GM Prices Cadillac ELR Too High

GM (NYSE: GM) has priced the new Cadillac ELR electric luxury car far too high for it to sell well. The primary reason is not that it has a sticker above that of the wildly well-regarded Tesla (NASDAQ: TSLA), with which it will compete.  Cadillac does not have enough of a quality brand image to justify the ELR price.

This is Cadillac’s calculation of the ELR’s sticker:

Designed for a new generation of technology-driven luxury buyers, the 2014 ELR has a starting price of $75,995, including a $995 destination charge but excluding tax, title, license and dealer fees. Upon IRS certification of an anticipated federal tax credit, purchasers may be eligible for a tax credit from $0 to $7,500 depending on individual tax liability.  Net pricing after tax credits could be as low as $68,495, including $995 destination.

In the new J.D. Power 2013 U.S. Initial Quality Study, Cadillac ranked well down the list, behind, among others Porsche, Lexus, Infiniti, Mercedes, and Audi. The challenge of  creating a premium image for a non-premium brand makes the ability to get a high price almost impossible, at least in any volume. And, by the other  J.D. Power measurement, the 2013 U.S. Vehicle Dependability Study, does even worse, falling behind budget brands Suzuki and Mazda.

Another nationally regarded measurement of auto product quality is the American Customer Satisfaction Index. While Cadillac does slightly better than the industry average, it still falls behind Mercedes, Lexus, and even Subaru. And, the Cadillac rating fell from 2012 to 2013.

It is impossible to imagine what series of decisions Cadillac management made to price the ELR at a level which will make its success nearly as impossible. However, Cadillac executives have made poor decisions for decades, which is why it has fallen so hopelessly behind foreign competition, and, more recently, has to contest with Tesla as well

In the announcement of the ELR release, Bob Ferguson, senior vice president Global Cadillac said

"The ELR is a unique blend of dramatic design with electric vehicle technology capable of total range in excess of 300 miles. ELR is also unique in that it will be offered nationwide within a luxury customer experience, with proven benefits and care extending from the shopping process all the way through the ownership experience."

Consumers are not impressed with the Cadillac “ownership experience” now. The ELR won’t change that

Covered Call = Naked Short Put

  It always amazes me how much bad, disingenuous or downright false information there is out there in options education land. And too many people make options too complex as well. Sure, options can be complex and they can also be as simple as can be. Just like options can be speculative and can also be as conservative as you like.

I am going to talk about what is probably the simplest and best known options strategy there is and why so many so called advisors out there get it wrong. Namely, the covered call, ie, buy the stock, sell the call (also known as a covered write).

If you buy the stock and sell the call, your profit is capped by the premium you receive for the call. That premium is also the only protection you have to the downside. If the stock falls farther than the premium you receive you start losing money. How is this different from selling a put? It isn't! This same graph applies just as well to being short the put.

Take an imaginary stock, XYZ, trading at 50. If I buy the stock at 50 and sell the 52.50 call at 2 the most I can make is 4.50 if assigned on the call. 2.50 in the stock plus 2 for the call. And I start losing money at 48. The exact same thing holds true if I sell the 52.50 put at 4.50. The most I can make is the 4.50 I get if the put expires worthless, And I start losing money if the stock falls below 48.

Moreover, selling the put is one transaction instead of two, thereby saving on commissions. And, since I am not buying the stock, less money is tied up. Sure, I have to put up margin for the short put but that margin can be in the form of an interest bearing asset such as a T bill. So, selling the put is actually fractionally more profitable than doing a covered write with exactly the same risk.

In fact, I don't like the covered call strategy at all. It caps your upside potential while offering minimal downside protection. It is not a direction neutral strategy, it is an entirely bullish trade. If you ! want to be that bullish then just sell the put!

Hot Value Companies To Watch In Right Now

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Market Wrap-Up for Sept. 6 (AMT, STI, MCO, TKR, more)

Stocks opened higher this morning, following the release of August’s jobs report. Even though the report was underwhelming, investors and traders starting buying up stocks due to their belief that the weak employment data would prevent the Federal Reserve from applying the breaks to its monetary stimulus. However, those initial gains were quickly erased following comments from Russian president Vladimir Putin that suggested that Russia would aid Syria in the event of a strike by the United States. Nonetheless, stocks eventually bounced off their lows and the major indices were mostly unchanged by the close.

Stocks on the Rise

American Tower Corp (AMT) shares rallied after the company announced a $4.8 billion acquisition of MIP Tower Holdings. Also rising today were shares of Timken Co (TKR), after the company announced that it will separate into two publicly-traded companies.

Furthermore, Wall Street analyst upgrades of Moody’s (MCO) and SunTrust banks (STI) helped push the stocks higher in the day’s trading session and a dividend increase announcement from Trinity Industries (TRN) caused the stock to rise. Walter Energy (WLT) and Extra Space Storage (EXR) were a few other strong performers on the day.

Stocks on the Decline

Among the stocks in negative territory today were The Gap (GPS), after reporting disappointing August sales, M&T Bank (MTB), following a Wall Street analyst downgrade, and Ford Motor Company (F).

Be sure to check the Dividend Daily for all the latest earnings reports, analyst moves, and much more.

Jobs, the Fed, QE, and Dividend Investors

The big news on Wall Street this morning was August’s Non-Farm Payrolls jobs report, which showed that 169,000 new jobs were created in August and the unemployment rate ticked down to 7.3%. Seems great right? Well, not exactly. Actually, not at all. The jobs created failed to top economists’ expectations of 180,000 new jobs. Not only that, but June and July’s job numbers were revised down sharply. Also falling was the labor force participation rate, which was the primary reason why the unemployment rate dropped to 7.3% despite all of the negative underlying jobs data.

Because of these disappointing numbers, many analysts and investors believe the Federal Reserve will be less likely to taper its bond buying stimulus this month or in the near future, as a less accommodative monetary policy would put the brakes on our already slow economic recovery. These expectations of continued monetary stimulus caused investors and traders to send stocks higher this morning, with bonds rising as well. However, I’m not sure that this continuance of QE-infinity will be the case; don’t be surprised if the Fed continues toward its path of a tighter monetary policy at its FOMC meeting in a week and a half.

What Dual Mandate?
This is because, historically, worrying about unemployment has not been the Federal Reserve’s main concern. Of the two pillars of its dual mandate, the Fed typically worries more about price stability, o