Dashwood's Wall Street

[skinny]

Kitty, I think you were saying your were trading the drillers? Or was it Ananda? Have been stopped out a few times with them on US markets over the past couple of weeks, most fustrating, but think (at some point!) they will be one of the best buys around, anywhere. Below is a nice bit of analysis picked off the CWEI board on investor village that paints the picture:

[quote]quote:

The stock market, as a leading indicator of roughly 6-8 months, is predicting that dayrates and earnings for offshore drillers will be coming down in the 1st & 2nd quarter of 2007--that peak earnings for drillers is either right at hand or just past. Is the market right? This question has been eating away at me recently.

I keep going back to the example of the housing sector. In mid 2005, profits were growing like gangbusters, valuations were low and the real estate market was on fire. Yet in mid 2005, housing stocks like TOL and DHI started to decline in the face of all this good news. In Aug-05, TOL was at ~$56/shr and DHI was at ~$42. At today's close, TOL is $24.53 and DHI is at $20.7. On the recent conf calls of TOL & DHI, profit expectations are being cut back, the companies are taking charges on abandoned land purchase options and sales are slowing. Ergo, the market was right in Aug-05 as the housing stocks began their descent.

Is the market right about the drillers? In May-06, DO touched $97/shr, ESV $57, RIG $90, RDC $48 and GSF $65. Most of us know where these stocks closed today. Are we in the midst of housing sector déjà vu, with further dowside coming for the drillers?

There are two big differences between the offshore drillers and the housing sector.

One, is the time it takes to build houses vs. rigs. I live in Atlanta, and about 400 new large homes have been built in the past year within ~4 miles of my house with plenty more being built right now. Houses can be built quickly and easily. But it takes ~3+ years to build a jack-up or a semisub rig and costs hundreds of millions. These rigs are not something the local S&L finances at a whim. Most are built with contracts already signed. So, the housing market can unquestionably become saturated much more easily than the offshore rig market.

Two, housing prices are subject to the whims of the current real estate market and can change on a dime unpredictably. Yet dayrates for rigs are set several months if not years in advance and the rates are well known. So, visibility into housing prices is murky at best and varies all over the country, whereas visibility into dayrates is transparent (posted right on the drillers' websites for all to see) and are set with firm contracts paid for by profitable E&P companies with deep pockets.

So, lets look at these transparent dayrates. As many of you know, I've been posting dayrates from rigzone.com, and those dayrates are showing no signs of a drop at all. But let's drill a little deeper (pun intended) and look at a specific company--D0.

Here is the most recent Rig Status update for the DO fleet, as 08-Aug-06:

http://www.diamondoffshore.com/excel...07,%202006.xls

On it are a few key data points I'd like to highlight. Dayrates for deepwater semisubs are particularly strong. Here are some examples of DO's deepwater semisubs:

Rig Name..Current rate..expiration..new rate after expiry...% diff in dayrate
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
Ocean Quest...low $270s....Apr-07....mid $350s thru Apr-09..30% higher dayrate
Ocean Star....mid $170s....Oct-06....mid $380s thru Oct-07..124% higher dayrate
Ocean America..low $230s....Apr-07....low $400s thru Apr-08..74% higher dayrate
Ocean Valiant..low $300s....Mar-07....mid $390s thru Mar-08..30% higher dayrate
Ocean Victory..mid $200s....Dec-06....low $320s thru Dec-08..60% higher dayrate
Ocean Baroness.low $200s....Dec-06....low $360s thru Dec-09..80% higher dayrate

So, there it is--completely transparent for all to see. G

[kittydashwood]

Yep I trade the drilling sector. Like you I've been stopped out of RIG and DO. The worry is that as earnings decline PE's will compress. Of course the discounting is exacebated in a falling market.

I hold SLB and PKD long and still have a candle for UNT & ENG but can't seem to get a position for the right price. UNT looks the best technically, stop at 54$? Mainly land based natural gas driller, overall i think we have another rally to look forwards to in this sector before it tops.

Scheaffer has a option tip for SLB 70 put.

This from Scheaffers this week.

It should be no surprise that a monthly chart of the AMEX Oil Service HOLDRS Trust (OIH: sentiment, chart, options) shows significant price increases during the past four-plus years. On a monthly relative-strength basis, OIH significantly outperformed the S&P 500 Index (SPX) until April of this year. Since then, the Exchange-Traded Fund (ETF) has lagged the SPX.

