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September’s Dozen (Members Only)

Are we jumping the gun?  

It’s been so long since we’ve been bullish it feels wrong, doesn’t it?  We’ve had plenty of long-term, well-hedged trade ideas in Member Chat this month but not too many aggressive shorter-term trade ideas so I’m putting together an aggressive list, like last year’s "September’s Dozen" that was 12 for 12 with huge winners, many pulling in 300% or more.

Although we still need to confirm that this rally is real on our Big Chart, let’s take a look at a quick dozen trade ideas for short-term gains.  I like all these stocks long-term too (it’s always better to play short-term where your fallback is you own the stock long-term) but we what we’re looking for here is that immediate satisfaction you can get from some quick, monthly gains.

Are these trades riskier? Sure they are and they are trade ideas under the assumption that we hold our levels today and next week so no staying in them if the market sours but $85 oil and $4 copper and 11,200 on the Dow and 1,173 on the S&P give us some pretty easy markers to know if we’re still healthy.  

This is NOT going to be a virtual portfolio, this is simply a list of trade ideas I like, taking advantage of low prices and a high VIX before we lose one, the other or both!  Also, people sometimes ask if we ever pick just stocks and the answer is:  Of course if we like a stock well enough to paly an aggressive option combination on them we also like the stock straight up as a buy!  I’m going to put the current prices on the stocks we select to clarify that.    

What we’re looking for is simple, a repeat of the action we got last year coming out of the Jackson Hole conference so we’ll be making some of the same plays with a couple of new ones as well.  Keep in mind that THIS IS OUR PREMISE – we expect the S&P to go up from this line (with, perhaps, a rocky start the first week), certainly not falling below our -5% line at 1,173!  We expect the Dollar to go down from 74 and TLT to stay below $108.  If these things don’t happen – then our premise is blown and we DO NOT want to stay in these trades – as they are very aggressive.

 

BRCM ($33.91) was my first choice last year and is again, they are back down from the January highs of $47 and just crossing over the 50 dma at $33.73, which is an excellent line to play the straight stock bullish.  The 200 dma is way up at $38.75 so not too much upside resistance but we do want to beware that the run ends there.  They are on track to earn $3 this year and that’s a p/e of 11.3, which is crazy-low for a stock like this so a great long-term hold:

  • The Sept $33/35 bull call spread at $1.11 has .20 in premium with 3 weeks to go so it’s a penny per day to "rent" the stock.
  • Oct $30 puts can be sold for $1 to offset the spread down to .11 or a more conservative 1/2 sale to knocks out the premium and puts you in for net .61 on the $2 spread. 
  • Jan $31/35 bull call spread at $2.15, selling 2013 $20 puts for $1.70 is net .45 on the $4 spread that’s $2.91 in the money to start.

GNW ($6.51) gets very little respect for a company with $10Bn in sales.  They were spun out of GE years ago and, like all insurance companies, they suffer from bad investments and low interest rates but, like all insurance companies, they are dollar cost-averaging their incoming premiums and, as a long-term investment, these things tend to work out.  As they fell all the way to .70 in the crash, this is NOT an investment you want to press your luck with but, with the possibility of Mortgage Stimulus AND QE3, they have the potential to rocket higher. 

  • The Jan $5/7.50 bull call spread is $1.40, these can be paired with the sale of the Dec $6 puts at .92. 
  • 2013 $7.50/10 bull call spread is .58, that pays $2.50 (up 331%) by itself if all goes well or you can sell Dec $5 puts for .20 as a start towards reducing the basis.

HCBK ($5.86) is priced LOWER than the panic of 2009.  As a conservative, regional bank, they are being hurt by low interest rates as well as having to pay higher FDIC insurance rates to make up for their less-conservative cousins.  So far, they are still paying that .08 quarterly dividend and that’s 5.4% at this price.  

  • The April $6 puts can be sold for $1 to provide a net $5 entry.
  • The April $4/6 bull call spread is $1.30 so the pair would be net .30 with $1.70 upside at $6 (up 566%) and a break-even at $5.15.  

MRO ($25.89) is not the same MRO as it was as they split their refining operations into MPC in June, which was terrible timing because 11% of MRO’s E&P business is in Libya and is totally shut down.  Obviously we expect Libya to improve now and oil also may shoot up under QE3 and we need a bullish play on oil so this is a good pick (besides VLO, of course).  

  • 2013 $20 puts can be sold for $2.70 for a net $17.30 entry (33% off the current price)
  • Sept $24/26 bull call spread at $1.30 can be offset with the sale of the Oct $24 puts at $1.18 for net .12 on the $2 spread that’s $1.89 in the money, up 1,566% if they hold $26.  

 

 

SNDK ($34.80) is still like riding a bucking bronco but that means it’s a great stock to sell calls against if you like to momentum trade the front-month caller.  At $34.80, it’s as low as it’s been since August of last year, before they ran up to $53.60 in January.  They have once again been dragged down with the SOX (and our beloved WFR!) WFR is recovering now and USD looks like it has finally bottomed so SNDK once again looks like a bargain. 

  • Selling the Jan $30 puts for $2.65 is a net $27.35 entry.
  • Oct $33/36 bull call spread is $1.60 and can be offset by the sale of the $30 puts at $1.42 for net .18 on the $3 spread that’s $1.80 in the money (up 900%) to start.  
  • Oct $30/35 bull call spread at $3.20, selling $33 puts for $2.35 nets .85 on the $5 spread that’s 564% in the money (up 488% if they hold $35).
  • Sept $34/36 bull call spread at $1.04, selling 1/2 Oct $30 puts for $1.42 is net .33 on the $2 spread that’s .80 in the money (up 500% if they can hold $36). 

SPLS ($14.48) is back around their 2008 lows ($12.99) and they actually pay a .40 dividend (2.8%) so a nice little stock to own.  They are not in trouble – in fact, they have $1.4Bn in cash against a $10.27Bn market cap and they have earned about $800M a year.  International growth has been strong but the US is where they make the margins and we have been lagging – even without stimulus I’d look for the US to pick up and margins to improve in Europe and Asia.  

  • Since you can just sell the 2013 $15 puts for $3.20 and establish a $11.80 entry – I do like that idea!  That would make the .40 dividend 3.4%.  
  • The Jan $15 calls are $1.15 and the Oct $14 puts can be sold for .80, which is net .35 on the set.  
  • The Jan $12.50/15 bull call spread is $1.45 and 2x can be paired with the sale of the 2013 $15 puts for a net .30 credit so you make $5 at $15 (up 3.6%) in Jan and lower the potential entry to net $9.70 or the worst case is a 1x entry at net $14.70 if they are still under $15 in Jan 2013 (rollable, of course).  

 

SVU ($7) is one we’ve played before with great success.  They were doing well in the Spring but they turned very negative in their outlook and cut their dividends as margins thinned out but things are improving and even the cut dividend (0.35) is 5% at this price so the fallback of ending up owning the stock long-term is not so terrible.  The key to this trade is simply deciding how much SVU you want to buy as a long-term holding and then seeing if we can possibly give ourselves a bonus discount.  This is a great trick for entering long-term positions.

  • Jan $4/6 bull call spread is $1.40 and the 2013 $5 puts can be sold for $1.10 for net .30 on the $2 spread that is 150% in the money at the moment.  If the spread comes in, the trade can be cashed for a quick profit or it can be held to the end for either a net 566% gain or a net entry of $3.30 (52% off the current price).  

