Continue reading Is the U.S. debt causing weakness in the dollar?

Is the U.S. debt causing weakness in the dollar? originally appeared on BloggingStocks on Tue, 17 Nov 2009 10:30:00 EST. Please see our terms for use of feeds.

With a total statutory debt limit of $12.1 trillion ($12,100,000,000,000) and the U.S. population at 304 million (304,000,000), the debt per American is $39,800.

Continue reading How much is your portion of the U.S. debt?

How much is your portion of the U.S. debt? originally appeared on BloggingStocks on Sun, 15 Nov 2009 15:15:00 EST. Please see our terms for use of feeds.

Continue reading Are low interest rates hurting the U.S. dollar?

Are low interest rates hurting the U.S. dollar? originally appeared on BloggingStocks on Thu, 05 Nov 2009 09:50:00 EST. Please see our terms for use of feeds.

Pigs at the Minnesota state fair have tested positive for the H1N1 "swine" flu virus in preliminary tests.

Confirmation tests are pending, but this could be bad news and cause panic within the pork industry. Pork belly futures and companies like Smithfield Foods (NYSE: SFD), Tyson (NYSE: TSN), and Hormel (NYSE: HRL) are a few that could be affected.

Continue reading Swine flu hits pigs -- will pork panic follow?

Swine flu hits pigs -- will pork panic follow? originally appeared on BloggingStocks on Sun, 18 Oct 2009 11:40:00 EST. Please see our terms for use of feeds.

There is a bill making rounds on Capitol Hill that would provide a tax break for up to $3,500 for pet expenses. Does Fido really deserve a tax deduction? Do we really need to subsidize pet ownership in this country?

The recession has been extra hard on pets as people have abandoned pets at shelters they are no longer able to properly care for them. Pet can be very expensive between food, visits to the vet and increased rent. Those of you who think dog food is expensive should try to feed a horse sometime!

Continue reading Does Fido deserve a tax break?

Does Fido deserve a tax break? originally appeared on BloggingStocks on Tue, 13 Oct 2009 16:45:00 EST. Please see our terms for use of feeds.

President Obama started an intense debate in recent months about national health care. People are concerned about how to pay for the high cost of health care in America and feel it is just too expensive. There has to be a better way!

I like oranges and I grew up in Wisconsin, but in January oranges do not grow very well in Wisconsin. I don't know why -- I am not a horticulturalist -- but maybe it's the lack of sunlight, hard frozen tundra, blowing snow or temperatures of 25 below zero. We could spend a long time pointlessly debating the actual reason.

Continue reading Can you cut your health care costs 90% and get a free vacation?

Can you cut your health care costs 90% and get a free vacation? originally appeared on BloggingStocks on Fri, 02 Oct 2009 14:00:00 EST. Please see our terms for use of feeds.

It has been about a year since Lehman Brothers failed and this financial crisis started, and it has hit many of the banks hard including Bank of American (NYSE: BAC), Citigroup (NYSE: C) and America International Group (NYSE: AIG).

There has been one thing that has been bugged me in the coverage of it since then. Frequently, reporters use words like unprecedented or unparalleled to describe it. That is false! Financial crises, panics, crashes, bubbles, and bank failures are really about a dime a dozen.

Continue reading Are we going to crash again?

Are we going to crash again? originally appeared on BloggingStocks on Mon, 14 Sep 2009 14:20:00 EST. Please see our terms for use of feeds.

The Obama administration has announced that it is imposing tariffs on Chinese tire imports. The three-year plan will be have 35% tariffs the first year, 30% tariffs the second year, and 25% tariffs the third year.

This is good news for U.S. tire manufacturers and bad news for Chinese tire makers. American consumers will pay more for tires over the next three years than they would if they could buy cheap Chinese tires, but it will be a benefit for U.S. big labor and domestic tire makers as their products will be more competitive.

Continue reading American jobs, Chinese tires or trade war?

American jobs, Chinese tires or trade war? originally appeared on BloggingStocks on Sun, 13 Sep 2009 13:40:00 EST. Please see our terms for use of feeds.

