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Obama Says: “SoU is Strong” – Phil Says: “Bottom 99% SoL”

Everything is great!

Well, if you are a corporation, that is and that’s all the matters in the United Corporations of America, right?  I went through the State of the Union Address last night with my commentary.  The Cliff Notes of the Cliff Notes are: A 25-year goal of having 80% of America’s electricity come from clean energy (another chance to short FSLR!), A proposal to "redouble" our efforts to rebuild infrastructure (zero has been approved so far, we can double that no problem!), A 25-year goal to give 80% of Americans access to high-speed rail (this will be a neat trick with Amtrack’s $2.6Bn in funding), A 5-year plan to get high-speed wireless coverage to 98% of all Americans.  That one I WOULD trust to private enterprise.

Blaming lobbyists for "rigging the tax code" (it’s not the voting by Congressmen, it’s those darned lobbyists!), Obama says we can lower the Corporate Tax Rate without adding to the deficit.  This is actually true, Corporations paid $182Bn in taxes last year, just 1.14% of the GDP while US taxpayers paid $2,000Bn – presumably under the same tax code as Corporations.  I have long advocated a VAT tax on business sales as profits are too easy to rig, with over 75% of businesses in America paying no tax at all.  It’s not complicated – add 10% to all goods and services sold and hand the government $1.5Tn – the consumers will then determine who is passing through fair market costs and capitalism triumphs and our deficit is wiped out.  That’s my first day in office – anything else need looking at?  

State of the union wordlesObama says worst of recession is over (boosting Global markets) but Government still spending more than it takes in. "That is not sustainable. Every day families sacrifice to live within their means – they deserve a government that does the same."   The President calls for a 5-year spending freeze that will reduce deficit by $400Bn over next 10 years ($40Bn a year?).  I love these plans – somehow a freeze saves you money because you WOULD have spent $40Bn a year more but now you won’t.  This is like when Tina comes back from a 25% off sale at the store and tells me she "saved" $500 – somehow it still costs me $1,500!  

The President says his military advisors have identified "tens of Billions" of Defense cuts that can be made.  Yeah, I think those were identified about $20Tn ago too.  While I have no doubt that $10Bn, even $20Bn can be cut from $1,000Bn in annual spending, I would sure feel better if we had a plan that at least saved enough to make a dent in the $400Bn of INTEREST we’re already paying on our Debt rather than showing us how we can reduce our additional annual deficit from $1.8Tn to $1.74Tn.  

Anyway, there was another few pages of BS and I applaud Paul Ryan for making a respectful rebuttal but, then again, he could afford to be nice as the Tea Party branch of the Republican Party was (literally, I think) foaming at the mouth as she waited to be unleashed.  Bachmann had already refused to sit next to a Democrat at Obama’s speech, unlike every single other member of Congress – so we kind of knew she wasn’t going to be a fan of what he said well before he said it.  I’m not going to say anything else about it because I will be accused of picking on her, so watch it yourself – we report, you decide!  

See, clearly this entire thing is Obama’s fault!  She even has charts that prove it!  I’ll just let Jon Stewart and Steve Colbert have fun with this tonight but the greater economic (and investing) point here is that this is not a Congress that is likely to work hand in hand with the President.  We can expect, much like we’ve seen since November, many compromises made on the part of Obama to cut Government oversight, reduce regulations and enforcement – including tax collections on Big Business – while getting not one penny of all that grand "Building America’s Future" stuff he was peddling.    

The Global investors were buying it as they don’t really understand how powerless a President is when Congress is against him.  The Dollar dove to 77.88 last night, the lowest it’s been since early November, right before it bounced and knocked the S&P down 5%.  Our direction today very much depends on whether or not the volume trading in the US can finally shove the dollar below that 78 line, potentially taking us back to 75.6 for another 5% boost in the markets as our currency collapses – whoopie!  

In my morning Alert to Members today, I said I liked shorting the Dow futures off the 11,950 line as I’m still not expecting 12,000 to hold on the main index (we already took up short positions) and we’ll see what sticks today.  As of 8:30, it looks like we may be able to ride the Nasdaq down as well if it slips below that 2,700 mark.  For example, the QQQQ Weekly $58 puts are $1.35 with very little premium and we can use that 2,700 line as an on/off switch in a contract with a two-penny spread.

Of course it’s a Fed day but, as I said earlier in the week – What are they going to do – PAY banks to borrow money?  When you knock rates down to 0.25%, there isn’t a lot of wiggle room although never say never as the BOJ has gone all the way to 0.1% and their debt to GDP ratio is "only" double ours (so far).  The Financial Times notes that $1Tn of loose Western "funny money" is flowing into emerging markets and could overwhelm the capacity of their economies, overheating their markets and over-inflating their currencies as Western investors scramble to convert their free money into something less worthless – even Drachmas.  

Laszlo Birinyi was the special guest on CNBC at the close and he did a great job of talking up the market despite the earnings misses (DOX, ELY, EWBC, EXAR, NSC, YHOO) that were scrolling along the screen as he said "the party is going to go on a long time."  "When you have an 80 percent move off the bottom as we did … it always has resulted in a long-term market because quite frankly so many people miss so much of it and they have to try and catch up," Biryini said.  Hey, who can argue that logic?  I’m sure CNBC was "surprised" by his bullishness and that the timing of the interview was a coincidence.   After all, how could they know he projected a 322% advance in the S&P on Jan 5th?  As Laslo said:

The bearish arguments for aren’t any more valid. Many bears expect a recession, which they assume is poison for market performance. Not quite. In the 11 recessions since World War II the market has averaged a 3% gain, despite the inclusion in that data set of the 23% decline in 1974. During 6 of those downturns the S&P went up. If this is a recession year, it is not automatically fated to be bad for stocks.

Oh, silly me!  That was what he said in January of 2008.  Gosh, how could I have mixed that up?  Still, look at that chart!  It’s the 3rd year of a Presidential Stock Cycle and we’re right on track to get back to S&P 1,500 by December – what can go wrong?  The Bernank gets to pat himself on the back this afternoon and investors are giving him a 66% approval rating according to 1,000 Bloomberg Readers.  What’s not to like, this guy has given us (top 1%) $3 Tn in totally free money and it only needs to be paid back by our kids and grandkids WAY down the line and we’ll probably be living in the Caymans by then.   

Of course, it does pay to keep a little money spread around our favorite tax havens as you never really know how fast it can all hit the fan.  Global investors are now predicting that Greece will default within 5 years and that will be the last straw for Ireland.  “The problems in Europe have been addressed, but only with a band aid,” said Ted Jarvis, senior vice president at the Indiana Trust Company in Anderson, Indiana, who participated in the survey. “Several euro members have not followed the correct policies and dug themselves a deep hole.”

Brazil’s inflation is on track to hit 6.5% in 2011, the worst since 2004, when EWZ fell off 33% in the first half of the year.  We’ve been looking at EWZ as a possible play ahead of Obama’s trip to Brazil in March but these are some pretty scary numbers!  “Policy tightening will not be enough,” Goldman’s Paulo Leme said at a panel held by the Brazilian-American Chamber of Commerce. “Something will have to give. What will give will be inflation.”

China is taking DRASTIC steps top put a lid on 4.6% inflation (that they admit), setting lending rates at some banks 45% higher than the benchmark 5.81%.  For ordinary industries, lending rates are about 30 percent higher than the benchmark, though top clients can still access loans at a 5 percent discount to the benchmark rate, it added. The newspaper also cited a separate bank official as saying that overall lending in January cannot exceed 12 percent of the full-year target, which is said to be about 7.5 trillion yuan. Yi Gang, deputy governor of the central bank, said that the effectiveness of Chinese monetary policy was increasingly limited, the China Securities Journal reported in a separate article on Wednesday.

Of course China tightening and The Bernanke (new POMO Explained video here) loosening is doing it’s job of ditching the Dollar, which is now down a full 4% since December 10th, when the S&P was at 1,275.  Now the S&P is at 1,295 so we are buying 5 S&P points for each 1% decline in the value of our money and all of our dollar-denominated assets.  If this trend continues and we make that 1,500 target on the S&P, that should give us a decline in the dollar of another 40% – won’t that be special?  

In conclusion – you’d better be out there making an assload of money because you’ll need it to keep up with rising prices for things you buy and declining values of your US assets.  We aren’t going to be able to afford to retire/run away to the Caymans if we have to count on US dollars to support us unless we have an obscene amount of them!  

 


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  1. 1020

    Good Morning!

  2. stjeanluc

    Interesting article for those inclined to play NFLX earnings – and also some good options trading info:
    http://www.optionstradingsignals.com/articles/ 

  3. 1020

    Phil – As I mentioned on your previous post. That speech was difficult to watch…..
     
    I’m in favor of term limits for all, starting with one – six year term for President. So much energy and time wasted to make sure "you like me, you really like me!"  http://www.youtube.com/watch?v=2bzU77zGDlI
     
    Good trading everyone!

  4. flipspiceland

    I keep a photograph of the very hot Michelle Bachman, nee Amble, when she was co-ed at Winona, on my desktop.
    Fostered 23 kids, has a bevy of her own.  Raised by her mother without a father.  What’s not to like?

  5. jromeha

    Phil/Anyone – could you please explain some things from the zerohedge article that Praizada posted yesterday AH about SFP -

     http://www.zerohedge.com/article/here-come-whispers-inevitable-unwind-feds-sfp-program
     
    I am not sure how it is free money…didn’t the banks exchange cash for these bills? 
    My questions:

     
    1. Hasn’t the treasury been selling these bills routinely? 
    2. It removes liquidity from the banking system, how was this supposed to help the financial system?
    3. How is it free liquidity? Didn’t the purchase of the bills remove cash from the banks?
    4. If the treasury stops rolling over these bills, and banks get their cash back, what makes people think they are going to run out and buy stocks and commodities with it? 

  6. stjeanluc

    Some charts and numbers for CSX who reported yesterday:
    http://lemoyne-mappingthemarket.blogspot.com/2011/01/quick-look-at-csx.html
    Phil, these guys have run up a lot and they are up again pre-market but I read the earnings transcripts and they are pretty optimistic about future earnings. Actually, next quarter could be gangbusters as they take advantage of Australia’s problems. Historically they are not expensive. On the other hand, any hicups in China could hurt them. Estimates for earnings in 2011 are around $4.80 and for 2012 at $5.40. At $70, we are talking P/E of 14.5 in 2011 and 13 in 2012. With only a 1.5% dividend, I would not buy them, but could they be interesting for an artificial? Or simply selling puts? There is strong support around $60, so you could sell the Jan 12 60P for $4.00 with $6.00 of margins. That gives you your 20% margins and a good entry point if put to you. And you can DD to $50 in Jan 12 or they can be rolled to the $50 in 2013.
    Once again though, it’s a play on commodities! Big risk…

  7. Cap

     SOTU: " Hey the economy sucks, lets spend more $ we don’t have, but look at that stock market go !  The end."

  8. stjeanluc

    Barry goes over his list of who to blame for the financial crisis he published in 2009 and matches it to the conclusion from the FCIC and BN:
    http://www.ritholtz.com/blog/2011/01/assessing-blame/ 

  9. alik

    Hello Phil, Do you think that in light of Obama’s speach SPWRA is a buy? What about TBT?
    Also, UAL made headlines by reporting an unexpected 325 mln loss on merger costs. Yet excluding one time items its profits are 42 cents versus 23 cents expected by analysts. The stock was down to 24 from 29.75 in recent months (the analysts target price is 36). Do you think it is a buy at this stage or you expect it to continue falling?
    What do you think about GLCH -an investment bank involved with high risk corporate bonds. They had lousy earning recently,  and the stock is down, but according to Yahoo Finance they have a surprisingly good balance sheet with cash minus debts four times the market capitalization.

  10. Pharmboy

    Good morning….I have been trying to find out what happened to the DEPO/ABT agreement, and if there was risk in a DEPO failure with the FDA.  Interesting article came out at SA, and all the other things I read in industry papers suggest that this is a strong armed attempt for better terms.  While playing the FDA is a risky proposition, their drug is a long lasting version of gabapentin (Neurontin), which was originally developed for the treatment of epilepsy, and currently, is used to relieve pain, especially neuropathic pain, as well as major depressive disorder.  There is not much new here.  Unlike Xenoport, who was teamed up the GSK for restless leg, DEPO is after one of the same indications that Gabapentin is already approved. Risks are there with a few failures in clinic, but pain is subjective…unless morphine is the drug of choice.  I am still liking the approval track, and targeting the Feb 7.5 Cs for 60c or better.  Don’t go all in, but a few for a gamble to me is worth the risk.

  11. ravalos

     Cap/SoU, you need to be more positive! without hope there’s nothing .. :)
    by the way, CMG has been downgraded today in expectation of DISAPPOINTING Q4 results by Raymond James (winter storms and higher grain prices).. good news!

  12. matt1966

    You couldn’t have paid me enough to watch the SofU last night.  I do appreciate being able to quickly scan some of the points he and the Rebuticans were trying to make.  Instead, I had a hilarious evening watching Ru Paul’s Drag Race and Tosh.0.  Both of which are 2 of the funniest shows in the vast wasteland that is TV in America.
     
