Uncle Bill

In Memory of Long Term Capital

Your market knowledge is very limited. When the market as a whole falls, the riskiest issues -- techs -- will fall the most. That's why they're the riskiest. Dismissing the banks and brokers because they only represent a portion of the market is a fatal mistake. The stock market follows the banks and brokers; check the charts. Just in the last couple weeks have the analysts taken off their buy ratings. You will soon see that the entire economy has been dependent upon new construction for the past five years, and now that's come to an abrupt halt. The whole foundation of risk taking by hedge funds was built upon the knowledge that CDOs would fund their operations. That business is bust. Those stocks you bought will be much lower in six months.

Can Citigroup Maintain the Dividend?

What makes you think Buffett would buy something that "will likely be dead money for a while"? You give no financial reason for buying the stock, because -- like the rest of us -- you have no idea what the bank holds. Total blind speculation. If you think that's the way to add alpha to your portfolio, you are mightily mistaken.

Citigroup Stake Hurts Lampert Short-Term

You liked the stock three weeks ago, and you're down almost 25% since. It's hard to do worse than that. And it's easy to see why -- you're analysis is woefully lacking in any financial specifics. No wonder there's no information in your bio about who you are. What do you want to bet Lamper won't take any loss on his C stake? It's called "parking stock," and it's an old trick. Cs trying to park its bonds right now (how do you think MS reduced its CDO position so dramatically this quarter?). You are wrong here -- this is the big one.

Enron, Subprime and the Derivative Disease

Very, very nice commentary, Christopher. One question: Why do you believe the CP market will come back strong? Who are the buyers of CP, and why would they buy now with the SIV threat hanging over banks? Thanks for the effort.

Options Trader: Plays on Dow Components

Writing LEAP puts? About 2/3 of option premium is expected to waste away during the last six weeks of an option's life. By selling so far away, you never get the advantage of that premium erosion. Your gain is limited to the amount of the put you've sold, while your loss is limited only by the price of the stock. You're essentially betting on the direction of the stock, and you've capped your upside gain in order to invest more money in the strategy than if you just bought the stocks on margin. If the market falls dramatically one day while you're holding these puts, you'll lose all the money you've made since '02. The best way to avoid this is to sell puts on stocks that already have fallen more than two standard deviations below their mean prices. Also, don't employ this strategy once the market itself has moved more than two standard deviations above its mean price. If the market falls after an extended rise, your short puts will get killed by volatility expansion too. This is a very dangerous strategy in this market environment.