Tuesday, August 31, 2010

JPM Shutting Down Prop Desk Operation (JPM)

(Orignally post @economicburn.com)
This is huge news. More info as it comes in. Looks like the effects of Dodd-Frank on big bank prop desks is being felt worldwide.

Here's what flashed on Bloomberg terminals, courtesy of Zerohedge:


FOMC Minutes Much Of The SAME BS (XLF)

Blah blah much of the same.. At least they are halfway admitting things are not quite right. The WSJ Writes:

Most Fed policy makers agreed that the new strategy of reinvesting maturing or refinanced mortgage-related securities was necessary to avoid an unwanted tightening given the weakening economic recovery, minutes of the Aug. 10 policy-setting meeting showed Tuesday.

Troubled Bank Number Grows By 54 YET Banks Post $21.6B profit (XLF)

Contradicting headline if you ask me! This past Friday was the first "bank fail Friday" we have seen without a failure, maybe they are playing the bank seizures a bit slower as the stock market erodes? Doubt it. Have no fear though the number of troubled banks has increased to 829, most are regional banks.

I believe regional banks represent the middle consumer's true condition because they service more of the middle class and rural America.  These smaller banks do not have fixed income trading desks, they do not make markets and are not SLP unlike the big banks who accounted for most of the $21.6 billion in net income in the April-to-June quarter.
() "The biggest banks have mounted a strong recovery with help from federal bailout money and record-low borrowing rates from the Federal Reserve. They also have been able to cut back on lending in troubled parts of the country such as Florida and Nevada.
Smaller and regional banks, however, have less flexibility. They have accounted for nearly all the banks that have failed this year."

Monsanto Shares Drop on Reduced Yearly Expectations (MON)

(Originally posted @Benzinga)
Shares of Monsanto,ticker: MON,  are down nearly 5 percent this AM as the company stated it expects yearly earnings to come in at the lower end of the range. The company also stated they are laying off 700 employees.

This year's earnings for Monsanto are expected to come in $2.40 per share and $2.45 per share for the fiscal year that ends Tuesday.

Monsanto is scheduled to release fourth-quarter and full-year earnings on Oct. 6

(Barrons Writes) "The company plans to further restructure its herbicide business, called “Roundup,” and the cost to do so will be reflected in a one-time charge of 22 cents per share that will be split across the current quarter and part of next year, the company said."

52wk Range: 44.61 - 87.06

Monday, August 30, 2010

Do Not Stand In The Way Of The President (SPY)

SPY 10 min 
(UPDATE) SPY closed down 1.43%.

As you saw from the minute President Obama started tapping the Mic the market was offered all the way down to 1050. The market is reacting A La 2008 style to the president speaking, down down down. A lot of bulls had their balls tied up with rubber bands ready to buck when the paddock gate was opened. The rubber bands must not have been tight enough as the market is down 1% or about 100 points on the DOW.

When you see lower highs and lower lows consistently throughout a session it is a good rule of thumb to not stick your neck out into the playing field.

Asia Fueling Futures Rally. BOJ Talking Yen on Monday (UUP)

As the Yen rises Bank of Japan is scurrying to to intact measures to devalue the Yen. Monday BOJ is holding a meeting to discuss the issue. Below is a key quote i would like you to focus on, theme "temporary":

“BOJ monetary policy alone will only stop the yen’s advance temporarily,” said Mari Iwashita, chief market economist at Nikko Cordial Securities in Tokyo.

Sunday, August 29, 2010

M&A Continues Aventis For Genzyme $18.5 Billion (GENZ)

This Sunday morning French pharmaceutical company Aventis, officially revealed their bid for Genzyme, ticker GENZ. Looks like merger Monday will be living up to it's nick name tomorrow with this 38% premium bid. The 38% premium represents the move from the low 50$ level when the takeover speculation first hit the market. This season we have seen the 3Par bidding war along with BHP's for Potash hostile takeover, my guess is we see a few more big names pop up before the 2010's M&A boom wraps up.
(Reuters Writes) "Sanofi approached Genzyme in July and the two companies were engaged in friendly merger discussions. But, according to Sanofi’s chief executive, Christopher A. Viehbacher, the talks were stifled by Genzyme’s management.

“We are disappointed that you rejected our proposal on August 11 without discussing its substance with us,” he wrote in a letter to Genzyme’s chief executive, Henri A. Termeer. “Our financial advisors finally met briefly on August 24, but the meeting simply served as further confirmation that as throughout you remain unwilling to have constructive discussions.”

