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Why Worry Wednesday – The Recession Is Over?

Uncle Ben says the recession is "very likely over" yesterday:

Even though from a technical perspective the recession is very likely over at this point, it is still going to feel like a very weak economy for some time as many people still find their job security and their employment status is not what they wish it was.   

Yeah, it sounds better in the headlines than when you quote the whole sentence and watching the video gives you even less confidence.  Speaking of confidence – I reminded members yesterday that there is no economic forecaster we should have less confidence in that Ben Bernanke:

  • July 2005:  "There was no housing bubble and housing prices are supported by the strength of the economy." 
  • Nov 2006: "The motor vehicle sector is already showing signs of strengthening" and "The rate of decline in new home construction should slow as inventory is worked off."
  • Feb 2007: "We expect moderate growth going forward.  There is not much indication that sub-prime mortgage issues have spread into the broader mortgage market."
  • July 2007: "Home sales should ultimately be supported by growth in income and employment…  The global economy continues to be strong.  Overall the US economy is likely to expand at a moderate pace over the second half of  2007, with growth strengthening a bit in 2008."

$9,000,000,000,0000 in bailout spending later, Mr. Bernanke is now telling us the recession is LIKELY over and that’s good enough for our man Cramer to tell his sheeple: "Sentiment is so negative right now it’s out of synch with reality.”  This clip is worth watching just to hear the way Cramer sneers the phrase "Nobel Prize-winning economist" as if that title, by itself, means you should dismiss Joseph Stiglitz out of hand as he warns that current bank problems are bigger than pre-Lehman.  Cramer calls Stiglitz’s article: "So stupid, wrong and anti-empirical that it’s just downright silly that it doesn’t even dignify the use of video-tape or digital or whatever they do now."   I know this sentence makes no sense but it is an exact quote

Jim does manage to plug his new book during this tirade against the man who has been working with the EU and other top economists to change the way GDP is measured to focus on actual improvements in the lives of the citizenry rather than just the corporations.  GDP has long been an inaccurate measure of a country’s economic prosperity:  It can make countries like Malaysia, who are tearing through their natural resources, look wealthy when, in fact, they’re enjoying a short-lived bubble and making no real progress.  Stiglitz says:

In the years preceding the crisis, many in Europe, focusing on America’s higher rates of GDP growth, were drawn to the US model.  Had they focused on metrics such as median income – providing a better picture of what is happening to most Americans – or made corrections for the increased indebtedness of households and the country as a whole, their enthusiasm might have been far more muted

Stiglitz’s proposed model takes into account factors like income disparity, health care, happiness ratings, environment, leisure time – many things that make capitalists cringe so it’s no wonder that Cramer is spearheading the character assassination team because, if you think health care is being fought by corporate interests and the MSM, wait ’till you see the backlash against measuring GDP as if the health and happiness of the workers mattered!  "That’s why," Cramer says, his new book has a "Rule #17: Just because somebody has a Nobel doesn’t mean they know anything about investing – or even the economy."  John Stewart and Don Harrold have already said plenty about Cramer’s own Economic forecasting ability so I’ll just leave his wisdom at that for now.

Asia jumped on the headline "Recession is over" data and the Hang Seng rose so fast that the graph couldn’t keep up with the buybots on that index.  They stopped at the 2.5% rule with a 536-point gain on the day that took the Hang Seng back to the levels of August 2008.  Exporters led the rally on "strong" US Retail Sales numbers but the Shanghai dropped 1.1% as government data showed investors opened fewer trading accounts in August (no money coming off the sidelines).  Keep in mind that the Shanghai is not open to foreign IBanks so the Gang of 12 has to concentrate on the Hang Seng to stir the pot in China.  The Nikkei had a wild day as the dollar was jammed back up to 91 Yen just in time for the Nikkei’s open (9pm) and that gapped them up 100 points, but almost all of the gain was erased in a massive afternoon sell-off as the dollar failed to hold 91 Yen into the close. 

UK unemployment hit a 14-year high this morning but that’s not bothering Europe, who are up about 1.5% ahead of the US open.  The OECD is predicting unemployment to hit 10% across the developed nations, the highest level since WWII with 57M people out of work by next year, double where it was in mid-2007, when Bernanke and Cramer were last telling us to BUYBUYBUY.  The OECD is counting on the US to be above the average while the euro zone’s labor market will suffer greater damage, it said. In Germany, France and Italy, the euro area’s three largest economies, unemployment is likely to reach 11.8%, 11.3% and 10.5% by the end of 2010, respectively.

Our CPI came in blazing hot, up 0.4% but all the money went to commodity pushers so it doesn’t count and Core CPI, which reflects what prices producers are able to pass through, fell to 0.1% depsite the move up in production costs.  I’m no Nobel Prize-winner yet but that seems to me like there may be some margin pressure in August….  Despite the "surge" in demand from cash for clunkers – dealers still dropped their pants and new car prices fell 1.3%.  Housing, which accounts for 40% of the CPI, was up 0.1% in our amazing recoveryless recovery.

I’m sorry to say I’m still urging caution.  We won’t be too impressed until we see 1,056 hit and held on the S&P and 6,959 on the NYSE – those are our last two 33% off the top levels we need to cross.  We should open right there this morning and it’s a good place to take some speculative shorts like the DIA $97 puts for .60 as they would be a great ride down on a pullback. 

 

 


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  1. Cap

    The pump monkeys are everywhere !
     
    Like clockwork, Merrill/BAC out w/ AMZN upgrade on the Wed of options expiration week, shooting AMZN over 85.

  2. dstillwe

    AMZN.  I need those AMZN pump monkeys today, Capster.  I’m becoming a little bearish longer term – you, others here and Jobs are wearing me down.  And I think the Kindle (as it is now) may die a horrible death soon.   You hate their retail prospects – how much does Aplle and Sony blowing them out of the reader market impact the bottom line?  (Anyway, I’ll use the pumps to keep writin’ front month calls.)

  3. EricL

    Core CPI up 0.1: almost nothing and in-line with expectations. The headline number of 0.4 only due to energy costs.
     
    This means corporations are likely eating much of the difference between yesterday’s PPI number and today’s CPI.

  4. ssdirk

    Another lesson learned:  I was waiting until today to roll my short FXP Sep 11 put.  Well, I got assigned at 7:30 this morning.  Arrrgh!! 

  5. EricL

    If this market ever goes down again, I would expect it to happen on a day like this where we get a gap up at the open that sellers can sell into. Not making any big bets on it though.

  6. ocelli7

    the dips keep getting bought and the market keeps going up without much of a pullback. It is extended and could correct at some point but fighting the tape has not worked for me, even if the fundies don’t support it.
     
    mostly in cash and missing the run……….

  7. chakra108

    Phil
    I have been struggling with receiving alerts into my inbox for the last week. I even switched from Yahoo to Gmail but no avail.And you know how cumbersome it is for some of us to stay glued on the chat page.We are fully dependent on receiving the alerts into our inbox. For the whole of yesterday I recd two alerts from you and this morning I havent recd the early morning comment. I am simply writing out of frustration. Your team is working on it but its been three days. Maybe you need to encourage them to go back to the drawing board with the whole set up.I am sorry to be venting but this is simply giving me no choice.Thanks.
    Chakra

  8. David Ristau

    Good Morning all,

    Recently changed the format of The Oxen Report. Get right into the picks now instead of dilly dallying around. I think it is a bit more effective. Would love to get your opinions. Link is here. Just leave me a comment on the page if you don’t mind. Thanks! I appreciate the help greatly. Let me know if you have any stock questions on the page.

    David Ristau

  9. matt1966

    Good point Eric.  It’s hard to think about us correcting.  But that’s precisely the time it happens.  And since it’s oe week.. anything could happen.  But it sure as heck didn’t during last months..  If not this week, then a spike up Monday at open will be followed by our long awaited correction!  But then if I had a nickel for everytime I said that I wouldn’t need to look for a correction..

  10. stockoptions88

    Phil – any adjustments needed for AMZN short straddle?

  11. Phil

    Good morning! 

    We are still focused on 1,056 on the S&P and 6,959 on the NYSE, which are our breakout levels and our higher 33% off the top numbers that we need to get through to really push our range up

    Keep in mind that the Hang Seng and Shanghai are up at Aug 2008 levels and we need to be 10% higher to get to ours – that means we should have virtually no resistance here and, if we do, then something is wrong.  

    XLF needs to break 15, QQQQ is right at the critical 42 mark (Nas 2100) oil is at $71 and gold just failed to hold $1,020 so we’re either breaking out or this was a spectacular blow-off top.

    In the morning post I picked the DIA $97 puts at .60, now .68 so I’d rather take the Oct $97 puts at $2.25 for  a momentum trade to the downside – out if the S&P and NYSE break over our leves – simple enough?

  12. sarahd

    AMZN is hitting $87 any moves on the 85 Calls and Puts?

  13. ssdirk

    I guess it is worth repeating again.  PARD Dec 5 call and put now at 6.50 mark on a 7.82 stock.  Before long this will be a free bet.

  14. merkhava

    Hey Phil…. Pretty fun week for trading this week… if you had bullish positions
     
    I started playing the WSS contest for the options portfolio… I’m on your buddy list at WSS
     
    This morning I closed a bunch of positions at the open and I got myself into the top 20 for the month and #3 for the week after just 5 days of trading and about 30 transactions… out of 6981 option players who are playing
     
    I’m scaling into puts now
     
    Who wants to race and be the first to $1 million?… chuckle

  15. jlui_tx

    Phil, for $100KP, I have sold AMZN Sept  $85 Calls for $0.88 and $85 puts for $2.02 and now AMZN is over $87. What need to be done? Also, I have filled the ERY Sept $15 puts for $0.60 nad now is $1, should I roll it?

  16. yodi

    same question as sarahd on AMZN

  17. oncmed

    Phil what ya think about C 4 putters @ 0.25 for an entry?

  18. 1020

    QCOM and NTRS look like decent shorts…..

  19. Phil

    By the way – lots of interesting chat last night and into early this morning if you missed it

    Monkeys/Cap – This is what happens a lot in a blow-off top.  There’s this mania by the MSM to shout down all opposition and the Gang of 12 starts throwing out upgrades to slap down the bears wherever they start to short.

    DIA – If you couldn’t get a .50 roll-up to the Dec $99 puts this morning, switch brokers!  We are naked on these at $5.45 and they are now the official put position. 

    AMZN $85 puts, if you have them, can be rolled about even to the Sept $90 puts and that needs to be done if they don’t drop back below $86 by lunch.

