Wednesday Morning

Looks like global consolidation day, everyone is flatish and our futures look flattish too. Whenever you have a day after a big high is made (Nasdaq 2,340) it is great just to hold it the next day. An up day today will be another indicator that we really are starting to benefit from either Global Rotation or possibly just be an indicator that retail investors continue to pile into our markets. The better the brokers do, the more likely it is that this rally is retail driven which means it could be a fickle thing if it turns choppy. All eyes are on oil inventories today but the interest rates bear watching as the 10 year is now 4.85% and movement towards 5% will really start scaring investors. Hints that Fed tightening may actually be winding down are no help for the dollar which has lost over a point this week which will add 1% to our deficit which everyone will call a surprise when the numbers come out. Speaking of surprises, this will be the first quarter where new rules on options expensing really start to kick in and I think we will be in for some shockers. The Nasdaq will be particularly susceptible and we will need to be ready in case things start turning on us. Earnings begin next Monday with most techs reporting a week later. I’m not touching stocks today until I see what oil does as drawdowns will boost oil stocks at the expense of many others while buildups can kill the oil sector and drag down the markets initially. ====================================== Google continues to rise as somehow people have gotten the idea that they will hit their numbers for the quarter. After missing last quarter by 12% at $1.54, analysts are expecting Google to make $1.99 this quarter, a 72% improvement over Q1’04’s 1.29! Is it possible? Well, anything is possible but, like any good magic trick, I can’t imagine how they can do it. Nonetheless I will let the trend be my friend and pick up some May $500s for $1.80 as they shouldn’t go much lower than $1.50 if Google drops back to $400. I already have lots of $470s and $480s otherwise I would be buying them too. Speaking of trends, LVS is making a new high. Let’s remember this thing IPO’d early last year at $48 so we shouldn’t consider $60 to be that much of a stretch. They have brought their p/e down from 200 to 73 and project 33 for next year and, although I still maintain that it is a giant scam, I’m not going to bet against this trend. They do have a great story to sell and I will want to short when they drive the p/e back to 100 or perhaps into earnings as any hiccup will spell disaster. Kyle correctly points out that it would be logical to take the SNDK $55 puts for $2.35 as SIMO becomes yet another chip company to warn of diving flash memory prices. He would be 100% correct, especially as the company just committed $2Bn to build even more in Japan. But Sandisk is heavily manipulated and they simply haven’t got enough suckers in yet to drop the price so expect it to go up a bit more despite all logic. Resistance is at $59.50 so that’s where we want to watch it for a possible play. Also noted by Kyle, someone bought a ton of fairly expensive ADM $35s yesterday so I will be picking up the May $40s for .40 even though I think it is very stretched (but someone made a $300,000 bet with a 50% premium so who knows). Catching things like this is a great way to make money so thanks Kyle! EBAY $40s are getting cheap so I’m going to put a .90 bid in for them and hope to catch them on the next dip. Just a 1/4 position to start. ADSK caught a lot of people by surprise by affirming guidance, which is for 15% growth. There is no way this stock should be trading 20% below last year’s high so I like May $40s for .90. APPL says ha ha to shorts as they release software that does windows! This is also a win for Microsoft but we already own that so let’s watch the APPL $65s, which were $1.20 (a $5 premium) yesterday. I would mostly wait for a pullback but I’ll let you know in comments what I decide as this stock should be at $70. Gosh it was only yesterday that the stock dropped 2.5% on an S&P downgrade and Forbes said they were overvalued. This is why I read the Journal: http://online.wsj.com/article/SB114304862088305343.html?mod=yahoo_hs&ru=yahoo DJ took a nasty downgrade by Merrill to sell. This is one of those situations where it may not go down but I would be shocked if it went up so I’ll take the $40 puts for $1.05 and see how it goes for a couple of days. I really really hate it when companies that are closely held declare huge special dividends. GAP declared a $7.25 per share dividend payable 4/25 on their $35 stock. $159M (50%) goes to Karl Haub and $725 will go to the average shareholder. This will leave the company itself with pretty much nothing in the bank so they’d better be selling the thing soon. I think there will be a reality check on this one so I will offer $1-$1.20 for the May $35 puts as I expect GAP to gap up on the announcement. SHLD stock is still too cheap says Uncle Eddie who is buying back $500M of the stuff! I love this guy! This represents 2.5% of the company so, unfortunately, there is no way to play this as it will gap up too fast. A Delta strike may be good for other airlines, especially if oil heads lower. I hate airline stocks but just an observation… MRK makes a nice play today as they up guidance. The premium is very low so I like the $35s for $1.20 but not for more than that!