Buzz Bits: Boo Almost Steals the Day
Mini Minyan Mailbag - John Succo - 3:10 PM
Hi John. Can you explain what short rebate is? Does it have to do with dividends? How can one calculate it?
When a stock is sold short it generates cash, which is deposited in an interest bearing account. The rate of interest paid on this cash is a risk-free rate less a fee for borrowing the stock.
This is short rebate. In the case of JPM there is a dividend on 12/14, so if the stock is at this price then these calls are an exercise. So conservatively we will estimate that we will be short the stock and therefore have cash on deposit until then (21 days). The calculation for rebate in cents per share is: $39 x 3% x 21/365 = $.07
(position in JPM)
Flash and Dash - Toddo - 2:30 PM
I return from my meld just in time to grab my bags and catch a ride to the JFK Zoo. I suppose there aren't too many words of wisdom that I can add to the daily fray--we see the action, we respect the performance anxiety and, well, I suppose I dropped the ball a bit on this last leg of the lift. Mea culpa and I promise to make it up to ye faithful in spades.
So you know, this last hour was spent putting pieces in place for the new and improved 'Ville. We've got some exciting things unfolding behind the scenes that will massively uptick our content and community. Take me at my word, we're working for you and our best days lie ahead.
More importantly, and while I write, is to wish you all a healthy, happy and safe holiday respite. When I talk about MV, it always begins with our human capital. That's a function of your belief and continued support so, for that, I am truly thankful.
Fare ye well.
Flashback! - Bill Meehan - 1:39 PM
This day in market history...
* Closing levels 1 year ago today...
o DJIA: 10,492.6
o S&P 500: 1176.94
o Naz: 2084.28
o Crude: $48.74
o Gold: $447.40
o GOOG: $167.52
This day in Minyanville history...
- In '04, Prof. Succo taught us a great deal about Credit Spread Compression
In other news...
- In 1987, still feeling the effects of the record crash, the CBOT implemented daily price ceilings
Mini-Minyan Mailbag - John Succo - 12:47 PM
You mentioned the vol on Research in Motion (RIMM) earlier. Don't know how low the stock goes, but seems a March ratio put spread makes sense for not much money. Long 1 March 45 Put @ $1.20 vs Short 2 March 40 Puts @ $.60.
Turn $0 potentially into $5.00 (I know it rarely works that way) or be long @ $35 worst case. Am I missing something?
Your maximum profit is $40 at expiration. The profit on these types of spreads maximizes around expiration as the time premium erodes sharply. When you do this type of spread just make sure you are willing to own the stock if put to you.
Your math is correct.
Mini-Minyan Mailbag - Sanjay Somaney - 12:24 PM
I was just looking at a 3 month chart on a few names that I am long. I was comparing the performance of the four net horsemen with a few of my IT / BPO longs like Cognizant (CTSH), Wipro (WIT), Infosys (INFY) and Satyam (SAY).
The one thing that really jumped out at me was the extent of the relative underperformance of the above mentioned BPO / IT names versus the nets.
I think the BPO / IT names are coiled springs here. The Indian rupee has been declining against the dollar (although stable the last week) for the last three or four months and that will really help this group going forward as it becomes cheaper for U.S. and European companies to do business in India. In addition, the December and March quarters are historically the strongest for this group and I expect that the same will continue this year as well.
My take is that earnings and guidance for this group will be above current expectations and these stocks are like coiled springs here. Just my two cents on the subject.
Thanks for the warm wishes Toddo.
(position in all stocks mentioned)
Talking 'bout the S-N double-O-P, the G double O-G - Kevin Depew 12:00 PM
While Google (GOOG) has registered DeMark 13s on both daily and weekly scales, we've seen that movie before... at the end of September actually... and the stock simply will not go down.
Ordinarily, that would be the type of alignment I would look for in a short, but the point 7 figure chart for GOOG is simply too strong and the price objective, ahem... 466 (basis 1x3 scale), too out there for me to get involved.
Speaking of DeMark, using the Thomson One DeMark scans, I see an increasing number of monthly buying exhaustion TD-Sequential signals across all sectors and in all markets. Not today's business (we're talking monthly) but certainly something worth noting in an environment of deteriorating breadth.
