Waiting For The Fill
Last night, we were in a cab heading to an event and the Gotham Gal said, "the market dropped around 400 each of the last two days, what’s up with that?". I thought of Bliss McCrum, the guy who first taught me about the markets, and said "more sellers than buyers I guess".
The truth is I’ve tuned the markets out lately. It’s not that they don’t matter, they matter a lot, but the indexes don’t tell the whole story of what’s going on. As Howard pointed out recently:
I like a day like today because indexes did much worse than stocks.
I am not sure what market gurus make of days when indexes do worse than stocks, but that’s what I feel like is going on in my world. I’ve been trying to bottom fish for weeks and have limit/good till filled orders in for:
$AMZN at $40
$GOOG at $320
$AAPL at $90
These are three companies I have great confidence in. I love where they are with their businesses, I think they’ll come through the downturn better than most, and all three have strong cash flows with even stronger balance sheets. In short, the kinds of companies you want to own in this market, if you want to own anything.
I’ve had these limit orders in for several weeks and I’ve not had one fill yet. It could happen this morning with $GOOG, but I’ve thought that on several days in the past couple weeks and it has not happened. There’s support for these stocks coming from somewhere. Or maybe there just isn’t that much supply. Maybe the selling in these stocks has come and gone. Who knows, but I am just saying that the carnage we are witnessing elsewhere in the market has not been happening in the titans of web/tech in recent weeks.
I’ve also been reading less gloomy prognostications recently. A friend of mine, someone who has been trading professionally 24/5 for around 20 years and a perennial bear, said this to me in an email yesterday:
For the first time I can remember I am less bearish then the consensus. I expect one stimulus package to be passed this year or the day after the inauguration and then another mid year. That stimulus along with all the additional liquidity the Fed is dumping into the system should result in overall growth to be positive for 2009! National housing prices should bottom (stop going down) in the 2nd quarter after another 8-10% drop. Equities should sell off another 15-25% and then form a long term bottom.
Look at that chart of the Nasdaq that I posted at the top of this post (click here for a bigger one). I am not a technician but that sure look likes a bottom trying to form to me.
But in any case, I am with my friend. I’m a lot less bearish on the stock market than many of the blogs I’m reading. I’ve got my orders in and am waiting for the fill. I hope it comes.
Hi Fred, wasn’t there a link to follow your investments on some sort of social investment site?
Covestorhttp://www.covestor.com/mbr…It’s ugly but there it is
Yes, he does post some on http://www.covestor.com/
Those are all of my trades. I don’t do much public stock investing and as you can see I’m not so good at it. But that doesn’t stop me from blogging about it
Like your friend, I, too, have been bearish for a very long time. It is true that “value” is starting to reveal itself across a broad spectrum of assets but I firmly believe that most assets will only get cheaper over the next 6 to 12 months.Here’s why: – On a valuation basis, markets tend to overshoot to the downside (buyer beware) – The markets have not priced in a very deep recession (it’s going to get a whole lot worse) – Recent (eg, past 50 years) historical comps are useless, one needs to look back to the 30s for perspective – As America’s influence wanes, the world will become more (not less) stable – Technology (like leverage) is a double edged sword, it can produce greats benefits but can also be highly destructive in the wrong hands – IMO, the stimulus (fiscal and monetary) will not work (I hope I’m wrong but giving a drunk another drink rarely works. it just prolongs the day of reckoning)Great opportunies will eventually reveal themselves. Value investors will be rewarded for the patience.Sorry I can’t be more optimistic but that’s what I see.MassMan”Lethargy bordering on sloth remains the cornerstone of our investment style” – Warren Buffet
That’s what the comments are for – discussion and debate hopefully making us all smarter and better investorsI appreciate your thoughts and agree with them to a degree which is why the fills I am waiting for are more like antes than going all in
I agree with MassMan, plus one more big factor: debt. As Fred’s partner posted last week, there is a huge overhang of corporate debt. All of it is senior to equities, which means that many shareholders will get wiped out as the leverage seeps out of the system. The companies Fred likes are exceptions sitting on huge piles of cash. But their customers and advertisers still have debt, and it will impact their businesses.Face it: good entrepreneurs and venture investors are usually way too early on the markets…right in principle but way too early…
i mostly agree I just dont like to put percentage guesses on where we go. check in on the all-time highs over time and see if the list starts expanding before you even need to think about the market. markets need leadership, we have none, so might as well focus efforts elsewhereuntil some industries start showing it.
