Options Trader: Wednesday Outlook 15 comments
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Vice President Dick Cheney’s office sought to alter a federal official’s prepared testimony about the health consequences of global warming.
You would think that would be the story of the day in the news, but it barely rates a mention as we have come to expect deception and witness-tampering from our country’s second-in-command. According to the WSJ: In a letter dated July 6 in response to questions from the chairwoman of the Senate Committee on Environment and Public Works, Barbara Boxer (D., Calif.), Mr. Burnett said Mr. Cheney’s office and the White House Council on Environmental Quality "were seeking deletions" last fall to congressional testimony about climate change prepared by the Centers for Disease Control and Prevention. Mr. Burnett said the latter office asked him "to work with CDC" to remove from the testimony "any discussion of the human health consequences of climate change."
The issue of whether greenhouse gases endanger public health or welfare is significant because a finding by the EPA that they do would require the agency to regulate them under the terms of the federal Clean Air Act, spurring new rules across a range of industries. This is possibly one of the factors affecting coal at the moment as it seems that "clean coal" plants may be called into quesiton. We need to keep our eye on affected utility companies as well.
Cheney’s pals in Iran had a missile test today that has sent oil back up $2 pre market for the 10th time the same excuse has been used in 4 years. Yes, Iran has missiles, yes, they test them once in a while. Perhaps if the Vice President didn’t order secret war plans to be drawn up for Iran and then have one of his staffers leak his plans to the press, things wouldn’t be so tense, but oil was languishing at $80 last October and the VP's actions were just what we needed at the time to boost the price over $100 as the "march to war" with Iran heated up. Of course, despite the fact that he was caught red-handed lying about intelligence on Iran back in March, Cheney keeps banging the drums - throwing the oil markets into a frenzy and driving the dollar relentlessly downward as investors fear yet another disastrous war is in the making.
That’s why I’m optimistic! They can’t keep this up forever. In fact, they can’t keep it up past Jan 20th so the end draws near and there will be no more Pumper-In-Chief to keep what is now a $40 "terrror premium" in the price of the 21M barrels of oil a day that this country consumes. The end is near and commodity traders are not known for sticking it out until the last minute, so I figure they have until the end of hurricane season tops.
Asia didn’t see this run-up until late in the day and the Nikkei fell off a cliff as crude climbed, dropping over 200 points after a nice open. The Hang Seng also dove in late trading, then recovered on last minute buying but the 22,000 barrier held tough to the upside. India flew up 614 points, a 4.6% gain on the day and the Shanghai Composite made it back to 320, a nice 10% improvement over last week but oil was "just" $136.74 at the close of China trading so, once again, we will be able to play the markets by keeping our eye on oil today.
Europe is up about 1.5% as the dollar rises to test 73 again today, which is great for their exporters and gives the EU reason to believe that the Fed may actually follow them and tighten rates to control inflation. Financials showed a lot of strength and UK homebuilders announced big staff cutbacks and were rewarded for their efforts.
We should be happy just to hold our gains from yesterday but I’d like to see us do better than that. We are very concerned with getting a big draw in crude inventories, caused by NYMEX traders refusing shipments of all but 21M barrels scheduled for July deliveries, effectively shorting our country 5M barrels a week to offset the dreadful news from Mastercard’s Spending Pulse Survey that shows 4% less consumption than last July 4th weekend and, even more startling, a 4.3% decline in total US gasoline consumption in the past 3 weeks alone - that’s VERY rapid demand destruction.
Let’s remain cautiously optimistic today as we need to keep an eye on how many of the above factors are dogging our corporations as they report on Q2. Alcoa (AA) came up roses yesterday and we have a biggie from General Electric (GE) on Friday to look forward to, it’s going to be an interesting week to say the least!
1PM is the re-announcement of the Air Force tanker deal, the loss of which diproportionately tanked Boeing (BA) from the $80s all the way down to $65 (it’s only 2% of their projected revenue) so we’ll see if we get a disporportionate reversal today…
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This article has 15 comments:
I think you're partially right in your analysis above. What is missing? The democrats. As if they're not part of the same corruption scheme, as if they want the price of oil to come down, to withdraw our troops from Iraq, and as if they're immune to the oil cartel lobbying.
I'd challenge anyone to come up with one SIGNIFICANT difference between republicans and democrats. One. And I will take back everything I said.
