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Thursday – Bernanke’s BS Bounce Part II

Bernanke Bail-OutYay, more free money! 

Oh not for you (unless you are a banker) but for all of Ben’s best buddies as the Fed Chairman promised yesterday to maintain "exceptionally low levels of the federal funds rate for an extended period."  He can do this because, according to Bernanke:

Increases in energy prices resulted in a pickup in consumer price inflation in the second half of last year, but oil prices have flattened out over recent months, and most indicators suggest that inflation likely will be subdued for some time. Slack in labor and product markets has reduced wage and price pressures in most markets, and sharp increases in productivity have further reduced producers’ unit labor costs. The cost of shelter, which receives a heavy weight in consumer price indexes, is rising very slowly, reflecting high vacancy rates. In addition, according to most measures, longer-term inflation expectations have remained relatively stable.. the range that most FOMC participants judge to be consistent with the Federal Reserve’s dual mandate of price stability and maximum employment.

Bernanke CongressSee!  I bet you didn’t realize how well things were going, did you?  Oil going from $70 to $80 in 15 days isn’t inflation – it’s SUBDUED!  Up from $37 last February and March – SUBDUED – As in, DUED, where’s my money??? 

I mean come on people – he says it right here in one of the early paragraphs (before people start to nod off) – the cost of shelter (ie. your home’s declining value) is heavily weighted in the CPI and since your home is worth less (worthless?) and will remain so for some time – that offsets all the other nasty inflation that is eating into your paycheck.

Aside from the fact that this assumes your home is something you will be buying at a discount TOMORROW as opposed to something you overpaid for yesterday, the whole measurement that Bernanke uses to define success is ridiculous.  Housing makes up 42.7% of the CPI, Transportation makes up 17%, Food makes up 15% Medical Care is 6% and Clothing is 3.7%.  That’s 85.4% so we’ll call "other" 14.6%. 

Now, let’s say you, like most Americans, already own your home.  That means what you pay on a monthly basis doesn’t change.  Let’s say though, that the cost of Transportation goes up 20% (3.4 out of 100) and Food goes up 20% (3) and Medical Care goes up 30% (1.8) and Clothing goes up 10% (0.4) – that would be an increase in the CPI of 8.6 BUT (and it’s a big but) if you are lucky enough to lose 20% of the value of your home (and we all did), that knocks 8.5 back off the CPI and PRESTO – we have "just" a 0.1% increase in CPI – PRICE STABILITY!  See, the $70,000 that dropped off the value of your home offset the $5,000 annual increase in the cost of gas, food, clothing and medicine (because $70,000 mortgages out to about $5,000 a year).

It’s one thing to sit there in front of Congress and play number games that paint over what a terrible situation the American people are in but it’s quite another thing TO BASE OUR ECONOMIC POLICIES ON BS STATISTICS! 

By the way – Do you know what percentage of the CPI is allocated to taxes?  ZERO!  Isn’t that AMAZING?  They can raise your property taxes, they can raise your school taxes, they can raise sales tax, they can raise income tax… And it doesn’t increase your CPI one bit!  I’m in New Jersey and my property taxes jumped 30% this year – if your state is in trouble (and who’s isn’t), you can expect the same.  The funny thing about increasing property taxes is it also increases the effective cost of your home (as does increasing utility costs) which then lowers the amount a prospective buyer can afford on a monthly basis, which then lowers the effective price you will ultimately be able to sell your home for.  So a $300 monthly increase in your property taxes drops the price a buyer can afford to buy your home for $50,000 (check it out – use the calculator!). 

No wonder more and more people are walking away from their homes.  If you have house you paid $500,000 with a $450,000 mortgage ($2,500/month) with $700 a month in taxes and $500 in utilities and $300 in repairs – that’s $4,000 a month – and the appraiser tells you you’ll be lucky to get $350,000 for it…  Why should you stay?  Have you looked at what you can buy for $2,500 a month these days?  You can get some nice homes – probably a lot nicer than the one you are in.  Maybe you can find a nice townhouse with lower taxes and utilities that can shave $1,000-$1,500 a month off your monthly payments – now THAT’s using the CPI to your advantage, right? 

I wrote an article recently that highlighted several ways to shave $100,000 in payments off a $200,000 mortgage that anyone can do with their current mortgage but let’s add "walking away" to the list.  In business school, they teach you to cut your losses and corporations walk away from real estate every single day – why then, is there a stigma attached to it when it’s an ordinary consumer making a wise business decision?  Heck, when an Industrial Corporation shuts down plants and exits their leases their stocks go UP on the brilliant cost cutting – shouldn’t consumers be similarly applauded when government policy pushes homeowners to the point where it’s simply not worth supporting their money partner’s (the bank’s) asset investment anymore

That’s right – the bank is your PARTNER when you buy a home.  In fact, they took out insurance in case you can’t pay.  They bought the asset and you agreed to pay them a good rate of return on their investment.  You both looked at the appraisal (in fact, you couldn’t have bought the home without their final approval) and you looked at the costs relative to your income and you both decided it was a good investment that you would be able to pay off over time.   Well, guess what – YOU WERE BOTH WRONG!   But why are you the only one who is suffering?   

You and the bank were in a partnership, perhaps you should consider dissolving that partnership.  I am advocating this now after watching Bernanke spin his BS yesterday and watching our clueless Congresspeople nod like toy dogs on a car’s dashboard while the Fed justifies putting YOU in debt for the rest of your life to rescue the banks so THEY don’t have to skip a bonus.  "Oh Phil," you may say, "what if the the banks had gone under – that would have been terrible." 

Why would that be terrible?  And I’m talking to you little people in the bottom 90% now, not my rich subscribers – Why do you give a rat’s ass if the banks fail?  What do they have of yours?  Maybe $10,000 in savings if you are the average American.  What do you have of theirs?  A $200,000 home with a $150,000 mortgage (also if you are the average American).  So, if the bank disappears tomorrow – who wins?  The only reason you think it’s a bad thing is because you believe that the bank can go under and not give you your money but somehow you still have to honor your obligation to pay them.  That makes no sense, does it? 

Sure our convoluted laws are written in the bank’s favor but let it all really hit the fan and see how fast those laws are reinterpreted by a jury of your peers.  Your bank is an investment partner.  You both saw a $500,000 home you liked and the bank said: "Hey, if you put up $50,000 and pay all the closing and transfer costs, I’ll put up $450,000 for the "asset" which you can pay me back with interest over time while paying all the taxes on my asset and maintaining my asset until the time I collect (at 6%) $971,000 from you over 30 years for my $450,000 investment.  THEN I’ll give you the deed to the house."  Since you have been brainwashed from birth to believe that owning a home is the only way you can consider your life a success, you agree to this insane arrangement and that’s all fine as long as the "value" of the home goes up because, in theory, you are building up some retirement savings. 

What happens when that underlying assumption is false.  Then you are simply throwing money down a gigantic pit with no end in site, all in an effort to make sure the bank gets a 215% return on their investment.  Let’s say you’ve been in the $500,000 home for 6 years and it’s now worth $350,000 and you are paying your $4,000 a month to stay in it.  If you walk away you have still left the bank with your $50,000 deposit plus 7 years of $2,500 monthly payments ($210,000) AND the house.  So the bank already got you for $260,000 on your $500,000 home and unless they can’t get $240,000 for it – at least THEY get out of the deal even.  Why is it we cry for the banks? 

Man, they have you and Congress and the President totally conned with their armies of lobbyists and PR people don’t they?  It’s not your home they don’t want you to walk away from, it’s the 23 years of $2,500 payments ($690,000) they don’t want you to walk away from because they WILL NOT GET ANOTHER SUCKER TO MAKE A DEAL LIKE THAT IN THIS ECONOMY!  Get it – you are the fish on the hook and they don’t want to let you go.  That’s what this is all about.  It’s not about morals and it’s not about "screwing" the banks – it’s about locking you into an unaffordable payment plan in which your joint asset has taken a huge hit but your business partner insists that YOU and YOU ALONE bear the ENTIRE loss.  Not only that, your partner insists on making their PROJECTED profits for the next 23 years DESPITE the MASSIVE change in the underlying asset that you purchased TOGETHER

Does that sound ridiculous?  Is your partner being unreasonable?  THEN DISSOLVE THE PARTNERSHIP! 

