Disqus - Latest Comments for Basque

Re: Theory of corrosion and backflow through feedwater lines to explain Fukushima radiactive water leaks

Basque — Mon, 28 Mar 2011 14:56:05 -0000

It's hard to believe that a steam plant is allowed the luxury of operating with leaking condensers. Not fearing the sea water is contaminated by radioactivity from the reactor but the opposite, for fear that the sea water contaminating the fresh water in the system.

During normal operation, the condenser pressure is negative, so a leak causes the entry of seawater into the system and deterioration of the system fresh water.

This “system fresh water”, a very high quality “boiler water”, is an exquisite substance which price should be similar to that of French champagne and that is ruined even with traces of marine chlorine (stainless steel which are constructed the reactor vessels can not tolerate chlorine).

(I apologize for my horrid english)

Re: Chart of $SPX

Basque — Tue, 26 May 2009 13:28:20 -0000

I think they chose the precise moment when any news comes as a signal to start a violent pre-planned movement, no matter what news is. I think the direction of the movement is not related to the good or bad content of the news. They use it as a sync signal.

Re: Swinger's ES Update April 28

Basque — Wed, 29 Apr 2009 14:04:00 -0000

Traders gone to the street to smoke a cigarette until FED hour. Too many nerves.

Re: Graphical: Solutide Model

Basque — Fri, 24 Apr 2009 07:40:54 -0000

Managed to see the market "turnaround" that you expected? or is it something that should even happen?

thanks

Re: Point vs. Counterpoint

Basque — Mon, 20 Apr 2009 16:46:53 -0000

According to Sanaullah, FAZ's future is bright.

"FAZ is looking great as ever. At levels this low, it is essentially a call option on volatility (or put option on liquidity). The derivatives that provide FAZ its leverage have little implied volatility right now, depressing their prices, and are already heavily discounted because of the equity rally. For volatility to remain this low and in fact decrease, the markets would have to continue trending higher on much stronger volume, bringing liquidity into the market. Clearly this is an impossible scenario, since all the institutional money is on the sidelines and the quant funds are being forced to deleverage. As institutions sell held assets into inflated prices at important resistance levels (like S&P 875), liquidity will diminish and stocks will go down. Both of these things help FAZ's duration and its high convexity nature should send it exploding mid-March and even early March levels. FAZ's downside is limited by the fact that liquidity is approaching dangerous levels and stocks have very little room left to rise. The diminishing liquidity and depreciating equities both feed upon theirselves, causing the aformentioned positive feedback loop, further magnifying its convexity and thus room for upside"

http://www.naufalsanaullah....

Re: AAII Bull Ratio 04/15/2009

Basque — Sat, 18 Apr 2009 10:18:13 -0000

According to the guy at ZeroHedge, Goldman and its quant partners have been killing a lot of long/short Quants funds.

According to Mr. Hussman, "this rally has been based on that "investors" have frantically bid up the worst credits distressed financials, homebuilders, and heavily leveraged cyclicals".

If I have correctly understood these gentlemen, the killing attack of Goldman has been based on attacking the short positions of these S/L Quants forcing them to close their short positions. Therefore, all this board market rally would be a massive classic short squeeze. These "distressed financials" (FAZ), "Homebuilders" (SRS), and "heavily leveraged cyclicals" Mr Hussman mentioned, are typical appetizing shorting targets. According to this theory, the computer models of many L/S Quants choose the very same names as perfect short candidates and the result is that millions of shorts have been piled up on all these values.

If this is what is really happening, this sharp rise in these junky values would be only a short lived mirage and these values will plummet as Goldman take profits and finish the hunting (for lack of prey). If this theory is true, just need a little patience.

Goldman can win in these reckless games one, two or five times but one of these days their victims are going to resist and Goldman will get a catastrophic defeat. Goldman is running very very high risks.

is Goldman part of the underlying of FAZ?

Hussman view http://www.hussmanfunds.com...
ZeroHedge view http://zerohedge.blogspot.c...

(I apologize for my horrid english)

Re: Commercial Real Estate - Starting To Crack?

Basque — Thu, 16 Apr 2009 14:31:15 -0000

The market is trying to do what KingShort said it would.

Re: Housing “Why There is More Pain to Come”

Basque — Thu, 16 Apr 2009 07:23:39 -0000

"My guess is it Shudo be <5%. OK, you get it right one time - what is the probability of that event happening again?"

Well, I do not know which is this probability. I assume that this probability should be "priced in" in the price of FAZ (in the price of the underlying realy)

"My point is increased with holding time + volatility remaining high, the odds of you hitting maximum loss is significantly more than your exit strategy in coming to fruition"

What you are saying is that FAZ is significantly overvalued. You think a long position in FAZ on average lose money, therefore, a short position in FAZ win money on average. You should short FAZ.

"In other words, it is very similar to buying SPY April 2009 100 calls for $ 1cent"

Well, buying options very out of money is to buy high risk (and very cheap) "gamma". This is an extreme case of long position in volatility.

