Tilson was on CNBC at lunch yesterday if you want to watch what he has to say. He's a good talker, so I have to be careful not to buy into what h is saying, just because it sounds good. Think he made the case it was now at 4 times 2012 EBITDA, good management who made a mistake, but is correcting it.
2nd - this may be your cue to sell stock given overhead resistance at the 200 DMA. my thoughts, though, are that we broke right up through resistance at the 1,250-1,260ish level, which was major support back in the spring/summer, and if we close above it then we could see the markets trade sideways for a week and move up again...just like in 1998.
BB - this guy has been wrong quite a bit lately...i always distrust a guy that talks calmly on CNBC pushing his positions. actually i distrust a lot of people when it comes to the financial world.
Sold my last utility stock (TRP) this morning and a Canadian REIT (RIOCF). Both had good returns and are very good companies, but their valuations had gotten high. I think, in general, both of these industries will be flat to down over the next couple of years as too many investors have bid these too high because of their yields and these will be sources of cash for more economically sensitive investments.
Put part of the proceeds into a Canadian hotel REIT as the valuations on hotels is low, the economy is picking up, and I've seen improving earnings out of the US hotel companies.
Will probably just sit on the rest of the cash for a few days and wait for a pullback.
Been on the inside with a few of these guys and what they say on TV and what they actual do can be completely different. Many are ethical, but the key is knowing the difference.
I disagree. A ton of buy-and-hold wannabees will be selling into today's strength- a mistake. As pointed out several weeks ago- it's actually more difficult to remain fully invested when the indexes charge ahead (than when they sell off).
oh man, this is too funny. i just turned on fast money and now these clowns are bullish!?!? you can't make this stuff up. i posted a while ago about how some numbskull was saying how it was a terrible idea to go long with the VIX so high. I think the guys name was brian stutland (spelling?).
i remember now why i don't watch that crap anymore. they really need to change that show's name to lose money fast.
Yeah, I would not be selling here either. I think we have a big move up coming and you may not get a chance to get back in.
I do think you want to review your portfolio here though. If we do get a big upside move, you want to be out of the telco / utility / dividend income stocks and into stocks that will benefit more from an improving economy.
Took some of my cash from this morning and bought an oil fracing company. These guys are still down 30% from where they were this summer and will almost outperform the market (both up and down). But rather own a stock down 30% with leverage to the economy than something paying 4% at a 52 week high.
All right! Looks like I did luck out with my decision to pile into TBT at the close on Tuesday and then afterhours, when it was taken down to $20.50!
This morning, my sell limit at $22 was hit for 200 shares I purchased at $20.52 and just now I sold 200 more shares at $22.75 that I purchased at $20.70. That's a $700 profit right there! I'll spend my Halloween weekend being scary drunk. :)
Still have 600 more shares of TBT purchased at the average cost of $20.69 (according to ETrade). If TBT moves up another $1, then I think my TBT gains will totally compensate for the losses I took on TLT puts.
Now, who was talking about shorting GLD? Don't forget, folks -- it was sold down ONLY because $USD rallied up a little, which happened ONLY because of the fears that European mess will result in banks disorderly liquidating all their assets, like during the Lehman failure. Since it now looks like there will be no disorderly liquidations, gold and silver will move to new highs and keep going up in a straight line, at the speed at which money is being printed in the developed world. Don't fight the multi-year trend!
David - That was me of course! I got stopped out of my fictitious trade. Just another reason why I don't trade / invest in what I don't know or can't understand.
I see that GDP grew at 2.5% during July-Sept quarter, mostly due to increased consumer spending. How many of you kept looking at the real-time consumer behavior graph at
http://www.consumerindexes.com/index.html
and thinking about implications of the awesome jump in the graph start early summer? We should be checking that site more often now...
agree on banks - even my LYG and NBG are up 10% today. But who would have figured DB would be one of the big winners up almost 20%? That's now 63% up in a month.
Financials and Energy are my 2 biggest holdings. In financials, still prefer the small insurance companies and banks as they have better valuations, are easier to understand and don't have the political risk.
Still have that MET from yesterday morning and it is now up 12% from yesterday morning - crazy fro a large cap S&P500 stock.
Haven't heard from illini in a while, but hope he's still holding KCLI up 6% today - pretty nice for a super-safe dividend paying stock with no debt. Would be trading over $50 in a "normal" market based on traditional metrics, so still 30% upside.
'All right! Looks like I did luck out with my decision to pile into TBT at the close on Tuesday and then afterhours, when it was taken down to $20.50!'
Actually, it was the folks on this blog who saved your ---. ;_
"Actually, it was the folks on this blog who saved your ---. ;_ "
Yes, I remember that -- thank you! :)
Now can you do something about AUMN? It's not hopeless yet, as the support at $7.30 seems to be holding up. Can you just light fire under it so that it would take off from that support level?
David - "WHAT'S WRONG WITH AUMN??? It keeps underperforming GDXJ"
Well, AUMN is not yet a producer, some dilution just occurred and there's the APEX stigma still dragging in tow, not sure these last two items are significant?.
On the bright side, I also see a mid Sept gap down that needs to fill.
SVM has a gap up from $8.31 that needs to fill, acting as a huge anchor.
GPL - Cant seem to move through heavy resistance at $2.52 after the heavy beating it took.
$Silver - $34.48 is an important pivot point, perhaps a retest is necessary to convince and re-instill confidence?
Thank you for a quick action, 2nd_ave! :) AUMN got ahead of GDXJ for the day just now. :) Let's keep it that way! And let's catch up all the lost ground -- i.e., let's move AUMN to a new post-October-4 high!
Just to lend some more support to AUMN and set a floor under it, I just placed a buy limit order for 700 shares at $7.40. THAT should convince the other traders (who are looking at all open orders) that the only way for AUMN to move is up!
Another statistical correlation that is out of whack today is that between ONP and HAO. With HAO surging up like crazy (after all, Europe is the main customer for China, and if Europe is not falling apart, then the oversold Chinese stocks should rally a bit), ONP is still staying flat. So I just bought 1000 more shares of ONP at $2.41. I know I am playing with fire, as I am deep into margin again and I have no more bailout funds coming as my credit cards are maxed out. But heck, if there is a time to take risk on the long side, it is now!
All right, my buy limit at $52 did provide a support for CSTR, the sellers bailed out and CSTR is surging back up. So I have just canceled that buy limit.
Technically, CSTR has a great chart with a higher low and a higher high since early October, and so buying today's dip at a price below the previous high at $54 seemed like a reasonable thing to do...
With CSTR earnings after hours tonight, its puts should be insanely expensive. So I just sold 2 November $50 puts for $3.20 each. This will give me 200 more shares of CSTR at $46.80 -- not a bad entry! :)
How did you catch it at THE low? It was there only for a few milliseconds, I think. I guess you were watching it like a hawk, with a finger on the button...
All right, bought 500 more shares of AUMN at $7.54. Moved my sell stop for the 2500 "trading shares" to $6.95/$6.9, so as not to get faked out. With silver and gold surging up, the case for AUMN is getting better by the day...
after you have a merger like happened with AUMN, the stock often does nothing or drifts lower for quite a period as the people who got shares in the merger, but don't want them, sell off.
It sometimes seems to take longer than you think it would.
SVM - What really pisses me off is the short and distorters stole the free beach house I'd almost earned and no matter how hard I try to win it back so far, no dice!
David - looks like they are raising prices to $1.20 because of the Durbin Amendment. That plus potential 60 day window is all longs needed to bail out of the stock. Ugh.
I think CSTR is being sold now simply because of fears that the same thing will happen to it after a price hike as what happened to NFLX. I think these fears are overblown.
Placing a buy limit for 50 shares at $48 and 100 shares at $47 after hours.
Mark - I'm waiting for the call to decide but the fact is they crushed earnings because the business is strong. That's something traders easily lose sight of.
Now when it comes to interchange fees and 60 day windows, do I think that will impact the business? I would have to say no but I don't really know. I don't think a change from $1.00 to $1.20 will be important to people because it's still so ridiculously low. But the perception in the market will be that it will hurt them badly. They will point to NFLX as a perfect example of how badly it hurt them.
