Demand for GM Calls Rises as Analyst Upgrades Lift Shares
by Option Review - December 28th, 2010 4:16 pm
Today’s tickers: GM, CECO, PFE & EDMC
GM - General Motors Co. – An onslaught of analyst upgrades for General Motors sent the automaker’s shares higher and kicked bullish trading in its options into high gear today. GM’s shares increased as much as 3.00% to secure an intraday high of $35.64 as of 12:55pm. The car and truck manufacturer was rated new ‘outperform’ with a target share price of $43.00 at Credit Suisse, new ‘hold’ with a 12-month target of $38.00 at Soleil Securities, new ‘buy’ with a target share price of $45.00 at Citigroup, and was rated new ‘overweight’ at JPMorgan Chase & Co., Barclays PLC and Morgan Stanley, among others. While near-term calls were active during the session, it was a large print in March 2011 contract calls that caught our eye. It looks like one bullish player scooped up 10,000 calls at the March 2011 $38 strike, which is more than two times greater than the 4,463 lots of previously existing open interest at that strike, for a premium of $0.85 per contract. The call buyer stands ready to profit should GM’s shares jump 9.00% over the current price of $35.64 to trade above the effective breakeven point at $38.85 before the contracts expire in March. It looks like General Motors may report fourth-quarter results at some point on March 10, 2011.
CECO - Career Education Corp. – Put buying observed on the beleaguered provider of for-profit education services on Monday continued this morning as shares in Career Education Corp. slipped 1.6% lower to $19.95 in the first half of the session. Investors positioning for shares in CECO to decline significantly in the next couple of months purchased at least 2,000 puts at the February 2011 $17 strike for a premium of $0.39 apiece yesterday. Today, bears once again targeted the same February 2011 $17 strike, buying up more than 2,400 puts for an average premium of $0.49 each. Put buyers paying $0.49 in premium per contract are poised to profit should Career…
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DiggJP Morgan Options Player Portends Near-Term Rebound in Shares
by Option Review - November 30th, 2010 4:18 pm
Today’s tickers: JPM, UPS, GM, SNDK, FO & SVU
JPM - JPMorgan Chase & Co. – One options strategist expecting a near-term turnaround in JPMorgan’s shares purchased a call spread in the December contract today. Shares of the financial services firm are currently down 0.75% to stand at $37.62 in the final hour of the trading session. It looks like the investor picked up 7,000 calls at the December $38 strike at a premium of $0.80 each, and sold the same number of calls at the higher December $40 strike for a premium of $0.22 apiece. Net premium paid to initiate the bullish spread amounts to $0.58 per contract, thus positioning the trader to make money should shares in JPMorgan climb 2.55% to surpass the effective breakeven price of $38.58 by December expiration day. The call-spreader stands prepared to accumulate maximum potential profits of $1.42 per contract if shares rally 6.3% over the current price of $37.62 to trade above $40.00 by expiration day in the final month of the year.
UPS - United Parcel Service, Inc. – Bullish options traders are scooping up in- and out-of-the-money call options on UPS this afternoon. Shares of the package delivery services provider increased as much as 0.80% today to hit an intraday- and new 52-week high of $70.44. The stock is currently up 0.40% to arrive at $70.15 as of 1:50 pm. More than 25,700 option contracts have changed hands on UPS thus far today, with more than 4.25 calls exchanged on the stock for each single put contract that has traded. Near-term bulls purchased more than 1,400 now in-the-money calls at the December $70 strike for an average premium of $1.16 each. Optimists looked up to the higher December $72.5 strike where more than 13,000 calls changed hands versus previously existing open…
Whig Party Wednesday – Reps take the House and QE Too!
by Phil - November 3rd, 2010 8:03 am
Now, like many Americans, the Democrats know what it’s like to lose their House.
Back in the mid-1800′s, the nation had another kind of Tea Party as the Whigs became a successful 3rd party, even going so far as to put two men in the White House – William Henry Harrison and Zachary Taylor plus Millard Fillmore, who succeeded "Old Rough and Ready" who died just after a year in office but that was a long term compared to Harrison, who caught pneumonia making a long inauguration speech in the freezing rain and died of it a month later despite attempts to cure him with opium, castor oil and leeches – treatments we are likely to see again as the Republicans vow to repeal Health Care legislation.
I don’t have to talk about what happened last night, Barry Ritholtz did a great job of it in "The Tragedy of the Obama Administration" so let’s just focus on the repercussions of the changeover and, of course, today’s upcoming Fed decision. The Board of Governors were meeting all day yesterday and will meet again this morning to discuss their policy decision and one would think they can’t be so deaf as to see that our citizens are not interested in additional deficit spending, which is exactly what QE2 is when the Fed writes checks to paper over the Treasury’s profligate spending.
