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Monday Market Manipulation – Goldman’s CIT Bonanza

Well, it looks like they "fixed" everything over the weekend.

By fixed, of course, I mean like Tony Soprano fixing the race results as opposed to any actual improvement in the economy.  Nonetheless, these fixes come much easier to the Gang of 12 than actually doing anything to promote a healthier economy.  Heck sometimes G12 members don’t even WANT the economy to improve.  Take CIT, for example.  Our pals at Goldman Sachs structured a deal to "save" CIT with a $3Bn rescue package.  Interestingly, that structure put the taxpayers on the hook for $2.3Bn if CIT fails but it PAYS Goldman Sach $1Bn if CIT files Chapter 11

Surely you say, Goldman Sachs would never screw the government and US Taxpayers out of $2.3Bn "just" to make $1Bn for themselves?  Of course they wouldn’t…  Goldman, in fact stands to make BILLIONS for themselves because this little government-sponsored rescue scam bought CIT just enough time on life support to allow Goldman Sachs to form GS Loan Partners, a $10.5Bn fund, that will make "senior secured loans to companies" just like the ones CIT will no longer be able to provide (now that Goldman has "failed" to fix them after consulting CIT and seeing their books, including client files).  According to Goldman’s GS Partners web-site

Our focus is on originating loans for mid- to large-sized leveraged and management buyout transactions, recapitalizations, refinancings, financings, acquisitions and restructurings for private equity firms, private family companies and corporate issuers. We will also make opportunistic purchases of senior secured loans in the secondary market.  We target high-quality companies with $500 million to $10+ billion of enterprise value; leading market positions; high barriers to entry; well-regarded management teams; and stable, cash generative businesses.

moneyLet’s not forget that Goldman IPO’d CIT with $5.8Bn of sucker investor money (pocketing a huge fee) and last year got a huge payoff for advising CIT on the sale of its Construction Finance business at the bottom of the market just months before GS predicted that sector would be turning around.  GS then rode to the rescue and got the government to put CIT on life support while Goldman raised $10.5Bn behind the scenes to create a competing operation that could cherry pick CIT’s top clients leaving taxpayers to pick up the tab for all the toxic crap that is left after Goldman skims the cream into their new operation.  Game, set and match – nice job GS! 

I’m not going to tell you to get mad, I’m not going to tell you to write your Congressman because you never do.  I’m only going to point this nonsense out as it goes by so that we can get better at identifying these scams at the early stages, when there’s good investment money to be made!  The Goldman/Government rescue package took CIT back from under $5 to over $10 last year and what a great shorting opportunity that was! 

In the broader view, we have very little market data this week with ISM Service today (still contracting), Consumer Credit on Thursday along with our joke of a Treasury Budget where the economy can celebrate a month where we break the $1.5Tn mark in 12 month debt.  This breaks our prior official record (not counting this year) of "just" $700Bn last year and, before that, heck, we were lucky to go $400Bn in debt in a single year.

 

What might be alarming (to a population of people who understand finance and are not already completely numbed to the horror of the situation) is that this incredible increase in government outlays is going hand in hand with the worst drop in Federal Receipts EVER.  Why should this particular data point get us more worried than the other 100 scrary data points?  Well since LAST YEAR, which was not a good year for tax collections in the first place.  Total State Taxes are down 8.2%, State Sales Taxes are off 4.8%, State Personal Income Taxes are down 13.6% and State Corporate Income Taxes have dropped 10.9%.  That is in addition to a MASSIVE drop in Federal Tax Revenues:

State and local government employ SEVEN TIMES more workers than the federal government and form the backbone of the U.S. safety net. In 2006 state and local government spent about $2.1 TRILLION on domestic programs (including grants) compared to $1.7 Trillion for the feds, according to the Rockefeller Institute. States provide medical coverage for about half of the nation’s poor children, maintain almost all the roads and hold more than 90% of criminals.

As we know from past and recent experience.  State and local governments tend to shut down suddenly.  Unlike the Fed, they can’t just print more money whenever they need it but – like the Fed, they CAN go out to raise money and what we are about to have soon is the $1.9Tn overspending Federal government having to compete, through interest bidding, with another $1Tn of state and local bonds that will be floated at much higher rates. 

In member chat this weekend we discusses a very nice play on higher rates by playing TBT, which is an ultra-short ETF on the 20-year Treasuries (they lose value when rates go up) and we can take a vertical call spread on them buy buying the 2011 $35 calls for $11.20 and selling the 2011 $43 calls for $7.  That puts you in the $8 spread for a net cost of $4.20 with $3.80 of upside of 90.5% if rates rise enough to keep TBT at the same price it is today ($43.40).  If you have a variable rate interest loan, this kind of spread can give you a nice hedge against an increase in rates.  Meanwhile, at 10:30 this morning the Fed hands over another $50Bn under TAF, which effectively let’s people like Goldman Sachs put up crap assets in exchange for virtually no-interest loans that they can use to manipulate the stock market.  This money is distributed bi-weekly, just in case $50Bn sounded light to you

In a great interview by our own Ilene with Mad Hedge Fund Trader this weekend, he explains why Proshares Ultra Short Treasury Trust (TBT) is one of his favorite ETFs: "As the supply of government bonds increases exponentially, their eventual collapse is inevitable. All Ponzi schemes must come to an end, and the U.S. government is no exception."

A bomb exploded outside a UN office in Pakistan this morning but it happened AFTER the Asian markets had closed and minutes before the EU markets opened so the Hang Seng kept their 100-point in 20 minutes "recovery" to put up a + 53 for the day so congratulations to all who worked so hard to paint the numbers over in Asia this morning.  Despite some very brave efforts, they could not get the dollar to hold 90 Yen this morning and the Nikkei just couldn’t stand it anymore and fell 60 points after lunch to finish down 57 at 9,627, now 10% off the Aug 31st high. 

[Greeks vote in snap election.]Europe is flat ahead of the US open as the Socialist Party takes power in Greece.  Unlike last week’s victory by Germany’s conservatives, expect to hear no mention whatsoever of Greece’s elections as it doesn’t match the premise that capitalism is triumphing as the solution to all the world’s ills.  George Papandreou, leader of the winning Socialist party, Pasok, told supporters  "We bear a great responsibility to change the course of the country."  To tackle an unemployment rate of 9% and what is expected to be Greece’s first recession in 15 years, Pasok has vowed to pursue a €3 billion ($4.4 billion) stimulus program. It has pledged to raise taxes on the wealthy and clean up endemic corruption in the public sector.

In another act of creeping Socialism,  UK regulators dug into bank profits by tightening liquidity rules, seeking to increase the safety of the U.K. banking system but will hit banks’ profits by requiring them to hold a pool of high-quality assets, such as government bonds, rather than using the cash to invest in riskier but higher-yielding assets.  According to the FSA Director: "We must learn the lessons of the financial crisis and we believe that implementing tougher liquidity rules is essential to ensure we are in a better position to face future crises." The new rules will also require regulated firms to develop better systems and controls which allow them to operate on a self-sufficient basis while also having to report their liquidity positions more frequently and in more detail than previously, to the FSA.

