Wednesday, May 16, 2012, Las Vegas, Nevada, USA

We are at Caesar's Palace for another Money Show, if you are in the area stop by the booth and say hello. Because of the trade show and the drive to Wisconsin - immediately following, our daily blogs (we are still gettting used to calling them that), will not appear in their customary frequency.

We did arrive early in Vegas in order to check out some real estate, and this market is still in the depths of a doldrum. But, a good friend of ours, Jeff P, who runs a small, private, Phoenix-based real estate fund (currently with over 450 properties), is now considering buying a few hundred in-and-around Las Vegas. "I can't find any in Arizona that fit our mold, so I might have to look in Nevada or Florida," he recently told us. In fact, he was going to make this Las Vegas trade show trip to look around, but is also in the process of locating a college for his high school junior, and is on his way to North Carolina to check out the home of the Tar Heels in Chapel Hill.

Jeff also told us that "you have to buy them when nobody else wants them and right now there are too many buying in the Phoenix metro market," to which we replied "kinda like options." And, being the week of the May monthly expiration, we hope you have either already closed your shorts and your short vertical spreads, or are in the process of doing so with GTC orders - now that nobody wants them!

"Trade 'em when you can, NOT when you have to!" -- CBOE market maker (circa 1980)

FHW
(* = FHW position)
fhwoption@hotmail.com

Monday, May 14, 2012, Prescott, Arizona, USA

Our final week in Prescott! Oh wait, we actually leave for the Vegas trade show today, returning on Thursday night - just ahead of our early expiration Friday morning departure for the Northwood's of Wisconsin. We (my driving partner and the two dogs) will be pulling out early on expiration Friday morning, for the 2,200 mile drive to our summer home in Rhinelander. And, as always, we will be in a hurry to get there. Yes, we can't wait to arrive at our wonderful summer manse on Lake Thompson, but we also kind-of enjoy the somewhat arduous weekend trek. Taking a nice roadtrip is still enjoyed; with music blasting the entire time, overnights spent at nice motels along-the-way; a couple of good dinners, with cold regional beers, and a nightcap cigar or two - the only way to travel.

"On the road again - just can't wait to get on the road again..." Willie Nelson

"The woods are lovely, dark and deep. But I have promises to keep, and miles to go before I sleep." Robert Frost

"I took the road less traveled, and that has made all the difference." -- Robert Frost

"Who travels for love finds a thousand miles not longer than one." -- Japanese Proverb

"Though we travel the world over to find the beautiful, we must carry it with us or we find it not." -- Ralph Waldo Emerson

It is monthly expiration week - SHAME ON YOU - if you haven't already covered your shorts or entered your nickel or lower GTC closing bids. If you haven't done this, hopefully you have already rolled your Mays to Junes - at least in partials. The futures (/ES) are looking lower along with the metals, so the 30-year bond (/ZB) is rallying - now up a full point. There are a few earnings reports due out today as well: A, ACAT, GRPN*, SLW, SDRL. We are blasting right into the mid-summer cycles; you might also think of rolling to Julys or Augusts series, especially if looking to avoid a possible dividend payout or just to take some summer time off.

Hope to see you at the booth at Caesar's Palace in Vegas. Have a great May monthly expiration. See you next week.

"A perfect summer day, and here I stand with you morons, trying to make a market AND a living. This really ain't much fun." -- OEX market maker circa 1988

FHW
(* = FHW position)
fhwoption@hotmail.com

Friday, May 11, 2012, Prescott, Arizona, USA

$60 Billion, yes, a big number in almost any regard, that is unless you are talking Arab oil money, Apple (AAPL*) cash, Goldman Sachs (GS), Mexico's Carlos Slim Helu, Bill Gates or a certain Mr. Buffett. Those kinds of guys can throw numbers around like water, but so can the Chinese, at least we think they can. Huh?  The Chinese economy is massive, and since they began turning into what they used to call "Capitalist pigs" or worse, the country and it's people have been having significant upticks. They are the biggest holder of U.S. debt, after all, so we really don't want to step on any Chinese toes, we really do like their food, and just about every consumer product on the market can be found with a Made in China label.

Yes, as much as the U.S. wants to claim to be the "Big Dog" in the world, we think we have been surpassed by the Chinese, or soon will be. From Heilongjiang in the North to Hainan Province in the South, the Chinese are simply HUGE! Geeze, any civilization that could build The Great Wall has to have our respect, especially when you consider they did it 2,000 years ago! As a written language, Chinese has been used for 6,000 years. Whew! There are 50,000 rivers in China, which might seem like a lot, but there are also about 1.4 billion inhabitants. That would make for some pretty crowded rafting trips! Their currency is the Renminbi (Yuan) or the "People's Currency", and with that many people, there sure must be a lot of Renmimbis floating around. 

