Filed under: Good news, Technical Analysis, Politics, Northrop Grumman (NOC)

Northrop Grumman (NYSE: NOC - option chain) shares have moved higher today after with other large defense contractors after President Bush and Defense Secretary Gates recommended that President-elect Obama increase overall defense spending for at least the next five years. This comes just one day after NOC CEO Ron Sugar said that he expects steady spending for at least the next two years. If you think that the stock won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on NOC.

NOC opened this morning at $36.80. So far today the stock has hit a low of $35.24 and a high of $38.05. As of 12:35, NOC is trading at $37.70, up 90 cents (2.4%). The chart for NOC looks bullish and S&P gives NOC a positive 4 STARS (out of 5) buy ranking.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $30 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just one month as long as NOC is above $30 at December expiration. NOC would have to fall by more than 20% before we would start to lose money. Learn more about this type of trade here.

NOC hasn’t been below $35 at all in the past year and has shown support around $35.25 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in NOC.

Northrop-Grumman (NOC) rises on defense spending speculation originally appeared on BloggingStocks on Thu, 20 Nov 2008 13:11:00 EST. Please see our terms for use of feeds.

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Filed under: Target Corp. (TGT), Best Buy (BBY), Costco Wholesale (COST), Black Friday

As Black Friday approaches just over a week from today, you may be wondering where some of the best deals will be had. Sure, the usual suspects like Costco Wholesale Corp. (NASDAQ: COST), Best Buy, Inc. (NYSE: BBY) and Target Corp. (NYSE: TGT) will be offering huge discounts on the largest shopping retail day of the year. This year is different: the U.S. is in the midst of a full-blown economic funk. Consumers are not spending, retail prices are way down and layoffs are increasing. Will you be spending like a drunken sailor this holiday season?

Regardless of the precarious economic climate the U.S. and much of the world is in, retailers are not closing up shop for winter. There are still some great bargains to be had and people will shop for gifts this year, just at a much lower rate than in the past. Just how low a rate remains to be seen, but let’s chew on some deals to whet the whistle: Best Buy if offering an eMachines desktop PC with 18.5″ LCD monitor and printer for $299 and a Canon Powershot 10 Megapixel digital camera for $199, Target is offering men’s cotton sweaters (your choice of neck style) for $10 and a Garmin nuvi 200 GPS system for $119, and CostCo is offering a VTech 3-handset cordless phone system for $39 and a Western Digital portable backup hard drive for $89.

Compared with normal pricing on all those items, there are savings to be had this year. Will you be out in your car early in the morning hours of Friday morning to snag one of these deals or perhaps another one? Human nature tells us that there will be those of you brave enough to trade time and patience for dollars. If you do take in some bargains this coming Friday, you’ll be in a select group, as many of us will be reigning in purchases and will be spending extra wisely. The retailers will thank you, and hopefully their bottom line numbers will show your effort this season.

A sneak peak into Black Friday deals for next week originally appeared on BloggingStocks on Thu, 20 Nov 2008 12:57:00 EST. Please see our terms for use of feeds.

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Filed under: Consumer experience, Competitive strategy, Apple Inc (AAPL), Dell (DELL), Hewlett-Packard (HPQ), Economic data, Financial Crisis

Recently, my wife heard a kitchen installer bemoan his economic fate on a local talk radio show. A job that netted him $10,000 a year ago, now goes for $4,000. This shows that the economy is not discounting goods and services. It’s correcting prices.

The installer will never get $10,000 for that job ever again. How could he since he’s willing to accept less than half the original price? The same thing holds true for the automakers. Every consumer with good or decent credit will now insist on zero-percent financing. How will the automakers — especially the embattled Big 3 — be able to afford these incentives? Is it any wonder that one in 30 new car dealerships are expected to fail this year with another 1,000 expected to shut their doors in 2009.

Retailers are offering huge bargains early in the holiday season to entice cash-strapped consumers. The problem, though, goes beyond this expected dismal season. Consumers are getting used to paying less and getting more and will not be satisfied if they do not get what they want.

Continue reading Price discounts: Good for consumers; scaring economists

Price discounts: Good for consumers; scaring economists originally appeared on BloggingStocks on Thu, 20 Nov 2008 12:42:00 EST. Please see our terms for use of feeds.

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Filed under: Economic data, Federal Reserve, Recession, Financial Crisis

Based on October wholesale and consumer price reports, July 2008 marked a shift from inflation into full-blown deflation. This has much to do with the declining price of oil, which in turn is related to the collapse of speculative buying of oil while shorting the dollar; the decline in demand resulting from a global downturn; and the failure of producers to cut supply fast enough.

However, as I posted, there’s a vicious cycle underway which leads to:

1. Excess inventory,
2. Price cuts,
3. Capacity and job reductions,
4. Less spending power,
5. Lower demand — followed by a return to step 1.

And with jobless claims at 542,000 and the price of oil down below $50, it’s pretty clear that this cycle is well underway. What can the Federal Reserve do to turn this vicious cycle into a virtuous one? It is likely to cut the Fed Funds rate to zero or very close to it — 0.25% — in January. But in a 2002 speech, Bernanke said that there are other ways the Fed could try to boost overall demand, which would reverse the deflationary cycle.

Continue reading Can the Fed fight deflation? How?

Can the Fed fight deflation? How? originally appeared on BloggingStocks on Thu, 20 Nov 2008 12:27:00 EST. Please see our terms for use of feeds.

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Filed under: Deals, Apple Inc (AAPL), Wal-Mart (WMT)

It was just a matter of time. It looks like the Apple, Inc. (NASDAQ: AAPL) iPhone 3G will be coming to Wal-Mart sometime before the end of the year, but probably after Christmas. According to the Boy Genius Report, which claims its sources are reliable and to have come across some internal Wal-Mart correspondence, the iPhone 3G will be sold in 2,500 Wal-Mart locations in about a month from now.

Remember that the iPhone 3G must be activated (unlike the original iPhone), so only Wal-Mart locations that can use a specific ordering and activation system can carry the iPhone 3G. Some Sam’s Club locations will also carry the iPhone 3G, but they also must use the Wal-Mart ordering and activation system in-house (several Sam’s locations use a different wireless activation system). All in all, this will make the iPhone available to just about every American (well, the ones with good credit at least) as more U.S. shoppers have exposure to Wal-Mart than just about any other store.

The question is whether Apple is forsaking the iPhone cool brand allure by offering it at the largest discounter in the world. At this time, no. The iPhone 3G has been out in the world long enough for the iPhone to make its name. Offering it at Wal-Mart now won’t impact its reputation nor affect Apple’s cred.

Since Apple pretty much dictates pricing to its retail partners, expect the iPhone 3G to sell for a dollar or two less than the standard $199 and $299 pricing levels seen at all other retailers. Say, something like $197.48 and $297.48, as Wal-Mart is into non-standard retail pricing schemes to try and create the illusion of low prices against the competition. The presumed launch date: December 28th. Get ready.

Apple iPhone may be coming to Wal-Mart in just over a month originally appeared on BloggingStocks on Thu, 20 Nov 2008 12:12:00 EST. Please see our terms for use of feeds.

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