    I will not be trading today.  Can’t stomach it.  Oh, and NPR’s MarketPlace is SUCH A TOOL!  All they said about yesterday’s action was that the Dow rallied to overcome early losses.  Early?  The market’s were down all day up until 2:50pm.  That is not early.  It has become blatantly obvious that they are part of this government’s market manipulation.

  13. amatta

    NFLX-- Canada passed Internet metering… getting some down movement today on the news…

  14. praizada

     TRIN closed higher than 1.8 yesterday and today it is hovering around 0.8 so far. I am learning to read technical indicators. From what I have read, high TRIN is bearish and lower TRIN is bullish and reversal of TRIN like today means trend reversal but from bearish to bullish. If the market was bearish yesterday, I shudder to think what turning bullish would imply!

  15. Phil

     Good morning!  

    As I said in the post, I’m liking those QQQQ Weekly $58 puts, now $1.40 and once we get below $56.50 on the Qs, that’s the stop line.  Too late on those Dow Future shorts as they are dropping hard and fast now, already down to 11,922 so stop at 11,930 (20 trailing) and we’re happy campers. 

    Stuff is going on today

    Wednesday’s economic calendar:
    9:30 Hearing: Bailouts and the Foreclosure Crisis
    10:00 New Home Sales
    10:30 EIA Petroleum Inventories
    1:00 PM Results of $35B, 5-Year Note Auction
    2:15 PM FOMC Announcement

    Notable earnings after Wednesday’s close: ACL, AMLN, CCI, CTXS, DRE, ETFC, HRC, LOGI, LRCX, LSI, MMI, MMR, NE, NFLX, OI, QCOM, RHI, SBUX, SYMC, TER

    Europe is now up 1% across the board – they are loving what they heard but I’m amazed as Germany, yes Germany, had a failed bond auction as investors had no interest in 3.25% 2042 notes.  That may actually be a "good" thing though as it demonstrates a lack of fear driving people into silly, low-priced notes but that’s NOT good for us as silly, low-priced notes is what’s keeping our government alive!  Also fun for Germany:

    German import price inflation rises to the fastest pace in 3 decades, tripping along at a higher than expected 12%. The main culprits are energy and industrial metals. ECB members continue to hold that current price pressures are "temporary." Germany +1.28%. Euro is flat.

    That should bounce TBT today, back to $39 at least (now $38.25) and still obeying our channel between $37.50 and $39ish.  

    While Germany’s bond auction failed, Japan kept their word and bought 40% of the $7Bn of Euro debt that was auctioned this morning with the UK buying 12% and Germany buying 12%.  “The response from international investors was overwhelming,” EFSF Chief Executive Officer Klaus Regling said at a press conference in Frankfurt today. “That is the biggest order book ever. We will check before we notify the Guinness book of records but nobody can remember anything like that in the world.”  Yeah, so realistic…  

    Remember yesterday’s "encouraging" news on housing?   Well, screw that:  

    MBA Mortgage Applications: -12.9% vs. +5% last week. Thirty-year fixed mortgage rate increased to 4.80% from 4.77%.

    Don’t worry though, extend and pretend gets an extension:

    Mark-to-market gets a body blow after the FASB’s preliminary vote yesterday allowed banks to continue valuing many of their loans at amortized cost as they do now. The FASB admits the overwhelmingly negative response to the new proposal helped change their minds.

    Meanwhile, we’re watching Dow 12,000 and S&P 1,295 (although why not 1,300 at this point) and Nas 2,700 needs to hold and it’s all BS if RUT 800 can’t be retaken (still 780).  Volume has been very low this morning supporting the pre-market pump job and, of course, the Fed is this afternoon so nothing matters until then anyway.  

  16. flipspiceland

    @matt1966
    Ditto…
    Was going to flip from "Housewives of Beverly Hills",  to Tosh.o when I saw it on the menu since I had no idea what it was about, but the distaff side owned the remote for three hours.  Thanks for the H/up. 
    Ru Paul, meh.

  17. Maya1

    Phil
    Good morning!
    I am short AAPL Feb $350 calls at $5.13, now 5.30.
    what is your opinion as to get out?
    Roll?
    Generally, when is good time to roll? 3 weeks before?

  18. jmiles008

    Phil/matt -
    Great call on the FAS/XLF play off 29.50/16.50 yesterday!

  19. Phil

     Wow, it’s snowing cats and dogs up here….

    Term limits/1020 – I like that, all Presidents 1 term, 6 years.  VP can become President so 12 years of essentially the same guy is plenty!  Same thing for Congress – the original idea of having them run every 2 years was to make sure they had to answer directly to their constituents but the cost of elections has completely perverted that concept so now they answer directly to their Corporate sponsors.  Short of a new revolution – I’m not sure how to fix this as the foxes are all guarding the hen house.  

    Bachman/Flip – Ah, that explains a lot! 8)

    Wow, new home sales up big at 329,000 and they adjusted Nov down 10,000 to 280,000 so they can call it a 59,000 increase.  Of course these are seasonally adjusted numbers and they are extrapolated over 12 months so up 59,000 means about 5,000 extra homes may have been sold in the entire United States in December and that’s 100 homes per state but don’t try to explain this to CNBC, who are running with this report and, whatever you do – don’t look at this chart!  

    Perspective is a bitch, isn’t it?  

  20. samz3700

    Phil
    I really need some longs to hedge my shorts. Should I just look at the inflation hedges?

  21. jabobeast

    TNA running again….BUY the F"N dip (guess I need to keep telling myself that instead of living in denial and thinking fundamentals still matter).

  22. matt1966

    Phil / perspective:  chuckle.

  23. samz3700

    Wtf

  24. Pharmboy

    MRK – seems to have found a bottom.  If you like the dividend, then buy here and sell some $35 Jan12 Ps.  If you want the options, I like the Jan12 30s for $4.60 or better.  No cover for now, and a 1/4 entry JIC.

  25. amatta

    Phil, 
    Still think we are going down? I don’t think I can take the carnage on the DIA puts much longer… 

  26. samz3700

    ^rut up 1% in a matter of minutes

  27. morxlntway

    good mattress roll up time, but nothing to pay for it :(

  28. lvmoda

    Sold a NFLX weekly 155/220 strangle for 1.50.   Hope I gave the thing enough room to play!  I never thought I’d have to say that with 65 points on a 184 stock!

  29. bobhu

    Good Morning Phil,  I got an old hedge SQQQ play need your advice,
    Short 20 SQQQ Jun $35 put with little premium left, thinking about take little loss to roll to 2X Jun.  $27 put for $3.80 each or I should roll to 2X Sep. $27 Put for even(maybe).  Thanks.

  30. samz3700

    What’s the news that is pushing the ^rut up 1.5%

  31. 1020

    Phil/That explains a lot   I wanted to say something – Thanks for the LoL!

  32. Highlander

    Phil,
    Can you believe CNBC Indian financial analyst  visitor saying no vocal signs of unrest re food prices!! hell no its way past vocal its rioting!!

  33. Phil

     Deficit jacked up $200Bn to $1.5Tn in 2011 – so much for the $60Bn Obama said he can cut…

    SFP/Jrom – The Supplementary Financing Program was a deal struck between Fed and Treasury during the melt-down in 2008 where the Fed held a $280Bn balance as a "cash buffer" and to drain excess reserves from the Banking System.   `At one point there were close to $600Bn in SFP bills outstanding but it’s really short-term stuff.  By asking Treasury to terminate the program (which pays good money to the banks for guaranteed debt), the Fed is going to force $200Bn or whatever the balance is now to go elsewhere – yet another way to pump money into the system.  Since it goes back as cash to the banks and they lever cash 10:1, it’s another $2Tn or so of money that now has to go to buy regular Treasuries (keeping rates artificially low), commodities or equities.  Essentially, they are forcing the banks to buy at what may be a top in hopes of forcing another market breakout so they can regain momentum above 12,000/1,300.  Just the hint of this is enough to run speculators back into the market.  Keep in mind the banks HAVE to do something with the money or they lose to inflation.  They can choose not to lever but they can’t choose to stay in cash – this is how an inflationary cycle can feed itself.  

    CSX/StJ – With the coal situation alone I would not bet against US rails this Q.  I agree that put selling is the way to go if looking for an entry.  

    Good speech Cap! 

    Blame/StJ – Yes, that is an excellent article on who was responsible.  Not that anything is going to be done to change it but at least someone got to say "this is what really happened." 

    SPWRA/Alik – We thought they were a buy yesterday.  So far, so bad on them but I do like them long-term.  TBT I think is inevitable but how long do you have to wait.  For now, they are very range-bound as the Fed steps in to squash it any time it’s over $39 (TLT $90 is actually what they are watching).  

    UAL/Alik – is a good stock at $25 and you can do a lot better with the short $2013 $20 puts at $3.90 and spend $4 to buy the $17.50/25 bull call spread so net .20 on the $7.50 spread and worst case is you own them at net $20.20.  Even if you had 100% margin, $7.30 profit is still 36% in two years if UAL flalines or better but I’m showing $5 net margin so this is a 145% play with 20% downside protection. 

    GLCH/Alik – Don’t know enough about them.  Inflation is very risky for those kind of companies who have to constantly roll their debt.  It’s also dangerous for the companies they invest in for the same reason so you are double leveraged to a serious catastrophe if inflation takes off.  I’m just not willing to put that much faith in the Fed containing inflation long-term. 

    DEPO/Pharm – They do look interesting.  You can also buy the March $5s for $1.95 and sell the Feb $7.50s for .65 so you are in the $2.50 spread at net $1.30 and, if you are lucky, nothing happens in Feb and you can then sell March $7.50s for another .65 and drop yourself to .65 on the $2.50 vertical.  

    RUT coming on strong.  It’s been 100% buying since the housing report.

    EIA Petroleum Inventories: Crude +4.8M barrels vs. consensus of +0.9M. Gasoline +2.4M vs. consensus of +2.1M. Distillates -0.1M vs. consensus of -0.3M. Crude futures -0.1% to $86.10. 

    Also helping:  Sounding somewhat optimistic at Davos, Nouriel Roubini says the world economy can be viewed as a glass "half empty" or "half full." He sees risks from debt issues in the EU and U.S., calling Obama’s proposed spending freeze mere "spare change," but is hopeful about growth in nations other than the usual BRIC heavyweights.

    More cheerleading:  Morgan Stanley says the market is in the middle of a “multi-year bull cycle for equities,” according to its most recent global investment report. It expects U.S. and global EPS growth near 15%, remaining overweight in equities, commodities and REITs, and underweight cash and bonds. 

    Faced with the prospect of not passing the finance bill crucial to receiving a bailout and an immediate collapse of the government, Irish Finance Minster Lenihan bows to the demands of 3 legislators by reinstating an amendment taxing bank bonuses at 90%. Dublin +0.8%

    Given softening PC sales, analysts expect Microsoft (MSFT +1.2%) to report a Q2 profit of 68 cents/share, down from 74 cents/share in last year’s Q2. Now Microsoft must make the case it can succeed in the mobile and tablet PC markets. Or the Street will really take a long look at CEO Steve Ballmer, who "is always on thin ice." 

    Fond of saying China is more capitalist than California, Jim Rogers can point to a new poll saying the same thing about France. While just 3% of Chinese say the market system is working poorly, 33% of the French think it’s time to abandon capitalism.

  34. rainman

    Looks like the bots are setting up for a technical breakout – DJI 12k, SPX 1300, RUT 800, IXIC 2750.

  35. flipspiceland

    "….the French think it’s time to abandon capitalism."
    Sure, if they can find what doesn’t exist.

  36. flipspiceland

    Missed that Irish thing taxing bonuses @ 90%.  
    From their mouths to the ears of our CONgress and the guts to do the same. Riiight.

  37. rainman

    Phil / Roubini — Half full? Whuck? Does he have altitude sickness or something?

  38. lpjblb

    Phil--need some help please. Have a synthetic buy-write on LH. Spread cost was credit of $1.78--long  May 90 calls and short Feb 80 calls. Stock has run up and spread now plus $7.30. I have rolled twice trying to keep up, but need your advice on next step.

  39. rainman

    Wow CNBC just mentioned Dow 13k!

  40. shadowfax

    My IWM levels, hope JRW takes over soon!
    80.28, 79.74, 79.33, 78.97, 78.71, 78.05, 77.52, 77.08
    Key pivot is between 78.97 and 78.71 not sure. Players beware!

  41. stjeanluc

    Gold is quietly taking another dip below $1325. No support under that until 1300 with the 200 day MA! Some people might start getting nervous… And all that with a weak dollar. Not a good sign!

  42. etradingsignals

    What would be a good way to play POT earnings? I am also interested in holding POT long term. Is there a good way to play it through options?

  43. stjeanluc

    And oil is below the lows of December – panic soon! 

  44. reza99

    Phil:
    Nice read, the summary of the SoU and rebuttals in this AM alert!
    What do you think of covering the Feb DIA Ps w/DIA 116Ps at $.53?

  45. Phil

     AAPL/Maya – They way the market is going I think a naked short on AAPL isn’t worth the risk.  Also, word is they are getting into the CC game with the IPhone 5, which will have waving technology for retail purchases.  Figure 50M IPhone users buying $2,000 worth of stuff with their phones at POS, vending machines etc and that’s $100Bn so even a half point for AAPL is a nice bump.  

