The other day we noted the bearish head and shoulders formation in the GOOG chart along with the breaking of its 50-day moving average, which it failed to recapture yesterday even after a great deal of buyside defense.
In going through the analysts comments, Soleil had some especially noteworthy things to say. That firm claims that that GOOG's average price per search keyword is down more than 10% since the start of the year. The firm also says U.S. search revenue dropped to 6% sequential growth in the third quarter. Those comments went by pretty much unnoticed especially after PACS lifted its target from $500 to $575. We'll see who's right eventually.
Wednesday, December 20, 2006
12/20/2006 Morning Market Comments
At least the stock market was able to bounce back yesterday as the realization set in that the bond market was not completely freaked out about the wacky PPI data given the volatility of series in recent months. But this morning the folks over at Marketwatch note that stock futures are off the highs (click here). Editor's note: Since everyone and their brother already puts out the customary list of story stock movers ahead of the open each day, I am going to link a write through which I feel does the best job of summing things up going forward. What I will offer in my 'morning market comment' is hopefully some additional non-commoditized, unique insight.
While the markets rebounded yesterday, 17 to 15 breadth on the Big Board was nothing to write home about and put to call indicators have been on the rise. That indicator alone doesn't signal an immediate correction ahead IMHO, but it bears watching when the crowd is loading up on puts in some big names like AAPL, WMT and DELL - just to name a few. But for weeks I've been talking about 'seasonality' and this is generally a bullish period of time for the markets. But we have seen fear, or the VIX find a floor at just above 9-1/2 and actually even an unwillingness to stay under 10 intraday, so there are some folks out there a tad bit more on the defensive.
There's no major economic data today aside from DOE crude inventory data a little more than an hour from now.
Morgan Stanley being total sleazes for failing to produce emails in arbitration cases - using 9/11 as an excuse! (Click here).
One company not getting coverage on the story stocks lists: Sharper Image. I couldn't help but to notice a note out from DANN that comps at SHRP will be down 22 to 25% this month. OUCH.
Zune and Vista finally like each other: http://www.theinquirer.net/default.aspx?article=36497.
I continue to be in holiday shopping and family arrival preparation mode. Posting will be limited during daylight hours for the rest of the week. Check out the World Sunlight map http://www.die.net/earth/... pretty cool stuff as we close in on the shortest daylight day of the year in the northern hemisphere. Night has indeed become a very large shadow in this part of the world.
While the markets rebounded yesterday, 17 to 15 breadth on the Big Board was nothing to write home about and put to call indicators have been on the rise. That indicator alone doesn't signal an immediate correction ahead IMHO, but it bears watching when the crowd is loading up on puts in some big names like AAPL, WMT and DELL - just to name a few. But for weeks I've been talking about 'seasonality' and this is generally a bullish period of time for the markets. But we have seen fear, or the VIX find a floor at just above 9-1/2 and actually even an unwillingness to stay under 10 intraday, so there are some folks out there a tad bit more on the defensive.
There's no major economic data today aside from DOE crude inventory data a little more than an hour from now.
Morgan Stanley being total sleazes for failing to produce emails in arbitration cases - using 9/11 as an excuse! (Click here).
One company not getting coverage on the story stocks lists: Sharper Image. I couldn't help but to notice a note out from DANN that comps at SHRP will be down 22 to 25% this month. OUCH.
Zune and Vista finally like each other: http://www.theinquirer.net/default.aspx?article=36497.
I continue to be in holiday shopping and family arrival preparation mode. Posting will be limited during daylight hours for the rest of the week. Check out the World Sunlight map http://www.die.net/earth/... pretty cool stuff as we close in on the shortest daylight day of the year in the northern hemisphere. Night has indeed become a very large shadow in this part of the world.
Tuesday, December 19, 2006
Some Rambling Thoughts on Commodities
Gas au Naturale -
With this forecast, the price has got to keep sliding..
http://www.cpc.ncep.noaa.gov/products/predictions/814day/. That ought to keep downward pressure on Nat Gas for at least another 5 days until we start getting a feel for how the first 10 days of January are going to shape up.
