Buzz Bits: Dow and Nasdaq End Higher
Your daily Buzz & Banter highlights.
Bell Buzz! - Todd Harrison - 3:34 PM
As I step out of my afternoon meld--and recognizing that my best trade today is giving back another way--the following are the first blush vibes that are flashing behind my eyes.
If you woulda asked me to lay fitty to one on a flat close this morning, I just mighta done it. OK, I don't lay 50-1. The flat close is still surprising.
There is a fine line between capturing the disconnect between perception and reality and viewing the market as wrong. I can't verbalize it right now--a function of the 6:00 AM workout--but I know it's floating around there somewhere.
Wow, silver can vote! That's nuts, particularly as I remember how stressed I was trading around a $7 long position. Man, I remember musing "I should just buy energy and metals, short tech and financials and open a taco stand in Costa Rica."
If I did that, three things would likely be a certainty right now. 1) I'd be a pretty snazzy surfer. 2) I'd be entirely more relaxed and 3) I'd likely have a lot more money.
By the way, that silver chart looks an awfully lot like a China chart late last year. Just saying.
I'm fatter, er, flatter! Yeah, outside of a handful of situations, I'm going home long dry powder. The last coupla sessions have been wheel spinning but Winky has been good to me so I'm not complaining. Seriously, I'm not.
I've got that Happy Hour thang post-close then a margie with my pal Stephanie Pomboy. Seeing good friends is good for the soul, we know, so I'm looking at some very profitable heels to this hump! Have a good night, you, and we'll pick up the scent fresh in the ayem.
"It's Just A Liquidity Problem, Not Credit" - Minyan Peter - 3:20
"It's just a liquidity problem, not a credit problem." We have now heard this from Costco (COST) with regards to its "enhanced" money market investment, various municipal investors with regards to their ARS, and, in case you have already forgotten, some northern brethren in Canada with regards to their asset-backed commercial paper (which now looks like it is going to be converted into 5-10 year notes).
And, not to rain on all of their parades, but with time a liquidity problem is a credit problem. Ask any margin lender. Ask any bank treasurer.
In any deflationary environment, liquidity trumps all other cards in the deck. But this is particularly true in the unwinding of a debt bubble where asset values are subject to dramatic valuation declines.
Credit wounds. Liquidity kills.
I repeat - Credit wounds. Liquidity kills. I can not emphasize this enough.
Position in SKF.
Benefitting from AT&T - Sean Udall - 1:22
Per Barron's Tech Blog:
"AT&T (T) this morning announced plans to invest $1 billion this year to expand its network for multinational customers. The company said the investment would be 33% more than it invested in its enterprise network in 2007, and twice what it spent in 2006. In a statement, the company said the investment is being driven by "demand for Internet Protocol (IP) networks and services as companies deal with the explosive surge in data, voice and video traffic made possible by the proliferation of high speed networks and devices worldwide."
Well, as many Minyans know by now, I feel fairly good in the long term thesis here about what companies will benefit. The undersea optical component and cabling companies may see a slug of new business off this initial surge by AT&T. However, that space is filled with penny stocks and many touchy balance sheets so I've not mentioned names in this space. I'm using a basket approach but keeping names pretty well defined and concentrating on very solid balance sheets and companies with well above market growth. Prof. Zucchi has been all over this space as well and we share some similar positions.
However, the short of it for me tends to be the players that will be able to ride the convergence wave with products that sell into the telecom, cable, wireless and satellite markets will perform the best over the course of this next secular cycle.
These names would include Ciena (CIEN), Infinera (INFN), Harmonic (HLIT), Cisco (CSCO), ADC Telecommunications (ADCT) and Juniper Networks (JNPR), among a few others.
Position in CIEN, INFN and CSCO.
Minyan Mailbag: Hedge it up! - Fil Zucchi - 11:17 AM
If I'm looking to hedge a predominantly long portfolio, which is being held despite of potential near term pain.
What are the benefits of buying a leveraged reverse ETF like the SKF (financials) vs. a put spread on an index or a particular stock? Does either offer me better risk reward?
The benefits of the ETF are primarily tighter bid/ask spreads and no time decay. A put spread works all right as long as you time the move correctly. Otherwise you may see the stock plunge, but closing out the spread gives you very little gain because there is still so much premium in the short leg.
I would consider just buying the put and if the stock or index moves up, then offset the cost of the put by selling an out of the money call.
Hope this helps!
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