The energy stocks actually started the day halfway ok. But above you can see hedge fund liquidation 101 on a 1 day chart This is 15 minutes delayed - the stock is actually down another 4% in the last 15 minutes.... It really does not matter what your thesis is or was, when the margin clerk comes calling. Chesapeake Energy (CHK) along with Sandridge Energy (SD) were among the 2 biggest positions of many of the best and brightest funds.
Were.
Now the funds unlucky to still own them not only have to sell, but other hedge funds will target those positions and short sell at will... sharks eating sharks.
And you thought the stock market had to do with fundamentals? Not anymore. Thanks for a reader for sending this blurb about Volkswagon - its an interesting read if you want to know how big money now controls the stock market.
- Volkswagen AG today surpassed Toyota Motor Corp. to become the world's biggest automaker by market value as the shares benefit from hedge-fund trading strategies and the collapse of Lehman Brothers Holdings Inc.
- Volkswagen is up 84 percent in 2008 and surged as much as 55 percent today. Traders who shorted the shares on expectations they would decline on Porsche SE's bid for a majority stake were forced to close their positions, according to three people in the securities-lending business who declined to be identified. The failure of Lehman, which lent Volkswagen shares to short-sellers, probably helped trigger a so-called short-squeeze, they said.
- ``This is a popular, crowded short play that has caused the shares to become disconnected with the company's fundamentals,'' said Renaud Berenguier, who advises hedge funds on equity trading at Aurel BGC in Paris. ``You take one of the biggest prime- brokering lenders, and one of the most shorted stocks in Europe, and this is the result.''
It is dangerous out there right now - when normal mechanics mean nothing. It has been that way for a while now, but it is at extreme levels the past few weeks.
Amazing fact of the day
- The S&P 500 extended its 2008 tumble to 34 percent, while the Dow is down 31 percent. Both are poised for their worst yearly performances since 1937.
S&P 960 is a support level parallel to 1998 lows (we got lower in the 2000-2002 era but those supports don't kick in until far lower) So that's the level we're watching. But the lack of catalyst to the upside is striking.
9 comments:
Would you short volkwagen today at the close?
this mkt is crazy, thought I could buy potash today after intraday pullback to 100, but went to lunch and boom.......
I wouldn't touch something that moves 50% in a day with a 10 foot pole
Might as well go to Vegas
*Volkswagen is up 84 percent in 2008 and surged as much as 55 percent today.*
Booyah!! Always a bullmarket somewhere! :)
As for CHK, they need to raise cash and will have to sell shares at these depressed levels, thats why it tanked. Also Accuweather predicting warm winter in combo with high NG inventories is not helping.
Are you buying anything into the close? Last hour is just straight vertical down... capitulation maybe? I placed a few buy orders set to go at :59
Is there a way to know the percentage of a stock owned by hedge funds? Looking at higher and higher volume on down days, I'd figure they'd be done puking up by now. Guess not.
On a side note, what's your mutual fund strategy going to be in this type of market (i.e. willing to stay in cash and wait it out, but potentially deal with clients that want you to make money for them since they are paying fees). Conversely, what would be your strategy in an up market (i.e. if you were up %30 by April, would you play with less money because the year was good already, and deal with clients saying there's more upside).
shax,
sure its weather! not hedge funds puking ;)
I am not buying into the close
my hope is we open down huge tomorrow to mark a true capitulation and then I'll buy
very few reversals are made in premarket so any premarket reversal I'll doubt again
crappy, there is no way to know - the whole idea behind hedge funds is secrecy remember? thats why they get paid the big bucks
you can see their quarterly LONG equity holdings each Q but that can change by the minute with some strategies they employ
I looked at a post I did in January 2008 when the 50 day moving average closed below the 200 day - I wrote this is the first time it is has happened in years and marks the true bear market. Now this time around I was greedy and was able to make money in Jan-Jun with commodities, before they imploded. I have a post it note on my forehead that the next time the index falls below both the 50 and 200 day I will go to like 20% short exposure and 80% boring CD type instruement paying 2-4%
I'd of been a hero doing that right now. I would of looked stupid in parts of Jan-Jun because some of my biggest gainers were in commodities but I've given all that back and more.
In an up market I would not cut things just because the market was up 30%. It has been so long since we've had consistent winners but for people who were around in the winter and spring you saw my strategy - when a stock I owned a position in ran 20-30% I'd cut back 20-40% of the stake etc. So I layer in and layer out. That strategy is useless now but so is every strategy.
Actually if the market is up 50% in a year I expect to lag because I'll always have some hedges and I always take profits and lock them in. But just like a 30%-50% down year, a 30-50% up year is not very common. I would much prefer a -5% to +5% year where individual stock selection matters. Since I started this we've only had maybe 2 months like that. It's been mostly guessing where the market goes since almost every week the entire market is up or down. Or entire sectors are.
So not a normal environment.
Obviously.
crappy,
The best site I've found for ownership of a stock is :
http://www.ownershipanalyzer.com/InstPositions.aspx?cik=37748&ticker=MEE
Type in your ticker in the box and then choose either "view more list", or my preference "historical changes", which gives you a bar graph of the history of the stock price, number of holders and the fund volume. Unfortunately, it is only as good as the last 1/4.. But I like to see the history of the growth of fund ownership. You can also go over to the Home page and keep a daily eye on buying and selling, but it's a long list. I keep this site (as well as a few others) on my toolbar and while I'm looking aat stocks, I can get a nice graphic of the history .... Er, for whatever good that does these days...
jegan
can you advise a group of 'cash-rich' companies that you think offer good value and growth potential
textile, on the far right margin I list my holdings on a weekly basis. I'd like to think I own many cash rich companies that offer good value and growth potential. In the past, I'd focus mostly on the good value and growth potential aspect but now its imperative to look at the balance sheet as well, so I've made that adjustment.
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