I cave in

[BigSully1]

Oil will peak at some point,$110,$115,$125,I don't know.Does anyone know of an investment vehicle that in effect shorts the price of oil?

you could short USO or buy puts. My brother was buying heavy puts on it today. I wouldn't though myself, I rarely ever agree with him and think he might well get hurt.

Heavy volume on Capricho's DUG today.

Maybe my brother will be right;

CHICAGO, March 11 (Reuters) - Option investors on Tuesday appeared to be betting on a decline in the price of oil in an exchange traded fund linked to the commodity even as U.S. crude oil prices surged to another record.

On the New York Mercantile Exchange, April crude CLJ8 settled at a record $108.75 a barrel, up 0.79 percent, trading from $106.61 to a new intraday high of $109.72, exceeding Monday's $108.21 peak.

NYMEX crude has settled at a record above $100 eight times since Feb. 19 and option traders may be positioning protectively for a slowdown in this momentum reflected by the spike in put volume in the United States Oil Fund USO.A, a fund designed to track the price of crude oil.

According to option analytics firm Trade Alert, a total of 52,000 puts compared with 9,138 calls changed hands in the ETF, three times the normal volume.

"There is weekly inventory data due out tomorrow, which could affect oil prices," said independent options trader Frederic Ruffy. "Some players might be looking to protect profits by purchasing puts on the USO ahead of the news."

Ahead of the U.S. Energy Information Administration's weekly U.S. inventory data due on Wednesday, an expanded Reuters poll of analysts forecast a crude inventory build of 1.7 million barrels.

"Also, there is talk that, since stocks have been under pressure, gold and oil have become asset bubbles," Ruffy said. "If optimism returns to the equity market, it could lead to money flows out of some key commodities markets and trigger a decline in the price of oil."

Unlike most other ETFs and mutual funds, the USO is a commodity pool that invests in oil futures on the New York Mercantile Exchange, options on oil futures, and forward contracts. It does not hold shares of individual companies.

."The idea underlying the fund was to give investors a way to get exposure to crude oil prices through an exchange-traded fund," Ruffy said.

"Investors expecting oil to move higher in price can buy shares of the ETF. On the other hand, if traders expect oil prices to fall, they might sell shares short," he said.

The fund on Tuesday closed at $86.34, up 71 cents after posting a 52-week high of $86.34.

In the options market, much of the focus was on April USO puts, allowing investors to sell the underlying fund's shares at a given price and time by mid-April.

Of note were the April puts with strike prices of $83, $84 and $87, as well as front month March $85 and $86 strikes,

"Traders are aggressively buying puts exceeding the open interest in several contract strikes," said Chris Mckhann, analyst at Web information site optionmonster.com in Chicago. "They are clearly positioning for a pull back in crude oil prices over the next 38 days or sooner." (Reporting by Doris Frankel; Editing by Leslie Adler)

[soxguy]

Don't know why DUG was down almost 9% today. Oil didn't do much. Maybe a big spike in oil is anticipated tomorrow. We'll see. Maybe the momentum in DUG is still to the down side. It's not far from the 52week low.

[kslifka]

How about shorting some of these mortgage investment companies.

These guys keep bringing the market down and are dropping like flies lately.  The latest victim: Carlyle Capital.   


Carlyle Expects Banks to Seize Assets
Thursday March 13, 2:11 am ET
By Joseph Altman, AP Business Writer
Carlyle Capital Expects Banks to Seize Some $16M in Assets After No Agreement on Refinancing

NEW YORK (AP) -- Carlyle Capital Corp. said late Wednesday it expects its creditors to seize all of the fund's remaining assets after unsuccessful negotiations to prevent its liquidation.

The London-based fund shook financial markets last week after missing margin calls from banks on its $21.7 billion portfolio of residential-mortgage-backed bonds. Carlyle's troubles have amplified fears that billions of dollars of depressed mortgage-backed securities will flood the market, reducing their value even further.

ADVERTISEMENT
More than $5 billion of Carlyle's securities have already been sold, but the fund tried to negotiate with the banks to prevent the liquidation of the remaining $16 billion.

"Although it has been working diligently with its lenders, the company has not been able to reach a mutually beneficial agreement to stabilize its financing," Carlyle said in a news release.

More than a year ago, the fund leveraged its $670 million equity 32 times to finance a $21.7 billion portfolio of AAA-rated residential mortgage-backed securities issued by Freddie Mac and Fannie Mae. It borrowed money from at least a dozen banks and firms, including Bank of America Corp., Citigroup Inc. and Merrill Lynch & Co.