So I will wait for the call to get some clarification regarding why they're doing the increase. Its says in their release that they raised fees primarily because of higher costs including the Durbin fees...primarily is different and entirely. So some profit will be padded in there.
Using my assumption that the reaction to their price increase is unjustified, that the earnings call will dispel some fears (executives always try to make the company look good while talking about it), and that the stock stopped dropping after hours, I just bought 100 more shares at $46.50. Let's see if I'll be able to turn around and sell them at $50 later on today or tomorrow. :)
from what i gather the guidance is related to the Durbin Amendment costs impacting their earnings for October (and possibly longer) before they raise prices across the board.
Just as I thought -- CSTR is trending up during the call. I can already turn around and sell at a profit the 250 shares I purchased at $47 earlier today. :)
The AUMN chart of intraday prices since mid-October looks like a descending wedge with a flat support at around $7.25. In what direction are such wedges supposed to be broken? Is it UP?
I'm totally biased on my opinion of this earnings report on CSTR, but it comes down to this:
*EPS guidance for q4 was light because they see a hike in fees of $10-$14 Million for the quarter related to the Durbin Amendment. That equates to roughly $.31 to $.43 for the quarter. They're estimating $.57 to $.67 for Q4 whereas old guidance was for $.88 so it looks like the difference comes entirely from the Durbin Amendment. The only question I have is with the proposed increase to $1.20 per movie we should expect an increase of say 20% on revenues and at worst maybe a loss of 10% of customers...so that would be $X*1.20*.9 = 1.08X where X is prior quarter's revenues (or $389 Million). 8% of $389 Million = $31 Million or $0.97 per share.
So a price hike of 20% should more than offset the fee increases they're projecting. And on the call they mentioned the possibility of only charging people after the movie is returned to the box, as well as negotiating with Visa/MC to get fees lowered. There are still possibilities to consider that might ultimately improve earnings going forward more than people expect.
Also, one key takeaway I got from the call was the fact that they still expect to announce a streaming deal before the end of the year. Given that there are only 2 months left in the year, that means that an announcement should come very soon. My thinking is it will be with AMZN and I think this will really propel the stock.
The basic fact of the matter is this company continues to grow rapidly and take market share. They saw unique swipes at their redbox kiosks grow about 10% quarter over quarter and I think I heard about 60% year over year. They had 36 million different people use their kiosks. Additionally, they have grown their followers on Facebook tremendously, from around 100k in the beginning of 2010 to almost 3.7 Million people. Those are huge numbers of people using their service and I think it has to be worth a ton to a partner. I am actually surprised that a company like AMZN wouldn't just buy them out given how much cash flow they are generating (they have generated $130 Million in free cash flow for the first 9 months of the year). That would be a boost of about 10% to their cash flow and they could buy them out with a minor 2.5-3% share dilution.
TOF- Didn't they say on the call that Q4 eps included both the swipe fee and the new increase in cost? Also, I'm surprised they haven't negotiated with what ever bank they use for processing. This is not new news.
Mark - I honestly think they tried to swallow the costs for the first month of the quarter in hopes that they could negotiate lower fees but weren't successful. So they had to take the hit on earnings this quarter and announce a price increase.
After hours the company is now trading at 8.8 times trailing free cash flow. By comparison, a company like CSCO, which is about as slow growth as it gets, is trading at 11 times trailing free cash flow.
You guys gotta see these comments on Facebook. Redbox is actually doing a good job responding to them. It's so funny to see people get all pissed about paying $0.20 more, some threatening to leave. Refuse to pay $0.20 more so they can go pay $3 more through On Demand? Funny stuff man. http://www.facebook.com/redbox
David - it's going to stay with the company in the worst case scenario. It's part of the reason they raised prices. I honestly think they were planning on raising prices anyway and used this as an excuse. They have been testing price hikes in different markets for about a year now. I think they wanted to increase profits.
In my math above, you can see that this hike should more than offset the increased fees. So it should boost profits. And there is always a chance that they can:
(1) Only charge customs upon returning a DVD (cuts costs in half)
and/or
(2) Negotiate lower fees from V/MA
Ultimately, the hike will result in higher profits and could potentially be significantly higher profits should they negotiate lower fees or figure out a workaround.
The cost of a DVD rental through redbox is still so inexpensive, but it's amazing to see how much of an impact just a $0.20 hike can have on EPS. Even if you assume 10% of customers leave they could potentially generate a significantly higher EPS off a price hike. In my example above this would generate $.97 per quarter in additional EPS.
That sounds good, TOF -- I think their profits WILL grow as a result of the price increase. Now we just need to figure out why they guided EPS down for 4Q (they knew that they will increase prices, so they should have included the extra profit per customer in their guidance). Can you call them up tomorrow and ask about that?
Mark / David - I think there are a few things in there other than this...I think they guided lower for a few reasons:
(1) They have been sandbagging estimates lately...this qtr is a great example (they beat their estimates by 40%).
(2) They expect fewer hit releases this quarter (3) They mentioned something about buying more DVDs than usual this quarter...can't remember why (4) They are probably conservatively guiding a big hit in number of people stopping to use their service because of price hike (5) They mentioned they expect some delays in getting permits passed for their kiosks that they previously expected to launch in q4...so they will launch in q1.
So taken all together I think they're guided very conservatively.
The only other risk to the business at this point is the movie studios extending new releases to 60 days. Again, I don't think this will impact them because the reason people use them is for price/convenience, but the stock will take a hit if it happens (although u could argue it's already priced in).
"The only question I have is with the proposed increase to $1.20 per movie we should expect an increase of say 20% on revenues and at worst maybe a loss of 10% of customers."
I think you've overestimated the loss at 10%, more like 1% if at all.
The big question nobody's mentioned I have in my mind concerning the business model is who else aside from greedy banksters intent on hiking swipe fees could demand higher prices for services essential to the business model?
Obviously keeping costs under control will be an issue going forward so more specifically, who actually provides the services for handling the transactions (These machines are connected to some kind of network, right?)?
Then there are agreements with the various owners of the intellectual property but can't we just assume that end of the equation has already been defined?
Just to be clear, the exchange fee's charged merchants is through the providing bank. C/BAC, whoever. It is not V/MA. Those fee's are different.
Credit cards do NOT have the exchange fee. Pretty much every small retailer I go to charges a fee if you use debit. What I don't get is you can just say it's credit, sign for it, and no fee. You can't take cash back this way obviously.
TOF- You do agree, correct, that the guidance includes the rate hike?
Mark - I believe the guidance includes the rate hike but if you go to their FB page you can see that if you reserve online then it stays at $1 for the next month. So they had to incorporate this into guidance...it's not an exact science but I think they're assuming they will have higher fees for the entire quarter and higher revenues for maybe 1/3 of the quarter...with customer defections. But going forward they will get $1.20 per rental and assume they have to pay max fees (even tho they may negotiate lower fees).
I personally thought that they would be able to allow u to charge as credit just like you can at a merchant like 7 eleven. Not sure why they don't just offer that instead and say its $1.20 for debit or $1.10 for credit for example. Who knows.
And those Durbin related fees are fees banks charge...I think the banks didn't change their fee structure other than being limited to $.21 max instead of $.44. But from what I've read they don't charge $0.21 fees on smaller transactions. Instead, VISA/MC who are in bed with the banks, saw that the banks were losing revs and imposed these fees on merchants as way to offset the lost revenues.
In the article you posted TOF, the author guessed debit transactions were about 50%. This was asked today, and the answer was "the vast majority"..or something like that, so it must be pretty high. I'd guess over 75% or they would have said.
CSTR - Okay, maybe you guys have latched onto something and I need to retract my discount concerning the price hike but just to rant about how a 20% price hike (when in reality it's still the cheapest thing since sliced bread) is apt to kill the business model kinda blows things out of proportion from my perspective.
A new modem and we're back online. If I had to choose between TV and internet I'd choose the internet. My coworker just bought an internet TV. We'll see how that does.
