Stealthmouse

Four Points on the 'Great Short Trade'

I doubled my net worth shorting last year and this one, so I'm not buying any green shoots. Have to be nimble though, or you'll be buried. The trend is still down. Oh, and I've been long on a few of the sucker rallies too. Fair is fair.


On May 28 06:15 PM Fighting Yoda wrote:

> "never met an actual person who made money in the market without
> some optimism in reserve." - well you can be an optimist on the short
> side too.
>
> Well if you consider 500K+ job losses and 2%+ PM home price drops
> as green shoots - good luck to you.
>
> We had a bubble stock market and a phony economy for last 20 years
> - ever since Greenspan. That era is over. Being long has not worked
> for the last 10 years. Time to rethink all investment strategies.
> There are no simple answers out there - long or short or long-short,
> biding time is my strategy for now - will wait for the euphoria to
> settle.

Four Points on the 'Great Short Trade'

The bond market has a much bigger wallet then City Hall, and it's coming to the party now. The limitless funding mechanism is starting to get shut down. The administration will be unable to keep printing money and generating debt without the impact on dollar devaluation and inflation. If they stop, however, we will get the asset devaluation that comes with unwinding of leverage, which had already started but is being fought by the gubberment and its minions tooth and nail. Soon, those who need to pay for the consequences will, it's just a matter of when. The time is nigh, there isn't much room left for the PPT.


On May 28 03:14 PM wpdragon wrote:

> I agree with the author and the commenters about how bad things are,
> especially in housing. This is one of a few hundred "short" theme
> blogs I've read the past few weeks, and I find great agreement with
> most of them.
>
> But you know what? For all the negativity, there is one thing on
> the other side of the short trade - and that is the unholy alliance
> of government and one or two monstrously large bank holding companies,
> which between them are pumping tens, perhaps hundreds of billions
> of taxpayer $$ into the market, and they are absolutely cleaning
> the shorts' clocks and taking no prisoners.
>
> So fight the tape all we want, and I have here and there to a small
> extent, but all we are doing is fighting a very huge city hall, and
> until something changes, which I don't see happening, the guys with
> the biggest wallets are gonna win this game... news, common sense,
> reality and pursuasive arguments to the contrary be damned.

American Public Education: What Rally?

So why do you think their enrollment will decline or stop growing as fast? All the issues you cite are speculation, not based on data. I think the for-profit educational space is a dog as well, but would like to see some trigger, such as a drop in actual enrollment figures.

Is the Obama Plan Creating Unfounded Market Optimism?

You said it all in your first paragraph:

"True the country's debt situation is dire but that could change very quickly if the employment and stock market improves."

Since that will not happen any time soon, the rest of your response is largely irrelevant. Rational thought is needed, not hope as an investment strategy...


On Dec 08 09:21 PM Manifestor wrote:

> The family balance sheet will look up when the stock market goes
> up and the house price stabilizes. True the country's debt situation
> is dire but that could change very quickly if the employment and
> stock market improves. Even the various bailout dollars lent out
> will return with interest! One should also consider the following:
>
> 1. Mortgage rates are on a down trend. Refinance will help the balance
> sheet.
> 2. Housing prices have come down significantly but there is hope
> that it is bottoming (except may be in some specific neighborhoods).
>
> 3. Credit crunch seems to be easing (small businesses can look up).
>
> 4. Inflation has come down.
> 5. Many world economies are implementing big spending plans
> 6. Season retail sales looking up
> 7. Finance sector stocks are starting to look up. It is a proxy for
> the stock market.
> 8. Don't hear of any more major bank/finance company failures - at
> least for the time being.
> 9. The current payroll statistics might be the result of response
> to stock market downward spiral. The labor market statistics are
> a lagging indicator.
> 10. Layoffs increase need for more productivity tools (computers
> and other automation stuff).
> 11. Many big and essential companies and banks are now awash with
> cash
> 12. Country is saving a bunch due to fallen oil prices
> 13. The stimulus plan money is only needed in phases over a two year
> period
> 14. Will be interesting to see how the labor market behaves if the
> S&P goes up another 10 -15% from here.
>
> The two areas that bother me still are health care (especially for
> those who are laid-off) and acquiring new skills for a new job. Hopefully
> the stimulus plan will address these in some form.
>
> Above all, most in the country (except for you shorts and ideologists
> ) want the country and the stock market to look up!
>
>

11 Stocks Selling Below Cash

Though some of these could be gems in the rough, there are usually good reasons for a company selling below net cash. And they're usually not positive. It's usually a sign that the company is dead, it's burn rate is very high, or both. This same argument was used for some of the internut companies a few years ago, as they burned through the remaining cash in a matter of months. No knowledge of these ones, but buyer beware if it's your only screen.

