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Monday Munificence – Greece “Fixed” for “Only” $146Bn, Who’s Next?

Yay, Greece is fixed….  again.

Now we only have to worry about Austria, Belgium, France, Germany, Greece, Hungary, Italy, Ireland, Japan, Netherlands, Portugal and, of course, the UK – who all have WORSE Sovereign Debt to GDP ratios than Spain (who are up next on the "wall of worry" the markets are climbing) while we pretend that the US is in "good" shape because we "only" have $15Tn in debt on a $14Tn economy, which is how we, through the IMF, were able to write Greece a $20Bn check this weekend. 

$146Bn given to Greece is almost 50% of Greece’s ENTIRE $339Bn GDP – now THAT’s a bailout!  Bailing out Spain’s $1.5Bn economy would force us all to dig just a little deeper, despite the lower ratio and bailing out Italy’s (same ratio as Greece) $2.1Tn economy might be a stretch so maybe we can help Belgium first ($470Bn) before we all get together and figure out what we’re going to do about Japan, who have a $5Tn economy that is $10Tn in debt yet somehow has had their bonds marked to fantasy for years.  

16.5% of Japan’s tax revenues currently go to debt service (10% on interest alone) as the government borrows money at an average 1.3% (10-year rate) and you won’t here it from the happy, happy CNBC crew this morning (because Greece is "fixed" and Buffett says GS are REALLY nice guys) but Fitch released a report this weekend warning: "Japan is increasingly vulnerable to an adverse interest rate shock, given the scale of government debt and hence the volume of refinancing.  The lack of a coherent and credible plan" for fiscal discipline is likely to put downwards pressure on creditworthiness in the medium term."  According to the non-Murdoch London Telegraph:

Tokyo has until now been able to borrow at ultra-low rates of around 1.30pc for 10-year bonds, drawing on a huge captive savings pool from its own citizens. While this reduces the risk of a "temporary liquidity problem" – or `sudden death’ in ratings parlance – as foreigners cut off funding, it does not protect Japan from deeper forces at work.

The Bailout"The slow but steady drop in the domestic savings rate could eventually undercut [Japan's] ability to fund itself locally at nominal yields and makes it more vulnerable to interest rate and refinancing risks," he said. Even at the current low rates – 0.16pc for two years, and 0.49pc for five years – interest payments already match 10pc of tax revenues. This is twice the average for OECD rich states. A sharp jump in yields would be ugly.

Tokyo stresses that "net" debt at 97pc of GDP is a better indicator of Japan’s health, since this takes into account the country’s assets at home and abroad. Fitch said these assets may prove illusory. A chunk equal to 38pc of GDP is in the form of lending to business. "It would be difficult to liquidate these assets in the event that [Japan] encountered payment stress, and the value of such assets is uncertain," it said. A second chunk worth 20pc is in foreign reserves, mostly US Treasuries. This could not be converted quickly into yen without causing currency havoc.

So if Japan had to borrow money for 10-years at the US 10-year rate of 3.89%, then their interest payments alone would be 30% of their GDP.  Well, thank goodness they are able to borrow an infinite amount of money at 1.3%, right?  And I love the way this works with 20% of Japan’s "assets" in the form of our Treasuries, so they borrow from their people at 1.3% and then buy our debt and collect 3.89% for a whopping 2.59% profit.  This all works great as long as the Yen (which they borrowed and have to pay back) doesn’t rise more than 2.59% against the dollar (which they will be collecting).  So you can see why the Nikkei gets so excited any morning the dollar is over 94 Yen and why the freak out when the dollar is below 92 Yen – Japan is a country that has bet it all on black and is just sitting there watching the little ball spin around the wheel with their fingers crossed.  Maybe David Blaine can help them

Indeed we have developed an international gambling culture with all the Central Banks placing their bets and hoping their nation isn’t the next one that is asked by the IMF to make drastic changes in government spending in order to get loan approval.  Greece is cutting (supposedly) 14% of their GDP in spending, that would be almost $2Tn cut from the US’s $3.5Tn government budget or a $700Bn of Japan’s government spending, which would be 95% of it.  I guess this is the realization of the Republican dream – the shut-down of all governments seems imminent so, well-played my friends!

Have I mentioned I like guns and ammo lately?

Speaking of guns and ammo (unfortunately), New York City suffered it’s 11th terror attempt since 9/11 and, once again, it was better to be lucky than good as a car bomb that was driven to Times Square, set to explode, left there and triggered – failed to work.  It was only by luck that I wasn’t blocks away from there with my daughters as we went to NYC Saturday but changed our plans from a dinner in midtown to dinner in downtown simply because the Lincoln Tunnel was backed up going in.  

Over the past year, on at least eight different occasions, people linked to radical Islamic thought attempted to carry out or carried out attacks on targets inside the U.S. That includes the failed Christmas Day bombing on board a Detroit-bound airliner, the shooting rampage at Ft. Hood in Texas, three separate bomb plots foiled by the Federal Bureau of Investigation last September, and a handful of earlier plots broken up last spring and summer.

Have I mentioned I like hedging lately?

Sometimes we forget why we have disaster protection in our virtual portfolio as well as life protection (insurance) and fire protection, flood protection, etc.  You need insurance.  Granted a check from the insurance company would have been small consolation for my wife if my daughters and I had happened to decide to sit in the tunnel traffic and had parked at our favorite garage (5 blocks from the bomb) and had happened to be in our usual favorite places when a bomb actually went off.  M&M World is on the corner or, even worse, we may have gone to stand in line for last-minute show tickets at Duffy Square, one block from the bomb at just about 6:30, when the most people are waiting for theaters to release their unused tickets.  

It is also small consolation for your virtual portfolio if you are unbalanced (see "Smart Virtual Portfolio Management") and overly bullish because you have not adequately insured against a disaster (see last week’s "Hedging for Disaster") and you have not adequately factored a "risk premium" into your stocks.  At PSW, we often target stocks that are "priced to perfection" for our short positions and my primary objection to the run-up to S&P 1,200 is that 1,200 is, in itself, priced to perfection and the global economy still seems far from perfect to me as well as the obvious possibility of another 9/11 or some other catastrophe, like an oil spill wiping out the entire Gulf of Mexico’s water economy.

The Nikkei was heading for a wipe out last week but the futures launched Japan’s market all the way back to 11,075 (up 150 points) and they kept 132 of them during the session to finish at 11,057, right back at last Monday’s open.  As I mentioned earlier, Japan is happy as long as the Yen is worth less and they will keep printing more Yen to buy Dollars faster than we can print Dollars to buy Yen for as long as this QE bubble can keep expanding – as long as nobody notices, we’ll all be just SUPER! 

The Hang Seng didn’t get Japan’s memo and they gapped DOWN 1.5% and finished there for the day (down 297 points) while the Shanghai flatlined after a 50-point "stick save" into their close – which has pretty much been their pattern as their melt-down below the 200 dma continues unabated.  There is a rumor that China may raise it’s reserve ratio requirement for the nation’s banks to 18 percent as the Government there seeks to reign in the inflation that the Government here tells us doesn’t exist

Kind of puts our little sell-off into perspective, doesn’t it?  Europe is having mixed results ahead of the US open with the FTSE closed for a holiday and the DAX flat and the CAC down 0.4%.  Everyone is crossing their fingers that the Euro will hold $1.30 to the dollar, which is the year-low, while oil priced in Euros is already hitting 18-month highs, putting tremendous pressure on EU consumers as we head into the summer. 

Still we expect at least a bounce off of Friday’s drop but then what?  It’s a very heavy data week with tons of earnings.  Frankly, I don’t know which way we’ll go - that’s why we’re in cash! 

Good luck to you if you’re not…

 


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  1. lflantheman

    824….Playing STEC through earnings:    In general I think playing stocks through earnings is akin to gambling.   But  hey, I like to gamble sometimes.   It’s fun!   When I do I risk a very small amount of money.  For an earnings play my rule is no more than 1% of portfolio.   With STEC, I think it may move significantly one way or the other.   My choice would be a long strangle, OTM by at least a dollar each way.  I had thought I might do this play before I saw your post.  But to be sure, if the stock doesn’t move much, you lose.  It’s only for fun. 

  2. terrapin22

    Pharmboy – what do u think of CRXX and BCRX?  Thx.

  3. jromeha

    Pharm – what do you think of VOLC going into earnings? I know you liked them in the past when they were around 20… Also, you mentioned ARNA, when will they have some news coming out?

  4. nitro

     WHAT! No Bible?

  5. kwan

    Apple sells 1 million iPads in the 1st month. It took them ~70 days to sell that many iPhones when they first launched.
     
    Damn.

  6. Pharmboy

    CRXX/Terr – approval of their pain drug was in March, and they are actively screening for other targets in cancer, inflammation, and pain using their "technology".  They are now making money (but for how long?).  My overall take is any company that is playing around in co-dose space is not "novel".  This company finds two drugs that are out there and puts them together to investigate whether they are synergistic or additive in therapy.  Fine for a flier, and could move to 3-5, but I would like to see earnings for their pain compound first.
     
    BCRX/Terr – peramivir competes with antiviral drugs such as Roche Holding AG’s Tamiflu (GILD) and GlaxoSmithKline Plc’s Relenza.  If my memory serves me correctly, GILD said Tamiflu sales were not as high as expected, b’c the H1N1/regular flu was not as bad as previously expected.  We will find out soon. They also have a gout drug, and it is behind (from what I can tell) Savient and Valeant.  They have options though, so protection is a bit easier with them.
     
    VOLC/Jro – I still like them long term, as they have a good story.  Revenues continue to grow, and if they can remain swift and agile ,make a few strategic acquisitions for continued growth in the CV space, they could too be the hunted.  Earnings should be interesting, but many of the device comapanies are doing well this last Q.  Looks like they lost 3c, but I think people want to hear what the managment has to say.
     
    ARNA – nothing until Oct/Nov.  Unless of course someone buys them or they sign a licensing agreement…..

  7. Pharmboy

    Rumours, and only rumours are going around that Roche/Genentech are looking at PDL…..I don’t know how many are in these guys from Phiil’s play back in Jan/Feb, but I am looking to add a bit here to our original as well as take off the Jan $7 C FWIW.

  8. Pharmboy

    THOR – another Med Device company that exploded up last week.  Holding the levels here.  There are just soooo many to keep track of. 

  9. tchayipov

    Phil what do you think about RIG at this price?
    thinking to sell Jan 60s puts

  10. Phil

    Good morning! 