    FXP/SS – You can keep the stock at net $10 and sell the Dec $9 puts and calls for $2.50 for $7.50/8.75, which isn’t a bad position.

    No bets/Eric – I know, it’s just too scary to be a bear.

    Volume just 31M at 9:55 so still very light.

    Fundies/Ocelli – Yes we are too light on the upside right now and we do have to capitulate and buy next week if we’re holding on the S&P and NYSE.

  20. stockoptions88

    ssdirk – Why is PARD’s IV so high when the HV looks to be so low?

  21. ssdirk

    Phil, I must be learning a little.  That is exactly what I did on FXP before your comment.

  22. yodi

    Phil hold AMZN call sep +85 and put + 80 shall I roll over to oct c 90 and p 80 ?

  23. doro165

    Are we rolling the RIMM sept 80 c to Oct 85c?

  24. smasher

    SRS ground to a pulp for another day. 

  25. yodi

    Hi Phil hold GE short 14c and 15p any suggestions?

  26. 1020

    Good Morning Phil. What are your thoughts on FXP below 9 bucks?  Thank you

  27. ssdirk

    SO88 – I am not experienced enough to answer.  I have just been watching the time value increase over the last couple of weeks.  It is coming down since my last post.

  28. aclend

    Phil, I’m long SU Dec 37c and BTU Dec 50c both up about 40-50%. If i think the shares have about 15-25% more upside over the next 3-4 months, should I sell higher calls now, then I would be hedged and could lock in a profit in case of a pullback. I prefer to not just stop out because I think there is more upside but I would hate to hold on while/if it goes negative or break even. I get in this situation quite a bit when I have a nice profit but think there is more, yet fear losing what I have…classic approach/avoidance conflict. What do you think?

  29. 1020

    mmmmm SRS……

  30. kellyman4

    Phil missed GE play yesterday can I still play selling oct 16 call, oct 17 puts for a play on GE 14 calls

  31. merkhava

     Whatchya think Phil?…. 
     
    BIDU at the 400 resistance target
    AIG looks like it will pin on the 40 strike going into OE day
    FSLR strong gap up over the 140 resistance line this morning… could make an OE week run to the 154 resistance level
     
    it’s been good beta day… premiums are nice and fat for the final two slide into OE day

  32. Phil

    Alerts/Chakra – Matt and Kyle are working on it and expect a fix later.  It seems our recent growth has strained the Alert system and they are adding another server and reworking the program.  I am sorry we could not resolve this issue within 24 hours of you raising it yesterday morning – I promise to whip both Kyle and Matt severly at the next programming meeting.   8-)

    AMZN/Stock – Roll as above if we don’t turn lower.

    PARD/SS – Always a good reminder.  PARD at $7.76, Dec $5 puts and calls are $6.30 which is net $1.46/3.23 with a call away at $5, up 242% if PARD falls less than 35% in 3 months (and we like them long-term anyway)

    $1M race/Merk – That’s a great idea.  I’m waiting until they have the new spreads working and then I intend to open a more aggressive $100KP there and it would be a great idea for us to have a competition over at WSS.

    AMZN/Jlui – Congrats on the $85 puts dropping down to .40!  As I mentioned above, the $85 puts are just $2.75 and they can be rolled to the Oct $90 calls, now $2.50 and that’s not even taking into consideration that you can sell the Oct $85 puts for $2.60 at the moment so patience is still a virtue (until noon).

    C/Oncmed – I take it you mean October.  I’m all for that. You can always sell the Dec $4s if they drop to .50 to lower the basis to $3.25 and you just have to buy if they bust back over $4 with a low net when/if they bounce.

    Transports not participating today.

    Shorts/1020 – Lots of things look like decent shorts but look what happened with AMZN…

    PARD/Stock – Because they are anticipating study results and PARD is kind of a one-trick pony.  Our bullishness is based on the initial studies plus the fact that they nailed down enough funding already to ride out a poor result but it will be a long year waiting for a re-test if they fail.  Hopefully we will be out before the results are even in.

    FXP/SS – Ah, that makes me happy, good job!

    AMZN/Yodi – Are those sold short?  If so, that’s a good roll but wait until lunch at least.

    RIMM/Doro – I have no fill on that, what did you sell? 

    SRS/Smasher – As I said yesterday, at this point we’re looking to DD at $8.50.

    GE – We’re just going to roll them but they are killing us but we’ll have to wait and see what sticks.

    ZION just broke $20 – clearly the recession IS over!

    FXP/1020 – I love them down here.  If the US doesn’t climb 10% very soon then China could snap back big-time.  FXP March $5s are $4 and you can sell the $9s for $2 so that’s net $2 on the $4 spread.  The 2011 $5s are $4.70 but you can sell the 2011 $9s for $3.30 so that’s also a good deal as a long-term hedge.   Oct $9 calls at .55 make nice weekend protection as they shouldn’t lose too much in the next week but they could easily double on a China dip (FXP was $9.40 yeterday)

  33. matt1966

    In trying to hedge my SRS position, I just tried to short SRS and was told by Scottrade there are no more shares available.  That’s never happened….

  34. jlui_tx

    Phil, I don’t quite understand your statement "AMZN $85 puts, if you have them, can be rolled about even to Sept $90 puts and that needs to be done if they don’t drop back below $86 by lunch".  I have the AMZN $85 puts, if I roll to Sept $90 and if AMZN does not move over $90 by Friday expiration, I’ll be obligated to buy at $90. Is that what we want to do in the $100kP?

  35. doro165

    the RIMM condor from Monday. Selling the 80 c/p and buying 85c and 75p. Bought back the put yesterday for a nice gain. Thinking it would make sense to roll the 80C (1.09 cost) to the Oct 85C now at 4.65.

  36. javaben

    Re GE 100KP – Just able to log in and take a look at the markets.  Appears I don’t have a full understanding of TOS Stops.  Thought I had it set to stop at $2.20, but it was still ‘working’ just now instead of triggering and taking me out.  So I took myself out manually at $2.77…..ouch.  Another lesson learned – don’t take anything for granted….should have paper traded the stop entry before I just assumed I had them set correctly on TOS.

  37. merkhava

     wow… SRS Sep 10 calls went out of the money this morning… what an annoying little ETF that one is…
    like a rat that steals your cheese then poops on your mouse trap

  38. yodi

    Yes Phil I am AMZN short 80p and 85c shall I roll to oct 80p and 90c ??

  39. stockoptions88

    Phil – AMZN Oct $90 calls now $2.9 while Sep $85 calls are $3.35. Its going to cost us to roll to this strike now. Should we go to Nov instead or just pony up the money to roll to Oct?

  40. javaben

    100KP – Phil, stuff above is getting confusing to me with regards to GE, AMZN, etc where you are talking about adjustments to be taken by lunch.  Specifically, it’s not clear to me if you are directly talking about the 100KP, as there are no tags.  If possible, if you are discussing adjustments on the 100KP, can we include that tag?  The current approach, as I’ve seen other members mention, leaves us not knowing if it’s the 100KP or not, and the missing tag may just be missing.  Not at all sure what the answer is here, but it falls short of being a complete, clear, not confusing setup….and there is some mention of another more aggressive 100KP too.

  41. 1020

    Phil, do you have any 10 step ideas for FAZaholics?  Thankfully it’s only 300 shares at 32 bucks. Thank you

  42. 1020

    UNG having difficulty holding 11.40….

  43. dstillwe

    AMZN.  I’ve got a bit of a screwy AMZN position.   Jan 80 calls (have had them for a long time) and Jan 2011 70 calls (same).  Been writing against them.  Maybe a sep adjustment question, but here I’m interested in the nice-premium Sept 90s – would like to write them.  Remedial issue:  If they top it and I get called away – or am about to – how do I cover with the long options? 

  44. Phil

    SU/Aclend – Congrats on those.  I would either get out or cover conservative, those plays are up 50% in a month and we picked them because both companies were very undervalued at the time.  Now they are not.  I’m not saying they are overpriced but you are risking 150% of your original bet and oil is way too high at the moment and could pull back.  If you MUST leave money at risk after making 50% in a month then SU March $33/35 bull spread for $1 only risks your profits and you make a clean double if SU holds $35.  BTU doesn’t work that way but you can sell Dec $28 puts for .55, which is a nice entry even if they do drop by 30%.

    Refinery utilization was 86.9%, a bit down from last week.  Crude is down 4.7Mb for the week, Gasoline up 500Kb, Distillates up 2.2Mb so not a very exciting net draw overall but the NYMEX boys jammed us up the minute they came out.  We’ll see if they can hold $71 for the day but I doubt it.

    GE/Kelly – Well WSS is down so I can’t trade there but yes to that spread.

    BIDU/Merk – Note that they are THROUGH $400 resistance.  AIG is just crazy but FSLR is getting tempting as a short again.  Today is a very good day to sell calls to suckers before ripping the markets lower into expirations.

    New from The Economist: a Global Debt Clock. At 10:37 today, global debt totalled $35,014,935,027,853.

    SRS/Matt – Just buy URE.

    AMZN/Jlui – Sorry, I meant the Oct puts.  The Sept $90 puts would not, of course, be an even roll.

    RIMM/Doro – That’s a great roll if you intend to keep playing it.  I’m still waiting until lunch but no one else seems to want to…

    Stops/Java – That sucks!  I wouldn’t paper trade, you should practice exiting using stops until you are sure you have it right.

    AMZN/Yodi – Well the $80 puts are done for anyway, maybe you want to wait for a pullback to sell those.  The Oct $90s are paying $2.80 now and that is great money but as long as the roll from the Sept $85s is less than .50, I wouldn’t rush it as a pullback will be a huge benefit to you if you stay in Sept.

    MHP flying today on speculation SEC hearing on ratings won’t be so bad.

    LYG flying despite news that they need to divest Halifax (too big).

    Euro-zone consumer prices fell 0.2% (.pdf) in August, unrevised from initial estimates. The current annual inflation rate of just 0.7% is well below the ECB’s target of just below 2%.

    The Irish government will unveil today a bold and expensive plan to buy distressed property loans worth up to €90B to shore up struggling banks and bring liquidity to the financial system. A major question which will be answered is how big of a haircut the government will demand.

    July Treasury International Capital: Net foreign purchases of long-term securities were $15.3B, way down from June’s $90.7B, with foreigners picking up $44B in long-term U.S. securities ($32.1B by private investors and $12B by official institutions), and U.S. residents buying $28.8B in foreign debt.

