Spicer Matthews - Seeking Alpha 'Spicer Matthews' Tag RSS Syndication from SeekingAlpha.com SeekingAlpha.com http://seekingalpha.com/author/spicer-matthews India's Record Week Displays Emerging Market Strength http://seekingalpha.com/article/140004-india-s-record-week-displays-emerging-market-strength?source=feed 140004 A revolution is unfolding in the world's emerging markets. Looking for better returns, investors are searching far and wide for the world's best investments. While the giants face financial stagnation, emerging countries are taking the spotlight for the best equity returns.

India's Coming Back

]]> Thu, 28 May 2009 06:53:06 -0400 Spicer Matthews A revolution is unfolding in the world's emerging markets. Looking for better returns, investors are searching far and wide for the world's best investments. While the giants face financial stagnation, emerging countries are taking the spotlight for the best equity returns.

India's Coming Back


Complete Story »]]> EPI ETF ICN INR Spicer Matthews Why Junk Bonds Are No Longer Junky http://seekingalpha.com/article/138768-why-junk-bonds-are-no-longer-junky?source=feed 138768 Junk bonds live at the bottom of the barrel below investment grade, and many times they are debt instruments sold by companies that have a poor track record of paying debt back. Many other times, however, bonds are labeled as junk solely because the rating agency fears that the issuing company will not pay them back. However, these fears are not always in line with reality.

Junk is Oversold

]]> Wed, 20 May 2009 15:18:19 -0400 Spicer Matthews Junk bonds live at the bottom of the barrel below investment grade, and many times they are debt instruments sold by companies that have a poor track record of paying debt back. Many other times, however, bonds are labeled as junk solely because the rating agency fears that the issuing company will not pay them back. However, these fears are not always in line with reality.

Junk is Oversold


Complete Story »]]> JNK Spicer Matthews What Do Unemployment Numbers Truly Divulge? http://seekingalpha.com/article/137119-what-do-unemployment-numbers-truly-divulge?source=feed 137119 The first Friday of every month is certain to be a volatile ride. As investors attempt to “pre-game” the employment report and others jump on board the second the report hits the feeds, volatility in the market is certain, at least for one day.

However, the impacts of unemployment are long lasting and will hurt generations to come as the eventual recovery seems to be farther in the distance.

]]> Tue, 12 May 2009 04:12:13 -0400 Spicer Matthews The first Friday of every month is certain to be a volatile ride. As investors attempt to “pre-game” the employment report and others jump on board the second the report hits the feeds, volatility in the market is certain, at least for one day.

However, the impacts of unemployment are long lasting and will hurt generations to come as the eventual recovery seems to be farther in the distance.


Complete Story »]]> Spicer Matthews The Regression of Risk: Gold, Treasury ETFs http://seekingalpha.com/article/136156-the-regression-of-risk-gold-treasury-etfs?source=feed 136156 As talking heads begin to discuss the potential end of the recession, there are many lessons to be learned about the last 18 months of economic slowdown. The lessons learned this time can better prepare investors for the future. Bubbles and market fallouts should be expected, and though rare, they do lend opportunity to the well timed investor.

Gold and Treasuries

]]> Thu, 07 May 2009 12:29:05 -0400 Spicer Matthews As talking heads begin to discuss the potential end of the recession, there are many lessons to be learned about the last 18 months of economic slowdown. The lessons learned this time can better prepare investors for the future. Bubbles and market fallouts should be expected, and though rare, they do lend opportunity to the well timed investor.

Gold and Treasuries


Complete Story »]]> GLD IAU TBT TLT Spicer Matthews Private Equity to Rev Up With Chrysler's Bankruptcy? http://seekingalpha.com/article/135622-private-equity-to-rev-up-with-chrysler-s-bankruptcy?source=feed 135622 For many years, private equity has played a critical role in finding the fundamental value of any publicly traded business. After all, it is not until a takeover occurs that a business is sold for its true economic value, and often the sale is completed at a hefty premium to an already pricey business. Chrysler's failure with private equity will spawn a new day and age with private capital; investors will again learn to be cautious, even with a business as large as Chrysler.

Where Will Private Equity Venture Next?

]]> Wed, 06 May 2009 04:13:23 -0400 Spicer Matthews For many years, private equity has played a critical role in finding the fundamental value of any publicly traded business. After all, it is not until a takeover occurs that a business is sold for its true economic value, and often the sale is completed at a hefty premium to an already pricey business. Chrysler's failure with private equity will spawn a new day and age with private capital; investors will again learn to be cautious, even with a business as large as Chrysler.

Where Will Private Equity Venture Next?


Complete Story »]]> Spicer Matthews How to Profit from the Reflation Trade http://seekingalpha.com/article/134143-how-to-profit-from-the-reflation-trade?source=feed 134143 When macroeconomic indicators show neither inflation nor deflation, what happens to our currency? Reflation!

Although the United States, through its monetary and fiscal policy, has added trillions of dollars to the financial system, consumer prices and other aspects of the economy show deflation, as consumers purchase less and value products at lower amounts.

]]> Thu, 30 Apr 2009 03:13:43 -0400 Spicer Matthews When macroeconomic indicators show neither inflation nor deflation, what happens to our currency? Reflation!

Although the United States, through its monetary and fiscal policy, has added trillions of dollars to the financial system, consumer prices and other aspects of the economy show deflation, as consumers purchase less and value products at lower amounts.


