orca

S&P Upgrades E*Trade Despite Struggling Financial Sector Peers

Well well this is getting interesting!
Since what is happening here seems to be some sort of extrapolation on general sentiment I will make a serious effort to share my thoughts and observations with you all. Sit back and enjoy the ride.

First off though I want to state my position on ETFC, just so I won't be accused of being a pumper nor a basher. Currently I have no position in ETFC. When I said they will out-beta any index by 300-500% it should be clear that beta works either way. The $5-mark / 90% fail-break observation (and $2 for that matter) didn't get any feedback, which is a pity since it is one of the most overlooked yet reliable rules in the whole wide stock universe (valid even with optical plays such as reverse splitting).

Now for the real work, starting with the general state of affairs. In my opinion we haven't yet scrathed the surface of what will become a world of pain. The Dow is off by some 20%, peanuts, in EUR terms the Dow has been stuck, for 5 years running, around the 8k-10k mark. Currently it is at 8k (12307,35 * 0.65), and yes, as you perhaps had guessed already, I am European. That's what happens when the USD goes Zimbabwean. It is my belief that we're currently in the 2nd phase of the 1st wave (mortgage meldown). The 3rd and final phase will start shortly, with (Option) ARM reset. The second and third wave will come ashore this fall, they are durable-credit and non-durable credit, and these waves will be bigger, longer and have a much greater impact than the first wave, difficult to imagine as it is, because they will affect not just upside-down home-owners and financials, they will hit everybody. This is the real unwind, affecting people in mortgage-free houses too, and it will take at least a decade to work through it, possibly much more (just ask our harikiri friends how they are doing, some 20 years after the top). Cash will be king, which doesn't spell much good for stocks, and you can see Treasury yield ticking up already. Actually spiking up is a better name for it. Cash is getting more expensive regardless of the FED Funds Rate. FED up, that's what the market is.

Let's enter the financial subfield of brokerage now. I have no doubt that the ETFC platform is great, many people here attest to that. I have no idea but will take their word for it. Good for ETFC. The problem is that ETFC is a bank disguised as a broker. Cindy has been busy combing through the numbers, which in my opinion is useless, since we won't know what we won't know, Rumsfeld's unknown unknowns so to speak. Trust should be regained in that matter, which will take time, which is running out, as stated above.
Also the longterm profitability of ETFC (per share) must somehow be factored in, and here it gets interesting. Some of you may have heart of VanderMoolen (MOO), a Dutch brokerage. They used to have American operations, since wound down / sold. Search for the stockchart of this puppy, it is almost a carbon-copy of ETFC. History doesn't repeat itself, but it rhymes. MOO currently stands at EUR 3,27, with a 12 month high/low of 4,29/1,75. All-time high was over €40 7 years ago. My point here is that the 2-5 rule, with a slight undershoot, is alive and kickin'.
This week S&P upgraded ETFC. I won't go into S&P, apart from saying that whatever they think doesn't interest me in the least, just to be clear on that one. Cindy probably climaxed on that call, but the stock didn't, being exactly in the beta observation, 111m shorts included. It is my belief that almost all shorts above $5 have hedged by now, so I do not see a short squeeze above that level.

I am winding down Your Honor. If you ask me gun to head where ETFC will be in 2 year's time: $3,50. We will see $2 ánd $5. Since I have no idea which one will come first I will sideline until one of these levels is breached and then, with defined risk, will take a contrary position. Pumpbaby Cindy, and friends, will fade over time, although in the meantime they are mighty irritating. The relentless pumping was what triggered me to respond in the first place. ETFC the company I wish all the best, no grudges here, have made some money with it, not much, but my position wasn't big to begin with. Any questions?

E*Trade's 'First In, First Out' Position: Yes, 111M Shorts Can Be Wrong

Dear Veronica,

If you have big brown eyes and a happy disposition I will concur with your chicken call. As to ETFC, my view is that it will out-beta the index (any index) by 300-500%, just because it is listed, not because of intrinsic value, which I believe to be a non-starter in this environment. And this environment will not go away anytime soon.
In investing as in romance time will tell, in the meantime keep smiling!

