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Saturday, January 29, 2011

Insider Trading

My super secret sources alerted me to heavy call buying in MEE on friday. MEE was trading around $56 on friday but somebody bought 10,000 Feb $65 call options. These calls are almost 15% out of the money, so the person was obviously banking on a buyout before the third friday of February.

Lo and behold, this comes out this morning. Alpha Natural Resources is in talks to buy-out MEE in a deal valued at $69-$70/share.

The 10,000 calls bought between  $30-$60 a contract are now worth $400-$500 per contract. A gain over 1300%!!!

Was somebody privy to non-public information??

Friday, January 28, 2011

Is this guy eligible to play at UGA? least my 5 years were free

Breaking news! Students aren't learning anything in college!


Thursday, January 27, 2011

Do championships bring money or does money bring championships?

Forbes has an article out about how much money SEC schools earn and spend on their football programs. Its very interesting....and explains why my bulldogs have sucked the past few years. Below are revenues and expenses for the 12 SEC schools from 7/1/09-7/30/10. Unfortunately, Auburn kept its Cam Newton payments off its balance sheet.

Stadium CapacityFootball Revenue
1Univ. of Alabama101,821$71,884,525.00
2Univ. of Georgia92,746$70,838,539.00
3Louisiana State Univ.92,400$68,819,806.00
4Univ. of Florida88,548$68,715,750.00
5Auburn Univ.87,451$66,162,720.00
6Univ. of South Carolina80,250$58,266,159.00
7Univ. of Tennessee102,037$56,593,946.00
8Univ. of Arkansas76,000$48,524,244.00
9Univ. of Kentucky67,606$31,890,572.00
10Mississippi State Univ.55,082$14,551,275.00
11Vanderbilt Univ.41,448$14,152,061.00
12Univ. of Mississippi60,580$11,920,510.00

Football Expenses
1Univ. of Alabama$31,118,134.00
2Auburn Univ.$27,911,713.00
3Louisiana State Univ.$25,566,520.00
4Univ. of Florida$24,457,557.00
5Univ. of South Carolina$22,794,211.00
6Univ. of Arkansas$22,005,104.00
7Univ. of Georgia$18,308,654.00
8Univ. of Tennessee$17,357,345.00
9Vanderbilt Univ.$14,152,061.00
10Univ. of Kentucky$13,905,724.00
11Univ. of Mississippi$11,920,510.00
12Mississippi State Univ.$9,951,097.00

Football Profit
1Univ. of Georgia$52,529,885.00
2Univ. of Florida$44,258,193.00
3Louisiana State Univ.$43,253,286.00
4Univ. of Alabama$40,766,391.00
5Univ. of Tennessee$39,236,601.00
6Auburn Univ.$38,251,007.00
7Univ. of South Carolina$35,471,948.00
8Univ. of Arkansas$26,519,140.00
9Univ. of Kentucky$17,984,848.00
10Mississippi State Univ.$4,600,178.00
11Vanderbilt Univ.$0.00
12Univ. of Mississippi$0.00

While I can't brag about any national championships, I can brag that my school is the most frugal in the SEC! Perhaps this is why UGA can't win national championships.....or the liberty bowl.

Miyagi says.....don't downgrade my debt!

Did Standard and Poor's just drop an economic nuclear bomb on Japan?

I'll crane kick your ass, S&P!

Take a ride in the Ford Fusion

Ford reports earnings tomorrow morning before the market opens. Expectations are high for Ford with analysts expecting results from Ford not seen since 2000.

I am long F 2012 $25 and  2013 $30 LEAPS because they are cheap ways of participating in any ford upside for the next two years and they costs about $100 vs almost $19/share.

Drive me to the land of bread and honey!


Ford reported their best annual profit since 2000. Ford's FY net income came in at $6.6 billion or $1.66/share. The fourth quarter income came in lower than anticipated, mainly due to higher commodity costs, one time refinancing charges, and increased advertising on new product launches. Also in 2010, Ford improved its balance sheet and paid down $14.5 billion in debt. Ford still has a substantial debt load at $19.1 billion, but reduced its debt service costs by $1 billion annually.  But the company still ended the year with more cash than debt, something it has not done since 2006.

