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John Gilluly

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  • Calm Before The Storm [View article]
    If it hit $80 you could sell the near-month(s) calls. However, his ETF seems leveraged enough for me.
    May 30, 2014. 01:19 AM | Likes Like |Link to Comment
  • Calm Before The Storm [View article]
    I understand your reasoning vis a vis the TVIX, but the timing has to be perfect or the tooth decay inherent in this leveraged and inverse fund quickly eats away at the position.

    The SVXY (and its half-companion XIV) on the other hand seem to track point for point. I estimate that a $30K short position in SVXY could completely hedge a $100k portfolio of high-quality stocks (on the long side) from any losses in a minor correction in an ongoing bull market. Hence my mention of cheap insurance. The timing of the entries would be all-important.

    SA Poster Nathan Buehler has written an excellent article in this regard. See

    In an actively-managed portfolio it would mean shorting at the top of the channel and going long near the bottom. Of course, if a bear market came along, then all bets would be off on the long side. Bear markets always plunge further on the down side than anyone expects. Saying that, I detect no hint of a bear market in our current scenario, only a correction in a secular bull market. We have been getting consistent Dow Jones Buy signals (confirmed by the transports) recently.

    Speaking of bear markets, however, the Spring action in the Russell 2000 sure reminded me of that. Every rally sold into. Sudden spikes and phantom trend-changes met by reversals almost immediately for 3 months. Just take a look at the homebuilders.
    May 30, 2014. 12:57 AM | 2 Likes Like |Link to Comment
  • Where Is The Market Headed Now? Leveraged ETFs Tell The Story [View article]
    Your are welcome.

    Peter, you wrote, " No free lunch; the price is nearly always SOME risk involvement. The trick is keeping that price as small and tolerable as possible in the trade-off with prospective return."

    Yes, that is it exactly.

    About a decade ago, I had an investment newsletter website (didn't many of us?). A member once wrote to me, canceling his subscription, because I had swallowed the bearish media pill of the time (March - May, 2003) after an exceedingly long Nasdaq downturn. I had become bearish - precisely when I should have been a bull.

    He told me that I didn't "get it", and that professional investors (like himself) approached the market completely differently, agnostically even, and he didn't want to read my stuff because my viewpoint could cloud his thinking.

    This investor applied a kind of Zen-minimalist thinking to the market. To coin a phrase of the musicologist John Cage, "To know the MEASURE of a sound, you must pay attention to it - as it is, just as it is." He studied the 100 most volatile stocks in the market, and when they broached one of their oft-broached extremes, he either bought or sold (in size), and then immediately began looking for his point, or even a half-point, so he could prepare to get out.

    "The only time I have risk is when I am in...the only time I invest is when the bell has already been rung to the extreme (i.e, the market has throttled it mightily).

    Long...short... he was agnostic. The thing he focused on was the probabilities of risk/reward at that moment in TIME he entered the fray. His methodology was eminently simple, guileless even; and according to him, he did exceedingly well at it. He said he was in cash at least half the time.

    I never forgot what he told me on the phone that day. Two months later, I finally went long (aggressively so) and in just two weeks made back all my losses from the Spring of '03. So much for knowing the trend instead of sticking to an opinion.

    When I first read an article by you a month ago, I remembered (again) what he had said to me back then; what I had come to know by personal experience in the ensuing years; and how completely and utterly the market price for home-builder shares did not support my current exegesis.

    It was like hearing the sound of a bell, one I knew I would recognize if I ever came across it. So now I approach this as I laid out to you in my previous letter. Your mindset - and your many years in that mindset - gave me the thinking I needed to proceed with what I already knew to be true.

    It's odd, isn't it, that when one subtracts out all the non-essentials, there is just a few things necessary to succeed at this. Wait for opportunities; respect the awesome power of TIME; and be grateful for the little things that we are given and can do.

    May 17, 2014. 04:42 PM | 3 Likes Like |Link to Comment
  • Where Is The Market Headed Now? Leveraged ETFs Tell The Story [View article]
    BTW..I think the TNA has the BTF that would be more in line with what the URTY should probably look like. These indexes (TNA/URTY) are similar, but the URTY seems the "most Russell" of the two.
    May 17, 2014. 03:58 AM | Likes Like |Link to Comment
  • Where Is The Market Headed Now? Leveraged ETFs Tell The Story [View article]
    Thank you Peter. I used the BTF as my range to begin my thinking for both RUSL and URTY.

    1) RUSL. I found a fairly good barometer for the Russian Market vis a vis the ETF. First of all, the price tends to correlate with the politics. Valuation gets in there too. I read on Bloomberg that at the bottom of the March drop, the Russian market had a P/E of 2.4. That's bear market valuations by any measure.

