Facebook IP is it a bust or an IPO success?

Today's Facebook IPO came and went, and the price of the stock which was offered at the end at $38 per share pretty much closed slightly above that price after the market closed.  Many people considering this a "failure" as everyone was hyping up the price to be in the 70s or even higher.

But looking at this from another point of view - Facebook had almost all of the major investment banks involved in planning the IPO.  Thus the stock and offering was priced exactly right:

1. Facebook did not leave any money on the table, thus offering the right price and right number of shares for the IPO
2. The banks got their piece by correctly pricing the IPO and not letting the stock slide below the offer price thus collecting their share of the profits between the offer price and the price they paid for the stock
3. Almost all the shares were placed long before the actual IPO day.

So examining this situation from an IPO process and comparing to some of the other recent IPOs (Google for example), Facebook and the bankers did a great job.

Now, whether I think Facebook is a good investment at the current price, that is another topic for another day.

Time to Short European Banks?

Is it a good time to short European Banks?  Since many European banks hold a lot of sovereign debt, of their own countries as well as other euro zone sovereign debt they will be affected by all the financial commotion that is happening in Europe.

And even if they are free of Greed debt, we still have to remember that recent events in Europe are causing borrowing rates to go up in many other week members of EU such as Spain and Italy.  If Greece exits Eurozone, many European banks can get hit hard and fast.

Even if Greece dose not exit, and another huge bailout will be created, ECB resources will be stretched to the limit.  Another Eurozone member starts having financial issues, the whole house of cards collapses.

Here is a list of US stock exchange traded Euro Banks with options available for the shares:

• STD - Banco Santander SA
• BBVA -BBVA Privanza International Ltd
• DB - Deutsche Bank Aktiengesellschaft
• CS - Credit Suisse Group
• UBS - UBS AG

Then again, some people consider this a great time to bank Euro Banks:


http://seekingalpha.com/article/572211-is-it-time-to-invest-in-european-banks-yet

How to survive in a down market.

From the looks of the dragging US economy and the mess that is happening in Europe, we may hit another bear market for a while.  Here are some strategies I'm taking with my retirement portfolio.

1. I'm getting rid of my mutual funds. Based on some basic analysis it seems that in the last 6 moths most of my mutual funds underperformed the SnP 500 index.  Question arises, why hold them? 

2. The money I got from cashing  my mutual funds are going into SnP 500 (SPY).  Why not simply hold cash?  Because I could be completely wrong about the bear market, and if the market is flat, at least I'll get the dividend yield (2% is still better then the 0.000001% interest rate in money markets).

3. Buy close to the money puts  with three months out expiration on SPY to protect the down potential of the market (Protective Put).  However, I'm not buying puts to cover my entire SPY holding, but rather in a ratio of 2 to 3.  Puts are expensive, and I'm not looking for total down side protection.  I guess another options would be to buy out of the money puts for the entire portfolio, more protection on the deep drop in the market, but total loss of premium if markets slide only a bit.

4. Write covered calls for within a month or month and a half on the SPY holding.  This was the main reason to move from mutual funds into SPY or another index.  I can write covered calls for income and/or to cover the costs of the puts.

Combining steps 2, 3 and 4 I've created a Collar strategy on my portfolio.  Thus we move away from passive buy and pray strategy.  If the market tanks, we can sell the puts, and buy more SPY.  If the markets stays flat, hopefully dividend + covered calls offset the puts.  If the market goes up, we profit (If the market spikes and our covered calls are exercised we still have a profit, as opposed to just being in cash, and simply repurchase the SPY shares at new prices)

Next steps, who to take advantage of the financial melt down in Europe?

Chesapeake - is it a buy?

So back to Chesapeake energy?  Is stock a buy right now?  It is trading below it's book value.  It has large reserves of natural gas that will rise in value once nat. gas will rise.  Management is terrbile, but it's a great take over target - take over, get rid of management and the board and you got some great assets to add to a well run energy portfolio.

So long stock, or long a LEAP call?

Chesapeake, saga continues.

So the Chesapeake saga continues.  It seems the board knew what CEO was doing and even OK'd it having him trade for his own account.

Reading more and more into this company, with all the shady things that are going on plus the fact that it is totally cash strapped and will be desperately unloading its assets.  So I think keep shorting it for the time being. 

http://www.reuters.com/article/2012/05/08/us-chesapeake-mcclendon-contract-idUSBRE8470EU20120508

On Chesapeake Energy

Chesapeake Energy (CHK) has been in the news a lot lately.  Looks like the stock has been sliding for a while, and then all the shady dealing that happened with the Chairman of the Board.  On top of that, company announced a disappointing quarter that way below the estimates for the last quarter as well as unrelenting low natural gas prices.

After all this negativity I bough a couple put options to make some money on the stock sliding down.  However, looking over the stock I also do realize that my put options may be a very short term strategy.  I believe the stock could be a good long term buy.  Looking at the fundamentals, it's a great value stock, as it is trading almost 5-7 dollars below the BOOK VALUE.  It's yield on dividend is almost 2%, and sooner or later the natural gas will rise and the stock pile that Chesapeake has will bring a nice return to the company.  One of the headlines also mentioned Chesapeake as a potential take over target.

I think it is worth doing more research into the company.  But I think as soon as media relinquishes Chesapeake Energy from it's grip, the stock has a very attractive long term potential, weather as a long term stock purchase for the price appreciation and dividend, or perhaps some LEAP way out of the money call options or a nice vertical bull call spread.

Then again, based on how the company has been run so far, I think maybe really really out of the money options could be a safe bet, because it seems Chesapeake still have a lot of cleaning up to do.

Starting a new blog.

I'm starting this blog to record my finance and investing ramblings.  Whether exploring investment ideas, commenting on market or economy or just putting random posts related to money and investing, this will be the place.

Disclaimer:  I'm not a finance professional, so do not take anything I post on this site as investment advice.  As it says in the Bible, if a blind man leads another blind man they will both fall into a ditch.