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Recessionary Wednesday Morning

It’s official (or semi-official, anyway), we are in a recession.

While we’ve been using the "R" word for ages, finally Jeffrey Frankel of the Business Cycle Dating Committee (who are in charge of declaring recessions) agrees, saying: "The weight of evidence is now overwhelming: We are currently in recession."  Despite this "stunning" revelation, our nation’s top economic thinkers are still unclear as to the timing, asking: "Did it start at the end of 2007, when employment and the other indicators peaked?     Or was the stimulus from the government and from exports enough to postpone the turning point, and did the recession thus only start towards the end of the summer, when the financial crisis intensified very sharply?   I am afraid that we need to wait for some more data and some more (regularly scheduled) revisions before we will know."  Gee Jeff, let us know when you get a fix on it will you?

For a more informed look at how screwed up things are, check out "The Financial Crisis From A-Z" a tragically funny article from Forbes.  You know things are bad when top financial writers turn to gallows humor when discussing the economy, part of the process of depersonalizing something that is going to die…

I’ve been saying for a while that the various stimulus plans have been very much like injecting adrenaline into a coma patient – you may get a quick reaction but don’t mistake it for signs of life until you get some steady vitals.  Yesterday the S&P flat-lined at the 900 mark and we are back below our critical 40% levels as well as our "Must Hold" levels on most of the Big Chart:

 

 

3-Day

2007

%

Must

40%

50

25%

Index

Current

Move

High

Loss

Hold

Down

DMA

Down

Dow 8,693 -2     14,021 38% 9,000 8,413 10,089 10,516
Transports 1,795 -7       3,114 42% 1,750 1,868 2,032 2,336
S&P 898 -6       1,576 43% 925 946 1,085 1,182
NYSE 5,634 -33     10,387 46% 5,750 6,232 6,950 7,790
Nasdaq 1,580 -28       2,861 45% 1,650 1,717 1,953 2,146
SOX 211 -8          549 62% 222 329 281 412
Russell 482 -13          856 44% 500 514 617 642
Hang Seng 13,939 -304     32,000 56% 13,000 19,200 17,245 24,000
Shanghai 192 14          588 67% 176 353 214 441
Nikkei 8,695 172     18,300 52% 8,400 10,980 10,696 13,725
BSE (India) 9,536 -428     21,200 55% 9,750 12,720 12,328 15,900
DAX 4,804 -54       8,151 41% 4,600 4,891 5,509 6,113
CAC 40 3,373 -47       6,168 45% 3,350 3,701 3,829 4,626
FTSE 4,304 -53       6,754 36% 4,200 4,052 4,746 5,066

The brightest spot we can point to is that the Shanghai came off the 70% mark since last Thursday’s Review but, on the whole, we have lost ground around the world despite the $500Bn Chinese bailout and despite the continued daily Billions being written to US companies, our markets are down across the board.  The EU is still hanging in the "Must Hold" zone but, if we lose those, we’re all heading to China (as in down 70%).

Losing the Transports will put us firmly in a downward spiral and their performance has been downright pathetic with oil dropping below $60.  Yesterday morning, in member chat, I noted that we had dropped about 10% since last Wednesday and I listed the 10% lines we needed to watch and the bounces (in brackets) we expected to get before we could even consider it to be a possible turn and they were:  Dow 8,662 (8,835), S&P 904 (922), Nasdaq 1,602 (1,634) and NYSE 5,710 (5,825). 

While we did spend the morning bottom fishing, picking 18 positive plays ahead of the 1:30 rally, watching our levels kept us level-headed and we never took the "rally" seriously.    At 2:38, near the top of the Dow’s 300-point run, I commented: "Running out of gas but that was fun."  We are really getting the hang of this market and, as David Fry says in yesterday’s wrap-up: "As long as we continue to have 2-4% intraday trading ranges as routine, the environment will only be safe for day-traders."  The only day-trade we took in the morning was the GOOG $320s at $8.50 as they bottomed out in the morning and they yeilded a nice $13 (up 52%) into the rally and finished the day at $10.50 for those who were too greedy to take 50% off the table…

Day trading is not a bad thing to do while you wait for market clarity.  My 10:29 entry call on GOOG laid out the strategy as such: "GOOG $320s are nice risk/reward play at $8 with a stop at $7 as they were $9.50 this morning and $20 yesterday and $30 on Friday."  That’s how you need to enter your day trades – with reasons and limits.  We had been watching GOOG $300 for a bounce for 2 days so it wasn’t an impulse buy and the same 10% logic we applied to our indexes led us to conclude we should get at least a $6 bounce off that level as we fell from $330 last week.

Our other 18 morning trade ideas were along the lines of the spread entries I discussed in last night’s educational post "How to Buy Stocsk for a 15-20% Discount."   What’s really terrifying is how many of these stocks we’ve entered in the past few weeks that have already gone below our 20% discount levels as we are still trying to firm up a bottom.  Still, the point is, as long as we are going to generate a long-term, forward income of 20% of our basis annually - we don’t really care what the face value of the stock is – again, it is all about goal setting!  If we are truly entering a recession, especially a deflationary one, generating a reliable annual income in the 15-20% range off our equities is going to come quite in handy.

Asian stocks traded off about 1.25% this morning on no particular news with airlines and brokerages putting in the best performances and the energy sector continuing to lead down as oil fell back to $58 a barrel in overnight trading and Brent Crude broke below $55 for a while.  There is growing investor concern that, without Obama’s participation in this weekend’s G20 conference, nothing of note is likely to be accomplished.

Europe is flat ahead of our open, which is not bad as the BOE came out with a downright gloomy forecast for the first half but they do expect conditions to improve mid-year and would be "rising somewhat above its historical average rate" by 2011.  Rising somewhat by 2011 – Woo Hoo! "In the central projection, inflation slows sharply in the near term, as the contributions from energy and food prices decline," the BOE said. "Further out, inflation falls well below the 2% target, reflecting a larger margin of spare capacity and the waning impact of import prices."

Russian President Dmitry MedvedevAlso worth noting in Europe is the Ruble may be the next currency to fall as Russia begins removing long-standing supports and immediately investors pushed the Ruble limit-down, forcing the RCB to spend $7Bn to cover their currency.  Since the summer, the RCB has spend $112Bn defending the Ruble and is seriously depleted.  This caused the RTS to fall 10.7% as falling oil decimates the Russian economy.  "Today’s move achieves nothing," Renaissance Capital economist Alexei Moiseyev said in a note Tuesday. The modest decline in the ruble "has only served to raise market expectations of a further devaluation." "The more rubles they print now at a fixed exchange rate, the more reserves they lose," said Yevgeny Gavrilenkov, economist at Troika-Dialog, a Moscow investment house. "It’s in effect a road to devaluation."

Have I mentioned lately that I like gold long term?  Anyway, speaking of Socialist states that take over industry, it looks like AXP will be lining up for $3.5Bn in US government aid while GM is turning up their nose at anything less than $50Bn for their industry.  We actually discussed a GM play with a net entry of $.85 ($1.93 if put to you) in yesterday’s chat on the premise that the government simply can’t let them die but it was too much of a gamble to bold it (recommend).  Finally FRE and FNM are announcing something concrete to aid the actual homeowners but it is certainly far too little and probably far too late to have a serious impact and it looks like we’ll have to wait for January 20th to see some real change in policy that will help the actual people who are suffering in this crisis.

Somebody needs to bail out BBY, who lowered their forecasts despite the fact that CC, their main competitor, is going under.  We discussed this in chat the other day and I pointed out that CC’s bankruptcy was likely to be a headache for BBY as it will put pressure on pricing while CC dumps its assets but BBY is citing: "rapid, seismic changes in consumer behavior have created the most difficult climate we’ve ever seen," not the sort of thing that seems confined to just their particular market segment

So, will the "R" word finally send us to that blow-off bottom the buyers seem to be waiting for (the real buyers, that is, not the manipulators who swing the market every which way each afternoon)?  I still maintain that, fundamentally, a recession is already priced into most of the market and 8,200 remains our BUYBUYBUY target but investing remains a game for the patient – there is no quick turnaround coming as it’s the consumers who are hurting and consumer spending makes up 70% of our economy and there is nothing that Bush, Bernanke or Paulson have done so far that does a damn thing for those consumers so - CAVEAT EMPTOR!

 


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  1. harvey

    LVS:  The Singapore government will not loan money to LVS for their project.

  2. Phil

    LVS/Harvey - That’s what I thought, they have their own local talent that would love to pick the bones off a BK project.

    DEO getting cheap.  5.2% dividend looks like $55.50 at the open.   Dec $55 puts and calls sold can knock $7.50 off that price.  They bottomed out at $52 in Oct.

    USB is back at $26 with a 6% dividend.  Dec $25 puts and calls total $5.15 for a $20.85 entry ($22.93 if put).

    WFC is another good bank at $28.40.  Dec $29 calls are $2.85 and Dec $28 puts are $2.45 so that’s $23.10 and even if put, it’s just $26.55 on a 5% dividend payer.

    PEP amazes me at $55 and they pay a 3% dividend.  The Dec $52.50 puts and calls knock $6.50 off the price ($48.50/50.50) and $50.50 was the October low.

    More as the day goes…

  3. lindsay

    phil, what are your thoughts on oil inventory levels ?

