Buzz Bits: Dow and Nasdaq End in the Red
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Meltdown - Fil Zucchi - 1:16 PM
No, I'm not talking about the markets (yet), I am talking about my trading systems. Not making this up Minyans... I should play the lottery today.
As for the market wreck, I mentioned Wednesday I thought we were going over the cliff; if the market were a bus, I'd say the front axle is dangling and the chassis is rocking. Can the Fed start bailing out anything that fails? Yep, all they have to do is print. Will it work? Only as long as the dollar does not crash. Will the dollar crash? We'll see, but keep this in mind: the currency markets cannot be manipulated. If the dollar collapses, there will be no bailout.
How am I gonna handle this? Above two Standard Deviations in the Volatility Index (VIX) I will very gingerly start shedding puts in scale and replace them with out-right index shorts. Not much of a revelation, but that is all I can offer for now; where the market looks to be heading there are no "rules" or "systems". What you think is right for you is probably just as right as anything else you may hear. In a very primal way, the market is reverting from a playground open to all, to a dark jungle where only the fittest will survive.
Not Bear but Gold! - Lance Lewis - 1:07 PM
The media is reporting that gold is up on fear about Bear Stearns (BSC).
This is a fundamental misunderstanding of why gold is rallying. Gold doesn't rally on "fear." It's not a put on stocks. It's a call on the probability that the fed will print money and the systemic risk that BSC poses guarantees that the Fed will ramp up the presses even faster. THAT is why gold is rallying.
Position in Gold
Bear Implications - Minyan Peter - 12:41 PM
The last major "bailout" that the market saw was Countrywide (CFC) in which, over the course of a couple of weeks, Bank of America (BAC) agreed to purchase the entire company. I would remind Minyans that a lot can, and likely will, happen between now and the third quarter closing date to change the ultimate purchase price.
Be that as it may, I would contrast both the speed and structure of today's "bail out" of Bear Stearns (BSC). This came together far faster and without a certain end structure in place.
I raise these points, because the differences are dramatic and worth thinking through.
For example, I know that there were rumors yesterday of National City (NCC) being shopped by Goldman Sachs (GS). Based on what has occurred to today, I would suggest that the market for "whole franchise" sales is closed. As a result, and as I have suggested would inevitably be the case, I would look for troubled financial institutions to accelerate the sale of non-credit businesses.
Position in SKF
Ciena Connections - Sean Udall - 10:45 AM
IPTV seems to have lost any relevancy to the stock prices of many companies supplying technology to this area. The fundamentals of IPTV growth remain very strong, as shown in this report. Here is an except: "Strategy Analytics has different numbers but is equally bullish on IPTV. The company says revenues for IPTV in the US were at $694 million last year, and expects the market to grow to a whopping $14 billion by 2012."
One supplier is Ciena (CIEN) and two analyst downgrades later the chart doesn't look to be listening as CIEN has retaken the 50 day MA and the other indicators are moving into solidly bullish territory.
I thought this was simply another crushing good quarter out of CIEN and penned a piece on the subject after its call. Prof. Zucchi is also bullish here as well.
So, given the CIEN report, continuing trends on IPTV and bandwidth proliferation I may have to look a bit harder into Tekelec (TKLC). My longer-term bearish bias may not be as necessarily prudent anymore with regard to this name. I'll post what I find.
Continuing with the IPTV vein, SeaChange International (SEAC) reported what looked to be a fairly solid quarter. I have not listened to the call yet and want to see how this stock trades. In the past I have favored Harmonic (HLIT) over SEAC and have been out of HLIT for some time since it did what I thought was a highly dilutive secondary offering. HLIT has pulled back $4 (a third of their value) since the secondary and I'm looking at getting long that name again. The one benefit of the secondary was that it took HLIT's balance sheet from being just okay to really quite good. I think longer term growth trends should, for their encoding and other end markets, remain quite strong.
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