Those interested in stock market: - One new high

[Beacon]

On Friday we had 827 new lows and one lone new high. It was.............Sturm Ruger.

And we all know what they make. Business must be good.

 

[strmrdr]

All of the firearms manufacturers sales are through the roof since Obama was elected and Ruger is extremely well ran.

 

[beebrisk]

Date: 3/7/2009 2:09:02 PM
Author: strmrdr
All of the firearms manufacturers sales are through the roof since Obama was elected and Ruger is extremely well ran.

Saw a small piece on CNN a few weeks ago about gun stores.

I don''t remember where this particular store was, but the owner pointed behind the counter to a framed "Salesman of the Month" photo--of our new president.

 

[movie zombie]

Date: 3/7/2009 2:09:02 PM
Author: strmrdr
All of the firearms manufacturers sales are through the roof since Obama was elected and Ruger is extremely well ran.

actually, it was bush and company that got me stock piling 3 years ago.

mz

 

[tradergirl]

Netflix and AutoZone are also doing well.

Now, Beacon, what do you think about this? I have been leaning toward playing a potential rally in the high beta techs but consider this. Are you a fan of efficient market theory? This came from a discussion on root causes of this recession and alternatives to FASB 157, i.e., mark to market even in distressed markets such as we have now. When that was implemented in late '07 along with eliminating the uptick rule, it really was like ringing the dinner bell for short sellers.

*****************************************************************************

I prooppose only one thing: the cessation of all models based on Fama's efficient market hypothesis. Now more than 50 years old, it's safe to say that markets are not efficient, particularly in the 'event of an event'. Kahneman and Tversky (1979, Prospect Theory), if correct, refutes Fama and the efficient market hypothesis -- that at times, particularly during extreme events, the market is not rational and that market prices fail to properly discount for all known public knowledge. For example, if cash flow analysis of subprime MBS results in a value of, say, 50-60 cents on the dollar, but the market quote is 20-30 -- perhaps because of distress selling, an oversupply to demand, or lack of confidence -- then why are we valuing them at the latter? Could it be that emotions and human behavior have influenced beyond what would be deemed as rational pricing?

The answer is emphatically yes, and the current distress prices of such assets are great examples, and are no different from past crisis. The sharp trader, the smart money, with full understand that the efficient market hypothesis is wholly flawed, will, at some point, capitalize on the situation.

This begs the question: if subprime MBS and CDOs are so mispriced in the market -- because the markets are inefficient -- but are forced to reflect those prices as fair, based on efficient market hypothesis-based accounting standards, is smart money patiently waiting and/or trying to find a way to capitalize on that discrepency? I think so.

If that's the case, then logic follows: at some point, securitized products will be viewed as sorely undervalued; that capital will swiftly flow into that market to catch those undervalued assets; that the shore-up of those assets will stop mark-to-market activity (despite it possibly being suspended); that banks, which hold those assets, will suddenly be view as undervalued; and that there develops a fierce rally (bear market or sustained) lead by those banks, and thus catching big bears off guard.

 

[strmrdr]

Date: 3/8/2009 12:07:09 PM
Author: tradergirl
If that''s the case, then logic follows: at some point, securitized products will be viewed as sorely undervalued; that capital will swiftly flow into that market to catch those undervalued assets; that the shore-up of those assets will stop mark-to-market activity (despite it possibly being suspended); that banks, which hold those assets, will suddenly be view as undervalued; and that there develops a fierce rally (bear market or sustained) lead by those banks, and thus catching big bears off guard.

nope for 3 reasons....
1: they want to keep their jobs and the yes men are saying no-no-no-no
2: the market is ran on emotion and they have to much negative emotion attached to them.
3: the government interference insured they will stay dead and likely be illegal by this time next year.

There is a one word answer to why the models always fail and that is emotion.
When emotions are flying high and everyone is talking about how much money they are making it leads to insane risks on little value which leads to spectacular crashes.
Case in point.... the housing and stock market today

The stock market in almost every crash since the market opened.
Japanese real estate crash, same thing.

Think about the dot bomb...
Same thing billions of dollars thrown away on stupid ideas because emotions ran high it is the "NEXT BIG THING" and everyone is talking about it.
To much money in and to little value....
BOOM CRASH!

The Great depression followed the same pattern if one cares to read the history books.

The drop after 9-11 again emotion but for a different reason.

No model can accurately predict human emotion.

 

[tradergirl]

Emotion is why charts and technical analysis, particulary candlestick charts, are so useful.

 

[tradergirl]

I predict a fierce bear market rally beginning very soon if not tomorrow which will be hailed by the O administration and their media sycophants as proof positive of their "policies" working.

Which will simply be a mean-reverting mechanism. The market is grossly oversold by all possible metrics and must revert to the mean at least.

Which will spawn many threads here along the lines of, "See? Obama is right!"

LOL. He''s been "wrong" for 3000 Dow points so far.