  4. Anton Chigurh

    Must read article on how we got into this mess. Long but well written and equal parts entertaining/distressing!
    http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom

  5. Phil

    DOW (the chemical company, not the index) is down at $22.25 and the Dec $22.50 puts and calls total $3.75 for a net $18.75/20.63.  7% dividends here.

    VZ is getting hammered again with a 6% dividend and FIOS, which I love.  They are way off their bottom where we first picked them but I’m saying right now that if they get to $24 again, plan to DD as that price was insane.  At $29.30, we can sell Dec $27.50 puts and calls for $4.75, which drops the entry points to $24.57/26.04, which is close enough to $24 to make it worth looking at here

    VZ is one of those things that are not likely to come back down, like TEVA, who are not looking like they will come back to $39, where I was loving them or RIMM, who even I had to recommend at $40.  Of course, if we collapse from here, everything can still go lower but that’s what index puts are for as we’re talking about catastrophic market moves back to 8,000 or lower.

    GOOG punched $300 again and turned back up.  C reduced their target on GOOG to $450.

    Oil/Lindsay – I’m not sure what expectations were but any kind of build has got to be terrible news for oil.  Still, at $57 it’s hard to short them.  My long-term price on oil is $60, not $40 so anything ranging in the $50s seems very defendable to me. 

    LOL – that is a great picture in that article Anton!

  6. patrickc

    Phil,
    I covered my short position this AM.  Partly because I will be out all day today and partly because my brother has updated his wave count, and he is saying that a big rally is possible in the next couple days.  Here it is:

    Based on his count, we should start wave e of iv of 3 sometime today.  e waves are rogue waves and tend to overshoot so the target for the Dow can be anywhere from 9680 (minimum) to 10100 (maximum).  This count corrsponds to a giant pennant formation which is clear to see on the DOW although less so on the SPX.  A spike down today on  the SPX to anywhere around 860 will touch the bottom of the pennant (the dow is already there), and will put the next wave in play.

    In addition to the wave count and pennant formation, we are also entering options expiration week.  Max pain (or no pain for the option sellers is currently 975 on the SPX).  The expectation isi that we will hve a rally to at least that range by or before next Thursday.

  7. Fabregas

    SOL – down 20%!

  8. Singapore Steve

    So we are in a recession.  How many of you did not know that?  So Best Buy and Macy’s sales and forcast suck.  How many of you did not know that?  The same news keeps getting recycled.

  9. Singapore Steve

    Anton
    That is a long article about the greed on Wall Street but it totally leaves out how they got that greed.  The Clinton administration started a everyone gets a house strategy which Bush followed.  The democrates , Reid and frank, let fanny and freddie do what ever they wanted because they were a wing of the democratic party.  Wall Street just saw an opportunity to make money on it.

    "And now we know the rest of the story"

  10. Fabregas

    Phil,
    NDAQ – any quick thoughts on them?

  11. matt1966

    Patrick:  Interesting, thanks for that.

  12. Phil

    GE, GE, GE (I know, I sound like a broken record).  Do we really think they are not going to exist in 20 years?  Well then if you buy them for $17 now and sell just $1 in calls for 20 years, you will make at least a 10% profit so BUY IT!!!  They also pay a $1.24 dividend, which works out to more than 7% now and if they pay that for 10 of the 20 year you own it along with the calls you sell, you will make over 50% on your purchase plus whatever residual value the stock has in 2028.  Come on, some things are just must owns!!!  If you don’t believe this $173Bn company can survive, you can buy the stock for $17.30 and sell the very pessimistic Dec $15 puts and calls for a whopping $4.10.  That’s in at $13.20/14.10 with a 13% profit if called away.  If you do believe in Immelt, then you can get $3.55 for selling the Dec $17.50 puts and calls and that’s $13.75/15.60 but a 27% profit if called.

    KFT is nice at $27.70 with a 4% dividend.  Dec $27.50 puts and calls sold for $3 drop you to $24.70/26.10 – not the greatest discount but they are just not that volatile and that’s kind of nice for a change of pace.

    China consumer spejnding is holding up very well and YUM is a China play as well as US cheap fast food.  $25.50 is almost a shame to cover and they pay a 3% dividend.  Selling the Dec $25 puts and calls drops a nice $4.40 off the price for entries at $21.10/23.05.

  13. kustomz

    Out of GOOG, but i like the chart short term and plan to creep back in… we do have Pa pa pa Paulson speaking shortly……i stutter sometimes so i can take a jab at Paulson :)

  14. Phil

    LOL Patrick – nice flip-flop by your bro but I agree, you can’t discount at least a bear market rally and expirations looming make it very possible indeed. 

    NDAQ/Fab – they will do well IF the markets come back but a recession in the economy is usually a recession in market volume and that’s why the brokers and exchanges are so hurting.

    Let’s hope Paulson can dazzle us with one of his oratory showcases…

  15. nsacres

    Do people stop smoking in a recession? MO is now $16.70 and pays a $0.32 dividend.

  16. RMM

    SingaporeSteve:
    its 9 days to OPEX: what are your plans for nov covers ?

  17. RMM

    Phil: early DECEMBER, funds will do selling for tax purposes.
    What do you expect from this /

  18. Fabregas

    NDAQ – down another 2% since my last post!

  19. Phil

    OPEC basket price down to $52 a barrel.  CNBC falling back on using 2030 demand forecasts to try to get investors back into oil… 

    We talked about PFE yesterday with their 7.5% dividend, a major buy at $16.50.

    SNY is probably better than PFE from a growth perspective and $30 seems to be a new floor.  Dividend is "just" 5% and selling the Dec $30 puts and calls nets you in for $26/28, again, not a huge discount because they are not a huge mover but not everything in your portfolio needs to go up and down 10% a week

    PRU made it through the last Depression and I figure they’ll manage through this one too.  They pay a 4% dividend and $27.50 is a great price AND (and I cannot believe these prices) you can sell either the Dec $25 or $30 puts and calls for $10+ so either way, depending how bullish you are, this is one of the best entries we’ve seen.  *****

  20. gohp

    I was looking at KFT options last night.  With the low volatility, they are very reasonably priced.

  21. Phil

    Smoking/Nsacres – Smoking has never cost so much before so it’s hard to say.  Since a pack a day smoker can save about $200 a month by quitting, I wouldn’t count on them being recession-proof anymore if this thing goes long and deep.

    Fund selling/RMM – Nothing worse than the hedge fund redemptions we’ve already seen and there may not be much need to sell for tax purposes when there are no profits for the  year. 

    Qs at $29.66, very sad. 

    V is actually going up!  MA with another quick rise off the same bottom as yesterday. 

    UWM at $19.50 are a fun way to guess a bottom.  We got a great spike back to $22 yesterday and the Dec $22s are just $2 and you can cover with Nov $22s when they go past $1 on a rally.

  22. DanW

    CAL at $11.89. WTF, did cheap oil go out of style?

  23. Phil

    CHK used to make money when nat gas was $2, now that it’s $6.50 they are being treated like they will go BK.  The only reason the stock tanked was the CEO got margin called, nat gas will always be a big energy source so a good long-term play.   This one only pays 1.5% dividend but buying them for $21.81 and selling Dec $22.50 puts and calls for $6.10 puts you in for $15.71/19.10 so who needs dividends?

    To make up for CHKs low dividend, I like FRO with a 37% dividend at $30.23.  They are a tanker co so, like DRYS, people are bailing but, one dcay, oil will get shipped from one place to another – mark my words!  The dec $30 puts and calls are an amazing $8.30 to sell so that’s $22/26 but, if this dividend stays in place – getting called away will be a bummer.

    KMP is a pipeline company and, until they are able to put a fusion machine in your basement, oil and gas will very likely be piped around the country, no matter what price it goes to.  Dividend here is 7.5% and they never miss but we missed the insane sell-off in Oct that took them below $40.  The good news is that jacked up the premiums on this usually involatile company and the Dec $50 puts and calls can be sold for $5.40, putting you in for $45.70/47.85.

    Paulson to talk about expanding TARP as he has some more friends he needs to give money to and, of course, he’s going to pressure Congress to hand over more cash with no questions asked. 

    His speech has been released and markets are disappointed already (gee, we never could have seen that coming..)

  24. kustomz

    Excellent point on smoking, i recently visited a smoke shop in Floral Park NY which is a suburb and the owner complained about a huge drop in sales due to higher NY taxes. Bloomberg raising just about every tax in NY, either you get government assistance or your well off….. prerequisites to living in NYC. I’m starting to take the idea of buying trailer parks in NC very seriously!

    With the Government pulling out all the stops to save the American dream(s), I’m afraid they are prolonging the nightmare.

  25. RMM

    Phil:
    my LDK dec 17.5 putter is not were I want it to be.
    Putter are often exercised early.
    What can be done ?

  26. kustomz

    Cramer Says Buy MasterCard (MA) ‘On the Way Down’

  27. ephmen85

    Taking off callers.   It feels like this option cycle has gone on forever, but we’ve still got a week and a half to go.   I mainly have an LTP port and don’t take covers off as quickly as some of you and the high VIX has dissuaded me from buying much back.  Today, however,  I’ve been scrolling down my port and killing my November callers for pennies: WFMI 18 @ .01, XLF 17 @ .04, MSFT 26 @.02.   You might want to look for "forgotten callers" in your ports and see if you can take some out.  It’s not like I expect a great recovery, but in this volatile environment it’s important to remember the old NY Lottery slogan: "hey, you never know"

  28. RMM

    This flow of bad news and bad markets has to stop: but Paulson is speaking nad that has not helped in the past.

