Leveraged Theta

“Don’t worry, the next generation will pay for the energy”, Toronto said today.

They approved a 4 storey ICE RINK, made of GLASS.

http://tinyurl.com/38gxob8

An architect's rendering of the four-pad ice rink. CREDIT: RDH Architects Inc.

In data released by Standard & Poor’s on August 4th, the top down operating earnings estimate for the S&P 500 during 2011 was $76.43 per share.  Bottom up estimate was $94.64.  The S&P closed at 1127 on August 4th.

In a file dated August 17th, 2011 top down, is now $82.12 – 7.4% higher than 13 days prior.  While, bottom up, was little changed to $94.40.  The S&P closed at 1092.54 on August 17th.

Could it be, the S&P computers, are Keynesian and starting to predict a response to the latest in FED policy? Or, are the numbers as worthless as the paper it’s denominated in?

If the models are accurate, we should bounce here.  The fed model, says the same.  Technical analysis on the other hand, says the bottom falls out of equities tomorrow, with oil following suit, and the long end of the yield curve prints fresh lows.  Who wins?

…by Ceridian via Globe and Mail.

Tesla Model S

More info here.  And here.

The Ontario market will likely see a great deal of volatility in the coming months, as it faces the ‘payback’ effect of the earlier gains related to buyers advancing their purchases to ‘beat’ the HST, new mortgage rules and anticipated rises in mortgage rates.

Consequently, we expect generally weak resales in the second half of 2010, with further monthly declines likely in the near term.

Pricing momentum is decelerating rapidly in Ontario, because much of the steam has run out of the market by now. With demand slowing down and the surge in new listings earlier this year having boosted the supply of homes available for sale, buyers presently have plenty of choice before them and, as a result, are gaining back some bargaining power. In our view, this will severely limit home price increases in the near term. That being said, the likelihood of outright declines is generally low because the market is expected to remain reasonably balanced. Any further drop in demand will be matched by reductions in supply (i.e., listings).

-Robert Hogue, Senior Economist at RBC, August 11th.

Since August 11th, mortgage rates have dropped by approximately 50 basis points on 5 year fixed rates.  The Toronto Real-estate numbers for SEPTEMBER, and OCTOBER, will be a great barometer into the health of the Canadian Economy.

If prices surge, on lower rates, that’s good news.  Anything but that, will be a troubling sign.  Gauging by my unofficial polling of people who say things like …

“I’m holding off, the housing market is going to cool off soon”,

compared against the lack of people saying things like

 ”I would really like to move, but I just can’t sell my home for enough money.”

I’m willing to bet on surprises to the upside for price action in the second half of 2010.  Time will tell.

I wonder, if 15 years ago, there was a bunch of Japanese analysts, shorting Japanese Government Bonds as they kept going, lower, and lower, and lower, and lower.  Probably.  That’s what makes markets.

Check this out. 

Japanese Mortgage Rates August 2010 (Click to enlarge)

At 1085, the indicated dividend rate on the S&P 500 is 2.11%. 

The 10 year, just hit 2.69%.

1.275x

At the beginning of .July, the newsflow made it sound like the world was going to end within days.

At 1022, the indicated dividend rate on the S&P 500 was around 2.24%

The 10 year, was around 2.95%.

1.32x.

In the middle of May, while the index plungged through 1071, the yield was somewhere around 2.13%.

The 10 year, was roughly 3.15%.

1.47x.

Just watching here. 

If stocks hit the lows from July, that multiplier breaks 1.2x.

I heard on Bloomberg today, that the Euro had a record breaking move today. A 19 month old record. It was after I heard that, that I decided to unload the volatility I bought back at 1.32. I made a few bucks, I think 4%, on the trade. After holding for about a week, it took at 19 month old record breaking day, to pull me from the red and into the black.

Then I remembered, THAT is why I don’t go long plain vanilla.

There is a $4M study being drafted right now, looking at electrification of the GO Transit System, in Toronto Ontario.

Last week, they released a draft for comment.

With respect to the growth of service, in my part of town, they had this to say:

“On the Lakeshore East line, the number of trains arriving into Union Station in the 3?hour AM peak is
assumed to increase from 12 to 17 by 2021. Within the peak hour (0730?0830) there will be 9 trains
arriving into Union Station, representing a 6 to 7?minute headway. There will also be a significant
increase in the off?peak service, with an expansion from 1 to 2 trains per hour in each direction.”

I think, over the next few days, I’m going to put some money on December EUR.USD volatility.

Get long a $1.315 Call, and Put, for $0.07.

Going to think about it.

After hearing an analyst on Bloomberg discuss the relatively high levels of cash on hand, I wanted to have a deeper look at the numbers myself.

I struggled with data quality, and sample size, until by random chance DistressedVolatility showed me ycharts.com.  What a great site.

Check this out:

That cash, will be deployed, sooner or later.

Buybacks are coming. More dividends are coming.  Aquisitions are coming.

You can take delivery of 1000 barrels of oil in December of 2018, for $92.51.  The front-month September Contract settled at $78.98. 

That’s just slightly over 2% annualized to account for inflation and the cost to carry.

Not much point, in paying to store the stuff at that rate.