Archive for July, 2007

The Four Horsemen (of the Apocalypse?)

OptionSage submits:

Phil often uses physics to describe movements of the markets and this weekend might be an appropriate time to review one lesson in particular from December 20, 2006:

“The larger the Apogee (the point at which the market is furthest above "normal") the more terrifying the drop back to the Perigee (underperformance) will seem, even though there are literally trillions of astronomical bodies that go through this cycle every single day without crashing!

“The perigee is a good time to eject excess mass (nervous investors) as you prepare to leave them, and previous market highs, behind”

The market’s move on Friday has spooked a lot of investors and perhaps rightly so.  If we restrict ourselves to earthly objects for a moment then we know well that gravity dictates:

“What Goes Up Must Come Down!”

Unless the market swings from its respective Apogee to its respective Perigee and rebounds with strength, gravitational pull can be deadly and parachutes need to be deployed quickly as the earth approaches quickly when traveling at terminal velocity and nobody wants to feel that thud upon impact!

What does it mean for us traders?  Firstly, be cautious of the flagship stocks that garner mass attention after they have run up tremendously.  For example, Cramer anointed Apple, Research in Motion, Google and Amazon as his Four Horsemen.  I don’t know if Cramer really wanted to follow through with that description as the typical reference to the Four Horsemen is “The Four Horsemen of the Apocalypse” and refer to the forces of man’s destruction:  Pestilence, War, Famine and Death.  Surely Cramer didn’t miss this so it proves to be a particularly fascinating description of his favorite stocks! 

It’s especially interesting because as the old boxing analogy goes “the bigger they are the harder they fall” and Apple, Research in Motion, Amazon and Google have all had big runs.  In fact, Google might have been the first to


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Monday Mop-Up

That was the least exciting 90 points we ever gained.

We were not very happy with that rally as it was just the typical M&A Monday sort of thing without the broader participation we would have liked to see that would have indicated a run-up to new highs.

Our finish was very weak and we failed to retake Friday's open with the poor Russell still stuck in the mud, down 1.5% for the past 5 days.  We are still up about 5% for the month (with poor Russell dragging us down) but the SOX have given up their leadership and no new index looks anxious to take their place.

That was surprising as there was EVEN MORE M&A activity than I reported in the morning as URI agreed to go private for $7Bn and NOK/SI is offering $7Bn for TLAB (if $7Bn is some sort of magic number I will humbly offer PhilStockWorld up for consideration!).  When $105Bn is offered up to the markets in one day and we can't hold  a 100 point gain - that is not a day we can crow about!

35 of the Dow's 92 point gain came from MRK, who ran into heavy selling near the close and the post-market reporting was bad to say the least with AXP missing by .03, TXN just in-line, NFLX guiding down, AMLN in-line and ALTR reporting declining revenues.  None of that really matters as tomorrow morning is a very busy day with morning earnings from AKS, BIIB, BJS, BNI, BP, BTU, CFC, CME, DD, EDU, KMB, JBLU, LLY, LM, MCD, NOC, OXY, PEP, SVU, T, X, UAUA, UPS, USG, WAT and XTO followed by AMZN, AFL, BXP, CAKE, CB, CTX, PNRA, RDN, STM and RHI at the close so we'll check our levels and see how things are shaking out:

 

 

Day’s

Must

Comfort


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Monday Merger Mania

It's Monday and the money is flying on Wall Street!

Thank goodnees SLB chased us out of shorting most of the OIH group last week but I still have some leftover RIG puts that are never coming back now that they announced a $53Bn mega-merger with GSF$15Bn is going back to the shareholders in a very large financed buy back so both companies should go up on this news and the OIH may make a nice momentum play in the morning.

Our faith in CCJ may be rewarded as Electricité de France SA said Friday that it will buy an interest in CEG in order to develop next-generation nuclear reactors in the US – well, if we're not going to invest in our own infrastructure at least foreign companies are starting to make some investments!  Constellation and EDF said they aim to build 1,600-megawatt nuclear machines designed by French state-run engineering company Areva SA and which are being reviewed by the U.S. Nuclear Regulatory Commission for licensing.  Also, there has been nice progress on our negotiations to power up India – all bad news for the oil pushers.