    August Industrial Production: +0.8% vs. consensus of +0.6%, the second straight monthly gain after July’s 1% gain (revised up from +0.5%). Ex-auto, manufacturing was +0.4%. Capacity utilization rose to 69.6% from 69% – still 11.3 points below its historical average.

    Wells Fargo (WFC -0.2%) chief John Stumpf says initial performance on Wells’ modified mortgage loans has been ‘positive.’ In an interview today, Stumpf said the bank’s TARP loans are not impacting its operations, that it will pay the loans back "in a shareholder-friendly" way, and that "I think we would have made it anyhow." (slideshow, webcast, interview)

    A word of caution for gold bugs from FT’s Lex: "The U.S. is not Weimar Germany and, in spite of interest rates that make gold ownership cheap, the opportunity cost of owning it is still unattractive in the long-run. Smarter ways to anticipate inflation include bricks and mortar, mineral rights or even equities, all with vastly superior historical returns." For now, Dec. gold +1.1% to $1,017.

    Global confidence registers a record high in September, with optimists outnumbering pessimists for the second month in a row in Bloomberg’s six-continent survey.

    AMZN/Stock – waiting is always an option.

    $100KP/Java – If I adjust the $100KP officially, there will be an alert that looks like the one from yesterday.  Obviously if I start another one we will name it something else. 

    FAZ/1020 – I’d say go long with bull call spreads, they can be fun on FAZ. 

    AMZN/Dstill – I’d take the 2011 $70s off the table and roll the Jan $80s, now $13 to the 2011 $90s at $16.20 (2x if you want to) and pay for it with the sale of the Jan $90s for $7.30.  Even if you DD, that takes a nice chunck of change off the table and you can always spend $5 later to roll them down to the $80s, which would put you in those at net $11 on the $10 spread with the Jan callers and a year to roll at worst.

  45. allen060

    KIM
    Phil, I am short KIM at 12.60 (now 14.60) and short the Oct 12.5 puts at .90 (now .25). I got caught in this CRE squeeze. Any advice would be appreciated.

  46. EricL

    FWIW, I’m continuing to add to OTM put spreads on some existing positions (and by the way, I’m only doing this against a lot of bullish positions, including a big SPY call spread). So for instance, I still like my little SPG 55 put calendars (long April short Oct), and similar calendars on COF, IYF, and others names where the fundamentals seem completely out of whack with the stock price. I’m considering this for OIH now too.
     
    My premise in every case is to make sure that I can sell enough premium to support the position over the long haul. I like the calendars here over other spreads because the delta drops if the stock goes wildly against you. This way I can hopefully avoid large losses on them if we just keep climbing, while still participating in what I still think will be an eventual reversal.

  47. samz3700

    Phil -
    How do you like a bull spread on SDS – buy Dec 40 call sell Dec 45 calls – debit of $1.55?
    Also – I am newbie – why do you prefer the dia puts to spy puts?
    Thanks Sam

  48. jlui_tx

    Phil, I sold  ERY Sept $15 puts for $0.6 and now is at $1.25. How should I roll?

  49. dflam

    Pharmboy : What’s happening w/ABT today. Can’t find any news but stock is down 1.5 % today in an up  market. Thanks!
    dflam

  50. bgbigelow

     DIA COVERS – Phil you called for going naked on the dia mattress yesterday.  Should we sell a half cover now that we’re above your breakout level?

  51. allen060

    FAZ:
    Phil, in the 100 KP for some reason I am in the Sept FAZ 18/23 call spread for a 3.23 debit versus your 17/22 spread. I was doing okay until today. My short 23′s  are worth only .20 now so does it make sense to do a roll to Oct or just wait to see what you do with FAZ in the 100KP at this point.?

  52. allen060

    Pharm:
    Any opinion on DCTH?

  53. smasher

    Phil, if I am naked on Sept SRS 10 puts, how should I be looking to roll these?  IV is 117 now for Sept (up from the high 80s it was last week) and only 90% for October.  I’m still learning the nuances of options, but this doesn’t seem like a great deal for the roll though I’ve painted myself into a corner a little.

  54. Cap

    Monkeys / Phil … my thoughts exactly.  This is insane !
     
    AMZN pushing 89 !  What a crock !
     
    IYR up to 44.60 !
     
    AAPL 181.  Goog 485.

  55. Phil

    KIM/Allen – Well you just have to stick it out until earnings (11/5) and be happy to get out on a dip.  It’s not a very good stock to short as they are still 1/3 off their highs although earnings should be less than 1/2 of last year.  Something like KBH, on the other hand, is up to $21 with a high last year of $25 and they are still losing $3 per share with mountains of debt against quesitonable assets.  KIM, by comparison, has a positive cash flow and pays a 2% dividend - always good to watch that with the builders.

    Good plan Eric.

    SDS/Samz – I prefer the DIA out of practice.  It’s always the headline number so easy to watch, even when you’re not at your desk and there’s only 30 components to watch for news – makes it a lot easier to see things coming.  My issue with your vertical is you must get a potitive move in SDS or you lose it all.  You are going for a $5 payoff with $1.55 at risk and your break-even is $41.55 and you need a 10%+ gain in SDS to max gains.  If you bought the Dec $35s for $6.70 and sold the Dec $39s for $4.50 you would be in for $2.20 on the $4 spread.  You may have "just" a $1.80 (81%) upside on the play but your break-even is $37.20 or 10.5% lower than your break-even on the higher spread.  This way, using SDS as a hedge, your longs can actually gain more and you STILL don’t lose money on your hedge but if your longs drop SDS LESS than 8%

    ERY/Jlui – I’d just roll out to the Oct $14 puts, now $1.35 but no hurry as it’s a credit to you and oil may turn lower. 

    DIA – If you are too short in the market, the DIA Dec $93 calls are $6.50 and the Dec $96 calls can be sold for $4.50 which is $2 on the $3 spread that is 170 Dow points in the money with a 50% gain at 9,600 and break even at 9,500 where your puts should certainly be kicking in big-time

    VZ with a nice downgrade today.  Oct $30 puts are a nice naked sell at .95.

    Volume coming into noon is looking like 90M and no sellers in site so far.  GOOG, AMZN, AAPL, RIMM all getting pushed and NYSE testing 7,000 so let’s keep an eye on that..

  56. kustomz

    right on time pre lunch pump

  57. merkhava

     BIDU… yeah… just a little bit north of 400 resistance…. but I consider any movement of plus or minus 1/2% to be day trading noise
     
    Still worth selling the Sep 400 calls at 8.00 for the premium decay slide into OE day… I bought equal number of Sep 420 calls for 1.66 as hedge just in case BIDU does go crazy to the upside

  58. stevenparker

    Is it lunchtime yet?  :D
     

  59. ssdirk

    Phil, I shorted both FAS and FAZ at 45 and am down quite a bit.  I sold the FAZ Oct 18 put and the FAS Oct 55 put to make up some loss, but still am down.  Any suggestions?

  60. kustomz

    I feel uneasy about this strong move, i feel as though they are pushing this too hard to fast. Stocks approaching levels that demand some profit taking…

    Unless someone leaked something about some new gov. program where they euthanize everyone that’s unemployed and the elderly collecting SS

  61. merkhava

     Ya know… "they" just might be shooting for the magic DJIA 10k before Friday… and S&P 1100…
     
    just imagine the headlines in the business section of the weekend papers and the "I told you so" opining on Sunday morning TV talk shows… if "they" can get the indexes through all the raging bear attacks
     
    "Jimmy duh Crammer" is gonna have himself a heck of a luvfest show on Friday evening’s Madd Muhnaaaay….  if his buds at Goldman Satan can jam the markets up to the target

  62. aclend

    Why do we have a tendency to form unhealthy emotional attachments to certain stocks? Today’s price action is bringing back many hateful feelings I formed against AMZN about 4 months ago. Now I remember why I hate it and that I swore I would never trade it again!  hahaha.

  63. Pharmboy

    ABT – don’t see anything exciting on them either.  Economic Times noted a sale of nutritional suppliments to ABT that is getting flack, but doesn’t seem enough to move them.
     
    DCTH – Cancer is HOT HOT HOT….they have a technology to deliver chemotherapy at concentrations up to 100X that of normal routes of administration.  Interesting concept, and if it works, they have room to grow.  A 135M market cap has room to run.  They have flown up in this space, so I would scale in buying 1/4 positions ( I will buy a small round 1 @ 4.29 limit order).  The company has gained orphan status, which means exclusivity for years….Options are lightly traded, and the spreads are wide.

  64. Fabregas

    Volume on LVS MGM feels like an imminent blow-off top..

  65. Phil

    I don’t know if I’ve ever seen the market go so high on so little volume – this is just amazing!  The Dow just gained 50 points in 30 minutes on less than 10M shares traded. 

    This is a serious breakout and all you can do is grin an bear it on the short side and hope it ends.  Taking the lower end of the DIA long spread above (the Dec $93 calls) and waiting to cover is one way to stop the losses on your short plays.

    You can give yourself GOOG for XMass with the Dec $450s at $51, selling the Dec $490s for $26, which is $25 on the $40 spread.  If you really want GOOG, you can also sell the $450 puts for $12.20 and that’s not a bad plan with a stop at $15.

    DIA/BGB – IF we get the roll to the Dec $100 puts for .50, THEN we sell 1/2 the Oct $98 puts (now $2.35).

    FAZ/Allen – We dropped it $1 that morning as they sold down, see below. 

    $100KP Moves:

    • AMZN – Selling 5 Oct $90 calls for $3.40. NOT buying back Sept $85 calls yet. 
    • FAZ – Buying back Sept $22 calls for .20.
    • GE – We are left with 10 Oct $16 calls and 10 Oct $16 puts both sold short as the buy back triggered on Sept.  Selling 10 more Oct $16 calls at $1.25.
    • XLF – I have just the 10 Sept $14 calls sold short at .50, now $1.17.  Selling 10 Oct $14 puts at $1.35 and NOT buying back the Sept $14s unless they break $1.50.

    We are still way too bearish but I’m not ready to shift just yet use below play if worried:.

    DIA – If you are too short in the market, the DIA Dec $93 calls are $6.50 and the Dec $96 calls can be sold for $4.50 which is $2 on the $3 spread that is 170 Dow points in the money with a 50% gain at 9,600 and break even at 9,500 where your puts should certainly be kicking in big-time

  66. ssdirk

    Phil, is this what a blow off top looks like or is it usually way more volume.  If more volume then I hate to see the blow off top.

