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March 09, 2009

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mel

Sure, Jane.

At the link I gave you, Barron's Econoday schedule. The week's economic releases are spelled out, with any links or forecasts that might accompany them. When you hear somebody say, "the street is looking for (or expecting) X", what they are actually saying is "The Wall Street consensus average for this economic number is X", these are those numbers. Barrons does a very nice thing, when you click on one of the data points, you are linked to a page that's titled "Why Investors Care", and they break down every single data point. It's a great tool. So fiddle around with it at your leisure.

But, you asked, so we'll go through the Redbook figure, the hard one, first. Here's their definition:

"Redbook
Definition:
A weekly measure of sales at chain stores, discounters, and department stores. It is a less consistent indicator of retail sales than the weekly ICSC index. It is also calculated differently than other indicators. For instance, figures for the first week of the month are compared with the average for the entire previous month. When two weeks are available, then these are compared with the average for the previous month, and so on. It might be more useful to compare year-over-year figures since these are indeed compared to the comparable week a year ago. This index is correlated with the general merchandise portion of retail sales covering only about 10 percent of total retail sales."

Ignore the year to year carp, it's like measuring freezer burn on fish sticks, not useful for day to day trading, but that's me. If you have more luck with it, well, you're ahead of the game as far as I'm concerned.

The reason this data is watched is for consumer trend changes, because it's somewhat smoothed as a function of time. Sudden sales by chains are washed out, like a President's Day Sale. And you can watch Christmas sales build, or falter, week to week.

The Icsc is like watching a dart game, unless you know where the last data point was it's meaning less until the next throw, or in this case, week.

I hope this helps. If I blew it again, let me know.


mel

Jane-

And I just threw you a complete red herring for what Rick actually gave you in response to your request. I stayed with consumer spending, which has been fascinating to watch as the savings rate has surprised a bunch of people.

To quote Emily Letilla "nevermind".

mel

pagar-

In the event of bankruptcy, Short put means open your wallet, unlimited exposure or risk.

Long put? JACKPOT!!! (now you know where hat unlimited risk goes)

And short covered call, the stock goes to zero, but you keep the option premium you originally sold, less all commissions.

Fresh Air

Mel--

Thanks. I know all that. I've had about three options classes and am a Series 7. A bit rusty. Sorry if I wasn't making myself clear.

mel

Too many in a row, I'm writing to myself.

Night all.

mel

FA-

You're sorry? I ran the options desk on the CBOT for some well known Zombiebank as it's known here at JOM.

Got carried away.

I'm sorry for boring people.

Pofarmer

Hey, mel, nothing boring at all, thanks for that little refresher. I've actually got a minor in economics with an emphasis on farm management and marketing. However, my futures and options classes basically taught me that I'm a producer, not a trader. ;0) I do tend to understand the functions, though.

I suppose that where the risk comes in IS the naked shorts. How do you do that?

Fresh Air

Mel--

Oh dear, another citizen of the Most Corrupt City in America? If so, pleased to make your acquaintance. If not, well...at least you won't have to worry about the tax hikes ahead of the 2016 Olympics.

Caro

Not boring, Mel. Challenging.

Pofarmer

That's a dangerous way to think. Deciding shorting isn't part of the legitimate function of the stock market and should therefore be banned seems like a close cousin of deciding the legitimate function of automobiles is commuting and forbidding other uses.

Not really, it just seems that you ought to actually OWN a stock to sell it, no different than you have to OWN a car to commute. d;0)

Rick Ballard

I haven't been bored - it's been a nice refresher on basics.

FA,

Dunno about writing that 25-100 valuation. It makes the vultures drool too much.

I find Turbo's punt on the stress testing rather interesting. No action until April indicates (to me) that some fingers and toes are being crossed in the hope that "things have picked up" in Q1 for those poor, stressed out money pits. It's a real ringing endorsement of the money center banks. I wonder if some of them are being sent to a Swiss spa to recover?

Molon Labe

"In the event of bankruptcy, Short put means open your wallet, unlimited exposure or risk."

Not true. Your exposure is the strike price of the put option you sold.