  29. ephmen85

    Rolling down 2010 calls.   I"m seeing some wide B/A spreads when I’m looking to roll down my long calls.   I’m trying to roll a NKE Jan 10 50 --> 45 and I see a midpoint of 1.65 and a natural of 2.60.  I have my order in at 1.75 but it’s not filling.  On a rolldown, should I be satisfied with $2 per $5 in strikes or am I right to wait for a better price?

  30. Phil

    WMT "only" pays a 1.7% dividend but, at $53.25, you can sell Dec $52.50 puts and calls for $7.15 so you are in for $46.10/49.30 and that pretty much covers the spike lows for these guys – the only store making gains in this economy and the numbers don’t even begin to reflect the massive squeeze they are going to be able to put on suppliers.

    INTC we discussed yesterday and, at $13.50, their .56 dividend is now 4%!

    MSFT’s little .52 dividend is now 2.5% of their stock price.  This company has more cash than the IMF so Ballmer can buy a whole country and make everyone buy a Zune.  Meanwhile, they are buying 10% of their own stock back so there’s 10% growth per share right there no matter what the economy does.  Selling the Dec $21 puts and calls for $3 nets you in at $17.70/19.35 and they are just .60 off their October lows here.  When MSFT buys YHOO for $12, they’ll probably go up fast.

    ED is bouncing off $37.50 and that makes their $2.34 dividend 6.25%.  The service NY metro, probable the place most able to pay their bills in America.  In this case, they are in a poor spot for selling so the Jan $35 calls at $4.35 and the Jan $35 puts for $1.50 give you an entry of $31.85/33.43 so no less than 10% discount at worst and 17% if called.  That’s a pretty good rate of return on a utility stock.

    CEG is another good utility with an 8% dividend.  Buffett bought them so $23.50 is rock solid yet still you can sell the Dec $22.50 puts adn calls for $3.10.  I don’t know why but I sure don’t know why not!  Entry there is $20.50/21.50.

    That’s my list of very solid dividend plays where the dividend should be safe and the companies should be around for the long-term.

    LDK/RMM – When a putter is in the money and most of the premium is gone, then it’s very valid to roll him to the next month at a lower strike.  The Dec $15s are $3.55 so that’s .85 out of pocket to put you problem way off.  I love LDK down here at $14 though so let’s put up buying them at $14 and sellingthe Dec $12.50 puts and calls for $5.40, which is in for net $8.60/10.55!

    MA/Kustomz – "On the way down" – hey, that’s my price target too!  8-)

    Good point Eph!   Yes, $2 per $5 is great for 2010s (assuming you are moving to at the money).  The main point is you are putting yourself in a good position to sell more premiums so how quickly will you recoup that .40 extra – that’s the key…

  31. Fabregas

    Yen up 2.5%

  32. RMM

    Phil:
    many/most of my callers are OTM and therefore are all premium, so keep them as they will probably expire worthless.
    Next week, if they move ITM, roll to dec.

    For ITM callers: for each 20%, roll 1/4.

  33. DB

    You guys heard of Ameros ???

    What do you make of this "Ameros"     -  a hoax ?

  34. newparadigmz

    hey kustomz…we live near each other…i’m in bayside but go to floral park a lot (my friend lives there)…is this smoke shop on hillside around 270 st?…with a seperate cigar room with glass windows…

    anyway, regarding smokes…the nat sherman guy on 42nd street and 5th said sales are not down at all…but they’re specialty…

  35. RMM

    Phil: LDK;
    1.8 out of is timevalue to 5.4 total, so still 33% premium,
    also, this putter is already dec 17.5, so the suggested roll would be to jan 15.
    Do you really put off the problem as long as the putter is ITM ?

  36. kustomz

    NewP no this ones on Hempstead turnpike, Bayside, my friend used to own a bar on Bell Blvd the name will come to me, its been years

  37. bigs

    RE: Amero.  http://en.wikipedia.org/wiki/North_American_currency_union#Rumors_of_.22Amero_coins.22  They indicate that the coins are a medallion that was published in 2005 by a famous coin designer and not this rumored amero.

  38. Phil

    US holiday sales are projected to be off 1% yet the retail sector is off 40%.  Meanwhile, a whopping 92.9% of the people surveyed said they plan on shopping at WMT!!!

    OTM callers/RMM – Actually the rule for this week (2 weeks before expiration) is you take out callers you are up more than 85% on unless you are almost certain they will expire worthless.  The reason is that last 10% will not go away until the last few days and all you are doing is exposing yourself to risk and limiting your own flexibility in selling the next set of callers.  You want to roll ITM callers when it’s adavantageous to you, that would be when the stock is going down, not up because the front-month contracts will go down faster than the contracts you are rolling to. 

    Ameros – Oh come on, the guy intercepted a coin from a secret shipment of $800Bn Ameros from the US to China?!?   This idiocy has been around for years, here’s a 2007 Boston Globe article about it.  On the other hand, the undelying premise that the dollar will collapse and become worthless is perfectly valid…  Have I mentioned how much I like gold lately? 

    LDK/RMM – Oh you don’t have to do it now, I thought you were worried about having it put to you…   The Dec $17.50s still have a ton of premium – if they get put to you you just say "thank you" and keep the premium (10% of the stock price).

  39. kustomz

    My crystal ball is telling me we are headed lower

  40. OptionRookie

    Any play with HOV at this level?

  41. Fabregas

    FXP - picked up some

  42. Bronek

    PatricC – FWIW software from HUBB evaluates SPX as follow: Wave 3 was completed on 10/10/08, but is not confirmed. Wave 4 (~30% retracement) was completed on 11/04/05 (also not confirmed), the wave 5 target is 784 – 620 in time frame of Nov24 – Jan 15. The wide target price is based on Fib (784) and statistical estimates from on previous (~20000) similar patterns. It will be very nice if we get Dec rally but this software is not predicting it.

  43. DB

    UK closed down 1,8%. Lots big hits on all sectors. Biggest hit went to the pound which has lost over $0.04 against the dollar at 1.49.

  44. kustomz

    Look at the hostility on CBNC!!

  45. kustomz

    What a sham, this 700 billion dollar bailout was a joke from the beginning. Greasing palms and keeping the kings on their thrones. You can take that 700 billion and use it as toilet paper, that’s how helpful its been to the average American. Monkeys could run Capital Hill. Angry!

  46. RMM

    kustomz:
    man you are right about the 700 billion, they talk and talk but there is no conviction that they know what they are doing,
    I am reading McCullough’s book "TRUMAN", you find that during and after WWII, the politicians and powerbrokers were doing the same thing: waisting taxpayer money on a huge scale, contractors cheating on government contract, the book is a revelation to me, the only HONJESY guy was really TRUMAN, he was a honest country farmer, they firstly did not think much of him when he was in the senate but eventually he was put into the ticket by the powerbrokers.

  47. RMM

    Why is it that I do not like Epperson’s way of talking ? Does anyone have an idea???

  48. Bronek

    RMM – Disliking Epperson’s is typical symptom of ketchup deficiency.

  49. Phil

    HOV/Rookie – At this point they are a buy and hope.  Not really worth selling the $2.50s although it’s an interesting play to go to May and take $2.40 for the $2.50 pust and calls as it’s just .60 in cash tied up that may get called away at $3, not bad if you have nothing better to do with the margin side and don’t mind owning them for $1.80 if it’s put to you.

    FXP/Fab – I like them a lot but don’t expect a fast ramp up…

    S&P 620-784?!?  That would suck!

    CNBC/Kustomz – Don’t forget their jobs are now on the block.  What do you think the bubblehead weather girl will do when they don’t want to pay here 6 figures to stand around a depressing NYMEX all day?  I think it’s funny that they just invented the "octobox" when soon there won’t be enough people to fill it….

  50. Phil

    Oil heading for another 5% down day – nasty!

  51. matt1966

    I’m wondering if today is one of those all down days.. sure looking like it so far.

  52. RMM

    bronek: I do not dislike Epperson, I do not like her way of talking, it goes thru my bones.
    Are you suggesting I should get a hotdog with ketchup ?

  53. Fabregas

    FXP - HSCE held up well today, but with Europe and US taking another dive, no way Hong Kong can hold up again, especially with JPY up huge and NIKKEI likely to dip tomorrow.  If HSCE can pull back 5-6%, FXP may reach $85 tomorrow.

  54. RMM

    Singapore Steve:
    please interpret and advise;
    i looked at all my OTM callers, they have a delta from 0.18 to 0.48, with one at 0.65.
    Based upon what I learned from you, let these run to OPEX, delta is low,
    except the one with delta at 0.65, which is ITM, this one I will roll to dec.

    Makes sense ????????????

  55. MikeE

    I read a lot about expectation of coming inflation.  But, then I remember Jimmy Carter.  While he was in office, OPEC embargoed the USSA and doubled the price of oil.  There were lines at filling stations and interest rates went up to double digits (I remember 14% on Certificate of Deposits).  Now, there is a credit squeeze.  People in the USSA have been living beyond their means for quite some time and they have maxxed out their credit limits. The govt is pouring money into the system to stop the collapse of banks and Paulson’s former employer.  Theory has it that if you print too much money then it becomes worth less (worthless).  All of this is to say that there are two forces at work here – the falling price of oil and a surplus of cash.

