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Atomic Testing Tuesday

Welcome back everyone! 

I hope you all had a nice holiday weekend.  PSW provided the Kindle crowd with some great beach reading with and update of our now $104,340 Virtual Portfolio, a 3-part series called "Hedging Your Way To Healthy Dividends" and our very timely "How To Vacation-Proof Your Virtual Portfolio" with an on-line lesson from Option Sage’s Market Tamers.  All this sudden interest in North Korea’s nuclear test didn’t catch us unaware as Tyler reported on this Sunday night!.  Hey, the markets never sleep and neither do we!  

36 hours later, the North Korea nuclear test is still the top story and global markets are down and the dollar is bouncing as a flight to safety BUT IT’S NOT NEWS…  Come on people – this has been going on for more than 15 years with these guys, are we really going to freak out every single time we hear that North Korea has nuclear capabilities? REALLY???  Hey, I can write tomorrow’s fear headlines today:  Iran doesn’t like us, the Middle East may erupt in violence, the Taliban are still a threat.  Oops, looks like I got scooped on that last one by Defense Secretary Robert Gates, who decided that this weekend would be a good time to inform us that "the momentum in Afghanistan is with the Taliban, who are inflicting heavy U.S. casualties and hold de facto control of swaths of the country.

At the suggestion of some of his staff, Mr. Gates has begun referring to himself as the "secretary of war," saying that shows he and his department have no higher priority than the conflicts in Iraq and Afghanistan.  "If people begin to absorb the fact that we’ve got several dozen very dangerous terrorists in our jails right now…maybe a little greater perspective would be brought to the issue," he said.  Do not make the mistake of assuming anything Gates says is not carefully planned and coordinated – he was previously the director of the CIA, just like Poppa Bush (who he served under)!

We have been playing for the dollar bounce over the weekend so this is just great for our oil shorts as well as our overall market posture, as we were looking for another catalyst to push us to a lower level test and last week’s Cheney/Obama virtual debate was just a warm-up for this weekend’s fright-fest, which sure has caused damage in Asia as well as early European trading but probably won’t be enough to keep US equities down without some bad data to back it up.  According to Briefing.com, we have a pretty big week ahead of us:

Date ET Release For Actual Briefing.com Consensus Prior Revised From
May 26 09:00 S&P/CaseShiller Home Price Index Mar   NA -18.4% -18.63%  
May 26 10:00 Consumer Confidence May   43.0 42.0 39.2  
May 27 10:00 Existing Home Sales Apr   4.65M 4.65M 4.57M  
May 28 08:30 Durable Goods Orders Apr   0.0% 0.5% -0.8%  
May 28 08:30 Durables, Ex-Transport Apr   -0.5% -0.3% -0.6%  
May 28 08:30 Initial Claims 05/23   615K NA 631K  
May 28 10:00 New Home Sales Apr   365K 363K 356K  
May 28 11:00 Crude Inventories 5/22   NA NA -2.10M  
May 29 08:30 GDP – Prelim. Q1   -5.5% -5.5% -6.1%  
May 29 08:30 GDP Deflator Q1   2.9% 2.9% 2.9%  
May 29 09:45 Chicago PMI May   41.0 42.0 40.1  
May 29 09:55 Mich Sentiment-Rev May   68.0 68.0 67.9  

So, we are starting the short week off with a bang with the Case-Shiller Report and Consumer Confidence could be a market booster as long as the took the poll before the "duck and cover" headlines hit the weekend papers.  Durable Goods may be better than expected tomorrow but it’s all up to the GDP on Thursday and we are expecting a worse than expected number there and that will keep us cautious this week.   

Asia was cautious this morning with the Hang Seng and Shanghai each falling about 0.8% with the Nikkei faring better, down just 0.4% but the BSE hit the -2.5% rule (but held the gap test so far) even as the Baltic Dry Index climbed yet another 2.76%, all the way up to 2,786 now.  This is going to make last week’s shipping plays look very, very good and we’re probably heading for a test of 3,000, where we’ll find out how real a resurgance in global shipping looks at that critical juncture. In general, Asian markets were open yesterday but ended up pretty much where they left off Friday ahead of the US open so it’s up to us to give some guidance.

Europe had a bad start this morning but is recovering a bit into our open (9am), also waiting for direction from the US markets and we are waiting from direction from home prices so – yawn so far….  Euro-Zone Industrial Orders fell another 0.8% in March and are down 26.8% from last year but that’s an improvement from February’s annual decline of 34.5%.  Is this getting worse more slowly or was March 2008 just an awful month giving us easy comps?  Orders for intermediate goods dropped a monthly 1.6% in March, while orders for capital goods fell 2.1%. Orders for durable consumer goods declined 1.8% and orders for nondurable consumer goods were 2.5% weaker.

Uh oh – Case/Shiller just came out and, as we expected, no green shoots in March housing.  Home prices are down 19.1% with ALL 20 metro areas still showing negative rates of return and this is the "biggest quarterly decline for the reading’s 21-year history."  For the 12th straight month, no region was able to avoid a year-over-year decline. Phoenix and Las Vegas were again the worst performers, with drops of 36% and 31%, respectively. Phoenix is down 53% from its peak in June 2006. Dallas has been the least hurt, down 11% from its June 2007 peak.  Two regions reported a slight price increase in March from a month earlier: Charlotte and Denver. A third, Dallas, was flat. Also, nine of the 20 areas reported better month-to-month results in March than February. 

So there you have it:  A crazy guy has nukes, the terrorists are still out there, Europe and Asia’s economies are in shambles and no one is buying either durable goods or homes.  Is it finally time to start buying stocks?  We’ll be looking for signs of a bottom this week as we test my theory that THIS (around Dow 8,100) IS the bottom and the BOTTOM we hit in March was just plain stupid and will not happen again (unless the world really does end).  While we were HOPING for cheaper entries and we are still poised negative, it’s a very wary negative and I am much more in the mood for bargain hunting this week than I was last week.

Hopefully the energy complex will give up the ghost and head lower, dragging the markets to whatever low we can achieve at which point we can whip out our Buy List but I think we’ll be starting this week off by looking at our dividend payers and setting up some long-term positions.  Let’s keep an eye on copper, which is squeezing into our test zone and really needs to hold that 200 dma at $200 this week - if they can hold that against a bouncy dollar, that will be impressive!

 


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  1. Kwan

    Here’s an interesting article that notes the VIX has gone up 18/19 sessions on the first market day immediately following memorial day (since 1990). You may want to keep that tidbit of knowledge in your back pocket..

  2. where

    Breaking News – S&P/Case Shiller’s 20-city home price index fell 19.1% in Q1, the index’s steepest quarterly decline on record and worse than the 18.7% drop expected.
     
    Green shoots or SRShoots?

  3. bjkeck

    Phil
    Great call on the USO 32′s…..I’ll take 28% in a day!
     
    BK

  4. ocelli7

    Phil,
     
    yes, great call on USO puts……

  5. stevenparker

    RF is going for a walk…

  6. Phil

    USO $32 puts stopped out at $1.05 too nice a gain not to sell into excitement and the OPEC meeting is coming so we’ll probably get another chance to short a pump.

    OIH and XLE dwon 1.7% so room to run for them if oil recovers.

    XLF $11.50 is breakdown point to watch, $12 is nice recovery for financials and the markets can fly if they get going along with an oil bounce.

    We have several sets of levels to to watch, right now we are above most of our old breakout levels of:  DIA 8,130, S&P 870, Nas 1,700, NYSE 5,500 and RUT 480 so let’s watch the Nas and the RUT to lead us up by breaking those.  Of course, these are not dollar adjusted so really 5% over that isn’t very exciting.

    That would bring us up to the 40% lines at Dow 8,412, S&P 945, Nas 1,716, NYSE 6,232 and Russell 513 before we have anything that can even be considered a positive move.  All but the Dow and Nas are miles away so we need Nas leadership in both respects to get a rally going and that’s what we’ll look at today. 

    QQQQ is at 33.85 and MUST break 34 with authority and even failing 33.50 is going to be bad.

  7. merkhava

     Dang… this market just will not go down !!  I just want to pull my hair out !
     
    Obama gives an interview over the holiday to say the USA is broke and has no more money,
    ….and the market says so what ?!?  I guess all is well is Bizarro World.

  8. newparadigmz

    FSLR First Solar discussed in Barron’s Online (191.72 ) 
     Barron’s Online reports the coming week could get uncomfortably hot for the co, seemingly unscathed by its industry’s sliding prices. Wednesday is the start of the Intersolar trade show in Munich, where the world’s solar businesses bargain their next contracts. The deals will surely adjust for the plunging price of refined silicon — half the cost of goods at First Solar’s rivals. One leading customer says it will ditch First Solar’s "thin-film" panels if crystalline silicon alternatives keep getting cheaper. That seems likely. Silicon prices are expected to drop another 30% by year end. First Solar profits — and its shares — could get cut in half. That possibility seemed lost on the investors who doubled the stock price of the co in the last few months to a peak of $205 last week. But there has been a big seller amid the run-up. The estate of Wal-Martheir John T. Walton — who bankrolled the innovative solar-panel maker — unloaded more than $425 million of First Solar stock in recent weeks, about one-tenth of its holdings.
     

  9. Phil

    Thanks BJ and Ocelli!

    Wow, while I was writing that the Nas went crazy! 

    AAPL is helping with an upgrade.

    I’m going to be pretty pissed if the markets just take off again before we have time to go shopping.

    X just made a very nice U-turn.

    Bizzaro/Merk – Why will no one believe me?  It’s just math, there is $11Tn of cash on the side of a $24Tn market.   Because the $20Tn is nowhere near as fluid as our old $42Tn market used to be and because trading volume is low, it takes just a $25Bn trade imbalance to move the market up 2.5% so any day that buyers outnumber sellers is going to move the market up significantly and it only takes a total of $150Bn worth of buys (6/11ths), which is only 1.3% of the sidelined cash to think there are bargains to give us a green day.  Since we are not crashing, that $150Bn in becomes $150Bn of sideline cash and doesn’t disappear so it can come back in tomorrow and the next day all the way until it requires 10% of the sidelined cash to move the market, like it did in 2007 when we finally ran out of fuel.  Somewhere between 1.3% and 10% is equilibrium, but I’m betting that you won’t be finding it soon!  From day to day you can be bearish but I think being long-term bearish is a very dangerous position to put yourself in…

    FSLR/New – Hey thinks for that, they were really starting to annoy me last week….

    Holy Cow – Consumer confidence 54.9 – MASSIVE beat!  Run away bears!!!!!

  10. merkhava

     That is just crap !!  Consumer  confidence higher… with so many getting laid off and foreclosed??  
     
    They all must be high smoking crack when the survey people called !!

  11. stevenparker

    Cover our DIA Puts?

  12. merkhava

     Dangerous position… Phil I hear ya
     
    Market up and gold selling off… I feel like I got Goldman Sach’s red lasar dots dancing across my chest like I’m one of those little yellow rubber ducks running across the shooting gallery… and all the shooters have aimed against just me.
     
    Dang this is killin me…  this ain’t a real market anymore… it a shooting gallery

  13. Cap

    Consumer confidence … what a false read on reality …..traffic light on Mem Day; gas prices up; 

  14. merkhava

     Obama has a female nominee to join the Supremes… I guess the market can go up 300 points today since everybody is happy happy joy joy today…

  15. Fabregas

    Phil, when to reload oil shorts?

  16. Cap

    Obama on w/ BS about his woman/hispanic interest group pick.
     
    Outrageous to claim that his standard is for a judge to interpret and not make law, when Sotomayor is caught on videotape gleefully claiming that Laws are made from the Bench, to much amusement and applause from an activist friendly crowd.