Complete Story »]]> DIA SPY Spicer Matthews Can Recent Bank Earnings Be Trusted? http://seekingalpha.com/article/133823-can-recent-bank-earnings-be-trusted?source=feed 133823 To spectators, the banking industry appears to be staging a comeback rally. April earnings season was easy on the market, as many companies and banks beat expectations. However, can this round of earnings be trusted? Or are the numbers just a result of another mark to market bounce?

The Fundamental Facts

]]> Wed, 29 Apr 2009 02:56:08 -0400 Spicer Matthews To spectators, the banking industry appears to be staging a comeback rally. April earnings season was easy on the market, as many companies and banks beat expectations. However, can this round of earnings be trusted? Or are the numbers just a result of another mark to market bounce?

The Fundamental Facts


Complete Story »]]> BAC C JPM WFC XLF Spicer Matthews Who's Listening to Bernanke Anyway? http://seekingalpha.com/article/128183-who-s-listening-to-bernanke-anyway?source=feed 128183 In the past few weeks, the role of the Federal Reserve has ballooned. Thanks to AIG bonuses, a “contracting” money supply, and increased involvement of the Federal Reserve in free markets, you would think Bernanke may have won a presidential election. Ironically, it appears that the more Bernanke starts to speak, the more the market begins to listen.
Here's a recap of Bernanke's ability to move the markets over the past year.
First Bank Failures – Bear and Lehman (LEHMQ.PK)
The markets were in panic as LIBOR rates soared with delinquencies on mortgage debt and the derivative time bomb began to unwind with AIG. This is when Bernanke started garnering attention from Wall Street as he spoke of the necessary evils of bank bailouts and orchestrated inflation to prop up the world's markets. Traders hated him almost as much as Henry Paulson, and the markets tumbled a few hundred points every time Bernanke opened his mouth.
The Fall Credit Crunch
When the markets finally realized that they would be testing their lows, Bernanke’s addresses became far more important. However, each time he again opened his mouth to discuss new policies, the markets would tumble by several hundred points. After TARP, which was initiated by Paulson, the markets weren't happy and took further nose dives.
Today - Quantitative Easing
For the first time in nearly a year, Ben Bernanke is starting to feel love from Wall Street, but only after new quantitative easing (inflation) steps were taken. For the first time in the crisis, it appears that Ben Bernanke has some kind of relevancy in the world markets.
The Question Is...Who's Listening?
Although Bernanke is finally riding the waves he wants on Wall Street, by practically moving the market with every recent step he has taken, it does pave the way for the question of who is really listening to the Chairman. Are the markets following Ben, or are they reviewing him? They hated TARP, hated most purchases by the Fed of mortgage-backed securities, but they're loving inflation.
Thus, the question remains: Wall Street, are we rating Ben Bernanke or only trying to make an easy dollar off what he says?
]]> Fri, 27 Mar 2009 04:36:20 -0400 Spicer Matthews In the past few weeks, the role of the Federal Reserve has ballooned. Thanks to AIG bonuses, a “contracting” money supply, and increased involvement of the Federal Reserve in free markets, you would think Bernanke may have won a presidential election. Ironically, it appears that the more Bernanke starts to speak, the more the market begins to listen.
Here's a recap of Bernanke's ability to move the markets over the past year.
First Bank Failures – Bear and Lehman (LEHMQ.PK)
The markets were in panic as LIBOR rates soared with delinquencies on mortgage debt and the derivative time bomb began to unwind with AIG. This is when Bernanke started garnering attention from Wall Street as he spoke of the necessary evils of bank bailouts and orchestrated inflation to prop up the world's markets. Traders hated him almost as much as Henry Paulson, and the markets tumbled a few hundred points every time Bernanke opened his mouth.
The Fall Credit Crunch
When the markets finally realized that they would be testing their lows, Bernanke’s addresses became far more important. However, each time he again opened his mouth to discuss new policies, the markets would tumble by several hundred points. After TARP, which was initiated by Paulson, the markets weren't happy and took further nose dives.
Today - Quantitative Easing
For the first time in nearly a year, Ben Bernanke is starting to feel love from Wall Street, but only after new quantitative easing (inflation) steps were taken. For the first time in the crisis, it appears that Ben Bernanke has some kind of relevancy in the world markets.
The Question Is...Who's Listening?
Although Bernanke is finally riding the waves he wants on Wall Street, by practically moving the market with every recent step he has taken, it does pave the way for the question of who is really listening to the Chairman. Are the markets following Ben, or are they reviewing him? They hated TARP, hated most purchases by the Fed of mortgage-backed securities, but they're loving inflation.
Thus, the question remains: Wall Street, are we rating Ben Bernanke or only trying to make an easy dollar off what he says?

