Terrific Tuesday Wrap-Up

by Phil - March 11th, 2008 11:55 pm

Whee - what a day!

That was just way too much fun but it’s still not a clear victory until we get a little follow-through so I will save my victory speech for tomorrow.  As Winston Churchill once said: "Everyone has his day, and some days last longer than others."  Today was certainly a day for the bulls and I predicted this afternoon that it would last through tomorrow based on the fact that the Europeans were not buying our rally in the morning and will be forced to come in and play catch-up tomorrow.

Also apropos to Mr. Churchill (a personal hero of mine) is his quote that relates so well to the hyena attacks that took this market down to ridiculous levels  of late:  "A lie gets halfway around the world before the truth has a chance to get its pants on. "  The market has been moved by rumors for weeks and what really surprised me is how little people understand the stocks they invest in.

I said to members on Monday: "Was everybody crazy in October or is everybody crazy now?" as we have THOUSANDS of companies who have dropped 30-50% from their highs in the space of just 3 months.  This has come without any significant changes in guidance based solely on assumptions that I pointed out a while ago, were NOT shared by 97% of the CEOs surveyed.  As a business consultant, I look at companies from the inside, as companies, not as lottery tickets that spit out winning or losing stock bets.  I’ve never seen fundamentals being given less credence than I have in this downturn where even a company like BG, who couldn’t possibly have a more positive story in a more positive sector, has been chopped down 40% in 40 days.

TlsVet pointed out this evening that SIGM has gotten ridiculously cheap and I couldn’t agree more.  They have earning tomorrow, I think in the afternoon so we’re going to go with the Jan $30s at $6.40 and risk it ahead of earning.  The company is down 65% from it’s January high and has a forward p/e of 10!  Sales growth should be along the 200% line while earnings should be roughly triple last year’s and the company makes their money selling media processors for IP video as well as HD TV and digital media players - pretty much the only bright spot in every single manufacturer’s sales…

Posted in Uncategorized | 5 Comments »

Sprint tanks…but some call-buyers are undeterred

by Andrew Wilkinson - March 11th, 2008 11:34 am

Today’s tickers: S, USO, SDS, XLF, WM, BAC, C, VIX, HUM, CVH, WLP, AET, UNH

S – While most of the rest of the market bathed in a bullish lather today, a concoction of very bearish factors came to a froth in wireless telecom Sprint. The troubles began with an analyst downgrade that came after closer examination of Sprint’s latest 10-K filing, which concluded that the company faces a possible increase in wireless acquisition costs and handset subsidies. Add to that the company’s ongoing embroilment in a price war with other U.S. mobile carriers and a presentation tomorrow at a Bear Stearns industry event tomorrow, and you can color traders spooked. Today’s near-10% decline to $6.07 has put its shares at a 20-year low. The upshot was an immediate 25% increase in implied volatility to more than 90% - making Sprint one of the day’s top volatility gainers and showing about 30% more price risk to Sprint shares over the next month than they have shown historically. What interested us most of all however was the fact that option volume in Sprint scarcely bears the mark of “disaster preparedness” that one might expect from such a catastrophic drop in its share price. Instead, traders took the opportunity afforded by lower call-side premiums to buy calls at strikes of 6 and 7 for as little as 15 cents apiece – a cheap bet that all may not be lost for the most battered and beleaguered of the wireless carriers. Elsewhere, we saw directionally neutral but long volatility trades in play at the April 6.00 line, where the $1.05 cost of the straddle combination would protect the buyer in the event of a decline below $4.95 or back above $7.05. And it looks like one trader profited handsomely from the closeout of a put position at the May 7.00 line that was entered yesterday for 95 cents. With the value of puts swelling on back of today’s share price action, the 10,000-lot position was closed out today for $1.38 – yielding a 45% profit margin in the space of a day.

USO – After five successive sessions of record highs for crude oil, futures pulled back slightly on today’s Fed liquidity action. Still, it’s hard to imagine the end of the road for energy stocks, which is why we were so fascinated with today’s spike in put volume in the United States Oil Fund, an ETF…

Posted in Uncategorized | No Comments »

Tuesday the Market Saw Fed

by Phil - March 11th, 2008 8:45 am

Woo-Eee!  The Fed rides in to save the day!

The Fed has, (as predicted by me, but who listens to me anyway) has announced a coordinated effort with foreign CBs to inject $200Bn in additional liquidity into the markets in the form of increased reciprocal currency swaps and extended overnight lending rates to effectively 28-day lending rates - something they are calling "Term Securities Lending Facility."  Call it what you want, it’s FREE MONEY!

I am so relieved!  I got very nervous yesterday when TXN warned after hours as I went out on a very long limb at 2:30 when I said to members: "I’m taking out my callers right now (the ones I am up more than 50% on) and looking to roll down here so this will be the last time before I give up and it will cost me a lot if I’m wrong about this but I’m just not seeing a rationale to how oil can be at $108 if the economy is so awful or how can the economy be so awful if oil is at $108 (and Elliot Spitzer can afford $5,000 hookers)?"

While our Governor may be playing with hookers it’s pimp-daddy Bernanke who’s shaking his money maker for the financials (and we just bought XLF calls yesterday too!).  This is so great and the Dow is up over 200 points pre-market.  Is it wise?  Is it just?  No - but it sure is fun while it lasts.

The bad news is this will punch oil through the $110 mark but I talked about my concerns there in yesterday’s wrap-up but today is party day and we’re going to ignore the fact that our trade deficit got worse and I will take a moment to point out right now the the new and horribly disfigured Rupert Murdoch’s Journal, at 8:50 pm, with the Dow up 221 points and 20 minutes after the Fed announcement has the following headlines on their on-line front page:

Spitzer Engulfed in Scandal New York Gov. Eliot Spitzer apologized to the public and to his family, but didn’t directly address reports that he has been involved in a prostitution ring. Spitzer has been identified as one of the ring’s clients cited in a legal complaint and officials said his involvement was caught on a federal wiretap.  8:48 a.m.

Weak Dollar Feels New Stress Inflationary pressures around the globe are adding to pressure on the U.S. dollar as central banks from China…

Posted in Uncategorized | 488 Comments »