OK, now that I’ve got that off my chest, let’s take a look at the markets….

We have a big snow storm in NY and Bernanke is testifying to the Senate today.   I used to say the Senators were generally smarter than the Representative – at least they generally serve longer and get a chance to learn something about the committees they are on but this particular Congress has caused me to lose all faith in our elected representatives, who have sold this country right down the road to special interests at exactly the time that the people need them the most. 

Speaking of which, another 496,000 voters lost their jobs last week, that’s 36,000 (8%) more than estimated.  Looking at the report data, the item that strikes me is the U1 Benefits being paid as of Feb 6th is 5,479,942 that’s up 196% from last year’s 1,847,439.  Nice job stability Ben! 

Fear not my top 10% comrades – everything is fine up here on top, though, as Durable Goods were up 3%, that’s 100% more than what "expert" economists had predicted but right in line with my "Tale of Two Economies" theory as economists tend to be idiot acedemics who don’t understand the joys of "zero down-zero payments for 12 months" or the fact that if I lay off just one employee, I can buy Tina that new washer and dryer she’s been wanting (sorry Greg!).  Ah capitalism – you efficiently drive us to make the wise decisions….

Asia was generally down this morning other than the Shanghai, which magically rose 1.25% to 3,060.  Here’s Bloomberg’s "China" page – maybe you can figure out why because I sure can’t.  India is forecasting 8.2% GDP growth, which is great because it means that consumers will only fall 8.8% behind their 17% food inflation rate - clearly India went to the Ben Bernanke school of Fine Federal Fiddling.  Ron Paul tried to make the point that our 4.7% GDP growth isn’t all that impressive in the face of a 10% growth in the money supply but unfortunately raised other issues to which Uncle Ben made the general comment that Pauls allegations were "bizarre" but what Bernanke did not realize is that Ron Paul got him to agree to turn over a great deal of records for examination and Barney Frank made it an actionable item.

Also under intense scrutiny today is Greece, where bonds are once again falling on downgrade threats, driving the Euro ($1.34) and the Pound ($1.52) to 10-month lows against the dollar and the Yen (89).  Overall European Economic Sentiment fell slightly as the European Commission said that European domestic demand remains weak and it’s not yet clear to what extent the Euro region will benefit from a global recovery. As governments seek to bolster the recovery, they also are trying to stem investor concern about widening budget deficits in Greece and other nations.

We will be having that same problem today as the US seeks to sell $32Bn in 7-year notes to suckers investors who wish to tie up their assets in dollars at 3.5% interest for the next 7 years.  Who these anxious buyer are remains a great mystery, as does how it is possible that they can coexist in the same financial eco-system as gold bugs, housing speculators, carry traders and other commodity hoarders but the game continues until the authorities come to break it up and, since this game is run by the "authorities" – we could be in for a long run indeed!

Overall, we could not be more pleased with our oil and gold shorts as we topped out right at our $80 target, giving us fantastic entries on USO puts as well as the futures.  Copper will test the $3.20 line today and we have to be very pleased with our short play on FCX as well, now down around $71 from our $77.50 entry.  TBT sold off nicely and is ripe for a re-entry ahead of the longer-term Treasury cycle and we should be getting excellent entries on our new $100,000 Virtual Portfolio, that is designed to make a nice, conservative, well-hedged 25% annual return – as opposed to the more aggressive $100KP, which is up 8% for the week and will be doing even better this morning with 200 USO $37 puts that were picked up yesterday at .52.  

So another fun day of market watching and more BS from Ben but this time the markets may not be biting as we have the FHFA Housing Price Index at 10 and a Congressional hearing on the "Foreclosure Problem," which is never a good thing to remind investors of.  Meanwhile we’ll be watching our ranges, same as yesterday and I do think our 5% levels will hold and tomorrow I expect a push back up. 

 

 


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  1. samz3700

    Phil -
    I just love reading your morning post – you always cut through the BS!
    Thank you.
    I worry every day that you are going to start another business and leave your fair readers.

  2. samz3700

    Phil -
    I very luckily / stuppidly went naked overnight on the dia covers -
    I am in meeting all day today – in lovely Birmingham (irony) -
    What would you suggest I sell at the open? or I can trigger the sale based on a price target on the underlying dia -
    I am in the June 105s – thanks again

  3. Phil

    DIA/Samz – Can’t go wrong with a 1/2 cover of the $103 puts.  You should get a nice premium for them on the dip.  If you were here, I’d say risk the $104 puts but if we don’t bounce, things could get ugly so why risk it? 

  4. matt1966

    Great article today Phil.  The CPI calc IS a joke. 

  5. judahbenhur

    Good morning, Phil.  Do you like VLO if it drops a bit more?  I am thinking of selling some Apr 17 puts. 

  6. jomama

     phil, what are your thoughts on CCJ earnings.  Last years earnings looked good but their outlook for next year is down 5 -10%.  Last quarters earnings were also boosted by the sale of a gold mine.

  7. Cap

    You may recall that the other day I sold PALM $7 puts for 24 cents.  Seemed safe, right ?
     
    Well, not today; as PALM warns.  Stock getting killed in premarket, now below 6.50.
     
    any thoughts on IF and WHERE PALM is a bounce play ?

  8. David Ristau

    Hey all,

    I am not seeing any really solid trades that I like this morning with the market poised to open so far down. It sort of takes the wind out of my sails. Therefore, I am going to do two trades later today. We will do one overnight trade, and I will throw a longer term trade at you that I like to hold into next week. Thank you and those should be out around lunchtime or so.

    Good Investing!

  9. judahbenhur

    SS, Looks like it may turn out to be a good day to sell Apr strangles.

  10. roberthjrfl

    Judah, why do you like April SS now and not March.  Is there not enough time left?

  11. judahbenhur

    Robert, Yes, not as much premium unless you enter a tighter strangle, which I don’t like to do.  If I look at the March strangles I currently have, for example SPX 1180/950, as of yesterday’s close there is only $1.75 left on that position, which I had sold for $10.  You may be able to get a decent price for a March strangle at, say 1150/1000, but I prefer starting these with 6-8 weeks out with more cushion.  If there is a real spike in the VIX, it may make sense to be opportunistic for a quick March play.  I’ve just moved on in my thinking and planning to April.

  12. JRW III

    In TNA at IWM 62.14, R1 at 62.46, then same as yesterday.

  13. Phil

    Good morning!

    Same old range as yesterday:  Bounce levels (Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625) and our 5% lines (Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620) so it’s not worth playing much in the middle.

    Same as yesterday, now we need the NYSE to get back over to feel "safe" and we need to watch that 620 line on the RUT and, of course, 1,088 on the S&P is critical.  Watch the Dow transports too – if they fail 4,000 (now 4,012) then BIG TROUBLE. 

    Copper now $3.18 and they need to retake $320 to show strength.  Gold ($1,095) needs to get back over $1,100 and Silver ($15.75) needs $16.

    Volume on Dow is just 24M at 9:50 so light for a real sell-off so I like the risk/reward of playing the Dow to hold 10,200 with the DIA $104 calls at .90, stopping out if we fail 10,200 and very happy to make .10 – .20.

    Happy to take the money and run on the short plays at this point to as a 170-point sell-off at the open is a gift!

  14. EricL

    Looks like we’re sitting on some weak support from late last month.
     
    AZO is just amazing. Long-term, this has been one of the strongest stocks I watch. It’s great to sell premiums into the 160-area. I’ve been doing it with diagonals, but am adding a few condors here selling the 165 line (so that’s long 160 p and 170 c, selling the 165 c and p, currently 4.00).  I do keep a modest bear-weighting overall on this one since one day it may finally snap.

  15. Phil

    VLO/Judah - Me love VLO long-time, $15 not too beaucoup for VLO!

    TBT – Nice chance to sell $48 puts for $1.05!  Nice chance to buyy Apr $48 calls for $1.25 and we can turn it into a spread later.

  16. EricL

    Gold futures nosing green.

  17. dmankoff

    phil, would you sell the TBT 48 puts in March now and thhen buy April 48 calls now also?

