Monday, July 11, 2011

Morning Note

July 11, 2011


Equity futures are trading below fair value following last Friday's disappointing US jobs report and China's inflation report, which also impacted sentiment. European indices are trading lower on Greek and Italian debt worries. Senior European Union officials are meeting today at 12:00 CET for talks in Brussels ahead of a meeting of the 17 EuroZone finance ministers later on Monday. The talks were arranged over the weekend by European Council president Herman Van Rompuy; a spokesman denied that it was a crisis meeting.

Alcoa (AA) will be reporting Q2 earnings after the close.

OECD May leading indicator for OECD 102.5 vs 102.8 in April; OECD May leading indicator for G7 countries 103.0 vs 103.2 in April


Libor fixings 
- Overnight Libor: Dollar: 0.125% vs prior 0.125% ; Sterling: 0.566% vs prior 0.566%; Euro: 0.571% vs prior 0.574%
- 1-month Libor: Dollar: 0.186% vs prior 0.186% ; Sterling: 0.628% vs prior 0.628%; Euro: 1.381% vs prior 1.345%
- 3-month Libor: Dollar: 0.246% vs prior 0.246% ; Sterling: 0.826% vs prior 0.826%; Euro: 1.381% vs prior 1.533%

Aug WTI crude ($1.32) to $94.88

Natural gas $0.05 to $4.26

Gold $5.53 to $1549.68

10-year yield 2.9754%
30-year yield 4.2667%


Asian Markets

Most Asian markets fell today on disappointing jobs data from the US and higher inflation in China. Financial stocks were weak across the region on worries about the potential for the Greek sovereign-debt crisis to expand to Italy. Airlines did rise 1-3%, lifting China to a small gain on reports that the country will invest in and encourage consolidation in the sector over the next five years. But banks and property stocks fell. A stronger yen hurt exporters in Japan. Led by coal miners, steelmakers, and airlines, Australia fell, reacting badly to the government’s imposing a carbon tax on polluters. In Hong KongChina State Construction (3311.HK) fell 2% on results. Japan June M2 +2.9%. China June trade surplus $22.27B vs cons $14.2B. ChinaJune inflation 6.4% y/y vs 5.3% seq. The yen is trading at 80.72 to the US dollar.

European Markets

European equity markets fell from the open led by the periphery as concerns that the EuroZone debt crisis could spread to Italy weighed. Worries over the outlook for global growth following last Friday's disappointing US jobs report and China's inflation report also impacted sentiment. UKoutperformed the region, briefly trading in positive territory before moving lower. Reports that EU Council's Van Rompuy, EuroGroup's Juncker and ECB's Trichet will hold a meeting ahead of the finance ministers meeting scheduled for later today and an FT report that some EU leaders were considering allowing a partial default by Greece hit sentiment added to peripheral European concerns. Italian market regulator Consob introduced new rules to curb market speculation following the sharp falls in Italian financials on Friday. France May Industrial Output +2.0% m/m vs consensus +0.5% and prior revised (0.5%) from (0.3%). The pound and the euro are trading at $1.5948 and $1.4117 respectively


Today's Economic Releases (Eastern Time)

02:45 France Industrial Production +2.0% m/m vs consensus +0.5% and prior revised (0.5%) from (0.3%)
02:45 France Manufacturing Production y/y (May); consensus n/a
—:— Japan BOJ Policy Meeting (2-day) (11-Jul); actual ---; consensus --- 

Today's Key Events (Eastern Time)

19:00 Novellus Analyst Event from SEMICON West
—:— Cisco Live
—:— Global Hunter Securities with TORM A/S 


Company Specific News

Offerings
MACK (Merrimack Pharmaceuticals files for $172.5M IPO through JP Morgan and BofA)

M&A
ARJ (Lonza Group (LONN.VX) to acquire Arch Chemicals for $47.20 per share in cash)
HTZ, DTG (Hertz Global extends exchange offer to acquire Dollar Thrifty (DTG), HTZ has extended the expiration date of its exchange offer for all outstanding shares of DTG to 5-Aug from 8-July)
MT, BTU (ArcelorMittal confirms submitting an indicative nonbinding and conditional proposal with Peabody Energy (BTU) to acquire Macarthur Coal for A$15.50/share in cash)
QGEN (Qiagen (QGEN) increases purchase price to acquire Cellestis Limited (CST.AU) by 7% to A$3.80/sh)
WOOF (VCA Antech to acquire MediMedia Animal Health for $146M in cash)
WTFC (Wintrust Financial Corporation acquires first Chicago Bank & Trust in an FDIC-assisted transaction.)


