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Archive for the ‘Education’ Category

Don’t Defer Taking Social Security Without Reading This

By Paul Price of Market Shadows

Read Paul’s take on one of the biggest financial decisions you’ll ever make.

Click on the link below for the full article.

You’ve Been Warned

 Third Rail - Danger Sign

 





Insider Sell/Buy Indicator: Little Changed

Insider Sell-Buy  as of Mar. 21, 2014





Mom and Pop- Duped Again: Puerto Rican Bond Update

Puerto Rico’s newly issued $3.5 billion worth of 21-year duration bonds were sold only to ‘big boys’ who could pony up $100,000 minimum. Those hedge funds, Wall Street firms  and primary dealers (banks) scooped up the whole batch at about 93-cents on the dollar.

A day or two later they off-loaded their stakes to the gullible public at prices as high as par (100-cents on the dollar of face value).

The suckers never learn. Barron’s reported today that the paper is now trading for less than its issue price.

PR bonds now below par





Played Oracle’s Opening Dip

Market Shadows Virtual Put Selling Portfolio happily added a new position.

By Paul Price of Market Shadows

We took advantage of Oracle’s (ORCL) early sell-off and high volatility this morning. ORCL reported fiscal Q34 earnings  after the close yesterday.

ORCL Jan. 2016 put

We sold three contracts of the Jan. 2016, $35 puts @ $3.85 per share. Our commitment is to be willing to purchase 300 shares of ORCL, if exercised later, at a net cost of $31.85 per share ($35 strike price minus the $3.85 put premium). 

 

ORCL 18-month chart with Jan. $35 put break-even 

Our $31.85 ‘if put’ price is near 18-month lows that were touched during November of 2012 and again in June of 2013. Both those occasions proved to be excellent entry points for this blue-chip stock.

We have two older short puts commitments (LNN & VMI) coming up on their expiration dates this Friday. Both appear to be on track to expire worthless. That is the best-case scenario for us as sellers. We are likely to pocket 100% of the premiums collected without having to buy any of the underlying shares. Check back after the close on Mar. 21st to see if these worked out as as expected.

You can follow our ORCL trade and all our previous option positions by clicking on this link

Put Writing Portfolio details.

Research firm Trefis also liked ORCL after seeing their latest news release.

ORCL Trefis rating

Disclosure: I sold short ORCL Jan. 2016, $35 puts in my personal account today





Income Investing in a ZIRP World

By Paul Price of Market Shadows

Zero Interest Rate Policy (ZIRP) has been a curse for risk-averse savers and investors. Bank CDs, T-bills, money market accounts and corporate bonds have almost never paid less than they do today.

That led many investors to chase after yield in alternative investments, at prices that they shouldn’t have paid. Holders of the natural gas transmission company Boardwalk Pipeline Partners (BWP), a master limited partnership (MLP) were recent casualties in this struggle for income.

Units (similar to shares) of BWP had spent most of the last seven years trading between $24 – $30. Its valuation was largely based on its cash distributions, which averaged 7.1% over the entire period 2006 – 2013. Investors didn’t pay much attention to anything but BWP’s yield.

Last month, management cut the quarterly payout from 53.25-cents to 10-cents. BWP cratered, plunging from above $25 to around $12. BWP closed last week at $12.55 after hitting a new all-time low of $11.99 early Friday.

 BWP  YTD 2014   Mar. 14, 2014

Disgusted holders who suffered big losses have been dumping BWP while other investors, who like the 3.2% current yield, see rebound potential. These new investors have been buying in for the rebound potential, the current (lower yield), or both.

Option savvy income seekers can use the drop in BWP to try for better returns than before the dividend was slashed.

Better returns are likely achievable using a buy-write strategy--i.e., buying shares of BWP while writing (selling) covered calls. One idea is to sell calls that expire at the close of trading on September 19, 2014, about six months from today.

 BWP quote with options prices

Selling calls on BWP limits upside potential but brings in substantial upfront payment in the form of option premium. The income often rivals anything available in today’s ZIRP environment while also reducing the risk of holding the underlying shares.

Here is an example based on prices that were available just before the close on Friday.

Buy-write-win with Calls Used 

That best-case scenario will play out if Boardwalk goes up, remains unchanged or even if BWP drops down to $12.50 (but no lower). An almost 33% rate of return sounds pretty good in a zero interest rate world.

There’s no guarantee that BWP can’t decline but the money from the covered calls would mitigate up to a 13% drop if the shares fall.

BWP - calls expire 

The buy-write’s break-even price is lower than any actual open market transaction in…
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Proof of the Truth

Thursday's Wall Street Journal offered vivid confimation of what I wrote about here last weekend.

By Paul Price

Anyone who dumped their Puerto Rican muni bonds after reading Barron's ultra-negative cover story (last August) got horrible bids when they went to sell. Ditto for those that held on until Standard & Poors finally down graded (clown-graded?) PR bonds to junk status.

