Weekend Update – Page 9

May 9, 2015

Weekend Update – May 10, 2015

Many years ago people were fascinated by the movie “The Three Faces of Eve.”

It was the story of a woman afflicted with what was known at the time as “Multiple Personality Disorder,” although many incorrectly believed that the story was one characteristic of an individual with schizophrenia.

For her performance of all 3 characters, none of whom was aware of any of the others, Joanne Woodward won an Oscar for “Best Actress.” Yet 30 years later, in a sign of an unjust society, neither Eddie Murphy nor Arsenio Hall received any notice whatsoever from The Academy for each portraying 4 distinct characters.

While there’s still hope that such acting genius may someday be rewarded, there’s very little hope of being able to understand just what face the market will be showing from day to day.

Doug Kass, a well known hedge fund manager is fond of Tweeting that the market has no memory from day to day and that observation, while not seeming to be offering a diagnosis, has it well characterized.

Lack of memory for important information not explained by ordinary forgetfulness is one of the cardinal signs of Dissociative Identity Disorder and this market, however one wishes to characterize it, may have the same affliction as was suffered by Eve. But as long as it keeps reaching new record highs, it too will keep winning awards for its performance.

While some may say that the market is “acting schizophrenic,” they neither know the distinction between that malady and Dissociative Identity Disorder, nor understand the use of adverbs. While volatility may also be a hallmark of the disorder the rapid alternations between market plunges and surges are doing nothing to enhance volatility. In fact, for all of the uncertainty, volatility remains within easy striking distance of its 52 week low and was virtually unchanged last week.

In a week with very little economic news scheduled until this past Friday’s Employment Situation Report and with most key companies having already reported earnings, there was little reason to expect many large moves. However, as has been the case in recent weeks, there hasn’t always been the requirement of an identifiable reason for the market making a large move. What has also been the case is that so often the very next day brought about a reversal of fortune or mis-fortune of the previous day and another subsequent Doug Kass Tweet.

Those Kass market memory Tweets are fairly common and I do believe that he recalls having sent them on many previous occasions. While I offer him no diagnosis based on those Tweets, they do perfectly sum up the market that we’ve come to know.

The problem is that which just don’t know which market will be showing up from day to day and sometimes from hour to hour.

I wonder if Eve had that same problem?

Compounding the inherent uncertainty occurs when an otherwise dependable and reliable source seems to turn on you.

Mid-week we got to see a Janet Yellen face that we had only seen once previously. It was the face that unlike its more commonly visible counter-part, wasn’t the one that sought directly or indirectly to calm and prop up stock markets.

During her tenure, especially during her post-FOMC Statement release press conferences, most of us have come to appreciate the boost of confidence Janet Yellen has supplied markets, as well as having an appreciation for the manner in which she balances pragmatic and social concerns with monetary policy.

But this week instead it was that Yellen character that questions stock market value, almost in the same way as a predecessor pointed a finger at “frothy exuberance.”

While not quite as bad as the racy and wild side of Eve that tried to murder her child, the value questioning side of Janet Yellen sent markets for a tumble. But just as after her 2014 comments about “substantially stretched” valuation metrics in bio-technology companies, the impact may be short lived, as it was this week.

Perhaps some thanks for that should go to the auspiciously timed release of the Employment Situation Report that avoided creating either a “bad news is good news” or “good news is bad news” by delivering numbers that were right in line with expectations.

Of course, when considering how much contra-distinction there has been in recent monthly Employment Situation Reports one might be excused for believing that they too suffer from Dissociative Identity Disorder and it may be injurious to one’s portfolio health to base too many actions on any given month’s data.

This coming week is another very slow one for economic news. While earnings season is now winding down the catalyst or the retardant for the market to get to the next new set of highs may be the slew of national retailers reporting earnings this week.

Some 6 months ago those retailers were among those optimistically talking about how they would benefit from increased consumer spending as a result of lower energy prices.

About that….

Those same retailers may be putting on a different face when reporting this week if those gains haven’t materialized, as there are no indications that the GDP has grown as expected.

To the contrary, actually.

Only one of the major retailers will report before this Wednesday’s Retail Sales Report, but it was the CEO of that company, Terry Lundgren, who was initially among the most optimistic regarding the prospects for Macys (NYSE:M) and who months later made the very astute observation that the energy savings experienced by consumers hadn’t accumulated sufficiently to create the feeling of actually having more discretionary cash to spend.

Sooner or later the projections for significant growth in GDP will have to be written off as just the rants of economists who had surrendered their better judgment to their racy and wild alternate egos and who can’t be blamed for their actions.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

After the last two weeks, I think, that even after a previous lifetime of toiling away for a paycheck and not really appreciating its significance, I finally understand the meaning of “TGIF.”

The strong recoveries seen in each of the past two Fridays helped to rescue some weeks that were turning out to be fairly dour.

The downside, however, is that when the coming week is about to begin, so many of the stocks that you had been eying for a purchase were up sharply to end the previous week.

There are probably worse problems to have in life, so I won’t dwell too long on that one, but that is where this past Friday’s 267 point gain in the DJIA has us beginning the new week.

Sinclair Broadcasting (NASDAQ:SBGI) has quietly become the largest television station operators in the United States. While seemingly the only topics discussed these days are about streaming signals, satellites and cable there’s still life left in terrestrial television. The family controlled company certainly believes in the future of traditional television broadcasting as over the past several years the company has actively amassed new stations around the country.

Following an initial move higher after it reporting earnings shares gave up some ground and are now about 9% below its recent high from last month, at which time I had my previous shares assigned.

I purchased shares on 5 occasions in 2014 and have been waiting for a chance to do so in 2015. With its recent decline and with this being the final week of a monthly option cycle, I would consider once again adding shares in the hopes of a quick assignment. However, if not assigned, shares are then ex-dividend May 28th and I would consider selling either June or the July 2015 options on those shares.

Mattel (NASDAQ:MAT) has suffered of late.

It literally started 2015 off by being named one of the worst run companies of 2014 on New Years Day. Its shares continued to stumble even after its CEO unexpectedly resigned a few weeks later as the lure of its Barbie was waning in a world of electronic toys more welcomingly embraced by some of its competitors.

More recently some of the negativity that characterized 2015 had abated as the market actually embraced the smaller than expected loss at the most recent earnings report. While some of the gains have been since digested, Mattel may have now seen what the near term bottom looks like.

With earnings now out of the way for a short while and an upcoming ex-dividend date the following week, I am considering adding shares, but bypassing the week remaining on the monthly May 2015 contract and going directly to the June contract and banking on some share gains and not just option premiums and dividends for the effort.

Fastenal (NASDAQ:FAST) is one of those stocks that I always like to own, as it is an assuming kind of company that tends to reflect what is going on in the economy and is relatively immune from currency exchange issues

Most recently, after having positively reacted to earnings it failed to climb back toward where it had been at the time of its January earnings report. However, it does appear as if it is building a base to make that assault. As with Sinclair Broadcasting and Mattel, Fastenal only offers monthly options, so any potential purchase this week paired with an option sale could look at the May 15, 2015 contracts, effectively making it a weekly contract, or go directly to the June 2015 expirations, especially if believing that there is some capital appreciation in store for shares.

DuPont (NYSE:DD) and Teva Pharmaceuticals (NYSE:TEVA) have both spent a lot of time in the news lately and both are ex-dividend this week.

DuPont is one stock that came to mind when bemoaning the strong gains seen this past Friday, as it was definitely a beneficiary of broad market strength. It continues to be embroiled in a fight with activists which may have profound ramifications with how investors look at and value a company’s intellectual and research pursuits.

The question of how valuable research activities are to a company if they are part of a separate company is one that pits short term and long term outlooks against one another. Although I tend to trade for the short term, and while I believe that Nelson Peltz is generally a positive influence on the companies in which he has taken a significant financial stake, I disagree with the idea of splitting off assets that are at the core of developing intellectual property.

However, as long as the fighting continues, there is opportunity to see shares climb even higher. It is precisely because of the uncertainty that comes along with the ongoing conflict that DuPont is offering an exceptionally high option premium, particularly in a week that it is ex-dividend.

The world of pharmaceutical companies was once so staid. Every self respecting portfolio was required to own shares in a high dividend paying blue chip pharmaceutical company, many of whom have been swallowed up over the years in the process of creating even larger and less responsive behemoths.

From nothingness, generic drug companies and bio-pharmaceutical companies are becoming their own behemoths and are recently at center stage with seemingly daily merger and acquisition activity.

Teva has joined the crowd seeking to grow through acquisition and may be willing to fight for the opportunity to grow. Of course, its target may have some other ideas, including possibly seeking to purchase Teva itself.

Like DuPont, the uncertainty in the air has it offering a very appealing option premium even in a week that shares are ex-dividend. With shares having recently declined by about 10% in the past month, it’s possible that some of the downside risk that may be associated with a fight or a failed conquest attempt has already been discounted.

Zillow (NASDAQ:Z) reports earnings this week having declined about 25% since its last earnings report. Its CEO, a darling of cable business news blamed the prolonged regulatory process encountered during its proposed purchase of its competitor Trulia, for leaving the company “trending a couple quarters behind where we’d like to be.”

But that comment was from last month, so the expectation would be that the market is prepared for whatever may come their way as earnings are reported this week.

That kind of logic is fine until faced with counter-examples, such as SanDisk (NASDAQ:SNDK) which despite warning upon warning, still managed to surprise everyone. Of course, the same could be said for early 2014 when markets seemed to be surprised by how bad weather impacted earnings after having heard nothing but how weather was effecting sales for months.

In this case the option market is implying an 8.1% move for Zillow after earnings are reported. That’s fairly mild after the past 2 weeks of having seen declines on the order of 25% coming from companies that couldn’t place many excuses for its performance at the feet of currency exchange woes.

Finally, it takes a lot for me to consider a new stock and to think about putting it into portfolio rotation. It’s even more difficult to do that with a company that has less than 6 months of public trading behind it.

I recently found my second ever blog article, one from 8 years ago, which was about peer lending re-posted on an aggregator site. At the time, I looked at peer lending as a potential means of diversifying one’s portfolio, especially with the aim of generating income streams.

While the early leader of the concept is still around, it was LendingClub (NYSE:LC) that finally brought it to the equity markets.

Its earnings last week, despite being slightly better than the consensus, did nothing to stem the downward price spiral since the IPO. The stock’s close tracking of the 10 Year Treasury Note broke down in March, but I believe that with the stock approaching its IPO price that concordance with interest rates will soon be re-established.