TFX is buying ARRO for $2Bn in cash, German lender Hypo Real Estate is buying Depfa Bank for $8Bn ($4Bn cash) in a risky dillutive move I'd love to play, TomTom is buying Tele Atlas for $2.7Bn after announcing a 37% increase in sales and a 79% increase in profits, the $5Bn bid for EMI Group has been extended, European insurers Friends Provident and Resolution are in a $17Bn merger and HPQ is spending $1.5Bn for OPSWAnother Monday, another $25Bn in equities coming off the market and another $91Bn in transaction for GS et al to collect some fees on.  Hard to be short on a day like today – I always try to keep things in perspective by multiplying Monday's deals by 52, to see if it seems strong for the year and $91Bn x 52 is $4.7 Trillion, so I can state with virtual certainty that this is indeed – A BIG DEAL DAY!

I'm not even mentioning that BCS has upped their bid for ABN to $93.2Bn because that mostly cash deal alone multiplied by…
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Weekly Wrap-Up

41 Monopoly ManWhoopie, yet another amazing week put to bed.

It’s always great when pretty much all of our major bets work out:

Last Friday Zman pointed out some refiners that had gotten ahead of themselves and we decided HOC Aug $75 puts at $2.25, now $2.88 and WNR Sept $55 puts at $2.12, now $3.50 made good plays.  We also liked BHI Aug $85 puts at $1.62, now 4.15 from the 12th and the BHI July $85 puts at .30, which finished the month at $2.60.  That was the last of our official "Free Picks" but there were so many good plays lest week we still found a couple of new ones to play.

In last week’s wrap-up I outlined Dr. Brett’s concerns about the market and nothing that happened last week changed our opinion of that.  On Monday morning I promised a thrill ride for the week and that’s exactly what we got with the Dow; up 150 by Tuesday afternoon, back down 175 to 13,850 by noon on Wednesday, up over 14,000 again on Thursday morning and back down to 13,800 at 1pm on Friday.  Since we went into the week with a pretty good strangle on DIA puts and calls (which we spent the whole month working into), it’s no surprise that they were the stars of our virtual portfolio, accounting for much of the week’s gains despite the fact that they are there mainly for "protection."

In Monday’s wrap-up I pointed out that the dollar could go further down and that gold could go further up, and they did.  Finally all that discussion about China and the Euro and the carry trade starts to pay off for us! 

Someone was interviewing me last week and they asked me if we specialize in energy and I said no, it’s just hot so we talk about it.  I explained to him that if medical devices were hot my members would know every last detail about drug coated stents because, over the long haul, THAT’S HOW WE MAKE MONEY, we take the time to learn the sectors that are in play because this is not roulette, this is the market and there are market forces at work and understanding those market forces allow us to make sensible bets over time!

On Tuesday, Happy and I were concerned and I said: "I don’t
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Friday Virtual Portfolio Moves

Posted July 20, 2007 at 9:37 am | Permalink (Edit)

Sorry, concentrating on GOOG.

In with 40 $520s at .75, will sell 1/2 at $1.50 and buy 20 $530s as a roll. Puts are too expensive so far but will buy 20 $500 puts for $1, preferably .75.

Posted July 20, 2007 at 9:38 am | Permalink (Edit)

VLO turning down sharply again.

NOV $115 puts at .10, just a feeling!

Posted July 20, 2007 at 9:45 am | Permalink (Edit)

GOOG – sorry was shooting up while I posted. Already a free ride – this is why I posted the strategy last night, you need to buy into that initial dip. Now going the other way. NEVER chase these the time to buy the puts is when its going up and the time to buy calls is when it’s going down – don’t be a sucker, don’t spend more than a craps bet and don’t violate your intended amounts until you are ahead (and then never risk your nut).

Posted July 20, 2007 at 9:46 am | Permalink (Edit)

XOM – sold $95 puts against my $90 puts for a mo play, praying to get even.

Posted July 20, 2007 at 9:57 am | Permalink (Edit)

AMD being slapped right back down. Internals look ugly, nobody would pay me for XOM $95 puts 8-( I am just screwed on that position! Going to funnel my frustration into more Aug $90 puts. I no longer X these as I do not generally recommend them as they are only good plays if you can afford 3 month’s worth of DDs and rolls.

ICE popping back up.

GOOG – very dangerous here as many many people are playing this channel so there will be a lot riding on expiring right at $515 but I’m trying to get the $510 puts for $1.50 or less and will buy more $520s at $1, looking to be 40/40 ahead of lunch and cutting back to 20/20 through the end of the day. Every time I get a double on either side I take half off and…
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Thursday Virtual Portfolio Moves

Posted July 19, 2007 at 9:48 am | Permalink (Edit)

SIRI – no, I’m frozen into a roll.

