Monthly Archives: January 2012

When the Sh#t hits the fan

AT&T’s massive loss this evening has been telegraphed since… T-Mobile.When the shit hits the fan

I wrote about this in November (AT&T is going to lose 4 Billion!) and even back in August (AT&T + T-Mobile = Arnaque).

To be honest I’d lost interest. The obvious stupidity of this deal baffled me at the moment, but impotent I moved on. I should have taken note…

Tonight AT&T posted a $6.7 Billion quarterly loss, with margins falling. And considering the collapse of the $39 Billion deal, a humbling experience by any measure, why not spend the earnings-call reassuring your investors? Or even groveling a bit? Mr. Stephenson you might have even tried to be humble. But bashing the FCC?

I’m reminded of Netflix!

 

Here’s a quote from Reuters:

In his first presentation to investors since the December collapse of his $39 billion bid to buy Deutsche Telekom’s T-Mobile USA , Chief Executive Randall Stephenson spent much of the earnings call criticizing the U.S. Federal Communications Commission for opposing the deal.

The FCC colludes in your partial monopoly, companies with far less firepower would have managed both the deals and the marketing many times better than you have.

Mr. Stephenson, why do you still have your job?

Contradiction

Aren’t fixing inflation targets and locking down interest rates contradictory statements?

I am very sceptical of this little bounce off the words ‘historic’ which are crossing the wires. “In historic shift, fed sets inflation target.” Wow. So if I understand (which I obviously don’t) on one hand, we’re printing money, for more jobs and to save the banks, fine. I can buy that. But we’re also printing money and have been for a few years. This is inflationary. Period. It raises our default risk but with luck will lower our $15,000,000,000,000.00 + national debt, great. Inflation will also makes pickles, beef, homes, etc. more expensive, and I like pickles. So how is setting an inflation target at 2.0% even remotely believable? This is pure marketing. I can print because I have a target. There’s a 100% chance they won’t hit their target.

For the moment the markets are buying it. It’s Dollar negative which is boosting the Euro, Gold, and Silver.

Update: Very well said ZH!

Not sure what to make of a market that traded relatively poorly on strong apple earnings but managed to rip higher on a relatively neutral fed statement.

AMZN Chart

AMZN Trade Considerations

A super smart friend said to me today, “tell me what you think about buying AMZN, because a sensible friend of mine, said the following, blah, blah, blah”.  “Hmm”, I thought.

Lets say, Jim Cramer or another guest friend says you should buy a stock for XYZ reason, you can be sure within 4 days you’ll have another (or easily find another) friend, who firmly suggests that you don’t buy that same stock, for a whole other set of reasons. Both might be ‘right’. If you watch CNBC, you have friends, though rarely as smart as mine… See the parallel yet?

Remember consensus is rare, short lived, and dangerous. Except in Apple’s case, and maybe Amazon’s… Hmm, if this wasn’t a super smart friend I’d say, “run away”.

In any case we all look at the same charts, events, and time-frames, some with more clarity than others. By looking at the AMZN chart over the last year, I can point out some obvious elements which might help you, my virtual friend, manage an entry. You want to buy AMZN because you believe in their product, management, track record, positioning, gossip, etc. The reasons the market ‘intended’, and armed with a little knowledge…

But before you look at the chart below, KNOW that we’re entering earnings season. Amazon releases after the close 1/31/12 (still unconfirmed). This raises the likelihood that AMZN will move strongly one way or the other in the near future, if GOOG is any example (down 8% after hours tonight), I’d avoid going ‘all in’ before the 31st. Spread out your investment so you won’t completely miss the potential earnings gap up and can balance things out or bail if we get a gap down. Amazon will be watched closely, and it’s likely to over react in one direction or the other.

Now for the chart:

AMZN Chart

AMZN looks like it’s turning up off the low end of the range, breaking through the 50 day MA and approaching the 200 day MA (which could act as resistance). This is positive, but bad results from GOOG after hours yesterday, might weigh heavily in the short term. We’ll see.

Notice also the high RSI, this is getting into overbought territory (dangerous), though the MACD is still trending upwards (positive) – slightly contradictory signals here… Think CNBC.

Another indicator which speaks to sentiment is the call put ratio. In Amazon’s case you have an optimistic ratio. Today, 1.5:1 for example. Options are trading with positive expectations.

If I was going to imagine a stock investment here, even considering the chart’s and indicator optimism, I’d look for a bounce off the 200 day MA, a pull back and a small entry between 180/185 ish, before earnings.  Add some after earnings if AMZN doesn’t tank. 175 ish is a good stop-loss if you manage to get in between 180-185. Do this… Set a stop-loss when you make the trade.

If AMZN breaks under 175 after earnings, I’d reconsider completely, watch for 160 and start over. AMZN is a fund darling it’s unlikely to fall of a cliff but weirder things have happened.

Good Trading!

 

Lab Killer?

Suspect…

What I probably should not be reading:

German man denies murder, says overweight pet Labrador suffocated wife

Lab Killer?

And what I really appreciate:

The Kangaroo Court of Wall Street on The Big Picture. Nicely said!!

SLV Option Idea

An Intriguing Silver Trade

I spend a fair amount of time dissecting option flow for the following reasons:

  1. Copying from another can be the highest form of flattery
  2. Institional traders know a lot more than I do
  3. Puzzles inspire me

Yesterday I stumbled on an option trade in the Silver ETF, SLV which has intrigued me for the last ~12 hours, a call butterfly at the 40/50/60 Jan 13 strikes. IV at 42/44/46 and the risk profile looks like this:

SLV Option Idea
SLV is at $29.29 so this trader finds maximum profit at 50 or a 59% rise in SLV over the course of the year. Remember, the expiration is 11 months out. Now look at the yearly chart for silver:

SLV 1 Year Chart

This trader is betting that before the year is out $SLV will retrace it’s past year highs. On first glance I couldn’t quiet understand why anyone would want to take this trade. It cost $0.70 (x 10k) or $70,000.00 and granted if SLV tests last years highs the profit on this trade would be a factor of 10. So… Still why would you make this trade? A market makers hedge against something I don’t understand? Could it be a hedge against a short futures position? A pure macro play assuming Silver becomes a safe haven? Wouldn’t a long call with lower strikes or a bull spread at lower strikes bring the same risk reward? If anyone that reads this has any idea, I’d love to hear.