Live Stream of Retirement Panel at 2pm EDT (If it works)  Thursday Tidbits--Special March Madness Edition Yesterday I participated in the retirement panel with Seeking Alpha. This was the second panel like this (the other was a different topic back in November) I've done with them. The positive, at least the ones I've done, is that we cover a lot of ground including reader questions. The negative is that I am not sure if the format allows for a lot of depth. Clearly we delve into the topic I'm just not sure if we meet expectations on depth but it is fun and we are trying to help people which is a net positive. My opening comment for the panel; Generally I am not a believer in taking on a lot volatility and risk in the fixed income portion of a clients portfolio. Quite simply if we, generically, are in a 5% world and you buy something yielding 10% you are taking risk. You either understand the risk or you dont - but you are taking it. Obviously there is not always a negative consequence for taking risk, but that does not mean you are not taking it. A few days ago I sold the PowerShares Agriculture ETF (DBA). I first bought it ages ago in the mid to high $20s sold a little (not enough as it turned out) in the low $40s and sold the rest last week with a $24 handle. The fund changed its makeup to take in more commodities as a way to address position limits and ever since then the fund has not done much but seemingly eroded very slowly. Part of the problem might have been low correlation between the components being a drag on the fund but also some of the components aside from being in downtrends were also in a contango. For now no soft commodity exposure but we do have the MOO ETF which owns stocks. Given what might be the new dynamics of the holdings it might be that the single commodity ETNs or narrower ETNs from iPath could be the better way to go in terms of accessing the asset class. Barry Ritholtz posted this video about five keys to happiness. Two things stuck out to me above the others. One was about exercising. Per the video the various chemicals released from exercising act like anti-depressants and also being fit makes for healthier aging. Dr. Oz, not sure why, put in a quick appearance on CNBC a week or two ago and made an interesting comment. he said that if your waist measures more than half your height you have a problem. I've never heard it put that way before, hopefully you make exercise a priority. The other nugget from the video was about simplicity. This is a good one and it relates to portfolio management and cycle navigation. What constitutes "simple" is in the eye of the beholder. One way I think of simple, kind of parroting Peter Lynch, is being able to explain why I hold something in a sentence or two to a friend who is not active in the markets and the friend follows the logic. From the panel yesterday I was down on various types of products (annuities and currency CDs) that I think make things more complicated especially at times where no one wants more complicated. In the panel discussion we broached covered calls and while the strategy has its pluses and minuses it is not simple. I was able to see some of the question from people watching (is that the right word?) the panel live and quite a few of them went beyond simple strategies. Complex, especially where enhancing or chasing yield is concerned, often ends badly. To clear one thing up, I said that people might have to consider ratcheting down the withdrawal rate to 3% from the normal 4%. One reader left a comment agreeing with my change of mind. I would not say I have changed my mind but in general people need to put everything on the table. One common point I make here is about something having to give. For some people that will mean withdrawal rates. On a more positive note the NCAA tourney starts in a couple of hours--March is my favorite month of the year.  Thursday Options Brief: ATVI, DNDN, HIG, DD, RCL, SFD & AMR Andrew Wilkinson submits: Activision Blizzard, Inc. (ATVI) – The producer of online, console and hand-held games received a vote of confidence by one large options player anticipating bullish movement in the price of its shares through expiration in January 2011. Activision’s shares rallied 2.12% to $12.05 in the first half of the trading session. The optimistic investor established a massive bullish risk reversal on the stock by selling put options to finance the purchase of calls. The trader shed 25,858 puts at the January 2011 $10 strike for a premium of $0.62 apiece in order to purchase the same number of call options at the higher January 2011 $15 strike for a premium of $0.50 each. The investor pockets a net credit of $0.12 per contract – a total of $310,296.00 – on the reversal play, which he keeps as long as Activision’s shares trade above $10.00 through expiration day. Additional profits amass should ATVI-shares surge 24.50% from the current price to surpass the $15.00-level by January expiration. The 51,170 contracts utilized by this investor represent a whopping 32.28% of total existing open interest on the stock of 158,517 lots. Dendreon