right now you can sell a GOOG $320 Jan put for $29. If you get hit (stock below 320) your net cost is $291. if you don’t it’s $29 free money vs. leaving a good-til-canceled out until then which is a free option to the market.you can also sell a GOOG $370 Jan put for $55 which is in the money, if you get hit (stock below 370) your net cost is $315.so you can get filled right now on a pretty close substitute… good time to be a seller of volatility
I just don’t think this way, which is why I am not a good public stock investor
wow .. this really IS a highly structured ponzi-scheme … 🙂 betting against the bettors … the culture needs more win-win for all, but in this crowd that will sound like moralizing .. good luck making your fortune .. toss me a dime when you see me beside the roadenjoy, gregory
surprised by these replies… if that isn’t win win then I don’t what is? someone wants insurance because they’re afraid the price will drop, you’re interested in buying if the price drops. They buy an option from you, everyone is happy.only way it’s not free money is if you don’t really want to commit to own the stock at that price … might as well pick up some free money when the market gives it to you which is not that often.most of the time options are kind of expensive but now it’s just ridiculous so might as well be a seller if you’re in a position to be, which is what it sounds like.
Spock: He is intelligent, but not experienced. His pattern indicates 2 dimensional thinking.Khan: FULL POWER! DAMN YOU!Spock: If I may be so bold, it was a mistake for you to accept promotion. Commanding a starship is your first, best destiny; anything else is a waste of material.Kirk: I would not presume to debate you.Spock: That is wise. Were I to invoke logic, however, logic clearly dictates that the needs of the many outweigh the needs of the few.Kirk: Or the one.I have no idea why I cut and pasted that but it seemed oddly relevant at the time
cool .. you are an artist as well as a financial wizard… nice .. me, i haven’t got a clue ab out the money game .. not even close
I think you’re partially right about the stimulus packages stabilizing the ship for a while, but positive growth for ’09 is very ambitious. Sometime in mid ’09 we’re going to see second wave of the mortgage crisis in the “Alt A” category, and I don’t think the market is pricing it in yet.
The stimulus/pumping money will only prolong the inevitable liquidation of malinvestments made during the boom of the business cycle. The more you try to artificially correct the market the worse the recovery will be. Just the basics of Austrian business cycle theory.
Fred,I’ve also been buying APPL and GOOG. You seem to be trying to call the bottom. What made you choose those price targets? If you’re truly long you should be asking yourself if you’d be more upset about missing these prices or missing the next 3 years’ gains.
I’ve got positions in all threeJust trying to get some more at prices that are no brainers to me
Got it. Since I’m already all in I’m sorry to say I’ll be rooting against you filling these but GOOG is looking very close 😉 Good luck!
You just got GOOG – congrats!
Well, to be exact, I got more GOOG.I think I’ll put in another good to fill order at $300 or maybe even $290I am just starting to build a position
Interesting post Fred. For know reason other than luck, I have been 75% in cash during this crisis. I have recently put that money to work over the last three weeks, and I now have about 20% to 25% in cash. I plan on putting the rest of that to work over the next quarter or two. If you don’t need this money for at least five years, I think you will do well dollar costing in to this market over the next several quarters. Good luck!
I think so too but you have to dribble it and put it only in rock solid companies with no debt, lots cash, and strong profitable franchises
Fred – The obvious thing for you to do while “waiting for your fill” is to SELL PUTs at the strikes where you want to buy.For example, sell GOOG $320’s and either pocket the premium, or be assigned stock for a net cost of $320-premium if stock gets down there.If the stocks don’t go that low, rinse, repeat and do it again.Easy money if you want to own the stocks at those prices. Where you get hurt is if the prices crash much much further below your target buy points, but if you are a buy and hold guy at the levels that you say, it shouldn’t matter to you.
Druce, I see you beat me to the “sell puts” strategy. I could say “great minds think alike” but I’ll leave it that selling volatility is a good strategy as the premiums expand, and if you really like those stocks at those prices, then its a no brainer to do just that.
I just want to own the stocks. I am not a trader. I don’t do this for a living. In fact, I’m not very good at public stocks. I just like to buy stocks in companies in understand and like.