Carlyle posted the securities as collateral under repurchase agreements, so if the value of the securities fall, the lender has the right to ask for more collateral -- a margin call -- to secure the loan. If the borrower does not meet the margin call, the lender may sell the security.

The value of mortgage-backed securities plummeted as U.S. home prices fell and foreclosures surged, prompting the banks to ask Carlyle for more than $400 million in additional capital. The fund was unable to come up with the money, prompting lenders to start foreclosing on the securities.

As of Wednesday, Carlyle said it has defaulted on about $16.6 billion of its debt, and the rest is expected to go into default soon.

Carlyle Capital Corp. is one of 55 funds managed by the Washington, D.C.-based Carlyle Group, one of the largest private equity firms in the world with $76 billion in assets.

Carlyle Group "participated actively" in the fund's negotiations with its lenders to refinance its portfolio and was prepared to provide substantial additional capital if sustainable terms could be achieved, the fund's statement said.

But hopes for refinancing fell apart after some lenders said the value of the collateral had declined further, which would result in additional margin calls Thursday of about $97.5 million.

Carlyle Capital is registered in the United Kingdom but managed by New York-based executives. It was the first Carlyle Group fund to go public, at $19 a share in July on the Euronext exchange in Amsterdam.

Trading of the fund's shares was suspended last week after tumbling more than 50 percent to $5 apiece on the news that the fund wasn't able to meet the margin calls.

The shares continued to fall after regulators lifted the trading halt Tuesday. The shares closed Wednesday at $2.80.

[terainvestment]

Hi All and expecially to David,

I still own GSB, did not sell when you said to sell.
Do you think is reasonable selling now at 2$ or trying to keep and hope it comes back?

I remember you was pretty confident on GSB business, so aht is changed in just one week?

Any other still owning GSB?
Suggestions?

Thanks, ciao

Andrea

[David Randolph]

Don't know why DUG was down almost 9% today. Oil didn't do much. Maybe a big spike in oil is anticipated tomorrow. We'll see. Maybe the momentum in DUG is still to the down side. It's not far from the 52week low.

Why would one short oil, one of the few bullish things around? And, in reality, oil is scarce and someday it will inevitably end. How much will a barrel of oil cost 100 years into the future? Maybe 100 times more than what it is now, or $10,000.

My take is the oil market has decoupled from the economic environment and its outlook. It isn't rising because worldwide demand is expected to be very strong, but because supply is falling even as the price rises, because oil is a physical good made over millions of years by the Earth. The Earth can't make oil the same way the FED makes US dollars.

Hi All and expecially to David,

I still own GSB, did not sell when you said to sell.
Do you think is reasonable selling now at 2$ or trying to keep and hope it comes back?

I remember you was pretty confident on GSB business, so aht is changed in just one week?

Any other still owning GSB?
Suggestions?

Thanks, ciao

Andrea

GSB had a brutal sell off Andrea, it's a pity you're still holding. I still believe GSB's industry will continue to grow into the future (Wide Area File Sharing, Continuous Data Protection, Secure Servers, etc) but suddenly I saw clouds over its specific business model. Their revenues don't seem to be recurrent, they sell a software package to large size companies and that seems to be it ... and how many large companies are there to sell?

GSB has other business parts which are recurrent, but for example, its direct to consumer business, the Cute FTP software, lost most of its revenues in the 3rd quarter, I don't know if it was because of a competitor.

Randy Poole leaving for retirement was also a factor in my selling decision ... anyway, the stock now trades at less than 10 times 2007 earnings, so it looks very cheap. If the business just keeps growing the stock will go back up. However, the chart says there are bad things coming ... like lower sales and losses. It's hard to know what to believe, the perceptions which would occur if there were normal business conditions, or the current perceptions, which basically say there's going to be a very deep recession in the US economy.

I'm sorry for not giving a definitive answer, I'm also in doubt and I'm not happy that I sold higher ... I should have sold above $6, at least that.

Good luck.

[capricho]

I dont think their are 15 million underwater mortgages,

read and enjoy:
http://money.cnn.com/2008/03/14/news/economy/krugman_subprime.fortune/index.htm?postversion=2008031705

[kslifka]

I dont think their are 15 million underwater mortgages,

read and enjoy:
http://money.cnn.com/2008/03/14/news/economy/krugman_subprime.fortune/index.htm?postversion=2008031705

Interesting read.

I've never understood why...in general...housing prices should ever go up more than the inflation rate.  Well I could see prices going up a little more than the inflation rate...say 4 to 5% a year to adjust for population growth.  Some locations in this country were going up 30-50% a year....truly unsustainable.

