Oh, hello Mr. Seoul,
I dropped by
to pick up a reasonStick around while the clown
who is sickdoes the trick of disaster
Asia was in turmoil last night as news of the death of Kim Jong Il hit the wires. South Korea’s Kospi Index fell 3.4%, both the Shanghai and Hang Seng fell more than 2% at their opens but, along with the Nikkei, they all finished strong and down about 1.25%. My comment on the matter to Members at 11:29 last night was:
Meanwhile, Dear Leader has died and that shot the Dollar back to 81 and knocked the futures down half a point. Asia is down more like 2% as no one is please with Jr. taking over in South Korea. I always find that amusing when leaders who are hated die and the markets react negatively – as if the next guy could be worse. Markets just hate uncertainty but China is in charge of N. Korea – I doubt Kim’s son is going to suddenly declare war or whatever it is people are worried about. He’s just 27 and probably not suicidal
If anything (but I’m going to bed), I’d take oil long off the $93 line (/CL), which is where we liked them Friday. Gold already zoomed back to $1,600 and has been rejected there and the Dollar doesn’t look that strong above 81 so far.
So far, my logic is holding up as things have already calmed down and oil topped out at $94.50 at 5:30, for a nice $1,500 per contract gain in less than 6 hours. I find it easier to trade futures off news like that than they are to play during the US Market hours as the moves internationally, still seem to make a little sense while the moves in the US market are often pure nonsense.
Speaking of nonsense, David Fry agrees with me on Treasury rates as we are now falling below what you can get in an FDIC-insured deposit, which I consider the non-panic limit for rates. Unfortunately, we do get plenty of panic at a drop of the hat these days and TLT shorts were our big loser last week but we stuck with them for January, hoping things calm down over the next few weeks.
Europe is calm enough this morning with not much happening over the pre-holiday weekend (our own dear leaders also have families to shop for). We began our 2011 PSW Holiday Shopping Survey. With dozens of reports from around the World already in, it’s great reading and please remember – it’s even better if you contribute as well!
On Friday, we stuck with our plan to get very cashy into the holidays. You can get a full review of the week’s action in Stock World Weekly, which also features a rundown of Pharmboy’s 2011 Biotech Trade Ideas, with plenty of good entries still available in this very choppy market. We were worried enough about the weekend to add an EDZ hedge in Member Chat – this time it was the April $21/25 bull call spread for $1, which has a 300% potential upside all by itself and is easily offset by short puts on many stocks we REALLY want to buy for less if they go on sale, like VLO, where someone will pay you .98 just to promise to buy the stock for $20 (now $20.67) in 30 days. That’s a nice hedge!
Of course the best hedge in the World is CASH and we were fortunate enough to hit our targets on most of our expiring plays in our White Christmas Portfolio, leaving us with just our GNW Jan spread, a bullish Jan spread on FAS (of course) and the aforementioned TLT position that went against us and was rolled to January.
That brings us to over 95% virtual cash, which is something we can live with over the weekend. If we catch a break and get a little Santa Rally (as we’re 100% bullish now with our 5%), then we will be thrilled to go 100% cash on Friday so we can, as planned, have ourselves a merry little Christmas with our 200% gains.
The markets are closed on Monday and again the Monday after New Year’s and again on the 16th (MLK day) so lots of long weekends for us to go skiing this year so why not take advantage of it by setting yourself up cashy or market neutral and taking a weekend or two this year to balance out the other parts of your life?
Look at Kim Jung Il – rich, powerful… From the above picture it looks like he was a happy little baby. Where did he end up? As dead as anyone else at 69. Money helps but it doesn’t buy you immortality and you still can’t take it with you and, as pointed out by the Beatles 50 years ago, it can’t buy you love either (except in Nevada). While Kim Jung Il may have left a bit of a mark on history as a brutal dictator, what about Henry Flagler, Stephen Harkness, Henry Rogers and O.B. Jennings? Those 4, along with John D. Rockefeller, were some of the richest men in the World in 1900 – long forgotten now.
Rockefeller was the lead partner in Standard Oil and amassed a fortune that put the others to shame and he was smart enough to hire PR people to take picture of him handing dimes out to poor people (his annual salary, at the time, was $60M a year – $2Bn by today’s standards so he could spare a few) and also smart enough to buy a few newspapers to make sure they thought those pictures rated page one coverage (a dime then would be about $3 today – if Bill Gates handed out $5s today, and the newspapers declared him a generous God, wouldn’t you find that a bit strange?).