You may like this style of betting or not but that does not mean they are consistently bad bets.

Given the current market situation and VIX situation, Is it, for you, a good idea to get "free money" by selling for cents very out of money put options? it'sa good idea to sell SPX december puts with strike 550?

Re: Housing “Why There is More Pain to Come”

Basque — Wed, 15 Apr 2009 16:52:06 -0000

Yes. On your example, if you are short and the underlying rises 33% you are stopped out and loss the positión at risk, whether you used a 1xleverage and a stop or if you used a reduced position in a 3x ETF.

With a 3xETF risk management can be based on using a much smaller position than that normally used, a position that you can totaly lose.

The leveraged ETF are shortable instruments and so they can not be systematically or statistically bad business.

If a long position in 3xETF was consistently a losing position, then a short position in this ETF would be consistently successful. You could build a consistently winning neutral position shorting at once both FAZ and FAS, for example.

But this does not work because if you're short a leveraged ETFs your gamma is negative. Your losses in the loser leg of the position are big that profits in the winner leg.

If you find a systematically losing strategy you can transform it in a systematically winning strategy changing the arithmetic signs of each position. Buying rather than selling and selling rather than buying. (The instruments need to be shortables)

The issuer does not win more with these 3xETF than with 1x "normal" ETF.

I have never used these leveraged ETF. Ever use small (put) positions in options.

Re: Housing “Why There is More Pain to Come”

Basque — Tue, 14 Apr 2009 15:06:47 -0000

The risk management in the x3 ETFs is similar to that used in the options trading and not necessarily use (hard) stoploss.

A leveraged ETF will protect itself from unlimited losses because they have a non-linear behavior (due to "gamma") that acts as a "soft", gradual, stop. I know this sounds strange.

Imagine that you want to get an initial 100k $ exposure to an underlying with a maximum loss of 20%. You can buy 100k $ of the underlying and set a stop at 20% lower price.

Another possibility is to buy 20k $ of a 5x leveraged ETF (wich tracks same underlying) and not use any stop.

In this case the maximum loss is also 20k $ (your 5xETF posición goes tu zero) but there is a gradual "soft" stop ("gamma"), which reduces your exposure gradually from 100kto 0k rather than from 100k to 80K and then suddenly to 0 when you are stopped out at a very precise price.

(These "gamma" and x5 leveraged things are usually done with with options)

(I apologize for my horrid english)

Re: Long FAZ btw 9.85-9.9

Basque — Mon, 13 Apr 2009 11:53:04 -0000

Often called "martingale"

http://en.wikipedia.org/wik...

Re: The end will be astonishing !

Basque — Mon, 13 Apr 2009 07:13:05 -0000

From Sanaullah:

"The internals of the rally are where things really get interesting. Volume is nowhere to be found and the rally has been led by a series of overnight gaps up. Short-term liquidity is driving the markets, as last week NYSE program principal trading volume was 21% above its 52 week average while overall NYSE volume was 9% below its own 52 week average.

Sustainable equity market trends are dictated by the long-term directional players, but these market participants are not buying into this rally. The constant overnight gaps higher are being met with low volume action during market hours with no follow-through of price action to rival that of the gaps up. This is indicative of unsustainable behavior, as the core equity market players are decreasing participation while short-term liquidity players like quant funds are massively increasing their participation"

http://www.naufalsanaullah....

Re: The end will be astonishing !

Basque — Sun, 12 Apr 2009 19:53:47 -0000

I think FAZ value is not affected by changes in volatility nor has time decay. FAZ has a constant "delta". I think it uses a swap against a long ETF. It works like a future not like an option.

Re: tested 850

Basque — Sat, 11 Apr 2009 06:16:32 -0000

A shortable instrument like FAZ can not be a systematically loser instrument. If it were, the opposite position (shorting FAZ and hedging with a "fair" instrument) would be a systematically winning position.

There are no systematically winning positions on the market. (Unless you're an investment bank, a broker or the Government)

Re: tested 850

Basque — Sat, 11 Apr 2009 05:58:39 -0000

Negative exposure to financials in FAZ is ultimately generated (through a swap) by the sale of banks stock.

A short covering in FAZ force the sale of bank shares by the issuer of the swap. Short sales needed to cover the exposure of FAZ are only a tiny portion of financials stock (FAZ is a drop in the financials ocean), but a big short interest in FAZ must be correlated with strong speculative long positions in banks that could produce such a spike if the banks fall. (a overconfident bulls squeeze)

Re: http://lcmarket.blogspot.com/2009/04/bulls-have-upper-hand.html

Basque — Wed, 08 Apr 2009 14:56:27 -0000

KingShort:

For see a turnaround, need you to see it in real time? be watching the market in the minute when turnaround happens? or can you rebuild it based on past, registered market data?

You look the market action in a computer screen or are you physically present in the floor watching the faces and gestures of other traders?

