THREAD IS CLOSED! --- Bob Brinker Free Discussion Site 11K+

» SLO219 - Re: Re: Re: The qqq trade

In response to message posted by Kirk:

Kirk,

I've indicated an approach that involves both shorting certain stocks as well as buying a fund that is a 2X proxy for the Qs. In addition, there is a fund in the same family that is a 2X short proxy for the Qs. Any or all of these could be used to either average down a Q position (which will benefit if there's a rally tomorrow) or to benefit if there's a continued down move tomorrow. No one has to do what I've done but they could, at the very least, use the Velocity Fund to average down. This is only a short term strategy to correct a short term trading mistake. I don't short term trade but I have to make an exception in this case. As previously mentioned, until recently, Brinkers approach has been conservative. Many of those who trusted him felt that he had a handle on this type of trade. As in the case of many others, I let this trust affect my judgment. In fact, I was short over 1000 Qs (at 88) when the bulletin arrived. I took a small profit on this and went long a bit later on. A tragic blunder, to say the least. However, I corrected the error, to an extent by averaging down using the Velocity fund and shorting some very high P/E tech stocks. Shorting is not for the faint of heart since a squeeze is likely at some point. However, my feeling is that many tech stocks are significantly overvalued even at these levels. Ultimately, they must come down in price. I do not take large short positions, just enough to offer a partial hedge against the Qs. I will cover these positions when it looks like there's some stability in the market. My bias is to the upside but we have to be aware of the possibility that we're starting a long term secular Bear market. I certainly don't want to be gambling frivolously but also, I wouldn't want to be holding a losing tech position for the next 10 years. Incidentally, virtually every short position that I had (some established in 1999) would have been profitable had I held on to them. Held some at a profit, freaked out during a short squeeze and covered some at a loss. They were a small part of my portfolio and they were used as a partial technology hedge.

This is what a Bear market, overvaluation, and a market bubble are all about. Incidentally, I'm about 60% in cash. I really don't like the look of this market. The Q debacle originally cost me about 8% of the value of my portfolio but I've paired this down to 6%. Assuming the short positions don't blow up and we get a reasonable rally, I hope to get this closer to 0.

I only find these boards interesting when posters have ideas. I've been posting these rather long messages to get some feedback, to help anyone else, and to get new ideas. I have a life outside of this but I'll check back periodically.

-SLO219

-- posted by SLO219

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» DanG_6 - Re: Re: Re: Re: The qqq trade

In response to message posted by SLO219:

SLO219, would you please explain the advantage of hedging Qs rather than just selling them. If you sell them, no matter what Qs then do, it does not affect you. If you perfectly hedge them, then no matter what Qs then do, it does not affect you.

So the only difference I can see between outright sale of Qs and hedging them with short sales is that with hedging, you get to pay extra commissions to sell stocks short for hedges. If you just bailed out of Qs altogether, you'd avoid those extra commissions.

-- posted by DanG_6

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» SLO219 - Re: Re: Re: Re: Re: The qqq trade

In response to message posted by DanG_6:

Dan,

My feeling is that you'll have the option of covering the shorts and being a longer term holder of a portion of the Qs after we've hit a bottom. I like the idea of hanging on to some of the Q's rather than taking an instant hit. Also, you don't need to hedge the entire position. Just hedge to the sleeping level. In addition, you can selectively unwind the hedge over time. This market is so volatile that one can easily imagine selling the Qs at rock bottom only to see a sharp (but temporary) rebound. In addition, I'm DCAing into the Velocity fund to average the position down. Plus, I’m using some selective shorts. Thus, the strategy has 3 parts to it but each individual part might be useful by itself. I'm assuming that we'll see a "V" shaped move at the bottom but I don't see a major BB type recovery in the cards. In fact, this call looks downright ridiculous in retrospect. Where would a rally come from? Big rates cuts are already in the market. Techs won’t stop their downward revisions for some time. A recession is a real possibility now. The hedges are an attempt to buy some time and have some flexibility. At some point the NAZ will reach a bottom. It’s not going to 0. Yet, there are still many stocks with stratospheric P/E's. Commissions are too small a part of the picture to even be a concern.

I believe that a shorting and hedging strategy is perfectly legitimate in this type of market. I’m attempting to reduce the loss at the least and perhaps break even. I don't really want to have much market exposure AT ALL since there's a real possibility the NAZ Bear will spread into the other markets. Just my opinion.

-SLO219

-- posted by SLO219

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» Fahrenheit451 - Re: WPPS And Class Action Suits

In response to message posted by Centigrade233:

Fortunately, there is a higher standard of protection for publishers because of the First Amendment. Being wrong is not, and should not be, a crime.