E*Trade's 'First In, First Out' Position: Yes, 111M Shorts Can Be Wrong

Veronica, was that 10% down in 2 days a bankable fact? My point is that there appears to be an inverse relationship with regard to Cindy's incessant plugging and the share price, hence the "take a hike" advice. Also, she (and others) are marketing current conditions as t.h.e. low, well let me tell you we ain't seen nothing yet. Just suppose WM or C goes belly-up, or GE catches a cold to $23, or GM/F are collected to the Big Honcho in the sky, or the Naz craters, or the USD goes Zimbabwean, or or or, than we have Cindy plugging her love-baby at $1,60 and the herd still likin' it.
E*Trade may be great (no idea, but generallly good comments) but the share-price is composed of many factors, some of them micro (the company itself) and some of them macro. And by the way, what I said about 90% of stock falling through $5 never regaining that level is a valid observation, we can argue chicken/egg here as to why, but we won't.
Finally, I am trading this cracked fountain of hope, not investing in it, and no, I am not short in it and neither do I have puts or short calls.
And a final finally, not all 111m shorts are at $4 and there's also no way of knowing if they have hedged their position, so that number in itself is not very instructive.

E*Trade's 'First In, First Out' Position: Yes, 111M Shorts Can Be Wrong

Darling,

You don't need to write yet another hysterical piece on your love-baby, no no, what you really need is a vacation, preferably somewhere with no internet access. Relax, have a Bud, get bronzed, let the hair hang loose, and enjoy life for a week or two. Clear up the mind and pamper the body. ETFC is going nowhere until some macro issues are dealt with and huge imbalances are worked out of the system. Will be over in a year or 10, so no use auto-mutilating your brain with each and every ETFC tick. I very much doubt ETFC will survive in the current form and even if they do that it will be profitable from $4 upwards, but hey what the heck do we care with the US financial and monetary system imploding all around us. From a statistical point of view: 90% of stocks that fall through $5 never regain that level. Basically the same thing applies to $2, so worry about that, but only after your (and our) vacation.
Hasta la vista, bon bini, surf's up and all that,
Your tourguide
Orca

Bernanke's Backfire: Now What?

As we speak uncle Hank is at it again. Unless it is followed up by action the recoil will be ferocious. Also concerted intervention will not work for more than 2-3 days, there is only so much dough you can spend on buying something the issuer doesn't want to defend with structural reforms.

Bernanke's Backfire: Now What?

True, bearfund. The same happening over here (Europe) by the way, although here it can be sort of explained with higher rate expecation. In the USA it is probably something else, more inflation- and save parking-related. Can't put my finger on it yet. We have had a brutal move on our EUR-dominated state-treasuries, falling 550 bbp from the March-top on 4-year maturity. 10-year even more savage at -600 bbp. Interesting times, that's for sure.

Bernanke's Backfire: Now What?

The whole world is royally pissed off, excuse my french. Couple of weeks ago you saw it with Bush in Saudi-Arabia, regarding production quota (Bush looking even more stupid than usual, which is an accomplishment of sorts), and with OPEC explaining that every USD fall of 1% will be accompanied by a crude spike of 4%.
Last week you saw it with Trichet calling Bernanke's / Paulsons bluff within 2 days. This morning your prez, oblivious of everything around him, also reiterated that moronic "strong $ policy" phrase.
G8 tried and failed too last month to verbally support the USD.
You are spot on regarding credibilty. After the subprime fiasco, the rating agencies, the monolines, LIBOR, the FED facilities, "strong $ policy" BS etc nobody listens any more, they want to s.e.e. something. That something is the patient taking the medicine, in the form of multiple rate hikes. The question is will it happen in a week, a month or a year. It will happen, no doubt about it, but seeing your "leadership" probably later than sooner. BS time is over.

