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It’s the End of the World As We Know It

What are 308,367,109 Americans supposed to do?

First of all, despite clamping down on immigration, our population grew by 2.6M people last year.  Unfortunately, not only did we not create jobs for those 2.6M new people but we lost about 4M jobs so what are these new people going to do?  Not only that, but nobody is talking about the another major job issue: People aren’t retiring!  They can’t afford to because the economy is bad – that means there are even less job openings…   The pimply-faced kid can’t get a job delivering pizza because his grandpa’s doing it

There are some brilliant pundits who believe cutting retirement benefits will fix our economy.  How will that work exactly?  Pay old people less money, don’t cover their medical care and what happens?  Then they need money.  If they need money, they need to work and if they need to work they increase the supply of labor, which reduces wages and leaves all 308,367,109 of us with less money.  Oh sorry, not ALL 308,367,109 – just 308,337,109 – the top 30,000 (0.01%) own the business the other 308,337,109 work at and they will be raking it in because labor is roughly 1/3 of the cost of doing business in America and our great and powerful capitalists have already cut their manufacturing costs by shipping all those jobs overseas, where they pay as little as $1 a day for a human life so now, in order to increase their profits (because profits MUST be increased) they have now turned inward to see what they can shave off in America.

How does one decrease the cost of labor in America?  Well first, you have to bust the unions.  Check.  Then you have to create a pressing need for people to work – perhaps give them easy access to credit and then get them to go so deeply into debt that they will have to work until they die to pay them off.  Check.  It also helps if you push up the cost of living by manipulating commodity prices.  Check.  Then, take away people’s retirement savings.  Check.  Lower interest rates to make savings futile and interest income inadequate.  Check.  And finally, threaten to take away the 12% a year that people have been saving for retirement by labeling Social Security an "entitlement" program – as if it wasn’t money Americans worked their whole lives to save and gave to the government in good faith.  Check

As Allen Smith says: "Ronald Reagan and Alan Greenspan pulled off one of the greatest frauds ever perpetrated against the American people in the history of this great nation, and the underlying scam is still alive and well, more than a quarter century later.  It represents the very foundation upon which the economic malpractice that led the nation to the great economic collapse of 2008 was built.  Essentially, Reagan switched the federal government from what he critically called, a “tax and spend” policy, to a “borrow and spend” policy, where the government continued its heavy spending, but used borrowed money instead of tax revenue to pay the bills.  The results were catastrophic.  Although it had taken the United States more than 200 years to accumulate the first $1 trillion of national debt, it took only five years under Reagan to add the second one trillion dollars to the debt.  By the end of the 12 years of the Reagan-Bush administrations, the national debt had quadrupled to $4 trillion!"

Both Reagan and Greenspan saw big government as an evil, and they saw big business as a virtue.  They both had despised the progressive policies of Roosevelt, Kennedy and Johnson, and they wanted to turn back the pages of time. They came up with the perfect strategy for the redistribution of income and wealth from the working class to the rich.  If Reagan had campaigned for the presidency by promising big tax cuts for the rich and pledging to make up for the lost revenue by imposing substantial tax increases on the working class, he would probably not have been elected.  But that is exactly what Reagan did, with the help of Alan Greenspan.  Consider the following sequence of events:   

1) President Reagan appointed Greenspan as chairman of the 1982 National Commission on Social Security Reform (aka The Greenspan Commission)

2) The Greenspan Commission recommended a major payroll tax hike to generate Social Security surpluses for the next 30 years, in order to build up a large reserve in the trust fund that could be drawn down during the years after Social Security began running deficits.

3) The 1983 Social Security amendments enacted hefty increases in the payroll tax in order to generate large future surpluses. 

4) As soon as the first surpluses began to role in, in 1985, the money was put into the general revenue fund and spent on other government programs. None of the surplus was saved or invested in anything.  The surplus Social Security revenue, that was paid by working Americans, was used to replace the lost revenue from Reagan’s big income tax cuts that went primarily to the rich.  

5) In 1987, President Reagan nominated Greenspan as the successor to Paul Volker as chairman of the Federal Reserve Board.  Greenspan continued as Fed Chairman until January 31, 2006.  (One can only speculate on whether the coveted Fed Chairmanship represented, at least in part, a payback for Greenspan’s role in initiating the Social Security surplus  revenue.)

6) In 1990, Senator Daniel Patrick Moynihan of New York,  a member of the Greenspan Commission, and one of the strongest advocates the the 1983 legislation, became outraged when he learned that first Reagan, and then President George H.W. Bush used the surplus Social Security revenue to pay for other government programs instead of saving and investing it for the baby boomers.  Moynihan locked horns with President Bush and proposed repealing the 1983 payroll tax hike.  Moynihan’s view was that if the government could not keep its hands out of the Social Security cookie jar, the cookie jar should be emptied, so there would be no surplus Social Security revenue for the government to loot. President Bush would have no part of repealing the payroll tax hike.  The “read-my-lips-no-new-taxes” president was not about to give up his huge slush fund.

The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day.  The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers.  But the trust fund is empty!  It contains no real assets.  As a result, the government will soon be unable to pay full benefits without a tax increase.  Money can be spent or it can be saved.  But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything. 

That is how the largest theft in the history of the world was carried out.  300M people worked and saved their whole lives to set aside $2.5Tn into a retirement system that, if it were paying a fair compounding rate of 5% interest over 40 years of labor (assuming an even $62Bn a year was contributed), would be worth $8.4Tn today – enough money to give 100M workers $84,000 each in cash!  The looting of FICA hid the massive deficits of the last 30 years in the Unified Budget. Presidents and Congresses were able to reduce taxes on the wealthiest Americans without complaint from the deficit hawks, because they benefited. The money went directly from the pockets of average Americans into the pockets of the rich.

Now that it is time to repay those special bonds in the Trust Fund, we are inundated in opinion pieces in the leading newspapers and magazines complaining about Social Security and its horrible impact on the budget.  Government finances have been trashed by foolish tax cuts, unpaid wars, tax loopholes for corporations and the very wealthy, the failures of economists, the greedy search for greater returns in financial markets and the collapse of moral values in giant businesses but Social Security is supposed to be the problem that needs fixing…

Social Security is not "broken" the money is in the Trust Fund. But the people who manage the finances of the United States don’t want to repay the bonds held by the Trust Fund. They want to default selectively against average people, their fellow citizens, who paid their taxes expecting to be protected in their retirement.  Refusing to repay the $2.54 trillion dollars in bonds held by the Social Security Trust makes the US look like Greece, just another nation unable to govern itself coherently. The people who manage US finances come from the financial elites, the best that Wall Street and enormous corporations have to offer. Selective default exposes them as charlatans. The claims of the economics profession to expertise are puffery. Their theories about the benefits of tax cuts are proven false. Their mathematical proofs about free markets collapse in the real world.

So, what is this all about?  It’s about forcing 5M people a year who reach the age 65 to remain in the work-force.  The top 0.01% have already taken your money, they have already put you in debt, they have already bankrupted the government as well so it has no choice but to do their bidding.  Now the top 0.01% want to make even MORE profits by paying American workers even LESS money.  If they raise the retirement age to 70 to "balance" Social Security – that will guarantee that another 25M people remain in the workforce (less the ones that drop dead on the job – saving the bother of paying them severance). 

What’s next?  Is it fair to say that children can’t work in a struggling family business?  Isn’t it to everybody’s benefit that kids should be allowed to help out at the family store?  That will be the next step towards turning America into a 3rd World country.  The seemingly innocent concept of "letting" kids work will deprive another 5M people of paying jobs – throwing them out into the labor force as well and driving labor costs down even further

There’s an expression that goes "give them an inch and they’ll take a yard."  The top 0.01% of this country have taken their inches and they are foreclosing on the yards and they will come for the rest of your stuff next.  If you think you are "safe" from the looting of America, it is only because they haven’t gotten around to you yet.  As I explained in "America is 234 Years Old Today – Is It Finished?" – the game is rigged very much like a poker tournament.  The people at the top table don’t care how well you do wiping out your fellow players at the lower tables, they know they will get you eventually and your efforts to scoop up a pile of cash for yourself simply makes their job easier when they are ready to take it from you. 

The average American is $634,000 in debt thanks to the efforts that Reagan and Greenspan put in motion 30 years ago and the richer you are, the more of that money is going to come out of your hide eventually and the more you lobby to make sure that the "rich" are not taxed unfairly, the less fair it will be to you because, no matter how rich you THINK you are, unless your income is measured in MILLIONS PER MONTH, you aren’t even close to the top 30,000. 

No progressive tax?  That means that people and corporations who make $1M PER DAY should pay no more tax than a person making $1M per year, right?  Well that means that the $2.5M debt that your family of four owes will be paid by you over 2.5 years of labor while the $2.5M owed by your Billionaire competitor will be paid over a long weekend, after which he can turn his attention back to crushing your business by creating cheaper goods – maintaining profit margins by driving down local labor costs and outsourcing the rest

It’s a new world, America, and you’d better get used to it – we were sold down the river on a slow boat to China long ago and we’re only just beginning to feel the first effects of waves that wash back to our own shores.  The people who own the media don’t want CHANGE.  That’s why you never hear this stuff in the MSM – things are going exactly according to plan and the old money crowd is playing a long, patient game and they already have most of the chips – the last thing they want is people questioning the system…

 


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  1. drcraig

     Holy cannoli Phil- what a way to start the weekend! 

  2. Phil

    Good morning!

    Cap got me started with his ranting yesterday.

    This is a great article on the Propoganda campaign that is currenty being waged against SS – they are pulling out all the stops lately. 

