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Monday, February 6, 2023


Monday Mourning – Good Night Dear Leader

A young salute: A picture of North Korean founder Kim Il Sung, his first wife, Kim Jong-suk, and his son, Kim Jong Il, is displayed at the Unification Hall at the West Seoul Life Science High School in Seoul


Oh, hello Mr. Seoul,

I dropped by
to pick up a reason

Stick around while the clown
who is sick
does 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.  

IEF WEEKLYSo 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! 



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Caption: " No try without vaseline!"

From Leaf West at Slope.


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

rofl smileys

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!

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?

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

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?

 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.

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.  

Do you think they are going to sell down after the open.. What is the stop on the appl 5 Jan 380 calls

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