Worst case is you end up owning the stock at net $5.30 (24% off the current price) in 2013 (and if the stock falls below $6, you can sell $5 calls to cover (now $2.80) and then buy the stock if it crosses back over $6.  

 

SWY ($17.08) is another supermarket we like (and was on last year’s list) and they are expanding in Mexico and Canada, which I like.  3.5% dividends continue to get paid.  

  • Selling 2013 $15 puts for $1.85 is a net $13.15 entry at worst (23% off).
  • Oct $16 calls are $1.55 (.47 premium) and those are good naked as long as they hold $17.
  • Jan $15/17.50 bull call spread at $1.50, selling $15 puts for .70 is net .80 on the $2.50 spread that’s $2.08 in the money. 

X ($27.55) was way down at $16.62 in 2009 so not a good one to hold in a big crash but they are now priced like a homebuilder with a $3.9Bn market cap despite the fact that, in 2008, they made a $2.1Bn profit.  Of course they LOST $1.4Bn a year later and $482M last year so timing is everything but VERY nice if you catch them at the right time.  Sales were up last year and last Q they made $222M so they could really pop if the economy gets in gear.  If not, there is a chance they don’t survive (pension costs are a big issue) but it’s hard to imagine even our Congress is so stupid that they would leave us without a Steel Industry in America so I do believe there is a floor to their problems:  

  • 2013 $18 puts can be sold for $2.70, a net $15.30 entry, which is 44% below the current price and lower than the panic lows of 2009 – just as a matter of statistics, it’s an interesting gamble.  
  • The Jan $22.50/27 bull call spread is 100% in the money at $2.80, so a nice, straight play with a  60% upside at $27.  Pairing it with the sale of the Jan $22.50 puts at $2 makes it net .80 on the $4.50 spread and gives you a 462% potential upside.  
  • A very aggressive play on QE3 would be the Oct $28 calls at $2.30, offset with the sale of the Oct $25 puts at $1.85 for net .45.  Keep in mind X was at $44 five weeks ago so potential for a 10-bagger if we get lucky.   

 

 

 

 

 

IN PROGRESS 

 

 

 

 

 

 


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  1. drcraig

    Maybe I’m misreading, but doesn’t it seem like they’re making more of this hurricaine than necessary? All over TWC the threat levels are listed as "extreme". It’s barely a catagory 1 hurricane at this point! In Bermuda we (locals) head down to the shore to watch the surf in these conditions. Sure, duration will be a long, and maybe that will cause greater storm surge than a quicker pass.. I don’t know. Just seems like the usual sensationalism now applied to the weather. 

  2. jmm1951

    Phil/Parking
     
    I have a question about an idea you published some time ago about parking a large sum of money safely. It goes something like this. (I have updated the prices.)
    Buy 1 AAPL $300 strike Jan 2013 call for $109
    Buy 1 AAPL $450 strike Jan 2013 put for $110

    Total outlay $219, i.e $21,900

    Current price of AAPL stock $183

    Now on expiration in January 2013 the minimum you get back will be $150, (though it could be more if the price is less than $300 or more than $450).

    $219 minus $150 = $69.

    If you can sell $69 of premium, you have broken even, so…

    Sell 1 AAPL $183 strike October 2011 call for $22
    Sell 1 AAPL $183 strike October 2011 put for $22 (approx).

    If the price closes at $183 in October you have already already recouped $44 of the $67 needed to break even.

    Both sides cannot miss, so you roll the losing side out and forward if it looks like going over $22.

    You have 17 months till expiration. If you only manage to get an average of $10 premium per month that will be $170, giving you an overall profit of $10,300 on initial outlay of $21,900. You would only need to earn $5 per month by selling premium to break even.
     
    OK, I looked at this, but the drawback in an IRA account would be that you would have to double the amount of cash set aside to cover the spreads. An alternative, for example if you were selling ATM calls and puts, would be to create two smaller spreads by buying almost worthless puts and calls to complete the spreads, which would slightly diminish your returns, but greatly diminish the cash set aside.
     
    However, if you were going to do this, then really you might just as well forget about buying the LEAP call and put and just sell weekly ATM iron condors or butterfly spreads with the intention of rolling the losing side.
     
    1. Is this a viable strategy? 2. Am I missing something obvious?

  3. jmm1951

    drcraig/hurricane
     
    It appears so. When I have been in the islands during hurricanes, they don’t make so much fuss about them. Once I was in a hurricane in Bermuda where schools were still open and there was no great fuss because the eye of the hurricane was passing 30 miles to the south of the island, so no biggie.
     
    Here in Florida they close all the schools and doctor’s offices if there is any hurricane within 1000 miles, thus causing huge disruption for the parents of children who may have to call off from their own jobs.
     
    The problem is that hurricanes are unpredictable. A few years ago in Hurricane Charlie, emergency services were issuing an extreme alert for the Tampa area and suggesting that people evacuate southwards, when in fact the hurricane took a sudden turn right and devastated Port Charlotte which is where some people from Tampa were headed for.
     
    When things go wrong, no one wants to be responsible, so they tend to overwarn to the nth degree.
     
    The country that has the best preparation for hurricanes is Cuba, where every single person is allocated a place in a shelter, and deaths are very rare.
     
    The best thing the US could do to prepare for hurricanes would be to put all power lines underground. Bermuda did this after Hurricane Emily created havoc in 1986, and while it took 20 years to complete the job, the results are very satisfactory. The other thing would be to improve the building codes for mobile homes and trailers because in natural disasters, they just don’t stand up well, especially if they have flimsy carports attached.  Here in Florida many homes are made more vulnerable by having "lanais" (screened or open porches under the main roof of the house) that allow the wind to get under the roof.

  4. pakdog

    I’ve been thinking the same although extremely high winds and flooding are nothing to play with. At one point it was a Categoy 3 but has lessened which is great news, but a Category 1 hurricane is still a really big storm. Of course, it’s all ratings heaven to the TV folks. Here are some links to what the categories mean.
     
    http://blogs.wavy.com/files/2009/11/Saffir_Simpson_Scale1.jpg
    http://www.boqueteweather.com/images/saffir_simpson_hurrican_scale.jpg

  5. rustle123

    I was evacuated from Edgewater, NJ because was told grounds could be 5-10 ft under water and our road has major floods even from flash rainstorms.  I live right on the Hudson River.  Evacuation was voluntary not mandatory but I didn’t want to chance my car being in 5 feet of water.

  6. prof

    Like!  Thanks for these stock ideas.  I am still very cashy and am looking to deploy. 

  7. revtodd64

     Hurricane – its really the amount of rain coming with Irene because it is a slow moving storm, so it can really dump.  The flooding in low lying places is the big problem.  I’m busy making sure I have room for extra homeless people this weekend and figuring out how to keep them entertained during the day tomorrow in case they have no other place to go.  I guess I’ll do a free movie day in the cafeteria, get a bunch of playing cards at Dollar General (which I own stock in), give out all the bottled water donated (own shares in KO!) and find ways to spend the donated Walmart gift cards (own WMT!).  See, the poor really do consume things that the economy needs.  I hope people don’t think I’m making lite of this too much.  I’m actually a little nervous, but we did do this all winter with the blizzards, so it really isn’t any different.  People who use their heads should really be fine.

  8. tangledweb

    Perhaps you do not like to do this Phil but I would prefer when you list several ways to play the stock if you would indicate which you would use for yourself.     As a newbie that would help me a lot.
    Also do you come back on these later and say when it is time to ditch them or sell more puts or…?