  3. snow

    Good job supporting your argument with both stats and history, Phil….of course, since my bias is to your left, it looks persuasive to me. I’ve posted this link before, but it hammers home a point about the difficulty of looking at wealth/income in a simple percentile fashion:
    http://www.deepcool.com/incomes.html
    Notice it was written in 2003, and the disparity has obviously widened since then. One wonders where the very top people would be now……halfway to mars.

  4. lumpenprole

    Excellent article, especially the characterization of he squandering of SS contributions as theft.
    It’s very important to label the .01% thefts as what they are to combat the genius reframing by the lapdogs in Congress.
    -- it absolutely is embezzlement, and the worst thing is, as you say, that that squandering is now treated as a fait accompli, and no one even thinks of the payments we were supposed to get-- only how to keep taxes low for the ruling class.
    Maybe a comma or dashes in one sentence, like:
    "Social Security is not "broken"-- the money is in the Trust Fund."
    Will edit for membership!

  5. lumpenprole

    oops "characterization of THE .."

  6. stjeanluc

    Phil, the frustrating part it is that the Republican party is getting a pass on their agenda. Reason is that they don’t want to discuss the agenda. Here is a snipet from someone else’s blog: 

    Yesterday, Rep. Peter King (R-N.Y.) endorsed the notion of the GOP giving "certain specifics" about what the party supports, but he doesn’t want to see his party go into too many details.
    "…I don’t think we have to lay out a complete agenda, from top to bottom, because then we would have the national mainstream media jumping on every point trying to make that a campaign issue."
    Did anyone read the roadmap proposed by Rep. Ryan? Replace Medicare by vouchers who would increase in value with inflation and not the cost of health care for example. 20 years from now, you get your $500 a month voucher and your healthcare costs are $2000/month…  How about privatizing social security? And continuing the Bush tax cuts but not pay for them as they say they pay for themselves (that worked well last time around). 
    And getting rid of the estate tax… Here is another post:
    Back in the day, one of the key Republican arguments against the estate tax was that it forced hardworking, salt-of-the-earth children of small farmers to sell the family plot in order to pay their taxes after dad died. It was a sad story, but with one problem: no one could find even a single small farmer who had been forced to liquidate in order to satisfy Uncle Sam’s voracious maw. Even the American Farm Bureau Federation was eventually forced to admit that it couldn’t come up with a single example, and a few years later the Congressional Budget Office estimated that under the now-current exemption level, only a tiny handful of small farms were likely to owe any estate tax to begin with — and of those, only about a dozen lacked the assets to pay their taxes. And even those dozen had 14 years to pay the bill as long as the kids kept running the farm. In other words, the story was a fraud from beginning to end.
    Or the fact that higher taxes affect small businesses:

    Today, though, we’re getting a rerun. The subject at hand is the Bush tax cuts, and the question is who exactly will get hurt if we go ahead and keep the cuts intact for middle income earners but let them expire for the rich. The obvious answer is, "the rich," but it turns out that, just as there are small farmers begging for our sympathy, there are small rich too: namely an alleged army of hardworking, salt-of-the-earth small business owners who would also end up paying higher tax rates. "To those who are pushing the higher marginal rates," thundered Sen. Chuck Grassley (R–Iowa) earlier this week, "I say the burden is on you to show that you are not harming our primary job creators, small business."
    OK then. Let’s show it. Step 1: The Brookings Tax Policy Center estimates that only 1.9% of small businesses are in the two top brackets that would be affected. That’s a little better than the dozen small farms affected by the estate tax, but not by much.
    Step 2: About half of that 1.9% aren’t really small business owners at all. They’re high-income investors who get part of their income from investments in small businesses. So we’re down to about 1% of small businesses that would be affected.
    Step 3: The top brackets are just that: brackets. When the top rate goes up, it doesn’t affect your entire income, just the portion in the top bracket. So if the top rate goes back up from 35% to 39.6%, it only affects the portion of income above approximately $400,000. A small business owner making $500,000 would see an increase of about $5,000. This is a fairly modest amount for someone making a half million dollars, and anything higher than that is hardly a "small" business to begin with. And the marginal effect is even smaller for the second highest bracket.
    Step 4: The Office of Management and Budget estimates that the 10-year cost of these upper-income tax cuts is $678 billion, the vast majority of which hits wealthy individuals, not small businesses no matter how you define them. That’s a fair chunk of change for anyone concerned about the deficit.
    So that’s the case. Letting Bush’s tax cuts for the rich expire affects only a tiny number of small businesses; it doesn’t affect them very much; and it generates revenues of $678 billion. If the only thing you care about is keeping taxes low for rich people, you won’t be convinced. For the rest of us, it’s a no-brainer.
    And on and on… With the MSM we have, no wonder unemployed people believe it’s Obama’s fault if they don’t get a check anymore when 98% of the Dem senator voted for extension of the benefits and 100% of the Repub. senators voted against. Somehow, it’s "Congress" fault! 
    Just my $0.02!
     

  7. stjeanluc

    And to close today:

    From Rep. David Obey (D–Wisc.), soon to retire after 40 years in Congress, on his biggest regret:

    I think our biggest failure collectively has been our failure to stop the ripoff of the middle class by the economic elite of this country, and this is not just something that happened because of the forces of the market. 

  8. rexx

    Gee. IF only we had listened to GW Bush in 2005 and privatized Social Security then.  It would have all been stuffed into safe MBS and have disappeared in a cloud of smoke in 2008.   Then we wouldn’t have to argue about this at all.

  9. flipspiceland

    @Phil
    Since I disagree with the union part of the rant, being from a union town and seeing how the unions ruined life for themselves, their children,  their  grandchildren, and great grandchildren by disastrously overreaching (featherbedding, no work ‘jobs’, 13 weeks vacation was the final straw for the steel industry, which agreed to it after a bitter strike and then promptly moved its operations out of town in the next 20 years), I’ll ask a strategy question instead.
    What is the best way to handle a very stable security that varies little month to month, year to year, stays in a very narrow range?
    Selling in the money one year out puts and calls is what I have concluded. Is there a better one?

  10. gel1

    Humvee… your prognostication from yesterday suggesting Hillary could very well be posturing for a run in 2012…. I have to agree. Lets face it, Obama’s presidency is finished, and his failures will be chronicled in the history books relatively soon. He has already lost the support of the lefties, which were his franchise.  From this date forward, Obama is merely a temporary custodian of the White House, and languishing in the largessee of luxurious living style, and the perceived power of the office.  He has proven himself to be a fraud – deceitful promises ( hope and change ) with no meaningful sucess, other than doing everything in his power to move the country toward a redistribution of wealth, and a Socialist economic system.  I do not recall him mentioning any of this in his pre-election political rants. Therefore his intent was to deceive, and that is defined in legal theory as "fraud".  Hillary ( as we all know ) is entitled to the presidency, after all, she has been working toward this goal her whole life ( her words ).  Bill is already attempting to pull the props from under Obama, in preparation for Hillary’s assent.  As a conservative, I can only say "we need Hillary" as her form of politics is cannon-fodder for the coming reversal of the lunacy of radical liberalism. ( end of conservative free-market rant for the weekend)

  11. palotay

    Highly informative as always Phil, keep it up.

  12. bhaskar

     People on both sides of the debate have got it wrong. Both the slash & burn Ripublicans and free loaders Unionist Democrats are responsible for this sorry state of affairs of this great country. However, lying through the teeth right wing conservatives, who sold this country cheap with unnecessary wars and tax cuts to rich are more to blame than the other lazy lot.
    But if this not a forum for political discussion,can we get some direction on the Market please?
    However, if we are here for expressing our political believe , my apologies for disturbing the debate. May be I am in the wrong place.

  13. DKGuy

    Gel – you said it all. Great post.

  14. Jtiff

     The notion that Obama’s presidency is a failure is a really unfortunate talking point in the media today.  Obama, by all accounts, is a very successful president and history will support that.  He followed through on his agenda and pressed through very tough legislation.  He is pushing for a draw down of forces in Iraq and an ultimate solution to Afghanistan.  The presidency has not failed.  Take the last two one term presidents, Carter and GHW Bush.  Carter micromanaged the office of the president and was terrible at pushing through legislation.  He was also subject to the whims of OPEC and a failed attempt to rescue the hostages in Iran.  GHW Bush was very popular during the first gulf war but fell victim to the recalibration of the economy after the Regan run up and then the fall of the Soviet Union.  Clinton was able to claim success in bringing the economy back to health and balancing the budget.  The end of the Cold War allowed Clinton to halt annual defense spending increases which also helped with the budget balancing.   Clinton was successful because he knew how to legislate and the major game changing incidents came before his presidency.  Obama fits more into this mold than the Carter of GHW Bush models.  
    Mid-term elections, historically, go against the sitting president.  This will happen in November but Obama has time on his side.  Two full years after these elections to allow the economy to heal and jobs to come back.  This will also give his legislation time to either work or fail.  As of now there are no clear markers to classify Obama as a failure.  
    Finally, Obama is no socialist.  He is a centrist and the fact that the far left is disappointed accentuates this fact.  H Clinton will not run in 2012 because she knows that the greatest marker for success is incumbency and she would not want to put a 2016 bid in peril.  I would not be surprised to see her on a 2012 ticket as Obama’s VP.  I think this would be the more likely development as Biden feels more like a placeholder and it would give the Dems a very strong and compelling long term strategy which they have lacked for a long time.  But again, time is on her side and acting as Sec of State is a good place for her to wait and develop her foreign relation skills while those in the political mainstream tear each other down, much like Romney and Palin are now. 

  15. barfinger

    The left has always used the outrageous case of the super-rich "robber barons" to grease the skids for the massive tax shaft that will slide down the ways and penetrate all the way to the $100k line, where, in case nobody has noticed, people aren’t exactly rolling in excess.
    If we design policy without rhetoric that does nothing but raise my blood pressure (and my docs say AVOID, so I may have to quit PSW), we might work our way through our current nightmare. Don’t hold your breath waiting for a more intelligent mix of approaches (and my docs were ADAMANT that I should not hold my breath).