    Well up is good and down is bad today so a simple plan for us.  Copper is at 3-month lows ($3.31) and that is the whole story right now as people are finally getting concerned about the combination of massive China stockpiling and a slowdown in needless construction over there (and clearly WE are not picking up that slack).  I am sorry I got bored talking about it months ago as that’s the reason we’ve been relentless in our shorting of FCX and why we picked up SMN last week (still a good play) – sometimes we are too far ahead of the trend but, eventually, reality does tend to catch up with the markets. 

    I’m going to eyeball upside resistance lines based on the 20-day, 60-minute chart I get on ETrade, so not as good as 5% measurements I hope to take later but good for now:  Dow 11,100, S&P 1,197, Nas 2,480, NYSE 7,590 and RUT 725.  SOX 385 can be included in that group and the Dow Tranpsorts (now 4,734) as well as the TRANQ (2,218) are still up near their highs so they are either our stalwart bullish indicators or the last index to fall – we need to watch them closely!

    3 of the big 5 over is a good reason to get bullish but rejections at those levels will be a good reason to get more bearish and, on the whole, today is a great day to be cashish and have a nice lunch and catch up on EMail because we’ve got a big week ahead of us and today is not likely to mean much judging by the very light trading we’re seeing this morning.

    We have March Construction Spending and April ISM at 10 and April Auto Sales this afternoon.  Tomorrow is March Factory Orders and Pending Home Sales, Wednesday is April ADP Employment, April ISM and, of course Crude Inventories (oil now back at $86.50 and we’ll want to short here with tight stops).  Thursday is Unemployment, Productivity and Friday is our Big Kahuna Non-Farm Payrolls (up 200K on census hiring expected) and the March Consumer Credit Report.

    So something almost every day to change our direction and whipsaw action is a great way to toss bulls and bears out of the market ahead of big moves.  We can take advantage of the channel if we think we’re sustaining it but, for now, let’s just see if we can manage more than a bounce first…

    Oh, if everyting is "fixed," why is gold $1,187 an ounce?  GLL (Ultra-short gold) June $41/43 bull call spread at $1.05 is a fun way to play gold down, stop if gold breaks over $1,200 and holds it, possible almost double on the spread that’s $1.46 in the money now

  11. Phil

    ISM Up slightly at 60.4 vs 59.6 in March.  We haven’t hit 60 in 6 years so this is our "big" celebration of that….  60.3 was expected.  Construction Spending was up 0.2% vs down -2.1% in Feb, which is a shocking revision to the down 1.3% originally reported, which they blamed on something so silly I have forgotten what it was but I do remember making fun of them last time…

  12. morxlntway

    morning Pharm – THTCF was brought to my attention this weekend. Is this one you are familiar with? I could only find a little written on them. Thanks

  13. Phil

    STEC/Iflan – I like gambling too but I like gambling on things where I at least "think" I have an idea of the outcome.  Betting on random 10% moves doesn’t appeal to me, that’s why I prefer to sell against the moves and let my buyers do most of the gambling…

    IPads/Kwan – That’s a nice number!  We need to go into business designing man bags for IPads – I haven’t seen them yet but it seems to me there’s not much use for a whole briefcase when you have one of these things - you can even remote connect to your desktop at home.  Maybe IPrint stations would be a cool thing to have too – something travelers could pay a quick fee to to print off their IPads or IPhones when necessary.

    AAPL and BIDU both cranking back up this morning but the Transports are leading the way with a 1.7% jump.

    And there goes 11,100 – let’s see if they hold it…

    We were looking for: Dow 11,100, S&P 1,197, Nas 2,480, NYSE 7,590 and RUT 725 and all are within 2 except NYSE, who are once again the drag on the markets. 

  14. judahbenhur

    SS, If you’re around, I used your entry method this morning. So far, it has worked like a charm.

  15. Pharmboy

    THTCF – have never heard of them.  Thinly traded and based in Canada.  One trick pony from what they have on their website…..Don’t know much about the space in fat disposition in HIV patients….Sorry.

  16. ssdirk

    judah – are you around.  5min with 10period ema worked liked a champ.  In Jun 72 calls for 2.70 at 9:55. 

  17. ssdirk

    judah – nice.  Now when to get out?  May have to use pivot points on TOS.  I show 74.99, 73.39, 72.47, 70.87 and 69.95.  Is that what you see. 

  18. aclend

    Anyone know when the reverse split on BIDU is happening? What are the chances it runs up afterward a la BRK.B?

  19. hanna5

    Sold the Jan 2011 65 Puts in RIG for 8.3 ; figure unless offshore / deepsea oil drilling is going under altogether, RIG should be good to own at 57-ish.

  20. judahbenhur

    SS, Yes, that’s really the question.  I’m looking to see if it holds 72.47.   If it is a screen play day, then we should leave these things alone and stop out about where we got in.  Or, we could use the same exit method as the entry method..

  21. dmankoff

    phil, i’m unwinding my bad TBT position and now currentlyt have this left, any suggestions how to adjust?
    long 70  Sept. 48 calls and long 70 Sept 49 calls
    and short 20 May 47 calls and short 120 May 48 calls
     
    appreciate any advice

  22. ssdirk

    judah – did you setup the 10 period ema on the 5min chart?  It just bounced off of it and held.

  23. judahbenhur

    SS, Yes, I’ve been watching the same thing.  I was thinking of exiting if it broke down through the 10 period ema, but it held and so did I.  Looking more and more like a screen play day.  BTW,  why the June calls this morning instead of May?

  24. tuscadog

    Phil, Euro fx view and US mkts not in synch.    BERLIN — Germany will examine closely an agreement between Greece, the European Union and the IMF on a bailout for debt-stricken Athens before deciding whether to contribute, Economy Minister Rainer Bruederle said on Sunday. (source K. Denninger)

  25. ssdirk

    judah – should have used the May’s.  Just picked the June’s for some reason.

  26. yodi

    Hi Phil, I see some member looking at RIG Last week you commended in my situation in respect of RIG as I sold the Aug 90 put which is very much against me ,you recommended to buy the 90p and roll to 70p Jan 11 and sell the same amount of additional 70 Jan11 putters to cover the roll. I could not close the play and looking today at a roll of the  70 puts of which my net cost is 11.40 and sell the other 70 putters for 11.60 so even my question how long to wait before the stk starts holding as the oil spill will take some time to resolve unfortunatelly. your thoughts thks

  27. Phil

    BIDU/AC – I think next Monday is split day.  It’s possible that the post split will see a lot of selling as people sell some of the hopefully more liquid shares. 

    RIG/Hanna – Good play but keep in mind there will be fines and lawsuits that go straight to the bottom line but the lower they get, the more I like them (but not enough to pull the trigger yet, given the circumstances). 

    TBT/Dman – How can you have a bad TBT position in September when it’s only May and we’re still in the same trend ($45-50) that’s held since last October?  Is it different this time?  Will rates now go lower and lower forever and the best place we can put our money is into 20-year notes at 4.5%?  If so, is that what you’ll be putting your money into when you cash out?  We did last October when there were people who bailed as TBT tested $43 and there were people who rolled or scaled in and made out like bandits when it flew back to $48 a few weeks later and went on to $50 in December.  That was Greece too!   So my continuing bullish adjustment to TBT is to roll the Sept $48 calls down to the $45 calls for $1.20 and keep a tight stop on the May callers.  If TBT starts to head up, then you can sell June $48 calls for $1 (now .60) and if TBT heads down, you can roll 70 or so callers to the June $46 calls for +.80 so, at worst, a cost of net .40 to roll the Sept calls down $3.

    Germany/Tusca – I don’t think it’s settled at all.  The Germans are outraged and this is the cover of what is usually a serious German Financial magazine:

    MarketnewsEBRD Head Warns Against Banks Absorbing Costs Of Greek Rescue
    The president of the European Bank for Reconstruction and Development (EBRD), Thomas Mirow, warned Friday against making banks shoulder part of the aid for Greece because this would weaken them again. “Therefore a bailout that would include the banks could be more costly for taxpayers than a straight bailout by states,” Mirow, a German national, told reporters on the sidelines of a conference organized by the Aspen institute here. “This is what one has to be very careful [about],” he said. A senior member of German Chancellor Angela Merkel’s CDU/CSU-FDP government coalition said Thursday that there should be discussions with Greece’s creditors about a voluntary haircut on their claims. “We should talk with banks and other investors about voluntarily forgoing their claims” against Greece, Leo Dautzenberg, the CDU/CSU’s parliamentary financial policy speaker, urged. Nobert Barthle, the CDU/CSU’s parliamentary budget speaker, said on Wednesday there was significant resistance inside the CDU/CSU parliamentary group against aid for Greece without participation of the creditors.

    Der SpiegelEuro Fears Force Merkel To Act
    After weeks of hesitation over the German response to the Greek crisis, Chancellor Angela Merkel is suddenly calling for swift action.  “It is clear that the negotiations must now be accelerated,” she said Wednesday at an appearance with Dominique Strauss-Kahn, the head of the International Monetary Fund (IMF), in Berlin. A serious-looking Merkel called for an agreement to assist Greece “within the next few days,” adding: “We will not back out.”  Observers were surprised by Merkel’s strong words. Until now, the chancellor has not exactly come across as a driving force when it comes to action on the Greek crisis. Merkel has long been reluctant to promise the Greeks billions of euros in European aid, something which has earned her the nickname “Madame Non” in the European Union. At home in Germany, however, she has been feted by the tabloid press as the “Iron Chancellor” because she had rebuffed the “bankrupt Greeks.”

    RIG/Yodi – I liked the story but then I got confused…  Do you own Aug $70 puts that you PAID $11.40 for?  How is it all the members have time machines but I don’t?  Just tell me what exact position and basis you have.  I assume you are long-term bullish (as I am but it may be a very long-term for RIG).  

    Oops – Rejection at our levels across the board on first attempt!

  28. EricL

    FWIW, it looks like the market needs to pull back and test the 50 MA on the major indices, which would be around 1165 on the SPX. That may position us for a final exhaustion run up to SPX 1230 or so, which I’m still waiting for and still expect to see.
     
    Nice pull-back in GDX. I’ll be watching for it to hold around 49.

  29. yodi

    HI Phil Technical question I am holding AAPL Jan 11 180c long pd 38.78 now 92.57 sold 200c Jan11 for 27.48 now 76.07 the gain at present is 16.52 on a 20$ spread simular situation I hold 220c long and 240c short all Jan11, shall one wait till Jan 11  and hope for a 20$ gain or close before?? thanks

  30. EricL

    Regional banks still weak; KRE might also be going toward the 50 around 26.6.