I'm so upset with myself for not shorting the investment banks sooner.  The personal debt is huge in this country.  Now the creditors don't have the liquidity to access capital...as the assest values continue to drop.  So no more credit for the consumer.  The stimulus package is a joke.  Giving people $300-$600 dollars to feed their addiction to spend...what does that solve.  Plus most of these people in huge debt will probably just pay down debt or pay bills with the money.  The government should have used the money...like stated in the article... to create jobs...either through infrastructure projects or funding for new technologies...I'd vote for alternative energy. 

I want to look at shorting commercial real estate now.  They haven't been hit too hard yet.  I know David doesn't live in the U.S. and see all the strip malls and retail stores in this country.  It's ridiculous...I don't see how the retailers survive with the unbelievable amount of stores lined up along the streets in this country.  How can the people that own these properties make it if the retailers have problems in the coming months??  I've also seen a lot of vacant properties.  I've had these convictions for years...I still believe in the global growth story...but since the American economy is still 70% consumer related....it's time to follow my conviction until the situation changes.

[poli]

David, 
Hang in there,  now that you have admitted defeat the market will start to head up again, ha ha.  Concerning your long term bull case was wrong, I beg to differ.  I really don't have a view beyond mid 2009 so I guess it is not a real long long term view but I believe the process of establishing a stock market correction bottom has unfolded in text book fashion over the last couple of months.  First,  the high volume closing low on January 22,  the subsequent rally and then the correction bottoming process to test that low on lower volume than the January 22 low.  This is where I feel we are at now.  I believe volume is always the key.  I believe this bottoming process will be over by March 21st and that the subsequent rally will take the S&P 500 to the 1600s sometime in 2009.  That is as far out as my crystal ball will show me.   I was a buyer in todays market ( I also bought more PAL ) and will be again on select stocks over the next couple of weeks.  Of the 4 stocks you recommended to sell I only own GSB & TBSI. (I own all the others in main portfolio except OPMR) I am going to hang onto both of those for now to see if the market agrees with my prediction.  I am in relatively good shape on both of these.  I sold my initial purchase of GSB on 10-19 for a nice profit and repurchased it again on 11-29 and still own those shares now, so I am kind of playing with house money and my cost basis for TBSI is only around 34.00.  Sorry for the long message but I just wanted to give my two cents here. David thanks for all your hard work, I really appreciate it. For all that are hanging in with some exposure to the market good luck, we will know in the fullness of time.  To all, good health and trading.

Poli

I Believe it will be volatile from here on out but the market has performed about like I thought it would from this last post.  The bottom is in and we will see the S&P at all time high in the 1600"s by end of 2nd quarter of 2009.  A 30% gain from the lows. Hows that for laying it on the line...HAHA.   I did sell GSB, CHME & DROOY from the mains portfolio, and GRS from my other stocks since the last post.  I bought my 4th serving of PAL today as well as other select stocks over the last 2 weeks.  David hope you have a great long weekend.  I am waiting to see what your new thoughts are of the current market and perdiction of where it is headed.  To all good trading and health.  Have a happy Easter weekend...
Poli

[poli]

David;   With all the negative sentiment throughout the market place I did find this article in Barrons that actually agree's with my thoughts.  I keep hearing where is the money coming from to fuel the next leg up and the figures stated here that have flowed in money market accounts is substantial.  I for one have over $300,000 still in a money market account out of $800,000 to invest.  Just some more food for thought.  We will know in the fullnes of time.  To all good trading and health.

Poli

Are you ready for Dow 20,000? (todays issue of Barrons)

March 22, 2008
By JONATHAN R. LAING

Despite the Bear Stearns bailout and the Fed's rate cut, a sense of foreboding is still abroad on Wall and Main Streets. Few investors feel good with an economic slowdown gathering force, the dollar in the dumps and contagion threatening to hit financial sectors previously unscathed or not even suspected of being at risk.

This in mind, we contacted James Finucane, a 67-year-old stock strategist who now works as a consultant in West Lafayette, Ind., home of Purdue University ("modest cost of living, a great brew pub and incomparable high-school hoops," he gushes). Among his talents: pool hustling. He was the 1961 National Student Unions pool champ, representing Notre Dame.

He also has been great at calling stock-market lows, including that reached in the week after the October 1987 crash. "Lows have always been easier for me to call than tops. I was premature in seeing the 2000 stock market high, for instance," notes Finucane, who long labored in Chicago at Stifel, Nicolaus.

Finucane argues that financial crises invariably yield spectacular buy points, and that we're at one now.