  16. barfinger

    If you somehow found a way to increase the tax payments of the top 1% by a whopping 10%, it would raise less than $200 bn. Barely denting the deficit. What do you suppose would come next?

  17. pathfinder

    I doubt Reagan and Greenspan were that wise and powerful that they created the strategy the led us to our current situation.  If so, then today’s progressives will create a strategy to unwind it.  It’s the 30,000 behind the scenes, or more likely a few hundred.  That’s why we don’t have a progressive tax with more brackets above $250k, like we should.  $250k today is upper middle class and that’s the only wealth that they can go after other than their own.

  18. humvee4me

    JTiff:  You should like you should be writing talking points for the dems.  Your final paragraph stating that Obama is a centrist is so laughable as to discredit your entire post.  Hillary will be 70 years old in 2016, clock is ticking and she knows it.  The Clintons both smell blood in the water and they appreciate that political openings need to be exploited when available, since the opening may close unexpectedly.
    Sitting presidents have a huge advantage at re-election time, so I am not calling him a one term president yet, a lot can happen in 2 years.  You may try to console yourself that off year elections always swing away from the incumbents, you will hard pressed to find any solace after this sunami of an  election this November.  Obama’s reaction to the dem’s loss of congress will determine how he does in 2014.  If he insists on running from far left, Hillary will run against him; he will need to govern from the middle if he wants any hope of avoiding a 2014 disaster for himself. 

  19. humvee4me

    OOPS  2012, not 2014  got ahead of myself

  20. goldman

    gel1 -  I have a land investment question and would love to get your advice (if I remember correctly, you are/were a land developer).  Would it be possible to send you an email ( thegoldmanrule@gmail.com) ?  If not, no problem, I fully understand.

  21. shadowfax

    Will Anyone justify the conservative agenda with facts, figures, and actual history. I always thought I had a conservative outlook but am dead set against continueing what has destroyed us since Reagan. The facts are actually about 1.3 trillion was lost to the bush tax cuts. Now that the super rich have more money and make more money eliminating them will generate more than 1.3 trillion, ending the 2 wars will add another trillion over 10 years, and stoping the drug war will add another 500 billion, fire the excess leagal system required and without a calculator about 3 trillion over 10 years. One honest sincere true conservative could do this if they  will just follow their own basic core values. Some of what I read tells me some wealthy people need to be deprogramed befor they join the poor. My numbers unlike Phil’s are generally accepted not down to the penny and common sense without a calculator says we need to go back to what worked.

  22. humvee4me

    Shadowfax:  the first thing is to define the "conservative agenda" and there is no clear consensus on what it is, so I don’t even know where one would start.  Probably the first starting point that conservatives can agree on is a smaller government, especially geared toward a return to a federalist system the country born with.  I’m not sure when you think American worked best for everyone, and there will be loud disagreement about it; America probably was at its prime post WWII say the 50′s and 60′s; but so much has changed since then that seem irreversible.  The globalization genie is out of the bottle, so unless we become extremely protectionist we have to compete with workers making less than 1/10 of what our  minimum wage is.  I think that the only "solution" to this is increased productivity through technology, but that demands an educated populace which we don’t have and can’t have no matter how much money we throw at it.  The culture of the US has changed, a victim of PC self esteem, narcissism  short term oriented ideals.  Pregnant teen age girls used to have shame, now they are celebrated and the baby is raised without a father; that girl and baby have no chance for success.  When high school drop out rates are over 50%, what chance does a society have.  We can change tax rates, create or eliminate various subsidies; but until our culture changes we will not, IMHO, have a chance to compete in the 21st century.  The social models of Asia are, in my mind, far superior to those of USA and Europe.

  23. diamond

    Phil – Should I start thinking about cutting back?
     
    The Rich Catch Everyone Else’s Cutback Fever – NYTimes.com

  24. acobra65

    For my Saturday morning "piece of mind"… I quit watching "news programs" on politics because the repetitiveness of the talking points by the shills for both parties was sickening. The long time incumbents protecting their very lucrative salaried positions, health care benefits and future pensions by voicing absurd positions on legislation just to look good for the hometown voters was even more sickening.  When you start talking to the TV, lol …. it’s time to move on… So, for my thoughts on today’s "rants"….
    Labor Unions: My grandfather was a very well respected labor attorney and participant in the social security legislation in the 1930′s.  The origianl reason for labor unions was improving working conditions, prevention of child labor and providing for reasonable wages with reasonable benefits.  Apparently, the magnates (VERY rich) of the day needed persuasion to give more concern to those men and women working for them.  Unfortunately, in those days (as today) all "rich people" are not as benevolent as we would like to think.  There are exceptions to the rule of course.  There is no doubt, many labor unions have "poisened the well" for many decades to contribute to this country’s problems. It’s very simple. When the common wage earner cannot afford to make a decent wage (living – wage, medical and education) to provide for family, there’s going to be a problem in maintaining a balanced future economy.    
    Jtiff:
    I agree with your assessment.  Obama is "no fraud", he might be culpable of being naive.  I think, Obama discovered who REALLY RUNS the country…. the powerful interest groups with their lobbyists…. like banking, the insurance companies and the oil companies. Phil has pointed out the facts and reasons supporting this contention with many superlative articles.  As for being a one term president… even Reagan and Clinton’s popularity was similar to Obama’s at mid term of the first year.  Hillary Clinton would not be too old for the office based upon a few other past president’s and world figures who have held such a position at an advanced age.  My cynicism is moderate compared to other’s regarding the Clinton’s motivations for the future.  Many people were "dead wrong" attempting to decide Hillary’s course of action have her defeat in the primary’s and if she would hold an office in the administration.  Quite frankly, there are many people who just "hate the Clinton’s" regardless of what they do. 
    In my opinion, the current condition of the economy will not be remedied in time to correct it’s course.  The snow ball is running down the backside of the mountain at an accelerating speed.  The ineptness of government officials to solve these problems will continue for many years to come.  As compared to other peoples of the world, we Americans consider ourselves to be a very priviledged group. We believe "pain and suffering" are for others, not for us.  Well…. strap yourselves in for the future because job security, benefits and standard of living for most will become more difficult.  For me, I will be educating my three recent college graduates to trade in the markets…. if, they want to keep, maintain and survive for the years to come…. a person is going to need an edge.
    Enough…..Now for trading:
    Phil:  What do you think of the Goldman trade on the site:
        Stock at high of 152; Bull Call Spread at 160/175 (5.50/1.86) with Selling Puts at 130 (3.50) … Net cost .14 and maximum upside of 14.86.
        The stock is now at 146.17: 160/175 (4.90/1.84) with selling Puts at 130 (4.80)… net 1.74 credit and maximum upside of 16.74.  So, I was thinking of …. what are your thoughts for this setup or suggestions of different strikes for Monday morning ??  Thanks  
       

  25. acobra65

    PS:  Phil: Sorry, Those Goldman trades are October contracts.

  26. hanna5

    acobra / GS : I trade GS a lot, and like it considerably more then Phil seems to….here is my advice (for whatever its worth). You seem to be talking about the October strike, which i think is a decent time horizon. I happen to think the earnings this week will be better then people think, but the stock will trade with the market / based on guidance.

    Consider. Selling the Jan 120 puts for 6.50, and then offer 7.50 for the january 150-175 call spread. That would be net $1 on the $25 spread, but the only risk is GS put to you at $119 net, which would be  great anyway…I also like this time horizon better then October since it gives you a chance to participate in the end of the year rally, if there is one. And, you could roll the 120 puts to 2012 100′s if forced…

  27. Jtiff

     Humvee- I agree that if the Obama presidency cannot produce something palpable for the left that Hilary might enter the fray.  But I disagree that Obama is the liberal that people cry that he is.  If he had the ability I think that he might, indeed, stray further to the left in his policies.  But he is a pragmatic politician and a smart legislator.  He put out to the legislature and the people what he wanted and, subsequently, relented on much of the more liberal items in the big legislation to get the bills signed and through congress.  No public option, less stringent financial reform bill and so forth.  He also adopted many Bush policies on national security and immigration.  But he certainly is not a socialist nor has he come remotely close to redistributing the wealth.  If anything he will push for a realignment to Clinton era tax codes and budgets once the recession ebbs.  This is normal in politics and the United States in particular.  GW Bush pushed policies to far to the right to be sustainable.  Much like GW Bush pushed for a huge tax rebate in the first six months in office to counter Clinton era influence.  We have had presidents who were far more liberal in office.  LBJ comes to mind.  Obama matches up closer to Clinton in terms of product and Clinton was pretty centrist.  

  28. terrapin22

    Phil / Hedges – what are the latest disaster hedges?  You referenced a DXD hedge on Friday but I cannot find it.  any new ones to put into play this coming week?  Thx. 

  29. Ranger

    My ill timed post from yesterday is below……………….. Sorry!! I know that you have answered this question but I am stumped as to where to start. What hedge would  you recommend as an initial, starting position on Monday for someone that doesn’t have anything in place?  Love your writings and  really appreciate the education you are providing!
    "Going into a weekend like this makes people more prone to dump out next week so make sure you have hedges in place and are well covered." 
    I am a relatively new member and am very confused about where to start with hedging. I have read about 2 months of comments with the Basic membership (which sometimes limits me to seeing only your response and not the original question)   in addition to the articles under the Portfolio tab – mattress play, 9 fabulous plays, hedging for disaster, etc. I am very happy with the buy writes that I have made off of the buy list but I just can’t figure out how to begin the hedging…………….DIA, DXD????? I know how important it is and would like to get something in place that I can build from.
    I also have positions in 401k growth and international mutual funds, and other "buy and hold" positions that were crushed in 2008/09 (that I am trying to repair by selling premium). Hedging would have saved me a lot of grief in the past and I am anxious to begin. Sorry to even ask…there is so much information here…I just can’t seem to find out where the beginning is! Many Thanks!!

