Buying some Starwood Hotels

Buying ~$21,000 worth of Starwood Hotels at $41.07


2 Year Chart of Starwood

Whilst I'm sure in a global slowdown hotel stocks can take a beating, I think that for now the big hotel chains have significant earnings power, particularly whilst we have generally rising prices across the globe. I do a fair amount of travelling, and the major hotels always seem very busy/full, from London to New York to Asia to South America. I would have thought that pricing in the US may have taken a hit by now, but just have a flick around Expedia.com to see what pricing is like...good luck finding anything for under $400 a night in NY.

I'd also recommend a quick flick through Google news for Starwood, it's the first time I'd done this, and as I'd thought from other things I read previously, they seem to be expanding across the emerging markets. Some headlines:

- "Starwood Hotels & Resorts Worldwide Inc, in co-operation with TCC Capital Land, will open a new hotel in Chiang Mai (Thailand)in the second quarter of 2008..."
- "Indian real estate company Parsvnath reported near pacts with Marriott, Starwood"
- "Starwood Hotels and Resorts will debut its aloft brand in the Middle East"
- "The US-based hospitality chain Starwood Hotels and Resorts Worldwide will open more hotels — under the Westin and Aloft brands — in India"

To me, this all sounds like a company growing strongly, and so buying today at the same price the stock was at in early 2004 looks positively a bargain. I haven't done too much research into their finances, so when I get a chance I'll look into their debt levels and funding profile. Yahoo has their total debt at $3.16bn. Also, Yahoo has their P/E at ~15 and the forward P/E at about 16, although I've read some analyst articles including this one by Zacks
which states "Starwood...which currently trades at 8.9x our 2008 EBITDA estimate", so not entirely sure what to believe!

Anyway...f*ck it, it looks cheap. I may keep an eye on buying some other hotel operators also. As I mentioned above, although I'm sure during a global slowdown, hotel earnings could suffer, I think 1) they have significant earnings and growth potential at the moment, plus 2) stocks like these will hopefully act as some sort of hedge to a generally bearish book that I plan to set up.


Yours,
2and20

Will give shorting Oil another go

Sold some Oil at $99.42 (the Mar '08 NYMEX Crude Future) in about $50,000.


6 Month Crude Chart

I don't see the rationale for oil being up here. An economic slowdown in the US will reduce demand for oil. A strengthening dollar against Euro/Sterling will mean a falling oil price will be needed just to keep the price the same in those currencies. Persistent high prices over the last few years has brought on (some) advances in other fuels (see solar stocks or the price of grain due to ethanol demand if you don't believe this). Yes we may be at peak oil, but shouldn't that have been priced into the market? Anyway that is a long-term effect, whereas we are seeing large short-term price moves.

So. We'll see how it goes. I've put a stop loss on 2 points above where I bought it ($101.42), so if it rips higher, I'll force myself to re-evaluate again.


Yours,
2and20

Selling FTSE versus Buying CAC, for the long haul

Looking for some long-term trades, I am shorting the FTSE versus going long the CAC, the idea being to keep it on for the whole year, although I may get opportunistic if it goes my way far and quickly.


2y Relative Chart of FTSE versus CAC

The UK is sitting on top of a perilous and bursting debt-induced bubble, with the property market having topped out and now slipping fairly quickly. Depending on which survey you look at, property has been going down for 2-4 months, including 0.5% in December, and mortgage approvals in November were over 40% lower than the previous year. Also worth noting is a complete collapse in first-time buyers. Keep an eye on the UK Housing Bubble blog for great info on the UK economy. As an aside, I also plan to be short Sterling most of the year (my 2.00 straddle rolls off on Friday).

Now, the rest of Europe (possibly excluding Germany) has also had a huge increase in property values/speculation/consumer debt, but one country I'm interested in from the political side is France, where Nicolas Sarkozy become prime minister last year, and with a solid right-wing profile, looks set to make a good effort of modernising France. Just a couple of months ago it was taking on some of the unions, and he didn't seem to waiver particularly.

From another BBC summary:
"After a bitter battle against his Socialist rival Segolene Royal, Nicolas Sarkozy was elected President of France in May after a record turnout of 85 per cent. His platform was to effect a "moral renaissance" for France by cutting down on welfare and restoring the work ethic. By the end of the year he had unveiled nearly 100 measures to streamline France's cumbersome public administration. He has also developed a playboy image after divorcing his wife, Cecilia."

So, as the UK goes into property freefall, contracting lending, and an increasingly socialist tax-and-spend government that has taken the Current Account deficit to record levels, it should underperform neighbour economies that are willing to make painful changes to their social structure.

I had a similar trade on the DAX a couple of years ago, and that subsequently went on to SERIOUSLY outperform the FTSE as Germany reformed to make itself more competitive. My bet here is that France can do the same.

I sold the FTSE whilst it was at 6491.
I bought the CAC whilst it was at 5645.

I put on the equivalent of £20 per index point they are apart, so short about £130,000 ($257,500) of the FTSE and long about $224,000 worth of the CAC. Looking for these to get much closer together, not sure they quite get flat this year, but we'll see.



Yours,
2and20

Selling some short-term EUR/USD Calls

One of my strategies this year, unless my mind is changed, is to play EUR/USD from the short side. Dollar weakness has clearly been on display in this cross last year, and I think unreasonably so, as the Euro is a fundamentally flawed currency, in that 18 (I think, I'm losing count now that Malta and Cyprus just joined yesterday) different nations can NOT share the same currency/interest-rate/monetary policy. OK, this might take 30 years to collapse, but still, a flawed currency long-term is supposed to be shorted. And yes, I know many will argue the dollar is flawed, but at least it's one nation with one monetary policy.


3 Month Chart of EURUSD

So, taking advantage of Xmas strength which has pushed it up to 1.4688 just now, I'm selling a 1.4600 call expiring Jan 11th. I'll see if I can keep pocketing premium through short call selling on the EUR whenever the opportunity looks good, and if it rockets upward, I am comfortable being outright short for the long-term.

Sold the call at 151, with my exposure being $20/point, so $3020 in premium. Of course, it's slightly in-the-money so I need about a 1 point fall over the next week and a half.


Yours,
2and20

First month P+L - Up $10,000

So, the first month of Blogger Capital Management's existence, and I'm up a shade under $10,000.

Highlight's:
Up £1,200 on owning Heely's, as it moved up 13%
Up $3,500 on selling a 2.00 straddle on Cable over the Xmas period
Up $5,500 on 2 leveraged shorts on the FTSE and the Dow
Up $1,000 on a short on Apple, where I sold at pretty much all-time highs.
Down $1,200 on shorting Crude Oil...a stop loss saved me from further losses

Fairly pleased with this, I expect going forward I'll be trading a little more actively, with more open positions. I'll also try and clean up the spreadsheet to make it more readable.

Looking forward to 2008, I think the trades I'll put on this week will be shorting US stocks and going long either 10y or 30y treasury futures, playing on the deflation theme that I believe in at the moment (see Mish if you still believe in inflation...), and I'm looking at shorting the FTSE versus getting long the CAC, as I believe France's efforts towards increased capitalism under their new(ish) president Sarkozy will benefit equity markets, unlike the increasing socialism going on in the UK under the Labour Party...plus I think the UK will be the next economy to hit major stress due to falling property values.

As always, I'll be posting every trade. Good luck to all in 2008. Lots of opportunities out there, and it should be easy to make money if you can see the big picture correctly.

Yours,
2and20