Is anyone else just looking at some of today’s moves in fascination like me, can anyone else think of examples of a major institution’s stock like FRE and FNM being down 90% and the market rallying in relief, I know all the priced in stuff and how the market can rally at points of maximum bearishness but I’m just saying isn’t it truly amazing? This is what I love about markets, they never stop surprising us, it’s like a constant display of shock and awe. And look at the FX markets again today, EURUSD, GBPUSD, EURJPY all having 300-500bps range days, truly staggering. We may criticise the number of failed systems on here especially in FX but we really should expect it in this environment and in some regards welcome it, this kind of market is the best trading education money can buy. It might sound trite and not what you want to hear right now but if you’ve bombed in the last few days try not to think about what you’ve lost, think about what you’ve learnt.
Jon,
I’ve been through this type of stuff before - 1998 to 2003 period. I am glad to have learned my lessons then and although I know what I am doing now will be quite successful - this last 12 months has definitely reiterated those very same lessons.
With government intervention jerking things all over the place. . .you really have to stick to what you know works and in time results will follow. Definitely in stark contrast to what most have experience (all roses) since 2003.
What I do like is the opportunity to now profit off Bear Market and “correction” periods and the leverage (when used appropriately) with futures. When I started my new funds I figured progress would show soon - unless we get a prolonged up and down period. Well they are progressing - despite the seemingly inane environment, but will do much better when we get back into a decent length of trend.
Being able to “trade another day” is directly related to MM (money management). But yeah, a vendor or the little guy has to absolutely factor in the most extreme conditions as you’ve heard me harp about this whole time, because the playing field definitely is not level.
But in the meantime, if we find a scalping system with low slippage/commissions. . .and a decently long track record I guess we could all be making $$$, lol. Or my covered call funds that are HUGELY outperforming the broader indexes: http://www.kingdomcapital.com/performance/currentperf.htm over the last 52 weeks and this year. Last year only allowed a scant 12% return, but it all averages out and with a lot less DD.
I am going to track these starting in '09 for anyone who is interested. One account to mimic my annual results each year and another to compound each year on top of the next! I do these funds in my sleep and the results are real. . .but I am opting for the larger average annual return (and more DD) because with all the recent lessons with futures. . .I pretty much know how to do what I will get (now) in my sleep. Pretty cool to learn all the lessons up front!!
Regards,
Gilbert
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I, for one, am having a blast today in this playground.
Of course I’m just trading paper money, which we all know gives a trader super-power in the same way canned spinach worked for Popeye.
Were it real money I would be terrified.
Actually I did try some live trades, only in the most reassuring setups, and even then I didn’t fell comfortable risking more than a nominal amount.
But for paper money, this market easily beats Monopoly for fun.
Or my covered call funds that are HUGELY outperforming the broader indexes:
which of course, is safely out of the view of collective2. Funny how only your systems that are NOT tracked on C2 seem to perform well…
Laughable. I seriously doubt it.
Jon,
It’s really interesting time, but it’s hard to be cool philosopher if you’re in the market with the unbelievable turn over in public sentiments. It’s good for studying on paper… later… Kind of small talk “do you remember 87th?”, but it’s very bad for nerves in reality. 
Eu
African trypanosomiasis maybe?
And now an interesting weekend. Here’s a commentary on a trade I just entered in Corporate Investments this Sunday evening, does anyone disagree? Thoughts, comments welcome as always.
This has been a tumultuous weekend in dealmaking but if we can step back for a moment and consider what has transpired I think there are reasons for optimism. There were several issues at stake going into this weekend so let’s take stock of what took place:- AIG has laid all their cards on the table and announced a detailed restructuring and planned sale of assets, Lehman weren’t able to secure a buyer and will likely now undergo a calm and orderly insolvency, and Merrill acutely aware of the ‘who’s next?’ bandwagon encircling them brilliantly sought to make a deal themselves the very same weekend and did so very successfully. So all in all as regretful as Lehman’s demise is (and I say that as a loyal former employee) there is a lot of resolution in these events, sure there’s going to be some concern as those assets unwind in the market but concerted efforts to provide liquidity are already being discussed and with the S&P’s already indicated to gap lower by 35pts and less than 2% above the last swing low and major support I can’t help but think it represents an excellent buying opportunity.
Interesting commentary. It is a rare lucid counterpoint to the prevailing expectation of an imminent crash this week.
I do hope you are right, but would also welcome a possible crash as it will provide a clear and well-defined bottom to this bear market. If it happens, the worse will be in the past and the future will be brighter.
Be sure to use a good stop on this one if your trade was a long!..
Jon,
If you believe in catching falling knives (imho). I think capitulation will occur with Vix 40+ and this time will be decisive “bottom” - no question as a classic “run for the exits” unfolds.
This thing can’t end this smoothly, there will have to be an all-out panic. When (if) this support breaks, we could get this. So yeah, I wouldn’t be bottom-fishing - just yet.
Regards,
Gilbert
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I don’t believe in catching falling knives at all, that would imply buying something without reason (other than it just had an outsize move to the downside), I personally don’t believe the Vix has much predictive value, but regardless it would be difficult to argue that there isn’t already a lot of emotion out there in this move. I would never make the mistake of trying to predict THE bottom or even A bottom, you will go broke many times over before you ever succeed, this is just another trade with favourable risk/reward imo.