OIH is subject to heavy optimism from the speculative options crowd, indicated by its Schaeffer's put/call open interest (SOIR) percentile ranking of 17. However, there is little sentiment in place to push the ETF higher, as it would take slightly more than 1.5 days to cover the 15.62 million shorted OIH shares. That said, OIH earns a bearish Schaeffer's Equity Scorecard score of 3.0 out of a possible 10. This low ranking indicates that the path of least resistance for OIH is a slippery slope that leads lower.

On a side note, you can find composite Scorecard scores for various ETF's here. Clicking on the sector name will take you to a scorecard page listing individual components and their scores, this is OIH's drilldown page.

I took a look at OIH's components and found several with a Scorecard rating of 3.0 or lower, indicating the potential for an attractive bearish play. I compiled all of these companies into the chart below, but today I will concentrate on Rowan ( RDC: sentiment, chart, options) and Noble (NE: sentiment, chart, options) .



**** NB RIG also turns in a 3 scorecard on the scheaffer system.

[kittydashwood]

Stopped out of HAWK & SLB
Now holding only BPT FTO CHK from energy sector
It's sad when a sector which lead for so long blows up.
Hard to see beverages, food and accomodation sectors really
taking up market leadership and giving us any type of half decent run.

Lovely short term climax with GROW.
Also stopped out of MTW after a stellar surge.

Hard to feel comfortable long when the RUT is above 700.

[kittydashwood]

Ok Long again as the RUT looks weaker than the SPY and the DOW for the first time in a mighty long time.
Still getting stopped out on the record volitility and still making money in media, food and healthcare.

Bought back into SLB

When IAAC and GROW fail i'm back to cash.
Hurricane Ernesto building but this season could be a fizzer and oil may slip. However I feel natutal gas and heating oil will spike as the winter will be very cold stateside and traders have last years mild winter in their minds.

Very scary over here in lala land right now 43% of new home loans this year interest only. Buyers are keeping prices high and sellers are not arriving. Volume? Nearly zero Inventory? Massive Holiday Home? Well forget it unless you want to take a 25% loss.

Scary very scary.
Turn the water off for one day and the whole LA valley will riot.
What cops? What backpack? What dirty bomb?

this from minyanville>


John Succo
Aug 18, 2006 9:19 am



...the reduction in systemic liquidity from the slowdown in housing, from less people borrowing, is being replaced through us by hedge funds that are still taking the credit.






"What do you have for me today Bill?"

"Well sir, we did another $2 billion in repo yesterday morning with the New York Fed. We certainly do not need the cash, but the repo rate was so attractive that I took it in. I called around and once again, the only takers of the cash was our stock arb desk and prime broker."

"Yes, I spoke to commercial lending Wednesday and they are at their risk limits. What is our stock position and how much are we out on prime broker?"

"The figures as of Wednesday night show us long stocks and short futures about three quarters our limit and we believe the rest of the Street is similar. Just so you know, the spread has been getting cheaper into expiration and our trader does feel there is a growing chance that we will wind up selling a large amount on expiration one of these times. If we do, then others will as well so it might shake the market somewhat. It may even be in September. The prime broker has been a consistent taker of capital. One thing that does concern me is the level of leverage they are at with hedge funds in general. They tell me that as volatility in the markets goes down, their VAR risk models allow them to lend more to the funds. There is demand for leverage from hedge funds for the same reason...as volatility goes down they want bigger positions to make the same amount of money."

"Are you suggesting another LTCM?"

"No sir, this is a little different. LTCM was using huge leverage, maybe 100 to one, trading assets that did not move much. The currency crisis made those assets move 50 times more than they usually did and all that was concentrated in one huge fund. This is a more general and marginal increase in leverage, maybe from four times to six or seven times, but these hedge funds are trading much more volatile assets with more directional risk. Interestingly what it is doing is injecting liquidity into the system as they borrow more from our prime broker and buy more risky assets. This is our biggest business, sir, and we have to be very careful not to curtail it at the wrong time. But the risk is growing due to the cross correlation of the hedge fund system....We know that as volatility rises, the process reverses and hedge funds will try to reduce risk by liquidating and reducing leverage. As that happens some will experience enough losses to cause redemptions. This will actually cause a request from these funds for us to increase lending to them just at the wrong time. If we cannot get liquidity ourselves at that time we may actually request funds that are doing fine to reduce their leverage to compensate."

"What are you saying Bill?"

"Well, the reduction in systemic liquidity from the slowdown in housing, from less people borrowing, is being replaced through us by hedge funds that are still taking the credit. The problem is that there is a scenario where this may unwind and reverse if volatilit

[kittydashwood]

XSNX up on good volume today.
Look at the support that kicks in at .58
Technical P&F buy?