If that proves to be the case and there is a suggestion that the bond market may now be on the right path in predicting the inevitable rise in rates, the LendingClub and its shares are likely to prosper.

Like an unusual number of stocks presented this week, LendingClub also offers only monthly options. However, without a dividend to consider, I would look at any potential purchase of shares as a short term trade and would sell the May 2015 options, which are offering a very attractive premium as the possibility of further share price declines are being factored in by the options market.

Traditional Stocks: Fastenal, Mattel, Sinclair Broadcasting

Momentum Stocks: LendingClub

Double Dip Dividend: DuPont (5/13), Teva Pharmaceuticals (5/15)

Premiums Enhanced by Earnings: Zillow (5/12 PM)

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

May 2, 2015

Weekend Update – May 3, 2015

For all the talk about how April was one of the best months of the year, that ship sailed on April 30th when the DJIA lost 192 points, to finish the month just 0.2% higher.

It will take complete Magellan-like circumnavigation to have that opportunity once again and who knows how much the world will have changed by then?

Higher Interest rates, a disintegrating EU, renewed political stalemate heading into a Presidential election, rising oil prices and expanding world conflict are just some of the destinations that may await, once having set sail.

Not quite the Western Caribbean venue I had signed up for.

With the market getting increasingly difficult to understand or predict, I’m not even certain that there will be an April in 2016, but I can’t figure out how to hedge against that possibility.

But then again, for all the talk about “Sell in May and go away,” the DJIA recovered all but 9 of those points to begin the new month. With only a single trading day in the month, if there are more gains ahead, that ship certainly hasn’t sailed yet, but getting on board may be a little more precarious when within just 0.4% of an all time closing high on the S&P 500.

The potential lesson is that for every ship that sails a new berth is created.

What really may have sailed is the coming of any consumer led expansion that was supposed to lead the economy into its next phase of growth. With the release of this month’s GDP figures, the disappointment continued as the expected dividend from lower energy prices hasn’t yet materialized, many months after optimistic projections.

How so many esteemed and knowledgeable experts could have been universally wrong, at least in the time frame, thus far, as fascinating. Government economists, private sector economists, CEOs of retail giants and talking heads near and far, all have gotten it wrong. The anticipated expansion of the economy that was going to lead to higher interest rates just hasn’t fulfilled the logical conclusions that were etched in stone.

Interestingly, just as it seems to be coming clear that there isn’t much reason for the FOMC to begin a rise in interest rates, the 10 Year Treasury Note’s interest rate climbed by 5%. It did so as the FOMC removed all reference from a ticking clock to determine when those hikes would begin, in favor of data alone.

I don’t know what those bond traders are thinking. Perhaps they are just getting well ahead of the curve, but as this earnings season has progressed there isn’t too much reason to see any near term impetus for anything other than risk. No one can see over the horizon, but if you’re sailing it helps to know what may be ahead.

What started out as an earnings season that was understanding of the currency related constraints facing companies and even gave a pass on pessimistic guidance, has turned into a brutally punishin

g market for companies that don’t have the free pass of currency.

All you have to do is look at the reactions to LinkedIn (NYSE:LNKD), Twitter (NYSE:TWTR) and Yelp (NYSE:YELP) this week, as they all reported earnings. Some of those would have gladly seen their stocks tumble by only 20% instead of the deep abyss that awaited.

Before anyone comes to the conclusion that the ship has sailed on those and similar names, I have 4 words for you: Green Mountain Coffee Roasters, now simply known as Keurig Green Mountain (NASDAQ:GMCR).

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

Coach (NYSE:COH) reported earnings last week and in 2015, up until that point, had quietly diverged from the S&P 500 in a positive way, if you had owned shares. As the luster of some of its competitors was beginning to fade and in the process of implementing a new global strategy, it appeared that Coach was ready to finally recover from a devastating earnings plunge a year ago.

It was at that time that everyone had firmly shifted their favor to competitor Michael Kors (NYSE:KORS) and had started writing Coach off, as another example of a company sailing off into oblivion as it grew out of touch with its consumers.

Who knew at that time that Kors itself would so quickly run out of steam? At least the COach ride had been a sustained one and was beginning to show some signs of renewed life.

I’ve owned shares of Coach many times over the years and have frequently purchased shares after earnings or sold puts before or after earnings, always in the expectation that any earnings plunge would be short lived. That used to be true, but not for that last decline and I am still suffering with a lot that I optimistically sold $50 August 2015 calls upon, the day before earnings were released.

Unlike many stocks that have suffered declines and that then prompts me to add more shares, I haven’t done so with Coach, but am ready to do so now as shares are back to where they started the year.

With a dividend payout that appears to be safe, an acceptable option premium and the prospects of shares re-testing its recently higher levels, this seems like an opportune time to again establish a position, although I might consider doing so through the sale of puts. If taking that route and faced with an assignment, I would attempt to rollover the puts until that time in early June 2015 when shares are expected to go ex-dividend, at which point I would prefer to be long shares.

As far as fashion and popularity go, Abercrombie and Fitch (NYSE:ANF) may have seen its ship sail and so far, any attempt to right the ship by changing leadership hasn’t played out, so clearly there’s more at play.

What has happened, though, is that shares are no longer on a downward only incline, threatening to fall off the edge. It’s already fallen off, on more than one occasion, but like Coach, this most recent recovery has been much slower than those in the past.

But it’s in that period of quiescence for a stock that has a history of volatility that a covered option strategy, especially short term oriented, may be best suited.

Just 2 weeks ago I created a covered call position on new shares and saw them assigned that same week. They were volatile within a very narrow range that week, just as they were last week. That volatility creates great option premiums, even when the net change in share price is small.

With earnings still 3 weeks away, as is the dividend, the Abercrombie and Fitch trade may also potentially be considered as a put sale, and as with Coach, might consider share ownership if faced with the prospect of assignment approaching that ex-dividend date.

T-Mobile (NYSE:TMUS), at least if you listen to its always opinionated CEO, John Legere, definitely has the wind blowing at its back. Some of that wind may be coming from Legere himself. There isn’t too much doubt that the bigger players in the cellphone industry are beginning to respond to some of T-Mobile’s innovations and will increasingly feel the squeeze on margins.

So far, though, that hasn’t been the case. as quarterly revenues for Verizon (NYSE:VZ) and AT&T (NYSE:T) are at or near all time highs, as are profits. T-Mobile, on the other hand, while seeing some growth in revenues on a much smaller denominator, isn’t consistently seeing profits.

The end game for T-Mobile can’t be predicated on an endless supply of wind, no matter how much John Legere talks or Tweets. The end game has to include being acquired by someone that has more wind in their pockets.

But in the meantime, there is still an appealing option premium and the chance of price appreciation while waiting for T-Mobile to find a place to dock.

Keurig Green Mountain was the topic of the second article I everpublished on Seeking Alpha 3 years ago this week. It seems only fitting to re-visit it as it gets to report earnings. Whenever it does, it causes me to remember the night that I appeared on Matt Miller’s one time show, Bloomberg Rewind, having earlier learned that Green Mountain shares plunged about 30% on earnings.

Given the heights at which the old Green Mountain Coffee Roasters once traded, you would have been justified in believing that on that November 2011 night, the ship had sailed on Green Mountain Coffee and it was going to be left in the heap of other momentum stocks that had run into potential accounting irregularities.

But Green Mountain had a second act and surpassed even those lofty highs, with a little help from a new CEO with great ties to a deep pocketed company that was in need of diversifying its own beverage portfolio.

Always an exciting earnings related trade, the options market is implying a 10.2% price move upon earnings. In a week that saw 20% moves in Yelp, LinkedIn and Twitter, 10% seems like child’s play.

My threshold objective of receiving a 1% ROI on the sale of a put option on a stock that is about to report earnings appears to be achievable even if shares fall by as much as 12.1%.

It will likely be a long time before anyone believes that the ship has sailed on Intel (NASDAQ:INTC), but there was no shortage of comments about how the wind had been taken out of Intel’s sales as it missed the mobile explosion.

As far as Intel’s performance goes, it looks as if that ship sailed at the end of 2014, but with recent rumors of a hook-up with Altera (NASDAQ:ALTR) and the upcoming expiration of a standstill agreement, Intel is again picking up some momentum, as the market initially seemed pleased at the prospects of the union, which now may go the hostile route.

In the meantime, with that agreement expiring in 4 weeks, Intel is ex-dividend this week. The anticipation of events to come may explain why the premium on the weekly options are relatively high during a week that shares go ex-dividend.

Finally, perhaps one of the best examples of a company whose ship had sailed and was left to sink as a withered company was Apple (NASDAQ:AAPL).

Funny how a single product can turn it all around.

it was an odd week for Apple , though. Despite a nearly $4 gain to close the week, it finished the week virtually unchanged from where it started, even though it reported earnings after Monday’s close.

While it’s always possible to put a negative spin on the various components of the Apple sales story, and that’s done quarter after quarter, they continue to amaze, as they beat analyst’s consensus for the 10th consecutive quarter. While others may moan about currency exchange, Apple is just too occupied with execution.

Still, despite beating expectations yet again, after a quick opening pop on Tuesday morning shares finished the week $4 below that peak level when the week came to its end.

None of that is odd, though, unless you’ve grown accustomed to Apple moving higher after earnings are released. What was really odd was that the news about Apple as the week progressed was mostly negative as it focused on its latest product, the Apple Watch.

Reports of a tepid reception to the product; jokes like “how do you recognize the nerd in the crowd;” reports of tattoos interfering with the full functioning of the product; criticizing the sales strategy; and complaints about how complicated the Apple Watch was to use, all seemed so un-Apple-like.

Shares are ex-dividend this week and in the very short history of Apple having paid a dividend, the shares are very likely to move higher during the immediate period following the dividend distribution.

With the announcement this past week of an additional $50 billion being allocated to stock buybacks over the next 23 months, the ship may not sail on Apple shares for quite some time.

Traditional Stocks: Coach

Momentum Stocks: Abercrombie and Fitch, T-Mobile

Double Dip Dividend: Intel (5/5), Apple (5/7)

Premiums Enhanced by Earnings: Keurig Green Mountain (5/6 PM)

April 24, 2015

Weekend Update – April 26, 2015

The question of how much longer this market rally can keep going is the same question that’s been asked ever since the last time the market had a 10% loss.

Actually even that time, way back in April 2102, it wasn’t quite a 10% loss. For that, you would have to go back to 2011.