  9. Turning1

     Yes, as a newbie and someone that wants to learn more,  I was wondering if Phil is recommending that we enter every bullet point or not?

  10. revtodd64

     SWY – Great trades Phil, can’t wait till Monday!  I assume you want to sell Jan. $15 puts, not calls on SWY.  The numbers work.  If I have power later, I’ll look forward to seeing the rest.  Thanks.

  11. rj_jarboe

    Phil,
    I thought I would add a few stocks that I have had on my watchlist in case you see a decent way to play one of them.
    LOW, GE,  HRB

  12. rpme

    Phil, Bill Gross agrees with you on the Bernanke speech, additional Fed stimulus forthcoming in Sept. I know having Bill on the same page makes you feel warm and fuzzy.

  13. revtodd64

     Good read – I somehow missed this in the July 10 NY Times Mutual Fund report, but my astute wife, who is a CFP, found this article on how to really beat the market.  It’s simple, just get elected to Congress and get superior information.  Or better yet, how about an ETF tracking key committee leader’s investments?!  

  14. dclark41

    Revtodd
    Where are you located?

  15. angelcur

    drcraig i thought you were from bangor?

  16. Pharmboy

    Turning – I would pick a few to enter and get a feel for how things are done.  Also, read the education section, including this:
    K1 project

  17. Turning1

     Thanks Pharm

  18. Pharmboy

    in addition, when entering, just paper trade the first few times to get a feel of how things work around here.  If one must enter, and I don’t advise it for 2 months, do in increments of 1s……1 call, 1 put, 1 bull call spread, or 100 shares, etc.  just easier to move things around.

  19. revtodd64

     dclark – I’m in Poughkeepsie, NY, just up the Hudson from NYC.

  20. Phil

    Good morning! 

    Well, it was hardly worth taking in all the pool furniture so far.  

    The news is still trying to make a huge deal of things but, on the whole, not the storm of the century so far.  Unfortunately, you do have to be prepared, my poor Mom in Florida has to go through this a dozen times a year and it’s usually nothing but you sure don’t want to not be prepared the one time it is something….

    AAPL/JMM – When was that trade from?  I guess you changed the numbers as it doesn’t make sense selling $183 puts and calls with AAPL at $383 and, of course, there are no $183 or $383 strikes.  The idea behind that kind of spread is that you are, in this case, buying a $150 spread for $219, paying a $69 premium (although that’s a bit much) and then turning around and selling $44 of it in month 1.  IN THEORY, you are not in bad shape as long as AAPL stays between $300 and $450 because you net $150 back on your longs and the trick is just too keep rolling the put and call combination and collecting a premium each month.  You win anytime AAPL moves less then $44 (or whatever premium you sell) and you lose if it moves more in each period.  Had you sold the July $320 combo in June, you would have been burned by the move to $405 and had a $40 loss to make up (in reality, you MUST pay attention and roll losing puts or calls BEFORE they cost you 50%).  So what you are "missing" is that possibility that the stock goes nuts and makes a series of $80 moves on you.  At this time, with the market this volatile and AAPL in transition, I would not feel confident running that spread.  

    The biggest damage caused by this storm is the loss of the 2nd to last weekend of summer.  Stores are close, malls are empty – 1 weekend out of 52 is 2% but I’m sure a Summer weekend counts extra.  

    Apparently 400,000 people have no power in NJ – that’s over 10% of our state (3m homes).  Big costs for PEG, ED etc losing sales and spending on overtime for repairs.  Anyway, if you don’t hear from me – it would be because the power goes out as we have no plans today.  

  21. Phil

    Water/Rustle – Good move as they closed the lower level of the Washington Bridge and that’s about 200 feet higher than you are!  

    Thanks Prof – I’ll finish them up later.  Now that we know the Hurricane is past without major incident, we can get back to business.  

    Flooding Rev – It looks like it’s still coming right at you.  The eye of the storm seems to be heading right up the NYS Throughway.  Investing in consumables is always a good idea.  Bless you for what you’re doing there, by the way!  

    Which way/Tangled – They are just different ideas on how to play.  I like them all, of course but do not mistake me for a financial adviser.  There is no way I can know what’s right for you as an individual investor or what fits in your portfolio or risk profile.  Anything involving options is inherently risky, of course, so it’s a matter of levels within but any of these short-term trade ideas, if wrong, will lose money almost as fast as we hope to make it.  My "favorites" are always ones where you sell move premium than you buy but not everyone can sell naked puts so I use a sort of a la carte menu for a post like this but, if you are a "newbie" and don’t know what’s right for your portfolio – the idea is to paper trade them and following them over time so you can get an idea of what is right for your own trading style and investment needs.  

    Also, it concerns me that you even ask if I will come back and say when it’s time to ditch these.  I very clearly laid out the premise for these trade ideas.  If the premise is blown, then it’s time to get out (or at least cover with alternate hedges).  If you are following a trade idea – you can always ask but don’t expect me to pro-actively follow up on what is probably 1,000 ideas I may put up during the year.  I have no way of knowing what positions people are in or not and, generally, I’m trying to look forward as to what is a good idea for tomorrow, next week, next month and next year – it is your JOB to set sensible stops and make adjustments but I am always happy (well, usually happy) to help if you have a question.  

    Entering every point/Turning – No, not at all.  See above comment to Tangled.  The main thing you need to learn is how to BALANCE a portfolio.  In our Portfolio section, there are 3 posts on "Smart Portfolio Management" and in our Strategy Section we talk about stops, scaling in and scaling out and hedging positions as well and also in the PSW Wiki we have the beginning of additional strategy discussions and it’s up to you new guys to add sections that you feel are missing as the older guys already know it.  

    So at any given time YOU need to be reviewing your own portfolio and deciding if you are on track or too bullish or too bearish and if you are too bullish (and I know this is a really complicated idea) you need to look for a BEARISH trade idea and, if you are too bearish, you need to look for a BULLISH trade idea.  

    I tend to put up more bullish ideas when we are at the bottom of the range or when I am simply feeling bullish and more bearish ideas when we are at the top of the range or when I am simply feeling bearish.  Of course, at any given time, we thing certain companies or indexes or commodities are going to go up or down on their own merits and that’s GREAT because, if we are very lucky, we can sometimes end up with situations in which our bullish AND bearish plays are working – especially if we concentrate on selling premium and happen to catch the market in a flat period (not lately!).  

    I would strongly suggest, if you are new especially, not just going to the Portfolio tab and looking for our current positions in our virtual portfolios (the ones I do pro-actively track although still you need to set sensible stops!) – but to go back a year or two years and follow those virtual portfolios from day one so you can see our logic from the day we set them up through the day we close them down.  The whole point of the exercise is so you can follow through the ups and downs and adjustments of various positions over time so you can get a feel of what kind of trades you are comfortable following over time.  

    And what Pharm said!  

    SWY/Rev – Thanks, proofreading is very much appreciated!  

    Good stocks RJ – I’m looking for ones I think might move quickly at the moment so GE maybe too slow although a definite long-term beneficiary of QE3.  HRB was good last year but only after crashing in October.  As we’re 33% higher this year, I’d rather wait and see if they plunge on earnings again so we can grab them cheap.  Of course they fall because HRB does not make much money in Q3 but that seems to take investors by surprise every year – which is one of those things that tells you what kind of idiots the average investors are!  That’s great for us but a sad observation of human behavior…

    Gross/Rpme – Wow, you know me well!  I am conflicted on that news…

    Congress/Rev – Yep, sickening.  