Let’s make sure the S&P breaks 1,555 or it is time to roll up our DIA puts back to the Aug $140 puts. If the Nasdaq can’t hold 2,710 that will be a concern too but I don’t like the Q puts as the Nas could really pop with GOOG/AAPL.

As usual the XLE’s are pokey so we can play the $75s to either side if we get a strong signal from XOM/COP/CVX. VLO tanking and TSO may follow so the Aug $55 puts at $2.30 are a nice downside play. XXX – but only if you need a downside play!

I looked at the upside and, other than XLE, I can’t get behind them – even with oil up here. OII would be the best of the bunch as they are consolidating at $55 and the Oct $55s are $4.85 and can be offset by the Aug $55s, now $3.05 on a downturn. XXX

Posted July 19, 2007 at 9:58 am | Permalink (Edit)

XOM – no I think I am screwed, I think that was stupid and my premise broke long before the close and I should have taken my lumps and gotten out with half. I’ve taken up a heavy position in the Aug $90 puts to start a proper following roll on them but, for the most part, I simply wasted a lot of money.

UNH – they are still paying $2.33 for the Aug $50s so we may as well take it as damage control and hope they stabilize (against leaps of course).

HOC giving a nice entry on Aug $75 puts at $2.30 XXX these will be great if the gas build is in the high 80s or better.

Posted July 19, 2007 at 9:59 am | Permalink (Edit)

Oh, if oil goes down they will take the S&P with them so don’t get too excited if XOM does start to tank until you cover the rest.

Posted July 19, 2007 at 10:00 am | Permalink (Edit)

OIH – I took the $2 of course for selling…
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Final Exam Friday

Now we get the big test:

A "miss" by GOOG, a BIG MISS by CAT (on record sales and profits), a big beat by SLB (which should rocket the OIH so let’s look at the $185 calls out of the box), a big beat by WHR, a mixed report from MSFT and nice earnings from C and BAC.

It’s oil day with Criminal Narrators Boosting Crude as they had our man Phil Flynn live first thing in the morning and hourly updates on T Boone’s China trip where they actually tried to explain that China’s Three Gorges Dam, which came in 10% under budget at $22.5Bn and will pay for itself in 10 years while generating 100 Terrawatts per year, isn’t such a good idea.  The energy generated by running water through a turbine with zero pollution is saving 31 Million tons of coal per year and cutting the emissions of 100M tons of greenhouse gas.

Relative position of the Three Gorges Dam .While some people (1M) were relocated to build the dam and some environmental damage was done to the surrounding region, the fact is that the project controls downstream flooding and protects over 50M acres of farmland in areas where millions of people have had to abandon on several occasions.  While T Boone and the CNBC crew seek to highlight hydroelectric’s problems, the fact of the matter is that this profitable government vernture will supply the electricity needs of 90M people and 4 more dams are in the works that will supply another 180M people’s needs with another (and I’m not kidding) 16 dams in early stages.  This project began in 2003 – while we were marching off to war for oil, China began a war on oil consumption and pollution that could meet the electricity needs of the entire United States for less money than the latest "troop surge" cost us

What is making T Boone and Phil Flynn so nervous?  Perhaps it’s the fact that China is now exporting this technology, with a project already scheduled in Burma that will produce 4Bn kilowatts annually.  If this catches on they’ll have to switch from crying "peak oil" to "peak water!"  Don’t worry boys, this solution will only work in countries where they have rivers.

Speaking of Mr. Flynn, apparently he now feels the need to directly address whatever Zman and I say in the mornings as his
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Thursday Wrap-Up – Google Goes Down!

Happy 14,000!

I said this morning that nothing mattered until we hear from Google but the market did do it’s leveling best to look like it mattered today.

We made it through Uncle Ben’s testimony and the Fed minutes relatively unscathed and we shook off some very shakey leading indicators (-.3%, down from +.3%, -.1% expected) and a pathetic 9.2 reading at the Philly Fed, down from 18 last month and far lower than the 13 expected.  So Q3 starting with a real downward turn but the party seems to march on with an unstoppable momentum but I’m worried it’s going to be like a New Year’s party where the action really heats up around midnight (pick your target level), even though everyone is tired, and then quickly breaks up, leaving a very big mess.