    FAS/Jmiles – Now my call is don’t be greedy.  XLF has had a lot of trouble getting over $16.50 so be happy with it.  

    Inflation hedges/Samz – Absolutely.  It’s imperative that you have some upside hedges like that.  Also, yesterday we had ABX and HMY plays – I like those too now that we had a little pullback in gold.    

    Denial/Jabob – The only fundamental that matters is that the Government, the MSM and Coprorate America are all aligned to prop up the markets.  They need you to feel rich so you will vote and donate to politicians, watch TV instead of rioting and, most important of all – go out and buy their stuff on credit.  They spend hundreds of Billions of dollars every year advertising to get you to buy their products – why would you think they would do differently just to get you to spend?  You can’t fight this game – it’s like when I would try to tell my girls that the EZ Bake oven they were advertising on TV wouldn’t actually make the best cookies they ever tasted – there was no way to stop them from getting one, which they used once and never again.  

    MRK/Pharm – I like the 2013 $25/30 bull call spread for $3.50, selling the 2012 $30 puts for $2 as that’s $1.50 on the $5 spread and you can sell puts again in 2013 if they don’t go up to high.  Margin is about $5 plus the $1.50 cash to make $3.50 with the margin released in 12 months. 

    NFLX/LV – Right you are, that’s "barely" safe.  

    SQQQ/Bob – I’d go June as that’s 3 months closer to expiration for .40 so not worth it.  Of course you can always roll back but AFTER Theta decay goes to work for you at least.  The Nas has been relentless going up, just make sure you take some QQQQ calls to cover over certain lines, like 2,750 to offset further losses.  

    News/Samz – Didn’t you hear – everything is great!  

    India/High – Have you seen Egypt?  The rioters had the police on the run yesterday.  All in good fun, I’m sure….

    Roubini/Rain – He’s a statesman now.  He’s been elevated to the point where they fly him to Davos and put him up in fine hotels and pay him keynote speaker fees…  This guy is an NYU professor, he’s not looking to rock the boat and be sent back to an 800-foot apartment in the West Village!  Also, if you think that the Fed and the BOJ and the EU can just keep printing money and that the BRIC’s won’t riot over food prices and that the US will continue to extend and pretend both real estate (see news above) and unemployment and that sets a precedent for the rest of the World then sure, it’s a half-full scenario.  I’m just a little more worried than Roubini that it all won’t hold together quite so neatly…

    LH/LPjb – Other than getting called away, there is no upside danger to a buy/write.  What is your actual basis on each position?  Did you not sell puts?  If not, this is nothing like a buy/write as you sold puts lower than your calls so it’s just a bearish calendar spread and all you can do is roll the May $90s ($6) to 2x the Aug $90s ($7.60) and roll the Feb $80 calls ($12.50) to 2x the May $90s ($6) and hopefully you’ll be able to roll the callers to the Aug $95 calls and you expire with a $5 spread.  You can make that more interesting by selling the May $85 puts but I’d be worried about a pullback after such a huge run.  

    POT/Etrad – Too iffy I think.  They might miss but they also may have strong guidance as Australia needs a LOT of fertilizer to revitalize their soil.  I like owning 4 June $175 calls for $9.60 ($3,840, delta 43) and selling 5 Feb $165s at $6.30 ($3,150, delta 53) for net $690 on the spread.  If POT flies up, you just add more longs and do a 2x roll of the callers.

    DIA/Reza – I’m still not ready to cover.  Let’s see what the Fed does this afternoon but this was a very blow-off top kind of move this morning.  

  46. tuscadog

    Phil / SFP $200B  I think the article mentioned the withdrawal program begins Feb 8th with 8 week duration.  That effectively doubles existing POMO for two months.  Sort of sounds like being short the mkt during that 2 month period could be very painful?   Also on Bloomberg last night a guy runnng $20B said the guys running pension fund money who are not ‘all in’ on equities are toast.  He said if they don’t get out of cash and increase their equity allocation (vs bonds) they won’t make it past the second Pension Committee update meeting, so they’re under extreme pressure to put more $ into equities.
    So, the Fed ponzi is putting everyone else under extreme pressure to pile into equities (Ben’s plan).  Would you agree that this equity bull could be a difficult train to stop between now and April 8th?  It’s weak fundamentals vs this wall of funny money and I sense it’s still too early to take the b.st.ards on with shorts.  In fact there may still be another 10% of upside before this bubble is popped (possibly by some external event, as you’ve outlined, though the global Feds are seemingly willing to throw massive amounts of money to head off each potential crisis, so we may have to be very patient).
    Now in cash with some gold shorts, waiting to short at ’the top’, but thinking maybe should be long whatever you still like for maybe 2 months?  (Ben has a lot at stake and therefore will be ruthless in ‘fighting his fight’).

  47. Pharmboy

    DEPO – FDA PDUFA date is end of this week, so too risky. 

  48. z401

    ANYONE
    When will iphone 5 be available?
    thank you

  49. Phil

    Big deal picking the dollar back up briefly

    The ECB continues to signal its discomfort with monetizing PIIGS debt, as Bank of France Governor (and ECB board member) Noyer calls for the EFSF take over the bond purchases. Noyer brushes aside inflation worries, opining that hawkish central bank rhetoric alone might cool price increases. 

    Other news:

    At the open: Dow -0.09% to 11966. S&P +0.19% to 1294. Nasdaq +0.14% to 2723.
    Treasurys: 30-year -0.54%. 10-yr -0.35%. 5-yr -0.2%.
    Commodities: Crude +0.07% to $86.25. Gold -0.14% to $1330.50.
    Currencies: Euro -0.09% vs. dollar. Yen +0.03%. Pound +0.27%

    10:00 AM On the hour: Dow +0.12%. 10-yr -0.45%. Euro +0.03% vs. dollar. Crude +0.03% to $86.22. Gold -0.55% to $1325.00. 

    11:00 AM On the hour: Dow +0.14%. 10-yr -0.45%. Euro flat vs. dollar. Crude +0.03% to $86.22. Gold -0.56% to $1324.80. 

    The U.S. budget deficit should rise to $1.48T, or 9.8% of GDP, by the end of the current fiscal year, largely because of the extension of lower tax rates, the Congressional Budget Office says. Zero Hedge believes the U.S. will need to issue some $5T in debt during the next three years to fill the gap, meaning "QE3 is guaranteed, and we are stunned that the market continues not to realize this." 

    Concerns grow about the quality and timeliness of information that state and local governments are disclosing about their finances, as a new study suggests they’re getting worse at a time when investors need information the most. Of 17,000 muni bond issues studied, 56% filed no financial statements in any given year between 2005-09.

    I’m glad someone besides me is saying this:  The real state of the union speech, according to Marc Faber, should "tell the U.S., you have to tighten your belts. We have to go through hard times for five years to repair the damage that was committed over 20-25 years." Instead, Obama has done a "horrible job, and I think that will continue… actually he’s made [things] worse."

    Many CEOs react with skepticism about Obama’s ability to deliver on State of the Union proposals to lower corporate taxes, but they appreciate his changed tone. His speech was "business focused" and a welcome move to the center, Blackstone (BX) CEO and Obama critic Stephen Schwarzman says. 

    With the exception of 3 countries, "Global tax policy (is) looking to increase the share of tax collected from multinational companies,” according to Taxand. The U.K., Canada, and Malaysia "stand out as regions where favorable tax policies have been introduced to stimulate economic recovery and … investment by multinationals."  

    Slowing growth and rising inflation leave U.K. households facing the worst squeeze in living standards since the 1920s, says BoE Governor King. Absolving the central bank of any responsibility, King says it’s the cost of the financial crisis (and preserving bank bonuses). Full speech here

    Egyptian stocks sink 4.7%, back to their lows of the year, after yesterday’s riots against the rule of Hosni Mubarak. "Developments in Egypt are moving very fast, and are beginning to bear some similarity with those in Tunisia," says an analyst with RBS.

    Toyota (TM -0.9%) recalls 1.7M vehicles globally, including 245,000 Lexus vehicles sold in the U.S., because of faulty parts including defective fuel devices. No word on how much the latest recall might cost the company. 

    Boeing (BA -3.8%) shares slide at the open after posting a sharp drop in Q4 operating income – down 35% Y/Y – and guiding 2011 numbers lower, citing delays to its new 787 Dreamliner and higher pension expenses. Boeing has not said how much it has invested in the Dreamliner or how much over budget the project is. 

    Integrated circuit maker Silicon Labs (SLAB) is -7.8% after reporting better-than-expected Q4 results, but a weak Q1 outlook. Given the contraction of gross profit margins and the rise in operating expenses, the firm projects profits to be from 33 cents/share to 39 cents/share – the consensus is 39 cents/share.

  50. ravalos

     Phil, when do you intend to start the $25KP?

  51. flipspiceland

    ZH being ‘stunned’  is a joke since they have been stock market perma-bears since forever—- amazed, awed, wowed, and alarmed that the market is paying no attention to their most excellent take on the fundamentals.
    Aside from their call on PMs, we would have all done very well to have never discovered ZH thruout the Battle of Bull Run which began in March 2009 a stunning nearly two years ago.

  52. morxlntway

    Pharm – what’s too risky? the trade you proposed? or are you responding to Phil? Thanks

  53. hoss18

    Tuscadog – I have been thinking the same thing lately…with the SFP unwind, we could be DROWNING in liquidity(like we’re not already, ha-ha)….so since many of the stocks I’m interested in are not in a reasonable buy position, how about an upside hedge type play.
    Phil, what do you think about  TNA April 73/77 Vertical for $1.70 and then selling the TNA Apr 47 Put for $1.60, giving a $4.00 spread for $0.10 with TNA needing to get back to Oct/Nov lows before the puts gets activated?

  54. jomama

    phil, you didnt quote the more interesting aspects of farbers comments :)

  55. shadowfax

    FAS levels +- .2% for fun only
    100% cash and trying new toys. 31.60, 31.29, 30.77, 30.17, 29.91, 29.51, 29.07, 28.82
    Hope Phil is right, direction at 2:15 FED

  56. reza99

    Re Faber / Jomama – Fabre is no politician; that seems certain! 8-)

  57. amatta

    SPRWA-- what can have spooked investors out of SPWRA now down over 12% from yesterdays highs?? Nothing Obama said, other Solar firms are not falling… Boy what bad timing to get in… 

  58. Phil

     Did you guys click on that cloud from State of the Union Terms?  It’s fascinating to see it compared to other Presidents on the link….

    SFB/Tusca – I suppose that’s the market booster du jour but is that also the kitchen sink?  What else can they throw at the market?   As I’ve been pointing out since we hit 1,225 THREE MONTHS AGO – we are getting less and less bang for the buck.  We got far less out of QE2 than QE1 and now QE2 is not getting us over the top so the Fed asks for ANOTHER $200Bn (or whatever) to be dumped in at a rate of $25Bn a week?  This is that swimming pool springing another leak and the Fed is calling for another hose and STILL no one is fixing the hole.  Meanwhile, more and more money/water rushes through the hole and makes it wider and wider and you need more and more to fill it.  I don’t want to be an alarmist but I think I may see a way in which this does not tun out well….

    I5/Z4 – I figure AAPL has their conference coming up soon and June is when they like to do refreshes. 

    $25KP/Rav – Probably this weekend.   I need to see the Fed and how we hold up after that but then it’s time to go shopping! 

    Ags/Nicha – It’s not demand, it’s speculation.  People are not rioting over supply, they are rioting over prices so the whole thing is just a bubble.  Not something I’d go long in other than our DBA inflation hedge.  

    Zero Hedge/Flips – I guess if you think you are better off not knowing what’s really going on and investing in ignorance then, yeah, you are better off without the distraction.  It’s like 60 minutes.  They used to expose all sorts of Corporate and Government corruption but then they were de-fanged.  Things fell apart in the mid 90s when they backed down on Brown and Williamson – I think that’s when Corporations figured out how to get to them and, from then on, they played nice so they never investigated the banks or the real estate bubble or anything real in the world and wasn’t it a good thing that no one said anything?  

    TNA/Hoss – It does seem like you’re leaving plenty of room!  It’s rollable so I do like it but you’re just a 15% drop in IWM from owning those TNAs so keep that in mind. 

    Farber/Jo – Hey, I’m just copying the summary that’s out there, no time to write my own! 

  59. Pharmboy

    DEPO/Morx – Phil’s is too risky for me.  I am an all or nothing on this. If they are rejected, I do not want them.

  60. judy

    Phil,
    Whenever you have a chance, can you provide some general guidance on the management of buy/writes. I have a couple short puts that have now gained 50-60% – they are a few months out – May and June. The underlying stock price is 10% or more away from the strike.  Should I, take money and run, leave alone to get the other 50%, roll to a longer dated strike ex. Jan at same strike, or roll higher to same date or longer and higher?
    The two positions are pfe june strike 17 put and s may strike 4 put.
    Thanks

  61. Pharmboy

    Therefore the Feb $7.5 for 65c are less risk, b/c my loss is 60c, not $1.30.  I read it wrong on selling, I thought they were puts.  Either way, I like the 65c premium rather than the 1.30 risk.