Most like to be the governator himself as California third phase experiments looks very good to me. Most of my pyshics is geotechnical but the output has been interesting.

[skinny]

A cute story on one of Wall Steets *very* old timers.


Gordon, Wall Street Icon at 105, Avoids U.S. Stocks (Update1)

By Christine Harper

Aug. 30 (Bloomberg) -- Albert H. Gordon took over Kidder, Peabody & Co. in 1931, turned it into an underwriting leader on Wall Street, and saw opportunities overseas before many rivals.

He's still looking abroad at the age of 105.

After eight decades as an executive and investor that spanned from the roaring 1920s to the age of terrorism, Gordon says he's ``bearish'' on U.S. stocks partly because of the $8.41 trillion national debt. He prefers shares of companies such as Canada's EnCana Corp., Wal-Mart de Mexico SA de CV and Petroleo Brasileiro SA.

``At least three-quarters of whatever I own is foreign stocks,'' he says from his Manhattan apartment overlooking the East River.

Gordon, who has outlasted Kidder as well as Wall Street staples like ticker tape, is a role model even to octogenarian elder statesmen such as former Goldman Sachs Group Inc. Co- Chairman John Whitehead and ex-President George H.W. Bush. This year, Gordon stopped going to the office at Deltec Asset Management, where his son John is a senior managing director.

A marathon runner into his 80s, Gordon now has a hearing aid and walks with a cane and assistance from a nurse. His opinions are still sought because he's one of the few living Wall Street investors who worked in the years leading up to the stock market crash of 1929.

While his three current favorite stocks each climbed at least 13 percent this year through yesterday, almost triple the 4.5 percent gain in the Standard & Poor's 500 Index, Gordon built his reputation as a salesman rather than as an investor, says Whitehead, 84.

Presidential Role Model

``He was a famous business-getter,'' says Whitehead, a former rival. ``Work hard and never give up -- those were very valuable lessons I learned from trying to compete with him.''

Whitehead, who joined Goldman Sachs in 1947, remembers vying for clients against the more experienced Gordon at St. Paul, Minnesota-based 3M Co., where Gordon's relationship was so close with then-Chief Executive Officer William McKnight that Whitehead says he focused instead on cultivating the next generation of executives. It didn't work right away, he says.

When McKnight died, Whitehead says, his will stipulated that Gordon and Kidder should handle any sales of McKnight's stake in 3M.

Gordon's influence extended to the highest levels of the U.S. government. He befriended Prescott Bush, a U.S. senator from Connecticut from 1952 to 1963 and grandfather of President George W. Bush, and served as a role model to George H.W. Bush, the 41st U.S. president.

``He taught me a lot about ethics and values,'' says George H.W. Bush, 82. ``He's a very energetic man of great character.''

Harvard Benefactor

Gordon, the son of a successful leather merchant in Boston, graduated from Harvard University in Cambridge, Massachusetts, in 1923 and from Harvard Business School two years later. He attended business school at the urging of his father, who he says lived to age 88.

Today, one of the main roads into the business school bears a plaque calling it ``Albert H. Gordon Road'' in recognition of his advice and donations over the years. Harvard declined to comment on the amount Gordon has given to the school.

``Al Gordon was a master salesman,'' says Samuel Hayes, 71, an investment-banking professor emeritus at Harvard Business School who met Gordon in 1961. ``He was an effective rainmaker long after he ceased to manage the firm on a daily basis.''

As a bond salesman at Goldman Sachs in the 1920s, Gordon says he considered stock values excessive and steered clear of the market before it crashed. That helped him a year later in 1930 to capitalize when a Harvard classmate, Edward Webster, approached Gordon to help rescue Kidder, a brokerage based at the time in Gordon's hometown of Boston.

Planes and Trains

They moved the firm to New York, and Gordon, who would go on to become the firm's seni

[kittydashwood]

Tomkins Deflation Evidence

Shares of Tomkins Plc, the world's biggest maker of car wiper blades and timing belts, fell the most in 14 years after the company said profit will miss targets on slumping U.S. demand for its auto parts and home fittings, according to Bloomberg.

* London-based Tomkins Plc fell as much as 16% after the company said 3Q profits will fall short of analyst estimates.
* What does a UK company have to do with the U.S. consumer?
* Tomkins gets two-thirds of its sales from the U.S. where it makes air- conditioning systems and bathroom fixtures for houses.
* The company also supplies parts to Ford Motor Co. and General Motors.
* According to Bloomberg, Tomkins makes one in four U.S. bathtubs.
* Well, they're car-related, so the slowdown in sales is natural given the weak condition of American auto makers, right?
* No, the slowdown is as much building related as auto related. "North America has slowed down markedly at a time when building activity would normally accelerate,'' Tomkins said.