  56. Phil

    Rupert reaps what he has sown with a 70% drop in NWS in the past year.  That’s why we’re seeing real panic setting in, the rich folk overplayed this one too and things are spinning out of control so they are screaming for government assistance. 

    I think the problem with the G20 meeting is that by just going 20 deep in the world’s largest economies you are including Argentina, Brazil, Italy, Russia, South Aftica, South Korea and Turkey (the whole EU counts as one country so Spain gets a pass) – all of whom are countries who NEED assistance and are in no position to help anyone else.  On the (slightly) more solvent side we have (in addition to the EU) Australia, Canada, China, France, Germany, India, Indonesia, Japan, Mexico, Saudi Arabia, Britain, the US.   You know we are in big trouble when Indonesia and Mexico are on our "stable" side (as if the US should be there) and who knows what’s going to be up in Saudi Arabia with $50 (OPEC basket) oil. 

    Gold down to $718 and I still like it!  Of course what I like is the hedged 2010s, not just sitting on it but you can get the 2010 $70s for $10.80 and sell the Dec $77s for $1.80, that will take you back to $800 with no worried and covers a roll down to the $65s, another 10% down from here.

    FXP/Fab – I agree, if we don’t get back to better than 8,600, they are due for a boost.

    Actually, 8,400 is holding up really well – you do have to respect that….  It’s where we held on the 24th, before blowing down on Monday the 27th and before that, the 8,500 line was very sold support, even on the 10th so this is nothing more than a retest of the non-spike lows.  The situation has not changed for the worst since then, we have put programs in place that will have an effect and we have removed most of the likely scenarios where banks and corporations fail.  Unless they actually fail or unless retail sales come in a damn bit worse than 1% less than last year – this is still the bottom.   That doesn’t mean we can’t go lower but it’s certainly a point at which I feel comfortable making long-term bottom targets around.

    BUD approved sale – Duh…

  57. kustomz

    What is up with MA, they seem to be bucking the trend i cant find anything of substance.

  58. biodieselchris

    This is the best looking investment I’ve seen today:
    http://bullion.nwtmint.com/platinum_pamp_bar.php

  59. Phil

    Oh man – they delayed the oil report over Veteran’s Day?   What is with these people – how the heck does Veteran’s day affect anything?

    TSN at $4.82.  This is a fundy call.  Feed costs are lower and isn’t chicken what we eat when money is tight?  Sales were up 8% last Q but they missed estimates and have gone from $15 to $5 in 3 months.  Ironically, they made their money in the new beef and pok segments as chicken sales were hurting in a prosperous summer.  Grain costs killed them as they were up $650M for the year – now they are back to scratch and the whole year’s earnings were less than $100M.  With sales the same or even lower and costs back down, these guys will earn plenty to justify a $1.7bn market cap and, talk about too big to fail – can you imagine letting the countries largest chicken supplier go under?  Next earnings aren’t until Jan 25th and you can sell Dec $5 puts and calls for $2+ so in for $3, put to you at $4 avg.

    Platinum/BDC – If deflation does take hold, you don’t want to be stuck with metal at a premium that you can’t even hedge against.  The reason I like GLD is, even in a grind down to $400, you can still sell $1.50 a month in premiums and get your long money back.

  60. Phil

    Wow, PCX at $10.20.  I want a refund from the $75 caller who beat me in May!

  61. Bronek

    MikeE – If one is to accept a premise that the assets accepted by Feds are not worthless, then Fed is not increasing significantly money supply. Also, as I understand the government should inflate during recession/depression and deflate during the boom. However, often happens that money is spent in the bad times b/c is needed and in the good times b/c is available. Politicians, to be elected, are evaluated on the amount of bacon they bring home. So, we dice most major programs between the states w/o regards to the increase in cost, produce obsolete military hdwe etc just to create the “bacon”. It would be a great first step if the title of every spending bill will have name of it creator a la Roth IRA. If Schumer/Frank names would be listed with the bill that “encouraged” GSE to spent monies it probably made less entrenched politicians more careful.

  62. RMM

    Are you tired of these 200plus drops? I am.

  63. biodieselchris

    Time to gamble on a Nov FSLR call and hope for a turn around. 135′s are 4 and the stock was over that yesterday at 3 PM.

  64. RMM

    I just searched whether there are any stocks green: only ones I found are GILD and GENZ.

  65. RMM

    Phil: please look at my 12:19 to SingaSteve: does it make sense ?

  66. kustomz

    It is far from clear from whom, and on what terms, the US Treasury will obtain $1 trillion a year, or even more, to finance its deficit. The overseas well has run dry, and domestic financing of the deficit would require a drastic increase in the savings rate at the expense of spending, or outright monetization of the debt by the Federal Reserve.

    One way to increase the government savings rate, of course, is to increase taxes, but that is an unlikely course of action during a severe recession.

    Monetization of debt remains a possibility, and to some extent would only continue the current trend. Total Federal Reserve Bank credit outstanding has more than doubled in the year to November 6, 2008, rising by $1.2 trillion to $2.06 trillion. This reflects loans, securities purchases, and related actions by the Fed to bail out the financial system. If the deflation persists, the Federal Reserve may be compelled to purchase US government debt.

    Another possibility is that risk appetite among investors at home and abroad will continue to fall, inducing a portfolio shift towards Treasury securities. In this case "crowding out" will occur through risk-preference. It will not be so much that competing borrowers are crowded out of the lending market, but that investors will stampede away from risk. In this scenario, even a very low federal funds rate will not help to restore economic activity.

    The point of lowering the risk-free rate is to push investors towards riskier assets. In a normal business cycle, falling output leads to lower yields on low-risk bonds, which in turn encourages investors to add risk to their portfolios by investing in businesses. If the safest of all investments, namely US Treasuries, suddenly offer much higher real yields, comparable to the boom years of the late 1990s, why should investors take risk?

    In any of these scenarios, the result of global de-leveraging is dire: the more the US government tries to bail out businesses and households, the more bailing out the economy will need. The Bush administration’s response to the financial crisis, and the likely content of the Obama administration’s economic program, will deepen and prolong the economic downturn.
    http://www.atimes.com/atimes/Global_Economy/JK13Dj01.html

  67. 3wayhard7

    should we be taking profits on our DXDs or laying in more protection in case 8400 doesn’t hold?

  68. Singapore Steve

    RMM
    With your ITM callers you need to be thinking about rolling these soon.   Your OTM you can either buy back or let them ride.  Depends on how you think those stocks will do since it is 37 days until the next OE.   For me it is a no brainer since most of my callers are OTM and since I have no cash to roll my longs or buy back my callers I am just waiting to cash out and start over within the next week so that I can get back to longs that are over 6 months and 2 strike difference.  Since the delta starts to drop at a fast rate on your DOTM even if the stock rebounds I should still be ok.  The question I have to ask myself will I make more if I cash out today and sell some Nov calls or wait 9 days and see if AAPL recovers up to the 105 level.  right now I have 30 jan115 fully covered with nov115.  If the stock goes up to 105 I would get about 8K.  But if I cash out and roll to April ATM I can only get about 7 contracts but if the stock goes up 13 then I get about the same amount of gain but I can sell the Nov OTM and make about 2k in 9 days plus sell the Dec after that.  The key thing that i am gaining  here is a theta advantage.  The Jan are loosing 8 cents a day while I would only loose about 5 cents on the Aprils.

  69. RMM

    CNBC: it is hilarious to see all these experts sitting there and telling us WHAT????????????????
    Do they get paid for this ?

  70. Phil

    Oil trying to hold 2.5% rule at $57.  Down 5% yesterday and down 2.5% today does indicate we can expect a bounce, as does the usual thievery at the NYMEX.   Maybe if we get a blow off to $55, which is right about 25% off $72.50, which is what tthey held in September and then couldn’t break back over in October (and is also the 50% mark off the top), then we can look for a 20% bounce back to $58.50, which is where they broke down this morning.  Hardly worth playing though at that level other than a mo play on USO off $55 – perhaps the $45s if they get down below $2.50 as a gamble (now $3.60).   Of course selling the USO Dec $40 puts for $2.50 has a worst-case scenario of you owning oil at $50 a barrel – it would seem like a good long-term investment wouldn’t it?

    LOL – Maria says coke dealers want TARP money – people are so angry!

    Regional banks are weak today – that makes me nervous!

    200-point drops/RMM – I hardly notice anymore…  Volatility fatigue I guess.   As to 12:19 – again, I don’t worry about the deltas, I worry about my targets and goals.  Did you make your goal for the month or not, if so – then don’t take big chances…

    Money supply/Bro – What Kustomz says is the real issue.  We can’t borrow money anymore so we have to print it and THAT is what makes our money worthless.  You can also construct a deflationary scenario but our government simply can’t let that happen.  We are already $11Tn in debt and spending $500Bn a year on debt service.  If our currency DEFLATES and we end up effectively $22Tn in debt (as a percentage of falling GDP) with $1Tn a year of a reduced GDP (maybe 15%) going to debt servicing – this country will never recover so it’s going to be default and bankruptcy if we don’t inflate our way out of this mess.  Bernanke has already advocated this solution and you can sure as hell bet that Congress would much rather try to spend our way out of trouble than run a government that collects 30% less taxes in 2010 than it did in 2008.  This is what all these deflationary discussion miss – Japan had no debt, not governemnt debt, not corporate debt, not consumer debt so they were able to survive a 10-year deflation.  None of the debtor nations of the world have ever done that – it’s just not possible…

    DXD’s/3Way – Yesterday I called for mattressing the short-side plays.  That would be adding a layer, usually 50% of your origninal positon, at a more off the money strike.  At that point you set very tight stops on the profitable original trade so you will continue to benefit from the downside but will be able to quickly cash out the main part of your play with no regrets if it turns on you.  Let me know what you have and I’ll give you a specific example but it’s a little hard to chase now.  Covering is a good idea too depending on what your long is.