Look for new and improved ways of not taxing corporations. Like GM, which will not have to pay taxes on its next $45.4Bn of earnings despite the fact that the Government paid for their losses already and allowed the company to bust union contracts and trash benefits for the millions of retired and fired workers as they shut down and sold brands – permanently shipping US manufacturing jobs overseas.
Of course, this tax break isn’t about GM. GM just sets a good precedent for similar treatment of Banksters and others who received relief under TARP and, of course, whatever they decide to call the next emergency bailout of Big Business. If the market breaks our tops, we are going to be loving the XLF which already owns most of the people who got elected last night. With FAS at $22.44, we can sell the April $19 puts for $2.75 and buy the Jan $17/21.67 bull call spread for $3.10 and that’s net .35 on the $4.67…
Even Though GM Lied and Said They Paid Us Back, They Say They’ll Need More Time to Pay Us Back
by ilene - September 16th, 2010 8:06 pm
Even Though GM Lied and Said They Paid Us Back, They Say They’ll Need More Time to Pay Us Back
Courtesy of Jr. Deputy Accountant
Wait a second… didn’t GM already claim to pay us back in slick commercials earlier this year or am I completely confused? If I’m not, GM said they paid us back but left out that A) they were using government money to do so and B) only paid back the part that was actually "loaned" and didn’t include the full $49.5 billion extended to GM should they need it. They argue that not needing it and instead using that money to pay back the government shows the company is in good shape but I argue that it only shows that our government is the worst loan sharking operation in history. It’s like taking out a payday loan to pay off the interest on the last payday loan except in the case of GM they get a way better interest rate than the 400% Western Union would charge for a few extra bucks til payday.
General Motors’ new CEO, Dan Akerson, confirmed Thursday that the government — taxpayers, that is — won’t get back all the money put up to save GM from ruin in the car company’s initial public stock offering, expected as soon as mid-November.
[I]t’ll take a couple of years, at least, for the taxpayers to get back the remaining $43 billion in bail-out money the government invested to save GM from going out of business. It won’t all get paid back in the government’s initial sale of its GM shares later this year, he said, but over time investors will be willing to pay more for the shares and the goverment [sic] can get higher prices as it continues selling its 60.8% ownership of GM.
Treasury gets back the remaining $43 billion of bailout money. GM must be consistently profitable for investors to pay such prices, he acknowledged.
Great bargain for the American taxpayer if you ask me. Just let Bernanke and the HFT robots lube up for some $GM and we might actually see a few pennies back on every dollar.
What a joke.
Jobless Thursday – America’s Infrastructure Crisis
by Phil - September 9th, 2010 8:13 am
What a disaster!
Not only are our students failing to keep up with the rest of the World but America is close to getting a failing grade in Infrastructure. That’s right, what was once the World’s mightiest and proudest economy, this once great nation of builders has been given an overall grade of D in the American Society of Civil Engineers report on our Infrastructure.
The 2009 Grades include: Aviation (D), Bridges (C), Dams (D), Drinking Water (D-), Energy (D+), Hazardous Waste (D), Inland Waterways (D-), Levees (D-), Public Parks and Recreation (C-), Rail (C-), Roads (D-), Schools (D), Solid Waste (C+), Transit (D), and Wastewater (D-). Awful? Shameful? How about DANGEROUS? Deadly even…
For one thing, The number of high hazard dams—dams that, should they fail, pose a significant risk to human life—has increased by more than 3,000 just since 2007, when there were "just" 1,000 dams at risk and 3,000 to pro actively maintain but the administration refused to fund the project, now the costs have tripled as the situation deteriorates but that’s nothing compared to what happens if just a few of them break completely. 1,819 dams are now in the "high hazard" category and, with the current budget, for every one damn that is reparied, two more become an emergency.
In urban areas, roadway congestion tops 40 percent. According to the report, decades of underfunding and inattention have jeopardized the ability of our nation’s infrastructure to support our economy and facilitate our way of life. At risk of catastrophic failure besides the dams (including levees) are things like our drinking water, sewage systems, bridges, waterways, rail lines, airports, roadways (especially elevated ones) and, of course, our entire electrical grid. Additionally, 7 Billion gallons of clean drinking water is lost every day through leaking pipes – that’s 23 gallons per citizen per day WASTED for want of $11Bn in repairs – don’t bother worrying about it, the last Administration wouldn’t fund it in 2001 or 2006 so why bother now – 10 Trillion gallons later?