Complete Story »]]> DIA QQQQ SPY Spicer Matthews Final GDP Numbers Must Go Quietly http://seekingalpha.com/article/127728-final-gdp-numbers-must-go-quietly?source=feed 127728 The final 2008 4Q GDP numbers will be released on Thursday, March 26 by the Bureau of Economic Analysis. This final release, unlike the preliminary and revision releases, will be the numbers that make their way into the history books. The 4Q numbers will be set in stone on March 26, and traders and investors need this release to go quietly.
What Major Revisions Could Do
We've seen several huge revisions, namely Japan, where initial numbers were revised to be far worse than originally reported. Wall Street doesn't generally like major revisions in either direction, both to the positive or the negative, because no one wants to be surprised.
A tremendous revision to the upside isn't expected, and with traders concerned over inflation and other events, this “positive” news might not even bode well for the market. Of course, major revisions to the downside are equally undesired, as the market will dive lower to meet the new numbers.
What Wall Street Wants
Wall Street is expecting that the final numbers will come in at a negative 6.6% growth rate, which is actually .4% lower than the previous revisions. Thus, Wall Street is already looking for negativity and granting .4% worth of breathing room to the release. When Wall Street diverges this much from the previous numbers, the importance of meeting or beating expectations is tripled.
Predicting the Impossible
It’s impossible, or nearly impossible at best, to predict the final GDP numbers to be released simply because of the lack of transparency on GDP reports. Traders neither know what has been calculated, nor how much government spending will be incorporated into the 4th quarter reports. Government spending has a tremendous impact on GDP reports; thus, if a large portion of TARP is included in the 4th quarter, GDP spending could be higher. Then again, it could be carried over into the 1st quarter and provide exceptional numbers for 2009.
One Thing Is Definitive
There are many important news events this week, and the GDP report to be released on Thursday will either reconfirm or turn the tide. Ease up on Thursday's positions or you could be on the wrong side of this unpredictable storm.
]]> Wed, 25 Mar 2009 05:37:44 -0400 Spicer Matthews The final 2008 4Q GDP numbers will be released on Thursday, March 26 by the Bureau of Economic Analysis. This final release, unlike the preliminary and revision releases, will be the numbers that make their way into the history books. The 4Q numbers will be set in stone on March 26, and traders and investors need this release to go quietly.
What Major Revisions Could Do
We've seen several huge revisions, namely Japan, where initial numbers were revised to be far worse than originally reported. Wall Street doesn't generally like major revisions in either direction, both to the positive or the negative, because no one wants to be surprised.
A tremendous revision to the upside isn't expected, and with traders concerned over inflation and other events, this “positive” news might not even bode well for the market. Of course, major revisions to the downside are equally undesired, as the market will dive lower to meet the new numbers.
What Wall Street Wants
Wall Street is expecting that the final numbers will come in at a negative 6.6% growth rate, which is actually .4% lower than the previous revisions. Thus, Wall Street is already looking for negativity and granting .4% worth of breathing room to the release. When Wall Street diverges this much from the previous numbers, the importance of meeting or beating expectations is tripled.
Predicting the Impossible
It’s impossible, or nearly impossible at best, to predict the final GDP numbers to be released simply because of the lack of transparency on GDP reports. Traders neither know what has been calculated, nor how much government spending will be incorporated into the 4th quarter reports. Government spending has a tremendous impact on GDP reports; thus, if a large portion of TARP is included in the 4th quarter, GDP spending could be higher. Then again, it could be carried over into the 1st quarter and provide exceptional numbers for 2009.
One Thing Is Definitive
There are many important news events this week, and the GDP report to be released on Thursday will either reconfirm or turn the tide. Ease up on Thursday's positions or you could be on the wrong side of this unpredictable storm.

Complete Story »]]> Spicer Matthews Who Will Profit from Mark to Market Changes? http://seekingalpha.com/article/127146-who-will-profit-from-mark-to-market-changes?source=feed 127146 Traders should rejoice over the recent Congressional debate to end mark to market accounting rules. An end to mark to market will buoy beaten financial stocks while leveling the playing field and improving the balance sheets of banks and businesses who are experiencing devaluations of their holdings.
How Mark to Market Works
Under the current mark to market law, businesses must revalue their assets every day to the present market value. In many instances, such as complex financial instruments and credit default swaps, there is neither an effective nor reliable way to accurately gauge the market value for an asset. Though there are markets for these types of securities, they are thinly traded between banks and institutions without a true “market” for the products.
Market Timing
Much of the mark to market “crisis” involves timing. Currently, real estate assets and loans on real estate are undervalued when compared to their historical levels. As such, banks have to write down the values of these assets, essentially creating a loss before the bill even comes due.
To illustrate in personal terms, the situation is akin to buying $10,000 worth of stock you envision to be worth $25,000 in five years. However, currently your holdings are only worth $6,000. In this scenario, you would have to “write-off” $4,000 against your profits because you are holding a paper loss, even though there are profits in the long-term.
How the Change Helps Financial Firms
Were mark to market to be overturned tomorrow, banks would be able to value assets at what they are worth to them, rather than to the end buyer. Many banks are sitting on loans that are currently undervalued; however, they have no intention to sell these loans, but would rather enjoy sitting on a plethora of monthly mortgage payments. If the borrower is still paying, is that not a good asset, even if in the short term it is undervalued?
Change Coming Soon
Shortly after the Congressional hearing, the Financial Accounting Standards Board (FASB) announced that within three weeks, the mark to market accounting rules will be changed. The rules will be relaxed, and banks will no longer need to write down billions in capital loss. This will certainly boost shares of slumping banks that are sitting on large, though not yet crippling, losses. It should only be expected that after the rule change, banking shares explode, as billions in paper losses are wiped off the balance sheet from pricing assets based upon how much they are worth to the bank.
]]> Sun, 22 Mar 2009 02:46:56 -0400 Spicer Matthews Traders should rejoice over the recent Congressional debate to end mark to market accounting rules. An end to mark to market will buoy beaten financial stocks while leveling the playing field and improving the balance sheets of banks and businesses who are experiencing devaluations of their holdings.
How Mark to Market Works
Under the current mark to market law, businesses must revalue their assets every day to the present market value. In many instances, such as complex financial instruments and credit default swaps, there is neither an effective nor reliable way to accurately gauge the market value for an asset. Though there are markets for these types of securities, they are thinly traded between banks and institutions without a true “market” for the products.
Market Timing
Much of the mark to market “crisis” involves timing. Currently, real estate assets and loans on real estate are undervalued when compared to their historical levels. As such, banks have to write down the values of these assets, essentially creating a loss before the bill even comes due.
To illustrate in personal terms, the situation is akin to buying $10,000 worth of stock you envision to be worth $25,000 in five years. However, currently your holdings are only worth $6,000. In this scenario, you would have to “write-off” $4,000 against your profits because you are holding a paper loss, even though there are profits in the long-term.
How the Change Helps Financial Firms
Were mark to market to be overturned tomorrow, banks would be able to value assets at what they are worth to them, rather than to the end buyer. Many banks are sitting on loans that are currently undervalued; however, they have no intention to sell these loans, but would rather enjoy sitting on a plethora of monthly mortgage payments. If the borrower is still paying, is that not a good asset, even if in the short term it is undervalued?
Change Coming Soon
Shortly after the Congressional hearing, the Financial Accounting Standards Board (FASB) announced that within three weeks, the mark to market accounting rules will be changed. The rules will be relaxed, and banks will no longer need to write down billions in capital loss. This will certainly boost shares of slumping banks that are sitting on large, though not yet crippling, losses. It should only be expected that after the rule change, banking shares explode, as billions in paper losses are wiped off the balance sheet from pricing assets based upon how much they are worth to the bank.