As I mentioned on our Weekly Wrap-Up, we went into the weekend fully covered on our long index hedges as we have come to expect shenangians into the weekend.  I also posted a comment early this morning that we need to remain VERY cautious because we know it’s all BS manipulation.  The fact that we know this is BS won’t stop the markets from going higher on low volume, especially with the crap I’m seeing thie morning where the Pound was jammed back to $1.60 and the Euro hit $1.465 even though the Yen "fell" back to 90 to the dollar and oil was pumped up over $70 with gold back at $1,007.  So, "amazingly" the dollar was strong against the Yen when the Nikkei was open despite being very weak in Europe.  That kind of meddling (probably by Japan, not GS) makes for a very dangerous investing climate. 

Watch gold, oil and copper to give you a real sense of the economy and the critical levels to watch in the markets are: Dow 9,535, S&P 1,032, Nas 2,070, NYSE 6,668 and RUT 586, which are the expected bounce zones off our 5% rule.  To the downside we have the full 5% (off the recent highs) rule points and 50 dmas lining up Dow 9,450, S&P 1,020, Nasdaq 2,030, NYSE 6,650 and Russell 580.  Unless we hold above those levels with some confirming volume, we are very likely to see an additional 5-7.5% move to the downside.

 


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  1. pstas

    ?Roubini- I meant to post a comment along with the article but got distracted watching Sunday’s
    Chicago vs. Detroit challenge- (Bears win; Sox lose) (BTW, the Sox thrashing of the Tigers on
    Fri/Sat sets up a great regular season finale of the Twins vs. Tigers on Tuesday – how’s that for
    alliteration).
    I digress- to my comment: So, I am probably preaching to myself here but useful nonetheless.
    Given my keen knack for grasping the obvious, there is a reasonable bull and bear case to be made
    and we are back to “stockpickers market”. The so-called easy money has been made. BAC @ $6
    or BRK/B @ 2400 were proverbial no-brainers- in hindsight. Now comes the hard part.
    I long to get back to some fundamental financial analysis. While 6 mos ago I was looking at
    companies and trying to figure out how much the furniture may be worth and actually seeing
    large, viable companies trading for ½  tangible book; Stock prices seemed more a function of
    momentum than reason. Now, I would like to be focused back on free cash flow generation and
    earnings based on growth rather than expense cuts. Looking back, my dartboard was as accurate
    as my analytical stock picking. Reminds me of the dot.com era.
    So, I get a sense that Oct 1st was a turning point. Nothing dramatic but a turning of the page and
    beginning a new chapter. We shall see.

  2. ephmen85

    TBT Play.    Would you consider the same spread but using the Jan 10s?  It costs about 25% more, but you’re done in a little over 3 months.

  3. ephmen85

    VLO   Getting to a point for a put sell?….maybe Nov 18s for $1.50-ish?

  4. Phil

    Monday’s economic calendar:

    10:00 ISM Non-Manufacturing Index

    10:00 Employment Trends Index

    10:00 $50B, 70-Day TAF Auction

    1:00 PM Results of $7B, 10-year TIPS auction

    6:30 PM Fed’s Dudley speaks

    6:30 PM Fed’s Fisher speaks

    Government officials agree taxpayers should not be the ones paying to dismantle too-big-to-fail institutions. The $64T question is: Who should be paying, and how?

    Then-Treasury Secretary Henry Paulson misled the public about the health of U.S. banks in order to seal the $700B TARP rescue package, according to a report due out today from TARP Inspector General Neil Barofsky. Paulson said TARP recipients were healthy, and that they took the money for "the good of the U.S. economy." In truth, regulators were already concerned some banks were teetering.

    Euro-zone services sector returns to growth for the first time in 16 months, with Markit’s PMI index (.pdf) climbing to a surprisingly strong 50.9 (consensus: 50.6) from 49.9 in August. France’s growth was most pronounced, climbing to 52.2 from 49.3. Business sentiment regarding activity in one year’s time hit a 44-month high.

    Euro area retail sales (.pdf) dropped 0.2% in August from July, the 15th straight month of decline, and 2.6% weaker than a year ago.

    The next scam: The Treasury will announce today that AllianceBernstein (AB), BlackRock (BLK) and Wellington Management have raised a combined $1.94B to participate in PPIP. For their efforts, the Treasury will match the $1.94B dollar for dollar, and provide debt financing to double that, bringing their total purchasing power to $7.74B.

    HSBC (HBC) CEO Michael Geoghegan is convinced we’re headed for a W-shaped recovery and a second downturn, and says he’s in no rush to expand. "I’m not as convinced we’re through the worst as others are," he tells the FT in an interview.  Over the weekend, HSBC sold its NYC headquarters for $330M in cash to Israeli businessman Nochi Dankner. – NOT a move you make if you think things are coming back within a year!

    Goldman hikes the U.S. large-bank sector to Attractive, lifting Wells Fargo (WFC) to Buy and Capital One (COF) to Conviction Buy. Markets have failed to recognize "the dramatic improvement in earnings power at the large banks vs. the regionals," firm says. WFC +4.3% premarket. COF +4.7%.

    I actually agree with that last item from GS.  The regionals that do survive are a great bet.  Not COF thought, that’s madness but HCBK is one I like a lot as they are Northeast-based, where real estate has held up pretty well. 

    Our DIA put covers have served their purpose so we buy back 1/2 and keep stops on the other half if we don’t break over our bounce levels. 

    Watch gold, oil and copper to give you a real sense of the economy and the index bounce levels are: Dow 9,535, S&P 1,032, Nas 2,070, NYSE 6,768 and RUT 586, which are the expected bounce zones off our 5% rule. 

    To the downside we have the full 5% (off the recent highs) rule points and 50 dmas lining up Dow 9,450, S&P 1,020, Nasdaq 2,030, NYSE 6,650 and Russell 580

    Unless we hold above those levels with some confirming volume, we are very likely to see an additional 5-7.5% move to the downside so BE CAREFUL!!!

  5. aclend

    Notes from G-land:
    We raise our coverage view on large banks to Attractive from Neutral, upgrade Wells Fargo to Buy and add Capital One to our Conviction Buy List as we believe the gap between sustainable earnings per share and current share prices is too wide. Against that we stay Cautious on regional banks given permanent earnings dilution and later cycle credit issues although we moderate our stance by upgrading Comerica to Neutral. The market has failed to recognize the dramatic improvement in earning power at the large banks versus the regionals. Consider tangible assets per share have increased 29% for large banks vs. a 25% decline for regionals. Pre-provision earnings per asset has increased 7% vs. -14% for regionals. We believe this difference in earnings power has not been fully reflected in share prices. We estimate that normalized earnings for large banks are 39% higher than in 2007 despite the 36% decline in share prices implying a significant fade in ROEs. Our normalized EPS estimates translate to 14% ROEs for large cap banks supporting a normalized 3X tangible book valuation.
    COF target raised from $37 to $44, WFC raised from $31 to $35

  6. Phil

    Man, this open is disappointing already! 

    Zero volume so far so no conclusions can be drawn. 

    TBT/Eph – I don’t like risking such a short time-frame.  It’s an emergency to fix Christmas so anything can happen in the short run. 

    VLO/Eph – As a scale-in sure but we have routinely been able to buy them at $16.50 so keep that in mind. 