With this forecast, the price has got to keep sliding..
http://www.cpc.ncep.noaa.gov/products/predictions/814day/. That ought to keep downward pressure on Nat Gas for at least another 5 days until we start getting a feel for how the first 10 days of January are going to shape up.
Gold-I'm playing by the same $632 to $635/oz script as last time. I want to see it break above that level again before I jump in. As I think more about PPI and as I looked at the bond market's reaction to PPI, the fact of the matter is that PPI can be all over the map and volatile. Too early to think about stag-flation, at least that seemed to be the bond market reax. $6 rally could be another headfake and I still don't rule out a trip to the $600 neighborhood first. BUT, if we do continue to lift back up... I'm in depending upon strength of momentum a little bit above the $630 area - that was a great trade the last time around.
In the New Year, I may make commodities the focus of my trading activities and work. It will be a very interesting year ahead, I think, in both metals and energy.
Bachman-Turner Overdrive in Subprime Lending
You Ain't Seen Nothin' Yet...
More than 2 mln homeowners face eventual foreclosure. The Mortgage Bust Goes On.
More than 2 mln homeowners face eventual foreclosure. The Mortgage Bust Goes On.
Dell - New CFO
When a company is out of listing compliance due to late 10-Q filings, it's always intriguing when it decides to change CFOs in the midst of the fun and games. That's what's happening at Dell Computer which says Don Carty - former AMR CEO - is taking on the role of Vice Chairman and Chief Financial Officer. Read the early word here.
The average denizen of Dallas-Ft. Worth will tell you that Carty nearly ran AMR into bankruptcy and resigned in disgrace. Interestingly enough, Carty has been head of the audit committee of Dell as well. Dell has been under SEC scrutiny for its accounting practices and has effectively put the guy who has been providing the checks on the executives WRT accounting in charges of the finances. Kewl. To Dell, in my best John Cleese voice, "Jolly, bloody good show!" This one definitely deserves the Mr. Spock raised eyebrow grimace.
I would imagine that the former CFO Schneider will eventually be leaving with more than just a Dell umbrella... perhaps a lovely parting gift in the neighborhood of seven figures, at least?
The average denizen of Dallas-Ft. Worth will tell you that Carty nearly ran AMR into bankruptcy and resigned in disgrace. Interestingly enough, Carty has been head of the audit committee of Dell as well. Dell has been under SEC scrutiny for its accounting practices and has effectively put the guy who has been providing the checks on the executives WRT accounting in charges of the finances. Kewl. To Dell, in my best John Cleese voice, "Jolly, bloody good show!" This one definitely deserves the Mr. Spock raised eyebrow grimace.
I would imagine that the former CFO Schneider will eventually be leaving with more than just a Dell umbrella... perhaps a lovely parting gift in the neighborhood of seven figures, at least?
CC - Short Circuit City
It's pretty darned amazing that a company can ring up over $3 bln in sales and still lose over $16 mln, but that's what happened to Circuit City in its 3rd quarter. Even with a same store sales gain of more than 5 percent, Circuit still couldn't make money. Stock down about 20% today at about $19 and hard to believe it traded above $30 earlier in the year. Competition in the flat panel tv realm has been cutthroat, but there's also an element of a slower consumer creeping into the picture as well and let's face it: This is a retailer which hasn't figured out how to outsmart its competition except through cutting prices and losing money - it's on its way to cementing its fate an also-ran. At least Best Buy was able to turn a profit even though it came up short as well. Another thing is clear: As usual, the Wall Street analyst crowd wasn't paying attention since the consensus forecast was for a Circuit City profit of 5c a share. Maybe CC should diversify into the sale of oven mitts?
12/19/2006 Morning Market Comment
Economists - you've got to love them. If you think weather forecasters are the bunch who get away with botched forecasts - think again... it's the economists. The mostly guys who are surveyed for the Wall Street consensus forecasts make a heck of lot more money than your average meteorologist, or really most anyone for that matter. The survey of economists showed expectations for a .7 rise in overall PPI. The government reported a number nearly 3-times higher at 2%. Core PPI which was expected to nudge higher by .3, jumped by a whopping 1.3% - the biggest gain since 1980.
