re: ["Slider, your last post was just enough to tip
the balance and make me decide to go long today. But
I'll probably only hold for a few days."]
Hopefully, I made you think…because that’s my only intention.
It’s not my intention to influence you to buy, or sell
anything. All I am doing is sharing my thought process
and a different perspective and opinion than may be
the norm.
As far as holding only for a few days… In hyper-volatile
markets... in many cases you only need to hold for
hours not days... because time is compressed.
We’re seeing $25 and 40% reversals off of corrections.
This isn’t about calling a perfect, to the exact
tick of the tape bottom. This is a fight…and it isn’t an
easy one. First, it’s about getting in the game. About
being willing to take a few punches and being willing to
throw a few punches. It’s about knowing when to unleash a
flurry…and when to cover up.
This isn’t a 1 round fight. It’s a full 15 round
championship title fight.
Doesn’t mean you can’t get a one-round knockout, or a
three round TKO. But, it does mean – you’d better be
ready, willing and able to go a hard, full throttle 15
rounds…and you sure as hell had better not be afraid of
taking a few punches.
These are extremely dynamic markets and there is no easy
roadmap. This is not a market environment for the timid,
the uninformed, or the confused.
You need an edge and you need a pair of big brass balls.
You can't think you have an edge. You must KNOW
you have an edge.
You must be 110% sure that you know something that
others don't know.
You must be 110% sure that you see something others
don't see.
And you must be 110% cock-sure in your contrarianism.
If you're not...it's better to stay on the sidelines.
Now, that's not to say there's anything wrong with
staying on the sidelines. Because there's not. And if
you are not 110% sure in what you know, what you see
and what you want to do -- then you should stay on the
sidelines.
No one reads every volatile market correction clearly.
I know I sure as hell don't. Knowing when to say - no,
and stay on the sidelines is part of the game.
But, conversely - so is having the courage, the boldness
and the balls -- to occassionaly step into the abyss,
to swim upstream…and to be Buster Douglas and be willing
to step into the ring with Mike Tyson., when the odds
seemed stacked against you.
This is a credit derivatives event. It involves the
mortgage lenders, the homebuilders and the investment
banks directly, and many other related subsectors.
If you're not familiar and comfortable with the
fundamentals of this sector, the players and the
dynamics of these markets - both public, and private
-- then, you probably should stay on the sidelines.
I'm not trying to influence anyone to do anything. And
I sure as hell couldn't move GS .03 cents if I
wanted to.
All I'm doing is sharing my point of view and my
thinking process.
Stepping into the abyss and buying fear, panic and the
unknown - from a historical perspective, is often
one of the best trades you can ever make.
Don't think so? You prefer to wait until the dust settles?
Well the big and fast money isn't made by waiting. And
bottoms are more often earned than called.
Remember this and write it down:
"Money loves speed."
Think about it. It's more complex than it seems.
Here's another way of saying the same thing - maybe this
will make more sense to you:
"He who hesitates is lost."
True more often than not - isn't it?
Don't think so? ...still too glib for you?
Then, here... try this one on for size. It'a a bit more classical...
"Boldness has genius, magic and power in it."
-- von Goethe
Still want proof...an example...and a recent one?
Okay... here's an example:
Ken Griffin is the founder of Citadel Investment Group in
Chicago. The Citadel runs around $13 Billion Dollars+/-
Remember Amaranth and Brian Hunter (he of the infamous
natural gas meltdown)?
Well Ken Griffin had an edge. He knew something others
didn't know. He saw something others didn't see. And he
was 110% cock-sure in his contrarianism.
He bought into the abyss and snapped up the ashes of the
Amaranth holdings, and ultimately made a cool, fast $1.5
Billion Dollar profit in doing so.
See:http://money.cnn.com/magazines/fortune/fortune_archive/2007/04/16/8404298/index.htm
Now, should you jump into every meltdown, take on every Mike
Tyson-esque opponent?
-- hell no. But, you’ll also never reach the level of a
championship title fight - if you’re not occassionaly
willing to do so.
You have to know when.
Trading is much more art than science.
The key is to be willing to step into an ugly, brutal
tape…and fight your way into and then out of a bottom.
Right now – right here, money is being made in both
directions. But, ultimately – the big and the fast money
will be made on being right on not just when…but,
also why.
The key, is in being able to set aside fear and emotion
and being willing to step into the darkness of the unknown
and a brutal tape.
The key mistake that I think many of the bears are
making is not realizing how much damage has already been
done in subprime and how dramatically subprime debt had
already been discounted - prior to this recent dislocation.
Subprime debt has been falling over the last year.
Here's a chart that only takes us to this June:
The $64 question remains: is this the final downdraft
and panic capitulation? And does it offer attractive
risk:reward opportunity?
Well Ken Griffin among others -- apparently thinks so:
Remember Sowood Capital, run by Mr. Jeffrey Larson who
lost over half his clients' money? Larson was making more
than $17 million-a-year managing money for Harvard
University. In 2004, he decided he could make even more
by setting up his own hedge fund. He and his partners
raised $2 billion from investors, including Harvard,
which put up $500 million. As of this past Wednesday,
more than $350 million of Harvard's money was gone.
And who's stepping in and buying the remains of Sowood?
Ken Griffin:
ft.com
Citadel scoops up Sowood Capital
By Anuj Gangahar in New York
Published: July 30 2007 21:51 | Last updated: July 31 2007 00:46
Citadel Investments, the Chicago-based hedge fund run by
billionaire Kenneth Griffin, has stepped in to take over
the credit portfolio of Sowood Capital, a smaller fund,
which has recently run up heavy losses in the credit markets.
The move demonstrates how the world’s largest hedge funds
are increasingly active in areas that were previously the
preserve of more established investment banks.
------------------------------------------------------------------------------------------
The question in this market is this:
Do you see reward where others see only risk -- and are
you willing to fight to find the bottom?
The bears are focusing on the Jeffrey Larson's...I'm
focusing on the Ken Griffin's.
They see only risk -- where I also see great reward.
And don't confuse facts.
This isn't about a bailout. This is about supplying
liquidity, to allow markets to work. For the weak to
fail and for the strong to survive.
The basic law of the jungle is the weak shall be
eaten by the strong. And life in the jungle moves on.
Don't confuse the Jeffrey Larson's of the world, with
the Ken Griffin's.
Those who ignored risk, and who applied reckless leverage
are being punished. And those who are willing to step into
the abyss of this darkness - will be rewarded.
More later tonight,
And remember:
You must fight - for your right - to the bottom!
SOTB |