Due to the earnings miss in the 4th quarter, F was pummeled by short-term speculators and momentum investors. Shares are down over 16% since the earnings announcement. This is a good time to average down on F. I purchased more $25 leaps, a $20 leap, and a 17.50 leap. Also, you might look at selling $15 leap puts to get Ford shares at even more attractive prices in the future!


Netflix has been one of the hottest stocks over the past year, going from $48-$211. It is up $25 today after reporting earnings last night. Probably people covering their short positions as 25% of the float is short. It currently trades at 78X trailing earnings and has a forward p/e of 54.

I wish I had bought a ticket for the NFLX train a year ago, however, it is getting pretty crowded now and people should get off while they still can. A few problems that could cause Netflix to slip up in the future are:

1. streaming content is weak. New movies come out 30 days later than Redbox, and typically don't come out on streaming until 6 mos later. As NFLX forces subscribers to streaming only plans, they need to come up with more popular content or risk losing those subscribers.

2. Future margins are going to be squeezed as content owners demand more money for the right to license their content. If netflix wants the best content, they are going to have to pay a lot more for it then they are currently paying.

3. Expectations are so high on netflix that the slightest miss in earnings could cause a massive plunge as it is one of the more heavily shorted stocks around.

I think one way to play this is buying Jan 12 200/190 vertical put spreads. These costs around $500 and will return $500 if NFLX is below $190 come January 2012. If it keeps rallying you will lose the entire $500.

Third-world economics

Wednesday, January 26, 2011

Rough day at the office

Tuesday, January 25, 2011

Choo Choo Norfolk Southern (NSC)

Norfolk Southers 4Q earnings improved 31 percent from the prior year. Revenue increased from $7.8 billion to $9.52 billion. CEO Wick Moorman said in a statement the company has "every reason to believe that 2011 will be an even stronger year for us." Another person who has been bullish on railroads lately is Warren Buffett, as he spent $26 billion to acquire Burlington Northern back in November. 1 yr target estimate is $72.88.

Buy 100 NSC:                     (-$6,300)
Sell 1 NSC Jan 12 65 call       480
Sell 1 NSC Jan 12 60 put      540
Net outlay:                        5,280

Return: if >$65 Jan 12, return is $1,220 or 23% on a stock that only needs to go up 3.2% from current prices.

Risk: If stock is below 60 Jan 12, you will have to buy 100 shares at $60.

Break-even: 56.4


I really like Kohl's. It was upgraded this morning by Stifel Nicolaus from Hold to Buy. Their target price is $62.

Buy 100 KSS:                   ($5,206)

Sell 1 Jan 12 52.5 Call:      $500

Sell 1 Jan 12 52.50 Put:     $600
Total cash outlay:          $4,106

Total return: $1,100 or 27% on a stock that needs to rise <1%

Break-even: 46.78 or 10% below current prices.

I have initiated this trade in my virtual portfolio


3M (MMM) reported earnings today and is down about 3% to 87.32. The stock has had a 52 week range of 68.96-90.52.

MMM reported increases in sales across all its divisions, but gross margins declined which has some investors worried. MMM sports a dividend of yield of 2.40%. The 1 yr target estimate is 100.56.

Buy 100 MMM:            (-8,747)
Sell 1 Jan 12 85 Put:       700
Sell 1 Jan 12 85 call:       860
total cash outlay: $7,187

Potential profit: $1,553 (700+613+240 dividend) or 22% on a stock that does not need to go up at all until Jan 12.

Break-even: 78.44

You can also just sell a Jan 12 85 put for 700 which would lower your breakeven to $78 which would be your cost basis if the stock was put to you on Jan 2012.

Ford lotto tickets

Ford (F) is reporting earnings on friday. Option traders are bullish on Ford. Today, one trader bought 10,000 Feb 19 calls while simultaneously selling 10,000 feb 17 puts to finance it.

Perhaps look at buying the feb 21 calls at .04 as a lotto ticket. These were selling for .25 as of last week and could easily go up 300-400% on a sharp move in the stock.

Monday, January 24, 2011

My iPad is smarter than your honor student

Will kids even know what real books are like in 10 years?