Thrill-Ride Thursday – Retail Sales and Maybe Some Jobs?
by Phil - January 7th, 2010 7:50 am
Beware the data!
The first thing you will hear this morning is that COST had a 9% rise in sales, with International sales up a whopping 25%. What you are less likely to hear is that COST sells a lot of gasoline, which has doubled in price since last December and, excluding inflation in gas prices, same-store sales are up just 2%, a tremendous miss of the 7.9% expected. Out of the 25% increase in International sales, 15% is attributable to currency exchange so up 10% is the real number.
This is nothing against Costco, I like that company, but it’s a caution sign to look carefully at the retail numbers we’re going to be seeing today as there are several outside factors that are skewing the results drastically – to the point where the numbers, whether good or bad, are almost meaningless. It’s also good to keep in mind that we are comping sales to the WORST CHRISTMAS EVER so anything less than double digit gains over last year is still pretty sad.
Mish did a good job yesterday of pointing out the statistical nonsense known as the Non-Farm Payroll Report, where "Birth/Death" model revisions that were as much as 356,000 a month last year (January) make the data beyond useless for any kind of serious analysis. Nonetheless, analyze it they will and if we manage to avoid posting our 24th CONSECUTIVE month of losses, surely they will be pouring champagne on CNBC and acting like Capitalism has once again triumphed over evil (evil being people without money who still want to live with dignity).
Speaking of dignity – if you know 100 people in Nevada then, statistically, 3 of them went bankrupt this year, up 61% from last year as our economy "recovers". In Tennessee, Georgia and Alabama, just 2 of your 100 friends filed while California, surprisingly "only" had one in 66 households file for bankruptcy so you can go almost a whole day and not run into someone who lost everything in California – too bad the same can’t be said for the State overall! California needs $21Bn over the next 18 months to keep the lights on. This doesn’t seem so bad, GMAC is losing $13Bn this quarter and we’re bailing them out but if we bail out CA then NY, NJ and 47 other states will come knocking to the tune…
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DiggPSW Holiday Shopping Survey
by Phil - December 22nd, 2009 3:40 pm
I finally went to the mall yesterday.
I guess that makes me part of 2 trends. I am one of those last-minute shoppers that finally went out and got done yesterday while Tina bought EVERYTHING on-line this year and I don’t even think she’s waiting for any more shipments at this point. If you get used to cyber-shopping, it’s easy to see why the trend is growing but on-line retail is still nothing more than a speck (5%) on overall retail sales and that’s AFTER being up more than 20% this year.
So I went to the trenches on Saturday, where the real people shop (well, the real, upper-middle class people, anyway) at the Garden State Plaza in Paramus, New Jersey – one of America’s larger and busier malls made even more so on a Saturday because Bergen County has blue laws and retail is closed on Sundays so yesterday was do or die in Paramus with just 3 more shopping days until Christmas.
I took the kids at about 10 am and the first sign of trouble was that we got a pretty good parking spot. On a normal Saturday at the Garden State Plaza, you can’t get a good spot anyway and on a normal Christmas you can expect a half-mile hike from your car to the mall. When I got inside, it was even stranger, there were so few children in the mall that the carousel was empty so my kids jumped right on that as we spend our first dollar of the day. Riding around the carousel I saw something that didn’t cost anything – there was a MSFT XBox demo station set up with very cool driving set-ups with seats and wheels and big screens and full band set-ups for playing Guitar Hero on a little stage and about 6 other game demo areas – right in the middle of that part of the mall AND IT WAS EMPTY.
If nothing else had worried me about Christmas before, that would have been it because who doesn’t want to play free video games on big-screen high-def TVs with all the coolest attachments (they had sports-car seats and a wheel/pedals combo that they said cost $100 (not the seat) and was sold out at Game Stop)? Something was very wrong. Leggo land was also empty so maybe people just didn’t want to bring kids to the mall this weekend but…
Option Trader Irons Out Bullish Risk Reversal on Vale
by Option Review - November 25th, 2009 10:06 pm
Today’s tickers: VALE, GLD, BKC, VIX, IYR, GPS, CTXS, JPM, JCG, BKC, & TIF
VALE – Vale S.A. – Iron ore producer, Vale, experienced a more than 2.5% rally in shares during the trading session to arrive at a new 52-week high of $29.64. A bullish risk reversal in the March 2010 contract today indicates at least one investor is positioning for continued upward movement in the price of VALE shares by expiration. The trader sold approximately 3,300 puts at the March 26 strike for an average premium of 1.29 apiece in order to finance the purchase of roughly 3,300 calls at the higher March 32 strike for 1.59 each. The net cost of the transaction amounts to 30 cents per contract and positions the investor to amass profits if shares surpass the breakeven price of $32.30 by expiration. Shares must jump at least 9% from the current price to breach the effective breakeven point on the trade.
GLD – SPDR Gold Trust ETF – Shares of the gold exchange-traded fund, which replicates the performance of the price of gold bullion, rose 1.5% today to yet another all-time high of $116.43. We observed bullish activity in the June 2010 contract by one investor who initiated a call spread on the fund. It appears the trader purchased 13,265 calls at the June 125 strike for an average premium of 5.95 each, spread against the sale of the same number of calls at the higher June 150 strike for 2.10 apiece. The net cost of the gold-spread amounts to 3.85 per contract. The investor responsible for the trade accumulates profits if shares rally 11% from the current price and surpass the breakeven point at $128.85. Maximum potential profits of 21.15 per contract are available to the trader in the event that shares of the GLD surge 29% to $150.00 by expiration day in June of 2010.