Anyway, back to the $60 Billion... that is the number PetroChina (PTR), already the world's largest publicly-traded crude producer, is planning on spending to "expand output" by purchasing assets on a "large scale". There goes our whacky mind trying to picture a scale with $60 billion on it! But with 60 billion, the Chinese mega oil outfit could buy most of the U.S. oil and natural gas companies, including large chunks of Exxon (XOM*) and Conoco (COP), along with just about all the assets of every single other American oil company. Maybe that is their next plan. They already own much of our debt, why not most of our oil companies and gas stations?

Okay, it is Friday, and our last one in Prescott, at that. So, as we look forward to spending our last weekend in Arizona, until the Fall, we have to get a little goofy (goofier?). And considering we will soon be stopping at a gas station several times next weekend on our 2,200 mile drive, we have to think of the new Chinese gas stations... what would their logo be? Nothing like the old Sinclair dinosaur or the Texaco Star, we are sure. Would their convenience stores replace beef jerky, stale hot dogs and crummy coffee, with egg rolls, fried rice and green tea? Now that we think of it, maybe Chinese gas stations wouldn't be such a bad thing, as long as we didn't have to pay in Renmimbis and they kept their restrooms clean.

"In waking a tiger, use a long stick." -- Mao Tse-Tung

Have a great weekend. We will be at the Money Show in Las Vegas next week and on the drive to Wisconsin, so our daily missives might be missing. 

FHW
(* = FHW position)
fhwoption@hotmail.com

Thursday, May 10, 2012, Prescott, Arizona, USA

The news march continues, with dozens of relatively important events coming out today:

6:45 AM - Bloomberg Consumer Confort Index
10:30 AM - EIA Natural Gas Inventory
12:10 PM - FDIC's Gruenberg: Ending TBTF
1:00 PM - Results of $16B, 30-Year Note Auction
2:00 PM - Treasury Budget
4:30 PM - Fed Balance Sheet
4:30 PM - Money Supply

Some earnings before today's open: AG, BAM, BT, KSS, MPW, MT, SNE, WIN.
And after today's close: AGO, BID, CA, CIM, DAR, DRYS*, ESRX, JWN, LBTYA, MBI, MCP*, MDR, NUAN.

Look for the corporate icon on your Activity and Position page for any news or company reports, or go to the Calendar on the Market Watch tab.
Next week is the final week of the May monthly expiration cycle - so sit up and pay attention! We will be at the Money Show in Las Vegas next week and then on our way to Wisconsin over the Friday - Sunday (5/18 - 5/20) weekend, so our daily blogs might be slightly altered. Hope to see you in Vegas.

"Revenues and earnings eventually come from a business being busy. How tough is that to figure out?" -- Anonymous

FHW
(* = FHW position)
fhwoption@hotmail.com

Some earnings before today's open: AGU, AOL, ARIA, DF, DTG, ENB, KRO, M, MPEL, TEVA, THI;
and some earnings after today's close: ATVI*, AUQ, BMC, CSCO, CTL, MKL, NWSA, PCLN, TSLA, WR.

For a full list use the Calendar tab under Market Watch.

Wednesday, May 9, 2012, Prescott, Arizona, USA

Below is a very wordy repeat from this same time frame in 2009 when copper (/HG) was trading in the low $1.00 handle, last year it got up over $4.60 but has retreated some and is now trading closer to 3.60. All of the metals have been severely beaten down of late, with gold (/GC) going from $1,920 to its current 1,580, and silver (/SI) topping out at $49.82 (04/25/11) - now trading at 28.82. Wow, those are some moves in the metals! But, as with most of our positions, we are in it for the long haul, and despite what Warren Buffett claims, the metals do have some uses and have been very good to us - over time. Let's talk copper...

Being a numismatist (coin collector) for over 1/2 a century, we constantly receive information from a variety of sources, some reliable and some not. From the United States Mint, to off shore scam artists, we get snail mail flyers and email junk on an almost daily basis. Our "collection" ranges almost as far-and-wide, in that we have books and boxes, sleeves and wrappers, ounces and pounds of everything from pennies and $20 Liberty Head gold pieces, to bars - in all shapes, sizes, years and quality levels.

