"Gentle" Ben Bernanke, the chairman of the Federal Reserve, coaxed the bulls forward in both the stock market and the bond market this week with his testimony on Capitol Hill. In his soft but direct style, which draws a sharp contrast to the cryptic gravitas of his predecessor, Alan Greenspan, the bearded central banker laid out his case for a smooth landing for the U.S. economy.
Indeed, this week's market shrugged off weak economic data in areas like January retail sales and industrial production, but the most worrisome data came on Friday, when the Commerce Department said January housing construction plunged to its lowest level in nearly a decade.
Nonetheless, on Friday the
Dow Jones Industrial Average
managed to eke out a gain of 2.56 points, or 0.02%, to 12,767.57, its third consecutive record closing high. The
was off 1.27 points, or 0.09%, at 1455.54, and the
gave up 0.79 of a point, or 0.03%, to end at 2496.31.
All told, the Dow finished a strong week with a gain of 187 points, or 1.5%. The Nasdaq added 36 points, or 1.5%, and the S&P 500 rose 17 points, or 1.2%. The New York market will be closed Monday for the Presidents Day holiday.
bloggers were all over the market action, and we'd like to share the best of their commentary this week with readers of the
. These posts best capture the intent of these blogs, which is to provide intelligent discussion on the issues each writer sees as most pressing that day.
Let's take a look at
on selling and rebuying in this market,
on why he still doesn't like Yahoo!,
on the sources he uses to stay current and
on small businesses' renewed confidence.
Click here for information on
, where you can see all the blogs -- and reader's comments -- in real time.
Rev Shark's Blog: Consider Selling and Rebuying
Originally published on 2/12/2007 at 12:38 p.m.
The market continues to show few signs of life. We have had a few dip-buying attempts, but they have been feeble, and the bulls are obviously becoming more cautious. I suspect that the mood is shifting to a "sell the strength" attitude, but we can't be too hasty to be negative, given how well and how often the market has recovered.
One of the major dilemmas that investors face on a day like this on which lots of stocks, especially small-caps, are seeing pullbacks is whether to simply hold on and wait for stabilization or sell and look to buy back.
If you try to micromanage positions, you often end up unable to reload. But if you simply sit there, you run the risk that positions will keep falling.
The line between prudent money management and sticking with fundamentally solid stocks is a tough one to draw, and becomes even more problematic if you are dealing with large-size positions in more thinly traded issues.
In market action like we are seeing today, the small investor really has a nice advantage in that he can typically be much more stringent with his money management rules than a bigger investor who has to move more money.
An individual investor can sell and rebuy without worrying too much about missing out if things reverse. The bigger investor is in far more danger of being whipsawed if he cuts back positions and then has to scramble to rebuild them.
Many individual investors fail to take advantage of their flexibility on a day like this, which is where they can really gain a huge advantage. We have it beaten into us that we should sit tight and not panic, and we can suffer some pretty good losses when we do that. Selling and rebuying when things start to act better is a great tactic that all individual investors should consider.
You are going to be whipsawed at times, but it is surprising to me how often a quick sale ends up being the smart move when the market starts to struggle. If you keep your mind open, the possibility of rebuying it makes pushing the sell button a bit easier.
Cody Willard's Blog: Yahoo!: How the Titan has Tumbled
Originally published on 2/13/2007 at 1:12 p.m.
Why don't I own
? This onetime titan has been reduced to a bumbling wannabe.
The growth rates at Yahoo!, which obviously collapsed after the bubble popped in 2000 but accelerated again in 2003, have slowed dramatically in that second-derivative growth-of-the-growth kind of way. While the same can be said of even the mighty
, Yahoo! is the only one of the two to disappoint the Street repeatedly with warnings, lowered guidance and missed revenue opportunities.
Yahoo!'s much-ballyhooed new ad platform, Panama, is finally at hand, and that might very well help the company catch up to where Google was a year or two ago with its own platform. Heck, even the slumbering giant
has an ad network that's competitive with Yahoo!.
Anyway, there's nary an initiative at Yahoo! to get excited about. Remember a few weeks ago, when Yahoo! successfully got some media outlets to believe that its new mobile initiative was meaningful? The same can be said of today's hype around Yahoo! now offering IM services within its email platform. As a savvy reader wrote to me this morning, who cares?
That's the point about Yahoo!. It is a hybrid wannabe of both Hollywood and the digital age, and it's not good at being either. The Internet has passed Yahoo! by, with its old-world, lock-in strategies like prohibiting users from forwarding their Yahoo! emails to another account unless they fork over $20 a year.
Yahoo! is doing next to nothing right. I won't bet against the continual rising tide of Internet distribution, and that means I won't bet against Yahoo! by shorting its stock. But I have no interest in buying it, either.
At the time of publication, the firm in which Willard is a partner was net long Google and Microsoft, although positions can change at any time and without notice.
Steven Smith's Blog: Straight to the Source
Originally published on 2/13/2007 at 11:24 a.m.
