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Wednesday
Dec142011

Rumorville



 

As a relatively "unsocial" kind of guy, I've been very slow to adopt to social media. In fact, it was only at the advice, suggestion and arm twisting by my kids to use social media as a tool to sell books and get people to read this blog, did I reluctantly agree that they may be right.

Ego is an amazing thing.

Over the past 25 years, the only other things that I was slow to adopt was the one time ubiquitous "PDA" and the "mullet."

Palm, Treo, Handspring. Whatever the names and models were, it's all a blur, I never went that way although I may someday go for the retro look as nostalgia is due for its next generational comeback.

I'll think about that after tonight's Hall and Oates concert.

Today was just another one of those laughable days in the rumor mills. Good thing, because it was an otherwise utterly boring day with no news coming out of the EU and with Herman Cain out of sight.

As trades go, I sold Caterpillar calls, bought some more ProShares UltraSilver ETF and subsequently sold calls and that was all.

Boring.

As much as I took delight in my accurate prediction about retail sales, when it was reported that they were disappointing (in advance of the revised results after Christmas which will indicate that they were better than expected), it was still a tiresome day.

NetflixThe best rumor and the one that got the most attention was about Netflix.

I own Netflix and have for about a month or so. In that time I've sold lots of weekly calls. Sometimes I've had the shares assigned and other times not.

Sometimes I've bought the shares back and sometimes I haven't.

This week started with a reduced holding due to an assignment of a portion of my shares, but as luck would have it, the rumor mill started early.

And often.

Monday started with the rumor of a Verizon buyout of Netflix. WIth the market spending most of the day down 2%, Netflix was up about 7% in reaction.

Although I did my obligatory sale of calls, as has been my recent habit, I was a premature speculator and sold the calls a bit too early.

This morning, in the pre-market, the rumors started anew and Netflix surged.

Now if they were as good at streaming speed as the quick fashion in which the stock price gave up the ghost in the pre-open following a suggestion that Verizon was denying any interest in a buyout, they'd have a pretty great product,

The rumors and their rationalizations were fascinating.

Sometime in the past 24 hours the speculation was that Verizon was fueling the rumors to drive up Netflix's stock price to make it a less attractive take over candidate for anyone else.

This is the kind of rumor that may be referred to as a "conspiracy."

Interestingly in my area, Verizon FIOS ads still tout the ill conceived and subsequently aborted Netflix pricing plan as a reason to make the switch over to FIOS. It's not really accurate, but that really doesn't matter, because it was accurate at one time. For a couple of days, for that matter.

That seems like a better strategy to make it less appealing to anyone else.

Attack their business through that good old American concept of competition. Sure, unfounded rumors are good, too, if you want to cause your opponent to stumble a bit.

But driving up their price?

Then it was a return to the plain vanilla rumor that started it all.

Verizon was planning to buy Netflix.

Although a Verizon spokesperson later said that there were no such talk, many in the investing world believed that the issue was not whether there would be a buyout, but whether anyone would figure out that the holdup was due to both parties being caught up in a Verizon telephone menu loop. All that's needed is for someone to realize that all they have to do is press "O" to be connected to a buyout specialist.

In the meantime, Netflix was then played to the vest. No one really knowing which way to go.

As a seller of options I like movement because volatility drives up premiums. But once I get those premums, I love stagnation. That may also explain why I haven't matured one bit after 27 years of marriage.

So while the Netflix story plays out, and my time horizon is only a week at a time, attention was turned to Zynga.

Zynga is one of those social media phenomena that I haven't adopted.

Best known for its Facebook resident games, especially Farmville, it's due to come public at the end of this week.

As opposed to most other recent tech and social media IPO's, Zynga is different in a number of ways.

One is that it is reportedly and surprisingly not a fun place to work. Brain drain is especially expensive when brains are your leading commodity. An unhappy mind is not a creative mind.

What was especially interesting is that in advance of the IPO, one analyst has already come out with a "sell" recommendation based on an "underperform" prediction.

Now I know knothing about Zynga or its products, but I do know that investors are willing to pay for growth opportunity.

Zynga is so heavily tied to Facebook, there's obviously a liability asociated if Facebook heads in a different direction. Ask any Apple suppliers that have seen the Golden Goose seek better priced vendors.

But really, how much more is Facebook itself going to grow?

How many more new games that set the social media world on fire, especially without cannibalizing its exisiting game base, will Zynga put forward?

Besides, once they've seen the next big fad, how are you going to keep them down on the Farmville?

Seems to me that buying Zynga shares is akin to buying out a floppy disk maker about a decade ago.

What Zynga needs is something that will capture the interest of the 1%, like me, who don't want to get their virtual hands dirty by playing Farmville.

Maybe "Rumorville" is the next logical step. Trade in the green of the farm for the green of the portfolio.

Buy and sell analytical tools, inside information, algorithms and television appearances.

Want to be a talking head? No problem. All you need is the right currency. "Want to be a rainmaker?"

Immunity from prosecution? You can buy it, just like in real life.

I suppose that if you're on the short end of a rumor it's not very funny, but that's the chance you take, especially with all of these momentum stocks bouncing around.

For now, as long as Netflix stays above $65 and trades in a predictable range, I can be a very happy guy.

Maybe even enough so to be a sociable kind of guy, as well.

Nah.

 

Follow me on Facebook and Twitter. Clearly my overt display of anti-social behavior is a cry out to be liked.

 

 

 

 

 

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George Acs - TheAcsMan. - I now spend my time at Option to Profit - OTP.