I THINK THE MARKETS HAVE BOTTOMED!!!

[quote author="Failedagent" date=1228465395]I think the market will bottom when price/dividend ratios start to make sense, not when price/earning ratios look good. I for one have given up on phantom earnings from the BS that public corporations put out as an income statement. My new motto is "send me the money" not "show me the money".</blockquote>


P/E ratios indeed are a horrid way to look at equities. As they are derived from past earnings. Now in a stable economy you can get a general idea as to how expensive or cheap the stock is trading at. But in this environment when future earnings can all of a sudden be down 50%, it will in theory double your P/E ratio making it expensive again. That is why its better to look at PEG ratios as they incorporate future earnings growth (assuming they have it correct), but in this market even that is risky. For a great example punch in ticker DRYS and see how low their P/E is at. However now they are charging 1,000 a day to ship vs. 200,000 when demand was high. It looks dirty cheap, but it will even look cheaper when it trades at 1 dollar.



Dividend to price ratio? Not sure thats any good either. Many firms have already slashed dividends and as capital gets more scarce they will continue to do so.

I mean go take a look at Frontline Limited (a shipping company, FRO is the ticker). The stock is around 26 with a 7.75 annual pay payout which yields 29%. Do you think they will continue to pay it out? What about Bank of America? Is their dividend safe?



I wouldn't buy investments based on dividend rates unless you know for a fact they won't cut it. Because if you buy something, and dividend gets yanked the stock will collapse the amount that it got yanked. So in FRO's example, a zero dividend will cause a 29% drop and some as it signals an obvious weakness.



There are many ways to play this market and succeed. To be honest this year has been one of my best years ever due to volatility and numerous ways to make fast cash. However, its a market where you can lose your pants and your wife if you're not careful either. So you have to be armed to the teeth with information, patience, instict, common sense, anticipation, discipline, focus, sounds strategy, etc. If you don't have that, just wait till the economy is better or pay someone to do it for you.
 
Here is a potential trade if you feel like gambling. Well its not gambling just protecting myself because I don't like the potential bad news coming out tomorrow.



I bought puts on BofA about 3 days ago. I was down about -45% and doubled my position early this morning to bring my overall loss to -14%. I'm holding on to it as a small hedge against my long positions if the market goes south tomorrow...and here are great reasons as to why...



A.) Employment data is the most important indicator of all. It is due to report tomorrow morning.

B.) Bank of America shareholders are voting on M.Lynch merger. The expectation is that the deal goes through...Has anybody wondered what happens if the shareholders vote it down? This can happen btw, since BofA did pay 50Billion for it, and shareholders know they could have had it cheaper. Oh yeah...here is the answer; MER will fail, and market will COLLAPSE.

C.) Nobody really wants to hold shares over the weekend, as ALOT can happen.



Here is a prediction for fun. Market drops 750 pts tomorrow. YEEEHAAW!!!
 
[quote author="awgee" date=1228465992]The ten year is at 2.55%. I am amazed.</blockquote>


As an investor, what would you have to believe to buy a 10-year note at 2.55%? Massive, decade-long deflation like Japan?
 
[quote author="blackvault_cm" date=1228450908][quote author="skek" date=1228450515]You could be right -- again, I'm just relaying a hunch. But you kind of made my point. Americans are <em>used</em> to seeing airlines in bankruptcy. BK is part of their business model. But when was the last time we've seen a car company in BK? You'd have to go back to the Chrysler bailout in the 80s for a close comparison. <strong>So a car company BK would be different.</strong> And, given that most Americans know that the government is considering a bailout of the auto industry, wouldn't a BK indicate that, to some degree, the government couldn't "save" GM or Chrylser?



But, you could be right. I just wonder what piece of news is going to finally make the point that this is serious to the average American. What do you think might do it?</blockquote>


Car company going under vs an airline is different. Let alone 3 of them.

Here are some few obvious reasons.

The amount of employees and GDP contribution that car companies have vs. airlines is not even a comparison.



People don't buy planes, and they really don't have to fly to Europe, Asia, or to New York. But people do need cars to get to work and do their everyday functions. So an airline going BK...who cares. I guess I'll have to drive instead?

The big difference is will you replace your car every 3-4 years, or will people buy one every 8? I know my relatives in europe cycle cars until it literaly can't be repaired anymore and MUST be replaced. If you follow this logic, you won't need a car for about 20 years.</blockquote>


I believe you misunderstood the intention of the analogy.