Speaking of rich people trying to manipulate the media. Saudi Arabia’s Prince Alwaleed Bin Talak has invested $300M in Twitter, buying up 3.6% of the company. Why? Because the microblogging service is hailed as being instrumental in helping organize Arab Springs protests this year and building up a stake in the new media gives the Prince a degree of control – as well as useful inside information.
I’m sure the Twits will deny he will have any influence – just as the WSJ insists that they maintain their journalistic integrity after Rupert Murdoch bought a stake or the way Rupert’s Fox News claims to be "fair and balanced" although, strangely, in the last 12 years – they haven’t found a single Democratic candidate to support anywhere in America, for any political office – Federal, State or Local across 25 network stations and 175 affiliates covering every single state in America. Just a coincidence, I suppose…
That, to me, is the funniest thing about Kim’s death today – to listen to Fox News talk about HIS use of propaganda and the way he treated HIS poor people! This is beyond the pot calling the kettle black, this is like the black hole at the center of the Universe calling the kettle black – except if the black hole at the center of the Universe did that, the sound would just get sucked up into the event horizon and we’d never hear it – but you know the black hole has got to be thinking that the hypocrisy of Fox News clearly knows no bounds!
How many slaves died after living lives of misery – building pyramids for Pharaohs whose names are now long-forgotten and who’s pyramids are nothing but dust? Even the Pharaoh would have been better off spending less time worrying about where to hide his burial chamber and spending more time with his family and friends. As Ben Franklin once remarked: "It is only when the rich are sick that they fully feel the impotence of wealth."
It’s funny how the modern propaganda machine tries to change that one word, "impotence", into "importance" to create a new paradigm for the war between the rich and the poor. Maybe one day, through cloning or whatever – the rich may be able to buy themselves a degree of immortality. After all, that’s what the Pharaohs thought they were getting and they were willing to commit all sorts of atrocities on Earth in order to assure their own place in the afterlife.
The spirit of Kim Jong Il is alive and well, sadly in the very people who claim to condemn him…
Merry Christmas to all!
JRW,
Caption: " No try without vaseline!"
GNW/Tarpoon – Just getting slammed with Financials I think.
Caption/JRW – "North Korea seeks to destabilize Israeli economy with giant irradiated pickle exports." Actually, it looks like the guy in the back right of that picture was already thinking of a good one….
Past options/Iflan – I use the Quick Chart function in TOS (right-click on any symbol) and, if it doesn’t fit there, I copy the code to the Active Trader chart, which has more room. In active trader, you must have a "." before the symbol. That works on Paper Money as well. I also use Investools for backward option charting – also very good but subscription.
Stolen Playbooks/Burrben – At least that’s an indication of SOME demand! What would really suck would be if the truck is found abandoned later on with the cargo intact and a not from the thieves that says "Sorry, we thought they were IPads."
And no mentioning the Giants!
TNA/Jasu – Temping but I want to see the Dollar confirm up or down first. Unless you are uber-bearish and need an upside hedge, I’d avoid taking aggressive upside plays like TNA as the trend is not your friend at the moment.
AAPL/Jerconn – I forgot I said that, it was the right call, even though it would have worked out to hold them in the end.
Reason/Diamond – Yeah, I’m funny that way, I like to see something real…
FCX/Etrad – No, I’m confident in the target holding but may be painful to look at for a while. Copper is not willing to give up $3.30 – even with all this bad news.
$50Bn/LV – I suppose that’s why the drop, disappointment. Meanwhile, Draghi is pumping about $1Tn into the economy through the back door and no one seems to notice.
Tennis/NF – Good analogy. Now we saw a pretty violent market move down but XLF held $12.20 so building evidence that supports bottom theory around here.
Reasons/JRW – I have to agree with that one. How can they let this go further – it’s insane!
VRUS/Oncmed – Those plays are fun but make sure you have the math right. You spend .45 of your $5.80 so max gain on a drop is $5.35, not $5.75. At $140, you owe the caller $10 ($4.65 loss) and you don’t get even until $42.32 as the one covering the calls will never make money for you so your loss window is $135.35 to $142.32 but that’s EXACTLY what the offer price is so, essentially, you are just betting on a + or – move of about 3%. The spreads are too wide to even suggest an alternative – it’s a very dangerous game is all…
FAS/Winning – That would take us from being the people selling premium to being the suckers paying it. Not only that, but you propose to INCREASE the premium we pay by 200% AFTER the trade is clearly off track? No thanks.
