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Logical Thought
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My name is Mark B. Spiegel and I'm the Managing Member of Stanphyl Capital Management LLC. I can be reached at: mark (at) stanphylcap (dot) com. My Twitter feed is @markbspiegel
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Stanphyl Capital Management LLC
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I don't have a blog, but here's a link to a WSJ article regarding my thoughts on the "flash crash"
  • I Think That the Dollar Slide is About to Accelerate, and... 9 comments
    Nov 9, 2009 8:43 AM
    ...stocks are going to flip very quickly from liking a lower dollar to hating it. The G-20 made it quite clear over the weekend that it wants a lower dollar. Why-- hearing that-- would a foreign owner of U.S. stocks or bonds be willing to buy any more? I think we're about to see a massive spike in Treasury yields which will kill equities from multiple directions at once by spiking mortgage rates, compressing equity PE ratios and raising corporate America's borrowing cost. The last few days' move up in the equity markets has been on increasingly less volume (including the pre-market volume today), and I don't think it's sustainable. I'm currently approximately 25% in SKF (the financials have been a real lagger here), 25% in SDS and 20% long SNTS (which, frankly, has been saving my portfolio's ass over the past few days). What would get me to sell off some SDS or SKF? An increase in volume for this up-move.
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  • Northern Dancer
    , contributor
    Comments (737) | Send Message
     
    Once again this author is guilty of logical thinking. I couldn't agree more with him, on all fronts. I believe the day is here when the direction of the dollar and that of equities becomes unhinged from their inverse relationship. And logicalthought spells out the exact reasons why it's inevitable. The implications of this pending change are horrendous. The last time the dollar and equities moved in the same direction was when the economy was strong. At that time when the dollar moved up, equities moved up in lockstep. But in 2003 that tandem relationship began to switch to an inverse relationship. That transition completed in 2006.

     

    The only way we're ever going to see the dollar and stocks move up together again would be on the coattails of an extremely robust American economy. I don't see that anywhere on the horizon. To see them moving "down" together would be an ominous signal that not only is the economy truly weak, but that the world has caught on. It's the stuff of nightmares. I certainly don't want to see it happen, but I also don't think there's any doubt it's inevitable and very nearly upon us.

     

    The volume metrics over the past 6 weeks have been very telling. I don't think there's much chance we're going to see an impressive spike in volume on any upward move, but as the author points out, that would be the only situation where I too would sell my bearish positions. The volume this week will be very telling
    9 Nov 2009, 10:41 AM Reply Like
  • Logical Thought
    , contributor
    Comments (4580) | Send Message
     
    Author’s reply » Northern,

     

    Thanks for the comments, and I hope you won't be offended if I say that "misery loves company". I upped my SDS even more near the close, and now have approximately 58% of my account in SDS and 22% in SKF. The SPY chart looks completely exhausted to me-- less volume every day of this recent climb, and a gap up today on the least volume of all. That said, if we take out the old highs and hit around 1102, I'll have to sell a chunk of it off just so I know I can keep the very good year I've had until now. Even with the 2x leverage, that's only around another 2% of downside risk from here, and I can live with that. Certainly, 10-year rates came down today (not up as I expect them to), despite new recent lows in the dollar.

     

    As an aside, I cut my SNTS back to a 15% position in the $3.90s. Considering that there's no verdict yet on the lawsuit and I'm so bearish overall on the market, I'm hoping to be able to take it back up to a 20% (or perhaps even 25%) position at better prices before they get that ruling.
    9 Nov 2009, 05:36 PM Reply Like
  • Northern Dancer
    , contributor
    Comments (737) | Send Message
     
    You're more than welcome. I've seen enough of your posts now to know that you and I are absolutely on the same wavelength. So when I compliment you, I'm complimenting meself too, lol. Because honestly, I'm just shocked at the percentage of the population who doesn't get it and in my humble opinion, you and I and a few others do.

     

    Yes indeed, misery loves company. I've been guilty of underestimating the willingness of the banksters to game the markets for this long, and I've been caught time and again with the head fakes and stick saves with FAZ, TZA, etc. But I have a little dry powder left. I honestly believe we'll be well paid very soon for thinking logically (love your name by the way). The volume metrics are all backwards... if this is supposed to be an impressive rally. It's only impressive in how choreographed it is, in my view.