  30. jvest

    Phil, you said in Friday’s comments, "I would not chase ultra-shorts here.  I still, now that I review the day, feel this sel-off was BS and it looked very much to me like forced selling by a fund, not any kind of real market exodus.  …  not really getting all the signals for a downtrend yet – other than technical ones, which were dead wrong last time. "
     
    I guess what I found a little confusing is that your site also syndicates lots of commentary like Pullback Off Lows Pattern Forecasted Today’s Sell Off that seems to contradict what you’re saying when it writes: "See those pink line breaks to the downside? They were all you needed to know." It tends to confuse me when I get a Phil’s Stock World email and open it up and it’s saying the opposite of what you just said. I don’t think it’s fundamentally bad to have contradictory articles on the same site, but since this one did come through on your site, maybe you could explain either (a) why it’s not contradicting your statement, or (b) why it’s bad TA.
     
    On a related note, it can be hard to find your articles and various commentary in the site’s search engine because it tends to get lost in the noise of syndicated articles. It’s particularly hard to find comments after the fact, because obviously for the main article content you can just turn to google once it’s old enough.

  31. Cap

    Better piece today Phil.
    But let’s be clear; I am not against Social Security.  I want my folks social security to be secure.  I want mine.  And I want all of you to get yours.
    I am for fixing it; and against raising payroll taxes on us working slobs to fix it so Barney Frank and Pelosi can break it again.
     
    Bush tried to reform Social Security; and whether you agree or not with his specific proposals, one thing that is 100% clear is that the Democrats killed any reform effort.  No discussion.  No engagement.  No ideas.  No compromise.  They could care less about Social Security reform; but they would be damned if they were going to let any Republican President, let alone the evil Hitler Bush, get credit to fixing what they claim is "their" issue.
     
    Your public servants at work. 
     
    And Bush was a wuss for giving up; instead of fighting on.
     
    Entitlements like Social Security and Medicare and Medicaid and Health Care are not fundamental rights.  We are not piggy banks to pay for crooked politicians wet dreams.  These programs are great if they provide a safety net; they are properly structured; and they are affordable. 
     
    The answer to all these overgrown behemoths is not to just throw more of our money into the sinkhole.
     
    But when they are not well run (most any govt program); or the money is diverted (social security) or stolen (think medicaid or medicare (just like that russian immigrant medical facility in Brooklyn just in the news for some $70 million in fraud, that included the doctors and the patients), then something has to change.
     
    How’s Obama doing on getting rid of the waste fraud and abuse in Medicare like he promised ?  Last I heard he was hiking in Acadia National Park, not out creating jobs; not out supervising the gulf oil spill and cleanup; not out getting rid of waste fraud and abuse anywhere.
     
    Daniel Patrick Moynihan … now there was a real Senator, a gentlement and a public servant.  That was a Democrat worth supporting even though he was a liberal; not schmo’s like Gillibrand or a crook like Harry Reid.  
    The Democratic Party today is very far removed from DPM….

  32. Cap

    Its not just Social Security $$ as theft; its pretty much ALL of our tax dollars !

  33. Cap

    Gel … well said as usual … so much more eloquent than I.
     
    Obama, still has the fawning media, but the polls don’t lie.  But Jtiff, what "all accounts" exactly have determined that "Obama is a very successful president" ?    The jury is still out; but its not looking good for him.  Plus with his massive ego and rigid ideological bent, I don’t think it would be wise to Hope that he will Change.
     
    And, you say Obama is a centrist ????   Holey Moley dude !   You might be the only person in the USA that believes that.
     
    As for Hillary, time is most definitely NOT on her side.   She is not going to be president.  Not in this country.  Ever.  She is over.
     
    Ah, Humvee4 mee, I see you beat me to it !  :grin:
     
    Acobra 65 … good GS trade idea …. but margin intensive …
     
    Have a good rest of the weekend all … visiting day tomorrow for my boy away at camp; 1st time ; not even 9 yrs old …

  34. fjd10595

    Bush tried to reform SS.  You mean Bush tried to turn SS over to his cronies on Wall Street.  Good thing it didn’t go through, to my memory it was just a few years before the collapse.  By the way, reform I can understand, i.e. change indexing to some extent, but turn SS into another 401k plan?  That is idiotic because we have seen how that has worked out for society in general, with everyone’s 401k crashing into the ground. That would just be another plan to further enrich the rich on the backs of the little guy.    How about this for SS reform:  change the inflation index so that it slows the rate of growth, and actually put the payroll deductions into a lock box and use them to fund benefits.  Don’t turn it into another 401k, unless you really do want to see people starving in the streets.
    Bush tried to reform Social Security; and whether you agree or not with his specific proposals, one thing that is 100% clear is that the Democrats killed any reform effort.  No discussion.  No engagement.  No ideas.  No compromise.  They could care less about Social Security reform; but they would be damned if they were going to let any Republican President, let alone the evil Hitler Bush,

  35. acobra65

    hanna5:
    Thanks for the information.  Learned about basic option strategies in Series 7 and 24 many years ago, but never had the opportunity to really use them or know them well….. Now, seems to be the time… Thanks, again !!!
    Your set up is a little better because of 150 Call.  My thought was October time frame because as you, I believe Goldman will report good earnings for July AND October prior to October expiration.  My concern was a large down draft in the markets due to possible weakening of the economy and growing European soveirgn problems. 
    I follow an options trader who appears to have an excellent handle on the macro economic picture. He has called every major correction in the market since 2000 (He’s been trading for 10 years)… in fact, for 5 weeks he predicted that Friday’s major sell off in June as the beginning of a trend down. He believes the consumer and financial sectors are now fertile for put options.  As you know, historically September / October / November time frame is not too friendly to the bulls…. my reason for October contracts.  What;s interesting, Phil uses option strategies which I think are a must in this market and I believe his approach short and long term with disaster hedges (now possible) is a must.  However, if I am correct, he believes straight call and put option buying is a house – suckers game.  This option trader since 2006 has a 85% success of winning trades with an average gain of 100% percentage on all trades with just purchasing straightforward options..
    If, I can utilize my own feeble approach, LOL…. with this traders macro view, some option picks and Phil’s day to day fighting in the trenches with his strategies…. I might survive the market and grow a portfolio. 
    Thanks, again for the info…    

  36. Cap

     Unions Discover Joys of Outsourcing   [Stephen Spruiell]
    In these tough economic times, even unions are discovering the benefits of employing a non-union workforce.

    WASHINGTON—Billy Raye, a 51-year-old unemployed bike courier, is looking for work.
    Fortunately for him, the Mid-Atlantic Regional Council of Carpenters is seeking paid demonstrators to march and chant in its current picket line outside the McPherson Building, an office complex here where the council says work is being done with nonunion labor.

    "For a lot of our members, it’s really difficult to have them come out, either because of parking or something else," explains Vincente Garcia, a union representative who is supervising the picketing.
    So instead, the union hires unemployed people at the minimum wage—$8.25 an hour—to walk picket lines. Mr. Raye says he’s grateful for the work, even though he’s not sure why he’s doing it. "I could care less," he says. "I am being paid to march around and sound off."

    These guys should strike for better pay.

  37. pstas

    "things are going exactly according to plan and the old money crowd is playing a long, patient game"
    Uh oh, time for my tin foil hat again.

  38. pstas

    Cap-outsourcing- this has been going on for a while. The first time I encountered this was 5 or 6 years ago -  I had a subcontract on a  job in one of the south Chicago suburbs and the Electrician’s local was picketing the jobsight using temps from Manpower. I hear it is a rather common practice. 

  39. samz3700

    Phil – I love you -
    I never thought i would find another lefty investor -
    Sadly my disdained for Reagan and the right led me to Sociology, Marx, and Critical Theory -
    the 90s and 00s were a tough time for us -
    You are so right that inequality based on wealth and income have ruined this country
    However, I want you 100% focused on making us all money!!! It’s alwasy been hard to turn left wing econ. into an investment thesis – bc so many people are operating in their own distorted reality – I do like the top 10 percent theory
    NYTimes just said they are cutting back too.
    http://www.nytimes.com/2010/07/17/business/economy/17consumers.html

  40. revtodd64

     Obama the Centrist – Radicals do not get through the primaries in this country.  It costs a massive amount of money to run for office and radicals don’t have the bank accounts to put up candidates.  There are very few left wing radicals holding national public office.  Read progressive literature like Mother Jones, The Progressive and the Nation and then see if there are any candidates that push the agenda of the left.  Trust me, there are not.  Many of my more left leaning friends want a strong Green Party and hold their nose and vote for mainstream Democrat candidates because they don’t want to give the race away to Republicans.  
    To those of us on the left, Obama looks very centrist.  We wanted more of a single payer type health like much of the industrialized world already has.  We wanted much stronger financial legislation than was passed.  We wanted Guantanamo closed, oppose predator drones blowing up civilians, can’t understand why Obama hasn’t gotten rid of "don’t ask, don’t tell" when most of the military is ready to move on.  But in each case Obama has calculated what is doable, not what the left wants.  That is the only way things can get done right now in a country so ideologically divided.  
    Maybe this is why Obama looks so radical to people.  The Democrats are divided, but the centrists still hold the power in the party.  The Republicans are divided, but the right wing is more dominant and moderate Republicans are nearly gone.  There are few moderating voices left in the Republican party who try to explain to the right wing that this is a big country with a lot of diverse people and you have to make some compromises and try to understand different points of view.  In the Democrat party, there are more moderate voices telling the left wing to hang on and accept gradual change.  Right now any change back to the center looks radical since Bush shoved things well to the right.  Much of the country has forgotten what the left or even the center look like.