Energy, truck prices, etc led the way higher. While the Fed can now say.. 'look, see, we told you inflation remains a risk that needed to be watched - NO RATE CUT FOR YOU!!! (in my best Soup Nazi voice)', helicopter Ben is on quite a tightrope. This type of data amid the backdrop of an economy with GDP that's still in the 2% area keeps monetary loosening off in the distance which is what the Fed seems to greatly desire. At least that's my kooky take since I think Bernanke is pre-occupied with his inflation targets and inflation in general and loathe to hurt the dollar with rate cuts and expand froth in the equities market with rate cuts. On the other hand, if this marks the start another leg up in pricing pressures even after last May's crash in many commodities prices, or if more data comes through to reinforce the weak manufacturing data we saw late last month and the growing concern that the coming economic landing might be like my landings when I was a student pilot (hard - boy I drove my instructor nuts) then Bernanke is up that certain upleasant smelling creek without a paddle.
The soft, hard landing debate will rage on for some time to come. Of intitial concern on the street is that Bernanke and the Fed won't be cutting rates for months to come and that they may have an inflation headache on their hands. I won't even get into "stag-flation". So an initial nudge lower... maybe we'll get another 100+ down day before Christmas? Or better yet, maybe we just get the leg lower in the morning, but then rally 200 by the end of the day for no good reason except to get the financial journalists scrambling to come up with a reason. Seriously, the reaction is just a slightly negative bias this morning... all of this inflation news is really more of the same. With so much liquidity sloshing around, it's likely that major indexes will remain confined to their recent upward trading channels, which would keep the Dow risk to a drop of no more than a few hundred points, initially unless there is a shift to bearish sentiment, but that has yet to happen.
Housing starts rebounded in November, but permits fell again... (Read about that here). I expect that we could see starts move along in December as well with this great weather we've been having, but until actual builder sentiment and permits really take off housing will remain on the skids.
Gold getting a nice boost... up more than $2.. glad I stayed away from the short. With 0 CPI numbers, hadn't put much weight into the possibility of completely insane PPI numbers.
Energy, truck prices, etc led the way higher. While the Fed can now say.. 'look, see, we told you inflation remains a risk that needed to be watched - NO RATE CUT FOR YOU!!! (in my best Soup Nazi voice)', helicopter Ben is on quite a tightrope. This type of data amid the backdrop of an economy with GDP that's still in the 2% area keeps monetary loosening off in the distance which is what the Fed seems to greatly desire. At least that's my kooky take since I think Bernanke is pre-occupied with his inflation targets and inflation in general and loathe to hurt the dollar with rate cuts and expand froth in the equities market with rate cuts. On the other hand, if this marks the start another leg up in pricing pressures even after last May's crash in many commodities prices, or if more data comes through to reinforce the weak manufacturing data we saw late last month and the growing concern that the coming economic landing might be like my landings when I was a student pilot (hard - boy I drove my instructor nuts) then Bernanke is up that certain upleasant smelling creek without a paddle.
The soft, hard landing debate will rage on for some time to come. Of intitial concern on the street is that Bernanke and the Fed won't be cutting rates for months to come and that they may have an inflation headache on their hands. I won't even get into "stag-flation". So an initial nudge lower... maybe we'll get another 100+ down day before Christmas? Or better yet, maybe we just get the leg lower in the morning, but then rally 200 by the end of the day for no good reason except to get the financial journalists scrambling to come up with a reason. Seriously, the reaction is just a slightly negative bias this morning... all of this inflation news is really more of the same. With so much liquidity sloshing around, it's likely that major indexes will remain confined to their recent upward trading channels, which would keep the Dow risk to a drop of no more than a few hundred points, initially unless there is a shift to bearish sentiment, but that has yet to happen.
Housing starts rebounded in November, but permits fell again... (Read about that here). I expect that we could see starts move along in December as well with this great weather we've been having, but until actual builder sentiment and permits really take off housing will remain on the skids.
Gold getting a nice boost... up more than $2.. glad I stayed away from the short. With 0 CPI numbers, hadn't put much weight into the possibility of completely insane PPI numbers.
