Friday, October 10, 2008
Potter Isn’t Buying. He Can’t.
Don’t you see what’s happening? Potter isn’t selling. Potter’s buying! And why? Because we’re panicky and he’s not.
—Jimmy Stewart as George Bailey, It’s a Wonderful Life
The last two weeks have seen near endless speculation on when, precisely, the bottom of this crash will have been seen—so that investors can start to buy.
Gray-hairs who’ve actually been through real crashes—1987, for example—understand that so long as television talking heads are still asking if it is time to buy, then whatever we’ve been through that day didn’t amount to a seller-clearing, bottom-creating panic.
It’s when everybody is too scared to buy—and we mean everybody, including smart-alack blog writers—that the opportunity has come.
And one of the hallmarks of just such a crash is forced selling—the kind of “automatic, involuntary selling” of stocks that has occurred in Boston Scientific in recent days.
Seems stock belonging to the cofounders of the upstart stent-maker and top-tick buyer of Guidant, known as “Boston Sci” on Wall Street, was sold out in recent days owing to the shares having been put up as collateral for loans. Quite a lot of stock in fact: 13 million shares worth.
And it’s not just wealthy founders of medical device companies who’ve been forced to sell when they might have wanted to start buying.
We noticed sales hitting the tape in recent days by the executive officers of other, less high- profile companies, and have learned that in more than one case the sales were due to margin calls.
And it exactly this kind of the forced liquidation of securities that creates the kind of fear-inducing, but ultimately seller-clearing crashes, that all the talking heads seem to so earnestly want.
Even Potter, it seems, isn’t buying right now: he can’t.
Potter has a margin call.
I Am Not Making This Up
© 2008 NotMakingThisUp, LLC
The content contained in this blog represents the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.
Posted by Jeff Matthews at 8:32 AM