The ASCE calculates a 5-year $2.2Tn investment is needed to address the situation, that’s $500Bn (25%) more than it was 5-years ago, when they released their last report and nothing was done by the previous administration. So, rather than having invested in America, putting people to work and improving EVERYONE’s way of life, we spent over $1Tn fighting a war, another $600Bn a year on our regular military operations and gave over $1Tn worth of taxe breaks…
Can GM Really Call That an “Initial” Public Offering?
by ilene - August 17th, 2010 8:20 pm
Can GM Really Call That an "Initial" Public Offering?
Courtesy of Jr. Deputy Accountant
Initial would imply they didn’t embarrass themselves by getting kicked off the exchange the first time around.
General Motors Co has completed the paperwork for an initial public offering, and timing of its filing with the U.S. securities regulators rests with the board of the top U.S. automaker, sources familiar with the process said on Monday.
The initial prospectus, expected to be for $100 million, is likely to be filed with the U.S. Securities and Exchange Commission on Tuesday, two people said, asking not to be named because the preparations for the IPO are private.
Meanwhile, GM will tell you they have paid back the government in full but that’s not exactly true. They’ve paid back the $6.7 billion they were actually loaned but the total $49.5 billion extended to GM to help it through bankruptcy is still outstanding. A large chunk of that (the part they DON’T mention in the "we paid you back!" commercials) consists of the government’s equity in GM, so GM can turn around and say they paid back the bailout loan and technically be correct. Tricky ain’t it?
It gets worse when you realize they used government money to pay back the government.
As it turns out, the Obama administration put $13.4 billion of the aid money as "working capital" in an escrow account when the company was in bankruptcy. The company is using this escrow money—government money—to pay back the government loan.
GM claims that the fact that it is even using the escrow money to pay back the loan instead of using it all to shore itself up shows that it is on the road to recovery. That actually would be a positive development—although hardly one worth hyping in ads and columns—if it were not for a further plot twist.
Sean McAlinden, chief economist at the Ann Arbor-based Center for Automotive Research, points out that the company has applied to the Department of Energy for $10 billion in low (5 percent) interest loan to retool its plants to meet the government’s tougher new CAFÉ (Corporate Average Fuel Economy) standards. However, giving GM more taxpayer money on top of the existing bailout would have been a political disaster for the Obama administration and a PR debacle for the company. Paying back the
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Shipping Our Economy, Our Jobs And Our Prosperity To China
by ilene - July 11th, 2010 9:32 pm
Shipping Our Economy, Our Jobs And Our Prosperity To China
Courtesy of Michael Snyder of The Economic Collapse
As the U.S. economy continues to implode, large American corporations are investing billions upon billions of dollars in China. But all of this investment comes at a price. Over the past several decades, hundreds of factories and manufacturing facilities that would have been constructed in the United States, along with millions of decent paying jobs, have ended up going to China instead where labor is so much cheaper. In the process, China has become a massive economic powerhouse, while once thriving manufacturing cities in the United States such as Detroit are now rusted-out corpses. In fact, China’s economy has grown so rapidly that it is being projected that in 2010 China will replace Japan as the world’s second-largest economy. Not only that, but China has already overtaken Germany and is now the biggest exporter of goods in the entire world.
But none of this growth in communist China would have been possible without all of the globalism and free trade that U.S. politicians from both parties have been pushing on us for the last 40 years. When they were selling us on the benefits of "free trade" they didn’t tell us that we would end up shipping our economy, our jobs and our prosperity over to China.
American consumers never seemed to be able to put two and two together. As we were busy running out and filling up our shopping carts with cheap plastic crap made in China, we didn’t seem to realize that a "global economy" meant that we would be competing for jobs and wages with workers on the other side of the world.
So now the U.S. economy, with its high wages and repressive government regulations, is suffering while China’s economy is thriving.…
GM Auto Sales Rise 17% – Not as Impressive as it Sounds
by ilene - June 2nd, 2010 3:08 pm
GM Auto Sales Rise 17% – Not as Impressive as it Sounds
Courtesy of Mish
V-Shaped recovery proponents are crowing about auto-sales as GM U.S. Sales Rise 17%, Topping Analysts’ Estimates.
General Motors Co. posted a 17 percent increase in May U.S. sales, the first time the automaker topped analysts’ forecasts since January, as customers snapped up Chevrolet Equinox sport utility vehicles and Malibu sedans.
Deliveries rose to 223,822 from 191,875 a year earlier, the Detroit-based automaker said today in statement. GM was expected to report a 5.9 percent increase, the average estimate of five analysts surveyed by Bloomberg. Industrywide sales may match the longest streak of gains in a decade, analysts estimated.
Total sales of Chevrolet vehicles gained 31 percent from a year earlier to 167,235 vehicles, and GMC brand deliveries increased 26 percent to 30,160.
Industrywide sales may have risen to an annualized rate of 11.2 million cars and light trucks for May, the average estimate of eight analysts. That would mark the eighth straight month of year-over-year gains, according to Bloomberg data.