  67. kustomz

    http://online.wsj.com/article/BT-CO-20090916-710105.html

    LONDON (Dow Jones)--Barclays PLC (BCS) Wednesday sought to cut its exposure to volatile credit markets by selling $12.3 billion in risky assets to a new fund managed by two former Barclays executives.
    The sale means Barclays will no longer have to record market moves in the value of a portfolio of securities backed by U.S. subprime mortgages and other poorly performing loans that already wiped more than a billion pounds off its profits in 2008. But it won’t free up any capital because Barclays is extending the new owner, Protium Finance LP, a $12.6 billion loan to finance the sale, and will keep the securities on its balance sheet for regulatory purposes.

  68. stevenparker

    ?? Surely barclays will have to mark its Loan to Protium Finance LP using essentially the same rules it used for to securities it moved ??
    *sigh*. I suppose Barclays will now have trust its former employees to value the portfolio correctly, rather than be directly responsible for valuing the portfolio itself….

  69. merkhava

     Playing a roullette bet on the "Green Zero"…. chuckle
     
    I got AIG Sep 60 calls… for 0.02…
     
    just in case the short squeeze shennanigans start up again and AIG goes all Freaky Friday on the bears
     
    C’mon Green Zero…. daddy needs a new fishin boat !!  LOL

  70. Highlander

    The tech stocks , esp amzn, fslr, & aapl are the steering wheels being used today! watch them for any breakdowns.esp after cramer’s pump of aapl after telling his viewers to wait for a few days just the day before.

  71. maxt1234

    Phil,
    Is there a plan for the COST $52.5 calls that we sold?

  72. where

    kustomz – That has been happening for a while now in the UK.  Seems like fraud to me.
     
    Phil – Any thoughts on the fact that TLT as a measure of US securities performance is up today?  I know they say the debt market is the smart money, but this TLT move screams non-confirmation regarding the equities bump. 

  73. brianma

     the DIA Dec $93 calls are $6.50 and the Dec $96 calls
    just curious, sell 93 and buy 96?  What are you suggesting?

  74. stevenparker

    brian, buy 93 sell 96. It is a way to add bullishness if you are bearish,
     

  75. kustomz

    Heres the whole article
     
    LONDON (Dow Jones)--Barclays PLC (BCS) Wednesday sought to cut its exposure to volatile credit markets by selling $12.3 billion in risky assets to a new fund managed by two former Barclays executives.
    The sale means Barclays will no longer have to record market moves in the value of a portfolio of securities backed by U.S. subprime mortgages and other poorly performing loans that already wiped more than a billion pounds off its profits in 2008. But it won’t free up any capital because Barclays is extending the new owner, Protium Finance LP, a $12.6 billion loan to finance the sale, and will keep the securities on its balance sheet for regulatory purposes.
    Loan interest payments to Barclays will come from the securities’ cash flows, and the loan will be secured on the assets.
    In exchange for what the bank hopes will be a less-volatile investment, Barclays is giving up any potential upside from securities that in many cases are still making interest payments, suggesting that it expects those payments to tail off over time and that capital wouldn’t be fully repaid when the securities mature.
    Group Finance Director Chris Lucas said Barclays has been collecting $100 million to $120 million each month in interest payments on the portfolio, but the interest rate on the loan will bring in annual returns of less than $400 million.
    He declined to say what the face value of the securities is and exactly how much of that total Barclays has already written off.
    "We are not seeking through the transaction to effect a change to our underlying credit-risk profile. But we are restructuring a significant tranche of credit-market exposures in a way that we expect will secure more stable risk-adjusted returns for shareholders over time," Lucas said.
    Analysts said the move might be duplicated by other banks, especially those with large exposures to monoline insurers. The bulk of the assets Barclays is selling – $8.2 billion worth – are monoline insured. Monolines insure bonds against default.
    Investors have long been concerned about the health of the monoline insurers and the effect on banks if they fail. Barclays’ remaining monoline exposure totals about $6.78 billion, almost exclusively in securities backed by corporate loans.
    "This gives Barclays a way to tidy up its monoline exposure, and anyone with significant monoline exposure could follow suit," said Simon Willis, an analyst at NCB Stockbrokers who called the transaction "sensible."
    Tom Jenkins, a credit analyst at Royal Bank of Scotland, said it is a clever structure "but essentially smoke and mirrors" in the context of Barclays’ GBP1.5 trillion balance sheet.
    Barclays managed to avoid having to turn to the government for any support during the financial crisis by instead boosting its capital with cash from Middle Eastern investors and by selling its Barclays Global Investors unit to BlackRock Inc. (BK) for $13.5 billion.
    Helping establish Protium Finance – whose manager, C12 Capital Management, is employing 45 former Barclays Capital staff – might also help revive asset-backed securities markets if other banks turn to it or similar vehicles to unload these kinds of investments.
    Uncertainty about future losses on the securities has plagued banks since the credit crisis started two years ago.
    Protium Finance’s manager, C12 Capital Management, was founded by Stephen King, the former head of Barclays Capital’s principal mortgage trading group; and Michael Keeley, a member of the investment banking unit’s management committee covering European financial institutions.
    The Cayman-based Protium fund has received a further $450 million in funding from two institutions, Barclays said. It declined to say who they were, but Lucas said one was based in the U.S. and the other in the U.K.
    Barclays isn’t investing in the fund or C12 Capital Management.
    The $12.6 billion Protium loan matures in 10 years and is secured on the credit assets. Interest payments will be drawn from income generated by the fund’s assets after the managers collect annual management fees of $40 million, plus expenses.
    The interest rate is fixed at Libor plus 2.75%, which Barclays said should result in about $3.9 billion in total interest payments.
    Shares in Barclays closed up 11 pence, or 2.9%, at 380 pence

  76. drumkeerin

    a few weeks ago there was the GLD backwardization trade of the long Jan 105 and the short Oct 99. Is this a good time to roll the October caller even up to the Nov 103? Don’t quite understand what to do in a deal like this.

  77. kustomz

    Essentially Barclays sheds the exposure but collects interest on the 12.6b loan…neato

  78. concreata

    Eric – SPG – could you help me understand your comment on delta drop on OTM puts. You said you like the $55 put calendars (long April, short Oct) "because the delta drops if the stock goes wildly against you". Over last week (not including today) the stock gained 6.5%, the April long $55 put declined 20.5% while for comparison purposes the April long $70 put declined less – 17%. Or were you referring to the delta difference between the long and short put? The short $55 OCT put dropped 50% over the last week substantially more than the April long. thanks

  79. where

    Gotta admit this is pretty brutal…I wonder what it’s going to take to turn this all back around.  There has to be an institutional investor somewhere that wants out and with just enough selling volume the whole thing could go down in flames.  Phil had a great analogy about a old west gunfight.  Everyone is standing around the coral, itchy fingers waiting to go for the draw.  Once someone does it could be fast.

  80. diamond

    Having a little fun while the market makes me crazy …
     
    CNBC cartoon characters:
     
    Jim Cramer = Bluto  (Popeye’s nemesis)
     
    Guy Adami = Pepe Le Pew 
     
    Pete Najarian = Yosemite Sam
     
    Tim Seymour = Speedy Gonzales
     
    Melissa Lee = ???
     
    Karen Finerman = ???
     
    Tim Seymour = ???
     
    Joe Terranova = ???
     
    Joe Kernen = ???
     
    Carl Quintanilla = ???

  81. Kwan

     Phil, I bought BSX Jan 10s and was looking to sell the 12.5s for .90 to put me in for about $1.00 on a 2.50 spread but the 12,5s never got anywhere near that and the 10s are now down 20% from where I originally purchased them. Do you have any suggestions about how to (possibly) convert this to a rent-strategy play?

  82. jlui_tx

    Phil, for $100kp, since I didn’t get the XLF Sept $14 Calls filled, do I need to still get the OCT $14 call?

  83. stevenparker

    "Essentially Barclays sheds the exposure but collects interest on the 12.6b loan…neato"
    Lol I don’t get it :( how are they shedding the exposure if they provide someone a $12.6bln loan to buy $12.3bln in assets?

  84. kustomz

    Anyone else getting unreliable quotes from there Ameritrade streamer?

    Interesting read here on mark to market dilemma
    http://www.forexyard.com/en/reuters_inner.tpl?action=2009-09-16T165831Z_01_LG543940_RTRIDST_0_ACCOUNTING-G20

     

  85. mrmocha

     Those SMN 11 puts I bought Friday for .15 are heading for a buck, time to bail out.  Don’t we all have these "If I’d put my whole portfolio in that trade I’d be retired…" trades!?

  86. ssdirk

    Kustomz – I have TDA.  Prices were jumping up and down with wide swings for about 30 mins.  Seems to have stopped now.

  87. Phil

    FAZ+FAS/SS – Yeah that trade failed, now they are $107!  The plan was to just keep selling as we won’t make money until there’s a reverse but, at this point, you may want to buy back FAZ at $20 (up $25) and just ride out the FAS hoping for a pullback and selling some puts.  Your basis on FAS would be $70 so not too horrible as a 7% move down in the financials would get you even.

    Too far/Kustomz – Way too far, too fast.  This is just stupid at this point and does smack of a blow-off top.  Even FDX finally stopped going up today.   People need to get real.  Euthanasia idea is great – I’m going to send copies of Logan’s Run out to all the members of Congress to get the ball rolling… 

    GE is testing $17 and BXP is testing $70.   VNO is getting to $67, all up 5% on the day.

    Blow-off/SS – Volume is usually up a bit on a top and today we have 4:1 up/down volume trends that really aren’t taking us all that far up.  We’re now past the 5% rule on the last S&P run from 1,000 (2 weeks ago!) so a little stretched and 1,056 was exactly 20% over 880, which is where we based in early July so it’s surprising to see the level so closely followed in July totally blown off in September.  That run in July came from 700 at the lows to 950, which was 35% up in 3 months before pulling back to 880 (25% off the base) a month later.  This run gets 3 months old on 10/13 and 35% up from 880 is 1,188.  Since I cannot possibly believe that can happen – I’d have to say 1,100, which is EXACTLY 25% over 880 should be the tippy top of the S&P for this run and then a pullback of 20% at least is 44 points back to (and I don’t make these coincidences up, this is the 5% rule) – 1,056.  So I feel pretty confident shorting at 1,056 and pressing those as I’m fairly certain we’ll be back here, no matter what.

    BCS – That is brilliant stuff!  Starting essentially a shell company and using it to offload your crap and give you plausible deniablility if the whole thing blows up.  Moving $12Bn to pretty up $1.5Tn in booked assets at BCS is very clever…

    AIG/Merk – I could happen.

