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Mandarin Monday Meltdown – Ancient Chinese Secret is DEFICITS!

In a gadda da vida, honey
Don’t you know that I’m lovin’ you
In a gadda da vida, baby
Don’t you know that I’ll always be true

Oh, won’t you come with me
And take my hand
Oh, won’t you come with me
And walk this land
Please take my hand

That’s all the lyrics there are in the 17 minute and 10 second song "In-A-Gadda-Da-Vida" by Iron Butterfly yet it sold 4M copies (the most ever for Atlantic Records at the time) and was on the charts, with a hit run for 140 weeks.  43 years later, it’s "Iron Who?" and I challenge anyone reading this to name another song of theirs.  Market rallies are kind of like that – once they get going, you often forget how they started and, after they end, you can only wonder what kind of drugs people were on when they were buying…  

We have talked for years about the myth of China’s "infinite expansion" that has been driving the global economy, particularly the commodity bubble.  We’ve talked about the empty cities and shopping malls, the unused rail lines and airports, the bridges to nowhere, etc. that dot the Chinese landscape because it’s easy to grow a $5Tn economy 10% a year if the Government spends $500Bn a year building things that no one needs.  China’s "boom" began with their preparations with the 2008 Olympics, for which they spent over $400Bn on infrastructure projects in preparation.  China was "booming" and China became as addicted to infrastructure spending as the US ever was to oil.  And who was pushing behind the scenes to encourage this madness – why GE, of course – China’s pump-masters on CNBC!  

Recently, local government debt has become a concern in China and, as recently as June, Standard Chartered had warned that debt would hit $2Tn Yuan ($308Bn) by 2012, which was likely to trigger a debt crisis in China.  The report, authored by Fraser Howie, also the co-writer of a book entitled ‘Red Capitalism,’ which portrays a gloomy picture of China’s ‘fragile‘ financial system, said that banks could resort to fraud and false reporting on their balance sheets to cover up any losses arising out of lending to local governments.  As a last resort, they might even be forced to seek capital injections, it noted.  

http://worldmeets.us/images/2009.china.new.year_times.jpgAccording to data from the People’s Bank of China, the central bank, there are more than 10,000 financing vehicles set up by local governments, with a total debt of 14.4 trillion Yuan ($2.22 Trillion), or 30 percent of the country’s outstanding loans denominated in Yuan — much higher than Standard Chartered’s estimate of 10 trillion Yuan ($540 Billion). Few stock analysts were alarmed by Standard Chartered’s report: 20 of the 24 analysts tracking the China Construction Bank had a ‘buy‘ or ‘accumulate‘ rating on the stock; not one of them rated it as a ‘sell.’ Similar ratings were given to the Industrial and Commercial Bank of China’s shares.

Now it has been confirmed by China’s National Audit Office has found there is ALREADY $1.66Tn (10.72Tn Yuan) in local debt (20% of the GDP) and the report shows that 2,746 of the 2,800 municipalities audited are "at risk" of no being able to repay their loans.  That’s 98.1%!  What’s even more disturbing is that, just one year ago, the figure released was just 2.79Tn Yuan, just 26% of the new total.  Did spending quadruple in one year (that would be bad) or were they lying then?  That would then lead to the very important question – are they still lying?   

Moody’s is now leaning towards "still lying" and has identified AN ADDITIONAL (are you seeing a theme here?) 3.5 TRILLION Yuan ($540Bn) that did not show up in the NAO report.  Moody’s says that the potential scale of the problem loans at Chinese banks may be closer to its stress case than its base case, when considering the apparent absence of a clear master plan to deal with this issue.  Moody’s also views the credit outlook for the Chinese banking system as potentially turning to negative.  

"We assume that the majority of loans to local governments are of good quality, but based on our assessment of the loan classifications and risk characteristics, as provided by the NAO and other Chinese agencies, we conclude that the banks’ exposure to local government borrowers is greater than we anticipated," says Yvonne Zhang, a Moody’s Vice President and one of the authors of the report.

In other ratings agency news (and other national disasters in the making), S&P says Greece may be in "Selective Default" which means you can screw some of the people all of the time or all of the people some of the time BUT, if you screw all of the people, all of the time – NOW THAT’S DEFAULT!   “Sentiment was undermined with those S&P comments,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “Markets are reluctant to aggressively sell the euro, though. We need to see what the other rating agencies are going to suggest.”  Isn’t that precious? Hope really does spring eternal…

Despite Greece being "fixed" (according to Mr. Stretch and the rose-colored glasses brigade), The cost of insuring against default on European sovereign and corporate debt rose, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed 3 basis points to 221 at 12 p.m. in London. An increase signals deteriorating perceptions of credit quality. Swaps on Greece climbed 14 basis points to 1,875, according to CMA. Contracts on Spain jumped 6 basis points to 263, Portugal increased 5 to 755 and Ireland rose 4.5 to 732.5, while Italy was 4 higher at 182 and Belgium was up 3 at 146 so we’re just barreling trough on to our next crisis – or do people REALLY think that Portugal and Ireland can afford to borrow money at 7.5%?  

Of course, even though Greece is "fixed" – it still may become "unfixed" if Germany’s Constitutional Court rules that Germany’s participation in the $113Bn bailout violates their own constitution.  This is, however, the third attempt to stop the bailouts:  “The court has always been very critical on the European integration in its language — only to be rather conciliatory when it comes to the practical results,” said Axel Kaemmerer, a professor at Bucerius Law School in Hamburg. “The judges may lift their fingers to admonish the government about red lines that cannot be crossed, but in the end it won’t rain on its parade.”  

We talked about Barron’s bullish call on oil in the weekend post and Bloomberg reports I’m not the only one who is skeptical about commodities as Funds Slash Bullish Commodity Bets to One-Year Low on Slow Growth Outlook.  Funds have reduced bullish bets on commodity prices to the lowest level in almost a year on speculation that slowing global growth will curb demand for metals, energy and grains. Speculators cut their net-long positions in 18 U.S. commodities by 15 percent to 958,309 futures and options contracts in the week ended June 28, government data compiled by Bloomberg show. That’s the lowest since the week ended July 13 last year, when oil was trading closer to $75, not $95!  Also from the wayback machine, gold was $1,200 last summer, silver was $17.50 and copper was $3 so PLENTY of room for a commodity crash IF the Dollar wakes up.  

Of course we’re short oil (/CL in the futures) below the $96 line it looks to open today.  They were spilling oil all over the place this weekend in an attempt to drive up prices and despite the fact that Asian and European traders never bought a barrel over $95.50 yesterday, the minute the NYMEX opened, those crooks ran the price right up to $96.50 and we hope they take it $97.50 so we can short it there but, if they fail $96 – that’s fine too for our first entry as we enter into the next rollover cycle (more on that tomorrow).  

Overall Consumer Prices in OECD nations are up 3.2% in May, 10% higher than April’s 2.9% pace so inflationary pressures are accelerating rapidly – now at the fastest pace measures since right before the Global economy collapsed in 2008 and, right on cue, rice is now projected to rise 56% (number pulled out of someone’s ass) as the Pro-Thaksin Party sweeps to power in Thai elections.  The party that won parliamentary elections is expected to implement a policy to buy the crop from farmers above current rates.  A Bloomberg survey last month, conducted during the campaign, suggested a gain to $750 per ton if Pheu Thai were to win. “It isn’t only Thai prices that will go up, the rest of the world will have to follow,” Mamadou Ciss, chief executive officer of Hermes Investments Pte, said from Geneva.  With rice – fear of high prices often leads to high prices (remember all the idiots who were stockpiling it in 2008?).  Unfortunately, rice is the staple of the World’s 2Bn malnourished people and rice, more than anything else, can quickly lead to mass starvation. 

We’re already short (see last week’s posts and this weekend’s Stock World Weekly) – you be careful out there!  

 


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  1. jabobeast

    how could you not be bearish after reading Phil’s report? Is there any country that isn’t destined to blow up within the next couple years?

  2. kevinb63v

    Phil,
      Are You Happy, Flowers and Beads and Most Anything That You Want, off the top of my head. As much as I love In A Gadda Da Vida, side two is arguably better.

  3. pstas

    FXE- PHarm, you were shorting this at or even below this level. Any prognosis today?

  4. l4real

    " Most Anything You Want"

  5. jabobeast

    Netflix jumps 7 pts on announcement that it will provide service in Latin America and the Caribbean for streaming TV shows and movies later this year

  6. rainman

    And right along side the NFLX expansion, CMG expands: US chain selling ‘healthy’ Mexican plans European expansion

  7. dclark41

    Looks like they are working on the dollar again to keep things nice and pretty.  What China?

  8. chaps

    kevin/Iron Butterfly:
     
    I’d usually passed out before somebody put on side 2. :)

  9. Pharmboy

    FXE – I need to see direction, and Portugal is next. or Ireland, or Italy or Spain….no, I got out b’f vacation and will watch closely in the days ahead.

    Having problems uploading images and hyperlinks today…..so PP pictures are here (http://pharmaphavorites.blogspot.com/2011/07/blog-post.html).

  10. rainman

    chaps / out — Obviously your timing was off.  I wish you better luck at timing the markets! :)

  11. davew

    rainman
    Funk Congress, Funny Stuff!

  12. champ87

    Iron Butterfly:
    How about "in the Time of Our Lives." I saw them in concert in Edwardsville, Il in ’68 or ’69. Memorable only for the fact they did NOT play Inna Gadda Da Vida. Upstaged completely by their opening act, Blues Image, who were also one-hit wonders: "Ride Captain Ride.":

  13. stjeanluc

    Oil Lines
    R3 – 96.21
    R2 – 95.84
    R1 – 95.44
    PP – 95.07
    S1 – 94.67
    S2 – 94.30
    S3 – 93.90
    We have already ran all the way to R3 and retrace below… 

  14. exec

    Debt……what Debt????  
     
    Quit making such a big deal over nothing.  What’s a few trillion dollars between friends anyway.
     
    It’s all about keeping their power and control…….if they have to lie…cheat….deceive….pretend….imagine….whatever it takes to keep a lid on the approaching storm……christ……look what they did to Kahn.
     