  31. gel1

    Boy do I hate Mondays….. Early telephone call (waking me up) this AM, from my father in law screaming at me for recommending BP to him  LAST YEAR. Good lesson for me for the future!

  32. yodi

    PHil, RIG I originally sold the AUG 10 straddler 90 c/p  call I received 3.10 strangely still 1.46 and I received for the 90 putter 9.83 now 23.22 so I forget about the caller but the rolling is about the putter from 90p aug to 70p Jan11 and sell the same amount of Jan11 putters 70p for now already 11.75 my roll cost me now 11.50

  33. gel1

    The Australian government trashed my positions in RTP and BHP. They have added a new 40% tax on mining, in order to finance their social programs. ( sound familiar?) Out with a big loss, but I feel wonderful as my investment will help build hospitals in Australia.

  34. jburgess

    Gel:
    Maybe you should just apply for non-profit status. You’ll pay a lot less in taxes   :)

  35. gel1

    MO has just inked a big contract for the sale of Marlboro cigs in China… Will enter a bull verticle spread today – The Chinese love to smoke!

  36. DKGuy

    Phil – would be interested in your thoughts of selling the OIH Oct 104 Puts going for around 5.60 this morning.
    Thanks

  37. ban2

     hi phil
    last friday i wrote and you responded as below.
    ———-
     Phil
     I did your BIDU trade on selling the June 720 calls – 5 yesterday 5 this am (fri) for avg $36 now $26.5 (went naked)
    I just covered 5 
    Cover the other 5 or sell some puts to protect and see if we drop further?
    thanks alot for this one!!
    ———--
    BIDU/Ban – Congrats.  I have a pretty strong conviction that they are NOT worth $720 and my conviction is backed up by the fact that the $720s can be rolled up to $800 in October so if you don’t mind those consequences, then you can wait for your other $26.50 ($13K!)   ——-
    ——————--
    I covered the other 5 calls before eod friday because i didn’t understand — just D.L.   I didn’t see any Oct 800 on etrade and didn’t understand how you got another 13K
    Anyway looks like Bidu June 720 calls could get close to 36 again today if we run up into the close (it is Monday) and if they weren’t worth $720 last week they shouldn’t be worth it this week either.
    Does pre split action makes this too dangerous to try again?
    thanks

  38. cwan120

    Hi, gel1,
    Exactly what lessons did you learn?
    Stop recommending BP to your father in law?  Stop talking to him all together?  Unplug the phone?
    8)

  39. Phil

    Banks’ boost in purchases of longer-term U.S. debt while clamping down on lending reminds some of Japan in the 1990s. "Banks buy more and more government bonds, it will be very difficult for the Fed to raise interest rates because they will lead to massive losses in the banks and cause them trouble all over again."

    The FDIC’s Sheila Bair opposes the provision in the Senate plan that would force banks to spin off their derivatives businesses, saying it could destabilize banks and drive risk into unregulated parts of the financial sector.

    Not only will the Chinese economy slow down, suggests Marc Faber, but it’s "likely that we will even have a crash sometime in the next nine to 12 months.” Declines in stocks and commodity prices signal the Chinese property bubble is ready to pop.

    Eurozone officials call Greece’s unprecedented €110B ($146B) rescue package "an ambitious program, it’s austere but it’s absolutely necessary." Now Germany’s Merkel needs to sell the plan to lawmakers ahead of a parliamentary vote on Friday. Euro -0.7% vs. the dollar.  The ECB suspends credit rating minimums on Greek sovereign debt, which means Greek debt can still be used as collateral for ECB lending even if ratings agencies continue to downgrade the country.

    Apr. ISM Manufacturing Index: 60.4 vs. 60 consensus and 59.6 prior. Prices index 78 vs. 75 prior. Employment 58.5 vs. 55.1. Inventories 49.4 vs. 55.3. New orders 65.7 vs. 61.5.

    March Personal Income and Outlays Income: Income +0.3% in-line with consensus and vs. +0.1% prior. Spending +0.6% in-line with consensus and vs. +0.5% prior. PCE core price index: +0.1% vs. 0% expected, 0% prior.

    March Construction Spending: +0.2% to $847.3B/year vs. consensus of -0.5%, and 12.3% below the year-ago estimate. For the first 3 months of the year, spending was $179.9B, 14% below the same period in 2009Notice this news feed omits the 50% downward revision from to the prior month (Feb)

    The recession is fading, but frugality is not, which means a rebound could be unusually sluggish.

    Warren Buffett says the economy (which he is HEAVILY invested in) is showing signs of "real strength" thanks to increased manufacturing activity and improved consumer demand as people regain confidence. Berkshire Hathaway (BRK.A) is "net hiring" right now, he tells CNBC, due to renewed demand for the products its subsidiaries make. Rah, rah, rah – Goooooooooooooooo Markets!

    Driving the TransportsAirline stocks at large are higher following the announced merger between United (UAUA +1.3%) and Continental (CAL +0.8%), and Alaska Air (ALK +9.7%) in particular is trading up on renewed talk of synergies if it merged with American (AMR +1.6%). Delta (DAL) up 1.8%; US Airways (LCC) up 2.7%.

    U.S. regulators are nearing a decision about which agency will launch an antitrust inquiry into Apple’s (AAPL) new policy of requiring software developers who devise apps for the iPhone and iPad to use only Apple’s programming tools, according to the NY Post.  Piper Jaffray’s Gene Munster estimates Apple’s (AAPL +1.3%) iPad sales have already broken the 1M mark following Friday’s U.S. launch of the 3G model. Skeptics note Munster’s estimates tend to be on the high side.

    DRL July $5 calls are a fun play at .25 (no more):  Doral Financial (DRL) falls 34% following a Cantor Fitzgerald downgrade. "Doral did not win any of the three Puerto Rico banks that the FDIC closed and sold last Friday. This was a surprise to us because… with a relatively narrow and stagnant franchise, in our view, this was Doral’s major opportunity to grow." (earlier)

    BP (BP -7.1%) continues to take some heavy losses over the Gulf of Mexico oil spill, though Barron’s suggests that by this point the spill is already priced in to shares of BP, Transocean (RIG -3.55%) and Anadarko Petroleum (APC -1.7%).  Oil continues to gush from the Gulf of Mexico spill, raising the possibility that it may surpass the 1989 Exxon Valdez disaster, which poured 260,000 barrels of crude into Alaskan waters. Analysts say the cost of the spill could exceed $14B, which is bad news indeed for BP (BP -1.9%).

    Another potential culprit in the oil spill blame game: federal regulators, who learned as early as 2004 that a key piece of oil-drilling safety equipment might not function in deep water, but did nothing to strengthen industry requirements.  Must be Obama’s fault

    GM April U.S. sales: up 6.4% to 183,997 vehicles. In the four remaining core brands (Chevy, Cadillac, Buick, GMC), sales rose 19.7%; non-core brands, particularly Pontiac and Saturn, are starting to tail off the sales rolls.

  40. ssdirk

    judah – did not get shaken out, still in.  I think we are seeing resistance at 11,100 more than anything.  Can’t see a reason to not break through it.  It’s not like we averted a disaster in Time Square or have a disaster in the Gulf or anything.

  41. concreata

    Phil – SPG – I am naked short July 75 call (bought 11.50, now 17.55). Advice?

  42. concreata

    Phil – SPG – correction -  I sold the July 75 call for 11.50, now 17.55

  43. judahbenhur

    SS, Same here.  Lately I’ve cashed out these morning plays too early, so this morning I’m seeing what would happen if I leave it alone (with a mental stop break below 72).  If this were any day other than a Monday I’d have thought the right play would have been Puts at 10:15.  But it is a Monday and 72 has been a pretty good jumping off point before, so I’ll wait. 

  44. gel1

    jburgess…. LOL… The way thing are going, I won’t have to apply, as there will be no profits anyway!

  45. gel1

    Cwan – A good laugh is the best tonic, thanks. Just like those multiple choice questions when you take a test sometimes – All of the above!

  46. dflam

    morning Phil : talk about catching a falling knife.Last Thursday,  I rollled  BP August $50 calls  to Jan. $ 50 calls for $5.46,now $3.40 with the intent to sell $55 calls on a bounce. Sold 1/2 Jan $50 puts for $3.96 ,now $7.70 Should I sell Oct. $50 C at $6.25 and 2x Oct. $45 P at $3.75 ?

  47. daveo

    Hey Pharm, any idea what just happened with ALTH?

  48. craigzooka

     Phil, maybe I am loosing my mind here, but on my screen, The EDZ 39/40 call vertical is going for $0.30.  That is a $1 spread which is more than $2 in the money selling for $.30 with only 18 days to go.  This seems way too good to be true.  

  49. philisit

    CashQ- when u go to cash in a big way, across the board in all time-frame investments, what is the best way to hold this money? Money mkt at Vanguard- Local banks MM (although you can quickly exceed FDIC coverage in a joint account) and if/when the big sleep sets in on this mkt, how do u get it out?  I can just see it now at my Local bank "How would you like that $2mil, Mr. Smith?"-  "All large please, I just need to buy a loaf of bread".

  50. RMM

    Phil: why is BIDU running up so wildly ?
    I have jun750 naked shorts.

  51. phlit

    philisit
    LOL
    Phil

  52. mrmocha

     Phil, is this a lesson for me about volatility?  I bot the VIX May 21 puts this morning for 1.90. VIX is down 1.2 since I bot them, which at .5 delta should mean they should rise .95.  But they are still listed for 1.90, haven’t budged, presumably due to the declining VIX??!!

  53. lflantheman

    Trading STEC…..an interesting trading scenario.  I planned to play this on earnings with a long straddle.   I decided to buy the call leg first, as this is an ‘up’ day in the markets, so I expect STEC to be ‘up’ today.  Indeed, up 15% since I purchased the June 15 calls this am.  Now some nice choices……add to the position, convert to a call spread, buy the puts, or simply take profits.   Phil, what would you do? 

  54. Phil

    Woops, Euro plopped to $1.317 into EU close.  Pound holding $1.524 and dollar is at 94.5 Yen so Nikkei futures are happy as long as that scam continues.   Copper is $3.28, a 2% drop for the day so I think you are NUTS to be bullish right now – JMHO….

