What's Frank Thinking? rss
30-year bonds - don't hold your breath.

 

Tuesday, 9/23/14, Rhinelander, Wisconsin, USA 
 
- Today is the 266th day of 2014 and the 2nd day of the autumn. On this day in 1988, Jose Conseco became the 1st member of the "40 - 40 Club" - hitting 40 homers and stealing 40 bases in one season. Fusajiro Yamauchi founded Nintendo on this day in 1889 - the company originally produced handmade playing cards. Birthdays: Bruce Springsteen (1949); Mickey Rooney (1920 - 2014); John Coltrane (1926 - 1967); Ray Charles (1930 - 2004).
- The 30-year bonds (/ZBZ4) are now trading right on 137, a full handle higher than last Tuesday, as they bucked the selling trend on Monday in which just about every asset class sold off. As we have continuously mentioned, the bonds have been stuck for almost the entire summer in the 136 - 140 range, but now that we have entered autumn, will they break out one-way-or-the-other? If interest rates are to rise, that would have to make for some bond downticks, but with the current Fed domination, we wouldn't hold our breath. Oil (/CLV4*) is trading in the 91 - 92 range, about a dollar lower than where it was last week. Light Crude did get into the low 90 range yesterday and if it dips down there again, it will be interesting to see if the whole 90.00 price point holds. Gold(/GCZ4*) is up about 16 bucks this morning (1234), but after dropping to almost 1200, that level of 1300, where it traded much of the summer, is still a long way off. Corn (/ZCZ4*) is lower again, after getting up to about 350 last week, it is now just under 330. Wheat (/ZWZ4) is unchanged, and beans (ZSZ4) are higher, so maybe there is some hope for a corn rally. The emini S&P contract or SPU (/ESU4*), that was trading over 2002 a couple of weeks ago, is trading right at 1980, just about where it was last week at this time. We asked last week if we were headed back to 2000 or down to 1950, and it looks like we might have to wait for the bombs to stop dropping in Syria or some other world event to break this relatively tight range. The US Dollar (/DXZ4) hit a six year high and is trading just over 84.50, just about where it has been for the last couple of weeks.
- Possible stock movers and shakers: CarMax (KMX) reported better and looks lower; Clorox (CLX), Bed Bath and Beyond (BBBY), Fluor (FLR), and Dick's (DKS) all look lower on downgrades. Cree (CREE*) was upgraded but looks about unched. Salix (SLXP) could be today's version of Monday's Sigma Aldrich (SIAL), as it is in take-over talks. Apple (AAPL*) is trading slightly lower, despite our heir-to-the-mortgage buying the new iPhone 6s. We understand the new iPhones are selling in China for 10 times what they are in the U.S. - can we get the kid to take a trip to Beijing? After paying dearly for Dr. Dre's Beats streaming music service, will AAPL really stop the Beats music and merge it into their gigantic iTunes service? Emerge Energy (EMES*) continues to be a mover-and-shaker; Sina (SINA*), Youku (YOKU*) and SunEdisson (SUNE*) were all beaten down on Monday, just as they were last week - will they once again have a Tuesday rally? 
 
- Today's economic events:
ICSC Retail Store Sales
Redbook Chain Store Sales
FHFA House Price Index
PMI Manufacturing Index Flash
Richmond Fed Mfg.
Results of $29B, 2-Year Note Auction
 
Notable earnings before Tuesday's opening: KMX, CCL; 
and after today's close: AIR, BBBY, CPRT, SCS.
 
Early Morning Markets Summary:
- E-mini DOW Futures  17,054  (-0.26%)
- E-mini S&P Futures  1,979.75  (-0.33%)  
- E-mini NASDAQ Futures  4,038.50  (-0.35%)  
- US Dollar Index  84.436  (-0.37%)  
- Crude Oil  91.58  (+0.78%) 
 
"The great challenge of adulthood is holding onto your idealism after you lose your innocence." - Bruce Springsteen 
 
- Like us on Facebook (FB*) -- https://www.facebook.com/frank.walsh.169 or follow on Twitter(TWTR) at whatsfrankthink, or on Linkedin (LNKD).
Look for us at the upcoming Market Drive in Los Angeles on November 1st and the Money Show in Las Vegas 11/19 - 11/21 - see ya there. 
 