    As long as the market keeps advancing and the people don’t throw them out of their phony boloney jobs……then…. nothing else matters.

  15. lunar

    phil, i’m holding some July $82 IWM puts that I think I should roll to Aug.  What strike do you recommend?
    purchased at $2, now $0.52.
    thanks.

  16. JRW III

    Good morning,

     

    IWM    82.02,  82.28,  82.82,  83.01,  83.38,  83.61,  83.83  84.37 and 84.86

  17. gmarts

    "Flowers and beads are one thing, but having a girl is SOMETHING"……..
    I had a Nehru jacket too…

  18. gmarts

    I guess brain cells really DO grow back. :-)

  19. Pharmboy

    OK, now things are working….ES below.

  20. jromeha

    Pharm- what do you think of dyax?

  21. tuscadog

    Phil /Oil short    You mentioned you’re looking for $97.50 to go short.  Now $96.88   seems like a decent short point.  This level will guarantee a Ddip, so seems low risk to short?

  22. dday97

    USO Jul 37 weekly put for .13. I’ll take it

  23. Pharmboy

    DYAX/jro – interesting little company that has a technology for license.  Options are horrible, so I would buy an initial 1/5 round and let it sit.  Think of them as a PLDI, but very early on.  Lot’o'things in the pipeline licensed out.

  24. Pharmboy

    Even with Japan….Inventories are moving, up. Now, we will see if those are put into new orders!

  25. Phil

    Good morning!

    Am I bearish?  Yes, I am the absence of bullish – that’s for sure!  Nothing I’ve read over the weekend has changed that.  I would be gung-ho bullish but the technicals are very firmly against me.  Of course I believe it was nothing but a totally fake prop-job but I could be wrong and you have to at least respect the technicals as so many people look at nothing else.  

    What we’ll be looking for today/this week is a failure of the 2.5% lines OR (if you are the optimistic type) the breaking of the 2.5% line to the upside by the NYSE which, of course, I kind of doubt will happen.  Why is the NYSE a laggard?  Because there are 5,000 stocks in it and it’s the hardest index to manipulate so, when it’s lagging – it’s a good idea to be a bit suspicious.  

    So, the longer they hold the 2.5% line, the more solid the support should become and, not today, of course, but tomorrow and Thursday, we may have to take a few bullish plays to get more neutral if we don’t get a pullback.  The Dollar is at 74.75 and we think that’s artificially low but, if that’s the case, then it should get back over 75 by tomorrow at the latest.  If the Dollar is really going to stay weak – we have no choice but to get more bullish.  

    As I mentioned in the above post, I like oil futures (/CL) as a short below the $96 line only (very tight stops).  Above that, I’d rather wait for $97.50, which they may get to on inventories, which aren’t until Thursday this week so they have more room to mess around.  If we do get a nice run up, THEN I’ll be liking USO puts.  

    So it’s mostly a watch and wait kind of day.  If you want to play a pullback in China, I like 10 FXI Jan $40 puts at $1.90, selling 5 Aug $40 puts for .40 as a bearish spread.  That knocks 10% off the purchase price with 5 more months to sell so it’s a nice way to stake a starter hedge on China.

    Also, of course, I loves my EDZs.   The Aug $17/19 bull call spread is .55 and can be offset with the usual suspects (any bullish short put you REALLY want to own) or the short EDZ Aug $15 puts .50 on the assumption EDZ doesn’t drop another 10% or, if it does, that’s not a bad place to commit long anyway as it would be below the 52-week low (and good options to sell).  

    Tuesday’s economic calendar:
    10:00 Factory Orders

    Date ET Release For Actual Briefing.com Forecast Briefing.com Consensus Prior Revised From
    Jul 05 10:00 Factory Orders May   1.0% 1.0% -1.2%  
    Jul 06 07:00 MBA Mortgage Index 07/02   NA NA -2.7%  
    Jul 06 07:30 Challenger Job Cuts Jun   NA NA -4.3%  
    Jul 06 10:00 ISM Services Jun   52.0 54.0 54.6  
    Jul 07 08:15 ADP Employment Change Jun   50K 60K 38K  
    Jul 07 08:30 Initial Claims 07/02   425K 425K 428K  
    Jul 07 08:30 Continuing Claims 06/25   3700K 3700K 3702K  
    Jul 07 11:00 Crude Inventories 07/02   NA NA -4.375M  
    Jul 08 08:30 Nonfarm Payrolls Jun   75K 80K 54K  
    Jul 08 08:30 Nonfarm Private Payrolls Jun   95K 110K 83K  
    Jul 08 08:30 Unemployment Rate Jun   9.2% 9.1% 9.1%  
    Jul 08 08:30 Average Workweek Jun   34.5 34.4 34.4  
    Jul 08 08:30 Hourly Earnings Jun   0.2% 0.2% 0.3%  
    Jul 08 10:00 Wholesale Inventories May   1.0% 0.9% 0.8%  
    Jul 08 15:00 Consumer Credit May   $3.0B $3.5B $6.5B  


    At the open: Dow -0.06% to 12576. S&P -0.1% to 1338. Nasdaq +0.05% to 2817.
    Treasurys: 30-year +0.46%. 10-yr +0.37%. 5-yr +0.29%.
    Commodities: Crude +1.25% to $96.13. Gold +1.76% to $1508.70.
    Currencies: Euro -0.43% vs. dollar. Yen -0.23%. Pound +0.15%.

    10:00 AM On the hour: Dow -0.07%. 10-yr +0.38%. Euro -0.43% vs. dollar. Crude +1.82% to $96.67. Gold +1.87% to $1510.30.

    The June eurozone services PMI comes in a bit lower than estimated at 53.7, down from 56 in May. Much of the slowing was due to France, which saw a sharp drop from speedy spring growth, but still remains well above 50. The periphery remains in contraction/stagnation mode

    The ECB will continue to accept Greek debt as collateral, says one senior official, unless all three major ratings agencies declare it to be in default. Yesterday, S&P became the first of the lot to warn that a plan for banks to roll over their Greek debt would be seen as a "selective default."

    The ISDA, the arbiter of what constitutes a credit event, yesterday said that French proposals to voluntarily roll over Greek debt are unlikely to trigger the payout of CDSs, which caused such havoc during the Lehman crisis. The stance contrasts with S&P and Fitch, while Moody’s has yet to make an explicit comment.

    Stress testing shows that around 10% of European insurers would fail to meet future minimum capital requirements in an adverse economic scenario, leaving the sector as a whole €4.4B ($6.37B) short. Overall, though, the sector is well capitalized and prepared for shocks.

    The Reserve Bank of Australia holds steady at 4.75%, as expected, but says the nation’s growth may be weaker than previously expected. AUD -0.6% vs. USD.

    The Riksbank hikes for the 7th consecutive meeting, bumping the Swedish benchmark rate 25 basis points to 2%. At the same time, the bank lowers its forecasts for growth and inflation, suggesting a pause could be in the works. EWD +2.9%FXS +6.6% YTD.

    The eurozone’s big banks have scheduled a Wednesday meeting in Paris to rehash the plan for their participation in the Greek debt restructuring. Word is, the interest rate is going to be eased and a larger amount of Greek paper will be rolled over.

    Spreads on credit-default swaps for the debt of at-risk Eurozone economies are widening. The spread on 5-year Italian debt has widened by 6.7%, and spreads on Spanish and Portuguese debt have grown by 3%. In addition, Moody’s is warning that banks looking to roll over their Greek debt may have to take impairment charges.

    Western Japan jolted by 5.4 magnitude earthquake: NHK

    The modest rise in the yuan combined with booming labor costs are forcing U.S. firms with Chinese operations to cope by either jacking prices and/or moving production to other Asian nations or cheaper parts of China. Expectations China would consider a major revaluation of its currency don’t consider how thin a margin China, Inc. is operating under.

    The WTO is set to censure China today for curbing exports of raw materials, overruling China’s arguments that the limits are needed to protect the environment. The decision sets a precedent the U.S. and EU can use to file another complaint against China over rare earth quotas.

    On a breathtaking tear all year, rare earth metals prices fall M/M for the first time in June, according to Lynas (LYSCF.PK). "There are whole industries disappearing at the moment" because of high prices, says a producer. China is 

  26. Phil

    On a breathtaking tear all year, rare earth metals prices fall M/M for the first time in June, according to Lynas (LYSCF.PK). "There are whole industries disappearing at the moment" because of high prices, says a producer. China is expected to announce rare earth export quotes for H2 in the coming days.

    Sino-Forrest (SNOFF.PK +50%shares surge after Wellington Management discloses an 11.5% stake in the company. "If you believe Sino has more licenses than Muddy Waters thinks they do, there might be value," says a fund manager who does not own any shares.

    Western companies such as Cisco Systems (CSCO) and Hewlett-Packard (HPQ) are poised to help build a big new surveillance project in China - a network of as many as 500,000 cameras that could help prevent crime but that human rights advocates warn could target political dissent.

    Large cap tech stocks have been “orphaned” by the market in favor of the latest tech IPOs, but some analysts see a big buying opportunity with the tech mainstays at their cheapest compared with the rest of the market in almost 20 years. The Q2 rise in Microsoft’s (MSFT) shares could be an early sign that those attributes are beginning to gain investor attention.

    With many bank stocks trading near historic lows and expecting a round of rough Q2 earnings reports, FBR Capital sees an upcoming opportunity to buy banks for the long-term. FBR likes PNC Financial (PNC), JPMorgan Chase (JPM) and U.S. Bancorp (USB), but is less enthused about regional banks aside from Sterling Financial (STSA) and Zions (ZION).

    Netflix (NFLX+3.2% premarket after confirming that it will begin offering its Web video service in Mexico and 42 other countries in Latin America and the Caribbean later this year. Netflix did not announce a launch date for the move or pricing for the service, which goes for $7.99/month in the U.S. (PR

    Apple’s (AAPL) iPad still has no real competition in the tablet world. Net Applications’ survey of June web activity found the iPad to account for 96.8% of tablet browsing, marginalizing Samsung (SSNLF.PK), Motorola Mobility (MMI), and Research in Motion (RIMM). The iPad also now accounts for over 1% of total web browsing worldwide.