To him, we're now at yet another extraordinary low, especially with the unprecedented actions taken by the Fed of late to offer liquidity to investment banks and to commercial banks stuck with mortgage-backed securities of uncertain value. In fact, he foresees an explosive rally, with the Dow rocketing to 18,000 to 20,000 within a year from its current 12,361. The climb, he says, might begin imminently or take a few months of backing and filling before the market takes off.

Finucane argues that financial crises invariably yield spectacular buy points, especially when they reach crescendos. He points to calamities such as the 1970 Penn Central bankruptcy, the 1984 failure of Continental Bank, the 1994 Mexican peso devaluation and the 1998 collapse of the Long Term Capital Management hedge fund. Each time, important lows were made either simultaneously or within a month of the crisis.

He concedes that the latest crisis, which began last summer with the subprime-mortgage meltdown, has been "like a forest fire," spreading throughout the debt market, sometimes jumping fire walls to spring up in unforeseen areas. Yet he's now confident that the "panic lows" in the Dow, posted on Jan. 22 and 23, when it sank as low as 11,508, will hold. To him, the Bear Stearns bailout was a crescendo event.

Certainly, the news is hardly encouraging these days, with scary economic and market headlines like those for Alan Greenspan's recent assertion that the current financial crisis is the worst faced by the U.S. since World War II. A nasty recession impends or is already here. But crisis lows are always accompanied by hair-raising rhetoric and dire economic forecasts.

Finucane has long kept score, carefully cataloging predictions made at past economic inflection points. He points out, for example, that Greenspan contemporaneously described the Long Term Capital collapse in 1998 as the worst crisis he'd seen in his lifetime. Time magazine wasn't being intentionally ironic when it called the ad hoc government group cobbled together to grapple with the 1994 Mexican peso crisis the Committee to Save the World. Financier George Soros was just as downbeat after the 1987 stock-market crash as he is today, each time predicting a depression.

Why is Finucane bullish? For one thing, he observes that "governments and central banks have a clear incentive to promote growth, so to bet on a prolonged slump is to bet against the government, markets and human nature." He also takes comfort in a host of technical factors, including liquidity. Money-market cash, for example, has soared to $3.45 trillion, versus $2.2 trillion at the market low in March 2003. And U.S. domestic equity funds have seen a record nine consecutive months of net outflows, a skein that probably will hit 10 months when the Investment Company Institute releases its February numbers. The previous record was eight months, following the 1987 stock-market crash. The Conference Board Consumer Expectations Index is at a 17-year low. The Reuters-University of Michigan Consumer Confidence Survey is at its worst level since 1992. The American Association of Individual Investors finds small investors more bearish than they've been since 1990. And on and on.

What make these statistics all the more telling is that, by Finucane's reckoning, investors in 2003 had suffered more pain and yet were less fearful. By March 2003, for example, they'd endured 36 months of mostly falling prices, including 90% wipeouts in some top tech names. Retail sales had buckled in the run-up to the invasion of Iraq. United Airlines had filed for bankruptcy protection the previous December, the month in which McDonald's reported its first quarterly loss in 37 years. Industrial production was punk. Many forecasters warned of a double-dip recession close on the heels of the 2000-2001 recession.

In Finucane's estimation, months of stock liquidation and cash buildup, horrible sentiment and a bailout that could alter investor psychology have lit the fuse for an explosive rally. It will be ignited by one of those mercurial shifts in mood from abject fear to tentative confidence and, finally, wanton greed. "The setup is perfect," he asserts, using a pool-hall term. And he's confident that investors won't end up behind the eight ball.
<<


--------------------------------------------------------------------------------

[terainvestment]

Hi David,

I was thinking to investon SIX for medium-long term, I made some DD and found out some problems.

As per chart here attached, you see that SIX in the last ten years has been profitable only on 1998 and in that year stock price was 40$.

Then, SIX continue to lose money, at the link below you can find the income statement that shows continue losses until today
http://quicktake.morningstar.com/StockNet/income10.aspx?Country=USA&Symbol=SIX

This caused a continue decrease on shareholder equity, that became negative in the last year.
At this link, you can find this issue:
http://quicktake.morningstar.com/StockNet/balance10.aspx?Country=USA&Symbol=SIX

In the next 18months, I read that SIX will have to repay the debt (over 2 Bln/$) or, at least, re-finance it.
Given that SIX continues to lose money year over year and also the last earning release was pretty bad, don't you think there is a serious risk of Chapter 11 and bankruptcy?

Can you please give an hard insight on this stock we own and trying to understand if it's a good turnaround or not?

[poli]

Pertaining to my last few posts,  so far so good.  Not a bad week for the markets for all the bad news we have had each day.  With that in mind shouldn't we be going down down down???  I'm confused....We will all know in the fullness of time.  To all good trading and health.

Poli