But that’s splitting hairs.

I wish I would have known Michael Batnick, also know as “The Irrelevant Investor” on Twitter, back in those days.

He had the answer to that burning question that is every bit as applicable today as it was every time the market hit a new high over the past few years.

With each of those highs and the gap between corrections growing and growing, it reminded me of the fallacy of believing that after 8 straight spins of the roulette wheel falling on “red” the next spin just had to yield “black.”

The belief that “this time it’s going to be different” is frequently held by those who don’t get shamed even after having been already fooled twice.

Had I known Michael Batnick in 2011, 2012, 2013 or even 2014, he would have told me that it’s hard to make a bear case on the basis of the duration of any move, because the duration is never knowable.

Since I was one of those certain that the ninth spin would just have to fall on black, I’ve also been one of those waiting for a correction since having recovered from the one in 2012. Not only waiting, but convinced that with each and every week we were a week closer to that inevitable decline.

At least that logic wasn’t totally flawed, as we did get a week closer to everything. But mostly, what we’ve gotten closer to has been the next rally higher.

What do you say about a week that ends with the S&P 500 being 1.7% higher and closing at a new all time high, while at the same time the NASDAQ 100 closes at a 15 year high? Granted those S&P 500 highs have come fairly often and fairly regularly, so they don’t really mean very much, but for those that thought that the NASDAQ could never see 5000 again, a good case can be made for never giving up hope.

That’s why I never give up hope that there’s a correction coming.

NASDAQ has given me the strength.

This past week was one almost totally devoid of economic news. Instead, it was one fully dominated by earnings, as it was the first of the two most busy weeks of earnings reports every quarter.

The earnings pattern that has become clear is that revenues are down, but profits are up, especially if you focus on the “earnings per share” part of the report. The lesson to that may be that if you can’t grow your revenues simply find a strategy to shrink your share numbers.

Hashtag “buybacks.”

As long as revenues are lower as a result of the currency exchange issues that everyone has been expecting, the market has been kind. Surprisingly, however, the market has also been kind when companies have taken their guidance lower.

Next week, while still highly focused on earnings, two events within hours of one another may disrupt or enhance the party currently under way and take some attention away from earnings.

Just a few hours before an FOMC Statement release will be a GDP Report. Expectations are that the GDP report will be disappointing, particularly in light of earlier expectations for a consumer led surge in GDP. While disappointing GDP growth could quiet fears of an interest rate increase among those that are still hung up on that eventuality, it could also give FOMC doves another month to hold court.

Is that good news or bad news?

The longer the FOMC doves continue to influence monetary policy the more doubt there can be regarding the strength of economic recovery.

That can’t be good news.

Since it seems as if even bad news has been taken as good news for such a long time, it would seem natural to believe that sooner or later we would be due for some bad news to be finally taken as bad news.

You would think that sooner or later I would learn.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

Among those not faring well this earnings season was General Motors (NYSE:GM), predominantly on disappointing foreign news that went beyond currency exchange. Following a boost in share price following
some quick activist intervention it has returned to a level that makes it more enticing to re-enter into a position.

Having spent only $400 million on its promised $5 billion in share buybacks through the first quarter, as part of its activist appeasement, there is at least something to keep share price artificially inflated as it also artificially inflates earnings per share.

What General Motors has offered amidst all of the uncertainty and bad news over the past year has been an attractive option premium and a good dividend that, thanks to the same activist, is now even better.

Ford Motor (NYSE:F) reports earnings this week and also goes ex-dividend.

I’m not terribly interested in taking earnings risk with Ford, but those earnings are reported the morning of the day before it goes ex-dividend. In the event of a downward move after earnings are released, I would be interested in buying shares if the move down strongly after earnings.

The options market is implying a move of only 3.5%. If it approaches or exceeds that to the downside, I might take that as an indication to buy shares, although I might consider using an extended weekly option, perhaps expiring May 8, 2015, rather than the weekly option that I would ordinarily use.

Also going ex-dividend this week and also having had a difficult time following its earnings release this week is Texas Instruments (NASDAQ:TXN).

In a market that suddenly seems to like “old tech,” what’s older than Texas Instruments? I can still remember buying the most rudimentary of calculators for about $150 more than 40 years ago and thinking that we had now seen everything.

What I didn’t think I would see was a nearly 8% decline on earnings last week. That leaves it still well above its yearly high, but may represent a good re-starting point, particularly as the dividend is at hand, as well. While semi-conductors may have had a hard go of things lately, if looking for a global correction in order to get a better entry point, you may be better served by settling for a more focused correction.

While I don’t like buying shares when they are near their yearly highs, Kinder Morgan (NYSE:KMI) may be an exception, particularly as it is ex-dividend this week.

In the world of energy related companies that have been under significant stress, Kinder Morgan has ironically been a breath of fresh air as it stores and transports combustible fuels for a nation that gets even more energy hungry as prices are dropping.

Cypress Semiconductor (NASDAQ:CY) is a company that I always like owning. Mostly it has been due to the admiration that I have for its CEO, TJ Rodgers, as long as he sticks to his CEO and incubator patron roles.

Occasionally he veers into other areas and then I have to remind myself that what I really admire is the ability to make money by investing in Cypress Semiconductor and that’s far more important than admiration or personal politics.

With its acquisition of Spansion being hailed by investors shares surged to a point that was well outside my comfort zone, but following a 20% decline in the past month, it is now at the upper level of that zone.

Cypress Semiconductor is often very volatile at earnings and this time will likely be no different. While I usually want to consider the sale of puts prior to earnings, in this case I would probably consider the purchase of shares, especially if they continue to move downward in the early part of the week and then consider a sale of June 2015 option contracts, rather than the May 2015 variety, thereby providing additional time for shares to recover if shares drop drastically.

Finally, I’ve been waiting for a chance to enter into a Twitter (NYSE:TWTR) position one way or another. In 2014 I had positions on 10 different occasionsand spent most of that time trying to avoid being assigned shares after having sold put contracts.

In hindsight, I don’t mind the very high maintenance that those positions required, however, the perception of Twitter has changed, as it seems to actually have a plan to monetize itself. More importantly it has the means and the people to execute on their strategies that continue to evolve.

Following a period of withering criticism of its leadership, the unequivocal show of support for its CEO, Dick Costolo by the Board as well as some Twitter founders, seemed to stem the tide of calls for his resignation.

That and earnings.

Following a large move higher after its last earnings report and then slowly migrating higher over the subsequent 3 months, the options market is implying an 11% move next week.

However, a 1% ROI may be possible if selling a weekly put contract even if shares fall by as much as 13.6%. If selling puts and faced with an adverse move beyond the range implied by the options market, my past experience with Twitter has shown that the options market is liquid enough to have a good chance of being able to roll over those puts if trying to avoid assignment and wait out the price cycle until it starts to show signs of recovery.

Alternatively, it has also offered a chance to assume ownership of shares and then generate income by selling calls, that always have premiums reflecting the underlying risk and volatility of the shares.

Traditional Stocks: General Motors

Momentum Stocks: none

Double Dip Dividend: Ford Motor (4/29), Kinder Morgan (4/28), Texas Instruments (4/28)

Premiums Enhanced by Earnings: Cypress Semiconductor (4/30 AM), Twitter (4/28 PM)

April 24, 2015

Weekend Update – April 26, 2015

The question of how much longer this market rally can keep going is the same question that’s been asked ever since the last time the market had a 10% loss.

Actually even that time, way back in April 2102, it wasn’t quite a 10% loss. For that, you would have to go back to 2011.

But that’s splitting hairs.

I wish I would have known Michael Batnick, also know as “The Irrelevant Investor” on Twitter, back in those days.

He had the answer to that burning question that is every bit as applicable today as it was every time the market hit a new high over the past few years.

The belief that “this time it’s going to be different” is frequently held by those who don’t get shamed even after having been already fooled twice.

At least that logic wasn’t totally flawed, as we did get a week closer to everything. But mostly, what we’ve gotten closer to has been the next rally higher.

That’s why I never give up hope that there’s a correction coming.

NASDAQ has given me the strength.

This past week was one almost totally devoid of economic news. Instead, it was one fully dominated by earnings, as it was the first of the two most busy weeks of earnings reports every quarter.

Hashtag “buybacks.”

Next week, while still highly focused on earnings, two events within hours of one another may disrupt or enhance the party currently under way and take some attention away from earnings.

Is that good news or bad news?

The longer the FOMC doves continue to influence monetary policy the more doubt there can be regarding the strength of economic recovery.

That can’t be good news.

You would think that sooner or later I would learn.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

Ford Motor (NYSE:F) reports earnings this week and also goes ex-dividend.

Also going ex-dividend this week and also having had a difficult time following its earnings release this week is Texas Instruments (NASDAQ:TXN).

While I don’t like buying shares when they are near their yearly highs, Kinder Morgan (NYSE:KMI) may be an exception, particularly as it is ex-dividend this week.

That and earnings.

Following a large move higher after its last earnings report and then slowly migrating higher over the subsequent 3 months, the options market is implying an 11% move next week.

Traditional Stocks: General Motors

Momentum Stocks: none

Double Dip Dividend: Ford Motor (4/29), Kinder Morgan (4/28), Texas Instruments (4/28)

Premiums Enhanced by Earnings: Cypress Semiconductor (4/30 AM), Twitter (4/28 PM)

April 17, 2015

Weekend Update – April 19, 2015

When I was a kid just about the funniest word any of us had ever heard was “fink.” Way back then that was pretty much the way Mad Magazine felt too, as it used that word with great regularity.

I was stunned the very first time I actually met someone whose last name was “Fink,” but that came only after some giggles. I think the only thing funnier was when I met Morris Lipschitz.

Sadly, I thought that was funny even though it was after college, as it reminded me of the prank phone calls we used to make as kids.

I think “fink” has since fallen out of common parlance. Back then hearing the word “Fink” word evoked the same reactions as today’s kids may experience when hearing a sentence such as “but I do do what you tell me to do.”

I don’t think that’s very funny after the first 20 or so times, but I’ve gained a certain level of maturity over the years.

I don’t know very much with any degree of certainty, but I do know that I’m never likely to meet Larry Fink, the CEO and Chairman of BlackRock (NYSE:BLK).

With more than $4 trillion under management people at least give the courtesy of listening when Larry Fink speaks, even if they may not agree with the message or the opinion. The only giggles that he may get are when people may feel the need to laugh when they’re not certain if he’s joking.

