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Market Recap 9.11.2012

Metal futures and crude oil futures were mostly flat all day with gold up about 3 points and crude up less than half of a point. Natural gas gained 6.61%.

AIG ($33.03 | – 0.81%) had the highest volume of the day trading 217 million shares. Today’s volume is a result of the US Treasury selling off its stake in AIG reducing their stake from 53% to 16%. The Treasury gained $15 billion in profits from the sale of AIG stock. AIG has been trading between 30 and 35 since mid-August. 

Since the poor report on jobless claims last week and drop in exports in the international report this morning, speculation about a QE3 has increased. An asset purchase could improve exports by reducing the value of the US dollar. 

Important news besides Apple’s (AAPL | 660.59 [-2.15]) iPhone 5 debut tomorrow (possibly available for purchase by September 21st) is Facebook (FB | 19.43 [+0.52]) CEO will speak publicly since the IPO debacle. Facebook has continued its climb up the fourth day in a row hitting prices it hasn’t seen since August 24th.

Texas Instruments Inc. (TXN) announced second-quarter revenue of $3.34 billion, net income of $446 million and earnings per share of 38 cents. The stock stayed even today, slightly down $0.09, but the after-hours announcement caused the stock to surge $0.39 in after hours trading. TXN 52 week low and high is 25.60 -34.24 respectively. 

Some big economic events this Thursday include Jobless claims, Produce Price Index, and Bernanke’s Press Conference. 

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Halftime Report 9.11.2012

  Chinese Premier Wen Jiabao has announced that China will indeed meet their growth target for the year.  Markets have long been concern over slowing growth in China.  The German Constitutional Court has also announced that their ruling on the European bailout fund will be announced tomorrow. 

 The FOMC meeting is scheduled to begin tomorrow with forecasts scheduled to be released on Thursday. Bernanke’s press conference is also scheduled for Thursday.  Many analysts expect that the Federal Reserve Bank will launch a third round of quantitative easing, but there is still some skepticism over whether or not Bernanke will have enough votes to push the program through.

Moody’s has announced that they may downgrade the U.S. government’s credit rating if they cannot lower the nation’s debt ratio in the upcoming budget negotiations.

Indicies are up with the Nasdaq and S&P 500 both up around 6 points each. 

James Ramelli B.S. in Finance from UIUC. Email: james@keeneonthemarket.com Follow: @Jim_KOTM

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All That Glitters… 9.11.2012

 Whether or not the Fed announces QE3 or not they will continue to ease as they have been for years now so the announcement really doesn’t matter a whole lot unless they announce a huge new program.

 ….Is Gold

 Regardless of what the Fed announces Gold is going to go higher.  It will go a lot higher eventually.  There may be some bumps in the road, some pullbacks, but eventually gold will be a lot higher than it is today.

 I don’t know if it will be next month, next year, or in five years, but the world’s current monetary policy will send gold to at least $3000 an ounce.  It would not surprise me in the least to see $5000 gold at some point in the next ten years.

 Why Gold?

 There are several reasons why gold will continue to go up but the main reason is the global debt fascination.

 United States

 The United States is in debt up to our eyeballs.  The debt is somewhere currently around sixteen trillion dollars.  If you take into account the unfunded liabilities of social programs it is estimated to be anywhere from seventy to one hundred trillion dollars.

 There is no political will to address the funding of future social promises.  One side will never agree to raise taxes and the other will never agree to cutting benefits.  We will remain at a stalemate until it is too late.

 Europe 

As our economy flounders for the next couple decades because of all our debt, the government will continue to print money in order to “stimulate” the economy.  This is what they call monetizing the debt.  We will print money to pay off our debts.

 Europe is just in the beginning stages of monetizing their debt.  The European Union is a disorganized mess so it is taking them a few years longer than it did the United States to all come together and agree to print their way out of their financial mess.

 Portugal, Ireland, Greece, Spain, Italy, and the list goes on.  It will only be a matter of time before France and Germany’s economies are affected.  Some of those countries have over twenty percent unemployment. Europe will continue to go down the path of bond buying programs in order to prop up the unstable countries.

 Gold Will Shine

 In the end gold will be where it’s at.  In order to protect your purchasing power you will need to own gold in some form or fashion whether it be through gold coins or shares in mining companies.

 I’ve owned physical gold since the $800’s and don’t plan on selling it anytime soon.  I also own plenty of gold and silver mining companies.

 Shares in the miners have risks not associated with the gold market such as labor issues, input costs, and poor management.  Right now I would say the best way to accumulate gold is through the ownership of gold coins or bars either in your physical possession or through a company with allocated storage.

Get it now before it is too late.  These folks are going to print our way into a deeper mess someday.

-Ben Hoben

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AAPL iPhone 5 Prerelease Summary 9.11.2012

The only thing traders want is price action, or perhaps not. Option traders have the luxury of not necessarily needing large swings in the equity. Historically, on iPhone announcement days AAPL has had a return of less than 2.9% 4 out of the last 5 event days (buying at the opening print and selling at the closing price). The September weekly options, that expire this Friday, are implying about a $21.00 move either way or about +/- 3%. This is according the at the money (ATM) straddle (50 delta or 50% probability of expiring in the money). This straddle is also about one sigma (68%) range that is expected too by the options.

The one time AAPL had a move over 2.9% on an iPhone day was back on January 9th of 2007; when the world was first introduced to the revolutionary device from Steve Jobs.  Interestingly enough, back on January 8th 2007, the day before the event, the ATM front month straddle (with 11 days till expiration) was about $7.50 or about 9% of the stock then ($85.47). It is interesting to note that the actual move was just under what the straddle had implied and was also inside the one sigma expectation implied. Do with this information as you please…while moves outside a probability cone may not probable they are still possible.

Statistics and options aside, there are still many details Wall Street needs in order to make their rational decisions tomorrow. Investors are expecting the following details…

 Display: Rumor has the iPhone 5 display height at 3.9/4 inches. This is according to “leaked images” of the iPhone 5. One should note that this popped up during the iPhone 4S launch too.

Slick Design: While most folks keep their iPhone in a protective case, it is typical AAPL fashion to have a design visually appealing, but still skinny.

Resolution:  The iPhone 4 & 4S have a 960×640 pixel screen and folks are looking for this to be upped to 1136×640 pixels.  Other phones have like the Samsung Galaxy S III and Galaxy Nexus have 1280 x 720 pixels and the HTC One has 540 by 960 pixels. AAPL needs to stay on top of this in order to theoretically dominate, for consumers will maximize their dollars or not and just buy the brand name.

Cords: Maybe new cords with less pins.

Mobile Communications Standards: Considering that the new iPad was 4G LTE; it may be safe to assume iPhone 5 will also be.

Battery: It has been difficult to please this crowd, for battery is always an issue…especially for those who use their phone a lot. There are reports of the Samsung Galaxy S III battery life lasting 30+ hours easily…hopefully iPhone can top this.  According to recent rumors battery capacity may be increased 40% and may be 15% thinner.

 PIN ACTION

 QCOM: iPhone 5 may have a QCOM 28 nanometer processors for 4G

BRCM: BRCM chip may source Wi-Fi, Bluetooth, and integrated FM radio chip.

CRUS & OVTI: Both issued bullish guidance recently; which may be a tell that they have an order from AAPL.

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Feel free to e-mail any comments, feedback or general inquiries: mark@keeneonthemarket.com