DebinNC

On the Specter-predicts-doom thread at Hot Air, poster unseen mentioned a Bill Clinton self-serving decision I'd forgotten:

We the USa owe $12 trillion that thanks to Clinton is short term debt not long term debt. He refi the debt in the 90’s to give the appearance of a budget surplus. Most of that debt was refi in the late 90’s with 10 year notes which means most of that debt is coming due and must be rolled over at the same time Obama and congress are adding Trillions more to it. If we find buyers for that debt at the present interest rates we can limp along for a couple more months and hope things get better. If for some reason like china screws us and we can’t find a buyer for that debt interest rates will go up and 100’s of billions will be added to servicing of our debt. Which means massive inflation which means massive increase in interest rates etc until we default like any other subprime borrow. Yes the USA government is considered a subprime borrower.

Someone needs to cite this whenever Dems' "we inherited" excuse pops up.

bgates

no different than you have to OWN a car to commute.

You can rent one from somebody else who agreed to let you use it for that purpose, no different than you can rent a stock from somebody who agreed to let you sell it and compensate him for it later.

glasater

Have mentioned before that I don't understand bonds but someone on CNBC mentioned today selling one hundred year treasuries--referring to Deb's comment.

Mel~

Do you have any theories on what caused that run back in September?

Captain Hate

Some things are beyond parody. Yesterday I mocked John "unsafe sex" Edward's past evocation of Christopher Reeve in one of his typically non-science based bashing of Bush's banning of federal funds to be used for embryonic stem cell research (which is not the same as banning it which the MSM attempts to promulgate in the minds the unwashed). Listening to Laura Ingraham revealed that MSLSD's own bathtub boy was doing exactly that yesterday in one of his reality-challenged upchucks of verbiage. Rather than lying about what school he attended, Queef should try an illustrate a level of professionalism that could be gained merely by paying attention at the lowest rated community college in the country.

Captain Hate

try an == try to

bad

Captain, Edwards and Madoff (and most of DC) are constant reminders that no parent should be smug about their child turning out to be a success.

Sometimes the problems don't show up for a long time.

cathyf
Can someone explain the difference between shorting stocks vs buying puts. as far as the effect on the market?
If you buy a call and sell a put (where both options have the same expiration date and strike), this is equivalent to buying the stock. (Actually, it's the same as buying a stock forward -- there are some cashflow differences which have to do with interest rates and dividends.) So, selling the call and buying the put is the same as shorting the stock.

Suppose you want to buy a put on a stock. Well, you buy the put from a market maker. A market maker, pretty much by definition, has no opinion on whether the stock is going up or down. So as soon as the market maker sells you the put, he needs to turn around and buy the corresponding call and sell the stock short.

In other words, buying a put rather than shorting the stock means that somebody else needs to go short the stock.

The technical answer as to the difference is that buying a put is equivalent to shorting the stock and buying the call simultaneously. So the difference is that one has and embedded call while the other does not.

Also, the notion of "naked short" is significantly more complex. If you sell the stock short, while simultaneously buying a call option, then you really aren't "naked" -- because you have the contracted right to have that stock by exercising the call option. And so it's the guy who sold you the call option who is naked. Unless he isn't because of his other positions -- and the only way to tell is to examine everyone's trading positions pretty closely.

If the regulators were to try to eliminate short selling of stocks, one way to get around this would be to create an actual market in stock futures. If they used the typical mechanisms of daily pay/collects, this would have the advantage of reducing the systematic risks of unrealized losses (institutions would go bust much earlier and much more often, but in much smaller easier to digest chunks.)

Jane

Clarice,

I got in your Yucca Mountain thing in today - just for you!

Neo

Following through on his inaugural promise “to restore science to its rightful place, and wield technology’s wonders to raise health care’s quality and lower its cost“, the president will order the National Institutes of Health to extract stem cells from embryos whose parents earn more than $250,000 per year, and to inject them into “the sick and crippled middle class.”

pagar

Cathyf, Thank you for your answer on shorting stocks vs buying puts. I think I got everyone else thanked last night, but if I missed anyone, thanks to all. The subject is much clearer now.

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Wilson/Plame