Under the terms of the bid, Sanofi is offering $69 per share in cash for Genzyme. That represents a 38 percent premium over Genzyme’s unaffected share price before speculation hit the market about a possible deal. Shares of Genzyme closed at $67.62 on Friday."

Saturday, August 28, 2010

3Par Getting Cozy with HP's $30 A Share Offer (HP,PAR)

My guess is Dell will come back with a higher bid considering the options activity in PAR. The 30 strike front and back months saw volume eclipse open interest, with September 30 calls trading over 16,000 contracts. My guess is Monday new series will be listed and the game will be on. Can these companies even afford this bidding war? Apparently so..
() Both PC makers can afford to continue bidding. Dell has $12.4 billion in cash and short-term investments at the end of last quarter. HP had $14.7 billion.
Dell first made a play for 3Par at $18 per share, or $1.13 billion, on Aug. 16. That was an 87 percent premium over its previous closing price of $9.65.
3Par shares rose $6.43, or 25 percent, to close at $32.46 on Friday after HP put in its latest bid, suggesting investors believe a higher bid is possible.

Thursday, August 26, 2010

SourceFire Shares Fly On ArcSight News (FIRE, ARST)

(Originally posted on Benzinga) Shares of ArcSight (NASDAQ: ARST) soared nearly 30 percent higher this afternoon on news it has put itself up for sale. Potential rumored buyers include HP (NYSE: HP) and Oracle (NASDAQ: ORCL). The rumored going price is $1.5 billion. This news comes on the heels of Intel (NASDAQ: INTC) purchasing McAfee(NYSE: MFE) for $7.7 billion.

On the heels of ArcSight's move, shares of SourceFire (NASDAQ: FIRE) shot 13 percent higher on above average volume; shares closed up $2.54 to close at 24.68. SourceFire is in the cybersecurity space providing solutions to the IT industry. SourceFire has a market cap of $684mil, ArcSight market cap $1.2bil.

SourcFire 52wk Range: 16.80 - 28.00
ArcSight 52wk Range: 17.51 - 37.46

Was It The Philly Fed or POMO.... (SPY)

The Man Behind the Curtain (pomo)
Which tanked the markets at 11:45am?
Nobody will every know what really makes the market tick in this environment, but one can surmise the drop this morning was obviously related to the Philly fed stating more economic weakness. BUT! I believe stopping the days POMO buying in the treasury's was the real reason why the market dropped.

Zerohedge has been highlighting Permanent Open Market Operations affect on equities for quite sometime. He has pretty much concluded the entire rally from March until mid 2010 was a result of reinvesting interest payments into the purchase of treasuries.

To CNBC's credit they actually did mention POMO stopping for the day as a possible cause for the drop. Good work guys it only took months of the blogosphere covering the thesis for you to report on it. Blogging is the new medium for financial media and information exchange. I enjoy seeing CNBC embracing the medium though they could do a bit more of crediting bloggers for idea generation. I have seen many times CNBC use something a bloggers thesis (COUGH, zerohedge) on air as their own thesis.

Wednesday, August 25, 2010

Trading A Break Down (RIMM)

Now that the topic of shorting has come into play the last month or so i figured i would touch on how to identify a potential SCALP, not a trade to be married to. I use scalps to take advantage of momentum created by selling or buying through a key level. In the case today, selling through a key intra day level in Research in Motion.

Take a look at the chart to the right you can see a clear support line at 47.84, my entry was looking for a move down to 47.68.

Reason why i picked this level was because it was tested and congestion resulted at levels earlier in the session. When looking for an entry point for a you need to use a 1 min chart, watch for volume to come in and bids being hit.

X Marks The Spot (SPY)

(Orginally Posted @EconomicBurn.com)
Very simple here X markes the spot where we have two major trend lines near convergence at the 105.75 ish level in the SPY 1055 in the SPOOZ. Take a look at he chart above showing data from 1989 until this day. The Ozark instructs you to:
Take a look at the rally from 1995 to 2001 WTF happened? i Know. Deregulation, .COM's and Clinton resulted in a massive rally of unsustainable proportions.
Take a look at the rally from 2003 until mid 2008 WTF happened? I know. Bush, Greenspan, the Securitization of piles of shit and the over-leveraged consumer resulting in the creation excess capital to stabilize the market.