While I always try to respond to reader requests for source material on options in the various forms -- books, websites, seminars, software and more recently blogs -- I realize I have not
published a list since those lazy hazy days of last Labor Day weekend.
And because I'll be out of the office until later this afternoon, here is an updated, thoroughly consolidated, barely annotated, yet highly recommended list of places to click, quiver and blink away the day.
Building the base of the education pyramid, one can start with the Option Institute Corp.
. It is not only chock full of basic information from a glossary of terms, it offers basic strategies, an FAQ, books, and best of all, its 1-888-Options hotline is always manned by a friendly and knowledgeable staff. Don't know what's going to happen to your options after a spinoff or stock split? Give them a call.Another great educational site is
, which has a variety of screening tools and software.
breaks down some of the more popular trading strategies, has a great glossary and offers both live and online seminars. This site was developed by the guys that founded ThinkorSwim, the option-focused online brokerage firm which was acquired by
For an added bonus, you can
watch my video
discussing that combination, which proved to be a great a buying opportunity as InvesTools has risen nearly 45% since the merger. The lesson? When former option market makers that built a company from the ground up choose a public path for pursuing personal mad money retirement numbers, assume they know what they are doing and don't take the other side of that trade. The people that dumped IEDU at $8 that day are now licking their wounds at $15 per share. But I digress...
Another good educational site is
. As the name implies, this online option educational service emphasizes using limited risk/reward strategies to achieve consistent returns. The hook it uses to differentiate itself is that you must pass a test and "graduate" from each class before being allowed to advance to the next course level. This is a nice nod to the fact that option education is incremental and a process that builds upon itself rather than a singular event. It's also a smart business decision for keeping its clients from getting ahead of themselves and blowing all their tuition money on a bad trade.
Moving along the food chain, some subscription-based sites that have very advanced screening software, historical data downloads and analytic programs also happen offer some of the best free tools.
For example Chartbender.com's educational segment,
, has a great scroll-down toolbar that peels back to explain in both text and graphics the pricing behavior and profit/loss of various strategies during given time frames and volatility environments.
, which, as the name implies, focuses on volatility data. It offers free, though delayed, information on all listed options. This is where I go to get the first look at the historical and implied volatilities of a stock and its options. Its free option calculator has become the industry standard used by everyone from the
on its website to many of option-focused brokerage firms such as
Now to the fun stuff ... the recent proliferation of option-related blogs. Not only are these great reading by themselves, but part of their value is that they will lead you to even more places to click along to. One of my favorites is
from Adam Warner. He not only provides keen option insight three or four times a day, using his independence to take on everything from
and our own Jim Cramer, but he has an uncanny knack for finding an appropriate video on YouTube to accompany the written material.
It will also lead you to a number of other blogs, such as
, which has hysterical daily videos, and
As for books, you can't have a reading list without putting Sheldon Natenberg's
at the top. This is a classic, and it covers all the concepts and strategies without agendas or false promises.
One of my personal favorites is
, by Jabbour and Budwick. It's written by two active and practicing option traders who came from other professions, namely law and law, and they combine a disciplined learning process with great analogies and real-life examples.
One of the best books, though a bit more advanced, is
, by Charles Cottle. It can be found on his Web site,
, which also offers mentoring services, chat rooms and Web seminars. Cottle gets into dynamic hedging, position dissection, understanding the things that motivate market makers and defining the trading landscape. That is, he tries to point out all the pitfalls rather than emphasize the upside.
On that note, remember it's better to be looking down into a hole than the other way around.
Tony Crescenzi's Blog: Small Businesses More Confident
Originally published on 2/13/2007 at 3:05 p.m.
The National Federation of Independent Businesses, or NFIB, released its indexon small-business optimism today, which increased 2.4 points to 98.9. Theindex is now a notch above its 12-month average of 98.6.
The NFIB has beenreleasing its small-business survey since 1986 and the results of the surveyhave correlated well with economic activity. This makes sense since thevast majority of U.S. corporations are small businesses, and given the factthat around 60% of all U.S. jobs are created by small businesses, a tallythat tends to be even higher during periods when new types of businesses arebeing created, as has been the case often many times over the past 10 years,in response to many new innovations in computing and telecommunications, forexample.
Within the NFIB's survey, 17% said that they planned to hire new workers, upfrom 10% in December and about 2 points higher than the average of the pastyear. Fully 26% of respondents said that they were having difficultyfilling positions, the second most in 5 1/2 years. The capital spendingcomponent rebounded from a 4-year low back to normal levels, which mighthint at a rebound in capital spending, which has fallen in two of the pastthree quarters.
Also important was a rebound in the inventory satisfactioncomponent, which had matched a 10-year low in January. The rebound mighthint at a rebound in factory activity, which has languished over the pastfew months, with businesses trying to get rid of excess inventories,particularly in the automobile industry.
Interestingly, despite the added optimism, 21% of respondents said thattheir earnings trends were positive. That's the most since June 2003. Itis notable, however, that small businesses have never said that they weresatisfied with their earnings trends since the NFIB began asking thequestion six years ago.