Dipping a Toe

I'm cautiously dipping my toe back in on the short side. 600 points in three days has put some meat back on the bone. We'll see. I'm re-entering things slowly for now.

Airlines and commercial real estate stocks seem vulnerable.

The Fuse Has Been Lit

Just wait, there will be more.

MORE:

Other states are experiencing similar problems on a smaller scale.

The Montana Board of Investments, which manages the state's money, has seen $247
million withdrawn by local governments in the past three days from a $2.5
billion money-market-like fund called the Short Term Investment Pool.

"We've had some local government withdrawals in the past few days because of reports
about Florida's problems," Carroll South, executive director at the Montana
Board of Investments, said in an interview on Thursday.

Rating agency Standard & Poor's warned last month that it could downgrade a $4.8 billion
investment pool run by King County, Wash., because of potential subprime exposures.

Preview

"The nation's subprime-mortgage crisis is prompting Florida cities, counties and agencies to pull billions of dollars out of a state-run investment fund.

They fear they could have lost their money because a state agency invested it in funds backed by loans to homeowners with questionable credit -- the same loans that have triggered an international credit crunch.

Governments and agencies typically take money intended to pay for such basics as teacher salaries or road repairs and invest it in the short-term state fund so they earn interest before the bills come due."

Here's where we are headed. The toxic waste is everywhere. I'm not kidding. Got to love Gov. Crist's response, which was basically, "Don't worry we'll bail you out."

Since Greenspan we've all become accustomed to bailouts. Seems like everyone gets bailed out. We have socialized risk. Meanwhile the profits are usually private. At some point this all becomes too big to bailout. Can we really bailout everyone at the same time? Who is going to bailout our government? China?

It's all one trade. The equity markets are at that same point, where we assume the bailout is coming to save us. The Fed will cut and save us. It always works right? Well I fail to see how problems that were created by easy money will be fixed by more easy money. Anyway here are the articles:

http://www.orlandosentinel.com/news/local/state/orl-bk-statefund112907,0,5698387.story?coll=orl_tab01_layout

http://www.orlandosentinel.com/news/local/state/orl-run2907nov29,0,138068.story

Bears Get the Horns

Out was smart. For the moment anyway. I'm still out. Basically flat save for a small handful of positions. This way I'm not hostile and feeling under attack with the market going against me. Really I should have not only covered but went long today as well. Don't know why I felt it appropriate to be so arrogant as to shun easy low risk long trades. Bottom line is I don't trust the long side here. Our problems are just too big. It's important to be able to sleep at night.

Apparently the "Fed will save us" trade is back on in the equity markets. Strikes me as fallacy but the fallacy has the upper hand for the moment. No sense in fighting it. The more of a bounce we get the more meat on the bone come time to short again. Thing is, none of this will be easy. The coming bear market will be tough to trade long or short. Think volatility.

I'm Gone

Futures up huge again. Just like that. I'm wrong, I'm gone. This morning I will burn it all to the ground. No part of my trading plan allows for staying flat-footed while losing money. I'm gone. Maybe I'll get long. Yuck. Maybe I'll go lay on the beach.

Really I should have been out before the close yesterday but I was out of the office for the last half hour. Didn't expect such a big pump into the close. That will cost me. It hurts too. The best month ever for me is no longer. But I will admit when I'm on the wrong side. That is clearly now the case. I'll take my remaining profits and walk.

My watchlist for today has long ideas outnumbering short 2 to 1. Let me be clear though. This bounce has legs and could even last until year end. Does it change the big picture? No. I still think this is setting up the shorting opportunity of a lifetime. However, in the short run, you must trade the tape you are given. You are never smarter than the market.

Sucker Rally

Not convinced by the huge upside action today. Staying pat with my shorts despite the pain.

Back to the Bloodletting

Well there you go. That bounce didn't last long. One day of weak holiday volume. We gave back all of Friday's gains. And more. One giant flush this afternoon.

This market is damaged. No. This market is broken. Not technically though. Not yet. Soon enough.

The pain has just begun. Maybe the market can put in a double bottom here and vault higher. Though it feels to me that we are rolling over. A CLIFF!?

Tonight's watchlist provided 37 short and 13 long candidates. I'll be looking at the shorts and maybe adding to current positions. Cautiously now. The bounce is still out there waiting to trap the bears. Change in sentiment from uber-bullish to sanguine/nervous has me concerned but I don't yet smell fear. AAPL, GOOG and RIMM need to roll first. That may start real soon. Or not. I'll be watching those names more closely just the same.

Again the futures are being gunned upward tonight, speaking of a bounce. See, I'm scared. The short side has been too easy and when I'm hot, I'm nervous. Let's see if this one lasts any longer.

I had lots to be thankful for this year. Hope you did too. Even had Thanksgiving TWICE, on two different days, at our house and with me doing dishes.