Monthly Archives: August 2011

AT&T + T-Mobile = Arnaque

For those of you who have suffered The French Administration – for that matter, The European Administration – you might imagine telecom services nightmarish. You’re half right and half wrong. Service, or the notion of service, here is sadly lacking. On the other hand when the telecom markets were released from a monopolistic France Telecom (I think that started around 2002) dozens of very positive things happened very quickly. It didn’t happen without some pain, but a company called Iliad helped move things along.

Iliad launched what’s called a Free Box. Iliad is now worth 4 Billion Euros (with a B).

Since the Free Box’s release France Telecom (Orange), SFR, and several others have been following their every move, even calling their products ‘XYZ’ Box. Lame, we agree.

But for 29 Euros or maybe 39 now, you get fibre (if you’re lucky) or SDSL, 445 channels of television (CNN used to cost me 25 cents per month), a Tivo type disk recording solution, free international telephone, WiFi, etc. More than you can imagine. All of this happens over copper land lines (unless you have fibre access). And this got me thinking…

If you’re a cable subscriber in the US for your internet and television, you probably pay for a home phone and surely an i-phone with AT&T. All this pushes you over $200 a month? How many choices do you really have? Is it easy to find a competitor in your market? I’m pretty sure it isn’t. You’re already getting screwed today and the AT&T/T-Mobile Merger will make it worse. The lobyists and the telecom industry in the US are pulling your chain. I hope this recent news isn’t just ‘wind’. You should reject $T and this merger and support the anti-trust complaint.

I’m embarrassed that the US isn’t leading telecom innovation, mobile and fixed. I won’t even go into how your phones are blocked by the carrier… I’d love to see the US take the lead here. It’s unlikely, there’s too much easy money, but we can always hope for a disruptive competitor. It’s an investement I’d love to find and I’d fully support, but until then, this merger is a very bad idea!

Half Way Organic

I’m still perplexed… After the worst consumer confidence measure since 2009, the market is ‘rallying’ (it’s positive – barely). The SPY is consolidating as I type this around 121.50, GLD is holding up better than expected and the VIX is crumbling. Europe has closed at about even.

There was a commentary I saw pass that said “organic sellers” are non-existant and that headline shorters are all that’s left. Whomever “organic sellers” might be, I think there’s some truth to this. I mentioned earlier this morning that any positive news might hold greater sway than negative, this is playing out, even without positive news! To be fair there are whispers of QE3 and screams of, “duh”. What should we make of all this? Probably, sell straddles. Count on a channel until all the “organic gardeners” have come indoors?

If “organic buyers” are holding this market afloat, what would make the “organic sellers” come back to the party? They could look at their fibonacci’s and cross their fingers. They could even read ZeroHedge before they go to sleep.  If they haven’t come inside sooner, I’m guessing the ADP employement numbers on Thursday, and/or the non-farm payroll numbers on Friday might just do the trick.

Market Restart

I’m a bit perplexed with the current market optimism. Having digested 3 weeks of ‘the sky is falling’, the talking heads are turning on us again. Asian markets closed up and Europe has opened up.

Caution is the keyword today. Let me give you a few reasons why:

  • Dec ’11 Gold Futures this morning are up at 1798 GLD
  • There’s a gap to fill
  • SPY Sitting at resistance and Futures are weak ES_F
  • VIX remains elevated
  • Low relative volume

Option pricing remains a bit confounding as if directional bets are off. It looks like straddles are the strategy of choice.

The Case Shiller, Consumer Confidence, and FOMC meeting minutes are all released today. My sense is that after yesterday’s melt up, any positive news today will play well for the bulls. And that any negative news won’t have much impact.

Gold Vacation

Taking a little break for the next few days. Watching Gold from a distance.

Still managed to buy Sept. 115/100 put spreads on $GS after the pop this morning. I took it off the table at the close for about + 15%. Didn’t want to hold that type of spread overnight… The $VIX hit 40 and Friday should be an intersting one!

Good trading.

GLD SPY Divergence

I’ve been watching both sides of The Gold Argument lately. Overbought or not – this is the question… It’s hard to say obviously, but in parallel there are high expectations for Friday’s Jackson Hole ‘speech’, gold margin hikes, and some optimism creeping into the market. (Thanks to my post yesterday, surely!) The VIX has pulled back to 38 and this combined will put downward pressure on GLD. At least in the short term I expect to see $GLD hold under 185.

I put on a bear spread  today with the expectation that we might be nearing a top on the GLD ETF.

As long as the SPY trend upward was following the GLD trend upward the underlying buyers of $GLD were still expressing their anxiety. In effect the reason traders were buying gold hadn’t changed, even though the market was heading higher. But when I caught this divergence (on admittedly a short time frame), it was signalling a confidence change.

The trade:

  • Bought September 183 Puts
  • Sold September 178 Puts

Market Rotations

It’s interesting to me how the language of the financial markets work and what impact this language has on how I trade (and how you trade). Because, I want to trade better than you… In any case, take ‘rotation’. At the moment ‘rotations’ between sectors or ‘subjects’ change our approach to trading by instigating ‘risk on – risk off’ behavour. Some of the popular catch phrases which got me thinking today: ‘flight to safety’, ‘risk on/off’, ‘safe havens’, ‘smart/dumb money’, ‘QE’, ‘Bernanke Put’, ‘Jackson Hole’, etc. Each little phrase means something to individual investors or traders. Each of these phrases basically say “hey it’s time to rotate into other market areas”. The first one in/out wins. That’s the game.

And by ‘subjects’ I mean for example, our recent focus on the ‘economy’ as apposed to ‘earnings’. Or this disconnect between economists and analysts. I’ve heard that analysts are twice as bullish as economists which seems normal because analysts want you to focus on buying their stocks… Economists want you to focus on political and financial mismanagement. I wouldn’t let one camp soley, influence your trading strategy. Ironically, the fed is perceived as wearing both hats. Might companies looking for stable economic conditions and currently hoarding their cash be sitting square in the center of this mess?

The mini-panic we’re watching and these risk-off rotations into safe havens tend to burn the dumb money. Pure blah, blah… I don’t think I’m dumb money, but I’ve made some dumb decisions! On the other hand, I’ve actually seen some dumber decisions by smart money. That was a distraction…

If companies won’t hire, analysts just want to keep their jobs, investors won’t take a risk, and economists say we’re on the road to ruin why don’t we all just buy a plot of land and start growing carrots?

A cynic would say we can leave it to the PR firms and politicians, they’ll help us ‘kick the can down the road’, and I won’t have to plant carrots for a few more years.

An optimist would say something optimistic. Maybe that’s exactly what the market needs.