The credit and derivatives world remains flat to better this
morning, with the US CDS back below 40bps and the two-year swaps
consistently under 13bps. Large US financials' CDS are basically
flat, as are Italian and Spanish bonds and CDS. Yesterday's new
bond issuance was, not surprisingly,
. Various tidbits of interest on my screens:
- It took less than a week after decapitating the
center-rightPeople of Freedom (or PDL) party for the Italian
socialists in theDemocratic Party (or PD) to demand a
reinstatement of the IMU tax, the real estate tax on primary
residences. It has been nearly 20 years since the pigs have been
kept from the trough, and they are hungry; there's overwhelming
hatred for the IMU; if the PD wants to change the victory handed
to it by
("The Bad Palace") into a defeat, forcing back the IMU is just
the ticket. If you think that the EU matters, keep an eye on
Italian metrics because after the "vote of confidence" honeymoon,
things could heat up very quickly.
- The 3-month volatility index curve was inverted pretty much
all day yesterday. In my humble opinion, it's far more telling of
fear than the
(INDEXCBOE:VIX) alone, and its inversion has indeed served well
(subscription to Buzz & Banter required).
- I will be watching to see how
), and a few other names I follow closely may react to earnings.
(I am distinguishing between how the earnings/guidance may come
out from how the stock may react to them.) But it is suffice to
say that valuation may matter more this quarter than it has in a
) having pre-announced its third-quarter results, the first
post-earnings option series (the weeklies expiring November 1)
sports a very muted implied volatility profile (low 30s vs.
typical 40s by now). If that stays the same, calendar spreads and
other strategies to play expensive near-term volatility versus
the cheaper long date one aren't likely to work too well, which
leaves traders with the much riskier alternatives of laying out
directional bets. Sitting this report out may well be the best
"trade" for me.
(INDEXSP:.INX) future pit contract (SPA) shows a daily qualified
Propulsion Exhaustion Down target of 1661.50; last night the
contract closed below the 1669.70 TD Reference Close Down price.
If we get a lower low, the odds that it tags Propulsion
Exhaustion Down are pretty good.
- I'm all for seeing both sides of a trade, but
this bearish piece
on Seeking Alpha concerning
(GPOR) borders on the bizarre. The premise is that GPOR is wildly
overvalued because only 30% of its reserves are oil and the rest
is natural gas. That revelation is akin to saying that water is
wet. And from a value investor standpoint (which is what the
writer purports to be), would you rather invest in reserves of a
commodity that trades at depressed prices even though its
consumption is growing exponentially, or in reserves of a
commodity whose price seems to have attained a "new plateau of
prosperity" even though its continued use is broadly vilified on
a daily basis?
- As I wrote on
Buzz & Banter
in real time, I closed out my
(WDC) position a few weeks ago as it became more and more
apparent that WDC is pushing hard to move into the solid-state
drive (or SSD) space. That being said, some of the hard drives
price points offered on various e-retailers' websites are
screaming that the HD business -- or at least its margins-- is in
a complete tailspin. I kind of doubt that SSDs can pick up the
slack fast enough to save the next few quarters for WDC and
- There was a huge option trade in
(IP) yesterday, with a gorilla buying 15,000 Jan 45 calls and
selling 59,000 Jan 50 calls. If this was a 1x4 ratio spread
without a hedge for the excess calls -- considering the amount
available out there for M&A -- putting on this trade may
redefine picking up pennies in front of a bulldozer.
Happy trading to all!