Seeking Alpha

Joseph L. Shaefer's  Instablog

Joseph L. Shaefer
Send Message
Joseph L. Shaefer is the CEO and Chief Investment Officer of Stanford Wealth Management, LLC, a Registered Investment Advisor. Retired senior executive of Charles Schwab and Co. Retired (36 years) active and reserve military service -- six in special operations, the next 30 in the intelligence... More
My company:
Stanford Wealth Management LLC
My blog:
The Investor's Edge
My book:
Bringing Home the Gold
  • St. Swithin’s Day Massacre – Will it Rain on Us for 40 Days & 40 Nights? 0 comments
    Jul 15, 2009 12:10 PM | about stocks: GGN, BND, AGG, TIP, SHY, TUZ, SKF, SRS, SBB, EUM, PSQ, SH, DOG

     

     

    The week before options expiration is a tough one in which to be short.  Wall Street’s program traders set their algorithms to pound the markets the week before expiration week, but buy, buy, buy early in the week of options expiration.  Algorithmic computerized trading is now more than 50% of what used to be a stock market where actual human beings bought and sold securities and where Wall Street’s job was to act as a broker, not the biggest player aligned against us. 

    (For more on program trading and an egregious – but typical – example of how the last half hour molds public opinion up OR down, see the article here.)

    So what has this to do with St. Swithin’s Day and the future direction of the markets?  So glad you asked -- St Swithin, as any Brit can tell you, was a 9th century Bishop of Winchester.  When he died in 862, he told his monks he wanted to be buried in a humble grave outside the cathedral so that the "sweet rain from heaven" could fall on his grave.

    But later monks decided this was no proper resting place for so great an example of earthly humility.  On July 15, 971, they decided they would move his bones to an overwrought, flamboyant shrine they built for him.

    Legend has it that buckets of rain poured down from that day forward and for the following 40 days and 40 nights. Believing that it was St Swithin showing his displeasure by weeping in despondency, the monks decided against moving his remains. Of course, as any Brit can also tell you, it can rain for 40 days and 40 nights in any English, Scottish, or Welsh summer period beginning on any day, but St. Swithin’s is not a day for a proper gentlemen to leave his brolly home.

    And this has what to do with US markets?  Well, we’ve had 40 days of sunshine.  Actually we have enjoyed 62 days of sunshine from March 10 to June 12.  And it was truly brilliant market weather from June 4 to June 12, when the Dow closed above 8750 every single day.  Since then, it’s been partly cloudy to drizzly.  The market declined from that 8750 week to last week when it closed just below 8150. 

    Last week, true to what is now a well-documented event for all you day-traders out there, is when Wall Street buys a zillion-kajillion calls that are barely out of the money after manipulating the corporate news to be gloomy and the markets to decline via their program trading.

    This week, options expiration week, suddenly Goldman analysts are upgrading B of A and B of A analysts are upgrading Citi and Citi analysts are upgrading Goldman.  Dell said last week the PC market is in the toilet.  This week Intel says it’s going to the moon.  Last week, retailers said they lost money in June.  This week the government says retail sales were up (yeah – a few cars being given away for no profit and the rest was all rising gasoline prices, but that counts as "retail sales"!) 

     

    So with all the (manufactured) “good news” and program trading, they can easily push the market higher.  If Them Boyz iz trying to make us think rain is a thing of the past, this is the week to do it, so they can take massive profits on their calls they bought for a nickel or a dime and can now sell today and tomorrow for 50 cents or a dollar.

     

    Who’s buying?  The public, of course.  Believing the hype from Wall Street, which needs true believers so they can dump their positions before Friday.  You must decide for yourself whether you want to play this game or not.  I’ve decided that, for our clients and myself, it’s time to seek relative safety with our umbrella of cash, income stocks and some inverse ETFs.  If it rains for 40 days and 40 nights, we won’t mind a bit.

     

    Full Disclosure: We don’t change with every daily change in the weather.  We remain long a few bank and healthcare preferred shares that we believe still offer good value and high yield; we are long option-writing closed-end fund GGN because, through thick and thin, we like their portfolio of gold and energy companies; we own lots of cash equivalents (our biggest positions) in short-term bond funds like SHY and TUZ and slightly longer-term (5-10 years) BND, AGG and TIP; and we are short, mostly via inverse ETFs like SKF, SRS, SBB, EUM, PSQ, SH, and DOG.

    The Fine Print: As Registered Investment Advisors, we take our responsibility seriously to advise that, since we do not know your personal financial situation, the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.

    Past performance is no guarantee of future results, and it should not be assumed that investing in any securities we are investing in will always be profitable. We take our research seriously, we do our best to get it right, and we “eat our own cooking,” but we could be wrong. Finally, we will always disclose whether we own or are buying the investments we write about.

     

Back To Joseph L. Shaefer's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.