some cleanup work done at 2pm.

2PM update: enough with this game. Spread closes in to $2.81 and I am out all 1,500 shares. Beer money collected. I sold also the 400 shares I bot at 24.80s this morning. Cracker money in.

Note on the covered call portion: Now is $27.19, twenty cents above where I sold the $1.50 call four days ago, but the call option is trading $1.05-1.20. The decay is pretty good clip. One more dip to yesterday's level and we're done. I suspect everyone would want to be lightly loaded ahead of FNM 5/6 earnings day cuz anything can happen. And if the surprise is "negative", buying at $30s isn't pretty. :D

Hmm, reason tells me QQQQ went up to far and too fast for the smallish bit of news we've got in the past 2 days relevant to it. But why am I not moved after looking at AAPL's action? Too strong to fight.

SRS - on the other hand ....

5pm addon: hmm, the spread is still $3, a bit wider than 2pm, and the closing prints seem to suggest it may attempt $4 if FNM really wants to front-run earnings. Does that mean I should go long FNM and short FRE? I don't even trust my senses anymore. I'll stay out of these two UNTIL after FNM. I will only bet conditional on FRE earnings conditional on FNM (and a couple other things).

DSL short squeeze may have failed.

I went long with an average of 13.72 and dumped just now at 14.73, 2,000 shares. I think the short-squeeze I predicted just failed or for some reason I found very weak and $20 looks err, "optimistic". But you never know and do ur own due dilligence.

I still have 14,000 shorts since last year August. Maybe this is the end of Downey despite the talk talk jawbone jawbone work everyone has done for the Option Arm industry? Tsk, it used to work better than this.

More notes: B-b-b-booyah!!! heheheheh. I was wrong, squeeze is just starting as of lunch time May 1, 2008. Oh well. Panic time for short sellers. Booyah, booyah, booyah.

Update on FRE "game"

This is beginning to morph into a position albeit still small. Added at 24.89 400 shares long this morning.
(for a total of 1,000; 600 of them covered call in the past 3 days from the "top" :)

The gap is widening with FNM. Yesterday was $3.40, now $3.80, an absolute nadir in relative performance. I am thinking about 1000 shares long-short FRE-FNM I was mentioning yesterday if I see $4+ spread.

More notes: Okay F-it. I did 1,500 FRE-FNM with $3.72 initial gap. $500 if I am wrong and $3,000 if I am right sounds tempting for beer money.

Nasdaq Momo-ism back at full force!

Rally out of nowhere. Qs up 2%.
Well Symantec was doing great last quarter but is Symantec everything? :D
Great day to evaluate who in that space is most vulnerable to a pullback given this indiscriminate rally. Look for something financial in nasdaq.

Update on the FRE "game"

back to 24.70 at some point today where I bot the batch I used to play the covered call game at the top of the range, $27. The call was $1.50 and now $0.45, unfortunately STILL not enough to retire.

Still haven't added any more and my thinking I should at $24, as it represents $3 drop from $27. Gawd this earnings waiting game is getting longer and longer. :)

Hmm, FRE-FNM "spread" widened , now at $3.40 at the close 5/1/2008. Maybe if I add before it hits 24 (my target) I should experiment with a couple hundred shares hedged with equal # of shares (NOT equal $) FNM short. I'll think about it tonight.

More notes:

1. Could FNM bounce back to $30 ($2 up) which is a nice pattern if it completes within this triangle - remember it's been sold "hard" and that price is clearly not out of the question given the price range lately post BSC. ($27 - 34) - data @ BSC is not admissible.
2. On the same axis, could the spread FRE-FNM be due to a bounce as well. That one is also on a tight channel as far as I can tell.
3. If you get $2 FNM up and $1.50 tightening on spread, would you consider 5 days of "investing" be worth $3.50/$25 = 14% return unlevered unacceptable? :D
4. The risk? Looks to me 20c more widening and $1.00 drop more on FNM resulting in $1.20 further drop if you go naked long. That's 6% loss unlevered. Can you take that risk?
5. Let's say I use pure random walk theory ( I know NOTHING about these stocks ), Expected gain/loss = $0. Outcome anywhere between -$1.20 and +$3.50. The skew (and fat tail, check your option premium!!) is on your side?

Will think hard again later.

Doubled positions in ...

DCI. Target still $60.

Read what happened to CMI. Clean growth story with minimal GENERIC decoupling bullshit dependency.

Will very likely do the same. The P/E on CMI had just expanded 10+% suggesting the "spread risk" equity will take is going down for the sector.

Very stubborn vol ...

on FRE Calls May 28s.

I was thinking it should be like 30-40c by $25.50 but now at 60c.

Not yet time to buy it back. Will buy back the call at 25-30c and then sit on my a** waiting for possibly Fed to disappoint with super harsh language before adding. If FRE tanks along with broader market because of that then I will add with the formula 200 shares every $2 down.

Getting my balls taped to my forehead at the end of this? We'll see. :)

Why do you have LBO Credit Seminar in ....

Beverly Hills?