  41. Phil

    Good morning! 

    Interesting article in Time that says that those who say we have $56Tn in liablilities fail to take into account that $40Tn worth of entitlements should be counted as an asset to those due the benefits – interesting concept!  Also, good rundown of who’s to blame in the first place.

    I went to a garden party and now that song is stuck in my head.  Don’t know why no one plays it anymore – it’s a nice summer song…  I have decided people drink too much.  Maybe it’s because I live in an Italian neighborhood but I’m pretty sure my parents and their friends (plenty of Italians then, too) never drank as much as people seem to now, especially beer.  First of all, you shouldn’t have beer at a garden party in the first place – maybe I’m a snob but it cheapens the look of the event (I did have a Guiness and I contemplated this while I was drinking it and putting it down on the nice white table).  I remember my parents used to have back-yard parties and we would go to the store and stock up on soda, iced tea and lemonade and my folks would always have liquor for those who want A drink or TWO but we weren’t running out and getting 4 cases of beer for 20 people.  I’m curious to know what others think about this….

    Anyway, I’m off the political thing today as I am doing my reading (new post to follow), although that often leads to more political outrage…  Unemploymenty and the changing structure of the US economy isn’t political anyway but, as you can see from the comments, some of our more Conservative members will defend the status quo no matter what the consequences for our country and, until a solid 60% of the voters manage to sustain their outrage for more than a commercial break – nothing will change.  As long as "throwing the bums out" is considered a solution, nothing will change.   It’s like changing whether you are going to use the shoe or the thimble in Monopoly – you are STILL playing Monopoly!  By the way, think about that game – everyone plays it and the goal is to be a winner by buying up all the land, winning all the money and ruthlessly wiping out your competition – great indoctrination Comrades! 

    Keep in mind, as a general theory.  This is what I talked about in our economic outlook at the beginning of the year.  If you own a big business – this is all GOOD NEWS.  If you invest in big business – this is all GOOD NEWS.  We do need to separate our desire for social justice (for those who have any) from the desire to make money and stay ahead of the game.  We are playing Monopoly and if you want to make up your own rules and just bet on the little purple properties – YOU WILL LOSE. 

    I get a little bored making my global commerce speech every time the market dips 2.5%.  We ran from 9,600 to 10,400 (800 points, 8.3%) and now we pulled back to 10,100 (2.8%), which is about 1/3 of the run-up (remember Fibonacci).  If we pull back more than 50% (10,000) THEN we have a turn but, otherwise, how does Friday change your long-term outlook?  What really happened that shook up the global markets?  If you get out of the markets every time there’s a sell-off, here’s what you miss:

    Now, on the one hand you can say you don’t miss too much as we keep pulling back, which is why we love our disaster hedges but they still lose money if you don’t take advantage of 2.5% drops and take a little profit off the table.  These are, obviously, NOT rare events – certainly not in this bot-driven market.  This is pretty much the pattern they run on the way up – drive out the bears with relentless up moves as the bots accumulate – then sell it all and drive out the bulls.  Repeat as profits are needed.  As long as you sell it all for a couple of percent more than you bought it for – it’s a huge win!

    So an uptrending market these days seems to be a strong series of winning days followed by a huge sell-off while a down-trending market is a strong series of losing days followed by sudden bursts of buying.  Next week, we need to hold 10,000, I think, as that will start forming a nice base all the way back to mid-May and confirm the Feb bottom (9,908 was the low close).  We do need to take back our upside levels by next expiration but that’s a month away with a lot of earnings so please folks – try to have some perspective:

  42. bps2002

    Phil,
    I agree with the perspective.
     
    It seems to me that every investor/trader has a shortened time horizon on all investments/trades so we get these gyrations between expirations for fear of bots coming to eat our gains.
     
    There are about as many web ads and offerings for option strategies as there are for trading/owning gold; I’m not sure of the ramifications of that; any thoughts?
     
    One of my favorite movies is Pixar’s "The Incredibles" and my favorite line in that movie is when Syndrome says to Mr. Incredible as Syndrome intends to take being a super-hero mainstream…"and when everyone is a super-hero, then noone will be a superhero". Is that what is happening; option strategies and trading has gone so mainstream that a new breed of superhero (the bots) now dominate the game?

  43. rn273

    Phil,
    Have you given any thoughts to using the weekly options on AAPL? I was considering buying an Aug expiring ITM call (to have the least time premium) and sell ATM weekly calls. For eg. the 250 call expiring this Friday traded at about $8.1 – that is all premium. The Aug 220 call is trading at 33.5 – so you could buy that and sell the 250 weekly. Repeating a similar process week after week might give decent returns.
    One more strategy can be to buy the 240 Aug Call for 19, and sell the 250 weekly call for 8 – this can be a relatively low risk modestly bullish strategy into AAPL – our risk would be either if AAPL jumps up 10% or so in a day (thus losing premium on both calls), or collapsing entirely. 
    What are your thoughts on this?
    Thanks

  44. Phil

    Editorial notes/Lump – Thanks, I need someone to do that!

    Agenda/Stjean – Well you can’t expect people who have committed a crime to steer the conversation around to getting to the bottom of the crime and how to get retribution from those who benefitted, can you?  Good for David Obey!  I am very pleased that these issues are finally beginning to be discussed more openly.  We are heading to a class war and it’s amazing to me to see the top 1%’ers circling the wagons and deny, deny, deny until it’s too late when the trial finally comes and the vote is 90% guilty, 5% not guilty and 5% unsure rather than step up and address the situation properly.  This whole thing could be over tomorrow with a 10% tax increase on the top 1% and corporations ($1.5Tn) and we’ll have decades of projected surpluses even if we don’t trim spending (because most of Obama’s budget overrun is stimulus spending, not continuing programs).   Even if the entire $1.5Tn came out of $6Tn in corporate profits, that’s 25% off the record highs and the market is already 40% off the record highs so I’d rather balance the budget and take the market hit, on the whole…

    Privatized SS/Rexx – Man, could you imagine the catastrophe?

    Stability/Flips – Yes selling puts (assuming you want more) and calls is just a simple and direct thing that works.  The trick is to be realistic on the put side and not greedy.  If you bought GE at $11 and it’s now $14.55, you don’t really want to DD at $14, even if it’s net $12.60 after selling the Jan $14s for $1.40.  So you take a little less and sell the Jan $12.50 puts for .88 which, paired with the $15 calls at $1.30 is a snappy 15% return in 6 months on $14.55 but would be 20% of $11 so there is no reason to be greedy when setting your targets.

    Politics/Bhaskar – Well they do tend to influence the markets and you ignore it at your own peril.  We try not to get into political debates during maket hours but I’d rather discuss politics with this fine group of people than anywhere else.

    Good point on Obama Jtiff.  Remember G2, 7 years into his Presidency saying "you can’t judge me too quickly, history will show the job I’ve done" and all the Conservative pundits circled the wagons and talked about how you can’t rush to judgement on what was clearly, to most people paying attention (and the 2008 voters apparently) the worst Presidency EVER.  Well now it’s moth 18 for Obama and judgment has been passed and the sound bites are flying but what the Conservatives don’t get (and they didn’t get this in 2008) is that they live in a bubble with other Conservatives and they are being more and more marginalized by thier ridiculous statements and hypocritical behavior.  I’m sure that this statement will be met with derision and that’s fine with me because I want them to think Obama’s a failure and the election is in the bag etc. etc. - it’s the same misguided strategy that took them down in flames last election so – Shhhhhhhhhhhhhhh….

    Speaking of misguided, Sarah Palin kicked ass in the Gallup poll with a 76% favorable rating as the Republican Presidential nominee vs about 65% for Huckabee and Gingrich with poor Romney at 54%.  Thankfully Bobby Jindal is down at 45% (or I would think they have totally lost their minds) but that’s mainly due to the fact that 46% of the people surveyed don’t even know who he is (yet he scores just 11% below Romney).  I personally can’t wait for the Palin/Obama debates.  Good choice guys – you must be very proud!

    Yes Barf – it’s all a plot to tax the middle class because the Democrats have decided that they should represent only the interests of the bottom 60%, even though most of them don’t even vote and they generate less than 20% of all campaign contributions – that’s their secret model for success all these years.  I can’t belive you cracked the code…  As to taxing the top 1% – with an average income of $3.6M a year, that would be 1.4M x $3.6M/10 = $500Bn but we’re not just talking about people, we are talking about coporations and their $6Tn in AFTER TAX income so that’s another $600Bn at least – all from asking for 10% from people whose 10% represents 10 times the average American’s total salary. 

    I’m very sorry if you fall in this MARGINAL bracket and your income OVER $1M gets taxed in a 10% higher bracket and you end up paying $260,000 more taxes on you $3.6M income in order to save our country from ruin.  Please tell me all the horrible ways this will impact your lifestlye and I will be happy to plead your case to the powers that be.  If you do a really good job, you may be able to stop America from taxing TBoon $360M on the $3.6Bn he made, which would be the ENTIRE earnings of 100 people like you that will have to be collected elsewhere to make up what you don’t want the top 1% to pay. 

    This is called the Greater Fool theory for a reason – unless you ARE TBoon or one of the other top 30,000 – this is not about you at all – this is about what’s best for America and this is about addressing a MASSIVE inequity in the system that causes the top income earners to have an average tax rate of 17% because they derive 95% of their income from dividends and long-term capital gains (their accountants, of course, make sure they do) – effectively escaping the burdern of doing their fair share to keep this country running. 

    Oddly enough, the same people who defend the right of the wealthy to live a tax-free lifestyle are the same people who say a fat guy on an airplane should have to pay for 2 seats.  Where is the logic different?  A "Fat" Capitalist has more homes, more cars, more stocks and uses more resources than everyone else on America Airlines so they take up more room and leave less for the rest of us.  Should they only pay for one seat?  

