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Wednesday Wrap-Up

Wonderful PotterWhat a nice recovery today!

Was it our man Paulson?  He didn't say much about the markets but he did let the Hedging community know he was on their side as he came out strongly in favor of the status quo (raping AND pillaging).

I know there was once a time when a public figure like Paulson would have recused himself from the discussion due to his long history and close associations with the industry possibly having just the slightest hint of conflict with his position AS TREASURY SECRETARY, but noooooooooo!   Secretary Henry Paulson warned that raising taxes on hedge funds and buyout firms may have “unintended consequences'' and said Congress shouldn't “single out'' firms that go public, such as Blackstone Group LP.  “I don't believe it makes sense to single out one industry,'' Paulson said when asked about proposed legislation at a conference hosted by the Wall Street Journal in New York. Senate legislation would force Blackstone to pay taxes at corporate rates of 35 percent instead of as a partnership, with a burden as low as 15 percent. “We need to be careful dealing with something like this piecemeal,'' Paulson said.

Yes, going after the people who are actually causing the problem is no kind of policy for THIS administration!

Bulldozing MoneyAnd it's a good thing too because, as we discussed 2 weeks ago, wealthy people put a substantial portion of their assets into hedge funds and we know they don't like paying taxes (they prefer to give directly to charity I hear..).  According to a brand new Wealth Report, there are now 9.5M people with over $1M in net assets who now control $37.2 Trillion of the World's wealth (up 11.2% from last year!).   For the first time, the 11th annual World Wealth Report detailed philanthropic giving, and estimated that high net worth individuals turned over $285 Billion to charitable causes in 2006.

That's equivalent to someone worth $100,000 giving about $766 to charity, or 0.76 percent of their wealth.  I guess charity does begin at home, but perhaps it begins in the wing that's under renovation – you know, the one you never get around visiting as you're only in that house from Labor Day through Thanksgiving and things are so hectic you just haven't had time to even learn the names of the staff on that side of the house, yet alone organize a charity function and don't we pay enough in taxes anyway?  (you can tell I spend way too much time in the Hamptons!).  Anyway if you went to that awful dinner to help whoever it was and you bought that thing at the auction that you didn't even really want — you're done all you can!

Also being covered today were a lot of shorts as the intensity of the rally caught a lot of them by surprise.  Not us, thank goodness, as I called shenanigans early this morning and 10 minutes after the market opened sharply down I said: "Who is NOT down, that’s what we need to look at today… "  Three minutes later I decided "Big tech is working so far – AAPL, INTC, MSFT, SNDK, TXN… "  By 10:23 I pointed out "Very strange, both my July DIA puts have lost value! VIX coming down a bit too.  DIA July $133 puts active, tight stops on $135 puts (up 135%)."

2 Minutes after that, at 10:25, ZMan and I addressed the nation on Andrew Coffey's show and actually went bullish on oil with the following selections:

  • VLO $75 calls at $1, now $1.62
  • XOM $85 calls at .65, now $1.08
  • TSO $60 calls at $1, still $1.05 (I hate this company both ways!)
  • EOG $75 calls at $1.2, now $1.65

The only way ZMan and I can improve on this month's broadcast picks would be if we just drove over to people's houses and gave them money so they wouldn't have to bother with all that tedious time it takes to actually buy the stock and wait an hour or two before cashing in!

The markets got some additional afternoon help as fund managers circled the wagons and downplayed the downturn.  Merrill Lynch & Co. Chief Executive Officer Stanley O'Neal and Goldman Sachs Group Inc. CEO Lloyd Blankfein offered reassurance to investors today, saying they see few risks of widespread turmoil in the credit markets. O'Neal said rising foreclosure rates on U.S. subprime mortgages aren't sapping confidence in other parts of the global debt market. Blankfein said the boom in leveraged buyouts has yet to reach a peak. “It's reasonably well contained,'' O'Neal, 55, said at a conference in London organized by Euromoney Institutional Investors Plc. “There have been no clear signs it's spilling over into other subsets of the bond market, the fixed-income market and the credit market.''

Here's just one of today's examples of how well contained this is!

Not since the Sting won 7 Oscars in 1973 have I seen such an all star cast assembled, at this London event, the one in NY and all over CNBC all day, all there to make sure the fix was properly in.  This is fine with us, we don't care if the game is rigged, as long as we know which way it's rigged!   We grabbed another Google spread on the dip and the writing was clearly on the wall at 12:15 when I said: "Don’t forget Paulson speaks in 1 hr 15 mins and it’s possible he will release prepared remarks so let’s watch for a sudden pop. DIA $134s for .38 make a fun momentum play as the $133s are .85."