    GS/Aclend – Hmm, I didn’t realize they DON’T like regionals.  That’s fine by me, let them come down a bit and we’ll pick some good ones up.  

  7. Phil

    Good perspective on earnings season expectations:

    Usrevs

    Transports moving higher very fast (IYT) on no volume.  Looks like we will be getting an early morning pump as SOX are flying too and that means horesemen probably next.

    RIMM is still a good one but a little late to the party if you didn’t enter with us last week.  I still like the Nov $65 puts sold naked for $3.

  8. dmankoff

    HI, Phil

    is the 100K portfolio flat so far , basically?  wondering if I’m reading it right.

    for example

    XLF  Jan. 11   the 10 calls and 20 put are $11.50 to buy both

    you can sell the NOv. 14 or 15 strike calls and puts for combined $1.70

    so, already in first month your cost is down to $9.80  below the 10 spread
    and
    you have 13 more months to sell against it.

    do you like this one?

    XLF has kind of flatlined from 12 or so up to 15.50 lately, and may trade sidewayish for awhile (who knows?)

    but this puts you kind of with a running head start, then if close anywhere near 14 or 15 on Nov. expiration,
    you can sell at th emoney Decembers for p robably $1.40 or so.

    the leveraged ETFs are so screwy how they compute them daily, and don’t really give a pure play on something
    like this strategy, do you agree?

    otherwise, cheap ones like URE, SRS, TZA could be considered. or even BGZ and FAZ at around 23
    since the premiums seem to add up better on a low priced item

    ;love to hear your comments…

    of course, if we start any kind of huge correction, then this kind of strategy blows up in your face again,
    unless you adjust on the way down and roll down the puts and calls to a lower strike, right?
    thanks
    David
     

  9. chakra108

    Phil
    I own the SKF NOV 24/26 calls @ 1.05. With GS coming out with the report on banks, is this a keeper?

  10. mrmocha

    RTI has been a crazy fun roller-coaster for me, closed my covers and bought more calls this morning.

  11. JRW III

    Phil,
    Look at the $ paid # !!! How can there be ANY profit ?

  12. Phil

    Great Retail link from the NY Times this weekend (click to expand):

    changes retail

    Barry Ritholtz also points out that the ajdusted employment number show that things are MUCH worse than we’ve been led to believe:

    Employment Falling Faster, Recovering More Slowly

    Also from Barry, an excellent list of on-line Economics classes you can check out.  And, this cartoon:

    69230.strip

    $100KP/David – Yep flat so far.  We have not made much of a commiment as we thought the market was too toppy to buy into and too manipulated to short – seems about right so far…  Yes on the XLF spread.  By the way, that’s an important note on those $100KP positions, they may seem even but you are often solidifying long positions and reducing your premiums so you end up even at $100K but you have your cash back and you are in the money, as opposed to where we opened the positions, using our cash and holding positions that has 25% premiums.  It gets better month after month, just like our old $100KP did.  On XLF, it doesn’t really matter what it does this month or next month or the one after that.  We have a LEAP risk of $1.50 and we’re going to sell $12 worth of puts and calls against our longs so if we are 50% successful, it’s a great return.

    The strategy is better with double ETFs or flat ones than triples, which can blow you out on your front months.  The problem people have is you show them a way to use $11.50 which GUARANTEES a return of $10 after 15 months and allows you to sell $1 a month in premiums with a high probability of making $6 for a 50% return and all they want to do is figure out how to turn that play into something much more dangerous…  If you can’t be satisfied with a goal of making 50% returns, the stock market will never make you happy and you are almost certain to take too many risks and blow up your account.

    SKF/Chakra – If it’s a hedge, it’s a keeper.  I don’t believe a word GS says anyway so I’d give it a day or two before throwing in the towel. 

    Sept. ISM Services Index: 50.9 vs. consensus of 50 even, up from 48.4 in August. Business activity index jumps to 55.1 from 51.3. New orders to 54.2 from 49.9. Prices paid plunges to 44.3 from 63.1.

    That is just SO DEFLATIONARY.  Who cares that ISM is up 0.9% over flat when prices are falling off a cliff?  This is just Services for Clunkers as you have activity at ultra-low prices that won’t last. 

    Very nice Bounce Level Failure!  Down we go….

  13. dmankoff

    thanks, Phil, I keep losing the link for the 100K portfolio, can someone please send it again?  thanks

  14. dmankoff

    SRS, the "widowmaker".  Any good play to start on this right now?  even the Oct. options still have some good premiums and Nov. is a long 5 week expiration month. How about buying SRS and selling the 10 puts and calls for Oct.?

  15. bgbigelow

    Phil are you buying out the other half the dia covers here?

  16. pstas

    Phil
    What about a new entry on short calls- AMZN Oct 90′s & AIG Oct 40′s from the 100K port. Seems a "safer bet’ for the AIG 42′s or 43′s?

  17. roth87

    I’m new here. Can anyone post a link to the DIA put strategy?

  18. RMM

    Phil: with recent downturn, my portfolio lost 10000$: how many protective puts should I have had considering that market went down 300 points ?

  19. dmankoff

    link for the 100K portfolio?
    pleasze

  20. Phil

    $100KP/David – The WSS link is:   http://www.wallstreetsurvivor.com/Public/Content/PhilStockWorld/Dashboard/Philstockworld.aspx 

    SRS/David – So I guess me saying that selling front-month contracts against 3x EFTs being monumentally stupid doesn’t phase you right?  The Oct $10 puts and calls pay $1.30, which is a lot but

    DIA/Bgbig – If they fail again here, yes.  So far we’re just bouncing around in our range so no reason to change from 1/2 cover.

    Short calls/Pstas – Those short calls on AMZN were already a roll up from short $85s that killed us.  I doubt I’ll be going back to them again.  The AIG short calls are the remains of a spread we have that we legged out of and I expect those to end up worthless unless we have a major financial rally in the next two weeks. 

    DIA strategy/Roth – "The Stock Market Parachute"

    Protection/RMM – Well it seems you were bullish overall so knowing you have $10,000 of exposure to a 300-point drop lets’ say you want to mitigate 60% of the loss on a dip, then you simply need to buy $8,000 worth of the DIA Jan $97 puts for $5.70 and sell 1/2 the Oct $96 puts for $1.85 and those can be DD’d to the Oct $94 puts (now $1.02)  and those can be rolled even to the Nove $88 puts (now $1.08) which is a $9 spread return off your net $4.78 initial investment so if you had spent $8,000 to buy 17 contracts, you’d have $15,300 plus some premium left if the Dow falls below 8,800.  If you want to cover a 300-point dip instead of a 700-point dip, 34 contracts should do it (net $16,252) but just make damn sure you’re going to make more than $8,000 if the Dow goes UP 300 points!

  21. Cap

    HAL 9000 appears to want DIA 95.85 today

  22. Cap

    stealth FMD developing….possible

  23. shanehoover

    Has anyone tried to quantify how much rates would have to rise for TBT to stay at $43 in January 2011?

  24. pstas

    Employment- just wondering- not intended as a political commentary- do these stats take illegal immigration into account?
    The extended recovery periods roughly correspond to the surge in illegal immigration.