Buffalo Heads, Eagles, Mercurys, Washingtons, Lincolns, and Kennedys, we have them all. But by-far-and-away the coins we have the most (in number, not in value), are of course the smallest current denomination - U.S. cents, or what most refer to as the penny. There have been other United States minted coins with face values of less than .05 cents, and we also are the proud owners of some of these Two Cent and Three Cent coins, minted between 1864 - 1889. But the small bronze cent, created by The Coinage Act of April 22, 1864, is our most numerous. The Two Cent coin was also brought about by the same act, but was not really accepted by the public, in spite of it being known as the first United States coin to bear the motto "In God we Trust."

The Three Cent coin was originally minted to evenly pay for a postage stamp, which at the time (1851) was three cents. This odd numbered Three Cent coin was tiny and because of its size and appearance originally became known as the "fish scale" coin, its street name later became the "Trime" as it fit in nicely between a "tri" (three) and another small U.S. minted coin, the "dime." In spite of it matching the postage rate of the time, the Trime was never popular with the masses and mintage was halted in 1889.

Believe it or not, the Half Cent coin was very popular and was one of the earliest U.S. coins in circulation. As George Washington began his second Presidential term, with the average daily wage just under a dollar a day, the Half Cent coin could actually be used in many commercial ways. But the One Cent coin, that has remained so popular over time, in spite of its current near worthless state, being equal to one-hundredth of a U.S. dollar, with the dollar having recently come off it's lows, the penny has also up-ticked. The penny, has featured the profile of President Abraham Lincoln, since 1909, celebrating the centennial of his birth, and since 1959 (the sesquicentennial of his birth), the reverse side has featured the Lincoln Memorial.

Leading up to the Lincoln cent were the Large Cent coin (1793 - 1857), the short-lived Flying Eagle Cents (1856 - 1858), and the popular Indian Head Cent from 1859 to 1909. It was Teddy Roosevelt who had the idea to honor Lincoln with a new one cent coin, and although quite controversial at the time, as the first U.S. coin to depict a person, living or dead, the new "Abraham Lincoln Cent" was successfully issued on August 2, 1909. In fact the new penny was so popular, at the time, that long lines were formed wherever the coin was available, and within a few days, Americans had overwhelmed the mint, and at distribution points signs were seen reading "No More Lincoln Pennies."

When the U.S. entered World War ll the penny contained 95% copper; to ease the wartime need for the metal, copper was substituted with zinc-coated steel, and by the end of 1943 more than one billion of the new steel cents were minted. An interesting note is that the steel cents were an unsuitable substitute and the 95% copper pennies were reintroduced in 1944, with much of the copper being provided by spent shell casings returning from the war front. And how many of us have collections of "wheat back" pennies? After 50 years of mintage, the wheat stalks on the reverse side of the Lincoln cent were replaced by the now commonly seen Lincoln Memorial, making the penny a true Lincoln cent.

Next year (2010) a new and improved Lincoln cent will appear, with four different reverse designs, still being determined by the Treasure Secretary, all depicting important scenes from Lincoln's life. There may be as many as 12 different designs of the new Lincoln penny, so the collecting market could be busy. Speaking of collecting coins, what about the true value of the current-day Lincoln cent? The actual metals composition of the penny has changed more often than its appearance, as before 1982 the penny was made up of 5% zinc and 95% copper. But, since 1982, the penny is lighter in weight and is made up of 97.6% zinc and only 2.4% copper. So melting your hordes of post 1982 pennies for their copper content may not be worth it.

And, speaking of worth it...last year (2008) it cost the U.S. Mint nearly 1.5 cents to create a penny, and nearly nine cents for them to make a nickel. This means that the mint lost $40 million in 2007 - making the penny! The director of the mint, Edmund Moy, points out that "with each new penny and nickel we issue, we increase the national debt by almost as much as the coin is worth." But the penny has a large group of backers, and in spite of the almost constant calls for it to be discontinued, a 2006 Gallup poll showed 76% of respondents saying they would still bend over to pick up a penny. If the metals that the coins are made up-of do continue to rise, we might see a call for steel pennies again - more to add to our collection.

Using the current approximate values of copper and zinc, the pennies gathering dust in various household containers do have a fairly wide spread in value. The pre-1982 pennies are worth about 2.59 cents, while the post-1982 pennies only carrying a metals value of approximately .593 cents. Okay, now we can see everyone dumping their over-flowing penny-cans out on the floor to see how many are pre or post 1982, and trying to put on a zinc versus copper ratio spread. You had better have a lot of the little copper colored coins before placing a metals hedge against them. In fact, now that we think of it, maybe we should check out our own supply of pennies!