The immediate drop in prices for those bonds allowed dealers, who likely knew in advance that last week's $3.5 billion new offering was coming, to take PR tax-free bonds from scared investors at distressed prices.

PR bonds - WSJ Mar. 15, 2014

 Puerto Rican bonds are still down from late 2012 but anyone who 'sold on the news' from Barron's or the ratings services locked in the worst prices in decades. Many of those bonds are up more than 10% in principal from their recent low points. That is a massive move in the usually stodgy bond arena.

PS: I want credit for coining that 'clown-graded' term.





It Could Have Been Worse

We were buying this week, not selling.  

By Paul Price of Market Shadows

The DJIA was lower all five days while the SPY eked out a minuscule gain on Wednesday in the midst of a bad week overall.

Market Shadows Virtual Value Portfolio dipped along with the broad market but we took advantage of the sell-off to add to existing positions in PVD and BWP. Both were higher at the end of the week than they were when we bought more.

We added one all-new position by shorting some puts on Knowles Corp. (KN) in Market Shadows' Virtual Put Writing (Selling) Account. Knowles was a recent spin-off from Dover Corp (DOV). KN's stock also headed higher shortly after our trade and despite the market’s overall negative action.

Here's what we did: 

1. ‘All In’ on Boardwalk Pipeline Partners
We couldn’t resist owning another chunk of Boardwalk Pipeline Partners (BWP) iMarket Shadows Virtual Value Portfolio after it dropped to a new low of $11.99 today. The 52-week range on BWP has been $11.99 (set today) to $33.00.  
 
2. Doubling Down on a Value Stock Today
We got another chance to pick up shares of Chilean-based pension fund manager PVD this morning and didn’t waste it. The Virtual Value Portfolio doubled our 42-share position at $78.94. 
 
3. Played a Recent Spin-Off with Options
We sold three contracts of the KN Sep. 20, 2014, $30 puts @ $3.30 per share.

It Could Have Been Worse

 

SPY week ended Mar. 14, 2014





‘All In’ on Boardwalk Pipeline Partners

Today’s new intra-day low was too good to pass up.

By Paul Price

Market Shadows Virtual Value Portfolio couldn’t resist owning another chunk of Boardwalk Pipeline Partners (BWP) after seeing it go down to a new low of $11.99 today. The 52-week range on BWP has been $11.99 (set today) to $33.00.  BWP’s current yield is 3.32% at our latest entry price.

We were able to buy another 300 shares at $12.06 per unit, using $3,618 from our cash reserves. For the moment we are essentially fully invested.  We will need to sell something before being able to purchase our next great idea.

 BWP buy @ $12.06

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Doubling Down on a Value Stock Today

We Doubled Down on a Value Stock Today

By Paul Price of Market Shadows

I love bargain prices. We got another chance to pick up shares of Chilean-based pension fund manager PVD this morning and didn’t waste it.

The Virtual Value Portfolio doubled our 42-share position at $78.94, a much lower quote than we paid for our original stake back on Dec. 2, 2013 when we liked PVD at $86.55 per share.

 PVD  1-year chart

I added 100 shares to my personal holdings today as well.

The company is majority owned by US insurance giant MetLife (MET). I expect that MET will eventually want to buy out the minority holders to simplify their own corporate structure and eliminate expenses.

The $3,315 purchase price will come out of our cash reserve fund.

 

Market Shadows’ reader Leilei noted that MetLife’s ownership of PVD was above 90% as of Sep. 30, 2013 and is approaching 94% since.  MET paid $92.214 per share or $13.20 (+16.7%)  above our purchase price today. Any offer to sweep up the remaining shares would probably come at a premium to that.

PVD - MET ownership @ $92.214

***
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Played a Recent Spin-Off with Options

Market Shadows Virtual Put Writing Portfolio added a new position. 

By Paul Price of Market Shadows

Knowles Corp. (KN) was carved out of Dover Corp. (DOV). KN started trading 'regular way' early last week.

The shares had been as high as $32.85 just days ago while trading on a 'when issued' basis. They were offered at just $28.42 early today.

We sold three contracts of the KN Sep. 20, 2014, $30 puts @ $3.30 per share.

KN new chart plus put

 

Our maximum profit is limited to the $990 we collected upon sale of the put options. If KN closes at $30 or higher on the Sep. 20, 2014 expiration date we will make that full amount without ever having to buy the stock. Until then we must stand ready to purchase 300 shares of Knowles for a net cost of $26.70 ($30 strike price – $3.30 put premium). 

That $26.70 per share break-even point is lower than any KN shares have actually changed hands for since the spin-off took place.

KN estimate

    Source: Yahoo Finance

Follow this trade and all our other option positions, open and closed, by clicking here …

Market Shadows Option Portfolio.





