The computers
They are now blowing up. This is quite the market. Guess it pays to know what the tickers stand for.
I am not being pompous. I am really scared.
I am not being pompous. I am really scared.
posted by MattKelly54 at
7:25 PM
19 Comments:
This might have been the most bizarre day I have ever seen. Beazer up over 10% in a market like this. The quant funds had to have been unwinding pair trades because I dont think I have ever seen such variance between industry comparables with no apparent explanation. Buckle up, we're going for a ride.
It was the quant unwinding that drove the market today.
I have lists of the stocks that are currently being unwound...lots of small caps & value names.
I suggest you all buy RGC as it was one of the names that screened well & was sold off due to the quant sell off. At $20 it carries a 6% dividend yield, has 0% downside and 50% to 100% upside in the next 24 months. In addition, the current quarter is as strong as could be as the box office is up 16% & will be up more after this weekend as rush hour 3 will be a big draw as african americans are number one moviegoer demographic & tucker hasn't done a movie in years.
Regardless of fundamentals, the sell off is indicative of what is too come as the deleverage takes hold and hedge fund asset to equity ratios begin to trip covenants & force sell offs.
Volatility has returned people
I want to buy precious metals. But I am scared. I like cash, and deflation seems like a no brainer. But WTF. In the long run, the central bank bullshit put is out there, to inflate everyone. I am paralyzed. Maybe options is the place to be.
0% downside are the investments I like, guess I can headout for the golf course and call it a day.
Silver, did you give your password to Wokasch?
no, why do you ask?
no, why do you ask?
0% downside? Seriously?
By the way, if anyone wants to see evidence that the computers were playing funny games, check out symbol BKI. Down 35% one day, up 50% the next.
As a point of reference, this stock is a 3-factor model's dream: 600 million market cap, p/b of around 2, and positive momentum (stock went from 8 bucks to 18 pre-crash).
Holy shit. After dogging Brown's classes for two years, Fresh spits something out that sounds like it was a directly from class discussion. Are pigs flying or cats and dogs getting along? And we thought you were just surfing the internet the whole time...
On another note, I distinctly remember someone, I dont remember who, asking when in hell swaps were ever going to be relevant to us. That question was asked in Ready's class. Yep, just some obscure part of the market useful to insurance and corporate treasury guys.
Doug, yes 0% downside...SERIOUSLY. As you would notice it never broke $20...and it won't.
With such a large dividend its almost like a bond, & unless you think rates are going up (in which case there is downside) I stand behind my statement.
I just sold 1000 puts of Regal at 20.
Just kidding Ben, I love you.
"um. so whats like shorting? When would I short something?" - some Acfin genius.
If I was Ready I would have bitch slapped every person in that class including me. And then handed out 10 font print notes so that no one could follow.
Ready actually did hand out 10 font notes at the ASAP roadshow that I went to.
Silver I actually like your thesis on RGC and have looked into it in the past. My compliance here is so strict. I got denied recently in an attempt to purchase. Guess one of our quant funds has a position in it, oh maybe thats not such a good thing.
AHM had a nice dividend yield. ;)
Credit default swaps are suddenly relevant, but nobody really values the present value of CDS. It is all just stated in basis points.
However, I am big enough to admit that I was wrong about swaps. Maybe not as much about the other point of contention.
I've heard the 0% story before and it almost always ends badly. That said, what do you make of industry-wide theater traffic being down 6%?
Cinemark and Regal say that the quarter was basically driven by 3 big movies (Spiderman, Shrek, and Pirates) and shit else (referencing such disappointments as Ocean's 13, Meet the Robinsons, and Evan Almighty). I tend to agree with them. If you didn't go see one of the first 3 in Q2, you probably didn't go see a movie. Q3 should be better on the back of the Simpsons, Bourne, Ratatouille, Rush Hour 3, Transformers, Die Hard, and Harry Potter vs. what I think is an easier comp. That said, I think the Q4 movie lineup is terrible... though it was terrible last year as well (exempting, perhaps, the new Bond).
There are rumors that hedge fund financing of movies has dried up or is drying up as asset managers are forced to be a little more pragmatic in investing client money. The finance world (non-traditional producers) provides about 10 to 20% of the capital used to produce movies, depending on who you believe. If this rumor is true, the movie production companies will have to be even more selective about what gets made. We may see a developing trend where we have 3 or 4 blockbuster type movies each summer and not much else. That makes me a little cautious, but not bearish.
Sorry I don't buy that movie production will somehow fall off due to a lack of financing, especially the blockbusters with actors named Cruise, Damon, Pitt etc.. As someone recently said "Human beings are genetically incapable of lending and borrowing" meaning lending and borrowing in a pragmatic sense, thus someone will almost always being willing to float someone $ to produce a "blockbuster" movie, its an ego thing. Now maybe Deuce Bigalow Male Gigolo the 3rd or 4th gets pushed off but not the big movies. America loves Hollywood and that isn't changing.
I am talking about on the margin and the marginal movies are very important in the movie theatre biz. Why did these companies only report 1% admission revenue growth in Q2 DESPITE having 3 of the best selling movies of all time on the calendar? Probably because Disturbia was the #1 movie in America 3 weeks in a row. The third week it grossed 9 million. That is terrible.
Also, I'm not saying that WILL happen... only that if the rumor is true, that it could cause some trouble for these guys.
That said, after doing some more research, I am on board with silver: the movie theatres will benefit from any impending financial disaster. If you look historically, movie attendance revenues were 15% higher in 2001 than in 1999 or 2000 and they were 25% higher in 2002 than they were in 1999 or 2000. Part of that was due to better product. Most of that was due to a soft economy.
If you believe that the economy is in trouble, you should be a buyer. I am still concerned with the movie lineup in Q4, but after that I would think things look pretty good.
After today's WMT results, is there any concern that the low end consumer will be spending less for entertainment? Although the previous authors clearly have better command of the facts than I do, I am not sure I fully buy into the counter cyclical argument. Also, cap ex and the dividend seem to account for all of the CFO. Is there a chance they have to cut their dividend if revenues are light or margins compress?
Fresh, my apologies if my previous post was directed too much toward you. I think the observation applies to all of us. I certainly did not know what a credit default swap was at the time, or at least was only vaguely aware of them.
I don't know the specifics on RGC, so I'll let Ben chime in.
However, CNK converts about 50% of EBITDA into free cash flow. That gives them 280 of FCF on a pro forma basis (they made a huge acquisition which has yet to cycle all the way through). They just initiated a dividend (which whill run them 60 a year to maintain). The rest will be used to grow, acquire, and pay down debt. They also own 300 million worth of NCMI stock as of the Q.
AMC is private, so probably not worth re-hashing the numbers on here.
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