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MA beat the street’s estimate by 9cents, but the market decided to take it down hard. Yesterday was interesting for the credit card transaction companies. Visa reported a solid number, and numbers caused V and MA to shoot up in after hours. Master Card produced similar solid numbers, and the street had no mercy.

Those preaching MA was due for a hit because ‘the stock got ahead of itself’, IMO, are not correct. Visa is much more expensive than MA on a PEG basis, yet MA took the bigger hit today. Kinda throws the ‘expensive’ arguement out the window. Visa has a right to be at a premium given its huge market share, but growth causes premium, not market share.

On a valuation basis, MA traditionally starts to pull back when a PEG higher than 1.58 was achieved. Obviously in the current economic environment we can not have such a PEG. However, at what price is a good price for a company growing EPS at an actual +25% rate.

Looking at the chart, support is present at 240, around 220 and around 180.

Current EPS estimates have MA bringing in 8.73 for the year, with a 5yr growth rate of 21.1%. They beat today by 9cents, which conservatively lifts estimates to 8.81. At 240 MA has a PEG of 1.29, the lowest I have seen it thus far.  At 220 MA has a PEG of 1.18. At 180 MA has a PEG of 0.96.

So… how low can it go? I think 240 is a good price with respect to macro economic conditions and the company’s business model. At 220 the stock is just cheap.

If 180 is achieved, consider yourselves the luckest SOBs for having the opportunity to purchase it at that price.

I bought MA 240 Oct calls because of the earnings collapse.

Sometimes I do not understand Wall Street. Upon news of the Amex settlement MA shot up. They post today, and they collapse because of the loss from the settlement. Yet their earnings were great, and beat nicely.

What pissed me off about the trade… I guess when I typed in the order I initially typed in a different option order then I thought i was typing in. The process of closing it out, then buying the correct option order cost me.  Anyway, had to vent that. Its such a pisser.

Here are a few stocks that I am interested getting long, but waiting for the right moment:

AAPL – Looks to want to break down further to around 145. Some protection is merited here via selling calls on a position or purchasing puts. I also will be looking to play the Oct 140 calls around 145.

JPM – Around 36 looks to be an interesting entry point if entry at 30 was not taken as I pointed out before. I will be playing the common at 36 for the pop. If the pop is not seen, I am willing to hold it.

PWR – As stated earlier, I will add (to the common) at 29. The weekly indicates the 20 SMA (within the weekly) is acting as support withing the current movement. After this set of consolidation, the 34 resistance will mostlikely be broken upward.

I closed out the remaining of my market short position. I am under the most humbling of opinions that the easy money from this current down side was made.  Things have gotten over sold for the trade.

Also, I am looking to add PWR at low 29. Just an FYI.

(I’ll post charts later in the day.)

PST is an ETF that is UltraShort Lehman 7-10 yr Treasury ProShares. Basic thesis is that rates will go up, yields go up, which means bond values will go down. The inverse of down is that PST goes up, obviously.

Inflation is with us, and in a normal economic situation rates would have gone up a while ago. But rates are kept down because of the credit and housing mess this country is in. I am under the belief the ‘Paulson’ Bill, about to be passed, will give the Fed the ability to start raising rates.

The question that remain are…

1. When will rates start going up?

-Will the Fed want to see some housing data improvements, and GSEs improve before they raise rates or will data points not matter.

2. By how much will rates rise? (I’m not an economist so I will have to pay attention to what Kudlow says )
At the moment PST looks to want to consolidate a bit…

And this is confirmed by the 10yr treasury yield, as it wants to consolidate to maybe 39.

However, within the yield chart, notice the SMAs are now indicating an uptrend, and economic fundaments suggest the trend to continue… at least until the housing/credit mess is out of the way.