FHW
(* = FHW position)
fhwoption@hotmail.com 
What's Frank Thinking? | 9/23/2014 8:09:58 AM | 0 Comments
NOW is the time to be retail!

 

Monday, September 22, 2014, Rhinelander, Wisconsin, USA  
 
Who are all these guys? We remember thinking that back in the late 1970's early '80s CBOE equity crowd days, when there would be some news event that quickly brought all the market making "floaters" into the crowd - or as they were commonly known "the boat people." Many would come in buying volatility thinking the news would jack-up option prices on both sides, wherein the traders that resided in that particular pit on a day-to-day basis would be more than happy to either hedge their existing positions or take on new short stuff versus other options or the stock itself if no option trade presented itself as a better "other side". Retail option traders oftentimes reacted in a similar trading fashion to the floor "boat" traders, in that they tried to buy the volatility. But the difference for the off-floor "boat people" was that they had to deal with monthlys only, ridiculously wide bid/ask spreads, 5 to 10 dollar wide strikes, no instantaneous electronic order entry, options that traded in fractions (smallest being a "teenie" - 1/16th or $6.25), sometimes terrible fills, AND outrageously high commissions!  
 
In today's electronic world of options trading, the "boat people" sitting at their computers, still float to where the action is, but it is now to the weeklies on equities with big movement, or some massively traded, incredibly tight bid/ask, dollar-wide strikes, index product and/or ETF. This is no different than in the old days, as many of the new retail online boat folks still tend to be buyers of any "jacked-up" premium, as the floor traders and old-style online traders are more commonly the sellers. The biggest difference is that it is now so much better for the retail side "boat people" in literally all regards. Just turn around all of the above mentioned difficulties for the retail side mentioned above! The commissions have never been lower, the "fills" never better, options trading in pennies (dollars - NOT "teenies"), instantaneous on-line fills, dollar wide strikes, crazy-tight bid/ask spreads, and quite possibly even insanely actively traded weekly options. 
 
No matter what anyone in the media says about the new products, High Frequency Traders (HFTs), or all of the new options exchanges and ease of electronic trading; they have all made today's options trading world THE time to be an electronic retail stock/options/futures trading customer. Yes, even we have been drawn into the online "boat traders" game; but only in names that we already know, love and possibly already have a position in, and not necessarily from the sell-side. We can't explain how happy we are to have left the trading floor when we did and what an incredible difference the relatively new online firms have made and the benefits added to the retail side of the stock/option/futures industry. thinkorswim (AMTD*) was clearly THE first electronic options "boutique" trading platform, and we are also happy to have been a very small part of the upstart of the firm. Many of the industry-wide changes have been because of the online trading firms, and most of them have been upticks for the rapidly growing retail side. 
 
Having been a trading floor market maker and an independent floor broker on the CBOE; seeing how difficult (read: almost impossible) it was for the retail customer, we never thought we would EVER be on that side of the trading coin. But if there ever was a time to be "retail" - NOW is the time. 
 
"Is that a customer order?" "What if it is?" "I just wanted to know who I am screwing." -- MCG and FHW (OEX pit circa 1986)
 
Follow us on Twitter (TWTR): whatsfrankthink, like us on Facebook (FB*) - Frank Walsh Prescott, AZ or on Linkedin (LNKD)
FHW 
(* = FHW position)
fhwoption@hotmail.com
 
What's Frank Thinking? | 9/22/2014 7:29:49 AM | 0 Comments
The 2001 Space Odyssey continues

 