  25. ssdirk

    Pharm,
    Hear any chatter on PARD or BEAT?  I have buy/writes on both

  26. allen060

    XLF: Phil, regarding David’s suggested XLF trade, wouldn’t it work even better with really low priced ETFS like URE where you can buy the Jan 2011 4 calls and 6 puts for under $5 and sell Nov 6 calls and 5 puts for .80 – and you keep selling premium each month.. Am i correct that the risk is lower there even in the case of a major market move? What am I missing?
     

  27. JRW III

    Cap,
    Why only 25 more to the DOW ?  No upside resistance till 104 1/4 on SPY.

  28. Phil

    A new study of financial news coverage finds that the story was largely told from the viewpoint of the government and Wall Street, not the economic troubles of everyday Americans. The study also notes that when markets bounced, the media abandoned the economy and returned to reporting on fires, muggings and Michael Jackson.

    11am volume – the usual 50M.  9,5700 should be tough on the Dow but a very impressive move up since the last dip.  Note that oil is Down $1.50 so a very strange day today with major mixed signals.  Copper is also down ($2.68) but gold is holding $1,005.

    Taking out (buying back) DIA $95 puts at $1.30 – good enough. Will sell $97 puts for no less than $2 (now $2.30) if we break higher.

    TBT/Shane – Those ETFs are strange, they tend to deteriorate over time but, in theory, rates don’t have to rise very much to maintain $43 and a 1% rise would almost certainly be plenty.  Because they are dynamically balanced, there is no sure way to tell. 

    Immigration/Pstas – That’s a good point.  The loss of cheap labor when they cracked down on it a while back did a lot of damage to our economy.  I am always baffled by how a country that was built from the ground up by immigrants can think immigration is a bad thing. 

  29. javaben

    $100KP – put the GE stop on for .50 per yesterday’s post.  It got executed at 10:40 today.

  30. javaben

    The GE stop was on the short -20 Oct 16 calls

  31. Phil

    XLF/Allen – The trade David mentioned was buying the 2011 $10 calls and $20 puts for $11.50 total.  Since the spread on the two strikes is $10, it is NOT POSSIBLE to lose more than $1.50, no matter what price XLF finishes at.   On the other hand, if XLF moves above $20 or under $10, you do get those gains.  So what you are missing, in terms of a conservative portfolio, it the lack of long-end risk and minimal premium spending.  Your trade costs less and gets a higher % premium each month but it’s an ultra so much riskier and you are risking more on your long end so it’s not even close to being the same trade. 

    GE/Java - I didn’t set a hard stop myself.  I wasn’t buying the market pump so I didn’t get around to taking any cover action.  Also, as you can see, hard stops are not the best way to go as they trigger into BS spikes.  Ideally, you should use stop levels as the point at which you need to make a serious decision.  As you can see from the previous comment, where I took out the DIA covers, my decision is it was BS so I’m a little more patient.

  32. Cap

    JRW … just looking at levels for today … S2 is 95.85; we may not make it there.

  33. bgbigelow

    DIA – Phil taking out the 95 puts does that put you naked or at a half cover?

  34. javaben

    Phil, I took the instructions at face value.  Since I thought the portfolio was one that was set up for us people that didn’t have the ability to be closely monitoring positions, I don’t know of any way I can set a stop other then to set it with TOS.  Please explain how those of us that can’t do real time monitoring should have done the stop per yesterday’s post?

  35. balancenv

     Just a data point while watching local TV: 
    Retail sale $ for the 10/1 ‘Golden week’ holiday period (10 days) is forecast to be 25-30% more than last year. 
    I wonder what will happen to Shanghai index come next Monday. 

  36. thegame05

     hi phil – new member.  any thoughts on WLT?  it broke its 50 dma so looking at this as a bearish trade like last year, but the options are so expensive.

  37. hp

    Phil,
    What level would you buy MON??
    thanks

  38. Phil

    DIA/BGbig – Naked on Jan $100 puts, looking to cover per above, otherwise hoping for a nice dip to cash out and move to a lower spread. 

    GE/Java – Oh a hard stop is fine if you can’t watch something.  If you take things of the table with a 66% profit consistently, you should do well over time so there’s nothing wrong with it.  On the other hand, that doesn’t preclude you from acting like you do have free will and using it once in a while.  Yesterday the portfolio was at $100,400 and today it’s at $100,700 so, even though that particular GE position is testing it’s limit, I feel like I’m balanced enough not to worry about it hurting me too much.  I’m not looking to let it ride and wipe me out but it was a $1.29 sale and if I end up having to buy them back for .65, I’m not going to cry too much about it but, at .50 – I’m watching them very closely.  We did an experiment with the Buy/Write Portfolio at one point and didn’t touch it for a month and it was one of our best months – there’s nothing wrong with making trade adjustments but there’s also nothing wrong with NOT making them as you are just as likely to be wrong as right most of the time.

    Golden week/Balance – That’s huge, do you think it’s true?

    Investors hoping for a bounce in retail stocks should beware the Wal-Mart effect. While many retailers reduced spending and slashed prices, Wal-Mart (WMT) spent more and avoided aggressive price cuts, and now appears ready for an offensive that could hobble rivals’ hopes for a rebound.

    Welcome TheGame!  I don’t think I’d short them here, they’re a pretty good company with a low p/e and oil is holding over $65 and nat gas is holding $4.  If they get back to $67.50 and fail there, then they’d be an interesting short.  I suppose you can simply sell something like the Jan $70 calls short for $3.40 and let someone else pay the crazy premium.  WLT has to get to $73.40 just for you to have to pay the guy back in full but it’s a lot of margin and you can probably do better if you wait for a move up to sell into.

    MON/HP – I’d want to see them miss on Wednesday and then I’d want to see if $70 holds.  Since I like them at $60, I wouldn’t mind selling the Jan $65 puts, now $2.25, for $4+ on a dip.

    Condon Naste can’t support Gourmet and Modern Bride anymore – Is this a healthy economy?

  39. yodi

    Hi Phil I am holding the oct call short of ERY 14. sold for 1.00 trading now for +_ 1.55 any good suggestions??

  40. allen060

    XLF: Phil, okay I understand the concept on the long side. What about adjusting the short side each month? Let’s say I sell the Nov 14 puts and calls for about 1.70 premium. Would I look to roll up or down when XLF moves about 1.70 or 2.00  in either direction (ignoring support and resistance lines for now)?

  41. pstas

    Best line I have heard on the failed Chicago Olympic bid:
    "The Audacity of NOPE"

  42. billman

     Phil What do you think about buying mos and selling the oct 45 calls for 2.40?

  43. dmankoff

    Phil, did you stop midsentence?  would love to know the rest of your thoughts on this, thankjsDAvid
     
    SRS/David – So I guess me saying that selling front-month contracts against 3x EFTs being monumentally stupid doesn’t phase you right?  The Oct $10 puts and calls pay $1.30, which is a lot but

  44. dmankoff

    Phil,
    and on the XLF trade, if we are short the 14 Oct. straddle, and long the 10 call and 20 put for Jan. 2011, on the long side we can only lose $1.50, but on the short side, if we h ave to cover one of the short sides for a lot, how does that work out?  i guess we’ll have to roll at a certain point and keep collecting premium until we are able to keep a lot of the erosion, and start to gain on that $1.50 that we want to gain on, right?