    News Corp. (NWSfaces accusations of hacking an abducted schoolgirl’s phone by its News of the World tabloid. Called a ‘truly dreadful act’ by U.K. Prime Minister David Cameron, the timing is poor for the firm as it seeks to finalize its purchase of the remaining stake of BSkyB (BSYBY.PK). 


  27. stjeanluc

    I guess we’ll have to save Greece, Portugal and Ireland every month:
    http://ftalphaville.ft.com/blog/2011/07/05/613156/the-same-crisis-again-and-again/

  28. jabobeast

    nflx,cmg,lulu hit all-time highs again.
    Phil--will these mofos ever go down?

  29. shadowfax

    pharmboy
    That was a great sumation of state!

  30. qcmike

    Test

  31. Phil

    Blowing up/Jabob – Irrational/Solvent is the equation you have to be aware of.  Just because it’s obvious, doesn’t mean the market will reflect it.  QE3 is still a possibility as is a Trillion Dollar China bailout or more money from the EU and any of those things can give the bulls another 6 months here and another 6 months there….

    OK Kevin, you win the official 1967 Hippy Dippy Weatherman clip – I’m sure you can relate!  I also did not know there was a side 2 to that album, I thought the sound of the needle scraping against paper for another 20 minutes was also part of the song… 8-)

    NFLX – DEADLY!  Low VIX makes the Dec $220 puts at $10.20 a fun play.  They were $20 last week so 20% shouldn’t be too much to ask on a pullback.  You can offset with the short Aug $240 puts at $4, a 3/4 sell net’s $3 off the $10.20 investment.  

    3 CMG Aug $310 calls can be sold for $18.50 ($5,550) against 2 Dec $340 calls at $18 ($3,600) for a $1,900 credit and that will be our first trade in our new $25KP! 

    Onion/Rain – That’s funny but this picture is priceless!  Mr. Met Takes Out Frustration On Fans At Citi Field

    Very true Exec.  

    IWM/Lunar – Always plan for failure.  The $82 puts are .50 and you can spend $1 to roll them to the Aug $81 puts, which are $1.52 and they have a better delat (.33) than your current puts (.28) so no big deal dropping $1 in strike.  If IWM breaks over $84 again, then you can sell the July $83 puts (now .82) and spend that money to roll up to the Aug $83s.  If those expire worthless, then you can maybe sell something in Aug and contemplate a roll to Sept and if IWM drops before expirations, you can stop out 1/2 the July puts at $1 and you still have a net .30 (per long) short sale which is easy to roll down to an Aug vertical with more than a $2 spread, which would cover your loss.  

    Oil/Tusca – Very risky playing the in-betweens.  The dollar is still locked between 74.50 and 75 and it’s zig-zagging and oil can easily pop one way or the other.  If you are quick, then sure you can play each .50 line (and they just topped out at $96.99) but be prepared to lose a few nickels.  

    Nice trade on USO, DDay!  

    Inventories/Pharm – Sometimes inventories build up simply due to a sudden drop in demand.  Very depressing article by Smith. 

    Saving the EU/StJ – Yes but think what a great boost the markets will get every time we "save" them.  

    MoMos/Jabob – Only when they report in-line earnings.  

  32. jcaesar

    Phil – Are these trades going to be scaled for $25k, or $50k?

  33. tuscadog

    Phil / China   When I challenge my Chinese contacts on this RE bubble risk the reply is essentially:   We’ve 1.35B people, most of whom live in huts.  We are completing about 10mm housing units p.a. (mainly tiny apartments).  Wages are rising in many regions at 25% p.a. enabling a whole new group of middle class buyers.  Families combine savings to buy units (one child hangover).  Yes the mega cities of Beijing, Shanghai and HK are now in a bubble and will pop, but not the major part of the country where the goal is to create scores of 2/3 mm pop cities to urbanize the population.  Popping the bubbles in the mega cities won’t change the macro thesis of massive regional / hinterland urbanization and expansion.  The empty apartments will fill.
    Phil, the reason the US can’t grow meaningfully for years is that we borrowed 5 years of future building versus demand via financing shenanigans.  China won’t have this problem for many years given their pathetic housing stock starting point.  And, their infrastructure is still in it’s infancy vs US and Europe.  They don’t even have 1/10th of our road system.  Most importantly, they have a lot more room to print more money than we do, given their central reserves – and will do so to maintain growth and avoid social breakdown.
    I wouldn’t bet on a collapse in China any time soon.  I’m more worried about US, Japan and Europe (that of course will affect China exports, but they will still have scope to goose domestic consumption).

  34. angelcur

    tired today..spent some time with a dynamo over the week end  commodities have turned into another big i-banking scam….people just dont realize it yet.

  35. Phil

    ECB/StJ – I like this paragraph:  

    Well, whatever permits the ECB to look in the mirror in the morning and tell itself that it’s not monetising Europe’s government debt. We would point out a small, small flaw in this ratings loophole however. It’s completely rubbish on any time scale beyond the attention span of a goldfish, or in other words, on a ‘forward-looking’ perspective of Greece’s sovereign credit, as the ratings agencies put it.

    $25KP/JC – I’m looking at it as a $50,000 portfolio, not $25K but I will certainly make most plays without too much cash required.  Don’t forget this is NEVER intended for someone who ONLY has $25KP – this is for a carve-out risk portion of a larger portfolio so we’re not expected to run into margin requirements.  If you have less money or little margin, then you need to be aware that any initial trade idea that commits more than 10% of your margin is not going to be appropriate because it limits your ability to adjust a trade.  

    China/Tusca – I don’t disagree over the long haul but those short-run adjustments are a bitch, aren’t they (see the Great Depression).  I’m not saying China will collapse but it will correct and you can call a drop in the Hang Seng from 23,000 back to 18-20,000 whatever you like but it isn’t growth and that’s what the rest of the world’s bright prospects are based on – continued 10% annual growth in China.  

    Commodities/Angel – All boosted by weak dollar but when Dollar comes back (now 74.83), they will blow technicals as well as the general sentiment shift and then it’s going to be very hard to find buyers to cushion the fall.  

  36. Pharmboy

    v’er did everybody go?

  37. Pharmboy

    I guess the street dot com finally picked up on SGEN.

  38. David Ristau

    Phil -

    Any ideas what to do with some TZA $34 Calls with July expiration…down over 50%…just accept the loss?

  39. jerconn

    Phil – actually managed to sell those CMG Aug $310′s calls for $20.  But, here’s where I have to ask what your thesis is – that the premium on the Aug calls will decay faster than the Dec $340 calls go up?  At the moment it’s going baliistic, so your expectation is that it will back up a bit?  I know this is a beginner’s question, just trying to understand the trade…thanks!   

  40. Phil

    LOL Pharm – Pretty normal for day after a holiday and summers are generally light participation so we’ll just have to amuse ourselves – especially if the markets are going to flat-line like this.  

    TZA/David – Yes,  you can just sell the weekly $34s to some other sucker for .50 and roll out to the Aug $35s at $2.20 for +$1.25 and hopefully the weeklies will expire worthless and then you can sell the July somethings (the next weeklies) for .75 and that pays for your roll.  

    Dow volume just 41M coming into noon.  Europe closed flat on FTSE and DAX and down 0.5% on CAC.  Asia was essentially flat this morning and we’re struggling to get green but SOX and Transports are off 1% and the Nas is held up by MoMos and a strong showing by AAPL (up 1.5%) and GOOG (up 2%) so up 0.17% on the Nasdaq means the headline strength is masking a hell of a lot of selling that’s balancing it out!  

    11:00 AM On the hour: Dow -0.27%. 10-yr +0.55%. Euro -0.66% vs. dollar. Crude +1.42% to $96.29. Gold +1.74% to $1508.40.

    Regional banks (RKH -1.9%) are the morning’s worst-performing stock sector after Citigroup cuts price targets on the lenders, citing earnings pressure from continued low interest rates. CMA -3.4%FHN -3.2%RF -3%KEY -2.7%FITB -1.9%PNC -1.9%MTB -1.8%HBAN -1.8%.

    Recent data seem to show the impact of the U.K. government’s austerity budget may be greater than anticipated. Calls for BoE rate hikes are being replaced with forecasts of more easing. The end result could be a far weaker pound. One warning sign: the meek rally in sterling last week as risk markets soared. FXB +2.6% YTD. 

    In a demonstration of the power held by finance industry lobbyists, a last-minute change in patent legislation before Congress would allow the banking industry to skirt paying for certain important patents involving “business methods.” One software exec worries that his company would be forced to “spend more time and money defending” its patents; “Only lawyers stand to benefit from this.”

    The Semiconductor Industry Association estimates global chip sales to have risen 1.3% Y/Y in May, results that are seen as in line with projections of 5.4% growth in 2011. The industry was hurt in May by thelingering effects of Japan’s earthquake, as well as a slowdown in demandfor PC industry chip suppliers such as Micron Technology (MU).

    Declining shipments from Taiwan-based notebook makers indicate tablets are impacting computer sales. The top-five notebook manufacturers saw combined shipments drop 4% sequentially in Q1 and Q2, and are expected to gain just slightly in Q3. 

    If there is a slowdown in China, VALE isn’t seeing it, according to CFO Cavalcanti. Combined with the difficulty of bring new iron-ore projects online, it is likely the supply-demand imbalance will continue for the better part of the next decade.

    Woops, they just found $600M worth of gold!  Silvercorp Metals (SVM) is up 10.7% after reporting that a resources estimate on a Chinese mining property "indicates" the presence of 225K ounces of gold. The estimate also "infers" the presence of an additional 208K ounces of gold, as well as 111K tons of lead and 284K tons of zinc. (PR

    Goldman, JPMorgan and other securities firms are snapping up warehouse operators to take advantage of the big profit opportunities in holding metals. Warehousers collect a holding fee and can charge a premium on large corporate orders, but critics worry firms will exploit their trading knowledge.

