math, I'm pretty certain...

Remember also, this liquidity event is just that. Blackstone will continue to gather the bulk of it's funds from private sources. Those sources will be even more willing to offer their cash in return for preferred rates of return from Blackstone thanks to the hoi polloi's cheaper cash influx here.

JakeGint said...

Tim said:

$RUT - - which is just about the only index which isn't a BLATANT RIP-OFF (how do the S&P guys get away with it?!?!?!?)

You want to see highway robbery, try buying $BKX calls, like I did this morning. Tried, that is. No way I'm going near 90 cent spreads...

JakeGint said...

Oh, and one more thing... if that's you in this vid today, who's the guy in the pic upper right?

Vince McMahon?

toober said...

That light bulb looked unnaturally bright. Thanks for the enlightening vid.

JB said...

Yo Tim

Any thoughts about the all-time high in volume in QID & SDS (ultra short index ETFs) today? Both have positive divergences between RSI/MACD & price, indicating a loss in bullish momentum.

JB

william bills said...

Oh man Tim,

You know, the way this market has paused while banging its head on the old intraday high, and interest rates backing up, that if you back out energy out of the S&P its forward PE is around 23, and the BX deal; I began to seriously entertain the notion that this could be a long term double top for the markets.

But then, HD did what many are calling the Do It Yourself LBO (DIY LBO). Very Interesting blog called Accrued Interest ( http://accruedint.blogspot.com/ ) is run by a pro bond manager and his take on this is it could be just the beginning - since there are many companies out there with high credit ratings that could easily be notched down a peg levering up the equity. He closes his latest post with this - "It also is example number 4,312,789 that bond holders are always stock holder's bitches."

If HD is the first in a long line of large caps to do a DIY LBO - the float is going to seriously shrink, capitalization weighted indexes are going to fly, and well, you know the rest..........

Author Ego said...
This comment has been removed by the author.
Author Ego said...

I know for a fact that the Members Grill at Hualalai has an "off menu" turtle soup. Have you no shame?

Momo Fader said...

Tim, I'm with you on BX. There is something absurdly grotesque about the floating of those shares ... starting with the wall to wall coverage of the event on CNBC. Some times I leave on Kudlow for a laugh. One of his guests today was practically begging to discuss the Bear Stearns CDO issue, and Larry gave him an outright "No!" and moved back to the feel-good Blackstone story.

Really it evokes nothing more in my mind than the Mr. Creosote scene from Monty Python's 'The Meaning of Life'. BX is just one more thin mint for all the piggies at the market table.

In my heart of hearts I would love nothing more than to see it fall under offer price on day one. But it looks like the greedy piggies didn't jack up the price enough or increase shares enough to make it fail right out the gate. I still can't understand the euphoria surrounding that turd. I do know that the oversubscription numbers are a red herring and meaningless out of context that nobody except the book-runners really have. At least the Everquest IPO got pulled, so there is some hope that not just any trash can get foisted on the rubes.

Anyway, the CDO issue is likely to get buried as quickly as it bubbled up. I mean who would want to mark to market a CDO-cubed that is worth nickles on the dollar. If anyone ever thought that Wall St. was a giant ponzi scheme, that debacle would hardly disabuse them of such a notion. Systemic risk is everywhere, but the jugglers and the clowns do a damned good job of papering over it, eh?

dbohntr said...

tim,
thanks, classic as usual.

Jerry said...

Tim,

A great video! I had to watch it twice to confirm what I saw... that with glasses, you briefly looked like David Duchovny.

Back to my heavy drinking...

yuri said...

Something's up in the semiconductor sector - I would surmise a buyout is being anticipated. I have been holding a zillion MU Aug $13 calls, which used to be way out-of-the-money, but no longer. Cash ed in a few, but I'll continue to hold. AMD was up an obscene 8% today - maybe they are the target and I am dead wrong - it certainly is cheap enough.

Thomas said...

Tim, did you ban that beanie111 from the blog? I'm waiting for the defense of the "bottoms" list. I particularly wanted to hear about SBUX. That hypercaffeinated stock fell thru a hard support level and won't find any wood until $22/$23. It smashed through in such a convincing fashion (check out the vol, dude), I'm going to short more.

Tim Knight said...

"Tim, did you ban that beanie111 from the blog?"

Don't you think if I could individual posters from this, that I would? God almighty. I mean, that turd "tradertime" posts now and then.

Beanie is easy enough to figure out. If solar moves up on a given day, he posts 11 times with exclamation marks. If his stocks don't go well, he's mute.

I, on the other hand, have to post no matter what, and deal with all the nimrods regardless.

Leisa said...

"you briefly looked like David Duchovny."

Jerry notes, and I confirm, the above.

John said...

Whenever they roll Bill Fleckenstein out, start buying hand over fist. I watched Wed's Fast Money and they rolled this guy perennial bear out. He is usually 1000 pts early and makes Tim sound like Abbie and Joey Batts back in the day.

