Royal Spa

TSE will collapse today

mprex said:
Not so long ago Nortel stock sold at $124 per share. Then a bubble burst and it went down to $80, $50, $25, $15 and still inched lower.

I remember when their stock finally hit $10, all the finance-types were saying how a "great buy" Nortel has become, how Nortel is a "Canadian technology darling" undervalued against Cisco, Lucent, Alcatel, etc.

At $10/share, Nortel could be worth "twice its share price" in a takeover scenario, they'd say. And after losing 90% of its value, "it can't get any lower, only upside opportunities left". Big gains are to be expected.

Tons of investors bought Nortel at $10, laughing at those who previously owned it at $124. Then boom, Nortel stock crashed all the way down to 60 cents, where (10:1 split adjusted) it pretty much remains today.

It's like a bad joke that we hear the same stories being told again today by the same "finance types" who think they know everything. Buy this buy that and expect "rapid gains". Don't worry and "hold for the long term".

So many fools buy into the market without a clue of what's going on. Just remember all those suckers who bought Nortel at $10 suffered the same fate as those who bought at $124.
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The issue there is that Nortel was not, is not and probably never will be a good quality company with steadily growing revenues, cash flow earnings and dividends

There are a lot of quality companies trading a PE ratios not seen for decades. Manulife comes to mind as does CNR, GE, Medtronic, Stryker, Schlumberger, Encana, Canadian Natural, Suncor, Power Fin etc

The market is in a mess right now and no one is buying with conviction.
These stocks will probably go down further. How much ??, Who knows.
I know I can not pick a bottom and I am pretty sure on one can do it with precision and do it consistently

I am pretty confident is that these companies will survive and 3-5 years from now they will be prospering and worth more than they are today. So I buy a little bit on a regular basis.

An old (and I mean old ) friend once showed me his portfolio of bank stocks he started accumulating in the late 50s and early 60s. In some cases the dividends he received every year were in excess of his cost

When asked about bear markets, he shrugged and said , they go up , they go down, over the long haul they go up a lot more than they go down
 
21pro said:
this monday may be the monday that wasn't last week.
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I guess the monday that wasn't last week happened.
 
enduser1 said:
Truthfully, I am a contrarian investor. The pessimism has been brutal over the weekend. IMHO it was overdone. Way overdone.
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then I guess you are not a true contrarian then.

Guys, I'm still not in the market since August.
 
mprex said:
Not so long ago Nortel stock sold at $124 per share. Then a bubble burst and it went down to $80, $50, $25, $15 and still inched lower.

I remember when their stock finally hit $10, all the finance-types were saying how a "great buy" Nortel has become, how Nortel is a "Canadian technology darling" undervalued against Cisco, Lucent, Alcatel, etc.

At $10/share, Nortel could be worth "twice its share price" in a takeover scenario, they'd say. And after losing 90% of its value, "it can't get any lower, only upside opportunities left". Big gains are to be expected.

Tons of investors bought Nortel at $10, laughing at those who previously owned it at $124. Then boom, Nortel stock crashed all the way down to 60 cents, where (10:1 split adjusted) it pretty much remains today.

It's like a bad joke that we hear the same stories being told again today by the same "finance types" who think they know everything. Buy this buy that and expect "rapid gains". Don't worry and "hold for the long term".

So many fools buy into the market without a clue of what's going on. Just remember all those suckers who bought Nortel at $10 suffered the same fate as those who bought at $124.
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After NT crashed to less than a buck, it rallied up to around $10 and then crash again.
NT at $1.33 now is 13 cents allowing for 1:10 reverse split.
 
bbking said:
You know people goof when they make these kind of statements. Essentially what the problem is that people with no understanding of risk management miss the opportunities that Nortel presented at every level of it's trading.

I really recommend that people take the options course that CSC offers, not to gamble in the options market but use this as a tool to manage risk.

Recently I've been long on POT and got caught in the rapid decline of the stock. I had a US dollar Put in place to protect the currency and downturn risk and I wrote covered calls all the way down. I made nearly 10% even though the stock fell a 100.00 a share.


bbk
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Outstanding.
Its nice to see a post by someone who understands and differentiiates between managing risk and gambling
 
bbking said:
I really recommend that people take the options course that CSC offers, not to gamble in the options market but use this as a tool to manage risk.
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I am presently learning about options:) . i don't have a margin account as of yet but I really enjoy all the strategies that options entail.

One thing that irritates me is the Montreal Exchange. The bid ask spreads are huge and the volume and open interest of individual strikes is pitifully low. i would like to trade US options but with the presently low cdn dollar that is not worth doing either---lol.

IMHO, even paper trading options is a great tool to manage risk. Right now I am working on a short term call buying strategy. The paper losses I am taking on this strategy makes investing in stocks or etfs a walk in the park. On some options you can lose 80% in a day.

BB, I guess you traded long POT on the Montreal exchange. You could just as easily have traded it on the US side with a better bid/ask spread.

A great book on options that I took out of my local library is called Getting started in Options---5th edition by Michael Thomsett----excellent book.
 