Corp. (DNDN) – A bear with butterfly wings feasted on the biotechnology company’s put options today as shares of the underlying stock edged 1.15% lower to $35.99. The investor unfurled the wings of a bear-put butterfly spread in the April contract to brace for potentially significant share price erosion ahead of expiration day next month. The trader initiated the spread by purchasing 5,000 puts at the April $30 strike for a premium of $0.82 apiece [wing 1], and by picking up another 5,000 puts at the lower April $20 strike for $0.28 each [wing 2]. The central April $25 strike housed the body of the butterfly, which involved the sale of 10,000 put options for a premium of $0.40 a pop. Net premium paid for the butterfly spread amounts to just $0.30 per contract, but yields maximum potential profits of $4.70 per contract should Dendreon’s shares plummet 30.50% from the current price to $25.00 by expiration day. The most the investor can ever lose is $0.30 per contract – the premium paid for the spread – but he stands to gain more than 15 times that amount if Dendreon’s shares collapse. Options implied volatility on the stock is up 7% to 65.16% thus far in the trading session. Complete Story » Private Equity on the Rebound Streetwise Blog submits: By Boyd Erman Private equity funds returned a grim -9.2% in the year to Sept. 30, reports industry tracker Preqin, trailing a wider rebound in stock markets. Complete Story » Dollars 'Undisputed' Reserve Currency Role Is Important Factor Underpinning U.S. Aaa Rating Research Recap submits: But ratings agency sees little threat to dollar’s preeminence in next few years. Selected excerpts from US Dollar to Remain Undisputed Global Reserve Currency for Foreseeable Future (Premium) Complete Story » Garmin's Dividend Hike: Just a One-Time Deal  Chad Brand submits: Despite reports on CNBC Wednesday that GPS maker Garmin (GRMN) had doubled its annual dividend from $0.75 to $1.50 per share, a thorough reading of the company’s press release shows that this increase is “one-time” in nature, meaning that Garmin has decided to add $0.75 to its dividend this year, but that investors should not assume it will necessarily stay at that level in 2011 and beyond. A few firms choose this type of dividend policy; paying out a standard rate every year and then, based on cash flows at the time, perhaps choose to pay out special dividends as well. Oil driller Diamond Offshore (DO) is another company that uses this policy. Had Garmin actually boosted its core dividend to $1.50 per share, it would have been very good news (technology firms typically do not sport 4%+ dividend yields), but without assurances that this is not just a one-time event (the company actually used “one-time” in its own handpicked wording) investors who bid Garmin stock up $2 on Wednesday based on an extra $0.75 of dividends may be a bit optimistic. Complete Story » Is IMAX a Buy? IMAX is a big-screen darling. Is a Discount Rate Hike Coming Today? I'm Not Convinced Marc Chandler submits: Speculation that the Federal Reserve is going to hike the discount rate today has weighed on the Treasury market and is helping to lift an already recovering US dollar in the foreign exchange market. The speculation is likely to be for naught and this may leave the markets vulnerable to a reversal. The last discount rate hike was largely tipped by Bernanke himself and explained. With the Fed having recognized again in the latest FOMC statement the weakness in bank credit, and not wanting to spark additional tightening of monetary conditions, some preparation would seem necessary. Complete Story » U.S. Economy and Heavy Industrial Orders: More Curious Inconsistencies  Michael Panzner submits: I admit I don't spend as much time drilling down into the details of company announcements and earnings releases as I ought to. It's hard enough keeping up with and sifting through government statistics and other big-picture data series. Luckily, there are many websites in my blogroll (and in my feed reader) that have a knack for finding real gems in the torrent of information that floods the newswires each and every day. Today's example includes a post from Karl Denninger's The Market Ticker, entitled "If The Economy Is Recovering.... (CAT)," which reveals another one of those curious inconsistencies I and others keep writing about:
Complete Story » Sirius XM's Next Hurdle: Overcoming Uncertainty Brandon Matthews submits: By Brandon Matthews The highly anticipated news of Sirius XM Radio (Nasdaq:SIRI) receiving a delisting letter from the Nasdaq has finally occurred, and as expected the company has announced its intention to appeal. Ahead of this notice, SIRI shares have fallen about .25, which was also anticipated and can be seen by the increased short interest over the past month or so. This is in spite of the fact that news surrounding Sirius XM has been favorable, including positive analyst comments and even more positive debt restructuring. Complete Story » Emerging Economies Buying More Gold Adrian Ash submits: Emerging-market nations hoarded new gold reserves at a near-record pace in 2009...
