Jenna -- I just thought that this old post may give some answers to prophets of gloom and doom--
To: Getcher (17203 )
From: IQBAL LATIF Sunday, Mar 1 1998 3:59AM EST
Reply # of 17208
Is market ripe for a short- Yes -
because most probably temporarily one can be right and say 'I told you so' but---- a market which was great short 890 should even be greater temptation at these astronomical heights-
Same market was ripe for short for perpetual bears at 850 SPA on 28th Oct 1997 or at 992 when it broke new highs or BKX at 690 when it was being touted as a short, now at 785. As far as it takes no pain to continue to be a short from down under it is fun but I think shorting or buying protection here is quite different from that downunder level I will rather stretch this run to as hi as 1064 level .
DELL AOL YAHOO will instill a lot of sensitivities with bears-- I clearly know all these three preceding names were short at 40 30 and 21 now at these levels the bears should be mortgaging houses to short them--- SI shorts as we all know very well do not have margin calls, free world short and forget. Unlike ASND or INTC or TXN or WDC which haunts the bulls even if they make a recovery. ggg-
However, the target on Dell is 155- Dell is in my portfolio as a part for long time and will stay as such I may buy some puts selling covered calls but that would be it I will never short it- one can always short and later on see his levels but knowing very well after paying our dues, in real world 'shorts' in a bull trend always get it wrong and running a short from DELL 100 just few days back can be a very expensive exercise-- I know one of these days if Dell is 10 down this very post will come to haunt me but I would rather be long then short within a bull trend. MSFT was a clear but at 132 we initiated here but now at 85 post split it can still go up to 100 no hard and fast rule once squeeze comes in, don't ever forget that we still run huge open short interest as of Monday but we also have moved up 6% from old highs history tells me that it is around this level we can see consolidation on DJIA and SPA.
I will for prudent investors recommend a laddered long construction of SPA puts like 1020 Aprils- that is in going to be in place for my account and I would like to spent some hard earned profits to protect my downside even if these long puts expire worthless-a raging bull has more then even chance of being killed quickly in the arena by the matador if he gets too aggressive since the gashes are deeper, it is for this I would recommend long puts- one put offers 250,000$ protection but it is worth every penny. Offers good sleep and you can be unashamedly be a bull as you are perfectly aware of your downside contained risk. To buy this protection this may be the time but decision of pulling the trigger lies with the investor. Lopsided hedging is expensive so one needs to know what to look for and exactly customize one's requirement like some small accounts can look at mini-contracts of S&P but if your exposure is in Tech you may not really need to establish a recipe sensitive to your requirement as most important move will come in SPA .
Now, I have seen amusingly people shorting as a 'matter of habit' like they end up shorting at 992 violating basic rule 'you don't short market making new highs' or buying puts at 870-890 level, we all saw it in case of BKX was being short at 704- now to be honest this run alone above 992 would mean a hefty loss on positions being run so far, and how on earth someone could short at 992 and 680-690 on banking when ASEA was turning around is still beyond me and will most likely stay that way-- total lack and respect for fundamentals- One example on 2nd of Dec Kurlak was talking of 25% further decline in values and thread was also abuzz with his warnings on 8th I re-issued my 1st Dec long on SOX letter ( very interesting-) we had a temporary set back but we are up 18% from where the levels were at one time ' post-Kurlak warning' but on SOX we never really looked back-- now not that we are better then Kurlak rather no but that is the purpose not to listen to these guys and make our own sensible decisions with an open mind-- Dr Ravi Batra book on the impending bankruptcy of America was a NYT best seller list- if you have time go through it and you will find that markets bearish sentiment is a mindset which can see deficits without regards to potential windfalls once a nation turnarounds- TB's were expected to be 14% in 98 we are at 6% Inflation in upper teens- it is simply lack of understanding of recuperative-ability of a nation's potential which makes ingredients of a 'short mind' this is a similar mind set which tells us to short INTC at 60 or at SPA 990 because they look at valuations without noticing the ultimate higher bottom being established since 93 as a result of higher corporate earnings year over year over year, also not much regard is paid to global reach- short within a bull trend is an art and that one needs to master. This is what hedge funds exactly do play markets on both side and take advantage of leverage-it is leverage alone which enhances results and provides satisfactory protection in case of crisis, it is leverage one should refer too.
Why a intact bull trend?
Imagine if CAC DAX FTSE are making new highs on back of a very strict financial discipline within global economy these new highs if we consider markets as forward gauge of profitability will result in higher demand from these European companies who with exception of UK are just coming out of slumber still unemployment in France and Germany is 12%-- the Europeans corporate sector has shown new interest to acquire US know how and management style if European economy turns around which we are seeing these very same companies will make higher profits like US companies do-- ALA or ELF or TOTAL this within an integrated world the slowdown or 'ice age' of deflation toyed so often may just be another fear tale. Over-capacity- falling prices- depressions don't happen put of blue sky's for a depression one needs gold standard in a monetary set up where liquidity is a function of productivity and growth the deflation scenarios goes out of window last and not least is demands of 'savings' where do you invest in when gold has lost its glaze and oil or commodities do not provide a hedge against inflation.
One should never overlook our natural tendency to break then fix- short then long, it is this fixation with levels rather fixation with earning projections as to where are may be heading on earning's front that is what will determine the future of this move in the interim the way 'industrial production- durable goods- and capacity utilization' will come one needs to be carefully watching the quarterly employment cost index, hourly earnings and prices paid lest any of these indicators may give few preceding early signs of an aging bull but remember they thought the bull has already expired on 27th of Oct and we are exactly 1500 points higher-- some funny convoluted 'man' was calling for TB's in WSJ being sold by Japanese since June last year now instead of TB's being sold we found Japanese skins saved from profits driven on TB's-- instead of selling TB's became their most prized possessions then we consequently heard about so called 'divergence' again a botched up borrowed idea half cooked which was bonds will fly north as markets head south and what did we find north -north alignment -- this is a frame of mind something just looks too pricey but this darn DOW has been pricey since that eventful break from 3000-why to talk of 5900 why not 1000 DOW . However, fortunately markets unlike 1929 (you remember the comparisons made by the doomsayers and short sellers) or 87 or even 90 is progressing on a different set that of higher productivity, over-stated inflation and lowered interest rate environment these conditions have never co-existed in tandem and therefore I will within this bull trend like to find shorts between' moving averages' but no more it has to be a macro shift and once this macro shift will be visible we all will see rising inflation and declining profitability that is where a bear trend will emerge but so far in very short term we are waiting for our numbers on Monday based on which we will decide new targets --a market which takes no prisoners like VLSI - the entire semi conductor sector was shot on post VLSI news shows how sensitive the market is about valuations after 330 was tested-- I see markets at 1020- to 1070 in short-term and 1130 on SPA as my target for next three months for SOX I remain a bull and expect SOX to resist decline below 280 rather 302 is quite a formidable support-- for short term I think we should see 312 holding up well if INTC close above 90 on Monday I would rather not like a second close of INTC below 90 as it can quickly test 85 area on TXN a close below 57 will not be good and one needs to accordingly position exposure if these levels are violated on closing basis.
One should never underestimate the potential of the markets which are moving like a freight trains-- I was just going through some macro data last night and interestingly watching possible repercussions tomorrow of NAPM number a strong NAPM number with weak inflationary data can be bullish and a weak number around 51 showing some increase prices paid will also be interpreted as good-- in both the cases bonds will consolidate below 6% however the consequent trading pattern would be very different for both the numbers the first combo may sustain the rally but second will bring in correction to 1020. Let's watch and see. |