I wasn't comparing contributions to GDP. I was simply stating that very visible large companies go into bankruptcy seemingly every day. They continue operations, and emerge later and go about their business. Sure, it sucks if you are a stock holder in the companies. But the companies keep on keeping on.



Also, though the automakers are larger, the airlines are no slouch. Delta Airlines has 52,386 employees, American Airlines has 85,500 employees, US Airways has 32,779 employees, ... (All numbers are according to Yahoo Finance)



Simply put, I believe most people are aware that going bankrupt doesn't mean that they cease to exist.
 
Yeah I did. Morekaos pointed what you meant and I acknowledged it. At times it is harder to communicate over the internet as I don't get to see people roll their eyes when I talk. haha my bad.
 
[quote author="IrvineRenter" date=1228473300][quote author="awgee" date=1228465992]The ten year is at 2.55%. I am amazed.</blockquote>


As an investor, what would you have to believe to buy a 10-year note at 2.55%? Massive, decade-long deflation like Japan?</blockquote>
I guess so. Or maybe I would need cash very bad for redemptions on the hedge fund I was running. Or maybe I would be counting on the Fed buying treasuries on the open market. Or maybe I would need a place to put cash while I wait to see when the equities market and corporate bond market and commodities market and ________ market was heading up. I guess that is result of deflation, eh?
 
[quote author="IrvineRenter" date=1228473300]what would you have to believe to buy a 10-year note at 2.55%? </blockquote>


That there will be a Greater Fool who will buy it next month @ 1.7%.
 
[quote author="awgee" date=1228465992]The ten year is at 2.55%. I am amazed.</blockquote>
And most likely going lower below 2%. The markets have hit bottom IN 2008, the markets go lower in 2009.
 
[quote author="blackvault_cm" date=1228472619]Here is a potential trade if you feel like gambling. Well its not gambling just protecting myself because I don't like the potential bad news coming out tomorrow.



I bought puts on BofA about 3 days ago. I was down about -45% and doubled my position early this morning to bring my overall loss to -14%. I'm holding on to it as a small hedge against my long positions if the market goes south tomorrow...and here are great reasons as to why...



A.) Employment data is the most important indicator of all. It is due to report tomorrow morning.

B.) Bank of America shareholders are voting on M.Lynch merger. The expectation is that the deal goes through...Has anybody wondered what happens if the shareholders vote it down? This can happen btw, since BofA did pay 50Billion for it, and shareholders know they could have had it cheaper. Oh yeah...here is the answer; MER will fail, and market will COLLAPSE.

C.) Nobody really wants to hold shares over the weekend, as ALOT can happen.



Here is a prediction for fun. Market drops 750 pts tomorrow. YEEEHAAW!!!</blockquote>


bv, bofa is buying mer with stock. 0.8595 bofa: 1 mer, which is currently reflected in the stock price of mer. so they're not paying 50B, but somewhere around ~20B since bofa stock is down that much since the deal was first announced. i think the deal goes through.
 
[quote author="acpme" date=1228525357][quote author="blackvault_cm" date=1228472619]Here is a potential trade if you feel like gambling. Well its not gambling just protecting myself because I don't like the potential bad news coming out tomorrow.



I bought puts on BofA about 3 days ago. I was down about -45% and doubled my position early this morning to bring my overall loss to -14%. I'm holding on to it as a small hedge against my long positions if the market goes south tomorrow...and here are great reasons as to why...



A.) Employment data is the most important indicator of all. It is due to report tomorrow morning.

B.) Bank of America shareholders are voting on M.Lynch merger. The expectation is that the deal goes through...Has anybody wondered what happens if the shareholders vote it down? This can happen btw, since BofA did pay 50Billion for it, and shareholders know they could have had it cheaper. Oh yeah...here is the answer; MER will fail, and market will COLLAPSE.

C.) Nobody really wants to hold shares over the weekend, as ALOT can happen.



Here is a prediction for fun. Market drops 750 pts tomorrow. YEEEHAAW!!!</blockquote>


bv, bofa is buying mer with stock. 0.8595 bofa: 1 mer, which is currently reflected in the stock price of mer. so they're not paying 50B, but somewhere around ~20B since bofa stock is down that much since the deal was first announced. i think the deal goes through.</blockquote>


I realize that. However, I believe they still have to record on their books 50B. The point is though if they waited a bit longer MERs stock would have dropped further and they could have had a better deal. Not virtually 1 for 1 on the stock conversion.

