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Gambling with FAS

February 12, 2009 Equity Trading No Comments

When it comes to triple leveraged ETFs, I tread with caution. However, one that keeps on tickling my pickle is FAS. It is an exchange traded fund (ETF) that seeks daily investment results of 300% of the price performance of the Financial Select Sector Index (“Financial Index”). The Fund seeks to create long positions by investing at least 80% of its net assets in the equity securities that comprise the Financial Index.
… Continue Reading

What is it Lassie – Is Timmy in Trouble?

February 11, 2009 Economy No Comments

Context: Yesterday, as Treasury Secretary Tim Geithner addressed the nation on the government’s plan to fix the financial system, the stock market tanked BAD. He gave no details whatsoever. The stock market hates uncertainty.

I took the opportunity to take another long position in UYG at $2.99 a share, hoping to make another 20+% in the near term.

The cartoon is by Tom Cheney.

Successful Swing Trade: + 22.76%

February 6, 2009 Equity Trading 1 Comment

Yesterday morning, while going through my watch list, I found UYG trading below $3.00 a share. Granted, the financial sector deserved to be beaten down but not this much, especially since the U.S. government made it clear they were near a plan to save these institutions, and were not looking to nationalize banks.

Anyhow, looking at the technical indicators I performed a quick analysis. Short-term, the chart looked pretty neutral, with a faint of bullishness. After gauging the risk:reward ratio, I took a long position in UYG with a limit order for some shares at $2.90; it was trading in the $2.92-2.95 range. My plan was to exit around $3.50 for a 20% return, or cut my losses if the stock hit $2.65 (~9%).

As I watched the price fluctuate and eventually head up for a moment, it took great discipline to not modify my order to execute at market price. Eventually, after 5 minutes or so, patience paid off. Immediately after my order was filled, the stock shot up and my position ended the day  11%.

Today, on the heels of news that the government would announce plans to fix the banking system next Monday, the market experienced a short-covering rally. Consequently, my plan was coming to fruition a lot quicker than anticipated. I thought about holding the stocks over the weekend, but I already had a plan and needed to stick with it so I placed my order and exited the position at $3.56 for a 22.76% return. Not bad, huh? =) 

How John Paulson made a shit load of money in 2008

February 2, 2009 Economy, Equity Trading No Comments

Paulson Advantage Plus, the largest of his funds, returned 37.6% net of fees on $7B in assets. For the coming year, he says…

We remain bearish on the outlook for the U.S. economy and believe the recession will extend into late 2009 and likely into 2010. The sharp contraction in the global economy, the instability of the global financial system and the ongoing credit contraction are unlikely to be resolved in the first half of 2009. While the U.S. stimulus package will likely cushion the decline we don’t think it can halt the downturn and will likely have longer term negative consequences.. … Continue Reading

History Lesson: How Gov’t Dealt with Past Recessions

February 1, 2009 Economy No Comments

Since the Great Depression, presidents have frequently experimented with Keynesian economics to combat recessions. Three economists chronicle the history of government policy during past recessions and explain what worked and what didn’t.

click the source link below to play along.  … Continue Reading

Right way to bail out banks

January 30, 2009 Economy No Comments

according to George Soros….

gsoros

In my view, an equity injection scheme based on realistic valuations, followed by a cut in minimum capital requirements for banks, would be much more effective in restarting the economy. The downside is that it would require significantly more than $1,000bn of new capital. It would involve a good bank/bad bank solution, where appropriate. That would heavily dilute existing shareholders and risk putting the majority of bank equity into government hands.

Source:
The right and wrong way to bail out the banking sector,
by George Soros, Financial Times, 1/22/09

Bad Bank, Bad Idea

January 30, 2009 Economy, Equity Trading No Comments

Meredith Whitney, the Oracle of Wall Street, has spoken.

whitneyIf a bank were to sell its “bad” assets into a “bad bank,” it would still be left with lower earnings power from higher losses on “good loans” and the requirement to build reserves, lower earnings power from lower assets and a higher legacy expense structure, or both…The greatest unknown regarding the “bad bank” is at what price the gov’t would pay for “toxic assets.” If the government elects to pay fair market value, the banks will likely not elect to participate as capital hits would be too dear; however, if the gov’t pays above market, the burden on an increasingly “taxed” taxpayer grows…We would be most encouraged by banks selling “crown jewel” assets to cover their own losses. We believe private capital will readily invest in businesses that make money and grow. However, the banks do not fit this description. We remain cautious on the group.

Source:
Meredith Whitney: A Bad Bank Won’t Save Banks, by John Carney, Clusterstock, 1/29/09

In a Bear market, sell the rumor, buy the news!

January 29, 2009 Equity Trading No Comments

sell

Yesterday, the markets advanced in anticipation that the U.S. government was near a plan to fix the crap economy. Near the peak of buying, I concluded my UYG swing trade for a nice +14% ROI.

After hours, the Democrat-controlled U.S. House of Representatives passed a pricey $819 billion stimulus plan with no Republican support. Today, the market sold off.

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