 

[strmrdr]

Date: 3/8/2009 1:56:09 PM
Author: tradergirl
Emotion is why charts and technical analysis, particulary candlestick charts, are so useful.

no chart can accurately predict human emotion.

Human emotion isn''t 2d it is 5000d
Human emotion is not logical and not mathematically sound.

 

[Beacon]

I cut and paste from a bit I posted in PPs foreclosure thread a few days ago:


ANother point of view, from the investment side:

If you were offered PPs mortage for sale, what would you pay for it? She is in default, it is going to foreclose, you are short of funds anyhow. You will pay next to nothing for this toxic asset. If you are the bank owning it, you have to write it down on your books to market value - you take a huge loss, there is no market for this.

But let's say someone offered PP a different deal. She could stay in her home and the new loan amount is 140K, about what the place is worth. PP, would you stay? Some folks will stay.

Then this worthless toxic loan is no longer worthless, in fact it is a great security as PP is a great owner. The bank hit is taken, the asset is now performing. Depending on how much of hit was already taken by the bank, this asset is worth more than the current book value of the toxic asset.

It could happen. And if it does, watch out above. Money to be made

 

[Beacon]

On efficient market theory: for those not into this stuff, efficient market theory figures that all information known to the markets is currently priced into the security in question. Therefore any outperformance you might have is based on luck.

This is not really true at all. Especially now, when some of the the things known to the market are: "I am losing everything and am scared to death.", "Obama's plan will wreck the country." "I cannot take another day of this awful market." Yah, we know.

TG, I think there will come a catalyst (I do not know what), that will cause the financial companies ( and many other type companies) to be revalued upwards. One such concept I posted regarding PPs foreclosure example. However, this could come from lower levels and may not include all of the financials in any meaningful or sustained way.

I don't try to time markets cause I am pretty bad at it.

 

[tradergirl]

Look at PennyMac

Buys mortgages at 30c/$$ near or in default

Makes deal w/homeowner to reduce principal, pay 50-60%

Makes the spread.

Only loser then is the idiot bank who made the loan and the bond "investors."

 

[tradergirl]

Possible catalysts: suspension of fasb 157, re-implementation of uptick rule
watch out above

 

[omieluv]

Date: 3/8/2009 2:08:47 PM
Author: strmrdr

Date: 3/8/2009 1:56:09 PM
Author: tradergirl
Emotion is why charts and technical analysis, particulary candlestick charts, are so useful.

no chart can accurately predict human emotion.

Human emotion isn''t 2d it is 5000d
Human emotion is not logical and not mathematically sound.

I know this is not the main topic of this thread and I can honestly say that I do not follow stocks or the market -- just something that does not interest me (*gasp*). However, I can say with a level of confidence that strmrdr is correct. Any sort of research in psychology is very difficult to carry out because there are so many variables that need to be isolated. Even if most variables are isolated, which could mean that the experiment was conducted in a lab setting, which may or may not generalize to real life situations. One might be able to look at historical trends to generate a theory or two of what people are likely to do, which is a good starting point. However, one must remember that correlation does not mean that something will happen, even if it could appear statistically that there is a high probability of it happening. There are often variables that we might not realize that could be influencing the scenario, so one must be cautious when interpreting data from charts, statistics, etc.

 

[Harriet]

BEACON!

 

[Beacon]

Date: 3/8/2009 5:15:41 PM
Author: Harriet
BEACON!

Are you horrified that I would disagree w/ Eugene Fama?

C'mon, if effiicient market hypothesis worked all time there would be no internet bubble, no real estate craze, no broken AIG. I think efficient market theory works very well, up til it doesn't.

I think one could figure that all that is "known" results in a price and then there are many "what if's" weighted by their expected value which adds onto or subtracts from a price. Sometimes those expected values are way, way off.

Didn't someone sell a book about this? The Black Swan.

 

[Beacon]

Date: 3/8/2009 12:28:43 PM
Author: strmrdr

Date: 3/8/2009 12:07:09 PM
Author: tradergirl
If that''s the case, then logic follows: at some point, securitized products will be viewed as sorely undervalued; that capital will swiftly flow into that market to catch those undervalued assets; that the shore-up of those assets will stop mark-to-market activity (despite it possibly being suspended); that banks, which hold those assets, will suddenly be view as undervalued; and that there develops a fierce rally (bear market or sustained) lead by those banks, and thus catching big bears off guard.

nope for 3 reasons....
1: they want to keep their jobs and the yes men are saying no-no-no-no
2: the market is ran on emotion and they have to much negative emotion attached to them.
3: the government interference insured they will stay dead and likely be illegal by this time next year.

There is a one word answer to why the models always fail and that is emotion.
When emotions are flying high and everyone is talking about how much money they are making it leads to insane risks on little value which leads to spectacular crashes.
Case in point.... the housing and stock market today

The stock market in almost every crash since the market opened.
Japanese real estate crash, same thing.