    COST/Maxt – Sure, the Sept $52.50s at $5 can be rolled to the Jan $55 calls even and the Jan $52.50 puts can be sold for $2 more (so they can be rolled up to Apr $60s even.  Cost topped out at $74 last year so they should stop eventually…  If people think about it (but no one does in this market), an economic recovery should be bad for them the same way the recession was good for them.  Right now all retail is being played like a huge winner, as if no segment will lose market share to another.  This is amazingly stupid in a declining wages and declining consumer credit environment.

    TLT/Where – I dont’ think it means anything when the Fed bought 1/3 of the notes at yesterday’s auction.  If you (Treasury) give me (Fed) $2Bn to buy $2Bn worth of your notes at 3.2% – does that mean the notes are worth 3.2% or just that you fixed the auction?  Don’t forget they are dutch auctions so everyone places bids and the highest bids fill first.  So there could have been 2/3 "real" buyers (and don’t get me started at how the TARP-protected, Discount-window shopping Gang of 12 can be considered real buyers) who bid as high as 3.2% but then there’s a huge dip up to an average of 3.8% on the next $2Bn – the proper auction rules are all get filled at 3.8% but the Fed steps in and buys 1/3 at the 3.2% cut-off they fix the rate down where they want it.  So the Fed only needs to take out the marginal buyers – they never have to support the whole thing but the fact that they buy 1/3 means for sure they outbid 1/3 of all offers and that means the bid to cover ratio of 2.5:1 is BS because the Fed oubid all but .66:1 of the bidders.

    DIA/Bri – It’s a bull vertical on the Dow.  Buying $93s (now $6.85) and selling $96s (now $4.85) for the $2 spread that pays $3 (150%) if the Dow holds 9,600.  If you are too bearish on 50% of your portfolio, taking 10% on a trade like this gives you 10% protection on your bear plays without canceling the possibility of a downside win.

    GLD/Drum – Well the Jan $105s are great and the Oct $99s still have 66% premium so it’s a little early to move them.

  88. kustomz

    Steve i must refer any questions you have about the deal to Barclays magicians i mean accountants

    The sale means Barclays will no longer have to record market moves in the value of a portfolio of securities backed by U.S. subprime mortgages

    The $12.6 billion Protium loan matures in 10 years and is secured on the credit assets. Interest payments will be drawn from income generated by the fund’s assets after the managers collect annual management fees of $40 million, plus expenses.
    The interest rate is fixed at Libor plus 2.75%, which Barclays said should result in about $3.9 billion in total interest payments.

    Tom Jenkins, a credit analyst at Royal Bank of Scotland, said it is a clever structure "but essentially smoke and mirrors"

  89. stevenparker

    kustomz the quotes from OX are all over the place today

  90. dflam

    Hi Phil : Some general advice. What  do you recommend when I have buy/writes and the calls double with several months to go & the time premium is now very low.For Example I bought HUM at $33.23 and sold the NOV. $34 call  at $$3.33. Stock is now at $40 and the call  is at $7.10  Thank you
    dflam

  91. merkhava

     DJIA up triple digits…. whoa

  92. matt1966

    this action reminds me of Q4 of 08.  relentless and unbelievable. 

  93. ssdirk

    Isn’t it funny how the "uptick rule" cry has subsided.  I bet we here it again soon. 

  94. Fabregas

    Check out the blow-off top in the casino complex especially LVS and MGM.  Today’s volume is through the roof.

  95. blair

    I second dflam’s question, I never know what to do when the call on a buy/write is ITM.

  96. Phil

    Cartoons/Diamond – Crazy may be a short drive…  8-)

    BSX/Kwan – How did you find a stock that didn’t go up?  I’d sell the Nov $11s for .80 and let that pay for the roll back to the Feb $9s (now $2.45).  That puts you in the Feb $9s for net $1.90.  When the premium burns off the $11s, you can then roll to the Jan whatevers and feb whatevers and burn off the premium but I’d do the roll first and only sell if they can’t hold $11 or the market turns south. 

    XLF/Jlui – No, no point then. 

    BCS/Steve – Not real exposure, just the booked exposure and that lets them lever up their other assets.  It doesn’t matter what a rational accountant would say any more – the global governments have given the financials a free pass to fantasy land and guys like Stiglitz try to point it out and he gets his reputation smeared by Cramer and his media buddies.  Since he has no platform of his own, this chips away at his lifelong reputation and hurts him financially in speaking engagements and invites to conferences etc so it’s no small thing when button-boy decided to call you an idiot on national TV because you dare not share his views. 

    WYNN – another high-flyer makes a U-turn.  Isn’t it interesting how WYNN and FDX can have almost identical patterns over 4 consecutive days even though they have virtually nothing to do with each other?  One would almost think they are being traded by the same exact computer program that has no concern at all for the actual facts of the stocks but is simply programmed to take them up and then sell them off (along with a hundred other market influencing stocks).

    SNM/Mr M – Nice call!

    NAHB Housing Market Index: +1 to 19, its third straight increase, and at its highest point since May 2008. Current sales expectations and prospective buyer traffic ticked up, but expectations for next six months declined slightly, likely accounting for the expected expiration of the homebuyer tax credit.

  97. gumba7

    That’s it. I’m done. Packing up for a road trip and ain’t coming back til this nonsense is over.

  98. gel1

    Phil
    Great reading from last nights chat. I now know how you do it all… you have two brains and have no need for sleep!  After reading it all, we really do agree on most of it.
    BTW – thanks for the congrats, which should really go to you and PSW.

  99. maxt1234

    Phil,
    one more thing on COST, would youn sell 50% more Jan puts than calls, COST is not a bad deal at around $50?

  100. maxt1234

    Phil,
    I have  Jan 11 CMCSA  I bought @ $3.70 now $6.05 and I sold 1/2 sept. $14 @ .95 now $3.60. How do you suugest I handle the caller?

  101. kustomz

    MSFT made a move on Monday but is lagging today
    Microsoft’s new Bing search service is the fastest-growing U.S. search engine among the top 10, according to a Nielsen report released Monday

    Similar studies have also seen a boost in Microsoft’s search business. An August report from ComScore discovered that Microsoft’s share of the global search engine market lept 41 percent from July 2008 to July 2009. Bing was introduced in May, taking the place of Microsoft’s Live Search.
    http://news.cnet.com/8301-10805_3-10354394-75.html

  102. craigzooka

    Phil, assuming we do have some kind of a pullback in the near future,  At which point do you sell some of the DIA puts and use cash to do more buy/writes?

  103. JRW III

    So, to add insult to injury, do " they " use the STICK into the close ?  Sure glad my 10, 000 TZA’s at 3:59 yesterday didn’t get filled !

  104. jomama

     phil, why hasntt intc participated in the run up?

  105. javaben

    100KP – XLF – sell Oct $14 puts at  $1.35: wanted to confirm this price, as it’s currently trading at .23/.24

  106. EricL

    concreta,
    With the SPG puts, I was thinking of the fact that as they fall further OTM, the puts lower their delta. This is of course true for both the long and the short leg, so it’s not a pefectly linear relationship. Also, there’s a point where the front-month is so far OTM that you don’t collect enough premium to make it worth it (e.g., 50 put calendars in SPG are this way now, and the 55s are almost there, requiring me to possibly roll up next month).
    So the April calendars have about a -9 delta each right now. If you go up to the 65s, say, you go up to a -11 delta.
    Actually right now, if I weren’t hedging a more bullish portfolio, I go with the 65s, since you’re paying 7.50 for the April long put, which means you only have to sell 1.05/month to break even, and the Oct 65s sell for 1.40, which means you’ll do better than break even on the trade if SPG stays around these levels. However, you’re not going to make as much on the 65s if SPG heads down.
    So it depends on what you want to do: the 65s are better for premium collection, the 55s better for downside (they will still be profitable if SPG dumps down $20, e.g.).

  107. EricL

    merk, I like your BIDU trade above but lack your courage, and so just entered selling the Sept. 400 call against an Oct 410 call (-9 delta).  Looking to snatch the Sept. premium without getting my head ripped off, LOL.

  108. kustomz

    ATVI coming out with Modern Warfare 2 shortly may give boost to shares, this title should sell well

  109. EricL

    VIX edging up. At this point it’s probably because people are afraid to sell calls….

  110. concreata

    Eric – thanks for the explanation

  111. Phil

    HUM/Dflam – Well, looking at that one, you have a net $33 off a net $30 entry so you are up 10%.  I take it you didn’t sell the puts but mission accomplished basically and you can just cash out.  The Nov $34 calls can be rolled to Jan $40 calls and Jan $37 puts for about even and that keeps your net $30 entry the same and raises your call-away by $6 so another 20% as long as you are willing to risk the assignment.  The whole point of a buy/write is you can’t lose on the upside.  That takes out a whole 50% of the things you usually have to worry about in a spread.  When you entered this trade (and I’m not clear if you sold puts or not) you entered with a $4 upside expectation by Nov.  You have $3 now so you are way ahead of trend, that’s a winner – don’t overthink it…

    Buy-write/Blair – Hmm, it is so hard to answer the question "I set up a conservatively hedged trade with a max profit of 15% and I made 13% and now I don’t know what to do."   I must be getting old because I remember a time when 15% in an entire year was something to be proud of.  Keep in mind that Gel mentioned yesterday that applying this basic strategy consistently for 8 months made him 40% on a large portfolio (and he kept 1/3 in cash at all times).  I’m sure Gel didn’t get there by constantly upping his risks every time he had a clear winner.  Step 1) Take Money, Step 2) Run – THEN look for another good trade to make

    Later Gumba – Let us know when you find a place with rational people….

    Chat/Gel – Not every night but sometimes I just keep going.  Asia kept me very entertained last night.  As to the other, I’m not surprised a couple of entrepreneurs with legal backgrounds have plenty of common ground…

    COST/Maxt – You say that now but will you still think so at $45?  I think thatg’s unlikely but just make sure you are really prepared to deal with that outcome – they were $37 in March.

    CMCSA/Maxt – That’s no problem, just roll them up to 2x the Oct $16s – no sense in adding cash until you need to.  That gives you a $5 spread on net $3.30 so no tragedy if they keep going higer and still well protected if they pull back.

    Search/Kustomz – Interesting that GOOG gained too.  Bing’s growth came right out of Yahoo so nothing too impressive yet. 

    DIA/Craig – Not sure what that means with cash.  Generally we sell DIA puts against our longer DIA puts and that cash is usually reserved for roll-ups etc.   The DIA spread is an insurance policy for the long plays, not meant to "win" on their own unless we crash.  We made .75 on a half-sale yesterday and another .75 would pay for us to roll to the Dec $101 puts (maybe less .25) at which point we’d sell whatever other Oct puts are $2.  We’re willing to kick in a quarter (5%) every 200 points and if your longs aren’t doing MUCH better than that, then you need to check your balance. 