Thursday, September 18, 2014, Rhinelander, Wisconsin, USA
 
- Today is the 261st day of 2014 and the 90th day of this extraordinarily cool and rainy summer. On 9/18/1850, Congress assed the Fugitive Slave Act, which allowed slave owners to reclaim slaves who had escaped to "free states". On this day in 1947, the National Security Act established the CIA. In 1999, on September 18th, Sammy Sosa became the first player in major league baseball to hit more than 60 home runs in two seasons. Birthdays: Samuel Johnson (1709 - 1784); Greta Garbo (1905 - 1990); Frankie Avalon (1939); Rick Pitino (1952); James Gandofini (1961 - 2013). Voters in Scotland are taking to their neigborhood polls today in a referendum on whether the country should become independent or continue to be part of the United Kingdom. 
- Anyone else want to know exactly what is the Fed's definition of a "considerable time"? If you had the SPUs or bonds or just about anything else up on the Active Trader page when the Fed news came out yesterday, you would have been amazed at the short-term swings. Had you been a scalper it was like a dream come true! Now that we think of it, we wish the Feds would make some ridiculous statement weekly! Daily?  
- The SPUs (/ESZ4*), as of this writing, are trading higher, having traded in about a 10 handle range overnight (1993 - 2002.75), about 13 points higher than last week, and are now back over that all-important 2000 number. Once again we were awoken in the middle of the night by a thinkorswim (AMTD*) alert, when the S&P emini futures contract traded back over that 2000 number. We just wish, for our own sleep-sanity, that it would either stay over or under that darned number! We couldn't resist ourselves though, and sold one of the new December contracts (as a hedge), at 2001.25. The Russell (/TFU4) is also trading higher, as are the US Dollar (/DXZ4) and oil (/CLX4). Only the 30-year bonds (/ZBZ4), gold (GCZ4) and corn (ZCZ4*) are showing any weakness. Gold is now all the way down to 1222. Will 1200 be next, or can it fight it's way back up to 1300? Natural Gas (/NGV4) traded back over $4.00 on Wednesday, but is now just under - watch out for movement in NatGas with today's EIA inventory number. 
- Today's possible movers: Boeing (BA) announced, after winning NASA's $4.2 billion contract for the "space taxi" program, that it's new spacecraft will contain a seat for "paying tourists". Being called a "taxi" leads us to believe that some paying customer should be mandatory. Our only question is where does the tourist get dropped off? Sony (SNE) announced a dividend cut (first since 1958), mostly because of this year's loss of $2.2 billion! Back to taxis; Tesla's (TSLA) Elon Musk says they will be producing self-driving cars in five-to-six years, but regulatory hurdles might push the scedule out another few years. We can envision "self-driving" taxis, at least the "driver" wouldn't smell and might speak English! The "steels" all made big moves yesterday - wih Nucor (NUE) hitting it's highest price since 2008, and U.S.Steel (X) also gapping higher enabling the stock to now be trading twice what it was just four months ago! Apple (AAPL*) looks higher, as do 
Facebook (FB*), InterOil (IOC*), Emerge Energy (EMES*), Kohl's (KSS), DuPont (DD), Monsanto (MON), and Bank of America (BAC*).
 - Today's economic events:
Housing Starts
Initial Jobless Claims
Philly Fed Business Outlook
EIA Natural Gas Inventory
Money Supply
Fed Balance Sheet
- Notable earnings before the open: CAG, IHS, RAD;
and after today's close: ORCL, RHT, TIBX.
 
"Man's chief merit consists in resisting the impulses of his nature." -- Samuel Johnson 
 
Follow us on Twitter (TWTR): whatsfrankthink- like us on Facebook (FB*) - Frank Walsh Prescott, AZ  -- Look for us on Linkedin (LNKD)
The next Market Drive event will be in Los Angeles on November 1st and Houston on November 8th. - go www.tdameritrade.com/registerformarketdrive. 
The next Money Show is in Las Vegas - November 19 - 21. Hope to see you at one of the events.
 
FHW
(* = FHW position) 
fhwoption@hotmail.com 
What's Frank Thinking? | 9/18/2014 7:53:46 AM | 0 Comments
A look back...

 

Wednesday, September 17th, 2014, Rhinelander, Wisconsin, USA 
Today is Quad-Witching Wednesday - the 260th day of 2014 and the 89th day of summer.
Births:
1271 - Wenceslas II king of Bohemia & Poland (1278-1305) 1st Santa? 
1907 - Warren E Burger - Supreme Court chief justice (1969-86) 
1923 - Hank Williams - Country singer ("Hey Good Lookin") 
1927 - George Blanda - NFL hall of famer (Bears, Oilers, Raiders)
1935 - Ken Kesey - "One flew over the Cuckoo's nest"
1939 - David Souter - Supreme Court Justice (1990- ) 
Events: 
1630 - City of Boston formed 
1776 - Presidio of SF formed as a Spanish fort
1787 - US constitution adopted at Philadelphia convention
1920 - National Football League organized in Canton, Ohio
1953 - Ernie Banks becomes Chicago Cubs 1st black player ("Let's play two today")
1963 - "The Fugitive" premiers on ABC TV 
1964 - "Bewitched" premiers on ABC TV 
1964 - Mickey Mantle gets hits #1999, 2000 & 2001
1967 - "Mission Impossible" premieres on CBS-TV
1972 - "M*A*S*H," premiers on TV 
1978 - Begin, Sadat & Carter sign the Camp David accord
1983 - Vanessa Williams of NY became 1st black Miss America
2001 - The NYSE reopened, having been closed since the Sept. 11th terrorist attacks.  
2014 -  The SPUs and gold as of this writing are wrapped-around unchanged, oil is lower, the bonds and dollar are higher and corn is once again dropping. 
 
