Buzz Bits: Dow and Nasdaq End Higher
Your daily Buzz & Banter highlights.
Bell Buzz - Todd Harrison - 3:37 p.m.
- You think equities are volatile? Check out the long bond. Yeesh and yeesher!
- Mother Morgan (MS) joins Goldman (GS) and Lehman (LEH) as further flies in today's tries.
- My gut says that they're offering President Tyler some stealth winkage and I I may call an audible and go home short Goldman, so you know.
- There will surely be further shoes to drop in the financials. The key to the vault will be in how they react to that news.
- How much productivity would a ping pong table zap from the 'Ville?
- I'll say it again--what a difference a week makes. It may be anecdotal, but everyone I speak with has shifted their lens from risk management to reward capturement.
- The Harrison Household sure feels a bit... emptier... these days. Sorta comes in waves, ya know?
- OK, enough--lemme get this out there for ye faithful. Fare ye well into the bell.
Position in GS
Now that is gonna leave a SERIOUS mark... - Bennet Sedacca - 3:32 p.m.
Those that piled in to Treasuries on Friday are in some serious pain. As the Fed promises to take all the nuclear waste (excuse me I meant AAA non Agency CMO's) off dealer's balance sheets, everyone feels great again. Those that got long CDS on names like Lehman (LEH) and Bear Stearns (BSC) are getting smoked, and when I say smoked I mean smoked.
What if you bought a 10 year on Thursday at 3.35% and found your bond down a cool 2 points today. Well there goes like eight months of interest. In a day. The long bond? It's down 3 beans and that is also eight months of interest.The 25 year TIPS? Down four and a half beans! That is the yield from Friday plus another 3 beans.
This is serious pain for someone. Mortgages are outperforming and spreads continue to tighten. This will likely prove a temporary change in spreads as the Fed's balance sheet is slowly converted from Treasuries to, well, other than Treasuries.
Like an old friend of mine likes to say 'Bennet if the market does something that doesn't make much sense to you, chances are, someone is off-sides'.
And when was the last time you saw 3 month bill yields double in a day? From 0.6 to 1.2%. I have been at this umpteen years and this is all new to me. Thanks, Uncle Ben.
InterDigital Ripping - Sean Udall - 12:50 p.m.
InterDigital (IDCC), a stock I've mentioned earlier this month, is moving notably higher today on "talks with Nokia (NOK)".
Talk is cheap but this is what moves IDCC and its huge patent portfolio. With 13% of shares short and a very high 13.9 short ratio this stock can spike wildly.
Interestingly, the stock stopped right at the 200 day. So that could be resistance for a bit, however this midcap name with a huge cash stock hoard has an equally large stock pile of patents. As well as a history of prior wins. Basically, IDCC trades like a biotech name with a number of drugs in stage 3 trials.
Fundies haven't changed but a settlement improves them, and the chart is moving off a hugely negative bias.
The Blame Game - Adam Warner - 11:46 a.m.
So it's 1999 and I'm still a market maker on the AMEX. And one of my options is Pedatrix Medical (PDX). Someone comes in and overpays wildly for puts. And does it again. And again.
I tried futily to sell some stock, but can't either borrow much or get a plus tick. But it wouldn't have mattered that much, no bids anyway and we never would have gotten enough off as the buyer was front-running. Lo and behold, there was some news out over the weekend and PDX lost about half it's value before the next open.
My point? The put buyer didn't cause the selloff in PDX (although he may have hastened it a few hours). And the plus tick rule in existence at the time didn't save the stock either. It ultimately went lower because... there was market moving news out there that had yet to hit the tape (so yes, the put buyer did execute an illegal trade and ultimately it was resolved in a class action suit).
Sound like a vaguely familiar story? I've seen mucho noise suggesting some toxic combo of put buying and the elimination of the downtick rule last July caused the near destruction of Bear (BSC).
Um, no, Bear apparently did that to itself. And in this case not even clear the original put buyers traded on any material non-public information. It was apparently credit players watching its paper get smoked who first decided to take some action in the equity.
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