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By Pete, September 20, 2008 10:00 am

During this week, we saw a 158 year old investment bank file for Ch. 11, another ended it’s 94 years of independence, America’s biggest insurer getting bailed out and entering the federal conservatorship, gold making it’s biggest 1 day move in history, the credit crisis spread outside the financial industry and a huge panic in the short term lending money market fund. And the Dow only ended down 34 points for the week?!?!?

While the headlines above would suggest a shear nightmare-ish bloodbath in the global equities market this week. That was not the case at all thanks to our government. While everyone holding equities in their portfolio or 401k is rejoicing, I should point out that the price we all paid is far too great – capitalism is dead.

Without even getting into the constitutionality of AIG bailout, the SEC decided Thursday evening that they should temporarily ban short selling in 799 financial stocks to “regain” the market’s confidence. The role of short selling has always been a self-correcting mechanism for the free market. Without this self-correcting mechanism, the price of a security (as you can clearly see at the open on Friday) will become very inflated.

While many recent accusations blamed the shorts for the tremulous run on the market (especially in the financial sector), one cannot ignore the fundamentals. It is INSANE to see how much leveraging some of these firms are using. If a firm is going to, in the name of greed, participate in predatory lending practices and lend out money to people who cannot afford to repay it or run their business on this leveraging on steroids model, they (and eventually their shareholders) ought to be the ones paying for it – not the taxpayers. Granted, I have no doubt that manipulative shorting does go on in the market (there was an analogy of someone being able to buy his neighbor’s life insurance policy and then running them over with a car by buying a firm’s CDS and then shorting their stock, creating a nasty spiraling cycle of events) but banning short selling is not the solution.

By banning short selling, the government not only create a window for inflation and mispricing of securities, they also create a build up of short side demand. When this ban is lifted, the market is going to take a kick in the face. And guess what the headlines are going to read that evening?? “Shorts take over the market again.” This is just going to be nasty.

What the government should do instead is to regulate the CDS market better and reimplementing the uptick rule. By providing more transparency in the CDS market taking down manipulative short selling, we can still keep our free capitalistic market. A stock is not guaranteed to appreciate in value, I don’t understand what’s so awful about a long overdue correction.

A “free market” without the self-correcting mechanism of short selling is almost like Christianity without hell.

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By Pete, March 15, 2008 4:27 pm

Damn. The Ides of March. I HATE this day, not because I’m a big Julius Ceasar fan, but because of what’s this day inevitably brings – April 15th.

This post will not mean much to most of you, but I’ve FINALLY found something that makes sense for K-1’s. I’m not sure why the hell my firm cannot write up something like this. But here’s the motherload (text also available after the jump for future references). Hope it helps. =)

Continue reading 'Beware the Ides of March'»

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By Pete, February 27, 2007 10:14 pm

I’m so excited about about going into the office tomorrow and seeing what the market will do, I’m not too sure if I can sleep tonight… Here’s what the international market did yesterday and maybe a bit of a preview tomorrow morning:

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By Pete,

[youtube=http://www.youtube.com/watch?v=_-rke3JXqb4]

Wow. -416.02. This is BY FAR the craziest thing I’ve ever seen at work, especially the massive sell off around 2pm. I remember thinking around lunch time that today’s sell off is probably done and I thought about taking my money and going home. But that 10-15 minutes from 1:55 to 2:10 (central) was INSANE. When all the dust finally settled, it is reported that a computer glitch had cause a recalculation glitch in the DOW that pushed it down over 200 points in less than 15 minutes!!! At the end of the day when I finally walked out of the office, I was greeted by the sun shining brightly. It was only then that I couldn’t recall a time that I got up out of my chair the whole day except once during lunch. Incredible.

In retrospect, I believe that CNBC host Jim Cramer is actually right in saying that the system has failed the investors (although you’re not going to find me complaining about the market today). I really think that the NYSE need to reexamine the hybrid trading system and see if it’s really the trading platform they want to stick with in the long run. Ever since the don of the electronic trading age, the market has always prided itself on transparenecy – the ability to read the tape anywhere in the world. But even with transparency, most of the investor public will not be able to react to the volatility created by the hybrid platform because the platform is asking traders to react as fast as a computer (which is impossible for the majority). The result is that during that panic sell off today, you’ve got no buyers fast enough to step up to take the shares and automated trading programs wanting to dump shares based on market conditions.