Google’s topline revenues rose 62% but they made the unforgivable mistake of investing in the future by hiring 1,500 very highly paid employees (+13%) AND expensing the bonuses paid to capture the best and the brightest.  In the conference call Eric Schmidt said:  "We have continued to make significant investments, as we have previously discussed. We are growing rapidly, building the best infrastructure, hiring the best to extend our footprint internationally, all the things that we talked about. Building better and better products and invest in doing so in the model that we’ve talked about: 70/20/10, 20% of the time, and that sort of thing."

That’s right, they are doing EXACTLY what they said they would do and missed earnings by .03 out of $3.59 and took a $15Bn hit in after hours trading for it.  I have been blaming corporations for ruining this country by focusing more on stock buybacks and bottom line earnings than capital investment and R&D but now I’m going to blame — YOU!  What is wrong with you investors?  Are you people 5 years old?  If you don’t get the results you want every single quarter do you just have a little temper tantrum and dump a stock?  Apparently so…

Oh well, Mr. Buffett and I thank you for your skittishness!

Seriously people, I know that attention deficit disorder is some kind of national disease but isn’t this taking things a little too far?  Here is a list of the wealthiest Americans who ever lived, adjusted for inflation.  Mr. Buffett is only…
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Through the Roof Thursday?

Are we ready for takeoff?

I've written several articles outlining my theory of stock market physics and we do indeed seem to be appoaching escape velocity as the Paulson/Bernanke plan that led me to make my Dow 15,000 call in December bears (oops, don't say bears!) fruit.

As I predicted yesterday when we bought FXI calls on the member site, Asia responded well to our minor dip and the Hang Seng jumped 174 points to close back above 23,000, now outpacing the Dow by 9,000 points since both indices stood at 8,000 back in April of 2003 (hey, isn't that around when we went into Iraq?).  Well we're still over there but the Hang Seng (and the rest of the world) decided not to wait and started a global party without us.  As we discussed on Monday, there are very good reasons for China to be enthusiastic about their decision to choose butter over guns in the new millennium.

"We can do without butter, but, despite all our love of peace, not without arms. One cannot shoot with butter, but with guns." - Joseph Goebbels

"Guns will make us powerful; butter will only make us fat." – Hermann Goering

China announced this morning that Q2 economic growth accelerated to 11.9%, up from 11.1% in Q1.  This is what Cramer likes to call ARG, or Accelerating Revenue Growth and it's his number one reason to invest in a company.  Costs (inflation) are running a little high at 4.4% over last year but sales (exports) are up 28% with "continued heavy investment in new factories and infrastructure."  It's amazing what can happen when the government and corporations work together to build an economy rather than their balance sheets isn't it?

It's not just China, Bessemer Venture Partners are earmarking 1/3 of their new $1Bn fund for India while other US venture capital firms are setting up specific funds for China and India.  So we gather money from US investors and invest in foreign corporations, where all the real growth investments are being made.  This is the begining of the Dollar Carry Trade I talked about yesterday and, while it's not exactly great news for the US, what do you expect investors to do…
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Wild Wednesday Wrap-Up

That wasn't so bad was it?

You know the markets have clearly left orbit when a $20Bn hedge fund blowing up barely causes it to pause.  While he didn't hurt the market, I wouldn't say Bernanke helped the market, as he flat out stated the housing slump had deepened and "Upside risks to inflation are [the Fed's] predominant policy concern."  Woo hoo – party on Ben!

Here's some of the great things Ben said that don't seem to matter to investors:

  • Mr. Bernanke added a new inflation risk to the ones he has cited in the past: Productivity growth has "slowed somewhat," he said.
  • "Month-to-month movements in inflation are subject to considerable noise, and some of the recent improvement could also be the result of transitory influences."
  • "Sizable increases in food and energy prices have boosted overall inflation and eroded real incomes in recent months… PCE inflation ran at an annual rate of 4.4 percent over the first five months of this year to a level that would clearly be inconsistent with the objective of price stability."
  • "Yet another risk is that energy and commodity prices could continue to rise sharply, leading to further increases in headline inflation and, if those costs passed through to the prices of non-energy goods and services, to higher core inflation as well."
    • Nonetheless, the Fed lowered their official 2008 core forecast to between 1.75 and 2%.
  • "Declines in residential construction will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth should diminish over time."
  • "Nevertheless rising delinquencies and foreclosures are creating personal, economic, and social distress for many homeowners and communities--problems that likely will get worse before they get better." 
  • Fed officials lowered their forecasts for economic growth both this year and next by a quarter percentage point from their February view.

