Tuesday

Shorting IBM | Olympus Limit Up 2 Consecutive Days

2 Comments November 15, 2011 – 5:52 am |   | Permalink |  Print This Post |

Since we bought Olympus on Friday at Y470, it has shot up on 2 consecutive days - so much so that it triggered its daily limit up of 19% per day. Monday it closed at Y540, and today it closed at Y640. WSJ reports “easing concerns of delisting” and that Reuters and local Japanese media reports the unlikely event of a delisting. This is just how the media explains short covering - they need to write something to justify the rally for their readers.

Technically, the gap to fill is at Y1000. We will aim to close our position as close to that as possible. It is only a $500 AUD position - so far 37% return in 2 days; better than nothing!

Last night we also did the unthinkable by shorting IBM at $189 after news of Warren Buffett buying a 10b USD stake in IBM at an average price entry of $167. Short term, Buffett’s record have not been great - partly because he buys when others are fearful, ie catching the falling knife (BAC, Bank NY Melon, etc). His IBM play is not a typical Buffett trade. At $167 average entry, it is almost at its all time high.

IBM Warren Buffett Purchase

It should concern bears that the Oracle of Omaha is chasing IBM up to its all time high (when he bought it) - that is how bullish he is in the global economy. We waited for IBM to “pop” on opening (only 1% up), and shorted at $189. To hedge out bets, we longed an equivalent amount on another stock Buffett is long on - Bank of NY Melon. So far our position is down as BK fell more than IBM. Probably a better idea to keep that short a naked trade, but was part of our risk management strategy. Why Bank of NY Melon? A quick glance at their numbers look better than most other banks - but the unknown black hole consisting of sovereign bonds remains.

We are still holding our Amazon shorts patiently - very resilient indeed!