Fi Fiber Fo Fum, I Smell the Blood of a Telcoman

Long anticipated Google Fi is here. Specifically uncovered in regulatory filings last fall, providing a (good) network was a natural extension for a firm whose growth comes from increased internet usage.  It turns out to have been considered since at least 2007.  On Fi you’re on a, you guessed it, Wi-Fi network first.  If none is available you get Sprint and T-Mobile’s Network, whatever is working best at the time. No doubt Google’s wireless network to come to help replace, ahem, compliment them.

This comes on top of — and ultimately related to — Google Fiber.  One report a year ago had Google Fiber winning 75% market share…and 30% of low income households where after all the service at 5 megs is free.  Who cares if Time Warner and Comcast had merged or not?

Free – or less than free – is tough to beat, and the writing is on the wall.  Verzion and AT&T have higher quality networks…for now.  As Bill Gurley says in the link regarding the GPS market:

Despite these challenges, it would be a dangerous strategy for any of the many threatened players in these markets to hang on to this “quality” rationalization for very long.

It’s hard to see how the cable and telco stock prices haven’t tanked in anticipation of the forthcoming price war against Google that only Google (or Facebook, or Amazon, or Apple) can win.

End of 4/24/2015 prices of giants that could fall:

T: $34.01 (5.7% dividend yield)

VZ: $50.03 (4.5%)

S: $5.27 (0)

CMCSA: $59.64 (1.7%)

GOOG: $565.06 (0)

 

 

 

ZC on precipice and LULU

Back from Greece and looking to fire up the blog:  ahead on short ZC position from 760; about to break through 735 which has been the repeated low of the last month:

Prior to the summer run up Corn was in the 550s.  I have no idea if it can rapidly return there but feel this is a decently safe position to enter into an extension of the position.  I did the same on the LULU short, less for technical reasons than increasing fundamental conviction at 68:

I’m down on the effective ZNGA long position (by shorting Jan 13 & 14 puts at 3 & 2.5; the premiums got most of the move down and I also feel there isn’t much further move down there but perhaps could have waited a bit longer to enter the position: now trading underneath net asset value makes the risk minimal I think.

 

 

Three Cash Rich Video Game Stocks

The video game industry is cyclical, and leadership within sectors is cyclical as well.  A proverbial “buy when the blood is running in the streets” opportunity I think has emerged with three very cash-rich companies.  I wrote puts (ZNGA) or bought outright the following three video game stocks.

Zynga @ 2.90

Nintendo @ 13.82

Perfect World @ 11.14

At Interactive Brokers you need to pay $3/month for real time quotes on pink sheet foreign stocks like Nintendo which is ironically hard for me to stomach but then the transaction cost was the same as any other stock — much different than what I remember from the Fidelity desk to buy a foreign OTC stock.  I haven’t checked the margin implications.

Margins of safety are hard to come by in technology whose rate of change makes persistent advantages hard to find.  But when there are firms that do have some moat — Nintendo’s franchises might be among the deepest in gaming — with nearly 2/3rds of the market capitalization in cash in the first two cases and half for PWRD (offset by some debt) then it is time to back up the truck.

 

China gooses Dr. Copper (or CAT?), position update

I’m wary of global economic growth but stimulus is stimulus and I’m not going to Fight the Chinese Fed.   According to Bloomberg a stimulus of the kind that actually builds roads and infrastructure is on its way.

I’m awfully tempted to play this right now…week’s positions have been ho hum; exited soybeans at 1772, got back in at 1738 but losses on S&P Futures (just 7 points, missed getting whacked by the huge rally) evened that out.  My tight stop on Gold hit, which I’m looking to get back into, but slightly ahead on long Corn and short Treasury trades.  Sold APPL for slight profit but it was underperforming S&P on big move today so thought the money would be better put to work elsewhere.

Copper is just over the highs hit twice in July, but employment report looms tomorrow morning.  Close correlation between corn & soybeans means I may lighten either (or both) positions to establish one in Copper.  May also halve position on Treasuries given the risks of a rebound there.

Shorting Copper was one of the great trades I had in August 2011: am I emotionally obscured by it, even if going long?  I’ve bought one contract of Copper at 3.567 which is a way to implement strategies to see how I feel being in the position and brings the contract to various screens of my Interactive Brokers account.

Going long CAT might also be a decent play here but haven’t given it much thought beyond initial feelings about CAT at low valuation and weak arguments to the contrary.

Chart forCaterpillar Inc. (CAT)

FWIW, CAT Jan 2014 120s & 125 calls in the low $2 range…82.5 strike at 13.10 if one feels more cautious.  I’m not sure I have the patience to let that play out.

Small other position update…Selling ZNGA Jan 13 & 14 calls at 2.5 & 3 strike prices is slightly ahead and I’m feeling good about that position.