  45. gel1

    Phil
    Back from re-hab and in recovery mode. Had too many positions (300) and too few covers. Will scale down to 150 positions and manage the portfolios better. Was in Palo Alto, CA over the weekend and tried to get in the Apple store, but it was totally jammed both Friday & Saturday. What a great company! I would like to sell some leap puts on TBT – any thoughts?

  46. JRW III

    http://www.youtube.com/watch
    For your viewing pleasure !!

  47. JRW III

    Sorry that’s supposed to be  http://www.youtube.com/watch?v=druQ6o1Ifm4.  Or google Big Bird & Michelle Obama.

  48. Cap

    DIA 95.82
     
    the magic of HAL9000

  49. ssdirk

    Same old story – $ smoked = commodities up and stocks up.

  50. ssdirk

    Add to that: on extremely low volume.

  51. matt1966

    Well, well, well.  All IS well in the market.  Halejulia!  Friday was puttin on the breaks and today is up, up, up baby.  Your Fed at work again.
     
    But kudos to the British who are trying hard to learn something from the lesson we all have been taught about inflating asset classes.  They’re requiring THEIR banks to hold less risky assets like govt bonds rather then stocks.  Wow.  It makes sense AND they’re doing it.  Incredible!  But not here.. no, no, no, no, no.  Not here.  We’re like the Russia of the West.
     
    Read Matt Taibi’s latest article in Rolling Stone on naked shorting.  He makes it look like that Bear and Lehmen were both pushed over the edge by the market makers and their ability to ‘counterfeit’ stocks for shorting.  It’s just a sickening system we have here.
     
    Phil, I like your characterization of the current situation.  WAY overbought so can’t go long.  But WAY too manipulated to go short.  That’s it in a nutshell and it will stay that way until the Fed turns off the spigot.

  52. stevenparker

    Hi Folks, I am still in MBI as a buy/write with net now $3.84
    I currently have Nov 7 puts and calls s sold for $2.36 now $2.15 so hardly a major panic. However the shares look very unhappy upon the S&P downgrade.
    Anybody have a strong opinion on MBI please?

  53. Phil

    How come the guy who was just on CNBC can talk about selling an October option and then says "if that doesn’t work you can then roll it into November" and everyone doesn’t freak out on him for using cryptic terminology?  8-)

    ERY/Yodi – Well I think that’s a terrible, terrible trade idea so I’m not sure what I can tell you.  If you want to take a VERY bullish position on oil then the WORST way to do it is to sell naked calls against the triple short fund.  You could have just gone with a long bullish call on ERX where at least your loss would be limited or bought an ERY put like the Jan $12.50s, which fell from $1.90 to $1.40 since last week but at least you have 3 more months to possibly be right and the ability to sell calls against it.  Meanwhile, you sold the $14 and it’s got .75 in premium so not worth panicking as long as oil holds $67.50 and you are lucky it’s a short expiration month as the options contracts expire before the oil ones.  Of course you know all this or you wouldn’t be messing around with unlimited risk on ultra ETFs right… 

    I’m not even going to suggest a roll as it doesn’t help.   I would suggest looking at what happened to ERY between June 15th and June 22nd and then you can tell me at what point between $16 and $24 would you have finally decided to get out.  Perhaps you would have rolled and seen the next $3 correction to the downside before it jumped back up to $28.85?  If you can ride out that kind of damage, then you should be OK as we generally get a sell-off after a major run-up but it’s just after long, quiet periods like this that we do get those run-ups. 

    XLF/Allen – Yes you look to always roll the caller and putter to more premium.  Of course you can’t lose on both so it’s really a question of hitting your target once in a while when you get to cash in.  So, if XLF does jump 15% to $16, you would owe the $14 caller $2 and then you would sell (assuming you thought we were flatlining) the Dec $16 puts and calls, which are now $2.10.  That means that you collected zero on one of your 8 potential sales.  If you only collect one, your ROI is $2/11.50 but your ROR (return on risk) is $2/$1.50.  If you lucky twice (2 in 8 sales) then you make 4/11.50 and if you happen to be on target 3 times in 15 months of selliing then you collect $6 on the $11.50 you committed, making a 52% ROI when all you ever risked was $1.50.  If you don’t think XLF is is generally going to trade in range for the next year – DON’T GET INTO THIS POSITION. 

    MOS/Bill – Not enough protection into earnings for a stock that jumped $5 last earnings.  We’re right in the middle of that gap and if you really, REALLY want to own MOS long-term then fine but I haven’t been feeling to good about that sector this Q and MON is our first data-point so you are a much braver man than I am to bet on them for earnings with no clue at all to how the sector has been performing….

    Volume a super-lame 72M at 12:45.  Take a look at last Weds, Thurs, Friday and Monday and see if anything looks familiar, even right town to the 1:30 top-off that didn’t quite make the next major levels (9,850 then, 9,600 now)

    SRS/David – Hey I guess I did get distracted.  They pay $1.30 but SRS has often moved $2 or more in a week so you have only the illusion of a buffer.   If you are comfortable rolling them along then that’s fine as they are unlikely to spike but it’s simply not something you can possibly pick a target on so you are betting on the spin of a wheel as to whether they finish at $9, $10, $11, $12 or $13 in 2 weeks.   We play SRS by buying them at $9 because we feel they have some value down there, playing them at $10.50 you may as well go to the track and pick 4 horses in an 8 horse race. 

    A lot of people talking up commodities but I think they are rusling up some bagholders because:

    New derivatives-oversight legislation would give CFTC head Gary Gensler the power he’s been seeking, to regulate commodity swaps and derivatives traded on foreign exchanges. It would have a particular effect on swaps investors such as the U.S. Natural Gas Fund (UNG), who bought swaps when it couldn’t offer new shares.

    Other good lunchtime reading:

    From Calculated Risk: A sortable list of all failed banks since 2007. Which helps explain why the FDIC’s DIF is broke.

    In a description of the ten deadly sins of investors, John Dorfman warns against overtrading, listening to analysts, assuming good companies make good stocks, and market timing: "Most people who try to time the market end up being on the sidelines during the unexpected sudden upturns that account for a significant part of the market’s long-term gains – this spring’s rally, for example."

  54. Phil

    XLF/David – As above, yes, we roll.  A lot of these plays were designed when the VIX was 12 and people were THRILLED to make 20% in a year.  That means just 2 successful sales out of 8 would have been great.  If this maket begins to normalize, you are all going to get out of your fantasy world that precludes you from making sensible, high-probability investments because of the "opporttuntiy cost" of not making some high-risk investment that may pay a jackpot later. 

    TBT/Gel – See above, we took the long bull vertical.  Welcome back.  300 positions seems like a bit much, as do 150…

    GLD Nov $98 puts at $2.10, stop at GLD $101 (maybe down .70) lookng for $3+.

  55. diamond

    Pharmboy – DEPO is getting some action today. Have you look at this company? 

  56. morxlntway

    Did anyone get in the TBT trade for $3.60? Any PHuge PHactor on this PHil?