    AAPL/Yodi – I think you need to look at the $180/200 spread as you have $16.42 AT RISK with anticipation of making $3.68 (22%) by Jan expiration so the question becomes, can you make more or the same on $16.42 with less or the same risk?   For one thing, you can sell the Jan $200 puts for $8.75 so (ignoring margin issues) THAT pays much more money on the same bet (that AAPL holds $200) and you would take net $25.17 off the table, which is actually enough to pay for the margin on that sale (but I don’t recommend it unless you have tons of cash sitting around bored and REALLY want AAPL to be put to you even after something terrible happens to them).  No you can get paid $5.30 for selling the Jan $180 puts and that play ties up $16.50 in net margin so it’s the SAME exact overall requirement as leaving your current trade but you don’t lose any of your $16.42 unless AAPL falls below $180 AND you make $1.62 more, which is 32% (vs 22%) with a $20 (10%) lower profit threshold on the same cash.  

    So that’s how you have to weigh your risk/rewards on those plays.  I do think there are better ways to make 22% on AAPL and my choice would be to either place tight stops on the spread to take advantage of a downturn to re-position or just cash out and be patient for a re-entry on the next good dip.  You can also keep the spread and sell the June $300 calls for $2.70 with a stop at $4.40 as the delta on the June $300s is .17 so AAPL would have to climb $10 to put the callers up to $4.40 so you’d spend $1.70 but be $10 more in the money and more comfortable sitting on the long spread.   IF AAPL fails to make $300 and the calls expire worthless, then you can spend that $2.70 to roll some or all of the callers up $10 and then sell some July calls…

    Man those resistance lines are hanging tough.  NYSE still pooping the party but moving up to test 7,500 again.

    LOL – Welcome to my world Gel! 

    RIG/Gel – Those calls hold up a while when there’s a sudden dip.  Think of it like the VIX for RIG in particular is up around 60 right now.  OK, this is much better.  Let’s focus.  You sold $3.10 and now owe $22.75 (current look) so out about $20 and we’re ignoring the callers for now.  RIG makes about $3-4Bn a year and we assume they have some insurance but this could cost them a year’s earnings and if we are generous and look over 5 years, we can call it 20% of the market cap lost, which is right about where they are now.  It seems to me that you can roll to 2x the Jan $65 puts ($8.70) for not too much more margin than you have now and 2x the Jan $70 puts ($11.30) for a bit more.  You can roll the Aug $90 callers to the June $80 callers about even because you will be totally thrilled to have to roll those higher and then you’ll be able to sell more callers along the way to help cover this trade over time.    The 2012 $60 puts are $11 so that’s about your worst case – owning RIG at $60 for the LONG term…

    Tax/Gel – That’s a good point, foreign governments are not going to be as shy about confiscating corporate profits as ours is so watch your assets!

    OIH/DK – Strangely, I like that play but I wouldn’t do it because we could be looking at regulation and taxes (think "clean-up" fund) being put on the industry that may spook investrors further.  Had OIH not fallen all the way to $59 in Nov ’08 AND $87 last July, I’d feel better about it but I think that $87 line looms large and I’ld rather see a test of $90 before going gung-ho bullish on OIH.  It may never happen.  It PROBABLY will never happen but it MIGHT happen so net $98.40 depends on if you REALLY want to own OIH at that price and, long-term, I still think that’s fine.  

    BIDU/Ban – I might have been looking at Dec, I hate it when they skip months!  It is a dangerous play on the split because anything can happen but I think I may have also mentioned the very attractive sale of the Dec $540 puts, now $30 to offset some upside risk.  

    Disaster/SS – I know, had the guy put one extra wire properly in place, the markets would be down about 10% today…  Have I mentioned how much I love my cash lately? 

    SPG/Concreata – You have the roll to 2x the Oct $90 calls (now $9.60) ahead of you and you can offset that with the sale of 1x the Oct $90 puts at $8.75 which would flip you to selling $24 worth of Oct premium.  As long as that roll (and check overall margin requirements) is available to you, there’s not a lot of need to worry about the calls but, realistically, they are very unlikely to sell all the way back down to $75 and you can sell July $80 puts right now for $2.40 to help pay for the eventual roll.  Also, keep in mind you don’t HAVE to win back $17.55, you really only have to win $6 to get even so you can roll to 1x the Oct spread and sell 1/2 x the puts and you’d still have a winner if it works out. 

  55. dflam

    Phil : Sorry,but I had Oct $50 c and $45 prices incorrect. The Oct. $50 c are $3.30 and the $45 puts are  $3.85

  56. Pharmboy

    ALTH – one word – Cramer…..

  57. SeanC

    Phil: I was looking at your disaster hedges and thinking of putting on the following trades
    Buy 500 shares FAS ($50,000)
    Then buy the disaster hedge: buy 5 contracts FAZ Oct 9 call, sell 5 contracts FAZ Oct 14 call, sell 5 Oct 10 puts.  Cash outlay as of today is ~$200. 
    So if there is a 3.5% drop in Financialsl, FAS will drop 10% - $5,000; but the play returns $2,500 (maybe I should buy 10 contracts?)
    If financials go up 15%, FAS would go up 45% – $22,500, then I would not mind losing $3,750 on the hedge and be assigned FAZ – at that point, FAS and FAZ are wash and I can just close out everything.
    The biggest risk, I think is that financials are down more than 3.5%, which is very probable - but I could always stop out FAS at 10% drop.
    Does this trade make sense? 

  58. sns1

    Phil- need help on a position re V…i’m long May $90 calls at $4.95 cost (now about $2)…i’m bullish longer term, am prepared to double down if necessary…totally happy to own at $70, ok at 80-85…but i’d rather just play through options…thoughts?

  59. lflantheman

    Trading AAPL…..momentum traders…….I came in this morning with some May 270 calls when AAPL was 262, then got out at 266.  I’m out because I don’t think we are going to push much higher today.  There seems to be little conviction out there, and I expect a general downturn.  And AAPL will turn down with the market in the near term, I believe.  I’m looking to scale back in below 260,  move back in vigorously below 255. 

  60. SeanC

    XOM trade is losing more and more money.  Do you recommend holding to maturity or getting out now?

  61. bgbigelow

     VNO – Phil thoughts on VNO?  Particularly the short 80 calls?

  62. Phil

    China Real Estate:  The latest measures, more harsh than those released by the State Council, are aimed clearly at curbing speculation and promoting healthy and stable development of the property sector, Chen Zhi, deputy secretary-general of Beijing Real Estate Association, told Xinhua.  Speculation is the main reason behind high home prices in Beijing, Chen said. "There exists a rather big bubble in the city’s real estate market. Housing has become more unaffordable for many," he added. 

    BP/Dflam – They are a huge company and Jan is a long way away and $47.50 is the lowest they have been with oil over $60.  I would ignore the short puts as $50 is a good entry and spend the money on improving your Jan position, like $4 can roll you down to the 2012 $45s and THEN if you get worried, you can sell July $49 calls, now $3.10, for $2.50, which will pay for you to roll down to the $40s….

    EDZ/Craig – Always worth asking for.  Each individual strike is somewhat subject to supply and demand and you can fill all kinds of crazy prices sometimes.  I doubt you would have gotten that fill but .50 can easily happen if someone comes in and buys a lot of $39s (driving up the price) or sells a lot of $40s (driving down the price). 

    Wow, NYSE was a great signal as they popped 7,500!

  63. judahbenhur

    SS,  Well, this has worked out nicely.  Your method is proving itself valid once again.  I’m thinking of trailing stops and checking back in later.  This would have been a good day to set it and forget it and I would have avoided my skittishness at 10:55..  My question for you — this morning, I entered when it looked like the 5 min candle would be green and it was breaking the 10 period ema, that is, I didn’t wait for the completion of that 5 min period and entered instead at 9:53.  Have you been waiting for the green candle and then entering the next minute, or have you been entering when it appears it will both be green and be higher than the 10 period ema? 

  64. gel1

    Executed a Buy/Write on SU (Suncor ), buying stock and selling short straddle – Dec. 34′s, for a 23% discount on deal. China still tying up sands production, and oil is not going away… sorry Obama, will not be replaced with windmills.

  65. ssdirk

    judah – good question.  By waiting for the 5 min candle to finish green you could potentially be entering the trade a full 5 minutes late, which could be a lot.  That’s why I think pivot points in conjunction are important.  I entered early today based on feel also.  I have also been playing around with a 3min chart and different period ema’s for quicker entry/exit signals.  However, I am trying to avoid over trading this.

  66. jromeha

    Did Cramer also just mention FSYS? Im looking for news but can’t find any and it went from being up 3% to down almost 15% the past hour – they don’t report earnings until Thursday….

  67. stockbern

    Phil ………..  Oil ?   Short Here 86.95

  68. ravalos

    Phil, VNO reports earnings tomorrow.. are we keeping our short May $80s into this earnings report?

  69. Phil

    Cash/Phil – I like selling puts on TBT for some inflation protection as well as Canadian and Aussie currency funds as they seem the most stable to me.   Gold is now a little crazy to be a hedge and to me, the best use of cash is always as plenty of margin so you can sell some puts in things you REALLY want if they should get that cheap.  Let’s say you have $1M in cash that gives you $1M in option buying power and you sell 100 TBT Jan $40 puts for $1.90.  You collect $19,000 against $200K of margin, even if you have a 50% requirement (which you sure shouldn’t with $1M) and that’s a 10% gain on cash unused if TBT holds up.  If TBT doesn’t hold up, it’s only because the buying power of your $1M has been improving and, had you put your money in TBills, you’d be getting killed while the Jan $40 puts can be rolled to 2012 $35 puts (now $2.60) and so on…  200 FAZ Oct $9 puts can be sold for $1.05 ($21,000) and TOS tells me that’s $85,000 in net margin.  100 UYG Sept $50 puts can be sold for $27,000 with $100K of net margin and it’s not possible for FAZ and UYG to both go bad.  Find 5 plays like that and you collect $100K on less than $1M in margin while your cash still sits in the account and you take a nice vacation.

    BIDU/RMM – Greece is all better – haven’t you heard?  Warren Buffett says GS has his confidence and all the shorts are getting squeezed today big-time.  $750 is still a long way away. 

    VIX/Mr. M – Those contracts are very poor movers and tend to re-adjust violently.  I’m pretty convinced the MM on the VIX is one of the greatest crooks out there.  Keep in mind that the VIX will "true up" on expiration day but expiration day for the VIX is NOT options expiration day so be on your toes, this month it’s May 19th, next month June 16th.

    STEC/Iflan – I’d take the profits and go for a double selling the May $14/15 bull put spread for .50 credit so you risk .50 (your proifts only) and double up if they head higher.  I like the put spread because, if they spike down, you might be able to lighten up on your puts and hold some naked putters on the bounce. 

