Thursday, 19 February 2009 23:00

BoomBustBlog Research Is Off to a Strong Start for 2009

In penning A few grim thoughts for the New Year, as I reflect upon the past year, I seriously thought this year would be significantly more challenging than last year. After all, by now EVERYONE should have gotten the memo - we are in a dire economic downturn and real asset and financial asset wielding companies that relied on short term funding and/or excessive leverage are pretty much done for. Now, theoretically, we will have to do a lot more work for a lot less return, right? Well, obviously not. Apparently, there are still many out there who didn't get the memo. Roughly 80% of the researched and blogged subjects that bore a negative opinion have significantly outpaced the S&P 500 to the downside since the beginning of the year. By the end of the 2nd quarter, the I am confident that the remaining 20% will drop pass the broad market as well. Paying subscribers should realize that this group is relatively diverse in that includes UK and Eurozone companies as well as banks, consumer retail, real estate and insurers. Most of the manufacturing and industrial picks from the last two quarters have lost considerably more than 50% of their share value.

Click graphic to enlarge to print size

1st_two_months_2009_recent_research_performance.gif


I implore you to keep this in perspective. If you were long the S&P via an index fund, you would have lost significant wealth. If you were in an actively managed fund or with a sell side broker, chances are you may have lost even more (see Super Brokers form to push Super Broken products to make those with High Net Worth Super Broke). If you were in cash you would have preserved your wealth, and relative to those invested in the broad market or through the sell side, would have been that much wealthier. Now, if you were a BoomBustBlogger, you could literally consider yourself to be a member of the capitalist class - at least from an "in the know" perspective. I know it's early in the year, but it appears as if we are on track to beat last year's competition trouncing invest performance (see BoomBustBlog performance for 2008).

News from around the globe>

The Dow industrials broke to a new six-year low. The
average of the nation's 30 biggest companies has lost 47% of its value
since its record close 16 months ago.

Last modified on Thursday, 19 February 2009 23:00

19 comments

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  • Comment Link phirang Monday, 23 February 2009 09:15 posted by phirang

    delete plz mgmt

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  • Comment Link cube660 Sunday, 22 February 2009 22:20 posted by cube660

    Insist on mentioning actionable names in the open forums?
    Why?

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  • Comment Link phirang Sunday, 22 February 2009 04:27 posted by phirang

    RAH isn't up there. That's been my only dog out of the rest. I know you're busy, but I'd appreciate your opinion on their recent earnings and your channel-check of RAH in the industry as a whole.

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  • Comment Link Reggie Middleton Saturday, 21 February 2009 20:14 posted by Reggie Middleton

    I am little shy about what I do personally. I hope you can understand. Rolling a position is buying a new one to replace an old one. Whether it is feasible or not depends on spreads, timing, liquidity, profit in the position, hedges, etc.

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  • Comment Link huc7ks Friday, 20 February 2009 23:13 posted by huc7ks

    Reggie,

    When you say that you "roll your positions" when profitable does that mean you take profits but keep your initial capital in play or do you sell the entire position and, assuming put options, take a new position farther out of the money? I am very interested in learning about any money management strategies you employ; i.e,. timing to enter and exit positions. Thanks again. Awesome job!

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  • Comment Link Daedal Friday, 20 February 2009 13:30 posted by Daedal

    @Reggie:

    I wasn't trying to imply that you are Madoff. Far from it. Rather, I wanted to point out that people shouldn't blankly believe what they are told if there is no way to verify that information.


    Needless to say, I have followed this blog for about 6 months now, and while I am not a paying subscriber, I have been impressed by the caliber of research you have provided. Perhaps I will subscribe in the near future.

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  • Comment Link NDbadger Friday, 20 February 2009 12:20 posted by NDbadger

    that's what i figured,

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  • Comment Link shaunsnoll Friday, 20 February 2009 11:48 posted by shaunsnoll

    I've always wondered who could possibly be on the other side of Reggie's trades! i guess this site not only lets you diseminate your trading thesis but occasionally find out who sold you those puts! :)

    PS: tradingbr, i think its clear you don't really understand what a "short squeeze" is because its not what you describe

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  • Comment Link Reggie Middleton Friday, 20 February 2009 11:02 posted by Reggie Middleton

    @Daedal
    There were three reports on GS, each had a different valuation range. The latest one had a range of somewhere around $75, down significantly from the first one which was in the mid $100's somewhere (I can't remember specifically, so I'm guessing). Remember, I issued a report, Buffet took a large preferred position, then GS transformed into a bank holding company. I have made it very clear that I am still bearish on Goldman, and I have also reiterated that my research reports are purposely skewed to the conservative side. Nearly every report subject has significantly pierced its valuation band. The risk/return proposition is nowhere what it was, but these banks do not have a very bright future in the near to medium term. They will have to cut their balance sheet and leverage in a deleveraging environment, find a new business model, and probably find a new compensation model, all during a near depression where I banking, brokerage and high fee wealth management are at an all time lull in terms of demand. We haven't even discussed what they are going to do with the trash on their balance sheet. Do a search for the term on the site's comments. I regularly take profits when they are on the table by rolling my positions, thus maintain exposure to the underlying. You see, it is possible to have your cake and eat it to.

    You are right in that no does know what I do with my personal monies, which is as it should be because it is personal. Claimed returns are pulled straight from brokerage statements, though. I have had requests by media to have my results audited, but I refuse since - again - there is no need to. I run no outside money. If you simply map ATM options at the release date of my research and regularly roll the deep in the money positions to take profits you should easily be able to back into the numbers.

