Did Obama Already Let the CAT Out of the Bag?
I would like to offer my congratulations to the new President-elect, but must ask...what have you done for me lately?
Bill Gross told us on the last day of June that President Obama had a $1 trillion deficit in his future, and the Keynesian policy response playbook has been dusted off in October. Keep your eye on the US dollar, and gird yourself as the infrastructure trade is discovered by people that tend not to think more than one chess move ahead:
President-elect Barack Obama may put spending on roads and bridges at the top of his agenda for stimulating U.S. economic growth.
``He's identified infrastructure as one of the ways to strengthen the American economy,'' Janet Kavinoky, transportation infrastructure director for the U.S. Chamber of Commerce, said in an interview. ``So we would expect it to be on his list of actions both for the stimulus and longer term.''
Obama was elected yesterday amid a global credit crisis and with the U.S. in or heading into a recession that may be the deepest in more than 20 years. He promised during his campaign he would use infrastructure spending to create jobs.
``We'll create 2 million jobs by rebuilding our crumbling roads, schools and bridges,'' Obama said in an Oct. 13 speech in Toledo, Ohio, where he outlined his plan for reviving the economy. Bloomberg
Bloomberg's piece this morning is pretty predictable, and the stocks might catch an early morning bid. To chase or not to chase, that is the question, now that the (CAT-NYSE) is out of the bag. Cramer was pitching the stock on Mad Money yesterday, for various reasons. Will it be that easy to pick winners here?
Panic Subsides as Republicans Freak Out
While we have not quite witnessed a meltup, outside of selected materials names, fear continues to subside and the market is settling down. Will it be enough to bring the likes of hedge fund SAC Capital, who have been sitting it out in cash, back into the market? Traditional metrics like earnings and valuation might matter again, good news for investors that like to handicap outcomes, as opposed to guessing.
Credit Suisse started Monday morning with these thoughts....as we finally strung together a few up days...
SPX closed higher for the 2nd consecutive day, first time in over a month this has happened. Financials helped pace the markets. Our index trader James Masserio, commented this morning that the mid-September blow-out in money market spreads (whether measured by LIBOR rates, TED spreads, or OIS spreads), has coincided very tightly with the blowout in the VIX from 30 to almost 80. However, so far the VIX has lagged improvements in the money markets due to technical factors (covering short vol positions). But as stresses continue to subside in the money markets (1-month LIBOR today down another 27 bps), the VIX should soon follow suit, settling in the 40-50 range. While still extremely high by historical standards, a VIX with a 40-handle could add an incremental bid to the market from investors who were scared away by the "casino" atmosphere that reigned while the VIX traded in the 70s and 80s. After a few more days of smaller movements, vols should compress quite a bit and term structure could flatten further.
That might be too late to help, but OptionMonster is weighing in from the pits as the VIX continues to deflate....although VIX options are signaling more vol ahead.
Crazy Leverage Coming to a Ticker Symbol Near You
Does anyone buy individual stocks anymore? Maybe, but everyone is daytrading leveraged ETF’s it would seem.
Indeed the blogosphere is buzzing over reports of Main Street pulling money from their traditional brokers and setting up accounts at online brokers where they can whip it around:
US retail investors have been trading stocks and options at record levels in recent months, apparently responding to the financial crisis by taking greater control of their own investments.
The level of trading has helped brokers such as TD Ameritrade, Charles Schwab and Fidelity to lift their brokerage commission revenues, making this one of the few areas where financial services companies are making money.
Fidelity on Monday said that during the three months to September 30 it had added more than 200,000 net client accounts across its three brokerage units. Daily average commissionable trades reached a record 438,000 – 19 per cent more than the same quarter last year.
TD Ameritrade said October was set to be a record month, with its average daily trades reaching 433,000 to October 20 – the latest date for which data were available – exceeding the previous high in January this year, of 346,000.
TD Ameritrade said it had added 75,000 net new client accounts in the first 20 days of October, bring its total to 6.9m. “We are seeing more accounts coming to us from the full-service firms . . . people are looking for a more stable firm,” it said.
“People are wanting to take more direct control of their investing, and make decisions themselves about how to rebalance their accounts. FT
Merrill and UBS brokers are sure to quibble with the data and conclusions, and will likely sound the alarm over the newest product on Wall Street...3X Levered ETF’s that will mimic moves in the Russell 1000.
At a time when many investors are hoping for a bottom in this year’s plummeting stock markets, Direxion Funds says it’s ready to come out with eight new leveraged and inverse exchange-traded funds.
But these ETFs won’t just offer a bit more juice. They’re set to become the first to offer three-times the leveraging power of their underlying benchmarks.
