Weekly Market Assessment
What is the strength in the US dollar telling us about the market? In the past 9 weeks the dollar has rallied over 7%. A stronger dollar suggests a stronger economy, which is also related to the rise in interest rates when signs of inflation appear! Once loose monetary policy becomes tighter, its intentions is to strike down the fear of inflation and cool the economy, limiting the supply of money into the market. This is done by raising interest rates. However, when looking at some commodities, there appears to be no signs of inflation; as most commodities are down in the low to mid double digits. So, for now, that can be potentially ruled out, even though many may disagree at this time. It seems impossible that with all the quantitative easing and low interest rates, that inflation has no impact...yet! Or are we starting to see the beginning signs of how a market reacts to artificial stimulus?
The markets latest reaction to this has been to sell off, as we are now back below 2000 on the S&P 500. The 10 Year Treasury Bond has acted accordingly to the currency markets as rates on the 10 year are now back above 2.60%. Most still believe that we will see rates on the 10 year below 2% by the years end and almost nobody thought we would be where we are today. The correlation between the bond and equity market still remains broken as they drift farther and farther away from each other. Are we finally seeing the affects of the Federal Reserve exiting the bond market with this recent move up or is it just plain and simple - when growth is strong in the US, we see an increase in the US dollar? There is a simple mantra that goes Keep It Simple Stupid (KISS) and sometimes its just that simple when trying to analyze what at times comes off as extremely complex.
The Rant: Going Off on a Tangent
This Thursday Josh Brown, (a CNBC commentator) a guy whose opinion I deeply respect, had some things to say about FireEye. I have a biased opinion because I have a long position however I wanted to expose a few things he said I found ridiculous! Mr. Brown says that this company has "an untrustworthy management, they have bagged shareholders numerous times since they became public". He goes on to say how FEYE IPO'd at ~$20 and ran up to ~$90 (mind you they have only been public for 3 quarters) then did a secondary offering at their highs and fell back down below $30. Let me address the first claim of having untrustworthy management - David DeWalt, who is FireEye's CEO, and was previously the President and CEO of McAfee, before it was acquired by Intel for $7.7 billion, and prior to that he ran Documentum, which was acquired by EMC for $1.9 billion. Therefore, these his acquiring history speaks for itself as it pertain to "management". On to the second part about the offering - for a company to take advantages of "it's currency", you do it at the top, not the bottom! Here is a link to an UBS analyst's recent comments about FEYE "they train the FBI, they train the U.S Department of Defense, and other Federal Government Agencies, on how to deal with breaches, so you cant find a more trusted resource." ....That's just my 2 cents!
Making the Watchlist: Below are the stocks that I will be looking at over the coming months. I will provide the the current stock price and why I am watching them. I will comment on them as I continue to keep an eye on them. You will be able to see and follow their growth and/or decline. Chart links may be attached.
Yandex (YNDX) $31.56- YNDX is the Google of Russia. The continued sanctions and potential conflict with Russia has pushed this companies stock lower where it is now undervalued due to geopolitical situations. I have purchased shares at $31.65
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk:
S&P 500 (SPX) -no trades
FireEye (FEYE)- FEYE jumped in the wake of the Home Depot credit breach and Apple iCloud hacking of various celebrity photos these past weeks, all the internet security companies including FEYE have been on a awesome run. I continue to hold these common shares as mentioned 3 weeks ago and now am up 24% on this position. I continue to hedge this position with weekly Vertical "CALL" Spreads and Iron Condors.
T-Mobile (TMUS)- Continued rumors keep coming up with now DISH Network looking into purchasing TMUS. I sold my common shares for a 3% gain and replaced this position with November $30 "CALLS". I have freed up a ton of capital, however remain in the position with less risk while keeping the potential return higher then with the commons.