Joseph L. Shaefer

U.S. Markets Absorbed Billions in Redemptions and Still Rose - Cause for Rejoicing?

Thank YOU, wpdragon, both for your comment and for catching my oblique reference. I couldn't say which part of the anatomy in a family publication like SA! //grins//
Joe


On Jun 03 09:05 PM wpdragon wrote:

> Joe, thanks for the peek into one more little aspect of the hedge
> fund world that never saw sunlight... until NOW.
>
> I'm not sure its our LIVES per se that those guys are trying to pipe
> however... maybe just a certain part of our anatomy.

U.S. Markets Absorbed Billions in Redemptions and Still Rose - Cause for Rejoicing?

Mr. Moon, I wish I could tell you there is a limited time in which this must be resolved. But it will move at the speed of threats, cajoling and litigation. And we all know how efficient and clog-free the civil courts are. Since the hedge fund managers are still getting their 2% fee for as long as they can hold on, many will stretch it as many months or years as they can... You've cut right to the crux of my concerns here.


On Jun 04 01:40 AM Moon Kil Woong wrote:

> Interesting take on collapsed hedge funds. What a mess. Is there
> a liquidation time frame or is it like banks with overhandging housing
> where they can sit on it forever and then lie about it's net worth
> on their balance sheet.

U.S. Markets Absorbed Billions in Redemptions and Still Rose - Cause for Rejoicing?

Thank you. It's an aspect too little-known, I believe...
JS


On Jun 03 08:52 AM TeresaE wrote:

> Nice take on yet one more aspect of this fiasco that has not played
> out yet.
>
> Green shoots.

A Butterfly's Wings in China: How Chaos Theory Affects the U.S. Market

Hello again, larylar 1,

Actually, you may be proven correct, but to this point, no, //we haven’t missed a thing.// You’ll note in my March 3 SA article, we went long all those lovely bank preferreds. We made 35-50% on all of them and were long “the market” until mid-April. Then in my 15 April article for SA I clearly stated that we were in the process of raising cash but had //not// yet begun to buy our inverse ETFs. All a matter of public record!

In my 19 April (Sunday) article we reported we had almost finished raising cash and were in the process of putting about 10% of the proceeds of sales into inverse ETFs. I actually Instablogged that article, you’ll notice, on Friday – it was published by SA on Sunday. That Friday, the DJI was at 8131. It closed at 8300 today. The difference, in 5 weeks, of just 169 points is “decimal dust” in the grand scheme of things. I took close to zero risk for our clients from 17 April until today, having no crystal ball as to the future direction then, any more than I do now. We “missed” 169 points – but were in cash sleeping quite soundly.

At this point, our golds are up, our income stocks are paying dividends, and our inverse ETFs are just about flat, with real estate profitable and financials and techs against us just a hair.

You have been a conscientious conscience but I just can’t consider 169 points incredible gains. As I stated in the last paragraph of this article, especially in this kind of market, "I would rather sell a month too early than a week too late."

If you think that is heretical, check out the article I just Instablogged this morning. No matter the manipulation of news and numbers that has everyone believing we are in an “incredible rally” when in fact it is virtually unchanged in 5 weeks, I believe a decline is imminent. I also state that periodic rebalancing – call it “market timing,” if you like, though that wouldn’t accurately describe the way we stair-step in and out -- is //essential// in bear markets. The article is aptly titled, “Buy and Hold is for Lemmings.” Saying that shakes a lot of people’s coconut trees but, for us, it’s worked for nearly 40 years. Why change now?