Newspaper Articles / Headlines

Barron’s
- Barron’s cover discusses rebalancing your portfolio to spread risk and talks to five mutual-fund portfolio managers about their top picks. The manager’s top picks include: David Daglio of Dreyfus Opportunistic Small Cap (DSCVX) likes: Jones Lang Lasalle (JLL), Autoliv (ALV), DealerTrack Holdings (TRAK). David Winters of the Wintergreen Fund (WGRNX) likes: Jardine Matheson (JM.SP), Swatch group (UHR.VX), Canadian Natural Resources (CNQ.CN). British American Tobacco (BTI), Birchcliff Energy (BIR.CN), Genting Malaysia (GENM.MK). Thomas Chow of Delaware Extended Duration Bond Fund (DEEAX) comments: Chow tells Barron's that 85% of its portfolio is in investment-grade rated bonds and the rest in high-yield, including junk bonds, bank loans and convertible bonds. According to Barron's, The Delaware fund uses Treasuries as hedges Dan Solender of Lord Abbett Intermediate Tax-Free Fund (LISAX) comments: Solender tells Barron's that his strategy has been to pursue relative value by buying well-researched bonds in the eight- to 10-year maturity range and single-A and triple-B credits. Solender notes that the recent offering from Florida Municipal Power is a good example of the opportunities that still exist. Bill O'Neill of Logic Advisors likes: SPDR Gold Trust (GLD), Global X Copper Miners ETF (COPX), Pimco Commodity Real Return Strategy (PCRIX), John Wenker and Jay Rosenberg of Nuveen Real Estate Securities Fund (FARX) like: U-Store-It Trust (YSI), Boston Properties (BXP) , Westfield group (WDC.AU).
Barron's features Jim Stack, newsletter writer and financial advisor and his top three fund picks. Stack also runs InvestTech Research Portfolio Strategy. Stacks top fund picks include: FMI Large Cap (FMIHX), whose top holdings are 3M (MMM) and Accenture (ACN). Some of the fund's positions, like Automatic Data Processing (ADP) and Devon Energy (DVN), overlap with InvesTech's individual stock picks. Scout International Fund (UMBWX), whose top holdings include Toronto-Dominion Bank (TD), Finnish bank Sanpo Oyj (SAMAS) and Komatsu (KMTUY). T. Rowe Price Health Science fund (PRHSX), whose biggest positions are Alexion Pharmaceuticals (ALXN), Valeant Pharmaceuticals(VRX) and Gilead Sciences (GILD).
- Barron's feature cautious on Syngenta. Barron's argues that Sengenta's plan to merge its two biggest divisions, crop protection and seed, in order to boost sales, may not have an impact on Syngenta's stock. The article points out that some analyst even say that shares could fall because of weak pricing of products, threats to global demand and poor exchange rates. Barron’s notes that Syngenta executives have reported that they expected to report significant revenue growth for Q2, however details were not disclosed and some analysts interpreted the lack of specifics as a sign that revenue growth would come in lower in Q2. The article notes that in the past year Syngenta ADRs, now around 68, jumped about 50% and that bulls see them going higher. Barron’s notes that John Goltermann, a portfolio manager, with Obermeyer Asset Management in AspenColo., says that the stock's intrinsic value is north of $80.
Barron's feature positive on Ruth's Hospitality. Barron’s argues that although Ruth Hospitality group’s (RUTH) shares have fallen into the single digits from a 2007 high of around 23, analyst John Wright of Rollins Capital Partners thinks the stock could rally to 9 or 10 in the next year and a half, up 40% from Friday’s close. The article points out that that Ruth's enterprise value is currently 7.7 times the past 12 months' EBITDA vs. an EV/EBITDA ratio of 9.2 for rival Morton's Restaurant group (MRT). Barron’s points out that Wright thinks Ruth’s warrants a higher multiple than Morton’s because 67 of Ruth’s 131 steakhouses are franchised, while all of Morton's are company-owned. The article notes that as the economic recovery continues, revenue at Ruth’s will rise. The article also highlights that, according to Wright, there is room for both revenue growth and margin expansion even without opening new restaurants. Jeremy Redenius of Bernstein Research in London thinks the ADRs could fall to $56 in a year, because the crop-protection chemicals industry has a bad record of maintaining or increasing prices in the face of rising costs.
Barron's feature discusses the 2011 report card and the best and worst calls of H1 2011. Below are Barron's best and worst calls of H1 2011. Bullish: Best: International Coal (ICO) , which was purchased by Arch Coal group. Worst: Research in Motion (RIMM) Bearish: Best: Zipcar (ZIP). Worst: Questcor (QCOR)
The Trader: Discusses Friday’s jobs report and its impact on the market
- International Trader (Europe): Discusses investors new interest in the opportunities of the Swiss franc
- International Trader (Asia): Highlights the Bank of India’s (SBIN.IN) recent disappointment
- Current Yield: Discusses Friday’s jobs report and how it has changed expectations about Federal Reserve policy and the course for interest rates over the next year and beyond
- The Striking Price: Volatility, not only implied volatility, can affect the profitability of an options trade
- Commodities Corner: Discusses Brazil’s smaller than expected crane crop
- Up and Down Wall Street: Highlights the state of the economy, while Washington focuses on inflation; discusses Friday’s jobs report
- StreetWise: Explains the markets humble reaction to Friday’s jobs report
- D.C. Current: J.P.Morgan Economist, David Kelly, thinks politicians should let voters should decide whether to raise taxes or cut spending
- Technology Trader: Argues that earnings season will be a strong indicator about the health of the tech industry
- Plugged In: Discusses whether or not Microsoft’s (MSFT) pending acquisition of Skype and possible new relationship with Facebook is a threat to Goggle (GOOG)
- Electronic Investor: Highlights the IRS’ new rules for cost-basis reporting
- Speaking of Dividends: Lists Caterpillar (CAT), Chevron (CVX), Exxon Mobil (XOM), General Electric (GE), International Business Machines (IBM), Intel (INTC), Johnson & Johnson (JNJ), Procter & Gamble (PG), Travelers (TRV) and UnitedTechnologies (UTX), among others
- Follow- up: Highlights DineEquity (DIN) and discusses Blackboard’s (BBBB) privatization