Direxion says that the eight 3x leveraged ETFs should launch on Wednesday. They’re part of some 36 in the works. (See related story here.)
“Do you have an opinion on the direction of the market? Maybe you are interested in overweighting or under-weighting a certain sector. Direxion Shares powerful 3x leverage (the highest in the ETF and mutual fund industry) seeks to amplify the performance (positively or negatively) of your investment capital by 300%,” said the company in recent marketing material made available to investors.
For example, if the Russell 1000 Index gains 1% in a trading session, the Direxion Large Cap Bull 3x ETF is designed to gain 3%. On the other hand, the Direxion Large Cap Bear 3x ETF would move in just the opposite direction. If the same Russell index fell 1%, the ETF’s goal would be to gain about 3%.
The new ETFs are listed with net expense ratios of 0.95% per year. (The prospectus for the new ETFs can be found here.)
Half of the initial eight hitting the market later this week will provide 3x leveraged exposure. The other four will offer 300% inverse exposure. Seeking Alpha
This is great news for people who want to make up their year-to-date losses with a 10% uptick.
As they say in Vegas, good luck.
Investors might want to keep in mind these offerings cannot always deliver as advertised....check out this piece warning against the downside...The Case Against Leveraged ETFs
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Retail investors push trading to record levels
FT
Had Enough Volatility Yet? Direxion Set To Launch 3X Leveraged ETFs
Seeking Alpha
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position
RIM Rallies Ahead of Blackberry Bold Debut
While many people on Wall Street dismiss blogs, occassionally it beats reading First Call reports.
Initial reviews of the Blackberry Bold were released at the end of August, and if you paid attention to them and the rumors of delays on the Bold launch you might have saved yourself 70 points of subsequent downside:
August 29th
Does the long awaited Blackberry Bold from Research in Motion (RIMM-NASDAQ) finally have a launch date in the U.S.? The latest rumor is October 2nd...which is mere speculation, but might account for some of the softness in the stock.
But it does not look like it is going to be delivered hassle-free......while the phone part of the handset is likely to work better than the iPhone 3G, the browser and internet surfing are not without issues, according to some Crackberry addicts, who are having problems loading websites under certain conditions:
But once I tried to browse to WSJ.com the phone just locked up after 2 minutes of attempting to load the page. And really, should I have to reboot the phone and clear the cache just to browse one site? Something is obviously messed up here. I lost patience and sent them in my data from this round of tests for the sites I could do in reasonable time. I’m waiting to hear what’s next.
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Research in Motion’s stock finally firmed up Monday, and a few hours ago AT&T put the Bold up on the website, available for sale, good news for RIM shareholders, some of whom continue to believe AT&T stiffarmed Blackberry in order to give the iPhone a few months of uninterrupted traction.
And the phone is even garnering good reviews from influential sites:
How can I put into words how I feel about the BlackBerry Bold? In short: I love it and never ever want to let it go, ever. For any BlackBerry user/fan the Bold is everything you’ve wanted and expected from RIM. Sure, it took a little longer than we all expected, but it’s definitely worth the wait. It’s far superior in every respect from anything that RIM has put out on the market. Of course, those of you with a hankering for a touch-screen need not apply. The Bold is for the hardcore CrackBerry addict or is it? CrunchGear
Go check out the review in CrunchGear....and take a gander at the chart. The Bold is finally gold for shareholders....
This was just posted a few hours ago...the most recent unboxing of the Bold..
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Review: BlackBerry Bold for AT&T
CrunchGear
Big Bold Moves
Portfolio
Previously--August 29th
Blackberry Bold Starting with a Whimper
CrunchGear
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. Position RIMM
Guttenberg’s Printing Press Shut Down With Sentencing
One of the more notorious insider trading rings of recent history ended with a whimper today as UBS executive Mitchel Guttenberg was sentenced to 6.5 years in custody:
In March 2007, federal authorities accused Guttenberg, then an executive director in the UBS equity research department, of illegally tipping others to upcoming analyst stock upgrades or downgrades.
The commission says he gave the information to two Wall Street traders, Erik R. Franklin and David M. Tavdy, in exchange for sharing in the profits they made from trading on that information. The two traders, in turn, tipped others who traded on the information, including all whose settlements were just approved by a federal judge in New York. Portfolio
Guttenberg's devious plan included coded text messages and cash payments, but he did not think through every angle and was ultimately brought down by a group of independent prop traders who latched on the the scheme, knowing an easy buck when they saw it.
And, believe it or not, this story even had connections to the movie "Boiler Room".