  70. judahbenhur

    SS, I agree. The TOS pivot point weren’t all that helpful this morning, and I didn’t have any of JRW’s lines though I probably should have looked back to the middle of last week for guidance.  I was using 72 as a line, which is why I didn’t wait for the full 5 minutes. 

  71. tuscadog

    Phil / your comment  NYSE was a great signal as they popped 7500 (like the other ‘levels’).  Are you saying you are now bullish and we should be taking long positions today (and dropping shorts like RWM) ? Or are you still for cash?

  72. ssdirk

    judah – a 3min chart with 10 period ema looks good.  I think it gives the a smooth sensitivity.

  73. gel1

    Could not get filled on my commodity plays that I tried to close out. Some of this stuff is down over 50%. I did some research and found the announcement from the Australian government, implementing a new tax of 40% (Geez), is JUST a treasury dept. recommendation, and HAS to pass the Parliament. I am going to hang in there, as this stupid proposal will NOT pass IMO. This even trashed their currency today. They must be reading the US treasury playbook!

  74. DKGuy

    gel/Su – with you on the trade. good luck to us.

  75. gel1

    Phil… I have a question. Often you say you are in Cash – quite often on Fridays going into a weekend. Does this mean CASH-CASH?. Or does it mean you are in many positions, but hedged as if you were in cash?  If it is Cash-Cash, then you must be closing out a lot of positions in order to reach this status.

  76. RMM

    Phil: talking about a nice vacation : I usually go to Europe for the summer, I do not want to worry about the market then,
    I am 65/70 % in cash (is this too low ?) is the above comment your vacationproof recommendation.?? or anything else ?

  77. judahbenhur

    SS/3 min.  I was looking at that, too.  Maybe we can convince JRW to give us his S1 R1 lines the night before just for our comfort.  What was that brand of scotch he drinks?

  78. dmankoff

    phil, ok, i’m 100% in cash,  how would you set up a portfolio, right now, to  make good money in next feww months?

  79. tradermoksha

    Hi , i’m thinking to buy an Iphone to manage my Tos trading.  would be fine an 8gb or i need more? is it a good phone for trading or lacks something important?  thanks ps. i’m in italy so i use an italian connection so no at&t problems here! the only problem here is that we will default soon…  moksha@libero.it

  80. gel1

    DKGuy/SU
    Yes, the fundamentals look very good, and I do not see a pullback in oil pricing before the end of the year. Some of the energy folks are predicting we will reach $105 oil before a correction. China has already locked up a lot of the tar sands production, and will be building a pipe line in order to get it to the coast. This is the largest potential source of reserves in the world, and at oil over $70 it is very profitable. The US government could have locked this available source contractually, but ignored it as the government here is focused on alternative sources. The Chinese took advantage of this lack of prudence, and the Canadians accepted the Chinese offer. Additionally, the US government is focused on this stupid global warming hoax, and is against the burning of gas to force the oil to the surface, which is part of the sands extraction process. Just my thoughts!

  81. Pharmboy

    Glad we are on board early to let the tides rise for us (from Fierce):
     
    Now that Dendreon has completed its victory lap following Thursday’s high-profile approval for Provenge, the spotlight has inevitably shifted to the other cancer vaccines in the pipeline.

    "It sets the stage, or at least facilitates, the approval of other cancer vaccines," Michael Becker, chief executive of MD Becker Partners, tells Dow Jones about the Provenge action. Becker compares the Provenge approval to Rituxan’s arrival in 1997, which heralded the potential of monoclonal antibodies.

    That’s all good for the likes of Celldex (recommended a here at PSW in December)--which is partnered with Pfizer--and GlaxoSmithKline, which hope to follow in Dendreon’s path with personalized cancer vaccines of their own. Geron has a leukemia vaccine in a mid-stage trial. And Bristol-Myers Squibb, Vical and Biovest all win some added attention for their work in the field.

    "We are next in line," insisted Oncothyreon CEO Robert Kirkman, who is looking for pivotal data on Stimuvax before the end of 2011--if the FDA lifts a clinical hold in time (bought the stock a few weeks ago). And Oxford CEO John Dawson tells Bloomberg the new attention could prompt a partner to step up for TroVax.

    Dendreon, of course, had to survive a huge setback when the FDA demanded a new Phase III trial three years ago. And the tough odds that face any new therapy in the clinic still apply. Noting the rise of all the "happy talk" surrounding the wave of cancer vaccines in the clinic, Adam Feuerstein at TheStreet this morning tweeted: "Reality check: Most will blow up."

  82. DKGuy

    gel/su – I agree with your assesment of oil. I also sold the 104 Dec puts on the OIH as well getting 5.60.

  83. DKGuy

    gel/su – I agree with your assesment of oil. I also sold the 104 Dec puts on the OIH as well getting 5.60.

  84. Phil

    BP/Dflam – Doesn’t affect the strategy.  Yes there is damage, no we don’t know the short-term effect, yes they will survive so the trick is to ride this out and stick with them.  The more you wait, the clearer the picture will look…

    FAS/Sean – That’s what hedging is all about!  The question is HOW worried are you about that drop?  Also, keep in mind it’s not a perfect relationship with those 2 (or even with the underlying) but it’s close enough to give you a nice comfort zone.  I will also point out that you can buy 500 shares of FAS for $105 ($52,500) and sell 5 Jan $105s for $26 ($13,000) for a net entry of $39,500 ($79) with a call away at $105 (up $13,000 or 33%) and you take 1/3 of the expected profits and buy 10 FAZ Jan $5/12 bull call spreads for $4,000, which return $7,000 if FAS even twitches down and holds $2,000 all the way to a 40% drop in FAZ (13% gain in financials) so likely your insurance cost is just $2K against your $13K gains and there are plenty of places in between where you can win both. 

    V/SNS – When you get behind you play to get even.  You can flip to the 2x the Sept $80/85 bull call spread at $3.50 and DON’T sell the $75 puts, now $1.40 unless V drops enough that you get your $3.50 back (about a $5 drop).  If it never happens, then you have your money back or, if V does drop and you STILL want to own them, then your worst case is you are in for net $80ish, still more than 10% down from here.  I’m not too keen on V because I’m worried about the consumers but clearly there’s a big market out there that isn’t…

    XOM/Sean – The $67.50s?  With the market going up and up and oil going up, I’m for holding for now.   Gotta have some bullish plays!

    VNO/BGB – The Sept $90s are $5.50 and you can sell the June $75 puts right now for $1.40 if you are worried they are going to the moon but this is just another Manic Monday and our 1:30 volume on the Dow is 90M, far, far less than we’ve had on our selling days and it’s another day of GREAT news with Buffett telling us everything is coming up roses and gold-stamping GS and great ISM numbers and good auto sales number and, of course, Greece is fixed.  Like I said earlier, good day to have a long lunch and ignore the market..

    Oil/Stock – I like shorting them at all of these lines but looking dangerous with it moving up even with the dollar making big gains today so very light betting.

    VNO/Rav – On the basis of being able to roll them to Sept, yes.  If you are not in it for the long haul, it’s a dangerous play. 

    NYSE/Tusca – Oh it was a great signal that the levels would pop higher but I still don’t like it. 

    Wow, these car sales numbers are amazing.  Surely someone here knows one of these car salespeople who must be raking it in or are we just comping to last year’s suicidal rate? 

    Australia/Gel – Well they could go mine somewhere else I guess but why should anyone in Australia care about RTP’s profits?  This is the problem with all these rootless corporations moving from nation to nation sucking up resources without creating any wealth – they eventually are recognized for the locust they are and some governements are going to take a stand. 

    Cash/Gel – Hedged to zero is cash but 50% CASH cash as well as the idea is to be able to take advantage of opportunities.  This is, of course, on the short-term (under 6 months) unhedged positions anyway, doesn’t affect hedged leaps and such although I would think you should look very critically at any single position that is over 5% of the portfolio and any similar group (like bullish financial plays) that’s over 20%.  If you have $1M of hedged financial plays that will drop about $200,000 if XLF fails $14, then you can easily hedge that with $100K on FAZ that will double up at $14 and then you’re good for a sell-off to $12 (down 30%) on XLF and if you think you need more protection than that then that’s a good reason to lighten up on your XLF exposure and go to ————--  CASH!  See how that works?

    Cash/Dman – Well step on is to stay in cash.  Step two is to wait for opportunities like BP, RIG, HAL, C, WFR, SPWRA….  that have been in play lately.  We’re waiting on the first 3 but we jumped on the other 3 over the past two weeks for long-term scales.  We have another month of earnings and almost every day there’s going to be a sell-off we disagree with, even if the market doesn’t crash.  Just decide how much cash you want to commit to 10-12 positions and allocate 25% of it initial buys and then wait for longs that feel right and buy them one at a time, keeping diverse and working back in.  See Sages’s post this weekend for the $10KP, the $100KP will be discussed next (we’re working on trade ideas to include).

    Default/Trader – I can’t trust a Phone with my TOS accounts.  I don’t care what they say it just seems dangerous.  If you do trade that way, make sure you set the account up so nothing can be transfered without signed approvals or maybe even stricter confirmaitons.  I am curious as to your take on Italy’s economy as no one is really discussing them over here yet. 

  85. ravalos

    Phil, I have a May $135 / $140 bull call spread on DECK paired with a short Jun $110 Put. My net cost was 0.25 for the whole trade. The stock is at 146 with the super run up today, would u suggest I close the ENTIRE position now, or should I just sell my long $135s first and wait for a pull back to buy back the $140s? Thx

  86. drumkeerin

    dear phil-need some help with TBT. Sold May 48C at .5, sold May 46p at .93 and sold May 48p at .6 Was waiting, but things are bleak with the 48 puts

  87. jromeha

    Gel – it’s climate change, not global warming. And it is a FACT, not a hoax. Whether or not you believe it is caused by human actions is another story, but the climate IS changing. Sprinkling in a little CNN with your constant diet of Fox News would do you well.

  88. Phil

    In reaction to the €110B bailout, Greek bonds have risen – with their yield hitting their lowest level in more than a week – while German bunds slipped, with 10-year notes leading the decline.

    David Kotok of Cumberland Advisors is seeing the worst-case scenario from the Gulf oil spill, including a damaged sea for a generation, an ever-increasing deficit as cleanup goes on, an extension of the Fed’s "extended period" on zero interest rates, and a double-dip recession.

    Why sell a risky bond once when you can sell it twice? Senate documents detail how Wall Street banks packaged and repackaged the same risky bonds into securities, magnifying the impact of the eventual subprime defaults.

