Unfortunately, I am ill today.
Tina, Madeline and I are all sick with some kind of virus but Jackie (8) has been taking care of us this morning. Sadly, she must go to school and we’re on our own for the rest of the day. Anyway – don’t expect much from me this morning – fortunately I gave an extensive outlook over the weekend and not much has changed this morning other than SLB buying SII for $11Bn but we pretty much knew that was going to happen last week.
The new credit card legislation goes into affect today so we should keep an eye on the financials and see how they take the rules that are supposed to cost the industry about $12Bn in lost revenue. Another rule change coming this week is the SEC decision on short-selling, that will be interesting too.
The most actionable story I see today is rising coal prices spurred by a massive increase in demand from China, who are having their coldest winter in decades and our own groundhog predicted another month of winter to go, which makes ACI a good bet at $22.57 and you can hedge that buy selling the July $24 calls for $1.85 and the July $20 puts for $1.45 for a net entry of $19.27 with a 19% profit if called away at $24 or an average basis of $21.29 if ACI is below $20 and a second round is put to you in July. We don’t want to get too excited with coal as natural gas prices fell below $5 this morning but ACI makes a nice long-term play regardless.
Our big concern over the weekend was that the Shanghai Composite would come back from their holiday and react badly to China’s rate increase but that did not happen and they held the 3,000 line, dropping just half a point for the day. The Hang Seng and the Nikkei both hit the 2.5% rule to the upside driven by strong moves in export stocks thanks to a strong dollar but that didn’t stop commodities from holding their gains of last week. Both Thailand and Taiwan released strong GDP numbers, which is also encouraging.