    Speaking in Jackson Hole about a "dangerous new phase" in crisis recovery, IMF chief Christine Lagarde called for more action from American policymakers, including principal reductions for homeowners. She echoed Ben Bernanke in saying that jobs must come first now – and that may mean spending cuts will have to wait.

    Jean-Claude Trichet defends the ECB’s rate tightening, saying at Jackson Hole that if it didn’t anchor inflation expectations, long-term interest rates would quickly rise. Trichet also pours scorn on speculation that EU banks are low on liquidity, arguing that their eligible collateral is much larger than the amount in use.

     The IMF doesn’t anticipate a coming global recession, but the risks are rising, according to John Lipsky. The soon-to-be retiring managing director says some of the risk comes from the deteriorating economic data, but also from the fact that investors are losing confidence in the "determination and clarity of key policymakers." (Video). 

    As U.S. economic and job growth barely move, corporate profits increased during Q2, as did the amount of cash businesses had available for investments, as taxes decreased. Corporate profits rose $57.3B, according to the BEA, after growing $19B in Q1; internal funds available for investment grew $83.8B, after growing $21.1B in Q1. - Notice how far the BEA goes out of their way NOT to give totals on Corporate Profits – if they did, there would be riots!  Also, Corporate taxes went DOWN $3Bn last Q… 

     Emails show that Larry Page allowed illegal pharma ads to appear on Google (GOOG) for years, says U.S. Attorney Peter Neronha, who led the probe that persuaded Google to settle the issue for $500M. In a DOJ sting op, Google staff helped agents evade controls designed to prevent the ads.

    Around 2M homes and businesses are without power as Hurricane Irene batteres the East Coast with winds of up to 115 mph, causing mass transit systems and shops to close, refineries to reduce operations, pump prices to rise, and airlines to cancel over 9,000 flights.

    The NYSE and Nasdaq yesterday said they expect markets to open as normal tomorrow despite Hurricane Irene, although the SEC and officials from the bourses are due discuss the issue this afternoon. A major problem is that if transport systems stay shut, traders may have trouble getting to work. 


  22. deano

    Phil

    Thanks for your guidance the last few days – all I can say is well played. Took out a few of my hedges, very slight loss on those due to a little timing, and leaving a couple in place to see how we do the first few days next week.
     
    On another front – I know you are a voracious reader – who’s blogs do you read daily or at least frequently to keep up with he market, and who of these do you think has the best record of being on top of the market. I’m looking for the guys that you never miss -
     
    Finally who else do you read politically?

    TIA – stay safe, and have a great weekend.

  23. Pharmboy

    FWIW from Stock Trader’s Almanac:

     

    • August’s next-to-last trading day, S&P up only twice in last 14 years.
    • First trading day in September, S&P up 11 of last 15, back-to-back huge gains 1997 and 1998, up 3.1% and 3.9%.
  24. ruairi

    Hi Phil,

    I was wondering what your view is on HOV. They are very beaten down and could be a good recovery play medium term. Iwas looking to sell the Jan 2013 $2 put for 1.15 and by 3 Jan 2013 $2 calls for 0.41 each. A nice profit if they run back up to the 200 MA of 3.84. I guess they may go bust but the risk reward seems good.

    Ruairi

  25. jmm1951

    PHIL/AAPL. Thanks for the clarification.
    You wrote:
    "When was that trade from?  I guess you changed the numbers as it doesn’t make sense selling $183 puts and calls with AAPL at $383 and, of course, there are no $183 or $383 strikes.  The idea behind that kind of spread is that you are, in this case, buying a $150 spread for $219, paying a $69 premium (although that’s a bit much) "
    My apologies. I wrote $183 when I meant to write $383. (I guess I had GLD on my mind.) No, of course there are no AAPL $383 strikes. One would have to take the closest one.
    The original idea was from a post in the K1 project that goes as follows:
    "You could do something mindless like buy AAPL Jan ‘10 110s for $64 and the AAPL Jan ‘10 $200 puts for $58.50 – obviously a $22.50 premium since the net of the 2 positions is $100 no matter what. So for a layout of $122.50 and a maximum loss of $22.50, all you have to do is sell $68 worth of puts and calls over 26 months to make a 20% return."
    AAPL has more than doubled in price since that time.

  26. dclark41

    Phil
    I was reading some of the old archives and reviewing my holdings to determine if any moves were required. For example KO:
    Own stock at $61.71 now $68.5/ sold 2012 $60 call at $5.31 now at $9.25/ Sold 2013 put at $4.15 now at $2.00. I look at this trade and say to myself that it is "on track". The only thing I am not sure about is when to make adjustments to gain more premium. The puts are down 50%+ would it make sense to roll those up to gain more premium? Would you roll the puts or just stay put?
    The other adjustment I am struggling with is HOV: 2013 $2.5 call bought at $2.05 now .35. I bought back a sold call for .80 and have been naked for a month. I want to sell against it, but am indecisive on what strike and when. I know I have to do something! I already hold 2013 $5 put sold at net $1.70. Thank you.

  27. Winston

    Phil, I don’t think there has been a TBT trade posted here that I did not like, so I find myself with a dog’s breakfast of a situation with the following set of positions. I broke every rule in the book, and let positions get away from me and did not take profits when I should have. I got obsessed by rolling, and paranoid when I saw how fast TBT could come back, so did not sell short term calls. It seems the horse really has bolted and was hoping for a dose of your wisdom. The positions are:
    -50 Sep 11 35 Puts   Trade price: 2.65   Mkt: 10.175
    -10 Sep 11 36 Puts   Trade price: 3.18   Mkt: 11.175
    +10 Jan 12 27 Calls Trade price: 8.18   Mkt:  1.885
    +20 Jan 12 30 Calls Trade price  5.78   Mkt:  1.115
    -20 Jan 12 37 Calls Trade price: 1.90   Mkt:  0.39
    -10 Jan 12 38 Calls Trade price: 5.899 Mkt: 0.345
    -20 Jan 13 30 Puts  Trade price 3.05  Mkt 7.975
    They say there is more to be learnt from the guy who screwed it all up than from those who have had great successes, so this could be a learning opportunity for many!

  28. drcraig

     Winston/TBT – This has been one gargantuan $hit sandwich, of which many of us have taken a bite. Do you have the funds to take delivery on all that stock? Long term it’s practically a guaranteed winner. 

  29. dclark41

    Winston:
    I agree with dcraig, but man what a position to be in if it doesn’t and you really don’t want to own TBT.

  30. drcraig

     Regarding AAPL and SJ, I did some reading on his cancer, and treatment history (since it wasn’t immediately obvious to me why he would have needed/qualified for a liver txp). It seems the most likely scenario is that his cancer recurred, but only spread to the liver- thus he was in a very small group of patients with metastatic pancreatic cancer who would qualify for a liver transplant. Assuming the liver txp was curative and went well, he should be thriving. Since he is clearly doing the opposite, the only logical conclusion is that the cancer has recurred again despite the liver transplant. The problem of recurrence is now compounded by the fact that he is on immunosuppressant drugs for the liver. His cancer will now likely spread rapidly. I would guess he only has a few months left, tops. What’s unclear is how much information he plans on passing along as he gets closer to the end. He might just choose to eek out information slowly to avoid a shock to investors with a surprising announcement. Alternatively, he could go very private with this until his death, or days before, like Freddie Mercury, who only announced he was sick a day before he died. Either way, the day SJ dies will likely be a good day to buy into Apple. Thoughts?

