It has been mere days since gasoline prices here in Colorado rocketed above $3, so news that Ford and GM suffered a catastrophic sales decline in April hardly comes as a surprise. With gas prices predicted to reach $4 here within the next few months ' which translates to nearly $5 in California -- it's going to be a long, hot summer for the Big Three and the auto showrooms. Even if buyers are no longer clamoring for Ford Excursions, F-150s and Hummers, they still seem to be driving these behemoths as though petrol were 1.30 a gallon, stomping on the accelerator so that they can arrive at the next red light before the rest of us. I used to drive like that myself ' back in high school, in a souped-up former police vehicle that could go through a set of rear tires in 5000 miles. Now I drive like your grandma, intent on coaxing another 100,000 maintenance-free miles from my Lexus SUV. Have you noticed that some of the new hybrids hearken back to the days of the 1960s muscle cars? Honda's latest offering in this category gets pretty impressive gas mileage, but it would have been more impressive still if the engineers had not used hybrid technology to extract nearly 300 horsepower from the car's relatively small engine block. What's curious is that they did not give the car a companionable gearbox and tranny that would have allowed (encouraged?) owners to lay rubber at every intersection. Focus groups must have determined that Honda owners were a little stodgier than that, even if enough of them still lusted after drag-strip acceleration in the 60 mph ' 90 mph range, where we do most of our passing. *** A Guru's Best Tricks Revealed 'While perusing some of your posts
May 2007
Permabear ‘Secret’: Take Some Profits
– Posted in: Current ToutsWe'd been looking to short Goldman Sachs (GS) and the Mini-S&P futures, among others, but both plummeted yesterday from highs just a tad shy of their respective rally targets. In Goldman, our price objective was 228.40, a Hidden Pivot where a potentially important top seemed like an enticing prospect. However, as you can see in the chart below, the stock never got any higher than 226.61, and the May 220 GS puts we'd been bidding 1.60 for traded no lower than 2.25. Shorting the Mini-S&Ps proved just as elusive. While we'd been looking since last week for at top at exactly 1406.75, the futures never made it above 1405.00 (yesterday's intraday peak). Fortunately, we held some QQQ May 47 puts from earlier, and they came in like gangbusters on Monday after stocks reversed the respectable gains they'd racked up in the first few hours of the session. This caused out-of-the-money QQQ puts to get pretty pumped up, so we shorted some of them against the May 47 puts already held. By day's end, we'd legged into the May 47 ' May 45 vertical put spread for a 0.20 debit. This means that although we can lose no more than $20 plus commissions come May expiration, we have a shot at making a profit of as much as $200/spread if the underlying issue closes 45 or lower. (The Cubes settled on Monday at 45.90, down 0.67.) We also held a short position in Citi by way of some May 52.50 puts purchased earlier. We originally paid 0.70 for them, but profit-taking along the way has reduced our cost basis for the puts we still hold to 0.40. Our goal now is to short some May 50 puts against them for 0.50, which would give us the May 52.50-50 vertical (bear) put
