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Thursday Thoughts

Asia is up to its old tricks again with the Nikkei moving up another 314 pts and the Hang Seng rising 176 pts. placing the whole continent on a confirmed uptrend. Hong Kong’s GDP grew 7.3% last year and the province had a budget surplus, perhaps we should elect the Chinese to run our government…

Europe is not sure what to make of this and its markets are all a little off but they are pausing at all-time highs. The only country not in danger of hitting an all-time high (by a long shot) is US!

Oil prices should trade flat into inventories at 10:30 where a 2M barrel build is expected and anything under will rally the sector.

Commodities should hold up in general on robust China numbers and increasing confidence in our own GDP for 2006. If the builders continue to run up, commodities are sure to follow!

Jobless claims were a little light today, indicating a tight labor market and the dollar is dropping a bit so we may be looking directionless unless oil heads back below $60 or one of the Fed Governors drops a hint. Tomorrow is a big day with durable goods orders in the morning.

No trades today. I like keeping it off the table but here are ones I’m watching if we turn up.

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VIA leads today’s earnings reporters with another one of my beloved “Sounds bad but is actually good” reports. The company is reporting a 70% drop in earnings when there is actually a 25% gain because the drop includes (at least) $154M in break-up expenses. Unfortunately, this stock is too widely held by people who won’t be fooled by this so I don’t think the headline will scare too many people off. The only underperforming division was movies and no one takes that too seriously. This is a very powerful company that came away clean from a huge break-up so I like the Aug $45s for $1.25 as a cheap way to get a look at the company in its new configuration.

I don’t think much of Sprint adding 2M customers last year as there seems to have been over 20M new US customers and only 5 carriers so 2M is not very impressive. Sprint has double the “churn” (loss of customer) rate of VZ and that is really going to kill them as we hit saturation but rather than shorting S, I’m going to buy VZ again, but not until they pull back to around $32.

I think OWENQ has gone down as far as it’s going to on the devestation resulting from a poor resolution on asbestos legislation. The company had drifted in the $2-3 range for years before running up on false hopes they would be bailed out. Now they have over corrected and crashed but this is an excellent company with a great forward business so I’m slowly building into this at $1.30 with a stop at $1 and I will take about 10% per week and stop buying at $2. If it doesn’t come back down I will reconsider.

BF had a great quarter, the chemical company wisely went into the oil and gas business to offset the damage that is done to most of the sector when fuel costs climb. Great move! Income was up 39% from last year and looks great for this year too. I can’t believe you can still buy this stock for $75, same as last year’s high (not optionable).

I am now officially suspicious of WMT’s guidance. Profit was up 13% again and again they told people not to expect it to continue. Let’s keep our eye on insider trades and stock buy-backs but I am tempted to begin a long position with the p/e at 17 vs. SHLD at 32 and TGT at 20. I like the bidding on the Jan ’08 $42.50s for $8 (a $5 premium) and working off the premium by selling the Apr $47.50s when they hit $1. You have to be patient on this one and wait for a pullback and a bounce up, could take weeks!

ABX had a very nice quarter pushing the whole year up 62%. Well, Duh! Gold costs them $221 per ounce to pull out of the ground if it’s selling for $400, like it was last year or $450, this year’s average. With gold starting this year at $550, the company is poised to make an extra $100 per oz on 5.5M ounces this year. Add that to the Placer dome merger and you may have one heck of a business! In addition to liking the $30s for .60 (a $1.50 premium) or the Jan $30s for $3.50.

I STRONGLY reiterate my buy on GG (3/6) and their very attractive Apr $22.50s for $3.60 (a .80 premium). NAK is a deal at $6.11 and MRB is looking good again at $2.75. Even NEM (2/27) may get a kick because expectations are so low (.35) for the quarter but I like the other guys too much to spend more than a gamble on this schitzo stock but I do like the Apr $60s for $2.40 as long as you take the money and run before they announce they are buying someone and give us a short.

I have a new Google thesis which I will divulge when I have time but I think they are a long-term mistake but will trade up short term. On a related note, there is no one out there writing CME $600 on their knuckles but it’s going to happen before Google! The Apr $430s for $17 are a great deal compared to Googles Apr $370s (about the same out of the money) at $24.

Much as I love EK they are going to get hit today as HPQ is going to swim in their pool by going after the photo kiosk business. Although HP will ultimately lose this fight (EK has long standing relationships with the vendors), perception will sour for EK and the $25 puts might be a fun day trade at .20.

Looks like I got out of WFMI a little too early but don’t say I didn’t call that one way back at the top on 1/9. It was $76 then (actually $152 pre-split) and I don’t even want to know what my puts are worth now as I sold them for just a double. Someone thinks they are recovering because the $60 puts are only .80 and I like ‘em!
http://stockcharts.com/gallery/?wfmi


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