"He who spends time regretting the past loses the present and risks the future." -- Quevedo 
 
Like us on Facebook (FB*) -- https://www.facebook.com/frank.walsh.169 or follow us on Twitter (TWTR) at whatsfrankthink or on Linkedin (LNKD) 
And also look for us in the daily Swim Lesson chat room from 10:30 CDT, and at the next Market Drive Los Angeles on 11/1 or Trader's Expo Las Vegas 11/19. 
 
FHW 
fhwoption@hotmail.com
(* = FHW position)
What's Frank Thinking? | 9/17/2014 7:57:50 AM | 0 Comments
Quad-Witching Tuesday

 

Tuesday, 9/16/14, Rhinelander, Wisconsin, USA 
 
- It is quad-witching week - PAY ATTENTION if you have any September monthly positions that are (ITM) In-The-Money or even close to the money. There are also dividends payable this week in some of the ETFs - like the popularly traded SPY. If you have any questions call the thinkorswim (AMTD*) trade desk at 866 839 1100. 
- Today is the 259th day of 2014 and the 88th day of the summer. On this day in 1940, President FDR signed the Selective Training and Service Act, authorizing the military draft, and some 30 years later FHW received #356 in the draft lottery, thereby missing any military service. On 9/16/1981, Sugar Ray Leonard knocked out Tommy Hearns in the 14th round at Caesar's Palace Las Vegas, and in 1974 President Ford announced a conditional amnesty program for Vietnam draft evaders. Birthdays: BB King (1925); Peter Falk (1927 - 2011).
- The 30-year bonds (/ZBZ4) are now trading in the mid-136 range, currently '13 ticks higher and appoaching last week's 137 level, still inside the 136 - 140 range they have been hovering around most of the summer. Oil (/CLV4*) is trading in the 92 - 93 range, also about where it was last week. Gold(/GCZ4*) continues to show weakness, although it is up slightly this morning -1239 up (about 4.00), it is still $20 lower than last week, and now a struggle back up to and a close over 1250 must take place, before we can see it getting back to the 1275 - 1300 level where it traded much of the summer. Corn (/ZCZ4*) is finally trading higher, but after being down much of the week, it's current 350 level is just an "ear-or-two" higher than last week's 346 level. Perhaps the grains will all stabilize or go higher now that there could be some frost on the midwest pumpkins. The emini S&P contract or SPU (/ESU4*), that was trading over 2002 last week at this time, is now under 1975. Are we headed back to 2000 or down to 1950? Anyone's guess would be as good as ours. The US Dollar (/DXZ4) hit a six year high and is trading just under 84.50, just about where it was last week.
- Possible stock movers and shakers: Apple (AAPL*) is trading slightly higher; Blackberry (BBRY*) is wrapped around $11; Microsoft (MSFT*) which was soft yesterday, might rally; Adobe (ADBE) was downgraded going into their post-close earnings announcment; Emerge Energy (EMES*) was down $7 on Monday, but after moving from 95 to 145 this summer, the 4.00 to 7.00 move have become almost ordinary; Sina (SINA*), Youku (YOKU*) and SunEdisson (SUNE*) were all beaten down on Monday - will they have a Tuesday rally? The FOMC meeting starts today - wouldn't you like to be a fly on THAT wall? 
 
- Today's economic events:
ICSC Retail Store Sales
Producer Price Index
Redbook Chain Store Sales
Treasury International Capital
 
Notable earnings before Tuesday's opening: FDS;
and after today's close: ADBE, APOG.
 
"If we had no winter, the spring would not be so pleasant: if we did not sometimes taste of adversity, prosperity would not be so welcome." - Anne Bradstreet 
 
- Like us on Facebook (FB*) -- https://www.facebook.com/frank.walsh.169 or follow on Twitter(TWTR) at whatsfrankthink, or on Linkedin (LNKD).
Look for us at the upcoming Market Drive in Los Angeles in November and the Money Show in Las Vegas 11/19 - 11/21 - see ya there. 
 