On May 27 01:05 PM Larylar1 wrote:

> This just goes to show that market timing does not work. Joseph,
> you've been in "boring stuff" for the past few weeks losing out on
> incredible gains, and the reverse ETF you have must have been getting
> killed. If the market does crash again, you're safe, but if it takes
> 2-3 months to do so, you've missed out on amazing gains

A Butterfly's Wings in China: How Chaos Theory Affects the U.S. Market

Fighting Yoda,
Like your namesake, Yoda, I nelieve you are wise to conserve your energy and choose reality over hope! One makes you feel good, the other keeps you from following the herd over the cliff...
Joe


On May 26 10:23 PM Fighting Yoda wrote:

> Joe:
> Thanks for your insights. Yes there is lot of chaos, Brownian motion
> - complete randomness. Markets were melting down a couple of months
> ago - now in complete euphoria. Which is right, both can't be. Bulls
> on Wall Street (almost everyone is – that is their business model
> and MO) - will tell you the latest is more right, till proven otherwise.
>
>
> Today's confidence numbers - were they warranted? Lets see what is
> confidence - it is simply hope not reality. People are hoping to
> find a job, hoping then to spend money. Does this hope have a basis
> - job losses and home price falls are real and now. So why is hope
> disconnected with reality. Maybe it is the same hope - bubbles are
> made of - housing, dot com.
>
> If 'green shoots' were true - why would Fed downgrade the economy
> last week. Why are S&P earnings forecasts coming down over last
> 3 months - from $49.09 on 3/22, to now $42.93 on 05/20. Why do we
> still have 500K+ job losses a month, why are home prices falling
> 2%+ per month. All this points to ongoing disaster not recovery.
>
>
> Invested little in gold, rest cash. Much better opportunities will
> come by in the near future.

A Butterfly's Wings in China: How Chaos Theory Affects the U.S. Market

Dear Ludovici,
Answwering your question as best I can, there is something to that argument – but not enough to keep me away from establishing a short position over a well-diversified index rather than selecting individual stocks.

The problem to which you refer is that inverse ETFs are constructed so as to return the inverse performance of the underlying index on a //daily// basis. On the surface of it, you may ask, why does that matter? The answer is: because large fluctuations in one direction or the other tend to skew the “daily” performance even if the long-term price action were to stay exactly the same. Of course, if there are numerous heart-stopping down days, instead of the up days we have seen the last two Mondays, you would actually do better in an inverse ETF than you would by shorting each of the stocks comprising that index.

That’s what I believe will happen next and I’m willing to put my money where my conclusions are…

Respectfully,
JS



On May 26 08:53 AM Ludovici wrote:

> Thanks for the analysis. In other comment streams, I've heard it
> said that these reverse ETFs are unsuitable for holding more than
> a few days, because of the way they work. Do you agree? Could you
> explain why or why not?

A Non-Chartist Charts the Coming Summer Decline

To all who have commented as of mid-day Thursday, 21 May:

I can only say that I hope all of you become regulars at this site. I respect the literate and well-thought-out quality of the discussion among all of us, and there are days when I definitely need the humor to keep me going! (Clarence the Dog, “ ‘head and shoulders’ above the crowd” / “just a ‘candle’ in the wind,” indeed! Very clever puns…)

And, yes to all, especially Jasper M, who notes I am a closet chartist [without the charts.] Probably true, in that my background in special ops and intel took me around the world and gave me an insatiable interest in the socio-historical and “what if” worlds. I am certainly willing to believe that there is more in heaven and earth than dreamed of in my philosophy, (Horatio.) Now, if you’ll excuse me, it’s back to my stack of African Business journals and Defense Week newspapers…

Best regards,
JS

April's Unemployment Report: Lies, Damned Lies, and Statistics

On May 12 03:42 AM Cetin Hakimoglu wrote:

> Can we stop dwelling on job loss? Those aren't important. ...<

JS responds > Thank you for your comment -- community discourse on these topics is important. And -- I must disagree, sir. Another half million households that may lose their home if they don't have a large savings account or don't find a new job ASAP may not be important to some Fat Cat banker whose toughest decision is whether to water the common stock at the shareholder's expense or take another bailout at the taxpayer's expense -- but it's important to the half million newly without income. And to the 16.5 million others I write about in a contiguous article who are looking for work.

They cannot simply say, as a befuddled Wall Streeter might, "So they'll lose their apartment in Mid-Town. Why don't they just go to their place in The Hamptons or Como?"