Wednesday, February 09, 2011

9 February 2011 All That Gitters . . . .


9 February 2011  All That Gitters . . . .

This is the first time I actually started this blog after 10:00PM at night. I have edited and posted this late, but not started it. It is getting off to a late start because I had the honor to participate in the recognition of a person who unselfishly dedicated the last 15 years to the spawning and birth of a City. Neil Blais, was duly recognized for his dedication and service to our fine city, Rancho Santa Margarita. Having the pleasure to be associated with the 5 founders of the city over the years it was fun to see the where the city had come from and where we are today. Until tonight I never recognized the instrumental role Neil Blais played in it development. It was a great evening for Neil, his wonderful wife Destin and their son Nash. A special night indeed.

Iv’e tried makin money and I’ve tried loosin money.

And I highly recommend makin money. We started the day expecting slow and sluggish opening and that is about what we got until about twenty minutes into the day and we say one of our April calls POP!

Back in November we pimped DSW and discussed several call options. We ended up with some pricey April options that quickly faded to 70% losses. We took another look in early December and basically doubled down to average down our cost. (BTW this is not a recommended strategy.

This strategy might nave come from my good friend Joseph Phelps. –hint a winery in Napa) Today that play paid off as their was an SEC 13G filing for the company indicating that someone was buy a significant stake in the company. We ended up taking a nice double on the call. By days end the call had cooled tremendously, so our sell was very well timed.

We took some of those gains and started a new call position of one of the picks of the day from a while back as it look like it was time to strike.

IDCC InterDigital, Inc. engages in the design and development of digital wireless technologies for use in cellular and wireless IEEE 802 related products. Here was our play, we bought March 19 $55 dollar calls. This would be called In The Money as the it is 55 dollar calls and the stock is selling for $56 and change. These were not cheap calls as they cost 4.30 cents a contract. Remember, we are controlling 100 shares of stock with each call contract so for $430 we are controlling $5,600 of IDCC stock. Our plan would be to stop out at 3.00 a call and look for a 30%+ upside. Even if you choose to go long, this is a really sexy equity. Look at the chart and look at the earnings growth. The chart shows a long box or trading rang then a series of nice breakouts. BUT look at the last three days High Volume and new highs. This is a Saturn rocket. NOW my guess is you will see a good size tech shake out tomorrow morning because of Cisco’s nasty miss. If I am right, wait till later in the day to consider a move. If it corrects 1-2% tomorrow, don’t freak out. Look for AAPL, MSFT, NFLX, AMZN, INTC and a bunch other to correct in an over reaction to CSCO. DO YOUR OWN HOMEWORK.

Here is one to watch

PLAB Photronics, Inc. engages in the manufacture and sale of photomasks primarily in the United States, Europe, and Asia. Photomasks are high precision photographic quartz plates containing microscopic images of electronic circuits, which are used in the manufacture of semiconductors and flat panel displays, as well as used as masters to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits, and other types of electrical and optical components.

Photonics has some nice things to say about 2011 guidance and it is an IBD sweetheart holding a 97 rating with them AND being gobbles up by institutional buying. Ok I know you are saying how does he know it is institutional buying. All you have to do is look at the average volume which for this stock runs about 400 M shares a day. Two days in the last week this gem had one day a 1.6 million shares and today at 3.6 million shares. Bays and Girls, you don’t get that kind of volume by having Dave Hanna and 6 of his bar fly’s buying this stock. Somebody or several somebody’s feel this is a good place to park some money. DO YOUR HOMEWORK.

It shiny and its yellow.

We told you about a week ago we got out of gold with a nice gain. We described, correctly that there was a technical resistance at 1300 an ounce. It hit and bounced their for a few days and seems to be coming back a bit. The uncertainty of Egypt, fears that social unrest might spread, China tapping the breaks with an interest rate increase all helped the yellow stuff back in the 1325-1330 range. Were we wrong? Probably? We are wrong a lot. The object of the game is to be right more than you are wrong. We took profit for our portfolio and bunch other as well. We are watching gold and silver again. Today we saw a great reason to keep an eye on the precious metals market again. A recent poll shows that Americans agree on something politically. Yeah go ahead and read it again. Americans agree on something political regardless of party affiliation, age, and gender. Want to guess? While republicans agree more than democrats, we all agree that the Congress should vote NOT to lift the deficit limit to the 14.2 trillion under consideration.

OMG This Can't be Right

It was something 78% of republicans and 64% of democrats feel it would be bad if we got more in debt. IF our elected officials listen to their constituents, we will see gold and silve hit all times highs. Here is why if we do not raise our debt ceiling, buy March, we will not be able to pay our debt. We would be in a technical default. As discussed her that would (from everything I have read) assure that the US dollar would not remain the Global Reserve Currency. All markets would rush to gold and in certain parts of the world might lead to hyper inflation making the social unrest in Egypt look like a crowded day in Disneyland.

Do we think that will happen? No. I am confident there are enough smart people in congress (ok I’ll wait till you stop laughing) that regardless of public sentiment they know there is no option but to increase the debt limit. Unfortunately Bernanke, Guitner, President Obama and Paul Ryan cannot openly tell the American Public that if we don’t, feces will hit the oscillating wind device.

So let’s stay calm, have your stops in place, keep an eye on the gold stuff, and consider you contrarian plays like VXX. We continue to add to ours and are loosing our shorts everyday the market goes up. When the correction comes, between our puts, our stops, and our VXX calls should make for happy days.

Salve Lucrum


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