Thank you (and I apologize for my horrid english)

Re: Long ES @ 803

Basque — Wed, 08 Apr 2009 09:19:16 -0000

"The 2x/3x ETF's are terrible for long-term. Consider SDS at beginning of bear market Jan 2008: price 81
Today: 74.71"

have been distributions (dividends) in SDS worth $ 16 since then.

http://www.proshares.com/fu...

Re: Covered remaining 50% ES / SP @ 811

Basque — Tue, 07 Apr 2009 16:40:14 -0000

The uptick rule confirms that we remain in a bear market. They never think about things like uptick rules in bull markets. If they were watching light at the end of the tunnel would not have to appeal to such ridiculous things.

Re: Covered remaining 50% ES / SP @ 811

Basque — Tue, 07 Apr 2009 16:26:01 -0000

The trading with futures (like ES) can be heavily leveraged (x8 or x10). Fees and spreads are lower (at least in Europe).

Trading with futures is very dangerous (due to big leverage). If you are learnig to trade it is better to start with x1 ETFs.

Re: SRS and why I am keeping it

Basque — Fri, 03 Apr 2009 17:10:04 -0000

"Calculated Risk" writes today on commercial real estate and mall vacancies.

"Office Vacancy Rate Rises to 15.2% in Q1

"Companies struggling to cut costs dumped a near-record 25 million square feet of office space in the first quarter, driving vacancy up and rents down, according to data to be released today by Reis Inc.
...
The office vacancy rate nationwide rose to 15.2% from 14.5% in the previous quarter..."

http://www.calculatedriskbl...

Re: Started shorting SP around 835 upto 850

Basque — Thu, 02 Apr 2009 16:46:57 -0000

These v-bottoms were inflation-bet bottoms. There was no economic recovery but an explosion of inflation. The shares rose in price but not in (real) value.

The actual bear market is a deflationary bear like 1930s bear.

The money supply is contracting, and neither the Fed nor the government will be able to avoid it. There is too much debt and no savings to lend.

Re: Comparing Bottoms

Basque — Thu, 02 Apr 2009 13:28:44 -0000

The government's plan to restore the economy will fail and will only make things worse. There will be no economic recovery in years. I think we all know this and that all investors know it.

In my opinion, bull investors are not betting on a recovery of the real economy, but on an inflationary increase of asset prices (stocks, indices, homes etc)

I think this is a bet on whether the Government will be able to cause a tidal wave of inflation (monetary mass explosion, dollar and euro destruction). Tricks of the statal planners, such as M2M abolition, is just trying to gain time. Time for the inflationary wave to inflate asset prices away. They hope inflationary beast will rob savers and pay down the debts of subprime debtors (and de debts of the subprime governments)

I do not believe that statal planners will be able to destroy the deflationary beast. All this time I have been and I remain a "deflationista".

However, it is possible that I underestimated the stupidity the recklessness and the economic and monetary illiteracy of the policymakers and their friends. They are proving to be much more stupid than anyone had anticipated. It is possible that they end up destroying the economy of the world just to save the banks bondholders.

(I apologize for my horrid english)

Re: Thoughts about March

Basque — Thu, 02 Apr 2009 03:02:52 -0000

You can not make money, in the medium term, by adding wrong trades. This makes no sense. The martingale strategy provides no advantage over pure chance. You can get many trades with modest benefit and win for a while but always ends up reaching a "black swan", a catastrophic losing trade that cancels all previous earnings.

The martingale strategy and its variants are statistical mirages. You can prevent the arrival of the "black swan" only if you have an "infinite capital", but if you have an infinite capital, in fact, you not need trading at all. Nothing can loss who has an infinite capital but but neither can win who has an infinite capital.

Re: Zero Hedge: AIG Was Responsible For The Banks' January & February Profitability

Basque — Wed, 01 Apr 2009 03:54:01 -0000

Well, I'm not a trader, not even an amateur trader. I only attempt the government does not rob to me too.

What I said is that certain arbitrary conventions, if in the minds of traders, might distort their perception. One such convention is to assume that the dollar's value is a constant. The market could be actualy going down even though the SPX change from 700 to 800.

I have a small investment. Half bonds, half stock and a little gold (buried in the garage). I just change my position once a year or so. The bonds, german and american, can go from short dated to long dated or vice versa. The neutral positión in stock can go from slightly long to slightly short.

This year my position is cash (euros and yens), fisical gold and tin, very long dated bonds and heavily short in stock. For someone like me, trying to time the market would be ruinous.

Re: Zero Hedge: AIG Was Responsible For The Banks' January & February Profitability

Basque — Tue, 31 Mar 2009 16:32:51 -0000

"Having said all that, most TA chartist agree that 570 will be the next 'bounce' point. It will likely be the terminal low of this bear market"

But if everyone knows that 570 is the bottom who will sold at 570? If technical analysis works, why the market is not pricing in it and canceling its operation?