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Tom Graff
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| Bond market errata |
11/20/2009 4:34 PM EST
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Long-term Treasury bonds had a wild day. Despite stock market weakness, the long bond was flat at 8AM, down 3/4 of a point at 10AM, up 1/8 of a point at 11:30, down 5/8 at 2:30, and finished down 1/4. Take this as a bit of a preview of what light holiday volume can do to prices. Then remember that we have $118 billion in Treasury auctions. Could be very volatile.Municipals were very firm today in the face of Treasury market weakness. The two markets seem to have completely decoupled.Swaps spreads were mildly wider again today, by about 1bps in most parts of the curve. Interesting then that agency MBS and agency debt were both tighter vs. Treasuries. Like munis and corps, its all about too much cash chasing not enough bonds. Next year we might see some crowding out, but not this year.
Position: Long TBT
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Howard Simons
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| Pin To Win And Plaudits For Audits |
11/20/2009 4:16 PM EST
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Tim C., I agree. While not every market pins at every expiration, the mechanics of how insurance changes behavior will create a situation at many expirations where price will converge on a defended strike. It is not a rule, but once the game starts in that direction, it tends to finish there. Moreover, I have seen commodity markets lurch from one strike to another during the course of a day. Greatest pain to greatest number and all that.
Bob, I agree on the audits. I cannot imagine a division manager in a widget company telling the EVP of Finance that his widgets are too important to face an internal audit. He'd be fitted for thumbscrews until his attitude improved somewhat. Honest people with nothing to hide covet the seal of approval an audit conveys.
Position: None
I know there are many doubters and lots of articles that point to the fact that pinning is just a myth and doesn't exist. I disagree. I present Apple (AAPL), Google (GOOG), Goldman Sachs, and Hewlett Packard (HPQ) as my evidence today. No, it won't happen with every stock, but there are at least another dozen I could add to this list.
Position: nm
Greenspan and Bernake have gotten it soooo wrong, I am in favor of the Fed audit. Failure cannot be rewarded with smoke and mirrors. Audit the Fed.
Position: none
Flipped a few of the Dec 17.50 calls on 51job, Inc (JOBS) as they are pushing .85/1.00 already.
Closed the short Nov 22 calls on Gap (GAP). I will hold the Dec 21 calls going into Monday, but the rest will wash out.
Closing the ProShares UltraShort S&P 500 (SDS) short Nov 37 straddles for .22 or better, decent, although it may be just short of my target.
Closing the Direxion 3x Daily Financial Bear (FAZ) short Nov 20 straddles at .18 (these were sold for .46). Much happier with these than the SDS. Also, sold my long Nov 21 puts for 1.07
Selling the remainder of my Bunge (BG) Nov 60 calls (just a smattering left) and was filled on all the short Nov 65 calls at a nickel.
Position: Long JOBS, GPS
In case you missed it, Dan Freed writes on the banks' holding pattern due to looming regulation about capital requirements.
Position: n/a
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Doug Kass
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| Memo to John "The Candy Man" Reese |
11/20/2009 3:10 PM EST
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The Oracle is spent-up, not pent up!
Position: None
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Timothy Collins
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| JOBS...the stock cause I don't see any others |
11/20/2009 3:04 PM EST
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I'm taking a small stock and options position in 51job, Inc (JOBS) over the weekend. The Dec 17.50 calls are .60/.65 and the stock is currently 16.30. This one has earnings Monday morning before the market opens. On good numbers, the stock could push 18 pretty quickly. On a miss, I think the 15.25 area becomes support. 14 would be on the table with an abysmal report, but I don't see that here.
Position: If you can't find a job, then buy some JOBS
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Don Dion
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| Position Oversight |
11/20/2009 2:43 PM EST
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I forgot to disclose a position in this post; Dion Money Management is also long SPDR KBW Insurance (KIE).
Position: KIE
Shorted some Gap (GPS) shares at 21.90. These are to cover the long Nov 21 calls, but it does leave me open the short Nov 22 calls (although those are technically covered with the long Dec 21 calls, but that would not be profitable). The original spread was open at .70, so trying to realize .90 instead of .80 here. The spread can be sold for .80, which wouldn't be bad either.
It's time to take a good chunk of the Bunge (BG) Nov 60 calls off the table with very little time left. I should be able to sell these here at 2.95 and I will put in an order to buy back the short Nov 65 calls for a nickel. Given the M&A in the space, I do NOT want to be short the 65's at the close. Remember, options don't expire until tomorrow night, so news after the close today could still impact a holding. If BG were to get bought at say $75 per share, you better believe those "worthless" short 65 calls that I thought "worthless" would be called away from me in a hurry. This is a case where that is a nickel well spent due to the current sector environment.