Yesterday, sad sad day. Sold my FCX weekly calls for $.25 because they would expire this Friday and I thought they would get hit with big time decay today. They went out today at $1.89. Lesson for the day - don't sweat the chump change when there's a big ass move that could happen at any moment. This would have been a good trade 4 months ago. Since we are likely to go thru this same Greece bailout exercise sooner rather than later, (thinking Italy, Spain, Portugal) i'll buy strangles on the SPY or better yet, the triple banks long etf.
Mark – Yeah I think debit cards make up maybe 75% of the transactions.
Even so: $0.15 extra fees per transaction x 75% = $.1125. Let’s assume 5% of customers leave, which is probably reasonable. So 1 x $0.20 (price hike) x .95 (customers leaving) = $0.14 - $0.1125 = $0.0275...
If they can negotiate lower fees or figure out a workaround (charge customers only on returns or charge cards as credit transactions instead of debit) then the net income will be higher than above.
I think there are two catalysts outstanding: (1) move to 60 day window by movie studios (2) streaming partner
Now I wonder if the rest of the PIGS would like a 50% reduction on their liabilities? That's what it sounds like to me at first glance but i'll just read what the smart folks have to say tomorrow.
My FXE puts got smashed but then MHT is back in town and he recommended a similar trade, DEC puts on FXE so I'm hanging with my puts till he says close them out.
Also sold Nov 46 strike calls against FCX and I sold a little more of my dog EPM position to raise a little cash in that account for other activity.
I have 1300 shares of SVM, a BC trade, and I was thinking about selling 300 and keeping 1000 as a long term play or selling calls against them. Anyone have any thoughts?
BB's comment on exiting divy stocks has me thinking over my T shares. What to do??? I have not sold any more covered calls on them yet., I have T just for the dividend and I was just going to keep selling covered calls against it to lower my basis.
TOF- I think they addressed 1 pretty clearly. All locked up except Warner. And frankly, if your a renter, you'll continue renting. It sure as hell got hit by a ton of crap today. I'm also guessing mang. has to be a little careful re fee increases. It would look pretty shitty if they are getting .05 of it.
I'm still trying to figure out why the euro rallied and I guess the obvious is that the international investors were sitting in dollars and just spent the last 24 hours buying the eur/usd to buy euro equities.
David - good play on your TBT. I'm holding TBT long term, its underwater but I've been waiting for a pop to sell covered calls. I think I may give it another week though.
“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”
From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan
I plan on buying a new printer this weekend. One with an automatic feeder to scan several pages instead of me trying to scan one page at a time. Then I can scan all this NFX stuff I have for Mark and send it to him. I'm sure I'll have lots of reading material on the bailout tomorrow so I'll bring some of that home too. I know you guys like to read.
"CSTR - Okay, maybe you guys have latched onto something and I need to retract my discount concerning the price hike but just to rant about how a 20% price hike (when in reality it's still the cheapest thing since sliced bread) is apt to kill the business model kinda blows things out of proportion from my perspective. "
CP > Those comments on FB consist of about 1/2 pissed about the fee increase. So that's about 1,000 people out of the 3.7 million following them...
Well we've been through this before, but the reason Greece can't default is because credit default swaps must not be triggered at the expense of creating another global financial meltdown.
Thus, private investors will "accept" a "voluntary" nominal 50% cut on their holdings to reduce Greece's debt burden.
Hmm, you must agree, this logic makes perfectly good sense...
TOF- I look at it this way... No fucking way is CSTR mang. stupid enough to push through a price increase at this time unless they had to...and they did re Durbin. So, if you know your going to take a shit load of heat, your 'out' is Durbin, so blame it on that. At the same time, you better get some down the road money for the short term pain. Believe me, after having some pretty serious talks about this type of thing with high levels players, all the institutions knew all about all of this ahead of time.
CP - I've never understood gold or precious metals. For some strange reason I feel the need to buy some GLD or something gold/precious related. I have some friends that buy coins from the US Mint. I'm thinking about that. That would be a long term hold, something I would expect to pass on the kids hopefully.
"which internet tv" - I'll find out. He and another coworker are like you guys. They read everything on energy so I always check with them before I buy an energy stock. They are working trying to pick out some good takeover targets but that's a tough thing for part timers. They do like HES and consider DVN to be one of the better natty plays. The key to DVN is when will natty turn around and they don't see it anytime soon.
good luck tomorrow - the patience required teaching 4th grade math is wearing me out. She'll be on her on in 6th grade. It's a good thing the wife knows how to read and write.
Mark - yeah that's my take too man. The fact that they were testing this price increase out in multiple markets for the past year means they've been wanting to increase for a while now. Unfortunately, Durbin forced their hand and they used now as a good time to raise, blaming it on Durbin. And it's a valid excuse. Otherwise, yeah there's no way in hell they push through an increase on the heels of NFLX's increase.
I just listened to the call again and it does look like pretty much all but Warner Brothers has been re-negotiated and there will not be an extension of release dates past 28 days. So while Warner Brothers may be shitheads about it, it's really not a big deal. Also, apparently they're pretty confident that they can negotiate lower fees from V/MA, and they're also already working on getting their software squared away so they only have to charge customers when they return the videos, which would drop their costs pretty significantly. So all in all this Durbin Fee thing might actually be a blessing in disguise:
they raise revenues 20% probably drop volume like 5% negotiate lower fees (maybe like 10%) cut number of transactions that have fees by 33% (assumes that half of their rentals are for 2 days or more so in those cases they would only be charged fees for one transaction (upon return))
I think my math is a bit naive but revenues could increase by $0.14 per transaction (assuming transaction is only 1 day) in this scenario...
while costs would only increase by $0.058 (assumes fees go from $0.08 per transaction to $0.23, they get a 10% reduction in fees and they reduce the number of transactions by 33% or $0.23*.666*.9-$.08)
Sounds like in this case it sounds like they could actually make significantly higher profits. It would be $.14 higher profits less $.058 = $.082, which should drop to the bottom line. If this is the case they could increase operating margins from 14% to 22%. WOW.
The only question I have is how they arrived at $0.57 to $0.67 this quarter. They must have assumed a few worst case scenarios:
(1) They have to pay higher costs on all transactions (no mitigations) and can't get software to work so that they only pay on DVD returns (2) Price hike drops customers by like 10% (3) Price hike doesn't go fully into effect until at least halfway through quarter
As I looked at the chart of AUMN over the past 1.5 years, I saw that it is trading right now at the pre-QE2 level. It stayed flat at that level for 5 months, so it must be a very strong support level. Thus, I think the chances of AUMN dropping meaningfully below it are very slim, especially given the fact that the Sentient Group recently bumped up their stake in AUMN by buying $30M worth of shares at $7.44. In the light of this, any stops I place near the current price levels will be hit only during fake moves down. Thus, I decided to remove all stops on the 2500 "trading" shares of AUMN I recently bought on margin at around $7.55 and just sit tight and hope for the best.
In order to raise some cash and reduce my margin debt, I decided to place a sell limit order for all my 6000 shares of CADC at $2.22, since with the latest approval by the board of directors of CEO's offer to buy CADC at $2.65, its upside is limited by 20% now. On the other hand, the upside of all my other stocks is an easy 2X within a year. Thus, I should make a lateral move from CADC into stocks with a greater upside potential.
Also, over the past few months I had added 2000 shares of GMO to my core position at the average cost of $3.85 (my core position has the cost basis of around $4.40). Given the amazing rally in GMO since October 4 low, I decided to place a sell to open limit order at $0.5 for 20 December $4 calls on GMO, so as to sell at $4.50 the 2000 shares I added at $3.85.
David - nice move getting out of CADC...I don't like that one a lot. It seems that your conviction on AUMN is about as strong as mine is on CSTR.
Just curious, but do you have any money in stocks other than metals / mining stocks in case that whole sector goes into a bear market? Not saying it will but it's a very cyclical one.
TOF, besides AUMN (2/3 of my port at the current price) and GMO (20% of my port at the current price), I also have crappy Chinese stocks like CAAS, WATG, SORL, ONP, CADC. I thought this would provide some diversification for my portfolio, but then I was shocked to see that GDXJ has a very high correlation with HAO, much higher than with S&P.