  57. Cap

    Matt — naked shorting — one of my pet peeves — no doubt that naked shorting was a huge contributor to BSC, LEH and others.  No question about it.

  58. morxlntway

    Sorry, i missed the update on TBT.

  59. Cap

    DIA high for day now 95.86 …. what did I say earlier ?

  60. morxlntway

    Got it now

  61. gel1

    Phil
    Ya, I was getting dizzy and thought it was swine flu, but it was nothing more than being overly "piggish".

  62. JRW III

    Phil,
    So you’re saying we go down for the day at 1:30 ?

  63. Phil

    Restructuring pros are expecting more pain and a "sad holiday season" for corporate recovery, as even the wealthy are discovering frugality: "That excess spending creates little boutique hotels, it creates that restaurant that sells the $19 doughnut and the Kobe beef burger. Those things don’t need to exist."

    I for one will be very sad if Cheescake Factory stops selling Kobe beef burgers as those kick ass.  They’re not REALLY Kobe beef but they are darned good burgers.   A more real Kobe beef burger is at Old Homestead in NY and AC for $35 and those are great but not so great that I don’t prefer the $12 one at CAKE.  I don’t know where you get a $19 donut but I’d like to find out as I’d like to stand outside that place and sell those people real estate….

    Taibi/Matt – Do you have a link on that? 

    MBI/Steve – They are at junk status on bonds but, as you said, it’s a wide spread and you are well ahead so not a bad time to call it a day.  If you don’t want to "miss" something, you can go for the 2011 $7.50/10 spread for .60, which pays you another $1.90 AFTER you take $2.80 off the table by cashing out but MBI insures a lot of muni bonds and that’s exactly what I was talking about earlier as a huge concern as those municipalities run out of money into the end of the year.

    TBT/Morx -  You just have to be patient with those plays.  Speaking of Treasuries:

    The Treasury sells $7B in 10-year TIPS at 1.51%   Bid-to-cover ratio of 3.12 compared to a recent 2.1; indirect bidders buy 44% vs. recent average of 26% (all before the change to how indirect bids are tallied). Regular notes trimmed gains a bit; The 30-year yield -0.01 to 3.98%; 10-year -0.02 to 3.2%; 5-year flat at 2.2%; 2-year +0.01 to 0.88%.

    So these guys think inflation is just 1.51%?  Certainly not the same people as the ones buying gold…

    Good job Cap!

    Dizzy/Gel – Well I guess that can be worrying.  Glad you’re OK!

  64. matt1966

    Phil / Taibi:  No, I read it in the magazine.  I assume its the most recent one.. but just in case it’s got U2 on the cover.  I was at a friend’s house when I picked it up.  Off topic:  Can you believe the U2 tour takes 112 tractor trailors to haul around all their stage crap?  The Edge said we are as big as we can physically or financially be in terms of tour size.  Bravo.  It would be so easy to be a humanitarian with that kind of cashola.  But at least they are doing it.

  65. chakra108

    Phil
    GLD – whats the premise? Can you drop a link from the past if this has been dealt with. thanks. 

  66. RMM

    Pharmboy:
    what is  your view on:
    ONCY
    CVM
    HGSI
    AVII
    INO/
    Txs

  67. boonie

    I hate it when my order gets routed to GS and fills almost instantly … seems like a bad start toa trade.

  68. diamond

    October 5, 2009 11:32 AM EDT
     
    Leerink Swann comments on Human Genome Sciences (Nasdaq: HGSI). 
    Price target $30. 
     
    Leerink analyst says, "In 12 months, both of HGSI’s lead programs should be approved, making the company a prime candidate for take out or large cap status, we believe. We believe that HGSI’s core programs are worth around $29 per share on a risk-adjusted basis, primarily comprised of Benlysta (belimumab) at roughly $28 per share. We apply 6x sales to projected Benlysta revenues, 3x sales to Zalbin (albuferon) sales, and 1x sales to milestones and Abthrax revenues. We believe that HGSI’s share of GSK’s (NYSE: GSK) darapladib and Syncria programs is worth around $1 per share on a risk- adjusted basis, using a 3x sales multiple. Our analysis assumes a 75% probability of success for Zalbin/Albuferon, 70% probability of success for darapladib, 50% for Syncria, and 85% probability of success for Benlysta (belimumab). We apply ’09-’15E average annual probability-weighted revenues discounted back at 17%. Applying the same parameters to ’12-’15E probability-weighted revenues for darapladib and Syncria suggests an additional $1 per share for HGSI’s participation in potential GSK products." 

  69. samz3700

    Test

  70. Phil

    1:30/JRW – No, look at last Monday.  Morning pump, peak at 1:30, pullback and then crazy pump into close.  We don’t sell off much until Tuesday.

    GLD/Chakra – I just don’t think the dollar goes much lower and I see people buying TIPs at 1.5%, not very inflationary. 

    In a wide-ranging interview that covers inflation, currencies, stocks, commodities and more, Marc Faber tells CNBC India that Chinese demand for commodities isn’t going away, although it may not keep up the torrid pace of the past seven months

    GS/Boonie – That is a bad sign.  I used to trade with MER and discovered whenever they filled my order quickly I must have made a mistake….

    HGSI/Diamond – I’m pretty sure they’re already priced for a buyout.

    Gosh it takes me so little time to be right these days:

    California is preparing to sell $4.5B in debt as muniicpal bond yields fell to a 42-year low. Tax revenues have fallen 1.3% from forecasts made when current spending plans were approved.

    More green shoots turning brown and dying on the vine:

    The first slump since 2002 in online advertising has extended for another quarter, falling 5% in Q2 to $5.4B – though it’s expected to be a temporary downturn compared to the structural upheaval of the dot-com collapse.

    Hey at least our expectations are still up there, despite all evidence to the contrary…

    Volume all of 95M at 2:30 with 140M at 3pm considered easy to stick save…. 

  71. blair

    Did the market lull you all to sleep?

  72. Cap

    Breakout above S2 DIA … REITs ; financials, commodities loving it;  not so much anyone else.

  73. Cap

    DIA now hitting 200 min MA (96.15)  ….I think that should be hit; but who knows what the HAL9000 programmer has in mind.

  74. Cap

    DOW now up about 200 points from last Friday morning’s opening lows.

  75. Phil

    Sleep/Blair – I’m bored actually.  Just watching to see if we top out at Wednesday’s open, which is what we did last Monday and would be about 9,650.  It’s kind of fascinating watching an identical pattern forming across a 10-day chart.  It’s tempting to go short but, other than rolling up existing shorts and buying back sold puts, there’s not much to do with just 100M shares traded with an hour to go – they may as well be trading futures on this volume…

    Nas double-topping from the morning run at 2,075, I think that should be it.

  76. Cap

    I’m sorry, I have to call BS on this latest ramp !   60 points last 1/2 hour on fumes.

  77. Cap

    AMZN looking sickly here despite the pumping everywhere else !

  78. boonie

    Phil,
    Are those NYSE total shares volume that you quote?   I wonder if shares trading in the off market "dark pools" get reported in that volume. 

  79. RMM

    Phil: as you are bored , please comment on on sold puts:
    MCO oct 23.