    Chrysler (FIATY.PK) April U.S. sales: +25% to 95,703 vehicles, best Y/Y gain in nearly five years. Chrysler brand +61% to 22,386; Jeep brand flat at 19,645; Dodge brand +61% to 38.795; Ram brand -22% to 14,877. Car sales increased 96%. (PR)

    Daimler (DAI) April U.S. sales: +18.8% to 18,908 vehicles. Mercedes-Benz up 21% to 17,628; Smart down 49.4% to 680. (PR)

    Ford (F) April U.S. sales: +24.7% to 167,542 vehicles – a fifth straight month of 20%-plus increases. Fusion sales increase Y/Y for 13th straight month. Ford cars up 10%; utilities up 33%; trucks up 38%. (PR)

    GM April U.S. sales: up 6.4% to 183,997 vehicles. In the four remaining core brands (Chevy, Cadillac, Buick, GMC), sales rose 19.7%; non-core brands, particularly Pontiac and Saturn, are starting to tail off the sales rolls.

    Honda (HMC) April U.S. sales: +12.5% to 113,697 vehicles. Honda Division up 11.7% to 102,978; Acura Division up 21.6% to 10,719. Overall, car sales slipped 1.4%, while truck sales increased 40.7%. (PR)

    Hyundai (HYMLF.PK) April U.S. sales: +30% to 44,023 vehicles. Sonata, its top seller, up 57% to 18,536. Tucson SUV +171% to 3,871. (PR)

    Kia April U.S. sales: +17.3% to 30,036 vehicles. First U.S.-built vehicle the Sorento leads sales with 8,486.

    Toyota (TM) April U.S. sales: +24.4% to 157,439 vehicles. Toyota Division up 23.8% to 139,080; Lexus Division up 29.3% to 18,359. SUVs up 34.8% to 35,707, including a 20.7% increase in Lexus SUVs. (PR)

    OK, now I may be an old fuddy-duddy but I’m counting less than 1M cars sold in a month in this group and it seems to me that there are well over 200M cars in this country so 12M cars a year is a replacement cycle of once every 16 years.  That doesn’t sound good, does it? 

    So, while the gains may be "impressive" - that’s only because last year was a complete catastrophe but we are a lot closer to the bottom than the top yet that is not in the least the story we’re getting is it? 

    Three lunchtime reads:
    1) Welcome to the age of the trader
    2) Debunking the myth of the "sophisticated investor"
    3) May is a good time to toss out stocks you doubt

  89. gel1

    Phil/Cash
    Thanks… terrific guidance. This pretty much mirrors my thoughts and strategy.  50% Cash-Cash is as you say, beneficial to take advantage of the opportunities that develop.

  90. jimmyv

    IYR Puts seem too tempting. Going full boar into the May $57 puts, and the June $54.

  91. bassdad

    A couple of the bloggers, & Phil, briefly tossed around their favorite WMT plays a couple of weeks ago.  Could someone re-comment on them or direct me back to the former posts.  Thanks!

  92. judahbenhur

    SS/stops.  I was wondering if you had given any thought to trailing stops as a discipline for your morning entry play (we need a name for it).  Something that would keep us from overtrading it during the day and allow us to take advantage of afternoon sticks, but also doesn’t give up the gains if the market turns the other way.  Maybe set up half with a .10 or .15 trailing stop?

  93. sns1

    Txs Phil!

  94. tradansh

    Pharm – What’s your take on POZN? The stock has had a really weird reaction to the FDA approval, sold off actually. Any trade ideas ?

  95. gel1

    jromeha/ Climate change
    I have read as much as possible on this " contentious subject", and I have come to the conclusion it is a hoax. This whole thing started out with the idea the world is "warming", until we discovered that in actuality, through well established statistical data, that it is just the opposite. So… in order to make the hypothesis sound more realistiic, the acronym of choice became "climate change"  What is climate change anyway? Is our climate getting colder or warmer? Oh by the way… Al Gore ( didn’t he invent the internet and the color green ) was the one that innovated and promoted the concept of global warming, however last year’s horrifically cold winter, it is no longer referred to as global warming. I guess I’m confused!

  96. jomama

    Just checking in.  Gotta love GS &  Uncle Buffett.  Sold some more calls agains GS Leaps.  The gift that keeps on giving.
    Sold some more BP puts 50 2012′s for 11 – but just noticed now they are 9 (so i was obligated to buy them back).

  97. Pharmboy

    POZN/Trad – me too company.  Their lead product is Vimovo naproxen/esomeprazole (both OTC meds).  AZ, POZN’s partner, sees the product as "modest".  Now, AZ owns the patents to Nexium for now, and the OTC Prilosec (same compound as Nexium for all intensive purposes).  My "gut" says these guys are way overpriced.  10 should serve as some support….if not, 7.50 it is.

  98. jromeha

    Gel – how can it be a hoax? It’s a FACT that the earth’s climate has always changed. Anyways, I’ll save my opinions for after hours sometime when I dont have as much studying to do….Got to become the best cost analyst the Air Force has to offer. Then maybe I can help the Air Force only go over budget by 30-50% on our weapons programs instead of the usual 90%+ :)  

  99. microflux

    Hello phil you had said to wait on WFR if thats not the case, what would you recomend for today ? or wait and see some more ?
     
    thanks
    david

  100. kustomz

    GILD looking weak in a strong market

  101. Jordan

    Something occurred to me: you know these annoying articles about should you "sell in May and go away"?  I have not seen a single one of them this season.  Did I miss them or the public is conveniently not being reminded that they can just Sell… and enjoy the summer?

  102. jcaesar

    gel1 – The National Academy of Sciences is pretty convinced about climate change (check out http://americasclimatechoices.org/).  Are there any other consensus views of the scientific world that you disagree with? Are you a climate scientist?  Are you sure politics aren’t swaying your beliefs?

  103. morxlntway

    Jordan – i have seen 2 or 3 just today. I think one was a Phil’s lunch special

  104. dmankoff

    how do i see this weekend’s posts?

  105. gucci

    cwan — or peter D — my account suddenly have a big BP adjust today on an up market day, my ss SPX and RUT are positive , the only negative is my BIDU, I am not sure why TOS Penson put a 200K BP agjust in my account, is this the problem that that you and peter has talked before….not sure if I need to call TOS and see if they could adjust it ..thx

  106. Pharmboy

    Dman – Here.

  107. yodi

    Phil  Do we buy back some of the May 110p mattresss play sold for 1.37 average now .92 thanks

  108. gel1

    jromeha & jcaesar
    Global warming… oops excuse me its now global change – good subject for another time. Oh by the way, I do watch CNN and that is why I have a contrarian view. The National Enquirer has some bias as well!

  109. Phil

    Oil smacked down to $86!  That’s why it’s fun to keep entering and taking those .05 losses – every once in a while, you hit the jackpot.  This one didn’t even pause at $86.50 but done now as NYMEX is closing.  Hopefully a big run we can short into tomorrow morning with inventories ahead on Weds and unlikely to support $86.50 oil.

    DECK/Rav – They already had earnings so I think I’d be careful about going naked short on the callers.  I know you feel like you are lucky you got saved but that’s not nec. a reason to take a big chance all of a sudden.  Your short put seems safe so the whole trade is looking like a huge winner on the spread so why try to finesse it?  The vertical is about $6.50 now with $3.50 left to collect if all goes well and you can stop out your longs at $10 (now $11.70) and THEN put a tight $1 stop on the callers but, otherwise, a little patience gets you $3.50 more.

    TBT/Drum – Well the callers are expiring worthless so that’s good!  I’d say (and there’s no hurry) just roll down to whatever number of June $44 puts (now. 70) gets you even or the $45 puts ($1.10).  If that’s a margin issue, there’s Sept $43 puts at $1.70.  This all goes back to the first rule of selling naked puts: If you REALLY want to own the stock at the net price, then it’s not a problem… 

    IYR/Jimmy – Good luck on that madhouse.  I have some May $52 puts (down 40%) I can sell you when you are ready to roll lower! 

    WMT/Bass – I like the 2012 $45/55 bull call spread at $5.80, selling the $45 puts for $2.80 for net $3 on the $10 spread and selling 1/2 the June $55s for $1 (now .55) or 1/2 the $52.50s if they fall to $1.50.  Net margin is less than $10 so for $2,000, rather than buying 40 shares of WMT, you can buy 2 vertical spreads at net $3 and have a $2K margin requirement with a $1,400 upside (35% a year on the whole $2K) before you sell any calls.  If you sell just 1 contract for .50 per month ($500) for 20 months, that’s another $1,000 in your pocket.  To make $1,400 on 40 shares of WMT, you need WMT to get to $88.  To make $1,400 on this play, you just need WMT to go up $2 over 20 months (and hopefully not too quickly!).

    Climate change/Gel – Are you kidding?  Let’s say I know NOTHING else at all other than the fact that glaciers that are 4,000 years old, some much older, are MELTING and falling into the ocean.  The tops of mountains that have been covered with Ice since the Ice Age are now exposed – what possible stream of logic do you have that can call this a hoax?   It doesn’t happen every day and even if you want to call it a "natural cycle," it’s a potentially catastrophic one if it continues.  I notice the reflexive Al Gore bashing when someone mentions Climate change – it’s very interesting to see how they have you trained to respond.  Pavlov would be proud!  Meanwhile, if you want to act like a frog in a pot of boiling water, that’s your decision but why try to stop other people from caring? 

    WFR/Mirco – I’d start with selling the Oct $12 puts at $1.20 and see how that goes.  If WFR looks to be moving over $13.50, you can grab the Jan $12.50 calls (now $2.60) as a momentum play, looking to sell the $15s (now $1.60), hopefully closer to $2 or maybe covering the whole thing and letting you ditch the puts.

    Sell in May/Jordan – I’ve heard a few but you are right, way below normal.  Most writers are scared to say anything bearish for fear of looking foolish.  This happened in 1999 when the market was ridiculous but it was like "The Emporers New Clothes" as no one was brave enough to point out the obvious for fear of being the only one so up and up we went until the whole thing was exposed for the massive fraud that it was.  But this time I’m sure it’s different…  8-)

  110. dflam

    PhiL : Do u still like NLY,now at $17.15 and selling $17.50 puts & calls for $3.45 ? With interest rate & mortgages fairly certian to go up in next 6 to 9 months, Would I be better off selling $15 puts for $1.26 ? Than k you

  111. gel1

    Phil/Climate Change
    The glaciers have been melting since the Ice Age. Every guy with a PHD with a compass and a pocket protector has an opinion as to the cause of climate changes that have been taking place since the galaxy was created. Theories are all over the place, and I do not believe the understanding of forces that influence long term climate change is a science. It is nothing more than a subject for conversation and a motivation for political decisions that are in my opinion artificially tied to this hypothetical science.

