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Time to Hibernate?

Grrrrr. I’m very bearish this morning.

Oil is flying up. Nat Gas is out of control (weather change + short squeeze). Gold is at $527. Intel guided down the top of their range…

Today’s NY snow will ramp oil up even further. HD will take off soon as it occurs to people that they sell salt and snow blowers.

Luckily these (other than Intel, were my plays but I still would have rather seen nice rally conditions, it’s so much more fun!). Intel’s problem is that, although they are shipping a lot of units, the units cost less. Moore’s law has driven chip prices down faster than our need for more powerful chips has increased so we have moved into a bad range for Intel.

I don’t see that this is really bad for tech but it may take the market a day or two to figure this out. Yesterday the Nikkei dropped 300 pts on a sell off that was initiated by a trading error. Today the market is back 220 pts already – I look at this week’s sell of as a trading error as well but I am maintaining a cautious stance.

Consumer sentiment is out at 9:45 and that will be the market mover of the day – hopefully up.

Mondays TOTD CHK is still in good shape. The April $27.50s should see some real appreciation from our $5.90 entry point. Alternate pick NBR is doing quite well too, up 4% yesterday.

It looks like we will get called away on the BCRX play as well. I knew it was going to be a quick 12%, I just didn’t think it would only take 4 days to achieve it!

Something very strange is going on with our short pick LVS. One of the other bidders on a Singapore project dropped out and the rumors about who did what to who sent the stock flying down 8% in the after hours yesterday. To me it looks like LVS is still standing along with HET and WYNN.

It is possible that LVS people were hoping Tabcorp would be a partner because I can’t see how LVS can fund this project without dilution. I don’t expect that kind of drop to last into the open but it will be interesting to see where it goes today.

It’s a good thing we got out of the ADM put on Tuesday, it turns out it was going down for no reason! Now it’s going up on an ethanol play, that’s a reason I can get behind but I still don’t trust the stock unti it breaks $25 with volume.

Tuesday TOTD TMG is a keeper, the March $7.50s are a clean double and a sensible person would half out and take a free ride until then.

Wednesday TOTD MSFT is really ticking me off but I see consolidation here and I am sticking by that call although I am not willing to add to it atm.

There’s a nice chart in this article that sums up my opinion, also a warning on Google that I agree with but that stock is too scary to bet on either way.

http://www.thestreet.com/_yahoo/funds/investing/10256365.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

NGS was a good pick on 11/22 at $23 and looks even better today at $25. I also like ECA in that sector too.

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Here is an interesting advanced arbitrage trade:
Buy the RIMM January $72.50 put for $10.10
Sell the RIMM January $70 put for $8.40

You have spent $1.70.
If RIMM finishes below $70, you collect $2.50 (47%)

Break even is $70.80, which is the 200 dma. They would have to have a favorable court settlement and a surprisingly good quarter to break through that by Jan 21.

I’m not making this trade myself but I have a practice fund that I do things like this with…. The safer way to do this is to also take the $80 calls for .50 to offset the possibility of a spike up. This lowers your potential return to .30 if you are right but virtually eliminates the risk and .30 on $1.70 in 35 days is very nice when you do it with large sums of money!

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PNRA is getting very, very tempting as a short. Any downgrade will hurt this stock (which is a great stock but it’s not Starbucks) but I would still like to see a little more buying first. I hope I am not being greedy, this is a case of my gut saying yes but my chart saying no. On the macro view, it is just too darn high compared to SBUX and DRI – both better companies.

http://finance.yahoo.com/q/bc?t=1y&s=PNRA&l=on&z=m&q=l&c=sbux%2C+dri

This stock exploded last Jan 1 (see chart) so I am very leary of getting in on the downside before that anniversary passes.

Speaking of SBUX, they are just about too darn low but they imploded last Jan 1 (same chart) so I watch and wait.

Do not confuse the bidding war between Viacom and GE for Dreamworks SKG for an opportunity on DWA, the animation studio. The entry of Viacom into the fray is great for my GE puts as this ups the price of a deal investors don’t like anyway (they want GE out of the entertainment business).

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Citigroup came out with a Buy on yesterday’s TOTD SIRI and had this to say (and I apologize for the newswire analyst gibberish):

December 8, 2005 SUMMARY

We are initiating coverage of SIRI with a 1H BROADCASTING rating and a $9 PT. Our PT is based on a 10 yr Eileen Furukawa DCF analysis and a 7-year forward P/FCF analysis discounted back. eileen.furukawa@citigroup.com

Admittedly, valuations on 10 yr forward ests are imperfect. So, we look at the history of other growth/subscription-based stocks, like AOL, for guidance.

Like AOL, SIRI stock should track the ups/downs of sub net adds with the streak trending up as long as we see Y/Y growth in sub net adds-- with the 1st sign of decline in net add growth (in 4Q06 -3Q07), a potential signal of a downturn.

But, SIRI’s potential downside pales next AOL’s actual experience, given its exponentially inflated valuation at the time ofits peak--with AOL’s P/FCF peak multiple of 135x, 5 times that of our target ’09 P/FCF multiple for SIRI of 28x.

Satellite radio is one of the few growth stories in media, w/ fast growing subs and rising ARPU driving robust revenue growth and attractive oper. leverage driving FCF profit for SIRI by ’07, w/ 40% FCF growth thereafter. “

In other words, it’s their trade of the day now too!

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ERTS made a huge offer of $620M for Jamdat to get into the mobile game market. Giving up 1/4 of it’s cash will surely anger investors today and seems like a pretty dangerous move for a company whose earnings are wayyyy off this year.

UBS downgraded IBM because “the company is approaching” the analyst’s $100 target. The stock is at $87!!! That is not $100. IBM will really drop as a result of this comment as it is a little overbought anyway. I have been hoping for a pullback to the low $80s and this should trigger it…


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