     

    I saw a couple of charts recently, where the S&P had been priced in British and Japanese currencies, and I believe in a couple other European. It was shocking how flat the S&P has been since June in terms of foreign currencies. What that tells me is that from June forward, the rally has been 100% based on USD devaluation. That's not what lasting equities rallies are made of. Sooner or later the world is going see it from the perspective you logically write about. Thumbs up my friend.
    9 Nov 2009, 11:40 PM Reply Like
  • Logical Thought
    , contributor
    Comments (4580) | Send Message
     
    Author’s reply » Well, I've been right about the dollar, but wrong about the market's reaction to it. I set stops on a chunk of my short ETFs at S&P 1105, and they were triggered (albeit, on ridiculously low volume, but whatever the volume, the money is "real"). So I sold all the SKF (as the financials look as if they're coming alive again), but kept a 30% position in SDS (so as to still be able to make some real money if the fundamentals start reasserting themselves). I'm still a bit over 15% in SNTS, too.
    11 Nov 2009, 10:35 AM Reply Like
  • Logical Thought
    , contributor
    Comments (4580) | Send Message
     
    Author’s reply » lol... Stopped out at 1105, high (so far) at 1105.34 and then it reverses... Just beautiful!

     

    On Nov 11 10:35 AM logicalthought wrote:

     

    > Well, I've been right about the dollar, but wrong about the market's
    > reaction to it. I set stops on a chunk of my short ETFs at S&P
    > 1105, and they were triggered (albeit, on ridiculously low volume,
    > but whatever the volume, the money is "real"). So I sold all the
    > SKF (as the financials look as if they're coming alive again), but
    > kept a 30% position in SDS (so as to still be able to make some real
    > money if the fundamentals start reasserting themselves). I'm still
    > a bit over 15% in SNTS, too.
    11 Nov 2009, 11:57 AM Reply Like
  • Northern Dancer
    , contributor
    Comments (737) | Send Message
     
    logical, I use Elliott Wave analysis to the extent of maybe 20% of my tools. What Prechter and the other EWT gurus who I subscribe to are saying, is that we're right there. This is very possibly the final thrust. My own analysis concurs. In my view, all the hallmarks are there for a top, decreasing volume as price rises, etc. The most compelling factor for me is that since June, the rally has been based on absolutely nothing other than a crashing dollar. I have a hunch that the world of investors is waking up to that fact and will soon (maybe today), capitulate and come to the conclusion that they no longer want US equities. I could be wrong, after all I got married once.

     

    I admit that I found this morning excruciating as watched what I believe was a final small 5th wave up, and against all my triple bears. lol But I held on to them all. It looks to me like this could be the highest volume day in perhaps the past 3 or 4, and if it's a red day... you and I both know what that suggests. Don't give up yet. I'm not going to be changing my shorts until next spring :-)
    11 Nov 2009, 12:09 PM Reply Like
  • Logical Thought
    , contributor
    Comments (4580) | Send Message
     
    Author’s reply » >> I could be wrong, after all I got married once.<<

     

    I love that line!

     

    Well, even after my stop loss, I still have 30% of my funds in SDS, which most people would define as "insanity". (Of course, that's what they were telling me when I was 100% in it-- with leverage!) during the summer of 2007. And to answer your possible follow-up question: Yes, I was up in 2008, but only by around 10% because I closed out the SDS too early, and then got stuck in some other positions that-- due to the "personal account" minimum mandatory holding period policy of my i-bank employer-- stuck me with some very big losses, as I wasn't able to stop myself out.)

     

    I spent a fair amount of time looking at charts last night, and the final highs of both 2000 and 2007 for the S&P were "definitive peaks", not "double tops". Thus I suspect that there's a reasonable chance that this could go higher before turning around for good. I personally think the Elliot wave stuff is a little crazy, but enough people look at it that-- even if it just has some efficacy BECAUSE a lot of people look at it-- it's worth considering. What I've read there is 1120 or so is a very big resistance point and, in fact, lots of other people seem to be flagging that, too. Of course, because the market's job is to f*ck with the maximum number of people possible, this thing will almost certainly top out at least 20 S&P points higher or lower than that. We've had the "lower" so if it keeps going up from here, my inclination is to get overwhelmingly short again at around the S&P 1140 level (which also happens to be just below the 50-month EMA, which looks like a great mega-resistance level to me). As a primarily fundamental investor, I hate like hell to spend so much time looking at charts of the S&P-- especially as none of them have recently worked other than as very brief support or resistance levels-- but I also don't want to kill an extremely good year (currently +85% or so, down from +100% recently) by getting and staying too short too early.