Early Morning Markets
E-mini NASDAQ Futures  4,028.25  (-0.13%) 
E-mini S&P Futures  1,974.25  (-0.09%)  
E-mini DOW Futures  17,012  (-0.09%)  
US Dollar Index  84.241  (-0.03%)  
Crude Oil  92.59  (-0.36%)  
30-yr Bonds 136'18  
 
FHW
(* = FHW position)
fhwoption@hotmail.com 
What's Frank Thinking? | 9/16/2014 7:58:39 AM | 0 Comments
Witching Monday

 

 
Quad-Witch Monday, September 15, 2014, Rhinelander, Wisconsin, USA
 
Having started on the CBOE trading floor as a runner in 1976, we were a first-hand witness to some seriously boring days. Standing near the AG Becker phone banks waiting for orders to come down to the old floor (7th floor in the CBOT) via either wire-orders or over the phone was oftentimes uninterupted for hours, unless liars poker was being played or a crossword puzzle was being worked. There were a few real old-time traders on the new Chicago options exchange, and their stories of the "good old days" in the early 1950s when less than 7 million Americans actually owned common stock (about 4.2% of the population), were sure to include reasons like the 1929 Crash and the Depression of the 1930s. Yes, there were some on both the CBOT and CBOE that were THAT old. 
 
The Glass-Steagall Act of 1933 prohibited commercial banks from doing business on Wall Street, and the independent stock brokerages could charge ridiculous commissions for their services;all done over the phone, including just stock quotations, pre-CNBC or any other quote sources other than a dial-up phone. Daily volume on the NYSE (then the only exchange) in the 1950s was less than a million shares, as mutual funds and other new investing options were still non-existent. Widespread retail stock investing didn't pick-up to any extent until the 1970s, and there were no exchange traded options until 1973. But the decade of the '70s and it's corresponding "stagflation" saw very little market movement. The Dow Jones, which was just above 800 at the start of the 1970s, had only moved to 839 to end the decade, just a 5% gain in 10 years! Not exactly a great time to be starting a new trading floor job, as markets were stuck-in-the-mud, but also not a bad time to learn how to sell options on any movement in either direction. 
 
Mutual Funds, the 1st index fund, and the Employee Retirement Income Security Act's (ERISA), opening the door for individual retirement accounts all came about in the mid-1970s and the NYSE extended their trading hours to accommodate the upticks in trading. The SEC banned fixed minimum commission rates in this time frame and the dramatic improvements in trade processing that came with some incredible advances in automation and technology all tended to uptick retail trading. In 1982 daily trading volume on the NYSE exceeded 100 million shares for the first time. And, by the beginning of the 1990s the amount of Americans investing in the US stock market numbered more than 51 million - over 20% of the population! On the CBOE trading floor we were lucky enough to partake in the incredible growth in the markets in the '80s - '90s. But we missed the real explosive volume that came in the new milenium, when 2001 saw NYSE trading daily volume exceed 2 billion shares, and a record 4 billion-plus in February of 2007. Actually, thanks to our early involvement in thinkorswim (AMTD*), we didn't miss a thing.
 
The day the OEX opened for trading on the CBOE saw FHW as the one-and-only Independent Floor Broker in the crowd of maybe 15 traders. That 1st day in 1983 we did a total of 17 contracts as the first Index Option product was a investment infant. But, by the days of pre-crash 1987 we were averaging between 3,000 - 5,000 contracts per day; as the crowd grew to about 500 traders, which included dozens of independent and firm floor brokers. Post-crash, however, the retail business in both the OEX and SPX options dried up, and by the time we closed our floor brokerage operation in 1995, our daily numbers had shrunk down to less than 1,000 per day. The incredible proliferation of new products and insane volume numbers in many stock and options products has almost completely dried up the volume in the once proud OEX pit, with the new average daily volume in the entire product now coming in at under 1,000 contracts a day! 
 
Apple (AAPL*) alone in today's electronic, low commission day-and-age will easily trade 50 million shares and on a busy option day it will seem like a zillion options. The excitement, immediate gratification and outrageous volume of the weeklies has surprised everyone in the investment industry (thanks to thinkorswim founders Tom S and Scott S), and even old timers like us have been known to trade them. Oh my goodness, we can't even imagine filling all that paper the old way, but it sure would be fun trying!
 
