Saturday, June 30, 2007

No Respect At The Dollar Store

I went to a dollar store to pick up some envelopes.... oddly enough many things in there were priced at $1.25. Inflation? Brought back memories of Rodney Dangerfield...

"What a crowd, what a crowd... I tell ya, I don't get any respect, I go into a dollar store and they charge me $1.25!"

Tuesday, June 26, 2007

The Options Screener

Tuesday activity...

Aircastle LTD (AYR) popped up on the Screener today. No news with heavy call volume both in the July 30 and 35 strikes - simply overwhelming open interest. There was no put volume. We'll see if there's some follow through Wednesday, or if this was some type of hedging strategy.
Bear Stearns (BSC) call options volume was especially strong on talk that BSC could be acquired for 2x book value, or around $180 a share. That goes in the "analysts who smoke funny cigarettes" file. It really is nice that financial stories can be almost as funny as something that Groucho Marx could have dreamed up. 2x book value? How does one assess book value when assets may be mispriced?
A great bonus Groucho line, "I can see you and I married. I can see you bending over the stove. I can't see the stove!"

Elan (ELN) calls were active on recurring takeover talk. How many rumor mill stocks have been taken out this year? Not many to my recollection. TXU, SLM come to mind, but most of the real deals come like a thief in the night. Takeover talk not withstanding, ELN has had a nice run.

Hoku Scientific (HOKU) was a $4 stock not long ago. Now it's $12 as the solar power play wins contracts left and right.

Mirant (MIR) still trying to sell itself and often pops on to the Screener.

Reynolds (RAI) was up in anticipation of the patent ruling, which did go its way. We'll see if they out of the money calls hit paydirt on Wednesday.

Tiffany (TIF) - again July 55s active on buyout speculation. Is Lee Scott going to buy them to add a new level of offerings to Walmart.com while at the same time instantly boosting the average income metric of the Wal Mart shopper 14-fold? Will you be greeted by blue smock wearing attendants at TIF who can also be called on to use a meat slicer? Have you seen the jewelry counter lately at a Super Wal Mart - they must be sweating it out at TIF. Only kidding. LVMH has been the rumored suitor of TIF.

Amazon (AMZN) - pre split, the thing must be trading at about $500? The usual give and take activity with bulls betting to the moon with calls.
As usual, above info presented for informational purposes... not a recommendation to trade.

A Victory For The Bulls??

According to my gadgetry, the high print of the day for the Dow Jones Industrial average was 13,452.52 and the close was 13,337.66; yet a broadcast commentator opined that the "flat" close was a "victory for the bulls". What the?? A close more than 100 points below the highs is a victory for the bulls?? LMAO. It's a damn shame that good analysis is so hard to find nowadays in the mass media. The declaration that today was a victory for the bulls insults the intelligence and experience of many in the audience and on the street who know there is so much more than just looking at the close relative to the open. So much for looking at volume, breadth, money flow, other indices and internals to come to an informed conclusion about the health of trading in a given day. It is truly amazing what passes for 'good' reporting these days. Remember, most broadcasters are prohibited from owning stocks they report on and in some cases aren't allowed to trade any stocks, or derivatives at all. So what good is their critique to begin with when they have no skin in the game?


With the VIX close at the high of the day at 18.89 (back to the Feb mini crash levels) and the market sliding well off the highs again, it's only a matter of time before the market takes a real spanking. Put to call ratios look shabby, breadth has continued to deteriorate and the action in general of a strong open and weak close is bearish. A good chunk of the early bull rally, or bull victories were built on either morning dumps followed by afternoon runups, or strong opens followed by even stronger finishes. There's little to celebrate in two successive failures to cut Friday's losses in half. Someone needs to prime the discount window even more and pump more cash in... copy NY Fed??


Credit woes and subprime meltdown will continue to be themes that dominate trading this week. Don't believe subprime is getting worse and spreading? Bill Gross is an excellent read: Looking for Contagion in All the Wrong Places.


Fed policy makers start a two day meeting late Wednesday afternoon. The all important rate announcement will come on Thursday at 2:15. Stand pat and talk about risks is the likely outcome on Thursday. By fall it's also likely that Gentle Ben will look back longingly at his period of keeping Fed Funds unchanged. Surely the day will come when housing meltdown and inflation troubles will have to be dealt with directly by way of one of those 2:15 pm announcements where real action and tough pills to swallow will be doled out.


Stronger than expected earnings out of Oracle (ORCL) and Nike (NKE) are good for a quarter point gain out of S&P futures.


A VIX at just about 19... no surprise if you've been reading here. I remain of the opinion that the mean long, long term averages of the VIX are quite a bit higher than even today's level (simple method is to look at monthly moving averages). Yes, VIX is getting overbought short term and I don't rule out a spurt for the market and drop in VIX if corporate America can put together another good earnings period, but the writing has been on the wall. The pricing in of risk has only just begun as the subprime woes have only just begun and things with Iran and the Middle East start to get more interesting by the day.

Quick Morning Market Comment

I've been on temporary assignment in certain media circles, so my time to post has been limited.

1492 is not only the number associated with Chris Columbus, but it was key support yesterday - deja vu all over again from earlier in the month. While stock futures are a tad higher and VIX futures are at a decent discount to cash, the negatives on the subprime front are still looming. Easing crude oil can also be a positive, though we saw yesterday what can happen when the market gets even a whiff of rumors about refinery problems.

In Asia, stocks were weaker and I continue to keep a wary eye on Shanghai. Japanese yen also strengthened a bit: Yen Rebounds, Asian Stocks Ease.

While I'm not saying I think Bear (BSC) will get down to these levels, or to buy far out of the money puts, I'm intrigued that 120, 115 and 100 strikes on Bear Stearns calls and puts are now available for trading.

Sunday, June 24, 2007

The Week Ahead

This is going to be a heavy week for economic data: US Economic Calendar for next week. The data sifting will be going on as Fed policy makers meet Wednesday and Thursday. The Fed certainly has lots to be worried about as the housing market takes another dive as gauged by the recent slide in the ABX indices and the troubles with two Bear Stearns hedge funds. I remain in the camp that believes yields have been rising as systemic risk is further priced in and inflation continues to run rampant due to the intense amount of money creation as gauged by shadow-M3 figures. Those countervailing forces (especially the illusion that the economy is rebounding and that Bernanke is some sort hero ROTFLMAO) will enable the Fed to stand pat again.

Looking ahead in the credit markets: Treasury Bill Auctions Set for This Week.

What better time to do a roadshow to raise some buck-a-rooskies? Road show planned to raise funds in Chrysler deal: WSJ.

Investors will continue to watch for developments on the Bear Stearns front. I suspect that lots of work has been going on over the weekend to try to sweep this under the rug. If all goes according to plan the talking point for the week should be, "CDO problem? What CDO problem?? There was a CDO problem??? LOL, don't be silly..." and all should be well with the market resuming at upward trajectory. Or will it? If enough folks were paying attention last week to the reality that a whole lot of that tainted paper is only worth 10-cents on the dollar, then the curtailed Merrill sale of Bear collateral could be just enough to turn the tide away from 'buy first and ask questions later'.