Given the recent controversy over Obama's address to school children Tuesday, I was interested to see the speech released on the White House web site. While not all schools will be showing the speech, it is still likely to have a huge audience of many students across the nation. I looked to see which companies might benefit from this exposure.

Overall, Obama encourages kids to study hard, be responsible and overcome the many obstacles they face, while relating his own difficulties from school.

Google (NASDAQ: GOOG) gets a positive mention as an example of the kind of company to strive to build.

The iPhone also makes it into the speech, to the benefit of Apple (NASDAQ: AAPL).

J. K. Rowling -- author of the Harry Potter series -- gets included, a plus for her publisher, Scholastic Corp. (NASDAQ: SCHL), and Time Warner (NYSE: TWX), which has released the movies based on the books.

Continue reading Which companies get extra credit in Obama's school address?

Which companies get extra credit in Obama's school address? originally appeared on BloggingStocks on Tue, 08 Sep 2009 09:00:00 EST. Please see our terms for use of feeds.

With Barack Obama's stimulus plan working through Congress, there is a lot of negotiating going on. The plan that passed the House of Representatives cost $819 billion dollars. Millions, billions, and trillions: all these numbers can start to lose meaning.

As much as we would all like a free lunch, we know that there is no free lunch and ultimately you the taxpayer are going to have to pay for this. Let's estimate some number on this a few different ways:

$819 billion dollars for the House version.
303 million people in the US
That costs $2,700 for each man, woman and child

Continue reading How much will Obama's Stimulus plan cost you?

How much will Obama's Stimulus plan cost you? originally appeared on BloggingStocks on Fri, 06 Feb 2009 16:15:00 EST. Please see our terms for use of feeds.

Market fear has been running rampant recently and with the Dow Jones Industrial Average dropping hundreds of points daily, it is easy to understand why. The CBOE Volatility Index know as the VIX has hit all time high levels that have exceed all previous readings since they started the index back in 1990.

Today the VIX hit 70.90; a month ago it closed at 24.52 ---an average level for the year. That is a 189% rise in the last month! In 2007 it averaged 17.3.

Before the current crisis the highest reading for the VIX was 45.74 recorded on 10/8/98. That means we have surpassed the previous high by 55%.

The VIX is based on call option premium scared investors are willing to pay for protection on their stocks.

Kevin Kersten is an Stock and Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

Market crash fear index up 189 percent originally appeared on BloggingStocks on Fri, 10 Oct 2008 12:21:00 EST. Please see our terms for use of feeds.

Newt Gingrich has gone on the record with a solution to the crisis that is the best I have seen so far. Rather than pass a $700 billion bailout, suspend the accounting rules that are causing the liquidity crisis to begin with.

In the past few years, accounting rules changed and these changes are in part causing the current crisis. Specifically, the problem is mark-to-market accounting where all assets are required to be valued at current market prices. If the market is temporarily depressed, it can cause an artificial crisis.

Let me give a silly but simple illustration. If you have 20 one dollar bills in your wallet, we would all agree you have a net worth of $20. Thirsty Bob also has one dollar bill in his wallet and walks into the break room and wants to buy a Coke. Soda in the machine costs 50 cents, but it only takes quarters. Thirsty Bob asks if anyone has change and they all say no. Sam says he has only two quarters and will trade Thirsty Bob -- who is really thirsty -- two quarters for a dollar. Thirsty Bob quickly agrees to take Sam up one his offer in order to get the Coke now. Bob knows that two quarters for a dollar is a bad deal, but he is takes the deal anyway.

Continue reading Would suspending mark-to-market rule solve the financial crisis?

Would suspending mark-to-market rule solve the financial crisis? originally appeared on BloggingStocks on Tue, 30 Sep 2008 10:15:00 EST. Please see our terms for use of feeds.

There is a bit of trepidation as I sit here at my screen, watching the S&P 500 drop more than 3%, reading about yet another bank "buyout," and especially after skimming through Congress's just-released 110 page $700 billion Emergency Economic Stabilization Act -- Wall Street bailout plan.

