Stock index futures were on a path to flat open as investors longed for news on Deutsche Bank's agreement with the U.S. Department of Justice and the speeches from Federal Reserve's decision makers.

There are meetings that are going on to discuss the terms of settling this fine and speculations were rife in the course of the weekend that the bank desired the penalty to be lowered.

Trading on Monday saw the Dow falling 104.40 points amidst lows before it ended up slipping by 55 points. Additionally, the S&P 500 went down by 0.3 per cent, while real estate plunging by 1.8 per cent to become the lead decliner.

While the U.S. rate hiking schedule kicked off on Tuesday, most investors eye the employment data for September scheduled to be released on Friday.

Two Federal Reserve speakers are scheduled to speak on the possibility of rate hikes in the course of the week. Richmond Fed President Jeffrey Lacker insisted that there was need to increase interest rates and in order to ensure that inflation was kept under control.

In Europe, shares of Deutsche Bank had recorded a higher value on their first day of trading after a long weekend. The bank went through challenging days last week where the Department of Justice leveled a penalty of $14 billion due to the role the bank played in a festival of toxic mortgage securities in Wall Street in the period that leads to the 2008 financial crisis.

Given the many other troubles that Deutsche have experienced – manipulating the financial benchmark, the general confusion that surrounds its mission, and issues of trades that seemed to have violated the sanctions placed in Russia – makes the American move to charge the bank a huge fine visiting at the inopportune moment.

The dangers facing Deutsche Bank sent the stock markets across the globe on a wild ride. However, the biggest worry seems to emanate from the vast array of unknowns and not its finances. Furthermore, the bank seems not to bother whether Europe will be able to muster the will to embark on a rescue mission.

All these seem to heighten the fact that Deutsche Bank – whose shares have declined to more than half their value this year – requires some new investments that are secure, in case it wishes to avoid any impending crisis.

The biggest fear lurks when Deutsche will disintegrate to a point that it will threaten the globe with a financial shock. However, the main question will lie on whether the buffers and new rules that were instigated after the last crisis can prevent the severity from spreading.

The chaos ranging from the debt crisis to the bitterness over the rising number of refugees, European governments have shown something less than an example of a united government action. The EU seems to have embraced populist anger and encouraged constraining solutions. With Germany not allowing bailouts for banks from other countries, the mission to rescue Deutsche is politically radioactive.

If the worst case scenario is to happen – the bank may possibly collapse, forcing the bank to collect money from the global market. Various institutions that carry out trades with Deutsche may be inclined to get their cash back. Given the amounts of cash witnessed in the bank's balance sheet that can extend to up to 1.8 trillion euros, then the effect will have to be distributed to every financial crevice in the world.

Despite rumours in pundit quarters indicating this type of scenario may be re-emerging, provokes similarity to be traced back to the disastrous bankruptcy experienced by one of the American banking big boy, the Lehman Brothers, about eight years ago, but most economists disregard the talk as overambitious and overblown. The shares of Lehman had seen a tremendous decrease in value at the CMC Markets.

Deutsche Bank's cash reserves sums up to about €240 billion. It has further sold bonds that can end up to be equity whenever it deems necessary. The fine of $14 billion proposed by the Justice Department unveils a possibility for a negotiation that could amount to a fraction of the amount. It is such a way of interpretation that left the stock surging on September 30th.

Cabela's CAB Merger spread

Monday, October 03, 2016 | 0 comments »

Cabela's (CAB) is being purchased by Bass Pro Shops in a cash deal for $5.5 billion or $65.50 a share for Cabela's shareholders. So CAB shareholders will receive $65.50 a share. Cabela's stock has been around $62 to $63 all morning. There has been as much as a 4% spread to made. I bought some CAB at 62.90 this morning. There is still over a 3% spread at the moment. If there is a mini market crash the spread could even widen. So it's worth keeping an eye on. All cash deals are the safest. The deal is expected to close in the first half of 2017 and still requires shareholder and regulatory approval. Here is the official SEC filing.

This company Performance Sports Group ticker PSG has run up 100% in less than 30 days from $1 and change to $4.00 a share. It appears the main driver of this huge run is that it is in such a poor financial position it got an extension on a loan agreement. This is from another article,

Shares of Performance Sports Group (PSG) were surging 29.44% to $2.33 on heavy trading volume late Friday morning as the sports equipment maker nears a deal to receive a 60-day extension to meet its loan covenants, sources told the New York Post. If the Exeter, NH-based company fails to reach such a deal, it will reportedly default on August 29 and consequently become vulnerable to creditor action. Certain creditors hope to swap their debt for equity and assume control of the business, the Post reports.