  112. Pharmboy

    QCOR falling hard, lots of profit taking now.  Could be a nice place to get in, so let’s see where it ends up.  Currently at S1 on the daily.

  113. cwan120

    gucci: Sorry I was out for a while.
    What changed between last Friday and today in your account?  Did you sell more calls or puts?
    Call TOS anyway and ask to talk to the margin desk.  At least find out from them why.

  114. jcaesar

    gel1 – Theories are not all over the place.  Consensus views are expressed by major scientific organizations in this country (and the world).  They say that global warming exists and we’re the cause.  I gave you the link to the National Academy of Sciences – did you read it? Are you just willfully ignorning these consensus views?  Just having a good time playing with us? ;-)

  115. cwan120

    Gucci RE TOS margins:
    Did you read Peter’s comment on April 28 regard TOS’s margin.  Copy & paste below:
     
    Peter D
    April 28th, 2010 at 5:24 pm | Permalink

    Hi Cwan,
    TOS margin issue is less random now.  Basically, they look at large accounts (over $500k I assume), and do the -15% and +15% analysis using the 7 steps/rows of 5% in the Analyze Tab.  If the resultant margin at either end is more than your balance, then they’d put on additional margin.  This is basically 2X to 5X the normal PM margin depending on what strikes you have.  For smaller accounts, it would triggered if you have too many shorts.  Knowing this, our game plan can change a little bit.  We can go further out in time so that we can be further away from the money, and need to roll when it’s within plus or minus 5% ATM.

  116. Phil

    Notice, by the way, that all we are doing today is making lower highs than last week.  This rally means nothing but setting a downtrend if we don’t pop over those levels – more on that when I get a chance to run my numbers

    By the way guys, always be careful what you read.  I am constantly being offered cash and prizes to "present" certain points of view and other writers I talk to are as well.  Just like Congress is lobbied, journalists are lobbied to get the "right" stories out to the public.  Some is blatant, like CNBC pointing out every hour that the BP well is "only" one of 30,000 that are operating so it’s "no big deal."   I suppose they should be slapping the backs of companies involved in plane crashes then because, at that rate, we’d be losing a few dozen a month! 

    Posts/Dman – Just hit the home button to view the main page.  Other articles will be under the other sections (tabs on top).

    Or you can use Pharm’s link!  8-)

    Mattress/Yodi – Sure, I feel the same, close to 11,200 is a good spot to go naked again.  Whenever you make .50, it’s "mission accomplished" on those plays as it pays for 5% of the longs at least. 

    NLY/Dflam – Heres a good IBD article on them

  117. aclend

    The history of science is a constant revision of poorly contrived consensus views so waving that flag hardly argues for fact.

  118. aclend

    …and the National Academy is as much a political organization as a scientific one with agnostic/atheistic membership at 93% so forgive us narrow-minded skeptics if we don’t jump on their "Truth" bandwagon.

  119. judahbenhur

    SS, I have you to thank for a very nice day.  Out at the close.  Back to it tomorrow.

  120. jcaesar

    aclend – The history of modern science does include improvements upon and revisions of previous theories.  To say that all such previous theories were "were poorly contrived" needs some backing up.  That statement is a vast generalizaiton that certainly argues for more support.  

  121. gel1

    jcaesar
    Seriously, the much debated theories that are tied to Climate Change are very diverse. The preponderance of opinion is on the side of my position, whether it is right or wrong, however this debate will be discussed long after there is any definitive proof as to a scientifically proven conclusion.

  122. kwan

    gel – as a scientist with a PhD I can assure you there is a general consensus amongst 99% of us. Unless you’re one of us stop putting words in our mouths please…

  123. jcaesar

    aclend – OK, so I’m going to guess you don’t believe in evolution.  How about the earth being round?  I hear that’s up for debate nowadays. 

  124. kwan

    (at least that it happens – the actual cause(s) is still somewhat open for discussion…)

  125. Pharmboy

    Aclend – "The history of science is a constant revision of poorly contrived consensus views so waving that flag hardly argues for fact." – Whoa Nellie….careful there young Bronco!

  126. ssdirk

    judah – I don’t think any charts with ema’s would have kept us in till the end allowing us to catch the stick.  With trailing stops we would have been stopped out at some point.  However, I do feel good about what we are putting together.  It certainly worked today.  From my entry this morning until the close was good for 20%.

  127. gucci

    Hi cwan I did not open any more position since last friday, just waiting for may expiration— hopefully wortless, I call TOS margin dept and they readjust down 100k for me today, they said that they will adjust more margin tomorrow and asked me to call pter back at the margin desk tomorrow, pretty nice guy. This is how  the calculation was adjust according to peter at TOS, when the option you have that have imp volitily increase above 40% then the margin will be calculate as followed as an example: let said BIDU imp vol went up 60%, and for example the regular margin reqired was 10K per contract for simple math, the new additional margin reqired would be  (60%/40%)/10K = 15K more margin requirement and when imp vol go back to 40% then margin go back to the orginal number.  I was hit with BIDU and GS last week, but was reverse today to about 2/3, they told me that they will look at my account again and tomorrow for more adjustment.  Thx

  128. cwan120

    Gucci: Thanks for the update on TOS calculation on margins.
    Now we know that TOS has 2 rules, the +15%/-15% rule (as posted by Peter D), and the implied vol. rule.  I hope that they don’t have more rules.

  129. aclend

    I was merely pointing out that there have been many ill-conceived notions in "science" that were later shown to be false so just because it happens to be "consensus view" at a given time does not guarantee veracity.
     
    …and my understanding is that the Earth is NOT round but a slightly oblate ellipsoid.  Of course, I only have a master’s and not a PhD so perhaps I am not allowed to know the truth or express my beliefs on this matter.  :-/

  130. SeanC

    Phil: thanks.   Not sure if you are still online AH.  But do I have to worry about the "decay" of these 3x leveraged ETFs?  The horror story I heard is that even when the underlying index was down big, the supposedly inverse ETF was also down.  I still don’t understand how that happened.  Could you explain?

  131. Phil

    Climate/Gel – Here’s a nice fake video for you.  I think they did a count and something like 32,000 scientists against global warming but that’s a load of BS fed to you by your corporate masters (this is a great video).  Even the 32,000 number, if taken at face value, kind of loses it’s punch when compared to the MILLIONS of scientists (yes, there are millions of these "agnostic/atheistic" bastards still at large, despite Bush’s best efforts to marginalize them) who find the evidence to be fairly conclusive. 

    Earth/AC – I think it’s called a geoid by those foolish enough to believe that nonsense but we know that Columbus proved the Earth was flat by traveling "around" the world and finding, not India, but America – definitive proof that the world is not round at all

    Decay/Sean – I don’t know if you should "worry" about it but accept it as a fact.  The 3x ETFs will decay in value over time and more so the more volatile the markets are.  Why?  Because a 10% move sends a $100 ETF down 30% to $90 but then a 10% recovery sends the $90 ETF up $27.  It’s just math – they HAVE to decay over time but two 10% days in a row can make that theory seem blown to hell.  We did an experiment shorting FAS and FAZ when they crossed at $45 and it took us forever to get even and, even now, they are back at $116 combined.  I don’t see how an inverse ultra can be down when it’s index is "down big" – doesn’t really make sense and I can’t remember us seeing it happen with hundreds of us watching them for years….

    Well that climate change discussion was a nice silly end to a silly day. 

  132. Phil

    Copper prices are often viewed as a leading indicator of economic growth because of the metal’s many industrial applications, so the fact that copper futures have hit two-month lows could signal weaker growth ahead.

    Banks maintained tight restrictions on most types of loans to businesses and consumers during the past three months, according to a Fed survey. Banks eased standards for loans to large and medium-sized businesses, but standards for small businesses and for consumers tightened further.

    The U.S. is not going the way of Europe, John Tamny says, and the basic reason: "We’re not like them." Americans are far more entrepreneurial than Europeans and the path started by restless ancestors ensures that European-style government policies eventually will be thwarted.

    Mining shares sink in the wake of Australia’s decision to impose a windfall profits tax on profits from mining projects: RTP -5.8%, BHP -1.9%, VALE -1.8%, CLF -5.9%. The tax could upset Peabody Energy’s (BTU -1.9%) bid for MacArthur Coal (MACDF -11.1%).

    Goldman Sachs (GS +3.3%) shares are on the mend today, even as it discloses details of the many lawsuits it faces tied to the SEC civil fraud charges. The lawsuits seek declaratory relief, compensatory damages, restitution and corporate governance reforms.

    Why isn’t there a Greece-like panic over California – which, after all, could still default? There are key differences, chiefly that California’s is a political crisis through and through: California’s deficit is 1% of GDP and its debt 5% of GDP, while Greece owes more than the size of its economy.

    Google (GOOG) has boosted advertisers using display ads on YouTube 10-fold in the past year, a sign the company is making headway to lift sales in businesses other than search.

    Sirius XM Radio (SIRI +2.8%) argues that the FCC’s plan to expand wireless web access would interfere with its service and has enlisted none other than Howard Stern to rouse his fans into action. "You are going to destroy the satellite radio market? Perhaps that was your intent?" one listener writes the FCC.

  133. salvum1

     PHIL / Strategy
    Thanks for posting the article this past weekend.  I have been around here for a couple of months but I have a question:  what exactly is the strategy called which you employ regularly?  I know it is a vertical with a short put but is it called something else?  I am trying to create a spreadsheet so I can do some quick calcs on candidates such as breakeven, adjustments, etc.  Thanks.

  134. Pharmboy

    Phil (silly)- if you only knew

  135. sns1

    Pharm- Are you familiar/have a view on GXDX? Txs

  136. tradansh

    Pharm – LMAO. How do you guys find these videos?

  137. gel1

    Gentlemen… Please allow me to apologize, as I am the one that submitted a comment about "global warming" and the belief therin by our government that oil consumption is a cause of "global warming" and have taken an agnostic position with regard to securing oil availability. This was coupled with my comment regarding the Chinese securing Canadian oil sands production.and the position I took today in SU. My intent was not to engage in a debate about whether or not there is scientific proof of its existance.There are PHD scientists ( including Kwan) that have very strong opinions on the existance and cause posibilities of each side of the discussion ( thanks Phil for the stats), however Opinion and Fact are not synominous in this context. Incontovertable evidence does not yet exist, which would conclusively determine whether there are scientific facts that remove any doubt. This is still a point of conjecture. This is my opinion, but what do I know – I did not evolve from the metamorphus of a monkey, but to the contrary – it was a lightening bolt!