The weekly S&P chart, at least from my half blind perspective (left eyesight a goner because of retinopathy), has the lower high, lower low look complete with the bearish engulfments that we saw last summer as the market struggled with a rising bond yield problem. In many respects it is amazing to realize just how far the stock market has come in a year, how risky credit derivatives have also become and yet the stock market has had this uncanny ability to hold above S&P 1500 and not get caught in the whirlwind of selling that occurred last summer under far less harsher conditions.

I am continuing to keep an eye on ABX and also relative strength, which as the chart shows, has fallen even as the market has remained range bound between 1500 and 1540. A weekly RSI break below 50 will surely be a big event, since 50 proved important support in the late Feb/March swoon. It's getting closer now at the 58 level. A further break below the 10 week moving average might also be pretty important as well. Yep, I've got that bearish feeling again. It may go away quickly IF I'm making too big a deal about CDO chicanery, in which case earnings season in July could prove the next upward catalyst.

And Friday is the big day... at least for some: Release of iPhone Has Industry Abuzz. Will this be the ultimate buy on the anticipation, sell the news?? Stay tuned.

Box Office Battle

'Evan Almighty' sails to box office title. Others portray the $32 mln take as a box office disaster especially since $175 mln was spent to make the movie which is distributed by Universal Picture (GE): Weekend Box Office: 'Evan Almighty' Runs Aground at Box Office.

How out of touch am I with tv and movies in general? I didn't even know who Steve Carell was until this weekend. I took my children to see "Evan" yesterday and I find it hard to believe they spent so much to make what was amusing, but nothing special kind of flick. I'm a big Morgan Freeman fan and he did a fine job in the film. I'm looking forward to his portrayal of Nelson Mandela: Morgan Freeman to play Nelson Mandela in new movie.

Blackstone (BX) Overvalued?

Barron's thinks so...

"By almost any financial yardstick, Blackstone looks richly valued relative to other asset managers, especially at a time when rising interest rates and burgeoning competition threaten to make the buyout business tougher. Indeed, the IPO could prove a high-water mark for the private-equity business." Read more here.

BX's first day (minute chart):

Options Screener


The Options Screener picked up on a number of interesting situations.
Macy's (M) takes up 3 slots on the screener due to speculation that it would be taken out in a leverage deal.
Kraft (KFT) also popped on to the list following word of Nelson Peltz' 3% stake in the company. One caution here is that Peltz is a longer term investor who prefers to build shareholder value as opposed to simply selling companies to the highest bidder.
Harley Davidson (HOG) also rose 2% on, if you can believe it, Honda takeover talk.
Frontier Oil (FTO) June 45 and 50 calls both with strong volume that exceeded open interest on no news and just vague takeover speculation.
Omnivision (OVTI) has also been on the rumor mill circuit.
Marvell (MRVL) call options volume has also picked up on takeover talk.
As usual, info above presented for informational purposes only.

Saturday, June 23, 2007

ABX and Its BROAD Implications Explained

"On the accusation that we are merely ‘talking our book’: we are not short any of the ABX indices or, for that matter, do we travel in these circles from a trading standpoint at all. We are simply trying to understand the credit market
dynamics of these instruments because we have believed for the past two years
that the credit bust we see coming will originate from these murky waters. The
troubles that the Bear Stearns hedge fund has had over the last two weeks speaks
directly to this risk. The ‘’fat tail’’ potential in this area, given the amount
of leverage utilized in this sector, is enormous. Who’s to say if the trade is
crowded or not? Since crowded can’t be quantified, we prefer to stay away from
conjecture and merely focus on the facts. We find that the very entities exposed
to losses in credit derivatives are buying more assets to "prop" up prices is
extremely disturbing."
The quote above from John Succo and Scott Reamer in the Minyan Mailbag. It's a great read and sheds some understanding into why the stock market was spooked Friday by the on going difficulties at Bear Stears and its collapsing hedge funds.

Next week could be a very bad week for the stock market unless things simmer down on the mortgage derivatives front. Below is the 2006 ABX bbb-, 2007s look the same as well.

The broader issue remains the cat getting out of the bag about CDOs and how they are grossly mispriced. Attempts by Bear creditors to sell some of the "assets" was met with offers of 10-cents on the dollar. Scary stuff.

From Wikipedia:

"According to the Securities Industry and Financial Markets Association, aggregate global CDO issuance totalled USD 157 billion in 2004, USD 249 billion in 2005, and USD 489 billion in 2006."

Thursday, June 21, 2007

Bear Stearns (BSC)

Late word this evening from the FT that Bear is canceling an IPO: Bear Stearns to cancel Everquest IPO. Everquest is tied to the two stricken Bear hedge funds. Earlier, Reuters ran a story on how Bear may get through its hedge fund crises without suffering major bottom line losses. But now Bloomberg is reporting that Bear is going to take on a bigger chunk: Bear Stearns May Take on $3.2 Billion of Fund Loans, People Say. The truly scary issue is that CDO pricing via mark-to-model is a complete delusion as Bear is now forced to take on loan obligations because creditors are realizing that the sale of the collateralized debt obligations are exposing how far off the mark mark-to-model pricing is. The last thing creditors want is for the CDO's to be marked-to-market which could cause a chain reaction selloff throughout the entire industry. This is starting to look like the equivalent of Three Mile Island, and the loan offer may yet contain the situation keeping it from becoming a financial Chernobyl.

While I've made negative posts on Bear, Blackstone and housing, this doesn't necessarily mean I think the stock market is going to crumple tomorrow. The bulls are still intent on pushing stocks higher. Just the mere word that Merrill decided to stop liquidating the assets it seized from Bear, was enough to stop the bleeding today and further empower techs. As the old saying goes, "never short a dull market".

Blackstone and KKR

No doubt Mr. Schwarzman is a happy camper (so long as no one wears squeaky shoes) with his IPO pricing at the top of the range. Blackstone IPO raises $4.13 billion. Did they price it low enough so BX will have that Google like quality of surging a never looking back? Somehow I doubt that as the credit boom falters, but for tomorrow, at least, it ought to be a happy day as BX comes to market. Can me cynical, but this has market top written all over it. Surely, Mr. Schwarzman & cohorts would not be sharing and letting the unwashed and huddled masses in if they thought BX was undervalued?

And don't look now, but... Reports: Private equity firm KKR is planning an IPO.

Supply vs. Demand

Is it stupidity, or arrogance? Americans still confident in home values: survey. The bust has only just begun (Carpenters hit song?). It's not hard to imagine, that in the most frothy markets values will fall 50%+ from their stellar peaks over the next few years. As long as there have been markets, there have been booms and busts. The rules sure haven't changed in the 21st century WRT U.S. home values.

Continental (CAL) Apologizes

I've heard of Snakes On a Plane, but sewage on a plane? And what's with the spokesman at the airline with the last name of MESSing? Airline Apologizes for Sewage on Plane .

