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Thread: OK investment savvy posters ...

  1. #1
    Banned Melonie's Avatar
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    Default OK investment savvy posters ...

    ... there's no denying that major trend changes are now afoot re US stock/bond markets, worldwide stock/bond markets, currency exchange rates etc. In the interest of any DD readers who may be invested in US stocks & bonds, and who may be affected in a major way in a short period of time by these trend changes, I would call for the experienced and savvy investors here at DD to post their opinions as to where things are likely to be headed in the near term ...


    In my own opinion, the fate of the US stock and bond markets next week is entirely dependent on the willingness of the US Fed to continue printing up yet more billions of new US dollars out of thin air and channelling these newly printed dollars into the US markets via the primary dealer banks. My guess is that the US Fed will attempt to keep printing and pumping next week in order to continue propping up the 'house of cards' US markets through options expiry at the end of the week.

    This may work. However it's just as likely foreign investors in US stocks/bonds will see the Fed's massive dollar printing as only causing further losses on US stocks/bonds in their portfolios in terms of their own home currency. A 'race for the exits' could easily develop by wednesday or thursday of next week that could cause a MAJOR market decline into friday's option expiry date. Because of this rising risk I have already sold off my 'long' US stock and bond holdings and have been mostly sitting in cash expecting a significant US market decline.

    I have also made a high risk 'contrary' bet i.e. buying shares of UVPIX early last week (right after Morgan Stanley released their triple sell prediction). I am actively watching the US$ exchange rate vs the SwissFranc/Euro, and am prepared to move some of my surplus US dollars into an EverBank EuroTrax CD at the first sign the US$ exchange rate is turning downward again.

    ~
    Last edited by Melonie; 06-10-2007 at 05:13 PM.

  2. #2
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    Default Re: OK investment savvy posters ...

    I don't really know what's going to happen in the next fortnight.

    In terms of liquid investments: I'm at 30% cash in AUD, 20% cash in euro, 20% long australian shares, 10% long hong kong stocks, 15% derivatives and futures and CFDs, mostly bearish, and 5% gold.

    I'm going to be watching the markets with more intensity than I have for a long time, but I have no clue what to expect

  3. #3
    Banned Katrine's Avatar
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    Default Re: OK investment savvy posters ...

    I don't know and I don't care. My clients and my personal investments are well diversified enough that a large dip in a certain sector isn't going to drastically affect porfolios.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
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    Default Re: OK investment savvy posters ...

    Quote Originally Posted by Melonie View Post
    In my own opinion, the fate of the US stock and bond markets next week is entirely dependent on the willingness of the US Fed to continue printing up yet more billions of new US dollars out of thin air and channelling these newly printed dollars into the US markets via the primary dealer banks. My guess is that the US Fed will attempt to keep printing and pumping next week in order to continue propping up the 'house of cards' US markets through options expiry at the end of the week.
    If they don't dump money, how can they raise rates? Thus, they will dump money as long as they can.
    This may work. However it's just as likely foreign investors in US stocks/bonds will see the Fed's massive dollar printing as only causing further losses on US stocks/bonds in their portfolios in terms of their own home currency. A 'race for the exits' could easily develop by wednesday or thursday of next week that could cause a MAJOR market decline into friday's option expiry date.
    I'm expecting a large enough drop this week that they will have to halt markets at least once.
    Because of this rising risk I have already sold off my 'long' US stock and bond holdings and have been mostly sitting in cash expecting a significant US market decline.
    You can get 5+% short term with zero risk, that's very attractive.
    I am actively watching the US$ exchange rate vs the SwissFranc/Euro, and am prepared to move some of my surplus US dollars into an EverBank EuroTrax CD at the first sign the US$ exchange rate is turning downward again.
    I think the swiss franc is better poised, but you won't lose on the Euro. Just my hunch.

  5. #5
    Banned Melonie's Avatar
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    Default Re: OK investment savvy posters ...