Daily Mail
News Corp may sell UK newspapers to prevent BSkyB (BSY.LN) takeover from dying. The Daily Mail only cites "City sources," and it is not clear if they are negotiating a sale/purchase, or simply speculating. The article notes that the entire News of the World phone hacking scandal has made it unclear that James Murdoch will be able to succeed Rupert Murdoch as chairman/CEO of News Corp, or even continue on the company's board. A large shareholder says that COO Chase Carey would be a good choice to take over from Rupert Murdoch.

Der Spiegel
RWE negotiating for investment from Gazprom (GAZP.RU). Der Spiegel reports that the companies' CEOs met in Paris 8-Jul, and that Gazprom CEO Alexei Miller also met with E.ON (EOAN.GR) CEO Johannes Teyssen to discuss possible collaborations 7-Jul. Talks are touchy, as Gazprom and E.ON are at odds over the price of Russian gas.

Economic Times
Outsourcers to see lower margins as US customers cut rates up to 15%. Officials at outsourcers tell the Economic Times that margins could fall 1-3% as large companies reduce what they are willing to pay. It's not clear that this is news, however, as the article says that analysts have already forecast the lower margins.
Groupe Danone merging Indian distribution operations with Yakult Danone India. An executive tells the Economic Times that the move will bring "significant synergies," though no numbers are given.

