Buzz Bits: Dow Edges Lower, Nasdaq Inches Higher
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Earnings Report - MV News
Adobe Systems (ADBE) reports 3Q EPS of $0.29 vs. $0.26 cons on revs of $602.2 mln vs. 594.0 mln cons. The company guides 4Q EPS to $0.32-0.34 vs.$0.32 cons on revs of$655 mln-$685 mln vs. $670.4 mln cons.
Mini-Minyan Mailbag and other assorted pleasantries - Todd Harrison - 3:30 PM
Toddo-could tomorrow be a "fulcrum day" with the CPI, options expiration, massive complacency, S&P rebalance...let alone the dynamics the MV profs have discussed? Thanks--Minyan Mike"
MM- Sure, considering the sheer size of the PA (personal account) puts that will be Beetlejuiced tomorrow, it sure would fit!
In other news....
- A gorilla bought 50,000 QQQQ Sept $40 calls for .20 in the last hour and the dealer (who sold the calls to the account) bought about $100,000,000 worth of tech to hedge.
- Holy Cow! Macke makes a Chloe face when he writes too!
- Well, I was half right on the gun to head into the close. My longs are going down with a passion. My shorts are hangin' with Mr. Cooper.
- Please circle December 1st for Minyans in Manhattan. We're getting the particulars together but suffice to say it'll be like the Vail Macro (in the afternoon) and the Ranch Party (at night). After-hours beer pong will be optional.
Crude Conversation - Kevin Depew - 2:00 PM
Check out Crude Oil (basis Dec. futures) registering a DeMark TD-Sequential buy signal right here. A DeMark TD-Sequential (aggressive) buy signal registered yesterday as well. The US Oil Fund (USO) is registering a TD-Sequential (aggressive) buy signal today, but is on 12 of a potential TD-Sequential 13 buy signal. Bennet and I were talking about this a few minutes ago. He noted that his oil sentiment indicator is showing extreme pessimism here.
Oh yeah, did we mention that Unleaded Gas futures are registering a TD-Sequential (aggressive) buy signal here and nearing (currently on 11) a potential TD-Sequential buy signal as well? Lotsa interesting stuff.
Bennet wanted me to look at the CRB Index and the Gold. I told him that looks like a short-term target for CRB Index is 306, but the longer-term PnF target is 264. Gold is in a nearly identical pattern with a longer-term downside target of 536 using London fix as the basis.
It never rains in California - Jeff Macke - 3:09 PM
After filming a new Fast Money commercial until the wee hours last night I grabbed a few Z's then headed to the 'Ville through what I thought was a particularly heavy fog. Three blocks into my commute the horrible truth finally seeped through my brain (as well as my shirt and pants), this wasn't fog at all. It was rain. In September(?!).
The kids in the office are trying to tell me this kind of thing happens all the time out here. I can only assume they are playing some sort of cruel joke on the new guy. I mean...there's just no way 8 million people would actually choose to live in such a place...right?
Reverting to things I can more easily grasp, it's a nuttin' honey day in equityville. Touching on a point made in last night's show, and by Brian Gilmartin this morning, keep an eye on Walgreen's (WAG) and CVS. Supporting Brian's well-stated theory, the drug co's are working higher today in the face of weaker than expected retail sales data. The Big Idea is this: portfolio managers with retail stocks on their books move to drug-selling safety when the consumer is soft. When the consumer is rocking, the PM's grab Best Buy (BBY), American Eagle (AEOS) and other, more risky plays.
Either that or traders are looking for a spike in drugstore umbrella sales, due to the freakish weather. Regardless, it seems worth keeping the stocks on your trading Doppler.
Why do bonds act so darned well? This could be a reason...... - Bennet Sedacca - 10:56 AM
According to CNNMoney.com, foreclosures on homes are skyrocketing. They are not just increasing; seriously, they are skyrocketing. Check out these statistics:
- In August, according to RealtyTrac, an online marketplace for foreclosure sales, 115,292 homes entered into foreclosure, 53% above a year ago.
- It was the second highest foreclosure total for the year after February's 117,151.
- How are the 'hot states' like Florida, California and Nevada doing? Ummmmm, awful. There were 16,533 foreclosures in Florida, 62% above a year earlier. In California, August saw a 160% increase to 12,506 and Nevada was up 255%.