This week, he wasn’t joking, although there were certainly some, at whom his message was directed, that won’t take it seriously or to heart.

I never really thought about Larry Fink very much until this week whenhe said something that needed to be said.

While investors seem to love buybacks and dividend hikes Fink politely said that CEOs were being “too nice to shareholders.”

The most conventional interpretation is that buybacks and dividends may be coming at the expense of future growth, research and investment in the business. It also calls into question whether you really need a CEO and a board to do any long range strategic planning if companies are going to become something on the order of a REIT and just return earnings to shareholders in one form or another while effectively mortgaging the future.

Of course, that also calls into question the role

or responsibility of activists, who now take great pains to distinguish themselves from what used to be called corporate raiders back in the days when I thought the very mention of Lipschitz was hilarious.

They may be more genteel in their ways and they may stick around longer, but so do buzzards as long as there’s still something left on the carcass.

What Fink didn’t directly say was that CEOs and their Board of Directors were being far too nice to themselves at the expense of the future health of their company. Their paydays, both direct and indirect, benefit far more from short term strategies than do shareholders, especially those who are truly investors and not traders.

Jack Welch, former Chairman and CEO of General Electric (NYSE:GE) which has certainly been in the news lately for its own buybacks, may, in hindsight begin to seem like an Emperor without much of a wardrobe. The haze from hot air may have obscured the view, but to his never ending credit, Welch has long criticized incompetent board directors and the roles they may play in the diminution of once great American companies.

Sooner or later the cash needed for buybacks is going to start to dry up, especially when the predominant buying of shares may be at price far removed from bargain share prices.

What then?

It’s difficult to argue that fundamentals have been altered through intervention in the form of buybacks, but that fuel may have peaked with the recent General Electric announcement. It’s hard to imagine, but we may soon get to that point that quarter to quarter comparisons will actually have to depend on real earnings and not simply benefiting from having fewer and fewer shares in the float from one quarter to the next.

The prevailing question, at least in my mind, is where will the next real catalyst come from to drive markets higher. As currency exchange issues have been making themselves tangible as earnings are forthcoming, the impact has, thus far been minimal as we’ve been expecting the drag on earnings.

Prior to Friday’s sell off, the limited earnings reports received where currency was a detrimental factor in earnings and forward guidance was greeted positively, as the news wasn’t as bad as expected.

Fortunately, the market reacted to the expected bad news in a more mature manner than I’ve been known to react to names.

But going higher on less disappointing than expected results is not a good strategy to keep banking on. There has to be something more tangible than things not being as bad as we thought, especially as energy prices may be stabilizing and interest rates moving higher.

Larry Fink has the perfect solution, although it’s a little old fashioned.

Invest in yourself.

That’s sound advice for individuals, just as it is for businesses that care about growth and prosperity.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

American Express (NYSE:AXP) has not had a very good ride since Costco (NASDAQ:COST) announced that it was terminating its co-branding agreement with them, that allowed it to be the exclusive card accepted at its shopping warehouses. While that may not have been a huge surprise, what was a surprise was just how important of a player Costco may have been in American Express revenues. As a result, those shares have fallen more than 10% in the 2 months since the announcement of the split, which will occur in the first quarter of 2016.

American Express reported earnings this past week and dropped heavily on Friday, having done so before the overall market turned very sour. But buried in the bad news of decreased revenue, that supposedly stemmed from decreased gas sales, was the fact that they don’t anticipate further revenue declines this year.

Based on my perception of recent degradation in customer service, I think that they may have already become cost cutting through workforce reductions prior to the end of their agreement with Costco. SO while revenue may not be growing any time in 2015, the bottom line may end up better than expected.

While there may not be much in the way of growth prospects this year a rising interest rate environment will still help American Express and it is now offering a better option premium than it has in quite some time as uncertainty has taken hold.

Microsoft (NASDAQ:MSFT) and eBay (NASDAQ:EBAY) both report earnings this week and both will likely report the adverse impact of a stronger US dollar and provide guarded guidance, but if the past week is any guide the market will be understanding.

Despite the bump received from their new CEO and the bump received from having an activist pushing eBay’s Board’s buttons, Microsoft and eBay respectively have trailed the S&P 500 over the past year.

Microsoft still hasn’t recovered from its last earnings decline, although eBay has, but in the past month has been making its way back toward those near term lows as it may be getting closer to spinning off its profitable PayPal unit having just completed a 5 year non-compete contract with PayPal.

As eBay approaches that lower price level it has returned within the range that I’m comfortable buying shares. While I u

sually consider the sale of puts as the primary way to engage with a stock getting ready to report earnings, I wouldn’t mind owning shares and the enhanced premium offsets some of the added risk of entering a position at this point.

As with eBay, I prefer considering an earnings related trade when shares have already had some downside pressure on shares. While eBay is a better candidate in that regard, Microsoft also has a premium that will also offset some of the earnings related risk. Like eBay, the options market is anticipating a relatively sedate price move, that if correct in magnitude, even if an adverse direction, could be relatively easily managed while awaiting some recovery.

Colgate (NYSE:CL) goes ex-dividend this week and I continually tell myself that I will be someday be buying shares. As a one time Pediatric Dentist it’s probably the least I could do after a lifetime of being the fifth out of those 5 dentists on the panel. But somehow that’s never happened, to the best of my recollection.

While it does have a low beta and isn’t necessarily shares that you buy in anticipation of excitement, if those shares are not assigned during the upcoming week, there is a need to be prepared for earnings the following week and potentially the need for a longer term commitment if earnings disappoint.

I like considering Best Buy (NYSE:BBY) whenever its shares have gotten to the point of having declined 10%. It has done just that and a little bit more in the past month and does it on a fairly regular basis. But in doing so over the past 14 months the lows have been higher as have the highs along the way.

That has been a good formula for considering either adding shares and selling calls or selling puts. In either case the premium has long reflected the risk, but the risk appears to be definable and at lest there aren’t too many currency exchange concerns to cloud whatever issues Best Buy faces as it is currently once again relevant.

Bed Bath and Beyond (NASDAQ:BBBY) was on my list last week as a potential candidate to join the portfolio. However, with cash reserves low, it wasn’t a very active week, with only a single new position opened.

This week, despite the sell-off on Friday, I had the good fortune of still being able to see a number of positions get assigned and was able to replenish cash reserves. With a 2.5% decline last week, considerably worse than the S&P 500, Bed Bath and Beyond added to its post-earnings losses from the previous week, as it often does after previous earnings declines. But what it also has done after those declines is to relatively quickly recover.

I think the weakness this week brings us simply one week closer to recovery and while waiting for that recovery the shares do allow you to generate a competitive return for option sales. Because of that anticipated recovery, I might consider using an out of the money option and a time frame longer than a single week, however, particularly as Friday’s market weakness may need its own time for recovery.

Finally, SanDisk (NASDAQ:SNDK) didn’t disappoint when it announced its earnings this past week. It was certainly in line with all of the warnings that it had given over the past month and may make many wonder whether or not they may be Jack Welch’s new poster child for dysfunction at the C-suite and board levels.

With everyone seeming to pile on in their criticism of the company and calling for even more downward price pressure, I’m reminded that SanDisk has been down this path before and arose for the ashes that others had defined for it.

The year to date descent in share price has been impressive and it is only a matter of great luck that I had shares assigned right before another one of its precipitous plunges.

This one is definitely not one for the faint of heart, but I would consider entering a position through the sale of puts, rolling them over, if faced with assignment. However, with an upcoming ex-dividend date the following week, I’d be more inclined to take assignment if faced with it, collect the dividend and work the call sale side of share ownership.

Traditional Stocks: American Express, Bed Bath and Beyond

Momentum Stocks: Best Buy, SanDisk

Double Dip Dividend: Colgate (4/21)

Premiums Enhanced by Earnings: eBay (4/22 PM), Microsoft (4/23 PM)

April 10, 2015

Weekend Update – April 12, 2015

This was one of those rare weeks where there wasn’t really any kind of theme to guide or move markets.

The week started with some nervousness about where the opening would take us after the previous Friday’s very disappointing Employment Situation Report statistics. On that day some were obliged to even suggest that it was a conspiracy that the report was released on Good Friday, as the markets were conveniently closed for what was supposedly known in advance to be a report that would have otherwise sent markets tumbling.

How convenient. Talk about a fairy tale.

That was as rational an outlook as was the response of the futures and bond markets trading, as they remained opened for holiday abbreviated sessions. Futures did go tumbling and interest rates plunged, leaving a gap for markets to deal with 3 days later.

But by then, after the mandatory initial response to those S&P 500 levels as the market opened, rational thought returned and the market had a very impressive turnaround beginning within minutes of the open.

Some brave souls may have remembered the market’s out-sized response to the previous month’s extraordinarily strong Employment Situation Report data that took the market down for the month to follow, only to see revisions to the data a month later. The 3 days off may have given them enough presence of mind to wonder whether the same outlandish response was really justified again.

One thing that the initial futures response did show us is that the market may be poised to be at risk regardless of what news is coming our way. One month the market views too many jobs as being extremely negative and the next month it views too few jobs as being just as negative.

Somewhere right in the middle may be the real sweet spot that represents the “No News is Good News” sentiment that may be the only safe place to be.

That is the true essence of a Goldilocks stock market, no matter what the accepted definition may be. It is a market where only the mediocre may be without risk. However, the question of whether mediocrity will be enough to continue to propel markets to new heights is usually easily answered.

It isn’t.

After a while warm porridge loses its appeal and something is needed to spice things up to keep Goldilocks returning. U.S. traded stocks have plenty of asset class competition in the event that they become mediocre or unpredictable.

The coming week may be just the thing to make or break the current malaise, that despite having the S&P 500 within about 0.7% of its all time high from just a month ago, is only 2.1% higher for 2015.

Granted that on an annualized basis that would bill respectable, but if the 2015 pattern of alternating monthly advances and declines continues we would end the year far from that annualized rate.

The catalyst could be this new earnings season which begins in earnest next week as the big banks report and then in the weeks to follow. Where the catalyst may arise is from our lowered expectations encountering a better reality than anticipated, as we’ve come to be prepared for some degree of lowered earnings due to currency considerations.

The real wild card will be the balance between currency losses and lower input costs from declining energy prices, as well as the impact, if any from currency hedges that may have been created. Much like the hedging of oil that some airlines were able to successfully implement before it became apparent how prescient that strategy would be, there may be some real currency winners, at least in relative terms.

