where would you invest your $$$''s in this economy ?

[Dancing Fire]

rental properties? stock market? hold on to cash? precious metals? or???

 

[steph72276]

The same way I would in any other time. Mutual funds with long track records. I''m in it for the long haul, so the way I see it is that everything''s on sale right now. I really think America''s strongest companies, Home Depot, WalMart, ect. will pull through all this just fine and their prices will go back up in the long term.

 

[tradergirl]

Oops. Then you don''t want to know that Janus'' downgraded to junk this a.m.

I just covered my "Geithner short" though and am long some large cap tech stocks. SOX ETF.

Tech is what will lead us out of this.

 

[Beacon]

A couple years ago a friend approached me wanting to know if she should invest in homes in Las Vegas, as her friend bought 5 houses and was doing well with her "investment" (speculation). I told her then that I did not know when it would happen, but that market was going to break down, it was a bubble and it would end badly.

So here we are at the opposite side.

Our equity markets can go lower, business can get worse. I cannot tell you when it will end, but this depression will end and top quality US companies will be a stunningly good investment over the long run.

Meanwhile, I would say do everything you can to conserve your cash.

I would also recommend to take very good care of your health. This could be a long recovery and you need to stay alive quite a while to take advantage!

 

[strmrdr]

Date: 2/23/2009 12:41:05 PM
Author: tradergirl
Oops. Then you don't want to know that Janus' downgraded to junk this a.m.


I just covered my 'Geithner short' though and am long some large cap tech stocks. SOX ETF.


Tech is what will lead us out of this.

Not in the very long term more and more of it is being done in India and China.
They are trying to move from makers to designers.
It will be a long bitter patent battle to keep them at bay.
I give the US tech industry 10-15 years tops as being the top dogs.

 

[tradergirl]

I hear what you''re saying but you can buy the growth companies in those countries too. I''m mostly talking about a sector vs. any specific company. In 1994 when that awful market bottomed, the last tech boom was born.

The S&P would be up today were it not for oil. Financials actually have a bid.

 

[Beacon]

What was so bad about 1994? I don''t remember it being bad.

 

[bebe]

Looking for Muni''s, I have Hybrid Bonds in B of A (keeping my finger''s crossed) and J P Morgan. ETF''s, some funds and about 75% cash, for now.
We are early 50''s, semi-retired, can''t go forever like this!

 

[HollyS]

Date: 2/23/2009 11:42:29 AM
Author:Dancing Fire
rental properties? stock market? hold on to cash? precious metals? or???

In my savings account that is guaranteed for far more than I have!! I might have to pay taxes on the percentage I took out of 401K to redirect to my bank account, but at least it will accumulate, not disintegrate.

 

[Abril]

Stock market for me, all the way!

 

[Dancing Fire]

Date: 2/23/2009 5:44:54 PM
Author: Abril
Stock market for me, all the way!

30 more days like this the S&P 500 will be at 0.

 

[Beacon]

Date: 2/23/2009 11:14:16 PM
Author: Dancing Fire

Date: 2/23/2009 5:44:54 PM
Author: Abril
Stock market for me, all the way!

30 more days like this the S&P 500 will be at 0.

I know! Since soon all the stocks will be worthless, I plan on buying all of Exxon, or maybe just all of Estee Lauder, and putting myself in as CEO and paying myself a big salary!

 

[Dancing Fire]

Date: 2/24/2009 12:41:51 AM
Author: Beacon

Date: 2/23/2009 11:14:16 PM
Author: Dancing Fire

Date: 2/23/2009 5:44:54 PM
Author: Abril
Stock market for me, all the way!

30 more days like this the S&P 500 will be at 0.

I know! Since soon all the stocks will be worthless, I plan on buying all of Exxon, or maybe just all of Estee Lauder, and putting myself in as CEO and paying myself a big salary!

or Tiff & Co...you'll get to wear all their jewelry,plus pay yourself a 5 mill annual salary.

 

[Harriet]

We''ve been buying financials, especially investment companies.

 

[Beacon]

I want to be CEO of Tiffany. When it goes to zero I will take over!

 

[Harriet]

May I be #2?

ETA: I meant "insurance", not "investment" companies.

 

[FrekeChild]

Shoes. Duh. Goes without saying.

 

[Harriet]

Thanks for the laugh!

 

[zhuzhu]

Date: 2/24/2009 3:49:19 AM
Author: Harriet
Thanks for the laugh!

Ms Harriet, what are you doing up so late, NY time?

 

[Harriet]

Mulling over the state of the world.

 

[Abril]

Wish I had invested more in the market yesterday. It''s up quite a bit today.

 

[tradergirl]

and big cap tech up the most

 

[Beacon]

Not really TG. Financials are way ahead of tech.

I would also add, so are the REITs. Bless their black hearts.

 

[tradergirl]

I don''t even count those. I''m talking about companies that will actually be here a year from now in their current form.

I bought Bear Stearns at 3 and sold it at 6; same thing.

 

[Beacon]

BXP, EQR, V, MA, ESS, WFC

They''ll be here in a year, count on it. And they are outperforming tech today.

 

[tradergirl]

I might make you a friendly 5 cent bet on Wells Fargo being here next year in its current form.

In the financials you always have to remember the "enhancing" effects of the double and triple long/short ETFs. I spent most of last year trading SKF (mostly up) and stopped doing it so much when they put in the "no short" rule on the financials. Weak shorts blown out today probably. Here's something interesting to read on that subject. You can see that one fund could bring the whole complex down (theoretically). I got an email this afternoon saying my clearing firm won't let you trade them on margin anymore or write naked options.