  62. qcmike

    Phil
     
    No where is the link
    Did you guys click on that cloud from State of the Union Terms?  It’s fascinating to see it compared to other Presidents on the link….
    thanks

  63. lpjblb

    LH/LPjb – Other than getting called away, there is no upside danger to a buy/write.  What is your actual basis on each position?  Did you not sell puts?  If not, this is nothing like a buy/write as you sold puts lower than your calls so it’s just a bearish calendar spread and all you can do is roll the May $90s ($6) to 2x the Aug $90s ($7.60) and roll the Feb $80 calls ($12.50) to 2x the May $90s ($6) and hopefully you’ll be able to roll the callers to the Aug $95 calls and you expire with a $5 spread.  You can make that more interesting by selling the May $85 puts but I’d be worried about a pullback after such a huge run.
    Phil--basis--Feb 80--4.19,May 90--$2.41. I sold puts earlier and have cashed them for a profit. I guess I need to re-read the theory. I thought the B-W was a long call ATM , selling ITM short calls  monthly and puts if they made sense.
    Thanks

  64. shadowfax

    FAS
    Discovered todays top 30.60 was matched on Jan 13, a turning point on Jan14 topping at 31.60, and SMAs crossed that day at  10: 35. Maybe today is the blow off top?

  65. praizada

     The spreads on TNA options are horrible! TZA’s are far better. Hope they split TNA.

  66. amatta

    Phil, 

    Your comment:
    AET looks ready to rock.  I like selling the 2013 $25s for $2.20 and buying 2012 $30s at $6 for net $4 with the stock at $33.60 and, ideally, you want to sell Feb $34s for $1.50 (no .90) but fallback would be selling Apr $34s for no less than $1.25 (now $1.60) if the stock goes the wrong way.
     
    Looks like it is playable. Do I understand correctly that we are obviously selling the Feb 34 puts right ? so we would have a potential 2x entry if put to us on Feb? or guess we roll it…
     
     

  67. flipspiceland

    Yes. Ignorance is bliss.
    I now really only want to know what’s going on when I can actually do something about it. e.g.  It does me no good to know that Joe Cassano  and Dick Fuld are two of several  major perps of the Mortgage Backed Securities fraud-that-we-can’t-call-a-fraud. I’m satisfied to know this but it does me no good.
    If I had only found PSW at the same time I found ZH, I would have been better off financially, but much more aware of what was also happening in the alternate reality. 
    However, has I ONLY found PSW and not ZH at all, three years ago, I could be spending  some more time at my condo on St. Bart’s.
    The beginning of wisdom is first knowing what to ignore.  Taking that a step further, if it can be ignored, why know about it in the first place?

  68. nicha

     flip – I am with you on that. Had I found PSW earlier, I would have been better off too.
    For eg. someone sends me an article today about Ag demand going up and up. Pre-PSW, I would have done a little bit of research on google/yahoo and prolly bought what was recommended. 
    Now that I am at PSW, I looked at the article and thought it wud be better to ask Phil before I do something. Ordinarily I would have ignored it but since there is talk of doubling POMO, I thought Ags get lifted too.
    Thanks for this "The beginning of wisdom is first knowing what to ignore."
     
    And thank you, Phil.

  69. samz3700

     Phil - 
    I am thinking of a long term short on iwm -
    Short etf at 79 and then sell 2x the Dec. 70 puts for $5 each – take in $10 bucks – IWM has got to go under $65 before the puts hurt you and assuming I would just slap an additional short on to cover. 
    gives you a lot of protection on the upside before you get into trouble

  70. nicha

     Home loans set to go up in India. Some people are already paying 12%.
    "…The biggest concern for the central bank now is that in the third quarter, banks have lent more money than they raised in the form of deposits…."

    hmm…now where have we seen this before. Hopefully this cools the crazy real estate speculation.

  71. ajaytoo

     Phil / DIA  - Yesterday’s DIA $119 puts…should we look to DD or abandon? In at 1.40.

  72. ravalos

     Phil, what do you think of a play on LLL bull call spread Jan 12 $70 / $75 with a sale of a Jan 2012 $70 put for $1.55 in net credit? Margin is $1,600, possible return of 40% over margin in 12 months or 9.3% over committed capital ($7,000) if assigned)..
     
    Or would u suggest a naked short put of the Jan 12 $70 put @ $4.70 credit? margin is the same, but return would be less.. ($470 / $1600 = 29.38%)

  73. Phil

     Timing/Amatta – If you are hedging long-term or scaling in, this stuff should not be bothering you.  The point of doing a buy/write is you DON’T have to worry about the trade.  Yesterday it was the 2013 $10/17.50 bull call spread at $3.50, selling the $12.50 puts for $3.  That was about noon, when SPWRA was up 10%.  Now the 2013 $10/17.50 bull call spread is $3.25 and the $12.50 puts are still $3 so a .25 loss on a $1.50 drop in the stock.  You need to learn to let things go short-term – this isn’t even a trade you should be looking at until next year unless SPWRA is down around 20% ($12) and then maybe there’s a worthwhile adjustment.  

    DEPO/Pharm – I’m more betting on the delay than the direction.  

    Guidlines/Judy – Well it always depends on the stock and what you think they will do over the remaining time.  ALWAYS the main question is – do you have anything better to do with the money?  PFE is at $18.50 and we like them so the June $17 short puts, now .55, seem like "safe" money to make.   They are hitting you fro about $2K in margin so a 25% return on your cash plus margin over 6 months.  Do you have something safer and better to do with your money?  If not – then leave it.   Low VIX means it’s not a great time to roll and why should you pay this bum .55 NOT to buy PFE for $17?  S is actually more in the money than PFE but it’s only .48 so seems scarier.  The May $4 puts are .18 and you are tying up maybe $500 to make $200 – that’s 40% in 5 months.  I like making 40% in 5 months, don’t you.  Let me know what positions you are more certain will return $180 on your $500 investment in the next 5 months and we’ll see about switching over to that but, otherwise, learn to love being patient…

    Terms/QC – The link was the image in the above post but you can click here.  I find these studies very interesting.  

    LH/Lpjb – OK so you are in for net $1.78 credit plus whatever you made on the puts (secret I guess to make it more interesting for me to understand your overall position?).  This is NOTHING like a buy/write where we BUY the underlying or, in the very least, a deeper call than the short calls we are selling.  As you calendar spread was a bearish diagonal by $10, it was probably a very bad idea to kill the bullish put position as that flipped you 100% bearish.  Well, given that position you are well behind now at a $7 debit (less the put money, less the $1.78 you collected) so the adjustment I gave earlier would still stand if you want to stick with them.  

    Well, if we’re going to go long we need a few covers so let’s look at TZA Apr $12/17 bull call spread at $2, selling the $13 puts for $1 is a nice 400% return if TZA gains $2 and it don’t cost you nothing unless TZA drops over 10% so about a 4% gain on the RUT (820) before you have an issue.  Keep in mind that you only need to sell 10 short puts, obligating you to buy $13,000 worth of TZA (but margin about $2,500) and that plus $1,000 buys you $4,000 worth of downside protection.  

    Obviously TZA isn’t going to $0 and it would take a 15% pop in the RUT to knock TZA down 50% to $7.50 and that’s $7,500 in losses while, for example, $50,000 in upside positions you were covering for an 8% drop gain 15% ($7,500).  That’s if you were doing straight stocks without options.  If, on the other hand, you were covering $70,000 worth of buy/writes where you had sold $20,000 worth of protection and were just using TZA for additional coverage on your $50,000 exposure, then you collect that $20,000 and roll your protection and do it again, right.  That’s what hedging is!  

    QID also getting fun at $10.65!  July $10 calls are $1.05 and you can sell March $11s for .45 and that’s net .60 on the $1 spread which is still a 66% upside and if QID goes further down, then you can sell some puts for .50 to offset further, maybe the July $8 puts, which are .20 now.  

    AET/Amatta – That was selling the 2013 $25 puts and buying the 2012 $30 calls for net $4 and waiting to sell the Feb $34 calls for $1.50 but they only topped out at $1.07 and it’s not looking likely now.  

    AET – As that trade looks now ($33.36), I still like the 2013 $25 put sale at $2.20 and I still like buying the 2012 $30s, now $5.80 for net $3.60 and you may as well be conservative there and sell the Apr $33s for $1.85 as that drives your net down to $1.75 on the $3 spread with tons of time to roll.  

    Ignoring/Flips – That’s a good point.  I read tons and tons of stuff and I go out of my way to read at least 25% stuff I totally disagree with and THEN I decide what to ignore but I couldn’t stand NOT knowing.  

    Thanks Nicha and Flips for the vote of confidence.  I read all the ugly truth so you don’t have to!  8-)

    IWM/Samz – I like my TZA play better.  Once the ultras get this low, they get harder to kill and they roll for good premium.  

  74. ravalos

     Phil/TBT, I have some long TBT Jan 12 $35 calls ($8.90, now $6.90) but TBT is forming a wedge between the $40 resistance line and the ascending 50MA ($37.78); in addition the 50MA has presented a "golden cross" with the 200MA so would you be more inclined to wait until I breakout occurs in order for me to cover? or just leave them naked? What risk do you see for TBT to fall apart? Thx

  75. stjeanluc

    Now, that’s bandwith….
    http://www.engadget.com/2011/01/26/korean-researchers-demonstrate-lte-advanced-in-a-custom-rv-scor/
    Download a full featured movie on your mobile device in less than 20 seconds! As long as you are in Korea though! 

  76. Cap

     If the market sells off on the Fed, I would look at high flyers like PCX  (only up 8.3% today for no reason) to possibly go short.

  77. Cap

     Interesting Stocks down today:
     
    AMZN
    AXP
    BA
    GOOG
    CMG
    NFLX
    PCLN
    MA

  78. stjeanluc

    SPWRA / Amatta – If you are really worried about the SPWRA trade, you should have gone with the Jan 13 10/12.5 vertical selling the Jan 13 10 P. 10 contracts puts $600 in your pocket and a $2.5 vertical that is close to $4 in the money. Margin is around $2300 to make $3100 in 2 years. That should keep up with inflation! And SPWRA has been able to hold $10 for just about ever! Not very aggressive, but allows you to sleep soundly at night!

  79. reza99

    Re Fed / Cap – I am not up on the Fed news, what risk do you see in this Fed announcement?

  80. Cap

     reza; to me it doesn’t matter what they say; the bozy and robots are in charge and will do what they do … its just an excuse to have lots of trading volatility.

  81. stjeanluc

    SPWRA / Amatta – But I would wait until after Feb. 17 when they release earnings. The last 2 have been bad surprises so you might get a better entry price. 

  82. amatta

    Phil, 
    Is your feeling that we head down on the Fed? I feel weary of risking a pop with the DIA puts down to 3.40 already! Would a cover be in order?
    Don’t get me wrong, I am willing to stick it out if your still strongly we are going to see a dip sooner or later, just don’t want to take unecessary risks (like playing a stock on an earnings day).
    Thanks

  83. reza99

    Phil:
    What do you think of VIX Feb BCS 17/19 @ $0.65-0.70 selling the VIX Feb 15Ps @ $0.4 (costing $.25-$0.3)?
    Any better VIX trade?
    Thanks!

  84. acobra65

    Zero Hedge/
    Reading all the articles on Phils’s site including Zero Hedge is GREAT INFORMATION to know what is happening…. however, to use any one source as strictly for trading or investment decisions, I have found to be a big mistake…. Experience with knowing the facts and being alert as to when those will affet the market is the challenge.  I believe POMO will keep this train moving but MArch/ April could have several head winds beginning to unfold…… Thanks for the articles Phil…   

  85. amatta

     Stjeanluc,
    Thanks for the input. Unfortunately I got in a at the very top yesterday! Oh well it is a long term play so will hang in there… I am much more concern with the shorts in the portfolio and that I don’t have enough longs (although I agree with Phil that it seems crazy that all is up and up)…

  86. reza99

    Re Volatility / Cap – I see what you mean; tomorrow’s jobless numbers another risk to sour the mood.

  87. williex

    Phil
    any recomendations for uso play.  I am long 5 feb 35 calls  for 2.00

  88. oburlacu

    Hey Phil,
    is worth doing a BUY/WRITE on ALU for 2012 or 2013 at 2.5?

  89. ajaytoo

     Phil, I’m sitting on 200 DXD @ 27 and 300 SDS @ 25 and 60 TZA @ 25. These are assignments resulting from our disaster hedges last fall (sell puts to lower the cost of our bull call spreads). I’m wondering if there’s anything interesting I can do with these other than just sit on them as continued insurance to keep me from being too bullish in this frothy market. Thanks!

  90. Phil

     DIA/Ajay – Down .20 in a day is no reason to DD.  First of all, it’s not 20% yet, is it?  If you were aggressively scaling in, then you want to have a buy at $1.10 to get to $1.25 avg but, other than that, not worth pressing.  On a 1x entry, my inclination is to wait for the Fed and, if things go South, that .20 will come back fast and, if not, then we have to decide if it’s worth the DD on a bogus reaction or if this is truly the end of the bears and it’s time to buy the $120 calls ($1.19) to offset.. 

    LLL/Rav – I like them down here but I’d prefer selling the 2013 $65 puts for $6.50 and buying the 2012 $60/70 bull call spread for $7.50 for net $1 on the $10 spread and, if all goes well, you can do it again in 2013 and maybe push the returns to $13-14.