Complete Story »]]> BAC C GS JPM RKH WFC XLF Spicer Matthews How to Trade the Impending Treasury Bubble Burst http://seekingalpha.com/article/127091-how-to-trade-the-impending-treasury-bubble-burst?source=feed 127091 As investors pulled billions from the stock markets and piled their wealth into safe havens to protect against downside risk, treasuries became the ultimate investment for risk aversion. Now that the stock market has fallen 50% and stocks begin to look cheap again, it should only be expected that the world's wealth will shift out of safe haven purchases to purchase beaten equities. The result will be lower treasury prices and higher yields.

Treasuries Remain Bloated

]]> Sat, 21 Mar 2009 14:12:21 -0400 Spicer Matthews As investors pulled billions from the stock markets and piled their wealth into safe havens to protect against downside risk, treasuries became the ultimate investment for risk aversion. Now that the stock market has fallen 50% and stocks begin to look cheap again, it should only be expected that the world's wealth will shift out of safe haven purchases to purchase beaten equities. The result will be lower treasury prices and higher yields.

Treasuries Remain Bloated


Complete Story »]]> SHY TBT TLT Spicer Matthews Leading Indicators Data: The Missing Key to Continued Rally http://seekingalpha.com/article/126730-leading-indicators-data-the-missing-key-to-continued-rally?source=feed 126730 The leading indicators data report to be released by The Conference Board on March 20 is generally of little significance; however, this week it may provide the boost needed to continue the March stock market rally.
Leading Indicators to Summarize the Economy
The leading indicators report is a summarized version of all economic data released previously, as well as a few revisions and new information that was not outlined in previous economic reports. This week, the leading indicators number could be the missing key to the continued rally; improving numbers could help buoy Wall Street, who is sure to start taking profits if stocks keep heading higher.
Where Will The Traders Sell?
In this irrational market, it is not where investors are buying that is important; rather, it is where they are selling. After months upon months of negative outlooks, worsening economic indicators and falling stock prices, the negativity on Wall Street can surely be felt by any trader. Because of this, many traders are not only cutting their losers, but they're also cutting winners short by selling quickly upon gains of just a mere few percentage points.
Momentum Means Everything
The stock markets have now set the standard for what it takes to maintain a rally in a down market. Traders are meeting positive news announcements with plenty of buy orders, but are quick to snap when indicator numbers turn out of favor. With positive news coming from the banking sector and a 22% improvement in housing starts, investors were willing to bet big and pushed the market up 15% from the bottom. Now it will take extra effort and continued improvement to keep that 15% gain from being absorbed by rapid profit taking.
An Easy Target to Beat
At present, the market is expecting a .6% drop in leading indicators statistics for the month of February, while the briefing forecast is suggesting only a .5% contraction. Economic indicators generally perform to the briefing forecast with little divergence from the ordinary; however, leading indicators for the month of February could show a bigger improvement than expected. At this point, it is not important how the numbers come out, but how Wall Street accepts them. A contraction of .5% would beat Wall Street expectations but pales in comparison to the .4% gain recorded in January numbers. If Wall Street approves of the leading indicators numbers, it could just mean that the March rally will extend further than just a dead cat bounce.
]]> Thu, 19 Mar 2009 03:16:02 -0400 Spicer Matthews The leading indicators data report to be released by The Conference Board on March 20 is generally of little significance; however, this week it may provide the boost needed to continue the March stock market rally.
Leading Indicators to Summarize the Economy
The leading indicators report is a summarized version of all economic data released previously, as well as a few revisions and new information that was not outlined in previous economic reports. This week, the leading indicators number could be the missing key to the continued rally; improving numbers could help buoy Wall Street, who is sure to start taking profits if stocks keep heading higher.
Where Will The Traders Sell?
In this irrational market, it is not where investors are buying that is important; rather, it is where they are selling. After months upon months of negative outlooks, worsening economic indicators and falling stock prices, the negativity on Wall Street can surely be felt by any trader. Because of this, many traders are not only cutting their losers, but they're also cutting winners short by selling quickly upon gains of just a mere few percentage points.
Momentum Means Everything
The stock markets have now set the standard for what it takes to maintain a rally in a down market. Traders are meeting positive news announcements with plenty of buy orders, but are quick to snap when indicator numbers turn out of favor. With positive news coming from the banking sector and a 22% improvement in housing starts, investors were willing to bet big and pushed the market up 15% from the bottom. Now it will take extra effort and continued improvement to keep that 15% gain from being absorbed by rapid profit taking.
An Easy Target to Beat
At present, the market is expecting a .6% drop in leading indicators statistics for the month of February, while the briefing forecast is suggesting only a .5% contraction. Economic indicators generally perform to the briefing forecast with little divergence from the ordinary; however, leading indicators for the month of February could show a bigger improvement than expected. At this point, it is not important how the numbers come out, but how Wall Street accepts them. A contraction of .5% would beat Wall Street expectations but pales in comparison to the .4% gain recorded in January numbers. If Wall Street approves of the leading indicators numbers, it could just mean that the March rally will extend further than just a dead cat bounce.

