2/19/09 (UBS army knife? HP free printers! Whole Food Money!)

Traders,

The market seemed to be absorbing all the news – from the stimulus to the $250 billion plus foreclosure fund. Good news or bad news – at this point it would seem (for the short-term) at least that it is good news. We may halt or reduce the slide of housing prices, make credit available, get people to start spending money again – that is the plan right? Even though it is very short sighted, as how we plan to finance it.

It is also expiration week and we look at it with an uncertain eye. The market has moved enough to nullify typical pin risk (or plays) – creating more volatility into the close of the week. Which means another 2-3% move could be in the cards, regardless of expiration hedging. So make sure to keep a close on those deltas.

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UBS getting squeezed

If UBS (as well as other banks) didn’t have enough problems with write downs, UBS has agreed to pay $780 million and turn over (some) names to the U.S. – after the U.S. threaten prosecution of the bank in alleged tax evasions. The U.S. is the one of the very few nations to tax its citizens based on their nationality. That means if you work abroad you are of course subject to the taxes of the country you are working in, as WELL as U.S. Taxes. Foreign citizens (German, English, Swiss) are taxed on their residency, if a German citizen works in the U.S. he pays U.S. taxes, but Germany doesn’t tax him as well. Additionally, many nations do not treat “Tax Evasion” as a federal crime. UBS practice a policy that was legal by the Swiss standards, but not the U.S. standards. Even several U.S. citizens that have not lived in the U.S. for years, but had an account at UBS and used these “Tax Evasion” practices at UBS – but are now subject to U.S. prosecution, even if they paid taxed in the country they resided in.

As the credit crisis worsens and the U.S. has to print more money – they need more revenue to finance it (selling treasuries, taxes, etc.) – Expect the U.S. to go after foreign nations more vigorously as well as its citizens to collect money to pay down the national debt and the trillion dollar deficit.

However the knife cuts both ways – those foreign banks that might get squeezed by the U.S. for their tax policies are the same ones we are asking to help buy more U.S. treasuries to keep the U.S. government credit flowing. No doubt these are interesting times and relationships will be tested.

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Hewlett-Packard (HPQ) miss!

Swing and missed expectations and lowered 2008 guidance – computer and printer sales are not what they use to be. The lower end computer models are turning into commodities, while printers already have (as a give-away when you buy a computer or something else). The revenue shift on the printer side of the business has not been the hardware, but selling the ink (print cartridges). However the cost to build, design, and keep printing technology up to date, just to give away, does hit the bottom line. Additionally, what is great for consumers (competition) is also bad for margins.

HPQ is getting hit in the pre-market. ($30 looks to be the previous low area).

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Whole Foods (WFMI) up?

People still need to eat and while Whole Foods sells their products at a premium – many are still buying into the BRAND name and what is selling right now is GREEN. Slap a green label on it, say it is Organic, blessed by monks or picked by Amish, and bingo – you got a winning formula. The reality – is much of it is more about branding than actually healthy food. Being the hypocrite that I am, I too sometimes buy the overpriced granola (not that it is going to make me any healthier than eating the off-brand granola), but knowing that some crunchy I-love-the-earth company put it into a recycled box does make me feel better.

Stock beat estimates and is up solid in the premarket.

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Futures Pre-Market

It looks like it took a day to absorb the stimulus and the home bailout packages. The futures seem to be thinking it is good for the short-term and we are getting a rally in the AM. Expect the Arb traders to short futures to buy the cash – thus putting upside pressure on the market at the opening.

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Support / Resistance

As I said yesterday – we are at some big time need to hold support levels.

INDU 7500 / 8000 (We closed above the 7500 area again and are looking stronger in the futures premarket.)

NDX 1150 – 1200 (Still in la-la land – looking higher.)

SPX 800! (If we can close above the 800 line – maybe this was just a temp dip below support?)

RUT 400 / 450 (Getting back to 450 would show the narrow indices that the broader market is holding.)

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Gold 900+ (It is certainly ignoring the dollar strength – so one of the two have to break, my bet is the dollar breaks first.)

Silver 12+ (Silver has been climbing and breaking the 14 market yesterday – it’s gold’s little brother?)

OIL 35-40 / 50+ (Again we just sit in the 35-40 range waiting – I think when it moves it will move up fast and hard when we least expect it.)

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Conclusion

There is lots of chatter about the Stimulus and now the billions going to steam the foreclosure tide. The money is flowing – but many are concerned about the financing of this money. It will not come to haunt us, until we don’t realize it. Keep all eyes on the USD – that could be the first sign.

Also – don’t expect too much “Pin Plays” this expiration – many issues have blown through too many strikes to see effective hedging volume against the strikes. That means expiration could see more than typical volatility. It looks like to the upside now.