  17. Cap

    Big deal that HW Bush initially appointed her.  He also appointed Bryer who turned out to be a disaster.  Obama the master of BS deflection.

  18. Cap

    short POT, DIA, WFC

  19. Phil

    DIA puts/Steve – Oops, that would have been a good idea right?  I was moving so many things I forgot them but I was 1/2 covered (stopping out putters with a $1+ gain) so I didn’t look.  I wouldn’t chase a cover here as this is a big move and needs to be confirmed around the 2.5% rule, which is still 60 points from here at 8,484 and, with 8,412 still to get though, that would be an impressive move for one day.  

    I’m not trusting this move as there was massive volume on the consumer confidence but the volume quickly faded out so we need more signs than just a jump on news before we all rush to turn bullish.  It would be healthy and bullish to consolidate here but the banks really need to get it in gear. 

    VIX just loves to crash – down 6% already and back at the 30 line.

    Confidence – Don’t forget that 60% of those consumers think their home went up in value in the past 12 months so why we should react just because they say they are confidend is beyond me but – what can you do?  You’ve gotta go with the flow (for now)…

    Oil/Fab – Best to leave them alone ahead of OPEC on Thurs.  We also get inventory that day so timing will be everything but this inventory could be another draw ahead of the holiday.  At some point we get the driving numbers for the weekend and we need to stay sharp for that.

    That’s right Cap – enjoy your precious constitution while you can – We’re just one judge away from shredding it and replacing it with our glorious manifesto!

  20. Phil

    POT at $116 – feels like Christmas!  Selling $115 calls naked for $7, stop at $8, looking for $5 or less to buy back

  21. Fabregas

    Phil – oil inventory on Thu (not Wed)?

  22. Cap

    Comrade Phil, you make funny ….
    :grin:

  23. Cap

    and a FMD looms large ….

  24. Cap

    I predict reversal today; give up at least 1/2 gains.

  25. Cap

    TRIN went below 1.00 briefly; now 1.63.   This rally is being sold into.

  26. RMM

    Phil: UNG,
    have UNG oct 20 calls, base 1.04$,
    how about selling call june14 for 0.7$ and jun 13 put for 0.6$ ?
    1/2 cover or full ?

  27. jomama

     phil, why isn’t bac participating.  are they just tied in with housing now?  they even got an upgrade this am, i think

  28. merkhava

     Naz, RUT, S&P500 and DJIA breaking over resistance levels… technically signalling we could go up higher?  But I can’t get myself to believe it… we had a double top failure last week!!
     
    How can I go bullish with all the bad news out there in the real world?
     
    Go long with calls or scale into a larger bear to position?   
    Decision decisions… arrrrrrgh

  29. Cap

    TRIN down to 1.00 again.  Very strange fluctuations.

  30. Highlander

    phil,
    aapl with huge volume this morning (based on ms aapl bear analyst changing her mind again) but still not able to break previous ‘lower high’  back on 5/20. how should this be read?

  31. Cap

    This is about the typical range lately, +/- 200 points.

  32. Cap

    Merkhava, who you gonna believe ?  CNBC or your own lying eyes ?   LOL.

  33. Phil

    Nas at 2.5% rule. RUT up 3%, that’s the leadership we needed for a move up.  Transports just over, SOX well over.  Otheres are up about 1.75% so it won’t take much for us to get a 2.5% test across the board.

    May have been too early shorting POT in that case, dropping stop out to $7.50 and I’ll just reload next time (still $7).

    Oil/Fab – Yes, it’s delayed this week.  It usually is on a holiday week.

    UNG/RMM – Didn’t we cover that in the $104K portfolio this weekend?  I think it was taking out the higher callers and selling 1/2 the $14s and adding some Oct calls.

    BAC/Jo – I think flat at $11, coming off $3 just 90 days ago is participating.  They need to consolidate and XLF is doing a very, very slow build lately.  I think the banks may grind higher if the markets keep going but it will be very slow.

    Failure/Merk – I don’t think it was a failure.  It was a double test of a top but if we’re consolidating for a breakout, we could have a dozen more tests ahead of us.  I had said that anything that held 8,200 on the Dow was still bullish and we really didn’t even challenge it last week.  The bad news you bears keep bitching about is, as I said in the above post, the same old crap that took the market down a year ago.  Reality is NOT worse than expectations, which were set so low that almost anything is a relief now and any small sign of life, like an insane Consumer Confidence number, is going to hit the bears like a freight train.

    TRIN/Cap – another reason not to trust this rally.

    AAPL/High – $130 is a pretty firm top for AAPL, you have to be patient.

    Only the NYSE hasn’t crossed 2% yet (1.9%).

  34. merkhava

     Naz four horsemen are sprinting and jumping hurdles… looking like up 5% day for them
    Financials looking strong and if oil decides to join the party, then today is going to be a bear’s nightmare
    Everytime I see the daily high box flash yellow with another new high for today, it’s like getting shot with another BB… man it stings !!  
    I just wanna hit that sell button and crap out to cash… this is just making me sick

  35. barfinger

    Its the wall of worry, guys. The next big bull has already begun. You know how I know? For the last three months I have been selling calls on a whole bunch of stuff after taking years away from that action. The last time I plunged headlong into call selling? early 2003.

  36. RMM

    Phil: FAZ jun 7 put, ha dstarted with may 7.5, then on to jun 7,
    eventually this needs to be moved out in time,
    I want to be prepared for a move: what would it be ?

  37. merkhava

    We’re at ye ol 8440 line again…. keeping my fingers crossed it call hold as resistance for today…
    if we bust over 8440 and head back to that 8520 area I think I’m gonna throw up
     
    I think I need to get my Chicken Bonz out and do some rain dancing to make 8440 resistance hold… chuckle…
    rattle rattle rattle    stomp stomp    so far so good  LOL

  38. Cap

    TRIN back to 1.73 …. nutty fluctuations; conclusion is not to trust it today.

  39. EricL

    I’m just assuming a range-bound market for now: SPX 875-925.
     
    Tempted to go long a few July TBT or TLT atm straddles. Here’s my thinking: IV on these is still pretty low, relative to stock, although TBT has climbed a little recently. So for instance TLT 93 strike straddles only need about $3-4 of movement in the index this week to starting turning a profit. We could get a more dramatic move this week with all the bond auctions. If they go well, I expect a rally in the long bond from over-sold conditions. If they go poorly it will confirm everybody’s fears and — look out below.
     
    I’d exit this by the weekend in any case.

  40. Phil

    Oil up $2 from the 9:30 low – those guys are just amazing!  Gold at $951.

    Idiots at CNBC think a good consumer confidence reading means the consumer is "alive and well."  I think it has more to do with the record foreclosures meaning there are less jobless people left in homes to answer the survey so they are polling all the survivors.

    Worry/Barf – What, me worry?

    FAZ/RMM – It will be July $6 puts or whatever you can get away with cheap.  The thing moves $2 a week so it doesn’t lend itself to long-range planning.  Right now the $7s have .35 in premium and the roll to the July $6 puts is .45 so it stands to reason that you could put in for an even roll now and just keep an eye on that bid/ask to see how things are going.

  41. RMM

    Phil: on UNG, I had done what you recommended already last week,
    was not sure whether 1/2 cover for both call and out was ok ?
    Another question:
    in yourHedging, Part 3 there is a CAt TRADE: i HAVE bought CAT shares last week at 35$ and today at 34.31$, the jan2011 22.5 calls will sell now 15.2 $, so that is even better,
    on some of the shares :is the alternative of selling monthly calls and puts starting with july calls 36 for 2.4$ and july puts 35 for 1.65 $ attractive ?

  42. Phil

    FAS $6 puts are fun if you can get them for .15.  They have a .09 delta so a nice payoff if making .10 (66%) works for you with commissions.

    RUT needs to hold 489 (2.5%) and Nas needs to hold 1,734 (2.5%) otherwise the bears can take a dip back in the pool.

    I’m offering .80 for those same USO $32 puts again but no takers yet.  Early scale, looking to buy more at .60 or roll up.

  43. Phil

    CAT/RMM - As long as you are willing to own more CAT, you can do much better selling monthly put/call combos.  Once CAT settles down, they should go back to their norm of flatlining along with nowhere near the variation we’ve been getting but that could be a ways off.  Also, you need to consider that, if things do calm down, then the VIX won’t be as high and CAT may go back to paying .50 monthly premiums, not $1.25 so that needs to factor in as well.  So, if you want the headache of selling every month then you also want the headache of the crazy volatility on the stock.  If we do have another crash, CAT will crash hard so do stay on your toes…

    Range-bound/Eric – I hope so!  It’s what we need to move forward down the road.  Straddle is a good idea but watch out for sudden drop in IV after auctions.

    My oil puts filled, now let’s see how high the market can get.  I’m tempted to offset with XOM calls but I don’t have enough to bother yet…

  44. merkhava

     Uh oh… yellow boxes are flashing again for new daily highs… DJIA is trying to strain and crack over 8440

  45. merkhava

     Ha… CNBC giving the Saudi’s credit for keeping oil from going to $20 a barrel… that journalist chick sounds like she is celebrating the fine screw job the oil shieks are putting on the American consumer

  46. merkhava

     It’s a Star Trek trading day….
    Kirk: Beam me up Scotty
    Scotty: I’m givin it all I’ve got Capt’n

  47. Phil

    Oil/Merk – I got from that report that they are trying to talk up oil but they are mainly concerned that $60 is mainly due to speculation and they could go right back to $30 if OPEC can’t keep things together.  $30 oil would be very helpful for the global economy.

    SHLD must be a goodstock again today.  For those of you playing at home investors BUYBUYBUY on Tues and Wed morning, SELLSELLSELL Wed morning through Thurs afternoon, then can’t live without it Thursday  night, can’t stand it on Friday and don’t want to be left out of the rally on Tuesday morning.  Kind of like the whole market in a mircocasm…

    Well, I certainly could have been more bullish today…  RIMM past 5%, AMZN 2,75%, BIDU and GOOG through 2.5%.  EBAY is comparatively doggin it even though Oprah discovered Skype (I know that because my mother called me up to see if she could invest in it).  

    We’re not getting the XLF move over $12 we need to make a breakout and the dollar is weakening already, down 1% from the EU’s open and just under $1.60 per Pound and $1.40 per Euro (only $1.12 Canadian). 

    MS apparently said buy tech, so that’s another reason not to believe the rally – just the big boys manipulating the markets again on a low-volume day. 

    GM back at $1.27 so at least something makes sense in the world (although $1.27 is still too high).

  48. Jordan

    Phil, why is POT at $116 a gift (June calls at $7)?  What is the investment premise on POT?  Can’t it go up another $7 between today and June 19?

  49. RMM

    Phil: is this the top for DIA now: got 1/2 cover with jun 84 ????

  50. Cap

    Listening to Schumer talk about other people with an ivory tower approach who have never done anything is absurdly laughable for a career politician to say.  Look in the mirror pal.

  51. microflux

     Hello Phil, do you have a tan now ? :)
     
    so are we still in cash waiting ? i am all cash now. if i wanted todo a buy write for the next OE. what would make sense at these levels ? FAS , DRYS or wait for that drop ?

  52. merkhava

    Making new highs again and again every few minutes… I’m really starting to not like the sight of that yellow box flashing new daily highs… just relentless little stair stepping up and up and up… the moves are just enough to add some stress but not enough to make me jump out of the boiling pot
     
    Last Tuesday and Wednesday we consolidated around that 8520 level… wih a very short lived visit to that double top 8600 ceiling.  I think I’m gonna look at that 8520 level as a good trigger point where to dollar cost average as a bear position rescue plan.
     
