Whatever is really going on with GE (credit spread issues, raising capital, paying Warren 10% and so on), will we look back on this week has having been a crucial turning point?The turning point I would hope for is not necessarily that the bottom was put in on Monday (although that would be nice) but more that the "historic" volatility comes to an end, the news becomes far less dramatic and then at some point down the road the market turns up quietly.
The idea that GE, huge financial exposure notwithstanding, is in serious trouble seems unlikely. Strained, sure, but trouble enough to justify the rates it is paying to Warren, I doubt it. Maybe GE is taking a page from Goldman Sachs about hiring Buffet as a spokesperson.
Long before the crisis started I mentioned the idea that any company can fail and we have seen that but I doubt GE is facing that and I think its rush to raise money this week is an extreme reaction--probably an over reaction--to what is happening.
I have been thinking 1095 will be the bottom in stocks but that is just an opinion, whatever the final number is, I am saying that after this week, the search for the bottom could be a lot quieter.
Well I hope so anyway!
17 comments:
I'm in agreement. I sold some puts ($20 strike) because the premium was juicy (90% vol on GE is a multi year high) and hey, if I get GE for less than 20, I think that's a heck of a deal. Because like you, I don't believe GE is going out of business. Will they limp along for awhile? Probably.
The low was not put in Monday since we have hit a new low today.
anon,
what do you mean? the low monday was 1106, the lowest i have seen today is 1122(but did not check the quote) but either way no where near 1106.
I am down about 17% this year in my retirement account and will fire my advisor if he doesn't take action.
It'd be nice if we had hit the lows this week. Roger you've said before (if I remember correctly) that once we're over the 200 day moving average you'll start to go into the market in stages, to reduce the chance of being faked-out. Any concrete practices for that (e.g. 10% of total portfolio a month whilst above the line) and is it the SMA or EMA you use?
And thanks for all the posts. Please, please keep them going.
not really a systematic approach, for me it has to depend on what the market gives.
I would either add a couple of names at first, take off the double short if I still have it at that time or maybe both. It jsut depends when we get there.
I used to use EMA but switched to SMA.I view that not as different shades of gray but different shades of light gray.
GE doesn't have access to the Fed discount window like a regular bank. So they can't get the easy liquidity.
roger,
lots of crosscurrents everywhere, so i don't know if this will really make much difference. no one trusts anyone else--but from what i read, the biggest unknown is who has what exposure to over-the-counter credit default swaps (cds). the org that arranges settlements will run auctions to determine the exposures on cds' for fnm, fre, leh, et al on given dates from today thru oct 18. this may be wishful thinking, but if i were a bank i might be very averse to lending to another bank until i knew the other banks' cds exposure. if so, perhaps this will at least stabilize the credit markets soon. here's hoping...
gjg49
that is exactly one big facet of all of this. there are many others but between having just gotten back from the gym and trying to watch some baseball i don't wnat to try to recite all of the ones I know right now.
Roger,
Thanks for all your comments and perspective.
Sarah Palin’s stock holdings :
iShares MSCI Australia Index (EWA) is an ETF that invests in Australian stocks. It has a PE of 13 and pays a yield of 5.33% .
iShares MSCI Belgium Investable Market Index (EWK) is an ETF that invests in Belgium stocks. It has a PE of 9 and pays a yield of 9.98% .
iShares MSCI Spain Index (EWP) is an ETF that invests in Spanish stocks. It has a PE of 10 and pays a yield of 4.56% .
International Game Technology (IGT) makes and sells computerized gaming equipment. It has a PE of 14 and pays a yield of 3.10% .
Intuit Inc. (INTU) offers business and financial management applications for small and medium sized businesses, and financial institutions. It has a PE of 23 .
KBW Capital Markets ETF (KCE) is an ETF structured to track the total return performance of the Capital Markets index. It has a PE of 15 and pays a yield of 1.37% .
National Oilwell Varco, Incorporated (NOV) makes and markets systems and products for the oil and gas industry. It has a PE of 13 .
Roper Industries Inc. (ROP) makes and sells energy systems and controls, and scientific and industrial imaging products. It has a PE of 19 and pays a yield of 0.50% .
BP plc (BP) explores, produces, refines and sells petroleum. It has a PE of 7 and pays a yield of 6.20% .
Thoughts?
Roger, do you ever share your portfolio holdings? Do you manage just equities or do you manage fixed income as well?
anon 8:17 - is this a joke, or do you actually know SP stock holdings ?
anon 3:22 - "the org that arranges settlements will run auctions to determine the exposures on cds' for fnm, fre, leh, et al on given dates from today thru oct 18." ...to my mind this means once this is completed and made public we should find the market bottom ?
there was an aritcle on seeking alpha listing those ETFs and couple of stocks as Palin's holdings as disclosed on some state of Alaska site.
i take from the holdings that she is not wealthy which is not a knock. while i am not sure the VP is the best role for her she has achieved politcal success w/o a lot of wealth (so it appears to me) which is impressive to me.
i do not disclose portfolio holdings in the manner you mean, that would not be fair to clients. I mention names held in passing here and there and do share trade details after the trade is executed.
Do you think Buffett purchased too early... like his teacher Ben Graham... it took Graham 10 years to get to Break even... especially when Buffett is aware of the deriviates out there... one of our members on myinvestorsplace.com told us there is $63 trillion dollars in derivatives floating around... none of this makes sense... do you think Buffett was trying to restore calm... Really what should we do with our money now... the members are asking each other... no one knows... what do you suggest...
bot the GS and GE deals stand to be very lucrative for Buffet assuming they dont go out of business which is a good bet.
your question implies a scenario i've touched on many times before. I'm down 25%, what should I do now?
i've been writing about planning ahead for a bear market for as long as i ahve been writing.
i have no idea what to tell someone who has taken no defensive action consistent pre-planning.
My company is active in the commercial paper market both as issuer and investor. I know for a fact that GE has had difficulty rolling their commercial paper and has relied a lot on bank lines. Also, GE Capital is in denial and very slow to recognize losses in their commercial finance books.
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