Ian Shepherdson of High Frequency Economics is quoted by the journal saying: "To us, Mr. Bernanke has a pair of rose-tinted spectacles clamped firmly to his face, not least when he said that the housing drag will “diminish over time” and that the
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Insider Scoop

10 Stocks To Watch For November 12, 2019

Courtesy of Benzinga

Some of the stocks that may grab investor focus today are:

  • Wall Street expects D. R. Horton Inc (NYSE: DHI) to report quarterly earnings at $1.25 per share on revenue of $4.86 billion before the opening bell. D.R. Horton shares rose 1.3% to $53.31 in after-hours trading.
  • Analysts expect Skyworks Solutions, Inc. (NASDAQ: SWKS...


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Phil's Favorites

How To Spend $45,000 On A $27,000 Car

Courtesy of Mike Shedlock, MishTalk

As cars become more expensive, and trade-ins worth less and less, buyers go deeper in debt on new cars.

Please consider taking a $45,000 Loan for a $27,000 Ride.

Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value. This phenomenon—referred t...



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Zero Hedge

How To Spend $45,000 On A $27,000 Car

Courtesy of Mike Shedlock, MishTalk

As cars become more expensive, and trade-ins worth less and less, buyers go deeper in debt on new cars.

Please consider taking a $45,000 Loan for a $27,000 Ride.

Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value. This phenomenon—referred t...



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The Technical Traders

Welcome to the Zombie-land Of Investing - Part I

Courtesy of Technical Traders

This current market environment is very reminiscent of the 2006-08 market environment where price rotated into weakness on technicals and continued to establish new all-time price highs in the process – creating what we are calling a “zombie-land melt-up”.  This very dangerous price action is indicative of money chasing a falling trend.  Where technicals and fundamentals are suggesting that price is actually weakening quite substantial, yet the process of price exploration is continually biased towards the upside as investors continue to pile onto the back of the beast expecting a further melt-up.

Let’s take a look at what happened to the ES and Gold in 2006 an...



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Kimble Charting Solutions

Gold Indicator Sending Fresh Bearish Message, Says Joe Friday!

Courtesy of Chris Kimble

Could the Gold/US Dollar ratio be sending a fresh concerning message to Gold bulls this week? Joe Friday says Yes!

This chart looks at the Gold/Dollar ratio over the past 8-years.

The intersection of two long-term channel met at (1) a few months ago. The ratio was testing the bottom of one as resistance and the top of another as resistance at the same time.

As the ratio was testing both channels as resistance, a sizeable bearish reversal pattern took place at (1).

Since the reversal pattern took place, the ratio has been heading lower.

Joe Friday Just The Facts Ma’am; The ratio is breaking below...



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Digital Currencies

3 Reasons Why One Trader Didn't "Manipulate" Bitcoin Price To $20K

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Bitcoin price highs in 2017 were not the result of a single trader on an exchange, the CEO of payment company Circle claims. In a series of tweets on Nov. 4, Jeremy Allaire disputed ...



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Chart School

Gold Gann and Cycle Review

Courtesy of Read the Ticker

Gold has performed well, golden skies are here again. In fact it has been a straight line move, and this is typically unusual and a pause can be expected.

It seems the markets are happy again, new highs in the SP500, US 10 year interest rates look to re bound, negative interest may soften. The US FED has reversed their QT and now doing $250BN (not QE) repo. The main point is the FED has stopped QT, and will do QE forever. The evidence now is the FED put is under market risk and the possibility of excessive losses do not exist. 

Point: If in future if there is market risk, the FED will print it's way out of it.
Subject To: In this blog view. The above is so until the amount required rocks confidence in the US dollar as a reserve currency.&n...



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Lee's Free Thinking

Today's Fed POMO TOMO FOMC Alphabet Soup Unspin

Courtesy of Lee Adler

But make no mistake, if the Fed wants money rates to stay down by another quarter, it will need to imagineer even more money.

That’s on top of the $281 billion it has already imagineered into existence since addressing its “one-off” repo market emergency on September 17. This came via  “Temporary” Repo Man Operations money, and $70.6 billion in Permanent Open Market Operations (POMO) money.

By my calculations that averages out to $7.4 billion per business day. That works out to a monthly pace of $155 billion or so.

If they keep this up, it will be more than enough to absorb every penny of new Treasury supply. That supply had caused the system to run out of money in mid September.  This flood of paper had been inundati...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

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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