I actually don’t really remember how the story of Goldilocks ended, but I think there were lots of variations to the story,depending on whether parents wanted to soothe or scare.

The real lesson is that you have to be prepared for either possibility.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

WIth General Electric (NYSE:GE) getting most everyone’s attention this past Friday morning with plans to divest itself of most of its non-industrial assets, that may leave us with one fewer “systemically important” financial institution.

Too bad, for MetLife (NYSE:MET), which might find it would be less miserable with that proposed assignment if it had more company. It’s easy to understand why financial institutions would want to rid themselves of the yoke they perceive, however, it may be difficult to imagine how MetLife’s desire to avoid that designation can become reality. That is unless the battle goes a very long distance, which in turn could jeopardize a good deal of whatever confidence exists over the restraints that are intended to prevent another financial meltdown.

I believe that the eventuality of those restraints and capital requirements impacting MetLife’s assets is already factored into its share price. If so, MetLife is simply just a proxy for the direction of interest rates, which continue to be volatile as there is still uncertainty over when the eventual interest rate increases will be coming from the FOMC.

While waiting for that to happen MetLife has been trading in a fairly tight range and offering an attractive option premium and dividend. I’ve already owned shares on 3 occasions in 2015 and look forward to more opportunities while waiting to figure out if the economy is too hot or not hot enough or just right.

With the coming week being dominated by bank earnings, one that isn’t reporting until the following week is Morgan Stanley (NYSE:MS). Thus far 2015 hasn’t been especially kind to the money center banks, but it has held Morgan Stanley in particular low regard.

With its well respected CFO heading to warmer pastures it still has a fairly young CEO and lots of depth, with key people continually being exposed to different parts of the company, thereby lessening dependence on any one individual.

With earnings from other banks coming this week the option premiums on Morgan Stanley are a little higher than usual. However, since they report their own earnings before the market opens on Monday of the following week, it would be a good idea to attempt to rollover weekly contracts if not likely to be assigned or to simply sell extended weekly contracts to encompass the additionally enhanced premiums for both this week and the next

Bed Bath and Beyond (NASDAQ:BBBY) is no stranger to significant earnings related price drops. It did so again last week and the options market correctly created the price range in which the stock price varied.

While Bed Bath and Beyond is no stranger to those kind of drops, it does tend to have another common characteristic in that it frequently recovers from those price drops fairly quickly. That’s one reason that when suggesting that consideration be given to selling puts on it last week prior to earnings, I suggested that if threatened with assignment I would rather accept that than to try and rollover the put contracts.

Now that the damage has been done I think it’s safe to come back and consider another look at its shares. If recent history holds true then a purchase could be considered with the idea of seeking some capital gains from shares in addition to the option premiums received for the call sales.

SanDisk (NASDAQ:SNDK) reports earnings this week and has been on quite a wild ride of late. It has the rare distinction of scaring off investors on two occasions in advance of this week’s upcoming earnings. Despite an 11% price climb over the past week, it is still down nearly 20% in the past 2 weeks.

The option market is implying a relatively small 6.8% move in the coming week which is on the low side, perhaps in the belief that there can’t possibly be another shoe to be dropped.

Normally, when considering the sale of puts in advance of earnings I like to look for a strike price that’s outside of the range defined by the options market that will return at least a 1% ROI for the week. However, that strike level is only 7.1% lower, which doesn’t provide too much of a safety cushion.

However, I would be very interested in the possibility of selling puts on SanDisk shares after earnings in the event of a sharp drop or prior to earnings in the event of significant price erosion before the event.

Fastenal (NASDAQ:FAST) also reports earnings this coming week and didn’t change its guidance or offer earnings warnings as it occasionally does in the weeks in advance of the release.

It actually had a nice report last quarter and initially went higher, although a few weeks later, without any tangible news, it nose-dived, along with some of its competitors.

What makes Fastenal interesting is that it is almost entirely US based and so will have very little currency risk. The risk, however, is that it is currently trading near its 2 year lows, so if considering an earnings related trade, I’m thinking of a buy/write and using a May 2015 expiration, to both provide some time to recover from any further decline and to also have a chance at collecting the dividend at the end of April.

With a much more expensive lot of shares of Abercrombie and Fitch (NYSE:ANF) long awaiting an opportunity to sell some calls upon, I’m finally ready to consider adding more shares. The primary goal is to start whittling down some of the losses on those shares and Abercrombie is finally showing some signs of making a floor, at least until the next earnings report at the end of May.

With its dysfunction hopefully all behind it now with the departure of its past CEO it still has a long way to go to reclaim lost ground ceded to others in the fickle adolescent retail market. The reasonable price stability of the past month offers some reason to believe that the time to add shares or open a new position may have finally arrived. Alternatively, however, put sales may be considered, especially if shares open on a lower note to begin the week.

Finally, I don’t know why I keep buying The Gap (NYSE:GPS), except that it never really seems to go anywhere. It does have a decent dividend, but it’s premiums are nothing really spectacular.

What appeals to me about The Gap, however, is that it’s one of those few stocks that is continually under the microscope as it reports monthly sales statistics and as a result it regularly has some enhanced premiums and it tends to alternate rapidly between disappointing and upbeat same store sales.

All in all, that makes it a really good stock to consider for a covered option strategy. It’s especially nice to see a stock that does trade in a fairly tight range, even while it may have occasional hiccoughs that are fairly predictable as to when they will occur, just as their direction isn’t at all predictable.

The Gap reported those same store sales last week and this time they disappointed. That actually marked the second consecutive month of disappointment, which is somewhat unusual, but in having done so, it still hasn’t violated that comfortable range.

I already own some shares and in expectation of a better than expected report for the following month, my inclination is to add shares, but rather than write contracts expiring this week will look at those expiring on either May 8 or May 15, 2015, taking advantage of the added uncertainty coming along with the next scheduled same store sales report. In doing so I would likely think about using an out of the money strike, rather than a near the money strike in anticipation of finally getting some good news and getting back on track at The Gap.

Traditional Stocks: Bed Bath and Beyond, MetLife, Morgan Stanley, The Gap

Momentum Stocks: Abercrombie and Fitch

Double Dip Dividend: none

Premiums Enhanced by Earnings: Fastenal (4/14 AM), SanDisk (4/15 PM)

April 3, 2015

Weekend Update – April 5, 2015

It was a little odd having the Employment Situation Report released on a day that stock markets were closed yet bond markets and equity futures were trading on an abbreviated schedule.

It reminds me of the frustrations that I sometimes experience when being unable to react to news that moves a stock’s price after the market has closed on the Friday of option expiration. The option holder has the advantage of being able to exercise or not until nearly 90 minutes after the market has closed while as the seller of an option I can do nothing to respond to the news.

In trading circles that is something referred to as “a case of the blue calls.”

Not that I would know, but I would imagine that’s something like being in the old Times Square, before Mayor Rudy Giuliani cleaned it up and chased all of the adult entertainment away. Those glass walls between the patrons pumping quarters into the booth and the paid entertainment must have been frustrating for those watching events unfold but being incapable of taking appropriate action. That’s especially the case if knowing that a more genteel, moneyed and privileged clientele was in the back room and had less restricted access.

Or so I’ve heard. I believe that there was an expression describing that situation, as well.

While analysts are going to be spending time trying to find something good to say about the data released, the number of new jobs created was the smallest in more than a year and included downward revisions of the past 2 months. In fact, the 126,000 new jobs created in March was about half of what the consensus had been expecting. The 69,000 jobs downward revisions makes you wonder whether the decidedly negative reaction to what was perceived as a heating up jobs market previously was warranted.

The smaller than expected job creation number caused an immediate and large decline in interest rates and a meaningful decline in stock futures, although on very light volume.

Still, there was a net increase in jobs, and there is no specter of unmanageable and unruly lines queuing up as in scenes from 75 years ago. Yet we will begin trading on Monday on the far end of a 3 day vacuum having been unable to respond to the immediate reactions to Friday morning’s news.

After a few days to mull it over we may learn whether the disappointing employment news is ultimately interpreted as being good or bad for the stock market and more specifically for the likelihood of interest rates being increased sooner rather than later.

After all, lately that seems to be all that markets have cared about and the speculation has gone back and forth as the data has done the same.

As far as the Treasury market is concerned their bet is on lower interest rates after the Employment Situation Report was released and they’re said to be smarter than the average investor.

When rates go
back up just as quickly, as they have volleyed back and forth over the past few weeks, we can remind ourselves that the back and forth of rates simply reflects how smart those bond traders really are.

One might think that any further decline in rates would be good for stocks particularly as an alternative to bonds, unless it is interpreted as being bad news that the tepid economic expansion was actually beginning a deceleration phase.

Couple that thought with the worry that the upcoming earnings season is going to highlight currency woes more than costs savings from lower energy and you do have the makings of continued uncertainty about where the next catalyst to move stocks higher will be coming from.

Normally, I like uncertainty, but unfortunately, the uncertainty that we’ve seen over the past few weeks as markets have regularly alternated between triple digit gains and losses hasn’t really moved volatility as much as it would seem to have been logical. That’s because most days have actually traded with great certainty, showing little variance from where the day’s trading started and then giving way to an all new kind of certainty the very next day.

We’ll see how that certainty shows itself on Monday.

It’s anyone’s guess.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

Whole Foods (NASDAQ:WFM) is one of many stocks that I currently own that are not earning their keep because they’re too far below their purchase price to warrant writing calls and generating premium income. While shares do go ex-dividend this week, the dividend is too small to justify chasing or to make a trade simply in the hopes of capturing that dividend.

However, I’ve been happy to see some of the share gains seen after earnings in February get digested, notwithstanding this past Thursday’ strong gain. The slow and methodical retracement of those gains is providing an opportunity to add shares of Whole Foods again with the goal of using new shares to help offset some of the losses on the non-performing lot, as was done 5 times in 2014.

However, following the previous share increase after earnings those shares just seemed too expensive to use as an offset to paper losses. However, now they appear to be more reasonably priced and ready to stabilize at that lower level.

Having add my General Motors (NYSE:GM) shares assigned last month I’ve wanted to repurchase shares since then. At the time the entry of an activist into the picture was unexpected and poor timing for me, but I’m glad to see shares come down from that activist induced high.

Through several bouts of share ownership during the Mary Barra era I’ve continued to be amazed at how well share price has persever

ed against a barrage of bad news. The toll on share price has generally been small and short lived, while being able to roll over option contracts helped to increase yield while awaiting assignment.