  45. Phil

  46. alik

    In view of this diagram do not you think that BID (that caters to super-rich) is a good long-term investment even despite its so-so fundamentals?

  47. rj_jarboe

    Phil,
    Here is an interesting slide show that reinforces some of the points you have been trying to make.

  48. rj_jarboe

    I’ll try 1 more time. LINK

  49. rj_jarboe

    Sorry, it’s not working with hyperlink. It will have to be copied and pasted if your interested.

  50. Phil

    Education/Humvee – We can’t have an educated populace no matter how much money we throw at it???  Really, if that’s what you believe then no wonder we can’t agree.  America used to be a great country that felt that it could accomplish anything if we had the will to do it and now you say we’re too incompetent (or just too dumb?) to educate our own children.  WOW!  And single parenting makes this impossible (rare though it actually is)?  Steve Jobs was an orphan, you know…  Bill Clintons father died when he was a baby, John Lennon was raised by his aunt, Nelson Mandella grew up in a state foster home…  You can’t change culture by passing a bill, you have to change the attitude of the people first from "No we can’t" to "Yes we can" – obviously something only half the country gets and the other half fights against…

    Cutting back/Diamond – We are in trouble if the top 10% stop spending and that’s a reflection of the negativity of the past month.  Look how many people on this site (mostly top 10%’ers) think we’re going off a cliff.  The difference between a recession and a depression is attitude.  In a depression, people are literally depressed about the economy and don’t even bother to try to make things better as they simply withdraw into survival mode and everythig goes to hell around them.

    GS/Acrobra – That’s a cheap spread but I don’t think GS goes to $175.  Between fines and FinReg, it will not be business as usual for them in the near term.  Meanwhile, if you do want to play them up, you can sell the Jan $135 puts for $11.10 and the Jan $135/155 spread at $10.50 for a .60 credit at least unless GS fails $135, in which case you own it for net $134.40.  Meanwhile, you are starting out $11.17 in the money.

    Disaster/Terra and Ranger - Remind me tonight.  I have to see where we look weakest. 

    Contradictions/Jvest – The articles on this site are written by people whose opinions I respect.  Whatever it is you decide to ultimately follow, you do yourself a disservice by not reading both sides of an argument before making a decision.  There are many, many web sites that only give you opinions of people they agree with – this is not one of them.  There is no contradiction between David’s TA and my opinion that the TA is meaningless.  The TA is still fine, taken at face value but anyone who extrapolates anything based on a single day’s move is nothing more than a fool.  As to finding my articles – there’s a tab on top of this page that says "Phil" and that has just my articles but we don’t have a search coments by Author although we should have something like that in our summer update. 

    Bush Social Security/Cap – Thanks again for giving me the biggest laugh of the week.  Do you really not know the truth or are you just testing us?  I’m not even going to bother with this one, here’s the Washington Post from Feb 2006 – before people even realized that the Democrats has stopped a $700Bn disaster by stopping Bush from putting our SS money into the stock market right at the very to (to help GS et al head for the exits, of course):

    Last year, even though Bush talked endlessly about the supposed joys of private accounts, he never proposed a specific plan to Congress and never put privatization costs in the budget. But this year, with no fanfare whatsoever, Bush stuck a big Social Security privatization plan in the federal budget proposal, which he sent to Congress on Monday. 

    His plan would let people set up private accounts starting in 2010 and would divert more than $700 billion of Social Security tax revenues to pay for them over the first seven years.  Then he seemed to be kicking the Social Security problem a few years down the road in typical Washington fashion when he asked Congress "to join me in creating a commission to examine the full impact of baby boom retirements on Social Security, Medicare and Medicaid," adding that the commission would be bipartisan "and offer bipartisan solutions." 

    Tin foil/Pstas – So let me get this straight.  My observation that the top 0.01% work the system to insure them long, steady accumulations of wealth over time is a wild conspiracy theory but you know for a fact that union picketers are nothing more than temps???  It may happen once in a while and, even if it does, does that invalidate the union or the concept of unions?  Management hires lawyers to bust unions and reneg on contracts – what does that say when they use "hired help" on their side of the picket line? 

    Focus/Samz – As a fundamental investor, you don’t ignore politcs or fashion or anything else that goes on in the world – even if it makes you uncomfortable or stressed or whatever to face up to reality. 

    Center/Rev – Good point.

    Options/BPS – It’s still a very tiny fraction of all investing.  Go ask 100 people you know if they’ve every traded an option, even people you would think should know all about it – they act like it’s some strange form of voodoo that can never be understood by mortal men.  Bots don’t trade options – the spreads would bury them.  

    AAPL/RN – I haven’t had a chance to study the behavior of the weeklies but AAPL is so volatile I’m not thinking it’s a good idea to try to run spreads on them that way. 

    BID/Alik – Not a sure thing but we did like them when they fell off a cliff last year under $10 so if they die again I’d be willing to bet on their long-term survival. 

    Insider/RJ – Yes, I like that article, linked it earlier in the week.

  51. gra1957

    So Moynihan woke up to the fact that the Federal government was using the Social Security surplus to fund the deficits in the general fund in 1990?  He was either an idiot or a liar.  That practice actually started under LBJ in 1968 with the unified budget, so its pretty dishonest for Dr. Smith to paint this as a Greenspan/Reagan scheme.  I figured this out in 1979 as a graduate business school student.  Also, are we really to believe that Moynihan didn’t know that this was going on??    Both parties are equally complicit in this scheme and have been bought and paid for by the top 0.01%, although I blame the politicians more for this than the top 0.01%.  They saw this as a bottomless cookie jar to fund their pet projects.  Alas, the cookie jar is almost empty.

  52. augrusot

    Phil, You asked about people’s thoughts on drinking. I agree that people drink too much today. I think parents and the law have to some extent messed people up on this by making it "illegal" to drink before you reach a certain age. I grew up in an italian household and there was always wine on the table for dinner. I could drink it if I wanted since the time I could talk. My father’s rule was at dinner time, anyone could drink some. After dinner, the wine disappears until the next dinner time (you could drink but you had to be balanced). When I was in highschool, all of my friends wanted to drink and get drunk because they were all raised being told they couldn’t have it. To me, I didn’t care since it was always available. I got drunk once and realized my father’s wise rule.
    I have implemented a similar thing with my teenage boys. You can have a drink with me if you want, all you have to do is ask. To them alcohol is no big deal because it is available to them (mind you, I do not take this stance on drugs, since that is harmful in any amount).
    I think that if we teach our young people balance and moderation at a young age, then alcohol wouldn’t be as much of a problem as it is now.
    Tony

  53. fjd10595

    gra, I think that the REagan Greenspan scheme was the plan to put it back on a proper footing and that part of the understanding was that the money would no longer be used as a cookie jar.  But I’m not sure of this, I never read the plan. 

  54. knuklhead

    My two cents worth:
    The biggest on-going problem with govt over the past 20 or so years is the complete infestation of lawyers at all levels.  To me, lawyers are trained to do 3 things:
    1. Fix blame
    2. Move money/assets from one group/individual to another
    3. NEVER answer a direct question
    If you watch most politicians (regardless of party affiliation) you will see these 3 attributes again and again.
    I would love to see a requirement for anyone running for public office to post a resume for all to see.  I bet the work experience part for a lot of these folks would be pretty thin.
    —end of two cents worth

  55. gel1

    Phil
    I am scoping out a few plays for the morning… I have been looking at FXI as a good candidate for a long position. As far as I am concerned, China will ( with their much stronger economy ),  turn the corner upward before we will here in the US. I am considering doing a bull call ratio spread – Jan 38/45 and selling  the 41 puts in a ratio of 3 to 2 for very substantial credit.  Do you like this one?

  56. lflantheman

     Phil……Parties/Observations:     People do drink too much at parties, but that’s a GOOD thing.  It peels the cortex and allows for more meaningful conversation, as people say what they think and are less likely to bullshit you.   As to beer vs. wine……  Wine appreciation takes years to develop.   People drink beer for the buzz.  They drink wine to enjoy the oral and nasal attributes of the beautiful grapes, which also take years to develop.  I seek out wine-drinkers for conversation.   Beer drinkers…..not-so-much.    Was that a David Bruce 2006 Pinot Noir you said you were drinking at that party Phil?   

  57. rj_jarboe

    Iflantheman,
    Have you heard of the term Wino? You are probably right, their appreciation did probably take years to develop. Maybe beer drinkers are more sophisticated than you know.

  58. humvee4me

    Education:  In inflation adjusted dollars the US has more than doubled the amount spent per student from 1970-2007; more money doesn’t equal better education.  RE: Beer/Wine   Having a nice wine cellar, I still thoroughly enjoy a fine ale; a good microbrew has enough complexities to satisfy any palate.  USA only ranks 13th in per capita beer consumption; surely we can improve on that, perhaps a department of hops & malts??  
    http://en.wikipedia.org/wiki/List_of_countries_by_beer_consumption_per_capita

  59. pahurik

    Tomorrow is interesting day in Europe: http://www.reuters.com/article/idUSTRE66G0RT20100718
     

     

     

  60. Pharmboy

    augrusot – great philosophy on the wine at dinner.  When my boys get old enough, I plan on doing the same. 
     
    I am going to go off on a different avenue, but still a hot topic and one to consider since we are facing budget crisis, immigration, etc, and it has to do with drugs.   I am of the stance that all drugs (Marajuana, cocaine, heroine, etc) should be legalized.
     
