Riding The Gravy Train: April 2009

Riding The Gravy Train

Beating the market is fun and profitable. This is how we do it.

Wednesday, April 22, 2009

closing BTU +22% , long FAZ

Given Wednesday's market action, a near-term correction within this bull market rally seems more certainly underway and we do not wish to risk a winner becoming a loser so we close our BTU, Peabody Energy, long for a 22% profit after holding for 5 months.

As recently as a week ago we had reasonable hopes for a much greater gain in BTU which were scuttled by the reaction to its earnings report, so we must accept what we are given and considering the stock is barely higher than what we originally paid (we effectively reduced our cost via covered call sales), and that the general markets are lower than they were when we bought the stock, we feel we did well with this position.

The BTU saga is chronicled within these past postings :

BTU covered calls action update

selling BTU and VZ covered calls, shorting GCI

selling BUD +11% in 6 weeks / +100% on puts, buying BTU


Our "bottom" call of March 9 remains our current thinking, however we feel we'll first see a drop of 5-10% before the rally resumes, if it resumes at all. We hold existing longs and there's little we wish to buy & hold at these levels so we prefer to take fresh short positions in stocks exhibiting relative weakness as diarized here recently - MATW, MANT, and AIPC.

Outisde of positions we've written about in this blog, we have some calls on stocks that are effectively free of cost since we sold enough of the positions on the way up to cover our original risk. In this fashion we hedge our bets within what we believe is an ongoing bear market rally.


With our positions in a prudent relative balance, we feel a wild speculation would make things more interesting. "Investors" seem unimpressed with the fudgy numbers the major financial companies have posted recently, so we go long the Direxion Financial Bear 3X ETF, FAZ.

This is something that must be totally understood and its leverage respected. Due to the extreme volatility inherent in such instruments we will close the position for a loss immediately should it trade below $9 Specifics on this below. That's roughly a 10% risk based on Wednesday's close of $9.91

As we write, markets look to open higher Thursday morning so the entry at the market open on FAZ should be lower than Wednesday's close thus the risk also lower. With the ongoing earnings season and turmoil surrounding financials in particular, plus Credit Suisse posting positive surprise numbers overnight in Europe, this one's a coin toss.

If FAZ trades as low as $8.94 we will close the position intraday and will not advise such after the fact in a new posting in order not to waste time and space on the obvious. That is our nominal stop level. If triggered, we will diarize the sale the next time we post a trade idea. Should the position move in our favor we will post an update outside of market hours once we decide to sell, as per usual.



We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or for mentioning any stocks or companies in this blog. If we hold existing positions we divulge the fact, otherwise we generally buy and sell as detailed here. This blog is merely a diarizing of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

To be notified when this blog is updated :
Please e-mail christianguinness@hotmail.com with "Subscribe to blog" in the subject line or click here to do so automatically if your computer is configured accordingly. We have never shared our mailing list with anyone, nor will we. Please note that we only send update notifications when a trade idea is diarized, not if a blog entry only contains general commentary.

Monday, April 20, 2009

shorting MANT




In our modest "Links" section at right we now add the "Market Ticker" site of "Tickerguy" Karl Denninger. Please enjoy his highly enlightened & enlightening writing and weekly broadcast.

We've been readers of the site for a month now and as near as we can tell he's correct about everything. A wonderful, free resource, on par with Mish Shedlock's site (also linked at right). We cannot heap higher praise than that.



Again we find a stock that is exhibiting remarkable relative weakness and endeavor to short it.

MANT, ManTech International Corporation last traded at $40.81 The stock is down considerably since March 9.

It's possible the current bear market rally is only halfway over, and will resume after the correction which seems to have begun today. If so, conservative players may cover shorts should the DJIA close over 8200.

In the case of ManTech, we'd likely not cover unless the stock is closing over $50.



We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or for mentioning any stocks or companies in this blog. If we hold existing positions we divulge the fact, otherwise we generally buy and sell as detailed here. This blog is merely a diarizing of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

To be notified when this blog is updated :
Please e-mail christianguinness@hotmail.com with "Subscribe to blog" in the subject line or click here to do so automatically if your computer is configured accordingly. We have never shared our mailing list with anyone, nor will we. Please note that we only send update notifications when a trade idea is diarized, not if a blog entry only contains general commentary.

Thursday, April 16, 2009

shorting AIPC





We now short American Italian Pasta, AIPC which last traded at $31.

The stock is up over 400% in the past year. Clearly the company is doing well, and as the "recession" continues to worsen the company's products will almost certainly be in even higher demand, however it seems to us that both business expectations and the stock are unrealistically high at present. Further, the general markets are due to correct. The technical trend suggests the stock could trade closer to $20 thus we place our speculative bets accordingly.

We'd be very nervous shorts should the stock be closing above $35.



We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or for mentioning any stocks or companies in this blog. If we hold existing positions we divulge the fact, otherwise we generally buy and sell as detailed here. This blog is merely a diarizing of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

To be notified when this blog is updated :
Please e-mail christianguinness@hotmail.com with "Subscribe to blog" in the subject line or click here to do so automatically if your computer is configured accordingly. We have never shared our mailing list with anyone, nor will we. Please note that we only send update notifications when a trade idea is diarized, not if a blog entry only contains general commentary.

Tuesday, April 07, 2009

Trailing 12-Month Recap

Going forward we endeavor to post a monthly recap of trades diarized within this blog over the trailing 12 months, along with select bits of commentary now that enough time has passed to judge the accuracy which we will leave to readers to decide.



30 positions initiated or closed in the past 12 months :

5 of which are still open, 3 of which are currently profitable, with an average gain of less than 1% over an average holding period of slightly over 2 months.