    Shares of Medtronic (MDT -3.1%) fall sharply after a Wells Fargo analyst downgrades the company to Market Perform on more controversy over the firm’s failure to disclose side effects from its bone-graft product.

  41. angelcur

     the short-sightedness of the market is astonishing….its one of the main problems with our whole society…it promotes recklessness for short-term gain.

  42. angelcur

      you see the avg. hedgie is DOWN -2% this year….no wonder we are up today…hahaha

  43. jcaesar

    Thanks Phil.  I’ll scale accordingly.

  44. tuscadog

    Phil / Oil    Why up on dollar strength?  What happened to the Gov’t thesis that the consumer is scrwd at $96/97 oil, hence the strat reserve release?

  45. Troy

    Phil/TBT price at 4.25% 10 Year - If David Zervos is correct and the 10 year hits 4.25% EOY,  can one figure a linear relationship between TBT 2x inverse of the 10 year?  If so, would that place TBT into the 55ish range (72% gain)?  Ever considered starting an "Armageddon Fund"…. perhaps with a few cheap OTM TBT EOY calls, etc?  http://dealbook.nytimes.com/2011/06/29/a-new-investment-strategy-preparing-for-end-times/
     
    Per Bloomberg
    “We’ve still got a Fed hell bent on increasing inflation expectations, negative real returns and risk assets continuing to outperform,” said David Zervos, the global head of fixed- income strategy in New York at Jeffries Group Inc., the most bearish of the 20 primary dealers, expecting the yield to hit 4.25 percent by year end

  46. enni_82

    Phil,
     
    What’s your opinion on WM for a long term portfolio? With the stock at 37.65 is selling the Jan 2012 35 put and Jan 37.5 call for net 3.5 to complete the buy write at 34.15/34.58 a good way to establish a position? Thanks!

  47. Savi

    Pharm--LOL--my normal state in space

  48. Savi

    Phil—-do you like SD—-I have 1000 sh of SD @ 10.75 and was looking to a buy/ write PSW style—what strikes would be good?
    Tnx

  49. jabobeast

    PCLN hitting highs now
    FU MoMOs!!!

  50. palotay

     Phil,  I’m holding a lot of SDS July $21 calls that I bought late last week, expecting a big down day on Friday or today.  I realize that their value is going to rapidly deplete.  Would you roll today, or wait until tomorrow?  

  51. Pharmboy

    Afinitor from NVS….a mTOR inhibitor.  This can only help ARIA on off label use.

  52. terrapin22

    Pharm / DCTH - do you see any near term catalyst for this stock?  I’m in the sept. 6/11 bull call spread. 

  53. Pharmboy

    DCTH/terr – unfortunately not.  you still have the puts right?  That was a 15c net credit and the Sept $6 Ps are where they were when we sold them $1.35).

  54. Pharmboy

    How does one jump start to floundering economies….

  55. etradingsignals

    Phil:
    I need some help with a LNKD puts position I have.  I bought a few Jul 85 puts of LNKD when LNKD was around 85 last week. It has moved up quite a bit now. Even though I tried cost averaging, its still lossy. Right now I have 10 puts at a cost basis of 4.95.  As a way to control the damage, I sold 10 July 75 puts (basis 1.20) – so that I’ll collect atleast some premium. Do you think its time to roll 85 puts to next month or to a different strike? How would you handle this position? Or do u think I should just cut the loss and get out?

  56. jabobeast

    WTF--NFLX up over 20 points on that news?

  57. jromeha

    angel – short-sightedness – so true….

  58. Phil

    CMG/Jercon – It’s an earnings play, betting they miss.  If they do not miss, we buy 1 or 2 more longs and roll the callers and, PRESTO!, we’re bullish.  CMG is trading with a 54 p/e and has no operations outside the US and just had a massive problem with illegal workers that had to disrupt them and cost them money.  Food costs are up and they haven’t pushed through price increases and now rice may be popping on them too.   Note the dumb-assed owner blew $2.5M investing in "Soul Daddy", which was the winner of a game show he was involved in for "America’s Next Great Restaurant" and it lasted about 2 months before failing – this guy is NOT Midas yet the "success" of their Asian spin-off is already priced into the stock.  Also, it’s one of "Jim Cramer’s 5 Favorite Stocks" along with AA and VZ, which I like too but also BIDU (whuck?) and EMC (eh).   This is the kind of thing where, if they blow the quarter, Cramer will drop them like a ton of bricks and there won’t be an exit big enough to fit the stampede of sellers who bough it over $300 on Jim’s #1 pick.  

    Short-sighted/Angel – Good point.  Also a tax structure that does not promote R&D spending or the hiring of US workers – MADNESS!  

    Oil/Tusca – No inventory report until Thursday means they can extend and pretend.  Also, multiple spill incidents leading to production shutdowns over the weekend.  Just a coincidence, I’m sure…   The key to the oil trade is that it’s all going to hit the fan in November, when they run their rolls into 184,695 already-open December contracts.  That’s going to cause a 600,000+ barrel pile-up and that’s going to be ugly to get rid of.  So, if you look at it from a rolling and doubling down scale, it’s only a few months of being wrong before there is a great chance of a substantial pay-day. 

    MONTH

    Click for
    Chart
    SESSION PR. DAY OPTs
    OPEN HIGH LOW LAST TIME SET CHG VOL SETT OP INT
    Aug 11 94.98 96.99 94.34 96.87 12:25
    Jul 05
    -
    1.93 167260 94.94 299737 Call Put

    Sep 11 95.49 97.52 94.91 97.37 12:25
    Jul 05
    -
    1.86 34567 95.51 199216 Call Put

    Oct 11 96.15 98.02 95.48 97.90 12:25
    Jul 05
    -
    1.84 18968 96.06 73585 Call Put

    Nov 11 96.73 98.50 96.03 98.41 12:25
    Jul 05
    -
    1.80 12901 96.61 62199 Call Put

    Dec 11 97.38 98.93 96.58 98.90 12:25
    Jul 05
    -
    1.76 23244 97.14 184695 Call Put

    Speaking of oil – now testing $97 with the Dollar at 74.785.  Gold $1,511.40 means you don’t want to bet against oil here – tempting though it may be.  

    TBT/Troy – That’s the 20-year, not the 10-year.  Still, if the 10-year pops 10%, you can expect TBT to go up 20% as the 20-years perform in a similar manner but NOTE THE DECAY, which is about 15% a year on TBT, as you can see from this chart of $UST20Y:TBT, which plots the 20-year priced in TBT and you can see it gains, pretty steadily,  15% over a year.  So timing is key but if we get a nice 20%+ move up in rates, that decay won’t matter too much.   As to the "Amegeddon Fund" – I just put up disaster hedges when I think they are needed – it’s not like the market drops 50% in a day, just stay cashy and have initial hedges and you can go hog wild on the short side when Rome is actually burning, instead of burning your own premiums every time you hear fiddle music.  

    WM/Enni – They are a solid (LOL) long-term play but not particularly cheap.  I just think it’s a crappy (LOL) time to start making big commitments so I’d prefer to just sell the Jan $35 puts for $1.50 for a net $33.50 entry and you just commit, for example, $4,800 in net margin to take in $1,500 and, if they go down, THEN you can DD or roll or whatever and, if they go up, you can always sell the 2013 $40 puts for $4 (now $2) and cover at $40 (now $37.69) and then you’d have a net $34.50/34.75 net entry AFTER you wait to make sure you didn’t make a mistake in your timing. 

    SD/Savi – Well, they lost $1.5Bn in 2008 and $1.8Bn in 2009 but they made $153M last year so it’s "just" a loss of $3.15Bn in the last 3 years and the market cap is 4.4Bn so they should make that back at about the time the world completely runs out of oil in 2,200 so no, not my favorite bet but Cramer likes them and says they make oil for $7-8 a barrel so they must have one hell of a coke habit to blow all those profits…    Supporting my coke theory is $8.5M in cash and $3.4Bn in debt with A/R of $164M and A/P of $408M.

    SDS/Palotay – Well at .17, it’s hard to get more screwed but how about selling the $22 calls for .10 as I’m sure you would be THRILLED to get to net $1 in any case and you can roll out from under them and keep the dime while you decide if you want to sell Aug calls too.  

    Qaddafi/Pharm – Oh yeah, I forgot about that guy.  

    LNKD/Etrad – You bought premium.  That’s usually a bad idea.  The $85 puts are still $2.75, which is amazing with the stock at $92.50 and I don’t even think they have earnings by next Friday.  I’d sell the $87.50 puts to some other sucker for $3.60 and then you can spend that money to roll to the Aug $77.50 puts.  If an when the short puts expire worthless, then you can sell something like the $75 puts (now $5) and roll yourself up to the $90 puts (now $11.60) and you would have spent net nothing to move to an Aug $90/75 bear put spread.  Keep in mind this does not stop you from getting totally screwed over if they have strong earnings and shoot over $100 – any time you trade a MoMo it’s very risky – don’t fool yourself into thinking otherwise..

    NFLX/Jabob – Case in point!  

  59. Savi

    Phil—-took my $200 and ran
    Tnx

  60. jromeha

    This oil rally is blowing mind. Definitely will be shorting soon…..

  61. asaenz

    @ Phil, do you still think we can sell-off today or tomorrow? Do we need a catalyst for that to happen? I´m just getting a little nervous since i am more bearish than bullish, and today´s action just sucks…..thanks!

  62. stratdaddy

    Phil – I noticed references to 4 hour charts in yours (or someone’s)
    comments. I may have just forgotten, but I don’t recall these being used
    when I followed comments a couple years back.

    Are there any strategy posts or references for using
    these long intraday timeframes for timing, particularly for
    futures markets? Just curious.

    I’m interested in these time frames as well as big tick periods
    (10000-50000) for ES timing.

  63. Pharmboy

  64. Pharmboy

    FWIW – from Cheech

    The last 8 times less than 10 million shares of SPY were traded in an hourly bar, which just happened again by the way. In no case was it good for SPY intermediate term.

  65. Phil

    Good decision Savi.  

    Oil/Jrom – Metals are up to so there’s an anticipation of Dolllar weakness – be careful with oil shorts.  

