3SOF

I was able to short it thru Scottrade.

I was also able to short thru Scottrade.

Interactive Brokers do not allow to short it :-(

Neither Ameritrade nor E*Trade had stocks available for short sale yesterday, and the price is too low today to even try it again. I'm afraid I have to sit this one out.

Maestro

I tried a short sell order anyway just now but both of my brokers still have the stock not available for short sell. Too bad.
--
Maestro

Quote from: David Randolph on December 07, 2006, 02:02:38 PM

QuoteBy the way at this moment would you recommend DXD and QID which are inverse ??

Those are interesting instruments for sometime in the future, thanks for showing them to me. At this moment no, we're in a Bull Market !


David here are some more to keep in mind in case the bull should suddenly die;

Short QQQ PSQ
Short S&P500 SH
Short Dow30 DOG
Short MidCap400 MYY

The UltraShort ETF's are leveraged 200% and their movement should be twice the indices.

UltraShort QQQ QID
UltraShort S&P500 SDS
Ultrashort Dow30 DXD
UltraShort MidCap400 MZZ

These ProShares ETF's work the same way as a short position on the indices, the only difference being that to short, you would place a long order. For that reason, you can even be short in IRA's, or without a margin acoount, or if you are turned off to shorting individual stocks.

Thanks for your reports

It looks like at least 3 people were able to short CUBA, but the majority couldn't. So, although I recommend closing this trade around $9, I'll close it for the 3 Stocks on Fire Portfolio at, say, around $12.5.

This way the portfolio gets some benefit out of this analysis, but not all, since many people couldn't follow the recommendation, even though they wanted too.

Brokers like IB, Tradestation and alike are good for very short term traders and day traders, but for trading every stock you want, Scottrade seems to be the best.

The current Net Asset Value per CUBA share is $8.89. Usually the stock trades around the current Net Asset Value per share, with a little discount or a little premium, but never with a 76% premium like it's happening now.

Here's more information about closed end funds, provided by CUBA's website: What is a Closed-End Fund?

So, my recommendation is for you to hold your shorts to close them around $9. For the 3 Stocks on Fire Portfolio purpose only I'll close the trade around $12.5.

(thanks for those powerful bear market instruments BigSully1)

gap is filled and ready to continue...

D   O   W   N   !   !   !

Quote from: 422fwhp on December 11, 2006, 07:44:48 PM
gap is filled and ready to continue...

D   O   W   N   !   !   !

I agree 422fwhp

I also think yesterday's rise was because it was the last day to get the $1 a share dividend:

«MIAMI--(BUSINESS WIRE)--The Board of Directors of The Herzfeld Caribbean Basin Fund, Inc. (Nasdaq Capital Market: CUBA) declared a year-end distribution from net long-term capital gains of $1.00 per share, payable on January 12, 2007 to stockholders of record December 15, 2006.»

Today it is the ex-dividend date, so I expect CUBA to fall not just $1, but say, at least $2. We'll have to pay the dividend later. Then tell me how much you paid, and when, to compare with my own records.

I still recommend you to close CUBA short around $9, this is a sure thing. For the 3 SOF Portfolio purpose only I'll close the trade at $12.5.

No, the ex-dividend is tomorrow, so we may have some more pain today, as people buy/hold because of the dividend (in fact, they don't have a clue what they're doing).

I expect CUBA to go down $6 or $7 before the end of 2006.

I was totally freaking out yesterday as I watched CUBA go up 4.3%. It just killed me, because I'm sure I'm right on this one.

This is an important play for future strategic alternatives.

Because if I'm indeed right and this POS falls $7 before the end of the year to around $9, then I will know that anything is possible in terms of market inefficiencies, that is, people don't have the slightest clue of what they're doing with their money.

And if I'm wrong, that is, there's something so much hidden that I wasn't able to find it, then I'll consider that the market indeed always knows better, and if a chart is so damn bullish as CUBA's, I should never, ever, consider shorting it.

So, this play is a battle between reasonable fundamental analysis and technical analysis. The one that wins will see its weight on my overall analytical process raised.

But I maintain that yesterday's rise were fools buying because of the dividend. The ex-dividend date is today (I'm sorry for the mistake on yesterday's update), since someone that buys today won't be a shareholder of record at December 15th and won't receive the $1 dividend.

More importantly, people that bought/hold because of the dividend, can sell today and they will still get the dividend. I see no further reason for CUBA to stand this tall, I believe it will fall so fast these suckers won't have time to breathe chasing it down.

Or else I'm the sucker and they're right. We'll see ... 

CUBA was driving me nuts but finally it is starting to go down as it should. Selling this stock is almost a patriotic act, to punish ignorant investors (well, let it fall down hard first before calling them ignorant - or else I'll be the fool here).

Later I need to correct my selling price $1 lower on the 3 Stocks on Fire Portfolio, because I'll need to pay the dividend, I'll do that after the open, really short on time now.

The recommendation is for you to keep holding to those shorts if you have them.

I didn't know the following was about to happen, but I'm glad that it did:



CUBA's net asset value declined by $1 because of the dividend distribution. The distribution was made with money from selling shares of the fund, of course !

Let CUBA go down some more, then I'll put my selling price $1 lower since I'll have to pay $1 for every share held.

The trading plan changes to: Buy to cover CUBA around $8.

It's amazing how a rounding top takes time to develop, even when a stock is so obviously overvalued as CUBA is.

I guess that's because, even when shorts are 100% right, they are always shaking and fearing a big rally will wipe their equity (it's a legitimate fear, CUBA was already insanely valued at $12).

I don't know if you fully understand this play of mine (perhaps you need to read this whole thread), but CUBA is like an investment fund, but if you go to the bank to subscribe it, you pay 85% more than the market value of the fund's current holdings

I've never seen an inefficiency like this. Why is this possible? I guess because nobody held CUBA's shares before this Castro issue, everybody held the closed end investment fund since the beginning. So when misinformed investor's wanted to buy, there wasn't anybody to sell, hence the share price surge.

Of course, over time, CUBA shares need to come back down to it's fair value, which is the Net Asset Value per Cuba share of the closed end fund. Yesterday that value was $8.02.

In fact I'm going to write an e-mail to the company, saying I would like to buy shares of their fund for the long term, but with this premium ... just to see if they tip something.

Then I'll let you now, the trading plan continues to be "buy to cover CUBA around $8" (for the 3 Stocks on Fire Portfolio purpose I'll close the trade at $12.5, as I've explained before).

I received an e-mail from CUBA, here it is:

«The net asset value is $8.01 as of Friday's close.  The Fund was ex- a $1.00 per share year-end long-term capital gain distribution on Wednesday, 12/13, record date 12/15, payable 1/12/07.

All news and reports are posted on our website at www.herzfeld.com under Herzfeld/Cuba.

Sincerely,
Cecilia Gondor»

So, Cecilia refused to explain why in the hell the share price of CUBA closed yesterday at $14.9 when the Net Asset Value of the fund it represents is $8.02.  She can't explain, and I can't either. The only explanation I find is: the market is inefficient. The stock was so illiquid that it went up as people bought the name "CUBA" and the profile of "makes investments in the Caribbean", without knowing that this is a closed-end fund !

I was expecting this for some time, and on Friday the President of the company sold 18,721 of his 50,945 shares. I bet he'll sell them all, because his fund won't get to this around $15 a share value in several years to come

The plan continues to be: buy to cover CUBA around $8 (for the 3 SOF Portfolio purpose only I'll close this trade at $12.5 as I've explained earlier on this thread).