Monday, December 18, 2006
HOV - Hovnanian - Now, This Makes More Sense
High end homebuilder Hovnanian is getting spanked with a more than 3% decline after posting a loss of $118 mln to take a variety of charges to walk away from $141 mln in land deposits and pre development costs. If you have any interest in the state of the real estate market, this release from HOV gives an eye opening view: (click here). They're expressing some optimism by noting that more people are at least looking and resale inventories in some markets have relaxed a bit. Still, they issued weak guidance for 2007 with a guess that earnings could be as low as $1.50 a share vs expectations for earnings of $2.50 a share.
ORCL - Oracle
Oracle Corp (ORCL) matched at 22c/shr bottom line, slightly exceeded on top line. The stock is doing what it does best, not much of anything, down about 1% What I'm wondering is what was up with the more than 20k Jan20 and 56k Jan19 ORCL calls that traded today. Those were bullish bets. Last Sept there was a big gap up after earnings... doesn't look like a repeat performance... so it looks like a lot of options bag holders unless the stock can resume an upward climb in the weeks ahead.
While I Was Out - GOOG & ADBE
GOOG broke below its 50 day moving average... but really, this is the classic head and shoulders formation....
Sung to the tune of "California Here We Come...", the tune for GOOG might be, "440 Here We We Come..." I might be inclined to take a shot at the GOOG puts if I can find the time this week.
I did find the time with the ADBE Jan40 puts and they're up 75% today.... I will scale back on enough of those puts tomorrow to make it mostly a play with the "house's money"... and hold the rest and see what happens. I'm a big Adobe product user, but have been morbidly curious to see if the Adobe chart history repeats itself with more volatility (it's been a roller coaster ride the last 3 years especially). Every analyst and his plumber expects 50 before long and that's got me thinking it's time for some good old fashioned profit taking since the bullish hopes are based on future product rollouts that have yet to cause the cash registers to ring. I think it does get to 50, but not without more of the signature ups and downs.
Sung to the tune of "California Here We Come...", the tune for GOOG might be, "440 Here We We Come..." I might be inclined to take a shot at the GOOG puts if I can find the time this week.
I did find the time with the ADBE Jan40 puts and they're up 75% today.... I will scale back on enough of those puts tomorrow to make it mostly a play with the "house's money"... and hold the rest and see what happens. I'm a big Adobe product user, but have been morbidly curious to see if the Adobe chart history repeats itself with more volatility (it's been a roller coaster ride the last 3 years especially). Every analyst and his plumber expects 50 before long and that's got me thinking it's time for some good old fashioned profit taking since the bullish hopes are based on future product rollouts that have yet to cause the cash registers to ring. I think it does get to 50, but not without more of the signature ups and downs.
Quick $Vix
Been seeing a little nudging higher.... if that keeps up.. late day weakness for the stock market? Off to the mall-stravaganza.
12/18/2006 Morning Market Comment
As noted last night, until takeovers start becoming fire sale take-unders, these corporate marriages point to potential value that's locked up in the peers and competitors who aren't being acquired. Quality companies continue to go for decent premiums and that's a big pro on the list of pros and cons for buying stocks. The perma bears tick off a dozen fairly ominous reasons for why the end of the world as we know it will happen by tomorrow at 6:52 p.m., but so far no dice on the end of the world. I have a neutral stance listed on my block WRT to the stock market, which means I haven't been adding to long term fund holdings tied to the U.S. market, and remain allocated at 20% U.S. stocks for now. Neutral doesn't mean I think the market is going to crash tomorrow, or the next day. One of these days, I'll go into my long term portfolio allocations, but I haven't even had a cup of coffee yet and don't want to get into that entire subject this morning.
Caremark is up about 10% on word of the Express Scripts' offer. Biomet is being taken out by a private equity group including affiliates of Goldman Sach Capital, KKR and Blackstone. That's nearly a 30% premium to when the company announced that it was exploring strategic alternatives last April. Harrah's is up about 3% on word that Texas Pacific and Apollo are set to strike a deal. Realology is up 21% on a buyout by Apollo, though we wonder if that's the last word on that deal.
No doubt the air may be a little thin for some at this altitude of Dow 12,400+ which could lead to continued choppiness. Low volatility, low put to call has kept some with a wary eye on things - though it has been interesting to observe that while $VIX has slid below 10 the last few sessions it has scooted back above 10 by the end of the session indicating that there isn't a complete lack of complacency out there.