    Sell-off/Asaenz – The only catalyst we need is a dollar bounce.  Nervous is smart because we could also get a dollar breakdown and head higher.  That’s why today is a watch and wait day.  

    Charts/Strat – I may have mentioned that on TOS, I like to look at the 4-hour charts for the futures in active trader for pivot-point studies but that’s about it.  My timing is not at all based on charts really but when my decisions line up with pivot-points, then I consider it a good spot to make a play.  To me, the key to trading the futures is NOT trading the futures UNTIL you are fairly sure you are in the top or bottom of a channel AND at a point of serious resistance.  There’s really no point to playing the in-betweens.  

    01:00 PM On the hour: Dow -0.02%. 10-yr +0.45%. Euro -0.48% vs. dollar. Crude +2.37% to $97.19. Gold +1.92% to $1511.10.

    America’s Troubling Investment Gap by David Malpass and Stephen MooreFor the first time in decades, America is on net losing, not attracting, growth capital.

    Extending and pretending in Europe:  The IASB, which eased mark-to-market accounting at the height of the GFC, believes adoption of the new rule by the EU would ease the debt crisis by allowing banks to carry the paper at cost. "(It) is indeed a better standard," says the group’s new chief, "I am absolutely convinced the EU will in the end endorse it."

    Inventory Glut of Ultra Luxury Homes Hits Greenwich, Over 4 Years of Supply.

    Inside the Disappointing RecoveryTwo years ago, officials said, the worst recession since the Great Depression ended. The stumbling recovery has also proven to be the worst since the economic disaster of the 1930s.

    Data Confirms: Banks Hoard Cash & Securities, While Loans Contract. (graph)

    Morgan Stanley’s Adam Parker isn’t convinced current equity valuations are cheap. Parker’s arguments: the S&P 500′s forward P/E isn’t much lower than historical norms; the S&P’s dividend yield is below historical norms; a handful of large caps skew average valuations; and earnings estimates are due for a fall.

    The average U.S. credit score is at its highest in four years, the ratio of consumer debt payments to incomes is the lowest since 1994, and rising demand for auto loans add up to the best consumer credit environment since 2006. Hardly Stephen Roach’s "generation of zombies," "the household deleveraging process is much further along than is appreciated," Moody’s Mark Zandi says. 

    Hurting Financials today:  A source says nine of the top life insurers have received subpoenas from the NY AG seeking information about practices relating to payouts for deceased customers. Units from AXA (AXAHY.PK), Genworth (GNW), Manulife (MFC), MetLife (MET), and Prudential (PRU) are said to be included in the probe.

    Don’t be scared off from China because of increased regulator scrutiny on firms listing shares in the U.S. and Canada as reverse mergers, says a Wells Fargo analyst. Stick with large blue chip companiesfollowed by analysts, he advises, preferably buying H-shares traded in Hong Kong or A-shares in China. 

    As inventory bloats, Wall Street is concerned (GM +1.77%) may be falling back into the old habit of stuffing its current-year channel to boost earnings. “It’s unbelievable that after this huge taxpayer bailout and the bankruptcy that we’re right back to where we were,” says Jefferies analyst Peter Nesvold.

    Point. Counterpoint. Brazilian finmin Mantega tells the FTconcern over household debt is misplaced as higher incomes makes servicing it easier than ever before – though rising delinquencies suggest otherwise. For now, credit continues to grow smartly, making it easy to mask bad debt by issuing new. 

    Analysts at RBC Capital Markets see a rally in silver (SLV+4.6%,) for the second half of the year, and Phillip Futures agrees,calling for a $45 price. Large silver gainers: Endeavor Silver (EXK+11.1%), Silvercorp Metals (SVM +12.1%), Silver Wheaton (SLW +7.2%.

    Commodities Beckon Banks. About 600 miles from Wall Street, Goldman Sachs Group Inc.(GS) employees are busy doing deals. But instead of a sleek office tower, they work in a rundown warehouse deep in an industrial section of Detroit. And rather than trading in stocks or bonds, they move metal—lots of metal. Goldman’s warehouse on the banks of the Detroit River is one of more than 100 storage facilities controlled by the giant securities firm around the world. The warehouses are part of Wall Street’s effort to forge a new frontier in the commodities markets: warehousing metal.

    Gary Shilling: Commodities "Show Every Sign" of Being a Bursting Bubble.

    Apple (AAPL +1.6%) is moving up today but appears to be “losing its shine" among top-rated investment advisers, who have been outright negative on the stock since early May, Mark Hulbert finds. The group looks more upbeat about various other tech stocks, including Google (GOOG), Cisco Systems (CSCO) and IBM

    KB Home (KBH -5%) gets hit on a Keefe downgrade, saying despite the homebuilder’s strong cash position, valuations are difficult to estimate, and future obligations will impair its ability to deploy capital for new investments. 

    Three lunchtime reads:
    1) The oil reserve dump: speculators unburned
    2) Bank regulation’s capital mistake
    3) How to create an aggressive income portfolio 

  66. Phil

    Good article:  

    By Paul B. Farrell, MarketWatch

    SAN LUIS OBISPO, Calif. (MarketWatch) — No, do not raise the debt-ceiling. You heard me: Block the debt ceiling vote. Don’t raise it. America’s out-of-control. A debt addict. Time to detox. Deal with the collateral damage before it’s too late.

    We need to fix America’s looming credit default, failing economy and our screwed-up banking system. Now, with a Good Depression. If we just kick the can down the road one more time, we’ll be trapped into repeating our 1930’s tragedy, a second Great Depression.

     

    Barton Biggs: U.S. needs massive public works program

    The U.S. needs to invest in a massive public works program, and rich people and corporations should pay more taxes. Barton Biggs, of Traxis Partners, shares his views with the Simon Constable.

    Yes, depression. Spelled: d-e-p-r-e-s-s-i-o-n. Wake up America, recessions do not work. Won’t work in the future. Remember that 30-month recession after the dot-com crash? Didn’t work. Why? Because in the decade since that 2000 peak, Wall Street’s lost an inflation–adjusted 20% of America’s retirement money.

    And what about the so-called Great Recession of the 2008 credit meltdown? Didn’t work either. In fact, made matters worse: Wall Street got richer by stealing from the other 98% of Americans, the middle class, the poor. And now their conservative puppets in Washington want to make matters worse, widening the wealth gap further to benefit the Super Rich. 

  67. angelcur

    PORTUGAL CUT TO JUNK… OUTLOOK NEGATIVE – MO0ODY’S…

  68. lvmoda

     It would be interesting to see how many of the unemployed would sign up for a public works program, paying what:  $10/hr to do what: manual labor?   Although I believe that is the right answer to utilizing federal stimulus funds, call me cynical on the result of thirty years of educational and cultural decline.  The spoiled generations, where life was easy when the achievement bar was set low and we spent our future away, don’t know where they really stand…that becoming a ‘ward of the state’ in return for subsistence income, is probably the only future they really have.

  69. Phil

    Portugal/Angel – Negative FROM junk?  That’s pretty negative… 

    Hogweed/Angel – Looks closer to you than me!   Always beware of large plants:

  70. Phil

    Oh and wheeeeeee! 

    Dollar heading up on Portugal news, everything else heading down.  

  71. lvmoda

     Phil – would you be bearish now on oil at 96.60?

  72. kramer36350

    I wonder if this will impact the ECB’s rate decision . . . .

  73. kramer36350

    what just happened on the EUR/CHF??

  74. angelcur

    CASEY ANTHONY NOT GUILTY

  75. Savi

    wow

  76. gmarts

    Chloroform futures rocketing higher

  77. gmarts

    Apologies, poor taste…

  78. lvmoda

     Take that, Nancy Grace!

  79. brooklyn

    Phil/stjeanluc/FAS weeklies: I may have missed a beat – puts to be sold or hold off for a correction?

  80. Phil

    Oil/Lv – I mentioned earlier that I feel it’s "safe" to short oil off the $97.50 line or below $96 but not so much in between.  We had a nice rejection before at $97.48 (I hate it when I miss) and then back to $96.50 but that held.  This middle zone is just to wildly bouncy unless you are a read futures cowboy.  

    ECB/Kramer – I don’t see how they can tighten with the rate pressure that’s already on Ireland and Portugal (and Italy) since their rates are set at, essentially, Germany + X% (allowing for additional risk) so raising the general EU rate is crippling to nations that, ultimately, Germany would only end up having to bail out anyway.  That’s why the Greek bailout is nothing more than a stop-gap measure (much like the US Treasury borrowing $2Tn from the Fed for the past couple of years was).  

    CHF/Kramer – The Portugal thing. 

    Anthony/Angel – I don’t really follow that one.

    02:00 PM On the hour: Dow +0.06%. 10-yr +0.44%. Euro -0.39% vs. dollar. Crude +2.55% to $97.36. Gold +2.02% to $1512.60.

    03:00 PM On the hour: Dow -0.13%. 10-yr +0.55%. Euro -0.88% vs. dollar. Crude +1.99% to $96.83. Gold +2.14% to $1514.40.

    S&P is moderately optimistic about the global economy, believing growth in emerging economies will prevent a double-dip recession from occurring. However, the firm’s chief economist for Europe is worried about "flagging consumer demand in developed markets and a slowdown in emerging markets following tighter monetary policies."

    Even with unemployment north of 9%, Fitch believes certain industries are likely to face "labor inflation" due to a shortage of skilled workers. The natural resources and software industries are considered at risk, along with "unionized industries" such as auto and airlines.

     Cheap Beta, Expensive Alpha, and “The Investment World is Flat” (Corey Hoffstein)

    Moody’s cuts Portugal’s credit rating to junk territory, moving it down 4 notches to Ba2. The agency sees increasing probability the country will not be able to return to the markets in 2013, making a 2nd bailout likely. The euro reflexively moves lower by about 60 pips to $1.4417. 

    Fewer Americans filed for bankruptcy in the first half of 2011 and in the month of June, -8% and -5% Y/Y respectively, the American Bankruptcy Institute reports. Still, the number of filings was up M/M, and the pace of personal bankruptcies remains elevated, running at a rate of ~1.4M this year vs. 1.5M total in 2010. 

