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Apple & Google Pivot Points for 11.30.2012
Color Me Green- What is a Better Economic Indicator: Black Friday or Cyber Monday 11.29.2012
Considering the idea of volume, the proper answer to the aforementioned question is simply both. Mosaic theory suggests that looking at many different inputs creates a better, more informed, ‘picture’ than only sourcing from one idea or indicator.
Back on the topic of retail sales, in order to gauge the American consumer one should look introspectively first. According to the data and personal accounts, there is a solid mix of online shopping and physical shopping going on. Yahoo finance reported that the average American spent $423; up from $398 last year at this time over Thanksgiving weekend.
Over the whole weekend retail sales were estimated at $59 billion. After the weekend Computer World reported that, “The Adobe Digital Index, which tracks online spending, said that online sales totaled some $1.98 billion Monday, a 17% increase over Cyber Monday online sales last year.” Every data point should be taken in with a skeptical eye, for these holidays tend to overlap…for who is to day that online shopping is only done on Cyber Monday, because it is not. According to the data and other reports, online shopping is increasingly taking share of retail sales, but it also helps that traditional retail sales were increasing too. The best of both sectors, for these numbers seem to confirm the high valuation technology & retail stocks.
The other side of this argument is one that is rather harsh. Most traders and investors completely write of economists; they fade them. Economists get filed away with the analyst community, which is not a good place to be, for they tend to be wrong or confirm ‘group think’ in the mind of a trader. Right or wrong. The other side of the retail trade is that Americans are now more complacent, confirmed by our loose spending habits near recent highs.
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Dividend Stocks Face Higher Tax Rate 11.29.2012
The dividend stock payoff will not be as attractive if the tax rates go up. If a deal is reached before the January 1st deadline it may be feasible for lawmakers to negotiate a more attractive rate.
Currently the tax rate on income incurred from capital gains is 15%. As of January 1st, 2013, the income investors receive from capital gains could be taxed up to a rate relevant to their tax bracket. The chart below shows how each tax bracket will be affected by the higher tax rates on capital gains.
The possibility of a higher tax rate may cause investors who typically enjoy the payoff of dividend yielding stocks to start researching alternative investment strategies. One such alternative may be to hold on to a handful of stocks that have long term growth potential. Tech stocks are known for their high growth rate and may prove to be a popular choice for investors. According to Bloomberg, the information technology sector is estimated to grow revenue 8.7% through the 2013 fiscal year.
Anxiety over the possible increase in tax rates has made the muni bond market a popular choice for investors in higher tax brackets. Muni bonds are currently tax exempt, providing a more stable investment opportunity ahead of the fiscal cliff.
Author: Tyler Sciortino
S&P Emini and Unusual Option Activity for 11.28.2012
S&P Emini Pivot points for 11.29.2012
Apple & Google Pivot Points for 11.29.2012
AAPL Taking a Bite Out of Its Own Tablet Market 11.28.2012
The chart above estimates the iPad mini cannibalization scenarios from a conservative 50%, to an aggressive 70%. The cannibalization of sales could be bad news for AAPL.
According to recent data provided by ABI Research, AAPL still has a majority share of the tablet market with a 55% unit shipment. While still boasting the majority share of the tablet market, AAPL is constantly under pressure from competitors over the control of the tablet market and gave up 14% of its share this quarter, according to ABI Research.
Despite the concern of cannibalizing sales, AAPL launched the iPad mini in an effort to compete with the smaller tablets offered by ANZN and GOOG. AAPL is depending on the success of the iPad mini to gain an edge in the smaller tablet market. Apple stated that it sold 3 million tablets during the iPad mini’s debut weekend. AAPL, however, has yet to release the sales statistics for the new iPad mini.
Munster, who initially estimated that 1 to 1.5 million iPad minis were sold, now estimates 2 to 2.5 million iPad minis were sold during the official weekend launch. Mark Moskowitz, an analyst with J.P.Morgan, also believed that a majority of the sales were attributed to the iPad mini.
With a starting price of $329 dollars, the iPad mini will attract the attention of potential consumers who are set on spending less while still obtaining an AAPL product. AAPL will continue to expand into the tablet market as a means to stimulate growth and regain lost share value. AAPL is down from a September high of $702.10.
Data provided by: Tech-Thoughts ©
ABI Research
Author: Tyler Sciortino
SPY Straddle Fade and QQQ Straddle Long Since 2005 (SPY QQQ) 11.28.2012
What if one put on a pair trade? What would the results be then? Selling the aforementioned SPY straddle and buying, for example, the QQQ straddle. This is exactly what KOTM did. The thinking behind this strategy could be that SPY volatility is expensive and QQQ volatility is cheap. Another way to think about this trade could be that one is just covering their downside, for if the market crashed the short straddles will get crushed, but the long straddles will be rewarded. A risk to this strategy could be a year 2000 type scenario; where one index acts dramatically different than the other (even if we are indeed long QQQ vol, the idea of uncorrelated markets is a risk).
The results to this study were indeed very interesting. One would think, in theory, the theta (time decay) and long premium would end up being a losing trade, but it was not. The long straddles ended up adding to the net profit. The QQQ total return was a losing trade most of the time, which could be predicted. The spikes higher and lower were from crashes or spikes. The QQQ made $4.95 since Feb of 2005, in addition to the $48.72 the SPY made. The important part of this exercise is that the long straddles did offset losses during crashes.
The SPY was $116 in Feb of 2005 and is around $140 now, this trade made $48.72 points or around 42% total relative to SPY in ’05 or 35% total relative to SPY now. The QQQ made $4.95. The index was around $40 in Feb of 2005 and around $65 now; 12% total return relative to 2005 and 7.6% total return relative to now.
The trader would have to size the amount of contracts accordingly; relative to the size of both index products in order to do a proper pair trade…along with many other things. Below is a chart of the total return.
KOTM is clearly not suggesting selling an unlimited risk spread, but the data is interesting. More to come on this project.
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First Business Interview 11/28/2012