Think about it a little more deeply. If disgruntled subscribers were to prevail in court based solely on a writer's recommending something that went down, no one would publish newsletters any more. Kirk would be just as vulnerable as Brinker. Speaking as an investor, I want to decide for myself what I can read, not have the decision made for me by judges and juries who may or may not know anything about investing.

-- posted by Fahrenheit451

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» Fahrenheit451 - Re: Re: Re: Re: Re: Open Letter to Liberty Pilgrim

In response to message posted by LibertyPi:

"Do the math."

OK.

The week most received the January newsletter, QQQ ranged from 86 to 93.9375, for an average of 89.96875.

The week most received the bulletin, QQQ ranged from 74.5625 to 87.875, for an average of 81.21875.

89.96875 - 81.21875 = 8.75, not 20.

"100% sold at 95."

Actually, it was 60% sold at about 90.

-- posted by Fahrenheit451

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» Fahrenheit451 - Re: Re: No Bear yet.

In response to message posted by Kirk:

"No, YOU are wrong. IF you use the definition of a bear market that Brinker uses.. that ALL stocks go down, that there is NO place to hide, that "even the piano player is taken when they back up the truck to the house of ill repute" THEN we DID NOT have a bear market as several sectors of the market have gone up and hit new highs."

You're getting pretty desperate if you have to resort to a rubber yardstick to make your point. I have heard him characterize a bear market as you suggest, but I have never heard him claim that it was part of the definition of a bear market.

-- posted by Fahrenheit451

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» Fahrenheit451 - Re: Re: Re: Re: Posting under aliases

In response to message posted by Kirk:

"One of the reasons for trusting people is that you can depend on what they say and DO NOT have to go back and verify it. Perhaps you have not experienced this and the concept is foreign or perhaps I am unusual in this?"

Of course I have had that experience. For example, I feel that I can trust you to not misrepresent the facts, even though I may disagree with your interpretation of them in some cases. But that is because I have read enough of your posts, over a long enough period of time, to have gained confidence in your honesty. It has NOTHING to do with the fact that I think I know your real name.

-- posted by Fahrenheit451

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» kensailor - My Bob, my Bob, why have you forsaken me?

You said you would lead us to the promised land of critical mass.

We, the believers, have taken up the journey with you, though it has spanned many years, and most of us have yet to reach our destination. We have made the annual sacrifice of $185; we have listened to your weekly sermon.

Like Mosses' people crossing the Red Sea, there is fear among us, as we are underwater on the trade.

But we have faith in you. We know you will be with us for each step along the way. At our time of greatest need, we look to you for confirmation, for verification that the path we are on is the true one. We expect you to tell us that the vertical cliffs of market liquidity towering over us on each side are phenomena that you predicted to occur, a wall of worry for the bear market rally to climb.

But you are nowhere to be seen. Instead, we see "Flanagan". We go to your web site, to find comfort in your confidence, but find silence instead, and "no bulletin has been issued". In your topics section, you have muzzled your critics, and now, your supporters as well.

You said you would lead us to the promised land of critical mass, and we have followed you religiously.

We're not asking for water from a rock, or manna from heaven. Just a little honesty and guidance.

-- posted by kensailor

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» Fahrenheit451 - Re: Re: Re: Re: Re: A Question

In response to message posted by Will_L:

"Fahr. Your post in answer to Felipe's questions points out something I find interesting. It's the desire to believe--"faith" if you will in Brinker."

It's not based on faith. It's based partly on what I have observed, and partly on my willingness to experiment, with myself as the guinea pig. I recognize that there is not enough data to positively prove that his long term model works. But the factors it is based on make good logical sense to me, and his forecasts of the long term trend have been good for the past ten years: He was correctly bullish throughout the 90's. He correctly forecast that the DOW and the S&P would behave very differently in the year 2000 from what they had done in the previous ten years, and he correctly forecast the range in which they would fall. It is painfully obvious that whatever method he is using to forecast short-term rallies is flawed, but I consider the jury to still be out on his long term model, and I have not yet seen anything to cause me to abandon that view.

I know that you will not be satisfied until I say that Brinker is 100% wrong 100% of the time, and I am sorry to have to disappoint you, but nothing I have seen so far makes that case.

-- posted by Fahrenheit451

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» LibertyPi - This is Hilarious

I am shouted down and forced to leave. My departure is "proof" that I am wrong.

Or, in another scenario, I am swaying in the wind as the lynch mob takes my silence for admission of guilt.

LibertyPilgrim

P.S. One other point. No one that I know of is saying that, right now, the last QQQ trade was good. Yet, every other post here alludes to the Brinkerites that insist on denying reality. It is clear that Bob could have gotten a better entry point for this little 10-12% trade (for those inclined to trade short term), but it may yet prove to be a winner, and in no way diminishes his astonishingly gutsy and prescient call last January.

-- posted by LibertyPi

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