Buzz Bits: Dow and Nasdaq Plummet
Your daily Buzz & Banter highlights.
Jack in the Box! - Todd Harrison - 3:36 PM
One, cut a hole in the box. Two, it's the Fed in a box. Three, they'll cut rates like a fox. And this is how they'll do it!
Yeah, so I put it out there (along with some of the coins in my right pocket) that the Fed will whip out their scissors tomorrow. Will it happen? While I have no edge, I think so. If not, perhaps we'll get some anticipatory lift into the bell. Either way, we'll know within eighteen hours. Sleep? It's over-rated!
Some tired vibes, in no particular order:
- I looked all ova for some upside calls in the financials but vols are simply too fat (I could be right and still be wrong).
- I personally guarantee that there won't be a Black Monday next week. 100%.
- Hot Dog (HD) and Lowe's (LOW). Again.
- Homies too, homie.
- I've got some exposure in that hood, along with some tech and some tape.
- The tape stuff, so you know, is win, lose or draw exposure.
- Besides, I'm off to see the Maven, leaving around lunch. Hey, gimme a break, it's my grandmother and in 20 years, I'll remember that more than I will the tape.
- I should prolly cancel my trainer tomorrow morning, right? I mean, it's the responsible thing to do.
- Geez, the NYSE floor looks empty, eh? Sorta sad, albeit inevitable in the information age.
- OK, gotta focus. Contrary to popular opinion, I can't trade and write at the same time. Fare ye well into the bell and have a heckuva good night. You've earned it.
Zymo's RecoThrom Approved - David Miller - 2:35 PM
ZymoGenetics' (ZGEN) RecoThrom was approved by the FDA a few minutes ago and the stock is up a couple of bucks to $14. Competitor Omrix (OMRI) is down on the news, as I suggested would happen a while back. Congrats to anyone who put on that long-short pairs trade.
Honestly, I thought this was a pretty easy call. As I noted last hour, it became quite a drama in the last month. It was an interesting demonstration of the difference between independent and sell-side research. The sell-side shops with financial relationships with Omrix or trading desk-driven allegiances to those short ZGEN certainly broadcast their "sponsored" bearish viewpoint well. Being independent, goodness knows, isn't a guarantee my firm will be right. But it does tend to make the crystal ball less cloudy.
Now the battle in the market begins. Two tips: #1 is no recombinant has ever lost in the marketplace when replacing an animal- or human-derived product. #2 is Omrix has not booked a single sales win since its approval last August.
Position in ZGEN
Minyan Mailbag: MARS vs. Savings Accounts - Fil Zucchi - 11:55 AM
Regarding your last Buzz, would you please explain in layman's terms whether or not I need to be worried about my savings accounts? Are average people like me at risk of losing our money in savings accounts? Should I call my bank and ask them something specific about my savings account? If so, how do I word the question? What is the deal here? I don't want my savings to have one ounce of risk.
Bank savings accounts with institutions that are insured by the Federal Deposit Insurance Corporation (FDIC) are typically guaranteed by the federal government up to $100,000. So even if you had your money with a very weak financial institution, as long as it is FDIC insured, if that bank goes under you will get $100,000 back.
Municipal Auction Rate Securities (MARS) are totally different animals. They are bonds issued by municipalities with interest rates that reset every 7 to 35 days. Some MARS are issued by entities which are not sound enough to obtain AAA ratings (whatever that's worth), so to bump the rating to AAA and avoid having to pay higher interest rates, the entities purchase "bond insurance" from the like of MBIA (MBI) and Ambac (ABK). To the extent that MBI and ABK no longer are viable insurers, the bonds are left to fend for themselves.
Now, the immediate risk I see is not the municipalities defaulting, but a "run on the bonds" which no longer have insurance backing. If that were to happen there are two consequences: a) The municipalities would lose a vital source of financing; and b) If too many sellers want out at the same time, the price of these bonds could fall below par, because it is unlikely that the municipalities can fully redeem the bonds.
The latter would create risks to the entire system because, the MARS market is huge, and I assure you virtually no one investing in these bonds seriously contemplates the risk of not getting back 100 cents on the dollar.
Well Positioned - Quint Tatro - 11:19 AM
I have a smorgasbord of longs and shorts today and ironically feel pretty well positioned.
I have held onto the Nordstrom (JWN) short which is finally breaking below critical support today and looks to have the low twenties in its sights. At the same time, I was forced to part with some Shengdatech (SDTH) as it broke below my stop yesterday but will keep a very small token as a place holder to watch it for a possible remount. If the stock breaks below $11.00 on a close, even the place holder position will be thrown into the fire.
The biotechs continue to intrigue me here and I still hold the Regeneron (REGN) and the iShare (IBB). The later is showing some excellent relative strength in a terrible tape while the former is still above my line and awaiting a better tape to break higher.
The towels are piling up Minyans and each day they do we come closer to a snap that will last longer than a few hours. Don't get overly anticipatory but remain patient, when it happens we'll play it.
Positions in JWN, SDTH, REGN, IBB
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