Shares offer attractive premiums, an increasingly attractive dividend and the watchful eyes of activists. That can be a good combination particularly since earnings are still a month away, giving some opportunity to collect those premiums before contending with the challenge of currency.

Bed Bath and Beyond (NASDAQ:BBBY) reports earnings this week and used to be one of those traditionally being among the last of S&P 500 members to report earnings. Now it’s either still among the last or possibly among the first, as earnings seasons now just tend to flow one into the next.

While Bed bath and Beyond isn’t likely to suffer much due to the strengthening dollar, in fact it may benefit from increased buying power, it may report some detriment from the west coast port disruptions.

Bed Bath and Beyond is no stranger to large moves when announcing its earnings, but this time the options market is implying a move of 6.5%. A 1% ROI may be possible by selling put options as much as 7.1% below the week’s closing price. That’s not as large of a cushion as I would prefer seeing, but if selling puts and faced with the possibility of assignment, I wouldn’t mind taking ownership of shares rather than attempting to roll the put options over.

Being booted from the DJIA isn’t necessarily a bad thing, just as being added isn’t always a good thing as far as stock prices go.

Few have done as well as Alcoa (NYSE:AA), which despite a nearly 50% decline since reaching it’s peak post-DJIA share price is still about 65% higher and has well out-performed the S&P 500 and the DJIA.

Alcoa, which reports earnings this week, and while perhaps no longer considered to be the kick-off to a new earnings season still remains the first to get much attention.

Shares have been in a considerable decline for the past 2 months after having recovered from most of the decline that preceded the market’s decline in early December 2014. The subsequent recovery in share price at that time was in lock step with the S&P 500 from mid-December to mid-January when earnings intervened.

Unlike most earnings related trades that I consider, for this one I’m not looking at the sale of puts, but rather a buy/write and am further considering the use of a slightly out of the money option, rather than an in the money strike price, in the belief that there’s reason to suspect both on a technical basis and a fundamental basis that there is room to move higher.

While it’s too soon to tell how its continuing performance will be, AT&T (NYSE:T) has joined Alcoa as an ex-member of the DJIA. During the two week period of its exile, shares have out-performed the S&P 500, just as its replacement has t

railed.

While 2 weeks doesn’t make for a trend, as AT&T shares are ex-dividend this week, I think there may be enough past history with other ex-members in the immediate period of their expulsion to create a tiny additional increment of confidence. WHile that confidence doesn’t necessarily extend to believing that shares will move higher in the very near term, it does make me feel better about the prospects of it continuing to out-perform the broader market.

With it’s very generous dividend the option premium isn’t very large, but at the very least will offset some of the decline in price that will occur as the dividend is taken into account. With much of the competitive hoopla and pressure now in the past and with less of a concern about currency fluctuations, this may be a good time to consider a position as shares may be a bit more immune to some of the pressures that may face many other multi-national companies as earnings are soon to be released.

Finally, being added to the DJIA isn’t necessarily a golden ticket, either, as some more recently added members may attest.

In exchange for AT&T’s departure Apple (NASDAQ:AAPL) was added and has since trailed the narrow index as excitement mounts over the prospects for its latest product entry.

I’m not as excited about that as I am about the prospects of Apple announcing a dividend increase most likely concurrent with its next earnings release in 3 weeks. Between now and then I think there are going to be many opportunities for Tim Cook and others to increasingly whip up excitement and demand for a product that has a fairly low bar being set.

In the meantime Apple continues to offer an attractive option premium and can easily be considered as either a buy/write or put sale, as there is considerable liquidity on either side of the options aisle.

Traditional Stocks: Apple, General Motors

Momentum Stocks: none

Double Dip Dividend: AT&T (4/8), Whole Foods (4/8 $0.13)

Premiums Enhanced by Earnings: Alcoa (4/8 PM), Bed Bath and Beyond (4/8 PM)

March 27, 2015

Weekend Update – March 29, 2015

Fresh off of his estate’s victory in a copyright infringement suit, Marvin Gaye comes to my mind this week as I can’t help but wonder what’s going on.

With the Passover holiday approaching this week, I’m also reminded that much of the basis of re-telling the story of the exodus from Egypt is in response to the questions asked by children.

Among the classes of children traditionally described are the wise child, the evil child, the simple one and the one who doesn’t even know how to ask a question.

When it comes to trying to understand the past week I’m feeling a bit more like one of the latter two of those categories, although I still retain the option of holding onto my evil persona.

The week started with the Vice-Chair of the Federal Reserve, who coincidentally had been the Governor of the Bank of Israel many years after the exodus, getting some laughs with jokes that maybe only economists would appreciate. However, to his credit he was able to tone down his hawkish sentiments while still staying true to his tenets, but without frightening markets. That was nice to see, as it was his comments just 2 days after Janet Yellen’s congressional testimony that brought an end to the February rally and, perhaps coincidentally, set us on the path for March.

That hasn’t been a very good path for most investors and with only 2 days of trading remaining in the quarter has it threatening to be the first losing quarter in quite a while as we learned that the most recent quarterly corporate profits over the same time period fell for the first time since 2008.

Yet that news didn’t seem to bother markets this morning as they had a rare session ending with a higher close.

With Stanley Fischer putting everyone into a good mood from a dose of Federal Reserve humor all went pretty well to start the week, with Monday looking like it would mark the first time of having two consecutive days higher in over a month. That was the case until the final 15 minutes of trading and then the market just continued in that downward path throughout most of the rest of the week.

But why? Someone, somewhere had to be asking the obvious question that 3 out of 4 categories of children are capable of asking.

What’s going on?

Friday’s GDP data for the 4th Quarter of 2014 showed no change with the economy growing at an annual 2.2% rate. That’s considerably less than projections based upon lower energy prices fueling a resurgence of consumer activity in the coming year, even recognizing that those perceived benefits were theoretically in only their very nascent stages in late 2014.

While the GDP data is certainly backward looking there’s been nothing happening to support that consumer led growth that we’ve all believed was coming.

Corporate profits are falling, retail sales are flat and home sales aren’t exactly setting the economy on fire, all as energy prices are well off their earlier eye popping lows.

So you might think that would all add an arrow to the quiver of interest rate doves, but the market hasn’t been embracing the idea of continuing low interest rates as much as it’s been fearing the prospects of increasing interest rates.

But this week had nothing to fear. Even the most influential of the hawks seemed and sounded accommodating, but the market wasn’t buying it.

This past week, like recent weeks, has made little sense no matter how much you try to explain it. Just like it’s hard to explain how the defendant’s weren’t aware of the existence of Marvin Gaye’s “Got to Give It Up” or that somehow pestilence, boils and locusts rained down upon the Pharoahs.

No matter how you look at it reason is not reigning.

Even a child who doesn’t know how to ask knows when something is going on.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

I purchased some American Express (NYSE:AXP) shares a few weeks ago shortly after the news of their loss of Costco (NASDAQ:COST) as a co-branding partner. Coincidentally that decision came at the same time as both my wife and I had individual issues with American Express customer service.

With a combined history of more than 65 years of using American Express as our primary personal and business cards, we’ve done so largely for their customer service. My wife, after speaking to almost 15 representatives is ready to give her card the boot and she reminded me that she’s had that card longer than she’s had me, so I should be on notice.

Coming as no surprise, American Express just announced workforce cutbacks that will only serve to weaken what really distinguished them from the rest, but that may be what it takes to start making shares look attractive again as the company substitutes cost savings for revenues.

Fortunately, my shares from a few weeks ago were quickly assigned and now it looks as if another opportunity may be at hand as it has re-traced its bounce from the sizable drop it took when the Costco news was made known. It’s upcoming ex-dividend date this week adds to the attraction as the company is wasting no time in taking steps to offset what are now expected to be significant revenue losses beginning in 2016.

Who knew to ever ask just how important Costco was to American Express?

I purchased shares of Dow Chemical last week in order to capture the dividend. What I wasn’t expecting was the announcement coming Friday morning of their plans to merge a portion of the company with Olin Corporation (NYSE:OLN) while becoming a majority owner of Olin.

Fortunately that announcement waited until Friday morning so that I was able to retain the dividend. Had it come after Thursday’s close and based on the initial price reaction, those shares would have been assigned early.

While Dow Chemical has been somewhat phlegmatic lately as it tracks energy prices, the sale to Olin appears to be responsive to activist Dan Loeb’s desire to shed low margin businesses. This deal looks to be a great one for Dow Chemical and may also demonstrate that it is serious about improving margins.

GameStop (NYSE:GME) reported earnings this past Friday and recovered significantly from its preliminary decline. I was amazed that it did so after watching what appeared to be a very wooden and canned performance by its CFO during an interview before trading began that didn’t seem very convincing. However, shortly after trading did begin shares climbed significantly.

I like considering adding shares of GameStop after a decline, as there is a long history of people predicting its coming demise and offering very rational and compelling reasons of why they are correct, only to see shares have a mind of their own.

I had shares assigned just a week earlier and was happy to see that assignment come right after its ex-dividend date but before earnings. Now at a lower price it looks tempting again, although I would probably hold out for a little bit more of a decline, perhaps approaching Friday morning’s opening lows.

While GameStop has a reasonably low beta you wouldn’t know it if you owned shares, but fortunately the options market knows it and typically offers premiums that reflect the sudden moves shares are very capable of taking.

Up until about 30 minutes before Friday’s close it hadn’t been a very good week to be in the semiconductor business. That may have changed, at least for a moment or two, as it was announced that Intel (NASDAQ:INTC) was in talks to purchase Altera (NASDAQ:ALTR).

Among those stocks benefiting from that late news was Micron Technology (NASDAQ:MU), which has fallen even more than Intel in 2015.

Micron Technology reports earnings this week and is no stranger to large earnings related moves. The options market, however is implying only a 5.5% price move next week. While I normally look for a strike level that’s outside of the range defined by the implied move that offers at least a 1% ROI for the week, this coming week is a bit odd.

That’s because Micron Technology reports earnings after the market’s close on Thursday, yet the market will be closed for trading on Good Friday.

For that reason I would consider looking at the possibility of selling puts for the following week, but would like to see shares give up some of the gains made in response to the Intel news.

While Intel’s late news helped to rescue it from having sunk below $30 for the first time in 9 months, it did nothing for Oracle (NYSE:ORCL) nor Cisco (NASDAQ:CSCO). They, along with Intel had been significantly under-performing the S&P 500 this week and for the year to date.

Both Cisco and Oracle are ex-dividend this week and following their drops this past week both are beginning to have appeal once again.