Tuesday, August 24, 2010

When Do You Step Back On The Gas? (SPY)

The last few months and weeks have been very slow, my proverbial trading gas pedal has been less than half down or even on cruise. Summer trading combined with the post 2008 crash environment has left us with little volume and high implied correlations.

During this period of time most prop traders i know, including myself have taken a backseat driver role in regards to trading. This helps preserve gains and limit losses in a slow environment but most of all this period of time helps recharge your brain and batteries.

After labor day weekend we should see some volume come back into the market as bigger traders/players step back into the markets. This is the time where you as a prop trader or even home gamer pushes the gas pedal down. We are seeing market weakness which reminds me of mid 2008 trading leading into the fall/winter 2008-2009 turmoil.

Introducing the Dell Aero Smartphone (Dell)

Dell has ventured into the smart phone arena with the AERO teaming up with AT&T as the provider. The price point is 299 stand alone and 99 with a 2 year contract. Will she flop like the similar looking Palm Pre, or will she be a turn around machine for Dell. The need something now the HP has out bid them for 3Par, possibly Dell will sweeten the deal..

(PC World)The first proper smart phone from Dell will be the Aero, an Android smart phone that is coming to AT&T soon. With a 624 MHz processor and only 2GB of memory to start, it's clearly a low-end smartphone, not the next Droid rival.

The Burn!! Existing Home Sales Drop 27.2% In July

Look what we have here, more disspointment. Looks like the homebuyers tax credit was the real driver. As you can tell from my sentiment indicator over on the right, i have been bearish since May 9. No real growth here, move along. 
() Home sales picked up in the spring when the government was offering tax credits. But the market has struggled since the tax credits expired on April 30.

The sale of existing U.S. homes sank 27.2% in July - the biggest one-month drop ever - largely because of the phase-out of a federal tax credit, according to an industry trade group. The National Association of Realtors said existing-home sales fell to a seasonally adjusted annual rate of 3.83 million in July from a revised 5.26 million the month before. Sales of single-family homes fell to the lowest rate in 15 years. Inventories of unsold homes rose 2.5% to 3.98 million in July, representing a 12.5-month supply, the highest level since at least 1999. The median sales price edged up 0.7% in the past year to $182,600 in July, the NAR said

Remember to check out Bottarelli Research for ways to play the volatility. 

Monday, August 23, 2010

Merger Monday...HP vs. Dell For 3Par (HPQ,DELL)

Nothing like a good bidding war to start out the week. Cyber Mondays are back.  Mark Hurd is missing out on all the fun, perhaps he was the one holding back the acquisition? HP out bid Dell for 3PAR by the tune of 200mil, or 24$ per share.

()"Hewlett-Packard Co. offered $1.5 billion on Monday for 3Par Inc., a company whose data-storage machines are designed for "cloud computing," or delivering services over the Internet. HP's rival, Dell Inc., last week offered about $400 million less for 3Par, and many analysts and investors expect Dell to make a sweeter counteroffer."

Friday, August 20, 2010

FDIC Seizes Chicago Based ShoreBank (Fail)

I expect more failed banks inside this failing state in the near future, this bank actually had a fairly large amount on deposit, $1.54billion. Is the FDIC going to have a party when the 115th bank is seized next Friday? Oh wait never mind, they just seized three more banks, two in Fla, one in Va.
()"ShoreBank lost $39.5 million in the second quarter amid soured real estate loans. The bank had been under a so-called "cease and desist" order from the FDIC for more than a year, requiring it to boost its capital reserves. ShoreBank was able to raise more than $146 million in capital this spring from several big Wall Street institutions."

Somebody Must Have Known........ (JAZZ)

(Repost from Economic Burn)
Yesterday, prior to today's halt a large sell ticket was punched around 3:58 in Jazz. Late this afternoon the FDA rejected Jazz's fibromyalgia drug. The stock is trading down 30% AH: WSJ Writes:
An FDA panel of outside experts — including an FBI agent! — voted against expanding the use of Jazz Pharmaceuticals’ narcolepsy drug to fibromyalgia, in part because of its potential as a street drug.
Perhaps the lucky trader who traded at the close yesterday was clairvoyant?

