Hey Stock Market Guru (Bird)

Bird, WTF is going on!!!! . So is tomorrow going to be another sell-off?

(Yea, I'm definitely in a bitchy mood today).

tomorrow will be a flat day, pretty even buying and selling. you can thank the chinese for today, there was some rumor of the chinese government placing a large capital gains tax into effect but so far I don't think there has been any confirmation of that, that in turn caused a major sell off in the main chinese index, along with the fact it hit a record high on their monday, which spread to Europe earlier in our day and then made its way over to our indeces. Im sure this isn't all of it but it is one of the main culprits for todays disaster.

The corporate and economic fundamentals today are no different than they were two days ago. The trigger was the selloff in China. Now, the rumors of the cap gains tax triggered that, but really - if you look at the flow of funds into emerging markets generally, you look at the exponential appreciation of Chinese equities - good fundamentals or not, those always end up looking ugly. Hot money, momentum money, takes the first excuse they have to leave a sector, which is what we saw today.

As to the domestic markets, look at how steady the appreciation has been in the major indices for the past seven or eight months. Volatilty has been at nealry unprecedented lows. There were tons of unrealized gains on investors books', which seem to have been taken today. The fact that the losses were triggered by a reversal of hot asset flows in emerging markets, rather than something specific to a major domestic company or a major economic release, also gives me comfort that this is likely to be one of the inevitable short-term corrections / consolidations that we see, rather than the start of something long-term and ugly.

High-quality fixed income was up significantly today - the 10-year is back to 4.50% - which again shows exactly how valuable it is to hold a well-balanced portfolio. The only people who got killed today were those that had a crapload of the most speculative positions and who were all-equity.

It'll probably be ugly for a little while, but it seems likely to me that we'll have a few weeks of consolidation, not the start of a bear market.

The market is so much fun! When I retired two years ago I split a chunk into five funds. To date, the high growth fund has done the worst!

BUY BUY BUY, I am in for $40K

Pol

I'm well balanced and don't care much about bumps in my IRA's and 401k's at my age. But I did have some after tax investments (inheritance) that I wanted to shuffle but I procrastinated. They were pretty conservative but it'll still hack into my annual "fun money".

Just venting and figured we'd give the_bird some valuable content to post. Don't think we've had many/any stock market threads 'round here!

I'm done with it for now.
I have a bit over a few funds.

I got fed up of telling clients that even though they'd lost money in the last crash it was a good time to give me more. A few did and now they are happy. The ones that didn't...well!!!!!

Tell me that jackass didnt talk recession at the end of this year.
SOB.

Copper

Yeah, I agree with Bird. Unless you are liquidating funds in the near future, I don't think there's cause to worry. Dollar cost averaging works well in times like these.

But DaNM! even commodities like gold and oil went down as well!

Oil can plummet... that is AOK.

Pol

I had 20 option contracts on the DJX, which is the index that tracks 1/100th of the DOW. On Feb 7th I purchased 20 DJX Jun 07 126 puts. I sold to close and got filled at 3:45PM! The spike in volatility REALLY increased the value of the options. I am a happy camper!

johnsma22 said:

I had 20 option contracts on the DJX, which is the index that tracks 1/100th of the DOW. On Feb 7th I purchased 20 DJX Jun 07 126 puts. I sold to close and got filled at 3:45PM! The spike in volatility REALLY increased the value of the options. I am a happy camper!

Click to expand...

Damn straight, dude!

I've been telling our more-sophisticated clients to buy volatility, which is essentially what you do when you're playing in the options arena. The VIX (the volatility index) has been absurdly low, reflecting options being pretty damn cheap (if volatility does increase, as happened yesterday). Buying a straddle is the cleanest way of doing that, b ut just going long puts was a good move on your part as well.

johnsma22 said:

I had 20 option contracts on the DJX, which is the index that tracks 1/100th of the DOW. On Feb 7th I purchased 20 DJX Jun 07 126 puts. I sold to close and got filled at 3:45PM! The spike in volatility REALLY increased the value of the options. I am a happy camper!

Click to expand...

Even better if some of that was on margin.

I love crashes. You know they're always "on fears" which will recede once the governments see how trashed they go (economically). I should go and drop a few bucks on some heavily hit stocks since they're now at a discount. I'll bet some people sold off options that will be in the money as soon as things level out.

the_bird said:

Damn straight, dude!

I've been telling our more-sophisticated clients to buy volatility, which is essentially what you do when you're playing in the options arena. The VIX (the volatility index) has been absurdly low, reflecting options being pretty damn cheap (if volatility does increase, as happened yesterday). Buying a straddle is the cleanest way of doing that, b ut just going long puts was a good move on your part as well.

Click to expand...

I also had some long calls on the VIX that I sold before the close yesterday! I like to use straddles when I find a stock that is showing a distinct consolidation pattern in the price chart in the last 60-90 days and will put on the trade close to an earnings report. The stocks must have some history of movement at earnings. If the volitility stays this high or goes higher, buying straddles will start to get too expensive because you are buying both sides.