Anger/Scott – I know the 5 stages of dying are supposed to be Anger, Denial, Bargaining, Depression and Acceptance. Since we have denial and depression on this chart, I’d say anger fits in just fine between anxiety and Denial – let’s see if that holds up.
Shorting/Spiyer – If we follow though, then plenty of time to jump on short train but hard to trust low-volume sell-off based mostly on Dollar up in more Euro-panic – it’s just getting old.
Money/StJ – Waiting is fulfillment.
LOL L4!
From Leaf West at Slope.
Caption/JRW: "I said I GIANT NUKES not CUKES YOU IMBECILE!"
A good assessment of RIM’s present value by NYU professor Aswath Damodaran.
Living within your limits: Thoughts on Research In Motion (RIM)
He thinks the stock is undervalued, but only if they stop R&D and milk its current business and return profits to shareholders.
"As a potential stockholder in RIM, here is my unsolicited advice to the management of the company. Rather than fight the critiques of your product (that it is closed, corporate and limited), embrace them. In fact, I have names for your next few models: the Boring Blackberry, the Blackberry Funsucker and the Blackberry Stolid. Let’s face it! The primary market for Blackberries is composed of paranoid (often with good reason) corporate entities that worry about their employees revealing business secrets and playing games on their iPhone and Android Apps, and you will appeal to them with your "cant have fun with these" Blackberries. Disband your research and development teams, forget about product revamps and don’t even dream about more Playbooks. In effect, accept that you are an "old company" and behave like one. Your stockholders will be deeply grateful!"
kinkistyle / Giant Cukes
AT&T breaking off the marriage with T-Mobile. Now…buy Sprint…..
Anger/Denial – well, between my disgruntlement, and DSKs assertions of denail.. tells me we’re at the start of a ride down… get on your ultrashorts!
Kinki
Thanks for the laugh! Much needed after today’s market.
denail.. oops! "denial"
and PS.. as i’m ‘capitulating’ out of my longs, almost surely means we’re going to get a huge bear rally. Once i finish getting all sold off that is. And considering that likelihood just makes me angrier! Grrr!
BTW if we hold current levels and bounce – the graphs may look as up trend?
http://online.wsj.com/article/SB10001424052970204791104577109010174484888.html?ru=yahoo&mod=yahoo_hs
I received this today, make of it what you will, written by GS Dec.13th, so it’s not exactly hot news, but is interesting. I am translating the intro, the rest is GS in English: [sorry if the yellow highlighting remains, couldn’t get rid of it]
"Tomorrow the BCE is opening a large line of credit for Euro banks, which purports to lend them all the liquidity they might need at 1% for 3 years; if the take-up is substantial, it could cover all their liquidity needs for 2012-2013, perhaps reducing both bank and sovereign risks and holding down rates." [LTRO = long term refinancing operation]
From GS: We may be in a position in 10 weeks time where EU banks have secured an incremental €1,000 bn+ of 3-year funding to variable rate equal to ECB rate, and thereby completely pre-funded all their needs for 2012 and 2013 – ‘must-read’ report and ‘must-listen-in-to’ conf call replay. Jernej Omahen’s EU banks report quantifying the implications of ECB’s recent announcements and the replay of his accompanying conf call are both mandatory reading/listening for anyone with an interest in the equity market and/or bank sector. The bottom-line is that we are likely to be in a position in 10 weeks time where the EU banks sector has secured an incremental €1,000 bn+ of 3-year funding to a variable rate equal to the ECB rate (currently 1%, market pricing in further decline in 2012), and thereby completely pre-funded all their needs for 2012 and 2013, at a rate which is 300 bp+ cheaper than market funding (if available at all). This should reduce funding risk substantially and potentially generate significant amounts of capital (e.g. €1 trn x 300 bp = €30 bn per annum). Given that the bank sector has u/p market by -3% since the ECB announcements, and only is up +3% from its all-time market-relative low in late November, this seems to be overlooked by market. Even though the sovereign crisis will continue to be a major headwind until resolved (our best guess still late 1Q/early 2Q), it looks like banks should be in a decent position to o/p into and after the Dec 20 and Feb 28 LTROs. Sovereign yields could also benefit if perceived risk of bank system back stops decline, and/or some banks start using 1% 3-year ECB funding to buy sovereign paper at 5%+ yields (more likely at short-end of curve), which in turn would be supportive for risky assets overall.