    First, alcohol IS a drug.  It alters mood and behavior.  Alcohol intox has two phases:  First, it is a CNS depressant, and then it then becomes a CNS stimulant (in moderation).  Its LD50 is ~ 0.4% or greater (meaning it kills).  Here is a table of the BAC % and what it does in the CNS.  Alcohol is regulated and taxed accordingly.  Did alcohol consumption go up or down after prohibition?  Not known, but what is known is the deaths went up considerably after the first few years of prohibition b’c the quality went down (methanol content was most likely a big part of it as methanol tastes like ethanol, is more intoxicating, and kills quicker if you are lucky. Otherwise one is blind for life).  The Cato institute has a good article on prohibition and its society effects.  I think illegal drugs are doing the same and this would, in part, ease a small part of the budgetary problems of local authorities.
     
    Nicotine IS a drug. It is a stimulant and relaxant.  Nicotine releases glucose from the liver and epinephrine from the brain.  Cigarette makers were making hybrid plants (or maybe cloning plants OH NO!!!!!!)  that had higher nicotine content, and thus increased the ‘addictive’ qualities of their drugs, er cigs.  We are now regulating them more closely, and taxing them, but is this altering behavior?  Consumption has gone down – by using eduction!  From 1965 to 2006, we went from 46% to 20%.  I think the same eduction campaign can be done with drugs – all drugs.
     
    Heroine = Codeine/Morphine.  The body makes codeine and morphine (more morphine actually) from heroine through metabolism by the brain and liver.  All are addictive, but it has not stopped people from using Oxycodone (another derivative) which is a schedule II drug, meaning you have to have a DEA license to prescribe it.  But it is not the young who are abusing it …..it is middle aged people….
     
    Cocaine was legal and was in Coca Cola as late as 1905 (with lots of caffeine – another drug  OH NO!!!!). Cocaine is a stimulant and acts by inhibition of the transporters that reabsorb serotonin-norepinephrine-dopamine – think of it as a SUPER Prozac! 
     
    Pharma companies are making weight loss drugs that are of the cannabinoid family (marajuana).   Whilst they have a different mechanism of action (inhibition), the have side effects are not ones that people want to deal with ( see Acomplia). 
     
    So, being a scientist and studying drugs, patterns, behaviors, etc, people will do drugs no matter what, and if they are regulated and taxed, like alcohol, then why not legalize them.  Yes some drugs are more addicting than others, but addictive behaviors are in all of us.  Second, if they are legal and regulated, then dosages can be controlled (like prescriptions), because the drug cartels are now making drugs that are MORE addictive (as in the above noted prohibition problem and cigarettes)!  Education is the key here, and the US is doing an OK job at teaching about the use of tobacco, why not drugs (As to augrusot’s  point on alcohol, if it is there, maybe it won’t be so sexy to do).  Estimates are that we spend $45B/year for the war on drugs, and if it was legalized and taxed, the gov’t would bring in $33B in taxes.  That is a big turnaround. That does not take into account the prison population issues, refocusing the police, etc. to fight terrorism, immigration, etc.   
     
    On another note, Here is an article that focuses on the Minutemen patrolling for smugglers (drugs, people, immigrants, etc).  This is going to be the next problem when the minute men fire on the boarder agents or police in a fire fight with drug lords/smugglers, and the minute men actually outgun the police force!….then gun advocates will be cornered b’w a rock and a hard place (don’t get me going on gun rights). 

  61. tradinv1

    Phil, Did you see the aticle in Barrons about Greece?  If what the article says is true the idea that the IMF and EU have fixed the Greek (or any other European soveriegn debt) problem is crazy.  This must be a onesided view, but the outcome is close at hand.

  62. dflam

    Phil : If u get a chance, I would appreciate it if you would please update the 500 % protection positions or post some new recommendations. Thank you.

  63. kinkistyle

    Speaking of Barron’s, the cover of the current issue is purporting that Google is 35% undervalued.  Magazine Cover Contrarian Sell signal?!?

  64. gel1

    Pharm…. I am in agreement with your stance on the legalization of drugs. Making them "illegal" does nothing but make them expensive, and those that are predisposed to injest this crap will do so regardless of the price. It should be offered free. At present the druggies just steal whatever they need to to pay for it.  Parental guidance is the best solution for abstinence. I would make one more suggestion, and that is to have the government contaminate 5% of all drugs with a deadly poison, and let this be known among those that choose to use drugs (large budget to advertise this new stealth ingredient). It would be a lot like "Russian Roulette"as you partake in the substance, and for those that want to gamble, then they are not intelectually qualified to function properly in our society anyway. One last caveat – If you are using drugs, then you pay for all your own medical expenses, as you are otherwise uninsurable. If you are unable to pay for your medical – then tough luck! I believe my solution would be the end of this awful problem, and our prisons would be 50% empty, as opposed to the current overflow status. Our insolvent financial crisis at the state level will now take a turn for the better – less crime, less requirement for police, fewer court cases, and fewer lawyers preying on the unfortunate.

  65. bps2002

    Pharmboy
    You wrote; "augrusot – great philosophy on the wine at dinner.  When my boys get old enough, I plan on doing the same. "
     
    A reasonable idea, it was successful with my boys. I cannot see myself sitting around the table hitting a bong though with them.  Wine/beer is one thing but cocaine/heroine is another; be careful in legalizing everything; what is accepted as moderation is often used to excess and making it easy might be a mistake. I think it is a a mistake to equate all addictive substances/drugs to the prohibition analogy; as that is why they should be legalized.
     
    At least beer and wine have some calories and make a good meal even more pleasurable; cocaine/heroine I’m not so sure about.

  66. SeanC

    acobra, who is this great options trader you follow?

  67. augrusot

    Pharmaboy, I don’t agree with legalizing drugs. But I can say that the financial benefit to the government would be substantial. In Ontario, Canada, where I am from, alchohol is purchased through provincial (state) outlets. They are open 7 days a week. Alcohol has built in taxes and retail markup of course. Since it’s run by the state, they get both. It is the one government business that turns in a huge steady profit. Maybe just doing that would solve the US deficit problem :)
    The price difference for a bottle of Vodka is about 30-40% higher than in the US. I buy my liquor when I travel south, since we’re allowed 1 bottle per adult duty free. Even with the amount of liquor Canadians transport back over the border, the government still pulls in a huge amount of revenue.
     
    Tony

  68. augrusot

    Pharmboy,
    On another subject, what is your thought on NWBO Northwest biotherapeutics? They seem to have a better solution than DNDN for a cancer vaccine.
    Tony

  69. DKGuy

    Drugs and Alcohol – Having been raised by an alcoholic father I know the down side of living with the problem first hand. The entire question of legalizing drugs is one that scares the heck out of me since folks already have such a tough time dealing with the effects of those drugs and prescriptions of substances that are already legal.
    Due to my background my wife and I have spent many hours volunteering in shelters for abused women and children many of which have been victims of addicts and to see the affects on the innocent kids is not just alarming it is devastating. I’m affraid the issues of child abuse will only get worse. 
    My wife and I are not prudes by any means and enjoy a very fine wine cellar and have done tasting trips to California and Europe but again there needs to be a discipline and maturity exercised that unfortunately so many have yet to acquire. Not to say we are any better but we have seen what can go wrong and what is at risk.
    Folks the down side is already horrible. It scares me ot think that it could get worse.  

  70. Jtiff

     Alcohol- I think that if someone throws a party that is for adults then it is fine to serve alcohol.  But if there are going to be kids there, then the beverage choice should be dialed down and limited.  Guiness, my favorite pub beer, seems a bit heavy for a hot day outside or even a warm night.   Usually when I combine hot weather and heavy beers I sound like a pregnant woman by complaining about how bloated I feel.  Nobody wants to throw a party to have the guests go home and complain about the lack of, or choice of, booze and food.  Image is important and social events can be competitive.  I don’t think that people drink more or less now.  I think it has more to do with what impression people are trying to put forward at their party.  If everybody had fun and enjoyed the experience, then the choice of a lot of alcohol was a good one.  If not, then they should tailor their beverage choices a little better to suit their guests.  

  71. 1020

    Phil taking a stick to that ‘ol "independents" hornets nest, Pharm’s solid check on reality and all the great commentary. Just another weekend of fine reading at PSW…….  :)

  72. Pharmboy

    NWBO/arg – they seem to have DNDN beat, but in my mind they are very early in the game!  If you have play money, then I think they are worth a gamble.  There are several vaccine makers out there right now, but all are in early stages. 
     
    FWIW – MRK had a vaccine for HIV….it failed.
     
    Gel – Smoking kills people faster and thus those that stop are living longer and costing more to society as a whole.  Here is a New England Journal of Medicine article from some time ago.  Drugs would do the same thing, so the medical burden/debt on society would be far cheaper than the costs of keeping them in prison!  Oh, one other thing, alcohol kills more people than drug use…..

  73. gel1

    Pharm
    With my plan to eliminate illegal drug use, the greatest economic savings would come from the penal system. As you  know, our state is severly burdened by the cost of housing prisoners that are serving time for drug abuse and trafficing. All of this would be eliminated under my plan. These folks that otherwise would be incarcerated, would now be productive and paying taxes.My plan assures there would be only two options – you are either drug free, no longer a burder to our society, or you were one of the unlucky ones that chose the wrong option and are dead.  This sounds cruel….. but that is what it will take to cure this malady forever, before it destroys us.

  74. Cap

    Ah yes, Social Security …. Phil, you really are on thin ice …. having no facts on your side, you resort to sad mockery …
     
    http://www.nypost.com/p/news/opinion/opedcolumnists/three_little_pigs_how_entitlements_Ah41sxLQHFRPa5sB0vsB3L
     
     
    Ah yes, after Bush failed and gave up on the idea of reform, a commission is kicking the can down the road.
     
    No wonder its Obama’s favorite solution for everything.

  75. gel1

    Pharm/NWBO
    I am holding this stock, and as you say the payday is a ways off if you are waiting for FDA approval of the NDA. These guys might be a good takeover target, as they have so much in the pipeline. They have no manufacturing facilities, and work out of a office in Chevy Chase, MD, just ove the DC line. I used to have an office in the same building, many years ago.