SKF Wags the Dog




What could cause melt in underlying stocks.


Adam Warner
Feb 23, 2009 11:45 am

A reader whom I'll call Racer X sent me some numbers on Friday with regard to SKF.

And Friday's numbers were even more staggering than last week's. What's it all mean?

Each share of SKF (or any equity ETF, for that matter) could be arbed against a basket of the underlying. In other words, if someone owns 100 shares of SKF, he could theoretically lock in money if he could buy the entire basket of stocks in the IYF for less than he paid for SKF. Conversely, a short in SKF could theoretically lock in money, shorting the whole basket of IYF stocks.

All the above, of course, adjusted for the leverage and the dollars involved.

The salient point is that the stocks in IYF will move in line with the price of SKF on a given day. And if SKF volume comprises such a huge percentage of volume in the underlying names, you clearly have the potential for a "wag the dog" situation.

For example, let's say Evil Short Manipulating Hedge Fund Guy buys 1000 SKF at $195. That translates into $390,000 of financials that the opposite side of the trade has now gone long. JPMorgan (JPM) comprises 9% of that. So one trade produces about $36,000 of selling pressure on JPM, or about 1800 shares.

Now remember, 40 million shares of SKF traded Friday. As did 32 million shares of FAZ, which translates into an additional $7 billion of so in the financial space.

Before we get all conspiracy-theory, keep several things in mind. Remember that most shares of these pups just flip between parties. Over and over again, they're primarily trading vehicles. At least, they should be.

The point, though, is that potential exists for someone to cause their own meltdown in the underlying stocks when the volume of the ETF can account for such a large percentage of the volume of the underlying. In the above example, the volume accounted for by SKF actually exceeds the volume in TRV.

What to do? My friend George jokingly suggests we create an ETF czar. But seriously, it's entirely possible no one actually thought these pups through from any standpoint when they allowed them to be listed. Between the compounding math that ultimately trashes them, to a situation like this where they got too big and too popular and have now become the de facto market in financials, they truly should not have gotten to market.

But hey, who could have possibly imagined this?

No positions in stocks mentioned.
Adam is a proprietary option trader with Addormar Co, Inc. He traded as a member of the American Stock Exchange from 1988-2001, and in several off-floor locations since then. He currently pens a blog at http://adamsoptions.blogspot.com/ dedicated primarily to education about options.
Adam welcomes your comments and/or feedback at [email protected]

 

[Dancing Fire]

Date: 2/24/2009 6:36:20 PM
Author: tradergirl


I might make you a friendly 5 cent bet on Wells Fargo being here next year in its current form.

In the financials you always have to remember the 'enhancing' effects of the double and triple long/short ETFs. I spent most of last year trading SKF (mostly up) and stopped doing it so much when they put in the 'no short' rule on the financials. Weak shorts blown out today probably. Here's something interesting to read on that subject. You can see that one fund could bring the whole complex down (theoretically). I got an email this afternoon saying my clearing firm won't let you trade them on margin anymore or write naked options.

SKF Wags the Dog

losing my A$$ on UYG,VLO,MSFT.

 

[Beacon]

TG you are bringing up a really good point.

Those double long/short ETFs are terrible instruments. Not only are they ineffective, but they cause increased volatility in the underlying equities.

It is not an area that I have done deep study upon, but observation says a few things: first, those funds rack up huge unrealized gains and losses that can descend on the unwary investor at any time. Look a the the fiasco of the Rydex energy funds. Second: one has to question the underlying framework of the investment and the companies, many of which are new and potentially unstable. Last, they provide a convenient vehicle for manipulation by arbs and increase volatility.

To illustrate how ineffective the instruments are outside of day trading, compare SKF and BAC. On Jan 18, 2008 SKF was 129, BAC was 35. Today SKF is 161 and BAC is 4.80.

SKF only returned 24% between those dates and BAC fell 86%. What a totally ineffective double short fund! Plus, there were probably large capital gains passed to the investor at the end of 2008. Total waste of time, better to just be short BAC and have the return you deserve for the risk you are taking.

Those ETFs remind me of "program trading", the villian of the 1987 crash. Yep, they could cause trouble. If we ever get any relevent regulation out of the SEC, maybe they cut these useless funds down.

 

[tradergirl]

Someone didn't think that one through when they created them. Of course in those days, nobody believed the banking system would ever collapse the way it has.

That said, they are simply superb trading vehicles though. I made a lot of $$ on them last year but never held overnight even once. Did use options. The double long ones "should" work as well when the market bottoms and starts to recover.

BTW they kept pace w/the underlying until about September of last year when the govt and SEC started screwing around with short sellers. For instance, in July the SKF was 200 while the Dow was 10,000. Now the Dow is 7,000 and SKF 165.

ETA: I know program trading is another one people love to hate but it's been around since the 80s although is now probably 75% or more of NYSE volume (maybe less now that so many IBs are gone?). Again, it's something that can be "used" by traders to make money (via NYSE tick and trin watching)

ETAA (I keep thinking of stuff) Remember too, re your BAC vs. SKF theory, in September the govt made everyone buy in their bank shorts and prohibited new ones for awhile. That made SKF one of the only ways to express your opinion of the future direction of the banks. On the morning after they banned short selling in banks, the SKF gapped down from 114 to 89. A screaming screaming buy. It subsequently went to 300 a few months later.

 

[tradergirl]

DF: You want to see a real divergence, look at Amazon. 62 bucks or so, in early 2002 when the market was higher than this, it was 9. I think Amazon is the best company in America and all corrections can be bought in it.