Contemplations on Finance and Economy
And will keep Greece under close supervision until it’s finances return to normal. Government bond spreads started recovering and journalists switched their attention to Spain which alledgedly has even bigger problems than Greece. So, the Greek debt crisis is over. Some pundits even expected Greece to default last weekend.
I knew that market usually corrects in February – March. I was hoarding cash to deploy in the darkest days of February. The correction ce earlier than expected and midway through it I ran out of cash to buy at the bottom. What went wrong?
First, seing that I have a lot of cash and knowing that I will not need it until the end of February and seing how Greece is being decimated for budget deficit, I bout some NBG. I continued buying as it went lower and found myself overinvested. Still I had enough cash and would made a killing if,
Second, I starrted buying before VIX went above 25. Earlier I made myself a mental note that I will not buy before VIX goes above 25. If I followed it, I would have loaded up the cart nicely at the lows of last week and rode up with nice profits by now.
So, the rule for the near future: never buy when the VIX is below 25 and start selling when the VIX is below 19.
I see what they are doing there. They are trying to push Dow Jones Industrial Average below 10,000. Win of Scott Brown? Did not help. Nice state of the Union Address by Obama? Nada. Reconfirmation of Bernanke? Did not move the market at all. Market just ignored it. Everyone is talking about Greece debt problems. Now it is getting ridiculous. They are desperate for bad news to push Dow below 10,000. And we are just in the end of January. And we have very bearish months February and March ahead of us.
And all those clowns in Davos talking how the economy went wrong because of somebody else’s faults. They don’t help either.
Timothy Geithner is holding very well in the senate. He is defending his decisions during AIG bailout and he is very convincing. These accusations on Ben Bernanke and Tim Geithner were getting more and more ridiculous lately. I am glad that Geithner took a very strong stance. This is going to be good for the markets.
Next today, State of the Union Address and Apple tablet announcements. Let’s see how they fare.
Update 1: Next Hank Paulson testified. He was not as confident and outgoing and markets went down a little bit.
Update 2: Next Apple unveiled iPad. It is thin and light but I did not like the thickness of the frame. Price is not disclosed yet. Price is disclosed and made everyone excited: $499 starting price. This is going to be revolutionary. I will buy it to read books, watch videos and trade.
Update 3: Fed leaves rates unchanged at 0-0.25%. Markets responded positively
Update 4: Waiting for Obama’s State of the Union Address. Obama made the address. His style. Good talking, reconciliatory tone, markets moved up.
At the closing bought JOYG and helped myself to a big chunk of C that I could not pass at a very attractive price of $3.17. Meanwhile almost all of my free cash is spent and if tomorrow for some reason -Obama I am looking at you- take a plunge I will have to hastily unwind my positions. I keep my fingers crossed.
Obama, talking about new tax on banks to recover TARP funds lost on car firms, new regulation on banks aimed ad separating banks trading with its own capital and customer’s capital, and doubt about whether Ben Bernanke will be approved as Fed Chairman caused a sizable sell-off in the markets. I expected a sell-off in February and was not prepared for this one.
I had some free capital but I was putting it to work into Greek bank stocks as they were beaten down by Greek governmental debt speculations. So, when the sell off happened last week it caught me with my pants down. Thankfully Greek banks rallied on Friday and I sold some for a small profit. I sold more of them on Monday and now have a sizable position in cash to withstand another 5-6% sell off. I don’t believe it will sell off any lower. The lowest it could go is to the 200-day moving average.
During the sell off last week I sold RHT and RIMM that were to expire in February, sold part of NBG.
In the same time I opened new positions in AMTD, CSX, HPQ, JPM, KFT, WDC. I also have an order to open a position in JOYG if it pulls back low enough.
P.S. Just for the record, On January 15th BUCY, F, IP, JOYG, JPM, ORCL, TKC and V short puts expired worthless.
DELL, C, RHT and RIMM were expiring in the money and I had to roll them to February.
Very interesting analysis found here: http://breakpointtrades.com/controls/preview.php?nl_id=294
Author claims that there was one Elliott cycle 1929-1975, and another 1975-2008. We finished this cycle now we will have a first wave up, second wave (within 4-5) down, then a huuuge 20-30 year long third wave up. Take a look at charts.
3-Month US Treasury bills hit the absolute low record of 0.06% yield. Investors lost their faith in equities and flee to safety in treasuries, almost zero yield notwithstanding. What drives them? I have no idea. Good time to sell them if you have any.
US Treasury 3-month Bills Yield