    INTC/Jo – Maybe waiting on CSCO earnings tonight (yes, it’s that time again already!).

    7,800?!? 

    $100KP XLF/Java – That was selling 10 Oct $14 calls, now $1.37, not the puts

    And the bank books continue to change:

    Residential Credit Solutions is the first winning bidder in a public-private program to get toxic mortgage loans – rather than loan-backed securities – off banks’ balance sheets. The Texas mortgage company pays $64M in cash for a half-stake in a venture that takes a pool of mortgages from insolvent Franklin Bank and issues a $727M note backed by the FDIC.

    How crazy are things getting?  Check out some of these p/e’s:

    Bestpe

  112. Phil

    Oops, that was ORCL tonight, not CSCO!

    ORCL – I like the Dec $21 puts for $1.05, selling the Oct $22 puts for .90 so net .15 on the spread.  It’s an earnings crush play as I don’t think CSCO fails $22 by much with the 50 dma rising at $21.80 and they haven’t gone below it since March.  Goal is to have more than .15 left when the putter expires on 10/15 and if they head down, you can just buy more and roll the Oct putter but I doubt it. 

  113. cwan120

    TWM in 100KP / Phil – Any adjustments on TWM?

  114. Pharmboy

    HS Batman, what did you all do to the market.  FMD, hell, FMM, FMY….and in Steve Miller Band words – "go on take the money and run"
     
    BEAT – selling 7.5 Feb10 P for 1.5. This baby is gonna pop.  P/C ratio is 0.09.
    WFR – beatiful short squeeze there to 19 pin.  Now we can sell the calls.  Back to 16 t’will go.
    ARNA – everything filled yesterday.  Call side Sept 6 sold against Oct 7.5s (2:1); Put side Oct 4 sold against Oct 2.5 (1:1). $33 outlay.  Come to papa.
    PODD play from a month or so back….PODD is ratcheting up to 11.12….
    VIAP – MrM and I played with them a while ago.  Buying in here.  1K shares cost $390.
    GPRO – diagnostic company that is down considerably compared to the market.  They have good support at 35.  I think a nice opportunity to get into (Feb 45s for 1.25).  Shares are lightly traded (< 1M), but they have been upgraded by Oppenheimer and are well below highs.  Someone bought a boatload of the above mentioned at 1.25.

  115. Phil

    Volume 150M at 2:30, a little heavy for the stick.

    Oil finishing at $72.30 and gold at $1,019.   Dollar down to $1.473 to the Euro but holding $1.65 to the Pound and just under 91 Yen.  Dollar close to failing 76, that’s down 15% since March and accounts for about half the market’s gains. 

    Last time the dollar was this low, oil was $140 a barrel so that shows you how pathetic oil is right now.

    Cramer making fun of another guy who urged caution today.  I can’t wait to see how he will tell us he called the top of the market here after we do drop…  Now he’s pumping IYR, maybe can pop $45 finally. 

    DIA Oct $97 puts are $1.88,  Offering $1.75 is the way to go as this morning was a nickel loss so we can try again for overnight.

  116. arbolito

    Phil: DIA 97 puts are for SEPTEMBER?

  117. matt1966

    The VIX did an about face at 12:05 today.  How unusual is that? 

  118. lflantheman

    Phil…I’m holding several thousand shares of URE   ($6.53)  with covered calls October 6.00 @   $ .95   What’s the best way to play this out?  Should I roll the calls forward and up?  I could go to December 7.00 ‘s for $ .80.  Or should I hold them as is for another month.  Or should I close everythig out now.  I originally came in at 4.50

  119. arbolito

    Phil: sorry forget my question, kept on reading and found the answer. Thanks

  120. javaben

    Phill -  guess this was a mistake where it you said "Selling 10 Oct $14 puts at $1.35…"?
     
    "XLF – I have just the 10 Sept $14 calls sold short at .50, now $1.17.  Selling 10 Oct $14 puts at $1.35 and NOT buying back the Sept $14s unless they break $1.50."
     
    "$100KP XLF/Java – That was selling 10 Oct $14 calls, now $1.37, not the puts."

  121. allen060

    PARD now is a bit over 7.60. Selling the Dec 7.5 call (3.10) and the Dec 2.5 put (.45) brings in  3.55 (you can probably get a little more). If put to you, your average entry is about 3.25.  You can bring in more premium by selling the Dec 5 put but if put to you the average entry is higher.

  122. Phil

    TWM/Cwan – No move today, we’re going to roll them by Friday.

    Hiya Pharm, welcome back to the madness.

    VIX/Matt – Well at least someone is covering something.

    URE/Iflan – Nicely covered with those.  I don’t know, I think $6.60 is PLENTY for those and I can’t imagine what more good news can possibly lift CRE again but I’ve thought that for a while and they still keep pulling things out of their asses.  Cramer going IYR crazy is very likely a sign of the top but your callers have a .69 delta so you’re not risking too much by waiting to see if URE holds $6.50.

    XLF/Java – to be very clear, there are now 10 Oct $14 CALLS sold short at $1.36 and 10 Sept $14 calls sold short at .50 so it’s a 2x bet on XLF falling by Friday.  If not, there will be a roll up to the Oct $15s most likely and there will be 10 short $14s and 10 short $15s at which point I’ll likely sell 10 $15 puts too.

  123. Phil

    ORCL 5 Dec $23 calls for $1.10 ($550), selling 4 Sept $22 calls for .70 ($280) is net cost of .54 per long.

  124. cwan120

    SRS spread: Hi, Phil, I entered a SRS bull spread (when SRS was 11 or 12): Apr $7 bought at 5.73 / Apr $11 sold at $3.53.  Now they are about $3.3/$1.93.
    What do you suggest?  Leave alone?  Or buy back the caller, as it is almost 45% in profit?
    Thanks!

  125. mrmocha

    ORCL - I just got Phil’s spread for .45 and it executed quickly so if you’re getting in, start at .40.

  126. mrmocha

    PharmBoy - why back to well on VIAP?  I still have mine at .30 basis, convince me to buy more…

  127. mrmocha

    PharmBoy - VTIV chart drawing a nice steady mountainside, I got back in at 16.40, you back in?

  128. Pharmboy

    VIAP/MrM – word is on the street (has been known for years though) is that the target works in OA pain.  Since COX inhibitors are bad (cough) b’c of cardiovascular risks (think VIOXX), then a drug at this target could be used  in pain.  Now, their compound is IV, so won’t work well for a pill (that I know of), but I am playing the rumor mill looking for a nice perk in the stock.  They are also moving forward with PIII trials for CV events.  The way these companies move, I expect (pray) they go to $3.  SPPI moved to 7….from 50c.

  129. JRW III

    Phil,  do you think this goes on untill Friday’s close, or do I take a long TZA position overnight ?( Or for that matter a long TNA position ? )

  130. craigzooka

     Phil, I think you miss understood my question.  If we drop 500 points next week,  Our DIA puts will be worth much more than they are now.  Is there a point during that pullback in which we would cash in the gains on the puts?

  131. mitchroe

     Has anyone seen HNU.TO today? Is the move real? up 495%.  Any insight as to why this happened?

  132. Pharmboy

    VTIV lightly traded but that is some mountain, but no, sadly, I am focused on work (supposedly).   Right now I am trying to work the GPRO angle for free (call noted above, selling the Nov 35/25 P verticle for 70c to pay for it.  They areGood company. 

  133. blair

    HNU/mitchroe – It’s a 5:1 reverse split on HNU.

  134. Pharmboy

    I am also considering TRMA.  I have been in them, and considering more.  If you look at the 1 yr chart, that is a mountain it can climb.  The company provides marine services to the gas/oil industry…..CEO was buying stock up to $6 and someone just bought 120 Dec 12.5 C for 15c.

  135. kustomz

    We crossed 1055 on S&P and never looked back closed at the high of the day..

  136. Pharmboy

    SUNH has also decided to get off the $8 floor.   I still like them for a long term hold.  They provide elder care, rehab, etc.

  137. Phil

    SRS/Cwan – You are in for $2.20 (net $9.20) and about even right now.  Buying out the caller puts you in for $4.13 and about even with the current price of the call.  On the one hand you could say lucky to get out even and walk away…  What I would rather see is you spending that $1.95 to roll back to the 2011 $5s at $5.20 and then hoping for a comeback but, if we fail $9, you need to consider rolling the caller to the 2011 $10s, now $3.40 so you get most of your $1.90 back that way and end up with a $5 spread at lower strikes for under $1. 

    ORCL/Mr. M – I got .40 just now (been waiting) so it’s really a matter of waiting paitently for a shaky move to fill you.  If not – I’m sure someone else will have earnings in the next month or two.

    Overnight/JRW – If you are going to play something like TZA you can’t pay short premiums.  Best to do a vertical like the Jan $7.50/$12.50s for net $2.30  or just buy the Jan $12.50s and sell Oct $15s for .40 for net $1.80 on the $2.50 spread.  If they go up tomorrow – oops, you made 50%+ – if they don’t, then you can add more or roll down cheaper over time. 

    DIA/Craig – Oh that makes much more sense!  Sure, the whole idea is to use that money to get more bullish when we have a serious drop.  Usually we’re looking for about 300 points+ where we can start layering the mattress levels and take our winning puts off the table (usually around a double). 

    HNU/Mitch – I don’t watch non US listings.  It looks like they are splitting the ETF or something. 

    240M at the close.  Better than usual volume but no progress once the volume kicked in this afternoon. 

    Ah, Blair’s on top of HNU!

    ORCL earnings in-line and disappointing.  Revenue a small miss, $200K out of $5.05Bn, margin 46%.  Finally some bad news for the market – we’ll have to see if it has any effect

  138. 1020

    Bot a bit ‘o SRS and FAZ at the close….

  139. EricL

    Dollar closed a low of day.
     
    I like that ORCL call spread above Phil, and now a gentle sell off will be perfect.

  140. matt1966

    ‘The scared money is back in the market’.
     
    ‘Trillions are still on the sideline.’
     
    ‘Retail is getting in which is the kiss of death.’
     
    If so much money is STILL on the sidelines.. what the hell is causing us to go up like there will be no tomorrow?  These people don’t have a friggin clue.

  141. EricL

    Actually matt, I’m beginning to think the light volume is bullish. I really think most individual investors are still on the sidelines, or at least under-invested. Anecdotally, I follow the markets every day and I’m under-invested in my 403(b), and I know my colleagues, who have little interest in the stock market, were mostly blown out of it last year. 
     