And yes I have a stop thanks Wladimir!
Interesting article that may deflect some hate away from the errant vendor and onto the real culprits -
BULLETIN LEHMAN BROTHERS FILES FOR BANKRUPTCY PROTECTION
DAVID WEIDNER’S WRITING ON THE WALL
Risk is gone on Wall Street
Commentary: Missing confidence shakes the Street’s foundations
By David Weidner, MarketWatch
Last update: 11:02 p.m. EDT Sept. 14, 2008Comments: 186
NEW YORK (MarketWatch) – Where did it all go wrong?
Was it almost 10 years ago when after the bailout of Long-Term Capital Management when Federal Reserve Chairman Alan Greenspan waved off lawmakers trying to rein in hedge funds?
Was it during the past five years when the rampant practice of securitizing mortgages took responsibility out of the loan-making game?
Was it the expiration of the uptick rule that allowed short sellers to drop rumors like matches on the gasoline of market panic?
Wall Street was supposed to be a place where everything had its price and where glory was for risk-takers. Now, four firms have been allowed to collapse and the only buyer, J.P. Morgan Chase & Co., agreed to a deal only when the government guaranteed chief executive Jamie Dimon that his bank would have almost no exposure to risky assets.
Six months later Lehman Brothers Holdings Inc. appears headed for bankruptcy. Bank of America Corp. and Barclays PLC pulled out of the talks during the weekend because the government refused to accept the downside of risk.
Good for you, Henry Paulson. It’s about time someone put moral hazard back on the industry.
And what’s Wall Street doing with it? Punting, of course.
On Sunday night The Wall Street Journal’s online edition carried the headline “Wall Street Firms Scramble to Avert Crisis.” I’m not sure what “scramble” means but if it means cover your ass since the taxpayers have cut off the tap – it’s a dead-on description.
Raise your hand if you think Merrill Lynch & Co.'s John Thain just happened to be thinking about partnering with Bank of America because there would be good synergies. I’ve got some mortgage-backed securities you might be interested in.
Hypocrisy
On Wall Street they like to dazzle you with big numbers. Private equity giant Blackstone Group LP has $120 billion in assets under management. Its chief, Steven Schwarzman, cashed in nearly a half a billion dollars after the firm’s public offering. But neither could spend $1 on Lehman.
Schwarzman can go back to eating exotic food and complaining how hard it is to find good help.
Warren Buffett saved Salomon Brothers nearly two decades ago, but apparently his appetite for risk runs about as dangerous as Wrigley’s gum these days.
Dick Fuld, the soon-to-be former chairman and chief executive of Lehman, and Jimmy Cayne, the former CEO of Bear Stearns, tried to outdo each other with compensation.
The “hard-charging” Fuld took home about $45 million last year. But that was OK because he was a lifer at the firm who had helped rebuild it a couple of times when it neared collapse. No one ever thought that maybe the executive people liked to call the gorilla was one of the reasons the firm kept running into trouble.
Cayne’s net worth soared to $1 billion at the end of 2006, but we’re supposed to feel sorry for him because he lost a fortune in the collapse and has to live in a $26 million apartment in the Plaza Hotel.
The employees of these firms aren’t much better. They can’t figure out why the market has lost confidence in their eggshell companies built on mountains of combustible derivatives. They scowl at journalists, pay coffee vendors not to serve reporters who make a fraction of what brokers do. They blame the media for their woes, not their banking counterparts who have cold feet.
Wall Street tells investors to buy and hold and then goes on a bank run against two of its own.
We’re told to do our homework, that book value matters. Lehman is worth $38 a share by that measure.
As one investor wrote to me Saturday night in an email, Wall Street is full of shills. “The shills had four deals they could have taken some risk on; Bear, Freddie, Fannie and Lehman … where are the risk-takers (now)?”
'A seminal event’
Samuel Hayes, the Jacob H. Schiff chair of investment banking at Harvard Business School, says what’s happening is a watershed in the history of Wall Street. He sees super firms controlled by commercial banks rising. He sees new, global regulations that will forever change the capital markets.
“The mantra we’ve operated under since the Reagan administration has been allowing deregulation to flower and counting on the marketplace to discipline players in that marketplace"
- Samuel Hayes, Harvard Business School
"The mantra we’ve operated under since the Reagan administration has been allowing deregulation to flower and counting on the marketplace to discipline players in that marketplace,” Hayes said. “Without having the heavy hand of government regulation carrying that role” the market failed.
Hayes thinks boutiques new and old, like Greenhill & Co. and Evercore Partners, will take over the work that investment banks used to dominate.
His assessment makes perfect sense. The weak will be eaten. The strong will emerge stronger. It’s Darwin. It’s Adam Smith. The market will grow healthier from this pruning. The business is cyclical and blah, blah, blah. Cover your ears. You will be hearing it all week as people try to make sense of what’s happened during the past 72 hours.
But the death of Lehman and the panic it has ignited on Wall Street underscores another truth: When it comes down to it, you’re on your own, suckers. Investors have always been the ones to take on risks. Wall Street firms just like to profit from them.
It’s the same lesson we learned in the stock market panics of 1907, 1929 and 1987; the scandals at Standard Oil, Drexel Burnham Lambert, Long-Term Capital Management and so many more.
Where did it go wrong? We kept giving them our money.
Regards,
Gilbert
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