wndysrf Posted August 31, 2005 Report Share Posted August 31, 2005 Phone was going crazy all day long. Now that rates have plunged, all my clients who were knocked out of the refi window are back in. Its back to "game on"............ So I'll be busy again next week..... In the meantime, an interesting article in the WSJ about short interest in the ETF's. Especially noteworthy with Reg SHO noise these days. I just wonder how many HedgeFunds have illegally borrowed shares out of thin air. And how much borrowed money is on the short side of the market. And how many failed settlements are occuring these days. If the market blasts off from here, we'll know why... .......................... Short Sellers Turn to ETFs to Bet Against Small Stocks, Real Estate By IAN MCDONALD Staff Reporter of THE WALL STREET JOURNAL It is nice for regular folks looking to buy an array of stocks and bonds. Nirvana for professional bears looking to bet against them. Scads of traders, hedge funds and other professional money managers are using exchange-traded mutual funds, or ETFs, to bet on a plunge by broad swaths of the stock or bond markets, or just slivers of one or the other. So-called short-selling activity in ETFs offers a peek at where many pros are most bearish -- these days it is small stocks, real estate and bonds. It also shows how ETFs, billed as a better mouse trap for small investors than traditional mutual funds, are just as appealing to the Big Money crowd. Like other index-tracking funds, ETFs offer individuals a cheap way to own baskets of stocks or bonds. But unlike regular mutual funds, ETFs trade on an exchange just like a stock and price all day long. That is the attraction for bearish traders or money managers, who can sell borrowed ETF shares and profit by returning the shares later once their price has fallen. It isn't possible to precisely break down activity by professional and individual investors, but individuals' tendency not to short, as well as the difficulty in borrowing a modest number of shares to do so, means ETF shorting is largely professional territory. Deborah Fuhr, an ETF strategist for Morgan Stanley in London, says the number of money-management firms world-wide owning ETFs was 1,571 in June, up from 448 in 2000, according to an annual survey she conducts. Of the 10 largest ETFs by assets, more than 20% of their shares were accounted for by short-sellers through the middle of this month, according to ETF Consultants LLC in Summit, N.J. By way of comparison, short sales typically comprise 1% to 2% of the average stock's shares outstanding. One of the most popular ETFs -- the $49 billion (?40 billion) Standard & Poor's Depositary Receipts, tracking the S&P 500-stock index -- has about 30% of its shares sold short. And shorts accounted for 45% of the nearly $20 billion Nasdaq-100 Index Tracking Stock. These two ETFs were often traded by Samuel Israel III at Bayou Management LLC, according to the fund's reports to investors. Bayou is under investigation for fraud by state and federal authorities, but the probes aren't related in any way to Mr. Israel's use of ETFs. Several hedge funds are listed among the biggest players in ETFs. Pros are even more skeptical about niches of the stock market, other ETF trading shows: Short sales of the $7.4 billion iShares Russell 2000 Fund added up to 73% of its shares, according to ETF Consultants. The fund tracks an index of 2,000 companies with market values below $1.8 billion. These so-called small-cap stocks are on pace to outperform shares of larger companies for the seventh straight year, but the ETF shorts suggest the pros think this rally is long in the tooth. And short sales account for more than 106% of the $1.2 billion Dow Jones Real Estate fund's shares. Short-sell percentages can rise above 100% of a fund's shares outstanding, because one share can be borrowed and sold several times. Elsewhere, for instance, short sales of the $874 million iShares Lehman 20+ Year Treasury Bond Fund added up to 136% of the fund's shares outstanding this month, down from 255% in mid-July. The implication: Pros are betting rising interest rates will harm bonds. In recent years, Legg Mason portfolio manager Bill Miller has shorted the Nasdaq 100 Trust when he believed tech stocks were overvalued. Late last year, he closed out a Nasdaq 100 short position in the firm's $3.4 billion Opportunity fund. Link to comment Share on other sites More sharing options...
realist Posted August 31, 2005 Report Share Posted August 31, 2005 Short Sellers Turn to ETFs to Bet Against Small Stocks, Real Estate <{POST_SNAPBACK}> I sure as hell wouldn't want to be short on several ETFs like IWM, IBB or SMH right now! Massive ass blast in the works... Link to comment Share on other sites More sharing options...
