Category Archives: F

Is 5% the New 1%?

Judging from the overwhelming optimism it’s time to buy!

  • AAPL is going parabolic and is now worth more than Poland (Apple has 2 products)!
  • Europe is safely contained thanks to the ECB’s LTRO.
  • It’s an election year and with oil prices are at a near all time high – Mr. Obama will likely tone down the war mongering.
  • VIX is relatively low.
  • Renewed confidence in the EUR.USD

But here’s what reassures cynics and contrarians:

  • A recession in Europe will impact the US growth prospects to a greater degree than presumed. Ford is projecting a loss of $600M.
  • Commodity Markets are jittery. GC_F and SI_F fell off their chairs yesterday.
  • IPhones and IPads do not represent a solid market foundation, $AAPL does not create jobs, in fact their Jobs has moved on to better things (hopefully).
  • Housing and Employment. 54% employed 18-24?
  • And my favorite: Even with a 5% correction in the $SPY we’ll still be in a bull market, that leaves a good reversion to the mean.

One thing I’ve learned from losing money is to avoid betting against the trend or calling the top/bottom. That’s a fools game and you’ll be stopped out quickly. On the other hand, now is the perfect time to buy some protection for expiration on the April, May and January time horizons.

The levels that I’m watching on the $SPY are:

  • 138.22
  • 136.63
  • 135.80
  • 134.25
  • 133.72
  • 131.50

Ford January Expiration Trade Idea

I’ve recently had flashbacks of the popular press reassuring the popular investor that multinationals were less risky because large percentages of their profits come from overseas. I’m attributing these flashbacks not to an illegal substance but to the weakening Euro.

So I starting thinking again about Ford $F and those percentages.

Disclaimer: Ford is one of those stocks that I personally just like to own. For no other reason than supporting an un-bailed American company. Somehow, I see it as supporting American exports, workers and the general economy. For what that’s worth…

Here are the “operating highlights”  from Ford’s 2010 financial report:

Ford Worldwide Sales

Ford Europe represents 28% of Ford’s total sales (over 55% of Ford’s sales are outside North America).

Now the Operational Results:

Ford Operational ResultsThis 182 number strikes me as odd given that it should represent 28% of the sales volume. Are they suffering on european margins? Or I don’t understand, which is probable.

In any case, now for the revenue:

Ford Revenue 2010

 

24% of Ford’s automotive revenue comes from Europe. Lets just stick with the 24% number for fun and have a look at the Euro since January 2010. Ironically the Euro today is exactly where it was 1 year ago but  I’m sure my flashbacks date back to May.

Euro Dollar 1 Year Chart

Now for that $29.5 billion in revenue from Europe… What will happen to that revenue if the Euro continues it’s downward spiral and Europe’s demand falls of a cliff ?

I’d say 24% of Ford’s revenue is at significant risk.

I’m looking at January puts or January spreads for the possibility that $F retests it’s lows of 9.

Ford 6 Month Chart

 

Bear Market Specials

The VIX closing at it’s highs today at over 46 and the talking heads are spewing armageddon. I’ve heard: “falling off the cliff”,  “throwing the baby out with the bathwater”, and “big and bold” too many times today. I bought a few lottery tickets, with all the group pessimism, I couldn’t resist buying some calls and buying some large cap stocks today (AA, CSCO, F ).

The most surprising (for me) non-mover today was the Euro. I was expecting more downside and continue to expect it to break under 1.40.

There’s lots of attention on the Fed tomorrow.

With each soundbyte I cringe.

(Wikipedia on “To Throw out the baby with the bath water“. They say it’s origin is German…)