Yes, that means that private gold-hoarding, whether by GLD stockholders or Indian and Chinese households, has soaked up the difference. But as the gold-bug's Golden Rule says, "He who has the gold makes the rules" – an historic fact proven by the United States' own dominance of world finance and politics since the end of WWII. Complete Story » International Lease Finance - What's in a Covenant? Michael Terry submits: I was reading the new International Lease Finance (B1/BB+) senior unsecured 5.5yr debt prospectus as I am interested in ILFC and most things AIG. When going through the prospectus, I was reading the covenant package that comes with the debt. One covenant in particular I found interesting, and in this piece I will address it. First, in case you are not familiar with this company: Complete Story » Three Questions on Enterprise Software Licensing Trends Dennis Byron submits: There is a great interview up on cio.com March 16 concerning enterprise software licensing trends. The interviewee is Amy Konary of IDC and, truth in advertising, we were co-workers and worked for Claire Gillen at IDC back when Claire was doing the seminal thinking on application services provision in 1997. If that term is not familiar to you, plug in "software as a service" (SaaS) or "cloud computing" or "on demand" or "subscription-based" licensing. Or go back to 1965 for the granddaddy of all these buzzwords for the same thing, "utility computing." The interview led me to ask myself three questions related to investing in enterprise software suppliers as they embrace or re-embrace these licensing concepts: Complete Story » Chinas Assertiveness Could Lead to a Trade War with the U.S. Research Recap submits: The Economist Intelligence Unit looks at the prospects for a trade war between the US and China in a new risk analysis. Highlights: Complete Story » The U.S. Treasury's Bond Problem Charles Hugh Smith submits: The U.S. deficit and the Treasury bonds which must be sold to fund it are beyond comprehension--but I try anyway. The trouble with bonds (the U.S. Treasury variety, among others) is simple: there's too stinking many of them being issued. Given that every government on the planet except Lower Slobovia is issuing unprecedented quantities of debt (bonds) to fund their skyrocketing deficits (and Lower Slobovia would too, if its credit rating wasn't -ZZZZZ), then we have to wonder who will be showing up to buy the $1.6 trillion in freshly printed T-bills the U.S. Treasury will issue this year to cover the expected Federal deficit. This is of course "the new normal" given last year's $1.4 trillion deficit. Complete Story » Did Bernanke Mean Supervision or Bailout?  Tim Iacono submits: Perhaps there is some context, somewhere, that makes yesterday's words from Fed chief Ben Bernanke's prepared remarks before the House Financial Services committee on the subject of the Fed's role in bank supervision seem less filled with hubris than they first appear. But, if there is, I couldn't find them.
Complete Story » China Sky One's Cancer Drug Wins 'Breakthrough' Status  ChinaBio Today submits: China Sky One Medical (NSDQ: CSKI) announced its development-stage innovative cancer drug, Antroquinonol (Hocena) capsules, has been recognized as a Breakthrough Drug by China’s Ministry of Science and Technology (MoST). The designation qualifies Antroquinonol for accelerated approvals as well as financial and technical support of its development. Complete Story » Report From Europe: Market Sentiment Remains Positive The Mole submits: We have seen some more negative commentary on China in the past 24 hours, including from the likes of the World Bank (which in its latest quarterly report called for a tighter monetary policy stance to combat the risk of large asset prices increases and bad debts from the financing of local government projects). Yet the overall tone of the markets has remained distinctly positive, with key European bourses approaching new highs for the year, US markets making new cyclical highs and commodity prices and commodity currencies generally strengthening. Meanwhile volatility has continued to decline, with the VIX falling to the lowest level seen since May 2008. Alcoa (AA) and DuPont (DD) led gains that sent the Dow up for a seventh straight day as the US government said producer prices decreased 0.6% in February, underscoring the Federal Reserve’s assessment that inflation is subdued. Ford (F) rallied after Moody’s Investors Service upgraded its debt ratings Today’s Market Moving Stories Complete Story » Put Buyers Look for Ross to Pull Back optionMONSTER submits: By David Russell Ross Stores (ROST) has been climbing into record territory for the last two weeks, and now bears are looking for a pullback. Complete Story » Research in Motion: Has It Lost Its Edge? Market Blog submits: By David Berman Earlier this week, colleague Simon Avery wrote about Bernstein & Co.’s negative take on Research In Motion Ltd. (RIMM) The gist of it? RIM is still coasting on its technological breakthroughs of yesteryear, some of which don’t really apply today now that bandwidth is far less scarce. Complete Story » News Wizard |
The Federal Reserve is uniquely suited to supervise large, complex financial organizations and to address both safety and soundness risks and risks to the stability of the financial system as a whole.