Apparently, no on likes it. The bright point of the plan is the two inch margins and the double spacing that make it readable.

As an economist, I am very concerned about the long term consequences of the plan, whether it will train the markets to expect government intervention. Also, the sheer cost is very high -- about $4,600 per working person -- unless, of course, the government is able to make money with it.

Is this just the fore shocks and tremors before the financial earthquake? With all these banks failing, things could get very messy. Is this market setting up for a crash?

Continue reading Will the market crash in October?

Will the market crash in October? originally appeared on BloggingStocks on Mon, 29 Sep 2008 12:30:00 EST. Please see our terms for use of feeds.

Bernanke warned that a recession might come if the bailout plan did not pass. And as much as I like the idea of the government bailout of Wall Street -- I hate government interference in the free markets, and bailouts can encourage more bad behaviour. It is hard to get a good understanding of the cost of this Wall Street bailout plan. But I ran some numbers that I thought were interesting.

• $700 billion cost of proposed plan
• 305 million estimated number of Americans
• $2,295 estimated cost per American
• 151 million estimated workforce (excludes retirees, kids, etc.)
• $4,635 per working American
• $13.8 trillion estimated US gross domestic product
• 5.1% cost of bailout plan in one year's domestic product
• 13 days each American has to work to pay off bailout plan (5% of a year)

Considering we could be looking at a recession, and the economy normally grows 3% a year, this does not look so bad. A $700 billion dollar bailout would be equivalent to a one-year recession with a negative 2% growth rate. These calculations are a rough estimate of the impact of such a plan and gives one food for thought as to which is worse. So which would you prefer, a recession or a bailout?

Kevin Kersten is an Stock and Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

What would the bailout plan cost you? originally appeared on BloggingStocks on Tue, 23 Sep 2008 17:15:00 EST. Please see our terms for use of feeds.

Stock options give investors a great tool to control risks or speculate on stocks. Call options give investors the right to buy the stock and are typically considered a bullish tool, while puts give investors the right to sell the stock and are typically considered a bearish bet on the future price movement of the stocks. I was interested in seeing what equities have the highest open interest or most outstanding options issued on them looking at all strikes and all months (excluding ETFs).

The top six stocks with most options issued are:

Citigroup (NYSE: C) has an open interest of 5,366,521 options, 2,751,255 are calls and 2,615,266 are puts. The stock has been trending down with the rest of the financials for the last year. Speculation now appears equal with about the same number of calls and puts traded.

Bank of America (NYSE: BAC) has an open interest of 5,204,313 options; 2,575,909 are calls and 2,628,404 are puts. Like Citigroup, this stock has seen its price cut in half over the last year.

General Electric (NYSE: GE) has an open interest of 3,877,635 options; 2,138,926 are calls and 1,738,709 are puts. With 23% more calls than puts outstanding, speculators look slightly bullish on GE.

Continue reading The top 6 most optioned stocks

The top 6 most optioned stocks originally appeared on BloggingStocks on Wed, 09 Jul 2008 16:57:00 EST. Please see our terms for use of feeds.

We had the internet bubble and the real estate bubble and now, there is the ethanol bubble. Recently, I ran some numbers on ethanol and to my amazement realized that it is - too use a catch phrase from the environmental world -- not sustainable. Turning food into fuel is just plain silly; and when oil prices come down the ethanol bubble could pop big.

I ran did a little research and found some numbers:

• 47% of the Mexician' diet is corn
• it takes 2.4 pounds of corn a day to feed a hungry person
• it takes 22 pounds of corn to make one gallon of ethanol
• there are 42 gallons of refined gas in one barrel of oil

Continue reading World food shortage and the ethanol bubble

World food shortage and the ethanol bubble originally appeared on BloggingStocks on Mon, 07 Jul 2008 13:27:00 EST. Please see our terms for use of feeds.

I ran into an interesting article in Fortune titled "Don't expect another bull market: Stock returns may never be the same -- at least for this generation of investors." The article made a bold prediction:

Barring a miracle -- or the creation of a New Math of the market variety -- there's no way we'll ever see a bull market along the lines of what so many of us grew up with.

