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Sirius XM Holdings Inc. Message Board

dukeufinstu 5 posts  |  Last Activity: Jul 10, 2016 10:03 AM Member since: Dec 17, 2006
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  • So you are probably wondering how the gating by 7 mutual funds of about 20B could spread through the system? Good question, shows you are paying attention. You see most of the investors in these funds were not individuals like you and me but were other mutual funds that were seeking out yield. So let's say that Alpha Fund is in one of these gated property funds. It can't get it money back but it is cool because it has money for redemptions so it feels no pressure. No pressure until the property funds cut their value by 20% and you have to reflect that in your statement next month which is exactly what the property funds did in July. So some smart investor in Alpha Fund is going to look at the investment sheet and realize Alpha can't get its funds from the property fund. So the first thing he does is get out now while he can and then he tells all the laggards how smart he was on some Yahoo message board and panic ensues as Alpha crashes. This is what happened in 2008, check out The Big Short. I can't wait for the sequel. I plan to play the guy who spills the beans. I'm writing the script right now so we will have to cut this short (pun intended).
    Let's check out a few predictions. I said last fall that auto sales would slow down in March. Missed that one as it happened in April. After the last CC, I told you SIRI would rally back to $4.14. Only $4.13 so far but I have hope for tomorrow.
    Here is an interesting thing to look at. SIRI closed at $4.12 on FRI. The July 15 $4.00 have a bid of 10 cents which is pathetic. But here is what is really interesting. The July 22, July 29 and Aug 5 calls ended the day with NO BID for the options. I can't say I have ever seen that before. Wonder what it means?

  • Okay, so let's get back to our theme that history started to repeat 2007. This week seven mutual funds told their investors that they would not be able to redeem their shares for months. The seven mutual funds shared the same characteristics, they were all invested in the London commercial real estate market. The idea of these funds was simple. Pool money, buy some commercial real estate in London, as in a bunch of high rise office buildings and watch your money grew by 15-20% a year due to the inherent leverage of debt financing. Simple except for one underlying flaw. Investors can pull their money on any day but it can take months, sometimes many months to sell a building. Of course, when things are going up, no one wants their money so things are going swimmingly. When things start going badly, everyone wants out but the fund can't sell and that is when your money becomes gated. Gated, that says you can't get you money back until we say so, so don't bother calling because the prospectus, which you didn't read said we could do this. This is not good.
    Anyway, did you know that the same thing happened in early 2007 when the mortgage market started to crater. There was this firm call Bear Stearns and they had two funds invested in mortgage backed securities. People wanted to redeem but B S couldn't sell the mortgages so they gated withdrawals. Four months later Bear Stearns went BK. The question I have is why would anyone invest with a firm that had Bear in its name?
    Buyer Beware. Anyway, if you don't see the similarity here it is. There was a mismatch between the availability of funds (daily availability) and the ability to raise funds by selling the assets (months if there is even a market at all). History repeats itself. Investors never learn.
    But do you want to know what happened after Bear gated the funds? The overall market shrugged it off and rallied to a new all time high. But don't worry, that not likely to happen again because history doesn't repeat itself.

