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To: Earlie who wrote (195534)	10/5/2002 9:59:09 AM
From: Box-By-The-Riviera™	Respond to of 436258

nice!

To: Earlie who wrote (195534)	10/5/2002 10:23:24 AM
From: Justa Werkenstiff	Respond to of 436258

Earlie: A most excellent post!

To: Earlie who wrote (195534)	10/5/2002 10:23:41 AM
From: Terry Maloney	Respond to of 436258

Earlie, another of your 'classic' posts. "Brave bears are dead bears" just about says it all. <g/ng> Regards, Terry

To: Earlie who wrote (195534)	10/5/2002 11:30:52 AM
From: Bill F.	Read Replies (3) \| Respond to of 436258

earlie- i rarely stop by si anymore but when i do i check out this thread..that is one helluva post regading advice for short sellers...truly excellent..that ought to really help folks....cheers,fleck.

To: Earlie who wrote (195534)	10/5/2002 12:25:06 PM
From: ild	Respond to of 436258

Great Post!

To: Earlie who wrote (195534)	10/5/2002 12:43:34 PM
From: mishedlo	Read Replies (1) \| Respond to of 436258

west coast lockout sacbee.com

To: Earlie who wrote (195534)	10/5/2002 12:46:59 PM
From: mishedlo	Respond to of 436258

Pension Bubble search.ft.com The problem in insurance is well known and needs little elaboration. Falling equity prices cause insurers' capital to shrink. The more heavily exposed sell equities and reinvest in bonds, so equities fall further and increase solvency pressures. Less well understood is the problem in pension funds, where growing deficits pose a far greater economic threat than in previous bear markets. Because pension funds are legally separate from their sponsoring companies, and because their disclosure is so opaque, their difficulties are too easily overlooked. In national accounts, the investments of defined benefit pension schemes are shown as assets of the personal sector. Yet the members do not own them. Their right is limited to the promise of a retirement income, underpinned by the fund's assets. The economic reality is that the pension fund is a subsidiary of the company. The pension liabilities are similar to corporate debt, while the assets are cross-holdings in the rest of the corporate sector. On that basis the Anglo-American world is not unlike Japan, with its cat's cradle of cross-holdings. And for companies whose fund is larger than the stock market capitalisation, vulnerability to falling markets is hugely leveraged. The problem in this bear market is that many actuaries have encouraged the mismatching of bond-like liabilities with equities, leaving the company's shareholders to shoulder the risk. And an element of pro-cyclicality has been introduced by flawed methodology.

To: Earlie who wrote (195534)	10/5/2002 1:43:36 PM
From: Cactus Jack	Respond to of 436258

Earlie, Another for the file. Great post. jpg

To: Earlie who wrote (195534)	10/5/2002 1:46:17 PM
From: mishedlo	Read Replies (1) \| Respond to of 436258

Rally Talk quote.cboe.com OK here goes. To get a sustainable rally next month, we need to see a few things. 1) collapse now 2) Heavy buildup in puts 3) Lack of call buying 4) A trigger 5) Continued put buying on the way up OR continued call buying and extreme delta hedging takes place Looking ahead at Nov there are 118K puts vs 12K calls on QQQ strike 21. For being so near strike price, that is pretty damn extreme. If this number builds up bears better be thinking twice about what they are doing. Problem so far (for bulls anyway) is on any and every rally attempt call buyers step up to the plate and that stops it dead in its tracks. If the market is propped up here and we flop around, more than likely the same thing happens, and a rally will fizzle. For the bullish case, I want a drop to QQQ 18 with those puts still sitting there at 21 and more added at 19 and more added at 18 and no calls building up. If this happens, bears better get the F out of the way. Not saying we will get this, but this is what I am watching. #5 looks contradictory and it is. If a STRONG rally starts, call buying and delta hedging will escalate it. On a weak rally with not much volume, Call buying will top it too quickly. Note: This is looking ahead to NOV. I hope OCT continues to plunge. If it does I will be out of my puts and someone else can have the rest. A rally here would likely not get that far (but who knows). A rally next month with heavy buildup of puts can knock bears on their ass. M

To: Earlie who wrote (195534)	10/5/2002 1:53:00 PM
From: yard_man	Respond to of 436258

agree with almost everything you said -- but have a couple of ideas that I would add as an alternative to constantly weaving in and out here's a suggestion -- for a small portion of ones capital -- it's ok to short and hold with a reasonable stop -- some sectors are really ripe for this approach, IMO 1) housing 2) retail and 3) finance if one keeps bets small and uses stops, it may be wise to keep "a portion" of that on all the time if downside target have not been reached Also -- I know Burke doesn't like this and some others may not -- it does increase risk, but ... when put premies are very high and we are in one of those scorcher bear market rallies -- ITM puts can be a nice alternative to shorting. There are a couple of advantages 1) Tying up less of free funds than an outright short 2) Leverage this is more of short-term strategy, but I have found it useful for the above two reasons -- but it should never be used, IMO, outside of one of these scorching rallies and not on stocks that haven't already "broke down" Your post is really good -- and well-timed, I think, because many do lurk and some try some things without a decent plan or discipline -- similar to some nice things that Burke wrote before he sold his ... to Salami <vbg> not sure if questions by lurkers is a good indicator here -- there will be a washout sometime, Earlie -- can't help but have it, but you are absolutely right that one should not be positioning for that NOW -- it can't be done -- that is why I prefer to have some small short exposure ALL the time but you don't have to be short THEN to make good money and that is a good point, too.

To: Earlie who wrote (195534)	10/5/2002 1:58:41 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 436258

Really outstanding post, Earlie. It should be used as a bear market primer in all the investment books. I especially agree with you right now on puts, the primo's have made them way too risky. Shorting into the rallies remains the safest and most effective strategy.

To: Earlie who wrote (195534)	10/6/2002 10:11:32 AM
From: Tommaso	Read Replies (3) \| Respond to of 436258

>>> Buying puts that are very expensive is betting that a BK is near. So far, the evidence at hand supports the continuance of a "grind-down" scenario rather than a BK. << Been studying your classic post again. I continue to believe that LEAP puts on the Dow are the best way to bet against the market. It is also a way that gives a horizon of as long as two years for BK. And works fine if there is a slow grind down as well. Other people must have decided that, too, because what I call the "negative premium" is much smaller than it was. When I first got interested in these, they sold at 10% UNDER the actual value as measured by the current DJIA, because they are European style and cannot be exercised until expiration. This seemed to me a fantastic bargain, and it has proved to be so. I am still in the 140s of December 2003, but there are now 2004s available. I have not checked if they have a negative premium. Just checked. The highest strike for the 2004 puts is 124 and the difference between the "fair value" and the quote is pretty small--about 2%. quote.cboe.com It was funny how one and two years ago I simply could not convince anyone that this "negative premium" existed. Anyone who replied to me --almost anyone-- would say "Oh that's just because options have premiums that represent the time value." It did not seem to register that this was a negative time value--that the sellers of the options were willing to bet on a Dow rising back well above 10,000. I guess the sellers were the "Dow-is-going to 40,000" believers. I know that you are a little uneasy with options, and I realize that even the CBOE could default in a huge catastrophe. But so far so good, and I think I will hold these buggers until the Dow is below 6,000. Do wish I had bought a lot more.