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Mousetrap 10/23/2011
Condition Bear Market Rally
S&P Target 940
Hedge XLE 9.96% Closed
Hedge XLF -14.14%
Position Date Return Days Call
AWR 7/5/2011 -3.64% 45 Closed
BKI 5/31/2011 12.34% 144 Hold
CFI 6/22/2011 1.52% 122 Hold
SE 6/27/2011 6.80% 117 Hold
CLH 7/6/2011 1.62% 108 Hold
GCI 7/14/2011 -18.00% 100 Buy
AGO 8/5/2011 0.72% 78 Hold
DISH 8/10/2011 17.11% 73 Hold
GTAT 9/8/2011 -40.29% 44 Hold
CSGS 10/3/2011 10.58% 19 Hold
Cash-Neutral 5/31/2011 0.00% 144
Mousetrap Return -1.02%
S&P Return -2.58%
Hedged Return -5.73%
Mousetrap Annualized -4.13%
S&P Annualized -10.45%
Hedge Annualized -23.15%
Annualized Advantage 6.32%
Hedged Advantage -12.70%
About a month ago we were assured through various stress tests in Europe that Dexia and other banks were healthy.
In the US, the Federal Government was apparently so confident in our own banking system that they felt they could push forward a lawsuit to bring banks back down to earth.
Now, with Greece on the brink of sovereign debt default, the US is hinting at a possible settlement and Europe is saving the “healthiest bank in Europe” with a bailout.
Wait, what? That’s right. Dexia was listed as the HEALTHIEST bank in Europe… http://www.bloomberg.com/news/2011-1...than-weil.html
If the healthiest bank needs a rescue, that doesn’t speak well for the rest.
This week my value stocks got slammed while my financial stocks soared on hopes, prayers, and petitions, of temporary salvation from above. Not much to be done when governments play Deus Ex Machina but to wait it out. In a healthy market people would be buying value; in an unhealthy market people would be buying bailout whispers.
This isn’t going to end well.
Tim
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Thank you Tim.
About Dexia, its chairman was a former Belgian Prime Minister who was also Chairman of speech-recognition Lernout & Hauspie at the time it went bankrupt for fraud accounting reasons and whose patents were later developed by Nuance Communication (NUAN).
The trick when politicians become leaders of corporations is that their address book and political influences can hardly make up the fact that they are themselves often manipulated by the real managers of the company who are easily corrupting the political world through the Chairman.
There’s nothing like being an independent trader avoiding all those hidden agendas and professional life messes!
You can rely on no one but yourself.
Billy
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10/24/2011
Thanks for the word of caution, Billy!
Unless NLY gaps significantly higher than CFI in the morning, I’ll sell CFI and replace it with NLY.
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10/26/2011 pre-market
I was able to enter the NLY trade, but not exit the CFI trade, so I’m long in both.
Because my margin is tight, I’m not hedged on the NLY trade.
This is a bit too tight for my comfort, but I’ll let it sit for now.
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10/27/2011 intraday
Just sold DISH at 25.99 for a 17.87% gain.
Sorry for no advance warning. Decided to take some profit after today's move in the market.
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10/27/2011 BKI intraday
Just sold BKI at 29.39 for a 17.05% profit.
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Tim,
XLV is not the Services ETF but the Health Care ETF.
Billy
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Xlv
That's correct. I was going by the sector application stockcharts gave it in their perf chart (rather than ishares own designation). I should probably rename that on my spreadsheet to avoid that name mismatch in the future. Thanks for the nudge! :-)
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