The Financial Times managed to get hold of a memo written by Tony Hayward, the CEO of exploration and production at BP. Hayward who may be in the running to succeed Lord Browne, pulls no punches concerning BPs corporate culture and cost cutting. I find this stuff to be fascinating (click here). I'd love to see a BP organogram and the number of layers between Lord Browne, or even Mr. Hayward and the average bloke with a great idea at, say, the Texas City refinery or a platform on the North Sea. Good luck, Mr. Hayward.
Gold is looking shabby again... to short or not to short, that is the question. I should jump right on this, as the charts are flashing a move down to $600, and the low this morning already below Friday's low. But with black boxes, central banks, COT, Schmot, this, that and the other thing - the gold market is super manipulated, I've got a bullish long term bias - so I'm just going to sit and wait until I can go long again and buy. Wallstrip.com has a nifty feature on gold today... view the video in the UPPER right column of the blog.
These next few weeks are going to be light trading weeks for me. For much of today, I'll be at the 1 mln+ square foot Palisades shopping mall in West Nyack, NY. First stop will be to the Apple store where the must have item for my daughter is an iPod. My sons are already taken care of with a Playstation3 sitting right under my desk here in a box, which they've seen for weeks and have no idea. That will be fun next Monday morning.
Caremark is up about 10% on word of the Express Scripts' offer. Biomet is being taken out by a private equity group including affiliates of Goldman Sach Capital, KKR and Blackstone. That's nearly a 30% premium to when the company announced that it was exploring strategic alternatives last April. Harrah's is up about 3% on word that Texas Pacific and Apollo are set to strike a deal. Realology is up 21% on a buyout by Apollo, though we wonder if that's the last word on that deal.
No doubt the air may be a little thin for some at this altitude of Dow 12,400+ which could lead to continued choppiness. Low volatility, low put to call has kept some with a wary eye on things - though it has been interesting to observe that while $VIX has slid below 10 the last few sessions it has scooted back above 10 by the end of the session indicating that there isn't a complete lack of complacency out there.
The Financial Times managed to get hold of a memo written by Tony Hayward, the CEO of exploration and production at BP. Hayward who may be in the running to succeed Lord Browne, pulls no punches concerning BPs corporate culture and cost cutting. I find this stuff to be fascinating (click here). I'd love to see a BP organogram and the number of layers between Lord Browne, or even Mr. Hayward and the average bloke with a great idea at, say, the Texas City refinery or a platform on the North Sea. Good luck, Mr. Hayward.
Gold is looking shabby again... to short or not to short, that is the question. I should jump right on this, as the charts are flashing a move down to $600, and the low this morning already below Friday's low. But with black boxes, central banks, COT, Schmot, this, that and the other thing - the gold market is super manipulated, I've got a bullish long term bias - so I'm just going to sit and wait until I can go long again and buy. Wallstrip.com has a nifty feature on gold today... view the video in the UPPER right column of the blog.
These next few weeks are going to be light trading weeks for me. For much of today, I'll be at the 1 mln+ square foot Palisades shopping mall in West Nyack, NY. First stop will be to the Apple store where the must have item for my daughter is an iPod. My sons are already taken care of with a Playstation3 sitting right under my desk here in a box, which they've seen for weeks and have no idea. That will be fun next Monday morning.
It's Looking Like Another Merger Monday's On the Way
In addition to word of the deal for Harrah's, another one has dropped into the lap of the Journal. WSJ.com is on a roll with a report that Express Scripts is expected to make a cash and stock offer of $26-billion dollars for larger rival Caremark (CMX) to thwart a CVS buyout of Caremark. ESRX has a market cap of only 9 bln and would effectively be doing an LBO by piling on quite a bit of debt and taking a lower credit rating to do the deal, according to the paper.
Separately, the Journal, in another scoop, says Apollo Management is buying Realology (H), parent of Century 21 and Coldwell Bank for $6 bln.
Deals have been a great catalyst for the Wall Street bulls and may help to overcome the usual post quadruple witching Monday blues that often hit the market after a positive Friday close on those expirations.