    Whatchya think Phil? Think "they" will bust over 8520 and keep this market going to 8600+ new highs, or will it most likey run out of steam? Frankly I don’t think they’ve got the ballz to take to 9000.

  53. Cap

    Merk …. ROTFLMAO !  That was spot on ….
     
    She can’t take anymore; she’s coming apart ….

  54. ranjan81

    Phil – I have GS June 140 calls which i bought for 4.90$ and I have June 150 callers which i sold for $2.30. Should i take profits off the table? Thanks

  55. Phil

    POT – By the way, a very simple trading plan for something like selling the POT $115 calls for $7 (now $7.10) is to sell 1 and, if POT crosses $117.50, roll it into 2x the 120s, now $4.70 and roll those to 1.5x the $125s, now $3 if POT breaks $120.  That would put you in 3 POT $125 calls at $3 each rather than the original $7 single put you sold with POT at $116 so you are moving the caller’s break-even from $123 to $128 at no cost, that’s almost 10% higher than where it is now and those, of course, can be rolled to the  July $135s, now $3 so that’s the nice thing about selling calls into a rally – IF you scale in and IF you have the margins to hold a position like this open long-term.

    POT/Jordan – As above, sure it can go up but I think it’s a joke at this price.  MOS, MOO and DBA are already pulling back.  Our group sold a lot of calls so they are trying to shake us out of POT before going down and they can keep it up as long as the main market keeps climbing but there’s sure to be a limit.

    DIA top/RMM – I stopped out my putters so naked on DIA Sept $86 puts (still can’t get the damn roll up).

    Tan/Micro – Yep, well tanned and rested after the weekend thanks.  Still in mainly cash and wanting to buy but still waiting for the sale that I don’t see yet.  DRYS is still good but I wouldn’t trust FAS unless you are pairing the trade with FAZ to just work down premiums.

    They/Merk – I don’t see today’s data as good enough to break 8,650.  We are simply establishing the lower 5% of that range and we need to hold 8,200 for a while before we can bust the midpoint and head to the upper 5%.  That will take some "good" news that relates to the average investor and Consumer Confidence doesn’t manage it.  An upward revision to GDP on Thursday might do it though…

    GS/Ranj – Well your max profit is $7.40 ($10 spread less net purchase) and your current spread is $3.90 after starting with $2.60.  I don’t think I’d sell unless the market does start to look weak as  you have $3.50 more to go if they break up but maybe put a sell-stop at $3.50 on the spread to lock in .90 of profit.

  56. RMM

    phil: did you see my 11:14 ??

  57. Cap

    Time to short SPG here IMO – i am

  58. stevenparker

    GS/Ranj – they may announce repayment of TARP (?) during your expiration cycle which could lift the stock…..

  59. DB

    UA up 7.5% and IYR up 5% – I think thats just silly.

  60. stevenparker

    Phil, how much are you offering for the DIA Sep 86 put roll up to 88 pls?
    I am still at $1.

  61. RMM

    Phil: bought FAZ stock at these low levels., sold jun6 calls, if called, good return at 110%.

  62. ranjan81

    Steven – I think they wanted to repay the TARP money but I am not sure whether the feds would let them off  the hook so easily.

  63. RMM

    Phil:
    DNDN:
    how far out in time would you go out in selling calls against jan2010, 10 calls (base:10.4$) : this is speculative position as a takeover is expected,

  64. merkhava

     aaawwwwwhhhh snap !!  ….what a freak-o-nomic market
     
    I go take a hot shower to relieve some stress and come back to find we’re up over 200 points?!?  I feel like I’m living a real life Truman Show movie… this is unbelievable
     
    OK… I’m thinking of a bear rescue plan double down at 8520, sell a 1/2 cover… and if the market breaks over 8650, then I’m stopping out… just give up, go to cash and lick my wounds.

  65. Becker

    2.5 Levels   Reached,  holding,  holding…..

  66. Becker

    Portfolio plays,   We’re really looking forward to hitting that buy button,    maybe later this week?

  67. merkhava

     I guess the Chinese have decided to get back into US Treasuries with both feet eh?

  68. merkhava

     green shoots and strong roots… sounds like a recipe for CNBC soup… chuckle

  69. mSquare

    CRYP – A decent small-cap speculative LONG. Good chart and fundamentals too.
    http://finviz.com/publish/052609/CRYP1dl1310.png

    Already own stock with cost basis of low $5s but adding to it today around $6. Stop $5.45 and target (hped-for) is a spike to $7-$8 like it did a couple of weeks back.

  70. DB

    Driving me nuts – being bearish – trading bullish. Wish we could just take that 200 S+P drop and be done with it !!!

  71. matt1966

    Yo, yo, yo.   Sup.  Another unbelievable day, huh?  Glad I waited until jumping on some SKF for a short hold.
     
    Phil, really liked your assesment of SHLD.  It really could be applied to the market.  Only we don’t have that many ‘can’t get rid of it fast enough’ days anymore.  At least for now.
     
    I read last week that Chrysler could emerge from BK by the end of the first week in June.  How is this possible?  I would think the bondholders would take their fight to the Supreme Court.  There are incredible precedents being set there.  And now with GM headed into BK, will they trample contract law even further?  The Obama admin is becoming like the Bush admin in that it seems like anything is possible with these guys…

  72. Phil

    11:14/RMM – Yes I answered it at 11:23, did you see that?

    DIA roll/Steve – Still ofering $1 for $2 roll.

    FAZ interesting at $5.

    DIA $81 puts for $1.

    DNDN/RMM – If you own the 2010 $10s at $11.50 and you are playing for a buyout, you can hardly afford to sell front-month calls at all because the preemiums suck.  It’s not a trade I would do at all.  If you think they will get bought and want to go long, better to sell the Jan $20s for $5.35 and give yourself a vertical that can gain 60% if they flatline or get bought rather than trying to guess the move every month with 20% coverage in a stock that can break down or up very quickly.

    Portfolio/Becker – I’m treating this like most Mondays, not buying into the move on low volume and happy to sit and watch otherwise.

    Treasuries/Merk – Don’t forget the Fed still has $400Bn to buy with.

  73. bigs

     Phil I’m in the FLSR spread of Long July 180 P and Short June 185 P.  I suspect this needs adjusting.  Any thoughts on this?
    Thanks. 

  74. RMM

    Phil: the 11:14 had an UNG part, the CAT part you dealt with ?
     
    Now my HK jun 26 calls, base 1.01$, need ,ore time, so go out a few months, but is there some premium to be sold ?

  75. cisco

    Does FXP 15 puts at 1.10 look interesting to sell?

  76. jofori

    DIA/Phil
    Just double-checking…selling the June $81 puts for $1 is a new suggestion, right?  Or were you responding to an earlier comment?

  77. oncmed

    Phil…we can get PSW on kindle?

  78. KeyserSoze

    Matt,
    From this morning’s NPR regarding Chrysler and how they’re moving through the process so quickly.  Short version…it ain’t no fun being a creditor to these guys.  Looks like they’re shuffling the decks on secured versus unsecured and implying that any lack of acceptance or disagreement from a creditor is "unpatriotic".
    http://www.npr.org/templates/story/story.php?storyId=104527823

  79. mSquare

    FAZ – Was considering June options. With FAZ at $5, June $5 Put/Call are about $0.65 and July are about $1.05. No ‘fun’ – don’t know why so much complacency. FAZ used to move 20% on a single good / bad day!!!

  80. RMM

    Is there going to be a DROP after 2 or 3 ?????????

  81. stevenparker

    Lol I hope he is buying the DIA 81 puts cuz thats what I did rofl

  82. stevenparker

    Well it’s stopped going up, but does that mean it will go down….

  83. Phil

    CRYP/M2 – Just two weeks to that .03 dividend!

    Nuts/DB – short trip?

    Contract law/Matt – When it is in such an overwhelming public interest to trample the laws, Obama’s administration is doing much less than was done with the Patriot Act on constitutional rights and, not to belittle 9/11 losses but think how catastrophic the national damage has been from this economic crisis.  I don’t think it’s surprising that they do whatever they can but what is surprising is how little complaints you really hear from the bondholders.  It would be one of the great business achievements of our lifetimes if they actually pull Chrysler out of bankruptcy in less than 60 days – somthing they should make a statue about if we can come up with the right visual metaphore…

    FSLR/Bigs – No way do you buy back $10.50 in premium.  You can still roll the caller to the July $170 puts for $1.20 so not even a little bit of a worry at the moment. 

    UNG/RMM – see 10:54.  1/2 cover is fine.  I continue to think HK is not good and I continue to think you shouldn’t be in it at all and I continue to think that the risk of being burned selling calls on this stock is ridiculous.

    FXP/Cisco – Not today, China could have a massive rally off a 2.5% US gain.  If they fall to $14 it will be interesting to sell puts.

    DIA/Jofaori – Good thing you are double checking as it’s BUYING June $81 puts for $1.  If it were selling I would say selling.  I think 2.5% up on the Dow is a good place to speculate short and, of course, it’s an entry I’m willing to roll up and double down from here if the Dow is determined to retest 8,650. 

    Kindle/Onc – I was kidding about that but I’d be happy to publish on Kindle if there was some kind of demand and it was not a huge hassle.  I also want to make an IPhone app one of these days.

    FAZ/M2 – I agree, I took the stock and do not see the fun in selling puts or calls at these prices. 

    Interesting that VIX is still down 6%, very little downward movement indicating people are covering the last 50-point move in the Dow.

  84. jomama

     phil, thoughts on selling rf puts here?  can sell sept 4′s for 1$

  85. stevenparker

    Jofaori, I would think if we were selling DIA premium it would be an option with more value in it, it seems we usually try to sell around $3 in DIA premium at a time when we think the market may go up, and buy about $1 in DIA premium when we think the market may go down.
    As an inexperienced person here these rules of thumb are helping me understand which way we are trying to go…
    One other tip (this is just what I think), Phil often offers a Double Down point. He is very skillful at adjusting and rolling his position during the day so that even when he is wrong he generally still breaks even or better on the trade. Being inexperienced I find that entering trades at his DD point (or missing out) can be less stressful.
    Well, these are my thoughts. Hopefully nothing controversial….

  86. Cap

    Best guest on CNBC …. surveryed 7 trading desks … BEST ONE sez  SLOOOOOW;  others say dead; no buying.
     
    Conclusion he sez …. This is ALL Computers buying.
     
    But we already know this, don’t we ??!

  87. jofori

    DIA/Phil and stevenparker
    Thanks for the clarification and explanation…glad I asked.  Makes sense now :)

  88. Cap

    Welcome to ObamaNation:
     
    If you are a creditor who objects to being F-ed to advantage junior creditor unions — you are unpatriotic.
    If you are a taxpayer who objects to Congress throwing your money at banks insurance companies and auto companies, and object to paying higher taxes — you are unpatriotic.
    If you oppose liberal activist judicial appointments who are gender/ethnic appointees, light on intellectual rigor and want to apply international precedents in US decisions — you are an unpatriotic racist.
     
    Amerika … what a country…
     
    rant over.

  89. texasmotion

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    Phil/FAZ
    Would you buy here?   I have the FAZ fully covered with the Oct 6 calls.

  90. ranjan81

    Phil – What is your opinion about shorting COF at this point? Thanks

  91. texasmotion

    WTF…. FAZ, would you buy it?
    Thanks

  92. Cap

    Phil / Chrysler … where can I get those happy pills ?   :grin:

  93. craigzooka

    Phil, last time we shorted POT we bought puts that were $1. This time we sold calls( well, you did, I didn’t have enough margin to tale on that trade). How do you decide which method of shorting to use, and if you. Choose to buy puts, how do you decide which strike?

