Since 9:51am, the 140 April IBM Calls had an out of whack Bid/Ask ratio. The Bid is actually higher than the Ask. It is now 9:55am, and the Bid has ranged from 9.10 to 9.20 while the ask has stayed at 9.00.
Could be that the real-time ticker is frozen for the Ask, but everything else is working so I don't think that is it.
Just weird.
PS... IBM will have a year end eps of 11.44. With a conservative PE of 13, IBM will trade at 148.
(The market is so freaking undervalued.)
Wednesday, December 8, 2010
Tuesday, December 7, 2010
Market Thought... normalcy
The 10 yr pushed up today, despite the market loosing the floor at 2:50pm.
As I mentioned yesterday, 2010 SP500 earnings will be north of 86eps. The SP500 usually trades with a multiple of 15, putting a target of 1290 on the SP500. (I am also using 15 because end of the year we look forward to next year earnings potential. So the multiple should be higher, but I will settle with the historical average PE.)
2011 SP 500 earnings will be around 93-94 eps. A multiple of 14-15 will give an SP500 trading range of 1,302 - 1,395.
So, if the market consolidates this go around, I will be a buyer.
As I mentioned yesterday, 2010 SP500 earnings will be north of 86eps. The SP500 usually trades with a multiple of 15, putting a target of 1290 on the SP500. (I am also using 15 because end of the year we look forward to next year earnings potential. So the multiple should be higher, but I will settle with the historical average PE.)2011 SP 500 earnings will be around 93-94 eps. A multiple of 14-15 will give an SP500 trading range of 1,302 - 1,395.
So, if the market consolidates this go around, I will be a buyer.
Monday, December 6, 2010
Market Thought... conundrum
There is a consistent theme across many of the +150 charts I follow, overbought. But the 2010 SP500 earnings will be +86. Slap a 14-15 multiple on the earnings, and we have a market range of 1,204-1,290.
Here is my conundrum. The conservative technical trader would sell due to the overbought conditions. But the fundamental trader/investor can not sell due to the inexpensive level.
So my compromise was to transition from Jan 2011 calls to Apr 2011 calls, and continue to wait for until the VIX hits the 2010 low before selling and adding SPY put protection.
Here is my conundrum. The conservative technical trader would sell due to the overbought conditions. But the fundamental trader/investor can not sell due to the inexpensive level.
So my compromise was to transition from Jan 2011 calls to Apr 2011 calls, and continue to wait for until the VIX hits the 2010 low before selling and adding SPY put protection.
Sunday, December 5, 2010
Kindler quits
Talk about unexpected. The CEO and Chairman of the largest pharmaceutical company in the world, Pfizer, Jeff Kindler announced an immediate retirement.
I can certainly speculate endlessly about this, ranging from:
He quit because he feared the market effect of the potentially non-productive short-term pipeline.
or
The board let him go because within in 5yrs the stock went from a high of 23 to 17. A 26% decline. (The further one goes back, the uglier it gets.)
Having a lot of cash, and a very nice cash flow, can fog up an investor's judgment quite a bit. Pfizer bought Wyeth to make up for its potential cash-flow issue due to patent expiration. Instead of innovating itself out of their hole, they took a strategy out of their predictive play book. Acquire, and reduce. (Anyone that has studied these types of M&As can attest that 'acquiring and reducing expenses' is not an efficient strategy.)
The problem with certain acquisitions is that they do not work when both companies are projected to lose a substantial amount of revenue w/in the next 1-2yrs. Synergies will simply not cover high revenue losses, especially biotech/pharma synergies. (This is simply fact, and the nature of the specific-product-dependent driven pharma business.)
There is no question Pfizer is an efficiently run company, and I am sure Kindler facilitated in creating the efficiency, but it has been lacking the proper strategic vision. Unfortunately, under Kindler's leadership, the company has talked a big game, but its actions were not innovative and seriously questionable.
I can certainly speculate endlessly about this, ranging from:
He quit because he feared the market effect of the potentially non-productive short-term pipeline.
or
The board let him go because within in 5yrs the stock went from a high of 23 to 17. A 26% decline. (The further one goes back, the uglier it gets.)