  71. Phil

    Woo hoo – C made single digits!

  72. 3wayhard7

    Thanks phil!   I have DXD Jan 65 calls, cost 13, bid/ask is 22.5/24.7

  73. Singapore Steve

    DRYS at 9 bucks,  and I thought 10 was cheap.

  74. 3wayhard7

    oh yeah, covering – - I covered GE and AAPL Nov calls today, feeling very naked now…

  75. Phil

    I was watching some Mad Money shows from last year and it is really amazing to see all the excitement for buying things that are now down 75% – such a strange market we’re in…

    DXD/3Way – LOL – Come on, you have to take a double off the table!  If it was 30% of your portfolio and now it’s 60% and the other 70% of your portfolio is worth more than 40%, then you have made an overall profit in a very bad downturn – why would you risk that?  What you need to do is rebalance, which means get the bullish side of your portfolio back to 50% at least (as we are bottomish here) and reallocate to something like the Jan $80s at $15 (taking $8 off the table) and selling the Nov $90s for $5 so you effectively have a free spread remaining where your advantage to your caller is equal to your net so no danger of getting buried.   If you want to take a chance, roll 1/2 to that position and leave 1/2 the $60s as is with a stop if, say, they break below $82.50 but, like I siad, I think 8,400 is going to hold unless something else goes wrong.

    AMZN hitting new lows.  BAC, BKS, GOOG breaking $300!!!, YHOO new lows, LXK, RACK…

    Uh oh!

  76. kustomz

    I’ll take GOOG at 296… sure why not

  77. matt1966

    The GOOG has got to be one of the most manipulated stocks out there.   They defended 300 valiantly yesterday and today… until 10 mins ago.  Then, they just drop it straight through.  They are some seriously sneaky bastards.  There wasn’t even a bounce at 300 for shorts covering.  That’s ridiculous.

  78. Phil

    New lows are flying now:  CMI, MSFT, NVLS, TIF, GE, SHLD, STP, EAT, USG, ANF, RBS, XLNX, ATHR, AEO. MCK, TRN, AKS – it’s like global commercy is simply coming to a halt!

    Poor RICK is down to $5.

  79. Phil

    They seem determined to get the S&P back to 840, not to far but that’s going to be 8,200 on the Dow.

  80. kustomz

    GOOG bounced this morning to 309 back to 305 then 312 back to 304 then back to 309, plenty of chances to get out, and my philosophy is this, as prices get cheaper i buy more… more as the possible return is greater and the chance for loss on a percentage basis shrinks.

  81. Fabregas

    FXP moving
    VIX "only" 65

  82. 3wayhard7

    DXDs – it wasn’t 30% of my portfolio and I haven’t made an overall profit during the downturn, but its very nice to only be down a little by comparison - - this hedging stuff really works!!!  Obviously I still have a lot to learn.  Thanks for the suggestions.

  83. Emotrader

    Phi,
    Any guess where we could be closing today?

  84. Singapore Steve

    Everything dropped like a rock but the VIX was steady.

  85. mSquare

    FXP – You get nice premium for the calls. I bought it earlier today AM around $77. Plan to sell Nov $85 calls for more than $10 tomorrow. Or, may even try for the Nov $90 calls for $8-ish on a bump up!

  86. vicky

    Wow GOOG completes 60% drop from its high. Recession still not priced into this? or is this all redemptions?

  87. Phil

    New lows of note:  X, SPWRA, ITG, GLW, ADBE, NWS, PETM, LEAP, HAR, EBAY, MT, CCI, LOGI, NILE…

    FXP – Always good to grab if you miss a big down move in the Dow.

    VIX is very unnerving to see so calm, 3rd day in a row too…

    Closing/Emo – I still think we’re going to hold 8,400, there’s not enough volume in this downturn to indicate any real capitulation, maybe just a sell program of an unwinding fund but there are so many of them it seems like it will never end.  When you see GE, MSFT and X flying down like that with no particular news, you know you can’t trust the move.   Still, this is just awful and we need to stay 50/50 as much as possible until we can prove a bottom, tempting though it may be to go longer down here.

    IP new lows, CLF, DIS, BAC, NVLS, EK, WTI… bad craziness…

  88. kustomz

    That selloff happened on low volume

  89. Fabregas

    FXP – selling here.  Wondering if we’ll get one of those 3:30pm snapbacks.

  90. Phil

    GOOG – no movement on Dec $250 puts so people aren’t buying this move.  That means the Dec $320s for $15.20 are a fun play and the current $300s for $11.70 were $20 this morning and $24 yesterday so worth a risk with a stop at $10.

  91. vicky

    GS perking up…. shld be good for a market bounce.

  92. Fabregas

    SOL – down 40%, touched $3.6.  Its book value is $3.6 per share including $2.1 in cash.

  93. kustomz

    AMGN under 55 would have me nibbling

  94. kustomz

    GOOG that 300 they were holding all day is now resistance but i don’t expect it to last very long on a run up but it may close in the low 300′s

  95. kustomz

    If they are running out of TARP money then who’s going to hold the market up? :(

  96. newparadigmz

    GOOG flush below 300…(PivotPoint = 309.45) (S1 = 302.59) (S2 = 293.65)

  97. matt1966

    Looks like 1:45pm is the new 2 o’clock.  They’ve moved up execution of the daily sell program.

  98. Emotrader

    newparadigmz,
    "PivotPoint = 309.45) (S1 = 302.59) (S2 = 293.65)"
    just wondering, what do you use for a tool to get your levels.

  99. ephmen85

    IBM  I took off my Nov 95 cover and wonder if I should just go naked for a while or sell Dec 85s or something.

  100. Emotrader

    This is really Crazy. Just to put things in prospective. On Monday last week
    X was close to $40
    JRCC close to $19
    AAPL was close to $110

  101. newparadigmz

    emo….proprietary charting package

  102. vicky

    I guess this is why GOOG broke 300
    http://www.marketwatch.com/news/story/analysts-pare-google-estimates-stock/story.aspx?guid={FE050758-FAA9-414D-AFC0-5E6C1FA44800}&dist=msr_1

  103. biodieselchris

    GOOG 290? Earnings in Jan are going to rocket this thing up 100 points. But they might be at 220 going into them….

  104. Phil

    Oh that was harsh, the GOOG $300s are sitting right at $10 now, just happy to get back to $11.50 at this point…

    SOL/Fab – I’m a little dubious of the book value of ADRs but they do look good.

    TARP/Kustomz – My theory for the week is that this whle sell-off is being engineered to get the lame-duck congress to give Paulson the other $350Bn, it’s just a big shakedown…

    Speaking of which, GE capital just announced they can issue $139Bn of government guaranteed debt!  Sure isn’t helping their stock price but it’s kind of a good thing.

    LOL Matt!

    IBM/Eph – In this market, naked anything is way too scary.  Maybe a 1/2 cover?

    There goes GOOG – sorry, bad timing on that one…Will probably wihipsaw back but who wants to play it as they march the S&P back to the lows?  What’s scary is there is still not a lot of volume overall…

  105. biodieselchris

    GOOG article: please use the embedded link feature

  106. Fabregas

    Phil,
    If we close down here, we’ll likely break below S&P 839 tomorrow?

  107. Fabregas

    SOL – Barron’s article mentioned that JASO is one of their biggest customers and just cut forecast.  With USO down 4.5%, I’m staying away for all solars for now.

  108. newparadigmz

    http://www.pivotpointcalculator.com/

  109. kustomz

    GM only DOW stock green!! Talk about ass backwards!

  110. bigs

    Phil so I covered all my mattresses with the DIA 86′s yesterday after our discussion.  Any thoughts on some downside protection.

  111. mSquare

    IBM – Careful with this one. With business(es) going under and credit very tight, lots of used-IBMs (and even more Cisco equipment) finds its way to the ‘used’ isle and drive down prices a lot.

  112. Fabregas

    BOVESPA down 8%

  113. kustomz

    That (w)hole bailout plan is turning what could have been a total collapse into a total collapse LOL

    As for Paulson’s defense of TARP: "As I assess where we are today, I believe we have taken the necessary steps to prevent a broad systemic event," Paulson said in prepared remarks. "Our system is stronger and more stable than just a few weeks ago. Although this is a major accomplishment, we have many challenges ahead of us."
    http://finance.yahoo.com/tech-ticker/article/126386/Bailout-Improv-Paulson-Rolls-Out-New-TARP?tickers=AIG,FNM,FRE,XLF,AXP,^DJI,^GSPC

    Banking sector loss’s driving a lot of this sell off

    VIX at a 5 day high

    I love GOOG I love GOOG i love GOOG

  114. kustomz

    mSquare excellent point

  115. Phil

    Story not founce Vicky…

    This is getting ugly(er) – SKF heading back to $180, DXD punching through $85 and may have $10 more to go (5% more down on the Dow) if they can hold it. 