  76. Phil

    Weekend Reading:

    More evidence that it’s the end of the world as we know it5 Second Rule Repealed

    On the bright side:  No more shots

    Somebody bought 241,000 tonnes of cocoa futures for about $1Bn on Friday: Analysts said it was very unlikely that a chocolate company, such as Nestle or Kraft, or even their suppliers, would buy such a huge order in one go and that is was probable that one or a number of speculators, possibly hedge funds, had attempted to corner the market. By doing this, they would have control of the entire supply in Europe, forcing the price yet higher.  Eugen Weinberg, an analyst with Commerzbank, said: “For one buyer it would likely be a little bit too large. It would be a crazy number. That said, if you’re cornering the market …  If it looks like cornering, feels like cornering and the price difference between Europe and the US is so large, it probably is cornering.”

    Even brighter – Lightsabers are almost a reality with S3 Spyder Arctic: The Arctic emits a 445nm cool blue, ultra high power 1W beam which appears up to 4000% brighter than the Sonar’s 405nm violet beam. This direct blue laser diode is the result of the evolution of laser technology. Less than one year ago, this laser would have cost thousands of dollars to build. Don’t let the Arctic name fool you, this laser possesses the most burning capabilities of any portable laser in existence. That’s why it’s also the most dangerous laser ever created. In recognizing and mastering the power of direct blue diodes, the Wicked Lasers’ Arctic shall become the standard by which all other blue lasers are judged.   The girls are going to love this for Christmas

    Hedges – I’m still not buying the sell-off so it’s very hard for me to come up with new disaster plays I don’t believe in. 

    Very revealing graphic.  Of our $12.8Tn of official debt (not the unfunded liablilities), $8.89Tn is held domestically and BY A MILE, the largest holder of that debt is none other than our beloved Federal Rserve, who hold 61.2% of it.  Now keep in mind that the Fed is NOT really a government agency, it is a private corporation under a government mandate but effectively works on behalf of the banks.  So if Ron Paul really wants to "End the Fed" – let’s just not pay them!   

    Great article on wages and the economy: We’re back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground. And as long as this trend continues, we can’t get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing.

  77. Phil

    Straight Talk on Outsourcing (Infographic)

  78. Phil

  79. Cap

    Chocolate Buyer – the ultimate fat finger !
     
    300 miles driving today and lots of sun; I am wiped !

  80. Phil

    A new study from the Pew Research Center, based on an opinion survey in May of nearly 3,000 Americans and an exhaustive evaluation of economic data, provides a preview. Not surprisingly, it confirms that Americans have become more frugal; 71 percent say they’re buying less expensive brands, 57 percent say they’ve trimmed or eliminated vacations. Life plans have changed; 11 percent say they’ve postponed marriage or children, while 9 percent have moved in with parents.

    Hmm: Central banks have swapped 349 metric tons of gold for $14 billion in cash. This move by central banks is highly unusual. Until this year, gold swaps with BIS have been relatively steady. This year the swaps took a spike upwards. At this rate, the BIS holdings represent the "biggest gold swap in history."

    Speaking of unions hiring people to man the picket line.  Here’s an article about Chinese companies who hire white guys to pretend to be the CEO:   Any investor can tell you the story. Itching to endow — billions at the ready — you fly out to Shanghai, drive to company HQ, and walk into the board meeting — only to discover that the whole place is run by (gasp) Chinese people. This same scenario has apparently played out with so many potential investors, Chinese companies finally decided to act. Their solution? Slap a $3,000 suit on a white actor and let him play president The actors get a few hundred bucks to shake hands and give speeches, foreign investors feel the sense of security only a white man can provide, and the Chinese venture makes off with millions. Everyone comes out a winner.  Here’s an interview with one of the "actors."  And you guys wonder why I avoid Chinese ADR’s! 

    Uncle Rupert’s Telegraph in London banging the Depression drums: Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.  The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.  The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weniger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.

    "Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m."   Republicans on Capitol Hill are filibustering a bill to extend the dole for up to 1.2m jobless facing an imminent cut-off. Dean Heller from Nevada called them "hobos".

    This really is starting to feel like 1932.  Washington’s fiscal stimulus is draining away. It peaked in the first quarter, yet even then the economy eked out a growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and 8.5pc in the four quarters coming off recession in the early 1980s. The housing market is already crumbling as government props are pulled away. The expiry of homebuyers’ tax credit led to a 30pc fall in the number of buyers signing contracts in May. "It is cataclysmic," said David Bloom from HSBC.

  81. Phil

    Where’d you go Cap? 

    Hedges:  As you can see from above reading, there’s not really enough news to justify getting more bearish

    • The DXD play from Tuesday (and Wednedsday) morning’s Alert: Aug $27/30 bull call spread at .90, selling $25 puts for .35) is already net $1 so up 66%, which is as good as we can expect in a hedge on a fairly mild pullback.   
    • Also from Wednesday: FAZ Oct $11/16 spread at $1.90, now $2.50 and Jan $11 puts sold for $2.10, now .70 is up $1.50 already.
    • Also from Weds: DXD Oct $26/30 bull call spread at $1.30, STILL $1.30, sold 1/2 Jan $25 puts at $2.20, now $2 so this one is still totally doable.
  82. kustomz

    HH with some thoughts on the markets

    http://www.youtube.com/watch?v=cQjD2sw_eg4

  83. goldman

    Phil/BP News – "Seep" - So it would seem we now know why the pressure couldn’t build past 6,800 psi…the govt better un-cap the well immediately, or the relief wells could end up ultimately failing.  BP is playing a dangerous game…basically a high pressure fluid dynamics experiment surrounded by immense unpredictability and immeasurable consequences.  See the article excerpt below…even the govt is now finally admitting the well leak could become "unmanageable"…
    Seep near capped well worries U.S.
    http://www.latimes.com/news/nationworld/nation/la-na-oil-spill-20100719,0,1562603.story
    …..the federal government is worried that the seal could create problems of its own. Specifically, if the well’s underground pipes are cracked, the seal could exacerbate the flow of oil through them and up to the seafloor, creating a potentially unmanageable multitude of leaks.
     
    ———-
    And on a lighter topic…another possible unintended consequence of ObamaCare in 2012…for both small biz and and an already over-whelmed (and expensive) IRS agency….
    Why the Self-Employed Might Owe OfficeMax a 1099
    online.wsj.com/article/SB10001424052748704913304575371033842971968.html

  84. samz3700

    If you want a hedge – you could also just raise your cash positions.
    People are getting whipsawed in this market.
    Phil’s hedges are all great and you don’t pay for my opinion.
    But
    Getting short spy – with some longs in place that should out perform also feels pretty good.
    Our friend David Fry is almost entirely in cash – I went to cash in wife’s retirement account at 1160 on s and p – and feel no obligation to do anything -  have not made a single trade  -

  85. revtodd64

     Legalize drug trade – If we go this route, just make sure you are short Wachovia!  (see last week’s archives.)  I would make a huge FAZ disaster hedge since the loss of money laundering income will hurt banking.  It would probably hurt banks more than the recently passed financial regulations.  The illegal drug trade is estimated to be equal to at least 5 percent and possibly as high as 10 percent of global commerce.  (I’ll have to dig awhile to find the research, since I read it three or four years ago.)  Its not just violent drug gangs and the Taliban getting rich off this trade, so I don’t see there being much political will among the big banks to end this.  
    Before we legalize drugs lets do a test and see if we can cut down the spread of diabetes that is being caused by the very legal twinkies and Coca Cola.  If our public health and education system can cut down on obesity and diabetes over a five year period, then we might be able to tackle the kind of plan it would take to deal with illegal drugs.  

  86. snow

    Drugs -
    As a public health practitioner, I heartily espouse total legalization of all drugs – on a similar public health issue, I have a friend who is an elderly obstetrician. He tells stories of the illegal abortion days, when the Kaiser Permanente Sunset Medical Center had an entire floor devoted to caring for patients with botched abortions. There’s a very good model in Vancouver BC, where little store-front clinics have been set up, essentially as "shooting galleries" – anyone can come in with their injectable drug of choice, receive a clean needle & syringe, inject under medical supervision, and stay there in a relaxed if modest place until the effects of the drug have worn somewhat and it’s obvious that they won’t OD. It’s cut down enormously on infectious disease transmission as well as the ER trips and deaths from accidental ODs, opiates being the main problem there.
     
    Let’s go a little further – along with all the drugs, let’s please legalize prostitution. The trick with both of these is to make the legalization open enough that there is not an incentive for black markets. It would make public health work so much easier if both these "sins" were legal and open.

  87. srfrog

     Phil – a couple of things:
        1.  UCO:  I own UCO stock – and let the July $10 calls I sold in late May expire OTM of course, on Friday.  I still own the stock though – what do you suggest I do… sell another round of $10 calls for $0.50 -OR- wait (I think oil will go up in the near future – so I was thinking of waiting and trying to sell ATM (or a bit ITM) $10 calls for $0.75 instead) … but of course that risks the stock value going down in the meantime if I am wrong.  Long-term, I definitely think oil will grind upwards though.  What do you think?
        2.  TZA:    I added a bunch of TZA stock to what I already own (I believe the market will continue going down) – so I want to cover this by selling calls.  What looks most attractive to you?  For this one – again, my gut says I should wait for the stock price to increase, but this time sell OTM calls at the higher strike price on this one… but again, the risk of TZA going down is there to keep me up at night!
    Anyway – your advice is always appreciated and valued here!

  88. srfrog

     p.s.  what’s up w/ the times of the postings – I see 3 postings before mine that are 6:13, and 6:39, and snow, you are at 9:29 – AM… above mine?

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