    You cannot compare me with Madoff. Madoff ran other's money, I specifically have decided not to.

    @Tradingbr
    There is no need to get out. You are quite welcome, it is just that you are contradicting yourself. One minute you talk short squeeze, the next you say 50% profits. The only way to short a stock is through a margin account, which is why I tried to walk you through the margined return on Goldman.

    @NDbadger
    As I stated to daedal, I am still bearish on all of the banks I covered. As they fall in price and receive more and more government assistance, the risk/reward proposition changes, but their immediate future is just not very bright. I would not jump into them right now, but if I rode the positions all the way down (which I did), I would roll my profits off and keep my bearish exposure. If you have been following me for at least a year, you should have at least 100% give or take profit in most of these stocks so leaving your position cost basis in would guarantee market besting performance, even assuming a 100% loss from this point on - which I doubt very seriously would happen.

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  • Comment Link NDbadger Friday, 20 February 2009 10:41 posted by NDbadger

    the story isn't over here either. they have done a decent job bringing their leverage down, but they still have tremendous derivative and financial exposure.

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  • Comment Link NDbadger Friday, 20 February 2009 10:38 posted by NDbadger

    Hi Reggie,

    I did want to ask you about your comment on GS that you haven't commented on it in a while, so we shouldn't assume the story is still in place.

    In that spirit, you haven't mentioned STI or PNC in a while, yet I believe the story with those banks is still playing out. They are very thinly capitalized and losses continue to mount. At a minimum, current shareholders will be heavily diluted. More likely, current shareholders will be wiped out in some sort of debt-equity swap. Anyway, all I'm really asking is if you are still bearish on these names and agree that they still have a long way down to go?

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  • Comment Link Daedal Friday, 20 February 2009 09:47 posted by Daedal

    In the interest of fairness, I believe the price target Reggie posted for GS was $140 (when the stock was trading at ~$180).

    First let's give credit where credit is due. Reggie, you were undoubtedly correct in analyzing that GS was overvalued.

    Having said that, using hind sight to take the stock's lowest trading price as a selling point to measure the 'gains' one would have experienced if they took your advice is misleading (especially since margin/options are thrown into the mix).

    Again, no one is questioning your research -- it can stand on its own merit. Those who sold their long GS positions, or covered their GS short positions at $140 would have been better off, no doubt. But teasing people that they missed out on 200% returns by not subscribing with you, or calling your subscribers more intelligent than most investors, is a wily, if not unethical, way of getting more subcribers.

    Understand that your claimed returns are unaudited, so the reader must take the returns you claim you've achieved at face value. And while your research stands on its own, after Madoff, I think everyone should be a little more circumspect about claimed returns. No one really knows when you covered or what you actually did with your own money.

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  • Comment Link johng Friday, 20 February 2009 09:21 posted by johng

    Reggie, you're awesome, but, for all our own long term trading results the more people that disagree with you the better...

    tradinbr go back to Cramer![b][/b]

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  • Comment Link tradingbr Friday, 20 February 2009 09:16 posted by tradingbr

    >divided by the $100 margin you would have posted

    margin?who is saying anything about margin, I'm talking about &#xre;turn based on your exposure not how much the broker wants to keep you in the trde. And this is coming from the guy who claims big unlevered returns!!

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  • Comment Link Reggie Middleton Friday, 20 February 2009 09:13 posted by Reggie Middleton

    No, I am not mad. GS went down as low $45 and hovered around $50 - $60 for quite some time. $200 - $50 = $150, divided by the $100 margin you would have posted = 150%. Are you familiar with option pricing? Nearly any option at or near, or $50 out of the money would have given you a multi-banger payday. Why I am even having this debate. This is a silly discussion. You just acknowledged 50%, and a few minutes ago were talking about short squeezes. Which one is it?

    Don't bother. Have a nice day. Did you subscribe like I suggested?

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  • Comment Link tradingbr Friday, 20 February 2009 08:17 posted by tradingbr

    >I suggested to go short Goldman between $180 to $200 per share early last summer. >That should translate into at least a 100% profit, no matter how you took the >position

    Are you mad?I just hope you meant 50%

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  • Comment Link Reggie Middleton Friday, 20 February 2009 08:11 posted by Reggie Middleton

    Let me explain it to you:

    - Goldman was not mentioned in the last two months of this year

    - I suggested to go short Goldman between $180 to $200 per share early last summer. That should translate into at least a 100% profit, no matter how you took the position. If you rode the pops or leveraged up on options, it would have been a lot more.

    - I usually don't get short squeezed. Squeezes usually happen only to nervous people who don't have faith in their research, momentum traders, or those who bit off more than they can chew. I am neither. If I come off of a bearish position, that means I have been proven wrong, not popped out by short term market movements.

    - Research when I first mentioned GS being overpriced (try here, but I mentioned it earlier: [url]http://boombustblog.com/20080705449/Goldman-Sachs-Snapshot-Risk-vs.-Reward-vs.-Reputations-on-the-Street.html[/url]) and calculate the return at Goldman's highest point in 2009, then report back to this site and tell me if you feel feel that would have been a spectacular return. Then go to the subscribe button and buy a full subscription! Seriously, I expect to hear back from you shortly!

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  • Comment Link tradingbr Friday, 20 February 2009 06:40 posted by tradingbr

    how come you are not mentioning goldman where you are got short squeezed a ton

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