JakeGint said...

Tim said:

I, on the other hand, have to post no matter what, and deal with all the nimrods regardless.

When did this become a hunting and fishing blog?
_______________________

Watch out for that Duchovny tag from the fanzinas... for some inexplicable reason that's actually a compliment.

newequity said...

I knew this market was turning and called the top perfectly yesterday. I will take some of my profits right here and let the rest ride.

JakeGint said...

Take 'em quick, New.
________________________

Agree on that SBUX call, Thomas... and think that 23.10 is the next stop.

JakeGint said...

Re: Beannie--

I know there are quite a few who have their hate on for the poor fellow, and believe me, we give him tons o' schite on his own blog when he gets hyperbolic.

But he may be right about these solars. They seem to be leading this current bull, and as such, make for a good barometer on future overall market moves both up and down.

They are "en feugo" today, btw.

newequity said...

Covered the rest of my Q puts from yesterday for a nice 3k profit. Re-enter only if we rally back near the highs next week.

newequity said...

"Yes we are in agreement. There is a striking resemblance if you look at the drop in February compared to the action over the last two days. Next leg should be down and it will come quick if history repeats itself. "

I was correct and made a nice profit, bears in control now but be careful.

JakeGint said...

Is this usually a sign of an approaching bear?

JakeGint said...

More of interest to the bearish set?

Tim Knight said...

Hey, I'll take the David D. comparisons, gladly. He's done quite well for himself.

Tim Knight said...

"Is this usually a sign of an approaching bear?"

Guys, you cannot have it both ways. In other words....

The market is BULLISH because the COT numbers show all the pros are long the market

And the market is also BULLISH because the short interest in huge, thus indicating the pros are short the market.

And don't tell me short interest is all little guys. It isn't.

AssetStrategists said...

Tim,

How 'bout those RUT Puts! So is there a double-bottom for the day between 12 & 1:20? (it's 1:20 now)Guess we'll know if we go above 831...

JakeGint said...

Tim says:

And the market is also BULLISH because the short interest in huge, thus indicating the pros are short the market.

So, in your experience, then, a heavily shorted market indicates an incipient bear?

'Cause that was the question. We don't know what the COT says until this afternoon, btw.

AssetStrategists said...

RUT: If you draw a Fib fan on a 3 m chart from yesterday's high to today's low. The last retracement jumped to the 50% line...

Chris said...

"Buying bonds? Are you insane? You better be buying 3mo treasuries...wow you are going to get BURNED!

Keep that duration ultrashort."

What's wrong with buying govt. bonds? Correct me if I'm wrong, but I thought govt. bonds were good in flat/bear markets. I'm no expert, so I picked a short to intermediate bond fund to place a portion of my money. I also have a substantial amount of money in a six month CD at 5%.

JakeGint said...

Shorting SBUX here (again) on break of 25.56.

On the Road said...

It's 3pm NY on friday - watching the Q's - the bulls wound up to swing at 2:50 - and could not reproduce upward mobility - as in yesterday - I'm on QID from yesterday's near hight...

I decided to follow this right up to the bitter end today....I liked your casual - " I think the markets going to go down" said on thursday for friday. It tipped me into staying in
Tim Keep on keeping on!!!!

Tim Knight said...

Jeez, you guys are such trading junkies. You never comment on all the NON charting stuff I put at the beginnings of these posts.

I bet you didn't even look at CyberCyl's picture.

Anyhoo. Happy down day to all...

Tom2oc said...

Hey Tim, looks like you must be having a field day today! Congrats! Will have to review the situation this week-end but so far I don't think my latest market TA review I worked on last night will be impacted. Lots of volatiliy in the coming weeks/months though but I remain sligthly more bullish than bearish. The full details are on my blog if you and others are interested. BKX is a big problem though today so I'm ready as never before to join your camp if required. No need to jump the gun! Have fun!

Tom

AssetStrategists said...

Isn't this the TA blog? I'm thinking of putting on the social commentary hat. Oh wait, where did it go? I know it was here last Christmas!

Tim, were you stopped out of BEAS?

JakeGint said...

Yes, Cyl is cute.

JakeGint said...

Tom2Oc, good to have you back.

Any word on the book?

Tom2oc said...

Hi Jake! Sorry to say that I posted on the blog this month that the printed version is unfortunately a no go. I started a new job so I have no time to deal with it and on top of it my son who was going to act as my printer on the copy machine and shipper landed his first summer job. :) Have a great summer!

Best,

ilanit said...

The Orange County equity investment Firm invests in network-enabled service companies, specifically those that leverage networks to enable communication, deliver content and facilitate commerce. Meritage is stage-agnostic; seeking opportunities where the Firm's operating expertise and sector knowledge can guide the strategic direction of its portfolio companies and create sustainable value.