Top Takes From RealMoney
10/07/09 - 06:37 PM EDT
contributors are in the business of trading and investing all day on the basis of ongoing news flow. Below, we offer the top five ideas that RealMoney contributors posted today and (if applicable) how they played those ideas.
By Don Dion
6:22 a.m. EDT
The hugely successful Santander (BSBR)
IPO, which is the largest worldwide IPO of 2009, is a great sign that investors are craving to own growing banking franchises. This deal was massively oversubscribed. This bodes well for Citigroup (C)
, Bank of America (BAC)
and Wells Fargo (WFC)
. Look for these companies to continue to power up today. As taxpayers, we may not be happy with these banks, but the developed and emerging nations need these types of institution to grow.
Market Tells and Brazil: Know Your Edge
By Kristen Koh Goldstein
10:05 a.m. EDT
I agree with other commentators that it could be dangerous to follow market tells (e.g., Goldman Salchs (GS)
and Apple (AAPL)
) that are followed by everyone else -- where is the edge? You need to go a level deeper. When Bank of America (BAC)
call premiums collapse over a very short time period (magnitude of moves not explained by share-price movement), I know that we are getting too negative/oversold for the short term. Such moves tell me that hedge funds (who are all overweight Bank of America) are going short and/or protecting their favorite longs (like Bank of America) by buying puts or writing calls aggressively -- like here, where the $20 strike January calls collapsed from almost a dollar to about 20 cents over a few days, and here, where the same calls collapsed from over a dollar to about 60 cents. Market tells work until they don't. Of course, now that I have written this post, this indicator will stop working.
On a separate note, I was asked to comment on Santander (BSBR)
. I really have no edge on the short-term trading. I am, however, constructive on Brazil over the long term and own Vale (VALE)
and Petrobras (PBR.A)
. I have also owned the (EWZ)
in the past. I may or may not own Santander in the future after the shares settle, but I choose to sit out the short term, as daytraders are hyperfocused on this one ticker -- I manage many positions across many asset classes -- and big arb desks (buy the parent, short the IPO) come out with all guns blazing. Know when/where you have an edge.
Position: Long BAC stock, BAC calls, VALE stock, VALE calls, PBR.A stock and GS calls
The Perfect Trade?
By Robert Marcin
10:56 a.m. EDT
Commodities can do no wrong. Bad economy or good economy, bulls and bears alike love them. The bulls like them for the reflation trade. The Armageddonists love them as a hedge to dollar debasement that comes with an economic collapse. All talking heads gush positively on Bubblevision.
And everyone knows they have been on fire lately, right? Well, that's not really true. Crude oil has been flat for four months. Copper and gold work higher for sure. But many other commodities have been and continue to be lousy. Lumber, natural gas, steam coal, most grains, steel, electricity, pork bellies and cattle are all down materially this year.
Could it be that speculators have a crush on precious/industrial metals and crude oil? If inflation were about to rage, wouldn't all commodities be rocking? Surely, the fast-money guys want you to bid up the momentum commodity stocks; they pump them all day on CNBC
. But something just doesn't seem right to me regarding the commodity trade.
Maybe it's my contrarianism -- maybe just ignorance. But when the anti-dollar, pro-commodity trade is the surest, most popular trade extant, it might make sense to start thinking the other way. Just a thought.
Position: Long commodity stocks
10-Year Auction Strong
1:19 p.m. EDT
The Treasury's $20 billion 10-year auction came in very strong, especially impressive given how much the market had already rallied this morning. Pre-auction expectations were 3.23%, and it came in at 3.21%. Bid/cover was 3.01 times, which is the second-strongest level for a 10-year auction in the last 15 years (only bested by 3.28 times for the July 2009 auction), and 47.4% was awarded to indirect bidders, which is said to be an indicator of foreign demand.
Overall, it was a very strong auction and supportive of the notion that 10-years could test the 3.05% to 3.00% area in the near term. We'll obviously have to get past tomorrow's long bond auction first.
Position: Short TBT
Pandit Gets an A+
By Don Dion
4:24 p.m. EDT
Pandit got a solid review from a highly credible consulting firm. This fact along with the support of Prince Alwaleed bodes well for Citigroup (C)
. We didn't need another bank CEO search at this time. It's also relevant that Pandit, who is not in need of a paying job, is hanging in there and swinging the bat each and every day. Class acts are usually good for stock prices.