Does the potential end of the Fed's rate rise campaign really signal a ramp in equities? - New Professor Bennet Sedacca - 11:25 PM
- After the release of the fed minutes yesterday, stocks and bonds ramped simultaneously as the buck sold off.
- The yield curve (2's to 10's) spread is about 7 basis points
- But does this really mean significant new highs in stocks lie ahead if, in fact, the Fed has learned from their past mistakes of 'going too far?'
- Most people believe that stocks do well right after the Fed has ended their rate raises when in fact, of the 13 times this occurred this century, only 4 times has it led to higher prices in the days ahead. Nine times the market fell in the months following. The fact that it happened the last two times is fresh in investor's minds, so I guess that explains the ramp, not to mention positive seasonality.
- So don't forget that the market usually bottoms after the second rate cut, which could be a few quarters away. Not a prediction, just food for thought before all of that glorious food we will likely intake tomorrow.
- Happy Thanksgiving to all.
The Incidence of Remarkable Coincidence - William Fleckenstein - 11:09
In an email, Joanie noted the following: "Does it seem strange to you that recently, Koizumi called on Fukui to hold his rate horses, and then Trichet backed away from the idea of a round of hikes, right before the Fed let us know that at least some of them want to knock it off here? Do you still think this game is not rigged?"
Rigged or not, it does strike me as somewhat suspicious that those events she described have occurred in the last couple of days. Obviously, with hindsight, one could say that the stock market and the metals market have been sniffing out this eventuality.
It will be interesting to see how everything (stocks, bonds, metals, and FX) trades next week. I say "next week" because today and Friday will be thin and exaggerated. But soon we will see if any market "players" bought the rumor of the Fed stopping -- and are now ready to sell that "fact" -- or whether they will use this as justification to keep doing what they've been doing. I will be most curious to see what the dollar bulls do with this news. In other words, is this an inflection point, or must we wait a bit longer?
Editor's note: For more of Fleck's excellent insight, check out his Daily Rap.
Pulse of the Planet - Jonathan Schwartz - 10:18 PM
News, laughs and ideas beyond borders...
- Gulf states pour billions of dollars into lavish airports and fleets.
- Japanese gov't cuts corporate IT spending tax credit. Introduces new tax credit to reward cybersecurity spending, the Daily Yomiuri reports.
- Imagine you're a German beer executive. Sales have been lagging for years. What do you do? Simple. Sell vitamin beer to middle-aged women in pharmacies.
- Venezuela inks deal to provide low-income homes in Massachusetts with heating oil. The Bronx may see similar deal.
Fun fact - Jason Roney - 9:48 PM
So the SPX has closed up five days in row. The day before Thanksgiving, that has only happened once before and Wednesday closed higher.
I also looked for just Monday and Tuesday closes higher. Even then, Wednesday closed higher 85% of the time, and there were only 14 occurrences going back to 1933.
Nice catch by the other Fil!! Shorts caught in AKAM - Phil Erlanger - 9:32 AM
First there was the Two Jakes and now we have the two Ph/Fils. We congratulate Fil Zucchi on his call in Akamai Technologies (AKAM) for being a fan of this name. He has been writing on this since early fall. The stock jammed higher yesterday on a Prudential upgrade and the shorts are caught as it has been a short squeeze in our work. Short intensity is 71% with a short ratio of 4.44. In the spirit of full disclosure, we have recommended this name to several clients in the past two weeks and support Fil's views.
(Recommended to several clients as a buy)
Say what? - Kevin Depew - 8:21 AM
A look at commentary, opinion and analysis from around the world:
Germany's Angela Merkel faces a tremendous challenge with what the TimesOnlineUK calls a "coalition of bitter rivals." Here's her recommended blueprint for success.
Avinash Persaud, chair of Intelligence Capital, writes in the Financial Times that "Revaluation is not the answer in Asia." It's an interesting piece because he outlines the central bank-as-investor price insensitivity John Succo has discussed, and the problem for US markets when foreign central banks concentrate "investments" in the most liquid (read: US treasuries) instruments.
Writing in the Wall Street Journal, Christopher Hitchens says immigrants tend to mention Thanksgiving as their favorite Holiday. OK for now, but Meehan and I vow to change that come March 17, 2006.
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