12:40pm (EST)
The Senate Banking Committee has approved the nomination of Federal Reserve Chairman Ben Bernanke to run the show for another four years by a 16-7 vote. Big Ben’s nomination will now go to the full Senate for consideration.
It appears he has enough votes to win a second term, but as you can imagine, there are some politicians who strongly oppose the move and blame him for not spotting the early problems that led to the financial crisis and the Wall Street bailouts.
Six one way, half dozen the other, is what we say. You don’t switch quarterbacks during the stretch run of the playoffs and although he isn’t the real “Big Ben” to you Pittsburg fans, he is the “Big Ben” of the economy…
Talk about a train wreck…we have to talk about the ride FedEx (FDX, $85.51, down $4.44) has been on. We profiled the company on November 17th when shares were at $84 and profiled the December 90 calls (FDXLR, $0.04, down $1.06) at $1.40. Two days later they fell to 70 cents as the stock fell to $81.
Well, the calls made a serious comeback as the stock hit a high of $92.59 YESTERDAY and those same December call options could have been sold near our exit target which was $2.80 in the original write-up. Now look at them.
We were a couple days early on the trade and yes we took a loss but our research was dead on. The fluff and euphoria was clearly visible yesterday and we were thisclose from walking away from the trade with a double in our back pocket BEFORE earnings.
FedEx reported earnings of $1.10 a share versus Wall Street’s expectations of $1.06. The company’s revenues were also higher than expected but when its CEO mumbled “While there is some uncertainty regarding the sustainability of current demand trends after our peak shipping season”…it was all over but the crying.
The dude went on to say “We expect our strong operating leverage to provide improved year-over-year profitability in the second half of our fiscal year,” but the stock is getting hammered today.
Of course, all earnings trades are different and there is an art to picking them. The key to making money on these trades is to not follow the herd.
As we head to press, the Dow is currently down 97 points to 10,343.
We think the market has a shot at a late day reversal and here’s why. Going by history, the Dow has been up 22 of the last 25 years during Triple Witching Week and on Friday’s the Dow is up 18 out of the last 27 with a history of huge gains. Of course, every market is different but we have learned you never short a dull market.
We have some trades working in our favor despite today’s weakness and we update them again today in our Members Area.
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