  94. Cap

    FYI; shorts on WFC (4 times) and SPG (6 times) have worked well today.  Amazing WFC has worked out even though its up more than 5%.
    Less successful so far have been HAL (1 for 2) still holding; and POT (0 for 2) still holding.   Only down a tiny bit on these and they will work out, maybe not today.

  95. Cap

    Oh yeah; and DIA, that one has not been good either, but it is a hedge.

  96. pstas

    RE: contract law- huge difference- regardless of your view of the Patriot Act, remember that it was passed by Congress. Obama and his team are excercising executive pressure on bond holders and it is, in my opinion, intimidation. A more jaded view would call it extortion- i.e., do this or "else".

  97. jofori

     Shorts/Cap:
    Just checked the chart on SPG and wishing I had followed your suggestion to short it…keep us posted on future opps

  98. RMM

    Phil: the KMP from your Part 3 is now too expensive at 48.18 $?????????

  99. Cap

    well said pstas; complaints about Patriot Act are purely political BS, and now that the dems run DC, they have NOTHING to say about it.  And they voted for it too.

  100. RMM

    Phil: what news has driven the market up that much today ?
    for tomorrow, now that I aM NAKED on DIA puts, are you bearish and stay naked ?

  101. jofori

     Phil, would you consider a short on the QQQQs…perhaps the July 34 puts?

  102. Cap

    SPG / Jofori … I will try.
     
    Just went short WFC again …

  103. Cap

    All of these you are at the mercy of the computers driving financials and real estate — SKF UYG XLF FAZ FAS etc. and SRS IYR etc.

  104. texasmotion

    Cap/Patriotism, I had a long visit with my grand father at his assisted living center last weekend.  He fought in WWII and was shot down over Europe.  Several of his buddies died.  As soon as he could, he was back in the air bombing Nazis
    When I asked him about what he thought about the direction this country was headed.  He simply said, "It’s over."  America is gone…  We are an extension of Europe.

  105. morxlntway

    RMM & Phil:
    I got in KMP at: Put bought for 12.29; put sold for .81; the call is still on order for 1.20 (now 1.05). I guess that can just wait til 2011? that’s a joke, but how long do i wait or should i take it for less?

  106. Phil

    Only existing home sales tomorrow and that’s not until 10 am.  Thursday is the Durable gooods at 8:30 and that may sink the market and GDP not until Friday I just realized so we could keep going tomorrow and it doesn’t pay to be too bearish right now. 

    The problem for the bears is housing is now back down to 2002 levels but the S&P was at 1,000 in 2002, not 900.  Unless you have a trend that shows housing will drop another 10%, it’s going to be hard to sell the stock asset class as underperforming home ownership by 10% so the slightest indication that housing may recover means that stocks MUST recover.

    Earnings tonight from TTWO.  Tomorrow is AEO, AZO, CHS, CSUN, HOKU, RL, SPLS (could be bad) and ZLC (how can it not be bad?).  Wed night is CWTR, DSW, DMND (I would think people would cut back), JAS, SIGM and TIVO.  Thursday AM is ACAT (disaster), BIG, COST (major market mover), FRED, HNZ, MNRO (may be good), MOV (I doubt good), PERY, SAFM and SCVL.  Thurs night is DELL (no way as good as HPQ), JCG, MRVL (bad for sure), NOVL and WTSLA with FRO and TIF at night.  So lots of retailers to look at and if those trend down and GDP shows retail spending was a drag, the whole consumer confidence thing will be called into question but that is the main bearish hope here outside if some news.

    Probably the most bearish thing I can read into this is that the housing prices are pushing the stress tests past the most bearish scenarios so that’s where the attack is most likely to be mounted…

    RF/Jo – I do like that idea but I see Aug, not Sept puts that can be sold for $1.  I also like RF for $3.87, selling July $4 puts and calls for $1.40 for $2.47/3.24.

    DIA/Steve – Right on premium selling but we get about .50 less per week so, with 1 week left, we are lucky to sell something for $1.50.  $3 was last week’s rule of thumb, this week you want to get $2.50 if you can, next week we’ll take $2 if we have to… Good point on entering at my stops or DD points, as I scale in, I’m often early on that first entry and it is better to be more patient than me, especially because sometimes I change my mind and give up on a trade at that point.

    Computer buying/Cap – It’s all expained in "Terminator: Rise of the Machines"

    FAZ/Texas – I did buy some at $5, no reward yet.

    COF/Ranj – I’d rather see them go higher.

    Happy pills/Cap – Just take the red pill – join us!

    POT/Craig – My first look was at the puts but the premiums are ridiculous.  Since the put premiums are ridiculous I switched over to see if I could sell some and then I see the $115 puts are $7 (now $7.70) and can be rolled to 2x the $125 puts for $1.50 or less so I’m effectively selling 2x the $125 puts for $2.25 (now $3.20) and I REALLY don’t see POT breaking $125 although I look wrong at the moment.  I haven’t rolled yet as I obviously am not buying into this rally still but XLF is over 12 and QQQQ is over 34.50 and all the indexes are over 2.5% so it’s not looking good from a technical standpoint at the moment for the bears but I have enough conviction to take these positions into tonight.

    Extortion/Pstas – A long-standing government practice historically.  We just haven’t had a crisis in so long we forget what everyone’s role is.

    KMP/RMM – I wouldn’t chase them, they are up almost 5% since this morning.  News today was consumer confidence, nothing else.   Yes I am staying naked on DIA puts.

    Qs/Jofori – I think it’s a valid play, they are up 3.75% today though so I’d rather look to short them at the 5% rule assuming the follow-through tomorrow.

    USO – Gave up on waiting for .60 and took DD on $32 puts at .65.  They closed oil at $62.50 – that’s CRAZY!  Even crazier is the Transports are up 4% on that news.

  107. RMM

    texasmotion:
    man you guys always see things so SIMPLE, reason being lack of knowledge and facts.
    the USA is not gone and its not an extension of Europe, even if it were, would not be the worst.
    the culture are so different and cannot merge.
    with all respect for your grandfather: the USA will change and take on less ( such as democratizing other countries) and revise its priorities. The USA is NOT gone.

  108. cm0819

    Contract Law/Phil — Your cavalier attitude about the Obama Admin and its approach of "my way or the highway" is very defining about how narrow-minded you are.  Guessing your self-centered attitude would be a bit different if one of your funds or investments was being trampled on by the Obama-UAW tag team tandem.
     
    Too many Obama supporters define bi-partisan as inviting conflicting agendas to the meeting, listening to the views of all and then saying ok, BUT since I am in power its my way or the highway. Then lets get in front of a TV camera and tell the world how bi-partisan we are because we allowed everyone in the room!! Phil — be better than most – call bullshit when it is warranted!!
     
    How is it that smart people (like yourself) get so blinded to long-standing acceptance and interpretation of the US constitution and US laws in order to meet your political agenda or self-righteous requirements? No one is right on everything but today so few are willing to compromise and consider any other possibility than their own. Hoped you would be someone that  understood that laws and rights trumped greedy collection of more money and more power!!
     
    Unfortunately, history has shown time and time again that when compromise and true openness is not an option, only a cataclysmic event jars people back to operating without being driven solely by self-preservation and greed. 
     
    Not too long ago, Barry Ritholz began to aggressively bring his personal political views to the table on his website leading the current readership base to look and sound more and more like him over time. His sight has become "double-niche -- investment discussion primarily populated by left leaning investors, how unfortunate!!

  109. Phil

    KMP/Morx – I’m not sure what you paid but it’s all about the net entry.  It doesn’t matter what you pay for each leg as long as the net cost comes out where you wanted it becuase the math at the end will be the same.  So, if you are on track and a bit ahead, you can speculate a bit on selling the call.  Since you can fall back to selling the Jan $52.50, now .90 in case you have trouble, it’s not so terrible to take a chance if you feel strongly about the position improving in the short-term.

    FAZ and DIA working out after all…

  110. Cap

    For those who may be following my trades; covered WFC again small gains that add up …. 5-5 today.

  111. Cap

    which of course means it will probably drop $1 now.

  112. Cap

    Speaking of trampling over the rule of law, the latest on Chrysler from Zero Hedge:
     
    Indiana Pension Funds Move To District Court To Block Chrysler Sale
    Posted by Tyler Durden at 2:38 PM
    In a last ditch effort to stall the Chrysler sale, the Indiana Pension Fund has moved its objection to the 363 sale away from Gonzalez who flatly denied the plaintiff’s objection, and have moved it, with the assistant of White & Case’s Tom Lauria to NY Southern District Court. A hearing with Judge Thomas Griesa commenced at 11:45am today, ahead of tomorrow’s bankruptcy court hearing to approve the sale. From the memorandum filed in district court (attached below in its entirety):

    Rather than pay the secured creditors as required, the Debtors – at the Government’s direction – are essentially transferring the Collateral with any value to New Chrysler and then divvying up the majority of that value among unsecured creditors (the United Auto Workers (“UAW”)) and third parties (the US Treasury Department and Fiat).

    In response to this action, the U.S. Treasury Department had the following retort: "Put simply, it is nothing more than a last-ditch, eleventh-hour effort by a dissident faction of the debtors’ senior secured lenders to obstruct and impede core matters in Chrysler’s chapter 11 cases from being heard in bankruptcy court, which is the proper forum."

    While it is unclear how quick the turnaround on the case should be, and just how the two venues would interact, at this point it is safe to say that Lauria is willing to take this matter to the Supreme Court if need be (and need likely will be). He better hurry before brand spanking new Obama nominee Sotomayor is inducted.
    ———————————————————

    Those unpatriotic bondholders !   They just need to shut up and do what Obama sez…..

  113. RMM

    Phil: just bought SPWRA stock: how about selling premium:
    jun 27 call for 1.85$ and jun 25 put for 1.25$ >

  114. Potter

    Cap,                
      another acolyte[cm0819] speaks  lol

  115. Cap

    Bye bye Dow, WFC, etc.

  116. Cap

    Yes, you guys need to sign up and follow at ObamaNation !

  117. Phil

    Contract law/Cm0 – I’m not blinded by the trampling, I talked about it when it first came up but, at a certain point, you have to accept that it’s happening.  What is your arguement re. the auto companies?  Since the administration is bailing them out and is the only reason the bondholders are getting a single cent they should then bow down to them as well and meet their additional demands.  The problem is the bondholders – who are far bigger idiots than any lender who wrote a ‘liar loan" as there was no possible way on earth that you could have looked at the balance sheet of an auto company and thought they could make it without massive government assistance.  The bondholders were counting on the fact that the US would not let the auto companies failed and they chased after high-interest payments on worthless bonds because they thought they could strong-arm the government who couldn’t afford to let the auto companies go under. 

    The government could have walked away but they didn’t but paying off the bondholders would have really pissed me off.  Lenders take risks, this is what the risk is.  Lenders are restructured every day – that’s business.  You say I would feel differently if it happened to me – you are right, I would feel like a real moron for getting into an investment like GM, taking that sort of risk in exchange for some interest on a bond.  Junk bond are, in fact, junk and the majority of the bondholders do recognize that this is all they will get and the minority that do not have, in fact, been trampled for the greater good as they never would have prevailed in court anyway and all the delay would do is cause more damage for the rest of the participants.

    SPWRA/RMM – sounds like a plan.

  118. Phil

    Damn, I almost didn’t want to make 10% on the DIAs because now I can’t hold them overnight….

