Buzz Bits: Dow, Nasdaq Rise
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Earnings Report - MV News
- Allied Waste (AW) reports 4Q EPS of $0.17 vs. $0.14 cons on revs of $1.49 bln vs. $1.52 bln cons.
- Agilent (A) reports 1Q EPS of $0.36 vs. $0.34 on revs of $1.28 bln vs. $1.27 bln cons.
Answers I Really Wanna Know... - Todd Harrison - 3:12 PM
Wake Up, Little Suzie, Wake Up - Ryan Krueger - 2:20 PM
Yahoo! (YHOO) ushered in a new era in TV upfront history by inaugurating its own "infront" conference this week and I was intrigued by a few notes from the presentation:
* "We're not here to trash television...but 17% of a consumer's time is spent online, and only 6% of ad dollars are spent there. While people always say it's not about the money...that spread of 11 points is very much about the money."
* "We have a 29% higher conversion rate in search than Google."
* The time spent on Yahoo properties accounts for 13% of total time spent online -- "more than MySpace, Facebook and Google (GOOG) combined."
I am not a bull on Yahoo stock. I occasionally get tricked into wondering if Yahoo is getting cheap relative to its peers because of its poor performance yet whenever I look I still can't figure out how it trades with about a 50% premium to GOOG on a P/E basis.
But I am bullish on this business so I am still working on derivatives for this play with few candidates. I still favor content-rich sites as the new sales forces (layoff people and hire pixels). While not terribly tradable, I think another result will be true cost savings for large advertisers who can get more exposure digitally and spend less resulting in another leg, perhaps, in the productivity miracle which may not be factored in by certain bears who say profit margins have nowhere to go but down.
The Morning After - Jeff Macke - 1:15 PM
Greetings from Manhattan where Mrs. JeffMacke and I took advantage of the Ice Storm by staying in the city and filling a canceled-reservation void at Wolfgang's. It exceeded even my stratospheric expectations (based on reputation and Wolf-based name) but, by way of warning, I'd advise against watching Fed testimony with a food coma.
In less bloated news...
- I guess Guess? (GES) was playing it coy last Thursday because it didn't want to ruin today's forecast-crushing, stock-splitting surprise. The stock is over 10% higher and looking like the toughest thing out of Italy since Vito Corleone.
- Minyan Herb Greenberg is back in the ring tonight on Fast Money. That means I'll be talking to my mother-in-law after the show to assure her that Herb actually likes it when I'm harsh.
- The Retail Hldrs Trust (RTH) is well over 105 today, putting nice space between itself and the 103 break-out area. We start hearing from the RTH heavy hitters next week as the retailers report their 4th quarters; just to put it on your radars.
Buy Writes - John Succo - 1:00 PM
I have been saying how cheap option prices are. For those not versed in volatility terms, here is an easy way to understand it.
In the mid-1980's buy writes were a favorite strategy to "generate income." The calculation used by accounts to decide if the income was worth the risk was simple: take the time premium plus the dividend ("income" earned) and divide it by the stock price less the option premium (investment made) to determine a "rate of return." This was annualized for the number of days the investment was made.
A rule of thumb was most buy write accounts liked to earn at least a 20% "rate of return" to assume the equity risk for an "at the money buy write."
These accounts and their investors were destroyed in the crash because it turns out the real risk (losses) were way higher than expected. I have commented many times that I feel a big contributor to the crash was cheap option prices, which have a high gamma. Everyone was taking the same type of risk: short option premium.
Today once again the buy-write is a favorite way to "generate income." I just did the same (silly) calculation of income for risk that buy-write accounts used in the 1980's for IBM.
The return was 11%
Position in IBM
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