  31. Winston

    drcraig/dclark41: I started with the shared confidence that TBT had never been below $40 so I could look at it as getting a bargain! I could handle assignment, but doubling down on it would be a bitter pill to swallow. I could then sell calls against the position – but I know that sod’s law would mean that as soon as I did that there would be a humungous rally and I would be called away – left to nurse my losses.

  32. manitowocdave

     Phil — I have two options that I need your advice on what I should do…..hold, sell, or DD:
    GLD Sep 2 11 (W) $170 Put bought at $2.35
    BNO Sep 11 $71 Put bought at $2
    Any advice is much appreciated!
    I hope everyone on the east coast is safe!!  I grew up in Virginia Beach, VA, so i know what you folks are going through.

  33. Cap

     Howdy.  Hope everyone affected by storm is doing ok.  NYC seems to have gotten off pretty easy; but most things are closed which is annoying.  Nice and quiet here though; I like that.
     
    Hope y’all are managing the markets ok.
     
    This week … window dressing ? europe & ISM.
     
    Expect volatility to continue into September even if it calms down for a few days.   
     
    Risk is still to the downside, doesn’t mean we could not go up 3-5% first.

  34. jmm1951

    drcraig/Jobs
     
    What you are saying sounds very plausible. It is very hard to take into account an event that is so randomized, even if expected. It is gruesome, but there are probably lots of traders who have already entered lowball bids in anticipation of such an event. It also makes one a bit more cautious about selling AAPL puts. Note what Phil says above in a reply to me about AAPL:
     
    So what you are "missing" is that possibility that the stock goes nuts and makes a series of $80 moves on you.  At this time, with the market this volatile and AAPL in transition, I would not feel confident running that spread. 
     
    Could such an event lead to an $80 move? Hard to say, but if I had to put money on it, I would say no.

  35. 8800

    Phil,
    On a quiet – and dry- Sunday here in Atlanta (trust all PSWers are safely above water), I wanted to get a better grasp of why you felt the recent sell-off was due to ‘silly pessimism’ (Friday commentary) and not negative fundamentals. Other than the intuited suggestion that we might get QE3 from BB, has anything fundamentally changed (jobs, housing, political gridlock precluding any meaningful stimulus, Europe) ? I appreciate that animal spirits and oversold readings can precipitate a rally aided by short covering, but do you  feel sustainability is there lacking fundamental strength? If so, where are the economic bright spots? Would genuinely appreciate your thoughts for feeling the downside is limited  – realizing you are NOT bullish but rangish. I may be underweighting the power of animal spirits and of MSM but wouldn’t there have to be some real fuel in the tank?
    Thanks

  36. jcaesar

    Phil / 8800 – In answering 8800′s question, IF your answer is "inflation" of the markets, can you explain a bit?  For example, where has the Nikkei’s market inflation been over the last 20 years?  Or US markets in the 70s?  Or is this "QE3 induced inflation" you’re referring to?

  37. Troy

    Charlie Reese is a former columnist of the Orlando Sentinel Newspaper:
     
    Tax his land,
    Tax his bed,
    Tax the table,
    At which he’s fed.
     
    Tax his tractor,
    Tax his mule,
    Teach him taxes
    Are the rule.
     
    Tax his work,
    Tax his pay,
    He works for
    peanuts anyway!
     
    Tax his cow,
    Tax his goat,
    Tax his pants,
    Tax his coat.
     
    Tax his ties,
    Tax his shirt,
    Tax his work,
    Tax his dirt.
     
    Tax his tobacco,
    Tax his drink,
    Tax him if he
    Tries to think.
     
    Tax his cigars,
    Tax his beers,
    If he cries
    Tax his tears.
     
    Tax his car,
    Tax his gas,
    Find other ways
    Taxes to pass
     
    Tax all he has
    Then let him know
    That you won’t be done
    Till he has no dough.
     
    When he screams and hollers;
    Then tax him some more,
    Tax him till
    He’s good and sore.
     
    Then tax his coffin,
    Tax his grave,
    Tax the sod in
    Which he’s laid…
     
    Put these words
    Upon his tomb,
    ‘Taxes drove me
    to my doom…’
     
    When he’s gone,
    Do not relax,
    Its time to apply
    The inheritance tax.
     
    Accounts Receivable Tax
    Building Permit Tax
    CDL license Tax
    Cigarette Tax
    Corporate Income Tax
    Dog License Tax
    Excise Taxes
    Federal Income Tax
    Federal Unemployment Tax (FUTA)
    Fishing License Tax
    Food License Tax
    Fuel Permit Tax
    Gasoline Tax (currently 44.75 cents per gallon)
    Gross Receipts Tax
    Hunting License Tax
    Inheritance Tax
    Inventory Tax
    IRS Interest Charges IRS Penalties (tax on top of tax)
    Liquor Tax
    Luxury Taxes
    Marriage License Tax
    Medicare Tax
    Personal Property Tax
    Property Tax
    Real Estate Tax
    Service Charge Tax
    Social Security Tax
    Road Usage Tax
    Recreational Vehicle Tax
    Sales Tax
    School Tax
    State Income Tax
    State Unemployment Tax (SUTA)
    Telephone Federal Excise Tax
    Telephone Federal Universal Service Fee Tax
    Telephone Federal, State and Local Surcharge Taxes
    Telephone Minimum Usage Surcharge Tax
    Telephone Recurring and Nonrecurring Charges Tax
    Telephone State and Local Tax
    Telephone Usage Charge Tax
    Utility Taxes
    Vehicle License Registration Tax
    Vehicle Sales Tax
    Watercraft Registration Tax
    Well Permit Tax
    Workers Compensation Tax
     
     
    STILL THINK THIS IS FUNNY?
    Not one of these taxes existed 100 years ago, and our nation was the most prosperous in the world. We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.
     
    What in the heck happened? Can you spell ‘politicians?’

  38. exec

    Phil

    How did you weather the storm?

    Thank god it’s over…..one more day of wall to wall coverage by fox and the other idiots and I think I would have had to shoot myself.

    Honestly……is it me or was the coverage ridiculous? I watched one screwball reporter ask an official of the power company how long should people expect there power to be out….this happened 36 hours before the storm was scheduled to hit. Then you have these bozo’s standing out in the middle of the storm telling you how bad it was. Christ….. I felt like I was watching an auto race where you’re hoping for a good pile up to add a little excitement to the event……only in this case…..I was wishing for a big funnel cloud or sunami to swoop the yoyo away so we really had something newsworthy to watch.

    In any case…..they’re predicting low volume in the market timorrow because all the premodona brokers won’t be able to show up due to the storm. So what do you think…..low vollume Bot rally tomorrow?

  39. rustle123

    @ Troy
     
    If you dissect a little better all the taxes.  Many of them didn’t exist 100 years ago because many of the services didn’t exist 100 years ago.  We didn’t have telephones, the school system wasn’t organized, there were no vehicles like now, same with utilities, there weren’t motorized watercrafts.  It’s one of those articles that tries to catch people by surprise going wow without rationalizing it first.

  40. Troy

    Phil -  If the economy weakened since Q1 2011…..how can Q2 GDP at 1% be greater than Q1 of .4%?  "Stimulus Obama" and "Easing Ben" better juice the markets this month…as the Euro crisis is looking unravel in a few short weeks.  Dangerous markets ahead!!!