  80. Phil

    See, now you would think we don’t have the right mix for a 200-point run back up but $100KP up 1% today – $101,416 at the moment.  This is why it’s so nice to be balanced and SELLING premiums into expirations.  Now my monthly ranking is 54 out of 100,000+ on Wall Street Survivor and this is a super-conservative portflio! 

    And we accomplished this feat with our last trade on 9/25 and before that one on 9/22 and one on 9/21 (9/18 was our last big adjustment day).  The Dow went from 9,700 on 9/21 to 9,900 on 9/22 to 9,650 on 9/25 to 9,800 on 9/29 to 9,450 on 10/2 and back to 9,600 today and we made 3 moves total! 

    Yes, I would have done more stuff in a more aggressive portflio but the point is – you don’t HAVE to react to everything the market does.  If your strategy is good and your balance is good then the trades will come to you over time.  Did anything happen today to make me want to change my targets?  No – volume is too low to count on and I wanted BAC and C to go up and AIG and AMZN went down anyway and the rest are pretty well balanced. 

    Worrying over your existing trades all the time is a waste of energy.  If you are losing too much on the way up or too much on the way down, better to spend your time finding a trade to balance you out.  Once you are balanced, you only need to change a trade when YOUR opinion changes, not when the market moves against you

  81. Phil

    Volume/Boonie – No it’s Dow volume, usually about 1/10th of NYSE volume.  Dow volume just happens to be tracked on top of my Power Etrade Pro screen and it seems to be a reliable indicator and I like to use it vs the 1-2Bn share NYSE numbers since I can just track the smaller number (millions) all day. 

    MCO/RMM – I still like them but I WANT the stock.  They can be rolled to the Nov $21 puts for .40 at the moment so you may as well offer an even roll and see if you get it. 

    Despite all the ink being spilled about China switching to an alternative reserve asset, the yuan’s effective dollar peg (see chart) means Chinese exports have become more competitive in Japan and Europe – and its U.S. financial holdings have gone way up in value.

  82. Cap

    Despite NAZ being up 22 pts; a lot of tech names looking rather weak ….
     
    pump all in financials, real estate and energy …some other crappy names like WFMI (short it here) …

  83. Phil

    Stiglitz Says Deflation Threat Pushes Fed to Stay at Zero

    Mish: Deflation is not a threat because deflation is here by any practical measurement. Deflation is also here by impractical measurements such as falling prices. See Humpty Dumpty On Inflation and Daniel Amerman vs. Mish: Reflections on the Great Inflation/Deflation Debate for a further discussion of a practical definition of deflation, a contraction of money supply and credit marked to market, not falling prices.

    Great rant by Kuntsler: "When Alan Greenspan predicted three percent economic growth showing up in the reported figures for the third quarter of 2009, did he mean executive compensation packages?  Maybe the lesson here is: don’t ask a crackhead to predict the future supply of crack. Greenspan’s greatest success may be to drive economics into such disrepute that it will be cut loose from the universities and only be taught by mail order or internet subscription from the same outfits that offer PhD’s in astrology.  That is, before the universities themselves go broke."

    Here’s an important milestone reached:

    Here’s another fun chart:

    CIT Group (CIT -2.6%) may increase the size of a bondholder loan for $3B it took in July, a source says. The facility would work whether or not the firm goes bankrupt, compared to a previous plan for $5B-7B of debtor-in-possession financing.

    More good news from Mish:

  84. gel1

    At Lake Tahoe for a few days while it is snowing – beautiful…. Sunshine however on portfolios today – beautiful

  85. EricL

    Speaking of Mish, he’s been sounding fairly bullish on treasuries lately. This may be something worth keeping in mind for those who are short them, including me; we may have a loooong wait.
     
    We’ve had at least three nice bull flag set ups on /ES futures today, including one right now. Selling more SPY puts here, with a plan to sell the call side into the close. VIX is still running high, despite the pullback. Even so, it’s been a great day for most short gamma positions.

  86. cwan120

    DIA mattress: Phil, you said earlier "Will sell $97 puts for no less than $2 (now $2.30) if we break higher."
    Is it time to sell 1/2 cover?

  87. Phil

    Tahoe/Gel – I love that place.  We have a timeshare at the Marriott but mostly stay at Caesar’s.

    VIX/Eric – Yeah they fell 6.5% today, back below 27, seems like the VIX just can’t punch through 30 now. 

    Volume a very sad 126M.  If it were 1pm I’d be saying it was sad, at 3:45 words cannot express the pathos…  Won’t take much of a seller showing up for us to power dive into the close.

  88. Phil

    DIA/Cwan – Oh did I say that?  Well, I thought so than but this move up has been such utter BS that I can’t bring myself to cover but if you are worried, a 1/2 cover hardly ever killed anyone

  89. b1ll

    Phil with VLO downgrade should I sell my stock on this up day, i’m up 6%

  90. Phil

    Bespokes list of S&Ps most volatile stocks, good fun for slow days:

    Volatilestocks100509

  91. Phil

    VLO/B1 – I’d say so, you were lucky to get the pop. 

  92. gel1

    EricL
    Have been short the treasuries for some time – I keep rolling down and doubling positions for the eventual payday. With the fundamentals as they are, I can not see them going up long term, unless everything goes to hell and fear again prevails.

  93. Phil

    Another good set of numbers, most volatile stock on earnings reports:

    Mostvolatile

    Least volatile stocks after earnings:

    Leastvol

  94. EricL

    gel, I basically agree that they are way too expensive: right now 10-year buyers are barely holding even against our very low inflation. However, if deflation really does set in, they may not be overpriced. I’m just making sure I can sell enough against my longs to hold the position.

  95. shanehoover

    Here is an article from Bloomberg that highlights some of the near-term fundamentals that could influence Treasury Bond bullishness:
    http://bloomberg.com/apps/news?pid=20601009&sid=ahCXboqckrSU
    EricL, I too am short long dated Ts

  96. EricL

    Couldn’t have asked for an easier day: put spreads that had made money for days made even more today as the over-priced Oct. short legs got crushed.
    All my naked straddles and strangles were nice winners too. SPY OCT 101P/105C short strangles, which were bearish at the open, nonetheless finished up .46 as both legs got smashed.

  97. Phil

    Well that was a fun first day of the week, up over 1.5% across the board and wiping out Thursday and Friday’s dip.  To break the pattern, we need to make a very big move up tomorrow morning and hold it.

    Volume end of day hit 172M so 1/3 of the day’s volume in the last 10 mins and no gain.  That’s not a great sign for follow-through. 

  98. jromeha

    Phil, since Tuesday and Wednesday are light in news do you see Hal 9000 keeping the market positive until Thursday’s Jobless #’s come out?

  99. ssdirk

    MOS misses bad.  .23 vs. .35.

  100. Phil

    Hal/Jrom – If we continue to see this stick action I’ll actually be confused as I’m not sure what the game is.  GS downgraded REITs /Thursday and today the IYF and IYR are up at the 2.5% rule.  I said it was possible last week that they were just shaking out weak hands so they could buy ahead of another stimulus announcement or some such but it seems strange if they accomplished the whole cycle in just a couple of days. 

