August Stock Talk II

Grinder,

An interesting CC might be LEND..Sept 10 calls going for 1.50, add the premium on the stock would mean 3 bucks potential on an 8.40 stock..thats pretty sweet.

The downside is dramatic..if LEND doesnt get bought out the stock goes to 3 I imagine..

D2, yeah this thin trading is wild..add the extra volatility and you have a monster wild ride..I havent seen trading like this in quite some time myself..

CEGE starting to run again.  Not exactly sure what's moving this, but when she runs she can run pretty strong.  Might be tradeable.

That is quite a move..

Today it went below 13 and now at 15.50 thats quite a big move on big volume..

FSLR getting slapped...they priced that secondary VERY VERY poorly..

FSLR will be a good buy around $80.

Holy hell LEND keeps moving..

7.50 calls are a 5 bagger today alone..

Too bad the 10 puts are priced WAYYYYY too high.

D2,

Good comments and I agree..problem is they just tossed on some serious shares and people who bot are probably itching to get out, and will sell on upticks.

When a stock does a secondary it effects trading..so the greater the supply the lesser the wind movements (in general)

I am quite pissed at myself..HLIT got down to 7.75 which was an awesome price, now two days later its almost a dollar higher and acting nicely.

I guess being long the weekend is a good thing!

been watching the market for 10 years and ive never seen it this way either

  On it as well. By the way, any have a splits/earnings site or claendar they find particularly accurate. I especially am looking for one that includes announce date/ split/ record date/ ex-dividend date, and which can be back tested....

excerpt from a good read on the recent turmoil affecting quant funds:

As the global head of quantitative equity strategies for Lehman Brothers Holdings Inc., Mr. Rothman has an inside view into what went wrong. His story paints a situation that quickly snowballed out of control, as events damaged fund managers' confidence in their models and led them to take steps that made matters worse. By Thursday, Mr. Rothman was so concerned that he wrote an extraordinary plea to the industry to remain calm.

"Wednesday is the type of day people will remember in quant-land for a very long time," said Mr. Rothman, a University of Chicago Ph.D. who ran a quantitative fund before joining Lehman Brothers. "Events that models only predicted would happen once in 10,000 years happened every day for three days."

The extent of the damage remains unclear, but people involved agree that a wave of losses hit quantitative investors in recent days, dragging down performance for a universe of investors that includes hedge funds and proprietary-trading desks at some investment banks.

Koaj,

So was this article referencing the credit side here? Obviously this debacle isnt in relation to the stock market, but if you had a reference point investment wise that would be interesting to hear for those who might not understand what you are saying.

I dont have background in this area of the markets but I do know what it is referencing..when the credit markets started tightening up, these models got messed up due to the big spreads and dropping prices..as the models profit from reasonable spreads in the mortgage and credit markets..

Intriuging stuff and most dont know that this unknown market is really what moves the general market. Derivititives and model programs are the insides of the market we know..

here's the article

i guess the mkt neutral quant strategies were shaken by the whips the mkt was going through due to the credit mkt drying up

wall - not sure if you or others understand these statistical arbitrage or mkt neutral quant funds and what they actually do

basically they bet on or against stocks based on their historical trading multiples or some other determined variable

if a stock has averaged trading at 10x forward earnings for the last 10 years...if it dips below 10x then the fund will buy it and then sell once it reaches avg historical levels. same thing if it begins to get overpriced and trades at 12x forward earnings...the fund will short and the cover when it gets back to its avg

LTCM did this with debt and they were incredibly levered to the point where if the mkts didnt behave they were going to be up shits creek in a hurry....well in 98, russia devauled its currency causing LTCM to go haywire

we are seeing the same type of thing today with these quant funds

It is interesting..and it shows that computer programs can fail and when they do there isnt someone watching them and firms can lose a TON relying on computer programs.

I was speaking over the weekend with some friends about the volatility this week or so and how the market swings were the most severe in years..I would agree. You combine thin trading with the market and credit issues and you have a very nasty combination.

I am a bit shocked that the fat cats stayed on vacation while this disaster was going on..but it is obvious they did..

The article makes it seem the worst is over, I dont necessarily think it is. And it also shows that the market is only controlled by computers and systems to an extent...if bids are drying, even with computer programs there to supposedly maintain liquidity, these fool proof programs can fail and the market can get whacked..

I think these "systems" also exist in options pricing and markets..you can see computer bids and offers and spreads based on BS models versus stock pricing.

The problem is with any model that the market is an animal in itself and in the short and mid term, if there is a lack of buyers and a plethora of sellers, these programs can get nailed..any time you use programs to trade and use high levels of margin, these events can happen, especially during thin summer trading.

Oh and keep in mind that these models arent used for all stocks, more so for lower beta stocks like financials etc, and of course financials have been wacked for reasons OUTSIDE traditional valuation measures..so Bear Sterns and Master Card are getting nailed because of unknown potential risk in credit markets and that can and HAS caused normal stocks to increase beta and drop in price. I say they can drop even further..we dont know the extent to the damage on future earnings and we dont have any idea if we are finished or where these problems will take us..

Good job Bustin!

 not bad man

wall - the problem is, the math models are always calm and systematic, the humans programming are scared...thats not a good combo

want to short something? find things that GSCO and BSC filed as a 5% owner of...PSS is a good one. GSCO showed 10.4% ownership in May...the stock is down 8 points in the last month, Payless Shoes is in no way related to any of this current market mess...yet GSCO had to find cash so they sold Payless and other equities

You really think they are so hard up they sell investments to raise cash?

That sounds like somthing LEND might do versus BSC..but you are right about Payless..even at current levels for a shoe store they have an over 20 PE ratio..

Goes to show you how much I know, I never even knew Payless was a public company..