JohnLarue said:
There are a lot of quality companies trading a PE ratios not seen for decades... Power Fin
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Careful with Power group. If one of IG, GWL, CLA, MF, LL, PI, etc falls, it'll be dominos. Heavy leverage finance each other in acquistions.
 
squash500 said:
Maybe buy some more horizon beta pro bear etfs?:confused:
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with markets so beaten down I just don't have the balls to short at this time, I had 3 stops on my bears and all 3 have benn blown through, I don't know what the market is going to do so I think I will sit on the sideline till I get a sense of whats next

b d
 
BB said:
The Montreal market is very thin ... it depends on what currency I bought the shares in ... the US is a much larger market and spreads are thinner ... however that doesn't mean you can't get a good price in Canada.

In the case of POT the put protection was in US largely because any drop in POT's prices would be due to a rising US dollar ... the covered calls were done in CDN dollars for the same reason.

The one thing I would warn you about is that because of the leveraged nature of options there is a tendency to gamble ... options when used correctly are excellent risk management tools.
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BB thanks for the response:) . You obviously know way more about options than I do. The options book that I'm reading says that the chance of making profits just by buying calls or buying puts is very remote.

The author (Michael Thomsett) , thinks that selling covered calls or selling calls or selling puts is the way to go. I realize that selling calls or selling puts is way riskier than buying them but according to MT time value is working for you when you are selling either puts or calls.

I haven't read about strangles or spreads yet. I think it's great how you can get a good price in Canada. I guess you would have to place limit orders etc.

I guess options can be excellent management risk tools when you already own the stock---ie covered calls. Or as insurance when you have already made good money in a stock but don't want to sell it etc.
 
Wow another 460+ pts today so far. TSe down to 8957. All I keep hearing from analysts is to buy buy buy as the market is at the bottom. Evidently not yet :eek:
 
Radio_Shack said:
Wow another 460+ pts today so far. TSe down to 8957. All I keep hearing from analysts is to buy buy buy as the market is at the bottom. Evidently not yet :eek:
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Not yet indeed. I think by the end of the year ...
 
Radio_Shack said:
Wow another 460+ pts today so far. TSe down to 8957. All I keep hearing from analysts is to buy buy buy as the market is at the bottom. Evidently not yet :eek:
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You think today is bad wait till Friday....
 
big dogie said:
You think today is bad wait till Friday....
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Whats friday? Your wife coming home?.. lol..
 
Radio_Shack said:
Whats friday? Your wife coming home?.. lol..
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Believe its unwinding, settlement day for a bunch of financial contracts, generally associated with increased volumes and volatility.
 
rafterman said:
Believe its unwinding, settlement day for a bunch of financial contracts, generally associated with increased volumes and volatility.
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Wrong,it's the 3rd Friday of the month, next week. Today is the last day for hedge funds to accept redemptions for 2008. Could be a blood bath, but who knows?
 
BB said:
The thing about options is that they are both a way to mitigate risk and to take on risk. For me I use them to mitigate risk. The taking on of risk is not my game.

The one thing I do recommend is that if you like stock short term it is much better to sell a Put ... your risk is that the stock goes to zero, not likely if you are buying a solid Company in an solid industry ... this works well in bull market not the kind of market we have , a bear with very high volatility.

Other than that you can try bull or bear spreads, but individual purchases of calls and puts based on short term movements is a game best left to the traders who have the tools to properly calculate the value of the option. Spreads in my mind are a better way of making money than owning individual options. You mentioned strangles ... something I do recommend in this kind of market ... it is more expensive but gives you very good protection.

Another point about about options is that nearly 80% are not exercised so that should give you an indication of how hard it is to make a buck.

I like writing covered calls on my long term positions as a means of generating income ... I do these on Companies I plan to hold irregardless of price for at least 5 years. If I get called away well, I'm a big boy a will take my lumps but in most cases these stocks rarely move 5% a month.

I kind of look at what I do as OWNING a casino as oppose to being a player in the casino.
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Thanks for another excellent response BB:) . I really appreciate it.

I have one interesting options experience to tell you about. I don't have a margin account so this was just a paper trade with obviously no real money involved.

I thought that the price of MFC was going to go up. By the way this "hypothetical" trade took place on the MX. I decided to try a "short term call buying strategy." I placed the trade of an MFC NOV 25 CALL on oct 31/08 when the price of MFC was 24.12 a share. The premium I paid was 1.65. Taking commissions into account my break even point was 1.78 on the bid.

Last week, the price of MFC shot way "UP". At one point I could have offset my position at a bid of 2.34 to make a 31.8% return in less than one week.

However, then the price of MFC this week fell all the way back down to under 23.00. Now the bid is only at .30. Now I understand why most call or put buyers don't make money and lose most if not all of their premiums.

If this would have been a "real" trade I probably would have taken the profits 2 days into the trade when the bid got to 2.34. This trade was a good learning experience for me.

Thanks again for your response. I have a lot more options reading to do before I would ever consider opening up a margin account. I find learning about options trading is much more exciting than learning about how to trade individual stocks or etfs! This is what scares me--lol.
 
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