Paolo Pellegrini of PQSR Hanging Up the Racket As well (PQSR)

Further proof this market is eating traders alive as the quest for alpha becomes harder and harder.
The churn and lack of macro movement over the last year makes it very difficult to pick direction or even individual stocks. The days of 2008 where liquidity flowed? and the markets actually had conviction are over. Dispersion trading seems to be the way to go if your on a quest for alpha in the robot market.
(Marketwatch)"The PSQR hedge fund is down roughly 11% so far this year. Before this year, performance was strong. Pellegrini launched the vehicle in April 2008 and opened it to outside investors in December 2009
.In 2008, the fund generated 40% returns, in the midst of the financial crisis. In 2009, it returned more than 60%, according to industry publication AR magazine, which reported Pellegrini's plans earlier on Friday."

Thursday, August 19, 2010

HP Income Jumps 6 Percent Shares Drop Another point (HPQ)

(Repost from Economic Burn)

HP reported mathematically strong numbers after the close, though realistically the numbers were not at all promising. After hours HP's shares fell about 1 percent, settling around 40.40.

Clearly tech is still wobbling, with Sandisk's mere tip of the iceberg offering of up to $1.5 bil in convertibles combined with back to school sales already worrying the street; quarter 3 is going to be ticky one for the space.
 HP's numbers were in line with expectation, even with the ousting of CEO Mark Hurd.

Wednesday, August 18, 2010

What Is The Baltic Dry Index Telling Us (BDI)

Image: Bloomberg
(Original post from Economic Burn)
Perhaps the BDI is telling us the summer commodity rally has some legs to it. As you can see from the chart the index is still well off it’s highs put in back in May of 2008. From May 2008 the index has collapsed as commodities and world trade ground to a near halt. The index trended off a low of 663 in Dec of 2008 to high of 4632 only to trade flat until breaking down in May of 2009 as economic slowdown fears gripped the market.
On about July 12 the index caught support as world commodities specifically grain rocketed higher. The index needs to move above the 5000 level to signal a true reversal, if the commodity rally continues into the fall we may see this. If not, we may be heading back to lows as companies around the world feel the pressure of a slowing US/world economy.

Stanley Druckenmiller Closes Duquesne Capital After 30 Years

Looks like the average day trader and home gamer is not the only market participants struggling in this market. Stanley Druckenmiller is closing his fund after nearly 30 years in business. He cited "emotional stress and a failure to live up to his standards as reasons behind closing the fund." 

I empathize with this guy, the market is hard and what is even harder is dealing with the pressure of living up to past standards. The market is very different, what worked in the past does not always work in the future.

Tuesday, August 17, 2010

American Apparel Shares Skid On Going Concern Issues (APP)

Shares of American Apparel (AMEX: APP) saw heavy downside pressure off the open today, only to trade lower into the afternoon session. Shares are currently trading down 30c at 1.09. 

Today at about 1pm the company stating the company had "substantial doubt about its ability continue as a going concern and warned it could breach a loan covenant" reports Reuters.

The company was recently subpoenaed by the SEC regarding the resignation of it's former auditors. With sales declining and what looks to be an upcoming default it appears the company has substantial headwinds.

American Apparel 52wk Range: 1.08 - 3.9

Saturday, August 14, 2010

Sixty Six Points.....Nice Trade Lloyd! (GS)

Nothing like pulling 66 points out of stock  on  . This represents a 79% return for the CEO of Golden Slacks. Granted he did not make this money over night, GS becoming a SLP and the fact that GS received 13 billion from AIG definitely helped rocket GS's stock price back up to stratospheric levels they are currently trading on the backs of the US tax payers. 

*Remember, "Wall street privatizes gains while socializing losses" G. Simmons. Goldman's president Gary Cohn also exercised about 73k shares as well. Where is the party boys? 

Late Summer Trading = Blah.. Storm Brewing? (SPY)

It seems as if market wide sentiment is turning for the worst. Where have has all the market participants gone? In my opinion people are simply hording cash because the "recovery" has turned into a big fat fizzle. If you think back to the beginning of the year there was much hype and hope our economy had seen the worst. Six months later here we are, nothing has changed, economic numbers are indicating our humming economy is not quit as rosy as the media wants you to believe.

Investors are simple down and out, they buy and get crushed they sell and get crushed, the up and down churn has destroyed the average investors confidence. WE NEED AVERAGE INVESTORS in this market to keep this market working.

Alan Greenspan Destroyed The United States?

Hat tip to ZeroHedge for turning me onto Scope labs and Gregory Simmons. IF you are sitting at home this Saturday with nothing to do, watch this video.
Two quotes from G. Simmons.
"Greenspan treated a hangover with heroin." "We create derivatives we do not even fucking understand."
Scope Labs Video By Gregory Simmons.