    On the RUSL, such pessimism correlates to $11 and change, or imminent war - up to about $12. Attacks, aggravations and worsening geopolitical situation - but not all-out war - correlate to the $13-14 range. And anything approaching peace talks or a resolution of the matter, the RUSL quickly moves through $15 into the $16s. If they actually resolve the Ukrainian situation, then the March gap-down at $18-$19 comes into play.

    So the MMs have gotten this one right. When Putin had his change of tactics last week (and the imminent Soviet...errr "Russian" invasion was taken off the table) then the Russian Market's downside shifted quickly away from all-out war ($11-$12) to sustained misery ($13-$14) with sides having failed peace talks ($15-$16), in the hope of final resolution ($18-$19).

    Thus the MM range of $13-$19.

    All my comments are strictly from close observation and from riding this unique political cycle up and down three times; against a back drop of a sovereign market trading at severe bear market valuations.

    For the Russian market, the hope of peace is truly prosperity.

    2) Regarding the URTY, I used the BTF and RI of $75-$85 (approximate) as a bet on suppositions or probability. If the URTY was not "supposed" to be priced that low ($69-$73) in the MMs minds, then it probably wasn't supposed to be priced that low. I know this is an over-simplification, but it made sense to me.

    I also know that as an index gets more oversold (after already being-oversold) a certain panic-volatility and "gapping" begins to occur. That's where I targeted my buys. I still missed the absolute lows, but in both dips down to the low 70s (and again this morning, the low $69s) I was able to get-in within a buck of the lows as an average for all my buys. I sold the first trip up at $80. This second go-around I will look to sell anywhere above $75, unless I see some evidence of follow-through. As investors know, a day of follow-through on the Russell 2000 has been hard to come by of late.

    I snooze...I lose. I don't like that. I would like to kick-back with the best of them and "allow" it to work for me. But I have noticed that every time I sold I was glad of it an hour or two later.

    What you have done for me Peter is to get me to think about TIME. It holds ALL the muscle in the trader's equation.

    One can observe. One can enter at the right time, perfect in the range -at the moment when the probabilities are skewed most favorably for a change of trend - but if/when TIME begins to work against the investor it is hard to redeem it.

    In this sense, the "long-term" investor is actually a gambler hoping for his wish upon a star (and the story behind his stocks) to come true. It almost seems foolhardy.

    But hand-to-hand combat with TIME is something entirely different. It absolutely quantifies risk. I am only at risk when I am in. I am not at risk when I am out. I have grown to love the opportunities I have with cash (after selling), because there is always something new to do (that is, if I am not tied-up and over-committed to some "story" I hope will work out some day in the future. The same even goes for dividend-investing).

    The longer an investor allows TIME to hang around, the more risk he incurs. At least that's how I see it.

    To finish with my case in point. I am primarily a real estate and home-builder analyst. My articles can easily be found on SeekingAlpha. I truly believe in the real estate recovery; I see it working-out all around me here in CA. I am bullish on that market, and for good reason.

    But what does record profits, record housing starts (they rose 13% this morning from last month) and homes that sell the same week they are listed get you (as an investor)? 52 week lows and the media in an absolute panic. Biggest fundamental disconnect I think I can ever remember.

    So my long-term exegesis and careful study of the fundamentals... has brought me a year of frustrating losses and lower lows in my beloved stories and my facts and figures.

    That's when I woke up.

    What we call investing and what the pros call "making money" are two entirely different things. There is great freedom in the latter, and if you are not careful, a prison can be found in the former.

    Yes, I know there are those many Netflixes and Teslas out there, but if you are wrong about yours-in-waiting and "hang-in" there, you not only could be wrong, you could be dead wrong.
    May 17, 2014. 03:29 AM | 4 Likes Like |Link to Comment
  • Where Is The Market Headed Now? Leveraged ETFs Tell The Story [View article]

    I am quite confused about the BTF and risk/reward of URTY prominently mentioned in this article.

    Today it is -32 BELOW the lowest part of its range index. there are ZERO comparable examples out of 1048, and your article (above) placed it in the 100 to 1 category for reward/risk. So where is it now? 1000 to 1?

    How do you view "outliers" like this? Has the movement of the Russell 2000 caught every MM you follow completely and totally by surprise?
    May 9, 2014. 10:18 AM | Likes Like |Link to Comment
  • Plug Power: Ascension To The Big Leagues Is Imminent [View article]
    Purple K,

    It seems an eternity ago - and close to a 100,000 hits ago - that I wrote several articles on PLUG, discussing its cult status as a casino game par excellence, CEO'd by a barker who'd put PT Barnum to shame.

