Archive for June, 2008

Weekly commentary June 30 thru July 4

Saturday, June 28th, 2008

Last week we thought we saw a “downer” with a 466 point drop. Thursday we saw the Market tank by 358 points. In fact, there hasn’t been such a bad June since 1930.  Good thing we at Shadowtraders only trade the futures market. (more…)

Crackdown on the shadow banking system

Friday, June 20th, 2008

Full story here. This is coming from CBS Marketwatch, very mainstream. For them to be getting critical really means it’s out of the bag. (more…)

Weekly Commentary June 23-27

Friday, June 20th, 2008

Talk about a “downer…” How about 466 points down for the week. And for the first time, the Market blew through the Dow’s double bottom of 11870, closing at 11842. Can you say “Davy Jones Locker?” (more…)

Weekly Commentary June 16 thru June 20

Sunday, June 15th, 2008

It is amazing to watch a market driven by just 1 thing…Crude. When crude goes up, the market goes down. When crude goes down, the market goes up. Last week was a perfect example. Thursday, crude spiked, and the market lost 200 points. Friday crude retreated and the market went up. (more…)

National Political Brownout

Wednesday, June 11th, 2008

Full article here. I normally don’t deviate into any politics, but when finance issue become dire, they are automatically politicized–and this is a poignant message to America. Thus, I want to let you read this article from Marc Faber, author of Tomorrow’s Gold, which really changed my viewpoint on long-term strategies and investing. (more…)

Weekly commentary June 09-13

Sunday, June 8th, 2008

Gasoline finally hit $4.00/gallon across the nation. Crude reached $140/barrel, on its way to $150 by July 4th weekend. In one month, crude went up 40cents. Supplies? Speculation? (more…)

Financial Tsunami has not reached its Climax

Friday, June 6th, 2008

Full story here. Another in the continuing narrative of the Financial Tsunami by F. William Engdahl. Don’t get swamped by the tsunami, get to higher ground with ShadowTraders. (more…)

Lehman on the ropes, looking for $$$

Tuesday, June 3rd, 2008

Full story here. Don’t trust your nest eggs to a bunch of foxes. Use ShadowTraders to stay flexible and profitable.

“Lehman managed to escape the same fate as Bear Stearns around the Ides of March partly due to the heroic intervention of the Fed, in part to reporting first quarter profits. A member of the skeptically-minded short cohort described that the earnings as a sham, and noted that they depended entirely on counting the increase of their debt spread as a gain. And there were other red flags: changes in the way the firm measured leverage (and leverage increased nevertheless); a claim that their hedge for their Alt-A exposures was mortgage servicing rights; unrealistically flattering marks on commercial real estate and high yield. And the conference calls were described as Orwellian.

But the Street gave Lehman a pass, since if they went over the brink, who knew who might be next (UBS was the next on most lists). But sentiment appears to have taken a sharp turn. Ben Bitroff provides this tidbit

The open interest in LEH puts is absolutely massive, especially at strikes that would only pay off if LEH completely imploded (a la Bear Stearns). Either some idiots are going to be out a lot of money come June, July and October… or LEH implodes before then…

The open interest is absolutely massive and can only pay off if LEH collapses. Most of the open interest is at sub $35 levels… a level that LEH has now breached. A lot of the puts at the ‘bankruptcy’ strikes (say anything below $15) also expires in June. So either the put buyers or LEH are quickly running out of time….

Will Lehman implode? I don’t know. I can’t tell… I just don’t have enough information. The rumors continue to make their rounds and traders are definitely nervous.

And we have an early AM story now the lead item at the Wall Street Journal, presumably based on a Lehman response to the high short interest, rumors, and expectations that the firm will report a quarterly loss:

Lehman Brothers Holdings Inc., set to report its first quarterly loss since going public, is considering raising billions of dollars in fresh capital to help shore up its balance sheet, according to people familiar with the matter.

The exact amount of the capital hike isn’t known, but analysts and Wall Street executives estimate it is likely to be $3 billion to $4 billion. They said Lehman would probably announce the capital raising in conjunction with its quarterly results, due the week of June 16. The amount of new capital under consideration suggests Lehman’s quarterly loss could be larger than the $300 million or so that some analysts have been expecting…”

Weekly Commentary June 2 through June 6, 2008

Sunday, June 1st, 2008

What a difference another week makes. On Monday, the S&P 500 was at 1378. On Friday…1400. So what happened? In a word…Crude. This is exactly what we said last week. Crude. On Thursday, when the Crude Oil Inventory Reports came out, Crude jumped to $132+ a barrel. But by the end of the day, it was down to $126.Why? Who can explain that? It is unclear. At 10:30am what was reported was that Crude supplies were down 8million barrels. So how did Crude prices dip? The previous week when it was reported that Crude oil was down 5million barrels, Crude skyrocketed. What was the difference? The previous week was before the Memorial Day holiday and last week was after the holiday. Is that a coincidence?
We saw another interesting phenomenon last week. Durable Goods Report. The economists were “split” on their expectations of the report. Some said it would be -2.5% while others said it would be 0%. The prior month, Durable Goods Orders was down -.3%. So how could it go down to -2.5% in 1 month? And it didn’t. With that kind of extreme variance, no matter how bad the report is, the market will still go up because it is not as bad as the outlandish estimate. What happened? The report showed -.5%, worse than the previous month, but not as bad as -2.5%, so the market went up. Durable Goods orders actually declined from the previous month and the market went up. There was no possible way that the number would be -2.5% if the previous month was -.3%. So any number better than -2.5% would make the market go up, even a report showing a further decline from the previous month. As a trader, this new way of reporting is something to watch.

Last Week we also saw a decline in Consumer Confidence, down to 57.2. Anything below 60 is contraction, so we know that the consumer is not able to participate in the economic recovery. But don’t worry, Tiffany’s Department Store reported remarkable results….the rich are still buying. This week Tiffany’s stock rose 4%, up to $49.70, nearing its high for the year, at a time when Target Store’s share price is nearing its low for the year.
But all that’s last weeks news. What’s on tap for this week coming? Of coarse everyone will be waiting for Friday’s news on Unemployment. Don’t forget the ADP report due out on Wednesday at 8:15am. Although the two reports rarely coincide, at least it gives us all a picture about the American worker.
We’ll also see the ISM Index and ISM Services reports out this week. The Index reflects the number of economists reporting that conditions are improving compared to the number reporting conditions are worsening. The ISM Services report is very important in that it indicates how the broader economy is doing, including service sectors and goods producing sectors.
On Wednesday we will all be watching the crude oil inventories report as well. If it looks like last week, the market could be in for more volatile times.