A quick peek reveals it doesn't seem to be going well financially for the company. I ask myself is a move from $1.80 to $4 logical given what I see here. I think this run-up is overdone. Technically, it has printed a couple doji candles back to back and the last two trading days have been red. It looks ready to roll over if $3.88 fails to hold. I have a stop order to short sell PSG at $3.87.

Recently, I came across a familiar chart pattern in the stock NTP. It shows a long period of normal, light daily trading volume. We can see roughly two weeks ago the stock surged much higher on unusual volume. The unusual volume continued everyday as the stock continued to run. The daily candle's representing each trading day became shorter the past few days. These are doji candles. Doji candles indicate uncertainty and often are the beginning of a trend reversal. In the case of NTP this reversal could be down. This kind of enormous unusual buy volume always gets exhausted. It can't keep up for weeks. This stock looks overbought. I see it going lower in the short-term.

Initially, I only noticed the chart but digging deeper into the company I discovered this is a Chinese company. There was some news before the move up about a share buyback. I couldn't find any other substantive news on the stock around the beginning of the run.

Full Disclosure: I have a short position in NTP

Almost 3 years ago I put out Sky People Fruit Juice SPU as a net current asset stock. In about a week it has shot from $2 to $14 a share. No doubt a major short squeeze is going on and just pure momo. It has now become a great short. Another great short is KONE. Both of these will be significantly lower in a week. OPTT is another candidate when it finally loses momentum. Below are the charts of SPU and KONE.

I'm not worried about Europe impacting US growth significantly. That being said I see a very good chance of another down range day on the US indices today Monday the 27th. There could easily be a mini crash. By mini crash I mean at the least enough of a percentage move to trigger circuit breakers. Such a surge in the VIX and a wide ranging day on the major indices like Friday usually produces some follow through. Especially in todays market with all the bots and high frequency trading.

If there is any bubble big enough to produce a sustainable crash it would probably have to be in an industry that represents a large share of GDP. The top industry as a share of GDP in 2015 was finance, realestate and insurance at around 20% of GDP. In 2006,2007 this sector was around 30% of GDP before the housing crash. I don't see any real "bubble" in any particular major sector. That's not to say there can't be a recession. There's nothing wrong with a recession. The stock market has been around resistance for awhile now and this could end up being the move that will drive it down for a short term correction at the least. I've been long Smith and Wesson SWHC which has turned out to be a great long for the week or so I've been holding. It was up Friday and is up even more pre-market over $26 from my mid $23 entry. I'm hedged with QID and want to trade any crash today with orders out to long YANG and FAZ.

You might remember my article on two great pet companies from last year. The two pet companies I looked at in that article were PETS and WOOF. Both have done very well. PETS just reported earnings, beat the street and boosted the dividend. The stock just broke out over $20. WOOF is on a run to. I continue to believe this industry is a great long-term play. It's non-cyclical. Just look at the numbers in that BLS report in the article above. Some things worth repeating.

In 2011, households spent more on their pets annually than they spent on alcohol ($456), residential landline phone bills ($381), or men and boys clothing ($404).

Despite the recession, families continued to spend consistently on their pets between 2007 and 2011. Spending on pets stayed close to 1 percent of total expenditures per household, despite the recession that occurred during this time.

Spending on pet food stayed constant or increased during the recession, even while spending at restaurants fell. Married couples without children living at home spent the most on their pets out of any household configuration in 2011.

Blue Buffalo Pet Products (BUFF) is another good one in this business. Revenue growth is great and there is $129 million in free cash flow. The valuation is fair considering their growth. It ain't cheap but its growth at a reasonable price. The PEG ratio is about 1.6 and earnings forecasts have consistently been getting bumped higher. They report earnings tomorrow on the 10th. This is one to keep an eye on.

As more of a distressed play we have FreshPet (FRPT). This one has been beaten down for awhile. However, the analyst consensus is they will be swinging into profitability next year. I've seen the brand in Walmart so they have a fair chance at success.

I really hope the stock market has a semi-crash this year so I can buy a basket of all these pet stocks and any profitable pet or veterinary related company.