Tchaikofsky Posted August 31, 2005 Report Share Posted August 31, 2005 Close: The stock market turned in a winning performance Wednesday as oil prices declined while the action in the Treasury market conveyed a burgeoning belief the Fed will be inclined to end its tightening activity sooner than expected.... Specifically, the Treasury market caught a bid in the wake of a slight downward revision to Q2 GDP (to 3.3% from 3.4%) and a much weaker than expected Chicago Purchasing Manager's Index (49.2 vs 61.0 consensus)... The move was predicated on optimism that high energy prices will slow the economy to a point that will keep inflationary pressures under wraps... That viewpoint was evident in the steepening of the yield curve today, where the front end (most sensitive to Fed tightening) outperformed the back end, and the spread between the 2-yr and 10-yr notes widened to 20 basis points (it got as narrow as 11 basis points on Tuesday)... The inference from that showing is that traders are starting to place bets that the dual forces of high energy prices and Hurricane Katrina will slow the economic expansion and provide the Fed with reason to curtail its tightening efforts... The point is debatable, but it is a silver lining idea that helped feed broad-based buying interest in the stock market during the afternoon trade... Fittingly, the yield curve-sensitive financial sector (+0.68%) was an active participant late in the session that saw the indices close at their highs for the day on the heaviest volume all week... Though crude prices declined, the energy sector (+2.60%) remained the market's best performer as investors remained convinced demand is going to remain strong for an extended period... From an economic sector standpoint, there were no losers today... Link to comment Share on other sites More sharing options...
wndysrf Posted August 31, 2005 Author Report Share Posted August 31, 2005 Attn tdultima: 3 days worth of shorts wiped out in 5 hours. Go ahead, and pull the trigger....... Link to comment Share on other sites More sharing options...
Sudaca Posted August 31, 2005 Report Share Posted August 31, 2005 20 days of shorts in some cases, like SMH. Seriously, it isn't that crazy to think this other puppy has a shot at new highs, does it? Link to comment Share on other sites More sharing options...
Sudaca Posted August 31, 2005 Report Share Posted August 31, 2005 NYSE A/D line bounced right where it had to. Link to comment Share on other sites More sharing options...
termin-Al Posted August 31, 2005 Report Share Posted August 31, 2005 From MarketWatch: Bush administration and Fed officials insist that Katrina's effects won't derail the U.S. economy The very fact that they need to tell me this makes me concerned. I have no idea how a derailed economy will affect the stock market [i suspect it won't be negative, if it does], but I do know how it will affect the people of this country - for most, their lives will be even more miserable than they are now. What I have come to understand with this tragedy down in NO and with the comments that Ben Bernanke made today is that the government has no interest in protecting the people of this country. There is one thing and only one thing the government cares about, and that is protecting the scam that they like to call the financial markets. That is their #1 goal. Nothing else is as important. If you and I have to pay $5/gallon for gasoline, so be it as long as the financial markets (schemes) are protected. They have no other choice but to print money! Link to comment Share on other sites More sharing options...
GregFokker Posted August 31, 2005 Report Share Posted August 31, 2005 From MarketWatch: Bush administration and Fed officials insist that Katrina's effects won't derail the U.S. economy The very fact that they need to tell me this makes me concerned. I have no idea how a derailed economy will affect the stock market [i suspect it won't be negative, if it does], but I do know how it will affect the people of this country - for most, their lives will be even more miserable than they are now. What I have come to understand with this tragedy down in NO and with the comments that Ben Bernanke made today is that the government has no interest in protecting the people of this country. There is one thing and only one thing the government cares about, and that is protecting the scam that they like to call the financial markets. That is their #1 goal. Nothing else is as important. If you and I have to pay $5/gallon for gasoline, so be it as long as the financial markets (schemes) are protected. They have no other choice but to print money! <{POST_SNAPBACK}> Either they print more money, driving energy and raw material prices through the roof, or they print less (which Greenie seemed to be indicating last weekend), in which it all comes down. But, I guess each chart is its own separate universe. Link to comment Share on other sites More sharing options...
Guest Posted August 31, 2005 Report Share Posted August 31, 2005 nothing wrong with going long Link to comment Share on other sites More sharing options...
tdultima Posted August 31, 2005 Report Share Posted August 31, 2005 Attn tdultima: 3 days worth of shorts wiped out in 5 hours. Go ahead, and pull the trigger....... <{POST_SNAPBACK}> still a bit too early (for me) im on the lookout dont worry if its a tradable bottom i dont mind going long Link to comment Share on other sites More sharing options...