  18. bord

    Phil, Per the buy list, GLW getting trounced last several days and downgrade has it to 16.86 now. Is it time to roll down that 18 call spread or leave it be?  see link
    http://finance.yahoo.com/news/Sector-Snap-LCD-glass-makers-apf-1796410635.html?x=0&.v=4

  19. yodi

    Phil on the mattress play Jun  105 bought 5.07 now 6.03 covering with 103 sold 1.93 now 2.22 and 104 sold 2.34 now 2.83 any changes to be made covering 3/4 of Mattress thanks

  20. EricL

    By the way, when I’m selling these condors I’m immediately putting in a GTC buy order that would lock in 100% returns. While I still have to monitor them, if it fills one day I’m happy.
     
    So in the case of the AZO condors, I have a buy order in for 3.00. Since I sold them for 4.00 using 1.00 net margin, that would be 100% return on my 1.00 investment.

  21. Jtiff

    Phil-
    What is your take on EDZ right now?  It seems like Greece is in a slow, but increasing, death spiral.  I suspect that this would impact the other EU nations circling the drain should a downgrade occur.  Or is this just talk to get Greece to move on policy? 

  22. Phil

    CCJ/Jo – They earned $2.82 a share (from dumping the mine) and said: ""Operationally and financially, we are well positioned to meet our goal of doubling annual uranium production by 2018."  Sounds like a keeper to me!

    PALM/Cap – I blew that one too.  They are losing the Phone wars, may be time to cut and run or we could be looking at another MOT.

    Good call David – Sometimes the only winning move is not to play…

    Nice chance to sell TNA $39 puts for $1.50.

    TBT/DMan – Yes but that’s trading, not investing!

    GLW/Bord – I’d wait it out as I’m less confident as they did not get the AAPL contract and I am worried (for GLW’s sake) that AAPL is going to rip a major hole in laptop sales this year with the IPad.  That will really hurt GLW’s sales on that end of the market and it’s not like the rest of the electronic sector is strong enough to carry the weight. 

  23. EricL

    Out of my TM short from yesterday, and selling half my GOOG put verticals.

  24. gucci

    Juda, I was thinking about the same this am when I saw vix up 10%, I think Peter said if we could sell premium at least $5 or more in April would be good premium right.  I look at SS SPX 1180/940 now about 7.3 and RUT april ss 670/550 is about 8.7  --  is this would be reasonable range to start 1/8 position as Peter mention before — thanks ahead

  25. judahbenhur

    Phil/VLO.  I love that clip.  Methinks better to sell the Apr 16 puts for .40 than the Apr 17 puts for .75, right?  I’d rather own VLO for 15.60 if put to me.

  26. RMM

    Phil: is shipping ripe to take a position, like DSX, ?
    or OIL ?

  27. jomama

     Thx phil

  28. gucci

    Hi Phil, on Goog subject, I went back and study your comment on Feb 17, I  understand your option stragety for Jan 400/420 bull call spread and sell jan 400 put to lower the premium down to 2.7— this is longterm option stragety, the other stragety you mention if PM i a problem then a bull put spread of 510/570 for $30, and sell 1/2 550call each mos to finance the premium, so this would be a short term stragety since you anticipated that GOOG is on a downtrend for the next 6 mos.  By the way I assume the month for 510/570strike is september since you mention sell 1/2 550 call for $5 to finance the $30 premium.  If PM is not an issue can I sell Sept 550 call at the same time to lower the spread premium even more and continue to sell the front month 550call as describe earlier.  By the way, I am not questioning your option master knowledge, but I try to look up Bull put spread in e trade book but it describe different  — so got confuse a little bit-- but over all I think I understand your stragety on th espread, try to buy ITM and sell OTM to finance the premium …. thanks again for an extensive explanation of the DIA mattress, I am still in June 105put, and sell 1/2 cover 102

  29. judahbenhur

    Gucci, I’m more conservative than some on the starting positions.  With over 7 weeks out, I’m looking slightly wider--SPX 1190/920 and RUT 690/520.  Doesn’t get as much, but then the VIX is still relatively low.  I think Peter recommends that it is always easier to roll tighter for the additional couple of bucks later on, than it is to scramble and roll away if the market moves sharply against one of your positions.  Again, I play it conservatively taking what the market will give me.

  30. EricL

    Buying some call verticals (selling ATM) on some PM names (ABX, GOLD, RGLD) since there seems to be relative strength there. That’s probably all I do today though on the long side.

  31. roaster

    Thoughts on GME? I’ve started to work into a position from the buy list – Jan 11 17.5-25 bull call spread. Only 1/4 in so far. Good time to add more or could CFO leaving be canary in coal mine?

  32. Phil

    Mattress/Yodi – No change.  It was unfortunate we got that hit but I think we hold here and we’re back to 10,428 tomorrow like nothing ever happened thanks to the magic of end-of-month window dressing.  You could roll the $105 putters down to a larger number of $103 putters if you have room for it but it’s a long way to March 20th…

    Condors/Eric – That’s a nice way to play them

    EDZ/Jtiff – It’s a disaster play but I find them very reliable at $5.50 for a move back to $6.  It is mostly just talk.  In fact, German bonds went to new lows while the pressure was being put on Greece so we’re not looking at any major contagioun if they can’t even push the EU down in unison.  I don’t want to sound flippant about it but debt is not cancer.  You can ignor debt – it won’t go away but it can go a lot longer than you think before it kills you.  If everyone (G20) agrees to ignore debt then debt is not a problem.  It only becomes a problem when some of the members break ranks and do not continue to do business as usual. 

    That’s why the hyenas are pushing stories of China not buying our debt (they are, they are just covering their tracks better) and Greece not being helped by the EU (that would be like us letting riots break out in CA rather than lend them $40Bn) and China buying all the IMF gold because they are getting out of fiat currency – it’s all BS and it’s all designed to get you to make poor investing decisions which "THEY" bet against.  

    IF things start to unravel then it will be the countries outside the G20 that go up in flames first as the G20 will circle the wagons and become the safe haven for the world’s capital while the commodity nations (EDZ) choke on their unwanted products and suddenly discover that no one is willing to trade food or medical supplies for oil and gold – we just like giving them worthless bits of paper as fast as we can print it up…

    VLO/Judah – I would go for the $17 puts.  Don’t look at it as a one-time event.  If VLO breaks down and you owe your Apr $17 putter $1 ($16) then you roll to the whatever month $16 puts for $1 and if they fail there, then the $15 puts for $1 and THEN maybe you take ownership of VLO at net $14.25.  The biggest mistake people make in selling puts or calls is not thinking of it as a one-year play.  Anyone can get crushed in a month – even the Saints lost 3 games out of 16 – the trick is to dust yourself off, get up and get back in the game next month.  You only have to win once to wipe out your oppenent – they have to win every time! 

    Shipping/RMM – Commodities are too weak to be speculative but I do like the shipping plays on the buy list as long-term plays. 

    GOOG/Gucci – It’s September unless you can get Jan for about the same price, then time is usually your friend with those posiitons.  A bull put spread means you are doing a put spread wanting the stock to rise.  That would mean you are selling the higher put and buying the lower one.  A bear put spread (like I have on GLD at the moment) is buying the higher put and selling the lower put, hoping the underlying goes down.  That’s all it is – not too confusing.

    GME/Roast – People will play games.  People do play games, just not as many.  It’s a long-term play on an economic bounce.  CFO got a job offer anyone would have taken, I don’t think it reflects poorly on GME other than how poorly written their contracts are.   I’d say a good opportunity to go for round 2.

    GME – I like selling the Apr $17 puts for .90

  33. ChuckW

    Phil, what do you think about selling GOOG March 500 puts and buying 530 calls? Would you go out farther in time or consider different strikes? As I recall you considered 520 a decent entry but that was a few weeks ago.

  34. ChuckW

    sorry, didn’t see earlier discussion

  35. judahbenhur

    Phil/VLO.  Thanks. Exactly the guidance I was looking for.  I really like the play where you just roll the putter down and away until you are at a price where you don’t mind taking ownership, or the put expires worthless.  I’ve been looking for more such plays and VLO seems like a good stock for that.