    Eventually retail will come flooding in and volume will go up — maybe today was an early taste of that. When volume starts getting back to crash-levels on the upside, I’ll get real concerned. Most retail traders will get in at the end. In the meantime, light volume makes it easy to drive higher.
     
    More than one consecutive day of heavy volume selling would also make me a lot  more cautious.

  142. Phil

    Here is the point where you start to hit fundamental walls as to what the government can do:  "The Treasury will sharply reduce the funds it has stored with the Fed, targeting $15B rather than the current $200B, to avoid hitting the debt ceiling in mid-October."

    The eye-catching Daily Mail photo of the "ghost fleet of the recession" – a huge gathering of idled ships off Singapore – inspires Tyler Durden to do some vessel tracking of his own, spotting similar shipping-route dead zones in Europe, China and the Gulf of Mexico.

    September162009

    Meanwhile, bank lending in July DROPPED another 1.3%, which means Geithner just lied to us when he said that banks are increasing their lending to consumers.  It doesn’t look like much on this chart but that’s $54Bn of loans TAKEN AWAY from consumers in July.  Originations were also down 10% due to "decreased demand from borrowers," which is the official BS way of saying lending standards are so ridiculous that nobody qualifies and nobody even bothers to ask:

    BankLendingJuly

    Wow, something funny in the WSJ!  "The Devil’s Dictionary – Financial Edition"

    Here’s a cool timeline of how everything went wrong:

    crisis time line

    Great dollar chart:

    AnnotatedUSD091209

  143. JRW III

    Phil,  Not playing the options right now, just the direction; got 10,000 long TZA at the close at $ 11.53, hoping for a gap down at the open. If not, I’m out in the first 15 min.

  144. cwan120

    ORCL / Phil: You suggested
    ORCL 5 Dec $23 calls for $1.10 ($550), selling 4 Sept $22 calls for .70 ($280) is net cost of .54 per long.
    Are we expecting the Sep $22 callers to expire and we collect the premiums.  And then wait for ORCL to turn around?  Is that the plan?

  145. matt1966

    Eric, could be.  An old bull on Kudlow last night said he wasn’t worried about the rally failing until he saw an uptick in loan demand / issuance.  To him, that would indicate the beginning of the need for rate tightening.  And rate tightening is the death nail for any economic recovery.
     
    Buffet and Greenspan are worried that Congress will interfere with the Fed tightening rates.  I thought the Fed had total control over that?  Are they suggesting a tongue lashing by Congress will cause Bernanke to cave?  I don’t think so.  I think Bernanke will fail to act all by himself.  The Fed has a proud history of reacting out of necessity instead of enacting out of prudence.

  146. concreata

    CNBC : Is this a Suckers Rally
    http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=15595276&src=finance&ch=4043681

  147. lflantheman

    RE "Sideline" money.   It seems to me that with such low volume and no "sidline" money coming in that the following can be deduced:
    1.   The "sideline money" does not exist.  Hard to believe, but possibly many potential investors have been shaken to the core by the past 2 years and will keep it under the mattress.
    2.  If it does exist, it’s probably not money that is going to be used to short the market.  Short market players are probably already investing.  Thus any new money coming in will go long, for the most part.
    Conclusion:   The rally will continue., and will heat up if volume increases.    There may be some minor pullbacks, but short of some financial disaster, we are going to continue to move upward.   

  148. barfinger

    That commercial ship transponder display on google earth is really interesting, however I discovered that most of the ships in Tyler Durden’s picture of the gulf coast are tugboats, dredgers, and other service vessels. Not all are cargo ships, as implied.

  149. Cap

    Ridiculous.  That’s all I can say w/ AMZN up $7 on an opex upgrade; COF up $3 off yesterday’s low despite crappy credit losses, losing money and a downgrade; SPG up $3 +, IYR thru roof on cramer pumping off non-event "news".  Major robo squeeze is what this is.  Money on sidelines if not in by now is never coming in; who is gonna chase all this junk ?  Nobody but the robots.
     
    Where are the sellers is a legit question.
     
    Meanwhile:
    http://globaleconomicanalysis.blogspot.com/2009/09/nassim-taleb-we-still-have-same-credit.html
    http://www.twitlonger.com/show/ha4n
    http://www.zerohedge.com/article/hr-1207-now-has-support-290-voters-guarantees-passage

  150. Cap

    The Alfred E. Neuman HAL 9000 memorial helicopter Ben stock market !
     
    Market Commentary:
    With nearly $4 trillion on the sidelines and investors having real trust issues with our corrupt banking system and a Fed who is determined to get this sidelined money back into the equity market, it should come as no surprise that September is proving to be an up month despite the fact that “insiders” are exiting the market at a 100 to 1 on the sell side.
    Who is driving the market up here? This chart should be revealing.
    http://www.screencast.com/users/chartwiz/folder...
    These five banks have borrowed heavily from the Fed at a near zero interest rate and they are hoping to make a killing if they can get the public to buy into this rally. The banks are getting worried because the public isn’t going for it as they had hoped. While share price is going up, banks have to ante more up to make it more enticing and more convincing to suck in the public.
    When CNBC is now hocking their parent company’s stock, i.e., GE, and talking technical breakouts, while the insiders are selling into the advance, what does that tell you?
    Why are insiders selling at a 100 to 1 ratio? What is smart money seeing?
    As I have told you I am very alarmed by the deterioration I am seeing in the money supply. In my career over the last 30 years, I have never seen such a collapse in the M2 indicator. Here is a quote you need to read and understand!
    “ Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation.”
    “ Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).
    ” There has been nothing like this in the USA since the 1930s,” he said. “The rapid destruction of money balances is madness.”
    The M3 “broad” money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate.
    Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an “epic” 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc.
    ” For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew,” he said.
    It is unclear why the US Federal Reserve has allowed this to occur.”
    http://www.telegraph.co.uk/finance/financetopic...
    http://www.telegraph.co.uk/finance/financetopic...
    The Fed chart’s growth axis doesn’t even go this low!
    This will not show up in the third quarter’s GDP figures but beginning in the fourth quarter – a plunging money supply will severely undercut growth again.
    This means there is no new money entering the system to buy houses, cars or for business loans to invest. The seriousness of this fact can not be over-emphasized. If this continues we are headed for a recession if not a Depression, despite the false assurances of Mr. Bernanke again.
    This is why the dollar is plunging. This is why crude oil prices were up $2.07 a barrel to close at $70.93 today. This is why gold is at $1,005 an ounce as people grow fearful and angry.
    Insiders are jumping ship while they can before the news turns ugly. This isn’t good news for the longevity of this bull market and with the dollar falling every investor needs to understand we will remain in a secular bear market, even though at the moment we remain in a cyclical bull market that is even now being deprived of its growth components.

  151. Phil

    ORCL/Cwan – It looks like we’ll be bang on target and we’ll just have to see what happens tomorrow.  As with the BBY play, when you make 100%+ in a day it’s not such a bad idea to follow our patented 2-step approach to profit taking (ie.  Take Money…. Run).

    Suckers/Concreata – Don’t forget that Chna is still the tail wagging this dog and they have their big thing in two weeks so it’s kind of doubtful they’re going to usher in the 60th anniversary of communism with a market crash.  It’s very hard to say what the Chinese would consider "good" for the market as the Hang Seng was at 32K so anything they hit by Oct 1 will be down from there but I think they are likely to benchmark themselves against other major markets and just be happy with being the top performer for the year (and up 100% off the bottom should do it – 22,700, up 1,300 from here). 

    Sideline/Iflan – All the money going into TBills and gold and into loans for the banks is sideline money.  That money has chosen not to go into stocks already.  Still, there is plenty of cash on the sidelines but once that does move in – there will be nothing at all left to hold up the markets.  This is what happened in 1930.  I don’t have a better chart handy (maybe someone can link) but here’s a more optimistic one because it counts our crash a having begun in Aug ’07.   That makes a MASSIVE difference because if you look at us as being in year 2 of the rally and say we hit 70% of our peak in September, we are on par for a massive recovery.  If however, you say that we are in year one of a crash, then you have to imagine we are no better off than the market looked in 1930, right before the REAL crash began.

    If we split the baby we still find that 70% is a very critical line (as predicted by Fibonacci 750 years ago.  The zone we’re looking at on Fibs is between 38.2% (40% on the 5% rule) and 23.6% (25% we discussed earlier).  I have now found a much more bullish representation of the same numbers, this one basing the rally off the lows over time but notice that the other rally that made a huge, fast recovery was the ’29 crash and that did not end well at all!  NONE of the markets made it past 75% off the bottom over 3 years yet the S&P was 666 so 175% is 1,165 and the Dow was 6,500 so 11,375 would be the target there but NONE of those other rallies passed a 50% bounce in year 1 so we are in uncharted territory here – Crazytown!

    To me, even if we are following the most bullish recovery, the oil crisis recovery which was based on a single event that disappeared at little cost to the US and is not at all like our current, lingering crisis – then there is still a pretty hefty correction in our future, almost certainly within a few months but possibly next week too. 

    So I’m going to have to think long and hard about how to play this as we MUST get more bullish but it’s like playing Jenga near the end, you may go a few rounds or the whole thing may come crashing down if you touch it – that’s a pretty tricky investing premise! 

    Ships/Barf – That’s interesting but I have seen stats that there are just tons of idle cargo ships and the BDI pretty much confirms that too.  The problem with Tyler’s thing is we have no idea what the baseline looks like, maybe this happens every fall, maybe every two years — who knows?   What we do know is shippers can’t get 1/2 of what they got even before the crazy rally and that generally means there is little demand for goods globally (trade numbers also confirm this).  Anyway – I shouldn’t be talking about this as I’m trying very hard to put myself in a more bullish frame of mind and find stocks based on, not what I believe will happen, but on what the sheeple believe will happen and then we just have to hope we can get out a step or two before they do….

    Oh come on Cap – I’m trying to get bullish here!  8-)

  152. JRW III

    Phil,  I think you’re trying to get BULLISH here sounds a lot like CAPITULATION.

  153. kustomz

    All those ships sitting there is over capacity that’s been building for the past 5 years

  154. Cap

    How can you get bullish ?
    I can’t find anything … and I mean anything … in the equity markets that I would want to buy.
     
