Volatility Is Our Only Friend
Jack "Man Child" survived his 11 hour day at school yesterday. He is now officially a high schooler (I know no such word, but I like it.). Devin and I had a mountain of homework our selves as each teacher sent home the draconian rules and regulations for their class. We are pretty sure terrorist detainees have more freedoms than these kids do. One teacher actually put "Students will not be allowed to leave the room to use the rest rooms during class unless if it is a dire emergency." Then many of them got very creative with their supplies list. One teacher said the kids needed sticky note (Post it type notes) of a dimension that does not exists. Devin was driving all over today to gather the academic aids.
Above is a shot of our pool. It looked really inviting this morning and it was nice to get back into the routine we abandoned about three weeks ago. I will admit the first few laps yesterday morning were difficult. After just two days, I am feeling much better.
Today we volunteered to help Ellen get her new iPad up and running on her home network. That required a nice ride to Irvine and for the most part it went smoothly. Today is my Dad's birthday we Ellen and I celebrated by going to one of his favorite joints, La Perlita Mexican Cantina.
About 15 years ago, when I started at PADI, my father asked mee what I was doing for lunch and I said nothing. He said good, come on down to my office at about 11:15. When I did he was ready to go. He told his assistant, (Now my assistant, Ellen) that we were going to the Ritz. Now I was impressed as The Ritz in Newport is a pretty Ritzy place. Cool, my first week and we are havin lunch at the Ritz. When he started heading to down town Santa Ana (Not voted one of the best places to be after dark several years in a row.), I mentioned he was headed the wrong way. He said no were not. I reminded him The Ritz was in Newport Beach. He laughed and said we are going to the Mexican Ritz, La Perlita's. We spent many lunches at La Perlita's from 1995-1997 until we moved to Ranch Santa Margarita. Then in 1998, La Perlita opened a location near the office. It is still there today and we make it there almost once a year to have a ceremonial meal for dad.
We called it wrong today.
We did not even look at the market today till we arrived at the office at 8:00 am. The first thing we noticed was the nice pop we got on the OVTI calls we mentioned yesterday. Feeling a correction was coming like a steam train rolling down the tracks, we took the 22% gain in all accounts. Not bad for less than 24 hours.
We got a lot right today, but the market did not do what they should have. Even though the consumer confidence number was worse than SOME expected, some hope was squeezed out of the FOMC meeting minutes released today that there MIGHT be some type of asset purchasing quantitative easing coming down the road. That supported the market off its morning drop.
What seemed to get ignored, home prices continued to slide and oil crawled up. All of this does not bode well for the ISM survey and the jobs report Friday. So we are still cautious.
Now the day is over and the market ended up where it started give take a 20 dollar bill. Let's see what tomorrow brings. The Chicago ISM survey formerly known as The Chicago PMI reports and is expected to drop from 58.8 to 54. Our guess is more of a contraction to 52.5. Mr. Market should not like this. Factory orders which were way off last month are supposed to improve. Unless if there were a really quick inflow of goods from the improvement in the breakdown of Japanese supply management, we don't see how the number can improve. We will guess a 0% improvement which will be a disappointment. Then we have the ADP report which we think will be sad. We still feel a retraction coming.
What to do about gold. We made some nice money playing both sides of the stuff last week, taking the profit near the top and making some money on the way down. We are hearing that there will be another margin adjustment for commodity traders in gold. It could be by the end of the week. On the positive side, India is coming into its festival wedding season and the cyclonic gods have been nice to that part of the world. Inidan gold consumption from 09-10 was up 16% and is expected to be even higher this year. This all supports an upward trend, but if this is a bubble it is hard to pull the trigger and get back in GLD or AUX. We may have to watch this boat sail away from the dock a bit more before we jump on board.
Tonight we decided to go hunting. We went to the most recent SEC filings for the day. There are approximately 4,500 sec filings every single day. Some are benign name changes in company names or voting proxy statements or domicile statements. Others are relevant changes in ownership by key shareholders as well as quarterly and annual statements.
Tonight we may have tripped over a good one which we put out to our friends we co manage their accounts. "In a late search, I ran across a piece of information regarding corporate raider Carl Ican. In scanning the SEC filings for today it looks like he is dumping about 11 million shares of Lion's Gate Films for $7.15 a share. The stock has done rather well of late; this news is NOT on the street but will be in by tonight. I have placed some short term PUT orders for LGF at the 10 cent to 25 cent range. I am expecting a 1-2 dollar drop in the stock at the opening tomorrow. That could generate a huge profit on the PUTs. Ican was threatening a take over and that has driven the price from 5.80 to the current 7.52. If we can catch the PUTs in the morning, we might be looking at an 800% return."
Salve Lucrum