On the issue of Iran and their missiles and what could happen to a precious gasoline supply if they use them to take control of the region (or entire world...), there's a great article on greenfaucet.com today. The author argues that once the Iran missile issues fizzles, oil to make its much needed/anticipated correction. Once that happens speculators will get rid of their longs, and this will bring oil down even more- she argues that oil has $10 to go down.
Here's the link:
www.greenfaucet.com/en...
Oh - and Boeing didnt tumble due to the tanker deal loss -- they tumbled due to GS saying they could lose 30% of their aircraft orders due to the economic downturn.
oil stocks = f(future prices)
future prices = f (oil commercial corps, non commercial traders)
oil commercial corps= f(oil profits)
non commercial traders = f( panic, oil profits)
oil profits = f(spot oil price)
panic = f (bigbro)
Thanks Morgan - looks like that writer is right already! My target is a little more ambitious at $85. Tell your folks I said hi, even though that makes me feel really old!
Contender - You confuse checking the facts with bending over and accepting whatever BS Goldman hands out as gospel. Whoever made that clue doesn't know jack about the airline ordering process and I said as much the day it came out. I predict not only will orders not be cancelled but that there will be a market for trading slots. How soon would you like to start saving 20% of your fuel cost which is over 40% of your entire operating cost as a comany that drops (using CAL as an example) just 5% to the bottom line in a good year? It's not even a choice to switch, airlines cannot compete without upgrading their fleet.
As to our gains. They are simply the results of the tracked member portfolios with every single entry and exit publically traded with 1,000 members on-line trading every day on my site. We have a 98% monthly retention rate vs. an industry average of just over 70% and half the people who we did lose last year cited politics as their reason for leaving, not trading. I made a decision a long time ago that if conservatives can't take a little sermon with their economic salvation then they can damn well go pray for a winner somewhere else. Not surprisingly my board is still 50% Republicans as they don't really care what your politics are as long as your money is green!
Thanks Phin!
Geez dude at this rate you should be running the world by now.
I know.. ur doing it for the people... cuz you care.
Hey dont get me wrong - maybe since then you have put mechanisms into place for people to track your moves in real time (how do you actively buy and sell options on 40 or 50 positions in real time and keep it straight anyway?). Maybe now they can emulate your moves and everyone is making 300% per month !! woohoo !!
No wonder the market is tanking - Phils stock world is winning all the trades !
Please Phil... ur a smart guy - but get real.
"This is good timing for Bank of America (BAC) [another one of our LTP holdings], who are exercising $1.9Bn worth of calls to up their stake in China Construction Bank (CICHF.PK) to 10.75% from 8.2% in China’s second largest bank. BAC’s original $3Bn investment in June 2005 is now worth about $30Bn. The 2010 $35 calls are just $4.70 and make a fantastic long-term investment."
Those calls are selling for $1.20 today (a 75% loss in a little over a month). I'm curious how you would handle such value erosion in long term calls that you've bought, e.g. sell, hold, average down, if your reason for buying has not changed. Thanks. I enjoy reading your posts.
I'd personally rather spend mine answering legitimate questions like Blue Dogs.
On BAC - We already had the 2010 $35s back on 4/14 and we've been scaling into it over time following the gameplan from this article: www.philstockworld.com.../
We thought the financials were cheap then and we really think they are cheap now but it is key to take a long position, sell calls against it and roll the position to a lower strike as it falls, selling more calls along the way. This helps mitigate some, but not all of the losses and BAC is currently down 50% on us despite the scaling in but we are now in the 2010 $25 calls for a net of about $6.
The banks have been a real disaster and the financials make up close to 20% of our Long-Term Portfolio, which got killed the past two days.
As Al points out, these are just my trades and I'm not a financial advisor and you should ALWAYS consult a financial advisor before making any trade.
If I were still sitting on the BAC 2010 $35s at $1.20 I would be looking just to get even and I would roll the calls to the Jan '09 $22.50s at $3.10 (+$1.90) and sell 1/2 covers of the current $22.50s for $1.15 with a plan on rolling those to a full cover of the Aug $25s, which now sell for $1.08 so my expectation is to get $1.15 premium on 1/2 of my calls (.77) plus hopefully another $1 for the $25s so that's $1.77 of my $1.90 roll paid for.
My game plan going forward would be to get at least $1 of premium per month selling calls and if I do that for Sept, Oct, Nov and Dec that's $4 per contract made up plus whatever residual value I have left in the Jan position. Realistically, I'd probably double up the position on the roll as that way I only need to sell $2.50 worth of calls and retain my $3 value to get even, which is a much more obtainable goal.
Beware people