    Right now only the RUT has broken 5% to the downside but NYSE is almost there at 5,350.  Overall, if we can’t get back to 2.5% down, then we have 3 straight days of accelerating declines, oil down to $56 and energy sector is just crashing.  On the bright side, XLE puts are doing great!

    COF making year lows, MSFT heading to $20, AXP below $20!   CAK $7.30, GS $67, SHLD about to break $45, EXPE $7.6 (were $35), INTU $21.80, DECK $63, AMLN $6.75 – who needs small biotechs when you can get AMLN for that price?

    This is insane, sales are down – maybe a company makes 50% less for a quarter or two but that doesn’t invalidate the entire company forever.  This is some wild stuff!  CME hitting new lows at $223, that was a good short a couple of weeks ago!  XOM going below $70…

    Look at the turn in VNO today!

    S&P 839/Fab – Oh I think for sure without getting back over 2.5% at the close.  I said yesterday we were likely to test it but I got the impression we could hold 8,400 – we still might but we’re not going to feel good about it even if we do now.

    GM – $50Bn will do that for you – at least for a day anyway!  ;-)

    DIA/Bigs – What are your actual positions now?  As to downside, the DIA $86s, now provide you great coverage to add another layer below the one you have.

  116. Bronek

    Is there a bottom somewhere? I am almost ready to cash my LEAPS and sell puts. Rolling it down and down and down …. is so depressing emotionally ( and financially).

  117. Fabregas

    FXP – hope to reload before close

  118. bigs

    I have 20 Dia Jan 93′s and 5 Jan 90′s Covered by 25 DIA Nov 86′s.

  119. ephmen85

    OIH closing in on 80 again

  120. kustomz

    CNBC talking about China, our biggest lender is slowing down big time. So much for keeping our interest rates artificially low.

  121. Phil

    Yes, good point M2 – be careful with anyone who is owed money in this environment.  It’s been a long time since analysis included looking at "quality of receivables" but it’s going to be an issue.

    NYSE gave up 5,350!

    Bro – You HAVE to have downside protection other than callers!  There is fantastic money to be made in short plays.  It’s hard to chase but you have to work on some balance of things that pay you when the market goes down like this.  Next time we get a run up (if ever) make sure you establish at least a few DXD or SKF or whatever to cover a move back down.

    FXP is going to be good for $85 I would think, HK has to drop 5% if we’re closing down here.

    DIA/Bigs -  Puts I hope!    The $86s are fine and still have $2 in premium so no worries there.  If your goal is long-term protection, you can roll the 20 Jan $93 puts at $12.75 to March $86 puts at $11.  That takes a little cash off the table and gives you tons of time to roll and the March puts won’t lose too much money if we reverse.   If you are looking to up your protection though.  You might want to Add a layer (10-15) of $85s at $8.20 as they are well protected by the Nov puts and then you can put a $12 stop on the $93s ($1 trailing) so you don’t get caught. 

    S&P at 5% rule at 854, if that doesn’t provide at least a little support we are so screwed!

  122. ephmen85

    DXD  I own 4 Apr 60s covered with 2 Nov 74s and 2 Nov 75s.    There’s only about $1.50 in premium in the 74s right now.   I think I can roll to the Dec 80s for a credit, it seems like that might be worth it even though we have a week and a half to go.

  123. Emotrader

    Phil,
    If we going to close below the 8400 magic number. How would you agressively play tomorrow and what would you pick for a play.

  124. Phil

    OK, that was fast, we are so screwed!

  125. Fabregas

    FXP already $83!

  126. Fabregas

    HK (Petrohawk, not Hong Kong) down 16%!

  127. RMM

    Phil:
    DXD, SKF, and DIA are all at previous record numbers
    DXD close to previous 91,
    SKF higher than previous 170,
    DIA at 83 at previous 83
    Hard to believe these records will be broken.

  128. ephmen85

    Which would you improve if you only wanted to spend the money on one positions.   MSFT Jan 10 25 --> Jan 10 20, BBBY Jan 10 25 --> Jan 10 20, or PAYX Jan 10 30 --> Jan 10 25.   They’d all move from basically $5 OTM to ATM.   Any you’d just kill?   Anyone…Bueller?

  129. Phil

    DXD/Eph – Just concentrate on the relationship between the two calls.  As long as you are still around the same credit, don’t worry about the price.  On a snap back, the Nov calls will lose money MUCH faster than the Decembers so what you are effectively doing is rolling your caller into a lower downside delta position.  Doing that right at the end of a 5% run is not usually a good idea although we are almost certain to tests another 1.25% lower tomorrow at least.

    Tomorrow/Emo – I wouldn’t agressively do anything.  We could open up or down 2.5% easy.  Best to be balanced and make adjustments depending on if we bottom out tomorrow.  I guess my agressive play would be to have cash ready to reposition maybe 60/40 bullish if we can hold our lows tomorrow and ride at least a bounce up.  If we go below the lows, we may have another 1,000 points down before we make a bottom (Maybe we get Bronek’s S&P 620-784!).

    Records/RMM – very nasty business but not record intra-days yet so looks like further to go before bears are satisfied with a bottom. 

    Weak bounce off 5% levels, not good at all.  At least GM is heading up off of $3!

  130. matt1966

    A friend told me that on Fast Money last night they mentioned that this Friday is the end of the window for requesting redemptions from hedge funds.  If this is true, would like like we’re in for more pain through Friday.  Which would set Monday up for a nice bounce into OE.

  131. Bronek

    Phil – Thanks. I have mental block about downside protection. I just don’t believe my lying eyes. Probably I need to go to shrink.

  132. texasmotion

    I still think we’ll test the Oct lows imo…

  133. RMM

    Phil: I am stiff from what I see,
    I just checked my previous downside protective positions: I always cashed these in too early,
    example: SKF jan 100, cashed in at 36$, now 76$. Merde.

  134. ephmen85

    Do you think Oil Services will retest their lows?  SLB at 45 is looking attractive

  135. Fabregas

    FXP – reloaded some

  136. Phil

    Eph – PAYX I might kill as how are they going to make money when no one is working?  BBBY is also not likely to pull a fall recovery so your best bet is MSFT, who hopefully will be a safety play in a poor market.  BUT, why look at this as a choice when BBY 2010 $25s are $3.70 and they can be rolled to the $22.50s for .90 and you can sell Jan $25s for $1?  It doesn’t cost you anything to improve your position.   PAYX is very differenct as it’s so expensive to move to the 2010 $20s (there are no $25s) but you can go to the June $25s for $1.35 and sell Jan $27.50s for the same.

    Redemption/Matt – but requesting redemptions, if a lot of people do, may lead to more selling next week, not less.  CNBC has a special report on hedge fund meltdown tonight so we’ll see what they have to say.

    Bouncing off 5% again…  Stronger this time but no time left to do anything meaningful.

    Merde is right RMM!  Holy merde!

  137. Jordan

    Hedge Funds: do they have standard schedule for redeptions, etc?  I thought they were not regulated so they can pick wahatever schedule they like?

  138. RMM

    Fabregas:FXP: what did you do when you say reloaded: what did yoy buy/sell ?

  139. Phil

    Oil service/Eph – I though they should have gone much lower and was surprised how well they held up.  OPEC may announce another round of cuts.  5% less oil is 5% less revenues for those guys, more like 10% as they service the refiners too and then there is pricing pressure as oil companies must trim costs with oil down at $60 and whole projects may get cancelled…  Very dangerous space on the whole.

    Hedge funds/Jordan – You can pick whatever you want but 90% follow the calendar.

    FXP – As a rule of thumb, expect a 10% move in FXP on a 5% down move in the HSI.  They were at 11,000 at their lows, now at 14,000 so they could drop as much as 21%, which would be a 40% jump in FXP to 115 so that’s your "best case".  Figure it’s very reasonable to target Dec $80s at $20.50 as they would be $35 in the money at $115 and shouldn’t have too much trouble picking up $5 on a good move.

  140. Bronek

    Finally. EOD

  141. Phil

    Notice the Transports lost 1,750 and never got it back – that was really the last thing holding us up..  It’s going to be hard to take these things back now….  Nas is finishing at new closing low now, couldn’t even have the decency to hold 1,500.

  142. orion

    XLF, what’s next, zero ?..

  143. Cap

    What a disaster.

    Paulson – a major f-ing disaster.

    The Obama post election rally continues ….

    UYG … 6.50  … wow.

    The guy here who called GS to 50 … getting close.
    C – 9.50 (still love ‘em Phil ?)
    GE – 16

    What a friggin mess.

    GOOG 290.

  144. ephmen85

    NLY    What do you think about them down here?  The steep yield curve helps them and Farrelly and Co seem very capable managers.

  145. Cap

    "If you believe in Immelt" ???
    Phil, who on earth believes in Immelt ?

  146. Cap

    Patrick C; long way to go back to 975 on S&P, but certainly possible with a 2 day crazy short cover rally.
    I would welcome that.

  147. Phil

    DRYS articel of note.

    Well Cap, as Obama clearly stated:   I didn’t make this mess…  Still I do like C as they are not going bust and you can buy them for $9.63 and sell $2 a year worth of calls for the rest of your life, same with GE.  People are just terrified of everything and the administration gives them no reason not to be.   Why have Paulson come on if he has nothing positive to say – they know the markets need good guidance – even if they have to lie, I mean why stop lying now when they’ve been doing nothing but for 8 years?

