I will update my portfolio results later today. But I thought I would go ahead and put this weekend’s open thread up.
For this week’s top 3, I thought an interesting idea would be to post my top 3 frivolous expenditures when I win tonight’s Mega Millions lottery (which CNBC is reporting is up to $640 million now):
1. New house. I will probably stay in the Savannah area, but an upgrade in housing is called for. And there are quite a few very nice houses for over $1 million in the Savannah area.
2. New car. I am thinking a Lamborghini Sesto Elemento. 6 speed paddle shift transmission with a 5.2 litre 10 cylinder engine. It kicks out 570 HP and does 0-60 in about 2.5 seconds, with a top speed of 217 MPH. All for a price tag of $1.7 million. Salivate over this:
I’m thinking I may not be driving this to the store…
3. Mancave. I want 2 big screen televisions so I can have CNBC and Bloomberg on at the same time. I will probably have 2 computers too, so I can watch my investments at the same time I do research. I will undoubtedly add some new furniture too.
Even after that, I will still have plenty of money to blow on the wife and kids.
The markets are caught between an overvalued state, and the need to maintain that overvalued state until the end of the day today. The index futures have remained flat after the Consumer Spending and Income reports to day (the reports were mostly in line with expectations, as spending was a little higher than expected even as income was a little lower), so the economy won’t impact what the markets do today.
For the S&P 500, my tea leaves are calling for a flat day, with a possible peak at 1405 (the 10 day moving average). The next level on the downside is 1389 (the 20 day moving average). If the S&P drops that far, it might be a good time to go long, but make sure you get out by the end of the day. Next week is a new week, and it isn’t looking optimistic. That 1389 level will likely be visited next week, and possibly lower.
If you are looking to sell a long position, or buy a short position for next week, today is your day.
There is a lot of talk about the Mega Millions lottery tonight, which is worth $540 million. However, the true number is a bit less than that:
A $540 million jackpot, if taken as a $390 million lump sum and after federal tax withholding, works out to about $293 million.
And that doesn’t include what you will pay in state taxes, so we could even call it as low as $270 million. Still, that is nothing to sneeze at.
My own view? Comparable to the baby in this commercial:
But I won’t go so far as to say “don’t buy a lottery ticket”. For me, buying a lottery ticket is an exercise in mental investing. It forces me to consider the question of what would I do if I came into that much money.
The first thing I would do is find a lawyer who specializes in financial matters. I have heard that setting up a corporation to handle the money is a good idea, and I like it. From the corporation, I could then direct the investment of the winnings. I would be far more conservative investing such a large amount. Consider that a 1% annual return on $250 million is still $2.5 million. Bonds and secure dividend stocks make great investments.
You may have noticed that still leaves about $20 million unaccounted for. That is my “change of lifestyle” fund, which is a nice way of saying “the money I am blowing”. New house, new car, better school for the kids, and a few other frivolous expenditures.
Let us not forget that I will be quitting my job. Managing $250 million is a full-time job. But don’t worry: I plan to keep blogging my investments.
Apparently, Foxconn, the Apple supplier in China, isn’t as squeaky clean as they say they are:
A top Apple Inc. AAPL -1.27% supplier agreed to change its labor practices after an outside audit of its Chinese factories found widespread breaches of work rules…
The investigation of manufacturer Hon Hai Precision Industry Co., 2317.TW -1.29% known as Foxconn, was conducted by the Fair Labor Association and is the latest to document workers-rights violations in Apple’s supply chain.
The audit was based, in part, on surveys of 35,500 workers building products like iPods, iPads and iPhones at three Foxconn facilities in Shenzhen and Chengdu. Apple, whose own audits have found similar violations, requested the investigation.
The nonprofit labor group found at least 50 legal or code violations or policy gaps, according to its report. The findings prompted Foxconn and Apple to agree to new reforms.
FLA found that during some periods over the past 12 months, workers at all three facilities worked an average of more than 60 hours per week, exceeding the FLA code and Apple’s own standard. The audits found there were several months in the past year in which the majority of workers exceeded China’s legal maximum of 36 overtime hours a month.
The association said Foxconn agreed to bring its factories within China’s legal limits of 40 hours of work per week and 36 hours maximum overtime per month by July 2013. That would require more than halving the average hours of overtime, which the report pegged at 80 hours a month. FLA said Foxconn would need to recruit tens of thousands of extra workers to comply.
I won’t go so far as to say Apple’s competitors are all squeaky clean. This is what you get when you use emerging markets for your production. However, I think this will be a good thing in the long-term for both American companies and China, as it shines a light on the problems with labor abuses.
[Japan’s factory] output slid 1.2 percent from the previous month, the Trade Ministry said in Tokyo today, after a 1.9 percent gain in January. The median estimate in a Bloomberg News survey was for a 1.3 percent increase. The unemployment rate fell to 4.5 percent and consumer prices excluding fresh food unexpectedly rose 0.1 percent, government reports showed.
We have a tendency to look at the U.S., Europe, and China as the main economic drivers in the world. But keep in mind that Japan is the world’s 3rd largest economy, 4th largest if you consider the EU as a whole.
Watch today’s Consumer Spending and Personal Income report today:
Purchases rose 0.6 percent, the most in five months, after a 0.2 percent gain in January, according to the median estimate of 83 economists surveyed by Bloomberg News.
However, the impact of these reports may be short-lived, as today is still the last day of the quarter. Markets will need to stay up in order to give the market pros a good quarter to report.