'Good As Goldman' Not So Good

That silly little chart would have been better if it showed the top 10 banks in the US with revenue growth % and P/E, and then compared to GS. That alone would make the article about 1 trillion x better than it is.

'Good As Goldman' Not So Good

I agree with other posters, worthless information about how much GS has fallen relative to other IBs. How about an article about how much leverage GS had, and how much profit came from its proprietary trading desk, and how much of that will be gone now that it is a regulated bank? I would even argue that GS is fine, but its stock price will continue to come down as its leverage is further unwound, and as investors realize it can't use leverage to get its earnings jacked like in the past, and probably can't make big bets due to regulation. But nothing like that (or anything else new) is in this article. Yawn...

Q.E.P. Company: Flooring the Future

Fair enough. If I were putting any money on this company I would read the filings and listen to the conference calls. Still not compelling to me as a long, but I can see what you like about it. My own projections about the depth of this residential and commercial real estate cycle are probably different from yours, so I wouldn't touch anything related to real estate until we have truly bottomed out in the market.

Good luck to you as well.


On Nov 10 07:40 AM John Bradley wrote:

> I appreciate the discussion. Again, my "sweeping assumptions" are
> not based on just reading the cash flow statement in isolation. Please
> review the quarterly and annual reports, not just the "cover sheets".
> You asked my WHY the AR and inventory will correct, and I already
> eluded to why in my prior response. This is from the latest 10-Q:
> "the Company used net cash of $13.0 million associated with the increase
> in receivables, inventory, trade payables and other accrued liabilities
> principally related to the initial rollout of the national specialty
> tile tools program, and for the upfront consideration paid related
> to that program." Also, "During the first six months of fiscal 2009
> the Company borrowed an additional $10.2 million on its lines of
> credit primarily to finance the working capital requirements associated
> with the rollout of the national specialty tile tools program."
>
>
> Like I had said, they are rolling out a new program. Most companies
> have to put money up to rollout new products. This is not an increase
> related to normal operating problems. Like you said "Where there's
> smoke there's fire unless you've read the fillings...". Well, I read
> the fillings and you admit you didn't.

Q.E.P. Company: Flooring the Future

I hear your comment. But how will they reverse it? They went from $1.8m negative cash flow in the May quarter to -$7.7m in the August quarter. That's the trend, and it's an accelerating negative one. Do you really think things will improve for flooring companies during the next 12 months?

I don't think it's wise to make sweeping assumptions that they will reverse the trend. Unless you have something to add that supports your case, I stand by my analysis. And you are absolutely correct, I did minimal analysis and believe this is dead money. It would usually take a lot more than that. So why don't you write about WHY AR and inventory will correct? Where there's smoke there's fire unless you've read the filings and have something interesting that others have missed. Lehman said it had plenty of cash one month before it imploded. I don't believe management, I believe numbers. Cash flow does not lie (unlike earnings that you refer to in your article).

Q.E.P. Company: Flooring the Future

As of 8/31/08, they only had $990,000 of cash and were burning through much more than that in quarterly cash flow. It's pretty easy to see from that why it's trading at such a low level and for such low multiples. Without either turning cash flow positive or procuring additional debt or equity, this one could be dead in a matter of months.

A Dual Strategy to Balance Banking Sector Trade

I wouldn't touch JPM. The timing is uncertain, but with its derivative book and net exposure versus risk-based capital, it is a guaranteed zero sometime in this credit cycle. And unfortunately when JPM finally bites it, the government will be out of money (i.e., won't be able to print enough to make it happen).

GE's Rollover Risk Supports Short Trade

Wow, you might want to look at some actual numbers. Stock trading at 8x and paying a 7% dividend yield, plus half of it is industrial business. On top of that, you give no evidence of what the dollar amount or percentage impact would be from supposed rollover exposure. I wouldn't touch this as a short - valuation seems reasonable, paying a fat divididend yield (that a short has to pay out to the borrowee), and so far confirmed ratings. You might want to consider that the Feds asked GE to buy into the facility so that it gave the facility more credibility. PLUS, if I were GE, I would access all the sources of capital I could, regardless of how much I needed it. Why play a company like GE that could get flight to quality bids as this thing unwinds and it hits its earnings, when there are still plenty of banks that will be taken over by the government (to wit, JPM, C and FITB, among others).

A Short Update on My Four Short Ideas

User 227788 - Why do you like CFFN as a short?

Lehman: The End Game

Says You ~

Yeah, right, if you write it then everyone believes it and the economy is destroyed. Wake up, you fool. Leverage IS destroying the economy - this is the worst financial crisis since the Great Depression. It's caused by excessive speculation, leverage and greed, and not buy short sellers or those who are waking people up by using their First Amendment rights.

Go back to believing in Santa Claus, the Easter Bunny and God.