"Nobody was ever meant, to remember or invent, what he did with every cent.”-- Robert Frost

 FHW
(* = FHW position)
fhwoption@hotmail.com

May 8, 2012, Prescott, Arizona, USA

- After talking of Groupon last Tuesday and checking on it further, we decided to short a few of the June 9 puts in the dollar range.  If the stock stays at its current 10.50 level, or at least is above $9.00 in 38 days, it will be a nice trade. If the stock is under 9 on or near the close of the June monthly cycle we will either roll to the next month or let the stock be put to us at $9.00 less the dollar the puts were sold. GO GROUPON!

- The earnings numbers continue to flow with some before today's open:  AKRX, ARCC, CHTR, DISCA, DTV, FOSL, HCN, HL, HSIC, IFF, NVE, PRGO, SMG, STWD, STXS, TAP, TDG, THC, WEN. And after today's close: DIS, EOG, ETE, ETP, KGC, MRX, SGEN, XL.
There are also some ex-dividends and other events along with Retail and Chain Store Sales numbers. PLEASE look at your Activity and Position page and if there are any corporate action icons to the right of the underlying's symbol just click on it to see the news or click on Calendar up on the Market Watch tab. Short in-the-money calls have dividend risk and should be closed or rolled prior to the "ex" date, unless you want to pay the dividend! Dividends due on our sheets today are in PFCB*, and PFE*, the next couple days are in AA*, DD* and XOM* - along with many others. You MUST pay attention to those little icons!

- The futures (/ES*) are lower this morning - trading near 1358, oil (/CL*) is also getting whacked - now just under 97. Gold (/GC) and silver (/SI) are also much lower, whereas the 30-year bonds (/ZB), corn (/ZC), beans (/ZS) and wheat (/ZW) are all higher. The Feds announced the sale of $5.8 billion worth of their bailed-out AIG stock, sold earlier in the week at $30.50, with their break-even price of $28.72 - a nice trade. But AIG looks to open this morning over $32, so maybe the boys from DC should have collared the stock, and we wonder why they hadn't been selling options vs their long stock, but the open interest isn't there in that much size. Maybe the US Treasury traders should take an Investool's option class or sit in on a few Swim Lessons!

"For beautiful eyes, look for the good in others; for beautiful lips, speak only words of kindness; and for poise, walk with the knowledge that you are never alone." -- Audrey Hepburn

We will be at the Money Show at Caesar's Palace in Las Vegas next week, so our daily blogs might be somewhat thinner than usual. Stop by the booth and get ready for the next event in Dallas in June. For more info go to www.moneyshow.com. There are also some upcoming TD Amertrade Market Drive events in Dallas, West Palm Beach, and Houston - for info on those please visit www.tdameritrade.com/marketdrive and enter the word “market” in the Registration Code field.

FHW
(* = FHW position)
fhwoption@hotmail.com

Monday, May 7, 2012, Prescott, Arizona, USA

Hard to believe that by this time in two-weeks we will be at our summer home in Rhinelander, Wisconsin. That is after the long 2,200 mile drive that will include leaving early expiration Friday morning, and hopefully pulling in on Sunday afternoon. Every time we make the trek we try to make some sort of a game of it, by counting one-thing-or-the-other. We have compared the amount of roadside McDonald's (MCD) - within site of the freeway, to roadkill, and even whether there were more squished armadillos in Oklahoma or Missouri. This year the count will be musical, counting whether we hear more Rolling Stones or Led Zeppelin songs on the various FM stations along the way.

We have made the trip so many times (hundreds) that out of the hundreds of motels on-or-near the Interstate, we have "hit" just about everyone. Of course Marriotts (MAR) are always among our favorites, but that has just as much to do with our rapidly rising Reward Points as anything else. Several months ago we noticed (and noted in this blog) that the rates of all the chains have skyrocketed, and with the incredible up-tick in fuel costs, this trip is destined to be the most expensive to date. Our first "drive across" as it has become known, was in 1970, and from our hometown of Lincolnwood, Illinois (north suburb of Chicago) to Arizona State University, in Tempe, Arizona. That trip was "only" 1,800 miles and the cost of a "no frills" Motel 6, was actually pretty close to their name! Gasoline for our 1965 suped-up Chevy Impala (GM*) was about .25 cents a gallon, so the inflation monster has hit the travel industry about as hard as any other.

About the only thing similar, now that we think of it, will be the musical selections, although back in the '70s, it was a Craig 4/8 track-player blasting the rock & roll tunes as we passed several "dead zones" when out in the middle-of-nowhere. Nowadays, we might have either our little iPod or iPad plugged into the dashboard, or just be listening to some local FM station, as their signal strength has improved - leaving just about no desolate areas musically uncovered. The travel inflation numbers may have up-ticked several hundred percent, but music is still music, and we could have counted Stones versus Zeppelin tunes even back in those old college times. We did, back in those days, however, actually have to pay for the music played on various turn-tables, cassette players or 8-tracks - buying albums or their plastic-packaged taped equivalent. But in the current musical days, much of the downloaded music is somehow obtained free of charge - whether thru legal and delayed means, or somewhat less legitimate avenues.