And now I also have 250 shares of CSTR (purchased today at $47), 2 short November $50 puts on it (sold today at $3.20) and 1 long November $50 call (purchased a week ago for $4.20). Since my #1 priority right now is to get out of margin, I placed a sell limit at $50 for the 250 shares of CSTR I currently have. Hopefully this limit gets hit tomorrow, for another quick CSTR trade... I still can't believe that I was able to sell at $57 after hours today the shares I purchased at $52.XX during the day today...
The market cap for AUMN is $260M according to Google, and they have $120M in cash after the recent sale of $30M worth of shares to the Sentient Group (at $7.44/share). So they are given only a $140M credit for the silver and gold they have in the ground and for the fact that in 3 years, they will be producing annually $8M AgEqOz (adding $5M more AgEqOz in 2015). That's just crazy...
In order to make sure that AUMN doesn't drop below $7, I just placed a buy limit order for 500 more shares at $7. Also, just placed a buy limit order at $2.50 for 10 AUMN April 2012 $5 calls. Bring it on, baby!
in my experience, mining stocks go through a cycles.
They run up when a deposit is discovered and the resource drilled out as people get excited at the opportunity.
Then the stock drops or does nothing for the period while the mine is being built. During this period, the financials look like crap (all expenses, no revenues) and almost any news that comes out is bad (cost overruns, water problems, land stability, can't get tires, etc.). You can get a bump on news of good financing or better mineral grades, but these are less common.
Then when the mine is getting close to production, the stock starts moving up again as the stock can now be more reasonably valued on cash flows and net asset values as the cost to extract the mineral becomes more solid.
After this, the stock starts to go up and down more based on execution and further reserve development.
If AUMN is in that period where the mine is being built, but no production is close, you either have to just be patient or you could try and trade out and back in.
T is a good company and generates good cash flow and if you can increment this selling covered calls, this will likely be a good way to generate good income over the next while. It's also a good stock to own if you think the economy will continue to struggle.
If, on the other hand, you think the economy gets better, even slowly, there are a lot more beaten down stocks that should move back to traditional valuation metrics over the next year or two. Specifically, I like financials and energy, but some tech also looks good as do many other individual stocks.
David - I hope you're not looking to sell CSTR here...after listening to that call again and running the numbers, this price increase will do wonders for this company's bottom line. And my take is they used the Durbin Amendement as an excuse to raise prices. Now that they have 34,000 kiosks out there and own a leading market share, they're using it as an opportunity to really ramp up EPS.
By my quick math, this price hike could have raised EPS for this past quarter from $1.18 to $1.85...for JUST THIS QUARTER. I think the price hike can increase operating profit for the company by about 55 to 60%, which is just insane.
Also the company is going to announce a streaming partner very soon (before year end), which will significantly increase the redbox.
Buy-and-hold- no other way to enjoy mornings like this one.
ReplyDeleteHang on to these levels bulls!!!
ReplyDeleteCSTR... http://adage.com/article/news/redbox-green-netflix-s-pr-troubles/230589/
ReplyDeleteNothing new but kinda interesting take.
If you bought TCK at the open, your down 7% right now.
ReplyDeleteTCK Big gap up that needs filling, gaps up everywhere some already filled.
ReplyDeleteJust saw this on my TD Ameritrade APP:
ReplyDelete"Whitney Tilson, Tilson Mutual Funds, says Netflix is a similar value play to BP"
What are the odds he gets both sides of the trade wrong? Short NFLX at $130 or $150, get stopped out at $220. Buy NFLX at $80, get stopped out at ???
Tilson was on CNBC at lunch yesterday if you want to watch what he has to say. He's a good talker, so I have to be careful not to buy into what h is saying, just because it sounds good. Think he made the case it was now at 4 times 2012 EBITDA, good management who made a mistake, but is correcting it.
ReplyDelete2nd - this may be your cue to sell stock given overhead resistance at the 200 DMA. my thoughts, though, are that we broke right up through resistance at the 1,250-1,260ish level, which was major support back in the spring/summer, and if we close above it then we could see the markets trade sideways for a week and move up again...just like in 1998.
ReplyDeleteBB - this guy has been wrong quite a bit lately...i always distrust a guy that talks calmly on CNBC pushing his positions. actually i distrust a lot of people when it comes to the financial world.
ReplyDeleteSold my last utility stock (TRP) this morning and a Canadian REIT (RIOCF). Both had good returns and are very good companies, but their valuations had gotten high. I think, in general, both of these industries will be flat to down over the next couple of years as too many investors have bid these too high because of their yields and these will be sources of cash for more economically sensitive investments.
ReplyDeletePut part of the proceeds into a Canadian hotel REIT as the valuations on hotels is low, the economy is picking up, and I've seen improving earnings out of the US hotel companies.
Will probably just sit on the rest of the cash for a few days and wait for a pullback.
I agree TOF.
ReplyDeleteBeen on the inside with a few of these guys and what they say on TV and what they actual do can be completely different. Many are ethical, but the key is knowing the difference.
I disagree. A ton of buy-and-hold wannabees will be selling into today's strength- a mistake. As pointed out several weeks ago- it's actually more difficult to remain fully invested when the indexes charge ahead (than when they sell off).
ReplyDeleteAnother perspective- a mere 10-15% spike in the indexes now make stocks that were at 'generational lows' now expensive? I don't think so.
ReplyDeleteoh man, this is too funny. i just turned on fast money and now these clowns are bullish!?!? you can't make this stuff up. i posted a while ago about how some numbskull was saying how it was a terrible idea to go long with the VIX so high. I think the guys name was brian stutland (spelling?).
ReplyDeletei remember now why i don't watch that crap anymore. they really need to change that show's name to lose money fast.
I'm tempted to take a short position above 1280...
ReplyDeleteLooking at TZA under #28
"i remember now why i don't watch that crap anymore."
ReplyDeleteDoes it make sense to consistently do the opposite, or is it just meaningless entertainment dribble?
cp right there with you. probably early, but just sold a couple TZA Jan 24 puts @ 2.50
ReplyDeleteYeah, I would not be selling here either. I think we have a big move up coming and you may not get a chance to get back in.
ReplyDeleteI do think you want to review your portfolio here though. If we do get a big upside move, you want to be out of the telco / utility / dividend income stocks and into stocks that will benefit more from an improving economy.
Took some of my cash from this morning and bought an oil fracing company. These guys are still down 30% from where they were this summer and will almost outperform the market (both up and down). But rather own a stock down 30% with leverage to the economy than something paying 4% at a 52 week high.
CP,
ReplyDeletethere's a lot better ways to invest your time than watching CNBC if you want to make money.
All right! Looks like I did luck out with my decision to pile into TBT at the close on Tuesday and then afterhours, when it was taken down to $20.50!
ReplyDeleteThis morning, my sell limit at $22 was hit for 200 shares I purchased at $20.52 and just now I sold 200 more shares at $22.75 that I purchased at $20.70. That's a $700 profit right there! I'll spend my Halloween weekend being scary drunk. :)
Still have 600 more shares of TBT purchased at the average cost of $20.69 (according to ETrade). If TBT moves up another $1, then I think my TBT gains will totally compensate for the losses I took on TLT puts.
BB - Banks will be big gainers from here. If I wasn't so heavily invested in CSTR I would seriously consider buying C, BAC, etc.
ReplyDeleteNow, who was talking about shorting GLD? Don't forget, folks -- it was sold down ONLY because $USD rallied up a little, which happened ONLY because of the fears that European mess will result in banks disorderly liquidating all their assets, like during the Lehman failure. Since it now looks like there will be no disorderly liquidations, gold and silver will move to new highs and keep going up in a straight line, at the speed at which money is being printed in the developed world. Don't fight the multi-year trend!
ReplyDeleteNow I have only one question: WHAT'S WRONG WITH AUMN??? It keeps underperforming GDXJ, which is now more than a one-day statistical discrepancy...
ReplyDeleteDavid - That was me of course! I got stopped out of my fictitious trade. Just another reason why I don't trade / invest in what I don't know or can't understand.
ReplyDeletewow MITK.
ReplyDeleteIn order to hedge a little today's jump in my portfolio, I just bought 1 January $50 put on DB for $6.50.
