Fabulous Friday?

Today should be much improved – if not, we need to find a nice mattress to put our money in for a while because you can’t ask for better conditions today. Consumer confidence is up to 96.1 from 78.2 last month this is the best since Oct. 2004 (when the Dow gained almost 200 pts). Jobless claims are at the lowest level since April 2000. Oil is dropping again due to “demand destruction” fears (funny when the fear is on the other side). Consensus on rates is way down (this will come back to bite us if there are in fact 2 more hikes but for now, let everyone get excited). A full 40% of Americans now approve of Bush’s job performance (yes, I’m being sarcastic – I should just say 60% of Americans are now sane). This is all fabulous stuff! The note sale went great yesterday so everyone still wants to put money in the US and Asia continues to be weak and the dollar continues to be strong. We saw some warning signs yesterday on the global rotation front as money got stuck in Europe on the way over here from Asia but that is clearly not happening today. As far as sector rotation goes, we clearly have the pullback we expected on oil and commodities but no clear leaders have shown up yet. I am very concerned about any kind of rally that doesn’t involve tech but I have to weigh that against the possibility that I’m prejudiced towards tech (like many) so I will try to keep as open a mind as possible. Anyway, if we do not get a good day today we can blame Pfizer, who has a major analyst meeting this morning, because there is not much else that should sink this ship. A weak market today will put phenomenal pressure on Monday as we are currently right back where we topped off in December, a break either way will be significant. CNBC has jumped on the oil scare bandwagon today (again, suspicious timing) with “Oil Shock Scenarios” that they are repeating endlessly. I hope John Grisham is working on the book that connects all these players together… If we are weak, but not too weak (less than .3% drops), I will be taking up small positions but maintaining 70% cash because Monday can be big either way and it would be a shame to miss it. ===================================== Kudos to PFE for finally getting back to the value they had in 1998 when sales were $23Bn and profits were $4.6Bn! With 2005 sales at $51Bn and profits of $8Bn (both down from ’04 which was an unusually good year) my meeting with analysts would consist of me slapping them in the face until they rated me a buy. Out of 28 analysts covering Pfizer, 12 have a hold rating on the company but at least there are no sells. We’ll see what happens today but there are so many positives in the company against so much negative sentiment. The company repatriated $37Bn in overseas profits this year and will probably sell it’s less profitable consumer products division for $9Bn and they paid down $12Bn in debt leaving them at a 4 year low. The only fear on PFE is that they go acquisition happy like JNJ and BSX but I expect that will not be the case. The company’s pipeline is actually very strong and I think we might get positive news on Celebrex so I’m adding the Mar $27.50 for .40 in addition to the March $25s I still haven’t sold, even though they are already a double. I will sell the $25s if there is a big jump today and ride out the $27.50s but, if it goes the other way, I will take my lumps and get out sooner rather than later (setting a stop on the $25s at $1.20 to keep 50% profit). Don’t buy early on this one. The prospects for Pfizer are long term so there may be a lot of short-term investors bailing early on but if it holds the 200 dma of $24.75 in the morning, it should finish strong today or Monday. ===================================== SIRI’s drop was a gift yesterday. Oprah will have 1/2 hour a week on XMSR, how that boosts XM 5% and drops SIRI 3% is beyond any comprehension! Expectations are for SIRI to lose more this quarter than last year but last Q4 Mel was not in charge and I expect an upside surprise here. We picked up the Mar $6s for .40 on the 7th and it quickly got away from us, I will be taking advantage of this to increase my position. AET had a huge quarter but UNH is a much better buy at this price. Although it may need to consolidate for another month or two before heading back up, I will buy about 10% of my goal per week in the Jan $55s for $9.20 and sell the Mar $60s for $1.20 (15% with $2 headroom). This is a great article about how DIS traded sportscaster Al Michaels for a cartoon rabbit: http://online.wsj.com/article/SB113954127077170398.html?mod=home_whats_news_us Speaking of cartoons, I’d be shorting Danish companies if I knew any, this thing is growing, not subsiding. Olympic terror fears may be one of the outside factors keeping a lid on stocks. I am always disgusted by the extortionist price of RIMM options but I think their suffering may be over, if they break the 50 dma of $70 today on volume then they have a lot of room to fly. I like owning the stock at this price and selling the Mar $70 for $5.30 (7%) which protects you well below the 200 dma of $67. You can also take a chance and pick up the Jan $70 for $15, selling the same call for an amazing 30% but you should expect to be giving some of that back to your caller at the end of the month. You could also sell the $75 for an insane $3.30 (a $9 premium!) which is safer on the upside but riskier on the down. MSFT is planning on hiring all those laid off Oracle employees – they are committing $1Bn to expand Redmond to house 12,000 workers. Almost time to buy these guys but maybe a little more drop first. CCE is doing a brilliant deal with WMT that will kill regional competitiors. This has been a very dead stock and I wish I caught this sooner but I’ll still take the Mar $20s for .80, looking to get out for $1.20. MET has been flat since December but I think it’s ready to break up but not until after options expiration. This is a good one to ease into with the Mar $50s at just $1.30. You can also buy the Jan $45s for $7.50 and sell the March calls for a very nice return. ACI missed estimates by 20% – it’s a long way to the 200 dma of $66! Follow the Valero Rule on this trade but the $75 puts may go in the money today. This should be a quick in and out trade at most. BTU may fall further in sympathy, I predicted it would hit $40 post split way back on 1/24 when the stock was at $100. The split is already locked in and shares will be distributed on 2/22. The $90 puts are a big risk at $2.50 but if oil is down, look out! PCU is still way higher than PD and that never lasts. I like Buying the Sept $85 puts for $11.50 and selling the Mar $85 puts for $5.20. The stock would have to take out its all-time high of $91.60 for you to lose money and you can watch the price of copper as well as PD for warning signs of the market turning. STN finally broke up but too far, we need to hope for a pullback. If it keeps going up HET is lagging and will make a better play. Watch for a bottom on SHFL right about here but I want to see it hold $22.50. NFI pulled earnings today. Never a good sign for a REIT that lends money! They were expected to beat last year by 40% and the release didn’t sound very promising. I think the rumor mill will drive them down and there is little chance of a boom so the Mar $30 puts for $1.50 look like a good play. If oil breaks $61.90 today then, in addition to BTU and ACI, I like the following puts: OIS Mar $35 puts for .90 HYDL Mar $75 puts for $2.50 BHI Mar $70 puts for $3.70 OII Mar $55 puts for $2.10 They all should open up so follow the Valero rule to the letter! Buy in slowly and don’t lose more than 20% – remember Friday afternoon people buy oil so maybe wait until Monday for these. ********** Trade of the Day – LVS ********** LVS is holding firm to $47.50, we have a great profit on this trade but I’m going to go for it and hold my puts into earnings on the 14th. P/E is 188 and holding! BYD just turned an earnings miss but not as much of a miss as expected so they are up 5%, this is why holding into earnings is so dangerous, even when you are right you can be wrong. Of course, the p/e of BYD is 24, not exactly a good comparison… You can establish a new spread on this stock with the Mar $50 call for $1.40 and the Mar $45 put for $1.50, any strong move after earnings should be rewarded.