We would have no idea of how to obtain any of the above mentioned downloaded tunes, and we do make note of the almost weekly charges coming from the heir-to-the-mortgage for iTunes music. So, if downloaded immediately after release, even today's kids still pay for music, or their parents do. But when you consider the youngster has over 20,000 songs on his iMac laptop, iPad, and iPhone, who knows how they were accessed, and as long as he keeps updating our Apple (AAPL*) gadgets, we don't really care. And, to avoid the commercials, we actually pay the $36 yearly fee for Pandora (P) radio on our BlackBerry and iPad, and when we are sick of the 1,000 or-so songs on our little nano, and while on the bike at the club, the Pandora radio stations can't be beat - so to speak.

We don't know about most of the stocks in the music provider industry, but we have been watching Pandora's fall from grace (not Slick).  After almost buying the stock via short puts back in March, when it dropped from almost $15.00 to the mid 10s, on bad earnings (now trading $8.75), we still can't make up our mind on several of these new-fangled on-line outfits. But, what ever did happen to that reliable Craig 4-8 track player and our hundreds of eight-tracks?  We did keep all of our albums and have been carting-them from state-to-state for decades. Still love that good-old vinyl, even with a few skips now-and-then, hopefully there won't be any "skips" along the way in our soon-to-come weekend drive.

"Can you sing? 'Cause you sure can't trade!" BAM to GUR - OEX pit circa 1986

FHW
(* - FHW position)
fhwoption@hotmail.com

Some earnings before today's open: BSFT, CAR, CNK, CTSH, DISH, FTR, HFC, LPX, NOG, SYY, TSN
and some after today's close: CLNE, FRT, EA, IVR, OAS, PAA, PBI, RAX, SGY, VNO, WEN

Friday, May 4, 2012, Prescott, Arizona, USA

Marvell - not the comic company

Marvell Technology (MRVL*) is a major player in the technology industry, shipping over a billion of their chips a year. We have no idea about most of this tech stuff, but whenever a billion is mentioned, we have to pay attention. We can't tell the difference between a chip that delivers digital signal processing or one that is thrown into the center of a poker table, but a firm that has only existed since 1995 but already has over 5,700 employees worldwide, also makes us take notice - and Marvell is just that firm.

If you are a typical consumer with any form of wireless technology, Marvell is the industry leader in power management for extended battery life, while providing power solutions for a vast array of mobile and wireless devices. An industry leader in storage, networking, wireless and mobile technologies, as well as award- winning video processing products, MRVL solutions lead some of this amazing techological world in most cutting-edge devices. The company constantly talks of their incredible "history of innovations", but since 1995? Well, we guess at the hyper-speed that this world is now moving, 15 years is more than enough time, especially if you really are an industry leader in innovation, just ask Apple (AAPL*). Besides you have to love any company in that short of a time frame that has already had a prior generation of CPUs called Feroceon. 

At this point in our research we usually dig deeper into a company's background, but most of the companies we deal with (read: have positions in) are older than a teenager. Not that we have a problem with corporate youth, but even the heir-to-the-mortgage is older than Marvell. Oh, wait, we do have MRVL positions, and we have been rolling short straddles and strangles against the stock for a very long time. But once again, when a company is barely a decade-and-a-half old, a year-or-two of rolling is a relatively large percentage of the firms existence. The company's P/E is relatively low, for a tech outfit, there are only 586 million shares on the float, and lots of open interest and daily trade in their options.

The approximate .50 cents collected on an almost monthly basis (rolling both calls and puts), really brings the average price of the stock down, and no matter how old the company is, that positive theta looked at on an annualized return basis is always a good thing. Yes, MRVL has been another relatively inexpensive stock to make our Texas long play (long stock, short covered calls and naked puts), and after all the rolls the net stock price has been cut almost in half.

"Time is on my side, yes it is...Now you always say that you want to be free...but you'll come running back to me..." -- Norman Meade (Jerry Ragovoy)

Have a great weekend. If you are on the East Coast, don't forget the thinkorswim/TDAmertrade (AMTD*) road show event at the Times Square Marriott Marquis on Saturday - for more information send an email to events@thinkorswim.com or to jennifer.estep@tdameritrade.com

FHW
(* = FHW position)
fhwoption@hotmail.com