"How many you got at 1/2?" "I have 100 to sell at 1/2." "Buy 'em." "Okay I can sell another 500 at 9/16s." "Buy 'em." "I got another 1,000 a 5/8s." "You J _ _ O _ _! You're killing me! How many you got in total." "Just keep buying them and you will find out." - BAM and FHW (OEX pit circa 1986) 
 
Follow us on Twitter (TWTR): whatsfrankthink, like us on Facebook (FB*) - Frank Walsh Prescott, AZ or look for us on Linkedin (LNKD).
Remember the upcoming Market Drive Los Angeles on Nov 1 and the Trader's Expo Las Vegas Nov 19 - 21. 
FHW 
(* = FHW position)
fhwoption@hotmail.com
 
What's Frank Thinking? | 9/15/2014 7:28:49 AM | 0 Comments
9/11 - plant that apple tree

 

Thursday, September 11, 2014, Rhinelander, Wisconsin, USA
 
- This is the anniversary of the 9/11 terrorist attacks in 2001, when Muslim terrorists hijacked planes that crashed into The New York World Trade Center, the Pentagon in Virginia and a field in Pennsylvania - claiming almost 3,000 lives. NEVER FORGET! Today is the 254th day of 2014 and the 83rd day of summer, and we had snow flurries overnight in Rhinelander! Birthdays: Paul "Bear" Bryant (1913 - 1983); Tom Landry (1924 - 2000). 
- The SPUs (/ESU4*), as of this writing, are trading slightly lower, down about 6 points - near 1989, about 15 handles lower than last week, and now seemingly happy to hang under that all-important 2000 number. The September contract (U) will be flipping to the December (Z) in a few days, and the current spread between the two is about 8 - 9, whereas historically, as it gets closer to being rolled, it should be somewhere closer to 6. One thing to check is the Sept vs December volume, when the Dec starts to uptick and catch up to the current Sept contract - THAT is the time to roll. To see the various futures contracts, go to the Trade Page - All Products, type in the specific product (/ES) and click on Futures and make sure ALL is in the window to the right.  The Russell (/TFU4) is also trading lower, as are the US Dollar (/DXU4), gold (/GCZ4*), silver (/SIU4), and oil (/CLV4). Only the 30-year bonds (/ZBZ4) are showing any strength.
- The Labor Department will report on the number of people applying for unemployment claims at 7:30 a.m. CDT; Nat Gas (/NGV4) inventory numbers and the results of a bond auction could move the futures in the early afternoon - so if scalping, stay small, nimble and on your toes! Will Scotland really pull out of the UK? The Royal Bank of Scotland (RBS) thinks it might happen and have threatened to relocate to England should Scottish independence be declared next week. Haven't the Scotts been leaving since Hadrian's Wall and the Romans?
 - Today's possible movers: JDS Uniphase (JDSU*); LuLuLemon (LULU*); McDonald's (MCD) - Will it's new McBrunch plan McHurt; Men's Wearhouse (MW) - Tom Sosnoff's favorite store! 
 - A big day in news events:
Initial Jobless Claims
USDA weekly Export Sales
Quarterly Services Report
Sept WASDE Crop Production 
EIA Natural Gas Inventory
Results of $13B, 30-Year Note Auction
Treasury Budget
Money Supply
Fed Balance Sheet
 
Notable earnings before the open: FLWS, BRC, KR, LULU*, RSH;
and after today's close: ULTA.
 
"Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree."-- Martin Luther
 
Follow us on Twitter (TWTR): whatsfrankthink- like us on Facebook (FB*) - Frank Walsh Prescott, AZ  -- Look for us on Linkedin (LNKD)
The next Market Drive event will be in Los Angeles on November 1st and Houston on November 8th. - go www.tdameritrade.com/registerformarketdrive. 
The next Money Show is in Las Vegas - November 19 - 21. Hope to see you at one of the events.
 
FHW
(* = FHW position) 
fhwoption@hotmail.com 
What's Frank Thinking? | 9/11/2014 8:04:42 AM | 0 Comments
NADL - not Nadal the tennis player!

 

Wednesday, September 10, 2014, Rhinelander, Wisconsin, USA 
 
NADL - not the tennis player Nadal! 
 