    Of course, GS isn’t the only fund that has an interest in the market going up, just the biggest.  It is not impossible that they (and JPM, who downgraded Retail) got out Thursday and left a lot of other funds holding the bag.  Those funds may now be ramping up the market, which may be fine to GS and JPM as they almost certainly still have stuff to sell. 

    MOS missed by a mile.  .23 earnings vs. .35 expected (not by me, of course!).  Earnings were $2.65 a share last year so 1/10th is what we’re working at with the stock at about the same price it was last October!  Revenues are down to $1.46Bn from $4.32Bn and I do like the fact that they can figure out how to make a profit after losing 66% of their revenues – that does speak well of the company long-term, but not (as I said this morning)  for $46.  The stock isn’t going down much because they are giving a very positive outlook but no thanks with a current p/e of 30+

    Tomorrow morning is GIGM and PBG but tomorrow after the bell is YUM and they will be telling.  COST is Wed morning along with FDO, HELE, LNN, MON and http://WWW.  AA and RT report Wed night so that day will be the real test for the mood of the market.

    Thursday is MAR, PEP and PGR in the morning.  INFY and TSCM at night (a losing qtr for Cramer) and just CMN for Friday but then it’s our first big week of earnings AND expiration week so major, major fun next week. 

  101. chakra108

    Phil
    Do you have a Bullish Ultra on the Dow that we can use if there are any upside moves anticipated? Thanks.

  102. ssdirk

    From FT.com: "Celebrities face endorsement crackdown":  "Advertisers, celebrity endorsers and even some internet bloggers will be held liable for false statements they make about products as part of a crackdown by US regulators on deceptive advertising practices."
    Yet analysts at Government Sachs, et. al. can continue as long as they wish…If only celebrity advertisers were our biggest concern…

  103. mrmocha

    chakra - two options are: DDM = DOW Ultra-long, and SSO = S&P 500 Ultra-long.  Or if you really want a wild ride, try BGU = Russell 1000 Large Cap 3x Long!

  104. cwan120

    DIA Mattress: Hi, Phil, I was out of town the whole week last week and I had no internet access.  So, I still have the DIA Dec $99 puts.  I believe that the "official" position is now DIA Jan $100 puts?
    Do you think I should roll my Dec $99 puts to Jan $100 puts?  It would cost me approx. $0.90.

  105. matt1966

    ETFGuide coming out and saying that a market top is in place.  I think they are probably mistaken.  It really looks like it but we all know looks can be deceiving.  What they are failing to factor in is the ungodly amount of money that these stupid banks are throwing at the market.  And they know, that there is no one out there with enough money to out power them.  Naked short selling has been killed.  They are now free to inflate without impunity.  I think they willl continue to do so until the news becomes unbearable or the Fed spigot begins to run dry. Q1 of 2010.

  106. CaFords

    RE: ISM report
     
    The ISM reported declining prices for both Real Estate and Rental & Leasing. However, it also indicated inventory sentiment that was too LOW. This seems contradictory.
     
    Are we overestimating the distress in the commercial RE space? I think retail RE space is probably dead along with the consumer, but with the mounting home foreclosures, are we now seeing a floor in the pricing of apartment rentals? Will this possibly save the REIT funds?

  107. matt1966

    From the sign of the times department:
     
    Obama rejects at last minute meeting with the Dali Lama.  Clearly we are afraid of the Chinese.  Recaping quickly, we have granted China Most Favored Nation status and catapaulted them into being the largest manufacturer in the world.  Despite the fact that we are a democratic free market society and they are an authoritative communist regime.  Now, out of deference to our communist benefactors, the president of the free world will not meet with the peaceful icon that is the Dali Lama.
     
    From the more good news department: 
     
    Maybe it has something to do with this..  Phil, you haven’t mentioned you like gold lately.  And before you run your calculations to prove it’s not physically possible to replace the dollar.. this is just a first step.  Kind of like a trial run for the new ‘basket’ of currencies approach.  And certainly in a ‘basket’ of currencies, there is enough capacity to handle part of the oil market… no?
     
    http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html

  108. Phil

    Good morning!

    Dollar getting killed on BS rumors (same one again) that OPEC will begin demanding Euros instead of dollars.  The fact is, oil’s not holding up so well against the Euro…  Oil did fly up over $71 on that news and gold is at $1,025 in futures and the indexes are up about a point – still following the patten of last Tuesday but Tuesday’s rally was killed by very disappointing consumer confidence.  Today we have no news other than Retail Sales Reports but at 5pm we have the ABC Consumer Confidence Index.

    Tuesday’s economic calendar:

    7:45 ICSC Retail Store Sales

    8:55 Redbook Chain Store Sales

    9:30 Senate Banking Committee: Minimizing Potential Threats from Iran

    10:00 House Financial Services Committee: Capital Markets Regulatory Reform

    10:00 Results of $50B, 70-Day TAF Auction

    1:00 PM Results of $39B, 3-Year Note Auction

    3:00 PM Fed’s Fisher speaks

    5:00 PM ABC Consumer Confidence Index

    9:45 PM Fed’s Hoenig speaks

    Dow bulls/Chakra – As Mr. M notes and it looks like we may have to use them to cover the way the futures are running!

    Endoresement crackdown/SS – I think it’s a back-handed attack against bloggers by the MSM.  They need ad bucks and blogs are taking billions, this makes it a hassle.  Let’s see if they crack down on game shows or product-placement in TV and films (the new Jay Leno show is loaded with product placement) and what about cooking shows?  As you say, GS does far, far worse as do 1,000 analysts a week on CNBC, where they forgot about disclosure years ago. 

    DIA/Cwan – Well at least it will be cheap to roll them higher today.  Just make sure you pay for most of the rolll by selling a 1/2 cover (so something for $1.80).  You don’t have to do it in the morning, into the pump but also don’t let it get away from you as you are adding exposure.  Hopefully we get a sell-off to sell into.

    Factors/Matt – I think everyone is drawing grand conclusions based on 1/3 of a normal day’s volume.  The last time we had volume this low was last Monday and that was a much bigger gain than yesterday.   As I said in yesterday’s comments, we had follow-through Tuesday morning and then a full week sell-off.  We need some kind of slap-in-the-face news to knock the market back though, we’ll have to see what happens.

    REITs/CaFords – REITs can make money in hard times by renegotiating their mortgage and getting tax breaks and not making repairs but you can only put off all those things for so long.  At some point you need a new air conditioner, light bulbs must be changed, elevators need to be serviced etc and your variable loan kicks back up and your fuel bill goes higher and the town raises the tax rate to wipe out your appeal.  People are used to REITs riding out a quick downturn of 18 months or less, this may be many years of low occupancy and low rents and another downward correction would just kill them.   MGM is taking a 30% hit on CityPlace units in Vegas AND they are holding the financing and they still may not get interest – and that’s from people who stand to lose their deposits…

    Demise of dollar/Matt – As I mentioned above, this is the same story they pull out every time they want to knock the dollar down to new lows.  Now TBoone is on CNBC pushing nat gas again and this all smack of desperation to me.

    Here’s a July 2008 article talking about he Euro replacing the Dollar which reminds us in 2004 Iran attempted to set up an oil exchange that traded in Euros and it was a collosal failure.  

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