Separately, the Journal, in another scoop, says Apollo Management is buying Realology (H), parent of Century 21 and Coldwell Bank for $6 bln.
Deals have been a great catalyst for the Wall Street bulls and may help to overcome the usual post quadruple witching Monday blues that often hit the market after a positive Friday close on those expirations.
Sunday, December 17, 2006
Gold
Does this chart have the similar break down signature that appeared late last summer?
In many respects it does NOT. What is similar is that on Friday we got below $620 in somewhat violent fashion and within striking distance of $600. But the key distinction to the failure at $650 in September was the rapid downward knee jerk back to $600 vs the slower decent from $650 we've seen thus far this month. The way I read RSI and Bollinger leads me to believe that there's room to the downside toward the $600 area IF the dollar can drift a bit higher over the next few week. Who knows what kind of games were being played on Friday.
AM I SHORTING IT TONIGHT?? I don't have a pressing need to jump on a gold short unless I see sudden negative momentum, or a catalyst to grease the next leg lower (eg. slide in oil; Ahmadinejad receives Dr. Scholls for Christmas, starts Jellin' and makes nice with everyone; dollar rebounds).
Natural Gas
I'm crunching on school projects with my daughter tonight, but a quick comment on natural gas. Right out of the gate, it's down more than 2% to $7.235 per decatherm. Today, in mid-December at just a week before astronomical winter begins, we were outside wearing light jackets enjoying mild weather again. As far north as my home away from home, Williamsburg, Virginia, the mercury will climb to 70f degrees tomorrow. If you love mild weather when it's supposed to be cold - it's great, though it's a little weird as well. Global warming is quite a reality and the next target to the downside on nat gas would appear to be at just above $7.
The Intellecast Observed snow cover map shows no snow depth above 16" in the Northeast and pretty much out to the Continental Divide!
The Intellecast Observed snow cover map shows no snow depth above 16" in the Northeast and pretty much out to the Continental Divide!
Viva Las Vegas! HET - Harrah's
WSJ.com is reporting that Texas Pacific and Apollo Management are rolling the dice big time with an offer of "at least" $90 a share for Harrah's Entertainment (HET). HET, the subject of intense takeover speculation for weeks, nudged 40-cents higher on Friday to $79.50, or quite a few dollars below the now likely offer. Penn National Gaming had slid 2% Friday on speculation it would step up to the plate with a competing offer; so PENN could rebound Monday on relief that it's out of the running to make a large offer for HET. Read the complete Journal report here ($$ subscription required). Word of yet another mega deal, even if it was expected, will be another feather in the cap of the bulls to further drive the year end stock market rally.
Saturday, December 16, 2006
NWS - Newscorp and Regan Part Ways
No surprise following the OJ book debacle that Judith Regan was given the heave-ho by Murdoch. As usual, various stories (including this one from Reuters) don't dish the dirt on what the severance package is. We know most assuredly that Regan is not scrambling to get the resumes out, rushing to the unemployment office, or stocking up on the Kraft Mac & Cheese (though she did miss the company Christmas party). Her imprint at Harper Collins contributed about $50 mln to Newscorp.
Of Mice & Men
Wow, if this breakthrough with mice up in Canada translates into something meaningful for humans, there might eventually be a lot of short candidates among companies benefiting from the scourge of diabetes. The National Post is reporting scientists have cured the wicked disease in mice! I'm 43, and thanks to diabetes I've had a kidney transplant and find myself partially sighted in the left eye due to diabetes (driving is becoming more of an adventure at night and that's why you might see some interesting typos on this blog). It is truly a rotten disease which I battle every day with regular insulin injections, finger sticks to carefully monitor glucose and a regimen of careful diet and regular exercise; and yet I still feel the disease has the upper hand. Cure? Could the world handle that? Could corporate American handle that? Just off the top of my head, Eli Lilly (LLY), a big maker of insulin, would probably be cut in half overnight; it would be a disaster for a number of blue chip medical names since diabetes directly causes or is a contributing factor to so many other diseases. On the other hand, it might be a boon to health insurance companies, or would it merely enable a whole group of people who would have died sooner to live longer and stress out the system later? A cure for diabetes would have profound implications. But I won't get carried away with speculation since as the article points out, there's plenty of skepticism over whether it's as easy as a capsaicin injection (the ingredient in hot chili peppers). Anything involving a breakthrough in the lab with mice is often years away from a human application, though there is some optimism.Not to be a wet blanket, but this sounds like a nightmare for the drug industry - something from red hot chili peppers that can't be patented and turned into a multi billion dollar blockbuster? Oy, that's not gonna fly at the FDA. But, hey, maybe some high scoville unit laden chalupas and chimichangas can't hurt - just not from Taco Bell!