Wednesday, June 20, 2007

The Yield Minkey

I always got a good laugh out of the Peter Sellers monkey, err, Minkey lines in one of the old Pink Panther movies. On this otherwise quiet day, the 10 year is down about half point, yield back to 5.14%. Even as crude falls on the latest inventory figures, yields are ratcheting up a bit again, causing a small pull back in the stock market.

DOE Inventories

DOE Crude Inventories for week of June 15th:

Crude inventories rose by 6.9 mln vs. consensus estimate of down 50K. Gasoline inventories rose by 1.79 mln vs. consensus estimate for a gain of 1.19 mln. Distillates nudged higher by 157,000 vs. consensus estimate of 870,000.

The numbers have pushed crude lower, which in turn has led to a small bounce in the stock market.

Morning Market Comment

S&P futures have been on the plus side this morning by as much as 5 points indicating a higher open. What futures don't tell us is whether the market can make it past the May S&P highs whic is the 1540 area.

The economic calendar is quite today, aside from the release of the weekly MBA data showing a slide in activity: Ahead of the Bell: Mortgage Applications.

Some of the positive factors for the stock market include Morgan Stanley: Morgan Stanley's Net Jumps 40%.

Some expected a blow up out of Fedex (FDX), and they did lower guidance, but the company still managed post results that avoided a crash and burn scenario: FedEx Profit Falls Short as Economy Slows. FDX actually a little less than $1 in pre market.

MGM is sliding by better than 9%: Kerkorian's Tracinda Ends MGM Talks. The question now, what else might Kerkorian target?

Bristol-Meyers (BMY) is 20-cents higher after Citi reiterated a buy on BMY saying that following the Plavix court victory the company could be a more attractive takeover target. SNY, GSK and PFE could be potential acquirers. However, Leerink Swann, maintains a market perform saying any price on BMY above $30 is hard to justify. Leerink says BMY is relying too much on Plavix has had recently lackluster drug launches and a lack of pipeline surprises.

Medtronic (MDT) could be active today. It is holding an analysts day.

The pencils are sharpened today against Anheuser Busch. AG Edwards downgraded on valuation. Bernstein thinks a merger is already priced into the stock and maintains a $53 target.

Crude down 28-cents at 68.82. The 10 year treasury is down 6/32nds, yield at 5.116%.

Tuesday, June 19, 2007

Bear Stearns (BSC) and Merrill (MER)

What would you do if someone owed you lots of money - say, on the order of hundreds of millions of dollars? Merrill Lynch wants its money back from Bear Stearns. And as the days pass the numbers are going up! The Wall Street Journal reports Merrill is now looking to sell $850 mln worth of collateral assets tied to the sinking Bear High-Grade Structured Credit Strategies Enhanced Leverage Fund. Merrill had originally sought to sell $400 mln in assets on Monday, but delayed the sale to hear Bear's plan to recapitalize the fund. Merrill's not biting and the assets will be sold starting tomorrow afternoon.

WSJ:Merrill to Dump Bear Fund's Assets.

Thus far, this Bear fund meltdown has been orderly, but as it gets closer to being a complete shutdown it will be interesting to see if there's any market angst. BSC is down about 2% tonight.

It seemed like a good idea.. benefit from a drop in subprime bbb- as tracked by ABX. But the chart below is a road map that shows a few key problems for a short play vs ABX. The late February swoon that corresponded with the tumble in the stock market led to a full opening of the liquidity spigot whether by way of the Fed's Discount Window, or even via Term Investment Options, or TIOs from the Treasury. Then in mid-April a coordinated bailout effort was announced to pump billions more into the system by way of entities like Freddie to shore up subprime areas of damage. That's what really had to have damned the Bear fund to crippled status as the ABX surged above 75. Sudden liquidity can ruin your fund.

Darden (DRI)

I'm not fond of many casual dining chains and that includes Red Lobster and Olive Garden which are operated by Darden (DHI). Even the Olive Garden tv ads have been ridiculous. The worst commercial featured an old Italian guy who received his U.S. citizenship and celebrated with the family at.... Olive Garden. Mama Mia. My wife is Italian and assured me that her 70 family members, or however many there are (compared to like 8 remaining Kingslands) would not go to Olive Garden.


I have noticed lately that it is very easy to drop $90, or more at a casual dining chain these days to feed me. my wife and three young children. Even at the non chain casual restaurants, food is expensive. My wife and I had lunch today at a great local restaurant and spent over $50. IF I really wanted to cut corners, I could go to the supermarket and spend $80 for at least a few nights worth of home cooked dinners.


After looking at Darden's numbers tonight, I get the feeling that folks are cutting back. How else to account for 4th quarter revenue of $1.46 bln vs estimates of $1.54 bln? Wow, close to a $100 mln shortfall vs estimates. That's a lot of Lobster dinners that went unserved. 4th quarter earnings amounted to 67c vs estimates of 71c. This is a big miss and DRI is down 5% after hours.

Late Day Notes

Apple (AAPL) pulled off the highs on rumors that there are display problems with the iPhone... no confirmation.

GAP (GPS) options very activity on speculation the company will make a major announcement this evening.

I was seriously considering a purchase of puts on Circuit City (CC) following Best Buy's (BBY) lousy results, but have opted to stay on the sidelines there. I'm waiting to see if CC announces anything on the whether they will sell their Intertan unit.

Tamiflu (GILD) (ROG.VX)

Options Doggy has stumbled upon a good one: Japan struggling with Tamiflu dilemma. So if nervous system shutdown, or sudden death aren't appealing, might want to make a mental note.

The problem is seen as serious enough in Japan that new clinical trials will be started: Roche, Chugai to conduct new trials for Tamiflu.

As the Big Dog has pointed out, Gilead (GILD) is a touch weaker today. GILD has licensed Tamiflu to Roche in exchange for royalty payments. Something to keep any eye on.

Bristol Meyers (BMY) - Fade the Spike?

There are a couple of developments in the BMY front that are pushing shares higher:

Bristol-Myers Squibb: US FDA Accepts Ixabepilone Application

and

Bristol-Myers Wins Plavix Ruling

Interesting, though, that Cowen recommended selling into strength, according to an entry on theflyonthewall.com. BMY briefly poked above $32, but is now trading around $31.55.

Morning Market Comment

It's more of the same on the housing front. The latest housing data shows continued distress: Economic Report: Housing starts fall 2.1% to 1.47 million pace. The overall numbers were a bit better than expected, which is largely a reflection of a pickup in multi-family dwellings construction. Activity is near dead, especially relative to activity in '05 and even '06, in the realm of single family homes.

10 year treasury up a few ticks, yiled at 5.119%. This is probably the most distressing news of the morning: China Daily: China sells more US T-bonds.

Stock futures are in a bit of a funk this morning in reaction to weak earnings.

