The Market Ticker
Commentary on The Capital Markets- Category [Market Musings]

An old, beaten-down trucking company that got in a lot of financial trouble and reverse-split the stock, after nearly disappearing.

A relentless slide since then into oblivion.

And then, this morning.  One lone analyst issues a minor upgrade.

The stock moves upward almost 15%!

Earnings are on deck for tomorrow, but the fact remains that with exactly one little note from Raymond James the stock is on a tear.

Now forward P/E, if you believe the projections, is just 11 -- not a bad number.  And price:sales is almost zero; it's hard to go down from there (remember, big reverse-split!)  But the fact is that the company has an enormous debt load and, because of it, a negative book value (to the tune of $15/share!)  

In other words if you buy this stock you're buying something that has negative actual value!

But this isn't just algos chasing a momentum mover.... right?

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Buy the dip!  Ahhhh!

Buy the dip!  Ahhhh!

Buy Netflix, Amazon, Disney, Facebook!  Ahhhhh!

And then there was the time you did it in China, which over the last few days looked pretty good.

Until last night when the bottom fell out, with a huge number of issues hitting daily 10% down limits, sending the Shanghai index down 8.5%.

Ahhhhhhhh fuuuuuuuuuuuck!

That be coming here folks.

Oh, and that loan that the Chinese government extended to buy those stocks?

You still owe them the money.

Here, you might want this:

Suicide by tickerguy

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Remember that in mid-late 2007 and early 2008 we all heard daily about Cramer's Four Horsemen, and in early 2000 we had Cramers "New World."

Cramer managed to top-tick the market almost to the day in 2000.  He was off a bit more in 2007, but that's all right.

The point is that the same phenomena, where narrowing and even extreme strength in certain issues are apparent (e.g. Amazon, Google) while the broader market rolls over and fails to sustain relative strength, is a quite reliable indicator.

It's not perfect but it has a pretty good record of success in predicting when you're about to get the business end of the horse in the stock market....

PS: The stallion approaching you appears to be horny.

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So far the earnings season is simple awful.

It's not "awful" on the bottom line, but nearly all of that is from various financial shenanigans.  The reason is that the top line, that is sales, are actually negative.

So why isn't the market collapsing?

Simple: Everyone says "it's transitory" or some other sort of nonsense.  "It's energy", "it's the dollar", it's.....

Uh huh.

Anyone remember 2007?  M&A and other financial games were rampant then too; buybacks, etc.  The problem is that increasing leverage like this is a Martingale strategy and when it fails you don't miss, you blow up.

Who remembers GE's miss right into the maw of the blowup?

There is one fact that nobody can argue with: Without sales you have no business.

Good luck folks....

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So now you hold stock, you've margined your account, you're a big fish and.....

China’s securities regulator banned major shareholders, corporate executives and directors from selling stakes in listed companies for six months, its latest effort to stop the nation’s $3.5 trillion stock-market rout.

Investors with stakes exceeding 5 percent must maintain their positions, the China Securities Regulatory Commission said in a statement. The rule is intended to guard capital-market stability amid an “unreasonable plunge” in share prices, the CSRC said.

But this does not prevent the margin call, which you probably can't meet.  It also doesn't force anyone to buy, which you quite literally cannot do.

The result?  Down about 7% last night and that's with roughly 40% of the firms suspended from trading!

Crash in progress gentlemen and oh by the way, yes, this is a margin call and you have a purdy house, car, wife and young daughter.....

smiley

 

smiley

 

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