    TBT/StJ – Speaking of which, back at $39 already!  We should just do nothing but play that channel for $1.50 back and forth every day….  Yes, I’d wait for the breakout.   Figure your fallback is selling the 2012 $38s for about $5 and rolling down to the 2013 $30s for $6.50 so you pick up a year and $5 for $1.50.  As long as that doesn’t get away from you, you can afford top be patient.   Cool on the bandwidth! 

    Stocks/Cap – Well it doesn’t take much to shove individual stocks down but the index buying is relentless and back up they go.  Nothing to do but buy the F’ing dips really. 

    SPWRA/StJ – Nice trade!

    Heading down/Amatta – I’m not sure anymore. It’s kind of like thinking you understand physics but then being presented with a room in which everything just floats.  At some point, you have to accept the fact that gravity is out of the equation and you can spend the rest of your life assuming gravity will come back and clinging to the floor or you can jump around and have some fun.  If we are heading higher, then take some of the dozens of upside plays we’ve looked at this week and use the DIAs for a cover.  Once we get past this weekend, there’s a lot less chance of a real dip.  

    VIX/Reza – I am not too thrilled about the VIX at 16.74 – it’s another case of the laws of physics being repealed.  If you want to be the VIX up, you get more bang for your buck playing the TZA to go up as the two are not likely to be disconnected and the VIX hasn’t seen 19 in a while.  

    Thanks Acobra!

    USO/Willie – Well they had a huge build in inventories so of course they are going up now.  I would stay away.  We have such an easy time playing the last two weeks of the contract, why mess around during the first week of the cycle when they could go either way?  

    ALU/Obur – I don’t think they are all that great in the space and the option spreads on them are stupid but, if you can get .25 for selling the June $3 puts and you can buy the $2.50/3  spread for .30 then I like the risk/reward there.  

  91. samz3700

    I find reading this site very dangerous because I agree too much with Phil – I then fool myself into thinking that it actually matters what I think in the face of POMO – whose the bigger idiot – same with Zero H.
    Seems like a good JRW day – where is he

  92. Phil

    12:00 PM On the hour: Dow +0.03%. 10-yr -0.49%. Euro +0.05% vs. dollar. Crude +0.85% to $86.92. Gold -0.41% to $1326.80.

    01:00 PM On the hour: Dow +0.16%. 10-yr -0.37%. Euro -0.02% vs. dollar. Crude +0.86% to $86.93. Gold -0.08% to $1331.30. 

    The Treasury sells $35B in five-year notes at 2.041% (.pdf). Bid-to-cover ratio of 2.97, vs. a recent 2.76; indirect bidders take 45%, vs. a recent 39.2%. Direct bidders take 9.6%, vs. a recent 10.6%. 

    After rallying yesterday, Treasurys have been significantly off today – but pared losses after some strength in a five-year note auction: the 30-year yield now +0.06 to 4.55%, 10-year +0.05 to 3.39%, 5-year +0.05 to 1.99%. Traders now look ahead an hour to the coming FOMC statement, though any real change there will come as a surprise. 

    In a twist at Davos, it’s the emerging countries who are most pessimistic. The head of India’s Apollo Tyres speaks for others from his region: "Oil prices are high and natural rubber is skyrocketing, it’s like buying gold… our bottom lines are getting affected." 

    Fitch expects inflation to accelerate this year in most Asian countries, thanks to economies running at capacity and the importation of "loose U.S. monetary conditions through currencies linked … to the dollar." Letting currencies appreciate would help, but this won’t happen unless China goes first.  

    Wal-Mart (WMT) and Carrefour (CRERY.PK) run afoul of China’s inflation concern as the NDRC fines the retailers over misleading pricing. PetroChina (PTR) and China Petroleum (SNP) were in the NDRC’s sites earlier, fined for selling diesel above state-set prices. 

    Higher transfer taxes, price controls, and increased down payments for 2nd homes are among new measures announced by China to try and control its housing bubble. Beijing claims that prices have been “contained since last April," but that challenges remain.

    "Every day I pray that China will continue growing," said VALE CEO Roger Agnelli recently. According to Wikileaks, his attitude in 2007 was slightly different, expressing his alarm to the US ambassador to Brazil that China aimed to control South America’s natural resources.

    Three lunchtime reads:
    1) Long live BRICs, but welcome to MIST
    2) Why China hates loving the dollar
    3) The biggish short: subprime student loans

  93. Phil

     LAST Fed Statement (Dec 14th):

    Release Date: December 14, 2010

    For immediate release

    Information received since the Federal Open Market Committee met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

    To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

    The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

    The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

    Voting against the policy was Thomas M. Hoenig. In light of the improving economy, Mr. Hoenig was concerned that a continued high level of monetary accommodation would increase the risks of future economic and financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.

  94. iTrade

     QID PAIN
    Phil… I need your thoughts on this play as it has gone against me… I’m thinking of cashing out, but before doing so wanted to hear your thoughts.
    QID Feb 11 $10 Call – 20 contracts – now $0.71 (basis 1.26)
    QID Feb 11 $11 Call – 10 contracts – now $0.65 (basis 1.00)
    Thanks for your ideas!

  95. iTrade

     VEGAS… did you guys ever end up doing Vegas?  if so, how was it?

  96. 1020

    I wonder how many times a day GE workers take a break to do some line-dancing?…..

  97. Highlander

    Phil,
    Gross on cnbc says the headline inflation is the one that counts. He said the fed will talk about the core and hopes we will ‘buy’ it! But he says they (Pimco) will make their own decisions regarding inflation in response Steve Liesman defending the Fed.

  98. 1020

    ….maybe a boot-scoot boogie….. ;)

  99. Phil

     DXD/Ajay – I’d take the $1,600 loss on DXD and the $900 loss on SDS and your $600 loss on TZA ($3,100) and sell 15 TZA Apr $13 puts for $1 ($1,500) and buy 15 Apr $12/17 bull call spread for $2 ($3,000) and that pays you back $7,500 against your prior $3,100 loss and $1,500 cash if TZA hits $17 and TZA has to fall below $13 (10%+) for you not to get your $1,500 back. 

    Danger/Samz – The key is to play both sides.  The worst thing you can do is convince yourself you are right about anything.  No matter how sure you are – things could still go the other way. 

    QID/Itrade – I’d roll both to the April $10s ($1.05) and sell the March $11s for .42 as that’s about even on the $1 spread and you’ve bought some time.  Beats taking the 40% loss as it doesn’t cost you anything to go there.  I don’t know anything about Vegas but I had a nice weekend in Atlantic City that went great! 

    Fed time!

  100. amatta

    Phil, 
    I am talking about the 122.75 DIAs from the 1050P… 40 puts.  That is WAY TOO much cover for any longs I would put in. I have about 100K worth of buy-writes which have their built in… Just want to make sure what is the game plan, you mentioned selling some 119 puts (AS AN EXAMPLE) if we didn’t go down. 
    Thanks 

  101. Highlander

    euro is climbing

  102. Jordan

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    For immediate release
    Information received since the Federal Open Market Committee met in NovemberDecember confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Householdabout a significant improvement in labor market conditions. Growth in household spending is increasing at a moderate pace, picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to beis still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. LongerAlthough commodity prices have risen, longer-term inflation expectations have remained stable, but and measures of underlying inflation have continued to trendbeen trending downward.
    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.
    To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. TheIn particular, the Committee will maintainis maintaining its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee  and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
    The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
    The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.
    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra PianaltoCharles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
    Voting against the policy was Thomas M. Hoenig. In light of the improving economy, Mr. Hoenig was concerned that a continued high level of monetary accommodation would increase the risks of future economic and financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.

  103. Jbur

    Phil: Not even a dead cat bounce on HCBK yet. Have not sold Jan12 10′s to cover. Do you think this is a time for patience, or just pull the trigger?

  104. amatta

     Phil, 
    Moreover, I don’t want to take the accumulated losses now a whopping $14,900) on the DIA’s after having rolled how many ever times…It killed profits for the last 3 months on all other plays! So I am hoping for a plan to make at least some of it back.
    Thanks

  105. Jordan

    Fed looks to me like non-news. Same.

  106. Phil

     No change of course.  Fed says low levels forever continues despite great recovery.  

     

    Release Date: January 26, 2011

    For immediate release

    Information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions. Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, while investment in nonresidential structures is still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

    To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

    The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

    The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

    No dissent this time.  Hoenig no longer a voting member so a little more bullish Fed but barely a word was changed and that’s going to disappoint the bulls, who probably thought Hoenig was holding the Fed back from doing something truly stupid.  

    So this is a good report for our bearish positions.  It’s not like we expected the Fed to say "we’re not giving you any more money."  Next meeting isn’t until March 15th so the bulls need to suck POMO between now and then – let’s see if that’s enough to make them brave over 12,000…

    QQQQ Weekly $58 puts still $1.20 and I still like them but out by the close (or $1.45+).

    DIA Feb $119 puts also good at $1.23. 

     

     

     

  107. Jbur

    All: found this little quick read interesting.
    http://www.marketwatch.com/story/the-super-rich-at-davos-40-years-of-disaster-2011-01-25

  108. nicha

    iTrade – vegas did not happen. Looking at sometime in the fall now.

  109. reza99

    Phil:
    Is the QQQQ Weekly 56s the weekly play of this week?
    Cheers!

  110. escohen5

    Cramer just said to short bonds!!

  111. reza99

    Sorry QQQQ 58s!

  112. 1020

    Phil – If the Fed says they’ll keep buying till June, won’t that bode well for JBTFD?

  113. Phil

    DIA/Amatta – Those we were going to wait on at $3.65 as we’re in at net $5.65 and down $2 ($8,000 on 40) but they were $4.30 yesterday and $5.50 last Thursday and we have 4 weeks left so not hopeless yet but the exit path is selling the $119.75 puts (now $1.65) and rolling to the Apr $123 puts ($5) and hopefully we catch a dip one day. 

    HCBK/JBur – I’m confident they are worth $12.50 but you have to be patient sometimes waiting for people to agree with me.  As long as the overall XLF is staying over $16, they should sort themselves out eventually.  

    TBT taking off – That says a lot! 

    Cramer says inflation is under control.  Says we only have commodity inflation, not wage inflation so everything is fine.  Also, Cramer says your house is getting cheaper so when you buy one you save money.  What a jackass!  

    Thanks Jbur – I love that stuff.  

     

    Why? Inside Davos is a secret society, a Conspiracy of the Super Rich, more than half the 2,500 attending the event. They’ve got trillions. And it’s not enough. Right now, many are cruising to Davos at 50,000 feet, enjoying caviar, foie gras, filet mignon and Dom Perignon in the comfort of their tax-exempt Gulfstream 5 jets.
     
    For them a Davos invitation is not just a status symbol, not just proof of their power. An invitation confirms the illusion that their Conspiracy of the Super Rich is the main engine driving global economic progress the past 40 years … so they think they deserve all the wealth they’ve accumulated, including their $60 million jets.

     

    QQQQ/Reza – I just like the potential bang for your buck on them.  

  114. reza99

    Re QQQQ / Phil – In that case, what is your fav. weekly play?
    Should we hold WkQQQQ 58Ps overnight for jobless numbers tomorrow AM?
    What would you suggest instead?
    TIA

  115. reza99

    Let me guess, the DIA 119Ps? :)

  116. amatta

    Phil, 
    DIA’s-- OK, but when are we selling the 119′s? You said yeserday as an example, I don’t know if you mean sell them now? I

  117. Phil

     Short plays no good but yesterday’s gold stuff doing great so balance is good!  

    JBTFD/1020 – Well June is a long way off and there is a near-universal expectation of QE3 at this point.  

    RUT up 1.65% today, waiting on S&P 1,300 – they are up just 0.5%, crazy disparity on the indexes.  

    QQQQ/Reza – I wouldn’t hold weeklies overnight, better off with the DIA’s as you have time to recover.

    Ah, good guess! 

    DIA/Amatta – I’m saying that as long as you have a roll like that you can live with, then there is no hurry to sell.  Of course Reza is about to buy so maybe you can get an extra .05 if you sell now….  8)

  118. reza99

    DIA Ps – Sucker ALERT!
    Announcing a BIG order to buy 1000 DIA 119Ps, at a min. $1.25
    Yeah right! :)

  119. Phil

     By the way, this is a non-Pomo day so clearly that is not much of a factor unless you count only going up 25 points on the Dow vs 100 points Monday and flat yesterday to be slowing….

    Oil still having trouble at $87.50 – at least something is behaving rationally.

    Go Reza!

  120. amatta

    Phil, 
    on the AET: AET – As that trade looks now ($33.36), I still like the 2013 $25 put sale at $2.20 and I still like buying the 2012 $30s, now $5.80 for net $3.60 and you may as well be conservative there and sell the Apr $33s for $1.85 as that drives your net down to $1.75 on the $3 spread with tons of time to roll.  
    I am not sure I understand how to manage the trade and the goal. Are you looking to collect the .45 or so in premium in April (if the stock is above 33) and then sell 2012 calls depending on where the stock is at that point to collect (how much ideally?) in premium?
    Thanks

  121. 1020

    Phil/Cramer  I’m surprised you still watch the guy…..  ;)

  122. 1020

    ….and whats wrong with a little "wage" inflation?