With a holiday shortened week and also going ex-dividend the expectation is that option premiums would be noticeably lower, However, both Cisco and Oracle are offering a compelling combination of option premiums and dividends along with some chance of recovering some of their recent losses.

The real challenge for each may be related to currency exchange and how it will impact earnings. However, barring early earnings warnings, Cisco won’t report earnings for another 7 weeks and Oracle not for another 12 weeks, so hopefully that would allow plenty of time to extricate from a position before the added risk of earnings comes into play.

Finally, I came close to buying shares of SanDisk (NASDAQ:SNDK) just a couple of days ago, looking to replace shares that were assigned just 2 weeks earlier.

It’s not often that you see a company give earnings warnings twice within the space of about 2 months, but SanDisk now has that distinction and has plunged on both of those occasions.

What SanDisk may have discovered is what so many others have, in that being an Apple (NASDAQ:AAPL) supplier may be very much a mixed blessing or curse, depending on your perspective at the moment.

While its revenues are certainly being squeezed I’m reminded of a period about 10 years ago when SanDisk was essentially written off by just about everyone as flash memory was becoming to be considered as nothing more than a commodity.

In that time anyone with a little daring would have done very well in that time period with shares nearly doubling the S&P 500 performance.

With a nearly 25% drop over the past few days, even as a commodity or a revenue stressed company, SanDisk may have some opportunity as it approaches its 18 month lows.

As with many other stocks that have taken large falls, I would consider entering a new position through the sale of put options and if faced with the possibility of assignment would try to roll the position over to a forward week in an attempt to delay or preclude assignment while still collecting a premium.

Traditional Stocks: Dow Chemical

Momentum Stocks: GameStop, SanDisk

Double Dip Dividend: American Express (3/31), Cisco (3/31), Oracle (4/2)

Premiums Enhanced by Earnings: Micron Technology (4/2 PM)

March 21, 2015

Weekend Update – March 22, 2015

The past week has to be one to make most people pause and try to understand the basis for what we just experienced.

In a week otherwise devoid of any meaningful news there was a singular event in the middle of the week and then a little bit of follow-up to help clarify that event.

That event was the release of this month’s FOMC Statement and the subsequent clarifying event was the press conference held by its Chair, Janet Yellen.

In its aftermath, I am more confused than ever.

Not so much about where interest rates are headed, nor when, but more about the thought processes that propel markets when expectations are so clearly defined and what our continuing expectations should be.

Most everyone who follows markets knows that the great debate of late has not been whether the FOMC was going to begin the process of raising interest rates, but when they were going to begin that process. Somehow, we believed that the answer to that question was going to come when we learned whether the word “patience” would continue to characterize the FOMC’s timetable with regard to its effort to “normalize the stance of monetary policy.”

Most had taken positions that the first rate increase would come either as early as this June or perhaps as late as September. The continuing use of the word “patience” was perceived as a sign that interest rate increases wouldn’t occur until sometime after June 2015.

So you have to excuse some confusion when the market reversed course by more than 300 points as it learned that the word “patience” was eliminated, but also received news that the FOMC didn’t foresee an interest rate increase before their next meeting in April 2015.

April?

That could mean that an increase by the May meeting was still on the table and the last time I looked, May came before June, especially if you believe a more hawkish approach is warranted.

Presumably, it was the fear of interest rate increases coming as early as June that was a source for recent market weakness.

As I parsed the words I couldn’t understand the way in which the news was initially embraced. While I expected that regardless of the wording outcome the market would find reason to move forward, I certainly didn’t expect the reaction that ensued, especially since the signal was so mixed and really offered nothing to get excited about, nor to fear.

No rate increase likely in April? That’s the best the FOMC could do?

But in a world where even the slightest of interest rate increases is feared, despite the past evidence suggesting that it should be embraced, the very thought of an increase possibly coming before June should have sent buyers heading for the exits.

Yet it was more than good enough, at least for a couple of hours, and actually represented the first in 7 trading sessions where the market reversed course intra-day, having had triple digit moves in opposite directions each and every one of those days.

Now clearly that has to inspire confidence for whatever is to come next.

It’s a good thing that I don’t believe very much in chart analysis, because it would otherwise be very tempting to notice that the previous 7 trading sessions shows a clear pattern of lower highs and higher lows when looking at the net change and an even more compelling series of higher highs and higher lows when looking at the DJIA closing levels.

Yet, at the same time, it has been nearly 4 weeks ever since the DJIA has been able to string together as little as 2 consecutive days of gains.

Perhaps not to coincidentally the last time the market was able to do that was on the occasion of Janet Yellen’s two day mandated congressional testimony during which time she re-iterated a dovish position regarding the initiation of interest rate increases. But barely 2 days later suspicion of her intentions set in as the Vice-Chairman of the FOMC, Stanley Fischer struck a more hawkish tone that just a week later seemed to be validated by the Employment Situation Report.

Despite the fact that there has been no other corroborating evidence to drive the data that the FOMC insists that it values, the market lost its forward momentum from February until Janet Yellen once again took center stage.

Why people just didn’t believe her all along is a mystery, just as it is a mystery that they again chose to believe her.

How long will the trust in her comforting words last this time?

Perhaps Friday’s GDP release, coming on the same day as a scheduled speech by Stanley Fischer will give us some idea of the staying power of the dove when faced with a circling hawk.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or

“PEE” categories.

It was neither a good week to be DuPont (NYSE:DD) nor eBay (NASDAQ:EBAY) as both received analyst downgrades and saw their shares fall significantly when compared to the S&P 500 over the previous 7 sessions.

DuPont’s downgrade came amid worries of problems in its agricultural and chemical segments, along with concerns about the kind of currency headwinds that we’re likely to be hearing much more about in the coming weeks as the next earnings season gets ready to begin.

While those are all important issues, certainly important enough to see DuPont’s shares fall nearly 9% relative to the S&P 500 in the past week, there was lots of activist related news that may be setting the stage for a more contentious kind of fight than Nelson Peltz usually gets himself into. However, it is that activist position that the analyst recognized as a risk to his overall negative outlook as Peltz took to the media last week to be both more accommodating in his requests to DuPont, but also to voice his frustrations.

In the meantime the recent drop in share price is similar to other such drops seen in the past year that have been at levels representing higher lows and that have set the stage for climbs to higher highs.

While Dow Chemical (NYSE:DOW) may be suffering from some of the same issues as DuPont and has the added liability of oil interests in Kuwait, it is at least seemingly at peace with its own activist investors, or at the very least the relations are not overtly adverse at the moment.

Dow Chemical has been very much tied to energy prices these past few months even as its CEO Andrew Liveris has clearly stated that on a net basis the decrease in energy prices is beneficial to Dow Chemical, as it pays more for energy input than it depends on revenue from energy outputs.

Shares are ex-dividend this week and are attractively priced, although as long as energy is under pressure and as long as Liveris’ contention goes ignored, the shares will be under pressure. I currently own shares and Dow Chemical was for a long time a staple in my portfolio, both as a long term holding and as a frequent trading vehicle. At the current price I think a new position could be used as either a longer term holding or a serial trade.

eBay has been absent from my portfolio for a couple of months as I’ve grown too uneasy with it flirting near the $60 level to consider re-purchasing shares. Even the $57.50 level puts me at unease, but a recent downgrade calling into question the value of its PayPal unit in light of increasing competition, most recently from Facebook (NASDAQ:FB) was welcome and did bring shares closer to the upper level at which I had some comfort.

Shares recovered nicely from the initial reaction to the downgrade, but still trailed the S&P 500 by 5% over the past 7 trading sessions.

In the past I have very much liked owning eBay when it was mired in a tight range, yet still delivered appealing option premiums due to the occasional earnings related surprises. The story changed once activism entered the picture and shares started moving beyond the 2 year price range in the belief that PayPal had great value beyond what was already reflected in eBay’s price.

With each passing day, however, the luster of PayPal may be diminishing, even as it still remains an extremely valuable brand and service.

As it sits at the upper end of where I would consider taking a position, I would be very interested in either adding shares and selling calls or selling puts on any further drop in price. If selling puts this is one position that I wouldn’t mind taking assignment on in the event of an adverse price move, but would still look at the possibility of simply rolling over those puts to forward weeks.

AbbVie (NYSE:ABBV) is increasingly becoming an interesting company. While it certainly has some challenges as it’s chief revenue generating drug goes off patent next year, it has certainly been actively pursuing other lucrative areas, including management of Hepatitis C and cancer therapy, with its planned purchase of Pharmacyclics (NASDAQ:PCYC).

While shares have recovered somewhat from its recent low following an analyst downgrade, they are still nearly 8% lower YTD, but the company is certainly not standing still. In addition to upside potential, the shares offer attractive option premiums and an upcoming dividend that’s well ahead of that offered by its one time parent.

I’m not much of a video gamer even though I can get easily get sucked in by useless activities of a repetitive nature. My guess is that a combination of lack of skill, lack of attention span and allegiance to pinball have kept me indifferent to much of the last 25 years of home entertainment.

This week, however, GameStop (NYSE:GME) and Activision (NASDAQ:ATVI) have my attention.

I was actually happy to see my shares of GameStop get assigned this past week ahead of earnings this week. The timing was good as its generous dividend was captured without having to think about the risk of its upcoming earnings.

GameStop is a company that many have written off for years, pointing toward its paleolithic business model, the challenges of brick and mortar as well as streaming competition and the always large short interest looming over shares.

But somehow it continues to confound everyone.

With shares about 10% higher in March the option market is implying a price move of 7.8% upon earnings release. Meanwhile a 1% ROI may be able to be obtained even if shares fall almost 10% following the news. As with eBay, GameStop is a company that I wouldn’t mind owning if puts were at risk of being assigned. However, I’d be much more willing to sell puts if there was some price weakness heading into earnings. Otherwise, I would wait until after earnings and again consider the sale of puts in the event of a large price drop.

The last time I purchased Activision was after its own large price drop following earnings this past February when the company announced record earnings but provided weak forward guidance.

Shares, however, recovered quickly as Activision announced a large share buyback and increased dividend. Since then the shares have been trading in a fairly tight range and they are ex-dividend this week.

That dividend, however, is an annual one and on that basis is paltry. However, if shares end up being a short term holding the dividend yield can be very attractive, especially taken together with the option premiums available when selling calls.

Finally, LuLuLemon (NASDAQ:LULU) reports earnings this week and appears to be back in favor with shoppers as the company appears to be sufficiently distanced from its founder. Time may have been the best of all remedies to their particular problem as shares have shown great recovery.