 
 
 

Insider Scoop

Delhaize Group Announces Sale of Bosnian & Herzegovinian Stores

Courtesy of Benzinga.

Related DEG Why Companhia Brasileira de Distribuicao (CBD) Has A Bright Short-Term Future? - Tale of the Tape The Fresh Market (TFM) in Focus: Stock Moves 6.7% Higher - Tale of the Tape

Delhaize Group (Euronext Brussels: DELB, NYSE: DEG), the Belgian international food retailer, announces that it has signed an agreement with Tropic Group B.V. on the sale of its Bosnian & Herzegovinian stores.

Delhaize Group has signed an agreement with Tropic Group B.V., to divest all of its 39 Bo...



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Phil's Favorites

Groupthink Or Black Swan Rising? Not A Single 'Economist' Expects An Economic Downturn

Courtesy of Pater Tenebrarum of Acting-Man

A 100% Consensus

This doesn't happen very often. Marketwatch reports that Jim Bianco points out in a recent market comment that the 67 economists taking part in a regular Bloomberg survey have a unanimous forecast regarding treasury bond yields: they will be higher 6 months from now. This is a truly striking result, and given the well-known propensity of mainstream economists to guess wrong (their forecasts largely consist of extrapolating the most recent short term trend), it may provide us with a few insights.

In fact, considering that there have been only a handful of instances since 2009 when a majority of the economists surveyed predicted a decline in yields, we can already state that their forecasts regarding tre...



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Zero Hedge

#MyNYPD...

Courtesy of ZeroHedge. View original post here.

Submitted by williambanzai7.

.

Actually, it is their NYPD, not ours.

...

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Chart School

Get Ready for Europe to Print

Courtesy of Doug Short.

Summary:

  • Core Eurozone CPI inflation rate falls to 0.70%, a multi-decade low
  • This occurs at a time when the PIGS' average unemployment rate rests near 24%
  • Deflation threat in Europe real as GDP in Europe likely to peak this year
  • European hawks moving towards dovish side of the fence, opening door for more QE
  • Implications: stronger European stock market, stronger USD, weaker commodity prices, stronger global growth

Back in February I laid the groundwork for why we should expect to see the European Central Bank (ECB) massively expand its balance sheet (see article). The case for expecting to see the ECB print is only increasing as core Eurozone inflation is c...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Market Shadows

Soy Numero Uno

Soy Numero Uno

By Paul Price of Market Shadows

Bunge Limited (BG) is the world’s largest processor of soybeans. It is also a major producer of vegetable oils, fertilizer, sugar and bioenergy.

When commodities got hot in 2007-08, Bunge’s EPS shot up and the stock followed, rising 185% in 19 months.

The Great Recession took its toll on operations, dropping EPS to a low of $2.22 in 2009.  Since then profits have recovered.  They ranged from $4.62 - $5.90 in the latest three years. 2014 appears poised for a large increase. Consensus views from multiple sources see BG earning $7.04 - $7.10 this year and then $7.83 - $7.94 in 2015.

...



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Option Review

Casino Stocks LVS, WYNN On The Run Ahead of Earnings

Shares in Las Vegas Sands Corp. (Ticker: LVS) are up sharply today, gaining as much as 5.7% to touch $80.12 and the highest level since April 4th, mirroring gains in shares of resort casino operator Wynn Resorts Ltd. (Ticker: WYNN). The move in Wynn shares appears, at least in part, to follow a big increase in target price from analysts at CLSA who upped their target on the ‘buy’ rated stock to $350 from $250 a share. CLSA also has a ‘buy’ rating on Las Vegas Sands with a $100 price target according to a note from reporter, Janet Freund, on Bloomberg. Both companies are scheduled to report first-quarter earnings after the closing bell on Thursday.

...

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Sabrient

What the Market Wants: Market Poised to Head Higher: 3 Stocks to Consider

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

Yesterday, the market continued its winning ways for the fifth consecutive day.  The S&P 500 closed within 1% of its all-time high, and the DJI was even closer to its all-time high.  Healthcare, Energy and Technology led the sectors while Financials, Telecom, and Utilities finished slightly in the red.  All three sectors in the red are typically flight-to-safety stocks, so despite lower than average volume, the market appears poised to make new highs.

Mid-cap Growth led the style/caps last week, up 2.87%, and Small-cap Growth trailed, up 2.22%. This week will bring well over 100 S&P 500 stocks reporting their March quarter earn...



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OpTrader

Swing trading portfolio - Week of April 21st, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Click here and sign in with your PSW user name and password, or sign up for a free trial.

...

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Digital Currencies

Facebook Takes Life Seriously and Moves To Create Its Own Virtual Currency, Increases UltraCoin Valuation Significantly

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...



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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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Pharmboy

Here We Go Again - Pharma & Biotechs 2014

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.

And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference.  Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014?  The Biotech ETF beat the S&P by better than 3 points.

As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...



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About Phil:

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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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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