  41. jcaesar

    Troy / Reese Forgery – Are you serious about that Charlie Reese nonsense?  I got a copy from my 90 year-old aunt.  That bit about taxes was never in the original article.  It’s a forgery, appended to the end.  I have a lot of tea-bagger friends (or acquaintances) who do this all the time.  They (or their friends) just make stuff up, or forward stuff that is made up.  Just like Fox News, they aren’t fact friendly because facts don’s support them.  In the future, please help the discourse by doing your own fact-checking, and let whoever sent you that piece know it wasn’t from Reese. Here are two references for you.
    http://www.examiner.com/faith-family-in-atlanta/did-charley-reese-inspire-the-tea-party-taxed-enough-already
    http://filterednews.wordpress.com/2011/04/11/debunking-charley-reese-viral-email/

  42. jcaesar

    Troy – Also remember that we have taxes for a reason – because they pay for services rendered. In fact we need more of them at this moment, not less.  If we all want to get rid of those horrible taxes, then lets get rid of those horrible things, like, say our public education system.  Then we could all get better at sending forged, misattributed nonsense to our friends and acquaintances.  ;-)

  43. drcraig

     jmm/SJ – No I had not. Yikes. Assuming it’s real, he looks awful. Could be weeks away from being bedbound. One other possibility I thought of, if not recurrence of cancer, he could be suffering from chronic rejection of the liver transplant, in which case he might qualify for a new liver. I didn’t think that was very common though. Seems to me more likely the cancer is back. This would also make sense w/r/t his statement in January that his doctors couldn’t figure out why he wasn’t gaining weight. They probably couldn’t find the metastases. A simple liver biopsy would confirm rejection. So sad.

  44. Cap

     jcaesar — the Fed. Gov’t Dept. of Education has very little to do with the public education system, which is largely state and local and funded by real estate taxes.
     
    I don’t know what services you think you are getting for your $3.8 Trillion.  We are not getting our money’s worth by any stretch of the imagination.
     
    Face facts, the Federal Gov’t is filled w/ enormous waste to the tune of $1-2 Trillion per year easily.  The gov’t is not an efficient allocator of our tax dollars.

  45. rustle123

    Let’s not get things confused, the taxes listed on that post were not 3.8 trillion of taxes.  Services didn’t exist for almost all of them back then, even like the one that listed Social Security taxes, yet another which was not around 100 years ago.  Is the government efficient in using our tax dollars, no and I don’t think anyone would argue they are, but that post was just plain propaganda.  And not blaming Troy for the post, just the source it originally came from.

  46. ban2

    Well looks like storm is done going thru MetroWest Mass (Framingham/Natick
    10hrs no power.  3:00am winds still 30mph but should calm by noon
    Max winds maybe only 60-70 mph  but having leaves on the trees doubles the effect When one tree goes down across a power line it wipes out large densely populated areas.

    Tried to rent a generator last Wed eve and everybody was out. Couldn’t even buy one. Have a small one but couldn’t start it of course
    Have a french drain in my 1841 stone wall basement which goes into a sump hole but w/o elec it was a problem.
    Was able to keep up hand bailing from the sump hole — 70  5 gal buckets later (350 gal) things now look in control.
    Am exhausted but thankful we made it relatively unscathed. (and I have nearly 20 yrs on Phil)
    Will help neighbors in the am and hopefully be back to get on board for a few EOMnth trades.
    best investing to all — this market owes us

  47. Phil

    Good morning!

    Ended up going out last night.  We got off very light from the storm.  Some of our town has no power and plenty of flooding but no worse than usual when we get a lot of rain. 

    Futures looking good ahead of Asia open, up about 1% on Dollar dive to 73.62, pretty much what we expect if QE3 is getting baked in.  Gold topped out at $1,830 and we’ll see if they can hold $1,800.  Oil is $85.65, silver $41 and gasoline surprisingly back 5to $2.75 again – a nice long this week into the holiday (/RB).  

    Japan already has a new PM, Yoshihiko Noda (was Finance Minister), who wants to raise taxes and control the Yen.  Amazingly, the WSJ doesn’t think a new PM in Japan rates page 1 attention, probably because they want to avoid letting readers know that a candidate who ran on a platform of raising taxes to pay off debts just got elected in the World’s 3rd largest economy.    

    Thanks Deano!  Who do I read?  Well that’s what Phil’s Favorites are for!  I also read Barry, of course.  Between the Hedges, Trader Mike, Market Oracle and Seeking Alpha.  Mostly I read NEWS because I don’t really want opinions, I want facts and, because I want facts, I have to read the same story over and over again to eliminate single-source bias.  Politically, I mostly read global newspapers but Politico, Salon, Washington Times, Daily KOS, The Hill, Real Clear Politics, TPM, NRO, Free Republic and Drudge are all good places to visit.  

    HOV/Ruairi – I like HOV as they are a small, regional builder in a good part of the country and they are a smart group.  They are being punished for buying while the market is weak but, if you want to own a builder as a long-term investment – isn’t that what you want them to do?  They don’t run their business to make it pretty for Wall Street – they run it to make money building homes over the long haul, like they have for 50 years.  I like your trade idea but if you can sell the $2.50 calls for .35 to make a net 0.6 spread, then you can buy 19 of those for $1.14 and they make $950 at $2.50 while your 3 $2 calls would have to get over $5 to make the same money.

    So that trade would be, selling 1 HOV 2013 $2 put for $1.15, buying 19 $2/2.50 bull call spreads for .06 ($1.14) with a $950 upside at $2.50 against about $1 in margin.  Keep in mind HOV may go BK (as could any builder if the economy gets worse) and that they are currently $1.56 so $2.50 is a long way away, as is $2, where the stock would be put to you!

    AAPL/JMM – See that was WAY less premium back from 2008 and look how much AAPL swung during that time -down to $79.14 and back to $215 over the holding period so not as mindless as we thought it would be!  Those trades (like our FAS Money) work best if you have the firepower to DD on your longs if the stock does a crazy bottom but if you are going to stand there like a deer in the headlights when the stock moves out of your range – then your short sales can kill you on a black-swan event and, as I’ve pointed out regarding the short strangles, we’ve had 8 black swans in 3 years now so not the "rarity" we used to assume, which is why I’m no longer a fan of these plays.  

    KO/DC – Well you are in for net $52.25/56.12 and, if you are called away at $60 you make $7.75 (15%) so your real question is, how do you take an almost sure thing 15% gain and turn it into risk?  If you are so confident that KO can’t fail $60, you can just roll the caller to the 2013 $62.50s about even but is that worth tying up $60 of your money to make another $2.50 over a year or is it, perhaps, time to move on to a better opportunity – perhaps something else that can pay you $7.50 in one year rather than $2.50.  As to the puts.  If you let yourself just get called away then your puts make a nice net $60 re-entry, back where you do like KO’s price but any rolling or repositioning you do means you want to buy them at $68 (14% higher) and expect them to go where?  $75, $80?  If you are so gung-ho bullish on KO, then whey not just leave $2.50 in play on the 2013 $70/77.50 bull call spread and roll up the short put for another $2 to pay for that?  Then you have another $5 of upside of KO but you free up $60 to diversify on stocks that are not near the top of their range.  

    HOV/DC – Once you let a long position fall below 50%, you are essentially on a suicide mission from which it is very unlikely to return.  It is helpful if you are aware of this BEFORE it drops another 65% and then you finally decide you want to save it.  As I noted above, I still like them but why not convert that .35 into 6 $2/2.50 bull call spreads that give you back $3 at $2.50 vs $0 with just the short calls.  Either way, it’s do or die but a lot less pressure on the do side when all you need is $2.34 to get even.  On the short puts, the $5 puts are now $3.80 and the $2.50 puts are $1.60 so you can convert 10 short $5 puts to 24 $2.50 puts which would put you in 2,400 HOV at net $1.80 ($4,320) vs 1,000 at net $3.30 ($3,300) so you risk paying (at 10) $1,020 more to end up with 1,400 more shares (.73 each) but you lower your strike considerably to get out without owning any.  