Don't Take the World Sirius
More analysts are starting to speculate about whether Sirius (SIRI) and XM (XMSR) will merge. It led to modest upticks in the stocks of both companies and sparked some early lottery ticket buying in the options market.
There were two research reports out on Friday which stoked the fantasy buying in the options world.
Lehman says a merger between the two satellite radio providers increases if growth continues to disappoint. My spot analysis: Growth will continue to disappoint (that's why I'm getting the big bucks to do this). LEHM gave no time table for a potential deal. It did note that if all synergies went to XMSR, shares would be worth $45 while SIRI shares would be worth $9.50 if synergies were to go to Sirius. LEHM rates both stocks "Overweight".
UBSW said the likelihood of the two companies formally addressing a possible combination are at the highest level to date. UBS says both companies would benefit through operating and and capital cost synergies. UBSW rates both a neutral and lifted XMSR's target to $17 from $13.50.
SIRI rose 11-cents today to $3.90; XMSR up 74-cents to $15.89.
Options activity was brisk in the January 20 XMSR calls where more than 5,000 traded Friday. Nearly 5,000 January 5 SIRI calls also traded on bets that SIRI shares will vault to $5 before the 3rd Friday in January.
Right now those Jan5 SIRI calls are being bought on an offer at 5-cents, but with no-bid, meaning they cannot be sold; they are worthless at the present time! So early bets are being made on merger hopes, but given the huge open interest on these options, especially the Sirius options (Jan5 open interest is a whopping 170,000+ contracts), Friday's betting on way out of the money options was on the light side compared to what's already been bought in those options - which were once upon a time deep in the money LEAPS when things where much better. As for yesterday, what is it with people who initiate bets where they lose all of their money right away on the hope that a stock will magically rally for them by about 30% within a month?!? Unless Karamzin and Panero have already conducted business under the mistletoe, a deal like this will take some time to hammer out, especially the strategy to get by Justice Department problems, not to mention the CEO egos, but in the end it looks like the need to survive will ultimately dictate the need to combine.
So the Jan5 SIRI call lottery ticket bets are being made, but going to the casino for the free weekend might be a whole lot better, as the sleazy Tanya Roberts radio commercial says: 'You can get out of Dodge, be a high roller right on the strip, get tickets to a hot show... Las Vegas is calling, baby'!
There were two research reports out on Friday which stoked the fantasy buying in the options world.
Lehman says a merger between the two satellite radio providers increases if growth continues to disappoint. My spot analysis: Growth will continue to disappoint (that's why I'm getting the big bucks to do this). LEHM gave no time table for a potential deal. It did note that if all synergies went to XMSR, shares would be worth $45 while SIRI shares would be worth $9.50 if synergies were to go to Sirius. LEHM rates both stocks "Overweight".
UBSW said the likelihood of the two companies formally addressing a possible combination are at the highest level to date. UBS says both companies would benefit through operating and and capital cost synergies. UBSW rates both a neutral and lifted XMSR's target to $17 from $13.50.
SIRI rose 11-cents today to $3.90; XMSR up 74-cents to $15.89.
Options activity was brisk in the January 20 XMSR calls where more than 5,000 traded Friday. Nearly 5,000 January 5 SIRI calls also traded on bets that SIRI shares will vault to $5 before the 3rd Friday in January.