    Trouble in the Hamptons? (May 26, 2008)

     

    The eleven unidentified mortgage-bond investors calling themselves "Walnut Place" file to challenge BofA’s (BAC -1%) proposed$8.5B MBS settlement, expressing concern about the "secret, non-adversarial, and conflicted" negotiations. The group wants a way to allow bondholders to exclude their trusts from the deal; in March it tried to force BofA to buy back more than 1,400 soured loans. 

    Baby Boomers nearing retirement shouldn’t get too conservative, as rising life expectancies plus escalating healthcare costs force a rethinking of the conventional wisdom of cashing in stocks for bonds. Mark McLaughlin’s a list of 14 "stocks with staying power" as core holdings: VZJPMNVSBAABTRTNFCXPBRCATCMCSATJXEPB,BWPBDN.

    Momentum is building in the News Corp. (NWS +0.7%) phone hacking scandal, as the families of two more young murdered girls reportedly were contacted by detectives investigating allegations of hacking by News of the World. U.K.’s House of Commons will hold anemergency debate on the matter tomorrow, only the 13th such debate in 28 years.

    mapawesome

     

    shamemap

  81. Phil

    LOL Gmarts!  Er, oh yes, shame on you!  8-)

    FAS Money/Brook – I thought we sold puts and were waiting on selling calls?  Does anyone have the position?  

  82. Savi

    FAS Money—-I have we sold 7/8 weekly 25 calls @ 2.10 (now 1.55)

  83. deano

    Brooklyn/Phil/St Jean/FAS

    We sold calls at 26 and were waiting on puts

  84. yodi

    Phil on FAS I have JUL2 25 call short @1.12 now up on me 1.56 no puts sold
    On monthly I still have the JUL 25 call short @ .82 now 1.81 no puts sold

  85. jabobeast

    i forgot about the 230 stick…what a day

  86. asaenz

    @ Phil, why do you think that today´s pull-back was so lame? the dollar got a little stronger plus we got the portuguese "junk" news, and we are still getting a stick (thought we would not get these after the end of qe2) thanks!!

  87. pyern

    JOE dropped 12% today on a SEC investigation.
    Jan $15 puts at $1.50 seem like a good deal. Extrinsic premium is about 35% of the margin.

  88. Phil

    Nice stick all of a sudden.  

    FAS Money/Savi, Deano – I will have to defer to StJ but if we head higher tomorrow, we’ll have to sell some puts then, just to raise some premium.  

    Montly Yodi – I don’t understand that one, didn’t we sell puts and calls at the same time on that one? 

    Stick/Asaenz – No, we had sticks long before QE2, maybe they are back in style now with QE2 over, in fact.  The sell-off was lame because clearly there’s a massive attempt to keep things up in place still.  It doesn’t matter what we do into the close on a dead volume day (75M on Dow at 3:30), what matters is how we do for the rest of the week – that’s why today was a watch and wait day. 

    JOE/Pyern – I don’t know the story yet with the SEC, I’d want to find out more first. 

    President Obama will speak about progress on a deficit-reduction deal at 4:40 ET.

    Gartner estimates electronic gaming industry revenues (video games, not gambling) will rise 10.4% in 2011 to $74.4B, with over 60% of spending still tied to consoles. However, revenues from mobile gaming software and online gaming are expected to pass $11B and $28B in 2015, respectively. Count on Zynga execs to memorize those numbers.

  89. stjeanluc

    FAS Money – Sorry I  can’t really track that as I am at my folks in France this week with a bad Internet setup and one laptop screen to manage my work and the trades. On Thursday Phil said:

    I think selling the next weekly $25 calls is a good idea (now $1.05) if someone has the open short $24 calls from this week, they are $1.60 and still have premium so may as well wait for tomorrow unless XLF breaks over $15.35 – then we’d have to take another look.   Any short puts are looking worthless but I would not want to sell next week puts yet as they are too cheap and we expect a pullback anyway.  After we sell the $25 calls, if XLF pops, we may want to sell the $26 puts to cover and get more neutral so staying naked keeps us more flexible and, hopefully, we can get .50 or better for the $24 puts (now .25) on a dip.  

    And on Friday

    The this week $24 calls are $2.66 and they can be rolled to the next week $25s at $1.85 for .81 out of pocket and that’s the roll of the moment with no offsetting put sale (hoping for a pullback).  

    Following this might make us short the 25 calls and 26 puts right now.

  90. tuscadog

    Phil / Data points   In your a.m. list, what are you looking to most impact direction this week?   Do you think Portugal downgrade will move the Euro down tomorrow as this info is digested in Europe?  Also if Obama signals progress on debt ceiling talks in his 4.40 conference, might this goose the $?

  91. yodi

    PHIL FAS closed the JUL 22 p for .19 sold the same for 1.21

  92. jvest

     Phil, I’m holding a few DIA July $125 puts naked. How would you pay for a roll?

  93. stjeanluc

    FAS Money – The 25 calls are now around $1.60 with only 0.11 of premium. The 26 puts are around 0.30, all premium. They traded between 0.75 and 0.50 on Thursday and Friday depending on when you shorted them. 

  94. jvest

     (the DIA July $125 puts were just a short-term trade from Thursday in case we saw a dip right after quarter end)

  95. stjeanluc

    Apparently the Chinese local government have a lot in common with Greece!
    http://ftalphaville.ft.com/blog/2011/07/05/613441/the-great-wall-of-chinese-worry/ 

  96. rustle123

    Dennis Gartman told  CNBC that Greece is going default.  Tell us something the whole world doesn’t know.  I don’t know why I ever tune into that station as it frustrates me and raised my blood pressure in just 5 minutes.  Phil, when’s your news show going to get on tv?  Even a half hour of your talking about the truth in politics, oil, the market, big corporations, tax codes, bs govn’t numbers and making fun of CNBC would definitely get you big ratings and probably assassinated or framed to look like you raped the maid in a hotel you stayed at.

  97. ricktao

    Phil:
    It seems that the Selling FAS call options were used a lot. But for folks that can not sell call, is there any comparable way to sell put options with FAZ?  What are the difference with these two selling options? Thanks!

  98. lvmoda

     CNBC reports "oil up $1 on news of the Portugal downgrade".  Whuck?!    They make these statements but never explain them.  Doesn’t make sense to me – oil should move lower on a stronger dollar/weaker euro trade.  Unless they think bailing out Portugal will strengthen the euro…lol

  99. Phil

    FAS Money/StJ – So it’s the $25 calls, now $1.85 and the $26 puts, now .70.  Well that works so nothing to do at the moment.  

    Data/Tusca – Hard to say until Europe opens what Portugal means but it sounds like another Greece, which makes Italy the next Portugal or maybe Spain or maybe we get a twofer…  "Progress" on the debt ceiling means MORE debt and maybe a weaker dollar – hard to say.  

    FAS/Yodi – Well what good are the short $22 puts doing you now at .09?  If you didn’t sell calls, you can sell a put and call combo and make some money, which is what you always should be doing.  

    DIA/Jvest – I’d sell the $124 puts for .62 and wait to see what happens.  If we sell off, you have a $1 vertical with .70 more to gain and if we head up, the roll is cheaper, perhaps to the Aug $124 puts for + $1.  

    Thanks Rustle, I’m really motivated now!  What I’d love to do is a show following the Daily Show with a market focus and a sarcastic comedy thing.  It would be so great to have a staff to pull clips and dig into stories like that and even better to have microphones and cameras to shove in the faces of the rich and powerful!  That would be worth taking a bullet for (but hopefully in a Reagan "survive and joke about it way" and not in a Kennedy "brains all over the limo" way).  

    FAS/Rick – I’m not sure what you mean by not selling calls?  These are diagonal positions, there should be no problem selling calls.  You REALLY do not want to mess around with FAS if you don’t have the flexibility to make ANY adjustment along the way – it’s a violent mover that can screw you in dozens of ways.  

    Oil/Lv – Oil was up way before Portugal – that’s just total BS but saying it’s up from Portugal means they can save the other BS reasons for tomorrow’s pump.  

    At the close: Dow -0.11% to 12569. S&P -0.13% to 1338. Nasdaq +0.35% to 2826.
    Treasurys: 30-year +0.48%. 10-yr +0.61%. 5-yr +0.47%.
    Commodities: Crude +1.96% to $96.80. Gold +0.17% to $1515.30.
    Currencies: Euro -0.83% vs. dollar. Yen -0.23%. Pound -0.11%.

    Market recap: Stocks struggled to finish mixed in low-volume trading, as news of Moody’s downgrade of Portugal negated early gains from a favorable report on factory orders. Energy shares rose as crude oil futures jumped 2.1% after Barclays raised its target for 2012 prices, but financials fell. Treasurys rose for the first time in six sessions. NYSE advancers ended roughly even with decliners.

    VIX +1.2% on market concerns today, but it remains at a relatively subdued level and is down 50% since November. Declining volatility led Barclay’s (BCS-2.3%) to close its own VIX ETN after it fell below $10. The moral according to Schaeffer Investment Research is to avoid volatility ETNs.

    Energy-hungry emerging markets and supply that can’t keep up – not speculators -  are behind high oil prices, according to a new study from the BoC. Yes, speculative holdings have jumped alongside prices, but evidence shows the large positions come after the price has moved higher. 

    comScore’s latest U.S. mobile subscriber data might calm some worries about slowing Android growth. From February to May, Android’s share of smartphone users, on a 3-month moving average basis, rose 5.1% to 38.1%. That easily outpaces the iPhone’s 1.4% gain, not to mention the 4.2% decline seen by Research in Motion (RIMM).

    A few reasons why Netflix (NFLX +7.9%) could profit from Latin America: over 600M people, growing economies, increasing broadband usage, and a strategy that involves combining Hollywood studio libraries with local content. However, addressing the "local nuances attached to reaching customers in each individual market" won’t be easy.

  100. ricktao

    Phil:
    The broker has different level of options trading, some level won’t allow to sell call options.
    So back to my previous question: Can I "sell FAZ put options" get the same result as "sell FAS Call options"?