Complete Story »]]> DIA QQQQ SPY Spicer Matthews Falling Option Prices Make Bottom Picking Worth a Look http://seekingalpha.com/article/125661-falling-option-prices-make-bottom-picking-worth-a-look?source=feed 125661 Option premiums have fallen considerably after peaking during last September’s tumultuous market. Although volatility in the stock market has not disappeared, the VIX still sits at a recording of 54 in the near term, a fall from record highs. The result is option prices that are not only reasonable, but filled with opportunity to bet on a stock market rebound.
Inflation Will Bring the Market Back
Inflating the currency has been and will be the ultimate government solution to the financial crisis. Through interest rate reductions, bailouts and a massive stimulus package, the government hopes this money will make its way through the banking system to be multiplied. The effect would be higher prices across the board through real estate, commodities and the stock market. More money in the economy means more spending and better earnings reports for corporations; for the government, spending is a win-win situation.
Taking a Glance at Options
The Dow Jones Industrial Average is a perfect index to consider because it does not have overexposure to any industry. The S&P 500 is weighted heavily towards oil, while the NASDAQ has historically been the stock market of tech firms. For this reason, the Dow Jones ETF DIA will be used as the benchmark.
Looking Nine Months Out
January 2010 options for the index look excellent and are appropriately priced for how much action the market has seen in the past 10 months. Deep in the money options are extremely affordable with the $55 strike price YCKAC.X contract selling at a price of $14, effectively valuing the Dow at 6900 points. That's a fair price, giving only 400 points to play the option for nine months. Then again, with in the money options, we have to consider that investors could lose all the way down to Dow 5500, whereas more expensive and higher premium out-of-the-money options have less drawdown potential.
A Good Bet
A nine month timeframe for investment is good enough in this ever-changing game of stock picking. Today's option prices mean you can buy the market at 7000 and profit on any move higher. With the stimulus package making its way through the economy and banks slowly reporting smaller losses, an eventual turnaround (within nine months) could create huge profits for option players.
]]> Thu, 12 Mar 2009 11:48:08 -0400 Spicer Matthews Option premiums have fallen considerably after peaking during last September’s tumultuous market. Although volatility in the stock market has not disappeared, the VIX still sits at a recording of 54 in the near term, a fall from record highs. The result is option prices that are not only reasonable, but filled with opportunity to bet on a stock market rebound.
Inflation Will Bring the Market Back
Inflating the currency has been and will be the ultimate government solution to the financial crisis. Through interest rate reductions, bailouts and a massive stimulus package, the government hopes this money will make its way through the banking system to be multiplied. The effect would be higher prices across the board through real estate, commodities and the stock market. More money in the economy means more spending and better earnings reports for corporations; for the government, spending is a win-win situation.
Taking a Glance at Options
The Dow Jones Industrial Average is a perfect index to consider because it does not have overexposure to any industry. The S&P 500 is weighted heavily towards oil, while the NASDAQ has historically been the stock market of tech firms. For this reason, the Dow Jones ETF DIA will be used as the benchmark.
Looking Nine Months Out
January 2010 options for the index look excellent and are appropriately priced for how much action the market has seen in the past 10 months. Deep in the money options are extremely affordable with the $55 strike price YCKAC.X contract selling at a price of $14, effectively valuing the Dow at 6900 points. That's a fair price, giving only 400 points to play the option for nine months. Then again, with in the money options, we have to consider that investors could lose all the way down to Dow 5500, whereas more expensive and higher premium out-of-the-money options have less drawdown potential.
A Good Bet
A nine month timeframe for investment is good enough in this ever-changing game of stock picking. Today's option prices mean you can buy the market at 7000 and profit on any move higher. With the stimulus package making its way through the economy and banks slowly reporting smaller losses, an eventual turnaround (within nine months) could create huge profits for option players.

