Wednesday – Signs of INTELigent Life in the Markets?
by Phil - April 30th, 2008 11:50 pm
![[firewalker.gif]](http://bp3.blogger.com/_GMFF5jY6gGs/RvGuyRun3nI/AAAAAAAAB8c/BoWPhZ0MQM0/s1600/firewalker.gif)
Hopefully Ben finally got the message.
The markets were NOT happy with another rate cut. Today’s Fed announcement led to a 150-point plunge as commodities rallied on the continued idiocy of Ben Bernanke, who says inflation is "under control" while knocking another 20% off the Fed Funds rate, reinvigorating the oil market where each $1 per barrel costs US consumers $7.3Bn a year in crude alone – add refining costs and factor in oil’s effect on other prices and we’re closer to $15Bn per $1 rise in crude that the Fed is fueling in order to increase the loan crack spread for the banks (after 3% of cuts we’re STILL paying 6% for a 30-year fixed mortgage – who is benefiting?).
Nonetheless, I can’t be too mad at Ben as my total lack of faith in him gave us a fantastic day as my 12:27 comment to members was: "General – I’m moving to mostly 3/4 covers ahead of the Fed, essentially with 1/2 covers that means buying the covers I would want to roll my lower covers into. This gives me some money to roll the original 1/2 covers up to a higher strike if the Fed is good and, of course, gives me a little more coverage if they disappoint." That gave us plenty of time to cover up our positions ahead of the plunge.
We also grabbed the very cheap GOOG $560 puts at $9, which made a quick 33% in 60 minutes – Not that’s day trading! It was almost a perfect day with all of my market calls working and we even added oil puts on the morning’s pointless rebound (but I did chicken out of most of the front-month XOM puts). I also called the day’s moves in AAPL and FSLR to the penny, very helpful when you’re playing options!
Just after the Fed, my take was: "Oh a cut! They suck! And another cut in the discount rate… Very negative outlook. "Expect inflation to moderate" but they are going to cut like fiends while they wait. At least they say they are concerned about inflation and there were two dissenters so it is possible they will stop here but the discount window cut was ridiculous, more taxpayers bailing out banks." We played accordingly, and by 2:39 I was ready to call the top on the Dow as we bought back the puts we sold…
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DiggWhich Way Wednesday? Fed Edition!
by Phil - April 30th, 2008 9:29 am
Fed day, party time, excellent!
Hopefully the free money party has come to an end. Can Helicopter Ben change his evil ways or will will this groundhog continue to see a recessionary shadow and throw more money down the hole, giving us 6 more weeks (until the June meeting) of high inflation?
I ran down my expectations on key earnings in the Wrap-Up so we’ll move right along to the good stuff (and I’m way behind this morning so I’ll keep this short). CMI came through for us, and, as predicted, FSLR had blow-out numbers and gave good guidance so we’ll ge our shorting opportunity as planned (but let’s stick with Cramer as he sticks another load of bag-holders with this one this evening!). GRMN I was wrong on as they had a miss but profits are up 6% so we’ll stick with them and sell more calls. GM ONLY lost $3.3Bn in the quarter against their $12Bn market cap so they are, of course, up 5% pre market. HES had good numbers and I’m back to being glad we were too scared to short them.
NOV did well but not well enough to worry me on the June $60 puts with a penny beat on record prices. Woe unto these companies if revenues fall off with costs at this level! PG, SI and KFT all did well – what kind of recession is this? TWX was not good but they are spinning off the cable unit and maybe AOL if they find a buyer so they are still flattish, which was our bet.
Actually it turns out we’re NOT in a recession so the pessimists can say we have further to fall but, as I’ve been saying since last Summer, if we can have a $400Bn mortgage crisis and all it does is knock growth to 6%, then everything these bozos in the media are saying is wrong and there are Trillions of dollars on the wrong side of this bet and we could be heading right back to 14,000 (my prediction from 12/31 was a pullback below 12,000 and 14,500 by year’s end). If anyone wonders how we make money, just re-read those predictions when you have the chance and think how much money anyone can make when you get a…
Tuesday Wrap-Up
by Phil - April 29th, 2008 11:32 pm
Another day where not much happened.