  36. jomptien

    Phil,
    VZ – I have 200 shares @ 31.35
    bought 3 2012 30 calls @ 5.05 , now 2.10
    sold 10 2010 40 calls @ 1.46, now .44
    sold 3 2010 30 puts @ 5.35, now 6.10
    sold 3 March 30 calls @ .36, now .08
    How would you adjust?
    Thanks

  37. yodi

    Hi EricL Your condor ideas I am holding the V and SPG BIDU did not bite yesterday and still today seems to be trading at 3.15 . Do you have any other horses in the stable? thks

  38. RMM

    Phil:
    what about rolling my XOM putter Mar65 to apr 65?

  39. Phil

    ABX is always fun to sell puts against.  $36 puts can be sold for $1.02.  NEM had good earnings.

    As rumored, Coca-Cola (KO -1.3%) confirms it’s buying the North American business of Coca-Cola Enterprises (CCE +30.3%), its largest bottler. The deal is valued at around $12.9B, including equity and debt assumptions. (PRWow, how asleep at the wheel were the Arb boys on this one?  This was so in the cards I didn’t even look for a play as I thought everyone would have priced it in – my bad

    Dec. FHFA Housing Price Index: -1.6% month-on-month, vs. +0.4% prior (revised). Quarter-on-quarter, prices are -0.1% vs. +0.1% prior.

    EIA Natural Gas Inventory: -172 bcf vs. consensus of -168 bcf. Nat-gas futures -1.4% to $4.79.

    Sources say Greece is getting ready to issue a 10-year bond next week, after it rolls out its new €2B-2.5B ($2.7B-3.4B) austerity plan. The government wanted to issue the bonds this week but held off because of massive street protests and a downgrade warning from S&P.

    The Fed and SEC are both looking into accusations Goldman Sachs (GS) has placed bets on a Greece default, Bernanke says in his second day of testimony.

    Goldman’s (GS) Greek swaps aren’t the only issue in the country’s debt concealment; Greece went on a spree of mythologically named securitization deals in 2000 and 2001 that may have amounted to a "garage sale on a national scale."

    Sure, Greece is where all the drama’s at, but Spain may be the true test of whether the eurozone will stand or fall.

    Royal Bank of Scotland (RBS +5.9%): 2009 net loss of £3.61B ($5.56B) as charges on bad loans rose. The bank signaled the worst in bad-debt may be behind it, and surprised investors by saying it no longer expects to use a U.K. program to insure toxic assets.

    As Geithner meets with lawmakers to find a compromise on financial reform, the White House signals it’s willing to let an existing agency, rather than a new one, oversee consumer protection.

    Yay!  MetroPCS Communications (PCS): Q4 EPS of $0.09 beats by $0.03. Revenue of $930M (+28.6%) vs. $895M. (PR)

    Sirius XM Radio (SIRI): Q4 EPS of $0 beats by $0.02. Revenue of $59M (-10.2%) vs. $62M. (PR)

    Plains Exploration & Production (PXP): Q4 EPS of $1.37 beats by $0.76. Revenue of $368M (+12%) vs. $421M. Shares -0.1% premarket. (PR) ????

    Steel consumers are bracing for a jump in prices, as steelmakers’ annual negotiations are likely to end in significantly higher raw material prices. Iron ore could be 70-80% higher than last year’s benchmark prices, while coking coal could rise 80-100%.  Go ACI!

    Blackstone (BX): Q4 EPS of $0.29 beats by $0.09. Revenue of $738M vs. $567M. Shares +1.9% premarket. (PR)

    Blockbuster’s (BBI) worse-than-expected earnings yesterday are raising fresh questions about the company’s viability.

    Three Google (GOOG) executives are convicted of invading the privacy of a boy with Down Syndrome in Italy. The EU opens an antitrust inquiry on complaints that the company treats competitors unfairly. As the list of international incidents grows, so do investor concerns.

    Interesting:  Vermont votes not to renew Entergy’s (ETR -1.2%) license for a nuclear power plant, even though the state relies on the plant for a third of its electricity and license renewals have previously been routine. The reactor will be closed by 2012.

    Cisco (CSCO) plans to unveil technology next month that will "forever change the internet" and show "what’s possible when networking gets an adrenaline boost." Sources say the technology has to do with offering better, faster internet service.  Good time to get into CSCO anyway

  40. gel1

    Caop/PALM
    From inside the men’s room …. Lots of employees are leaving (do they know something?) I would be cautious to short them down here as there could be a buyout in the future, and then you are screwed.

  41. gucci

    Phil I have March bull call spread was open on FEB 1st — i think I read from your old article — MArch bull call spread bot 520, sold 540 call and sold 510 put — b/e now about 520, should adjust now or wait -  pleas advise

  42. kazoo

    Phil – Have a suggested entry for CSCO?  Thanks

  43. gel1

    Have been watching the health care summit – very limp support for the Democrat ideas by the GOP. It seems to me the plan as presented has a serious medical problem of its own – ED – no excitement for what has been presented.

  44. jomama

     gel – did you buy back your Ford puts?  I will be interested to see how Harry Reid does in the Neveda re-election.   Should be interesting.

  45. jomama

     kazoo – I have a CISCO  22.5/25 vertical that is even so far – I initiated the position about 3 to 4 months ago.

  46. gucci

    DIA mattress — should I sell another 1/2 101 put today, still have Jun 105 put and 1/2 102 cover short put

  47. Phil

    GOOG/Chuck – Lots of bad news flow from them coming out of Europe, I wouldn’t take short-term bullish plays right now.  I do think they’ll hold $500 and if they test it, THEN I want to sell puts but right now we’re not looking healthy enough to play a super-volatile stock like GOOG.

    Oil all the way down to $77.  Gold went nuts back to $1,103 and nnow quickly slammed back to $1,096 on some violent dollar moves but now the Dollar has gone way up to $1.52 to the Pound and $1.35 to the Euro but 88.9 Yen so I guess the Pound is taking a pounding. 

    VZ/Jomp – I’d buy back the Jan $40 calls and the March $30 calls.  You can roll the 2012 $30 calls (net $4.05) to the 2012 $25 calls for $2.35 and sell the $30 calls to someone else for $2.10 so you are in the $25s for net $4.30, which is not much upside (.70) but it beats the hell out of the $2 loss you are currently looking at.  I wouldn’t worry about the puts, which are mainly premium and you can just keep covering the stock for .30 a month or better and that’s a 10% ROI plus the dividend.  I’d wait for a bounce to sell, maybe get .75 for the Apr $29s. 

    VZ is a great entry at the moment. we can sell the July $29 puts for $2.02 and this is a stock we would like to own for net $27.

    XOM/RMM – Sure if you have ants in your pants and can’t wait to pay him a $1 premium so you can put him into a position with the same delta, less theta and an entire extra month to stick it to you – go ahead! 

    GOOG/Gucci – The correct play is to roll down to the $510s for $6.  It’s a long way to expiration though.  You can also take out the $540 caller and plan to sell the $510 calls (now $19) for no less than $17.50 if GOOG goes below $520 and then use that $17.50 to roll out to the Apr $500s (now $32 so maybe + $3).

    Damn, there goes 10,200!  Transports holding up and SOX at the 2.5% rule at $330.80 and Nas right at 1.5% at 2,202 as is S&P at 1,088 so I’m going to remain hopelessly optimistic until the S&P breaks down.

  48. harip

    Phil,
    Do you recommend uranium suppliers like ccj or folks who build nuclear plants like shaw for long term holds??
    thanks

  49. silentstorm44

    SRS only up 1.36%         FWIW

  50. jburgess

    Phil, about 6 weeks ago sold VZ Apr 29p for .69, now 1.22. Any reasonable adjustments I can make. And, yes, I do want to own more… at the best price I can get. Thanks.

  51. jburgess

    Phil: My VZ stock cost basis = 29.5

  52. Phil

    CSCO/Kazoo – I’d just go with the Jan $20s at $5 and sell the July $25 calls and $23 puts for $2.10 for net $2.90 on the $5 spread.

    DIA/Gucci – I advocate a full cover with $102 puts or higher here as we’re holding 10,200 and we still expect a pump by tomorrow’s close.  Simply set a stop at 10,200 on 1/2 – worth risking a nickel! 

