1 October 2010 Waste Not, Want Not
Ok I bought a silly stock. No really this is an ugleeee stock. It is like a trophy stock for me. TSCM TheStreet.com, Inc., together with its subsidiaries, operates as a digital financial media company in the United States. The company provides various subscription-based and advertising-supported content and tools to its readers and advertisers through a range of online platforms, including Web sites, mobile devices, email services, widgets, blogs, podcasts, and online video channels. Its Web sites include TheStreet.com, RealMoney.com, Stockpickr.com, BankingMyWay.com, MainStreet.com, and TheStreet.com Ratings. The company was founded in 1996 and is based in New York, New York.
Yes this is the thestreet.com of Jim Cramer fame. Now I have read his books and logged hundreds of hours watching Mad Money. And I know one thing. If you called into Jim during his lightning round with TSCM he would say, Sell, Sell, Sell. So why would I buy it? There is no good reason. I am using Las Vegas money of this worst of breed. Hell it ain’t even Vegas money, its my “What the hey, buy another round for the house money.” I thought it would be interesting to have a tracking stock of the company behind the curtain. Also if you take the time to read their latest quarter earrings report ZZZZZZZZ, you notice that most of the compensation related options are in the 2.50-3.00 range. So I can buy this dog as cheaply as Mr. Cramer. Also if you follow the money flow of late, there are tells of a small shift from money markets to balanced funds indicating that some people are putting a couple of dollars at risk in the equity market. That should inure to thestreet.com’s mission. Like him or not Cramer is a great franchise and there is some value there. It’s a fun little bet I am going to play.
Down under or under down?
I know I said I don’t play currencies, but it is important to keep an eye on the ball. The ball I refer to today is the AUD/USD, the Australian versus US dollar. It hit 97 cents today. If my numbers are correct (And I know I have a couple of forex fans out there who will let me know if I am wrong) that ties the all time high from July of 2008. My guess is, we will see parity on Monday. What is causing this 7 week rally in the Aussie Buck? It has a admirable banking infrastructure and all tells say the RBA, (Reserve Bank of Australia-kinda like our Federal Reserve without the obvious anatomical problem of not having its head up its assets.), will bump interest rates next week. This is a wise move on their part as their close ties to China (via the mining sector) are creating a relative hot economy.
Now the US dollar has another story. Against the Euro, we just hit a low of 1.37. And it’s not going to get better. Our congress is putting pressure on China to bump their currency (apparently our congress missed the announcement that China will double their minimum wage over the next 5 years-that will make goods coming out of china about 3-4% more expensive-which will accomplish the same thing as what congress is asking for) so the dollar will become weaker. Here is my guess for the Euro Dollar number. How about 1.51 by January 1, 2010. We’ll see.
Go on take the money and run.
The Steve Miller band did it in 1977 and I did it today.
On August 28th we did a post (Also called Waste Not Want Not) where we evaluated WM Waste Management. We picked up some 30.00 October 16 calls. We have seen a 71% on those calls and took have of the calls off today netting a nice little profit. We are keeping the other calls and look to excersize and take a long position since we are in the money. This is a great company and has is just cyclical enough to be profitable now but should have nice top line and bottom line growth as the economy continues to inch itself way back to the new normal.
99 Bottles of Wine On The Wall
I was asked recently how I track the wine I purchase store and drink. About 7 years ago I ran across a website called cellartracker.com, run by a guy named Eric Levine. He does an amazing job of running this site. It is free, but he does ask for donations if you are happy with the service. You really should go and kick the tires on this website. My screen name there is ewineguy and you can see the public tasting notes I have left on dozens of bottles. You can also do homework on wines you recently tasted or want to taste. Give it a digital sip.
There is another Option
One of the things I like about Barron’s is that it can help you predict the future. Now there are some questions as to whether we will see this rally continue into October. I think it will but I have some inside information I am going to share with you. Barron’s tells us who thinks the market is going to go down. They publish the NYSE Short Interest Ratio. This is an index of short sales via option contracts excluding hedge funds who use options to hedge their long positions (I’ll try and explain in a minute) and it tells us who is short in the market place.
We have been watching this with interest the last few weeks as this rally kicked off. The market has an option expiration coming up on October 16, 2010. That means that all those millions of option contracts written over the last two year (but as recent as today) expire. The owner of those contracts must decide to exercise those options or let them expire. Now let’s say I sold a put (the opportunity but not the obligation to sell the underlying stock at a future date) option on IBM in January of 2010 when IBM was selling for 125, and that PUT was for a 125 IBM in October 2010, that means I owe my broker 12,500 for every contract I have (100 shareX$125). Here is what actually happens. Chuck, find the shares and places them in your account. Between then and October 16th when IBM went below 125, you tell Chuck I was to cover the IBM short sale and you would be given the difference between the 125 and the current price of the stock. If you had done that on July 20th which IBM was at $75 a share, you would receive the difference between $125 and $75. Now on October 16th, you got a bit of a problem as your contract is coming due and you have to settle the contract buying the shares. And you will loose money of the IBM price is above 125.
With that in mind, let go back to Barron’s and the short interest ratio. As of September 15 the ratio is 3.9. That is up from 3.6 for the two weeks prior and way up from a year ago of 2.5. That means there are a bunch of people who have short interest in the market place. They will be forced to cover their positions by October 16. How do they do that? They buy stocks at the current price and take their lumps. What happens to a stock price when millions of shares are purchased? The rally continues. We feel October will be kind to us fluffy casino monkeys.
From the "Lunch at The White House Files"