While I remain on the fence until we get past this end of quarter "window dressing" week, one could bullishly construct an argument that this whole past week has been a flush leading up to these planned conferences and tomorrow's Fed report, which will somehow provide an excuse to send the markets up to 13,700, ending the quarter with a bang, not a whimper.  That's the problem when you're caught up in "The Big Con," even when you know you're being played you can't tell if the downturn was a ruse to get you to sell your shares or if the upturn is a ruse to get you to buy more.  Until we see the end of this movie, I'm going to be a little more comfortable holding onto my cash – even if it costs me an "opportunity or two.

Speaking of cash, we're up to about 70% cash in the more volatile STP and that's a good thing:

Description

 Cost Basis

Open

 Sale Price

Sold

 Gain/Loss $

%

5 JUL 830.00 $RUT CALL (RUZGF)  $    7,635 6/22  $  10,540 6/27  $    2,905 38%
10 JUL 45.00 BBY CALL (BBYGI)  $    1,410 6/20  $    1,290 6/27  $      (120) -9%
10 JUL 50.00 CCJ CALL (CCJGJ)  $    1,310 6/26  $    2,490 6/27  $    1,180 90%
50 JUL 80.00 CVX PUT (CVXSP)  $    1,260 6/26  $    3,240 6/27  $    1,980 157%
25 JUL 27.50 DELL PUT (DLQSY)  $       260 6/6  $      990 6/27  $       730 281%
100 JUL 134.00 DIA PUT (DAWSD)  $  20,010 6/25  $  20,990 6/27  $       980 5%
200 JUL 135.00 DIA PUT (DAWSE)  $  25,010 6/22  $  56,990 6/27  $  31,980 128%
20 JUL 7.50 DNDN CALL (UKOGU)  $       510 6/20  $      890 6/27  $       380 75%
10 OCT 12.50 FIZ CALL (FIZJV)  $    1,310 5/2  $      890 6/27  $      (420) -32%
10 JUL 45.00 FTO PUT (FTOSI)  $    1,860 6/26  $    3,290 6/27  $    1,430 77%
8 JUL 130.00 FXI PUT (FAHSZ)  $    4,170 6/19  $    4,710 6/27  $       540 13%
40 JUL 129.00 FXI CALL (FAHGY)  $  14,010 6/15  $  19,990 6/27  $    5,980 43%
20 JUL 25.00 GLW CALL (GLWGE)  $    1,710 6/20  $    3,190 6/27  $    1,480 87%
15 JUL 530.00 GOOG CALL (GOPGW)  $  18,010 6/25  $  18,065 6/27  $        55 0%
20 JUL 520.00 GOOG CALL (GOPGV)  $  32,010 6/20  $  31,990 6/27  $       (20) 0%
120 JUL 30.00 MSFT CALL (MSQGK)  $    6,010 6/20  $    7,430 6/27  $    1,420 24%
20 JUL 20.00 NFLX CALL (QNQGD)  $    2,010 6/15  $    2,290 6/27  $       280 14%
10 JUL 42.50 QCOM CALL (AAOGV)  $    1,510 6/18  $    1,490 6/27  $       (20) -1%
10 JUL 165.00 RIMM PUT (RFYSM)  $    3,460 5/4  $    8,690 6/27  $    5,230 151%
10 JUL 47.50 SNDK CALL (SWFGW)  $    1,510 6/3  $      490 6/27  $   (1,020) -68%
15 JUL 62.50 TSO PUT (TSOSU)  $    1,135 5/17  $    9,440 6/27  $    8,305 732%
20 JUL 37.50 TXN CALL (TXNGU)  $    1,610 6/15  $    1,790 6/27  $       180 11%
50 JUL 75.00 VLO CALL (ZPYGO)  $    5,010 6/27  $    7,490 6/27  $    2,480 50%
10 JUL 60.00 WFR CALL (WFRGL)  $    1,510 6/1  $    4,390 6/27  $    2,880 191%
10 JUL 60.00 WFR CALL (WFRGL)  $    1,510 6/7  $    2,600 6/27  $    1,090 72%
10 JUL 60.00 WFR CALL (WFRGL)  $    1,510 6/20  $    1,790 6/27  $       280 19%
100 JUL 85.00 XOM CALL (XOMGQ)  $    6,510 6/27  $  10,990 6/27  $    4,480 69%