    If they don't dump money, how can they raise rates? Thus, they will dump money as long as they can.
    IMHO therein lies the biggest unknown factor. In order for newly printed money to buoy the US stock and bond markets, it has to result in more US stocks and bonds being purchased with that newly printed money than the number of US stocks and bonds being sold by foreign investors / foreign central banks to cut their exchange rate losses. The Fed could lose this race !!!

    Also, the official gov't statistics may not be totally accurate in regard to the severity of the housing bust. Thus the Fed may be trapped between the proverbial rock and the hard place re needing to raise US interest rates to defend the currency exchange rate ( thus preventing oil / energy prices from rising in direct proportion to the falling US dollar), and at the same time needing to hold or cut interest rates to ward off widespread personal bankruptcies due to rising ARM and credit card monthly payments plus pump the US stock and bond markets.



    ~
    Last edited by Melonie; 06-11-2007 at 09:32 AM.

  6. #6
    Veteran Member StuartL's Avatar
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    Default Re: OK investment savvy posters ...

    I tried to post here yesterday and failed so I'll have another go.

    It is my opinion that the turn is coming, though I wouldn't bet on it being this week. I believe that the USA is already technically in recession, the official numbers just don't back that up yet. As and when they do, and they will, the world will realise if that have not already that the US economy is in for some deep trouble.

    As for the printing press - I think it is more important to look at who is buying all those bonds and all that brand new currency. Over the last 2 years, there has been announcement after announcement from central banks that they are 'thinking about diversification'. I'm sure that they will all soon plan to go back into gold...

    For me, I'm really no longer sure who is buying all those billions of brand new dollars. It was china and japan, but seems to be less so. The middle east seems to have eased it's appetite - even saudi. Then it were hedge funds in the caribbean - but they are merely short term players moving the 'hot money'. As mentioned above, the Fed could lose this race.

    In fact, they almost certainly will - IT IS JUST A QUESTION OF WHEN.

    I think that the dollar will have more weakness very soon - though probably not massively so. These things can take years to play out.

    In the UK, everyone expects base rates to rise once or twice more this year. Short term, that will make sterling more attractive on the money markets. As you know, the 'expectation' is enough. That might well be enough to stop much of a rise in the dollar, it might not.

    The UK economy is very credit, consumer spending and house price based - just as the US is. Property prices look to be topping, but that is hard to tell. Buyers seem to be hard to find though in most of the country. This may mean that the UK is 12-18 months behind America. We also have rising inflation and interest rates, increases in bankruptcy and repossession. Nothing serious yet, but up is up.

    My advice?

    Hmmmm.

    I'd be underweight equities. I think I have all my clients out of US equities now and also out of as many US assets as possible. I'm not sure I'd want to be a bond investor right now either - with inflation inching upwards - even index linked bonds won't protect you, the inflation numbers are so complex and open to interpretation that they probably won't be correct. But, inflation makes cash less appealing too.

    If you are US based, I'd say that currency diversification, if practicle for you, is a must. Euros, sterling and the Swiss Franc. Don't go overboard, but don't be shy either.

    Long time readers here (Melonie at least) will know my thoughts as to where to put the stuff. Real money sounds good to me...

    And as ever, this is just my 2c worth - for your entertainment only. All investment disclaimers apply here.

    Good luck.

    Stuart

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    God/dess britneyireland's Avatar
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    Default Re: OK investment savvy posters ...

    I see a lower high formed on all the major US indices.

    If confirmed with a lower low (maybe as early as tomorrow) we can call this a short term downtrend.

    I don't know much about currencies, but I LOVE to play the downside of the market. The market DOES NOT have to go UP to make $$$$ I've fared much better this past week than I did in May.

    Ways to play the downside: short sell stock or etfs, buy puts, sell calls, bear call spread, bear put spread, bearish debit diagonal spreads.
    Rebecca Avalon







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    Default Re: OK investment savvy posters ...

    another less 'involved' way to play the downside if you aren't set up to short sell or trade options contracts : buy inverse ETF's (example SDS = 2 times inverse SPX - I've been in and out of this ETF over the past few months), buy inverse mutual funds (example UVPIX = inverse emerging markets fund I'm into at the moment).