vasu Posted August 31, 2005 Report Share Posted August 31, 2005 Phone was going crazy all day long. Now that rates have plunged, all my clients who were knocked out of the refi window are back in. Its back to "game on"............ So I'll be busy again next week..... In the meantime, an interesting article in the WSJ about short interest in the ETF's. Especially noteworthy with Reg SHO noise these days. I just wonder how many HedgeFunds have illegally borrowed shares out of thin air. And how much borrowed money is on the short side of the market. And how many failed settlements are occuring these days. If the market blasts off from here, we'll know why... .......................... Short Sellers Turn to ETFs to Bet Against Small Stocks, Real Estate By IAN MCDONALD Staff Reporter of THE WALL STREET JOURNAL It is nice for regular folks looking to buy an array of stocks and bonds. Nirvana for professional bears looking to bet against them. Scads of traders, hedge funds and other professional money managers are using exchange-traded mutual funds, or ETFs, to bet on a plunge by broad swaths of the stock or bond markets, or just slivers of one or the other. So-called short-selling activity in ETFs offers a peek at where many pros are most bearish -- these days it is small stocks, real estate and bonds. It also shows how ETFs, billed as a better mouse trap for small investors than traditional mutual funds, are just as appealing to the Big Money crowd. Like other index-tracking funds, ETFs offer individuals a cheap way to own baskets of stocks or bonds. But unlike regular mutual funds, ETFs trade on an exchange just like a stock and price all day long. That is the attraction for bearish traders or money managers, who can sell borrowed ETF shares and profit by returning the shares later once their price has fallen. It isn't possible to precisely break down activity by professional and individual investors, but individuals' tendency not to short, as well as the difficulty in borrowing a modest number of shares to do so, means ETF shorting is largely professional territory. Deborah Fuhr, an ETF strategist for Morgan Stanley in London, says the number of money-management firms world-wide owning ETFs was 1,571 in June, up from 448 in 2000, according to an annual survey she conducts. Of the 10 largest ETFs by assets, more than 20% of their shares were accounted for by short-sellers through the middle of this month, according to ETF Consultants LLC in Summit, N.J. By way of comparison, short sales typically comprise 1% to 2% of the average stock's shares outstanding. One of the most popular ETFs -- the $49 billion (?40 billion) Standard & Poor's Depositary Receipts, tracking the S&P 500-stock index -- has about 30% of its shares sold short. And shorts accounted for 45% of the nearly $20 billion Nasdaq-100 Index Tracking Stock. These two ETFs were often traded by Samuel Israel III at Bayou Management LLC, according to the fund's reports to investors. Bayou is under investigation for fraud by state and federal authorities, but the probes aren't related in any way to Mr. Israel's use of ETFs. Several hedge funds are listed among the biggest players in ETFs. Pros are even more skeptical about niches of the stock market, other ETF trading shows: Short sales of the $7.4 billion iShares Russell 2000 Fund added up to 73% of its shares, according to ETF Consultants. The fund tracks an index of 2,000 companies with market values below $1.8 billion. These so-called small-cap stocks are on pace to outperform shares of larger companies for the seventh straight year, but the ETF shorts suggest the pros think this rally is long in the tooth. And short sales account for more than 106% of the $1.2 billion Dow Jones Real Estate fund's shares. Short-sell percentages can rise above 100% of a fund's shares outstanding, because one share can be borrowed and sold several times. Elsewhere, for instance, short sales of the $874 million iShares Lehman 20+ Year Treasury Bond Fund added up to 136% of the fund's shares outstanding this month, down from 255% in mid-July. The implication: Pros are betting rising interest rates will harm bonds. In recent years, Legg Mason portfolio manager Bill Miller has shorted the Nasdaq 100 Trust when he believed tech stocks were overvalued. Late last year, he closed out a Nasdaq 100 short position in the firm's $3.4 billion Opportunity fund. <{POST_SNAPBACK}> They do that for best performance....going long the best components of those ETFs. Thats common with the funds Link to comment Share on other sites More sharing options...
Sudaca Posted August 31, 2005 Report Share Posted August 31, 2005 Huge move today in mexican cement producer Cemex.... Up almost 8% Link to comment Share on other sites More sharing options...
wndysrf Posted August 31, 2005 Author Report Share Posted August 31, 2005 No doubt, the New Orleans reconstruction is going to turn into an Epic Boom for some companies. Just did a bunch of scans, and we have huge breakouts all over the place. Real estate, homebuilding, construction, engineering, etc. Top producing commercial real estate firm, CB Richard Ellis: Large supplier of home building materials: Engineering and construction: Barge companies: Link to comment Share on other sites More sharing options...
wndysrf Posted August 31, 2005 Author Report Share Posted August 31, 2005 Huge move today in mexican cement producer Cemex.... Up almost 8% <{POST_SNAPBACK}> Florida Rock, Vulcan Materials, etc. Link to comment Share on other sites More sharing options...
K Wave Rider Posted August 31, 2005 Report Share Posted August 31, 2005 Next 10 days or so all important for RE stocks methinks..if they can't crash 'em after this bounce, all those shorts will be forced to cover... There are moments in time, however, where the shorts are right though...I remember some fairly large short interests in some of the crashing internet stocks during the collapse.. And the fact that this info is being released to the public splashed all over the WSJ, when it is a well known contrary indicator makes me at least a little bit suspicious.. The markets are definitely ready to make a large move fairly soon..I have a bias towards a downside resolution at this point, but I'm ready to play either way.. Link to comment Share on other sites More sharing options...
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