 

 


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  1. Karmcon

    this link hooks me back up to the Wednesday Wrap Up….? (and it is an excellent article)


  2. OptionsXpress – There was some discussion during the day regarding OPXS versus some other brokers. I’m using OPXS now. Intuitive, lots of good support tools, streaming quotes (including positions) seem to refresh quickly. Execution has been great. Issue – and it’s a big one – is the commission structure. I don’t do a lot of trading by the board’s standards and the commissions are eating a lot of the upside. I’ve just started the move to OptionsHouse…everything looks better from a pricing pov. Note, both will require you to have $25K in your account to play day-trades. They classify you as a day-trader if you do 4 single day round trips in a 5 day period.


  3. Finance (or options?) 101: Amusing http://www.youtube.com/watch?v=PzdOVruFJfA


  4. ss Chubby that must mean it’s time for bed….cya’s in a few hrs.


  5. Gotta do this first though:

    Fallen Angel Stocks:
    How to Rob an Individual Investor
    Dylan Jovine

    THE RICH HAVE BEEN DOING IT TO THE POOR SINCE THE BEGINNING OF TIME.

    Fortunately for us, it’s a heck of a lot more blatant (and therefore easier to spot) on Wall Street than it is in many places.

    Some call it a “hustle”. Others call it a “con job”. Whatever your pet name for it is, one thing is certain: if you don’t see it coming, you’ll likely wind up much poorer as a result and very, very sorry you ever ran into it.

    On Wall Street, as opposed to Main Street, the con takes a couple of different shapes. One is the famous and well discussed “bucket-shop hustle”.

    Now, many people automatically think of small, dingy firms – akin to a boiler room – when they hear the name “bucket-shop”. But those firms are responsible for a small fraction of the damage done to individual investors. To this very day, the most harmful “bucket-shop” practices are engaged in by many of the largest brokerage firms in the world.

    It goes a little something like this: you get a call from a well-intentioned broker who has the “deal of a lifetime” for you. After getting you all worked up into a lather, you’re convinced that it’s something you should purchase. What you don’t know is that the broker who just convinced you to buy shares of XYZ was secretly selling them for one of the firm’s largest customers. Before you know it, you’re left holding shares of a stock or bond that have decreased in value by as much as 90%.

    Although these kinds of shenanigans continue to this very day, the last really blatant example was during the height of the dot com crash in the late 1990s.

    The “commission cartwheel” is another variation of the same hustle. The only thing that changes is that, instead of asking you to buy a stock that somebody else is selling, you’re asked to purchase shares in a stock that gives the salesman an extraordinarily large commission.

    What’s particularly damaging about this little hustle is that it comes in forms that most people couldn’t imagine.

    Sure, some folks expect to get hustled when buying shares of a stock. But oftentimes, people practicing the “commission cartwheel” hide their hustle behind otherwise innocent sounding securities such as bonds and mutual funds. Yikes!

    And of course, let’s not forget the traditional classic, the “pump and dump”. In its older incarnations, investors get called to buy a stock that is secretly being liquidated by the owners of the firms (as opposed to large clients of the firm).

    For example, you get a call to own shares of XYZ for $2 per share. What you don’t know is that the firm calling you had an investment banking relationship with the company and is selling the shares allotted to them at sometimes pennies per share. So every time you purchase 1,000 shares of stock, you are really making the firm an “investment banking” profit of $1,998 if the bank owns the shares at $0.02 each.

    These days, the classic “pump and dump” has taken on a new and much hipper flavor with the use of email. This new and improved “electronic pump and dump” does largely the same thing, but via email instead of phone calls.

    I can’t tell you how many friends of mine – largely smart and successful people – shoot me the occasional email asking my opinion on a stock they’ve just been given the greatest tip about.

    I don’t even respond any longer if the symbol ends in the letters “.PK” denoting a pink sheet security. If they don’t know to beware of those types of advertisements at this point (after years and years of my warnings), then nothing I can say will change that.

    Last but not least, there is another classic Wall Street hustle that I’ve failed to mention so far. Of all the hustles I’ve discussed, it is by far the sleekest and smoothest. In fact, it’s such a smooth and silky hustle that it isn’t even illegal! But make no mistake about it – it’s just as dangerous (if not more so) than the rest of them.