ReplyDeleteI see that GDP grew at 2.5% during July-Sept quarter, mostly due to increased consumer spending. How many of you kept looking at the real-time consumer behavior graph at
ReplyDeletehttp://www.consumerindexes.com/index.html
and thinking about implications of the awesome jump in the graph start early summer? We should be checking that site more often now...
TOF,
ReplyDeleteagree on banks - even my LYG and NBG are up 10% today. But who would have figured DB would be one of the big winners up almost 20%? That's now 63% up in a month.
Financials and Energy are my 2 biggest holdings. In financials, still prefer the small insurance companies and banks as they have better valuations, are easier to understand and don't have the political risk.
Still have that MET from yesterday morning and it is now up 12% from yesterday morning - crazy fro a large cap S&P500 stock.
Haven't heard from illini in a while, but hope he's still holding KCLI up 6% today - pretty nice for a super-safe dividend paying stock with no debt. Would be trading over $50 in a "normal" market based on traditional metrics, so still 30% upside.
Guys STVI is on sale. Ok, I'm kidding. But I'm kinda serious.
ReplyDelete'All right! Looks like I did luck out with my decision to pile into TBT at the close on Tuesday and then afterhours, when it was taken down to $20.50!'
ReplyDeleteActually, it was the folks on this blog who saved your ---. ;_
This is fantastic, this sucker just keeps on moving up. I go to a meeting in the bat room and return only to find higher prices...
ReplyDeleteShorting is futile!
Where to short I dare not guess today...
"Actually, it was the folks on this blog who saved your ---. ;_ "
ReplyDeleteYes, I remember that -- thank you! :)
Now can you do something about AUMN? It's not hopeless yet, as the support at $7.30 seems to be holding up. Can you just light fire under it so that it would take off from that support level?
David - "WHAT'S WRONG WITH AUMN??? It keeps underperforming GDXJ"
ReplyDeleteWell, AUMN is not yet a producer, some dilution just occurred and there's the APEX stigma still dragging in tow, not sure these last two items are significant?.
On the bright side, I also see a mid Sept gap down that needs to fill.
SVM has a gap up from $8.31 that needs to fill, acting as a huge anchor.
GPL - Cant seem to move through heavy resistance at $2.52 after the heavy beating it took.
$Silver - $34.48 is an important pivot point, perhaps a retest is necessary to convince and re-instill confidence?
Thank you for a quick action, 2nd_ave! :) AUMN got ahead of GDXJ for the day just now. :) Let's keep it that way! And let's catch up all the lost ground -- i.e., let's move AUMN to a new post-October-4 high!
ReplyDeleteJust to lend some more support to AUMN and set a floor under it, I just placed a buy limit order for 700 shares at $7.40. THAT should convince the other traders (who are looking at all open orders) that the only way for AUMN to move is up!
ReplyDeleteGGB - Very nice move there, I was gonna buy some a couple days back...
ReplyDeleteSigh......
Another statistical correlation that is out of whack today is that between ONP and HAO. With HAO surging up like crazy (after all, Europe is the main customer for China, and if Europe is not falling apart, then the oversold Chinese stocks should rally a bit), ONP is still staying flat. So I just bought 1000 more shares of ONP at $2.41. I know I am playing with fire, as I am deep into margin again and I have no more bailout funds coming as my credit cards are maxed out. But heck, if there is a time to take risk on the long side, it is now!
ReplyDeleteCSTR -- someone is not happy about it...
ReplyDelete$NFLX $CSTR Studios Consider 60 Day Delay for Netflix, Redbox DVD Rentals
ReplyDelete1288 - This is my next short target, mucho safeo place to short.
ReplyDeleteTZA - Bid $27
Just bought 100 shares of CSTR at $52.90...
ReplyDeleteDo you guys think TZA bid at $27 is too low?
ReplyDeletePlacing a buy limit order for 50 more shares of CSTR at $52. The earnings have not been announced yet, right? So no reason to sell it off yet...
ReplyDeleteAll right, my buy limit at $52 did provide a support for CSTR, the sellers bailed out and CSTR is surging back up. So I have just canceled that buy limit.
ReplyDelete$USD - Damn, that's quite a drop there... I like it.
ReplyDeleteTechnically, CSTR has a great chart with a higher low and a higher high since early October, and so buying today's dip at a price below the previous high at $54 seemed like a reasonable thing to do...
ReplyDeleteDavid- See my post above.
ReplyDeleteHm... CSTR is going back down. I am reinstating my buy limit at $52 for 50 shares.
ReplyDeleteMark -- we all know that temporary events should have ZERO impact on the fair stock price, so this is just a buying opportunity.
ReplyDeleteWith CSTR earnings after hours tonight, its puts should be insanely expensive. So I just sold 2 November $50 puts for $3.20 each. This will give me 200 more shares of CSTR at $46.80 -- not a bad entry! :)
ReplyDeleteMy buy limit for 50 shares of CSTR at $52 was just hit. I think I'll stop here...
ReplyDelete1000 CSTR 51.10
ReplyDeleteIt got THAT low, Mark???
ReplyDeleteOr is it just your bid?
ReplyDeleteYep...Bouncing here. 52.40.
ReplyDeleteThat was my entry. Low was 51.04
ReplyDeleteAwesome! You can sell it for a 1K profit already!
ReplyDeleteHow did you catch it at THE low? It was there only for a few milliseconds, I think. I guess you were watching it like a hawk, with a finger on the button...
ReplyDelete1000 off @ 52.80.
ReplyDeleteGreat trade, Mark! With 2nd_ave and TOF in the buy-and-hold mode, you have become our resident intraday Wiz!
ReplyDeleteAll right, bought 500 more shares of AUMN at $7.54. Moved my sell stop for the 2500 "trading shares" to $6.95/$6.9, so as not to get faked out. With silver and gold surging up, the case for AUMN is getting better by the day...
ReplyDeleteDavid,
ReplyDeleteafter you have a merger like happened with AUMN, the stock often does nothing or drifts lower for quite a period as the people who got shares in the merger, but don't want them, sell off.
It sometimes seems to take longer than you think it would.
Crap! As soon as I bought AUMN, it spiked down. Should have kept my buy limit at $7.40 instead...
ReplyDeleteTZA - Raised my bid to $27.20, don't want to pay too much...
ReplyDeleteTZA - Dang, I'll never win a free beach house if I keep missing these bids...
ReplyDeleteGuys - this 60 day window is very conspicuously timed right before Redbox blew out earnings. I find it very funny.
ReplyDeleteJust sold my 150 shares of CSTR at $57 after hours. My average cost was $52.60, so that's a $660 profit right there.
ReplyDeleteMark, if only you had held your 1000 shares...
Congratulations, TOF!
SVM - What really pisses me off is the short and distorters stole the free beach house I'd almost earned and no matter how hard I try to win it back so far, no dice!
ReplyDeleteWait, I don't get it: CSTR is DOWN to $48 right now, after being UP to $58 a couple of minutes ago??? Talk about obscure earnings...
ReplyDeleteDavid - looks like they are raising prices to $1.20 because of the Durbin Amendment. That plus potential 60 day window is all longs needed to bail out of the stock. Ugh.
ReplyDeleteTOF -- can you please explain to us the CSTR earnings? Why are they down so much after popping up initially?
ReplyDeleteTOF -- what is Durbin Amendment? Did their costs go up 20c or are they just planning to increase their margin on each DVD?
ReplyDeleteMy after hrs. trading doesn't start until 1:15.
ReplyDeleteDavid- The Durbin amendment was about the swipe fee's. CSTR is now passing that cost onto the buyer.
ReplyDeleteI think CSTR is being sold now simply because of fears that the same thing will happen to it after a price hike as what happened to NFLX. I think these fears are overblown.
ReplyDeletePlacing a buy limit for 50 shares at $48 and 100 shares at $47 after hours.
Both orders just got hit in one swoop!
ReplyDeleteTOF- What do you think?
ReplyDeleteCSTR - Hey, it's coming to me, I can't believe it!
ReplyDeleteHey guys, I hope it doesn't hit me in the head and knock me down, any thoughts on why the low price?
Hey who's collecting those swipe fees anyway, BAC just announced a $5 monthly charge and this is on top of the new swipe fees?