  148. Cap

    I was driving in my car listening to Paulson.  The guy made me want to puke.
    The 700 B that he had to have to prevent systemic meltdown he claims has helped to stabilize the financial system …

    Really ??

    Meanwhile, Dow down 2500 points from that singular achievement of government in action.

  149. Cap

    And you guys wonder why I am anti-politician and Congress.

  150. Cap

    RMM tired of the 200 point drops ?  How about 400 ?
    sheesh….

  151. Cap

    Yes, Obama didn’t make this mess (well, he does bear SOME responsibility as a member of a dysfunctional congress, even if he only voted present); but does anyone have confidence in him (+ pelosi reid frank and dodd) to clean it up  ?

    There is the rub.

    To be fair, I wouldn’t have had much more confidence in McCain either, but being scared of the Dems and their tax and spending ideas is a factor now IMO.

  152. Cap

    Driving in my car …. listening to Paulson …. get pulled over by a NJ cop for making an illegal turn … I told him Paulson was to blame … he let me off.

  153. Cap

    Phil … yes, why have Paulson come on and rattle everyone ?  Makes no sense.  They could have just released his transcript (which they do in advance anyway), sans the stuttering.

  154. texasmotion

    Socialism at work, Cap… Allowing “elected” and “appointed” lunatics run the asylum.   Instead of survival of the fittest, our government pushes for survival of the “un-fittest”. Which is completely insane. 

     
    MY “Uneducated” call… The DOW shed’s 509 over the next week and we re-test 7770s.  Phil keeps telling me we won’t when I ask about it. ;)
     
    What gives???

    Paulson should be investigated and thrown out on his sorry self-interested ass!  Scam artist of the lowest order imo

  155. Jordan

    FCX just keeps cropping up on my search screens.
    Thinking of the following (trying to emulate Phil’s analysis):
    Buy 100 FCX at around 22.50, the Dec calls and puts can be sold for $4.25 combined.  Stock has 9% yield at current price.  Worst case, you get put for a net of $20.37.   And last time they were at that price was in mid 2002.  Too bad they just recently made the sub-$22 low, so a retest could happen.

  156. Cap

    Another 509 on the dow is only a few hours more of selling.
    I am in the camp that all this crap is priced in; but between the forced selling and the scared buyers; there is almost no reason to want to buy a damn thing.

  157. texasmotion
    Well, Cap… since we’re in uncharted territory in terms of this current global economic situation. All bets are off.  People are scared…
    That said, I have been buying long GLD calls and bought some GE today (my LTP). Who knows if this is the “right” thing to. But, I did it anyway. Some of phil’s day-trade ideas look fun and interesting tho.
  158. PharmBoy

    FWIW – From my uncle – GE to 10 in the coming months (he said 17 a few months back).  That’s what the numbers say, and if they are in to solar, airplanes, biotech, moonshine (whoops), and financials…they are going in the crapper with C, AIG, etc. Who’s going to travel?  Buy solar?  GE capital lend???  No way.  Sad, but that is what this has come to.  I am shorting them on a nice bounce (if they have one).  GS will get to 50, and possibly lower (I did not follow my own post on that one – and I believe SinaporeSteve reiterated it).  Mr. Buffett is wrong on GE and GS.  The people leading him down the road are all ex GS and LEH people.  That should tell you something.  DOW could retract 30% more in the next few months.

  159. Phil

    Dow 7,700/Texas – Well now it looks like we will, INTC just warned and that may be giving us the capitulation move we’ve been waiting for – timing is everything I guess.

    FCX/Jordan – I agree but you have to want to hold something for years, not for weeks because if we fail the next level test, we may be down for years. 

    Qs down 3% after hours, we expected 2.5% additional drop anyway but this should be good for more.  Looking at some of the numbers going by on most actives, I’m actually amazed we were only down 5% today with so many major companies down 10%. 

    CROX got cut in half after hours after posting a $148M loss against their $150M market cap (restructuring charges but no one cares in this market).

    Maybe time for an emergency rate cut at this point…  Paulson was a disaster today, people can’t wait 2 months for things to get better.  AAPL down to $87 after hours and I can’t even bring myself to buy it – that’s sad!

  160. Phil

    Hey Karen on fast money finally figured out that demand destruction is worse than oil people are admitting!

  161. Cap

    Gasoline today in NJ…. 2.18 to 2.47

  162. Cap

    F— INTC

  163. texasmotion

    It seems to me that panic is taking hold of the general population (regular investors).  We’re seeing downgrades out the ying-yang and doom and gloom everywhere. If we retrace to the lows and the institutional investors are screaming BS like “the sky is falling”, opportunity is knocking. They push the prices down and buy everything worth a crap on the cheap.

     
    The whole thing is rigged. Why not just play along?
     

    Side note on oil… they wont be able to give the shit away in 5-7 years… let those snakes dry up and blow away like desert sands.
    Of course this is all opinion.  And I can offer it on many subjects.

  164. Jordan

    FCX/Phil-  I thought you like gold, long term and medium term.  Understood, the plays of this type should be longer-term, after all, we are going after the dividend and the fact that in the long run the rpices today are ridiculously low.

  165. Peter D

    Phil,

    What’s your feeling on what are the range for the Levels on the Big Chart should be if we have a long recession?  In seeing a warning from Intel, I’m thinking that should be expected as we are all saying recession, but somehow still expecting companies to keep growing revenue and profit.  We then push their stocks lower because they are saying the same thing as everyone else.

  166. mSquare

    FXP - now $89 in AH!!! Can anyone else verify this please. As per Nasdaq.com, FXP does not trade AH!
    as per this Yahoo ‘real-time data’ page http://finance.yahoo.com/q?s=fxp

  167. edro

    Alright now – we all believe the market will tank tomorrow.
    What can we do premarket to add protection to our positions??
    Or start new bearish positions – ideas??

  168. Fabregas

    FXP - meant I bought it back @ $81-82, after selling it earlier @ $80-81.  It’s more correlated with HSCE rather than HSI whose major components are HSBC and China Mobile (but HSCE is mostly Chinese banks, insurance, and energy companies).

  169. Jordan

    X – came down quite a bit..  Phil, what are your thoughts on X?

  170. kustomz

    Bone marrow ‘cures Aids patient’
    http://news.bbc.co.uk/1/hi/health/7726118.stm

    AMD has an analyst day Nov 13, wonder if INTC warning has anything to do with a possible settlement with AMD, thats a huge haircut in earnings.

  171. ramana

    Good Morning All (i should stop doing ‘good’ morning thing….so not right…may be Hi All !)

  172. ramana

    Asia Markets :    Thursday, November 13, 2008
    (The following is from WSJ; please cross check with other sources to confirm.)   

    Nikkei Average*                   8238.64    -456.87    -5.25%
    Hang Seng*                       13221.35    -717.74    -5.15%
    China: DJ Shanghai*            200.33          7.85     4.08%
    Seoul Composite*              1088.44       -35.42    -3.15%
    Bombay Sensex*                 9536.33    -303.36    -3.08%
    Baltic Dry Index                       824.00          6.00      0.72%

    *at Close

  173. ramana

    Asian Markets Slump to Lowest Level This Month

    (India Markets are closed for a national holiday, will reopen Friday)

    Asian markets fell to their lowest level this month, following a steep drop on Wall Street after the U.S. backed away from its $700 billion dollar bailout plan to buy up toxic assets. Intel added fuel to the selloff by cutting its fourth-quarter sales forecast.

    In Tokyo, the Nikkei tanked as much as 6 percent during the session but closed 5.3 percent lower, while the broader Topix Index gave up 4.3 percent on a stronger yen and after U.S. Treasury Secretary Henry Paulson announced a major shift in the rescue fund: That the government will back away from buying troubled mortgage assets from firms and use the money instead for a second round of capital injections into financial institutions that would match private funds. Japanese exporters were hit hard following the dollar’s slide below 95 yen on Wednesday.

    South Korea’s KOSPI halved its losses to close 3.2 percent lower, led by technology and banking plays.

    The main benchmark indexes in Hong Kong and Taiwan tracked the rest of the region lower. The Hang Seng Index plunged 5.1 percent after hitting a two-week low, as a selloff in banks lweighed on the market..

    China’s Shanghai Composite Index was the only market to close in positive territory, up 4.1 percent at a three-week high led by infrastructure-related shares due to China’s economic stimulus package.

    In Sydney, Australia’s benchmark S&P/ASX 200 plunged 5.9 percent to hit a four-year low, as several companies highlighted clouds hanging over their earnings prospects and falling oil and metal prices weighed on resources companies.

    Singapore’s benchmark Straits Times Index sank 1.6 percent, led by losses in financials and commodities after U.S. stocks tumbled overnight.

  174. ramana

    Euro Shares Fall as Oil, Miners Weigh

    European shares fell in morning trade on Thursday, putting them on track for a third straight day of losses as commodity stocks and banks declined, more than offsetting gains in BT and autos.

    The FTSEurofirst 300 index of top European shares was 1.5 percent lower at 840.89 points, after slipping more than 3.4 percent in the previous session. The index has lost about 41 percent this year, hit by the credit crisis and resulting economic slowdown.