  123. samz3700

     Cramer – are you kidding he is a great contrary indicator – also lets you know what people are trying to manipulate because the guy is basically a criminal. 

  124. amatta

    Phil, 
    Last question I promise.
    I am not proficient enough yet on this rolls and figuring out the timing, so I just want to make sure you are keeping your eye on the ball on those DIA puts and that you will let me know when to make a move (I think I am the only one still in?? As I haven’t read any comments lately from others and saw the volume when you recommended the roll to be a measly 144) which are an inordinate 15% of my portfolio at cash basis but much more so obviously since they are naked options deep in the money! 
    Thanks 

  125. ravalos

     BHI is flying! it broke a 5yr resistance at $63.. I wonder how high this will fly (it has a super implicit growth projections)..

  126. Phil

     LOL – I was explaining to a reporter that MS’s Renminbi structured notes are a scam and MS is ripping off her readers and they actually printed it in "Structured Products Daily" – which is a big newsletter in that market!  Well, if I die suddenly in the next couple of days – be very suspicious!  

     

    Philip Davis, founder of hedge fund
    Capital Ideas, agreed about risk. He said
    that investors in these notes are exposed
    to too much risk for the potential rewards,
    which he considered to be limited.
     
    “For a long-term duration like this, you
    should at least get some principal protection
    from the issuer,” he said.
     
    “You’re taking all the risk and what do
    you get in return? A 1% a year with a real
    possibility of getting even less interest than
    that and to lose a chunk of your principal if
    the exchange rate turns against you.
     
    Morgan Stanley is gambling with your
    money, hedging their bet and leveraging
    their gains. They’re just not paying you out
    enough for the risk you’re taking.”

     

     AET/Amatta – Yes, you are taking a diagonal calendar spread of the 2012 $30 calls and the April $33 calls for net $3.95 and you are selling the 2013 $25 puts for $2.20.  The plan is to roll the April $33 calls ($1.85) higher to a longer month once they run out of premium.  If AET keeps going up, your long short puts are in good shape and if AET goes down, you have good protection from the April $33s and plenty of time to recover.  This is a trade that requites setting it up, LEAVING IT ALONE, and being PATIENT – these are not really your strong suit…

    Cramer/1020 – Well he comes on CNBC in the middle of the day although he did manage to chase me back to Bloomberg where they are doing a proper interview with Trichet right now. 

    DIA/Amatta – Yes, I am watching but, sadly for you, I don’t tend to take action for days or even weeks at a time. 

  127. amatta

     Phil, 
    AET, no on the contrary, those are the trades I like--what I can’t take are the constant rolls and adjustments. The ones I have mainly made money on are the nice plain vanilla buy-writes. I hadn’t done a calendar spread but yes that is what I understood… 

  128. Phil

     BHI/Rav – Huge move on no particular news (one of the Gang of 12 liked the sector this morning). 

    Article on best gold deals.  NAK (#3) and HMY (#4) losing out to JAG and AUY – I may have to look into them as I obviously agree with 3 & 4.  ABX came in 7th and that makes sense too.   I like ABX because of their size, not just because they are reasonably priced.  

    Tom DeMark on CNBC calling for 11% correction!  "Market could expect a precipitous decline as early as tomorrow."  I love this guy!  

  129. Phil

     

    Why bother doing anything else?  

  130. make33

    Phil,
    How do you unlock the value of a vertical spread, both legs of which are in the money. I bought CAH 35 – 40  2012 Vertical when the stock was around 36. Now the price is past 41.5 but I cant unlock the full $500 per option of vertical spread unless I wait till Jan 12?? There has gotta be an easier way.
    Thanks!

  131. tuscadog

    Phil / Gold reversal     Looking at gold and Treasury reversal today it seems the mkt has decided QE3,4,5 etc is ahead and inflation guaranteed (reiterated again by todays minutes).  Time to exit my DGZ position?

  132. zeroxzero

     Already took out my GLD puts, I agree, inflation news is on the wind.  Maybe I should look at the "death by silver" market.

  133. amatta

    Phil, 
    We were talking about conviction on trades last couple days…(WYNN). I rolled up to the 115′s (consolidated into one positon from the 102′s and 107′s sold previously). And studied judiciously the charts and price movements for WYNN, and I had (well still do, but I don’t know if a huge move like today’s really changes the trend) that they should go down to 106sh… I had made back 70% of the losses yesterday and was tempted to take them out, but I remembered that I have to stay committed. Now I am back to square one… I guess it will have to start coming more natural, but I don’t know when to pull the trigger on the trades. Another example is the FCX trade (Feb bear put spread 119/110 with 120 calls sold) which I was committed to see through but on a comment I read from you to be careful I took it out with 20% of max profits (granted they were made in 10 days instead of 4 weeks, but in the end I made $950 versus $5,000). So a matter of learning how to let the winners run and kill losers quickly.
    Been at it the last 6 months really full time, so I guess I have learned a lot, but need to improve a lot still. 
    Anyways thanks for your patience and help!

  134. jabobeast

    what is the close to open strategy?

  135. praizada

     Phil, now that CNBC is calling for correction, is it time to go long finally?

  136. stjeanluc

    Phil, DeMark is talking about a 11% correction and that should be healthy. It would be a 50% correction of the last September to today run back to around 115/117 on SPY! Pretty mid-way where we paused in November. That would actually make sense! And would maybe allow us to enter in some bullish trades. 

  137. drmtv10

     Hi Phil & others,
    Looking to do a trade on CTXS (earnings tonight), selling 2x 62.5 calls and buying 1x March 65 calls, for a small position, as CTXS, along with other cloud vendors, would probably find it hard to move up from here..
    Feedback appreciated.
    Thanks,

  138. amatta

    They are surely pulling all they’ve got to finish above 12,000… 

  139. Phil

     Look at that Dow hugging 12,000!  Very impressive.  

    Vertical/Make – When you get into a long vertical, that’s often the price you pay – there are no early exits.  CAH is only at $42 so the caller has way more premium than you do.  If you want to make things interesting, you can roll the $40 caller ($4.70) to the June $42 calls at $2.50 and sell the June $39 puts for $1.65.  If you are confident they’ll hold $40, then anything up is a big improvement to you and they’d have to drop all the way back down to $34.90 for the putter to cost you more than the caller does now.  

    DGZ/Tusca – Well we are going to have to get more bullish so that’s a start.  I think, at this point, if an EU crisis doesn’t force the dollar up – it’s going to be hopeless and we’ll just keep drifting up and up on a sea of free money.  

    Silver/ZZ – Hey good idea, they are way down.  SLW June $27 puts can be sold for $2.09 and that buys the June $27/31 bull call spread ($1.90) with .20 to spare so you commit to buying SLW at net $26.80 with $4 of potential upside if they flatline.  The 200 dma is $25.50 and they haven’t been that low since October.

  140. rehat

    Hi Phil,

    I sold the weekly calls this afternoon and am up 40% already. Thinking of getting out. I am in the 215/220 call vertical short. What do you think.
    Thanks

  141. rehat

    I meant NFLX.

  142. stjeanluc

    And a chart to highlight where an 11% correction would take us. Based on the charts, Tom DeMark’s prediction do make sense as it would take us to some support line
    http://lemoyne-mappingthemarket.blogspot.com/2011/01/tom-demark-predicts-11-correction.html 

  143. reza99

    Go / Phil – In  Feb 119.75/115.75 BrPSs $1.03 avg.
    Trading in this market feels like a highwire walker on an ascending wire with you (Phil) sitting at the other end shouting
    "LOOK OUT BELOW".
    I appreciate your being the voice of reason.

  144. rehat

    Tried to get out but could not get a fill. Hoping for a soft AH on NFLX. 

  145. b1ll

    what is the story with SPWRA

  146. jromeha

    Im so sick of these monkeys! Im 80% cash and with my remaining 20% Im 85% short. THis house of cards has to fall sometime!

  147. jromeha

    Oil up 40 cents AH!?

  148. Pharmboy

    From ZH:  There was a time when stocks would make massive moves in the post-FOMC minutes, when there were actually things called "traders" participating in this algorithmic joke of a matrix/market. Not anymore. Which is not saying there is no vol. As we have now long been claiming, the only vol left is in FX and commodities. Observe the reaction in the EURUSD. With 500 margin, someone just got totally wiped out.

     

    This is getting to be ridiculous. 

    By now everyone is aware that following tremendous pressure by the banker lobby, which knows too well the Ponzi jig will be immediately up if Quantitative Easing’s TBTF Madoffs are forced to disclose the true value of their worthless assets (yes, true value comes from asset cash flow generation, not from diluting money), the FASB decided to stop its push for a return to MTM (mark to market). From the WSJ: "Accounting rule makers, bowing to an intense lobbying campaign, took a key step Tuesday to reverse a controversial proposal that would have required banks to use market prices rather than cost in order to value the loans they hold on their balance sheets." Transparency? What moron would propose that in an economy that is so obviously healthy and surging. After all, the only way to validate a surging stock market, er, economic recovery, is through bullshit numbers pulled out of the ass. That way they can pretend to tell us the truth, we can pretend to believe them, and everyone will frontrun the Fed who pretends not to be buying stocks.

  149. reza99

    Pharmboy:
    What do you think of EBS?
    TIA

  150. praizada

     Doesn’t SPY’s tape look a lot like April?

  151. Phil

     Commitment/Amatta – Getting back 70% (or 50%) of a loss and getting out is not a lack of commitment, it’s realism!  You made an adjustment and got a good move, in the very least you should have stopped out yesterday when they popped back up.  It would have been so easy to catch up 50% and then wait patiently for a nice entry (like right now) to go short again.  You play these violent stocks that go up and down but you only make moves when they are going against you.  That’s not a good way to play.  On the FCX, 20% is GOOD!  That’s it, move on.  Make another 20% and cash that out too and then another 20% so when you are down 30% on WYNN, you know to take it off the table because you know how easy it is to get to 20s to make up for it.  Take a good look at WYNN over the last month.  What do you see?  They broke up from $100 to $118 then back to $114 last week and $113 this week after going back to $118 so that’s a channel forming between $113 and $120.  That means at around $114 you should be looking to take bearish profits and at $118 you should be looking for an opportunity to go short.  If you insist on not doing anything until they get to $110 – you may be very disappointed – over and over and over again.  

    Close to open/Jabob – It’s just buying something like DIA or SPY at the close and letting them play their games in the after hours and jack up the market and then selling in the morning.   

    Correction/Craig – Yeah, I guess it is.  

    11%/StJ – Well, that’s pretty much what I’m looking for.   Thanks for chart.

    CTXS/DrMtv – It’s a nice play but I’d buy April so you have time to roll.  

    Mystery stock/Rehat – With the weeklies the answer is always to take money and run.  If it spikes against you in the morning you have no time to recover – not worth the risk.  

    Even NFLX, which I am very, very confident cannot justify $205, let alone $215!  

    Reason/Reza – Very hard to be the voice of reason in such an unreasonable market. 

    SPWRA/B1 – No real news, I think a shake-out before a move up. 

    85% of 20% short/Jrom – I can’t disagree with that stance.    Don’t know what’s up with oil.  

    That’s why they call it extend and pretend Pharm.  FASB just gave us another year at least – certainly worth 8 Dow points…

  152. jvest

    NFLX earnings and guidance basically on target. Can’t wait to short them tomorrow at 220 or whatever the post-Cramer bubble-up brings.   :)

  153. redlog

     nflx:
    Looks they found a cure for cancer in AH. hopes its stay up so we can short again. :)

  154. Phil

    3:00 PM On the hour: Dow +0.3%. 10-yr -0.5%. Euro -0.04% vs. dollar. Crude +1.4% to $87.40. Gold +0.59% to $1340.20.

    At the close: Dow +0.07% to 11985. S&P +0.42% to 1297. Nasdaq +0.74% to 2740.
    Treasurys: 30-year -1.28%. 10-yr -0.52%. 5-yr -0.21%.
    Commodities: Crude +1.69% to $87.65. Gold +0.8% to $1342.90.
    Currencies: Euro +0.06% vs. dollar. Yen -0.16%. Pound +0.54%.

    Market recap: A Fed that still sees the economy (despite improvement) as half-empty rather than half-full kept policy steady. Between digesting that and an upbeat State of the Union address, the Dow pushed the edge of 12K and stocks were led by basic materials and energy amid a commodities surge. Gold +0.8%, silver +2.3%, and the dollar fell accordingly (-0.1% against euro, -0.5% against pound).

    No wage inflation here but Chinese workers get the COLA that Cramer denies his fellow Americans: The Global Times reports 30 provinces across China raised the minimum wage by an average of 22.8% in 2010. Similar sized hikes look likely this year as several regions have already announced double digit increases. Even a country with 1.3B people can have labor shortages. 

    In talking about inflation and why it’s not taking off, the Fed gave a cursory nod in the direction of increasing commodity prices. But MarketBeat notes that’s not the same as inflation, since the cure for high prices is often high prices; oil highs in 2008 didn’t presage inflation but added pressure for a downturn. 