This is pretty much as we expected ahead of the Fed. I had said we will revert back to Monday’s open and Monday we went up to 12,932 and today we went down to 12,806 and we closed at 12,831, down about 60 points from Friday’s close. I’ll be surprised and worried if we break below 12,750 ahead of the Fed and holding 12,800 will be a good sign tomorrow.
A quick review of my earnings picks from last night:
- ADM – Made their money selling food and those prices are in doubt with costs up. Right on with that one.
- BP – Huge earnings overcame falling prices, still at $72. Totally wrong there.
- GLW – Great Q, I was right about GLW but it’s not rubbing off on AUO, who we had to DD on at .80 ($1 basis).
- MA – Wow! Way BTE, even so our butterfly is still up a bit so no panic yet but time is not our friend if they stay high.
- X – Perfect for us, earnings great but costs up and they didn’t go far which is perfect for our put spread.
- VLO – This was exactly what I said it would be. I still like the XOM puts into earnings but we took them off the table because we were too far ahead yesterday to take the risk (although still in the LTP as a put).
- BXP – Perfect! Also, very encouraging for the overall economy. This makes me think I may not be crazy and we really are at the bottom…
- BWLD – Very nice! The Sept $30s should do quite well!
- DWA – Another encouraging consumer signal.
- LFG – Also perfect. Man am I on a roll!
- PNRA – I should have been braver but those June puts were free money to sell!
We don’t know Wednesday morning but let’s look ahead to later Wednesday although the Fed is going to change everything so I’m not keen to make fresh picks without GDP and Fed data.
Wednesday evening:
- AKAM – These guys may affect GOOG so let’s watch them. An indication of web growth.
- CTX – I’m not guessing a builder’s earnings but if they don’t lose a TON of money they will go up. I think with 20% of the float still shorted down 75% from it’s highs, I
…
Tuesday Morning
by Phil - April 29th, 2008 9:08 am
We’re just waiting on the Fed.
I said to members yesterday that we should just sort of drift into tomorrow afternoon as we wait on the Fed, even though it is very doubtful they will do anything surprising, that’s just the time the final cards are dealt and the big boys will start to push their chips around the table. Until then it’s a penny-ante game while we wait.
Another thing we wait for is oil to get real. Just last night in chat, Xian pointed out yet another Bloomberg article pumping oil in what is becoming a concerning pattern for what used to be considered a reliably unbiased news service. This latest load of BS is from Deutsche Bank’s CHIEF energy economist Adam Sieminski (and I will now make sure we know who these people are and who they work for so you know where to move your money away from when they are spectacularly wrong) who wrote a report on the 25th that became news on the 28th because oil still needed a push.
Mr. Sieminski says "There is a huge risk that the oil price simply continues to escalate until it gets to some level ($200 a barrel?) when demand finally collapses because ordinary people can no longer afford to burn as much energy as they are burning now.” Yes, that’s right, what happens in a demand curve is that people use the same amount at $80, $120, $140, $160 but at $200, THEN demand just suddenly collapses as people say "Hey, I can’t afford $200!" I mean REALLY, that’s their CHIEF energy economist? Oil prices are up 82% in 12 months, you don’t think that is impacting demand already???
We talk about the PR activity of oil manipulators (hyenas) when they are trying to push prices over a critical level and let’s take a look at these amazing coincidences in publishing that occurred last night:
Analysis: Sky is the limit for oil prices
No end in sight for costly oil bubble
Oil nears $120 a barrel, may reach $200—Deutsche Bank
Supply side to blame for high oil prices San Francisco Chronicle
It is almost as reliable as predicting a Nigerian Rebel attack when oil goes down to predict a slew of peak oil articles when they are trying to…
Fireworks and Fizzle!
by OptionSage - April 29th, 2008 12:48 am
Take a look the data due to be released over the next few days….