North Atlantic Drilling (NADL) is the leading driller in the North Atlantic basin. Drilling in the north Atlantic is not an easy task, in fact it is titled an "offshore harsh environment" by everyone in the drilling industry, with both high risk and big rewards but even that doesn't do it justice. We have been successful with positions in another leading driller, Seadrill Limited (SDRL*), and that company owns the majority of NADL, who's shares were offered on the NYSE just this past January. The same good friend (thanks Nick E) that made us aware of SDRL also alerted us as to NADL, and when you consider his knowledge and connections in the industry, it was another "no brainer" for us. 
 
We constantly stress the importance, for long term investing, in knowing the underlying in all regards, or at least knowing someone who does, and in this North Atlantic drilling operation, it certainly isn't personal knowledge that got us involved. We are always looking for industry segment leaders and NADL is clearly one of, if not the leader, in harsh environment offshore drilling. The company pays a HUGE dividend (9.8%), and although the options are relatively thinly traded with somewhat wide bid/ask spreads, the initial sale of a straddle (10s) vs long stock was at a pretty good price, and if you add the soon-to-come dividend, the rate-of-return in the short term will be just fine. If we can continue to sell options wrapped-around the stock price, at least a few times a year (hopefully at least six) at a good price on both sides (straddles and/or strangles), while collecting a great dividend, all in a company that is a leader in their field - we will do it everytime. 
 
The company's harsh environment drilling rigs in contracts with firms such as Shell Oil, ExxonMobil, Conoco Phillips, and Statoil, along with great operation names like "West Hercules" in the Barents Sea, also got our interest. As for complete investor due diligence, we would, in fact, love to take a trip to one of their offshore facilities. We wonder what the weather is like in the North Atlantic in September? Well, come to think of it, we aren't necessarily fond of "harsh environments" and might have to take the word of a friend, and our own company research this time. We have toured many other companies facilities that we have been involved with; from automobile plants and mines; to canning, tanning, brewing, and other manufacturing facilities. But being "line secured" in a panda-sized parka on an offshore oil rig in the North Atlantic might not be for us! 
 
Like us on Facebook (FB*) -- https://www.facebook.com/frank.walsh.169 or follow us on Twitter (TWTR) at whatsfrankthink or on Linkedin (LNKD) 
And also look for us in the daily Swim Lesson chat room from 10:30 CDT, and remember the upcoming Market Drive in Los Angeles (11/1) and the Trader's Expo in Vegas (11/19 - 21).
 
FHW 
fhwoption@hotmail.com
(* = FHW position) 
What's Frank Thinking? | 9/10/2014 7:50:38 AM | 0 Comments
2002 - and we aren't talking the old BMW

 

Tuesday, 9/9/14, Rhinelander, Wisconsin, USA 
 
- How about that incredible Harvest Moon last night? 
- Today is the 252nd day of 2014 and the 81st day of the summer. On this day in 1776 the Continental Congress officially changed the name of the "United Colonies" to the United States of America, and in 1791, the capital of the United States' name was renamed Washington, D.C. after President George Washington. On 9/9/1850 California was admitted as the 31st state, and in 1956, Elvis Presley made his debut on the Ed Sullivan Show. Then, on Sept. 9, 1965, Dodger Hall of Famer Sandy Koufax threw a perfect game against the Chicago Cubs. 
- The 30-year bonds (/ZBZ4) are now trading in the high-137 range, another point lower than last week, and well off the 140 level where they began the month of September. Oil (/CLV4*) is trading in the high 93s, about $2 lower than last week, and that is after it's over $1.00 move higher overnight. The popular scalp Light Sweet Crude did trade down to 91.80 on Monday (9/08). As we mentioned last week, Gold(/GCZ4*) had failed time-and-again to get back over the 1300 mark, and now can't even fight it's way back to 1275. It is up slightly this morning - trading near 1257.50 as of this early morning's writing. We don't know if we have ever gotten sick because of corn, but the current 346 price range is making us feel a little ill. Is there a bottom in this once proud commodity, as (/ZCZ4*) continues to trade flat to lower - currently in the 346 handle. One year ago today corn was in the 470 range! The emini S&P contract that most traders refer to as the SPU (/ESU4*) did, just as last week, trade under 2000 in the electronic overnight session - down to 1296.25, but has once again rallied in the early hours to currently trade near 2002. The US Dollar (/DXZ4) hit a six year high and is now trading just under 84.50, almost 5 full points higher than just a couple months ago - a huge move for anything denominated in dollars.
- Possible stock movers and shakers: Apple (AAPL*); Dick's (DKS); Emerge Energy (EMES); Hi-Crush (HCLP*); Petrobras (PBR*); Facebook (FB*); North Atlantic Drilling (NADL*); Ralph Lauren (RL); Home Depot (HD); and all of the airline stocks - Delta (DAL*), United (UAL), American (AAL) and Republic (RJET*), as the entire sector was initiated at Credit Suisse with an "overweight" - which would not necessarily be good if on one of their flights!  
 