ECB Move: An Opportunity To Trim International Exposure

After 10 years of f@#$ed up FED policy the ECB/Trichet is now actively pushing for Bernanke to do the right thing. We in Europe have been hearing about "strong $ policy" etc for ages now and enough is enough. This will become ugly, with either the FED jacking up rates (not likely) or the USD falling rapidly, combined with a commodity price explosion. In Europe we have much more leeway and although crude at $200 will hurt, it will destroy the American economy. And then, finally, you will still be forced to jack up rates, with the EUR/USD at 1,85.
Something else, though related, remember the talk at $60-80 that the Iran-scare was worth at least $20 and that we could spike to $100? Well here we are at $140 and Iran is laughing their ass off. You can thank Bush for "protecting" the US interest in that regard.
The thing with both problems (USD, crude) is that finally you will be forced to do the right thing, but it will needlessly hurt much more then than now. Apparently your leaders don't seem to have any capacity for leading in the right direction, explaining their decisions and sticking to them. Paul Volcker is called for, that's who.
As a European who loves the USA I am completely sick of that spinelessness and wholeheartedly support the ECB, because I am convinced it will be the right decision for the long run. In the meantime we reach for the barfbucket the moment Paulson, Bernanke, Cheney or Bush come on stage. And no, this is not about Iraq, that's another story altogether, this is about cowardice under fire. Boy am I mad. Time now for a cool beer in the sun, tomorrow we have to be relaxed for trading.

The Case for AIG - Patience Required

"Check the Guru list of holders of AIG and you'll see a bevy of very savvy managers with big positions." Very savvy indeed. I will not invest at any price in an outfit run in mob-style at arm's length by super-starr (get it?) Tony Greenberg and family. AIG is a sick joke, whatever book value or guru-speak are trying to tell us, and belongs in the FNM / CFC category of stocks to permanently avoid.

Inflation Falls for Fourth Straight Month

Yeah, Mr. Ph.D. playing parrot to the government. In the core cpi energy was up 5,6%, however due to seasonal bs-adjustments it was revised downwards 2%, for a 7,6% gap between marked-to-fantasy pricing and real world cost. This guy is not for real.

AIG: From Blue Chip to Mediocrity

Yeah, bring back uncle Hank and get yourself a second a**hole drilled in the process! This guy should be on Guantanamo, not hiding behind some opaque shell somewhere in the Caribbean, playing the Godfather (as in Marlon Brando) to higher management. The problem with AIG is that whichever way you spin it this company is not to be trusted, so don't invest in it.

AIG: The New Math?

Whatever they say or report, I will not invest at any price in a business run like some sort of mob outfit with enforced omerta rules. Of course I refer to Greenberg's Carribean shell set-up with regard to higher management. This week's numbers, coupled with the idiotic dividend play, only confirm my decision.

Our Energy Efficient Economy Can Handle $112 Oil

I have n.e.v.e.r. read such a stupid article on SA before. Congratulations on providing an utterly useless graph, it is a pity it doens't go back all the way to the Stone Age. Buyitcheap is being polite but really, with Mr Ph.D. here bottomlining the way he does, without regard to price (at the very least), my only question is how much did you pay for your lifetime-achievement-d...

Buying the Dollar? Be Selective.

Geo, make that "paid attention to internationally". She is spot on, not pretentious at all, lays out different scenario's (meaning she is not path dependent), and most importantly, my positions agree with her. I am part of a small network of European traders (Holland, Belgium, Germany, Switserland) and we basically have the same positions, although with a EUR focus, so we have shorted the against the GBP, JPY and of course the USD. Most of this group do it from a technical point of view, I add a fundamental twist, as could be seen this week with massive USD interventions in the eurozone, meaning that there are simply not enough $ at the moment...because of stress (with appr 1 TR USD vaporized, no wonder, whatever the tinfoilhat brigade thinks of FED "printing"). Aaaaanyway, we take note of her point of view and yes, sometimes we are all wrong or make mistakes, as she is the first to acknowledge. in the meantime this situation has yielded over 600 pips in 6 days, time to re-evaluate but I am still 50% holding on to initial position (half out, taking a profit doesn't kill me now, does it?)
Cheers,

Orca (Belgium)

3 Reasons Why The Euro May Fall Further

Kathy, you rule.