Tuesday: Agco (AG), Archer Daniels Midland (ADM), Arris Group (ARRS), Avon Products (AVP), Bemis Company (BMS), British Petroleum (BP), Buffalo Wild Wings (BWLD), Burlington Northern Sante Fe Corp (BNI), Corning (GLW), Countrywide (CFC), Daimler AG (DAI), Domino’s (DPZ), Energizer (ENR), Express Scripts (ESRX), General Cable (BGC), Medco Health Solutions (MHS), Office Depot (ODP), Panera Bread (PNRA), Under Armour (UA), US Steel (X), Valero (VLO), Waste Management (WMI).
Wednesday: Akamai (AKAM), Centex Corporation (CTX), Colgate-Palmolive (CL), Cummins (CMI), Dean Foods (DF), First Solar (FSLR), Garmin (GRMN), General Motors (GM), HESS Corp (HES), IAC (IACI), Ingersoll-Rand (IR), International Paper (IP), Kellogg (K), Kraft (KFT), Murphy Oil (MUR), National Oilwell Varco (NOV), OfficeMax (OMX), Proctor & Gamble (PG), Prudential (PRU), SAP AG (SAP), Starbucks (SBUX), Sunoco (SUN), Symantec (SYMC), Time Warner (TWX).
Thursday: Administaff (ASF), Annaly Capital Mgmt (NLY), Automatic Data Processing (ADP), BEBE Stores (BEBE), Burger King (BKC), Cabelas (CAB), Callaway Golf (ELY), Cardinal Health (CAH), Cephalon (CEPH), Chesapeake Energy (CHK), Cigna (C), Clorox (CLX), Comcast Corp (CMCSA), Comscore (SCOR), CVS Caremark (CVS), Dominion Resources (D), Dynamic Materials (BOOM), Eastman Kodak (EK), Expedia (EXPE), ExxonMobil (XOM), Investools (SWIM), Marathon Oil (MRO), MetLife (MET), Monster Worldwide (MNST), Noble Energy (NBL), Nymex (NMX), Sun Microsystems (JAVA), Tyco International (TYC), Wyndham Worldwide (WYN), Wynn Resorts (WYNN).
Now ask yourself if you really want to be fully invested without hedging with this plethora of data still to come!
At Stock and Option Trades, we made the easy money in April since our bottom call in the middle of the month, closing out all of our April trades profitably within days of opening them thanks to big moves and good timing in the FXI, EEM and FCX. And our latest trade is risk-free through May, yet can profit in any number of directions. Innovative and profitable strategies is what we strive for!
We’re not the only ones happy to have some cash built up through April. Phil is back to 70% cash in his Complex Spreads virtual portfolio. We fully expect this volatile Year of the Rat to continue to surprise when surprise is least expected. We do believe a little more upside is possible, but as April comes to a close, we’ll be sitting with a heavy cash pile while our remaining positions will be heavily hedged.
The chart…
Monday Mop-Up
by Phil - April 28th, 2008 11:55 pm
That went about as expected.
My thanks to Stock and Options Trades for saving me the trouble of running through the remaining earnings for the week so I’ll just make a quick wrap-up here and concentrate on the earnings we REALLY care about.
Tuesday:
- ADM – It won’t get much better than this for them as we have a perfect storm for profits in agriculture (they bought low and prices went crazy) so we expect ADM to make close to 50% more than last year’s .51 and Q2 should look good too. After that???
- BP – We never got our puts as they were $5 for $65 puts with the stock at $69 (I was actually tempted to sell them for that price!) so we’ll see how they do.
- GLW – Premiums were too high and we went with AUO (the Chinese GLW) June $20s instead, I think we got a nice entry at $1.20 but let’s watch these earnings carefully (should be up just over 50% from last year’s .28.
- MA – We took a butterfly assuming no big move off $240. If it pops more than 10% one way or the other, we’ll have to scramble!