BKC – Burger King Holdings, Inc. – Burger King-bulls bought nearly 4,700 calls at the in-the-money December 17.5 strike for an average premium of 50 cents apiece. Such activity suggests investors expect shares to rally through $18.00 – the breakeven point on the calls – by expiration in December. Bullish sentiment on the flame-broiled burger maker is perhaps inspired by strength in the fast-food restaurant sector. Cash-strapped consumers, wary of the 10.2% unemployment rate, are likely trading down from moderately priced eateries to cheaper nosh provided…
Investor Plants WFC Short Straddle – Set to Bloom in April 2010
by Option Review - November 20th, 2009 4:24 pm
Today’s tickers: WFC, IYT, RYL, YHOO, XLE, MU, ADCT, KBH, DELL, NE & GPS
WFC – Wells Fargo & Co. – Shares of the financial holding company surrendered 1.5% today to stand at $27.88. One investor initiated a sold straddle on WFC in the April 2010 contract. The trader sold 10,000 calls at the April 32 strike for 1.59 apiece in conjunction with the sale of 10,000 now in-the-money puts at the same strike for 5.81 each. The gross premium on the transaction amounts to 7.40 per contract. The investor will retain the full premium if shares settle at $32.00 by expiration. The premium received acts as a buffer against losses in the event that shares swing in either direction away from the $32.00-level. However, the trader will accumulate losses if shares breach the upper breakeven price of $39.40, or if shares decline beneath the lower breakeven point at $24.60, by expiration in April.
IYT – iShares Dow Jones Transportation Average Index ETF – The exchange-traded fund, which measures the performance of the transportation sector of the U.S. equity market, appeared on our ‘hot by options volume’ market scanner this afternoon after one investor initiated a bearish put play. Shares of the fund moved 0.5% lower to $70.53 during the session. The trader established a put spread by purchasing 5,000 puts at the December 70 strike for 1.80 each, and by selling the same number of puts at the lower December 65 strike for 40 cents apiece. The net cost of the trade amounts to 1.40 per contract and provides downside protection beneath the breakeven price of $68.60 down to $65.00 through December’s expiration.
RYL – The Ryland Group, Inc. – Shares of homebuilder and mortgage-finance company, Ryland Group, declined nearly 4% this afternoon to stand at $18.86. Investors exchanging options on the stock today spread pessimistic sentiment through to expiration December. Traders sold 10,000 calls at the December 19 strike for an average premium of 1.10 apiece. The full 1.10 premium pocketed by investors is retained in full as long as shares of RYL remain below $19.00 through expiration day. Call-sellers do not seem to expect that shares of Ryland will recover before the start of 2010.
YHOO – Yahoo!, Inc. – We observed two different option strategies in play on Yahoo this afternoon. A large-volume sold strangle in the January 2011 contract suggests shares are likely to remain…
Just Another Manic Monday – Retail Edition
by Phil - November 16th, 2009 8:17 am
![[Growth and Deflation chart]](http://s.wsj.net/public/resources/images/NA-BC020B_JECON_NS_20091115220414.gif)
Good morning!
Japan had a huge GDP beat (+1.2% for the Q, 4.8% annualized)) and they leaked it early (to oil executives!) but, strangely, deflation is accelerating at the same time. That’s great news for stimulus watchers as the government can continue to pump money into the economy, even while it’s growing and, of course, the carry trade can continue.
Despite the robust third-quarter report, Japanese officials said they were still concerned about the economy’s strength going forward, and didn’t intend to pull back plans for further spending to ensure continued growth.
"There is no change in the severe condition of the country’s economy," Naoto Kan, the deputy prime minister, told reporters after the report’s release. "We are concerned about whether the economy falls into a deflationary situation," he added.
The domestic demand deflator — a measure of changes in prices of goods and services, excluding exports and imports — plunged 2.6%, the fastest pace since 1958. It was the third straight quarter of falling prices.
Another sign of concern in the report: The contribution of private consumer spending to growth slipped in the third quarter, suggesting measures to convert Japan from export-led growth to domestic-demand-led growth were facing limits. In the third quarter, private consumer spending, rose 0.7%, compared with a revised 1% climb in the second quarter.
It’s all stimulus but there’s no sign stimulus is stopping so party on markets. Japan also got a huge benefit from the Chinese auto sales – more stimulus! The Nikkei itself isn’t thrilled and is up just 0.25%, barely hitting Friday’s high on a stick-save into the close but that didn’t stopping the futures from jumping up more than half a point and gold from hitting $1,130. I sent out an Alert to Members at 2:24 this morning saying:
"Once the Nikkei closes (2am EST) the Hang Seng will have an hour to themselves and that should top out our futures (the Hang Seng is up at 22,900 (+1.5%). The shorting move on gold futures is to short them as they cross below $1,130 with zero tolerance for holding gold above that line. The same can be done with the S&P futures at 1,100, the Dow at 10,316 and the Nas at 1,800 and you can even use the 2 out of 4 rule to short one of the laggards only AFTER two others break down to be a little…
Bears in the Butterfly Garden
by Option Review - July 8th, 2009 5:05 pm
Today’s tickers: MS, EXPE, FCX, VIX, XRT, GPS, XLP & WFC
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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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