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Buzz Bits: Dow, Nasdaq Finish Ahead


Your daily Buzz & Banter highlights...


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

Earnings Report - MV News

  • Oracle (ORCL) reports 3Q EPS of $0.25 vs. $0.22 on revs of $4.4 bln vs. $4.33 bln cons.
  • Cintas (CTAS) reports 3Q EPS of $0.48 vs. $0.52 on revs of $905.4 mln vs. $925.4 mln cons.
  • Adobe (ADBE) reports 1Q EPS of $0.30 vs. $0.29 cons on revs of $649.4 mln vs. $655.0 mln cons.

Have My Peace of Mind - Jeff Macke - 3:16 PM

Greetings from New Jersey where my wife is finally back home from a six day trip, the sun is shining and all is right in the world. I've been spending the day putting out fires and listening to the first Boston album. The music is more or less perfect classic rock, the cover-art is 70's genius and, knowing how the story ended for lead singer Brad Delp, there's something very poignant about tracks like Peace of Mind. Check it out, Minyans.

  • Claire's (CLE) halted today with the stock widely expected to be bought out. As mentioned a few dozen times in this space, the existence of the M&A craze, whatever you think of it, makes it very hard to short even horrible companies (see also: BJ, DDS et al)
  • As I play a scorching air-guitar to "More Than a Feeling" for the umpteenth time today, I'm noting that Activision (ATVI) was upgraded yesterday, in large part based on the success of Guitar Hero II. I may never go to work again, after the title comes out for the Xbox 360 April 3rd (just in time for my b-day... HINT).
  • The saga ends for John Antioco and Blockbuster (BBI) as the CEO gets shown the door "By the end of the year." This is delicate surgery at this point in Blockbuster's recovery (which, to date, is still largely a function of the stock rather than operational). Be careful.

In the Franklinian Spirit... - Kevin Depew - 2:08 PM

What does $100 buy today? Take a look:

  • One share of Lockheed Martin (LMT).
  • One last minute special round trip ticket between Burlington, VT and Cleveland, OH on Continental Airlines.
  • Bose In-Ear Headphones at Best Buy.
  • The ability to write mortgage loans in New Jersey with no education, criminal background check or licensing process, according to the New Jersey Star Ledger (thanks for the heads up Minyan Scott).

From the article:

"A Realtor has to be tested, an attorney has to be tested. But a person can write mortgages and put people in millions of dollars in debt without a single exam or a single continuing education requirement? It doesn't make sense at all," said Marilynn English, president of English Financial in Cedar Grove, who has been fighting for years for the licensing of loan officers in New Jersey. "Under the current laws, for $100, Joe the Pizza Delivery Man can write mortgages in New Jersey," she said."

The cat's out of the bag. Let the blame game begin.

Buy? Right? - Adam Warner - 11:12 AM

Here's a graph of the Buy-Write Index (BXM) compared to the SPY.

It performs basically how you would expect. As the market rallied persistently last fall, the SPY outperformed the Buy-Write. This makes sense, given the Buy-Write perpetually caps gains.

And since the New Year, it's kind of the reverse. Also as you would expect. Getting that extra premium in has proven beneficial net-net as the market got shakier.

But here's the conundrum. What's with this closed-end BEP, that is designed to mimic the BXM? It traded at an increasing premium over NAV last fall as the market rallied and volatility caved. Then it continued increasing that premium as the market dipped and volatility rose.

One of those two behaviors should be right, and the other totally wrong. The question is which one? My opinion is the BEP is too high, no matter how you slice it.

Market rallies? Buy-Writes underperform. Market sinks? Why pay a premium over NAV for something that is going to be a straight-up losing trade.

Not to mention that fact that you can just invest in an open-end buy-write fund, or create them yourself at home if you are so inclined, so why pay any premium?

Position in SPY

SPY Vulnerable - Jess Thomson - 9:40 AM

My current read on the short-term order flow is that the SPY continues to be mired in a trading range. Price is in the upper quadrant (higher risk portion) of that range. I view the break down last week which occurred from the 140.75 to 141.00 level in the SPY as a key price event in terms of short-term order flow.

I do not consider price levels important per se unless the subsequent price action validates a suspect level as key. By my calculations, 140.75 in the SPY translates into a 1417 handle in the new June futures contract. That price was rejected early this morning after a positively construed housing starts number was issued at 8:30 EST -- which I am reading as initial validation of 1417 (140.75 in the SPY) as resistance.

I am monitoring price this morning for further validation of a short-term top in the SPY.

Performance Demand: In order to negate the potential for a short-term top today, sufficient bids need to flow into SPY so that 141.00 becomes support intraday instead of overhead resistance. That may be a difficult bar to meet with pre-Fed jitters calling for trading in reduced size.

No positions in stocks mentioned.

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