  • Mark Twain stated that history doesn't repeat itself but it does rhyme and it has become a staple of modern writers. While Twain was a fantastic story teller, The Duke thinks he may have this one wrong. History is always repeating itself. We are humans and constantly making the exact same mistakes over and over again. We just aren't smart enough to see that something has been repackaged but is basically the same as went before. You think Twain is right and The Duke is wrong? Okay, then why did Einstein say, the definition of insanity is doing the same thing over and over again and expecting a different result. Anyway, The Duke was a history major in college and firmly believes that history repeats itself ,and as you probably guessed, I am about to tell you 2016 is starting to look a lot like 2007.
    So lets start with June auto sales. They were terrible even though you didn't see it. The estimate was for an increase of 5.4% on a YOY basis. The actual was a 2.5% and you are going to tell me that is good. You didn't do you homework. Lets look at the raw numbers. This June we sold 1,513,901 units vs last year's 1,476,675. Looks good until you realize that we had 26 selling days this year vs 25 last year. On a per day basis we sold 58,227 units a day vs. 59,067 last year or a drop of 840 units per day. Puts that 2.5% INCREASE into perspective.
    Q2 was interesting in the auto business. None of the three months had the same number of selling days as in 2015 so comparisons were skewed. April and June had one more selling day while May had two less. But you know what that means, there were the same number of selling days in Q2 in both years. So lets look at the quarterly sales for both years. For 2016, they were 4,557,157 while in 2015 they totaled 4,566,716 or a drop of about 9,550 units. Interesting that no one noticed. Got any idea what was going on in 2007. Auto sales were setting new records until an unexpected slow down occurred mid year. Sales cratered in Q3.

  • So what does it all mean? The market seems to like double bottoms or as I like to call them W shaped patterns before it begins an up leg. If you look at a chart of the S&P it has two days straight down as four days straight up which form a PERFECT left side of a W. While we could go up a little more from here, the charts are telling us that there is a strong possibility that we will retest the 1892 low at some point in the next three or four weeks.
    So what is the catalyst for the retest? In a word, DEBT. On Friday Puerto Rico defaulted on some general obligation bonds. The was a big deal. The GO debt was alleged protected by a constitutional guarantee that placed the interest payment first in line before anything else could be paid. Poof, the guarantee was scraped and default occurred. Over in Italy, PM Renzi tried to recapitalize the banks to the tune of $40B, but that failed because it violated EU rules. So they recapped one bank and got permission for a $150B loan guarantee to protect against bank runs. They also said the loan guarantees would never have to be used which begs the question of why you need them in the first place. Confused? It is simple. All the Italian banks are BK and once the depositors figure it out we will see Greek style lines and capital controls. The idea is to confuse everyone so no one figures it out.
    Anyway, I betting that we get a right side of that W formation or a retest of the bottom within the next month so you might want to have some dry powder available.
    As for SIRI, we are in the run up period to the CC and Frear is dusting off his speech from last Q...filling in the blanks with new numbers. You think we are headed into the $4.00 range. Maybe, but the CC is three weeks away and SIRI will follow the S&P. The only question is whether the CC will come before or after the Brexit echo wave. Right now they are on course to arrive about the same time, so plan accordingly.

  • So Brexit has come and gone but what happens next?
    Before I answer that question let's review what happened in SIRI land and the market. On 6/23, the day before the vote SIRI had hit a high of 4.01 and closed at 4.00. After the vote that wrong footed the entire investment community, the market plunged about 900 points in two days and SIRI hit 3.74. Over the next four days SIRI rallied strongly and hit a high of $4.01 again on Friday and the market got within 1% of it 6/23 close. From a technical and Flabby perspective, we had a 100% retracement. 1 or 100% is a prime number for Flabby so all should be well in the market. The prevailing view is that Brexit, as far as the market goes, is behind us and we are poised to make another run at the all time high.
    That may appear to be true in theory, but a look at the S&P suggests a different story is about to unfold. We all remember the Aug. 25 mini crash when the market opened down a 1000 points due to the Chinese devaluation of the yuan. We got as low 1867 that day before a strong rally wiped out the losses. But do remember that a little over a month later on Sept. 28, we revisited the lows at 1879 before we fully recovered.
    Or what about this one? We all know that the market has rallied strongly since the 1810 bottom set on 2/11/16 to the present 2102, although the rally top was 2116. But did you know that the 1810 bottom was actually an echo bottom of one that took place a month earlier? Back on 1/20/16, we actually hit 1812, rallied only to retest the bottom three weeks later before the rally became durable.

SIRI
4.165-0.040(-0.95%)Sep 26 4:00 PMEDT