    Nukes/Harip – SO and CCJ are my two favorite was to play at the moment.   SHAW is good but ran up a bit fast, would be good back at $30. 

    VZ/Jbur – It’s all premium so you are not doing yourself any favors by buying it back (that makes you the sucker buying premium).  You can roll to 2x the $28 puts but that’s more a move you’d want to do (to July $28 puts) if you find you are clearly going to be underwater.   Way too early to panic now.  If you are worried about missing upside, just take a 2012 $35/40 bull call spread for .50 – that’s 1,000% upside and raises your basis to $30, which you can work off selling shorter-term calls.

  53. tuscadog

    Phil, Amed now trading at 10x 2010 Co. guidance of $5.60.  Jeffries says (correctly Co. always low balls and beats and expect $5.70 plus, and raised price target to $81.  53% short interest still amazing challenge, but fundamentals still improving as Co. evolves into the 800 lb goilla of this sector.  Down 4% today as shorts manipulate yet again.  A good buying point again Phil?

  54. gel1

    Jo/F
    On my positions ( sold puts ) that have a 5 or 6 strike, I will let them decay to zero. I have some 12.5′s that I will unload tomorrow, anticipating a bounce back as they are down 5% today.
    Poor Harry… he is toast as Nevada is very anxious to put him into retirement.  He is at 30% and dropping. I wish there was a way to handicap this loser.

  55. yodi

    Phil,
    Reading your commends on VZ holding the march straddle 32 c/p sold c for .58 now 0 and p for 1.41 now 3.38 could be assigned on the put thinking of rolling to Jul 31/30 c/p for a debit of .35 pos. .40  your thoughts pls

  56. gel1

    Executed a Buy/Write on AINV (Apollo Investment Corp) buying stock and selling June 12.5 p & c . Stock pays 10% dividend and is very safe.

  57. RMM

    Phil:
    does it make sense to roll MTW caller march12.5 to apr 12 ?

  58. jomama

     Phil, what are your thoughts on a JPM 35/40 2012 Vertical for about 2.35?

  59. aclend

    Thoughts on EWZ and Brazil when you have a chance? Is it primarily a China commodity-demand story or will domestic growth and consumption be a big driver?

  60. jburgess

    Phil re: KO, am I remembering correctly… didn’t Goizueta (Past CEO now deceased) spin off all of the bottlers about 10-15  years ago? His thoughts were to slim down KO to focus on selling the coca-cola syrup concentrates which have much higher margins, and get rid of the bottler headaches.

  61. jomama

     jburgess, i think that KO had to re-examine their model after PEP bought bottlers.  Probably the only way to increase margins and lower costs.

  62. jcedens

     Will we get the stick today?

  63. Jordan

    Phil, your "rant", the first part of your post this morning was very well done and I think we should let as many people with actual power to change things read it!

  64. Phil

    Ah, here we go!

    AMED/Tusca – Need to let them test 50 dma at $54 – they got a bit ahead of themselves at $60.  Strong market might keep them up but failing $57.50 indicates another leg lower more likely ($57.50 is exactly halfway between high at $61 and $54).  Nothing wrong with selling Apr $55 puts for $3 if you are in a hurry but very likely you can get $4.50 for them if you are patient. 

    VZ/Yodi – How about take out the caller and WAIT PATIENTLY?!? 

    I don’t know what it is with people that they think they have to adjust every position every day when the market swings up and down 150 points on a regular basis.  Do you know where we are now?  We are at the exact same place we were on January 22nd.  You could have sold March puts and calls and taken a month off and skipped the 500 point drop and the 600 point recovery and now, down 100 again – you could have come back and just counted your gains.  Do you know what 10,400 is?  It’s where we expired in Nov AND Dec and we were at 10,100 at October expirations.  Overtrading is a sin – try not to commit it!

    MTW/RMM – Well it makes sense to put a tight stop on him but do you feel some compelling need to lock in this drop or are you confident enough in your company to wait for a bounce?  

    JPM/Jo – I like that one. 

    EWZ/Ac – Too much of a commodity play. You can ask Gel, I tried to talk him out of it in the fall.  If they collapse, I’d like them as a long-term play but I see no compelling reason to buy Brazil at $70.

    KO/Jbur – Yes but it was a mistake.  They lost quality control and marketing control (shelf space) and it impacted the overall revenues.  Sometimes, with mega-corps, you have to have a division that runs b/e that greases the wheels for the rest.  That’s what bottling used to be for KO.  Giving it to people who tried to run them stand-alone for a profit led to quality and re-investment issues that hurt KO growth.  I’m not at all happy about KO taking on $9Bn in debt though.

    Stick/JC – Either today or tomorrow but I’m pretty sure we close out at 10,400 tomorrow. 

    7-Year sale was at 3.078%.  Bid to cover 2.98 with, as usual, suspicious participation. 

    Rant/Jordan – Yeah well I’ve been sick so I had a lot of words bottled up in my head and then I read over Bernanke’s testimony last night and got good and pissed.  Feel free to send it to everyone – it would be nice if this issue got some attention…

  65. dmankoff

    hi, Phil, i did your trade on TBT, bot the Apr 48 calls and sold the March 48 puts, and also bot the June 40 call on TBT, and am waiting for a move up on it, to sell the June 48 or March 48 call.   any suggestions?
    David
    glad I waited until today to do this TBT trade, since much better price than yesterday.

  66. JRW III

    Phil,
    GDP number tomorrow morning, " THEY " could probably fake something over 6% !!

  67. yodi

    Thanks Phil re your commends on VZ will hang them on top of the computer screen.

  68. dmankoff

    Phil, what do yuou exactly mean turn this into a spread?
    TBT – Nice chance to sell $48 puts for $1.05!  Nice chance to buyy Apr $48 calls for $1.25 and we can turn it into a spread later.

  69. Phil

    This chart pretty much says it all:

    Dow is a sea of red today.  All red but AA, HD, TRV and WMT trying to hang on.  KO is the worst at – 4.5%, causing 20 points worth of Dow damage by themselves.  IBM, XOM, CVX, BA and MMM are our other big dingers with about 60 points worth of damage so that’s half our losses there and we know nothing is wrong with IBM, BA or MMM so just profit-taking and we could care less if XOM and CVX roll over and die (well XOM I do care a little) so I don’t consider this such a bad day – it’s KO and a commodity sell-off spurring profit taking. 

    S&P is holding 1,088 so my thought process isn’t very complicated and the Transports haven’t rolled over and the SOX held the 2.5% line.  Gold is back over $1,100, copper is back to $3.20 and silver got back over $16 while oil is holding $77.50 so I think things are looking up.

  70. lflantheman

    Phil….Thanks for the slap on the hand re overtrading.    We’ve all been guilty of it in the past and it’s easy to fall back into the pattern of feeding the broker more than he can eat as we watch our own larder dwindle due to unnecessary overtrading. 

  71. bord

    Tuscadog, I am in a long spread on AMED too, but it’s going to be a rough ride with health care summit and reform up in the air. If anyone at that round table says "controlling health care costs" that can get interpreted as capping/cutting provider medicaid/medicare reimbursement rates, which will body slam a stock like AMED. So just be cautious and like Phil says see how they hold 50 dma during all the health care drama.  

  72. Phil

    TBT/Dman – I suggest patience and trying not to have a dozen positions on the same damn ETF.

    GDP/JRW – It could be anything but I assume "good" as they don’t schedule the GDP for the end of the month NOT to use it as an excuse to rally. 

    Hanging comments/Yodi – I used to tell people to put things like that on a post-it and put it near their execute button on the screen or the keyboard…

    Turning/Dman – In other words I like holding the call, waiting for a bounce and then seeing what I can sell against it. 

    This is not helpingThe Fed’s Pianalto: "It may take years just to get back to the level of output we enjoyed in 2007… All types of businesses are continuing to see weak levels of demand… In such an environment, firms are being cautious about new hiring and so unemployment persists at a high level, which in turn restrains spending. From any perspective this is not a pretty picture."