    When ol' PT said sarcastically, "There's a sucker born every minute" he was probably looking deep into the future and watching Andy Marsh in action.

    It's just amazing to me, the shallow deck of cards this guy brings to the table (almost weekly), and no matter what the hand he holds, he bets the whole pot on it, and bluffs his detractors from calling him on it. It's like he loves betting on credibility and how far he can "push" it.

    PLUG sold equity raises in the gazillions at 15 cents/share in 2013 and was doing the same thing at $5.50 and $5.74 in 2014. Marsh is agnostic to the underlying value. It's your money PLUG wants (and gets).

    However, I think that last equity-raise on PLUG's part finally did it. They might have drawn their last blood from the eternal fount of believing betters. It took 4 days for PLUG to go from $4 to $6 in late February, 2014; and 4 days to fall from its throne from $6 to $4 in late April.

    The easy-money woke up and smelled the coffee. They're gone. And they are not coming back.

    I will take any wager that PLUG NEVER trades above $5 again. Not in my lifetime. Not in yours. The sooner longs know this - and cut their losses - the less they will suffer in the end.

    The $115ML buyers who bought their recent secondary at $5.50 were 28% under water in the blink of an investor's eye. So is the guy who bought his large secondary placement at $5.74. Air Liquide is probably preparing its liquidation papers even as I write.

    We'll probably kick-around here in the low $4s for awhile, but the day will soon come when PLUG reprises its 4 day rise from $2 to $4 in early January, 2014 and falls from $4 to $2; probably in four days again.

    Absurd optimism in fuel cell stocks has always occurred just before a Nasdaq top. This is what happened in 2000, 2007, and now, maybe, 2014.
    May 6, 2014. 02:04 AM | 7 Likes Like |Link to Comment
  • Ukraine Crisis, Part 2: Mis-Priced Risks [View article]
    I have had similar thoughts to mkarpoff - wondering if the economic trade-off of allowing a restive Russian population to return to the East might give everyone what they actually want: a chance to live in peace. With all those industrial cities in the East goes the salaries, pensions, infrastructure costs; however also goes the natural resources of the geography, specifically the shale gas resources.

    This conflict can be clearly laid at the feet of former Soviet policies. Citizens were exported to Ukraine (Kruschev's nationality) and to Georgia (Stalin's nationality) with the result that these people of Russian nationality - the fruit of a sort of Soviet imperialism - were the second and even third generation in countries that wanted independence from the former Soviet state.
    Apr 24, 2014. 01:58 PM | Likes Like |Link to Comment
  • Down Market Ahead? What Do Leveraged ETFs Tell Us? [View article]
    Peter, I appreciate your simplicity and the timeliness for these articles.

    I went long the TQQQ (3x NDX100) on Monday and doubled the position on Tuesday at the lows (TQQQ was $20 cheaper a share). I assumed it will follow URTY's pattern. The charts look similar. I am looking for another pullback of URTY into the upper $70s for a second shot.

    Also, about 6 weeks ago you did a risk-reward on LBJ when it was in the $14-$16 range. The risk assigned by MMs at that price at that time was near zero on your scatter chart. Today it is at $22.

    The thing that I like most about your analysis is your stress on the importance of time: that it increases your risk the longer you dally with it; it is not the investor's friend in the way that the buy and hold investor assumes.

    If I am to assess correctly (my guesstimate) what you are presenting: it's that there is a TIME to do things when the risk/reward is in your favor, with a menu (range) that accompanies that risk/reward at that time. When it's there, it's there. When it's gone; it's gone.
    Apr 18, 2014. 01:50 PM | 2 Likes Like |Link to Comment
  • Beazer Home's Debt Deal Reflects Deteriorating Homebuilder Fundamentals [View article]
    Dave, I have thought about this a lot over the last 3 months, and the things you've written about the housing market are either somewhat - or entirely - true, depending on the time frame. For example, the last 3 months have been a very good time to be bearish on home-builders.

    But at the end of the day, bearish investors will have one outlook and bullish investors will do the opposite. For example, you have been shorting KBH; I am buying again in the mid $16s.

    Beazer was on its deathbed just two years ago (along with Hovnanian - HOV) and I am surprised it survived, given how much of the company's future profits they gave away to their angel investors. But BZH's ability to borrow insecured money ($325 ML) at 5.75% when their profit margins are above 16% is free money for them, to develop new communities. And if they use the dough to pay down high-interest debt (9%+), even better for their ratios.