UPDATE: did swap out of ZN at 132 ‘100 for copper at 3.575 – ZN is still in a range with a big unknown coming up in a few hours; HG is breaking out; Soybeans and Corn feel the risk/reward is better than ZN short term to swap out of them.  Set HG stop at 3.5245; HG & ZN are probably decently correlated in short term so the one breaking out of range right now is more appealing.

Position Update August 30

Well as feared the Russians were coming, and wiped out my short grain position.  A pretty bad loss whose saving virtue was sticking to stop loss plan and indeed getting short the S&P at 1406 which I’m ahead on, and even going long — though a smaller number of contracts of soybeans at 1733 which is now up a solid 1%.

I added this morning to it at 1746 which knock wood appears to be the low of the morning and moved up a stop to 1736.xx.  This is an awfully tight stop but the soybean supply/demand situation is not as bearish as with wheat or even corn with murmurs of $25 soybeans.   They look really good right now, and the thesis is after all is to trade into breakouts and let it ride:

I have also added a small position in Live Cattle at 125.575.  Here is the six month chart.  Barron’s wrote about Live Cattle in late January and I’ve kept my eye on it since, with another brief small trade earlier, and appears to be poised for a robust technical formation (similar to Cotton right now at 77 which I may nibble in as well)

I feel comfortable even if just slightly ahead on soybeans & S&P but is this an internal trading signal that there is little consternation or just a false hope generated from relief after the surge in wheat and soybeans that knocked me for a loop?

On the stock side, large cap tech and ZNGA under 3 among others still looks insanely cheap but I am waiting for a downswing or the S&P at least to head back to 141x before putting on a position like that.

Grain Complex and Positions August 29 Evening

There have been volitile moves since Sunday night — Apple was a whole lot of anticipation for a four point loss (in 677 out 673) finding better opportunities to double down elsewhere and likewise got out of Gold breakeven.  Both of those I’ll return to at some point.

(small) Short position in ZN near the close at 133 ‘295 — I could immediately unwind this for reasons below but think there are a few points to be had after it spiked up then regressed today

I added to the anti grain position by shorting ZS; and traded it very poorly today, taking a loss and going long on a head fake surge up only to see that too reverse — I think I got obsessed with too very short term of movements, my classic error and again got short at 1714 – only to see it rise again but long term perspective within what really should be described as a range.  The evening movement taunts the highs, I set a stop loss at 1740 and will let it lie.  A stop there risks another tweak at the top of the range only to return lower but given the extreme weather conditions to move it higher risks too much of a loss; I could take a 1.5% total loss and willing to give 10 more points from the 1730 it is trading at in the evening :

I remain short ZW, profitably but moved down the stop loss in case the market turns want to lock in that profit: stop at 891 with the Dec contract at 879 now.

The grains are going to bounce around, there is Russian poli-agicultural risk but by in large this market looks headed down after several attempts to break out.  Here are the continuous month contracts of the three major grains:

If I get stopped out, unless the S&P breaks out over 1420, I will likely move straight into a short S&P trade which I think will be good after this week which is a typically seasonally strong one for stocks the effect of which may be magnified by any GOP poll bumps.

UPDATE 1:25 AM: evening moves up in both ZS & ZW are disturbing enough for me to monitor but I’m not freaked out; I fear evening thin volumes could touch my stops and I’m going to go ahead and move them up to 896.25 and 1746.25 respectively; these are losses far higher than I would like but I also want to avoid the worst case scenario of another whipsaw followed by the precipitous dive that I think is very possible and profitable.

Positions August 26 Sunday Evening

Short Dec ZW at 896

Long Dec GC at 1678

Long Sep ZN at 133 ‘180

The ZN position I will not be keeping for long; I believe the trade is asymmetric with any bad news from Europe driving it higher; stop at ‘140 which is just below lows earlier in evening.  Long term I want to be short ZN and may flip this position in short order.  ZW traded up, then flat, then up when trading opened at 6 pm eastern, pretty much following Soybeans which are breaking out but Wheat looks like it wants to go down.  Gold is a long and short term disposition that is a position right now.  Short wheat into a purportedly bullish ProFarmer report wasn’t too comfortable this weekend but news had been issued throughout the week.  Rains in the southern united states should bode well for a short Wheat position.  If Corn, Wheat and Soybeans all were breaking out definitely would go long.

Looking possibly to play Apple long and Las Vegas Sands short tomorrow.

UPDATE 1:15 am – indeed traded out of ZN at 133 ‘215 after it started drifting down from ‘240, a nice small gain and driven by Apple opening at 677- just at highs but only 7,000 shares traded.  More on Apple another time.  Not sure where to set a stop loss but not too worried about it.

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