- X – We shorted the May $145 puts against our July $145 puts, I really think costs are going to hurt these guys. Foreign steel companies are doing well but they have a stronger currency to buy coke and other costs with and a stronger local market and a lot less distance to ship.
- VLO – This will be our best clue to XOM but no matter how well VLO does, they will be a mile from the $1.86 they earned last year (analysts are looking for .29, down from $1.35 expected for this Q after their last earnings). I think they might beat that but the headline is still going to be "VLO earnings off 75% on high oil prices."
After Hours Tuesday:
- BXP – I am VERY concerned with this one as I invest in commercial real estate so I’m more concerned with their occupancy trends than anything else. These guys never miss so a miss would be shocking but a beat would be even more shocking so I like selling the overpriced $105s for $2.40 against the also ridiculous July $110s for $3.40 just playing for the value crush on the Mays.
- BWLD –
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Microsoft: Not-so-sweet numbers from Yahoo’s sugar daddy
by Option Review - April 28th, 2008 12:16 pm
Today’s tickers: MSFT, YHOO, MCO, YRCW, TLM, IMA, ONXX
MSFT– Last night’s earnings miss from Seattle software hulk Microsoft took option traders by surprise (calls had been trading at a 6-month froth heading into the numbers, as open interest at the front-month 33 call strike swelled from 2,500 lots to some 35,000) and introduced a new level of no-nonsense in response to the hemming and hawing of its bid to acquire Yahoo. Simply put, yesterday’s numbers indicate that Microsoft does not have the limitless wherewithal to let Yahoo name its price, nor can it afford to let the online leverage of a Yahoo acquisition go unharvested (especially given the success of Yahoo). Indeed, while implied volatility in Microsoft options has come off by 30%, Yahoo’s implied volatility is up by more than 20%. This is occurring as Microsoft shares staged a 6.3% decline to $29.80. With twice as many calls as puts trading today, many traders may be taking fruitless upside positions at May call strikes of 30 and above off the table. Puts at the May 28 strike are being bought heavily for 21 cents apiece, suggesting more downside yet to plumb for the mortal-seeming Microsoft.
YHOO – Shares in Yahoo! slid 2% to $26.75 and its implied volatility spiked by some 30% after Microsoft’s macro-soft numbers last night suggested that it may not be quite the software sugar-daddy that many Yahoo shareholders might have hoped. With more than 693,000 option contracts in play today, option volume in Yahoo was at its highest level since the original February 1 Microsoft “bear hug” was made public. Puts and calls traded on comparable volume, but what was interesting to note today was the level of fresh positioning in deep-out-of-the-money front month puts at the May 20 level. These traded on volume of some 77,500 lots – more than 7 times the open interest – as the value of this position sweetened more than 91% on back of Microsoft’s numbers alone. Much of this volume sold to the bid today, suggesting some traders turning sellers of premium on back of the volatility move today.
YRCW – Option traders gave a big 10-4 to the continent’s largest trucking company, YRC Worldwide, despite the company’s $46 million loss. The so-called less-than-truckload operator indicated that internal restructuring efforts had put it on the road to recovery, sending shares 29.5% higher…
Just Another Manic Monday
by Phil - April 28th, 2008 9:29 am
Sorry, I got distracted today by this $200 oil nonsense…
I’ve had my say on oil and the banking industry this weekend (and don’t miss my pick on AUO, in member comments!) so now it’s time to get to work. To say we have a lot going on this week is a MAJOR understatement with a very full economic calendar, highlighted by a 2-day Fed meeting that hopefully will end in a pause or at most a quarter-point rate cut in order to give the dollar a chance to find a true bottom to stage a rally off of.