Having a lot of cash, and a very nice cash flow, can fog up an investor's judgment quite a bit. Pfizer bought Wyeth to make up for its potential cash-flow issue due to patent expiration. Instead of innovating itself out of their hole, they took a strategy out of their predictive play book. Acquire, and reduce. (Anyone that has studied these types of M&As can attest that 'acquiring and reducing expenses' is not an efficient strategy.)
The problem with certain acquisitions is that they do not work when both companies are projected to lose a substantial amount of revenue w/in the next 1-2yrs. Synergies will simply not cover high revenue losses, especially biotech/pharma synergies. (This is simply fact, and the nature of the specific-product-dependent driven pharma business.)
There is no question Pfizer is an efficiently run company, and I am sure Kindler facilitated in creating the efficiency, but it has been lacking the proper strategic vision. Unfortunately, under Kindler's leadership, the company has talked a big game, but its actions were not innovative and seriously questionable.
Friday, December 3, 2010
Jobs...
Non Farm Payrolls are pretty shitty. Really no sugar-coating it. The Employment Situation was about 100K below estimates.
Looking at the break down, the employment situation is still relatively healthy with respect to the valuation of this market. (take a look at the link)
Break down:
- I am pretty surprised by the 28k loss in retail, especially in this time of year.
- Temp employment is up from the previous two months, which is a good sign.
- Ave. weekly hours worked is flat from previous month. Could be due to the holidays, not sure. So I will rate it a neutral at best.
- Ave. weekly earnings is still growing month over month. This is good. (Albeit not at the pace we have seen from previous months, but growth none-the-less.)
This report is so-so. It certainly does not merit the SP500 breaking the 1220 resistance today. The report merits a pull back in the market.
A pull back to which I will be adding positions I day-traded around. I will re-enter IBM 140 Apr 2011 calls, look to re-enter AAPL 300 Apr 2011 calls, AXP and others.
Looking at the break down, the employment situation is still relatively healthy with respect to the valuation of this market. (take a look at the link)
Break down:
- I am pretty surprised by the 28k loss in retail, especially in this time of year.
- Temp employment is up from the previous two months, which is a good sign.
- Ave. weekly hours worked is flat from previous month. Could be due to the holidays, not sure. So I will rate it a neutral at best.
- Ave. weekly earnings is still growing month over month. This is good. (Albeit not at the pace we have seen from previous months, but growth none-the-less.)
This report is so-so. It certainly does not merit the SP500 breaking the 1220 resistance today. The report merits a pull back in the market.
A pull back to which I will be adding positions I day-traded around. I will re-enter IBM 140 Apr 2011 calls, look to re-enter AAPL 300 Apr 2011 calls, AXP and others.
Wednesday, December 1, 2010
Market Thought... stay calm
Bears are fucked.
First, really really good economic data came out today, again.
Second, Goldman raised their GDP estimate to 2.7% for 2011. (Which should mean the 10yr yield trades around 3.7ish. IMO, further enforcing my thesis that with a 10yr above 3 will bring an SP500 w/a more normalized PE. Which means IBM is disturbingly inexpensive.)
Third, today's move was technically nice. The really really nice economic data allowed for the SP500 to melt through multiple SMA's. (These SMA's were giving many many wall street chartists heart burn, but no heart burn from this pseudo chartist/fundies whore ;)
PS: Don't get me wrong, if you would like to take profits, take them. But my thesis is very much in tact. (fundies, technicals)
First, really really good economic data came out today, again.
Second, Goldman raised their GDP estimate to 2.7% for 2011. (Which should mean the 10yr yield trades around 3.7ish. IMO, further enforcing my thesis that with a 10yr above 3 will bring an SP500 w/a more normalized PE. Which means IBM is disturbingly inexpensive.)
Third, today's move was technically nice. The really really nice economic data allowed for the SP500 to melt through multiple SMA's. (These SMA's were giving many many wall street chartists heart burn, but no heart burn from this pseudo chartist/fundies whore ;)
PS: Don't get me wrong, if you would like to take profits, take them. But my thesis is very much in tact. (fundies, technicals)
Prediction...
The perception of the dollar strength will morph from 'flight to safety' (due to Europe and war) to US economic strength.
(I have always had the perception of the latter, but once the majority of the street traders realize this, it will further facilitate a more normalized PE for the SP 500, along with the rise in the 10yr.)
(I have always had the perception of the latter, but once the majority of the street traders realize this, it will further facilitate a more normalized PE for the SP 500, along with the rise in the 10yr.)
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