Electronics retailing giant Best Buy (BBY) posted earnings: Best Buy quarterly profit falls, and it wasn't a Don Adams, "missed it by that much..." BBY missed estimates by 11c. So much for the analyst at Jeffries who yesterday said that expectations have come down enough that there could be a positive share reaction after earnings - same for Pacific Crest which said worst case was factored in. BBY is down 4%.

Circuit City will post earnings earnings on Wednesday. Kaufman says the below consensus idea for CC could be "conservative" and that we could see a miss on the order of 16c a share in CC's earnings.

Carnival (CCL) is down about 2%. Earnings beat by a penny at 48c/shr, but lowered full year guidance to EPS of $2.85-$2.95 vs. consensus of $3.00.

A latebreaker of deal: Home Depot in $10 bln deal to sell unit--sources

Yahoo! (YHOO) was up over $2 after hours last night on word of the Semel ouster from his post as CEO. With Jerry Yang, co-founder, now in the direct driver seat some analysts are thinking that there's less of a chance of a merger. An analyst Nollenberger thinks had there been a chance of a deal with a company like Newscorp (NWS), Microsoft (MSFT), or Time Warner (TWX) Semel would have stayed on. Goldman Sachs also says near term sale of the company is not likely. Jeffries the odd man out saying Yang ceo-ship means higher chance of deal.

Is Burkle about to surprise us? Dark horse in the Dow Jones fight. Burkle said to be trying to get Yahoo! to help him bid for Dow Jones (DJ).

Over the weekend, there was speculation BHP would make a bid for Alcoa (AA). Now the speculation has shifted back to Alcan (AL) which is presently a target of AA: BHP Billiton to explore bid for Alcan.

Is Blackston the Last Hope for the Bear Stearns Subprime Fund?

LodgeNet (LNET) Guides FY Revs Above Wall Street View.

Crude down 16-cents.

Monday, June 18, 2007

24/7 Wall Street and the dk Report

A special Thank You to both 24/7 Wall Street and the dk Report for giving this blog some recognition.

dk recently highlighted The Kingsland Report as one of the "Top 30 Financial Blogs": http://dkreport.blogspot.com/2007/05/top-30-financial-blogs.html

And 24/7 Wall Street put this blog on their "Twenty-Five Best Financial Blogs" list: http://www.247wallst.com/2007/06/the_247_wall_st.html. Wow.

It's nice to know from deep in the trenches that this blog is making a positive impression!

I should also note that both lists are a great resource for finding a plethora a great blog. I need to update my links section.

Anheuser-Busch - No Tear In My Beer (BUD)


Anheuser Busch (BUD) remains on my radar. I own the July 55 calls which jumped 47% today to close at $1.40 bid - only problem is that I bought them at $1.20 last week, rode them down through expiration and now at least have my head a bit above water. The stock was up as much as 3% on no news. There has been speculation that BUD could become the target of activist investor William Ackman who has indicated a company about the size of BUD ($41 bln market cap) would be just right for him to take on. Rumors have also swirled that billionaire investor Warren Buffett might find BUD attractive, or that a larger global brewer could make a bid.

What ultimately happens is still in our future, but bulls have targeted BUD by buying large quanties of call options, especially calls that expire in July - meaning they're looking for something to happen sooner rather than later. Open interest on the July calls totals over 52,000 contracts, while put open interest for July totals 9,723. The options are also priced to factor in potential news with implied volatity at 24.6 vs historic volatility of 20%.

The real test for me is whether BUD can break above the $55 critical point of reference. The air above $50 has proven notoriously too thin in the past (which is why BUD could be ripe for an activist shareholder since this is a problem that dates back to 2002). Now that we appear to be making a run for $55, if we can't break above, I'll be out of those options; but a run above $55 on strong volume would be a positive momentum indicator and a signal that rumors could be about to turn to some sort of reality. It's put up or shut up time again for BUD shares.
By the way, beer and my kidney transplant anti-rejection meds don't mix, but a visit to BUD's Busch Gardens Das Fest Haus is always a great time in Williamsburg, VA. Knockwurst and Prograf? No problem!

Yahoo! (YHOO) Has a New CEO

Let's get this straight - Terry Semel has been ousted and deservedly so. But the guy owns 1.5% of the company's shares, so naturally the company is spinning this as Jerry Yang being "named CEO" as opposed to Semel "being ousted".

Semel is being put into the role of non-exec chairman. Congrats to the droves of shareholders who voted against the Semel led slate last week. Susan Decker, exec VP named as company president. As expected, YHOO trading up a little more than $2 on the news.
What I find funny is that CNBC's Faber earlier downplayed the rumors that Semel was on his way out. Score one, AGAIN, for the web world where the Jack Myers newsletter hit it on the head this morning with the early word that Semel would be toast. Faber, to be fair, has had a number of scoops, if not real coups and everyone gets it wrong sometimes. This one again goes in the catagory of "You're Only As Good As Your Information", and nowadays that means going far beyond cable tv to get your information.

EDIT: earlier I asked the rhetorical question of who the next, real CEO of Yahoo! might be... apparently Mr. Yang says he is in it for the long haul. I don't know, but ok, for now. Read: My New Job. I even went so far as to throw my two cents in on how the Yahoo! Finance site should be made better. They surely can't do what they've been doing. Enabling the user of the site to come up with his own ideas through unique sources of content (like blogs) and to offer an array of tools (which is why I've been developing my options screener) is the wave of the future. Honestly, how often is it that you make money from something traditional like the Wall Street Journal, AP, or Yahoo Finance? I can think of one instance this year, the buyout of Sallie Mae which was telepgraphed the day before in the Journal -- perhaps there were a few other times as well, but traditional, commoditized media is giving you old news. Regular readers here have gotten the early heads up on a number of situations and surely if I can do it, Yahoo! ought to be able to enable their users to get a leg up as well. Yahoo's message boards, overrun by spam, sure are not the answer to getting useful insights and ideas, nor is their regurgitation of AP.

AL (Alcan)

AL is now at the highs of the day, and gains in Alcoa (AA) have nearly evaporated. Reuters is reporting that BHP has hired Merrill to advise on a possible bid for AL. Reuters citing sources it didn't name.

A $69 Handle on Crude ($WTIC)

West Texas Intermediate managed to poke above the $69 level just a little while ago. Is a run at $70 next? The Schork Report notes that funds have further increased their length to 64,471 contracts, which is a 1-1/2 month high and an indication that a big chunk of the market is primed and ready for a run to $70.

Washington Mutual (WM)

The rumors are getting stranger and lamer. Today the chatter that's being heard includes Washington Mutual (WM) putting itself up for sale. With $319 bln in assets but sitting on top of a powder keg of alt-a and jumbo mortgages I would have to wonder who would buy them. Perhaps it would a "friends and family" (a term coined by Bill Cara) engineered rescue? Implied volatility has not moved much despite the rumors.

Schork Report Media Alerts

CNBC... TODAY at 2:00pmEST: My friend Stephen Schork will be interviewed by Erin Burnett on Street Signs.

BLOOMBERG TELEVISION... TODAY at 4:10pmEST: Stephen will also be interviewed by Lori Rothman and Mike McKee on Final Word.