ReplyDeleteSheesh, those bankers have no shame!
Anyway, a DVD for $1.20 instead of $1 isn't gonna make any diff to me, doubt it will to anyone else either.
Mark - I'm waiting for the call to decide but the fact is they crushed earnings because the business is strong. That's something traders easily lose sight of.
ReplyDeleteNow when it comes to interchange fees and 60 day windows, do I think that will impact the business? I would have to say no but I don't really know. I don't think a change from $1.00 to $1.20 will be important to people because it's still so ridiculously low. But the perception in the market will be that it will hurt them badly. They will point to NFLX as a perfect example of how badly it hurt them.
So I will wait for the call to get some clarification regarding why they're doing the increase. Its says in their release that they raised fees primarily because of higher costs including the Durbin fees...primarily is different and entirely. So some profit will be padded in there.
sorry..."different from entirely"
ReplyDeleteI'm also interested in hearing about streaming on the call. I think the call should shed a lot of light on a few things.
I obviously regret not selling today....shit I knew this thing is volatile and could just as easily be up huge as down huge.
TOF- Kinda see it the same way. I'm going to listen to the call also. I honestly don't think it will impact their business at all.
ReplyDeleteTOF -- when is their earnings call?
ReplyDeleteDavid- 2 our time.
ReplyDeleteThanks, Mark.
ReplyDeleteUsing my assumption that the reaction to their price increase is unjustified, that the earnings call will dispel some fears (executives always try to make the company look good while talking about it), and that the stock stopped dropping after hours, I just bought 100 more shares at $46.50. Let's see if I'll be able to turn around and sell them at $50 later on today or tomorrow. :)
In fact, I just placed a sell limit order at $50 for all 250 shares I purchased after hours today at the average cost of $47.
ReplyDeleteTOF- Does the .57/.67 4Q make sense to you?
ReplyDeleteMark - I think that estimate is just taking the total less the 1st three quarters. The company has been lowballing guidance for a while.
ReplyDeleteoh wait...actually i'm wrong on the guidance. yeah that's weird. i wonder what is imbedded in that number.
ReplyDeletefrom what i gather the guidance is related to the Durbin Amendment costs impacting their earnings for October (and possibly longer) before they raise prices across the board.
ReplyDeleteJust as I thought -- CSTR is trending up during the call. I can already turn around and sell at a profit the 250 shares I purchased at $47 earlier today. :)
ReplyDeleteCSTR - If I weren't neck deep in something already, I'd be snatching up this issue here.
ReplyDeleteTOF - What's an interchange fee, is this something related to ATM cards and who does it go to?
Placed a sell limit order at $23.50 for 200 shares of TBT, just to reduce my margin debit somewhat...
ReplyDeleteThe AUMN chart of intraday prices since mid-October looks like a descending wedge with a flat support at around $7.25. In what direction are such wedges supposed to be broken? Is it UP?
ReplyDeleteI'm totally biased on my opinion of this earnings report on CSTR, but it comes down to this:
ReplyDelete*EPS guidance for q4 was light because they see a hike in fees of $10-$14 Million for the quarter related to the Durbin Amendment. That equates to roughly $.31 to $.43 for the quarter. They're estimating $.57 to $.67 for Q4 whereas old guidance was for $.88 so it looks like the difference comes entirely from the Durbin Amendment. The only question I have is with the proposed increase to $1.20 per movie we should expect an increase of say 20% on revenues and at worst maybe a loss of 10% of customers...so that would be $X*1.20*.9 = 1.08X where X is prior quarter's revenues (or $389 Million). 8% of $389 Million = $31 Million or $0.97 per share.
So a price hike of 20% should more than offset the fee increases they're projecting. And on the call they mentioned the possibility of only charging people after the movie is returned to the box, as well as negotiating with Visa/MC to get fees lowered. There are still possibilities to consider that might ultimately improve earnings going forward more than people expect.
Also, one key takeaway I got from the call was the fact that they still expect to announce a streaming deal before the end of the year. Given that there are only 2 months left in the year, that means that an announcement should come very soon. My thinking is it will be with AMZN and I think this will really propel the stock.
The basic fact of the matter is this company continues to grow rapidly and take market share. They saw unique swipes at their redbox kiosks grow about 10% quarter over quarter and I think I heard about 60% year over year. They had 36 million different people use their kiosks. Additionally, they have grown their followers on Facebook tremendously, from around 100k in the beginning of 2010 to almost 3.7 Million people. Those are huge numbers of people using their service and I think it has to be worth a ton to a partner. I am actually surprised that a company like AMZN wouldn't just buy them out given how much cash flow they are generating (they have generated $130 Million in free cash flow for the first 9 months of the year). That would be a boost of about 10% to their cash flow and they could buy them out with a minor 2.5-3% share dilution.
TOF- Didn't they say on the call that Q4 eps included both the swipe fee and the new increase in cost? Also, I'm surprised they haven't negotiated with what ever bank they use for processing. This is not new news.
ReplyDeleteI still really like the play here. Comments?
Actually, the real question here is, would you add to your position here? I might, but I don't like the level the overall market is at.
ReplyDeleteMark - I honestly think they tried to swallow the costs for the first month of the quarter in hopes that they could negotiate lower fees but weren't successful. So they had to take the hit on earnings this quarter and announce a price increase.
ReplyDeleteAfter hours the company is now trading at 8.8 times trailing free cash flow. By comparison, a company like CSCO, which is about as slow growth as it gets, is trading at 11 times trailing free cash flow.
You guys gotta see these comments on Facebook. Redbox is actually doing a good job responding to them. It's so funny to see people get all pissed about paying $0.20 more, some threatening to leave. Refuse to pay $0.20 more so they can go pay $3 more through On Demand? Funny stuff man.
http://www.facebook.com/redbox
TOF, is the $10-$14M hike in fees due to Durbin Amendment going to stay with the company from now on or is it only going to be there for Q4?
ReplyDeleteDavid - it's going to stay with the company in the worst case scenario. It's part of the reason they raised prices. I honestly think they were planning on raising prices anyway and used this as an excuse. They have been testing price hikes in different markets for about a year now. I think they wanted to increase profits.
ReplyDeleteIn my math above, you can see that this hike should more than offset the increased fees. So it should boost profits. And there is always a chance that they can:
(1) Only charge customs upon returning a DVD (cuts costs in half)
and/or
(2) Negotiate lower fees from V/MA
Ultimately, the hike will result in higher profits and could potentially be significantly higher profits should they negotiate lower fees or figure out a workaround.
The cost of a DVD rental through redbox is still so inexpensive, but it's amazing to see how much of an impact just a $0.20 hike can have on EPS. Even if you assume 10% of customers leave they could potentially generate a significantly higher EPS off a price hike. In my example above this would generate $.97 per quarter in additional EPS.
ReplyDeleteThat sounds good, TOF -- I think their profits WILL grow as a result of the price increase. Now we just need to figure out why they guided EPS down for 4Q (they knew that they will increase prices, so they should have included the extra profit per customer in their guidance). Can you call them up tomorrow and ask about that?
ReplyDeleteI'm totally confused TOF. 4Q earnings guidance inclueded the increase to 1.20. What am I missing?
ReplyDeleteMark / David - I think there are a few things in there other than this...I think they guided lower for a few reasons:
ReplyDelete(1) They have been sandbagging estimates lately...this qtr is a great example (they beat their estimates by 40%).
(2) They expect fewer hit releases this quarter
(3) They mentioned something about buying more DVDs than usual this quarter...can't remember why
(4) They are probably conservatively guiding a big hit in number of people stopping to use their service because of price hike
(5) They mentioned they expect some delays in getting permits passed for their kiosks that they previously expected to launch in q4...so they will launch in q1.
So taken all together I think they're guided very conservatively.
The only other risk to the business at this point is the movie studios extending new releases to 60 days. Again, I don't think this will impact them because the reason people use them is for price/convenience, but the stock will take a hit if it happens (although u could argue it's already priced in).
"The only question I have is with the proposed increase to $1.20 per movie we should expect an increase of say 20% on revenues and at worst maybe a loss of 10% of customers."
ReplyDeleteI think you've overestimated the loss at 10%, more like 1% if at all.