The report speculated that Toyota sales may have risen 7.5%, Honda 22%, Nissan 11%, and Ford 16%.
Before everyone brings out the high-fives celebrating a miraculous recovery, let’s put this rebound in perspective.
Light Vehicle Sales Autos and Trucks
Note the cash for clunkers spike at the end of the last recession bars.
The industry had impressive gains percentagewise, but sales are at early 1980′s levels. This is hardly a V-Shaped recovery.
Tumultuous Tuesday – Funds Tend to Short Ten-Year Treasuries
by Phil - May 4th, 2010 7:55 am
Societe Generale is out with the latest edition of their hedge fund watch and in it we see that they’ve found hedge funds to have the "shortest position EVER on bonds."
Well, ever is since 2005 but still, hedge funds now have more than 270,000 short contracts on the 10-year Treasury Bond and that’s not even counting PSW Members and their TBT positions (ultra-short the 20-year) so we are either twice as smart as hedge funds or twice as dumb – either way, it looks like it’s coming to a head!
SocGen also reports large short positions in 30-year TBills too with a net short there of about 100,000 contracts and the Bank concludes that funds are also "strong net sellers of the Yen (50K net short) and buyers of US Dollars." Short positions in the Euro are being reduced now that we’re near my $1.30 target but this is a critical line for the Euro and we could still break 10% lower if it doesn’t hold, I mentioned our Euro play in the Weekend Wrap-Up so I won’t get into it here but what a day we had yesterday already!
According to Market Folly, hedge funds are also now net sellers of equities with long/short equity funds are now around 25% net long, which is definitely below their historical average of 35-40% net long. Folly also sees that, according to CFTC data, many hedgies have been adding to shorts in S&P futures. Whether they are simply selling longs to lock in some profit or making a market timing call, one thing is clear: hedge funds are definitely cautious in this market. Following the funds has been profitable this year as they are up 13% year-to-date after the Hedge Fund Generals Index was up 69% last year.
PSW members did their best to avoid temptation yesterday despite the "rally" (that failed to make it back to Thursday’s highs on low volume) and despite the "fabulous" auto numbers that CNBC et al could not stop fawning over. Indeed the statistics were so good they were – RIDICULOUS – Chrysler up 25%, DIA up 18.8%, F up 24.7%, GM up 6.4%, HMC up 12.5%, Hyundai up 30%, Kia up 17.3% and TM up 24.4%. This caused me to comment to Members:
OK, now I may be an old fuddy-duddy but I’m counting less than 1M cars sold in a month in this group and it seems to
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Welcome To The Banana Republic: GM In Hot Water With FTC Over Misleading “Repaid Bailout” Ad When All Just TARP Shuffle
by ilene - April 23rd, 2010 6:33 pm
See also the post two posts ago "How is that Bailout Coming Along?" with articles by Mish and Op-Toons Review.
Welcome To The Banana Republic: GM In Hot Water With FTC Over Misleading "Repaid Bailout" Ad When All Just TARP Shuffle
Courtesy of We are too busy maxing out our credit cards buying AAPL shares after hours into the parabolic blow out (using Sigma X of course, how else could we subpenny front run our own orders?), stacks of Kindles, 7th vacation homes with negative equity, and LBOing zero EBITDA companies to comment on this, suffice to say that if you ever needed confirmation that America is a banana republic in which fraud, corruption and lies are now the norm, here you go: Government Motors is now blatantly lying to its existing and future buyers, and everyone in the administration is complicit.
From Fox News:
General Motors is running ads on all the major networks this week claiming it has repaid its bailout from the taxpayers "in full." But the claim isn’t standing up to scrutiny from lawmakers and government watchdogs who have found that the automaker was able to repay the bailout money only by dipping into a separate pot of bailout funds.
Uhm, what’s wrong with that? That’s precisely the reason why the market is now on for an 8th straight up week. In order to make the rich infinitely rich (before there is revolution, hyperinflation or dollar devaluation), the Obama people must resort to anything and everything.
General Motors is running ads on all the major networks this week claiming it has repaid its bailout from the taxpayers "in full." But the claim isn’t standing up to scrutiny from lawmakers and government watchdogs who have found that the automaker was able to repay the bailout money only by dipping into a separate pot of bailout funds.The TV spot may land GM in hot water with the Federal Trade Commission over its truth-in-advertising laws, which prohibit ads that are "likely to mislead consumers."
"We have repaid our government loans in full — with interest — five years ahead of the original schedule," says Ed Whitacre, chairman and CEO of General Motors Company, asking Americans to give the bankrupt company another look.
But a top Senate Republican has accused GM
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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
coordinator for PSW. She manages the Favorites backup site
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