Complete Story »]]> DIA Spicer Matthews The Major Indices Need a Makeover http://seekingalpha.com/article/125509-the-major-indices-need-a-makeover?source=feed 125509 The plummet in the US indices has sparked discussion over what indices might need a major overhaul in moving forward. The NASDAQ Composite and S&P 500 already have guidelines in place to select new stocks for the indices, but the Dow Jones Industrial Average does not, and it arguably needs to biggest makeover out of the three.
Which Stocks to Purge
To start, the financials need to be cleansed. Bank of America (BAC) is currently included in the Dow Jones Industrial Average, but at its present valuation, it has little reason to be included. Although the corporation was one of the world's largest, it’s now just an ordinary name struggling to fight losses.
The bank could probably be better replaced with Goldman Sachs (GS), which has underperformed, but has not shown the same losses as its financial colleagues. Then again, changing out the guard also means locking in the losses on Bank of America and starting fresh with another company that could follow the same fate. Citigroup (C) is in the same boat and could quickly be dumped, while JP Morgan (JPM) has earned its position and still proves to be a solid banking firm.
General Electric's Identity Confusion
General Electric (GE) is a hegemonic company, who makes appliances and light bulbs, as well as owns several TV stations. However, above all, GE owns a huge debt portfolio. GE Money Bank, its lending arm and credit card issuer, has billions upon billions of dollars worth of unsecured credit card debt that has performed so poorly it has virtually evaporated the earnings of the company’s other holdings. As an industrial company and a leading producer of consumer products, GE should remain on the list of Dow components, but its derivative businesses are giving investors additional exposure to toxic risk in which they never intended to invest.
General Motors Can Go
General Motors (GM) is beyond the point of turning around. In the short term, it’s too financially destitute, and in the long term, too indebted to its pensions. Replacing General Motors with another auto producer may seem “un-American,” as it could only be replaced with a solid name like Toyota or Honda. However, including a strong auto company will add to the index considerably. And let's face it: the chance that General Motors will even be around a year from now is slim to none. A drop of 95% to $1.47 doesn't exactly help its future as a Dow component.
Those Three Names Drew the Biggest Losses
Over the long horizon, the Dow Jones Industrial Average is a very well constructed index with plenty of quality names. The index also has excellent exposure to recession-proof stocks like Johnson & Johnson (JNJ) , Proctor & Gamble (PG), Merck (MRK) and Wal-Mart (WMT) – just to name a few. The impending rebound in the US stock markets could be made even stronger by eliminating the weak few that have plagued the index and replacing them with quality companies.
]]> Thu, 12 Mar 2009 04:36:01 -0400 Spicer Matthews The plummet in the US indices has sparked discussion over what indices might need a major overhaul in moving forward. The NASDAQ Composite and S&P 500 already have guidelines in place to select new stocks for the indices, but the Dow Jones Industrial Average does not, and it arguably needs to biggest makeover out of the three.
Which Stocks to Purge
To start, the financials need to be cleansed. Bank of America (BAC) is currently included in the Dow Jones Industrial Average, but at its present valuation, it has little reason to be included. Although the corporation was one of the world's largest, it’s now just an ordinary name struggling to fight losses.
The bank could probably be better replaced with Goldman Sachs (GS), which has underperformed, but has not shown the same losses as its financial colleagues. Then again, changing out the guard also means locking in the losses on Bank of America and starting fresh with another company that could follow the same fate. Citigroup (C) is in the same boat and could quickly be dumped, while JP Morgan (JPM) has earned its position and still proves to be a solid banking firm.
General Electric's Identity Confusion
General Electric (GE) is a hegemonic company, who makes appliances and light bulbs, as well as owns several TV stations. However, above all, GE owns a huge debt portfolio. GE Money Bank, its lending arm and credit card issuer, has billions upon billions of dollars worth of unsecured credit card debt that has performed so poorly it has virtually evaporated the earnings of the company’s other holdings. As an industrial company and a leading producer of consumer products, GE should remain on the list of Dow components, but its derivative businesses are giving investors additional exposure to toxic risk in which they never intended to invest.
General Motors Can Go
General Motors (GM) is beyond the point of turning around. In the short term, it’s too financially destitute, and in the long term, too indebted to its pensions. Replacing General Motors with another auto producer may seem “un-American,” as it could only be replaced with a solid name like Toyota or Honda. However, including a strong auto company will add to the index considerably. And let's face it: the chance that General Motors will even be around a year from now is slim to none. A drop of 95% to $1.47 doesn't exactly help its future as a Dow component.
Those Three Names Drew the Biggest Losses
Over the long horizon, the Dow Jones Industrial Average is a very well constructed index with plenty of quality names. The index also has excellent exposure to recession-proof stocks like Johnson & Johnson (JNJ) , Proctor & Gamble (PG), Merck (MRK) and Wal-Mart (WMT) – just to name a few. The impending rebound in the US stock markets could be made even stronger by eliminating the weak few that have plagued the index and replacing them with quality companies.