- Today's economic events:
NFIB Small Business Optimism Index
ICSC Retail Store Sales
Redbook Chain Store Sales
Job Openings and Labor Turnover Survey
Results of $13B, 3-Year Note Auction
 
Notable earnings before Tuesday's opening: BKS, FRAN, HDS, JW.A, LAYN, LDOS, TITN;
and after today's close: IRET, KKD, PANW, PIKE, PPHM, SAIC, SPA.
 
- Like us on Facebook (FB*) -- https://www.facebook.com/frank.walsh.169 or follow on Twitter(TWTR) at whatsfrankthink, or on Linkedin (LNKD).
Look for us at the upcoming Market Drive in Los Angeles in November and the Money Show in Las Vegas 11/19 - 11/21 - see ya there. 
 
FHW
(* = FHW position)
fhwoption@hotmail.com 
What's Frank Thinking? | 9/9/2014 8:00:11 AM | 0 Comments
Airlines - toot toot?

 

Monday, September 8, 2014, Rhinelander, Wisconsin, USA
 
Not to blow our own horn, but looking back at past blogs - TOOT TOOT! 
 
From -- Thursday, March 29, 2012, Prescott, Arizona, USA 
"Are you constructively bullish the airlines? Have you taken any trips lately and noticed how crowded the airports were? Tried to book any "cheap" flights in the last few months, only to find they are about double what they were last summer? Is the upcoming summer season going to be a good one for the air travel industry? Have the airlines hedged their fuel costs and cut their number of flights, so they are actually becoming profitable?  If you answered "yes" to all or even most of these questions, then it sounds like you have to be more-or-less bullish the airlines. If so, and you want to own a big flyer or two, there are a couple of "sweet" Texas Long plays that can be made. The big caveat is that you WANT (need?) to own the underlying stock, at least for 50 days or so, but we feel the risk reward is at least as safe as flying on one of their airplanes, and the annualized return - if rolled might be tremendous!"  
 
Delta (DAL*) at the time was in the $9.00 range and recently traded over $42. American Airlines (AAL), parent of US Airways, was about $7 and it soared to almost $45! Republic Airways (RJET*), parent of Frontier Airlines, was in the $4 range and went as high as almost $14. Those are the three airlines we most often fly, not necessarily because they are the best at what they do, but because of where we have to fly to-and-from. And although they may not be the best, if there is such a thing in the airline industry, they are far from the worst. Two of the three even pay a dividend; they all have enough options trade with relatively tight markets and open interest to generate some good continuous short positions that can be rolled for years. Yes, rolling for years not only creates a comfortable monthly (weekly?) income stream, but after even just a few years, the cost basis of the long stock might become $0.00. That is when the rate-of-return becomes phenomenal and you stop caring about the stock price! 
 
However, with the entire market; and the airlines continuing to fly at seemingly unsustainable heights, we wouldn't necessarily climb on board any long travel-like stocks at the moment. The planes will continue to fly, but will the stock prices? Be careful! Perhaps wait for some pull-backs, not a crash or anything as dreadful, but as the flight attendents warn "a sudden drop in air pressure..." We hope we never have to strap that mask on during a flight, or cover some short puts that have soared into space! 
 
"Bring me a Snickers Bar and an air sickness bag." -- BAM to his clerk (OEX pit circa 1987) 
 
Follow us on Twitter (TWTR): whatsfrankthink, like us on Facebook (FB*) - Frank Walsh Prescott, AZ or on Linkedin (LNKD)
FHW 
(* = FHW position)
fhwoption@hotmail.com
 
What's Frank Thinking? | 9/8/2014 7:57:42 AM | 0 Comments