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Richard Glenn

 
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  • Calling Nokia: A Case For Using Options [View article]
    Crozz: You are right to note that implied volatility on the options is sky high at 80+%. But you have to remember that "normal" ballparks for what would be considered "high" IV just don't apply in some special situations (small cap drug stocks pending FDA approval etc.) and NOK at $1.86 is one of them. Option pricing models have a hard time dealing with the possibility of sudden radical price change rather than small steps. Even at an 80% IV, I think the options are too cheap given the range of possible outcomes in the near future.
    Try this as a thought experiment: buy the stock and sell the $2 calls for .65. Your net investment is $1.31 and you cap your upside at .69 for a max total return of 53%. Given the very real possibility of losing everything, I would say a 53% max upside is way too small for the risk involved. This shows just how cheap the $2 calls are, and why you might want to be a buyer rather than a seller.
    Jul 11 05:34 PM | 1 Like Like |Link to Comment
  • Calling Nokia: A Case For Using Options [View article]
    You are absolutely right that the common stock is basically an option on the survival of the company. The calls, however, give you even more leverage at the cost of having a time window for being correct. Given the situation Nokia is in, I think getting 3 x the leverage ( .65 vs $1.86) in exchange for an eighteen month window is a worthwhile trade off. Put another way, you can risk 1/3 of the money for almost the same reward if you are right and Nokia bounces back.
    Jul 11 04:27 PM | Likes Like |Link to Comment
  • JPMorgan: Estimating Q2 Numbers And The Whale Trades Impact, Part 1 [View article]
    Nice analysis. It's always good to hear from someone who has actually traded these products, as opposed to pundits who just finished talking to someone who knows someone who has the inside scoop.
    Jul 10 04:08 PM | 1 Like Like |Link to Comment
  • Microsoft: A New Breed Of Dividend King [View article]
    doc47 you are absolutely correct, and that underscores the need to buy even great companies at reasonable prices. 10 years ago Microsoft was trading with a p/e in the 40's. You can't buy there and expect long term success. Today with p/e at 11 is a different story, however. Good luck.
    Jun 28 08:12 PM | 6 Likes Like |Link to Comment
  • The No. 1 Reason Intel Is A Buy [View article]
    Thanks for the comments. In my book dividends are king - there is nothing like cash in your pocket. Bob, I also wish that Berkshire would return some cash to shareholders. I'm working on an article on BRK right now. Apple is also interesting from an earnings conversion perspective. At least they now have a nice dividend.
    Jun 27 03:51 PM | Likes Like |Link to Comment
  • The No. 1 Reason Intel Is A Buy [View article]
    Thanks for all the comments. J.D. Welsh: I'm basing my numbers on Morningstar's database, but all you need is the annual reports to get the income statements, balance sheet, and cash flows. All that is public and available from a number of sources.
    Skwestorange: You are absolutely correct that most companies buy back shares at the worst possible time (when business is good and the price is high). That's why I only give them "credit" for the current value of the net shares that they retired. And even there, I apply a haircut to the current stock quote to account for the fact that if they were to re issue the shares they would pressure the market. This is actually a good check on management: How much did they spend to buy back shares, and how much value did they receive? In Intel's case they were quite close, indicating that management took advantage of the market's weakness in the last few years to buy stock.
    Jun 26 09:59 PM | 5 Likes Like |Link to Comment
  • 3 Signs Wal-Mart Is About To Take Off [View article]
    ConservativeOutperformer: Congrats on your WMT position. True, anyone buying now will not be getting in at the bottom, but my contention is that the meat of the next leg up has just begun. Further, timing is key (as those who bought "cheap" shares five years ago can tell you), and if this is the start of the next leg up missing the first 20% in exchange for not waiting around for years with your fingers crossed seems like a good trade off to me. I have been invested for myself and clients for over a year and there have been several failed attempts to break out to the upside. I wrote this article because I think this one will finally stick. Finally, I would not advise just buying shares after the recent run, but rather to put the ticker on a watch list to buy on a pull back. If you get in at $62, you will not have missed much at all.
    Jun 20 01:05 PM | 1 Like Like |Link to Comment
  • Don't Worry About Target2 [View article]
    Another dose of sanity and clear thinking. Thanks again.
    Jun 14 10:05 AM | Likes Like |Link to Comment
  • The Inconvenient Truth About Spain [View article]
    Dana, It's nice to see someone make the case for reality. The hard - money - tighten - your - belt - lift - yourself - up - by - your - bootstraps chorus may be emotionally satisfying (get a job!) but at the national level it simply doesn't work (as you have pointed out). From your lips to the Bundesbank's ears.
    Apr 18 03:01 PM | Likes Like |Link to Comment
  • Using Buffett's Favorite Ratio To Analyze Apple And Its Industry [View article]
    Great article. It's always important to look at real cash as it circulates through a company. One question though. According to this analysis, Apple would look much better the day after it pays out a one time $20 share special dividend to shareholders. This, despite the fact that buyers would now be getting exactly the same company, minus the cash in the bank. It seems that you need a way to treat a cash hoard differently from other (non liquid, and in most cases required) PPE. Thoughts? Thanks again.
    Jan 9 12:55 PM | 1 Like Like |Link to Comment
  • What You Should Be Investigating Before Investing In A Bank Stock [View article]
    Thanks for the insight. I'm attracted to banks at these levels, but in this environment, the leverage / short term funding potential issues are hard to get comfortable with. What do you think of more traditional banks like WFC, or better yet PNC? Also, what about the processing powerhouses BK and STT? Thanks for your thoughts.
    Jan 3 01:43 PM | Likes Like |Link to Comment
  • Life Insurers Trading Mainly On Volatility [View article]
    Nice article. Some questions: What happens if you control for the level of the SPY? VIX rises as the market falls, so are the insurers reacting to a rise in the VIX, or are they just selling off due to their exposure to market sensitive annuities? Second, what happens if the "safe" investments that they made with the float (european debt etc) turn out to be not so safe? What kind of haircut would serve to wipe them out given the leverage (float / book) ? Also, have you looked at the counter party risk embedded in the "hedges"? Appreciate your thoughts.
    Dec 28 11:28 AM | Likes Like |Link to Comment
  • Warren Buffett's Investment In Bank Of America Is Doing Just Fine [View article]
    Not at all. If BAC buys back the preferred shares, Buffett still keeps the warrants. Nice article OP. I am amazed at how often even the WSJ is completely wrong about what Buffett is investing in. If they can't even get something simple like that right, what about more complex topics?
    Dec 21 05:12 PM | 3 Likes Like |Link to Comment
  • Why Apple's Cheap [View article]
    A great analysis of why the stock is so persistently cheap. Unlike most mega cap corporations Apple has to keep reinventing it's products (or coming up with great new ones) every few years. So far, it has knocked the ball out of the park time after time, and the stock pops accordingly. One miss, though, and the shares will fall through the floor.
    Dec 6 12:27 PM | 1 Like Like |Link to Comment
  • The Ultimate Demise Of The Euro: When, Not If [View article]
    A good summary of where we stand now. But the $64k question is: What happens in the near term? How do you position for the next few weeks / months? What is your prescription for making / not losing money in the near future? Any market predictions you would care to make? I'm all ears.

    For my money, I think the Euro survives, the ECB prints, Germany gets some sort of central budget watchdog, and we are back here again after the less competitive members don't make good on their promises. But this will take a couple of years, so until then don't fight the fed (s).
    Dec 5 07:01 PM | 6 Likes Like |Link to Comment
COMMENTS STATS
77 Comments
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