Complete Story »]]> BAC C DIA GE GMGMQ.PK GS JPM MRK PG QQQQ SPY WMT Spicer Matthews Wall Street Looks Towards Weaker Retail Sales http://seekingalpha.com/article/125294-wall-street-looks-towards-weaker-retail-sales?source=feed 125294 Investors are tentatively awaiting the retail sales figures that shall be released on March 12 comparing the year-to-year change in sales. February is a reasonably large consumer spending month due to Valentine's Day, and subsequently, the volatility seen year to year is larger than months when retail purchases do not make up a large portion of sales.
A Minor Dip
Wall Street expects nothing more than a dip in consumer spending, down .4% from last year. The number excluding auto sales is expected to be better, though still negative at -.2%. Improvements in retail sales or an unexpected positive uptick could send the market rallying higher on the release, although analysts expect a drop in sales, with very few expecting a positive result.
Tying it in with the Wholesale Inventory Report
Wholesale inventories, which typically garner little attention from traders, should give some direction to the retail sales numbers that come out two days later. On a positive note, January’s wholesale inventories only fell .7%, according to the US Commerce Department. Economists were anticipating a 1% decline in overall inventories, and the “good news” sent the market into a 350 point rally on Tuesday.
Although the wholesale inventories include only products in the second stage of production, it does have some predictive value in gauging strength for consumer goods, and inevitably, retail sales.
A Slow News Week Adds Emphasis
Limited news releases and government reports puts more emphasis on the retail sales number, as it is the only report to get any serious attention next week. Thus, investors will act accordingly and use the retail sales figure as a reason for buying and selling. Any number that meets or beats expectations will send the market flying, while a low number could force Wall Street to find new lows for the major market indices.
January's Numbers
Last month, the market was looking for a .6% decline in retail sales, but was surprised by a gain of 1% over the previous year for a disparity of 1.6% of growth. Wall Street historically has a hard time pinning down the numbers, but it would be entirely possible to see a positive number for February sales as some part of the retail economy (discounters) are already seeing growth. Other retail outlets aren't faring as well, including auto and clothing sales, which have faltered as consumers think cheaper.
]]> Wed, 11 Mar 2009 05:00:34 -0400 Spicer Matthews Investors are tentatively awaiting the retail sales figures that shall be released on March 12 comparing the year-to-year change in sales. February is a reasonably large consumer spending month due to Valentine's Day, and subsequently, the volatility seen year to year is larger than months when retail purchases do not make up a large portion of sales.
A Minor Dip
Wall Street expects nothing more than a dip in consumer spending, down .4% from last year. The number excluding auto sales is expected to be better, though still negative at -.2%. Improvements in retail sales or an unexpected positive uptick could send the market rallying higher on the release, although analysts expect a drop in sales, with very few expecting a positive result.
Tying it in with the Wholesale Inventory Report
Wholesale inventories, which typically garner little attention from traders, should give some direction to the retail sales numbers that come out two days later. On a positive note, January’s wholesale inventories only fell .7%, according to the US Commerce Department. Economists were anticipating a 1% decline in overall inventories, and the “good news” sent the market into a 350 point rally on Tuesday.
Although the wholesale inventories include only products in the second stage of production, it does have some predictive value in gauging strength for consumer goods, and inevitably, retail sales.
A Slow News Week Adds Emphasis
Limited news releases and government reports puts more emphasis on the retail sales number, as it is the only report to get any serious attention next week. Thus, investors will act accordingly and use the retail sales figure as a reason for buying and selling. Any number that meets or beats expectations will send the market flying, while a low number could force Wall Street to find new lows for the major market indices.
January's Numbers
Last month, the market was looking for a .6% decline in retail sales, but was surprised by a gain of 1% over the previous year for a disparity of 1.6% of growth. Wall Street historically has a hard time pinning down the numbers, but it would be entirely possible to see a positive number for February sales as some part of the retail economy (discounters) are already seeing growth. Other retail outlets aren't faring as well, including auto and clothing sales, which have faltered as consumers think cheaper.