Think about the dot bomb...
Same thing billions of dollars thrown away on stupid ideas because emotions ran high it is the ''NEXT BIG THING'' and everyone is talking about it.
To much money in and to little value....
BOOM CRASH!

The Great depression followed the same pattern if one cares to read the history books.

The drop after 9-11 again emotion but for a different reason.

No model can accurately predict human emotion.

Ummm, Karl, your argument is supporting TGs thesis, not negating it.

 

[Harriet]

Date: 3/8/2009 5:15:41 PM
Author: Harriet
BEACON!

You know perfectly well what I fear, dear.

 

[tradergirl]

Yes, Tasseb (sp?)

another one I loved, "Traders, Guns & Money" published in ''07 or ''06

and here''s Greenspan''s Black Swan. Scroll down a bit for the pic

http://www.itulip.com/forums/showthread.php?t=3532

 

[Beacon]

Date: 3/8/2009 9:59:36 PM
Author: Harriet

Date: 3/8/2009 5:15:41 PM
Author: Harriet
BEACON!

You know perfectly well what I fear, dear.

Ok, I figure you are not too concerned that I am insulting Dr. Fama.

Here's the thing: handgun sales always rise during recessions. So do bible sales. Nelson Thomas the bible publisher (no longer public I think) always did well in bad times. So, um, let's hope it is just the usual nervousness.

Maybe we should buy some Kevlar vests?

 

[strmrdr]

Date: 3/8/2009 9:12:52 PM
Author: Beacon
Ummm, Karl, your argument is supporting TGs thesis, not negating it.

not really anyone touching them right now using others money risks lawsuits and maybe jail time if they bet wrong.
That is how ugly the emotion attached to them is right now.

 

[Harriet]

Date: 3/8/2009 10:55:51 PM
Author: Beacon

Date: 3/8/2009 9:59:36 PM
Author: Harriet

Date: 3/8/2009 5:15:41 PM
Author: Harriet
BEACON!

You know perfectly well what I fear, dear.

Ok, I figure you are not too concerned that I am insulting Dr. Fama.

Here''s the thing: handgun sales always rise during recessions. So do bible sales. Nelson Thomas the bible publisher (no longer public I think) always did well in bad times. So, um, let''s hope it is just the usual nervousness.

Maybe we should buy some Kevlar vests?

Maybe.

Did I tell you about the Wall Streeter who bought an inflatable boat and is storing it somewhere near the Hudson? His rationale is that, in case of emergency, he can use it to get home to Jersey. And then what?!

 

[Beacon]

Date: 3/9/2009 1:36:28 PM
Author: Harriet

Date: 3/8/2009 10:55:51 PM
Author: Beacon

Date: 3/8/2009 9:59:36 PM
Author: Harriet

Date: 3/8/2009 5:15:41 PM
Author: Harriet
BEACON!

You know perfectly well what I fear, dear.

Ok, I figure you are not too concerned that I am insulting Dr. Fama.

Here''s the thing: handgun sales always rise during recessions. So do bible sales. Nelson Thomas the bible publisher (no longer public I think) always did well in bad times. So, um, let''s hope it is just the usual nervousness.

Maybe we should buy some Kevlar vests?

Maybe.

Did I tell you about the Wall Streeter who bought an inflatable boat and is storing it somewhere near the Hudson? His rationale is that, in case of emergency, he can use it to get home to Jersey. And then what?!

Ha ha hah - this is the best I have heard yet.

Oh sure, once we are all in New Jersey everthing will be safe and sound and the bad guys can''t get me and I can hide under my bed til everything is ok. Sounds like a plan to me.

Hello Prozac!

 

[Harriet]

Any pharmaceutical stocks low enough to buy?

 

[tradergirl]

Why do you want them? They have a big fat target on their backs under Obama''s "health care reform."

 

[Harriet]

I'm so mad at a number of his tax reforms that I haven't been following his health care ones. What is he up to now?

 

[tradergirl]

Any time you have "progressive" health care reform attempted, look out below for big pharma. They are the devil, fixing prices, experimenting on the public and overcharging the poor for medicine they "need" (like Viagra for instance?????). Soooo . . . the last time they were under this kind of "scruitny" was in the ''93 time period when Hillary was attempting to take over the world.

I''d probably think about playing health care with stem cell or biotech rather than big pharma.

 

[tradergirl]

All aboard the Rally Express. Don''t short this one.

 

[Beacon]

About time.

I feel like the blood is back in my body..................at least some.

 

[Beacon]

Date: 3/8/2009 2:06:28 PM
Author: tradergirl
I predict a fierce bear market rally beginning very soon if not tomorrow which will be hailed by the O administration and their media sycophants as proof positive of their ''policies'' working.

Which will simply be a mean-reverting mechanism. The market is grossly oversold by all possible metrics and must revert to the mean at least.

Which will spawn many threads here along the lines of, ''See? Obama is right!''

LOL. He''s been ''wrong'' for 3000 Dow points so far.

Nice call TG!