Strangely amusing that I have worked with each those anchors in the past with each being quite talented.

Bear (BSC) and Merrill (MER)

CNBC reports that Merrill Lynch has postponed plans to seize $400 mln from Bear's collapsing subprime hedge fund. BSC is well off the lows fo the day. Stock market is also staging a modest rebound.

Yahoo! (YHOO) Is Semel About To Resign?

CNBC aired a report this morning which it qualified as "pure speculation" that Yahoo! CEO Terry Semel may resign. RBC this morning says there's a 50% chance Semel could call it quits within 6 months and that such an event would push shares up $1 to $2.

Wendy's (WEN)

Wendy's (WEN) just lowered guidance, but also said that it is exploring that sale of the company - no longer looking at alternatives. I'm tied up this morning... so no morning market comment. Stocks poised to open a bit higher on M&A excitement with AA bid talk leading the way.

Cadence (CDNS)

Looks like no deal: Talks for Chip Software Maker Are Said to Bog Down on Price. Wow, I am going to take a major hit on this one.

Edit: Bought at 1.65.. sold at .65. Ouch!

The Week Ahead

Father's Day has been a blast. I'm a very blessed guy to have three wonderful children. They gave their old man at iPod Nano, so I'm now a really musically high tech dad. The gadgetry is always appreciated since my home office is gadget central, but my six year old son gave me a hand made card and a hand made replica of neck tie - amazing, the designs that construction paper and crayons can inspire and something that I will always cherish.

Will a traditional merger Monday return? Things have been pretty dead of late on the merger front on Mondays and it will be interesting to see if the deals return or if the recent surge in bond yields has helped to dry up some sources of capital for the LBO whizzes - not to mention the Washington effort to levy a chunk of new taxes on firms like Blackstone (BX).

Here's one small deal that's taking place: Lexicon Pharma in financing agreement with Invus (LXRX) is the ticker and will be a big mover on Monday.

As I've blogged recently, I have had my doubts about whether a Murdoch (NWS) takeover of Dow Jones should be seen as a forgone conclusion. Now, it appears that Roop may have some real competition. Pearson, GE in talks about joint bid for Dow Jones: report. Sources for the stories that have popped up this weekend about a GE/PSO bid are quick to point out that the talks could collapse, but if the two parties were to bid and enable the Bancroft family to retain a piece of the action, I would imagine that no amount of money Murdoch could offer would be good enough to get him a deal. With the Bancroft's as part of a potential GE/PSO privatization of the Journal, I'm inclined to believe that there may be little chance of much premium to Murdoch's $60 a share offer. Why should GE/PSO pay more if a Bancroft 'final-say' blessing would clinch an anti-Murdoch deal?

Nymex (NMX) is another potential deal in waiting: NYMEX in talks with three suitors, sources say.

The economic calendar is fairly quiet in the week ahead. Housing starts are scheduled for release on Tuesday. An annual pace of 1.47 mln is expected for May which would be down from the April figure of 1.528 mln. But really the key number to watch is Building Permits, which tumbled more than 8% in April. The usual Thursday release of jobless claims is on tap along with leading indicators that same day.

On the earnings calendar, Tuesday features numbers from Best Buy (BBY), Carnival (CCL) and Darden Restaurants (DRI) which should give a snapshot in retailing, leisure and casual dining and whether folks tightened the purse strings or found some extra money to spend. Wednesday earnings feature numbers for Carmax (KMX), Morgan Stanley (MS) and Fedex (FDX) which again gives us a look at retail spending, another look at Wall Streeet after less than spectular numbers from Bear (BSC) and Goldman (GS) and a peek into corporate spending with the Fedex numbers. Thursday earnings include numbers from H&R Block (HRB) and Jabil Circuit (JBL).

As for the week ahead on Wall Street, as J.P. Morgan famously quipped long ago, "Prices will fluctuate". I think it again comes down to whether the bond market can remain stable which helped stock prices to recover on Thursday and Friday. Any type of re-ratcheting of yields higher and it will be last Wednesday's swoon all over again. The Dow is only 3-dozen points away from another record high and the S&P is a scant six points away from a record, so it's not hard to imagine potential resistance at those high water marks should they be re-visited. It's also not hard to imagine a reversal of some of the Friday quad-witch gains on Monday which often happens (unless merger Monday comes back to life). Energy could also be a spoiler in the week ahead. WTI is already trading a bit above $68. A $70 handle on crude is likely not to be received warmly by the crowd down on Broad and Wall. There's also geopolitical problems which go hand in hand with crude, but in and of themselves can dampen sentiement (eg. Israel plans attack on Gaza. Still, last week was an up week for the market even with all the aforementioned negatives in play so I continue with mostly long plays but ever vigilant for a good short scalp when the opportunity comes along.

Corporate court room drama is set to begin on Monday: Brocade stock backdating case could have wide impact.

Sunday, June 17, 2007

More of That Made in The People's Republic Quality!

Thomas the Tank Engine Toys Recalled Because of Lead Paint

Alcoa (AA)

As I mentioned a week or so ago, Alcoa (AA) has been seen by a number of analysts as a potential takeover target. Speculation is really heating up by way of the Times of London: New BHP boss to put Alcoa bid plan back on agenda.

Do CEOs Make Lousy Dads?

"It's not that CEOs are cold and uncaring - it's just hard to bond with a kid via e-mail. And those bedtime memos! Not good! And of course, if you used to work at Enron, well, you tend to drift away from your family while you're in prison."

An interview with the author of CEO Dad: How to Avoid Getting Fired by Your Family (Davies-Black, $19.95).

Even if you're not a CEO, the above is a fun and thought provoking link. Happy Father's Day!

Saturday, June 16, 2007

Applebees (APPB) - Drinkin' Bad In The Neighborhood

Toddler Served Margarita in a Sippy Cup at Applebees. APPB says it was an honest accident and will pay for any medical bills. But nowadays in our litigious society that may not be enough.

Mortgage Fraud Is Alive And Well

Need a bogus paystub, or need to rent a well stocked bank account, or quickly improve your credit score?? No problem! Web Help for Getting Mortgage the Criminal Way

Subprime and LBO

It's a beautiful weekend here in the tri-state NY region, though there are certain Wall Street types - hedge fund types in particular - who must be brooding. Bear Stearns' subprime hedge fund problem is rapidly turning into a complete debacle. The Wall Street Journal is reporting that Merrill Lynch moved in Friday to and seized $400 mln of the subprime fund's assets and will auction them off in the coming week to cover a loan it made to the Bear fund. That could mean the dissolution of the fund. Read more: A 'Subprime' Fund Is on the Brink (subscription). The bigger question that has yet to be answered is whether there are similar hedge fund blow ups lurking.