[kittydashwood]

GROW new high 34$ up 16% today.
Reported earnings seven times last years.
Still running the top fund as judged by Lipper in select resource class.

Good profit from their own trading activities too.
Watch their allocations, often ahead of the curve.
These guys were cash in ApriL before the rest.

[kittydashwood]

Final denial rally before the looming gloom...

Prediction reiterated Hurricane season weak and late.
(must buy less SLB)
Winter very cold and long.(must buy more (HAWK)
More deep water elephant hunting (must buy more RIG)
Wall Street will cntinue to be artifically suspended from skyhooks by the plunge protection team (must buy more MS GS LEH)
Some traders are better than others(must buy more GROW, IAAC and NITE)

[kittydashwood]

Had to buy more ENG and IAAC & FTO
Held all my long term oilers but the stops are looming..
Most finished off their lows, even SLB showed some support?
Bought OMR DOC and XSNX again today.
DOC are interesting here's the ramp ramp rah rah from cheerleaderwatch.com
Digital Angel Corp
490 Villaume Avenue . Phone: (651) 455-1621
South St. Paul MN 55075

Fax: (651) 455-0413

Digital Angel Corp. was incorporated in Delaware on December 1, 1981 as Medical Advisory Systems, Inc. to provide medical assistance and technical products and services. On March 27, 2002, the former Digital Angel Corporation became a wholly-owned subsidiary of Medical Advisory Systems and was renamed Digital Angel Technology Corporation and Medical Advisory Systems was renamed Digital Angel Corporation. In connection with the merger, Applied Digital Solutions, Inc. contributed to Medical Advisory Systems, all of their stock in Timely Technology, a wholly-owned subsidiary, and Signature Industries, an 85.0% owned subsidiary. These two subsidiaries, along with Digital Angel Corporation, comprised Applied Digital Solutions' Advanced Wireless Group. As a result of this contribution, Timely Technology became a wholly owned subsidiary of Digital Angel Corporation and Signature Industries became an 85.0% owned subsidiary. On January 22, 2004, Digital Angel Corporation completed the acquisition of OuterLink Corporation. OuterLink Corporation a wholly-owned subsidiary of Digital Angel Corporation, provides real-time, satellite-based automated tracking, wireless data transfer and two-way messaging with large fleets of vehicles, such as utility trucks, helicopters, fixed-wing aircraft, long and short-haul trucks, service vehicles and ships. The Company's pet identification system is marketed by Schering-Plough Animal Health Corporation in the United States under the brand name Home Again, in Europe by Merial Pharmaceutical and in Japan by Dainippon Pharmaceutical. The Company's Animal Applications segment develops, manufactures and markets radio, electronic and visual identification devices for the companion animal, livestock, laboratory animal, fish and wildlife markets worldwide. Digital Angel technology is the integration and miniaturization of three technologies into marketable products: wireless communications, sensors and position location technology. Signature Industries, located in the United Kingdom, operates the Company's Global Positioning Systems and Radio Communications business. This segment consists of: manufacture, design and support of secure Global Positioning Systems enabled search and rescue equipment and intelligent communication products and services for telemetry, mobile data and radio communication applications serving commercial and military markets. The Company's medical telecommunications response center provides medical assistance services and interactive medical information services to people traveling anywhere in the world. Assistance is provided by telephone, satellite, high frequency radio, fax, Internet and telex. The Company also sells a variety of kits containing pharmaceutical and medical supplies. Digital Angel directly supplies pharmaceuticals to their maritime and airline customers through their pharmaceutical warehouse facility located in Owings, Maryland. As of December 31, 2003, the Animal Applications segment represented 65.2%, the Wireless and Monitoring segment represented 0.4% and the Medical Systems segment represented 6.2 percent of the Company's consolidated revenue respectively. The revenue in 2003 relates primarily to a software support contract, assumed from Timely Technology. As of year ended December 2004, the Company recorded Net revenue of 46.3 million an increase of $11.9 million or 34.5% from $34.4 million in 2003. As of February 28, 2005, the Company had 246 full time employees, including 8 in management, 22 in sales positions, 43 in administrative positions, 50 in technical positions and 123 in production positions.

Company at a Glance

Industry: Health Care Providers Emplo