"Tomorrow" refers to December 20, 2011.
Ah, and Phil, "When all you have is a hammer…." correctly has quotes around it — I borrowed it myself, and added it to a comment last week. "Hope is not a strategy", however, is an original of mine. You can imagine that the context of its coining was not a happy one. I have become very clear on the distinction since then; I’m glad you find it useful,
patent lawsuit/Iflan: I think this may be only a minor victory for Apple. The patent ruled in favor of Apple covered the process of searching for a phone number in an e-mail and tagging it with HTML. Kind of a narrow patent on a specific function (that is quite generic, but i digress).
The lawsuit was over 10 separate patents, I believe, and all were dismissed except for this one. So HTC can take that function out and ship it without that specific function. Though I bet someone hacks it or makes an app for it the next day.
"Water is fluid, soft, and yielding. But water will wear away rock, which is rigid and cannot yield. As a rule, whatever is fluid, soft, and yielding will overcome whatever is rigid and hard." – Lao Tzu
zero:
Did you receive that story from a friend or directly from GS? It will have a major impact on markets if true. Don’t you think?
Anyone know how to scan for stocks that are trading for less than their net cash per share?
Buyer’s Remorse; Record Volume of Returns Before Christmas; $217 Billion Returns Expected, Up 14%
DC: The original Goldman piece was sent to me; I don’t have a GS account, but work with people who have access to their material. It came out on Dec.13, as mentioned, and GS itself seems surprised that the news — it’s not a secret – has had so little impact. The variable seems to be whether the banks take the ECB up on it; many seem to feel that accessing the facility would show weakness, and might be a bad idea for them. Given their capital position, in the aggregate, I think many of them will get over it and draw down. I hesitate to call something a game changer when the news has been in the market for a week and hasn’t changed anything I can see. But it appears to have that potential, and I have held up on reducing certain equity positions and will definitely reduce my Euro short hedge given a window to do so. Staying loose, in other words.
Hi Phil,
The buyout price for VRUS is 137.
The 130 Calls were 5.80
The 3X 140 Calls were .15 total (.05 each)
Net spread 5.65 CR
So by Jan ’12 if VRUS has hit the buyout price then one will lose upto $1.35
I find the risk ($1.35)/reward ($5.65) ratio worthwhile.
Given the uncertainty hanging around the results of one of the compounds in the QUANTUM trial, there is surely going to be increased scrutiny, possibly delaying the completion of the merger. Add to that the upcoming holidays. Given that the deal was announced on Nov 19, its unlikely for a major pharma acquisition to be completed in 60 days.
There is a minimum possibility that there could be a bidding war. The bids would have to be over $144 ($7/share) to make sense for VRUS to reconsider the the current offer of $137 since there is a 400MM ($7/share) termination fee. Hence the 3X covers. So its likely that the stock would end up either around 137 or in the case of a bidding war above 144, both likely profitable scenarios.
I was just wondering if you had any ideas on further improving the odds of success on this trade. Selling offsetting Puts seems to be a very risky proposition given it could drop 60-90 pts if the deal falls through. I was thinking of selling Jan 38/36 Put Spread for $.62 on GILD instead to cover part of the $1.35 exposure of the VRUS call spread.
Good morning!
We’re off to the races today as the VP of the ECB, Vitor Constancio, finally smacks down the bears by simply saying what I’ve been saying for ages regarding the possible break-up of the Euro or the EU:
Constâncio said the ECB was determined to stick with its current policy of introducing new three-year funds to try to counter the freeze in interbank lending, and support greater fiscal integration in the euro zone. “What we decided is very recent and it’s enough, but we never pre-commit, so we will see,” he said. “So far, we think the decisions we made are very significant and should be enough for the objectives that we are responsible to attain.”
About time someone pointed out the obvious. As I said yesterday, the only reason the Dollar is so high is on fear of the Euro and all it takes is a rational word or two and the Dollar drops like a rock, back to 80.40 now, after testing 81 last night, with midnight giving us out tippy top on the Dollar and low in the futures.