Meantime, leveraged buyouts - the venerable LBO - has been a key pillar supporting the bull run in the stock market. Is that about to change? This blog has been warning, both extemporaneously and by citing the work of others, that the sudden rise in bond yields has led to changes in the credit markets which could be drastic enough to stem the flow of deals. In a perfect storm like fashion, cash hungry Congress has entered the picture with bi-partisan legislation to lift the tax rate on publicly traded partnerships. That sent shares of Fortress tumbling 8% and Alliance Bernstein (AB) down about 4%. The real target of the legislation is Blackstone (soon to be BX). Read more: Tax Gap Puts Private Equity Firms on Hot Seat.

These are a few situations in the making that don't necessarily mean an end to the bull market in stocks tomorrow, but certainly developments to watch.

Friday, June 15, 2007

Made In The People's Republic

This is a harsh, but real way to personify China's torrid economic growth, as GDP continues in high gear at above 10% growth: Reports of Forced Labor Unsettle China.

From the Times article, “My son was totally dumb, not even knowing how to cry, or to scream or to call out ‘Father,’ ” he said. “I burst into tears and held him in my arms, but he had no reaction. He was in rags and had wounds all over his body. Within three months he had lost over 10 kilos,” about 22 pounds." What father and son went through is just unimaginable.

I Live in a Goofy Downstate NY County

Rockland county executive approves ban on smoking in cars with children. Sure, it's a bad thing to subject kids to second hand smoke in a small, enclosed area like a car - but how do you enforce this one? This was the subject of intense media attention in the region and our goofy county exec with a total dead end politica career, C. Scott Vanderhoef, apparently needed 15 minutes of fleeting fame.

Bill and Hill Dump Stock

Clintons Sell Possibly Troublesome Stock. The trustee who managed their portfolio seems to have done a great job... too good and without trading one cattle future.

Friday Market Recap by IBD

Penn National (PENN)

It's up 21% on the private equity takeout of $67 a share. But is it a done deal? I don't have the full report, but JP Morgan commented earlier that the takeover price of PENN could increase by 10 to 20%.

Blog Talk Radio

There's a very cool site called Blog Talk Radio (http://blogtalkradio.com/) which features interview shows where the audience can call in to chat with the guests. I've signed up (http://www.blogtalkradio.com/businesstalk) and will soon be conducting interviews with the many people who I interviewed in my years at Bloomberg and CNBC. Blog Talk Radio is a huge leap in social media and for bloggers who want to expand their offerings beyond the printed word. I'll not only be able to conduct interviews with strategists and economists, but you'll be able to participate in the discussions and Blog Talk Radio archives the content!

Morning Market Comment

Stock futures are flying following release of the Consumer Price Index which featured an in-line overall rise of .7% in May, but a core reading, which excludes food and energy, that was up a less than expected .1%. The overall CPI was pushed higher by a 5.4% surge in energy prices. Helping to keep the core cool, owners equivalent rent was up by just .1%, and prescription drug prices fell .1%. This report is also boosting sentiment: U.S. June Empire State index at highest level in a year. And the current account deficit, while staggering, rose to $192.6 bln in the 1st quarter vs expectations for a surge to $200 bln.

The economic data as sparked a surge of more than 9 points in S&P futures, so it looks like a third day of gains ahead on Wall Street. Today is expiration Friday - the quarterly "quad witch". As noted earlier in the week, an OEX above the 700 strike at the end of the day could trigger computer driven buy programs. The OEX closed yesterday at 699.82. Look out above if we can get above 705 by the end of the day.

While it's 3 cheers in the stock market, the move in the bond market is on the tepid side with the 10 year treasury up by 7 ticks, the yield slipping below 5.19%. While it's possible to spin it positively seven ways to Sunday, especially by relying on the .1 core number, the overall price rises in both CPI and yesterday's PPI remain alarming given recent worldwide crude production shortfalls and the lower than usual gasoline inventories here in the U.S. that are likely to keep upward pressure on energy prices.

One of the big movers of the day - The New York Mercantile Exchange (NMX): NYMEX explores sale of company: report.

Penn National (PENN), which closed yesterday at just above $51, is being acquired for $67/shr cash. The buyers are affiliates of Fortress Investment and Centerbridge Partners.

Yummy? Coffee and salad: Starbucks to add salads to lunch menu.

Lazard is reiterating a buy on Medtronic (MDT) saying the company may release results of its Endeavor trial at a June 20th analyst meeting.

Blackstone had also bid for Archstone-Smith: WSJ. An interesting little story not so much because Blackstone bid, but because it pulled out and the eventual winner, Lehman and Tishman, lowered their offer as credit market conditions deteriorated.

Intel gets a fresh BUY rating from Goldman Sachs with a target of $28. Goldman says Intel should be able to maintain a lead over AMD as AMD moves toward more outsourcing.

Crude oil is up 30-cents at 67.92. Another meaningful rally in crude could put a damer on things on Wall Street. Crude Oil Rises on Supply Worries.

6-15-07 Wallstrip Chat: Andy Monfried

Are you just a regular Joe 2.0 looking to compile, analyze, and sell your media? Let Andy Monfried, President and Founder of LOTAME, show you how...

Thursday, June 14, 2007

Crocs (CROX)


Is this the elusive sell signal that long suffering CROX shorts have been hoping for?? LOL.

The Senate Targets Blackstone, et al

Who forgot to tell Schwarzman to spread a little more wealth around Washington? Too late now: Blackstone's tax burden could double. Actually, Schwarzman is about as well connected in Washington as one can be having been a roomie with W at Yale. A Journal write up notes that it could take 3 years before any new taxing structure hits Blackstone.

The Subprime Meltdown Continues

It's not over by a long shot. BBB- ABX index continues to sag as adjustable reset by the millions.
But beyond the insurance that protects against default in the ever shaky subprime debt, we saw the subprime woes in a much more tangible way: the results of both Bear Stearns (BSC) and Goldman Sachs (GS): Goldman and Bear Stearns feel impact. In the words of Goldman's CFO David Viniar, "We have not seen the bottom in the sub-prime market."

Wal Mart (WMT) and its Shrinkage Problem

Wal Mart's "Always Low Prices" slogan is taking on an extreme meaning for shoplifters who are helping themselves to merchandise and getting away with it: Wal-Mart Struggling With Rising Loss From Shoplifting And Employee .... That article has an amazing figure - that the company loses more than $3 bln, or 1 percent of total sales to so called "shrinkage". Mr. Sam has got to be rolling in his grave as a buffoonish effort to enhance profit margins by present top brass through cutting staff, including store detectives, has led to a literal backdoor disappearance of those margins.

Call me a snob, but I just can't imagine what anyone would covet from Wal Mart whether they pay for it, or steal it! Ok, that was a cheap shot since even I occasionally step into a Wal Mart to buy light bulbs, microwave Dinty Moore, or Dristan. I just find the blue-themed stores to be blues experience that I try to avoid both as a shopper and as an investor.

200,000 Unique Visitors

Wow, sometime during the last few hours this blog flew past the 200k unique vistors mark. Total hits, which isn't showed on the counter is approaching 360,000 hits. You can't imagine how tired my index finger is from hitting the return key over 300,000 times in the last 7 months to get my counter to hit 200k! Seriously, I want to thank all who have come through this internet tent for a visit and for the many who have kept coming back.