==============================

Apollo's Black Says Markets `Well on Way' to Health (Update1)
2008-04-29 13:39 (New York)

(Adds debt backlog in third paragraph.)
By Jason Kelly
April 29 (Bloomberg) -- Apollo Management LP founder Leon
Black said investment banks have pared their backlog of debt
committed to leveraged buyouts and will resume funding deals
this year.
``We're well on our way'' to a credit-market recovery,
Black said during a panel discussion in Beverly Hills,
California. As more LBO debt is sold off in the next six months,
``the banks will be in business again.''

Booyah Moment.

I have been examining several facts over the weekend till now and would like to write it down just so I remember where I last stopped for thinking. This part of the blog may not relate at all to investing much more so than a rant.

I read that the properties sinking in value used to be 100 miles off the coast of California in late 2005. Then as 2006 and 2007 progressed, the the "blight" moved to 70, 50, 30, and now in early 2008, about 15 miles off the coast. Coincidentally, those are the areas that have been highest in value for a long time or at least since I can remember looking at data. It is true in general for east coast area like DC and Boston, as well. And the blight is still marching on to the coast.

Why is this important?

I think it underscores the constancy of wealth and how wealth will over time concentrates over a few select individual.

Concepts:

a. TIMING: The right time and the right place: Two identically skilled workers, depending on when they enter the work force in my field (2002 - the start of the housing bubble or 2006 - the end of the housing bubble) : one will earn $250-350k and the other $50-70k. This thing is a time-frozen fixture and unlikely to change because now the economy is deflating and hope is fleeting and money is gone. BOOYAH.

b. CHANCE: Back to the blight creepage to the coastal area: Ten people invests $1 each, one of them bought puts and scored 10 bagger while every body else loses their $1. Then the $10 guy buys everything the 9 others owned, houses, yacht, mistresses and moved to the higher priced areas. This is a very likely explanation. Investment, I should caution, is not limited to stocks, before you are skeptically closed to this idea, think about currency, fancy Real estate, bonds, and other things to invest and see whether this concept is possible. BOOYAH.

c. SYSTEMIC: There seems to me, that the current US system is like a car with massive oil leaks. Fluid (money) circulates well but keeps leaking. How? example: Money circulates to fund profitable business. BUT: What's a business if it's not profitable, so you shouldn't be proud of just satisfying the "requirement", that's the CNBC clowns saying "Look but GOOG make money" crowds. Also, everytime money flows it passes to the banks and thus friction because everytime it passes wealth is leeched out of the flow to feed the three or four trolls pushing papers in your friendly neighborhood bank, investment bank GS, or some generic assholes in wealth management unit of UBS, who the f*** knows. The point is in my opinion when the system works it a) satisfies the MINIMUM requirement to keep functioning, but b) most of the time it NO LONGER does and chooses to feed TROLLS instead. BOOYAH.

All these imbalances would over time leave 299,999,999 with nothing and 1 guy with everything. While I think over time the best scheme is "free market" and capitalistic, I look forward to some Good old Bolshevik, Tzar-executing, BOOYAH moment in USA.

Ambac was complaining ...

that someone "tricked" them into guaranteeing ABS CDO backed by Bear Stearns 2007 ABS bond.

Here's the story, would you be surprised basically it's about they got taken to the cleaner?

Douglas Renfield-Miller, an executive vice president at Ambac, said Thursday in an interview that the company's policies will pay bondholders unconditionally, even in the event of fraud.In a case where a loan is determined to have been misrepresented "then Ambac may have recourse against the issuer to repurchase that loan," he added.A bigger claim would involve an entire insurance deal that was fraudulent.

This could give Ambac a claim against the issuer for any claim payments made.Ambac's worst-performing deal covers home equity lines of credit, packaged into securities by Bear Stearns Cos. (BSC) in 2007. Over-60-day delinquencies in the underlying loans have shot up to 81% of the current balance loans in the transaction.That delinquency rate is a multiple of the average for such securities, according to a Standard and Poor's report issued Thursday.

Total delinquencies for 2007 second mortgage-backed securities that had their ratings lowered hit 11.88% in March, the ratings agency said. Individual transactions have projected ultimate losses ranging from 11.56% to 88.36%.A Bear Stearns spokesman did not immediately return a phone call asking for comment.

"Financial guarantors did not sign up for the fraud that appears to have been rampant in the mortgage market," Ambac said in an emailed response to questions Friday. "As our positions continue to develop in this area, any assumptions about recoveries will be built into our loss reserving against particular transactions. Hopefully, our efforts will also prevent some deals from becoming impaired in the first place."

So I figure what the heck, maybe I take a gander what it is just for shitkicking fun:

Nine months old mortgages!! 92% refinance, and most of those managed to even cash out $$$ during the credit crunch in 2007. Kudos to BSC, the hero of little subprime midgets. (Hmm, Just occured to me, this is what avoiding reset through refi would look like, eeeekkk ... )


How was the deal supposed to perform? (For the BBB bond of that deal which was backing the CDO Ambac was complaining about)

Well, do you prefer Libor minus 15,000 or Libor minus 24,000? By that yield, does it mean the whole thing is wiped out in 3 and a half weeks or four? WTF.