Financial Times
Sports Direct International staff to get £87.5M bonus. The company tells the FT that it expects a earnings-based bonus share scheme to result in 34M shares' being issued. Each staff member will get £43,750 over the next two years; their average salary is £20K. The bonus is expected to be confirmed with FY results 14-Jul.
Royal Dutch Shell to invest $7B over next five years to raise Raízen's annual ethanol production from 2.2B to 5B liters. In an interview, Raízen CEO Vasco Dias tells the FT that the 50/50 JV with Cosan (CZLT11.BZ) plans to become the world's largest exporter of ethanol to the US once the country removes its ethanol tariffs.
- Deutsche Bank "virtually certain" to name Anshu Jain co-CEO. But after a meeting yesterday (10-Jul in Europe), insiders tell the FT that it's still not clear who might be named co-CEO along with him, as one of the three people on the nominations committee isn't sure that Jürgen Fitschen is right for the post. Sources say Fitschen may be seen as too old and not providing a suitable balance of experience in a team with Jain; the article says the same reasoning may apply to Hugo Bänziger, meaning Rainer Neske may be left for the job.
Rupert Murdoch may sacrifice Les Hinton from News Corp. A person familiar with News Corp tells the FT that that the Dow Jones CEO will be shown the door in order to protect people even closer to Rupert Murdoch, such as James Murdoch and Rebekah Brooks. People close to the company told the FT earlier in the News of the World phone hacking investigation that Murdoch wouldn't consider such a move.
Vallares considers investing in Genel Energy. According to the Financial Times, Vallares (VLRS.LN), is considering investing in Genel Energy, an independent exploration and production operating in Kurdistan. The article notes that, according to a person familiar with the discussions, Genel Energu is one of many targets Vallares is conducting preliminary due diligence on. According to the FT, Vallares is also looking at potential acquisitions elsewhere in the Middle East as well as Asia, South America and Russia
Doughty Hanson emerges as possible bidder for Synovate. The Financial Times reports that Doughty Hanson is a possible bidder for Synovate, valuing it potentially at as much as £600M, according to sources. According to the FT, Doughty Hanson had engaged advisers Wyvern Partners to work on a potential offer for the business but has had its proposal rebuffed by the company, which confirmed last month it was in exclusive negotiations with Ipsos about a potential sale of Synovate. The article notes that, according to people familiar with the situation, talks are at a very early stage and that if a deal were made it is likely to be months away.
Pfizer could earn $800M with extended exclusive rights to sell Lipitor in European Union countries. The Financial Times reports that Pfizer could earn $800M since European Union countries extended exclusive rights to sell Lipitor until summer next year, in exchange for tests that will provide adapted form of the medicine to a few thousand children. The article notes that in November Pfizer will launch a chewable grape-flavored low-dose version of Lipitor in the European Union. The article points out that at the same time the version is launched in the EU, Pfizer’s patents should expire and the product would normally be exposed to cut-price generic competition; however, Pfizer has sought a “supplementary protection certificate” in most EU countries, extending its control over supplies and pricing of Lipitor until May 2012.
EU considers accepting partial default by Greece. Citing sources, the FT reports that in a change, an idea to be discussed today (11-Jul in Europe), eurozone finance ministers will discuss the possibility of accepting Greece's defaulting on some of its bonds so that itcan reduce its debt to a manageable level. Details on any plan may not come until late summer.

Hong Kong Economic Journal
DHL to seek Hong Kong listing. The Hong Kong Economic Journal cites market sources, but says that parent Deutsche Post has not yet decided to split its business.

Investor Business Daily
The following changes were noted in the latest IBD 50 List.
Added: DECK, CHKP, TZOO, EW, JAZZ, FTNT, FFIV
Deleted: SPRD, SMTC, ROST, NETL, PNRA, OTEX, ABV

London Observer
UK to "radically overhaul" licensing rules for online gambling. A spokesman for the Department for Culture, Media & Sport tells the Observer that an announcement could be coming within weeks. The revamp will basically target overseas operators

London Telegraph
Northumbrian Water effectively accepts bid from Cheung Kong Infrastructure Holdings (1038.HK). The Telegraph reports that the board is permitting due diligence, and it is not clear if 26% shareholder Ontario Teachers Pension Plan will be on the buying or selling side of any deal that may come to pass

Sky News
Southern Cross to completely break itself up. In his blog, Mark Kleinman reports that an announcement may be made at the 12-Jul shareholder meeting rather than 11-Jul. Landlords will be advised to choose other operators for any homes they want to keep open; shareholders will be left with "little to show." A person close to the situation says that details are still being worked out.

South China Morning Post
- South China Morning Post summarizes Ford's plans for China. The article, which in part cites CEO Alan Mulally, does not really break any news. It says that Ford is spending $1.6B to build four car factories in China, and by 2015, it plans to triple its number of models sold, double its dealership network, and double its number of employees in China.
Veolia Environnement targets expansion in China. A Hong Kong Tramways executive tells the SCMP that Reolian will open in Macau 1-Aug, and Veolia is in final talks on some of the contracts in the eight Chinese cities now planning to build tram networks.

