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Tuesday Tear-Down

Wheee – that was fun!

The Dow sold off early, went down 100 points to 13,320 by 11, then back to 13,450 at 2 when (surprise, surprise) the Budget Report came out and told us that we are a silly, immature country run by ineffective leaders who never met a spending bill they didn’t like.

May deficit spending came in at $67.7Bn (and this does not count the $102Bn Iraq "emergency spending"), up 58% from last year and that news came on top of a 10-year note auction that drew scant interest from foreign buyers.  Perhaps it is because, of the $232Bn the government spent last month, over $50Bn of it was on debt interest payments.  Another problem was that receipts were down 15% from the prior year as the vast wealth being amassed by corporations and high net-worth individuals continues NOT to trickle down on other parts of the economy (but SKS had a 37.5% increase in same store sales so perhaps they got something nice for the maid!).

Hopefully they got her a big bag because 90% more people are being forced to live out of one than last year as home foreclosures rise to one out of every 656 households in the month of May.  If this trend continues, in one year we will have one out of 54 homes in foreclosure for the year.  This trend may in fact ACCELERATE as interest rates shot up to 5-year highs today.

Once an area starts down the road to mass foreclosures, it’s likely to spread as momentum picks up. "Foreclosures are contagious to the rest of the community, It’s very hard for a market to scrub volatility out and become stable again," said Steve Schroeder, CoreLogic’s chief executive.  Foreclosure’s impact falls on every member of a community, not just the owners who lose their homes. When properties sit vacant and unsold, entire neighborhoods suffer as property values decline.

We did our  best to halt the decline of our virtual portfolio values today as it was a great day for swing trading, with the Dow up or down over 50 points every hour except lunch!

  • 9:48 – "10-year 5.2%, 30-year 5.31% They have got to be kidding trying to rally back on this!"
  • 9:54 – Took MU $12s for .10, sold later for .25 (up 150%).  Suggested shorting MS (dropped $2.30 EOD).
  • 10:18 – PBR $110 puts at .55, finished the day at .62 (up 15%).  Also NMX $125 puts for .48, now .25 (they can’t all be winners!).
  • 10:48 – Made my weekly "I am still buying SBUX" statement
  • 11:05 – CME $550 puts for $3.30, finished at $4.70 (up 36%); RIMM $165 puts at $1.65, now $1 (down 40%)
  • 12:02 – Suggested GOOG $510 puts at $1.42, now $2.05 (up 44%)
    • Got the home foreclosure report – very concerned!
  • 12:43 – Round 2 of PBR $110 puts at .35 (filled later, avg. basis .45)
  • 12:52 – Decided that Bush/Greenspan and pending Deficit number could spark a rally so we prepared covers with DIA $134s at .57 (peaked at .95) and GOOG $510s at $2.35: "It’s not so much I think sinister forces are orchestrating it but the confluence of 3 positive statements will make you think people are out to get your bearish virtual portfolio.
  • 1:22 – Executed GOOG $510s at $2.50, out at $3.25 (avg, up 30%)
  • 1:37 – "Oil below $65 but oil sector turning up – must be all the IPhones they’re selling!"
  • 1:46 – called for DIA July $135 puts
  • 1:59 – "Deficit numbers out in 90 seconds – could get a quick reverse so hair trigger on GOOG here as $3.25-$3.50 is huge money on a cover play!"
  • 2:49 – "At least the energy sector knows the NYMEX close was a sham!"
  • 2:55 – "Mortgage Bonds getting worse and worse… Possible support here but otherwise we got to 5.5% which will FREAK OUT the markets."

After that it was pretty much like watching a slow-motion accident.  We were done trading and sitting in neutral virtual portfolios so pretty much taking bets on where this thing will stop.  I’ll put up charts in the morning but I’m way behind for the week and will be out tomorrow so best of luck to everyone!  Hopefully I’ll catch up tomorrow evening but please, please, please make sure you are well covered and out of June puts (unless it’s one you sold and you are sure they will expire worthless).

Rates are up, the dollar is up (just under 83 now), gold is back near $650 and oil is still being manipulated to keep it over $65.  We have our inventory reports tomorrow plus a slew of economic data so we should be in for another wild ride!

 


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  1. Phil,

    We’ll have to see what shakes tommrow. I hope its not to crazy as I will also be away from my computer most of the day on both Wed and Thurs.


  2. Boeing’s Dreamliner scores big order over Airbus A350
    In what will be seen by many in the industry as a stinging rebuke for Airbus and its planned A350 jetliner, its biggest customer is expected to place an order for as many as 50 of The Boeing Co.’s 787 Dreamliners at next week’s Paris Air Show, an industry source confirmed Tuesday night.
    http://seattlepi.nwsource.com/business/319618_boeing13.html

    AUO sees order visibility through 3Q
    Rebecca Kuo, Taipei; Emily Chuang, DIGITIMES [Tuesday 12 June 2007]
    AU Optronics (AUO) is seeing order visibility for LCD panels extending though the third quarter and the volume of orders are exceeding the company’s output, according to the company.

    June 13 (Bloomberg) — Asian stocks fell to a two-week low on concern rising global interest rates will sap demand in the world’s largest economies.
    Samsung, South Korea’s largest exporter, slid 1 percent to 572,000 won. It accounted for about 16 percent of South Korean exports last year. Taiwan Semiconductor, the world’s biggest supplier of made-to-order chips, fell 1.1 percent to NT$64.10.
    http://www.bloomberg.com/apps/news?pid=20601087&sid=ak7c74DI.YJM&refer=home

    Fidelity Charges Deeper Into MasterCard
    By Alexander Eule
    Word Count: 549
    Tables: Buyers | Sellers

    EVEN MASTERCARD HAS ITS PRICE, but mutual-fund giant Fidelity Management & Research is confident investors have not yet found it.

    On Monday Fidelity disclosed it now owns nearly 8.2 million shares of the credit-card company, a 10.2% stake. Fidelity’s current position represents an 80% boost since the firm last disclosed its holdings on March 31.

    Fidelity’s 3,650,700 new shares were purchased during a 10-week period in which MasterCard stock jumped 34%, as of Monday’s close.

    Micron says prices stabilizing

    Bloomberg News

    Micron Technology Inc., the largest U.S. maker of computer memory chips, said prices for the products may have stabilized after an inventory glut sent them plummeting earlier this year.
    “We’re probably closer to price-bottoming than not,” Kipp Bedard, Micron’s vice president for investor relations, said Tuesday at a shareholder conference in New York. Demand is increasing from computermakers that are promoting products with more memory, he said.
    Micron, based in Boise and with joint-venture operations in Lehi, has tried to diversify beyond the computer-memory business, its largest revenue source. Prices for the benchmark computer-memory chip have fallen 72 percent this year, according to Taiwan-based Dramexchange.com, the Asian spot market for semiconductors.
    Shares of Micron fell 3 cents to close at $11.96 Tuesday on the New York Stock Exchange. The shares have fallen 14 percent this year.

    U.S. Bond Yields Climb, Hitting A 5-Year High
    http://online.wsj.com/article/SB118170022451333473.html?mod=googlenews_wsj

    Great work,
    13,450 critical more important is holding 13,250


  3. Asia Markets : Wednesday, June 13, 2007

    Japan*

    17732.77
    -28.14
    -0.16%

    Hong Kong*

    20578.75
    -57.64
    -0.28%

    DJ Shanghai*

    435.93
    10.68
    2.51%

    S.Korea*

    1721.99
    -7.89
    -0.46%

    India

    14093.47
    -37.48
    -0.27%

    * at close
    Sources: Dow Jones, Reuters