Thursday, July 24, 2008

A. M. Post

The Tiger
Franz Marc

I cooked my first "flap steak" last night. I saw this cut of meat for the first time at BJ's. I had no idea what to do with it. With the power of the internet, the next time I went to the store, I was already armed with an idea of how to fix it.

I'm also rather intent on using stuff out of the garden. I elected to marinate this flap steak and serve it with grilled vegetables wrapped in a tortilla. It was remarkably delicious. I had to grill in the pouring down rain, but I was grateful for the precipitation given that our yard is taking on dust bowl characteristics.

CNBC reported, yesterday, that there was a hedge fund (oil/gas) that blew up. I didn't hear a name but apparently it was $3B in size and was forced to file bankruptcy. Apparently they were on the wrong side of the market in oil and were responsible for a good part of the run up. I've speculated about that here given the precipitous run up in prices, for I remember well Amaranth and Mother Rock in the natural gas space. That precipitous run up (lauded by all of the fundamental reasons as to why it should be so) ultimately ran out of the jet fuel (short covering) that propelled it so.

Despite our incessant efforts to find them, there are no sure things in the market--and the short in oil was the 'sure thing' with a slowing economy etc. I dipped my toe in with the buying of DUG calls, but nothing extreme--though the calls were not cheap as they were Sept calls that I purchased in Apr.

And in the space of 2 weeks we saw a deflation in financial stocks through unmitigated fear and then an equally astounding short covering rally--both seemingly 'sure things'. Here's a chart of UYG (2x financials).

It's gone from 69 to 24--that's a 65% drop. So when you hear the astounding jump off the bottom, even with that, the amount of loss is still substantial. The WSJ online had a very interesting article (click on title below)

Ellison's New Position: Cash Hoard

Money Manager,
Tired of Pummeling,
Dumps His Stocks
By DIYA GULLAPALLI
July 24, 2008



About HF manager David Ellison's (FBR Large Cap and FBR Small Cap Financial Funds) large position in cash, 50% and 38%, respectively. What I found interesting about those large positions is that these are sector specific funds. I often hear about the fund mandates of staying invested even in protracted downturns. It was refreshing to read about this manager.

2 comments:

nice said...

Leisa

The fund/company that went under was "TheSemGroup" - many are saying that it was partly responsible for the wild moves in oil lately..

Here's a snippet (from the WSJ I believe):

"The Tulsa, Okla., company filed for Chapter 11 bankruptcy protection Tuesday, citing among other financial woes a loss of at least $2.4 billion in crude-oil futures. Changes in its hedging strategies coincided with big moves in oil recently.

The company had taken out short positions, or bets that crude prices would fall, as a hedging strategy for oil it intended to move through a subsidiary's pipelines and sell to refiners, according to an affidavit filed in Delaware bankruptcy court by Terrence Ronan, SemGroup's senior vice president, finance

--

A bad bet indeed...

Really interesting action today - the broad markets are down - and all day the buy the dipper commodity crowd keeps running into oil and gold stocks - but so far they have not been able to get any traction - I've been seeing heavy selling against them all day...

Natural gas hit an interesting retracement area today...

Should be interesting to see where these commodities go now - Don Coxe etc... still says buy the dip - a few others are coming out now and saying that 'buy the dip' will not work this time and that this will be a large correction.

$XOI is doing things that it has not done since the beginning of its bull run (Weekly RSI moving below 30) - possibly not a good sign for those energy bulls longer term

nice

nice said...

A lot of red today...

I'll tell you what makes me really red..

I read yesterday that the total dollar amount of bonuses handed out by Wall Street during the past 4-5 years was $100 billion.

That is disgusting...

If you add up the writeoffs so far plus the recent stimulus package - that also equals about $100 billion

So a relatively small percentage of select men (and women) walked off with $100 billion

And the rest of the country is left near financial ruin?

Where is the accountability?

And why is one of their compadres Hank Paulson running the show now?

When is America going to turn off it's Iphones and Ipods and wake up and do something about this??

not nice

nice