    We’ll refer to it as the “IPO – Icicle” and it goes a little something like this:

    When a specific industry group has a great run – say 5 or 10 years of excellent business conditions – the founders plan to sell their stock at the very top of the market.

    For example, right now – for the first time in history – private equity firms of all stripes are planning to go public. This is largely a result of the success (or the illusion thereof) of Blackstone’s recent IPO.

    Why on earth would these otherwise greedy private equity mavens want to suddenly sell shares to the investing public? Is it that they’ve grown a conscience and want small investors across America to make some great money owning their shares?

    Of course not!

    What they’re saying to themselves is that we’re at the top of a bubble in private equity. With low interest rates, a business-friendly administration and a low tax environment, things are simply never going to get this good ever again.

    So they’re cashing out now. Right at the peak of the private equity bubble, when small investors who don’t understand the cyclical nature of things are at their most fascinated by the billions of dollars they’re making.

    This is by far the most dangerous of all hustles because it comes gift-wrapped by some of the biggest names in business whom you read about each day in The Wall Street Journal (Steve Schwarzman from Blackstone, Henry Kravis from KKR) and seems perfectly legitimate. And on the surface, it is; it’s not like they’ve planned a criminal enterprise with you as the victim.

    But that’s just what makes it so darn dangerous. They know that you’re buying their stock from them at the top of a bubble. And yes, they’re definitely taking advantage of that. But that’s really what Wall Street is all about, isn’t it: smart investors taking advantage of less informed investors?

    So consider this as fulfilling my job to inform you. Indeed, folks, trust me on this: you want to avoid these private equity firms like the plague right now.

    I’m not saying they’re not fundamentally good businesses.

    What I’m saying is that buying shares in these companies now would be like buying into the Florida real estate market a year or so ago: a bad idea, by any stretch of the imagination.

    For those of you sitting around right now in the middle of summer looking for things to buy, beware.

    Mark my words when I say the private equity firms aren’t the profit pond you want to be fishing in.


  6. Asia Markets : Thursday, June 28, 2007

    Japan*

    17932.27
    82.99
    0.46%

    Hong Kong*

    21938.22
    232.66
    1.07%

    DJ Shanghai*

    400.45
    -19.82
    -4.72%

    S.Korea*

    1751.75
    18.65
    1.08%

    India

    14476.60
    45.54
    0.32%

    * at close
    Sources: Dow Jones, Reuters


  7. TASR on a IRobot!!!!

    DOW JONES NEWSWIRES

    Taser International Inc. (TASR) formed a strategic alliance with iRobot Corp. (IRBT), under which the companies will collaborate to develop a new robotic capability using Taser technologies.

    The Scottsdale, Ariz., maker of electronic control devices said the companies have integrated the Taser X26 stun gun into the iRobot PackBot Explorer as the first step in its alliance with iRobot, a Burlington, Mass., maker of behavior-based robots.

    Taser said the collaboration will let law enforcement, federal and military users employ Taser from an iRobot platform to engage, incapacitate and control suspects.

    -Sara Leitch; 201-938-5400; AskNewswires@dowjones.com

    Order free Annual Report for Taser International Inc.

    Visit http://djnewswires.ar.wilink.com/?link=TASR or call 1-888-301-0513

    (END) Dow Jones Newswires

    June 28, 2007 07:51 ET (11:51 GMT)


  8. Phil, held TASR about a year ago and lost my shirt. Seeing a lot of positives now. Play?

    Jazz


  9. Good morning all
    Phil any thoughts on DIA JUL 135.- puts and QQQQ JUN 47.- puts(fun) this morning? Thanks


  10. Good morning all
    Phil any thoughts on DIA JUL 135.- puts and QQQQ JUN 47.- puts(fun) this morning? Thanks


  11. TASR – hard to chase because it’s such a dangerous stock, we picked it up ages ago.

    I’ll be talking about the DIA later as we’re going to want a spread ahead of the Fed but I’m dumping my calls for now and I already have $134 and $135 puts for July so the calls are for balance for me. If you need the protection, take it, but if you are just playing, then hope for a nice pointless rally and buy low.


  12. phil,
    what’s the best strategy regarding the RIG july 100 puts bought yesterday @ $1.40?
    thanks


  13. AAPl calls today to sell tomorrow or next week ? Good buy or bust?


  14. pretty quite here