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Buzz Bits: Dow, Nasdaq Have an Up Day


Your daily Buzz & Banter highlights...


Editor's Note: This is a small sample of the content available on the Buzz and Banter.

Randoms - Fil Zucchi - 1:18 PM
  • So China raises interest rates to squelch speculation and its stock market goes up 3%...uummm...

  • At risk of opening myself up to utter ridicule, I can't embrace Prof. Sedacca's suggestion that the subprime mess is already yesterday's story. I would agree that the subprime players, or whatever is left of them, do discount a whole lot of bad news, but I am not sure that the bigger and "more diversified" names are in the clear. These screen shots of Washington Mutual (WM), Wachovia (WB), and Bank of America (BAC) CDS are as of last Friday, and they were making new highs. I think we need to see a meaningful relief rally in these derivatives to make Hoofy feel officially better.

  • Early this morning I cranked my screens to headlines saying that Hercules Offshore (HERO) had been acquired by Todco (THE) for an 82% premium. Unfortunately, the headlines were corrected shortly thereafter. Oh well...easy come, easy go. I toyed with the idea of adding to my HERO long, but Prof. Dingmann suggested waiting a bit longer.

  • VXO -14%?

  • 90-day implied volatility in the Biotech Hldrs (BBH) is down from 21 last June to 13.8 now. For the smaller cap proxy iShares Naz Biotech (IBB) it is down from 21.7 in August to 15.4. Isn't biotech supposed to be inherently volatile? Risky?

  • Considering that last month's NAHB reading of 39 (revised) was heralded as the great housing bottom of 2007 (why remains a mystery, but I digress), will today's reading of 36 (including a level of 28 for future buyers traffic) be interpreted as a "healthy correction?"

  • Is it time for me towel toss on the idea that Advanced Micro (AMD) at $16 was a buying opportunity?

Position in HERO, AMD

Dirty Sox - Kevin Depew - 12:45 PM

  • Notice the SOX quietly slipping into the red here.
  • Meanwhile, Goldman Sachs (GS), is doing its part to keep things together here, up 1.1%.
  • Random interesting link of the day: "Today's art market is about the power of money to breed money, to fertilize itself -- not the value and staying power of art."
  • As it has always been, so it will always be.
  • Like Macke, I too have been eliminated from contention in the Minyan Madness Bracket Challenge.
  • Interestingly, check out who is in last place! With all number one seeds advancing to the Sweet 16 and only one seed higher than a 5 from states where brothels are not legal (Vanderbilt) advancing, it's safe to say that this year will not see a tail even in the tourney.

The Puck Stops Here Randoms - Jeff Macke - 12:23 PM

Greetings from New Jersey where, yet again, I've been mathematically eliminated from my March Madness pool after one weekend, prior to the first day of Spring. As it happens, this year's system of "Going with the Schools With Vaguely Personal Connections" was just as ineffective as my prior work with alternating alphabetic strategies. Who could have guessed that George Washington wouldn't go deep when I go over the bridge almost every day?!

In slightly less Random news...

  • Some good articles from the front-lines of the Digital Rights War in today's NY Times (NYT). Specifically, the paper features notes on the fight to make Internet radio stations pay royalties on its content, plus $500 per station. RealNetworks (RNWK) is leading the defense.

  • Also in the Times, Viacom (VIA), is rapping (with no apparent irony) about the merits of on-line video advertising, celebrating the more constructive half of their "Jam you with ads & Sue the Life Out of Free Clips" on-line pincer strategy. Thankfully no such restrictions are being enacted for Internet newspapers; you can read the above articles for free.

  • I'm keeping an eye on DelMonte (DLM), among other things a maker of private label pet food. The company could be favorably impacted if/ when a large recall of pet food spreads. Privately held Menu Foods makes pet food for Safeway (SWY), Kroger (KR), Wal-Mart (WMT) and Proctor and Gamble (PG). A list of recalled pet food is available at Menu Foods' website.

  • Concluding our tour of free web content, the SF Chronicle is appalled yet unable to look away from a pro-Obama take on Apple's (APPL) famous "1984" advertisement. 2008 is coming faster than any of us think or particularly want.

Position in SWY

More on hedgers and subprime... - Bennet Sedacca - 9:02 AM

I read this morning from my contact at Citigroup that sub prime was mentioned 58 times in Barron's this weekend. Can you say 'fully discounted?' I mean seriously, what the market knows isn't worth knowing. This helps to explain why my firm was a buyer on this last dip.

Eventually, I think there will be more problems but to me, that is more likely a late 2007-early 2008 issue.

I mentioned late Friday that smart money hedgers had covered their huge SPU short on the dip. Guess what else they did...

1. They shorted more bonds. See the chart here. FWIW, I agree with them that the long end part of the curve is over-valued and TLT may be a way to play it.

2. They covered shorts in the NDX and are now long. See the chart here.

3. They are record long small cap via Russell 2000 futes.

Please keep in mind that all of these charts net out the electronic (e-mini) contracts and open outcry contracts (big contracts) in big contract terms.

Position in S&P 500, TLT, small cap stocks

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