Right now those Jan5 SIRI calls are being bought on an offer at 5-cents, but with no-bid, meaning they cannot be sold; they are worthless at the present time! So early bets are being made on merger hopes, but given the huge open interest on these options, especially the Sirius options (Jan5 open interest is a whopping 170,000+ contracts), Friday's betting on way out of the money options was on the light side compared to what's already been bought in those options - which were once upon a time deep in the money LEAPS when things where much better. As for yesterday, what is it with people who initiate bets where they lose all of their money right away on the hope that a stock will magically rally for them by about 30% within a month?!? Unless Karamzin and Panero have already conducted business under the mistletoe, a deal like this will take some time to hammer out, especially the strategy to get by Justice Department problems, not to mention the CEO egos, but in the end it looks like the need to survive will ultimately dictate the need to combine.
So the Jan5 SIRI call lottery ticket bets are being made, but going to the casino for the free weekend might be a whole lot better, as the sleazy Tanya Roberts radio commercial says: 'You can get out of Dodge, be a high roller right on the strip, get tickets to a hot show... Las Vegas is calling, baby'!
Friday, December 15, 2006
Gold Bust
I've been in NYC for most of the day taking care of various and sundry end of year matters. A few quick comments on gold with detailed comments and charts coming on Sunday night. I've let a lucrative shorting opportunity fall by the wayside here over the last few weeks because of my long term bullish bias and fondness of gold. I've been out of the metal in the futures market since being stopped out more than a few weeks ago and have chosen to be neutral instead of objectively riding it down. That's still better than being stubborn. If I had stuck to a bullish wrong way Amaranth style futures bets on gold, I would now be living in a GE refrigerator box, though a larger Sub-Zero box would be preferable (Disclosure: Very happy owner of a Sub Zero 642 so brand loyalties would run deep even in selection of cardboard shelter). However, we pay heed to technical indicators and fundamentals in order to avoid trading disasters. The signals were clear a few weeks back that gold was overbought and that it was time to take a break, so I'm still here in a warm house and now noticing that gold is not only below $620 again, but below late summer support and in even more trouble. So the charts are, in my opinion, measuring a retest back towards $600 over the next few weeks. It looks like late summer all over again with bearish momentum beginning to snowball, but maybe with the saving grace that dollar woes will resume soon enough in the New Year to save the metal from sliding back to $565.
The frustration of the gold bugs is palpable - take a look at the remarks on the jsmineset website... (click here) in characterizing today's selling as "mad, mad, mad". It was and is just that in light of macro fundamentals, but isn't that what 21st century mass market psychology is all about especially in these 'interesting times' in which we live? The game is as much about being right about the fundamentals as it is about being right about what the consensus expectations are. My nutty put options trade a few weeks ago in Toll Bros was a good case in point. Evidence that real estate is rolling over further are everyone and I figured that the nice rally in the premier homebuilders would have to crest. Clever deductive reasoning, or so it seemed, but WRONG in spite of the evidence. Toll rallied after results because the crowd didn't think things were bad enough. The time will come for another harsh spanking for the Tolls of the world, just like the time will come from another leg up for gold. But being early when the market isn't ready means pain.
While I've been a gold bull for years, I think today's selling will be hard to quickly arrest... Barring a sudden geopolitical maelstrom, which is an unpredictable factor that can always argue for avoiding a gold short, it looks like gold is on its way to a retest of $600/oz, or so the charts seem to indicate.
More on Sunday.
The frustration of the gold bugs is palpable - take a look at the remarks on the jsmineset website... (click here) in characterizing today's selling as "mad, mad, mad". It was and is just that in light of macro fundamentals, but isn't that what 21st century mass market psychology is all about especially in these 'interesting times' in which we live? The game is as much about being right about the fundamentals as it is about being right about what the consensus expectations are. My nutty put options trade a few weeks ago in Toll Bros was a good case in point. Evidence that real estate is rolling over further are everyone and I figured that the nice rally in the premier homebuilders would have to crest. Clever deductive reasoning, or so it seemed, but WRONG in spite of the evidence. Toll rallied after results because the crowd didn't think things were bad enough. The time will come for another harsh spanking for the Tolls of the world, just like the time will come from another leg up for gold. But being early when the market isn't ready means pain.
While I've been a gold bull for years, I think today's selling will be hard to quickly arrest... Barring a sudden geopolitical maelstrom, which is an unpredictable factor that can always argue for avoiding a gold short, it looks like gold is on its way to a retest of $600/oz, or so the charts seem to indicate.
More on Sunday.
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