According to Briefing.com, here’s what we have to look forward to this week:
| Date | ET | Release | For | Actual | Briefing.com | Consensus | Prior |
|---|---|---|---|---|---|---|---|
| Apr 29 | 10:00 | Consumer Confidence | Apr | 62.0 | 62.0 | 64.5 | |
| Apr 30 | 08:15 | ADP Employment | Apr | -55K | 8K | ||
| Apr 30 | 08:30 | GDP-Adv. | Q1 | 0.7% | 0.4% | 0.6% | |
| Apr 30 | 08:30 | Chain Deflator-Adv. | Q1 | 3.0% | 3.0% | 2.4% | |
| Apr 30 | 08:30 | Employment Cost Index | Q1 | 0.8% | 0.8% | 0.8% | |
| Apr 30 | 09:45 | Chicago PMI | Apr | 49.0 | 48.5 | 48.2 | |
| Apr 30 | 10:30 | Crude Inventories | 04/26 | NA | NA | 2421K | |
| Apr 30 | 14:15 | FOMC Policy Statement | |||||
| May 01 | 00:00 | Auto Sales | Apr | 5.1M | NA | 4.9M | |
| May 01 | 00:00 | Truck Sales | Apr | 6.3M | NA | 6.2M | |
| May 01 | 08:30 | Initial Claims | 04/26 | NA | NA | 342K | |
| May 01 | 08:30 | Personal Income | Mar | 0.4% | 0.4% | 0.5% | |
| May 01 | 08:30 | Personal Spending | Mar | 0.3% | 0.2% | 0.1% | |
| May 01 | 08:30 | PCE Core Inflation | Mar | 0.2% | 0.1% | 0.1% | |
| May 01 | 10:00 | Construction Spending | Mar | -1.0% | -0.5% | -0.3% | |
| May 01 | 10:00 | ISM Index | Apr | 49.0 | 48.0 | 48.6 | |
| May 02 | 08:30 | Average Workweek | Apr | 33.7 | 33.7 | 33.8 | |
| May 02 | 08:30 | Hourly Earnings | Apr | 0.3% | 0.3% | 0.3% | |
| May 02 | 08:30 | Nonfarm Payrolls | Apr | -70K | -80K | -80K | |
| May 02 | 08:30 | Unemployment Rate | Apr | 5.2% | 5.2% | 5.1% | |
…
The Grand Oil Scam – Year 8!
by Phil - April 28th, 2008 8:42 am
I’m really fed up with oil this morning!
First of all, we have another run at $120 by oil. THEY are pulling out all the stops; Nigerian rebels, Nigerian Strikes, North Sea strikes, shooting at Iranian boats and, now, they have pulled out the big gun – OPEC President Chakib Khelil made a statement that oil could hit $200 – or did he?
I am publicly calling shenanigans on Criminal Narrators Boosting Crude and other MSM outlets who are pushing this nonsense as a story when the facts (which you have to go to Turkish newspapers for) are as follows: "Questioned about a possible rise which would go to $200, the minister did not rule out this eventuality, explaining that this rise is indexed from now on to the fall in the dollar or to the rise in the dollar." El Moudjahid reported. "In terms of fundamentals, stocks are high, demand is easing, supply is satisfactory. Therefore normally, without geo-political problems and the fall of the dollar, the prices of oil would not be at this level." he was quoted as saying. Khelil, a former World Bank official, is also Algeria’s Minister of Energy and Mines.
THIS is the actual story that is being spun by these oil whores (there, I said it) on CNBC as "Oil is seen rising as rising to $200 by OPEC" and is what is driving the NYMEX back up this morning. I urge you to tune into CNBC and listen to how many times they repeat this "story" and note how many ways they try to play off it while keeping in mind the actual, factual statement on which this BS is based – see how disgusted you are by the end of the day!
So we have an out of context comment being pushed at every commercial break I’ve seen this morning on CNBC as the story of the day. Could this be pure coincidence on the same week we start to get earnings reports from the majors? This is not just irresponsible journalism, this is a Jingoistic support of oil at all costs, and those costs are currently $2.4Bn a day to the American consumers, courtesy of GE, who stand to make billions of those dollars as they set themselves up as the alternate energy company in a $100 oil world.
No one is interesting in spending the Billions…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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