Then BAC was still trading around 30s I believe when they acquired them...a weeks wait, and they could have had it for a .5 or a .3 conversion.
 
[quote author="IrvineRenter" date=1228473300][quote author="awgee" date=1228465992]The ten year is at 2.55%. I am amazed.</blockquote>


As an investor, what would you have to believe to buy a 10-year note at 2.55%? Massive, decade-long deflation like Japan?</blockquote>


Or that you need treasuries as collateral for your CDS. Or you are a hedge fund or mutual fund company expecting plenty of redemptions. Or you think the stock market will fall further.
 
I think pretty much everyone thinks the stock market will fall further. I am a contrarian by nature and a cynic by birth. I post these two articles not to point directions for oil but to use them to illustrate how quickly accepted fact and one sided opinion can change almost overnight or in this case within 6 months. In this media driven, blackberry infested, 24/7 news world we go from one extreme to the other with astonishing speed.



"Goldman's Murti Says Oil `Likely' to Reach $150-$200"

<a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=ayxRKcAZi630&refer=home">may 2008 oil</a>





"Oil to hit $25 a barrel as global recession deepens, Merrill Lynch predicts"

<a href="http://www.telegraph.co.uk/finance/3564383/Oil-to-hit-25-a-barrel-as-global-recession-deepens-Merrill-Lynch-predicts.html">December 2008 oil</a>
 
[quote author="morekaos" date=1228527739]I think pretty much everyone thinks the stock market will fall further. I am a contrarian by nature and a cynic by birth. I post these two articles not to point directions for oil but to use them to illustrate how quickly accepted fact and one sided opinion can change almost overnight or in this case within 6 months. In this media driven, blackberry infested, 24/7 news world we go from one extreme to the other with astonishing speed.



"Goldman's Murti Says Oil `Likely' to Reach $150-$200"

<a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=ayxRKcAZi630&refer=home">may 2008 oil</a>





"Oil to hit $25 a barrel as global recession deepens, Merrill Lynch predicts"

<a href="http://www.telegraph.co.uk/finance/3564383/Oil-to-hit-25-a-barrel-as-global-recession-deepens-Merrill-Lynch-predicts.html">December 2008 oil</a></blockquote>


Really? I'm a contrarian too. However, I felt that everybody is talking about market bottoming out and rallying till end of January.



Speaking of it, my BAC puts are doing jack. I think I'm going to dump for about a 20% loss. Market can go further down, but my timing is off; two weeks left till expiration this thing will decay fast...oh well. I'll give it till end of today.
 
[quote author="morekaos" date=1228532422]Now you are seeing things my way</blockquote>
I am, I'm not...I don't know what I'm seeing. When we hit 7500, I was 99% confident that within a day or two the market will snap and we will have a nice rally. When I'm NOT highly confident about the direction of the market...I've learned to stay out of it as I tend to get myself in trouble.



My portfolio right now is positioned to be most profitable if DOW trades between 8300-8900. So I have some upward profits still to take, but if we go past 8900...covered calls willl prevent me from profiting any further -- atleast till Dec 19. I also will have a neutral position if the market goes below 8300 assuming I hold on to my BAC puts and I think I will. I also remain 68% cash.



So I'll just remain in my current position...kinda boring but oh well.
 
Morekaos, I meant to ask you what your definition of hitting bottom is. Are you looking at things short term or long term? My original response was a long term view, my cluelessness as to where the market is going next couple of weeks is short term view.



Saying that here is my statement.



If the market continues to climb on really bad news, it will just fall from a higher cliff down the road at some point. Yes? No?
 
I was making a intermediate to long term bottoming call. Not a trading call. I don't think the markets will violate the 7450 level for the next year. Having said that I am taking UCLA and the 33 points
 
[quote author="morekaos" date=1228567737]I was making a intermediate to long term bottoming call. Not a trading call. I don't think the markets will violate the 7450 level for the next year. Having said that I am taking UCLA and the 33 points</blockquote>


Morekaos.



I am going against you on this one too.

My prediction:



USC wins by 35. 45 to 10
 
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