  119. Potter

    Phil, the point is not only the bondholders ,but the unprecedented treatment given to the unions as they would also have been devastated by any bankruptcy.The UAW also had to realize that they had driven GM to the brink

  120. cm0819

    Acolyte/Potter — Last I looked, we are all americans before we are a dems, Rep, Libs, Ind, etc.
     
    You have no idea what my political leanings are — but have no doubt, I do lean 100% american living under the US constitution and Bill of Rights. 
     
    Accepting the greatness of the founding father’s vision for the U.S., requires one to consider all options and not dictate one perspective.  Quite sure that was a significant purpose of our founding documents and laws — Checks and balances. Spread the power. Represent all the people.
     
    Unfortunately, you missed the point of my post .. stop letting politcal agenda, money and power drive our country’s leadership because it doesn’t take long to realize our leadership (both Dem and Rep) are driving us off a cliff!!

  121. morxlntway

    USO – Went downstairs to cut a piece of base board for the babys room and the .60′s came through.  For better or worse!

  122. matt1966

    I guess I don’t have a problem with the executive branch advocating their position and using a little strong arm tactics to do so.  I would prefer otherwise, but politics is a nasty business.  And the Dems are bound and determined to save the economy at ALL costs… even if it means putting the county in dire straits for generations to come.  This economic crisis is Obama’s 911.  He will overswing just like Bush did.  What I do have a problem with is if rules are changed by using some backdoor mechanism.  I don’t think that ‘s possible here.. but that is just a hunch.  So that’s why I think this will go to the Supreme Court.  And it should.  This is clearly a situation where the checks and balance of the US Constition need to be ‘checked’.  I wouldn’t have a problem with the bondholders doing that at all.  They’d be foolish not to.  It would be no less patriotic tto do so hen the anti-war protesters were before the invasion of Iraq.  I actually look upon both of those actions as being VERY patriotic.

  123. Potter

    cm0819,I meant that  comment as a compliment as Cap was one of the few members of this board that presented a counterpoint to Phil’s bipolar capitalist/socialist  conflicted views

  124. ssdirk

    Phil, what do you think about a June SPY iron condor – Selling 94 call, buying 96 call and selling 84 put, buying 82 put.  The 2 dollar spread in either direction will be somewhat offset by the net credit of .84 in premium. 

  125. morxlntway

    KMP: my entry was at 45.68 a few months ago.
    When you say "lower your cost basis", is that figurative? The actual cost basis ie reported to the IRS is still what the stock was purchased for, right?
    I actually sold the call in one account and sold the put in another based on my approval level. But doesn’t it accomplish the same thing. Sorry for dumb questions but i was an art major.

  126. matt1966

    morx, lol!  R u blonde, too?!

  127. cm0819

    GM-Chrysler Bondholders/Phil — Could not agree more with you about the auto bondholders. But ,hy is it you are not as openly condemning of the UAW and its deep role in the auto failure. My point is all about treating all the "guilty" and "failed" entities equally. If the bond holders take the bath then so must the UAW and all others.
     
    When I say to you "call bullshit when applicable", I am perplexed that you are not as aggressively attacking the UAW and Obama as you are the bondholders. It is so clear that Obama is so driven by "grabbing of power" by ensuring the UAW (in its current make-up) was left standing and even more entrenched in the "new auto industry" at the expense of everyone else involved.
     
    Personally, would have preferred to see both Bush and Obama let the auto industry take the path of bancruptcy 8 months ago, buy all the assets out of bancruptcy (combination of private and gov funds)  and have both the bondholders and the UAW beg to be let back into the game knowing they have to operate under a completely revamped way of doing business. 
     
    Simply put, the suppliers, dealers, bondholders and taxpayers are paying a much heavier price that the UAW and based on what you have said to date – - you are ok with this. I call that letting one’s political and personal agenda get in the way of what should have been done.
     
    I suspect when you peel away all the onion layers that politics wraps around people, you too are very frustrated by the events. If so, then say it and write about — thats what a true bi-partisan individual that cares more for their country than their politics would do!

  128. 1020

    Sorry Kids, I’m with Phil on this one. There will always be Winners and Losers, for the most part, it’s common sense that’s come out the "winner" on this one….

  129. EricL

    Still not too late to play AZO earnings. June IV is popping higher into the close, July continues to lag. I’m long lots of July calls and puts, selling June.
     
    No idea where this goes tomorrow, but the stock has had a good run and there is a lot of expectation priced in. I have a very slight downside bias.

  130. Cap

    HAH; these idiot SPG crooks gave me 2 more profitable shorts, as I left orders in all day to short at 51.60  that got filled 10 minutes ago.

  131. EricL

    Long end of the curve continues to get hammered. Perhaps it’s anticipation of GM BK announcement (and more bailout $$$). 

  132. matt1966

    What a completely painted day.  Major dumping of UYG at close but it just stood there and took it.  Notice how they didn’t take out the recent high of 4.05.  Nothing is accidental in this market. 

  133. Phil

    Cap is right!  Every go to Obama Nation to talk about this BS – thank you!

    UAW/Potter – I do not dispute that the UAW was as bad as all the other idiots in that industry but there are millions of people who worked their whole lives and were promised pensions and benefits and did indeed make sacrifices.  Are their contracts worthless?  Between 1999 and 2004, with the same unions and contracts in place, GM made $20Bn - are you claiming the unions then sabotoged the company or did management screw it up?  To some extent the profits were an illusion as they depleted the pension plans and underfunded long-term health benefits that they knew would come back to haunt them but anything for a bonus right?  There is plenty of blame to go around in that industry, including the millions of auto workers who continues to play along with the sham until the music stopped when they’ve had 30 years’ warning that they should probably look for work in a healthier industry.  Frankly I would have as little pitty for the UAW getting screwed over as I do for the bondholders – just bad luck to the bondholders at this point…

    Meanwhile, there is only 1 objecting bondholder and it’s the Republican AG of Indiana objecting on behalf of the state pension fund that had no business investing in junk bonds in the first place so what kind of political blindness does it take to try to point to this as anything other than politically motivated pandering?

    Condor/SSdirk – Well Peter is the Condor expert here, I usually can’t be bothered with them as I’m kind of against anything with a negative risk/reward ratio out of principle.  You are taking a 1:2 bet that the S&P will not move 5% in 4 weeks even though it just moved 2% today.  It’s not a bet I would make but if you make those bets consistantly, they generally do have a good overall winning percentage.

    Well it looks like I’ll be out of those June DIA puts EOD now, maybe 1/2 out...

    Cost basis/Morx – I mean your net cost on the trade so $45.68 plus the $12.29 you spent = $57.97 less the .81 for the puts you sold is $57.16 and you cannot get less than $57.50 (unless it goes below $37.50) so you have locked in your dividends as profits and anything you get selling calls is a bonus.  Given that, I would put it to you that you may be better off selling 1/3 July $50s for .65 as that’s .20 per long over 6 days and could return more than $1.20 over 18 months with more flexibility and more room to run (if you are so inclined to mess around with the mix on a regular basis).

    GM/CM – If you find the LiveStock video of me back around March 6th you will catch my rant on GM where my advice was "shut them down."  I also wrote an article titled Kill GM before they kill America so before you criticize me for not saying what I think, please find out what I already said.  Just because I don’t fixate on the same issue over and over again doesn’t mean I don’t care – I just wouldn’t want to end up as some bitter old man who can’t let go of an issue with a hate filled web site like Obama Nation8-)

    Well that was a fun day – THAT is why we take 10% day profits off the table on DIAs – even if they weren’t intended as day trades….

  134. cm0819

    Phil — you say that all the the "idiot" bondholders had to do was look at the balance sheet to know their investment was high-risk and that they were counting on the governemnt not letting the auto companies fail .. I agree.
     
    BUT, try presenting a convincing argument the UAW was not operating under the same belief that the gov would not let the auto industry fail!!

  135. morxlntway

    matt1966: used to be – but it’s all gray. (what’s left)
    thanks for the vote of confidence!

  136. 1020

    You boys should stop worrying about Obama’s "grabbing or power"  This is just part of a huge mess either Obama or McCain would have had to clean up. 8 months ago, this was someone elses problem……

  137. stevenparker

    cm – I think it would be fair to say that the average hedge-fund-manager-cum-bond-holder knew plenty about the risks they were taking investing in those bonds. I suppose they were betting that the government would cover their debts for them as there is no other likely way they would get paid.
    I think it would also be fair to say that the average person banging metal in a Chrysler factory knew nothing of all of this and would not be expected to, and should hardly be penalised to protect bond holders who knowingly took that gamble.
     
    I think see another lawsuit coming out here.
     
    WHAT THE HELL WAS THE INDIANA PENSION FUND DOING INVESTING IN CHRYSLER JUNK BONDS?
     
    Boy if I was relying on that money for my retirement I would be pissed.

  138. Peter D

    SPY June condor/ssdirk – Thanks, Phil, for the expert label, which I’m far away from it.  ssdirk, Phil comment is correct that your condor is too close to the money.  The probabilily of expiring outside the profit range of 83.2 to 94.8 is about 44% per ToS Analyzer.   So risking $1.2 to make $0.8 with 44% chance of loosing the $1.2 is not great.  You can try further out strikes, or wait to enter one leg at a time, start the CALL leg from a market top or the PUT leg a market bottom.

  139. cm0819

    Phil .. yes you have stated in the past "shut them down" and your article of "kill GM before they kill America" was quite observant, BUT why then do you NOW offer different levels of accountablity to failed events and then find those entities that are more closely aligned to your political perspective to be "less accountable" and "less greedy" and "less power mongers" than other participants.
     
    Your previous thoughts and articles were good — don’t compromise now and go with what works today because it aligns much closer to your political perspective.
     
    As a quick reminder, it was you that triggered today’s politically pointed exchange by offering a very politically motivated statement about how Obama trampling on laws and constitutional rights was much "less bad" than the congressionally approved trampling of laws by Bush’s Patriot Act!!
     
    If you don’t want politics on the board then take the lead and stop making your direct and indirect political comments. if not, then eventually your sight will be less "investment insight and discussion" and more "left-leaning investment insight and discussion" and those remaining will all think exactly like you.
     
    You have too much positive financial insight and knowledge to offer to the investment community to follow the path of Ritholz and others!!

  140. pstas

    Hmmmmmmmmmm, more mental gymnastics.
    Standing up for bondholder rights under the law/Constitution is "politically motivated pandering" but moving the UAW to the head of the line is just fine. No pandering there, you betcha.

  141. Phil

    UAW/CM – Who is the UAW to you?  Is there some vast conspiracy involving millions of retired workers who got up every day and worked a line for 40 years on the promise of a pension with some benefits?  People who made $2M over their entire lifetimes and negotiated that salary in good faith with a company that promised them future benefits.  Do you think that the people who live in Michigan now, who worked at the state’s largest employer were running some kind of scam on the American public or were they perhaps trying to get a job and feed their family the only way they could?  You can say that the UAW LEADERSHIP knew the score and kept their scam going as long as possible but there are millions of hard working people involved who did nothing more evil than pay their union dues in a system that existed before they ever came to work at the plant. 

    You can shoot down whoever you want (it’s a first ammendment thing) but don’t go shotgunning the auto workers along with the unions, the bondholders and the management.  These people made the cars they were told to make and, according to the 2008 Harbor Report (industry standard), the 10 most efficient plants in the world were US and Canadian UAW auto plants and 8 of 9 segment leaders were UAW plants with some stunning differences in production time that more than made up for relatively small wage differences (wages account for just 10% of a car’s costs):

    Also, when testifying to Congress in December, Gettlfinger made a very good point about wages:

    The UAW vigorously opposes any attempt to make workers and retirees the scapegoats and to make them shoulder the entire burden of any restructuring. Wages and benefits only make up 10 percent of the costs of the domestic auto companies. So the current difficulties facing the Detroit-based auto companies cannot be blamed on workers and retirees.