BAC: -0.22 to $9.53 (-2.26%, 19.87% overall)–bought at $7.95
CBRL: 0.08 to $56.28 (0.14%, 2.78% overall)–bought at $54.76
NNVC: 0.01 to $0.73 (1.39%, -5.19% overall)–bought at $0.77
SLRC: -0.15 to $21.90 (-0.68%, -5.19% overall)–bought at $23.10
SPXU: 0.05 to $9.17 (0.55%, 3.15% overall)–bought at $8.89
I was quite surprised by yesterday’s action, although I should have anticipated it. I expect the markets to tank next week, so why wouldn’t the professional traders do the same, and get out this week? The real “tell” to me was the little lift at the end of the day yesterday. When the market lifts at the end of a bad day, that tells me the short positions are increasing. Expect more days like yesterday for the rest of this week.
Futures are down slightly right now, as the markets anticipate the weekly unemployment and GDP reports before the markets open. However, I still expect the market action to head south. I am watching the S&P 500’s 20 day moving average at 1387 as the bottom if we get a big drop today. However, I think we will only end up with a small drop by the end, with 1404 (the 10 day moving average) being a likely finish.
I consider the above news story to be a good thing. Frankly, etn’s like TVIX should not be allowed to float like Credit Suisse allowed it to do. Exchange traded notes, moreso than etf’s, need the constant buy and sell support from the issuer. If the issuer can’t support it, than the etn should be shut down.
I won’t recommend Facebook as an investment, but I will recommend the IPO to daytraders. I might even take the day off from work just to take advantage of this opportunity. If volatility makes for great daytrading, the Facebook IPO might make for the best of all daytrades.
If you are looking for IPO action today, here you go:
In IPO action on Wednesday, Rexnord Holdings, the industrial parts maker, sold 23.7 million shares for $18 a share, which was at the low end of the expected range.
Millennial Media, the mobile advertising company, sold 10.2 million shares at $13 a share, above the expected range.
Cafepress, the print-on-demand Web site, sold 4.5 million shares in its IPO at $19 a share, higher than the expected range.
The symbols: Rexnord (RXN), Millennial Media (MM), and Cafepress (PRSS).
BAC: 0.15 to $9.75 (1.56%, 22.64% overall)–bought at $7.95
CBRL: 0.24 to $56.20 (0.43%, 2.63% overall)–bought at $54.76
NNVC: 0.02 to $0.72 (2.86%, -6.49% overall)–bought at $0.77
NUGT: -0.79 to $15.79 (-4.76%, -4.76% overall)–bought at $16.58 (dollar cost averaged today)
SLRC: -0.10 to $22.05 (-0.45%, -4.55% overall)–bought at $23.10
SPXU: 0.14 to $9.12 (1.56%, 2.59% overall)–bought at $8.89
Index futures dropped off to flat after the disappointing Durable Goods Orders report (2.2% versus an estimated 2.9%). On the other hand, excluding transportation, the report beat the consensus (1.6% versus an estimated 1.5%). Overall, I would call it only important for the open, although it may weigh on today’s upside.
We may revisit the S&P 500’s high yesterday of 1419, but I would be surprised if we surpass it. However, I don’t think we will see a huge drop today either. The 10 day moving average at 1403 won’t be resistance, but the S&P will find some around that price, give or take 2 points. Overall, I would expect the S&P to remain around yesterday’s close of 1412, regardless of how far it moves up or down during the day. If I had to guess the closing price, I would say 1414.
Ironic quote of the day, from a Barack Obama campaign ad in 2008: “Hillary Clinton’s attacking, but what’s she not telling you about her health care plan? It forces everyone to buy insurance, even if you can’t afford it, and you pay a penalty if you don’t.”
The irony is in the fact that the individual mandate under Clinton’s plan was later incorporated into Obamacare, and that mandate may end up being Obamacare’s undoing in the Supreme Court. Perhaps the former constitutional law professor and current president should have listened to his own ads?
The euro area’s woes are “almost over” after a slow initial response by policy makers, Italian Prime Minister Mario Monti said in Tokyo today. German Chancellor Angela Merkel said yesterday that the crisis is ebbing and her country’s borrowing costs will probably rise as its status as a haven wanes.
While I won’t go so far as to say Europe won’t make it, I will say that Europe’s woes are far from over. When the southern European countries get their economies fixed, we can then talk about it being “almost over”. Until then, this is just politicians blowing sunshine…
Orders for U.S. durable goods probably rebounded in February as aircraft demand surged, economists said before a report today.
Bookings for goods meant to last at least three years rose 3 percent after dropping 3.7 percent the prior month, according to the median forecast of economists surveyed by Bloomberg News. Excluding transportation equipment, demand climbed 1.7 percent after falling 3 percent, economists projected.
Watch that report before the market opens. At the moment, futures are looking slightly positive, but that could change if the Durable Goods Orders report disappoints.
If you are looking for volatile plays, nothing beats an IPO. While I won’t recommend Annie’s Inc. (BNNY) as a mid or long-term investment, if you are looking for a daytrade today, go for it. What kind of future is there in organic macaroni and cheese? I suppose if they have gotten this far, their product must be good…
I went ahead and added my 2 daytrades, JRCC and NUGT, to my portfolio, although I am hoping they will be sold either overnight or tomorrow.
BAC: -0.33 to $9.60 (-3.32%, 20.75% overall)–bought at $7.95
CBRL: -0.53 to $55.96 (-0.94%, 2.19% overall)–bought at $54.76
JRCC: -0.09 to $5.34 (-1.66%, -1.66% overall)–bought at $5.43
NNVC: -0.03 to $0.70 (-4.11%, -9.09% overall)–bought at $0.77
NUGT: -0.16 to $16.74 (-0.95%, -0.95% overall)–bought at $16.90
SLRC: -0.05 to $22.15 (-0.23%, -4.11% overall)–bought at $23.10
SPXU: 0.09 to $8.98 (1.01%, 1.01% overall)–bought at $8.89
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