That Was a Fun Ride
The market got right back where it started today, but used a lot of green and red ink to do it. At 7:30 PST the market was up 120 points. About 11:00 it was down 60 points. Then we finished at 11,405. That was just about where it all began.
Ha ha we made money today. Yeah we told you yesterday about the stupid blind folded bets we were making on options tied to recent earnings gains. The TJX one paid off quickly this morning. The 50 dollar September call option we bought at $4.00 enjoyed a 37% gain in about 12 minutes of trading so we took the money and ran. We are down about 35% on the A Agilent call we pimped here last night and we are up about 2% on the WMT PUT.
Now a famous movie said, "Stupid Is As Stupid Does". Now there is no better example of stupid is when you try and catch a falling knife. In investment speaks, that means buying a stock on the way down or even dumber, doubling down on a stock you are loosing money on. Well BAKAKOAA, I did that this morning. We mentioned a JWN Nordstrom September 45 dollar call option we bought for $1.35. Well, we bought more today at 80 cents. We do expect a turn on the next few weeks and it is worth the gamble. I hope.
So why all the gyrations? We had some mixed earnings reports out of TGT Target, DE Deere, DELL Dell. It is interesting to note that while we still have 70% or better of the companies beating estimates, they are guarded about future margins. This does not bode well for the back half of the year. I am still thinking a gain by years end of 7-10% from today's levels. More blah blah out of Europe did nothing to ease our concerns about the Euro zone debt issue. The Swiss Franc cranked up again as the SNB (Swiss National Bank) shoes not to PEG its currency to the the Euro which seems to be in a free fall.
Now without getting too technical and scaring most of you to the Oprah blog, with the apparent destruction of the Euro, monies are flowing to the safety of the Swiss Franc. That is killing the profits of all of the companies that are HQ's in Switzerland but do business in Europe and elsewhere.
Perfect example would be RIG, Transocean, the company that builds and rents all the deepwater drilling platforms. Well, 3 years ago they moved from West Texas to Zurich in an effort to avoid some taxes and enjoy some international accounting advantages. Now they are looking at a 400 million dollar loss (an adjustment to profits) because of the 40% swing in the Swiss Franc.
In order to stave off the flood of monies headed into the Swiss banks, the SNB (kinda like our fed and Treasury all rolled up into one.) has begun pumping billions of Swiss francs off the their printing presses. Their money supply was recently increased from 45 Billion CHFs to 200 Billion CHFs. Now boys and girls (pay attention Hannah-not to be confused with restaurateur Dave Hanna) when we pumb billions of paper dollars into an economy we get inflation. The SNB is willing to suffer some inflation to get the CHF down to a 1.10 and above trading range against the Euro.
Then we wonder why Gold is flirting with the 1,800 range? Do I hear $2,000.00.
If all of that was not confusing and scary enough for you how about some more throw "the dart on the wall blindfolded" option trades. Don't try this at home kids.
RDC Rowan Companies, Inc. provides onshore and offshore oil and gas contract drilling services in the United States and internationally, reported some nice profits a week or so and usually has nice spike after beating estimates. The market and the drop in oil have hammered it down so I thought it might be a fun little gamble. We got in on a September 34.00 Call Option for $2.20 cents a contract. The stock is trading for 34.50ish and we are looking for a rebound to near its 100 day average of 38 within a month. If we head that way a 25% bump on the call would be a surprised.
In the retail sector we had a nice beat by ANF Abercrombie & Fitch Co., through its subsidiaries, operates as a specialty retailer of casual apparel for men, women, and kids. Now typically they do quite well after an earnings beat so when I heard about the 6% drop during the day, it got my attention. I do not like ANF clothes because they are really too big and baggy on my sleek firm body, so I would normally not look at the stock none the less a call option. However, there was no good reason for the drop after the beat so it looked like a good gamble. We got some September 65 dollar calls for $4.29 a contract. We think we could see a rise to 71 or 72 in a few weeks and that would make these calls quite in style, unlike the clothes from ANF. Rumor has it they are paying "The Situation" not to wear their clothes. Hell I do that for free.
We had a lot of folk on the sidelines today and that probably won't change much tomorrow. We will probably see some negative reaction to the inflation numbers today and what will probably be higher inflation numbers for the consumer side of the coin tomorrow. (Watch Gold Climb again). As we said earlier in the week, a jobless number at or below 400,00 is baked into the numbers. If we see a larger than expected number (North of 405,000) we could see a 2-3% drop in the market. Look for the VIX to creep back up!. I need a 40 on the VIX.
Have a great day tomorrow and be nimble and watch your stops.
Salve Lucrum
