Wednesday, April 30, 2008

Bookkeeping: I'm Meaningfully Adding Short Exposure here on the "Fed Pump"

Posted by TraderMark at 2:24 PM TweetThis
That was our last catalyst to break through 1400. I'm going to be more negative and if we pop to 1410, 1420 etc on S&P 500 I will began layering in even more shorts.

Since I don't know what the flavor of the day will be (strong dollar? weak dollar? commodities are great? homebuilders are great?), I'm using the broadest short I have which avoids the Dow stocks (multinationals baby) and focuses on those needing the power of Americans, Russell 2000 (TWM) When the hedge fund computers decide if this is a time to jump right back in weak dollar plays, or to continue this recent rotation out - I'll pounce. For now - who knows what the algorithims are saying... they are probably fried.

As you see, the Fed once again is showing it is very intent on "fighting inflation" (not) In fact, I believe a lot of people (me included) are surprised there is not any stronger wording about inflation - even jaw boning (sp?) it would of gotten CNBC into a lather about how "hard the Fed is fighting inflation". They (Fed) still live in a fantasy world of "lower inflation in 2nd half". I guess they will hold that line until Dec 31, 2008 and then be forced to change language to "lower inflation in 1st half 2009". As with kids, watch their actions not their words.

Here's my take - the Fed is afraid of deflation. Deflation gets rich people mad - it hurts people with assets the most (all their assets get devalued - think Great Depression). Inflation, on the other hand, focuses its hurt on lower and middle class - it hurts people who consume. So you can guess which side the Fed is erring on (not the peons). It's either that... or they are truly believing the numbers coming out of the government about inflation (no problemo!)... I don't know which of those 2 thought processes that the Fed brain trust seems to be using... to fear more.

Long Ultrashort Russell 2000 in fund and personal account

Posted by TraderMark at 2:24 PM Comments (7) | Edit This Post | Create A New Post

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7 comments:

d said...

My take on the Fed's doings is that they are lowering rates to get homeowners to refi their mortgages which were unaffordable with big resets. Rather than have homeowners out on the street or renting the FED is giving homeowners a TEMPORARY window to refi. Yes, some of the homes have lost value and are underwater, however that is what a market is about. The FED will likely raise rates late in the fall. Take the refi and worry about your home value later.

April 30, 2008 3:30 PM  
Mike Masland said...

"Long Ultrashort Russell 2000 in fund and personal account"


Smart :)

April 30, 2008 3:31 PM  
TraderMark said...

D,

Please put down the remote, walk away from the CNBC... no run.
Major misnomers

Prices have fallen year over year 20%. CA, FL, NV, AZ - the heart of the "prine run ups" no one who bought in 07 and almost no one from 06 is above water

#2 MANY neighborhoods were speculators - not home owners - when their investment went bad they are gone. Period. They are not sticking around

#3 MANY of those subprime folks never made their first payment.

#4 The fed impacts ARMs only which are now down to 5%ish of all mortgages, used to be close to 60% at one point in boom times. Long term rates are actually going up (the ones mortgages are based on) So Fed could cut to zero, and it would not matter.

#5 these people who want to refinance are by and large not going to by credit conditions alone.

d, be afraid. This has nothing to do with ARM rates - if you had given me that argument in April 2007 I would agree with you. We are WAY PAST that now. Way past.

April 30, 2008 3:42 PM  
cm202bc said...

Post fed cut:

Ags held their value well. MON has set a nice bounce off the bollinger under its 100 SMA and closed at the 100 SMA.

USO tested and closed above its intermediate bollinger, tho the 1 month+ stochastics remain negative.

DBA bounced off the lower bollinger and turned its 1 month + stochastics positive.

GLD regained the lower bollinger and closed above it, turned the 1 month + stochastics positive.

Truly the inflation dragon is slain by the Feds conservative action today:P

Long TWM, will be long SKF and DGP as soon as they pull back.

April 30, 2008 4:07 PM  
TraderMark said...

Yes I noticed the commodities did well; even gold popped.

If we can put 2 good days of action - I guess the dollar is strong trade is already over? I mean it lasted a whopping 4 days now - thats an epic victory for the US Peso.

We'll need some confirmation but I'll be happy to reverse some trades I did today as long as the coast is clear.

The hedge fund super computers have to think this over tonight before they decide what group to jump into tomorrow. I believe Ben even confused them.... I was shocked there was not stronger language towards inflation...

April 30, 2008 4:16 PM  
Mike Masland said...
This post has been removed by the author.
April 30, 2008 4:24 PM  
madhatter said...

yup good call. i loaded up on COF puts today because like you said the last catalyst has past us and we still can't break through 1400 and there is still no volume. stopping out above 55-57 anywhere in there, pick your stop, conservative or aggressive. tons of overhead resistance technically for this name.

short GLD as well if it breaks and closes below $86 (support) and then stop out if it hits 87 or so.

and lastly, i can't wait for the ARM reset party coming in july haha. weeeee

April 30, 2008 10:26 PM  

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