It was a disappointment not only for avid NY Knicks fans, but also for investors who bet that ”King James” would join the NY Knicks. Yesterday, LeBron announced he will instead join the Miami Heat from the Cleveland Cavaliers. Madision Square Garden is a US-Listed company that owns the Madison Square Garden arena, Radio City Music Hall, the New York Knicks basketball team, the New York Rangers hockey club, and the MSG regional sports cable-TV networks. Shares in the company witnessed heavy speculation with volumes rising 5x the daily average ahead of LeBron’s decision. MSG shares fell 10% during the past two days.

What was more intriguing to see is the action in the options. Below are the calls & puts expiring in July and August respectively. The action in the July 20 & 22.5 calls is massive as investors speculated as to where LeBron will go. Compare this to the less active August calls and June ones (I don’t have the June ones here). Also worth noting is the tilt towards calls vs puts as speculators bought calls equivalent to triple the number of puts as is evident from the open interest figures. Thus, investors betting LeBron joins the NY Knicks have two reasons to be sad!

LeBron’s mom was the only one who knew her son’s decision beforehand. If she would’ve told you, you could’ve made money selling a ton of these calls. Of course you shouldn’t do that since it is an example of the type of ethical lapses we discourage and oppose here at Alpha Dinar!

Source: The Economist

Recently, I have noticed that the market has been complacent and has been grinding up especially since the Greece scare. Looking at the VIX graph below, it is evident that every month or so the VIX has an average one day jump of 25% or so. Since the market’s direction has been up and confidence has been rising since the 2008 crisis, the VIX’s long-term trend is down. However, it is worth short-term trading as its deviations suggest ample profits when the timing it right. The latest spike was initiated by the Greece debacle and resulted in a >50% gain. It was then followed by another 25% gain in the same month.

Is the VIX setting up for a rebound initiated by a market sell-off? I think so.

*According to Bloomberg, the definition of VIX Index is: The Chicago Board Options Exchange SPX Volatility Index reflects a market estimate for future volatility, based on the weighted avergae of the implied volatilities for a wide range of strikes. 1st & 2nd month expirations are used until 8 days from expiration, then 2nd and 3rd are used.

Source: Businessweek

Prince Alwaleed bin Talal is chairman of Kingdom Holding Co., a Saudi firm with billions invested around the globe. He is ranked among the 25 wealthiest people in the world and is the largest single investor in embattled Citigroup (C), which just posted a $7.6 billion net loss for the fourth quarter. It is said that his displeasure with another Prince, Chuck Prince, contributed to the ouster of the Citi CEO in late 2007. The economic crisis has taken a toll on Prince Alwaleed’s holdings, and he recently injected nearly $600 million of his personal wealth into his firm after a year of steep losses. He is a nephew of King Abdullah of Saudi Arabia and one of the most outspoken members of the royal family.

CHARLIE ROSE

How do you see the global economic recovery?

PRINCE ALWALEED BIN TALAL

The decline has stopped. The question now is, will there be an L-shaped or V-shaped recovery? I hope that the L will be at least a U.

You just saw Vikram Pandit and Richard Parsons, and you’re confident that Citigroup is back on the road…to what?

We had a very healthy discussion about the past two years and what Vikram inherited from the previous management. If you follow what he has been doing, he has been extremely meticulous, and he has been delivering on all his promises. But I’m telling him, you have to deliver in 2010.

What’s your reaction to President Obama’s plan to impose a tax on banks?

I’m against that. The banks, with a few exceptions, have gone through major crises. So while these banks are just coming out of the ICU, you bang them with another tax? I believe it’s premature and unwarranted…and more of a vendetta against those banks that are still giving extravagant bonuses to their management.

You’re a huge investor in News Corp. (NWS) Are you confident about its future?

I’m the second-biggest shareholder there. I was with Mr. Murdoch yesterday and have a very close relationship with Mr. James Murdoch. James is now managing Europe and Asia. I would be the first one to nominate him to be the successor of Mr. Rupert Murdoch, God forbid something happens. I have full trust in him. He is really a Rupert Murdoch in the making, and he’s almost there. And I told that to Mr. Murdoch.

Have you seen the Fox movie Avatar?

I had to see it before I met Mr. Murdoch. If I didn’t, he would be upset.

Did you like it?

Well, it was the first time I’ve seen a science fiction movie. What I like is the fact that people like it and it will gross more than $2 billion and could possibly add $400 million to the bottom line of News Corp. Imagine that. Whether I like it or not I will keep between me and Mr. Murdoch.

What do you think of America and our future?

America is down but not out. You know, you are in a mess in the United States. I have to be honest with you because I love the United States.