  101. jvest

    rick, selling puts has the opposite effect as selling calls. If you don’t understand this you should be papertrading until you know the difference. This is why your broker has restrictions on letting you sell calls — to prevent you from shooting yourself in the head with a loaded gun.

  102. pahurik

    Hei Phil! I have 1 more question about Vegas. You know which hotell you stay, or all people decide last minute?

  103. bigbear

    Savi- I was told I should ask you about the Vegas details, when will the meeting be?

  104. zeroxzero

     Just checking in.  Not in the market much this week, travel & family.  Only  interesting in that I’m not watching a screen, have virtually no positions, and the occasional positions I’ve taken have just been the most tempting and obvious ones.
     
    Gee.  I’ve been making more, losing ALOT less, with far less risk and far more equanimity, than my full-time efforts seem to produce.  I’m not sure whether to feel enlightened or embarrassed.   Still a tyro, obviously.

  105. Kwan

    Microsoft strikes search deal in China with Baidu. No exchange of money involved – MSFT gets the exposure (integrated Bing search results), BIDU gets ad revenue. Effective later this year.

  106. Phil

    Levels/Rick – I would strongly suggest you read our education section as well as Sage’s EBook to get familiar with options basics.  Selling calls is level 1, selling puts is a higher level and, as Jvest says, they are the complete opposite and have opposite effects.  I cannot emphasize enough how important it is to learn by paper trading as using a live account to learn how to trade is about as smart as giving a bunch of kids live ammunition and telling them to "have fun."  

    Vegas/Pahur – Well it depends what the plans are but the longer things go undecided, the more likely I end up a Caesar’s, simply because I always know they’ll take care of me but, as I have said, I kind of wanted to stay at City Center so I could be sure I had time to check it out but I know nothing about the hotels there.  

    Pres. Obama invites lawmakers to the White House for a Thursday meeting to discuss a deal to raise the debt ceiling, and says a solution should include both spending cuts and revenue increases. Let’s do "something big to tackle our deficit," Obama urges, warning against falling back on a short-term "mini-deal." 

    Pres. Obama’s "original sin" is his "failure to demand a reckoning from the moneyed interests who brought the economy down," Frank Rich asserts – a simple explanation for the current troubles but not accurate, Derek Thompson counters. "Unemployment suffers today not because of, but independent of, Wall Street’s success. That is the simple, boring truth."

    Home prices may be returning to their long-term trend; at an inflation-adjusted 40% lower than their peak five years earlier, they’re just 7.5% above their average level from the mid-1940s through the 1990s. But just as home prices became detached from their historical trend during the bubble, they could overshoot during the correction and drop below the norm. 

    U.S. lenders probably need to suspend dividends and begin raising capital due to their exposure to Italy, writes Simon Johnson. Italy could be headed into a viscous cycle where austerity leads to worsening deficit/GDP numbers, leading to more austerity. Italy is too large to be bailed out. The end of moral hazard will be a new experience for banks.

    After posting sub-2% growth in the first half, the U.S. economy is forecasted by economists to grow by at least 3% during the second half. Lower gas prices and stronger auto production are expected to contribute to a higher growth rate. However, it’s not a sure thing that job growth will also accelerate. 

    The Fed needs to learn from the inflationary 1970s to set a more explicit inflation target to assure the public that it won’t let inflation get out of control again, Marvin Goodfriend says. And the job is about to become harder, he worries, thanks to developments in emerging markets and the weakening of the U.S. dollar.

    Among the "radical options" for preventing a U.S. debt default: The Fed could buy some of the Treasury’s $300B stock of gold, allowing it to create cash for paying bills until the debt limit is increased, then Treasury could simply buy it back. "It would be a purely paper transaction that would have no real effect on the price of gold or anything else," Bruce Bartlett writes. 

    "Absolutely not over," says Brazilian finmin Mantega talking about the global currency wars, and threatening new measures to slow the rise of the real. With interest rates well into the double digits, more hikes to slow the economy would only encourage more capital inflows, leaving capital controls as the next measure. Real ETF: BZF +10% YTD.

    Mish Shedlock sees a credit crisis unfolding in Brazil, as inflation and high interest rates lead to the average rate of interest on consumer loans hitting 47%; delinquencies reaching 9.1% of total loans as of May; and debt service being expected to reach 28% of disposable income this year.

    As evidence of overwhelming amounts of bad debt grows, it’s useful to know this isn’t China’s first rodeo. The country’s banking system collapsed in the 90s, forcing Beijing to remove the bad assets from bank balance sheets and set negligible deposit rates to finance recapitalization. The cost of the operation was ultimately born by consumers, who will likely be holding the bag this time around as well.

    Signal Financial compiles the correlations of different asset classes with the S&P 500 over the past decade. The results give ammo to folks who believe the bots have taken over – correlations are at multi-year highs. Want to know which direction the loonie moved today? Just find out what stocks did.

    Despite posting record receipts for the opening ofTransformers: Dark of the Moon 3DIMAX gets hammered -8% afterJanney downgrades the sector on declining overall 3D movie attendance. RealD (RLD -4%).

    More BIDU love:  Baidu (BIDU +1.8%), which inked a deal with Microsoft (MSFT) today, also got a lift from Collins Stewart, as the firm initiated coverage with a buy rating. Given the Chinese online advertising market’s rapid growth, and Baidu’s ability to outgrow the market, Collins Stewart believes the company can grow "at 40%-50%+ rates for many years."

    Smartphone subsidy expenses are damaging the margins of U.S. carriers, according to Moody’s. The average phone subsidy is now $138, and Apple’s (AAPL) iPhone is subsidized by $450. Moody’s sees AT&T (T) and Verizon (VZ) weathering the storm, but believes Sprint (S), Leap (LEAP), and MetroPCS (PCS) could have a harder time.

    Quick take on Moody’s subsidy fears: If carrier margins are pressured, expect carriers to pressure phone vendors to cut prices. Apple (AAPL) should be relatively immune, but Motorola Mobility (MMI), Samsung (SSNLF.PK), HTC (HTCCF.PK), and other Android vendors will probably take a hit, given their limited ability to differentiate using software. 

    Nearly half of flat-panel TVs shipped through 2015 are predicted to include internet connectivity, up from 25% this year. Little wonder that Netflix (NFLX +8.1%) hit an all-time high today, as NFLXAMZN andAAPL obviously are counting on the cloud as "a game changer for home entertainment and that your TV is nothing but a big iPad," Trutina Financial’s Patty Edwards says.

  107. ilene

    Today’s Levels

  108. yodi

    Phil I surely do not understand your explaination on FAS Again as per you guidance I bought Jan 28c for 2.44 now 3.15
    bought Jan 12 18.33 p for 2.43 now down to 1.31
    Against this I sold Jul 11 25 c for .82 cents now up against me 1.84
    I sold the Jul 22 p for 1.21 and I repurched the same for .19
    Now this is your reply
    FAS/Yodi – Well what good are the short $22 puts doing you now at .09? If you didn’t sell calls, you can sell a put and call combo and make some money, which is what you always should be doing. 
    I do not have any Jul puts any more. So what combo do you suggest now??? thanks you
    The same or simular situation we have with the weeklies plenty of JUL2 25 calls short at 1.12 now against me for 1.56 and no puts

  109. Savi

    bigbear et al—-meeting is scheduled for weekend of Oct 8th and 9th 2011
    8th—meet for dinner and some want to have a poker game--will have to be planned as to time and place
    on the 9th we will be meeting at Cafe Moda all day—-Maharishi Phil will be on call
    10th--some want to stay on and  trade together--Phil is not sure if he will be there--this is up in the air--not sure 10th is going to work
    Hotel—individuals choice—I will go with the majority
    need deposit of $150 per person --not sure how to collect the money--any ideas?

  110. hanna5

     Hey All!!!

    Sorry, cant tune into the days anymore, but i adjusted my portfolio accordingly. Just in longer term multi month positions. 

    GOOG, is doing great! Hope some of you scaled into some long positions as it fell. I still think it represents great value. Holding onto LEAP calls and stock. [great call by drcraig i think that it would fall to 480, tho his time frame was slightly off based on historical analysis it was accurate! kudos]

    Sold out of SODA recently, with a really nice gain. I think we should look into these MoMo companies early when they are hyped, and front run the sheeple. I think these stocks gain long after we stop thinking they are reasonable. (Take CMG and NFLX for example, which i dont even look at anymore. I really believe that both can go to $400, without any further significant distortion in fundy value from what we see today). 

    RIMM – Still hold significant amount of RIMM. Still think its great value, and will continue to hold for now. Was pleased with the Nortel patents that they got, tho the price was steep. 
    Have added BAC and NVDA recently. 
    good trading. 

  111. escohen5

     Savi/Vegas — most people have PayPal accounts…that’s one easy way to collect the funds.  Checks, obviously, but those involve (gasp!) the mail!
    Phil, re the City Center — it’s the Mandarin Oriental (nice chain), but I don’t believe they have a casino…not very Vegas!

  112. zeroxzero

     "China, estimated to hold more gas trapped in shale than the U.S., will open new areas to exploration as PetroChina Co.’s parent and Cnooc Ltd. (883) seek drilling technology through partnerships and acquisitions…Chinese shale may hold 1,275 trillion cubic feet of gas, or 12 times the country’s conventional natural gas deposits, the U.S. Energy Information Administration said in April. China’s “technically recoverable” reserves are almost 50 percent more than the 862 trillion cubic feet held by the U.S., the EIA said."

  113. lvmoda

     Savi,  curious as to what the $150 deposit goes towards, since everybody is making their own hotel plans?   A deposit will be needed for food & drink for the meeting on the 9th at Cafe Moda, but not nearly $150.   Regarding hotels, the current ‘hot’ place is the Cosmopolitan, which happens to be across the street from City Center with a short pedestrian bridge connecting the two.  There are a number of hotel choices at City Center, Mandarin, Aria and there is a casino in the complex.  All the people I know give a thumbs up to Cosmopolitan and a thumbs down to City Center.   I can give a thumbs up to the Cosmo having been there a few times, but I’ve never been inside City Center (I guess that says something in of itself).  In any event, staying at either place is convenient since they are right next to each other.