    Also – Keep in mind that if you have HOV $5 puts that you sold for $1.70 and now they are $3.80 and you are down $2, you only need to really try to get back what you are down.  Also, also – you don’t have to stick with HOV.  You can flip to another builder or sell IYR (now $54) 2013 $35 puts for $2.50 instead so you don’t have all your risk on one stock.  Don’t let yourself get stuck in a box – it’s just a tick on a balance sheet and the stocks are just widgets that can be interchanged at your discretion.  

    TBT/Winston – Yes, it does seem that we cannot fight the Fed, especially with an ultra ETF that tends to decay over time!  Same as above with the 50% thing – once you lose 50% on a trade, keeping it means you are flipping a coin and you’d BETTER not give a damn whether you win or lose because it’s probably not even a 50/50 chance as you are already way off track.  Your big issue is the 80 short puts – the call spreads are essentially a write off unless you massively luck out.  So you are down about $60,000 there and the Fed says they will keep rates low forever so it doesn’t seem very sensible to push it, does it?  I think I would take the whole thing and roll it to 50 2013 short $25 puts and calls at $9.70 ($48,500) and then buy 5,000 shares of TBT when they are over the $27 line with stops below so you are covered if they go crazy to the upside and, otherwise, one side or the other (or maybe both) will expire worthless and you can roll the losing side to get much closer to even down the road.  Whenever TLT is high, you can sell a few long calls or buy some puts.  If you make a couple of thousand dollars once a month, that would put you on the road to catching up very quickly.  

    For example, the TLT Sept $109 calls can be sold for $2.10 and the $111/107 bear put spread is $2.40 so net .30 means 10 short calls plus $300 buys 10 spreads that can pay $4,000 if they work out.   As I’ve said, if you set a stop at $1.20 on the bear spread, then you have netted $1.50 on the short $109 calls and your break-even is $110.50. 

    Jobs/Dr C – It’s possible he’s getting another transplant.  If anyone is going to get an exception, it’s him.  More likely he’s getting worse to the point where even doing whatever he has to to get himself together for appearances is getting out of his range though. 

    GLD/Mitow – Isn’t that $170 put still $2.35?  I think gold goes down eventually but when is the big question.  I certainly wouldn’t play it with money that mattered to me as it’s a pure gamble.  Europeans are still panicking into gold and they may calm down if the markets recover but who knows?  BNO is up on expectations of QE in Europe but it’s another highly speculative play so if you have a concern – don’t play it!  You should never buy premium as anything but a speculative bet – it’s NOT investing when you buy premium – it’s gambling!  

    Window dressing/Cap – True, we are closing Aug tomorrow but then Sept is the real month where we expect window dressing for the Q.  

    Silly pessimism/8800 – We’re priced for a recession.  If you believe corporate profits will not fall, then the S&P has a forward p/e below 15, which is very low and, as I pointed out Friday, I’m not buying the whole S&P – just the good stuff so my personal S&P p/e is around 10.  If I pay $100 for a stock and the company makes $10 then my ROI is $10.  Maybe it’s a dividend, maybe it’s the stock price, maybe they invest it in future growth but $10 is $10 and that’s 5x better than I get from a TBill!  

    If you think IBM is just a number on a chart then you can worry about QE3 and Bernanke and Europe and animal spirts and whatever other BS but if you think IBM is America’s best Tech R&D company (yes, better than AAPL) with an incredible international sales force, 100 years experience and more patents than any two other companies who are still managing to drop 10% to the bottom line in this economy plus pay a 1.8% dividend – then IBM may seem like a bargain at $169.  

    I’m not going to get into a whole thing here, you can read: "The Worst-Case Scenario: Getting Real With Global GDP" which I had to write back in June of last year when people asked how I could dare be optimistic at Dow 10,000 because clearly the World was coming to an end then as well! 

    Inflation/JC – Inflation is my "bullish" long-term premise but read the above for my bottomish premise.  The mistake in looking at the Nikkei is that they were acting in isolation, $5Tn of a $60Tn global GDP and their culture is a saving culture and they are a very strong exporter so there is a constant inflow of money, no matter how many Yen they print.  What we currently have now is a massive increase in the US (and Global) money supply but the VELOCITY of money has fallen to near zero.  So let’s say we had $10Tn money supply that moved at 1.5x and gave us a $15Tn GDP (arbitrary numbers) back in 2007.  Now we have a $20Tn moving at 0.75x giving us a $15Tn GDP.  That’s how QE "helps" the economy, there are two components – how much money is available to be used and how much it is used.  At the moment, the banks aren’t lending and people aren’t borrowing but if that $20Tn begins to accelerate back to 1.5x – we can suddenly find ourselves with a $30Tn GDP.  Of course, that’s what the Government wants because it’s a lot easier to pay off a $15Tn debt (that’s fixed long-term) with a $30Tn economy than a $15Tn economy. 

    100 years/Troy -100 years ago the average American only lived to be 47.  Also, 

     

    • Only 14 percent of the homes in the U.S. had a bathtub.
    • Only 8 percent of the homes had a telephone.
    • A three-minute call from Denver to New York City cost eleven dollars.
    • There were only 8,000 cars in the U.S., and only 144 miles of paved roads. 
    • The average wage in the U.S. was 22 cents per hour.
    • The average U.S. worker made between $200 and $400 per year.
    • More than 95 percent of all births in the U.S. took place at home.
    • Ninety percent of all U.S. doctors had no college education. Instead, they attended so-called medical schools, many of which were condemned in the press and by the government as "substandard."
    • Most women only washed their hair once a month, and used borax or egg yolks for shampoo.
    • Canada passed a law that prohibited poor people from entering into their country for any reason.
    • Pneumonia and influenza, tuberculosis and diarrhea were the top 4 causes of death. 
    • Two out of every 10 U.S. adults could not read or write.
    • Only 6 percent of all Americans had graduated from high school.
    • Marijuana, heroin, and morphine were all available over the counter at the local corner drugstores. Back then the pharmacist said, "Heroin clears the complexion, gives buoyancy to the mind, regulates the stomach and bowels, and is, in fact, a perfect guardian of health."

     

    I’m sure there are many 3rd World countries you can move to where you can get away from all those "politicians" that have changed all these things over the last Century in America.  I hear you can appease the average warlord by simply having an extra daughter or two and trading them for some land – not a tax really, just good old-fashioned barter without all that annoying Government.  

    Also, since 50% of all Government spending is Military  - what’s your solution?  Is that the politician’s fault and, if so – are we going to vote out any politician who won’t zero out the military?  Maybe we can get them to all sign a "Pledge" or something mature like that….   See how much fun it is to engage in Reductio ad absudum?  

    Jobs/Jmm – That picture is sad! 

    Storm/Exec – Had they not told us it was a hurricane, it was just another rainy weekend for us.  The problem with storms is you do need to be prepared (4M people did lose power) otherwise you get another New Orleans situation if a major storm does hit.  In most of the South, they are used to warnings with no actual storm but in the Northeast, since we only get one warning every couple of years – we get pissed when nothing terrible happens – which is kind of silly but that’s because we don’t really understand how great it is to have a hurricane miss us.  Once you deploy all those news people – they have nothing to do so they end up wasting time but there are plenty of other channels to watch – I think I saw less than one hour of coverage all weekend and yes, it was uniformly silly.  