This is very interesting from a sentiment viewpoint. A few years ago, at the height of the dot com boom, some claimed that we were creating a new economy in which the stock market could not go down. Then it crashed.

I say, don't buy into these extremes. In the long run, the market will have ups and downs, but will continue a slow long-term uptrend. We may have rough periods of adjustment -- like we are currently seeing in housing -- but that doesn't mean that the fundamentals have changed.

Articles like this can be a good contrarian sign. As writers predict the end of stock market gains, it may be a sign that we have reached the bottom.

Kevin Kersten is an Stock and Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

Is the bull market over? originally appeared on BloggingStocks on Wed, 05 Mar 2008 11:00:00 EST. Please see our terms for use of feeds.

People are always looking for the perfect investment that is going to be able to beat the market. I have been intrigued recently with the Ultra EFTs. For some investors Ultra ETF's may be the magic bullet to beat the market over the very long term.

ETF's such as SPY, QQQQ and DIA have become very popular tools for investors to mirror the indexes with minimal fees. The QQQQ has a management fee of 0.40% a real bargain compared to some mutual fund fees. The ETFs do not try to beat the market they try to match the market; but for an investor who has other investments it can be a great vehicle.

Recently, I noticed the ultra ETF and I guess they have been around for a couple of years. Ultra ETFs try to exactly double the market performance. If the market goes up 2% their goal is to go up 4%. On the other hand if the market falls 3% their goal is to fall 6%. No matter what the market does; the ultra EFT is suppose to double it.

Continue reading Can one beat the market long term with ultra EFTs?

Can one beat the market long term with ultra EFTs? originally appeared on BloggingStocks on Tue, 04 Mar 2008 18:05:00 EST. Please see our terms for use of feeds.

To say the least, this has been one interesting and turbulent week for the stock market. We saw international markets crash for two days, severe down action, a three-quarter point emergency interest rate cut by the Fed, a $7 billion mistake in France and work on a rebate package in Congress.

It can be a little hard to understand international markets and how they all work. But allow me to use an analogy to explain their interaction.

We all grew up in a family, and one of the most important people in the family is Mom. Mom does a lot of work -- making meals, doing laundry, cleaning the house and even working outside of the house. Families can have very complicated interpersonal dynamics in them. There is a saying that "if Mama ain't happy ... nobody's happy." And I think there is some major truth to it.

But it applies to international markets as well. The U.S. market is the "mama" and the most important player. The $13 trillion U.S. economy is bigger, stronger and more dynamic than each of the other markets, and if it has troubles, other markets have troubles as well.

Continue reading If Mama ain't happy: Understanding the global market meltdown

If Mama ain't happy: Understanding the global market meltdown originally appeared on BloggingStocks on Fri, 25 Jan 2008 16:10:00 EST. Please see our terms for use of feeds.

Last week Bank of America (NYSE: BAC) bought Countrywide Financial (NYSE: CFC). The deal benefits Bank of America in that it gets a big chunk of the US mortgage market and a nice tax write-off, while Countrywide gets saved from a deep mortgage mess and pending liquidity crisis.

What is interesting to options traders though is the option activity that happened in the days before the deal. The deal was widely reported on Friday 1/11/08. But the stock options tell a slightly different story. It appears as if there are some who got wind of this deal a little early.

Call options allow an investor to take on a levered position in the stock and make huge gains if the stock appreciates. In the days before the buyout the call options were extremely active and this is typical of insider trading on the news. If you look at the number of options trading on the day before the announcement and the number that were trading several days earlier, it is very apparent that some traders had wind that something was up. On 1/10/08, the day before the announcement 195,000 January call contracts traded hands. If you compare that to the volume of three days earlier there were only 13,000 January calls traded. That is a 14 fold increase in the daily number of January contracts trading.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about. Mr Kersten does not own or control BAC or CFC positions at the time of this writing.

Countrywide options active before BAC buyout originally appeared on BloggingStocks on Tue, 15 Jan 2008 11:44:00 EST. Please see our terms for use of feeds.