I know the housing stocks and market act well, but this is a trend, in my opinion, that will persist for a while. The ARM rate increases are really going to put a death grip on many if gas is $2.50 or $3.25 a gallon. Banks eventually will get hit I believe, just a matter of when.
I have mentioned in the past that we have seen slowing in mortgage prepays, but have seen a little pop lately as rates fall and ARM's get foreclosed on. Eventually, we expect prepays to slow again as values fall below assessed value.
I know this isn't positive stuff, Minyans, but it IS important stuff. And very bearish IMHO.
Sears Holdings Buying Home Depot? - Brian Gilmartin - 10:22 PM
CNBC's David Faber, who is an excellent business reporter, is speculating or commenting on the rumors this morning that Sears Holdings' (SHLD) Eddie Lampert might be buying Home Depot (HD) shares, but saying that some think that Lampert does not have the liquidity to do an outright acquisition right now.
Personally, I doubt if it would be a stock acquisition given how cheap SHLD's shares are at current prices. SHLD is currently trading at less than 2(x) book value, 6(x) EBITDA, 18(x) '06 earnings and 11(x) Enterprise Value to 4Q trailing cash from operations (according to Trinity's internal spreadsheets). SHLD does have about $25 per share in cash currently sitting on the balance sheet.
In addition, SHLD is currently valued at $24 billion at market cap, versus HD's roughly $75 bln market cap, while SHLD has $53 bln in 4Q trailing sales versus HD's $88 billion, thus David would be acquiring the proverbial Goliath.
I don't know: it wouldn't seem to make sense for SHLD to do an outright acquisition of HD here, since any stock acquisition would likely be very dilutive, and with SHLD's 25% current debt to market capitalization, it would have to really lever up to take out HD, although HD is very cheap, trading at just over 10(x) cash from operation and generating over $1 per share in free-cash-flow, thus any debt incurred could be partially paid down by HD's prodigious cash flow.
I'm hardly an expert in these investment banking matters, and these numbers are simply back-of-the-envelope calculations.
Maybe Lampert (like a lot of folks) just thinks HD is cheap here.
Positions in SHLD, HD
Fading Complacency - Adam Warner - 9:58 AM
So if you think the VIX will rise from here, as Jason Goepfert's work suggests, how should you play it?
In my humble opinion, make it simple. Buy actual options. Replace a winning stock position with calls. Buy puts as a general portfolio hedge or as a stand alone play. Buy straddles or strangles. Things along those lines. Tailor them to your market opinion, but all will stand to benefit from an uptick in overall volaitlity.
I would not recommend *betting* on volatility with any of these VIX derivative products. They of course respond to changes in the VIX, but not to the degree that most find satisfying. You may be making a different bet then you realize.
The VIX itself is an estimation of the volatility in the S&P for the next 30 days. A VIX derivative simply is a bet on what that estimate will look like on the day of expiration.
In other words, if you buy a Dec. VIX future right now, it may SEEM as if you are betting on S&P volatility between now and December. But in actuality, you are betting on 30 Day volatility going forward from December expiration. Market action between now and December will obviously influence that number, but NOT as much as one would think. The further out in time you go, the more stable the volatility. And these VIX contracts go further out in time than most realize when they buy them.
What you need to know... - Jon Doctor J Najarian - 8:15 AM
Lehman (LEH) Earnings Great – Stronger-than-expected performance in its bond operations and impressive stock-trading results helped the investment bank post net income of $916 million ($1.57 a share).
Rogue Back In Vogue - A rogue trader at Citigroup (C) cost the financial giant $20 million and concealed millions more in trades from the bank, which didn't catch on to the young woman's schemes for more than a year. The NYSE's regulatory imposed a censure penalty and a $500,000 fine on Citigroup Global Markets, for failing to reasonably supervise or control its precious metals trading desk.
General Electric (GE) Cut to Neutral at UBS- The Swiss banking giant reduces its target from $40 to $38 and they cited higher tax rates, continued earnings softness at NBC and the eventual deceleration of aerospace aftermarket activity as the reasons for their downgrade.
Vonage (VG) Demands Payment - Phone customers of VG that failed to for stock they agreed to buy in the company's ill-fated initial public offering are getting letters demanding that they pay part of the amount they pledged, even though they won't be getting any stock.
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