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2024
October 5th, 2009 at 4:00 am
Good morning!
I had a crazy weekend, things just kept coming up and this is my first chance to catch up.
Project/Deano – Sorry I didn’t get to that but I’ll have something this morning. Kwan and I are working on getting a Wiki format up and running and that’s where we’ll want to put the new project.
Correction/Pstas – We SHOULD correct down to 9,100 in any sort of normal market action (on a run from 8,000 in early July to 9,900 at the end of the quarter, a 50% correction would be "normal"). Of course we’re testing the 50 dma on the Dow at 9,458 AND it’s the 5% rule there (almost exactly of 9,917 peak) so that SHOULD be some powerful support, which means we need some bad news to fall below it and this is a no-news week ahead so it’s all up to earnings. We did fully cover our DIA puts on Friday because the weekend was looking too iffy after getting our 5% down move – you have to be happy with VERY small bearish gains in this market…
On your DIA spread, you are way too bearish as 1/2 the $93 puts ($1)) doesn’t give you enough coverage on your $99 puts ($6.50) and why do I have to tell you that .50 is inadequate coverage for $6.50??? Also, being in Dec $99 puts give you a .65 delta and sets you up to get killed if the market heads higher and you haven’t got enough time to sell enough puts to cover your long posiiton. If you want to move it without spending more money, you are better off in the Jan $97 puts at $6 with a .57 delta and selling 1/2 the Oct $96 puts for $2.30 (net $1.30 on the roll), which takes $1.15 off the table (17%) and what’s the point of having downside protection if you don’t take profits off the table on a down move? The Oct $96 puts can be rolled to 2x the $93 puts ($1.05), which can be rolled even to the Nov $87 puts, which are $10 below your Jan $97s so you have a clear path to a double if the Dow falls 500 points. Any gains you attempt to make above 100% on your long puts is a pure greed fantasy and is much more likely to lose you money than make it as you are clearly overcovered.
Thanks Iflan! I’m seeing "sheeple" used by a lot of financial writers now and I know I started that trend as people used to say "what’s that?" and now I don’t have to explain it anymore… 😎
$100KP/Allen – That’s up. Not much to do but watch and wait unless we get more of a sell-off.
VZ/Craig – I don’t know that there’s a rule as to how dividends countied. That’s why you can have "earnings" in trusts that pay out all their profits in dividends. Will VZ lower dividends? I doubt it, they spent $35Bn building an all-fiber network since 2004 otherwise they would have made more than double what they seem to have made this decade. Now they are poised to reap what they have sown although, of course, the economy couln’t have turned sour on them at a worse time as essentially FIOS is a luxury service AT THE MOMENT. In 5 years, as bandwidth demands increase, it will become a necessity anyway. That’s the only reason this stock is at $30 intstead of $45-$50 right now. More than the dividends, I’d be worried about a dillutive stock offering to reduce debt, possibly at about $38 a share when they get back there as that’s the point at which the math works for the company.
TBT/Concreata – Well that spread is even cheaper now ($3.60) and, generally, if you have the opportunity it’s better to go lower than take the lower price so that means that $4.20 is better spent selling the 2011 $43s for $7 and buying the $35s for $11.20 as that spread puts you 100% in the money with a 90% upside. Frankly it’s amazing that trades like this are available, don’t you think?
Wrap-up/Balance – That would mean it would take me a week to do the weekly wrap-up so no thanks. I don’t know what your overall impression is of what I do but if you think I just look at a trade and can say good or bad for the next week or so without any research you are sadly mistaken. The trades ideas I bold during the week for a are generally out of about 200 or so stocks I’m watching and, at the point where they hit a mark I’ve been expecting with the volume and direction I’ve been expecting with the news I’ve been expecting and the overall market conditions I’ve been expecting THEN I put it up as a trade idea. What you propose is what is wrong with the way most people invest, you flip the model from waitiing patiently for the right opportunity to starting with a trade and THEN trying to push it into the following week without looking at the current conditions. If you like a trade and you feel you might want to make it, just ask during the week and I’ll be happy to look things over at the time but I’m not going to sit here from 6am to midnight Saturday and Sunday running charts and graphs and reading company news and looking at SEC filings and running sector comparisons on every position from the prior week just in case you might be interested in "catching up."
As far as I’m concerned, if you "missed" a trade that made 20% already (5% for a stock) – it’s dead. Move on. Why would anyone in their right mind want to chase something that already made 20%? Clearly the chance of something making 40% is lower than the chance of it making 20% so every time you buy a position that already made 20% you drastically lower your overall chance of success. Learn to recognize the KINDS of trades that you are comfortable participating in and the sectors you have an opinion in and, when we see something that fits your premise, THEN perhaps take a chance on it. As far as old trades – focus on the ones that didn’t work, those are the ones I’d most likely want to play again – the ones that worked are over, there’s always something else to trade tomorrow…
Roubini/Pstas – I agree with him but that doesn’t mean we should bet with him. Unless earnings disappoint this Q, the markets can still leg up again, mostly because the dollar sucks and there’s nowehre else to put money but, whatever the reason, the net effect is the market can be good for a finish at S&P 1,100 as that’s the kind of gain that GS et al need to get people excited about investing in the markets again.
Whle we need to remain VERY cautious because we know it’s all BS – the fact that we know this won’t stop the makets from going higher, especially with the BS I’m seeing thie morning where the Pound was jammed back to $1.60 and the Europ hit $1.465 even though the Yen "fell" back to 90 to the dollar. So, "amazingly" the dollar was strong against the Yen when the Nikkei was open despite being very weak in Europe. That kind of meddling (probably by Japan, not GS) makes for a very dangerous investing climate.
CIT/New – I know, isn’t that funny?