    Nor this:  First Solar chairman Michael Ahearn sold more than 40% of his shares beginning Feb. 19, in a "clear signal" that he sees difficult times ahead for the company and the solar industry.  How about he knows his company is a scam and decreasing copper production will mean the end for them?

    Nor this: The WTO says world trade fell 12% in 2009, more than expected, and that successful completion of stalled Doha trade talks is more crucial than ever. It’s "too soon to say" if an expected pickup this year will be the result of short-term restocking or long-term sustained demand.

    And certainly not this: "A double-dip recession is still very much in the cards," former Fed governor Robert Heller tells CNBC. "The big elephant in the room is the huge federal deficit, and that will eventually force up interest rates. And as interest rates go up, it will kill both businesses and consumer recovery."

    Or thisBernanke says imbalances created from China’s large holdings of U.S. assets "can be a risk to our financial system." He hasn’t seen “any significant change” in China’s holdings of U.S. assets and that it has continued to acquire dollar reserves despite whether the dollar is rising or falling.

    Bernanke on the Hill (live stream): telling lawmakers that the economy still needs support – and that CRE news isn’t ALL bad. (MW)

    Damn, with all this horror-talk from the Fed, I’m proud we’re just holding 5% levels!

    Strong demand as the Treasury sells $32B in seven-year notes at 3.078% (.pdf), wrapping this week’s $126B in debt auctions. Bid-to-cover ratio of 2.98, the highest ratio since the maturity was reintroduced in Feb. 2009; indirect bidders take 40.3%. Direct bidders take 17.2%. Treasurys added to gains: the 30-year yield -0.06 to 4.58%; 10-year -0.06 to 3.64%; 5-year -0.06 to 2.34%.

    Buyers of bailout warrants for Capital One Financial (COF) last year made 34% in a month, and those who bought JPMorgan Chase’s (JPM) got 36% in the same time frame. Bidders wanting a third chance at a windfall could push proceeds from an auction planned this month for BofA’s (BAC) warrants to $1B. (previously)

    Gensler: How to stop another derivatives inferno

    Banks bet Greece defaults on debt they helped hide

  73. Cap

    Stupid, Crazy market.
     
    Gel … not crazy about Jan ’11 calls (long time to be short) on MDVN.
    BUT, the 80′s can be sold for $ 4.60 today …. so I did sell 1.  You may want to take a look.

  74. Cap

    And that stupid ass BIDU … down to 495; now 505.   Completely crazy and stupid.

  75. gel1

    Good entry today on IBM – Sold April 125 puts @ 2.81

  76. jomama

     Looking to Sell Apple 200′s for 5.5 again.  Looking to sell another round of GS as well after Mr. Stick visits.

  77. where

     Now that’s a stick!

  78. Phil

    Well Iflan, you convinced me to get some lunch!  8-)

    AAPL split rumors!

  79. JRW III

    Out of TNA ay IWM 62.91 for $1.75 !! YAHOO

  80. jomama

     AAPL split  eh? Will hold naked then!  

  81. lflantheman

    AAPL forward PE 17.   Gads, me needs to get some more ‘fore it splits and rockets!

  82. gel1

    Cap/MDVN
    On the short 80 calls – which date are you referring to ? On the Jan ’11 80 there was only one contract traded – Is that you ?

  83. Phil

    "The little dog laugh’d to see such Craft"

    SPWRA finally waking up. 

    Yahoo is right JRW.  I sold the puts so I have to wait but what a great price.  DIA calls came out nicely too….

    AAPL Jan $180/2000 bull call spread at $11, selling $180 puts for $16.50 is $5.50 credit so you make $25 or you have AAPL put to you at net $174.50.

  84. Phil

    Done with my upside plays – that was enough fun for now!

  85. jburgess

    Phil, thanks for DIA and TNA positions today!!

  86. aclend

    OK, then help me out on EWZ.. I bought in at 75.45 (100 shares) in Dec, I think…sold a Jan 80 call for 2.75 (expired worthless), sold one in Feb for 1.5 (expired worthless) and now sold a Mar 75 for .6, looking for it to recover to break even-ish purely on a stock price basis. I would be willing to double down if it was safe, but that would then represent about 7% of my portfolio, but it doesn’t sound like it is safe. What would be a compelling price for you?
     
    This is related to another question I have had lingering. How does one collect adequate premium selling calls on stocks that are dropping without limiting upside too much in case they recover and then getting called away early?

  87. Pharmboy

    Chart on HK looking promising now.  Gonna take a small position 19 Juns.

  88. Pharmboy

    CLDX has coverage by Roth Capital.  Initiated with a buy.  Where have they been?

  89. RMM

    Phil:  my DIA mar104 puts (full cover for June puts) are now up over 20 %,
    I think  I close half of them to go to 1/2 cover ?? what would you do ?

  90. gel1

    Sold the AAPL Jan 180 puts …. Nice one Phil !

  91. Phil

    Positions/Jbur – You are welcome.  Now I’m just watching to see how we do at this line, which is about Tuesday’s lows.  If we hold this, we’re staged to re-take 10,400 tomorrow although we could just punch up now.  I’m back in some DIA’s over 10,300 but I got out ahead of the test of 10,300 while the premiums were good to sell.

    Collecting/AC – Well if you have $75 stock and you are only able to sell $1.5 a month that covers just a 2% move then either you are dead positive that stock is going up or it’s not a good stock to own.   EWZ does pay a 4.2% dividend so that’s part of the reason the premiums suck to sell.  You don’t have an overall strategy is the problem, what are you gaining by selling $2 here and $1 there 12 times a year?  You get a 15% return on your $75 is you sell about $1.20 a month or, if you want to really be long on Brazil and collect a dividend, you can just selll the Damn Jan $60 calls for $12.50 and the Jan $55 puts for $4.50 to drop you from $67.50 (your basis is higher, of course) to $50.50/55.25.  That gives you 20% if called away or 2x at $55.  What is the point of messing around guessing targets month after month after month when you can just give yourself 20% downside protection with a 20% profit, even if the stock drops 10%?  And you STILL get the 4% dividend, which is more like 5% with your reduced basis.

    DIA/RMM – Yes, as I said above, take them off the table after you are gifted an 80-point rally.  1/2 cover with the lower puts (if you have 2 diff strikes).  I still think we hit 10,428 tomorrow but we got a gift today and we’re back to the old bird in the hand argument

  92. gel1

    Estimates are for a savings of $ 50 Billion for JUST tort reform – but will not even be considered. Those negligence lawyers really know how to twist arms and bend common sense.

  93. gucci

    Phil your thought on Bidu bear put spread  --
    Jun 510/570 spread and sell 520 call for total credit 0.30 cents — if Bidu stay flat till then is great — if not as long they stay below 510 this trade should be ok till June right ?  By th eeay you never teach us about exit point, on these spread I can exit any time before expiration right, is it best 1 month before expired or when — please teach me master Phil :) thanks

  94. JRW III

    Reloading on TNA if IWM holds 62.66.

  95. jomama

     gel – in all fairness, tort reform is a red herring and really will not bend the curve or make a huge difference (this is coming from an anesthesiologist)

  96. Pharmboy

    jo – have you used the new drug from MRK/SGP/Organon for bringing people out of anesthesia/muscular block?  It is not approved in the US (yet), but they say it is wonderful…..One of my premises for MRK, among others.

  97. RMM

    Phil: what is bullish about AAPL see you 2:12 recomm.

  98. aclend

    Thanks. Do any of the new 100K positions look particularly attractive now?

  99. JohnC1

     Phil:  Any thoughts on why UNP has been so strongly lately?  Would you suggest selling calls?  Thanks.

  100. alsos

    aclend
     
    Thanks for the recommendation a couple of weeks ago on the book THE DISCIPLINED TRADER.  I’m starting on it for the 2nd time. 
     
    Your other mention, FEARLESS GOLF, is also very good….you can substitute the word trading for golf and get the same benefits.

  101. yodi

    Phil  Are we buying any DIA Mar in the close if we get some stick??? thks  possible 1/2

  102. Phil

    Torts/Gel – Tort reform is a good idea but a tricky thing.  I think the government should have a gateway committee for class action suits.  When you look at all the things corporations try to get away with, it’s downright scary to think of what would be going on if they weren’t worried about lawsuits…   Tort Reform + strong regulation = good but Tort Reform + lax regulation is probably as dangerous to American lives as terrorism.