Complete Story »]]> DIA IPD QQQQ SPY Spicer Matthews What Happened to Dell? http://seekingalpha.com/article/124210-what-happened-to-dell?source=feed 124210 This year, we have grown accustomed to pulling up a chart and seeing a full year price slide. Across most industries, each and every chart has nearly an identical trajectory. Of course, some companies are still high fliers who are flourishing in this economy, including Wal-Mart (WMT) and McDonald's (MCD). However, what happened to Dell (DELL), the tech company that took the world by storm with made-to-order computers?
What Brought Dell Down?
Very few people realized how vested tech stocks are in the economic situation. Dell is primarily a made-to-order computer company; however, much of its operation, and approximately 50% of sales, is derived from the business sector. A recessionary slowdown affects corporate budgets and the prospect of buying a new laptop for “business trips.” The recent earnings report from Dell paints a gloomy picture, as profits fell by over 48% in the last year (see conference call transcript).
Where Is the Money?
In a recession, consumers typically think smaller and buy less. This phenomenon holds true in the PC business, where computer users are now buying popular netbooks and other light, inexpensive notebooks to save money. The netbooks, which have travel-sized screens and keyboards, are popular with users who want to buy a quality laptop for approximately $300. Unfortunately for companies like Dell, netbooks are some of the lowest margin PCs, with little room to raise prices. Competition is fierce, and on these mini-machines, a difference of $20 in price seals sales.
Is the Dell Era Over?
While its numbers may have slumped, Dell’s glorious era is far from fading. Dell's computers are shipped with Microsoft (MSFT) operating systems, which open the door for a sales boom with each new release. Microsoft's new product, Windows 7, is already out for developers in beta and will soon be launched OEM and retail to computer users. Although many PC owners were outraged with Vista, and some even refused to buy the operating system, a Windows 7 boom could be excellent for Dell. Many PC makers have kept the Windows XP operating system alive, but its low costs keep profits equally low.
Dell remains well positioned in the personal computing business and needs new software to boost its profit margins. Windows 7 is the perfect fit for this company's bottom line and should help Dell recover when the new system is released later this year.
Disclosure: I own no stock in Dell.
]]> Thu, 05 Mar 2009 02:51:28 -0500 Spicer Matthews This year, we have grown accustomed to pulling up a chart and seeing a full year price slide. Across most industries, each and every chart has nearly an identical trajectory. Of course, some companies are still high fliers who are flourishing in this economy, including Wal-Mart (WMT) and McDonald's (MCD). However, what happened to Dell (DELL), the tech company that took the world by storm with made-to-order computers?
What Brought Dell Down?
Very few people realized how vested tech stocks are in the economic situation. Dell is primarily a made-to-order computer company; however, much of its operation, and approximately 50% of sales, is derived from the business sector. A recessionary slowdown affects corporate budgets and the prospect of buying a new laptop for “business trips.” The recent earnings report from Dell paints a gloomy picture, as profits fell by over 48% in the last year (see conference call transcript).
Where Is the Money?
In a recession, consumers typically think smaller and buy less. This phenomenon holds true in the PC business, where computer users are now buying popular netbooks and other light, inexpensive notebooks to save money. The netbooks, which have travel-sized screens and keyboards, are popular with users who want to buy a quality laptop for approximately $300. Unfortunately for companies like Dell, netbooks are some of the lowest margin PCs, with little room to raise prices. Competition is fierce, and on these mini-machines, a difference of $20 in price seals sales.
Is the Dell Era Over?
While its numbers may have slumped, Dell’s glorious era is far from fading. Dell's computers are shipped with Microsoft (MSFT) operating systems, which open the door for a sales boom with each new release. Microsoft's new product, Windows 7, is already out for developers in beta and will soon be launched OEM and retail to computer users. Although many PC owners were outraged with Vista, and some even refused to buy the operating system, a Windows 7 boom could be excellent for Dell. Many PC makers have kept the Windows XP operating system alive, but its low costs keep profits equally low.
Dell remains well positioned in the personal computing business and needs new software to boost its profit margins. Windows 7 is the perfect fit for this company's bottom line and should help Dell recover when the new system is released later this year.
Disclosure: I own no stock in Dell.

Complete Story »]]> DELL Spicer Matthews What Will Happen to Wall Street After Friday's Critical Employment Numbers? http://seekingalpha.com/article/124004-what-will-happen-to-wall-street-after-friday-s-critical-employment-numbers?source=feed 124004 On Wall Street, recent unemployment numbers have stolen the show. Previously, economists looked past the minute monthly employment changes and instead focused on other economic figures, such as the trade surplus or deficit and changes in GDP.

However, this year, employment numbers have become critically important. The new stimulus package signed by the President is aiming to “save or create” three million new jobs. Subsequently, the market’s perception towards the monthly employment report has changed drastically, making it one of the most important measures of economic health.

]]> Wed, 04 Mar 2009 04:48:48 -0500 Spicer Matthews On Wall Street, recent unemployment numbers have stolen the show. Previously, economists looked past the minute monthly employment changes and instead focused on other economic figures, such as the trade surplus or deficit and changes in GDP.

However, this year, employment numbers have become critically important. The new stimulus package signed by the President is aiming to “save or create” three million new jobs. Subsequently, the market’s perception towards the monthly employment report has changed drastically, making it one of the most important measures of economic health.


Complete Story »]]> Spicer Matthews Grim Outlook for Preliminary GDP of -5% http://seekingalpha.com/article/122828-grim-outlook-for-preliminary-gdp-of-5?source=feed 122828 GDP numbers, which comprise a large portion of the recession algorithm, are set to be released on February 27. The briefing forecast provided little positive guidance, but instead suggested that GDP growth may fall to negative five percent as the economy grinds to a halt. Exhibiting fear that the slowdown is worse than what was forecast, economists and analysts alike are lining up with a median average of -5.4% growth.

From Bad to Worse

]]> Thu, 26 Feb 2009 07:24:20 -0500 Spicer Matthews GDP numbers, which comprise a large portion of the recession algorithm, are set to be released on February 27. The briefing forecast provided little positive guidance, but instead suggested that GDP growth may fall to negative five percent as the economy grinds to a halt. Exhibiting fear that the slowdown is worse than what was forecast, economists and analysts alike are lining up with a median average of -5.4% growth.

From Bad to Worse


Complete Story »]]> DIA SPY Spicer Matthews Cigarettes: Business Is Still Smoking http://seekingalpha.com/article/122824-cigarettes-business-is-still-smoking?source=feed 122824 The recession-proof cigarette industry continues to out-smoke other equity options in dividends and capital gain potential. In the cigarette industry, clients are highly addicted, profit margins are thick, and in the case of Philip Morris International, the potential for earnings grows as the economy sputters. Phillip Morris International (PM) offers an excellent high-dividend, anti-dollar investment, and the stock is currently trading near its lows.

A Long, Profitable History

]]> Thu, 26 Feb 2009 07:22:29 -0500 Spicer Matthews The recession-proof cigarette industry continues to out-smoke other equity options in dividends and capital gain potential. In the cigarette industry, clients are highly addicted, profit margins are thick, and in the case of Philip Morris International, the potential for earnings grows as the economy sputters. Phillip Morris International (PM) offers an excellent high-dividend, anti-dollar investment, and the stock is currently trading near its lows.

A Long, Profitable History


Complete Story »]]> PM Spicer Matthews