The Independent on Sunday
- JD Sports renews interest in JJB Sports chain. The Independent on Sunday reports that according to sources, JD sports may be renewing interest in and lining up a bid for JJB Sports. The article does not go into further detail about the potential deal, but notes that last week, JD Sports lost a bid for Sir Tom Hunter's Cruise and USC fashion chains to Mike Ashley's Sports Direct.'

The Sunday Times
The Competition Commission expected to tell BAA to rush sale of Stansted. According to The Sunday Times, next week The Competition Commission is expected to begin a sale of airport assets by telling BAA it must offload Stansted and either Edinburgh or Glasgow. The article notes that Ferrovial (FER.SM), owner of BAA, is expected to be given 18 months to complete the disposals when the commission’s final report is published on July 19.
The Sunday Times reports that understood BAA will choose to sell Glasgow airport instead of the quickly growing Edinburgh.
Guy Hands prepares £4B bid for Royal Bank of Scotland's RBS Aviation Capital. The Sunday Times reports that Guy Hands is plotting a £4B bid for RBS Aviation Capital, which Hands plans to combine with Awas, a plane leasing firm that has been owned by Terra Firma. The article notes that if Hands is successful, the business would become third in the global market for hiring out planes. According to the article, Terra Firma plans to raise a new fund of up to €3B next year and Hands has pledged to return his current fund to break-even after spending £1.75B on EMI.

Wall Street Journal
- Monsanto in advanced discussions to "significantly" deepen ties with Sinochem (600500.CH). People familiar with the discussions, which have been going on for months, tell the WSJ that a final agreement could result in a JV, a stake sale, or Sinochem's expanding its role in marketing Monsanto products in China. The companies are treading carefully for fear of upsetting political sensitivities in either the US or China.
Once an underwriter, not always an underwriter for AIG. In an interview, CEO Robert Benmosche tells the WSJ that for round 2, the company will replace at least one of the banks that managed its May offering of US government shares. People familiar with the matter say it is likely that one or two of Bank of America (BAC), Deutsche Bank (DBK.GR), Goldman Sachs (GS), and JPMorgan Chase (JPM) will go. The article notes that being dropped would hurt the banks far more in image than in the top or bottom line.
WSJ is positive on Limited Brands. A "Heard on the Street" column likes the fact that Victoria's Secret has not stormed overseas, and is instead biding its time. The brand is already strong, and its online presence means it doesn't mean to risk tripping over itself by moving abroad too quickly.
WSJ is positive on Advanced Micro. A "Heard on the Street" column notes that the company has reduced its debt, and its new chips look hot. By using free cash flow to pay down debt for the next two years, the company could make itself a bargain at the current price.
Hulu is for sale, but Netflix isn't buying. People familiar with the matter tell the WSJ that the list of companies expressing interest includes Amazon (AMZN), Google (GOOG), Yahoo (YHOO), Microsoft (MSFT), and DirecTV (DTV). The article doesn't say why Netflix isn't taking part in the bidding, but one source says that Hulu's media owners weren't nuts about the idea of selling the service to Netflix, which they already supply programing to.\
ONEOK, Inc complaining about Oklahoma law that Chesapeake Energy (CHK) benefits from. A spokesman for the governor of Oklahoma tells the WSJ that ONEOK has expressed displeasure with the law allowing large public companies to have only a third of their boards elected annually. It's not clear, but the article seems to be saying that the 115-page law, passed last year, does not permit companies to choose of their own volition to elect their directors annually. The article reports that ONEOK was not asked for its input on the law. According to proxy advisory firm Institutional Shareholders Services, less than a third of S&P 500 companies have staggered boards; the Oklahoma Chamber of Commerce hopes that allowing staggered boards will attract companies to move to the state.
Backers of Carrefour-Pão de Açúcar (PCAR4.BZ) plan looking for top-level investment funds to join them. A person familiar with the matter tells the WSJ that new investors are seen as key to persuading Casino (CO.FP) to go along with the plan. New investors might also calm the political uproar the proposed deal has engendered in Brazil, since the new investors would allow BNDES to take a smaller role.
- Southern Union has seen many suitors come and go. A person familiar with the matter tells the WSJ that since 2008, the company has held discussions with at least nine possible buyers. An SEC filing this week will say that Southern Union was in talks with two of them this year, but the buyers returned with lower offers after due diligence. Sources say Williams (WMB) is expected to raise its offer now that Energy Transfer (ETE) has.
Airbus aims to break Boeing's (BA) stranglehold on orders from American Airlines (AMR). People familiar with the proposal tell the WSJ that Airbus is offering $6B in preferential financing to help with a 260-plane order with a list price of $23B. A source says that Boeing is torn, fearing that cutting its prices too much to keep American in its stable would undercut its negotiations with other airlines. Airbus is putting up 130 A320s and 130 A320neos against 737-800s and 737-900 Extended Ranges from Boeing. The article notes that by buying Airbus planes, American could lose its most-favored-nation status with Boeing. Sources say a decision might be made by "next Wednesday;" it's unclear if that means 13-Jul or 20-Jul.
Google's Eric Schmidt to testify before the Senate antitrust subcommittee. The WSJ reported yesterday that Eric Schmidt, Chairman of Google, has agreed to testify before the Senate antitrust subcommittee in September to answer questions about the company's increasing dominance of the Internet. The article notes that last month senators threatened a subpoena if Eric Schmidt and Larry Page did not testify before them. The WSJ reports that Sen. Herb Kohl (D-WI), chairman of the subcommittee, reported that Google had complied with their demand.
WSJ reports that Bank of America appoints Terry Laughlin chief risk officer. The WSJ reported that, according to an internal memo, Bank of America (BAC) announced that Terry Laughlin will become chief risk officer, effective sometime later this quarter, once Bank of America reaches a settlement over foreclosure practices with the state attorneys general from all 50 states. The article notes that the move comes after Bruce Thompson, the company's current chief risk officer, was named CFO. The WSJ points out that, according to the internal memo, Laughlin is switching positions after recently taking the job of working through its troubled mortgage book. The article also reports that, according to the internal memo, Paula Dominick, global compliance executive, will serve as interim chief risk officer until Laughlin takes over. WSJ notes that the internal memo also noted that Gary Lynch, recently appointed global chief of legal, compliance and regulatory relations in April, will start in his new role on Monday.
Exxon Mobil given until 9-Sept to clean up Yellowstone RiverThe WSJ reports that Exxon Mobil was given two months to clean up oil from a ruptured pipeline along the Yellowstone River. The article notes that on Friday, The Environmental Protection Agency ordered Exxon to complete cleanup of the estimated 1K-barrel spill by Sept. 9. The WSJ notes that company spokesman, Alan Jeffers, said that Exxon agreed to the EPA order and expects to have the spill cleaned up by the deadline.