    “Contrary to an often-repeated myth, UAW members at GM, Ford and Chrysler are not paid $73 an hour. The truth is, wages for UAW members range from about $14 per hour for newly hired workers to $28 per hour for assemblers. The $73 an hour figure is outdated and inaccurate. It includes not only the costs of health care, pensions and other compensation for current workers, but also includes the costs of pensions and health care for all of the retired workers, spread out over the active workforce. Obviously, active workers do not receive any of this compensation, so it is simply not accurate to describe it as part of their ‘earnings.’ Furthermore … the overall labor costs at the Detroit-based auto companies were dramatically lowered by the changes in the 2005 and 2007 contracts, which largely or completely eliminated the gap with the foreign transplant operations.”

    The UAW has worked very hard with the Big 3 for years to do whatever they could on their end to help the industry survive but they were never asked what cars they should be building or what would sell.  Union guys tended to be the most loyal customers of the Big 3 and I’m sure you’ve heard stories of foreign cars being vandalized in Michigan – right or wrong, those are people who are proud of what they do and stand behind their employers and their product.  Yeah, let’s make them the bad guys because they can’t defend themselves against pundits who wrap themselves in the constitution and tell them that they should take it up the ass from the bondholders because it’s the American thing to do and our founding fathers would have wanted their families to starve while the money-lenders get paid in full.

  142. matt1966

    cm0819, I think it might have been me who started this discussion.  I just asked how it was possible that it was happening.  Phil filled in the blanks. 
    Phil, it’s not just the Indianna Teacher’s Pension Fund holding up the works.  There isn’t an exact count but it’s definately bondholderS.  From CNBC,
    "The participation (in the bond exchange) is very small," one of the sources said. "Everyone realizes this is going to bankruptcy court."

  143. morxlntway

    Phil – one more dump question then i’m finished.
    help me with the meaning of "1/3" please.

  144. cm0819

    Phil – You are consistent.
     
    So you have decided to defend your latest political perspective on the auto industry by quoting the Head of the UAW — hmmmmm! Now, there’s a credible source when offering a neutral, non-partisan perspective!!!  Of course, we all have total faith that the head of the UAW has not twisted dollar figures, earnings, benefits, etc to paint a picture that "the poor old labor worker" has made every sacrifice possible to make the auto industry viable!!
     
    Also, you have made a HUGE leap by implying that the 3 mil labor workers "should take it up the ass". No, that has never been said  — but it sure offers a nice convenient leap by you to dramatize the facts!! 
     
    Come on Phil you are SMARTER  than this!!
     
    Lets look a little deeper at the Harbour Report you have twisted. Sure you can " cherry pick any portion of a data set to validate your argument but first consider the info provided in the link below before you get all righteous about the UAW:
     
    http://leaninsider.productivitypress.com/2008/06/harbour-report-us-automakers-improve.html
     
     
     
     
    Again, it amazes me how tunnel visioned you when

  145. Phil

    1/3/Morx – Just means cover 1/3.  So if you have 12 long contracts, sell 4 covers.  That way they are easy to roll up to a higher strike if the stock takes off and also you can sell another 1/3 if the stock heads lower (but then you are into stops and such so be careful about that if you are new to this).  As my teacher often said to me: "There are no dumb questions, only dumb people."   8-)

  146. DB

    GM etc – Bond holders win or loose through the performance of the company so if the company goes tits up then they loose and they knew the risk. If part of that risk was a legal contract saying they would be "nth in line" for the companies assets when  it goes tits up then the governments have no rights to break that contract – surely that is the issue ? If governments go round breaking the law that is a cause to worry – and you USA guys should be ashamed for talking otherwise and you should be worried about the way the governments is overiding the boards of banks and the bondholders of companies.

  147. pstas

    This whole tale of woe about the poor auto workers is a crock. It stems from the general leftist view of society that that people are too dumb to fend for themselves. The notion that union workers were not in on the scam is laughable.
    This was a catastophe waiting to happen and they were all in on it – mgmt, workers; union thugs.

  148. merkhava

     I don’t like at all the way the chart ended today. After 3PM there was a selloff down to that 8440 line which held. So the 8440 line started off the morning as resistance and ended the day as a tested support level, with a final 15 min push up 40 points from the line.  Just sooooo depressing to see that.
     
    Now with the rumor circulating that GM is going to get a "massive" bailout to take bankruptcy off the table, I’m sweating bullets for the bearish play on the market.
     
    The potential that causes the most anxiety is that we open tomorrow with a gap up that is above and beyond 8520 on the DJIA followed with a very quick sprint over 8600 in the first few minutes. That sort of price action would preclude doing a double down and cover rescue play since the shock of it would be just too much to stomach. 
     
    Tonight is gonna be one of those no stressed out sleepless nights….. 

  149. EricL

    merkhava, JMO and feel free to ignore it, but if you trade more conservatively you’ll be able to sleep at night. Sleep = most important.
     
    Here’s Jansen’s bond update for today:
    http://acrossthecurve.com/
    Note his last point about the 5- and 7- year auctions this week. If the poor performance of the recent long-bond auction starts moving up the curve, we could see some serious dislocations.
    Hard to imagine that it wouldn’t hammer the stock market too.

  150. Phil

    Harbor/CM – Do you read the stuff you cite?  Cherry picking is slanting the results to say "First, all U.S. automakers are still losing money on every car (though the report notes that new agreements with the UAW, which let the Big Three employ people at lower wages and use them more flexibly, may help). Second, the news release notes that being a leading company is not just about how long it takes to build a car.

    So the comparison I cited was union vs. non-union and the part of the report you are citing is American vs. non-American cars, not really an apples to apples comparison but any port in a storm right?  The Big 3 are losing money on cars but the fact is that labor is 10% of the cost of the car and losses are more than 10% so the UAW can work for free and it’s not going to fix what’s wrong with these companies. 

    I’m happy to dramatize the facts when the lend themselves to dramatic conclusions – that’s why I’m a writer!  If you don’t like Gettlefinger’s sworn testimony to congress because you have some knee-jerk distrust of anything the man says regardless of the truth I can point you to documentation here but it’s also from the UAW.  Here is an article about the massive concession that are being taken by the Canadian UAW to keep GM alive.  Feel free to post any research to the contrary but I don’t feel like making this a research project since I have seen no contrary evidence and logic does dictate that, even if the workers were paid $100 an hour, unless it took them 40 hours to build a car, you couldn’t hang more than $4,000 on the workers while the interest on the bonds owed by GM alone is  $10Bn a year and that, divided by the 5M cars they will sell this year is $2,000 per vehicle in interest alone.  If they try to pay back the $100Bn they borrowed from bondholders over 10 years as well, that would be $4,000 per vehicle right there so if the company were to go bankrupt with  net tangible assets of -$86Bn (and that includes $41Bn worth of "property plant and equipment" of dubious value), the cash of $14Bn (all courtesy of the government), recievables of $7.7Bn and Inventory (again of questionable value) of $16Bn, there would be nothing left for the bondholders anyway. 

    If you allow the company to be flushed and idle the factories while you try to sell them off in order to get 10 cents for the bondholders then you move the defaulted benefits of 2M retired workers to who?  THAT’S what I would be pissed about – why should I, a US taxpayer, have to subsidize the bondholders who are willing to throw 3M current and retired workers to the wolves (not to mention another 3M in down-line parts suppliers, dealers etc) as they are thrown into unemployment and wellfare just so sanctimonious flag-waving constructionists can sleep well at night knowing their narrow interpretation of the constitution has been defended by the courts.

    Contracts/DB – Bankruptcy is all about breaking contracts, that’s what it is.  Bondholders need a company not to go BK to "win" otherwise they take a haircut with everyone else.  The problem with Auto bondholders is they took 14% notes against companies that were clearly on their last legs under the assumption that they would get a government bail-out which would insure their pay-outs.  Note in the financial bailouts, great pains were taken to keep the bondholders whole but the difference between LEH going BK and GM going BK is LEH had cash and convertible assets, GM does not.  The only asset GM has is its brand and theorical (at best) ability to make money making cars.  If you try to liquidate the company, there is nothing there at all.  A bankruptcy court looks at these things and makes decisions accordingly and, in this particular case, the Chrysler bondholders are actually going to get .29 on the dollar in settlement vs. what has been estimated at 0 (worst case) to 18 cents in a liquidation. 

    Also, from Tyler’s article on the subject:

    • While the three funds Indiana Treasurer Mourdock oversees have a face value of $42.3 million, the purchase price was approximately $17 million.  We expect they will receive $15 million, for a total investment loss of $2 million.
    • Under Chapter 11, Chrysler’s first lien creditors were allocated $2 billion (instead of the $7 billion in original debt). Ninety-eight percent of the first lien creditors have agreed to this allocation.
    • The Indiana Treasurer is willing to put Chrysler in liquidation over less than 1 percent of the three funds assets.

    So the bankruptcy judge must decide whether to allow Indiana, in contrast to the 98% of the bondholders who have agreed to take 29%, to roll the dice and shut Chrysler down and hold an auction for all the assets, hoping to get back more than 29 cents on the dollar for abandoned auto factories and bankrupt brand names.  This is not political, it’s rational business logic – for the 98% of the bondholders that agreed to this deal, it’s about salvaging a position before it goes to zero.

  151. Jim_Chacona

    Phil
    I find it amazing you have the patience to continue to support the GM/Chrysler – US Gov’t and citizen – UAW/CAW – auto parts supplier,  Ford/ Toyota/ Honda position with sound information and logic.  It is practically impossible to approach intolerant, fear based, idealogues with facts.  You know you’ll never get the last word.  Nevertheless, I appreciate your persistence in defending logical conclusions in the midst of fear based, self destructive hysteria.
    Jim_C

  152. eplasencia

    Phil,
    On the CAT play from the weekend you sold the Jan 2011 22.5 calls,why not go deeper in the money?If the div is the same the lower the call, the more we are getting back on the cov call, the less $ on the position thus higher the yield.What am I missing?Can this be called away from me before expiration?

  153. Phil

    Thanks Jim, I would rather not get into political debates here but sometimes they do erupt.

    CAT/Eplas – If you go too deep in the money it becomes worthwhile for your caller to exercise the option just before you go ex-dividend, forcing you to sell him the stock and allowing him to collect the dividend at which point he can dump it and sell a call to someone else the next day.  We don’t generally think in these terms but if you are a fund manager looking to collect CAT premium, you can buy the 2011 $10 calls for $25 (0 premium) which is a 30% discount and effectively boosts your dividend 30% as well as giving you the option of NOT exercising should the situation change.   I could take that position and sell the 2011 $30s for $10.28 reducing my capital at risk to $14.72 on a $20 spread and then execute the assignments on each x-dividend day, tying up the full $35 for maybe 8 days out of the year but still getting the full dividend on just $10.28 at risk for 357 days out of 365.  So you can play it that way but the 2011 $22.50s have enough premium ($2.30) where we don’t mind being called away and offer plenty of protection (40%) and the goal of this trade is to have a hassle-free position and just relax and collect premiums. 

  154. Jamie

    Read all your posts re GM, I havn’t seen anything yet that makes me money…
    But, I would like to know: How did Gettlefinget get to DC for the hearings when the Big 3 bosses got lampasted for flying in Corporate jets??? Does the UAW have a fleet?
    I’m curious because it is such a politically incorrect question that I didn’t hear anyone ask in the hearings.

