covering shorts RATE 11%, ERTS 12%, GOOG 2%
We've been adamant all along :
June 11, 2008 - "it would not surprise us to see the general markets much lower in the coming days, weeks, or months."
May 7, 2008 - "While the DJIA has recently tentatively breached 13000, we continue to see significant resistance above that level thus we have not turned away from our bearish stance and we proceed with caution since we continue to believe that the general markets, commodities, and the majority of individual stocks are considerably overvalued and overbought at present."
April 12, 2007 - "With the current outlook for the US economy growing darker, the housing bubble popping, and the coming credit crunch coupled with soon-to-be-higher interest rates along with many expecting the "summer doldrums" in the markets, it will be very interesting and educational to witness what transpires next.
Essential reading on these topics can be found daily at the Prudent Bear site.
As for gold, we track it at Gold Price. Have we seen a "double top" the past two days at $680 for gold? If not, the gold price will likely rocket through that level shortly which would auger well for many of our holdings and the Canadian markets in general."
Note : today the Canadian markets are just shy of their all-time highs.
Compare these calls with this 6-month chart of the DJIA.
March 23, 2007 - "Gold, silver, and platinum will break above their ranges to approach new highs this Summer in our estimation."
October 16, 2006 - "In 2007 we fear dire consequences as the housing and credit economy collapses and markets turn sour. We will have added several short positions by then in preparation, probably divesting some longs. If that scenario develops, we expect gold and other precious metals to continue upwards while base metals turn down with the economy, and we remain bullish on oil and uranium even in an economic slowdown. We plan to be strapped-in for an economic "hard landing"."
These aren't cherry-picked quotes. We've said this consistently in almost every update as far back as our initial post in this blog.
August, 2006 - "Bearish on housing prices, ... Canadian market should fare favorably, particularly in Western Canada, but the US market is in for a major shock. Bearish on the US dollar."
We continue to enjoy our good luck and to trade our plan. With today's massive drop in the markets coming as no surprise to us, we take advantage by booking profits on the short side while we still hold shorts for lower levels.
We cover our short in GOOG for only a 2% profit. That too is lucky however, as the stock had gone well against us but we remained adamant we'd turn a profit on it and finally we have.
We entered the trade on April 21 per this blog when we wrote that "While we remain bearish the overall markets, in the case of shorting Google we attempt a short-term speculation from which we'd consider profits greater than 5% to represent significant gains." and on May 7 we wrote that "The stock has indeed risen more than we had stated we'd be comfortable with, however upon re-evaluatiion we see that it remains within its down-trend from its all-time highs last year and remains in our opinion significantly overvalued and overbought thus remains as good a way as any to be hedged short per our general bearish market sentiment."
On May 7 GOOG was as high as $600 but it closed today below $529. Those who waited until the higher levels we suggested for more conservative short entries in the stock have done very well. We remain of the belief the stock is overvalued and due to fall lower, but we're more convinced a bounce is imminent and don't wish this to become a loser for us.
We cover our short in RATE for an 11% profit. We entered the trade in September of '07, and believe the stock remains extremely overvalued yet it stays up at persistently gross valuations despite the sinking markets so we're happy to step aside for now and book this gain.
We cover our short in ERTS for a 12% profit. We entered the trade in March of 2007, when we wrote that "It may prove a bit premature, but in case there's no continued bounce at all we'll add to our short holdings a position in ERTS on the NASDAQ market at $50.42. We feel that the chart looks right for it, and if the economic fallout is indeed finally happening we believe that frivolities such as video games and video game consoles will be among the first expenditures to be curtailed. This also fits into our standing plan to increase short positions. We would likely cover over $60."
Later that year the stock did close slightly over $60 on only a few days, marking its ultimate high point since our entry and another successful technical call on our part. Since it did not hold that high level, we luckily did not cover at a loss and today enjoy this gain. We believe the stock will go much lower along with the makets and consumer spending, but the time has come for us to close this position.
With this sale thus far in 2008 we've closed 19 positions, all winners both long and short, for an average 32% gain on an average holding period of approximately just over 7 months which implies an annualized gain of 52%
Our outlook remains unchanged. Bearish the general markets, bullish gold and silver, expecting a coming deflation in the pricing of nearly everything else.
We note with amusement that finally analysts at the big firms are giving GM a sell rating.
On January 20 of this year we shorted GM with the simple analysis that "The reasons for shorting General Motors to us seem self-evident, so we short GM at $27.46
American Axle & Manufacturing Holdings Inc. supplies the automakers. We short AXL at $21.65"
GM closed today at $11.43 (we covered the short per this blog on March 07 for an excellent 20% gain in just 5 weeks, writing "We remain GM and general market bears)"
We'd personally been shorters of GM for years, and remain so with personal holdings outside of the trades we diarize herein. We mention this because as seen during the last market crash, earlier this decade, it was very rare to see any "sell" ratings on major stocks and those "sell" ratings didn't emerge until far too late, as is the case now with this "sell" rating on GM.
It is nothing short of comical that the company had not been rated a "strong sell" a long time ago. We are reluctant to call some analysts stupid or irresponsible, so we perhaps suggest they're merely self-serving. It'd be interesting to see what positions they held while talking up the stock, and what they hold now. Enough said, other than "good riddance" to those deserving of termination among the tens of thousands of firings withing the financial sector.
Our blog is read by some of those who remain employed at large investment banks, and if they're in hiring positions we suggest they'd do much better to hire us and thus their holdings and public image would fare far better.
Expect more big-brokerage "sell" ratings on obviously doomed companies far too late as the bear market nears its bottom, at much lower levels we believe. For now, we still see "buy" ratings such as this one on AXL issued recently by Citibank.
We shorted AXL, as noted above, on January 30th covering 4 months later for a 28% gain. At the time we wote that "We expect [AXL] to be a great deal lower in coming months."
Here is the AXL chart.
Here is the Citibank chart.
No comment, just an observation.
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posted by C. Guinness @ 8:20 PM
