2010 Tin Tiger Tuesday
by Phil - February 16th, 2010 8:23 am
The year of the Tiger begins!
Chinese New Year is a serious business with tens of millions of migrant workers in China, as well as many from overseas, traveling home to have reunion dinners with their families. In addition to fireworks, celebrants like to wear new clothes from head to toe (preferably red as it drives away evil spirits) and they exchange red envelopes and red packets called “Ang Pow”. These Ang Pows are usually are passed out during the Chinese New Year’s celebrations, almost always containing money (from a couple of dollars to several hundred). Per custom, the amount of money in the red packets should be of even numbers. The number 8 is considered lucky (for its homophone for “wealth”). In addition to red envelopes, which are usually given from elders to the younger, small gifts (usually of food or sweets) are also exchanged between friends or relatives. Gifts are usually brought when visiting friends or relatives at their homes. Common gifts include fruits (typically oranges, and never pears), cakes, biscuits, chocolates, candies, or some other small gift.
The Year of the Tiger is considered lucky and this year is the year of the Metal Tiger, which explains all the commodity hoarding and the tigier is also considered auspicious for risk-taking and bravery. Traditionally, all debts are paid by New Year’s and there is much emphasis on looking forward and letting go of the past. The Chinese markets will be closed all week but we can expect a lot of forward-looking behavior when they come back so I’m liking FXI March $40 calls for $1 as long as our markets hold positive as we could get a nice pop next week as China plays catch-up.
BCS will be popping the financials this morning with some great LOOKING earnings but much of it came on the sale of their Global Investors unit to Black Rock for a $9.9Bn gain so nothing at all to get excited about. Impairments were up 49% but slowed in the second half and guidance indicates the worst is over. Also goosing the market this morning is SPG offering $10Bn for GGWPQ, the bankrupt version of what was GGP. This works out to about $9 for shareholders who hung on – we had taken a flier on them in the spring under $1 but got the heck out at $5 as THAT seemed high but I guess not and I”m now…
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DiggMerry Christmas Eve
by Phil - December 24th, 2009 8:28 am
First of all, what are you doing here?
Why it’s Christmas Eve, Mr. Scrooge – Most global markets are having a half day so, if you are waiting for a Santa Clause rally on a half-day’s trading, you are very likely to be disappointed.
Remember Marley, who cried: "Business! Mankind was my business. The common welfare was my business; charity, mercy, forbearance, and benevolence were all my business. The dealings of my trade were but a drop of water in the comprehensive ocean of my business!"
Marley was a man who worked and worked until the day he died and regretted it every day after. If you don’t believe in an afterlife and you don’t believe in leaving behind the World a better place than you found it, at least find some time for yourself so people don’t call you "a squeezing, wrenching, grasping, scraping, clutching, covetous old sinner!"
Those covetous old sinners in Congress passed the Health Care Bill in the Senate today with a 60-39 vote (Republican Jim Bunning did not vote against the bill but was too chicken to actually vote for it) so we can pretty much count on it moving through the House and on to Obama’s desk in the very near future. While it’s a total botch-job of a bill, at least America has taken the first civilized strep to recognizing that health care is a right and not a privilege – Tiny Tim would be very proud!
We were told by Fox that Health Care reform would destroy the universe but the market has taken the December passage of the bill very much in stride so maybe we should have just gone for it with Universal Health Care after all… Oh well, maybe next year! Meanwhile, we’ll be looking for good investing opportunities once we get a handle on the final bill but I still favor the device space (IHI, MDT, BSX, JNJ, GE, ISRG) as well as big pharma (MRK, PFE), who will be able to serve tens of millions of new customers. Hospitals (UHS, THC) should also start filling up and we always like our CELG as well as AMGN, who should also benefit from adding a population the size of England to the health care rolls right here in the USA. I’m waiting for the final bill but home health care providers (AMED,…
Just Another Manic Monday – The Inverted Risk Pyramid
by Phil - October 12th, 2009 7:43 am
This is going to be fun!
We already have a bigger boost than we expected in the futures market. After extensively reviewing our picks (generally bearish) from last week’s action we determined that even 55% is too bearish as we pop over our breakout levels. So we added more picks to our very bullish Watch List, held an extensive conversation on Mattress Plays in Member Chat (just in case) and dug through the dirt looking for "green shoots" in our weekend reading – all to help us get more comfortable with the bullish plays IF we break over our watch levels and hold them (3 of 5 at least): Dow 9,829, S&P 1,071, Nas 2,146, NYSE 7,047 and Russell 620.
Also, just in case, we reviewed the Collar Strategy, which is a very useful way to use options to lock in long-term profits, which can have nice tax advantages if you can benefit from hanging onto things over 12 months. Japan is closed and Asian stocks fell off on low-volume trading. “The question is whether the rally has over-extended beyond the confirmation of economic stability that we’ve seen,” said Jason Teh, who helps manage about $3.2 billion at Investors Mutual Ltd. in Sydney. “It’s still hard to know exactly where the world’s going to go, and the degree of growth remains very hard to quantify.” The Hang Seng dropped 200 points (1%), back to 21,299 and the Shanghai fell half a point but India went the other way (industrial output up 10.4%), along with Singapore, who are claiming a 14.9% rise in GDP – how’s that for a green shoot?
The futures went wild at 3 am, when Europe opened, and those markets are up over 1% on continuing news that the dollar is being dumped. This time we have an article in Bloomberg indicating that Central Banks have printed over $400Bn in new money last quarter, bringing their holdings up to $7.3Tn, yet only 37% of that money went into the US dollar. The dollar’s 37 percent share of new reserves fell from about a 63 percent average since 1999. Sever Englander of BCS concluded in a report that the trend “accelerated” in the third quarter. He said in an interview that “for the next couple of months, the forces are still in place” for continued diversification.
That helped reduce the…
Monday Mark-Down – For the Dollar!
by Phil - August 3rd, 2009 8:15 am
The dollar is off 2% since Friday.
That is sending oil back over $70 and gold back to $960 and has jacked the futures up 1% as the "value" of stocks tries to keep up with the less valuable dollars that they are exchanged for. People often forget that stocks are a commodity too and are also exchanged for currencies – when the dollar falls, at least initially, stocks tend to rise. Unfortunately so do our commodity costs but, as we saw in last week’s data, wages do not keep up and that, sadly, leads to a deflation of consumer buying power.
Every $10 increase in the price of a barrel off oil rips $25Bn a month out of the hands of global consumers, enough money to employ 6M people a year at $50,000 each. Those jobs are torn away from other sectors as discretionary income goes to commodities and, by the time you add in refining mark-ups and the cascading effects on other raw material cost, the effect of a $10 per barrel rise in oil is doubled to what amounts to about 1M global jobs per dollar.
What we are seeing is the result of the inaction against GS and other commodity manipulators as they breezed through Congressional hearings, aided throught he process by a massive market rally that kept their nonsense off the front page. Who cares if GS made a few extra bucks if the market is up 10% in a month? We’ll see if the resurging energy and commodities sectors can provide the catalyst to move the S&P up over the 1,000 mark, a level we haven’t seen since the September crash, almost a year ago but also the last time the dollar index was below 78 so everything is coming full-circle, right back to the conditions that crashed us last time!
This is not to say we are going to fight the tide. In the Summer of 2008 oil was around $120 a gallon and the Dow was around 11,500 from June through September before plunging 35% in the second leg of the crash. If the market is determined to climb back up that cliff and try again, we need to at least head on the fact that they might make it all the way back to the top – especially with help from heavyweights like Alan Greenspan, who knocked the dollar…
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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...
Ilene is editor and affiliate program
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