Buzz Bits: Dow, Nasdaq Fall Into Red
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Bell Buzz - Todd Harrison - 3:47 PM
- I agree with Professor Zucchi that the dollar, as both the "reserve" currency and a fiat currency, is tough to bet on longer-term.
- I am also quick to remind myself that, in 2002 with the NDX in single digits, it felt like that was going to zero--in a straight line--as well.
- With that said, we're hearing chatter that Honk Kong will move to tie its currency to the Renminbi (read: debasement away from the dollar).
- The Renminbi...you know, like the Revenge of the Renminbis?
- Macke is furiously typing with his Chloe face. Why do I sense a rebuttal?
- Wow, the VXO (volatility index) is up 12%!!!! All the way to...11.60?
- Our coverage is telling us that alotta folks are hand sitting during this downdraft. That doesn't mean that we can't bounce, it simply says that there's been no virgins thrown in the volcano yet.
- I'm about to jump and juggle my post-bell struggle. I sincerely hope you had a fine day and that your night puts it to shame.
- May peace be with you.
Randoms! - Fil Zucchi - 1:32 PM
- I shorted Dell Computers (DELL) on the post EPS release spike and I have a small profit in it. I cannot comprehend why on Earth this stock trades above $20, but to add to the frustration, it's not even behaving badly in the face of the overall market smackage. The leash on it has just gotten shorter.
- The last time the Big Board breadth stunk this bad it was September 6, and including today, it is only the 6th time this year that the number tickles -2000. What say you Profs. Goepfert / Roney?
- Did CNBC's David Faber snippet on how Goldman Sachs (GS) is the aggregation of a hedge fund and private equity play mark the top of GS' parabolic move?
- If that's the case, what does that mean for Sears Holdings (SHLD)? Doesn't the combo of the two most pathetic retailers on the planet trade at 27x EPS because folks are ignoring Sears and K-Mart in favor of the hedge fund angle of this stock?
- The BOJ hints at the possibility that sometime in the future, maybe, and only in a totally invisible manner, it might consider the outside chance of not keeping rates at zero forever. The same day the U.S. markets wet the bed. Coincidence? Was it also a coincidence back in May when the BOJ entertained the same non-thought?
- Will the corporate bond market be eager to lend $18b to a company on life support such as Ford (F)? Or is the monopoly money reserved for bad private equity deals that can be flipped into even worse future IPO's? Can you say Hertz (HTZ)?
- What happens if this week's home sale numbers are really bad?
Position in SHLD, DELL, GS
OMG, A VIX Rally - Adam Warner - 10:35 AM
Since everyone seems to have noticed the VIX breach of 10 last week, and the subsequent bounce higher, some reminders are in order.
Holidays throw off the volatility indicators!
They understate *real* volatility ahead of a holiday break, as traders lower option bids ahead of anticipated inactivity. And then that gives the illusion of a volatility rally after the holiday, as the calender catches up to the actual option prices.
Pretend for a second that instead of buying options last Monday, you were some sort of traveling salesman and you were interested in renting a *business* car for the next 30 days. The standard cost is $10/day, or $300 for the month.
But it's a holiday week and there is little business. So you would probably wait and just rent it now.
Now the rental company realizes this, and offers you a deal last Monday. You can have it for $240 for the whole 30 days.
So from the vantage point of last Monday, the rental rate was $8/day ($240/30 days), while today the rental rate is back to $10/day. The *market* for the car really hasn't changed, it's just that certain *time* has more value than other *time*.
This is kind of what happens to the VIX. Even though the calender has advanced a week, buyers last Monday had little hope of action.
10's fail at 108-16...again... - Bennet Sedacca - 9:04 AM
This is the 5th time that the market has failed at 108-16. I have to admit there is a flag forming but if a market truly had lots of demand, then it shouldn't take 5 or 6 times to break through. Note that commercials stay stubbornly short 10's.
I also note that the dollar has broken down and there are several countries that want to diversify away from the US's fiat currency. So my firm will watch the foreign inflows and indirect bidders in Treasury auctions.
I suppose traders should sell here and my firm might consider unloading some of the longer agencies that we bought at nice levels and even consider paring some of the preferreds we bought a couple weeks back that we are admittedly really 'renting,' not owning for the long-term as I expect an eventual blow out in corporate spreads. If other countries stop buying the US's corporates at their recent clip, it could happen much faster than many think. Trust me, I have 'been there and seen that.'
Anyway, watch that line as well as the multi-year trend line here.
Will the US have to 'defend' the currency and keep rates too high or cut as the economy weakens? Neither seems terribly attractive to me.
I hope you had a great Thanksgiving!
Position in various agencies and preferred seurities
What you need to know... - Jon Doctor J Najarian - 8:07 AM
Shopping Starts Strong – According to the National Retail Federation, more than 140 million shoppers hit the stores on Black Friday weekend, and they, or we, spent an average of $360.15, up 18.9% from last year's $302.81.
Barron's Slams Google (GOOG) – This week's Barron's cited Google's valuation and growth rates as primary reasons for their overvaluation. The newsweekly also noted that Google now has the 15th largest market capitalization among U.S.-traded shares, and its price-to-earnings ratio is two to three times higher that of similarly sized companies.
Wal-Mart (WMT) Expands $4 Generic to Remaining States - The program will now be in an additional 811 stores throughout California, Colorado, Connecticut, Hawaii, Louisiana, Minnesota, Montana, Pennsylvania, Tennessee, Wisconsin and Wyoming.
B of A Upgrades Lowe's (LOW) – Noting that LOW's fundamentals have not bottomed, the investment bank said valuation may have bottomed as they believe the market is beginning to look through the potential trough. It went on to say it sees evidence of that as LOW's price-to-earnings ratio has stopped moving lower despite weak sales and negative housing data points.
Position in GOOG, LOW
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