25 of which have been closed, none of which were losers, for an average gain of 29% over an average holding period of 4.75 months which calculates to a hypothetical 73% annualized return.

We'll post a trailing 2-year recap in coming weeks.



The list & commentary :


ZSL short at $11.65 currently $13.38 , +15% in 1 week. This position remains open.

MSFT +11% profit in 7 days.

March 9, 2009 - "The markets appear to be putting in a bottom. Not "the" bottom, but at least "a" bottom of some duration we believe."

AAPL shorted at $99.50 writing "A better short entry would be in the $105-$107 range, but rather than wait we enter presently." Stock is currently at $118.45 , -16% in 2.5 weeks. This position remains open.

SU sold at break-even after holding just over 2 months.

February 23, 2009 - "We sleep well with effective shorts in place, believing the markets will be much lower within months if not imminently."

NOV +31% in 3 months.

January 29, 2009 - "The markets could go either way, but appear to us to wish to go downwards."

GLD short at $86.23 currently at $85.27 , +1% in 2.5 months. This position remains open.

MGA +44% in 2 weeks.

DRI shorted at $28.18 currently $35.83 , -21% in 3 months. This position remains open.

GCI +24% in 3 days.

BTU bought at $24.51 , sold two sets of covered calls to reduce the effective cost to $20.46 Stock was last at $27.67 Profit will be 47% if called away at $30 by April expiry. Actual gain presently if unwinding the position would be 24% in 4.5 months. This position remains open.

BUD +6% in 6 weeks on the stock.

BUD +100% in 6 weeks on sold puts.

JAS +24% in 1 month.

PWE +26% in 1 day.

October 13, 2008 - "We feel certain that markets and most stocks will be much lower by this time next year and perhaps even early next year if not sooner."

MCK +15% in 2 years.

October 2, 2008 - "How low can we go? Much lower, and so we shall go."

CBRL +19% in under 7 weeks.

September 2008 - "Those following television personalities and stock pickers who can only succeed in raging bull markets will lose even more than they have recently - indeed very much more - if they persist in their market activity or come too late to the shorting table.

We will not be fooled into the idea that these markets offer "investment opportunities" or "value".

We believe the general markets will be much lower in the coming months if not weeks or days."


VAR +13% in 6 weeks.

August 2008 - "we do not wish to be late in replenishing shorts as we believe a new and severe downturn in the markets will begin soon."

CAKE +17% in 1 month.

DUG +5% in 2 months.

XLY +16% in 5 months.

SPG +17% in 2.5 months.

July 2008 - "In the case of SPG, we feel it will go much lower."

RATE +11% in 9 months.

June 2008 - "We cover our short in RATE [though we] believe the stock remains extremely overvalued."

ERTS +15% in 15 months.

GOOG +2% in 2 months.

June 2008 - "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 [...] Our outlook remains unchanged. Bearish the general markets, bullish gold and silver, expecting a coming deflation in the pricing of nearly everything else.

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.

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."


SYX +13% in 1 month.

HPS.a +200% in 20 months.

LEH +31% in 1 month.

AXL +28% in 4 months.

June 2008 - "We cover our Lehman Brothers, LEH, short as well as our short on American Axle, AXL. We expect both to be a great deal lower in coming months, however that'd be on the condition of severe general market declines which we are also expecting. If we're correct in that regard, then we have remaining shorts on which we can book profits at that time."

May 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 today's market slide bolsters our view, if perhaps temporarily. Nonetheless 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."


CDU +11% in 14 months.

CVT +42% in 5 months.




We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or mentioning them in this blog. If we hold existing positions we divulge the fact, otherwise we generally buy and sell as diarized here. This blog itself is merely a diarizing of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

To be notified when this blog is updated :
Please e-mail christianguinness@hotmail.com with "Subscribe to blog" in the subject line or click here to do so automatically if your computer is configured accordingly. We have never shared our mailing list with anyone, nor will we. Please note that we only send update notifications when a trade idea is diarized, not if a blog entry only contains general commentary.

Monday, April 06, 2009

shorting MATW

We now short Matthews International Corporation, MATW, last at $28.96

Per the company's profile on Yahoo! Finance, "Matthews International Corporation designs, manufactures, and markets memorialization products and brand solutions for the cemetery and funeral home industries in the United States, Mexico, Canada, Europe, Australia, and China. It operates in six segments: Bronze, Casket, Cremation, Graphics Imaging, Marking Products, and Merchandising Solutions. The Bronze segment provides cast bronze memorials and other memorialization products; cast and etched architectural products; and builds mausoleums."

Read more by clicking this link.

The company will release its 2nd quarter report Thursday April 23.

Despite the massive general market rally over the past month, MATW has gone down.




The longer-term trend is self-evident.





Given the continuing deterioration in the economy, we doubt companies such as Matthews will do well going forward.


Click here and here to view informative news videos about some common rip-offs in the $15 billion/year funeral industry. Please note that in no way do we suggest Matthews is in any way involved in, associated with, condoning of, or benefitting from such practices. We merely offer this information we feel everyone should to be aware of.

Further regarding scams and wasted money, please recoil in horror at the "Bailouts and Bull" series by John Stossel.



We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or mentioning them in this blog. If we hold existing positions we divulge the fact, otherwise we generally buy and sell as diarized here. This blog itself is merely a diarizing of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

To be notified when this blog is updated :
Please e-mail christianguinness@hotmail.com with "Subscribe to blog" in the subject line or click here to do so automatically if your computer is configured accordingly. We have never shared our mailing list with anyone, nor will we. Please note that we only send update notifications when a trade idea is diarized, not if a blog entry only contains general commentary.