The big question nobody's mentioned I have in my mind concerning the business model is who else aside from greedy banksters intent on hiking swipe fees could demand higher prices for services essential to the business model?
Obviously keeping costs under control will be an issue going forward so more specifically, who actually provides the services for handling the transactions (These machines are connected to some kind of network, right?)?
Then there are agreements with the various owners of the intellectual property but can't we just assume that end of the equation has already been defined?
Just to be clear, the exchange fee's charged merchants is through the providing bank. C/BAC, whoever. It is not V/MA. Those fee's are different.
ReplyDeleteCredit cards do NOT have the exchange fee. Pretty much every small retailer I go to charges a fee if you use debit. What I don't get is you can just say it's credit, sign for it, and no fee. You can't take cash back this way obviously.
TOF- You do agree, correct, that the guidance includes the rate hike?
Speaking of the advent of the home entertainment phenomenon and movies and such "nonsense", do any of you guys have experience with the ROKU system?:
ReplyDeletehttp://en.wikipedia.org/wiki/Roku
Mark - I believe the guidance includes the rate hike but if you go to their FB page you can see that if you reserve online then it stays at $1 for the next month. So they had to incorporate this into guidance...it's not an exact science but I think they're assuming they will have higher fees for the entire quarter and higher revenues for maybe 1/3 of the quarter...with customer defections. But going forward they will get $1.20 per rental and assume they have to pay max fees (even tho they may negotiate lower fees).
ReplyDeleteI personally thought that they would be able to allow u to charge as credit just like you can at a merchant like 7 eleven. Not sure why they don't just offer that instead and say its $1.20 for debit or $1.10 for credit for example. Who knows.
And those Durbin related fees are fees banks charge...I think the banks didn't change their fee structure other than being limited to $.21 max instead of $.44. But from what I've read they don't charge $0.21 fees on smaller transactions. Instead, VISA/MC who are in bed with the banks, saw that the banks were losing revs and imposed these fees on merchants as way to offset the lost revenues.
http://www.forbes.com/sites/ericsavitz/2011/09/23/conistar-pressured-by-prospect-of-higher-debit-card-fees/
OK, just reread the whole Durbin deal. TOF is correct about how the fee's are collected. This limits CSTR's options to negotiate. Hmmmm...
ReplyDeleteIn the article you posted TOF, the author guessed debit transactions were about 50%. This was asked today, and the answer was "the vast majority"..or something like that, so it must be pretty high. I'd guess over 75% or they would have said.
ReplyDeleteMy interpretation of today's market action(in a general sense):
ReplyDeletehttp://digital.lib.uiowa.edu/cdm4/item_viewer.php?CISOROOT=%2Fding&CISOPTR=6925&DMSCALE=25.00000&DMWIDTH=500&DMHEIGHT=1000&DMMODE=viewer&DMFULL=0&DMOLDSCALE=7.26744&DMX=0&DMY=0&DMTEXT=&DMTHUMB=1&REC=1&DMROTATE=0&x=55&y=70
CSTR - Okay, maybe you guys have latched onto something and I need to retract my discount concerning the price hike but just to rant about how a 20% price hike (when in reality it's still the cheapest thing since sliced bread) is apt to kill the business model kinda blows things out of proportion from my perspective.
ReplyDeleteHL - Okay so what the hell happened there, looks like the gap's gonna close...
ReplyDeleteA new modem and we're back online. If I had to choose between TV and internet I'd choose the internet. My coworker just bought an internet TV. We'll see how that does.
ReplyDeleteYesterday, sad sad day. Sold my FCX weekly calls for $.25 because they would expire this Friday and I thought they would get hit with big time decay today. They went out today at $1.89. Lesson for the day - don't sweat the chump change when there's a big ass move that could happen at any moment. This would have been a good trade 4 months ago. Since we are likely to go thru this same Greece bailout exercise sooner rather than later, (thinking Italy, Spain, Portugal) i'll buy strangles on the SPY or better yet, the triple banks long etf.
Mark – Yeah I think debit cards make up maybe 75% of the transactions.
ReplyDeleteEven so:
$0.15 extra fees per transaction x 75% = $.1125. Let’s assume 5% of customers leave, which is probably reasonable. So 1 x $0.20 (price hike) x .95 (customers leaving) = $0.14 - $0.1125 = $0.0275...
If they can negotiate lower fees or figure out a workaround (charge customers only on returns or charge cards as credit transactions instead of debit) then the net income will be higher than above.
I think there are two catalysts outstanding:
(1) move to 60 day window by movie studios
(2) streaming partner
Let's see what happens.
Am I the only one who can't trade between 1-1:15pt?
ReplyDeleteNow I wonder if the rest of the PIGS would like a 50% reduction on their liabilities? That's what it sounds like to me at first glance but i'll just read what the smart folks have to say tomorrow.
ReplyDeleteMy FXE puts got smashed but then MHT is back in town and he recommended a similar trade, DEC puts on FXE so I'm hanging with my puts till he says close them out.
Also sold Nov 46 strike calls against FCX and I sold a little more of my dog EPM position to raise a little cash in that account for other activity.
I have 1300 shares of SVM, a BC trade, and I was thinking about selling 300 and keeping 1000 as a long term play or selling calls against them. Anyone have any thoughts?
BB's comment on exiting divy stocks has me thinking over my T shares. What to do??? I have not sold any more covered calls on them yet., I have T just for the dividend and I was just going to keep selling covered calls against it to lower my basis.
TOF- I think they addressed 1 pretty clearly. All locked up except Warner. And frankly, if your a renter, you'll continue renting. It sure as hell got hit by a ton of crap today. I'm also guessing mang. has to be a little careful re fee increases. It would look pretty shitty if they are getting .05 of it.
ReplyDeleteport- Why wouldn't they? I honestly don't get it.
ReplyDelete"I'm also guessing mang. has to be a little careful re fee increases. It would look pretty shitty if they are getting .05 of it. "
ReplyDeleteWhat do u mean bro?
Yeah there was a lot of shit thrown at the company today man. I've never been in a more volatile stock.
I'm still trying to figure out why the euro rallied and I guess the obvious is that the international investors were sitting in dollars and just spent the last 24 hours buying the eur/usd to buy euro equities.
ReplyDeleteDavid - good play on your TBT. I'm holding TBT long term, its underwater but I've been waiting for a pop to sell covered calls. I think I may give it another week though.
ReplyDelete“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”
ReplyDeleteFrom "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan
I plan on buying a new printer this weekend. One with an automatic feeder to scan several pages instead of me trying to scan one page at a time. Then I can scan all this NFX stuff I have for Mark and send it to him. I'm sure I'll have lots of reading material on the bailout tomorrow so I'll bring some of that home too. I know you guys like to read.
ReplyDelete"CSTR - Okay, maybe you guys have latched onto something and I need to retract my discount concerning the price hike but just to rant about how a 20% price hike (when in reality it's still the cheapest thing since sliced bread) is apt to kill the business model kinda blows things out of proportion from my perspective. "
ReplyDeleteCP > Those comments on FB consist of about 1/2 pissed about the fee increase. So that's about 1,000 people out of the 3.7 million following them...
Well we've been through this before, but the reason Greece can't default is because credit default swaps must not be triggered at the expense of creating another global financial meltdown.
ReplyDeleteThus, private investors will "accept" a "voluntary" nominal 50% cut on their holdings to reduce Greece's debt burden.
Hmm, you must agree, this logic makes perfectly good sense...
Port - "My coworker just bought an internet TV."
ReplyDeleteWhich one, any details?
TOF- I look at it this way... No fucking way is CSTR mang. stupid enough to push through a price increase at this time unless they had to...and they did re Durbin. So, if you know your going to take a shit load of heat, your 'out' is Durbin, so blame it on that. At the same time, you better get some down the road money for the short term pain. Believe me, after having some pretty serious talks about this type of thing with high levels players, all the institutions knew all about all of this ahead of time.
ReplyDeleteNo it's up to the market to decide.
CP - I've never understood gold or precious metals. For some strange reason I feel the need to buy some GLD or something gold/precious related. I have some friends that buy coins from the US Mint. I'm thinking about that. That would be a long term hold, something I would expect to pass on the kids hopefully.