And you are heavily invested here.

Yes, sir. You know, the United States is going to be the leader of the world for many years to come. But when you have a country that has $14 trillion of cumulative debt, that’s not good.

So what should happen?

I’m not the U.S. President…but taxes have to be raised across the board.

It’s a hard political sell in America.

I understand, very dangerous. I see no way out, though. You’re going to have to pay the debt, eventually.

Young Chuck moved to Texas and bought a donkey from a farmer for $100.

The farmer agreed to deliver the donkey the next day.

The next day the farmer drove up and said, “Sorry Chuck, but I have some bad news. The donkey died.’”

Chuck replied, “Well then, just give me my money back.”

The farmer said,” ‘Can’t do that. I went and spent it already.”

Chuck said, “OK, then, just bring me the dead donkey.”

The farmer asked, “What ya gonna do with a dead donkey?”

Chuck said, “I’m going to raffle him off.”

The farmer said, “You can’t raffle off a dead donkey!”

Chuck said, “Sure I can. Watch me. I just won’t tell anybody he’s dead.”

A month later, the farmer met up with Chuck and asked, “What happened with that dead donkey?”

Chuck said, “I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00.”

The farmer said, “Didn’t anyone complain?”

Chuck said, “Just the guy who won. So I gave him his two dollars back.”

Chuck now works for Morgan Stanley.

Note: This is a forwarded email that we received.

I guess a lot of people wished they were Ghanians in 2008 as the Ghanian stock market surged 58% in 2008! For sure no one wanted to be an Icelander in 2008 as the Icelandic stock market collapsed 94.43%!

As we say Happy New 2010 year, we are deemed to look back at the eventful 2009. We left 2009 with some great winners and some bad losers and the verdict was mostly because of market timing. Winners are those who cashed out at the beginning of the year and invested in march. Investing in the MSCI emerging market index gave a return of 72% YTD and 110% from its March lows. World stocks surged approximately 30% for the year but a whopping 75% from March lows.

On the commodities side, gold grabbed headlines with its late surge and gained 24%. It is considered a good return, but not when compared to the great oil which spiked 75%.

Losers are those who waited a long time to jump back into the market. Realizing the recovery too late would have a huge opportunity cost, i.e. investing in the global stock market in june, just 3 months later after the beginning of the rally would’ve made you lose 50% in potential gains. Others got caught into a black swan event such as the Dubai crisis and the Greek government debt.

Edwin Lefevre
Reminiscences of a Stock Operator

I’m always happy when the market goes down. Then I feel pretty good about the stocks I didn’t buy with the money I don’t have.

By W.L:

In certain villages across Africa, the population growth is doubling. Scientists from all around the world were called in to figure out the big mystery. Nothing, from food to shelter, was any different from the city where the population was either constant or decreasing. After years of research they realized that the answer was right in front of them. No one knew that the reason behind this debacle was one of them many results of Global Warming. How are these villagers affected by it more than us more developed city people? Turns out there are side effects of global warming, financial and non-financial.

Now what we are looking at is the must-do decision making TODAY.

Let’s look at your portfolios shall we: Long-term investors are advised to pay attention, global warming will have a significant impact on the financial performance of companies in your portfolio. “As climate change is widely accepted as a reality, companies that are viewed as impeding progress to reduce global emissions may damage their brands. Institutional investors from Wall Street to Silicon Valley are acting on these trends.”

The current Goldman Sachs Environmental Policy Statement states: “Goldman Sachs is very concerned by the threat to our natural environment, to humans and to the economy presented by climate change and believes that it requires the urgent attention of and action by governments, businesses, consumers and civil society to curb greenhouse gas emissions.” And legendary venture capitalist John Doerr of Kleiner Perkins believes going green “is the biggest economic opportunity of the 21st Century,” and is investing accordingly.

One of the www.ceres.com publications is about their view on how there’s an emerging trend toward greater mainstream mutual fund support for climate resolutions. (A must- read I say.) President Obama seems to think so as well “The nation that leads in the creation of a clean energy economy will be the nation that leads the 21st century global economy,” he said.

Let’s look at that village again. Global Warming is the excess use of Carbon dioxide; a greenhouse gas—that traps heat that would otherwise escape into outer space. The cities developed manufacturers were using so much of the electricity, the only way they know how, leaving the villages….…literally in the dark. There was no electricity left for the villages. There are no rules and regulations in most countries on how to manage these emissions. That city was a greenhouse gas Mecca. For the villagers, night comes when the sun sets, real early. Hence, more babies.

Some say the answer to all of this is “very simple: It’s that we need to make clean energy cheap worldwide.” I say, give those villagers something to do!