Stock and stock option volume for Tempur Pedic (TPX) and Sealy (ZZ) popped up on the radar yesterday. Tempur Pedic’s stock price was up 11% yesterday and Sealy’s was up 6%. After hours, Sealy reported results which were in line with expectations. Sealy said in their conference call that they are beginning to see signs that consumers are beginning to recover from the recession.
The economic recession, which began in December 2007, ended in July 2009 according to some market analysts. Not all economists agree that the recession is truly over, but the one thing they can all agree on is that recovery won’t be quick. The US economy shrank at a nearly 6% annualized rate from September 2008 to March 2009, so it will be a long time before real progress is felt. The shape of the recovery growth curve is likely to be an L or a wide U, although unexpected negative news could easily turn it into a W.
E-books are here to stay, as evidenced by the proliferation of e-book readers, apps for the iPod and iPhone, and even email subscriptions to books. As more and more books become available in electronic form, it’s only logical that textbooks would follow suit. On June 8, 2009 California governor Arnold Schwarzenegger announced an ambitious plan to implement digital textbooks in all California schools. Phase one begins this fall, using e-textbooks for high school math and science classes. Northwest Missouri State plans to go completely digital and has been running pilot programs since fall 2008. These early adopters believe e-textbooks are superior to print textbooks.
Mention covered calls and many investors think limited upside and big exposure to the downside. But, it’s possible to make more money with covered calls and do it with less risk. Covered calls investing involves selling a call option against an existing or purchased stock. The inherent nature of covered calls provides less risk than simply owing the stock outright, as a covered call investing position has downside protection and a stock does not. The initial time value and the amount a covered call investing position is in-the-money determine how much downside protection a call option provides. The larger the time value and the more the covered call investing position is in-the-money, the more downside protection provided.
Mention the term covered call investing strategy, and many investors picture limited upside potential, with the potential for making a small profit. These investors may also consider the real beneficiaries of the covered call investing strategy to be the sellers of the call options who benefit handsomely when the price of the stock increases significantly.
A method for making money in a neutral stock market is with the iron condor. An iron condor is a neutral stock options strategy and consists of a combination of a bull-put credit spreads and a bear-call credit spreads. A credit spreads trade is entered by selling stock options and simultaneously purchasing stock options.
President Obama has introduced “Cash for Clunkers,” a subsidy program designed to help the automotive industry, the environment, and drivers with older, less fuel-efficient cars. Formally named the Customer Assistance to Recycle and Save (CARS) program, “Cash for Clunkers” is designed to stimulate the purchase or lease of brand new cars.
Consumers may be cutting back on a lot of unnecessary spending these days, but many people still see eating out as a “treat.” The average American considers going to a restaurant with family and friends as a relatively inexpensive form of entertainment and pleasure, and a nice break from cooking and cleaning at home. And, after all, everyone has to eat.
Mining investments are looking attractive. For the last 6 months, this sector has been on the upswing. Iron, used extensively in steel production, isn’t as glamorous as gold, but its importance is critical. Gold is, of course, the standard, and will always be a good recession investment, but the bottom of that market may have passed. This may be a good time to consider the broad Mining Sector.
Gillian Tett’s new book, “Fool’s Gold”, is a refreshing and innovative approach to the failings of financial institutions, in that she convincingly ties such failings to the personalities and tribal behavioral patterns of the bankers and economists who putatively cause them. As a trained anthropologist, Tett is well qualified to examine tribal behavior, and her research demonstrates quite clearly that it is alive and well at the corporate level. In her view, the current global credit crisis was unleashed by a relatively small tribe of bankers at J.P.Morgan, a wholesaler of financial services and a significant part of JPMorgan Chase & Co (JPM) which is a leading global financial services firm with assets of $2.1 trillion.