    BIDU/Gucci - I don’t agree with the premise that BIDU stays below $500 through June so make sure you are comfortable with what you will do if they hit $550.  As to exits.  HAVE A PLAN!!!  If your plan is to realize $30 in gains between now and July then that’s $6 a month and if you are on track – keep the trade, if you are falling behind by half a month – worry and if you are 2 months ahead with 3 months to go – why stay in the trade?   Just imagine a graph with where you should be and a stop line below it and a stop line above it and make sure you stay inside the lines!

    Looks like we’re hugging the line here.  Volume isn’t that big (Dow 131M at 2:50) but we can assume the stick-bot just ran and, like I said, this is Tuesday’s lows so a good staging area.  I’m not inclined to go bullish into the close – just cashy and neutral is fine for me.  We have the GDP in the morning and that should be about 6% but everyone knows that already so any miss would be dangerous.  I think we go up, I firmly believe we go up but I had a great week so why risk it?

    We also get Chicago PMI in the morning and that should not be very good and then Michigan Sentiment at 9:55, which is not likely to be good with national consumer confidence in the toilet and then, at 10, we get existing home sales so Mr. Stick will probably have his work cut out for him tomorrow and I’ll root for a retest of our lows at the open so we can go long from there. 

    AAPL/RMM – It’s a nice way to play for a split and, if not, I still want AAPL for $174.50.

    $100KP/Ac – Sure, the ones that are most behind are most attractive!  Nothing happened since last night to change my opinion of the values.

    UNP/John – That’s that whole Buffett thing.   I think they are all overpriced here but I wouldn’t bet against them. 

  103. RMM

    Phil: are there stocks which you would not mind owning that now you would sell naked puts ???

  104. gel1

    Jo
    Re tort reform… The savings would be profound in my estimates. The jury awards would be confined to actual damages and would not include punitive damages, which drives the insurance costs to physicians and hospitals skyward. If we had meaniful legislation to restrict these negligence claims, much in the same manner as has been implemented in the resolution of workmen’s compensation issues (a schedule) then the unknown would be removed and the actuaries could better determine the risk, therefore lower costs.( I am a former lawyer that could be wrong as I was so many times in the past)

  105. aclend

    …just like I do with my daughters, not giving them the easy answers on their homework! Haha. I wasn’t sure when that post was put up and/or updated but I got some good entries.

  106. Jtiff

    Phil-
    You think it wold be wise to wait until 174.50 for APPL, or is now a good time?

  107. David Ristau

     Hey all,

    Overnight Trade is up.

    We are looking to get involved with LaSalle Hotel Prop (LHO). This is a hotel REIT that I think should be good for an earnings pop tomorrow. I like the price it is at, but I wouldn’t buy above 19.70ish. 

    If you have any questions, post on my article.

    Thanks!

  108. Phil

    Stocks/RMM – Yes, lots.  Anything on the Buy List that’s close to our last prices.  The stuff I mentioned today and yesterday – that’s about 50 to start with…

    DIA/Yodi – As I said above, I’m inclined to just hang onto cash and see what opportuntiy comes around in the morning.  I do have some $104s, looking ofr a break over 10,300 – just in case we get a big push into the close to impress Asia and Europe but if I wasn’t playing with profits I wouldn’t be doing that.

    Torts/Gel – Oh for medical I agree 100%.  It’s corp tort reform that worries me but a combination of tort reform and a beefed up AMA oversight for serial offenders would suit me just fine.

    Homework/AC – Yep, I have the same habit!

    AAPL/Jtiff – I think you miss the point.  If you take that trade now AND it fails AND it’s put to you at $180, THEN your net entry is $174.50.  Anything over $174.50 on AAPL is a profit for you up to $25.50 at $200.  This is a nice play as a substitute for buying AAPL now and trying to hedge it as $25 is 12.5% anyway and you commit a lot less cash to the spread play and, of course, you can roll down the putter to 2012 whatevers so you are really only committing to buying AAPL at around $150 in 2012. 

    The end is near!  The Fed bought a net $11B in agency mortgage-backed securities this week, same as last week, bringing the cumulative total since the beginning of last year to about $1.206T of a planned $1.25T in purchases.

    Go stick go!!!

  109. Pharmboy

    HK moving now.  They need to fill the gap back up, but should be good for it.

  110. Jtiff

    Thanks, Phil.  I don’t have the original post so I was a bit confused. 

  111. Phil

    Wow, being bullish is such fun – you just place your bets and wait for something ridiculous to happen!

  112. JRW III

    And out of TNA at IWM 63.06

  113. EricL

    Check out SWY. Earnings miss, followed by a massive reversal. Things like this make me nervous about the market — that’s not the kind of bullishness you want to see for the long-haul.

  114. jcmcn5

    If there’s a bigger pig in the world than SRS, I’m not aware of it.

  115. EricL

    jcm, VXX is bigger, and it’s not even an ultra.

  116. Phil

    Transports are green, VIX flat for the day, Nas about to go green….

    Copper $3.226, silver $16.13, Gold $1,107, Oil $78.30 and nat gas $4.78.  Gasoline, oddly, is down 2.5% to $2.15 so all is not well in demand land….

    SRS/Jcm – What a constant disaster they are! 

  117. JRW III

    Phil / bullish
    It’s true, just got another $ 0.50 on TNA for a total of $ 2.25, or $ 45K; not a bad days work !!

  118. Jordan

    What’s this bullsh** action?  On WHAT news?  What happened in the last 30 minutes to subside the fears???
    Give me a break!

  119. gel1

    Executed a calendar spread on TM – Sold Apr 70 puts and bought July 70 puts – Oh ya !

  120. DKGuy

    Why is it a doctor can loose or settle 10 or more malpractice lawsuits and keep their license to practice medicine and insurance companies are left to pay for all their mistakes.
    Until doctors and medical societies begin to police their own nothing will change from a tort reform perspective. The damages/penalities should not only be considered financial but if there is gross negligence they should not be allowed to continue killing people. 

  121. gel1

    Phil… I’m doing my best to lobby against greedy lawyers and dumb politicos – not much progress tho !

  122. where

     Jcm – Yea, my SRS hedge is so hopeless.  I’m sure someday it will justify it’s existence, so I keep selling premium against it.

  123. Phil

    PALM Jan $5s at $2.50, selling $12.50s for .45 and $5 puts for $1.10 is net .95 on the $7.50 spread and worst case is PALM is put to you for net $5.95.  Great if they get bought and you can sell calls against if you want to be aggressive.

    Work/JRW – Yep, nose to the old grindstone….  8-)

    LOL Jordan – You must embrace the stick.  All will be well if you accept the stick into your life without question or reservations.  Stick is one, stick is all….

    Progress/Gel – I have given up.  We’ll set up a benevolent dictatorship on our island nation and settle all political differences in Texas Hold ‘Em tournaments…

    Well that sure was fun wasn’t it?  Another 100 points to go tomorrow and we are green for the year!

  124. jcmcn5

    What was today’s reason for SRS’ emetic performance?  Did I miss the bottom in CRE?

  125. deano

     SRS- biggest loser in my portfolio – should have cut the cord in month 1, but it just seems to make so much sense!

  126. jcmcn5

    Where — what premium? The effen thing never goes up enough to generate any call premium. I just bought back the March 8′s hoping to get something for the Aprils, but nothing jumps out.  I wondering if I should just sell something deep ITM and just let the miserable experience get called away.  As a market hedge, this POS is about as effective as our current political class, which is the biggest insult I can come up with at the moment.

  127. gel1

    Lots of talk today about Health Insurance… The end game will result in regulated rates, very similar to the regulations that prevail in the Utility sector, which allows the companies to make a Return on Equity (ROI) of 11%. All of this rhetoric is a waste of time as the end game is sure to take place, and the insurers will continue to exist, but income will determined by government regulation. I have absolutely no desire to have equity in any, until all the dust settles, if ever.