Washington Post
- Federal antitrust enforcers examine whether Google is facing an unfair coalition of companies. The Washington Post reports that according to sources familiar with the matter, Federal antitrust enforcers are examining whether Google (GOOG), is facing an unfair coalition of companies that could block its popular Android mobile phone software. The article notes that the biggest concern, according to experts, is that the $4.5B auction of Nortel Network’s remaining patents is an example of the growing dysfunction of the country’s patent system, where even the vaguest ideas can be approved by the government and protected for years. The Washington Post explains that companies are now arming themselves with constantly growing patent portfolios in order to shield themselves from costly lawsuits.

Wirtschaftswoche
SMA Solar looking to enter JapanThailand. CEO Pierre-Pascal Urbon tells Wirtschaftswoche that the company saw foreign sales pass domestic revenues in Q1 for the first time ever. He reiterates the company's prior guidance, that it expects 2011 sales of €1.5-1.9B, with a profit margin of 21-25%.


Research

Bank of America Merrill Lynch: downgraded TNK
Barclays Capital: upgraded TJX
Citi: upgraded ASML, KLAC, LRCX
Credit Suisse: downgraded CX
Goldman Sachs: upgraded ONE, WFM; downgraded NTSP
JMP Securities: downgraded TMK
Keefe Bruyette & Woods: upgraded CRBCD
Oppenheimer: upgraded MSCC
RW Baird: downgraded SHAW, SPWRA; downgraded HURN
SunTrust: upgraded EQT
Ticonderoga: upgraded VAR
Wells Fargo: downgraded BMR, GOV
William Blair: downgraded HGG, PETS


Options

Banks – Skew, a measure of implied downside risk relative to implied upside risk, in the XLF hit a ~10 month high last Thursday as we saw outsized put buying ahead of this week’s earnings and macro-related catalysts (budget talks; foreclosure settlement; Bernanke testimony). On Friday, we saw someone buy 24,000 XLF July 15 Puts trade for 6c. We think investors should look at buying the XLF August 15 Puts to protect positions into earnings season. 



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 No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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