As a professional, I have always preferred trading NYSE-listed stocks compared to stocks in the OTC market such as the NASDAQ. But after the hybrid, I found that the volatility attributed by the hybrid is so great that at times I cannot efficiently manage my risk. I think about it this way: The market has always make the underlying assumption that the professional trading community will be willing to step up to take shares, but when you get a market that’s tanking so fast and a system that doesn’t allow for a lot of time for reactions, the only market participants willing to take shares long will be the ones that take it on prices that looks promising to them, you can’t fault someone for not sticking their head out to be chopped off right? So if it is really the NYSE’s goal to compete with the NASDAQ in order execution time, they need to give up their “traditional auction market” pipe dream and go fully electronic.

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By Pete, October 9, 2006 12:06 pm

Not that I’m recommending anyone to take their money and “gamble” in the market, but CNBC has been talking about this ALL day. So I figured that some of you might be interested, Zecco.com is a new discount brokers that’s offering free (commission-free) trades to their customers. Now I have to admit that I’m always a doubter of deals like this, but from the interviews and the segments that they’ve done on CNBC, this sounds fairly legit. They’re putting themselves at a very interesting place in their sector because they’re not only providing discount trading, but they’re offering a community (via blogs & forums) for people to discuss their trades online.

Being involved in this business, I wonder how competitive the fills are with Zecco. I know that under the current structure, there’re ways you can actually get paid (via a “rebate”) to trade, but the prices you get with those trades wouldn’t necessarily be the best prices most of the time. Anyways, just thought I’d pass the information along. Please determine the suitability of Zecco.com yourself.

Disclaimer: PLEASE check it out for yourself, since I am not one of their customers.

MarketWatch: Zecco.com to offer free online stock trading

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By Pete, April 30, 2006 10:40 pm

It’s been a few days, but I didn’t want to say anything until it actually materialized. Since now that April is officially over, I can F-I-N-A-L-L-Y say that I’ve earned my first paycheck. I’ve managed to dig myself a nice little whole, but as Ice-T said, “It ain’t about the come up, it’s about the comeback.”

It’s an unbelievable feeling, really, to see the comeback. Now it’s time to take the trading to the next level. I just wanted to share this joyous news with ya’ll and thank those of you who’ve been praying for me.

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By Pete, April 7, 2006 10:02 pm

Remember my series 7 fiasco? Just when I thought failing a test by 1 single question is bad, I think I managed to find something to make it worse:

I am writing to inform you of a scoring issue that affected the outcome of the Series 7 examination administered to you on March 8, 2005. NASD has determined that a software error introduced into the automated scoring mechanism for the Series 7 exam affected a limited subset of individuals who sat for the exam between October 2004 and December 2005. Some candidates received a failing grade erroneously. The error, which affected only exams with scores on the edge of the pass/fail line, caused some test takers to score just below the minimum passing grade. Your examination result was among those affected, and you should have received a passing score.

If this is not cruel and unusual punishment, I don’t know what is.

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By Pete, December 30, 2005 7:47 am

This week’s been awful. Low volume, slow movement. With today being the last trading day of 2005, CNBC spent about 10 minutes talking about if the Houston Texans should try to lose the game to get Reggie Bush.

Needless to say, today’s going to be bloody awful. I’ve been leaving the office early the last two days. Today, I’d be shocked if I make it ’til lunch.

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By Pete, December 23, 2005 6:42 am

What the hell is wrong with me?!? ’tis the day before Christmas Eve, and I’ve never been this exitced about going into work. I think mostly it’s because no one will be there. And I’m hoping that there’ll be huge 95 cent crosses that come across my tickers.

I’m having a very difficult time making myself drive the 200+ mile pilgrimmage back to Plano. Mostly because it’s only for the weekend, and I’ll have to make the same journey again in a few weeks. Next year (assuming I’m in a position to be able to do this), I’m going to fly home and rent a car. No fuss, no worries.

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By Pete, August 25, 2005 8:49 pm

It’s been a rough week trading, a lot of dumb (and VERY costly) mistakes. This is what I look like this week in there:

LOL. Don’t worry, I think I’ll live. =)