  114. bigbear

    Savi might have some ideas how to do the deposit let me know how we could talk about it

  115. stjeanluc

    I guess this will not come to a surprise to any of us:
    http://www.zerohedge.com/article/daytraders-account-over-90-volume-price-formation-es-crude-gold-and-silver-futures 

  116. stjeanluc

    Despite the current meltup, I don’t think that anyone can make a prediction on where we will be come the first week of August with the debt ceiling talk.
    And it seems that it will be tough to get a deal….
    http://www.nytimes.com/2011/07/05/opinion/05brooks.html?_r=1

  117. stjeanluc

    For the early morning trading, the oil lines are:
    R3 – 101.64
    R2 – 99.56
    R1 – 98.50
    PP – 96.42
    S1 – 95.36
    S2 – 93.28
    S3 – 92.22
    We have just bounced off PP. And 97.75 seemed to be a ceiling this morning!

  118. Phil

    Good morning!  

    Been a wild ride in the futures overnight.  Crazy spike up about half a point and now down a quarter point.  The down quarter point makes sense but the spike up was pretty much just a shake-out prior to the real move.  Now we’ll see if those 2.5% line hold as well as the 1.25% line on the NYSE.  We got solid bounces yesterday off the NYSE at 1.25% and the S&P and Nas both tested their 2.5% lines – which was technically strong but sure wasn’t accounting for the new fact that Portugal is the new Greece.  

    Below 840 on the RUT (/TF) is a good line to short the indexes.  The Dow (/YM) is still the best long as long as it holds over the 12,500 line (currently 12,496).  

    Dollar is 75.18 and over 75.20 should take us below yesterday’s lows (the above mentioned test lines).  The Euro is down to $1.43566, the Pound just bounced off $1.60 (now $1.60195) and it’s just 80.914 Yen to the Dolar as money is flying there too.  If the Pound breaks $1.60 and/or the Euro breaks $1.435, then the Dollar will move up sharply, knocking us below our lines as well.  75.20 is the key level for the day!  

    Oil finally gave us an entry as they crossed back below our $97.50 line and a nice $1 already on the 3am trade (so don’t be greedy as $96 is bouncy), gasoline also a wild ride, falling from $3 to $2.965 already and nat gas remains neck and neck with copper at $4.32 for who knows what reason.  Gold still up at $1,516 as people panic back to that and silver zoomed up to $36 but was rejected, now $35.71.  

    Good, exciting stuff, worth waking up for (I think).  In other news:  

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    7:30 Challenger Job-Cut Report
    7:45 ICSC Retail Store Sales
    8:15 ADP Jobs Report
    8:55 Redbook Chain Store Sales
    10:00 ISM Non-Manufacturing Index

    Portugal Rating Cut on Possible Greek FollowMoody’s Investors Service cut Portugal’s credit rating to below investment grade on concern the southern European country will need to follow Greece in seeking a second international bailout. The long-term government bond ratings were lowered to Ba2, or junk, from Baa1, and the outlook is negative. 

    Fitch Aims to Conclude Portugal Ratings Review End of July. Fitch Ratings aims to conclude its review on Portugal’s creditworthiness around the end of July, after putting the European nation on negative ratings watch in April, David Riley, head of the ratings agency’s sovereign group, told Dow Jones Newswires Tuesday.

    Not surprising but a very big deal that may "unfix" Greece again:  Greek Rescue Snarled by SalesEurope’s hopes for a significant contribution by private bondholders to a new bailout for Greece are fading, as it becomes clear that banks have sold off a substantial proportion of their Greek government-bond holdings despite pledges by some of the institutions not to do so

    Greek Finance Minister Moves From Crisis to CrisisAs he approached the end of another 16-hour workday, Evangelos Venizelos had one question on his mind: Will Europe come up with the money that Greece so desperately needs? As the new Greek finance minister, Mr. Venizelos is the man in charge of steering a nearly bankrupt economy back on track — and, perhaps, preventing another global financial crisis.

    Ontario Regulator Probing Emerging-Market Stocks Amid Sino-Forest PlungeCanada’s main securities regulator, which is already reviewing Sino-Forest Inc., said it has begun a “targeted review” of companies that operate in emerging markets and trade on the country’s exchanges

    Too Big to Fail – Then Double Down, of course!  Bill Calls for Fannie, Freddie MergerA California Republican is set to introduce a bill as soon as Wednesday to merge Fannie Mae and Freddie Mac and restructure the company into a government-held corporation.

    Martin Wolf: The Political Genius Of Supply-Side Economics (FT)

    Constitutional Crisis? The Political And Legal Risks Of Ignoring The Debt Limit (TPM)

    Hong Kong Stocks Hit by Bank-Stake SalesChinese stocks in Shanghai and Hong Kong were pulled down by banks Wednesday on reports Singapore’s Temasek Holdings will raise up to $3.7 billion by selling down its stakes in Bank of China Ltd. and China Construction Bank Corp. “In the short-term, this is undoubtedly detrimental psychologically,” he said, adding that investors may now also worry that other strategic investors may also look to follow Temasek’s lead by selling down their respective stakes in Chinese lenders.

    China Bears Have Tools, Need Patience (WSJ)

    Easing Measures Creating Glut for Chinese Property: Expert. China’s measures to cool its property market by increasing land supply may be starting to work. But that’s creating another problem — a supply glut in the market, says Standard Chartered Bank. Senior economist Stephen Green believes the sector’s oversupply will be the dominant theme for the rest of 2011 and into 2012

    The Coalition To Abolish Corporate Personhood (BoingBoing)


    To understand modern Republican thinking on fiscal policy, we need to go back to perhaps the most politically brilliant (albeit economically unconvincing) idea in the history of fiscal policy: “supply-side economics”. Supply-side economics liberated conservatives from any need to insist on fiscal rectitude and balanced budgets. Supply-side economics said that one could cut taxes and balance budgets, because incentive effects would generate new activity and so higher revenue.

    The political genius of this idea is evident.  Supply-side economics transformed Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not like a free lunch?

  119. stjeanluc

    Thoughts on Portugal downgrade:
    http://ftalphaville.ft.com/blog/2011/07/06/614221/does-portugals-downgrade-matter/
    It is not going to end well… 

  120. Phil

    FAS/Yodi – Well if you tell me the actual positions then it’s a lot easier to answer the questions.  What you wrote here, at 8:13 is miles different than the question I answered from 3:42, where you only said:  "PHIL FAS closed the JUL 22 p for .19 sold the same for 1.21" after saying at 3:15 "Phil on FAS I have JUL2 25 call short @1.12 now up on me 1.56 no puts sold  On monthly I still have the JUL 25 call short @ .82 now 1.81 no puts sold "   If it’s too much trouble to lay out your position in some readable fashion when you ask a question, don’t be surprised if the answer isn’t quite matching up.  So, getting back to what I understand is the Jan $28 calls and $18 puts that were bought for $4.87 and are now $4.46, I still have no clue whether you have sold other things against them so I have no idea of your true basis but it seems that currently, you took a $1.02 profit off the sale of the July $22 puts and that seems to leave you with JUST the short July 2nd $25 calls that you sold for .82 and are now down $1.02 so even-Steven on those two so far.  FAS is at $26.45 so the calls, at $1.84, have .39 in premium and we are still bearish and still waiting to sell puts so I’m not sure what the panic is.  

    I guess I can respond to every FAS request on every twitch it makes every 5 minutes but I will instead choose to say that if you can’t learn to wait until Thursday to roll to the next week rolls or until there is pretty much no premium left (as these are weekly calls and you expect to burn it all, not just 75%), then this is not a trade you will enjoy following.  Do you really need me to lay out the various ways you can roll that caller?  Do you need to have it repeated for you what both StJ and I were saying above about covering with $26 puts if the caller got in trouble?  I can’t give customized instructions to every single person on this trade and I think it’s best if the people who can’t stick to whatever official version of this trade StJ (because I said from day one I will not track this) decides on should get out now.  I will make a FAS trade in the $25KP, which I will track, when I think there is a nice entry but this is a great example of exactly why I said I won’t track this 4-legged trade – it’s not worth it for me to get bogged down in it.  

    Hi Hanna!  Great call sticking with GOOG.  SODA too crazy for me and RIMM I love too.  

    Good morning StJ!  

    Asia was mixed this morning with Hang Seng down 1% (finished at LOD), Shanghai off 0.21% on a big stick into the close, Nikkei up 1% – also with a big stick finish and India flatlined.  Europe is bouncing off the lows with the FTSE down 0.5%, DAX down 0.2% and CAC down 0.33%.   

    Dollar right on 75.20, Dow hanging tough at 12,500, RUT just below 640 so could still go either way.  Key is going to be the Pound ($1.6018) and Euro ($1.436) holding their lines.

     

     

  121. stjeanluc

    Top of the morning to you from France Phil!
    Sorry I can’t be of much help regarding FAS Money from here, but I am fighting work, family, hardware and schedules around here! As it happens, I leave for 10 days and I get 30 days of work!  I’ll try to find 5 minutes here and there to update the position but you have been giving some guidelines that should be OK to follow like last week.

  122. Savi

    lvmoda
    Per Phil—-deposit=commitment—-of course ,whatever is not used will be refunded (food and equipment for Sunday)

  123. kramer36350

    Planned Job Cuts Increase by 12% In June, Second Sequential Increase
     "the number of planned job cuts announced by U.S.-based employers increased by 4,297 or 11.6 percent to 41,432 in June. The June increase is the second in as many months. Announced layoffs in May were up 2.0 percent to 37,135, after falling to a four-month low of 36,490 in April. The two consecutive months of increased job cuts did little to impact the overall slow pace of downsizing. For the quarter ending on June 30, a total of 115,057 job cuts were announced, down 12 percent from 130,749 in the first quarter and 1.2 percent lower than the second quarter in 2010 (116,494)." The worry is that after troughing in April we are now back to March levels, and just off from 2011 highs reached in February.
    http://www.zerohedge.com/article/planned-job-cuts-increase-12-june-second-sequential-increase

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