  155. Cap

    "Bitter Old Man"  ???
     
    Ouch, Phil……
    I’m old ?

  156. Jamie

    Pluus, we are not a country of savages, at least I hope not. We cannot ethically deny the retirement benefits of defined benefit plans retirees of GM or any company. I don’t know whether they are covered by the PBGC which is massively undefunded. Either way, we (the USA) needs to make sure these retirees get what they were promised. We can’t have destitute ex-autoworkers shining shoes on the corners of every Florida business district!

  157. cm0819

    So, let me get this straight — Phil can say it is ok to trample on people’s constitutional rights because one approach (the Obama answer to the auto industry failure) is "LESS BAD" than the congressionally approved Patriot Act  of the Bush admin…
     
    And, Jim Chacona  can offer to the board that those that question the "Obama World" are intolerant, fear-based idealogues while those that do whole-heartedly endorse all things Obama are patient, persistent and the only ones capable of offering logical conclusions…
     
    Exactly, how do you expect our country to properly address the myriad of issues it currently faces while half our country believes the other half is intolerant, fear based idealogues capable only of generating self-destructive hystreia?
     
    Do you guys actually think before you talk?

  158. DB

    Yeah and Phil doesnt like us bears either !

  159. Cap

    Seems to me that instead of the Gov’t pouring in tens of billions to "save" GM, they should have simply let it feel.
    As for the GM retirees, a better use of gov’t (read: mine and your taxpayer money) would have been to guarantee those benefits instead of flushing it down the GM rathole.  But on the other hand, who is bailing out my 401k or your 401k or Ma and Pa kettle’s 401k.   So while GM retirees are certainly a cause to be concerned about, so are Madoff investors, and so are you and I.  Why should GM retirees get special treatment from the gov’t (with your money and mine).
     
    Its the picking and choosing of winners and losers that bugs the hell out of me, especially when the "winners" it is crystal clear that the current administration, and the majority in Congress (read Obama and Democrats) are bought and owned by the UAW (and certain other interest groups).   So the unions are getting this special treatment, that most do not get, because they bought the politicians making these highly questionable and possibly illegal decisions.  Obama "owes" them protection; and that’s why it is playing out as it is.
    As for the bondholders, it is disingenous to suggest that recent buyers of GM or Chrysler debt (clearly speculating on an outcome, but grounded in bondholder rights) are the same as someone else’s pension plan that may have bought GM or Chrysler bonds at 100 cents on the dollar once upon a time, those folks are getting completely hosed.  So Indiana may not lose so much money on Chrysler bonds; but some of these other bondholders will.  And that group includes retirees as well, just not necessarily UAW retirees.  And don’t forget the shareholders who get wiped out.
    It is also disingenuous to suggest that Indiana is the "lone" holdout.  There were many holdouts; except Obama and Rahmbo and others bullied and threatened them and called them names like unpatriotic and greedy.  So they took their moral high ground and ran.  Good for those that don’t; I am all for them asserting their rights.  I don’t see how anyone can question that.

  160. Cap

    let it "fail" (not feel).

  161. cm0819

    To say you prefer not to have political debate on the board while offering "political tidbits" like your earlier "off-the-wall" statement (2:02p) that trampling on people’s constitutional rights is ok if it is "less bad" than other events that trample on our rights .. well even someone as patient and capable of offering logical conclusions like you should expect some "kick-back". 
    If you truly prefer the board to be "politics free" during market hours, strongly recommend you a stay away from offering your politcal perspective during market hours. As you know, it is you who that primarily drives this boards content.

  162. Cap

    Anyone with a point of view or trying to understand the implications of Chrysler should watch this interview:
     
    http://zerohedge.blogspot.com/2009/05/indianas-richard-mourdock-makes-his.html

  163. pstas

    "just so sanctimonious flag-waving constructionists can sleep well at night knowing their narrow interpretation of the constitution has been defended by the courts."
    Oh that Constitution, what a pesky impediment.
    What a tempting target , those evil bond ghouls. Let’s get the pitchforks!

  164. jomama

     has anyone been playing or looking at tbt?  this mofo has some crazy premiums.

  165. RichardA

    Since the topic of the night is GM, is anyone else buying puts?

  166. DB

    Good Morning – Anyone want to talk markets ? Hope Merkhava got some sleep.
     
    Doesn’t look like we’ll get an explosive opening – everything is pretty flat at the moment. UK +5 (0.1%) S+P futures about the same. Lots of comments on the Bond markets this morning – everything from "they’re great" to "we’re gonna crash". (About the same useful commentary that we get on the stock markets.) I’m still expecting a really big pull back because the economics dont justify the rally but, and this is doing my head in, I have more bullish positions than bearish. Consequently trading is no fun at the moment.

  167. where

    Mornin’ from Scotland, actually getting on lunch time here…
     
    Anyway, yea DB I’ll talk markets.  Last week I took out my callers on my bearish positions (FAZ, FXP and DUG) for a bit of profit.  I was leaving some upside for those positions expecting a pullback yesterday.  I thought the home prices were going to give me the boost I needed pre-market but I just got creamed by the consumer confidence.  Oh well…such is life.  At least my bullish positions did nicely yesterday, especially WMT.
     
    I think I may be changing my tactics here, and I’d like to see if you agree with me.  I think we are honestly heading into a period of stagflation, where assets and especially commodities see price increases while wages deteriorate.  The stock market fits into the commodities zone and will refuse to behave according to wide market fundmantals until we see an honest economic recovery.  With the dollar getting crushed, treasuries scorned, interest rates low and the need for returns everpresent the market will keep on trucking.  How the gravy train wrecks is a matter of debate, but I suspect the time the Fed starts bumping up interest rates to reign in inflation we’ll see the markets correct big time.  Until then…

  168. DB

    Loads of articles on seeking alpha about how the markets are going to tumble. They’ve been saying that for weeks and no matter how much I want to believe they’ve been wrong so far. Markets now starting to lift upwards. S+P +$0.32

  169. ramana

    Good Morning DB, where, Phil & all

  170. DB

    Where – Wages are already deteriorating. Just 5 minutes ago I saw a note on the wires that Eltec (dont know who they are but the point is …) had cut Management salaries and workers jobs. This seems to be a trend. Conventional wisdom says commodities will go up to cover the dollar going down. I am quite short the dollar but its only really a hedge because I’m UK based and want to protect my investment in £s. I think that some point soon a treasury sale will fail because everyone is raising cash by selling bonds or equity and there aren’t that many willing investors left. This may spark the big correction you mentioned. So yes I’d agree but the big question is in your last two words – WHEN ?

  171. DB

    oh and with S+P price/earnings around 30 theres an indication of a 50% fall to bring them down to 15 which is apparently still above average for recessions…..

  172. neverworkagain

    I am wondering whether I should capitulate on my Bearish slant for the good of fellow Bears, as I’m sure the whole market will tank the day I do. Despite a lot of market neutral profits, I just can’t keep myself from loading up on directional bearish positions despite constantly fighting the tape…. which is unfortunate given my #1 trading rule staring at me on my desk is "Follow the path of least resistance. – Jesse Livermore".

  173. DB

    neverworkagain/where – There are many more bears than you think
    Option open interest heavily favors a downward movement in the near term. The SPY is currently at approx. $91.31. June 20 SPY puts show open interest of (from TD Ameritrade):
    90 put = 181K
    85 put = 129K
    80 put = 187K
    75 put = 153K
    70 put = 127K
    65 put = 194K
    Total = 971K
    The June 20 SPY calls show open interest of:
    95 call = 114K
    100 call = 124K
    105 call = 15K
    110 call = 15K
    115 call = 13K
    120 call = 7K
    Total = 288K
    That’s a better than 3 to 1 ratio bias to the downside.

  174. ramana

    Asia Markets :    Wednesday, May 27, 2009
    (The following is from Yahoo; please cross check with other sources to confirm.)   

    Australia All Ordinaries*                               3795.30           13.70         0.36%
    Nikkei Average*                                              9438.77        127.96         1.37%
    Shanghai Composite*                                 2632.93           44.35         1.71%
    Hang Seng*                                                 17885.27         893.71         5.26%
    Seoul Composite*                                       1362.02           -10.02        -0.73%
    Singapore Straits Times*                           2306.08            67.29         3.01%
    Bombay Sensex*                                       14109.64          520.41         3.83%
    Baltic Dry Index                                           2942.00          156.00         5.04%

    *at Close

  175. where

    DB – I know it all seems like it should make sense, but it just doesn’t work that way.  I agree the market needs a correction to align with fundamentals but it isn’t going to happen till there is a better place to put cash.
     
    Where are institutional investors and middle class folks going to put thier cash?  They want to earn the best possible return and that is only available in the stock market right now.  It’s all just another tremendous stock bubble forming, but like I said wait till there are large "safer" bond investments available at higher interest rates and I bet you’ll see a huge swing out of the markets.  Large institutional investors are just as nervous about this rally as the rest of us, but they are stuck long the market until they have another option.

  176. ramana

    Asian Markets Hit 7-Month Highs on Economic Hopes

    Asian markets rose Wednesday to their highest level in more than seven months after a jump in U.S. consumer confidence reinforced expectations the global economy has hit a bottom, even if recovery appears fragile. The safe-haven yen fell, while currencies seen as riskier bets, such as the Australian dollar, advanced. In another sign of improving investor confidence, crude prices pushed to a six-month high above $62 a barrel.

    The bolder mood from investors follows a couple of days of caution after North Korea sparked alarm by conducting a nuclear test and launching short-range missiles, and week long fears that the United States could lose its top-notch AAA rating.

    Japan’s exports showed modest signs of recovery in April with shipments to China declining at a slower pace than a year earlier, providing further evidence that the worst of the global slump in trade may be over.

    Japan’s Nikkei rose 1.4 percent to close at its highest level in roughly two weeks, with exporters such as Sanyo, up 7 percent, gaining ground after U.S. consumer confidence surged.

    South Korea’s KOSPI turned lower to end down 0.73 percent, as the latest developments in North Korea highlighted South Korea’s geopolitical risks, but gains in techs including LG Electronics lent some support.

    Australian stocks rose 0.3 percent, as export-driven companies were driven up after consumer confidence data in the United States gave hope of an economic rebound.

    Hong Kong’s Hang Seng Index scaled an eight-month high in resurgent volumes, up 5.3 percent, with encouraging consumer confidence data from the United States shining the spotlight on a likely global economic recovery.

    Singapore’s Straits Times Index was 3 percent higher.

    China’s Shanghai Composite Index gained 1.7 percent. PetroChina rose sharply as crude oil hovered near a six-month high above $62 per barrel, while a sharp jump on the global dry bulk freight index sent shares in China Cosco up.

    Bombay Stock Exchange’s Sensex settled at provisional 14,095.97, higher by 506.74 points or 3.73 per cent. Stocks rallied Wednesday buoyed by strong cues from overseas markets. Also, with the derivatives series expiry for May due Thursday, traders covered short positions. Realty, banking and power stocks were in the limelight.

  177. ramana

    Economy Hopes Lift Euro Shares

    European shares rose in early trade on Wednesday, led by banks and tracking gains in overnight markets after U.S. consumer confidence data fuelled hopes of an economic recovery.

    The FTSEurofirst 300 index of top European shares was up 0.4 percent at 868.50 points. The index has risen 5 percent in May and is set for its third straight month of gains, its best winning streak in two years.

    Banks were broadly higher, with UBS, Royal Bank of Scotland, Credit Agricole, Societe Generale, Lloyds and HSBC adding 1.4 to 3.3 percent.

