500,000 IPhones sold over the weekend!
Hard to paint a picture of the consumer being dead with those kinds of numbers.
AT&T is showing 50% of the initial IPhone buyers switching from other carriers. If that trend continues they could easily end up adding 5M new subscribers in the next 18 months. To put this in perspective, the company just spend $2.8Bn to acquire DCEL with just 1.7M subscribers! This gives us a great opportunity to pick up the T Oct $42.50s for $1.50, hopefully a little less if they get the "sell on the news" effect Apple is sure to experience this morning. I like this play a lot because it is very easy to sell shorter calls against it – the Aug $40s, for example are $2.15 with a .65 premium. We have our AAPL July $120 puts and our Oct $115 puts protecting our longer call positions as we anticipated a sell-off this week (and thank you Barron's for sealing the deal!) but I'm going to be looking for a bottom very quickly and jumping on some August calls once we find a good support level.
The markets have found some sort of support level as Q3 kicks off with a lot of mergers. Aside from T & DCEL, we have a $33Bn private equity purchase of BCE but it's more like $49Bn due to an assumption of debt etc, making it by far the biggest deal ever for a Canadian company. Over in Europe, Virgin Media (quite the oxymoron!) received a $10Bn offer from Carlyle and they should take it! Our friends at Carlyle are also tossing $6.3Bn over to HCR, a small premium. Australia's Westfarmers, Ltd. is offering $18.65Bn for Coles (supermarkets, retail stores), which would be Australia's biggest deal ever. All in all, the first half M&A tally is $2.6 Trillion!
Hong Kong was closed today as they celebrated 10 years of Chinese rule (or else) and the rest of Asia traded pretty much flat on the day. The Westfarmer deal came in after the markets closed so there could be some merger-mania over there tomorrow, especially if we manage to log a strong day so let's consider some FXI calls if all goes well. I'm still very concerned about the unwinding of the Yen carry trade and/or a bouncing Yen so we're going to have to start tracking that currency closely.
European indexes are off slightly this morning but holding up quite well considering the terror environment this weekend. I know I've accused commodity traders of being criminals at times but now it turns out they may be terrorists as well, and not simply because their deceitful market manipulation is having a negative impact on the lives of Billions of people! EU authorities are looking to crack down on "trade-based money laundering" which is a popular method of transferring oil money, along with other commodities, to terror cells throughout the world.
U.S. officials have been warning about such swap deals since the State Department's release of its 2004 International Narcotics Control Strategy Report. "As both the formal international financial system and money-service businesses become increasingly regulated, scrutinized, and transparent, criminal money launderers and terrorist financiers are increasingly likely to use fraudulent trade-based practices in international commerce to launder, earn, move, and integrate funds and assets," the report said. Unfortunately, we were far too busy pursuing Saddam Hussein to worry about this. "There is no reliable estimate on trade-based money-laundering because no authorities are looking systematically at their trade activities," says money-laundering expert Nikos Passas of Northeastern University in Boston. "The vulnerability is gigantic though, and undermines all other financial controls we have in place, no matter how well these may be implemented."
Elsewhere in the world of criminal oil activities – Congress is now looking into our friends at BP who were so intent on constraining the flow of natural gas to our country that they stockpiled 9.2Bcf in a Prudhoe Bay facility that was only designed to hold 5Bcf. BP has been reinjecting this gas for years as they have continuously delayed building a pipeline to the lower 48 states, which simply don't need any more natural gas. XOM and COP are partners in the facility. ZMan had some fantastic charts over the weekend, neatly summarizing gas storage levels.
It's all about the S&P this week but if we fail to get Nasdaq leadership, I don't hold out much hope. Happy Trading says to watch the MACD and we will be doing so with great interest:
We are in full James Bond mode this week, having taken a more bullish stance into the weekend we are not going to play the hero if the market turns. More cash will feel more better over the holiday so we will keep tight stops and I will absolutely be tightening up and increasing my mattress positions on any upswing in the markets.
We also need to take the money and run on our very bearish set of oil trades if we get a nice break in that group. Inventory reports are not until Thursday and I will update you as to whether our live spot will be moved as well.
Trade carefully!