Oil shot back over $95, Gasoline (/RB) came back off that $2.50 mark and now $2.526, Nat gas is $3.13, gold $1,606, silver $29.32 and copper $3.34. Major congrats to those who took the (/CL) longs off that $93 line – money money money!
Unfortunately, so far, the markets are only up 1% at 5:30 , not a very impressive performance with an almost 1% drop in the Dollar. Asia had closed pretty flat and DAX and CAC are up 1% but FTSE flat (still not participating in bailouts) but the Nikkei futures have pooped about 1.2%, over the day’s trading high.
The Euro is at $1.307, the Pound $1.5632 with 77.88 Yen to the Dollar and 1.2177 Francs to the Euro.
I think the Dollar is consolidating for a further move down, if they break below $80.40 we could have a good reversal day but there will be plenty of Dollar bargain hunters on the way down. That sudden move up in the Dollar yesterday that we, fortunately, did not believe – may have been a blow-off spike to flush the shorts before moving down.
It’s certainly going to be an interesting day, in any case.
Edison didn’t invent the light bulb (they were around for 50 years before his) – he perfected it – after many, many, many attempts, saying: "I have not failed 1,000 times. I have successfully discovered 1,000 ways to NOT make a light bulb."
Sprint/Pharm – No way, same monopoly BS with S. S and TMobile can get together but T has apparently been told: "No mergers for you!"
Grrrr/Scott – Good call!
Big Chart – Don’t mean a thing as we swing between our lines (doo-ah, doo-ah, doo-ah, doo-ah, doo-ah, doo-ah, doo-ah, doo-ah, doo-ah).
AAPL patents/Iflan – I am just stunned that AAPL couldn’t get a sweeping patent on the entire concept of a smart phone – they were miles ahead of everyone else and CLEARLY everyone else just copied them. I was at the Wired Store in NYC this weekend, looking at all the tablets and they essentially rank in popularity by how much they are exactly like an IPad. It was also very telling that EVERY display that used a tablet for interaction was using an IPad – despite there being about 100 different companies represented. The only really cool thing I saw that was different was HP’s new touch computer, which is a 27-inch screen/computer with a touch interface that runs windows normally with a keyboard that comes on screen when you need it. Now somewhere in between that and an IPad is my FlatTop!
BCE/ZZ – Yep, that’s more than I thought ($1.4Tn) and, as I keep saying PLENTY of money to kick the can 2 years down the road. This crisis is over for now.
Cash per share/Burr – You can add it to the standard Google stock screener. The problem is, I don’t know if it’s accurate or perhaps it’s just not net as it shows GS with $78.40 a share but I guess it’s a good jumping off point to find a few gems like KYO, who have a very surprising amount of cash and almost no debt.
Game changer/ZZ – That was my initial impression too but nothing happened. Very strange.
VRUS/Oncmed – Ah .15 total. How do you see the risk at $1.35 if they get bought for $140 in the end? Bumping up a price to please shareholders ahead of a vote is routine. As I said, I wouldn’t trade them (we did sell some very low puts early on when they were still fetching a good price) because the spreads are ridiculously wide and you can’t get realistic entries or exits.
Dollar holding 80.40 so far. Europe still up about 1% – they just can’t seem to get people excited about the markets into the end of the year.
In Capitol, Investors Pay for Trading Tips
Seeking advance word of government decisions is part of a growing, lucrative—and legal—practice in Washington that employs brokers, lobbyists and political insiders who arrange meetings between hedge funds and officials.
RIMM/Phil: Edison was a genius and a cunning businessman — as was Jobs & Co. and the Google managers. I don’t know if RIMM management can be grouped in that same category at the moment…. I guess Damodaran is assuming RIMM staff is incompetent and is looking for that last "puff" on that still half-smoked cigar butt.
But, at this point, any step forward is probably a huge upside surprise for them, seeing as how they are so universally hated. Maybe if they started selling furry boots or yoga pants?
AAPL portfolio alert: Here is the plan for this morning: Place standing orders to sell 5 Jan 380 calls for 18.50 and sell 5 of the 15 Jan 390 calls for 13.00.
lflantheman,
Do you think they are going to sell down after the open.. What is the stop on the appl 5 Jan 380 calls
Thanks,
Sasanka