    Oils weighed heaviest on the benchmark, as crude fell below $56 a barrel. Royal Dutch Shell fell 2.4 percent and BP slid 4.1 percent.

    Mining stocks followed metals prices lower. BHP Billiton, Anglo American, Vedanta Resources, Xstrata, Antofagasta and Rio Tinto fell between 0.8-3.0 percent.

    The leading gainer was BT Group, which added 7.8 percent after second-quarter revenues rose and the group said it would cut its workforce by 10,000 by the end of its financial year. Vodafone, Deutsche Telekom and France Telekom were up 2.2-2.9 percent.

    The auto sector was also strong, with Daimler up 2.4 percent, BMW 2.6 percent stronger and Peugeot gaining 4.4 percent. Traders attributed the gains to an overnight rise in U.S. car stocks as the U.S. government weighs an emergency bailout for domestic automakers.
    General Motors, Ford and Chrysler are seeking $25 billion as their cash burn rates rise.

    Banks were also stronger, with Unicredit up 4.54, and Banco Santander gaining 3.47 percent.

    Technology shares fell after chip giant Intel cut its fourth-quarter revenue forecast by about 14 percent citing weak global demand across all its products, indicating the economic crisis is set to hurt computer sales over the holiday season and beyond. Infineon was down 2.2 percent.

    Across Europe, the FTSE 100 index was down 1.7 percent, the French CAC 40 was down 0.8 percent, and the German DAX lost 0.55 percent.

  175. ramana

    Oil Dips Toward $56 on Recession Fears

    Oil fell for a third straight day on Thursday to hit a 22-month low of $55 a barrel as mounting economic pessimism outweighed comments by OPEC that it could cut output again as early as end-November. OPEC officials, concerned about oil’s steep drop from record highs over $147 a barrel per day (bpd) in July, said the cartel could possibly decide by the end of the month to cut production again to raise prices.

    U.S. light crude [ 55.89  -0.27  (-0.48%)] for December delivery was down, after having fallen earlier to $54.67 the lowest since Jan. 30, 2007.

    London Brent crude [ 54.3    -0.22  (-0.4%)] fell, off an earlier low of $50.60.

    "Oil prices continue to be pressured by fears that weaker international economic growth will depress oil consumption," said David Moore, an analyst at the Commonwealth Bank of Australia.

    Oil fell 5 percent overnight, along with a big drop in U.S. stock markets, after the U.S. government shifted its position on how it planned to use its $700 billion bailout fund, which added uncertainty to financial markets and renewed fears of a protracted global recession. Demand in the United States, the world’s biggest consumer of oil, was expected to fall by more than 1 million barrels per day (bpd) for the first time since 1980 this year, the EIA said. The EIA also forecast world oil demand to rise by only just 100,000 bpd in 2008 and will be virtually flat in 2009, as it cut its 2009 oil price forecast to average around $63.50 a barrel.

    "If the prices continue their decline, most probably OPEC will have to take a further decision on a cut in supply," OPEC President Chakib Khelil told Reuters in an interview in Algiers.

    Yen Retreats vs. Dollar, Euro; Germany in Recession

    The yen fell against the dollar and euro on Thursday with wary investors finding respite from deleveraging as European shares steadied, but global economic worries remained, keeping overall risk aversion intact.

    Recession fears became a reality in Germany as gross domestic product in the single currency zone’s biggest economy contracted by 0.5 percent, putting it in recession for the first time in five years.

    Analysts said that the dollar and yen’s overall upward trajectory should stay on track as the U.S. Treasury backed away from using its $700 billion financial bailout to buy bad mortgages.

    The euro [ 1.2509    0.0006  (+0.05%)    ] was little changed versus the dollar.

    The euro [119.69    0.88  (+0.74%)   ] was up on the day against the yen. Earlier in the global session it briefly fell as low as 117.65 yen, the lowest since Oct. 28.

    The dollar [ 95.68    0.69  (+0.73%)   ] recovered from the day’s low of 94.53 yen to trade up on the day against the Japanese currency.

    Sterling [ 1.4946    -0.0016  (-0.11%)    ] was down versus the dollar, having earlier fallen to a 6-1/2 year low at $1.4807.

    Asia-based traders said short-term speculators who bought the yen from around 97 yen sold the Japanese currency back to book profits.
    Later in the day, markets will look for hints on whether the European Central Bank might step up its monetary policy easing as several ECB policymakers including President Jean-Claude Trichet are expected to speak at a banking conference in Frankfurt.

  176. ramana

    Gold steadies near two-week low on weak oil, equities

    Gold steadied on Thursday on bargain hunting after falling more than 2 percent in New York, but recession worries which had sent oil prices and equities down could ignite fresh selling from speculators

    Gold was trading at $713.80 an ounce, up $2.65 or 0.37 percent from New York’s notional close on Wednesday, when it fell as low as $707.80, its weakest since Oct. 27, as investors dumped risky assets including gold and stocks.

    "Gold is not immune to the general panic in other markets and hence will gyrate in line with the general sentiment," said  analyst Pradeep Unni at Richcomm Global Services.

    Platinum  was trading at $802.50 ounce, down $7.50 from New York’s notional close on Wednesday.

  177. Phil

    LOL Texas – very funny last line!

    Good morning all.  Hopefully we get our 8,200 bottom and hold it today, keep the above shopping list in mind as things sure got cheaper yesterday.

    FCX/Jordan – I do like them best with the gold component but the recovery in metals other than gold (and gold is just a disaster hedge, not a demand issue) we are in for a long stall – and you know what happens if you stall and can’t get the engine restarted….

    Long Recession/Peter – I think that a 40% drop in the markets is already pricing in a long recession.  The US GDP is $13Bn.  Let’s assume it drops 5% to $12.35Bn this year and another 5% to $11.74Bn and then we have a third year of negative 5% growth (this has never happened in history) to $11.15Bn – That would still be a bigger GDP than we had in 2004.  Companies are trading below 2004 prices, the Dow was at 10,000 in 2004 and the S&P was at 1,100.  These prices are way too low for any reasonable projection of the economic activity of this country.  Then you have to factor in that, if you stay out of the housing, banking and commodity sectors, which were already bubbling in 2004 – that the remaining segments of the economy have lower borrowing costs, lower materials costs, lower shipping fees, lower energy costs and a pool of readily available labor – these are the classic ingredients for a booming recovery!

    We’re not going to turn the economy on a dime but, as I keep saying re. the kind of companies I’m picking for the long-term, it’s simply not as bad as is reflected in the prices.  We may have a couple of bad quarters or a couple of bad years but, if you plan on owning IBM for 20 years, it’s like valuaing them now based on the 9/11 quarter or the 1987 recession – that’s what the go-forward valuations are like, as if we are NEVER going to recover.  This isn’t nuclear war, it’s an economic recession….

    FXP/M2 – That is right on target per my earlier projection as HSI was off a bit more than 5%.  The problem with FXP is that it tends to be a forward-looking ETF so if we do not follow-through with a bad session, they will turn back down quickly in anticipation of a recovery.  Shanghai was up 4% and that makes me think we may have found a real bottom where buyers are simply going to come in.

    New bearish/Edro – I’m still holding out hope we hold my original target of 8,200.  As I just said, I find the values down here extremely compelling and so do a lot of guys I’m talking to.   Check out the S&P in Euro chart, we aren’t anywhere near the lows and, if we turn right here and rally back to the election day high, we are confirming an uptrend.  More likely we will squeeze the range closer to the 9,000 mark, maybe all the way through Obama taking office and then we’ll hopefully get moving as the New New Deal gets passed.  Nonetheless, remind me and I’ll see what’s still good to short!

    X/Jordan – Same as the others, we’ll probably make something out of steel one day in the future, just not this quarter.   The company makes $1Bn a year and has a $3Bn market cap.  In 1998, X made $364M, in 2000 the lost 34M, in 2001 they lost 218M, in 2003 they lost 400M but since then they’ve been around $1Bn a year yet now they are trading back at the levels they were at when they were losing $400M.  Nobody is estimating a loss for these guys – they don’t have sub-prime mortgages…  They do have pension issues that need to be resolved so I wouldn’t make them a staple of my portfolio but look at their long-term chartthat’s a pretty positive risk/reward profile getting in at $27, especially as you can pic k up another $8.60 for selling the Dec $25 puts and calls

    INTC – a 14% drop in sales forecasts is huge, but it makes sense with CC shutting down (no new orders for the holidays) and everyone else looking to burn off inventory even if they can use their credit lines to make new orders.  Consumers don’t want what’s new this year, just what’s cheap and corporations aren’t even having Christmas parties so Q4 IT spending has got to be cut to the bone.  So INTC will "only" sell $9Bn worth of chips in Q4 vs last Q4 where they sold $10.1Bn and profit margins will fall 5% so let’s say 2.7Bn in profits is knocked down 20% overall….  Last Q4, INTC was $27, now it’s $13 – that is ridiculous!  Even if orders fall another 15% and another 15% and they still can’t get margins under control (in a deflationary environment), they are still worth more than $13!

  178. texasmotion

    Morning everyone… just drinking coffee and listening to the Dead.
    It would seem to me that much has changed since the last Recession.  The market is "globalized" and we might see a faster bounce out of a recession.  Everything is moving much faster.  A long drawn out recession does not seem to be in the books.  Hell, we may be half way through it.
    Thoughts?

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