     

    On Nov 11 12:09 PM Northern Dancer wrote:

     

    > logical, I use Elliott Wave analysis to the extent of maybe 20% of
    > my tools. What Prechter and the other EWT gurus who I subscribe
    > to are saying, is that we're right there. This is very possibly
    > the final thrust. My own analysis concurs. In my view, all the
    > hallmarks are there for a top, decreasing volume as price rises,
    > etc. The most compelling factor for me is that since June, the rally
    > has been based on absolutely nothing other than a crashing dollar.
    > I have a hunch that the world of investors is waking up to that fact
    > and will soon (maybe today), capitulate and come to the conclusion
    > that they no longer want US equities. I could be wrong, after all
    > I got married once.
    >
    > I admit that I found this morning excruciating as watched what I
    > believe was a final small 5th wave up, and against all my triple
    > bears. lol But I held on to them all. It looks to me like this
    > could be the highest volume day in perhaps the past 3 or 4, and if
    > it's a red day... you and I both know what that suggests. Don't
    > give up yet. I'm not going to be changing my shorts until next spring
    > :-)
    11 Nov 2009, 02:16 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    >What I've read there is 1120 or so is a very big resistance point and, in fact, lots of other people seem to be flagging that, too. Of course, because the market's job is to f*ck with the maximum number of people possible, this thing will almost certainly top out at least 20 S&P points higher or lower than that.<

     

    LMAO! Man, you sure have the same kind of thinking I do. Skeptical, logical, humorous, disillusionment at insanity of it all... yet it persists.

     

    It turned out to be a green day after all, but on volume that just dropped off the face of the earth after the initial couple hours. So the declining volume pattern is still in tact while prices keep rising. A quick look at the trend line on the volume bars on the daily chart of the S&P shows that by Christmas week, average daily volume will be somewhere around 150 shares.

     

    I almost barfed on my shoes when I heard Tiny Tim declare that a strong dollar is very important to him. The purposeful and wanton destruction of the dollar is nothing short of traitorous. Why he isn't already hanging by his nuts from a lamp post somewhere is beyond my comprehension.

     

    I'm not giving up on the short side. As soon as I capitulate and go long, the market will crash. For years and years I single handedly controlled all of Canadian residential property prices. Every time I bought a home, the market crashed. When I finally sold it out of anger and frustration, the market doubled in the next two years. I must have done that 5 times in my lifetime. I eventually go so good at it, that when I sold my home, my friends went out and bought a second or third one. I made a lot of buddies rich over about a 20 year period.

     

    .
    11 Nov 2009, 06:39 PM Reply Like
  • Logical Thought
    , contributor
    Comments (4580) | Send Message
     
    Author’s reply » That's a great story re. Canadian real estate. I was actually in the commercial real estate business before I went to work on Wall Street, so I knew "all about" real estate cycles... which is exactly why when I moved back to Manhattan in late 1997 I decided to rent, rather than buy, because the upswing was almost five years old at that point, and I wasn't going to be the sucker who bought at the top... lol, well, I was only 10 years (and around 300% of appreciation) early in calling "the top"!

     

    Re. Geithner, you must be channeling my comment from early this morning: seekingalpha.com/user/...

     

    I think I'll comment on the "volume situation" via a new instablog. entry.

     

    On Nov 11 06:39 PM Albertarocks wrote:

     

    > >What I've read there is 1120 or so is a very big resistance point
    > and, in fact, lots of other people seem to be flagging that, too.
    > Of course, because the market's job is to f*ck with the maximum number
    > of people possible, this thing will almost certainly top out at least
    > 20 S&amp;P points higher or lower than that.<
    >
    > LMAO! Man, you sure have the same kind of thinking I do. Skeptical,
    > logical, humorous, disillusionment at insanity of it all... yet it
    > persists.
    >
    > It turned out to be a green day after all, but on volume that just
    > dropped off the face of the earth after the initial couple hours.
    > So the declining volume pattern is still in tact while prices keep
    > rising. A quick look at the trend line on the volume bars on the
    > daily chart of the S&amp;P shows that by Christmas week, average
    > daily volume will be somewhere around 150 shares.
    >
    > I almost barfed on my shoes when I heard Tiny Tim declare that a
    > strong dollar is very important to him. The purposeful and wanton
    > destruction of the dollar is nothing short of traitorous. Why he
    > isn't already hanging by his nuts from a lamp post somewhere is beyond
    > my comprehension.
    >
    > I'm not giving up on the short side. As soon as I capitulate and
    > go long, the market will crash. For years and years I single handedly
    > controlled all of Canadian residential property prices. Every time
    > I bought a home, the market crashed. When I finally sold it out
    > of anger and frustration, the market doubled in the next two years.
    > I must have done that 5 times in my lifetime. I eventually go so
    > good at it, that when I sold my home, my friends went out and bought
    > a second or third one. I made a lot of buddies rich over about a
    > 20 year period.
    >
    >
    > .
    11 Nov 2009, 09:32 PM Reply Like
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