    Do you want to buy AMZN at 60X or higher earnings ?
    Do you want to buy COF at $39 and still losing money ?
    Do you want to buy AXP at $35X earnings ?
    What is the S&P  PE ?
    How about SLG at 3B + market cap w/ 6B + debt; Citi as 12% tenant; office values in the toilet; and 96% leased with no upside in rents and a dividend of less than 1%, 80% of which is in stock ?
     
    and so on ….
     
    I would like to find more long opportunities but everything has the feel of having been in a major short squeeze buying panic with no basis in economic reality.
     
    I just can’t do it … help me, Spock !
     
    BTW, Jenga .. that was funny ….

  155. Cap

    New Chrysler Boss Says September Auto Sales A "Disaster"
     


    Submitted by Tyler Durden on 09/16/2009 22:17 -0400

    It was a mere two weeks ago that we were predicting a collapse in the September auto SAAR, not only with the push-forward effect of Cash for Clunkers expiring, but after Chrysler and GM reported even August sales that were below forecast. Yet based on a speech by Chrysler boss Sergio Marcchione at the Frankfurt Auto Show, even the "conservative" 9.5 million SAAR that we estimated for September, after the 14.1 million number in August, is going to be an optimistic number. The Fiat/Chrysler boss warned that "we are going to see harsh reality in September." According to Bloomberg:

     

     

    Chrysler Group LLC, the U.S. automaker run by Fiat SpA, said nationwide industry sales are off 19 percent so far this month after a government purchase- incentive program ended.
     
    Light-vehicle sales in the U.S. last September ran at a seasonally adjusted annualized rate of 12.5 million, which was the lowest since March 1993. A 19 percent decline would equate to a 10.1 million annual rate, higher than any of the first six months of 2009.

    Even GM’s Fritz Henderson has thrown in the towel, saying that September will be a "very weak" month. And as for that 10.1 million SAAR, we are happy to take the under.
    We are not sure yet how the MSM will prepare the public for the collapse that is now expected in auto sales when they are reported in the first days of October. The bigger surprise is why the auto industry is not following in the footsteps of Senator Isakson and demanding not only yet another extension to Cash For Clunkers, but also an expansion. At this point there is no point in the government pretending it is not subsidizing any and all industry. As David Rosenberg and other economists have speculated, the government accounts for 80%, if not more, of all the "growth" experienced in the economy. The issue is that, as any first year analyst at an investment bank will attest, all such comparable stimuli are considered "non-recurring" unless of course, they become, "recurring." But at that point the economy is effectively one based on central planning: the key construct in any Communist/Marxist economic model. Which, (un)fortunately, is where the US is now and will be for an indefinite amount of time.
     

  156. matt1966

    It makes perfect sense that the worst recession since the great depression would have the strongest bounce in the stock market EVER!  But then, I also think we are a more volatile society today then in yesteryears.  We have information at our fingertips.  We have increased access to investment vehicles.  And there is alot of wealth concentrated by relatively few.  All those things can cause greater and faster ‘swings’.  But the real difference today is the government’s actions.  NEVER has the government taken on the level of risk it has on its books today.  Yes, during the depression we had a higher debt to GDP ratio, but I"m willing to bet it wasn’t on the hook for as much as we are now.  And then if you throw in SS and Medicare entitlement obligations, maybe we are higher in debt / GDP then during the depression.
     
    But the markets move in March was started by the government.  It has been sustained since by the government.  But now we are getting to the point where some of the support is going to be removed (not the direct kind, the indirect kind).  And just some.  But it’s a big difference from when we were having more support thrown at it on a weekly basis as was the case during December – March.  Cash for clunkers will destroy the car business for months to come.  QE will end in October (although I"ll believe it when I see it).  And supposedly the first time home buyer credit is up Nov. 1.    These are good things.  We need to stand on our feet.  The market will correct.  We have been juiced beyond any historical comparison.  Add to that supercomputers and a near monopoly in Market Makers and you have a recipe for exactly what is happening.  It shouldn’t come as a suprise.  But of course it does.  I’m the biggest loser in that regard. 
     
    What we need to be vigilant about is throwing good money after bad.  There will be TREMENDOUS pressure to add to the stimulus that has already been afforded.  The National Assoc of Realtors has already come out and asked that not only should the 1st time homebuyer program be extended from November through the summer of next year but that it should be expanded to include ALL buyers and oh yeah, the credit should be increased from $8000 to $15000!  THEY SHOULD BE F-ING ASHAMED OF THEMSELVES!!!  These people are no better then a bum in the gutter beggin for quarters.
    We are now in the last ditch effort to get as much money in the market as possible before our correction.  Jim Cramer is despicable in his actions.  There will be a special place in hell for him!  I predict a decent pullback next week into the first week in October.  Much like end of June.  And another ramp back up to here or perhaps a little higher during earnings.  But I think volume during earnings will be higher and the bounce lower as a result of alot of the big boys finally selling.  It’s their best opportunity.
    But according to Cramer,
    The bottom line, though, is that “we’re in great shape,” Cramer said. Ignore the naysayers, and prepare for a recovery.
    “Let’s laugh at the doom-and-gloomers,” he said, “all the way to the bank.”

  157. Phil

    Good morning!

    Capitulation/JRW – Sure it’s capitulation.  I think this rally is BS and I have been very reluctant to take bullish positions but the $100KP is down 5% on this week’s run, which indicates I’m way too bearish in my balance and I can’t simply let that keep going so I MUST take up some bullish positions.  The problem is, I don’t like too many of them at these prices.  Generally I am no more than 60/40 bullish or bearish and I swung too bearish last week as I was sure we were topping out for a drop at 9,600.  Now that the S&P and NYSE have broken the 33% line, it would be foolish not to "capitulate" as long as we hold our lines.  I can still think it’s all a load of crap but now I can pick positions and use the 33% lines as a stop on new bullish positiions as we have an easy to identify exit point.  Now the trick is just to find some things I can get excited about, which is a tough order with the VIX down at 22 and killing our sale premiums.

    Capacity/Kustomz - I think that’s a big part of it.  They pretty much doubled capacity this decade in anticipation of demand contnuing at the 2002-2007 pace for the next 5 years and, instead, we are back to 2002 levels so all that new capacity becomes idle ships but that may not necessarily mean we are worse than normal – just worse than the 100% gain that was anticipated.  That’s the case with a lot of things – demand isn’t really off 20%, it’s just off 5-10% from pre-excessive demand we had during the bubble. 

    Buying/Cap – I know but that attitude would have had you missing a 50% gain from about this time in 1998 (when we thought THAT was the end of a huge run) to mid-1999.  And that was on the Dow, the Nas went from 1,500 to 5,000 durig that same 6 months and we thought it was funny to 2,500 and at 3,000 we thought it was ridiculous (much as we do now) and then it went up another 40% in Q4 and Q1 2000 and THEN the whole thing collapsed in an epic fashion.  By Spring of 2001, all the bears were right and the Nas was back under 2,000 but that is no reason to sit out a 100% rally is it?  I’ll be looking for things and I’m sure not going to give up the bear side but I can’t stay 60% bearish if we’re going to hold the 33% levels.  Still, we’ll see where we are after the weekend. 

    Auto Sales/Cap – Hey, I told you to stop confusing us with facts!  How are we going to get bullish if we keep reading about the economy???  8-)

  158. Phil

    Come on Matt – go with they flow man…..

  159. Phil

    Thursday’s economic calendar:
    8:30 Housing Starts
    8:30 Jobless Claims
    10:00 Philly Fed Business Outlook
    10:30 EIA Natural Gas Inventory
    4:30 PM Fed Balance Sheet
    4:30 PM Money Supply

    PALM earnings after hours. 

    Here’s a great chart illustrating Job Distribution over the past 150-years.  I think it’s clear what the problem is — Women!  They’re taking our jobs dudes!!!  I really like the category "Operative" – that sounds like 10% of the population is spying on the rest (maybe so?)….

  160. lflantheman

     I picture myself at a lavish party.  There are important, intelligent, beautiful people everywhere, and interesting conversation abounds.  There is fine food and lots of it .  There is aged wine, very expensive, very good, and opened at a whim.  This is the bull market of the moment.  I will stay as long as I’m welcome.  But if the host says "Party’s over now." then I’m the first to leave.  My car was left idling outside all this time.  I leave and drive downtown to one of the local bars.  I find some of my old buddies there.  We reminisce.  I find a pretty girl there too.  A few more drinks and she’s beautiful.  And the peanuts, beef jerky and pickled eggs?  Marvelous.  The first party is the bull market of the moment.  The second is the bear market of the moment.  I love them both and I will participate in either at a moments notice.  For me, it’s very simple.  I don’t think too hard about what type of party I go to.   I just go to the party where I’m welcome.

  161. merkhava

     Hey Phil… how about RIMM… it is approaching a major resistance line located at 85.8 and earnings are next week on 9/24. The stock has been rallying up with some OE week mojo in anticipation of the earnings.
     
    If RIMM breaks over that 85.8 line then there is an "air gap" on the chart to 96.4… I interpret that air gap to mean that above 85.8 a short squeeze could take hold on the stock and cause it to move quickly to the 96.4 resistance line.
     
    The play I’m looking at is to buy the RIMM Oct 85 puts with a scale in…. buy 10 options and if the option bid drops 25% due to a sucker’s rally blow off top over the 85.6 line , buy another 10.
     
    For speculation on a wild OE week breakout over the 85.6 resistance line, I’m looking to buy the Sep 85 calls. They can be had for maybe 0.50 to 0.60 at the market open today and could be a "ten bagger" or better by Friday if RIMM goes crazy in a short squeeze today and tomorrow.

  162. matt1966

    Iflantheman, I like that analogy!  Either way you’re at a party.  I guess I can live with that… although, I’ve been to some parties that I wish I hadn’t.  ;-)

  163. matt1966

    Iflantheman, as a follow up, I’d be curious to know what rules you use to determine which party is being thrown on any given day.  thanks-

  164. matt1966

    Unbelievable!  Cramer states that retail investing surged from July to August by 15%.  Ok, fine.  So maybe we’ll hear less crying about all the money still on the sidelines.  But here’s the rub.
     
    He suggests buying Knight Capital as a play on the increase in brokerage activity.  He says they are the leading provider of flash trading pools for traders.  Ok fine.  What’s not fine is that TODAY is the day the SEC will finally hold hearings on Flash Trading.  Nothing good can come out of that.  So he’s herding his flock into a stock that is likely to be sold off by him and his buddies today if the hearings don’t go well.  A perfect example of him using his followers for his own benefit and at their own peril.
     
    http://www.cnbc.com/id/32881653

  165. Cap

    FDX reports.  Profit down 53%; margins down; shipping up "slightly".

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