Meltorment's Account Talk

[meltorment]

My intent is to document my positions in the market and to bounce ideas off of other people. I'd like to get input from people to see how what they think of the market. First, a summary of positions:

25 I shares
25 S shares
100 shares of BAC
500 shares of FIG
200 shares of MSFT
short 5 MSFT July 10 22.5/20 puts
short 5 NFLX July 10 140/145 calls
short 5 SPY July 10 117/119 calls
short 5 SPY July 10 98/95 puts

I'd like to hold onto BAC until another run at $20. Perhaps MS or even JEF is a better financial sector play.

MSFT has $4.22 of cash/share on the balance sheet (17% of it's stock price), I just wish I hadn't acquired it in the low 30s. I'm going to continue to sell puts and calls to lower my cost in the stock.

I think that the market is going to trade sideways in the short term. The VIX options are pricing in a 30.90 level by August. With the VIX at about 29 currently, any move above 33 and I'll be looking to sell more options (and likely pick up some choice equity names). I'd like to do something in MRO or another energy name in the near future.

The EU $1trillion bailout package should start to get the European market going again. Philosophical arguments aside, the short-lived injection may cause a rally similar to the March 2009 rally in the US.

Lastly, I'd like to buy some TBT, but I just can't bring myself to pull the trigger. This might be my next purchase to sit on for a year or so.

 

[KevinD]

Welcome!

 

[tsptalk]

Good luck, and thanks for sharing your ideas!

 

[nnuut]

Welcome to the MB, I don't do STOCKS but many of us do, you will fit right in.
Best of luck
Norman

 

[meltorment]

Using a regression line of 2s10s and the S&P, stocks appear to be overvalued by 25%. Interestingly enough, the difference from "FMV" to the current valuation can be mostly attributed to stimulus spending.
http://www.zerohedge.com/article/bond-yields-imply-fair-value-sp-750


The VIX has broken out to the upside, closing at around 34 today. The key words as of late have been "double-dip." Bear in mind, at the start of the March 2009 rally the key words were "cautiously optimistic." Moreover, at the beginning of 2010 everyone was calling for the 10yr to be at 5.50%.

The S&P is testing the 1030/40 level, but it may come down to what will happen if it reaches 1010 to see how far we'll slide.

 

[nasa1974]

Meltorment, Welcome aboard. Great place to learn.

 

[Blindman]

Well you maybe a Newby to this board, but sounds like you will bring some insight. Thanks for the posts. :laugh:

Blindman

 

[meltorment]

The PMI numbers came in today and the numbers show some slow down in growth. We peaked in April 2010 at 63.8 and we are currently sitting at 59.7. While any number above 50 generally still signals growth, we've had two month over month declines. Point #9 from the General Comments section highlights the concern over a prematurely strengthening dollar. I have a feeling this concern will only be a passing one. Giving more credence to our slowing in growth, China's PMI number also came in lower. Asian markets are weak today, most likely there will be increased selling pressure. It will be interesting to see how the market closes before the long weekend.

Another bearish sentiment is the Yahoo! stock buyback. This is a telling sign that the company does not have any prospective investments that would yield a higher return so the company just decides to purchase stock (a roundabout way of just paying a dividend). To me, stock buybacks are a waste of cash.

I hate to beat the AAPL drum, but the company has 17% of the stock's price in cash, or $45/share, and they are using cash to invest in new products not to start share repurchasing. I've only had a brief position in AAPL 6 months ago, and it may be an interesting trade again. I might and try and sell some puts (this may be dangerous because AAPL is such a high beta name and the market may still be declining) or I may put on a 270/280/300 butterfly in August for a 60 cent credit. The max profit would be $10.72, max loss would be $9.28, and I wouldn't start losing any money until $290.72. Any thoughts anyone?


https://www.ism-chicago.org/chapters/ism-ismchicago/files/ISM-C June 2010.pdf

http://www.bloomberg.com/news/2010-...ond-month-adding-to-signs-growth-cooling.html

 

[meltorment]

http://www.emerginvest.com/Source/E...stripped-of-aaa-credit-rating...by-china.html

The U.S. has seen its AAA credit rating go by the wayside. The decision to downgrade the sovereign debt rating is largely based on debt/GDP levels and other debt servicing factors. Another sign to go long the TBT?