Position: Long GPS, BG
Alan, some of the components of the Oil Services HOLDRS (OIH) are in shoot-first, ask-questions-later mode. All it took was a story about Mexico canceling some capital spending for a firm such as Noble (NE) to sell off hard this morning.
Scan through the components of OIH and you won't find anything to get enthusiastic about. Many of the firms wound up in excess capacity situations by mid-2008; after all, the bull market in energy had been under way for nine years at that point and order books were full.
This is one more industry where low interest rates have done what they can do.
Position: None
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Don Dion
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| TIBB/BOFL |
11/20/2009 1:44 PM EST
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The stock prices of Bank of Florida (BOFL) and TIB Bank (TIBB) continue to decline and these two banks continue to report losses. My observations of the real estate market over the past two weeks in SouthWest Florida is that only the very strong banks will survive. I would not be surprised if these two banks are history by year end. Be very careful with BOFL and TIBB. Both actively trade but now have small market caps.
Position: none
Not surprising, but most listed alternative funds fail to deliver any value whatsoever. Even though we have a chapter on the foreign listed hedge funds in my book, I gave up talking about them a long time ago.
Position: None
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Alan Farley
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| Oil Services HOLDRs Trust (OIH) |
11/20/2009 1:36 PM EST
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OIH broke a 3-month trendline and the 50-say EMA this morning. The message seems to be a loss of conviction that crude oil going to rally above 80. That breakdown also ties in, thematically, with the EUR/USD failures at 1.50.
Position: nm
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Brian Gilmartin
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| Watching the close for a change in market character |
11/20/2009 1:31 PM EST
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Rev Shark occasionally writes about the "character" of the market and watching how it changes, so we are watching the close today. Since the March '09 low, the market openings have been generally weak with rallies into the close, which we think is a classic symptom of a healthy bull market. (In the early 2000's particularly the Nasdaq meltdown, we'd come in in the morning and see higher Nasdaq futures with a higher open, and then an afternoon fade with a close at the lows, which was sickening to watch.) Even yesterday, we saw a little rally in the 90 minutes, only to give part of it back in the last 30 minutes. With the market seemingly trading heavy, and the inability to hold 1,100 on the S&P 500, we'll watch for a heavy volume close at the lows, which we havent seen very much of all year, and that will be our tell for a near-term top being in place. Next week is Thankgiving week and likely lighter volume. Monday's action is all the more important. Our big up or down days this year have seem to come on Monday's starting with Asia markets in overnight, pre-USA action.
Position: long S&P 500 index funds, SPY
Flipped out of HPQ after the ISRG debacle. Sold at .24 and .25 on the Nov 50 calls
Position: nm
Well there went a quick 90 cents as ISRG reversed hard and I was stopped out of my position at .50. Not a huge position, but I hate losses none-the-less. OK, back to weaving or something other than watching the markets for a few minutes.
Position: nm
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Geoff Johnson
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| Cold Weather Could Help Apparel |
11/20/2009 1:22 PM EST
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Some of the consumer weakness in apparel (and other cold weather related goods) has been due to unusually warm weather in much of the northern part of the country. Unusually cold weather aided September, but took away from October. Kohl's management noted that consumers are buying closer to need and without the chill there's no need to bundle up. Here in Minnesota we're usually solidly into hat/scarf/mitten weather by now, but one of the warmest Novembers on record has made bundling up unnecessary. I heard a weather report say we're due for a serious winter blast by end of November, early December. It may only be a marginal benefit, but it could firm up sales a bit.
Position: none
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Tom Graff
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| Credit slightly wider, buyers showing up |
11/20/2009 1:17 PM EST
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Corporate bond spreads opened wider, but now its much more mixed. Buyers are definately emerging. Its the back bid all over again. The basic reality of PMs having more cash than there are bonds to buy remains in place. As long as that holds, any credit widening will be mild.Notable movers today include Dell. The 5.875% of 19 opened with a +150 bid, about 10 wider from pre-earnings levels. Now seems to be more like +145. Other tech names are slightly tighter. Cisco '20's are 107/104, -1. HP '18's are 84/75, -3 on the day. ORCL 19's 99/94, +1.Energy also opened up weak, now most names are 1-3 tighter. Finance opened 3-4 wider, seems to be holding there. Pharma looks 1-2 tighter. Consumer names performing well. Home Depot 2016's +91 bid, 4 tighter today. Darden 2017's 180/175, 3 tighter.
Position: Long DELL, ORCL, CSCO bonds
For those that want the high risk/high reward play, I picked up a few Nov 180 calls at 1.35 and 1.40 on regulatory approval in Japan for Intuitive Surgical.
Dec options would be far less risky!!
Position: Long ISRG
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