    Your article sounds a little like, "If I was running the company. I would do this." But the company sees the same circumstances you see - differently. They are profitably selling houses into solid demand, and they like the easy money and the easy terms for borrowing.
    Apr 11, 2014. 02:44 PM | 4 Likes Like |Link to Comment
  • New 13D Filing Reveals More Dilution Ahead For Plug Power [View article]
    You are not missing a thing. Read my articles on PLUG. Common sense is an excellent place to begin. If what they have/had is so valuable, WHY didn't anyone who is anyone buy them for 15 cents when they could? BECAUSE IT DOESN'T ADD UP.
    Mar 26, 2014. 07:10 PM | 1 Like Like |Link to Comment
  • New 13D Filing Reveals More Dilution Ahead For Plug Power [View article]
    But that was yesterday, yes, and today was the day when he publicly admitted he had mislead the market by implying that there was material invest-able information where there was none.
    Mar 26, 2014. 07:07 PM | Likes Like |Link to Comment
  • New 13D Filing Reveals More Dilution Ahead For Plug Power [View article]
    I am glad to hear you were happier yesterday. I definitely was not (which might make you happy). But now today, I am very very happy, which makes me think you are not very happy, yes? So you have your days and we have ours...nothing personal. It's not about PLUG. It's about those who Play Plug.

    Which leads me to my next item: the CEO has forced me write another article, this time about the history of his deceptive ways. Today's debacle was nothing new for him - just one more pump and dump fueled by one day's misleading comments and the next day's mea culpa. 260 ML shares later and almost a billion in Lo$$es shared by shorts and longs, it's been one of the biggest whipsaws anyone could ever experience. That's CEO Mash's pixie dust for you.
    Mar 26, 2014. 07:03 PM | Likes Like |Link to Comment
  • New 13D Filing Reveals More Dilution Ahead For Plug Power [View article]
    Purple K -
    The thing is, it's fascinating, this mania, it truly is. For example, a few guys with some great forethought bought into PLUG at 15 cents after it had fallen almost 90%. (If you look at FLUX, you can see the same kind of thing happening there). So it flies upward in 6 consecutive parabolas to one of the greatest stock stories of all time. EVERY dip bought for 7 months. Not an unhappy "investor" as far as the eye can see! Plug-o-mania!

    Then Andrew Left and I write a couple of articles at the peak of the mania, because the trading has become just surreal, like the Nasdaq in March, 2000. People are literally THROWING money at Plug. It is almost messianic, people's reverence for this money-machine, printing-press. Just buy and you're golden.

    Left's article pops the bubble. I have to say this - it popped just like the Nasdaq popped - in a single moment that Tuesday morning, exactly 14 years from the previous time PLug popped, on March 10th, in 2000. And now, just like the trip up, every rally is being sold into, a shorter's dream come true.

    My interest in Plug is how a mania is disseminated, and I came to realize that all the strong feelings expressed here have nothing to do with PLUG, really, but they are like a Rorshach ink blot of each person's personal greed. Playing Plug has become a casino game; and the stock name is immaterial to what's actually happening in the casino. It's a game of wits.

    I would be very surprised if Plug Power did not sink back down to pennies again. Remember that analogy of the investor who bought a 1,000 shares of Plug at the IPO, was once worth $150,000 and today is worth $569? Amazing. I hope that doesn't happen to any of the early birds here.
    Mar 25, 2014. 02:02 AM | 3 Likes Like |Link to Comment
  • New 13D Filing Reveals More Dilution Ahead For Plug Power [View article]
    Catsrevenge - "Methinks thou doth protest too much" (see:

    And for a daytrader? I don't understand that at all. Too much huff and puff. Why you would have such strong feelings about something like a stock? Or me, a writer about stocks? Let the market cast the vote for you. You do agree it is important to be on the right side of a trade, yes, much more important than being "dead right"?

    A last point. Plug Power is not only extremely popular with investors. It's popular with Short-sellers also, who are lining up with a begging bowl for their "me-too" opportunity to Play Plug.

    Longs came for the first shift and left with outrageous profits... Shorts with significant profits (for good reason) have now come for round 2... Playing Plug part 2 - but it's an equal opportunity experience. So half the float hopes it will go to the moon, and the other half hopes it goes to (well, you know, the other place).

    By my pencil, almost 60ML shares are now short (0.6 BL if you don't count the reverse-split). Yet you would discriminate; not let the second half contestants their chance at Playing Plug? Doesn't make sense when you see the reality on the ground and the float changing hands umpteen times a week.
    Mar 25, 2014. 01:22 AM | 3 Likes Like |Link to Comment