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    Default Re: OK investment savvy posters ...

    There are also 'bear funds' that can be purchased. In the UK they are unit trusts - the US equivalent would be a mutual fund. Bear funds are specifically a downward play, usually on the market generally.

  10. #10
    Banned Katrine's Avatar
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    Default Re: OK investment savvy posters ...

    I'm recommending all of my clients move into a cave and eat dung beetles until this blows over.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
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    Default Re: OK investment savvy posters ...

    I think we'll start seeing new highs in a minute.

    To me, that means it's highly likely we'll end the year much higher from where we are now.

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    Default Re: OK investment savvy posters ...

    well, the Fed has certainly done their part via TOMO's to prop this market into yesterday's option expiry date .... averaging about $25 billion a day in freshly printed brand new money for most of last week. With that amount of money being injected ( equals enough money in a week to fund the Iraq War for all of last year), the US markets had no choice but to go up.

    However, this doesn't happen without a 'price'. Printing money like a madman puts intense pressure on US interest rates to rise, which eventually translates into a big(ger) drop in sales / prices for housing / cars / anything that requires financing. It also indirectly reduces business and personal spending, by raising the cost of servicing existing debt.

    Because of the implications of closing prices on the day of options expiry on options contract values, I can understand why the Fed had to do what they had to do to prevent the holders of options contracts from getting bloodied. However, monday is the beginning of a new month for options contracts ...

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    Default Re: OK investment savvy posters ...

    My take as of Friday's Close: Intermediate term Bullish, choppy through the summer, another irrational bull run in the fall. Key word is IRRATIONAL.

    Nasdaq broke through overhead resisitance and closed there.

    Dow Jones and SP500 stopped just short of overhead resistance, but the MACD and Stocastics are showing momentum to the upside.

    Melanie, thank you for your macroeconomic view. You've showed me some great websites. And I completely agree that "someday" it is all going to come crashing down. We can't continue to buy with "funny money" and it's going to be a scary day when we have to settle up. (I chuckle to myself, it's like getting paid for the champagne room in funny money, but then the house can't pay you at the end of the night!)

    I don't think the closing price on expiration day matters too much to the professional options trader. It's known as "pay day" to option sellers. Any seller that was close to being called out on an index would have closed their position on thursday since index options are Euorpean style (settlement price is determined by the opening price on Friday morning.) Option buyers would have out of their contracts two weeks ago to avoid the rapid time decay of the last two weeks. The only option buyer who would hold until expiration day would be a novice that was so far deep ITM on his calls that the value of the option was purely intrinsic value (the pro would have been stopped out when the market tanked and then bought back in with a July or August contract)
    Rebecca Avalon







  14. #14
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    Default Re: OK investment savvy posters ...

    I'm just doing what I always do, selling off slowly and re-balancing. Adding more small companies, tax-free bonds, and staying away from China. Also, global commercial real estate, "green" investing. For those who are emo-investors and want to hold onto their shitty stocks, just placing trades with stop and limit orders on them. Most of my peeps have been overweight in large-cap US companies anyway due to 2 years of major growth, so its time to sell off. Everyone is still happy.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

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    Default Re: OK investment savvy posters ...

    The only option buyer who would hold until expiration day would be a novice that was so far deep ITM on his calls that the value of the option was purely intrinsic value

    You may call me a 'bear' or a 'pessimist' or a 'tin foil hat' crowd member, BUT ...

    arguably, there is another group of PROFESSIONAL investors who had a lot to lose if the markets had tanked into this month's expiry ... the hedge funds and hot money managers who have been (illegally) trading 'naked' and/or are so highly leveraged that even a 5% decline would have wiped out 100% of their actual equity.

    also, arguably, the Fed is signalling that they cannot keep up the print fest forever to cover the collective asses of the hedge funds and hot money boys ... by telegraphing a clear message via the SEC that they should seriously start getting their collective houses in order in preparation for a different outcome on future options expiry dates.

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