Peak Oil Going Mainstream

The Independent: World oil supplies are set to run out faster than expected, warn scientists. Who are you going to believe? Big oil would surely not admit to soon running out of oil so you would expect them to say we've got 40 years of reserves, but 4 years and counting, according to these scientists, is almost inconceivable. Even if the truth lies somewhere in between, that's still a day of reckoning that will be here way too soon.

Adobe (ADBE)

They just posted Q2 earnings of 37c, beating the street by a penny. Revenue 15 mln above estimates at $745.6 mln. 3rd quarter outlook: EPS range of 39 to 41c vs estimates of 40c. Revenue btwn $760 mln to 800 mln vs estimates of $780 mln. Stock is lower by 1-1/2%. I have no position (have learned the hard way not to play earnings).

Today's Options Screener


Since it's fairly late in the session, just a quick presentation without commentary. As usual this is for informational purposes only - not a recommendation to buy or sell anything.

Integrated Device Technology (IDTI)


Integrated Device Technology (IDTI) has been stuck below $15 for a number of weeks now, but increasingly bullish sentiment could cause a break out in shares. A look at what analysts are saying:

A.G. Edwards
-We are initiating coverage of Integrated Device Technology with a Buy/Speculative rating and a $20 price objective.
-We believe IDT is well-positioned in a variety of $50-to-$500 million 'niche' semiconductor markets that are expanding along with Internet and networked communications. IDT uses its expertise in silicon timing, interface, and memory design to capture share, as transitions in industry standards create opportunities in a variety of communications, consumer and computer markets.
-We think concern with near-term prospects has unduly punished IDTI's price recently.
-We see renewed growth in the second half of 2007, and believe secular shifts and penetration gains in base sation switches, PC audio and switches, videogame and communications clocks, and network coprocessors will expand IDT's revenue base in the coming 18-24 months.

several other sell-side firms have been behind IDTI with similar reports, however I think we will finally start to see the buy-side catch up to this, especially after recent meetings with management.

great post by notable calls

Starwood (HOT)

You've got to be very careful with these rumors, but the chatter persists that there is interest in Starwood (HOT). Today's rumor features talk of a more than $90 a share offer already on the table and the Kirk Kerkorian is among the interested parties. Recall on June 1st, UBS put out a note saying a sale of the company was likely with a value of $84. Implied volatility has been rising and the heaviest options activity has centered in the July 75 and 80 calls. Yes the 80 strike, about $9 out of the money!

edit: I have decided to jump in with a small batch of calls.

Morning Market Comment

The Wall Street bulls will attempt further follow through to yesterday's gains, but their world is not perfect with a larger than expected headline PPI number and tomorrow's CPI figures looming large. It's not the first time that the PPI figures have come through way stronger than expected and the street has become used to largely shrugging off the big PPI swings and looking at core which again came through at a .2% rise; so S&P futures are nudging higher by a point.


As the old saying goes, "It ain't over 'til the fat lady sings". On the CBOT (BOT) takeover front yet another wrinkle: CME and CBOT Revise Merger Agreement to Provide Increased Value to ...


Big names in the brokerage world have posted results and their stocks are lower:

Goldman Sachs quarterly profit rises, beating estimates. GS is down over 2%.

Bear Stearns (BSC) reports a 2nd quater profit of $3.40/shr vs estimates of $3.49. Revenue at $2.51 bln beat consensus estimates by $200 mln. So much for the folks who bought the June 150 and 155 calls. BSC is down $3 at the $146 level.


There are a few very interesting analyst calls this morning:

  • UBS downgrades Dow Jones (DJ) to Reduce from Neutral believing the Bancroft family could still rejected News Corp's $5 bln offer. UBS says it doubts another offer will come along and that shares are vulnerable to falling back to where they were before Murdoch's offer - the mid $30s.

  • Bank of America initiates hi flyer Mannkind (MNKD), a developer of inhalable insuline, with a Buy rating and a $20 target. BofA sees launch of MNKD's lead diabetes product by 2010.

Trouble for Jones Soda (JDSA): Starbucks to drop Jones Soda . Jones is down 4%.

This week Greenspan said China's economic pace is unsustainable. But when does it end? More figures showing boom times: China May industrial production surges 18.1%.

WTI crude is drifting higher by 59-cents to 66.95. The Euro is flat and Yen futures are down 25 points.

Big PPI Jump

Overall PPI was up .9% on surging energy, but core wholesale inflation came in as expected with a gain of .2%. There was an initial knee jerk lower in stock futures but they've since bounced back since this isn't the first time overall PPI has come in well beyond expectations. The 10 year treasury is down 5-ticks. More coming in the Morning Market Comment.

Wallstrip - LJ International

Alcoa (AA) - Could It Get a $50/Shr Offer?

There's a lot of food for thought in this Reuters write up that actually focuses on Alcan's (AL) options: Alcan says considering all options to Alcoa bid.

The heavy put volume Wednesday in BHP Billiton (BHP), that I noted earlier in my Options Screener, has my antenna up that something may be coming down the pike in the aluminum space. Also noteworthy that call options volume in the July AA contracts swamped put volume. The heaviest of the AA July call volume was centered in the out of the money 42.5 and 45 strikes, though there was trading in the 47.5 and 50 call strikes.

I have no position yet, but will be keeping a close eye on the activity later today.

Wednesday, June 13, 2007

The Options Screener

I watched a 2 hour double feature of Ghost Hunters tonight on the Sci Fi channel and fell a bit behind in getting this post up. I lived in a very haunted 115 year old house back in the early 1990s, so the Ghost Hunters show is of interest, but that's another story for another time - maybe around Halloween.

As usual, I present my Option Screener information free of charge and for informational purposes. The Screener and this post is not a recommendation to buy, sell, short any security.


Some interesting stuff popped up today:

There was heavy trading in AU Optronics' (AUO) options following this early Wednesday morning report: UPDATE 1-Taiwan's AU eyes return to profit in Q2.

Ahead of earnings Thursday, Bear Stearns (BSC) options were active. And the confidence shown by the bulls to buy June options which expire on Friday was noteworthy. Not only did more than 5,000 June 150 trade, but more than 4,000 June 155s also traded - talk about cutting it close.

Citigroup (C) and Consul (CNX) appear to be spreads, so no comment.

There was no news on Equity Residential (EQR), but a pop in its soon to expire June45 calls.

iShares:FTSE/Xinhua (FXI) appears to be a strangle play with the 7500 call options on the 125 strike, but 7500 options trading on the 105 July put strike.

General Dynamics (GD), a variety of buys and sells on that strike.

Merck (MRK) could be someone positioning for earnings or other news ahead of July expiration.

Airline puts and calls trading remains very active with the Screener picking up Northwest (NWA) call options activity.

iShares:Lehm 20+ Trs (TLT) has been a popular play for those who feel bonds are oversold.

VIX July 22.5 is certainly an interesting bet that the market is going to get splattered at some point between now and expiration in July.

