Tuesday, January 04, 2011

4 January 2011 Economics FEMA Style

BAGAKOAA 4 January 2011 Economics FEMA Style

After a great day like yesterday, a slight correction should not have surprised anyone. I did get one call and couple of notes about gold prices being down. The profit takers were apparently in full force this morning and the market did open weak. Then we got the Fed Meeting Minutes saying that the economy was still fragile and there were no plans to back off of the quantitative easing. That helped the market but the anchor for the day was the stronger dollar. It made gold, silver, oil and other commodities come down and companies in those sectors came down a bit as well. The action in the option market was lively this morning.

While we did not have a lot of time to play in the market the last couple of days, yesterday we sold out of a May MDR option at a 38% gain. We sold out of a January PIP option for a 9% loss. We may have held on to this for a break even, but we felt we were running out of time with 3 weeks left. One move down and we would have been left holding the bag. We initiated some May 55 dollar call options on Bed Bath and Beyond BBBY for 1.13 a contract. We also added to our NEOG position. We also added to our position in VXX. We are down quite a bit on this but volatile will return someday and we will be well positioned when it does.

Get New Home Every Three Years FREE

It is hard for me to write this blog without referencing something that has gone on with our recent catastrophe. I can call it a catastrophe because I lost some out of print cookbooks so it’s really really bad. We had a chance to meet with some representatives from Cal EMA and FEMA. They took time out of their busy schedule to have the four homeowners in our neighborhood stand in the demolished family room of one house and tell us what the government can do for us.
Have you ever wondered about those folk who live in tornado alley or in Mississippi River flood zones and see their trailers get sucked into the sky or washed down the might river. I often asked myself why would you live there and go through that every few years. Today I discovered the answer.

Our Cal EMA and FEMA representative met with us and explained the following. If you make more than $50,000 a year, you will not qualify for FEMA funding. If you make less than $50,000 the most you will get from FEMA is $30,000 towards your repairs. So if you make less than 50,000 and live in a trailer which has an average value of 30,000, you get a free trailer every three or four years. This is no exaggeration, it all makes sense.

"We Need To Discuss The 50/30 Plan"
What will tomorrow bring?
We had a good factory order report today and there are a lot of positive economic data points. Tommorow we have a follow up to the ISM Mfg report on Monday and we will see how the service sector is fairing. The consensus is 56 on the index, but like the manufacture number we think this will do better. Look for 57 and a another positive day in the market.

Do Your Homework

Here is an idea. UBSI, United Bankshares, Inc., through its subsidiaries, provides various commercial and retail banking services and products. It offers checking, savings, time and money market deposit accounts; demand deposits, statement and special savings, and NOW accounts; personal, commercial, floor plan, and student loans; construction and real estate loans; consumer loans, including credit card and home equity loans; and variable and fixed-term money market accounts and certificates of deposit, reported today and they did OK. They did have some positive forward looking statements. There are some May 50.00 call options out there. This stock throws a 4% dividend and is relative healthy. If you can pick up the calls at 1.75 or less per contract, they could be sweet in a few weeks. I have a limit order in at 1.75. The current ask is 1.95 so it’s a bit of a stretch. Good luck.

Salve Lucrum


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