  138. hanna5

    Phil / VLO : Let me preface this question by saying that this may be a problem that doesnt need fixing…..just wanted to see what you think about this trade and if adjustment is necessary.
    Bought 2000 VLO at 17.1 (now 21.40), +8.4k
    Sold the Jan 2011 17.5 call at 2.1 (now 4.9), -5.8k
    Sold the Jany 11 17.5 put at 2.5 (now 1.30), +2.5k
    So, would you make any adjustment on this at this point? 14.1% profit now. Extra 4.6k to be made waiting to maturity, so that would be 28% (relatively safely at this point). As the premium on the caller decays, would you roll it? or leave it alone…..just for my education. I was thinking maybe as the caller premium approaches 0, i would roll to 1x the 2012 22.5 for a small (<$1) charge. thanks!!

  139. Pharmboy

    GXDX/sns – right here in my own backyard.  Yes, I have heard of them and I think we have discussed here before.  They are a great company with QoQ revenue growth, tons of cash, no debt.  Genoptix is a specialized laboratory service provider focused on delivering personalized and diagnostic services to community-based hematologists and oncologists.  I would welcome any doc’s on here to comment on them as I believe healthcare is moving in this direction not only in diagnostics but also in pharmacotherapy.  Genetic testing is going to make it possible to put people on drugs that actually work for them (think Plavix).  Hence my liking MYGN, GPRO, etc.

     
    Several recent landmark studies have proven the importance of 2C19 genotyping in treatment using clopidogrel or Plavix. In March of 2010, the FDA put a black box warning on Plavix to make patients and healthcare providers aware that CYP2C19 poor metabolizers, representing up to 14% of patients, are at high risk of treatment failure and that testing is available.

  140. phlit

    Phil, how does SSO fit in with the SEAN/DECAY explanation of 3x ETFs?
    Phil

  141. Pharmboy

    Poof!  All caught on tape – welcome gel (sorry, couldn’t resist…..) Very funny gel!

  142. Phil

    The evolution of Man in 90 seconds

    VLO/Hanna – You are right, it doesn’t really need fixing but let’s look at it.  You entered the spread at $12.50/15 so your max upside in Jan was $5 above $17.50 and, currently, your have a net cash value of $15.20, so you went from risking $12.50 to make $5 (40%) to now risking $15.20 to make $2.30 (15%).  You have made $2.70 on $12.50 so far (22%) so the timeless question is – do you have anything better to do with your money than make 15% between now and January.  We don’t consider it very risky so a free 15% is always nice but it’s the opportunity cost that’s at issue.  If you need the cash, or the margin, then I’d say take it but if you are mainly in cash – this isn’t a trade you need to take down.  Do we feel confident enough to roll the puts and calls up to the $20s for about $1?  It changes you basis to $13.50/16.75 and improves your potential upside to $6.50 so a little sexier but a LOT less safe.   Finally, there’s a possible tax consideration of long-term vs. short-term gains.  If you plan to stick with VLO for the long term (a good plan) then you are very right in your roll once you weal out the caller but really the $20s at $4.80 are fine because you are gaining $2.50 for nothing, still with very little risk.  If you combine that at the time with the sale of the 2012 $17.50 puts (now $2.30) when they expire, you are looking at picking up another $5 (assuming you hit $20) for another year at $12.50 (40%) – do that every year and you have a nice anchor to your portfolio. 

    Financial firms are fragile by their very nature, so Steve Randy Waldman thinks it’s possible that Goldman (GS) could go the way of Arthur Andersen or Drexel. Yes, it’s being singled out to the point that it may deflect scrutiny from other firms, but it has "no one to blame but itself."

    "Warren Buffett is a hypocrite," Lauren Tara LaCapra declares. After years of bad-mouthing derivatives, now he’s defending Goldman (GS) and trying to water down financial reform. He thinks it’s fine "to hammer everyone else with reforms that will help the system; just don’t hammer Berkshire (BRK.A)," LaCapra writes.

    April was fairly uneventful in terms of total returns for the major asset classes, with one exception: REITs. But the yield on equity REITs has dipped below the 10-year Treasury yield, which in the past has signaled rough times ahead for real estate stocks.

    From Barry: Headline figure of 3.2% annualized growth was down 40+% from the Q4 growth rate of 5.6%. Hence, we see a sharp deceleration in the so-called economic recovery. Hardly what one would expect to see in a healthy robust post recession expansion. And though Q1 was the third consecutive quarter of positive growth following three quarters of negative growth, this does not automatically mean we will have a balanced, V-shaped recovery, nor does it preclude a double dip recession.  Rather than focus on GDP, investors should pay attention to what Bob terms “the core business cycle” — below:

    The second chart below illustrates the Q1 GDP update of our working model of the double double-dips we expect, followed by a range of possible similar shapes of what can be more broadly thought of as a very wide U-shaped trough, or \____/ , rather than even the upside-down square root sign that only a few economists are expecting, as compared to the deep and/or sharp V-shaped and eventually self-sustaining recovery that the current consensus of them expects.

    Another scary chart

    Debt Rises Times Five

     

    This video of Palin telling Florida crowd chanting "drill baby drill" how safe and environmentally friendly offshore drilling is would be funny if they weren’t now saying TENS of Billions in damages and possibly $100Bn if they can’t contain it soon.  I’m not against drilling but it’s sad that we don’t employ the same safeties that the rest of the world does thanks to lax regulations (as usual).  If they had built a massive solar plant or a fusion reactor and it had left a crater in some massive explosion – I’d be defending the need to produce energy so I do see the other side of this – you always hope businesses will be looking out for the safety of their employees or the environment but, sadly, they only look out for their profits.  Good for shareholders (usually) but then something like this happens…

  143. salvum1

     PHIL/ TLT
    I know we have a TBT play, but would a short on TLT also work?  Say the 2011 short 85 puts, long 95 puts, short the 95 calls for 3.00 debit for a 10 spread?  Did I do that correctly?  Thx

  144. gel1

    Pharm… LOL…. Now I have an idea why my comments are so "SHOCKING" sometimes.

  145. gel1

    Phil
    Very interesting statistics, as it puts in perspective the mind set of the average citizen regarding their tolerance for debt and insecurity. One interesting stat that is missing is the average citizens equal share of the US government debt ($13.75 Tril ) and add to that the unfunded debt ( Social Security, Medicare etc ) and they all have an additional $350,000 of debt. I have to ask – why is this their accepted way of life?  You put all these statistics in perspective and one could come to only one conclusion – eventual bankruptcy. There is no way this debt could ever be paid.  No amount of taxes could even put a dent in the amount as the economy could not absorb the sacrafice.  So…. hyperinflation is all that is left… and that might have always been the plan. ( Have I mentioned I have a large position in TBT? )

  146. pstas

    Global warming & Safety:
    "Whoever undertakes to set himself up as a judge in the field of Truth and Knowledge is shipwrecked by the laughter of the gods."
    Albert Einstein
     
    and from the "ain’t that a fact’ dept.:
     
     
    "The very powerful and the very stupid have one thing in common. Instead of altering their views to fit the facts, they alter the facts to fit their views… which can be very uncomfortable if you happen to be one of the facts that needs altering."
    Doctor Who
     
     
     

  147. tradinv1

    Phil,
    John Mauldin sent an email with an interesting perspective on Greece and an excerpt from the "The Great Reflation"by Tony Boeckh.  I would love to hear your perspective on both.  Thanks!!

  148. snow

    ok, weighing is as a scientist *koff*. we do not have ‘definitive proof’ that smoking cigarettes causes lung cancer (heart disease, emphysema, chronic bronchitis) because we haven’t done the gold standard, a randomized clinical trial. Who wants to be a study subject? Or is there enough evidence that you’d rather not smoke?

  149. pstas

    Oil spill politics:
    Now, Donna Brazile gets it !
    http://www.cnn.com/2010/OPINION/05/03/brazile.oil.new.orleans/index.html
    Get out in front with a little subtle "blame Bush" inference:
    Already the response from the Obama administration exceeds that of the federal response to Katrina, and the oil hasn’t yet begun to cause the catastrophic damage we all fear.
    A political cynic (not me, of course) might take a different tack:
    http://blog.al.com/live/2010/05/fire_boom_oil_spill_raines.html
    and ask why:
    If U.S. officials had followed up on a 1994 response plan for a major Gulf oil spill, it is possible that the spill could have been kept under control and far from land.

    The problem: The federal government did not have a single fire boom on hand.
    Plus ask why, given  oil company’s well known rapacious greed and callous disregard for employee safety and environmental damage, would the Obama administration  allow this  environmental time bomb to continue ticking?
    Plus ask how, in light of the above could the Obama administration be so blase and irresponsible as to suggest expanding offshore drilling?
    Or even ask how, in the face of environmental catastrophe could the Obama administration allow existing offshore wells to continue operating?
    That would be the political cynic asking, not me of course.
    Me, I am an eternal optimist and what I find of  value amid the tragedy is the entertainment derived  watching the political rats scurrying for cover.

  150. pstas

    NMR- this will be an interesting story to watch:
    http://www.bloomberg.com/apps/news?pid=20601087&sid=ad717sLwhHHc&pos=6
    I made a bit selling puts on NMR months ago amidst some excitement over their hiring ex-Lehman folks to expand their footprint. Now, it appears the "greedy" are jumping ship.
    An interesting strategy:
    Maxton dismissed the notion that Nomura would have to guarantee compensation to attract workers.
    “We are not generally seeking to give people big, sign-on guarantees,” he said. “It’s relatively rare. We are absolutely against the idea of people wanting to be paid a fortune” in guaranteed compensation. “If that was the proposition you had and you were sitting opposite me in an interview, it wouldn’t be a long interview.”
    Rather the opposite of generally accepted standards for "masters of the universe".

  151. thelerner

    There are so many places to debate politics and conspiracy theories.  I hate when this board gets ‘overly’ mucked up by them.  ‘Overly’ meaning not having to do directly with the business on hand-Intelligent Investing.
    my 2 cents

  152. biodieselchris

     when is Apple going to release a search engine?
    AAPL 500 the next day

  153. biodieselchris

     brutal day today. 

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