Buzz Bits: Dow and Nasdaq End Mixed
Your daily Buzz & Banter highlights.
Target Hitting $120? - Jeff Macke - 1:27 PM
Hello from New York where, okay, this snooty native Minnesotan gets it: New York can get bone rattlingly cold in a meaningful way. If Mr. Heat Miser (who, students of holiday season stop motion classics know, is in charge of creating global heat) can get it in gear so I can thaw my finger tips, that would be soooooper. Other things I'm watching:
- Shareholder Activist Bill Ackman has a $120 price goal for Target (TGT). I like Target's long-term prospects but not the economy. Meaning it's not a question of "if" I think Target can someday trade at $120 but rather a question of "when." I'd put the over/ under at about 2016, give or take.
- Speaking of targets, UBS cuts Bed Bath and Beyond's (BBBY) target ahead of the once-great housing "stuff" merchant's report tonight. As I said on Fast Money about 20 hours ago: I wouldn't touch BBBY any more than I would touch any specialty retailer which has started missing estimates. Death comes to all specialty darlings, Minyans.
- Long-time pal Dougie "Poppa" Kass has been heckling me for being a bull on Best Buy (BBY). (Note: "Heckling" is said with love as we're stock trading males. Heckling one another is how we express affection.) It's not that I'm a bull, it's that Best Buy is Best of Breed in a space that just isn't that bad. I'd rather play continuation type shorts like BBBY or even Starbucks (SBUX) than wait for the companies still hitting numbers to start rolling over.
- Speaking of Starbucks, the company continues to cry over the price of the milk it spills all over its condiment sections. Isn't that rather like gas stations complaining about the price of the Windex in the self-serve squeegee bins?
AAII Bear Alert - Bennet Sedacca - 12:43 PM
It seems individuals have joined the bearish fray. I had some SPY and QQQQ put spreads on for the last 10 days but have lifted 'em, for now. The AAII Bearish Index is at levels associated with near-term lows.
Click to enlarge
Also, I am being bid left and right for paper I couldn't give away last month.
My long term view hasn't changed, but short term? Maybe a bounce here.|
Position in SPY, QQQQ
VIX Picks - Adam Warner - 12:07 PM
Even with today's dippage, the VIX has rallied about 4 points in 10 days or so. VIX futures/options are only up moderately. Even in Jan. paper. The reasoning is very simple; the *cash* VIX was artificially depressed as traders lowered bids of actual index options ahead of the slow holiday trade. VIX futures (correctly) anticipated that this was just some minor noise.
Often times when the VIX makes a move and then gives it back, we call it *mean reversion*. That's not really the case here though, this is more like "calender reversion"
Is there a way to game this? Not really. VIX products anticipated a move to the mid 22's, so it went a bit beyond that, but that had more to do with the weak market than anything else.
What about actual index options? Well yes, in volatility terms you could have made money. But in real dollars that was likely not the case as the real cost of buying those options is that you pay time decay each and every day. And unless actual stock volatility was sufficient, you lost on that end. And lo and behold, stock volatility was indeed very low. The chart here is 10 day historical volatility in the SPY. And that is now a 12.5, the lowest reading in 3 month's by this measure.
Small Buys - Fil Zucchi - 11:40 AM
- My target price on GPS maker TomTom (TOM2 NA) was triggered, with the drop caused by a competitor's bearish commentary. I have dipped my toe (and one of the small toes at that) as the P/E - even allowing for very little growth next year - is now in the mid-teens, a reasonable multiple for the number 2 player in a what I see as a secularly hot sector.
- Valuation has also pulled me into two refiners, Tesoro (TSO) and Alon USA (ALJ). I can't say I understand the intricacies of "crack spreads, contangos and backwardations", but I do see that '08 estimates for both companies remain roughly at the same level they were 6 months ago, when the stock prices were much much higher, P/E's are low even as refiners go, and EBITDA (which in capital intensive areas is a legit measure IMHO) is much higher than EPS. And besides, wasn't captain Kerkorian about to buy a piece of TSO for $65? Who am I to argue with a $45 price tag.
- Before Christmas, Prof. Krueger noted his interest in sugar. The long term chart has me officially "interested". I am using the London based sugar ETF (SUGA LN) as the vehicle. If this is the beginning of a bull market for this commodity, it'll likely be measured in months or even years. Therefore I am leaving plenty of room to ad on strength, and plenty of slack before I cut and run.
- And just in case Minyans get confused by my otherwise bearish vibes on the markets, all these "buys" are well within the context of a portfolio which will likely benefit nicely if my current "bear market" views are indeed correct.
Position in TOM, TSO, ALJ, SUGA
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