ReplyDelete"which internet tv" - I'll find out. He and another coworker are like you guys. They read everything on energy so I always check with them before I buy an energy stock. They are working trying to pick out some good takeover targets but that's a tough thing for part timers. They do like HES and consider DVN to be one of the better natty plays. The key to DVN is when will natty turn around and they don't see it anytime soon.
ReplyDeletegood luck tomorrow - the patience required teaching 4th grade math is wearing me out. She'll be on her on in 6th grade. It's a good thing the wife knows how to read and write.
Mark - yeah that's my take too man. The fact that they were testing this price increase out in multiple markets for the past year means they've been wanting to increase for a while now. Unfortunately, Durbin forced their hand and they used now as a good time to raise, blaming it on Durbin. And it's a valid excuse. Otherwise, yeah there's no way in hell they push through an increase on the heels of NFLX's increase.
ReplyDelete"Am I the only one who can't trade between 1-1:15pt?"
ReplyDeleteMark, Scottrade doesn't allow AH trades until 1:15. I was surprised ETrade allowed me to do that...
http://edge.media-server.com/m/p/xmupdc3u/lan/en
ReplyDeleteI just listened to the call again and it does look like pretty much all but Warner Brothers has been re-negotiated and there will not be an extension of release dates past 28 days. So while Warner Brothers may be shitheads about it, it's really not a big deal. Also, apparently they're pretty confident that they can negotiate lower fees from V/MA, and they're also already working on getting their software squared away so they only have to charge customers when they return the videos, which would drop their costs pretty significantly. So all in all this Durbin Fee thing might actually be a blessing in disguise:
they raise revenues 20%
probably drop volume like 5%
negotiate lower fees (maybe like 10%)
cut number of transactions that have fees by 33% (assumes that half of their rentals are for 2 days or more so in those cases they would only be charged fees for one transaction (upon return))
I think my math is a bit naive but revenues could increase by $0.14 per transaction (assuming transaction is only 1 day) in this scenario...
while costs would only increase by $0.058 (assumes fees go from $0.08 per transaction to $0.23, they get a 10% reduction in fees and they reduce the number of transactions by 33% or $0.23*.666*.9-$.08)
Sounds like in this case it sounds like they could actually make significantly higher profits. It would be $.14 higher profits less $.058 = $.082, which should drop to the bottom line. If this is the case they could increase operating margins from 14% to 22%. WOW.
The only question I have is how they arrived at $0.57 to $0.67 this quarter. They must have assumed a few worst case scenarios:
ReplyDelete(1) They have to pay higher costs on all transactions (no mitigations) and can't get software to work so that they only pay on DVD returns
(2) Price hike drops customers by like 10%
(3) Price hike doesn't go fully into effect until at least halfway through quarter
Even then I think their guidance is conservative.
As I looked at the chart of AUMN over the past 1.5 years, I saw that it is trading right now at the pre-QE2 level. It stayed flat at that level for 5 months, so it must be a very strong support level. Thus, I think the chances of AUMN dropping meaningfully below it are very slim, especially given the fact that the Sentient Group recently bumped up their stake in AUMN by buying $30M worth of shares at $7.44. In the light of this, any stops I place near the current price levels will be hit only during fake moves down. Thus, I decided to remove all stops on the 2500 "trading" shares of AUMN I recently bought on margin at around $7.55 and just sit tight and hope for the best.
ReplyDeleteIn order to raise some cash and reduce my margin debt, I decided to place a sell limit order for all my 6000 shares of CADC at $2.22, since with the latest approval by the board of directors of CEO's offer to buy CADC at $2.65, its upside is limited by 20% now. On the other hand, the upside of all my other stocks is an easy 2X within a year. Thus, I should make a lateral move from CADC into stocks with a greater upside potential.
Also, over the past few months I had added 2000 shares of GMO to my core position at the average cost of $3.85 (my core position has the cost basis of around $4.40). Given the amazing rally in GMO since October 4 low, I decided to place a sell to open limit order at $0.5 for 20 December $4 calls on GMO, so as to sell at $4.50 the 2000 shares I added at $3.85.
David - nice move getting out of CADC...I don't like that one a lot. It seems that your conviction on AUMN is about as strong as mine is on CSTR.
ReplyDeleteJust curious, but do you have any money in stocks other than metals / mining stocks in case that whole sector goes into a bear market? Not saying it will but it's a very cyclical one.
TOF, besides AUMN (2/3 of my port at the current price) and GMO (20% of my port at the current price), I also have crappy Chinese stocks like CAAS, WATG, SORL, ONP, CADC. I thought this would provide some diversification for my portfolio, but then I was shocked to see that GDXJ has a very high correlation with HAO, much higher than with S&P.
ReplyDeleteAnd now I also have 250 shares of CSTR (purchased today at $47), 2 short November $50 puts on it (sold today at $3.20) and 1 long November $50 call (purchased a week ago for $4.20). Since my #1 priority right now is to get out of margin, I placed a sell limit at $50 for the 250 shares of CSTR I currently have. Hopefully this limit gets hit tomorrow, for another quick CSTR trade... I still can't believe that I was able to sell at $57 after hours today the shares I purchased at $52.XX during the day today...
The market cap for AUMN is $260M according to Google, and they have $120M in cash after the recent sale of $30M worth of shares to the Sentient Group (at $7.44/share). So they are given only a $140M credit for the silver and gold they have in the ground and for the fact that in 3 years, they will be producing annually $8M AgEqOz (adding $5M more AgEqOz in 2015). That's just crazy...
ReplyDeleteIn order to make sure that AUMN doesn't drop below $7, I just placed a buy limit order for 500 more shares at $7. Also, just placed a buy limit order at $2.50 for 10 AUMN April 2012 $5 calls. Bring it on, baby!
David,
ReplyDeletein my experience, mining stocks go through a cycles.
They run up when a deposit is discovered and the resource drilled out as people get excited at the opportunity.
Then the stock drops or does nothing for the period while the mine is being built. During this period, the financials look like crap (all expenses, no revenues) and almost any news that comes out is bad (cost overruns, water problems, land stability, can't get tires, etc.). You can get a bump on news of good financing or better mineral grades, but these are less common.
Then when the mine is getting close to production, the stock starts moving up again as the stock can now be more reasonably valued on cash flows and net asset values as the cost to extract the mineral becomes more solid.
After this, the stock starts to go up and down more based on execution and further reserve development.
If AUMN is in that period where the mine is being built, but no production is close, you either have to just be patient or you could try and trade out and back in.
Port,
ReplyDeleteT is a good company and generates good cash flow and if you can increment this selling covered calls, this will likely be a good way to generate good income over the next while. It's also a good stock to own if you think the economy will continue to struggle.
If, on the other hand, you think the economy gets better, even slowly, there are a lot more beaten down stocks that should move back to traditional valuation metrics over the next year or two. Specifically, I like financials and energy, but some tech also looks good as do many other individual stocks.
PXP- Wow.
ReplyDeleteTZA - Lowered my bid to $26.50 in order to make certain market doesn't run too high...
ReplyDeleteGPL - $2.52 has been an important resistance level, let's see if this one can maintain this level...
ReplyDeleteWMB - There's another one that's had a great run...
ReplyDeleteDavid - I hope you're not looking to sell CSTR here...after listening to that call again and running the numbers, this price increase will do wonders for this company's bottom line. And my take is they used the Durbin Amendement as an excuse to raise prices. Now that they have 34,000 kiosks out there and own a leading market share, they're using it as an opportunity to really ramp up EPS.
ReplyDeleteBy my quick math, this price hike could have raised EPS for this past quarter from $1.18 to $1.85...for JUST THIS QUARTER. I think the price hike can increase operating profit for the company by about 55 to 60%, which is just insane.
Also the company is going to announce a streaming partner very soon (before year end), which will significantly increase the redbox.
sorry message got cut off...meant significantly increase investors perception of the lifespan of redbox.
ReplyDeleteTOF- Looks like 47.50 is a battle line.
ReplyDeleteMark - I'm holding man. The company's prospects have actually gotten better as a result of this conference call.
ReplyDelete