    On Wednesday, drug stocks slipped again, with Novartis, Sanofi-Aventis and GlaxoSmithKline, down 0.4-0.7 percent.

    Analysts said equities gains were fuelled by central banks pumping liquidity into the system, and were set to continue.

    Among top losers on the FTSEurofirst 300 was Britain’s Tullow Oil, which fell 1.5 percent after saying it had plugged and abandoned a well in Uganda.

    The FTSEurofirst 300 has risen nearly 35 percent since March 9, when it hit the lowest point in its 12-year lifetime, and is up 4.4 percent so far this year.

    In the year to date the DJ Stoxx European basic resources sector index has surged nearly 40 percent, while the banks index has risen 22 percent.

    On the other hand the DJ Stoxx European food and beverage index, a defensive sector, has gained just 2.3 percent, while healthcare stocks, utilities and telecoms are the three worst performing sectors, down 6.1 to 8.4 percent.

    Around Europe :

    FTSE     4,411.06    – 0.66    – 0.01%
    DAX        4,996.31     10.71     0.21%
    CAC         3,292.92     22.83     0.70%
     

  178. ramana

    Oil Hits 6-Month High Over $63, Saudi Sees Recovery

    Oil rose to hit a six-month high above $63 a barrel on Wednesday after OPEC kingpin Saudi Arabia said the global economy had strengthened enough to cope with oil at $75-$80 a barrel.

    Speaking ahead of the OPEC meeting in Vienna on Thursday, Saudi Oil Minister Ali al-Naimi said oil prices would continue to rise, recovering from lows near $32 at the turn of the year. "The price rise is a function of optimism better things are coming in the future," Naimi told reporters in Vienna."We see offshoots of recovery," he added. "Demand is picking up, especially in Asia."

    U.S. crude oil [ 63.13    0.68  (+1.09%)] for July delivery rose to its highest level since mid-November, before easing slightly.
    London Brent crude [ 62.04    0.80  (+1.31%)] rose.

    Global oil demand is seen falling at the fastest rate since 1981 this year, with the International Energy Agency, adviser to 28 industrialized nations, predicting a 2.56 million barrel fall. Crude inventories have risen to around 62 days of forward cover, but expectations of a slight drawdown in U.S. crude inventories are lending support to prices, analysts said. A preliminary Reuters poll ahead of U.S. weekly inventory data showed forecasts for a 1.1 million drawdown in crude stockpiles and a 1.8 million decline in gasoline stockpiles last week.


    Dollar Inches Up on ECB Remarks; Cable Hits $1.60

    The dollar rose against the euro on Wednesday after a European Central Bank policymaker said further interest rate cuts couldn’t be ruled out, but it fell against a buoyant British pound, which reached $1.60.

    The euro, [ 1.3954    -0.003  (-0.21%)    ] which has risen about 10 percent in three months to hit a four-month peak above $1.4050 last week, was back below $1.40 on Wednesday, down on the day.

    The dollar was up 0.2 percent against a basket of six major currencies at 80.21, although it was still within sight of a five-month low set on Friday just below 80.00.

    Sterling [ 1.6032    0.0108  (+0.68%)   ] was up versus the dollar, having traded as high as $1.6023.

    The dollar was up against the yen, [ 95.26    0.25  (+0.26%)    ] the euro was also up versus the yen [ 132.92    0.05  (+0.04%)    ] and sterling touched its strongest level since November at 152.79 yen, [ 152.68    1.37  (+0.91%)    ] according to Reuters data.

    The biggest mover among major currencies on Wednesday was sterling, which rose above the $1.60 level against the dollar and gained almost 1 percent against the euro. The euro was last down 0.9 percent at 87.00 pence, close to testing key technical support at the 200-day moving average of 86.78 pence.

    Gold holds below $950/oz as dollar weighs

    Gold was bid at $949.05 an ounce at 0902 GMT (5:02 a.m. EDT), against $951.25 an ounce late in New York on Tuesday.

    "In Asian trading, the dollar index recovered slightly, which led to profit taking in gold," said Peter Fertig, a consultant at Quantitative Commodity Research. A firmer dollar generally weighs on gold, which is often bought as an alternative investment to the U.S. currency. Strength in the unit also makes dollar-priced gold more expensive for holders of other currencies.

    Underlying demand for gold remained relatively quiet, with holdings of the largest bullion-backed exchange-traded fund, the SPDR Gold Trust, little changed on Tuesday. Physical gold demand in the world’s largest bullion market, India, remained sluggish meanwhile as high prices deterred buyers, traders said.

    Elsewhere silver was at $14.48 an ounce against $14.55. The metal is tracking gold lower but is likely to be supported by strong investment demand, analysts said. Among other precious metals, platinum was quoted at $1,136 an ounce against $1,132 late in New York on day, while palladium was at $228.50 against $229.

  179. kustomz

    I will be watching for the dollar to bounce before i get bearish, looks to be oversold.

  180. Phil

    Good morning!

    Old Cap – I have a fair degree of certainty that your views will not be changing with age!  8-)

    Thinking/CM – I’m very disappointed in you.  Why does your argument so quickly deteriorate into attacks on the people who are making a point?  If you want to have a dialog about supporting or not supporting a position, try to use facts, figures, precedents, historical comparisons etc.  If you are going to try to convince us "bleeding-heart liberals" (apparently anyone who doesn’t agree with you), claiming that we disrespect the constitution (where exactly?) or that we are calling you intolerent etc. isn’t really going to sway us.  We prefer to deal in facts and discover truths (which we hold to be self-evident) in order to make decisions.  Labeling everything with a catch--phrase from Fox news is very unlikely to change our minds.

    Picking winners/Cap – Where was that outrage when BSC and LEH were allowed to die while JPM and GS were chosen to be given gifts?  What special treatment is the union getting?  They are exchanging the very legitimate benefit claims of their membership that was effectively stolen though years of mismanagemnt of pension obligations.  This is one of the reasons the bondholders are so screwed but we’ve been talking about unfunded pension obligations for years so I don’t give the bondholders a free pass – their expectation was the UAW would fold and they would screw the retirees and take their cash.  Sorry it didn’t work out for them, boo hoo….  The fact of the matter is 98% of the bondholders acquiecced, I’m anxiously waiting for your citations from them that Obama threatened them and called them names and that they felt coerced into giving up their rights.

    Politics/CM – I do my best but sometimes when I see people spouting nonsense I can’t resist the urge to say something.

    TBT/Jo – Hey, this is no forum for idscussing the markets!  Oh wait, yes it is….  I think the premiums are actually a little low for the volatility we’re seeing, they are up 10% since last week!  I think a buy/write on them is great as long as you can be patient because, even if they fall back to the March 9 low of 35 (massively unlikely) all you have to do is buy more and wait unless we expect rates to stay below 2% for many years and, even then, we can still sell calls every month.  So I like the stock at $55, selling July $53 puts and calls for $6.60 for net $46.40/49.70.  Not a huge discount but a very solid addition to a portfolio.

    GM/Rich – We did a hedged play last week that paid off but shorting near $2 was a no-brianer, there are too many crazy people buying GM to short them at $1.34.  If they havfe another good run, ask me again though!

    DB - I heard even Roubini is capitulating, haven’t found the article yet….

    Stagflation/Where – Marc Faber agrees with you, I just saw him on TV talking hyper-inlfation and I’m in that camp long-term but it’s tricky to make the assumption short-term.  I really don’t understand how we seem to have decided that consumer confidence equals recovery despite massive data showing that there is no recovery yet.  Kudos to the administration for resoring confidence but if we keep losing 600,000 jobs a week, we’ll only have the most confident soup kitchens in the world…

    SAlpha/DB – Remember this is why I try to make sure I spend at least 25% of my time reading people who totally disagree with me (and I filled my quota yesterday just reading cm0819′s comments).  As for me, you know I think we have a bottom here but I also think we should be consolidating on the lower end of the range, which would be 7.5% to 2.5% below 8,650, around 8,000 to 8,450 is my comfort zone and the less time we spend at the low end, the less comfortable I am at the high end.  With low volume like we’ve been having, it takes a very long time to firm up a base, which makes it hard to get excited about these low-volume moves up, exciting though they may be…  Be careful shorting the dollar here as this is often the point (80) at which it rallies back.  As to the S&P, I did a whole article on that a while back, you can’t count AIG and other financial losses in your S&P value and apply that logic to saying the whole S&P is overvalued – that is a very doomed logic in my opinion.

    Least resistance/New – I’ve been taking bearish bets at the "top" too, we haven’t hit a bottom (below 8,200) I’ve wanted to buy in for ages so the solution is cash with light trading.

    1.45M/DB – Yeah, like you creditors will ever see that money!

    Oversold/Kustomz – As long as 80 holds, we should get a move up.  We need to watch gold at $950 very closely as well as $62.50 oil.  If those break up, then the dollar is probably in for another 5-10% dip.

  181. Cap

    I was outraged over BSC and LEH — you can look it up.
     
    POT down pre-market.   Covered my shorts from yesterday   :grin:

  182. bcfla

    Hey phil – the vix may be down in 30′s but the vol here on the board was a bit higher than usual yesterday…it was distracting as it is hard enough to follow the posts about the trades – especially after a long weekend…if the talk is part and parcel to a trade or something economic in nature, that is one thing, but I must say that as a paying member FOR market feedback (which I feel is a great value, by the way), I was put off a little that this went on so long – now here we are today still re-hashing – no less where it is getting personal…perhaps my expectations are misplaced, but neverthesless, I have expressed my opinion and."
    anyway, re: TBT -
    I am naked 2 July 50′s calls now ($4.85) and naked 2 June 54 puts at about $2.50…I figured my worst case is I get called at 57-58 (if it goes beyond that level, I will close out or roll) I have broken even, given the premium I have collected…The mistake I have made was assuming that after last week’s run, there would be a pullback in these where I could buy the shares…yes, yes, clearly the problem with being naked calls.
    However, given the premium collected, I am ok for now, but starting to think about it…As of now, the options, if I were to roll, will net me about a $250 loss as delta much higher on the 50′s
    what are your thoughts on this

  183. cm0819

    Phil – paint the picture of a big bad republican that lives thru Fox news as much as you prefer – it is your sight.
     
    I never called anyone a "bleeding heart liberal" like you imply above but that sure is a convenient phrase for you to randomly throw in the arena to try and label me as one that is not capable of understanding the view from the left.
     
    Just because one disagrees with you does not mean they are a "Fox News hynotized Republican" even thought that continues to be a very consistent label and weak position those presenting a position from the left always fall back on. When in doubt — label!! to which both Dems and Reps are guilty.
     
    Just recognize you began this event by offering a statement that indicated it was ok for the Obama admin to trample people’s rights but if the Bush admin does the same it is unacceptable. We seem to strongly disagree that it is ok and acceptable to trample on people’s rights based on the degree of trampling and by which party.
     
    Other than challenging you no where yesterday did I attack anyone on PSW.
     
    Sure, we can both present lots of facts and truths to bolster our beliefs. As I mentioned earlier, the problem with presenting the facts and truths is our political arena has deteriorated to the point where each side cherry picks the facts and sources that best fit their agenda and we have lost the one thing that is mandatory for debate and constructive discussion -- THE ABILITY TO LISTEN. All everyone wants to do is trample on the other side whenever they talk or present. 
     
    To me, both Dems and Reps have lost any semblance of listening and have mastered the art of trampling. So when you began this event on Tues with your statement about it is ok for Obama to trample but not Bush — well I believe you are better than that and that we could have had a discussion about why both parties need to stop trampling .. but that was not to be — too bad!! 

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