I also threw a few put trades up.

The BHP put activity notable on no news. Could it be positioning in case they make a large bid for a competitor?

WR Grace (GRA), at first it looked like a roll from June to September, but then big buys of December puts also crossed.... something to watch.

CNX again with heavy activity on the put side as well.

What Is Bear Stearns (BSC) Up To?

A nearly $4 billion bond offer pushed by the firm has many on Wall Street figuring its hedge funds are preparing to close shop. BizWeek: Is Bear Stearns Cutting Its Losses?. Bear Stearns will be posting earnings on Thursday morning.

Luxury Goods

One of the factors noted in stronger Fed bank district activity as reported in today's Beige Book was continued strength in high-end retail spending. AP's Warren Levinson gives a look at just how high-end things have become. What's driving it? "People with too much money."

Inflation

Thursday could be a pivotal day for the markets. 8:30 ET tomorrow morning we get the latest read on wholesale inflation. The Producer Price Index is expected by economists to rise by 6-tenths of a percent, largely reflecting the recent surge in energy prices. The core PPI, which factors out volatile food and energy (who needs that stuff), is expected to rise by .2%. Remember, PPI is a very volatile series where we've seen swings of as much as 3 standard deviations in the overall number. The bulls on Wall Street are praying for a mild inflation report to further stabilize the bond market.

Heavy News for Sanofi (SNY)

FDA experts reject Sanofi diet drug. Depression and suicidal thoughts prove to be too much of a side effect factor - seems like a pretty good call by the FDA panel. Imagine the disclaimer at the end of the t.v. commercial, ".... may cause a runny nose, cramping, depression and suicidal thoughts."

IBM (IBM) for Adobe (ADBE)?

When the market starts rocking and rolling so does the rumor mill. Today's most interesting rumor, if not craziest rumor was that IBM might be mulling a bid for Adobe. This one-minute chart of Adobe shows the rumor hiting at around 2 pm ET, sending ADBE on a upward trajectory right to the close.

IBM buying ADBE, my the rumor millers are getting creative these days. At present, ADBE has a market value of just under $26 bln vs the market cap of IBM at $153 bln. Big Blue also has around $10 bln in cash on its balance sheet. So it is conceivable that IBM could engineer such a deal, but I find it hard to believe that ADBE management would sell out and find it harder to imagine how ADBE culture would mesh with IBM culture since I know IBMers here in the Hudson Valley and what's going on at Big Blue these days.

Incidentally, ADBE will post earnings Thursday evening. While press reports say the rise in ADBE today was due to optimism about earnings, the IBM rumor did indeed hit a number of trading desks that I'm in touch with. There's no doubt that ADBE will also post strong results tomorrow night. 36c is the Reuters consensus estimate for the bottom line, 730.1 mln is the top line estimate.

The better bet with ADBE is likely to go with the earnings story and avoid speculating on the outlandish IBM for ADBE rumor.

Beige Book Gives the Stock Market Additional Lift

With the Fed districts reporting stronger consumer spending and increased hiring.

This Bud's (BUD) For You and Cadence (CDNS)

Just a quick note about Anheuser Busch (BUD) which at one point earlier today was up $1. BUD popped up on the Options Screener this past weekend. Today more than 10,000 July 55 calls have traded on no news. It's one to keep an eye on.

Options activity has been completely dead in Cadence Design (CDNS) yet a few well placed sources on the West Coast continue to say the NY Times report on June 4, 2007 of a potential buyout was not fiction. The takeout price that has recently been mentioned is $28 a share. That's another one to watch.

Also Applebees (APPB) options volatility has move up today. Merrill Lynch says major announcements are likely in the next few weeks that could get APPB to the $30 level. Other sources are saying that instead of a buyout, APPB could pay a special dividend to shareholders.

Research In Motion (RIMM)

How much higher will it go? An analyst at Canaccord today lifted his price target from $180 to $225.

Morning Market Comment

Stock futures are spurting higher following the 8:30 release of economic data. The figures on retail sales and import prices are stronger than expected. Retail sales jump 1.4%, biggest gain in 16 months, U.S. May import prices rise 0.9%. Briefly, the yield on the 10 year treasury jumped to 5.31%, but have since pulled back. So S&P futures are shooting higher as a rebound takes shape this morning indicating that even a whiff of a more stable 10 year treasury is able to give the stock market some room to rally. But staying power is what's important - whether initial gains after the open can be sustained in this higher rate environment. The usual suspects will need to be watched closely: everything from bond yields to VIX futures and the VIX (interesting that the VIX futures somewhat lagged the actual VIX yesterday) to breadth and put to call ratios, etc.

The recent surge in bond yields has had a noticeable impact on mortgage activity. US mortgage applications rose last week - MBA. It looks as if some folks rushed in to lock themselves in as rates moved higher.

Gold futures extend losses, as dollar rises

Tuesday, June 12, 2007

Not an Oil's Well That Ends Well Situation

FT: Oil Demand Rising Faster Than Expected.


To add further perspective, in just our country energy use continues to skyrocket:



And with energy use skyrocketing in places like China, India and even Africa, the supply demand picture is looking grim:


Really, the question that needs asking is why is OPEC so coy with upping its output these days? What are they trying to hide? I'll stop there, too late to get into the whole 'peak oil' debate.

One thing is for sure.... enjoy the 'cheap' $3.50 a gallon gasoline while it lasts!

The Options Screener

My Options Screener picked up a variety of interesting options volume situations. As always, this information is for informational purposes and is not a recommendation to buy either options, or the underlying stocks.

Automatic Data (ADP) - very intriguing. Nearly 5,000 June 42.5 calls traded vs open interest of 642 with just three days to go before expiration. More than 6,000 June 45s traded vs open interest of 749. Only 100 June puts traded.

10,000 Alpha Natural Resources (ANR) September 17.5s traded and more than 12,000 September 20s traded vs very little put volume across the entire put side of the chain.

Everyone loves Apple (AAPL) with many folks taking a stab at the July 150's. Even with 3 days to go before expiration, June 130's were active with volume of over 18,000 contracts with a bid of .05 and an offer of .10. While bullish speculators are willing to chase AAPL call strikes $30 above present levels, put players were willing to only go $5 below with the 115 puts being active in June and July.

Bell Canada (BCE) takeover speculation continues to heat up. This news from late yesterday got a bunch of folks lathered up: UPDATE - Onex joins consortium mulling BCE bid.

Crocs (CROX) calls remain a crowd pleaser. My screener only picked up the heavy June activity in the 90 and 95 call strikes, but over 2,400 June 100 calls traded as well! July call buying went all the way to the $110 strike and there was some nibbling of the September 125 calls as well.

Taser (TASR) has also become a darling again and its calls were active as earnings approach.

Delta (DAL) December 17.5 calls saw only 8 trades, but two of them accounted for 65,000 contracts hitting the offer.

UAUA and CAL options were also active.

ICICI Bank Ltd. (IBN) active on takeover chatter, so to Seagate (STX).