    Yes, bond rates have come a ways up since the Fed announced QE2 – but they’re still low by historical standards, and are likely to stay low, Paul LaMonica writes. Continued slow growth and a new focus on the deficit along with Fed buying should keep the 10-year between 3% and 4%.

    What’s up with NFLX?  I don’t see numbers, just 20M subscribers and they are popping?  

    Starbucks (SBUX): FQ1 EPS of $0.45 beats by $0.06. Revenue of $3B (+8% Y/Y) in-line. Shares -2.1% AH. (PR

    Qualcomm (QCOM): FQ1 EPS of $0.82 beats by $0.10. Revenue of $3.4B (+% Y/Y) beats by $148M. Shares +6.4% AH. (PR)

    Crown Castle International (CCI): Q4 EPS of $0.12 beats by $0.04. Revenue of $496M (+12% Y/Y) beats by $7M. (PR

    Symantec (SYMC): FQ3 EPS of $0.35 beats by $0.02. Revenue of $1.6B (+4% Y/Y) in-line. Shares +1.7% AH. (PR

  155. reza99

    Phil:
    When would you say the market was more reasonable to you, reasonable-ness being relative.
    What jobless numbers are you expecting? a lot lower or higher?

  156. reza99

    Pharm:
    PDLI has been trending down since Jan12, would you recommend to DD or stay pat.
    "I’d just buy the Aug $6 calls for .45 and leave it at that.  No margin and you can very likely escape with
     .25 if it tanks (the $7s are .25)."
    TIA

  157. stjeanluc

    You have to hand it to the these option guys – that Netflix AH move was priced fairly in the option volatility!
    lvmoda – looks like you that short strangle will pay off this week! 

  158. lvmoda

     stj/nflx –   Yes, that strangle better pay off with a 65 pt spread!   Sold more 215′s that should also expire worthless.  Hit and run…

  159. reza99

    Do you think a "madhedgefundtrader" would do well in an unreasonable market?

    ZH: All That is Gold Does Not Glitter

  160. Phil

     Reasonable/Reza – Well they’ve been getting less and less so since about 2005 so not for a while.  As to jobs – 400K is about right, anything over that should be a grave concern.  We get durable goods at 8:30 too, those should be interesting as they were -0.3% las month (not that it stopped the markets but maybe two is a trend).  Friday we get the Q4 GDP – that will be fun too as expectations are getting pretty high (3.5%).  

    The U.K. fiscal reform plan of tax hikes and budget cuts cannot “possibly be implemented without pushing the economy into a recession," says George Soros, who expects policymakers to reverse course when the effects are felt. Back in London, it’s full speed ahead.

    Netflix (NFLX): Q4 EPS of $0.87 beats by $0.16. Revenue of $596M (+8% Y/Y) in-line. Shares +6.7% AH. (PR

    In its letter to investors, Netflix (NFLX) detailed a number as closely watched as its EPS: It surpassed 20M subscribers as 2010 wound to a close, and expects between 22.7M and 23.7M subscribers by the end of the first quarter. (earnings)

    E*TRADE Financial (ETFC): Q4 EPS of -$0.11 misses by $0.15. (PR)

    Citrix Systems (CTXS): Q4 EPS of $0.65 beats by $0.05. Revenue of $530M (+18% Y/Y) beats by $22M. Shares +1% AH. (PR)

    Motorola Mobility Holdings: Q4 EPS of $0.37 beats by $0.01. Shares -6% AH. (PR

    Lam Research (LRCX): Q4 EPS of $1.74 beats by $0.17. Revenue of $871M (+79% Y/Y) beats by $43M. Shares +0.2% AH. (PR

    Amylin Pharmaceuticals (AMLN): Q4 EPS of -$0.13 beats by $0.19. Revenue of $174M (-6% Y/Y) misses by $16M. (PR)

    BofA/Merrill upgraded disk drive makers Seagate Technology (STX) and Western Digital (WDC) to Buy from Underperform. "We believe industry fundamentals are near cycle lows, with trough-like valuation." STX closed at +1.4%; WDC at +4.4%

     

     

  161. dflam

    Phil/Judy /PFE 
    You recommended to Judy to sell  PFE  $17.00 puts for $.55  that  produce a 25 % return on cash with $2k of margin. I’m usually good at math,but I  have not been able to calculate a 25 % return. Please do me huge favor and let me know how you get the 25 % return. I get 3 % ( $55.00/ $2000.)
    Thank you.

  162. randers1

    Phil,
    I agree with you about the structured note/products, another Wall St. sales job, with features that are not fully disclosed or understood…
    According to Ibbotson data,  a note that lasted one year and protected investors from a 10% drop in the S&P 500 while giving exposure to 12% of the upside would have reached the upside cap more than 40% of the time since 1926, while benefiting from the downside protection just 14% of the time. It would have broken the downside protection limit 19% of the time, resulting in losses.

  163. ravalos

     We should carefully read the NFLX’s letter to investors.. there are many things that they are working out well to maintain the costs low and continue to be competitive..  watch out those shorting the stock..
    —-
    Our interest in television shows is high. Our primary strategy is to offer complete previous seasons of shows rather than offering those shows the day of, or a few days after, broadcast, during the critical ratings and revenue window. This is in the best interest of content owners and is consistent with our desire to offer a very low-cost service for consumers. As with theatrical ticket sales, VOD and the 28-day DVD sale window, this allows studios to capture the market for those most interested in seeing content right away. You will occasionally see us offering shows day after broadcast, as we do with “Saturday Night Live,” or 15 days after broadcast, as we do with Disney Channel programs, but it doesn’t represent a change in our overall TV strategy.

  164. Pharmboy

    EBS/rez – Interesting company that is making money…..I like that.  Revenue YOY is growing, an other plus.  Options are horrible, as you can drive a truck through those.

     

    PDLI/rez – since we got in on Jan 12, the stock is only down 40c (10% or so).  I think our rule is to DD at 20%, but I also sold the Aug 6 Ps for $1.  Remember they pay a nice, hefty dividend, and the stock usually rises into that.  I still like them here, and selling a few more Ps would be fine.

  165. ravalos

     This is a great point for both NFLX and AMZN.. wow, I’m impressed..
    —-
    During 2010 we made great progress in moving our service from our own data centers into Amazon Web Services (AWS), a cloud platform offering. We now run on thousands of AWS servers and the majority of our computing is at AWS. We’ve been very pleased with this initiative in terms of the service Amazon provides, and in terms of the flexibility it gives us, which allows us to more quickly improve our global streaming business. This is part of why we’ll have minimal CAPEX going forward for IT, and it will be mostly OPEX. AWS has given us multiple assurances that they want us as a strong reference customer, independent of how much or little the retail side of Amazon eventually competes with Netflix.

  166. ravalos

     I’m truly impressed with this letter from NFLX!

    Our strategy over recent years has been to use excess cash to buy back stock. We took a break from that in Q4 to reassess our cash needs and the buyback strategy, but plan to return to buying back stock in Q1. The objective of our buyback program is simply to return money to our shareholders, similar to a dividend; consequently, we are neither price sensitive nor market timers. Given our long-term content commitments, we don’t see it as likely in the near term that we would add more leverage to our capital structure through additional long-term debt.

  167. stjeanluc

    Ravalos, shorting NFLX will have to be put aside for now! 

  168. ravalos

     They make quite a fair point.. they might be right.. plus a little bit of marketing for the best ISP..

    Recently the FCC adopted a version of net neutrality for wired networks in the U.S., and it’s a step in the right direction. The focus is on fair-play within an ISP’s network, but does not explicitly address entry into the ISP’s network.
    Delivering Internet video in scale creates costs for both Netflix and for ISPs. We think the cost sharing between Internet video suppliers and ISPs should be that we have to haul the bits to the various regional front-doors that the ISPs operate, and that they then carry the bits the last mile to the consumer who has requested them, with each side paying its own costs. This open, regional, no-charges, interchange model is something for which we are advocating. Today, some ISPs charge us, or our CDN partners, to let in the bits their customers have requested from us, and we think this is inappropriate. As long as we pay for getting the bits to the regional interchanges of the ISP’s choosing, we don’t think they should be able to use their exclusive control of their residential customers to force us to pay them to let in the data their customers’ desire. Their customers already pay them to deliver the bits on their network, and requiring us to pay even though we deliver the bits to their network is an inappropriate reflection of their last mile exclusive control of their residential customers. Conversely, this open, regional, no-charges model should disallow content providers like Netflix and ESPN3 from shutting off certain ISPs unless those ISPs pay the content provider. Hopefully, we can get broad voluntary agreement on this open, regional, no-charges, interchange model. Some ISPs already operate by this open, regional, no-charges, interchange model, but without any commitment to maintain it going forward.
    Tomorrow, we’ll publish on our blog ongoing performance statistics about ISPs collected from our 20 million subscribers detailing which ISPs provide the best, most-consistent high speed internet for streaming Netflix. We can tell you now, though, that for our subscribers streaming Netflix, Charter is the highest-performance ISP in the United States.

  169. ravalos

     This is their most viable threat to which they have NO control, yet it would be quite UNFAIR if the ISPs end up changing the charge-model..

    Recently, there was a report that at peak times Netflix subscribers in the U.S. were driving about 20% of peak downstream last-mile Internet traffic. This may or may not be accurate, but it should be noted that because we pay for the data to be delivered to regional ISP front doors, little of this traffic goes over the Internet or ISP backbone networks, thereby minimizing ISP costs, avoiding congestion, and improving performance for end-using consumers.
    An independent negative issue for Netflix and other Internet video providers would be a move by wired ISPs to shift consumers to pay-per-gigabyte models instead of the current unlimited-up-to-a-large-cap approach. We hope this doesn’t happen, and will do what we can to promote the unlimited-up-to-a-large-cap model. Wired ISPs have large fixed costs of building and maintaining their last mile network of residential cable and fiber. The ISPs’ costs, however, to deliver a marginal gigabyte, which is about an hour of viewing, from one of our regional interchange points over their last mile wired network to the consumer is less than a penny, and falling, so there is no reason that pay-per-gigabyte is economically necessary. Moreover, at $1 per gigabyte over wired networks, it would be grossly overpriced.

  170. biodieselchris

     well shit I have 12 shares of NFLX. I guess this is good for me but I want the rest of the market to go down so this is not good for me.

  171. stjeanluc

    Enough of these gold coins commercials on CNBC. What’s the best hedge against out of control inflation and food riots:
    American Eagle 1 oz. coin – $1400 or….
    Glock 17 9 mm handgun – $440 
    All your gold coins won’t get you food…
    Of course, you could load up on boxes of sardines. The ones I bought at Trader Joe’s are good until 2014!

  172. ravalos

    NFLX, I like A LOT what they did with this way of communication.. it gives you much more/better perspective on their business.. I would NOT short the stock at this point, but I wouldn’t go long either.. I think that if we get a significant market correction, I would be looking to go long rather than short, because shorting the stock at this time would be suicidal..
    I just hope that CMG does not come out with a communication like this or fundamentally strong as them or else my head will be handed over to me.. inside my ass!

    Two Fundamental Questions
    We think there are two fundamental questions for investors:
    (a) What will our domestic growth trajectory be over the coming years, given our strategy to maintain modest domestic operating margins so that we can invest aggressively in additional streaming content?
    (b) How successful will Netflix become outside of the United States?
    Our goal in communications like this one is to provide enough information and perspective to investors so they can come to their own conclusions on these two core questions. We’ll write a shareholder letter similar to this, but perhaps briefer, every quarter to give you our most recent perspective on our business. We hope you find it an effective approach to our earnings review. We will also strive in the future to improve our Q&A format to make it even more useful for investors. We welcome your comments.

  173. amatta

    Phil, 
    Well now it looks like a horizontal channel, but until yesterday it looked like it was going to repeat the multiple crests that it has made during the past year, where it gives up 10% or more AND it goes down to the 50MA (107). So that was my game plan. So I was trying to be PATIENT as you say instead of pulling the trigger when it does an intra-day move… I also had asked you about selling some 105 puts to cover any bounce…those would have come in very handy today!  
    I’ll stick to my premise and see if hopefully today was an anomaly, if not wait now for a rejection at 120 and this time I"ll watch the 113 support you mention…

  174. Pharmboy

    OIH – drillers moving quickly.  

  175. stjeanluc

    Ravalos, these questions about ISP are behind a discussion we had with other members in the past. The problem with the ISP now is that they cannot have commercials promising all these great download speeds like download a song in 3 seconds or a movie in 10 minutes and then complain when people download songs and stream movies! If Netflix is truly behind 20% of the last mile traffic, it’s another issue, but their point about the gigabyte cost is valid as well. Anyway, not sure who is right here! 

  176. biodieselchris

     NFLX = 0.87??? if no growth then 0.87 * 4 = 3.48 which at a price of 200 is a 57 P/E, so they better friggin grow or current shareholders are looking to get creamed, IMHO

  177. biodieselchris

     PFE Jan12 – 10 puts for 0.12 looks like a fun gamble, maybe I ride those out tomorrow. I’ve been so indescribably dessimated or short term short-side plays I can only think about long term right now.
     
    (sighs)

  178. judy

    Dflam,
    I have these sold in my IRA so margin doesn’t apply. I have to hold the cash for the put. But, looking at tos, this is now .61 for the pfe jun 17 put. If I sell one, it tells me my buying power is effected by $230. Therefore $61 is about 25% of $230. I think that is what Phil is referring to.