  128. jomama

     Gel, your point is well taken.  Another major problem is that physicians are sued for bad outcomes which is not necessarily the same as "negligence"    I think that if people are harmed they should have a workers comp type of deal – where their care is assumed and they get modest disability payments.  But there are too many special interests with skin in the game. I am just trying to put myself in position, so that i can walk away on my own terms if i choose.

  129. gel1

    Phil/Progress
    LOL

  130. gel1

    OOPS – should be ROE

  131. bord

    Phil,
    Wow BAC up from 14.50 to 16.55 in one week. Made my sucky Jan 15/20 bull spread look good, but it seems very far very fast. It seems like I should sell into this, but I am selling front month calls to help finance the spread, and the march calls sold are way in the red because they were written near options expiry time when BAC was around 14.50. WWPD? — What would Phil do in this situation? Thanks

  132. Phil

    SRS/JCM – VNO and BXP both got bought all day off the open – that’s all you need to kill SRS.  

    SRS/Deano – It’s a lot like where we shorted SKF at $150, $200, $250 and $300 – they ended up at $20 so we were never wrong – it’s just a question of being in the right place AND the right time…

    Steve Jobs tells Apple (AAPL +0.5%) shareholders that the company needs to hold its many billions in cash as dry powder for future acquisitions rather than looking for higher returns. What’s more, don’t hold your breath for a buyback, as Jobs says that wouldn’t affect the share price.

    Wow!  The Treasury confirms the existence of a plan that could ban all foreclosures unless they pass through (and get rejected by) the government’s HAMP modification program.

    Market recap: Some buying into the close added to an earlier leg up (based on Apple (AAPL) split rumors, or just the retreat of the morning’s strong dollar?), trimming what had been substantial losses. Transportation stocks did well with heavy trading in rail issues, and commodities moved up late.

  133. tradinv1

    Phil,  Do you like a CME Jan 280/300 spread and selling a 280 put for a net credit of 24.40?  Owning CME for $256+/- in January seems reasonable.  Thoughts?

  134. jcedens

     Gel,
    I would welcome the utility model for health care insurance. I’ been paying all insurance costs for my family for over 10 years with no health problems and we’re getting raped on rates. For 2 healthy people with no claims in over two years and no major claims ever, we pay almost $1000/month for $10,000 deductable policy.  Rate increases of over 60% in 2 years. Outragious!!  

  135. bord

    AMEN Jcedens!!!!
    If you are a small business owner and don’t get a health plan as a company employee/government employee and have to get private coverage on the "open" market, you are screwed. I face the same high premiums and deductible but I never get sick, still I have to keep paying for NOTHING basically as disaster insurance in case a calamity occurs. Listen to what Jcedens is saying people, who has to shell out $22,000 annually before dollar one of health insurance kicks in. Anyone who argues that this system is not completely fucked needs to have their head examined.

  136. judahbenhur

    CROX raises guidance to break even in the 1st quarter, announces new CEO.  Getting crushed after hours.  I’m selling puts tomorrow morning.

  137. jomama

     jcedens, the money is definitely not going to the physicians.  A major problem, is high utilization by few people.  Another problem is that people expect and receive MRI’s for knee pain.  Combine this with artificials knees, for 300/400 pound patients…well you get the picture.  All of this is just massive cost shifting – until we say NO and RATION there will be no true reform.  Everyone talks about how comprehensive the coverage is in canada and europe…..they say NO.  Here we say, "that’s immoral"…"its a slippery slope"…."death panels"…etc.

  138. gel1

    Jo
    You are much closer to the issue than I, but going back in time, the guys I worked with would construe a "bad outcome" as negligence, as they would argue under the theory of the "res ipsa" provision, ie the outcome (albeit less than what was desired) could not have occurred without negligence. This is one of the reasons I got away from the legal profession, is that they like to argue why a chicken crosses the road, and have all kind of evidence that supports their position from a chicken farmer in Shit-Kick Iowa.

  139. where

     Jcm – Haha!  Notice I didn’t specify how much premium!  Every little helps.
     
    I’ve been a bit lucky on timing selling on spikes and buying back when it inevitably falls on it’s face, but it’s like a festering sore in my portfolio.  I seriously hope it’ll turn around some day, but at least it’s been pretty stable in terms of decay issues since the market has gotten choppy.  My only concern is how it’s going to be affected by the new SEC short selling rules.

  140. jomama

     gel, if you go by that reasoning, good physicians will stop taking care of very sick/complicated patients.  You will get serious selection bias, where all of the shitty docs who have low volume/bad practices will take care of these patients.  Bad things happen to patients sometimes regardless of our best attempts to save them.  

  141. matt1966

    Phil, good call on the day’s action.  You seem to be in the zone this week and as such, I expect your premise of a very weak open with a strong rebound for the rest of the day to come to fruition.  It’s so not about fundamentals or technicals.  It’s all about extraction of wealth.  The month’s close will be the setup they want for next month’s action.. which should be down.

  142. jcedens

    I wonder if  some type of "medical co-op" could be created where a modest health care facility could be built and be customer-owned eliminating the blood sucking insurance middle men.  I live in a rural community and our electric utility is a member owned co-op. Not too many bells and whistles, just the basic services. Maybe require a "membership" fee and do some type of up-front agreement on how to settle malpractice claims in a way  that don’t require the doctors to "cover their asses" with endless paper trails of tests. Also could have an optional additional buy-in for different tiers of care.  Someting like the cable companies do with their different tiers of channels. I know the devil would be in the details, but there must be a solution to this situation where the middle men not only steal our hard earned money but also tell us we should be happy about it because we have no other choice.

  143. gel1

    Jo.. I agree completely with you. We need a system to insure that those who are creating our innovations and specialized skills are not the prey of others, as this liability will surely diminish the desired benefits that should be expected. That said, we must limit the selfishness of the parasite attorneys and poorly managed insurance carriers. The medical profession should be able to practice without the fear and expense of "out of control" law suits brought upon them and their insurers by law suits that are fradulent or excessive. The same goes for Pharmaceutical product manufacturers. Limits must be established when liability is considered, and based upon a consensus of experts, and not a jury of emotional lay people that have no idea of fairness. It is this unknown that drives up insurance costs. The seriously ill or indigent patients should have the opportunity to seek good health care, but this expense should be absorbed by our government, if insurance does not exist, and the professionals who treat these people should not be placed in risk because of the difficult procedures necessary to render assistance. 

  144. Cap

    gel:  MDVN  — yeah, that was me.  But someone was bidding to buy 40-50 or so contracts.

  145. Cap

    Man what a BS market; BS stick.  Really unbelievable.

  146. Cap

    Will Friday’s PSW headline  be "Bernanke’s BS Bounce Part III" ?

  147. matt1966

    Cap, stop trying to make sense of it.  It’s gambling.  We’re all gambling in ‘their’ parlor.  Some of us are just more aggressive gamblers and some of us are more conservative gamblers.  But we’re all gamblers.  Phil is onto what I’ve been saying since the bs counter rally began nearly a year ago.  Between the bankers and government they can make the stock market do whatever they want.  That is.. until they have completely run the country into the ground.  And that is where they are heading.  Quickly.
     
    It seems Paul Farrell wants to start a revolution, too.  That is surely what is going to take to save this country and wrest control from the bankers and their whores in positions of power.  Charles Munger has seen the future.  It ain’t pretty.  But it’s not until 2012.  How many of us will even be solvent by then?  When the $hit really hits the fan..  It’s time to elect the first engineer or accountant as president.  Someone with a $hit load of discipline and the gift of rhetoric to shame the masses. 
     
    http://finance.yahoo.com/banking-budgeting/article/108901/death-of-american-capitalism-the-10-final-scenes

  148. ocelli7

    Phil, had too many meetings today, but was able to get DIA calls this am before being away from the monitor. Therefor had to set a stop on it since and got out before you, but still did ok. Agree with Matt that you have been in the zone with DIA in the last week with some very precise and fruitful calls (no pun intended).

  149. EricL

    No time to do much today, but I just want to point out that March options are quickly running out and IMO this is a nice time to be selling condors, straddles, strangles, etc ahead of the weekend. Remember that the market starts discounting the weekend time decay on options well before the Friday close, so don’t wait until the last minute or you might not get the best price.

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