The option market is implying an earnings related move of 8% and a 1% ROI may be able to be obtained when selling puts at a strike level 10.1% below Friday’s closing price. In the past, LuLuLemon has had some very significant earnings moves, with 15-20% moves not being out of the norm.

However, unlike a number of other stocks mentioned this week, LuLuLemon had nicely out-performed the S&P 500 over the past 7 trading sessions. For that reason I would be inclined to wait until after earnings are released and would consider either a sale of puts or a buy/write in the event of a large price drop.

Traditional Stocks: AbbVie, DuPont, eBay

Momentum Stocks: none

Double Dip Dividend: Activision (3/26), Dow Chemical (3/27)

Premiums Enhanced by Earnings: GameStop (3/26 PM), LuLuLemon (3/26 AM)

March 14, 2015

Weekend Update – March 15, 2015

Anyone who has seen the classic movie “Casablanca” will recall the cynicism of the scene in which Captain Renault says “I’m shocked, shocked to find that gambling is going on in here!” seconds before the croupier hands him his winnings from earlier.

This week, the Chief Global Investment Strategist of Blackrock (NYSE:BLK) in attempting to explain a sell-off earlier in the week said “You’ve got the dollar up about 23 percent from the summer lows, and people are realizing this is starting to bite into earnings.”

No doubt that a stronger US Dollar can have unwanted adverse consequences, but exactly what people was Russ Koesterich referring to that had only that morning come to that realization?

How in the world could people such as Koesterich and others responsible for managing huge funds and portfolios possibly have been caught off guard?

Was he perhaps instead suggesting that somehow small investors around the nation suddenly all had the same epiphany and logged into their workplace 401(k) accounts in order to massively dump their mutual fund shares in unison and sufficient volume prior to the previous day’s closing bell?

Somehow that doesn’t sound very likely.

I can vaguely understand how a some-what dull witted middle school aged child might not be familiar with the consequences of a strengthening dollar, especially in an economy that runs a trade deficit, but Koesterich could only have been referring to those who were capable of moving markets in such magnitude and in such short time order. There shouldn’t be too much doubt that those people incapable of seeing the downstream impacts of a strengthening US Dollar aren’t the ones likely to be influencing market direction upon their sudden realization.

Maybe it just doesn’t really matter when it’s “other people’s money” and it is really just a game and a question of pushing a sell button.

This past week was another in which news took a back seat to fears and the fear of an imminent interest rate increase seems to be increasingly taking hold just at the same time as the currency exchange issue is getting its long overdue attention.

While there are still a handful of companies of importance to report earnings this quarter, the next earnings season begins in just 3 weeks. If Intel (NASDAQ:INTC) is any reflection, there may be any number of companies getting in line to broadcast earnings warnings to take some of the considerable pressure off the actual earnings release.

The grammatically incorrect, but burning question that I would have asked Russ Koesterich during his interview would have been “And this comes to you as a surprise, why?”

In the meantime, however, those interest rate concerns seem to have been holding the stock market hostage as the previous week’s Employment Situation report is still strengthening the belief that interest rate increases are on the near horizon, despite any lack of indication from Janet Yellen. In addition, the past week saw rates on the 10 Year Treasury Note decrease considerably and Retail Sales fell for yet another month, even while gasoline prices were increasing.

The coming week’s FOMC meeting may provide some clarity by virtue of just occurring. With so many focusing on the word “patience” in the FOMC Statement, whether it remains or is removed will offer reason to move forward as either way the answer to the “sooner or later” question will be answered.

Still, it surprises me, having grown up believing the axiom that the stock market discounts events 6 months into the future, that it has come to the point that fairly well established economic cycles, such as the impact of changing currency exchange rates on earnings, isn’t something that had long been taken into account. Even without a crystal ball, the fact that early in this current earnings season companies were already beginning to factor in currency headwinds and tempering earnings and guidance, should at least served as a clue.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

Years ago, before spinning off its European operations, Altria (NYSE:MO) was one of my favorite companies. While I have to qualify that, lest anyone believed that their core business was the reason for my favor, it was simply a company whose shares I always wanted to trade.

In academic medicine we used to refer to the vaunted “triple threats.” That was someone who was an esteemed researcher, clinician and teacher. There really aren’t very many of those kind of people. While Altria may represent the antithesis to what a triple threat in medicine is dedicated toward, it used to be a triple threat in its own right. It had a great dividend, great option premiums and the ability to have share appreciation, as well.

That changed once Phillip Morris (NYSE:PM) went on its own and the option premiums on the remainder of Altria became less and less appealing, even as the dividend stayed the course. I found less and less reason to own shares after the split.

However, lately there has been some life appearing in those premiums at a time that shares have fallen nearly 10% in just 2 weeks. With the company re-affirming its FY 2015 guidance just a week ago, unless it too has a sudden realization that its now much smaller foreign operations and businesses will result in currency exchange losses, it may be relatively immune from what may ail many others as currency parity becomes more and more of a reality.

Lately, American Express (NYSE:AXP) can’t seem to do anything right. I say that, as both my wife and I registered our first complaints with them after more than 30 years of membership. Fascinatingly, the events were unrelated and neither of us consulted

with the other, or shared information about the issues at hand, before contacting the company.

My wife, who tends to be very low maintenance, was nearly apoplectic after being passed to 11 different people, some of whom acted very “Un-American Express- like.”

The preceding is anecdotal and meaningless information, for sure, but makes me wonder about a company that received a premium for its use by virtue of its service.

With the loss of its largest co-branding partner to take effect in 2016, American Express has already sent out notices to some customers of its intent to increase interest rates on those accounts that are truly credit cards, but my guess is that revenue enhancements won’t be sufficient to offset the revenue loss from the partnership dissolution.

To that end the investing world will laud American Express for its workforce cutbacks that will certainly occur at some point, and service will as certainly decline until that point that the consumers go elsewhere for their credit needs.

That is known as a cycle. The sort of cycle that perhaps highly paid money managers are unable to recognize, until like currency headwinds, it hits them on the head.

Still, the newly introduced uncertainty into its near term and longer term prospects has again made American Express a potentially attractive covered option candidate, as it has just announced a dividend increase and a nearly $7 billion share buyback.

Based on its falling stock price, you would think that Las Vegas Sands (NYSE:LVS) hasn’t been able to do anything right of late, either.

Sometimes your fortunes are defined on the basis of either being at the right place at the right time or the wrong place at the wrong time. For the moment, Macao is the wrong place and this is the wrong time. However, despite the downturn of fortunes for those companies that placed their bets on Macao, somehow Las Vegas Sands has found the wherewithal to increase its quarterly dividend and is now at 5%, yet with a payout ratio that is sustainable.

The company also has operating and profit margins that would make others, with or without exposure to Macao envious, yet its shares continue to follow the experiences of the much smaller and poorer performing Wynn Resorts (NASDAQ:WYNN). That probably bothers Sheldon Adelson to no end, while it likely delights Steve Wynn, who would rather suffer with friends.

With shares going ex-dividend this week and trading near its yearly low, it’s hard to imagine news from Macao getting much worse, particularly as China is beginning to play the interest rate game in efforts to stimulate the economy. The risk, however, is still there and is reflected in the option premium.

Given the risk – benefit proposition, I ask myself “WWSD?”

What would Sheldon Do?

My guess is that he would be betting on his company to do more than just tread water at these levels.

The Gap (NYSE:GPS) fascinates me.

I don’t think I’ve ever been in one of their stores, but I know their brand names and occasionally make mental notes about the parking conditions in front of their stores. Those activities are absolutely meaningless, as are The Gap’s monthly sales reports.

I don’t think that I can recall any other company that so regularly alternates between being out of touch with what the consumer wants and being in complete synchrony. At least that’s how those monthly sales statistics are routinely interpreted and share prices goes predictably back and forth.

The good thing about all of the non-sense is that the opportunities to benefit from enhanced option premiums actually occurs up to 5 times in a 3 month period extending from one earnings report to the next, as the monthly same store sales reports also have enhanced premiums. With an upcoming dividend during the same week as the next same store sales report in early April 2015, this is a potential position that I’d consider selling a longer term option, in order to take advantage of the upcoming volatility, collect the dividend and perhaps have some additional time for the price to recoup if it reacts adversely.

MetLife (NYSE:MET) has been trading in a range lately that has simply been following interest rates for the most part. As it awaits a decision on its challenge to being designated as “systemically important” it probably is wishing for rate increases to come as quickly as possible so that it can put as much of its assets to productive use as quickly as possible before the inevitable constraints on its assets become a reality.

With interest rate jitters and uncertainty over the eventual judicial decision, MetLife’s option premiums are higher than is typically the case. However, in the world of my ideal youth, the stock market would have already discounted the probabilities of future interest rate increases and the upheld designation of the company as being systemically important.

With Intel’s announcement, this wasn’t a particularly good week for “old technology.” For Seagate Technolgy (NASDAQ:STX) the difficulties this week were just a continuation since its disappointing earnings in January. After its earnings plunge and an attempted bounce back, it is now nearly 9% lower than at the depth of its initial January drop.

That continued drop in share price is finally returning shares to a level that is getting my attention. With its dividend, which is very generous and appears to be safe, still two months away, Seagate Technology may be a good candidate for the sale of put contracts and if opening such a position and faced with assignment, I would consider trying to rollover as long as possible, either resulting in an eventual expiration of the position or being assigned and then in a position to collect the dividend.

Finally, for an unprecedented fourth consecutive week, I’m going to consider adding shares of United Continental (NYSE:UAL) as energy prices have recaptured its earlier lows. Those lows are good for UAL and other airlines and by and large the share prices of UAL and representative oil companies have moved in opposite directions.

I had shares of UAL assigned again this past Friday, as part of a pairs kind of trade established a few weeks ago. I still hold the energy shares, which have slumped in the past few weeks, but would be eager to once again add UAL shares at any pullback that might occur with a bounce back in energy prices.

The volatility and uncertainty inherent in shares of UAL has made it possible to buy shares and sell deep in the money calls and still make a respectable return for the week, if assigned.

That’s a risk – reward proposition that’s relatively easy to embrace, even as the risk is considerable.

Traditional Stocks: Altria, American Express, MetLife, The Gap

Momentum Stocks: Seagate Technology, United Continental

Double Dip Dividend: Las Vegas Sands (3/19)

Premiums Enhanced by Earnings: none