  179. Pharmboy

    SPY is in a very tight wedge…..and I mean tight

  180. stjeanluc

    Good for tequila and bio-fuel – who could ask for anything more:

    Agave can be used for a great many things, including, perhaps most famously, tequila. Turns out it makes a mighty fine fuel feedstock, too.
    Fourteen independent studies have concluded that the yields from two species of agave greatly exceeded to yields of corn, soybeans, sorghum and other feedstocks. More encouraging, there are additional species believed to be even more productive. Agave is an appealing feedstock because it is economically and environmentally sustainable.
    “We need bioenergy crops that have a low risk of unintended land use change,” bioenergy analyst Sarah Davis said. “Biomass from agave can be harvested as a co-product of tequila production without additional land demands.”

    Davis also said abandoned agave plantations could be repurposed as biofuel cropland. More research is needed to determine which species are most suitable for production in different parts of the world, she said. 

  181. minijoe

    Barron’s Article about Commodities price
     
    http://online.barrons.com/article/SB50001424052970204331604576105141675981046.html?mod=BOL_hpp_dc#printMode

  182. Cap

     Interesting Day for sure (or a joke, depending on your point of view) !
     
    Energy and Commodity stocks rallied
    I had bought a bunch the day before, so I sold ‘em all today (as always too early in the day !).
    Wynn … sold a few $125 calls for $1.60.
    NFLX … nice pump job … I don’t think $200 will hold,  but you never know.   I am short $220 and higher calls, so not particularly concerned; also short 150 puts, so those are good also.
     
    If I am here early tommorow, I may have a weekly call sale trade to recommend, we’ll see how the stock opens first.
     
    Tried to get a fill on an OTM RUT bear call spread … no dice !
     
    Stay alert everyone !   Interesting chart above Pharm ….
     
    Oil up tonite probably due to Egypt / Suez Canal stories I am seeing.

  183. bps2002

    Phil or anyone else,
    I am not sure what to think of this particular statement in the president’s sou speech. Any thoughts?  Does he mean to alter where retirement funds may be invested?; Or just taking a shot at the old privatize ss argument in case it resurfaces?
     
    "To put us on solid ground, we should also find a bipartisan solution to strengthen Social Security for future generations. And we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market."

  184. jromeha

    StJean – Im actually doing my thesis on Alternative Fuels and Feedstock. Had to narrow it down to  Corn/Grain ethanol, Biomass/Cellulosic Ethanol, Miscanthus, Switchgrass, Sugar ethanol,  Coal-to-liquids, Algae, Biodiesel via soybeans/rapeseed/waste oil, Jatropha and Palm Oil. Didnt get to agave…. The thing with a lot of these potential feedstock is they require a great amount of inputs. People make similar comments about Jatropha, Miscanthus, and Switchgrass. Those plants don’t NEED inputs to grow, but they do need inputs (water, fertilizer, etc) if they are to give commercial yields. Algae seems like the best bet of the ones I’ve reviewed if we can get the cost below the 180-400$ per barrel cost but unfortunately we are putting most of our research $s towards cellulosic ethanol! That way, we can still give all those farmers and big midwestern companies lots of subsidies! No way midwestern politicians would go for supporting algae which most likely would be grown in NM or Arizona.

  185. dclark41

    "The cyclically adjusted price-earnings ratio, developed by Yale professor Robert Shiller, stands at 23, a level 40% above its mean. The ratio of the total market capitalization to gross national product, a measure used by Warren Buffett, is almost 50% above its long-term average. Total market capitalization to corporate profits, which can function as an economy-wide P/E ratio, is 10% above its long-term average, despite current near-peak profit margins. In fact, take any valuation method that doesn’t rely on next-year earnings estimates that imply ever-expanding profit margins, and you’ll find elevated valuations and the lack of a margin of safety in broad equity markets. Yet, analysts’ target prices for the S&P 500 still point to significant market upside."
    Alan Hartley writing for Morningstar explores that question in A Potent Brew for a Tall Glass of Regret
    From Mish-Phil’s favorites
    Pomo is providing diminishing returns and I really think the pressure on congress, the senate, and the President, will be too great to support any large spending programs in the future. Sooner or later fundamentals will matter. I think sooner.

  186. ephmen85

    bps/SS   I think Obama just means that he doesn’t support investing SS funds in the market…whether managed by govt or individuals.

  187. barfinger

    I believe the streak of the SPX above its 10-day MA is still intact – it did appear to touch the line last week, but did not close below. The streak stands at an almost unbelievable 35 trading days. Hence Pharmboy’s tight wedgie.

  188. Phil

    PFE/Dflam –  You sell 10 puts, you collect $550, you have $2,000 in margin and $550 is 25% (ish) of $2,000.  I wasn’t talking about a single sale.  For one thing, even if your margin was 100% on 1 contract, your obligation would be to buy 100 at $17 for $1,700, which is less than $2,000 right there.  

    Notes/Randers – Yeah, those things always piss me off.  People ask me about them and I say "give me the money and I’ll give you that deal!"  Not only are they poor payers but people who thought they had a guarantee with LEH and BSC found out they weren’t as "safe" as they thought when those firms went under.

    NFLX – All I see is a brand new price plan that grew subscriptions by 15% and added .22 per share of profits.  Revenues were a miss but that’s being ignored, which makes no sense as obviously that means most of the gains are from differences in accounting recognitions.  Anyway, so they are on track to make $4 in 2011, that’s a p/e of "just" 50 at $200 so still not exciting to own.  From the WSJ:

    But Netflix’s fourth-quarter results also reflected a number of worrying trends. While the company added 5.6 million gross subscribers, double the rate a year earlier, the percentage of free subscribers leapt to 8.7% from 3.1%. Meanwhile, average monthly revenue from each paying subscriber fell 11%.

    Netflix’s streaming-content costs also are rising sharply, as was to be expected from the spate of deals done in recent months. Streaming-content library costs jumped to $174 million in the quarter, from $22.7 million a year earlier.

    Meanwhile, the company signaled that next year it would stop disclosing gross subscriber additions and related metrics. As Netflix’s growth proves more challenging, one thing the company shouldn’t do is clam up.

    AMZN/Rav – Yes, their cloud service is excellent.

    NFLX/Rav – I’m not pleased that they are buying their own stock at a p/e of 50.  If they can’t find something better to do with their money than put it into something that pays 2% a year – I don’t find that very impressive.  If business is so good they should be buying out RedBox (CSTR), whose market cap is 1/10th of NFLX and has huge overlapping expenses.  Meanwhile, they are very clever turning around the net neutrality issue and acting like the victim.  Also clever to "rate" ISPs, which is saying that those that play ball with them will benefit from good promotions.  My overriding issue with NFLX is that there is no future in what they do – look at how many places you can already go on the web for TV and movies.  

    Glock/StJ – This cartoon says it all:

    WYNN/Amatta – China is doing a lot to tighten, that news keeps hitting them in waves while the Macau numbers tend to give them a lift.  If we start getting better numbers in Vegas, then worry about the upside.  Also, casino stocks are rate sensitive as WYNN is carrying $3Tn in debt against property assets they have never written down.  Their cash flow took a nasty turn this year and it’s up to Q4 to get them positive.

    Commodities/Mini – Only a small correction so far, that’s why we went long on gold and sliver the last few days – they were holding up too well.

    Oil/Cap – Yeah, way up at $87.50 even after that awful inventory report.  Temping short again but a bad week in the cycle to guess them. 

    SS/BPS – Well, every time the Republicans are in power they try to push SS money into the stock market and the Dems always have to say no.  I wish they had done it back in 2008, it would have solved the whole deficit!  That’s the problem though – it’s hard to time the market and you can’t gamble with people’s retirement savings although, since the Conservative position is that the Government is not even obligated to make those payments – they may as well bet it all on red as it’s just free money to play with and most people under 50 don’t think they’re going to see a dime of it anyway…

    Biofuels/Jrom – Don’t you think the whole thing is pretty much a dead end as it’s proven that electric vehicles work so it would seem that perfecting those and improving solar collection is a far more efficient use of time and money. 

    Good point on valuations DC! 

  189. Phil

     This kicks ass – a Chinese protest cartoon!

  190. Phil

     Great commentary by former GS guy on state of the union:  

     

    Watching Obama deliver his State of the Union Speech last night, reminded me of all the rah-rah quarterly meetings that we had to attend as Managing Directors at Goldman, where senior management would remind us all of how great we were, and if there were any areas of competitive weakness relative to our adversaries at other banks, all we had to do was step up our game, innovate and globalize (or something like that.)
     
    My reaction was wtf? Two years after the worst recession? After? Really? What about the 26 million people unemployed or underemployed in the country? What about the 4.4 people applying for every job, compared to the 2.9 people per job after the 2000s recession? What about the 4.4 million jobs that should have been added, just accounting for a population coming of job age alone, forget any kind of growth, compared to the fact that instead, the job pool declined by a quarter of a million people in the past two years, because the time required to get a job is at record highs?
     
    What about the nearly 8 million FAMILIES that have been foreclosed upon because of the reckless investment bank race to create $14 trillion dollars worth of toxic assets in the five years leading up to the financial crisis and leave them to shatter lives and the non-stock market evaluated economy? What about the fact that the government fiscally stimulated the banking system by a multiple of 20 times more than it stimulated its citizens, with nary a fight from the politicians our democracy is so lucky to have as representation?  What about all that warm, cuddly multi-trillion dollar support from the Fed and the Treasury Department on our country’s way to Sputnikian economic greatness?

     

  191. Phil

    Good read on Elitism in America, both cultural and economic.

    I was saying earlier that I thought the stock market had departed from "reasonable" in 2005 but I forgot that John Templeton had pinned it at 2004 for pretty much the same reason (and a great article on Goldman, Facebook and the suckers market where I found the quote):

     

    In 2004, at the age of 92, the late Sir John Templeton, a pioneer in the world of mutual funds, issued a stark warning to investors. “The stock market is broken,” he said in an interview. He went on to predict the housing bubble would spark the sort of terrible market crash we witnessed four years later. But Templeton saw a bigger problem than just the bubble then emerging. Stock markets are now dangerously short-sighted. “Mass media, especially TV today, is so short-term that few in its audience grasp the lasting damage and corrective impact which will continue to linger from the greatest financial crash in world history,” he said. In the wake of that very crash, short-term thinking is as much a problem as ever before.
     
    The stats behind investors’ amputated attention spans are astonishing, and reveal the damage caused to the wider economy. According to the New York Stock Exchange, in the 1960s the holding period for stocks was eight years. By 1990 it had fallen to two years and today the average stock is held for just nine months. As investors have shortened their time horizons, companies have been focused on each next quarter’s financial results at the expense of the next decade, say experts. Last spring, the U.S. Senate banking committee held hearings to examine the plague of short-term thinking in capital markets. Some astonishing revelations emerged. In a survey of 400 chief ?nancial of?cers, 80 per cent said they’d cut research and development spending to goose short-term performance. To make matters worse, when companies do beat expectations, executives are lavished with huge paycheques and millions of stock options that dilute existing shareholders even further.
     
    One reason investor time horizons have shrunk so dramatically is that hedge funds have been taking massive gambles using borrowed money, says Cohan. “One of the biggest sources of volatility is hedge funds betting on very short-term movements,” he says. “That whole dynamic is not really conducive to long-term investing, or the long-term management of companies.”

     

    Bloomberg confirms rumors of AAPL using IPhones to pay for retail transactions

    Sorry rich folks, your custom luxury islands in Dubai are falling back into the sea!  

    Good chart from Barry – $94Bn spent on advertising in first 3 quarters of 2010:



  192. lvmoda

     NFLX for some reason reminds of Starbucks in the 80′s (maybe because they announced on the same day).   Back then, people would say coffee is available everywhere and who would pay $3 for a coffee (or whatever their price was at that time).   But what Starbucks did was out-execute everyone else and managed to stay one-step ahead of everyone else in a simple, obvious yet huge shift in consumer taste and behavior that developed into a major economic trend.   I kind of see NFLX doing the same thing, staying ahead in an obvious, simple (ie.  easily replicable) market by out-executing their competitors.  The obvious consumer preference in an early stage market is similar to the early days of starbucks, at least to me.
     
    Now, I have a personal bias against these momo’s, and love to make money selling them short one way or the other.  I’m short weeklies at 215 and 220 expiring tomorrow.  But frankly, I think NFLX is going to continue to fade up in price and perhaps expanding PE.  At some point their subscriber economic model will become fully developed and growth will abate, but I think the prospect of a broken stock is a long way off for them.

  193. flipspiceland

    Good read on Elitism?  On Education?
    And not one single word about how the ‘leaders’ of teachers unions have turned the education of the children to Indoctrination and a personal money pot?
    Too bad the nostrums in the article had to be torpedoed.

  194. lvmoda

     NFLX at 208 this morning….can’t believe I have to babysit my weekly 215 calls today!

  195. ravalos

    lvmoda, if they break their all-time high you could get in trouble.. Let’s hope not! But I would look to short them above $215, that’s for sure.

  196. japarikh

    Phil,
      Need to roll my March 200 NFLX short call after earnings. Would you do that today or after a few days?

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