    As to the market – relief that the storm wasn’t worse on thin trading could be bad for the bears but the Shanghai sold off into their close (down 1.37%) with the Hang Seng up 1.4% and the Nikkei up 0.6% although India jumped 3% so good in Asia other than Hong Kong.  Europe has the DAX and CAC up 1.25% but the FTSE is closed.  Key is the Dollar – way down at 73.70 at the moment. 

  48. Phil

    Economy/Troy – That link didn’t work.  Who said the economy weakened?  Sorry but you seem to let your political views cloud your interpretation of – well everything and it’s not very helpful.

    Germany/Angel – That is like Germans reading about the Tea Party’s demands and basing their investment decisions on the "US hysteria" that is sweeping our nation.  There’s no election until 2013 in Germany so Merkel simply has to wrangle her own coalition to get things done – those opinion polls aren’t going to do much as she’s a good leader who will do what needs to be done, even if the people aren’t thrilled with it.

    $3.8Tn/Cap – Well since $1.3Tn of that is SS and Medicare which are self-funded and NOT part of the Federal Tax problem.  Why not stick to the real issue of $1.5Tn in total military-related spending out of a $2.5Tn budget of which, $400Bn is interest payments being made on the deficit we pilled up by not paying for the wars in the first place (along with giving ridiculous tax breaks to rich people and failing to collect anything from Corporations).  So your claim that, out of $600Bn of non-military, non interest spending that the government is "wasting" $1-2Tn is precisely why  no one takes Conservatives seriously anymore.  

    2010-federal-budget-composition

     

      

    Face it, if you are anti-tax and anti-Government you are anti- war because this Government pretty much does NOTHING ELSE!  There are military dictatorships that spend less of their GDP on the military!  

    One of the great Conservative budget tricks is to re-classify Veteran’s benefits as SS and Medicaid, which makes those programs look worse and the military spending look not quite so insanely ridiculous as it is.  No matter how you slice it, the entire non-defense, non-entitlement portion of the budget is just $600Bn – that’s what we spend on running all of our other government services in a $15Tn economy – no wonder it can’t grow!  Imagine if you had a business and allocated just 5% of revenues to infrastructure?  Unless it’s web-based – you’ve got a serious problem and growth would be out of the question.

    Sadly, the same people who claim to be "the party of business" haven’t got the slightest clue about what it takes to build a business.  How is it that people can listen to talking heads on TV saying the government is "wasting" $1Tn or that we can cut our way out of a deficit without laughing at them?  These are ridiculous statements and people that make them should be ridiculed – not voted for!  

    We collect $935Bn in SS and Medicare payments from the current work-force.  If we need $400Bn more, we can either raise the collection 50% or remove the $106,000 cap – problem solved!  It’s INSURANCE, not a tax and the premiums need to go up if the outlay costs go up – end of story.  

    That leaves $1.2Tn of Income Taxes collected and $198Bn of Corporate Taxes collected.  If we deleted the Military – we’d be better than balanced.  If we deleted the entire government and left the military, we’d still be about $600Bn a year in the hole. 

    This is really not a complex issue folks – it’s only made that way by the people who want to distract you from the real problems, which are – too much military and too little taxes.

    Generator/Ban – Best investment we ever made for our home.  My area gets a lot of blackouts, very nice to have some power when others don’t.  

  49. jmm1951

    100 years ago.
     
    All 4 of my grandparents were born before 1900 into that very different world. If the Tea Party types want to see no taxes/no government in action, take a quick hop over to Haiti. It is good that everyone has a cell phone (huzzah for Digicell and modern technology!) , but not so good that there is no clean water supply, sewerage system, emergency services, or vaccination against infectious diseases, that many children clearly suffer from malnutrition, and that cholera is rampant.

  50. Winston

    Phil / TBT – sorry for the double post. I just don’t know how you maintain your prolific rate and depth of responses. I stand in awe of you. Now, I can be to a certain degree circumspect on my TBT position, because in my first year of membership I can truly say that through your prescient picks – of which there are too many to mention – I have more than covered myself. Most important of all, your ability to think through positions and make the highest calibre adjustments has prevented many a sleepless night on my part. So, fawning session over. But I am not sure if all the members of this board really appreciate the exalted company that we are in. Methinks they doth complain too much.

  51. Winston

    Phil / TBT – TLT; Just adjusted my position to your recommendation (after first understanding, analyzing and double checking). Then took some more time to understand the logic of the TLT trade, and then moved into that.
    By the way, you have mentioned it before, but trying to get a fill on rolling a spread on an Ultra ETF is nigh on impossible with TOS. Had to close out the short puts by buying back and then selling the longer term puts.
    Now wait for Bernanke’s announcement that upon further reflection, in order to prevent inflation overheating the economy interest rates are going to be raised on a gradual basis over the next two years.

  52. danosu77

     Phil Added the following plays to this portfolio on Monday August 29th in the Daily Post:

    Adding AA ($12.28) to Sept Dozen:

    Jan 12.50 puts can be sold for $1.45 for a net $11.05 entry.
    Oct $12/13 bull call spread at .50 can be offset with $11 puts at .42 for net .08 on the $1 spread that’s .28 in the money with 1,150% upside and a worst-case of having AA put to you at net $11.08 (10% off).  

    Adding HPQ ($26) to Sept Dozen:  

    Jan $22.50 puts can be sold for $1.42
    2013 $22 puts can be sold for $2.90.
    Oct $24/25 bull call spread is .66, selling $22 puts for .55 is net .11 on the $1 spread that’s $2 in the money (up 809% if it holds).  

     

  53. danosu77

     September’s Dozen Addition:

    BRK.B ($72.39) is kind of like what we were discussing – a best of the S&P investment.  Why be jealous of Buffett getting a great deal on BAC when you can play along with him?  

    Owning the stock long-term has not been a bad idea for investors since the 60s and you can buy it for $72.39 and sell the 2013 $70 puts and calls for $20.50 for net $51.89/60.95.  Think how smart you’ll sound at parties saying you bought Berkshire at $51.89!  They bottomed out at $44.82 in the 2009 panic but were back at $55 in a few weeks.  
    To raise cash, the 2013 $60 puts can be sold for $5.20.  TOS says that’s net $6 in margin, not bad to make $5.20 (86%) in 15 months if Bershshire manages to hold $60.   Buffett turned 81 today so, like Steve Jobs, he will die one day – keep that in mind..
    March $65/75 bull call spread is $6.10 and you can sell the $67.50 puts for $4.60 for net $1.50 on the $10 spread that’s $7.39 (492%) in the money – not a bad start.  
    Oct $70/72.50 bull call spread is $1.60 and you can sell the $62.50 puts for $1 so net .60 on that $2.50 spread or, if you sell 1 of the 2013 $60 puts for $520 and buy 9 of the bull call spreads for $560, it’s net $40 cash out of pocket and, at $72.50, you get $2,250 back if Berkshire holds $72.50 through Oct expirations.  If not, you can cash out at net .30 (down 50%) and you still have a worst-case net $57.80 entry in 2013.  

  54. danosu77

     Sept Dozen bonus stock:  

    INTC ($20.33) is Intel – say no more!  They are in a good spot just crossing $20 and lagging the Nas. 

    Short 2013 $20 puts at $3.20 puts you in for net $16.80.  Please don’t tell me I have to explain why that’s good!  
    Jan $17.50/20 bull call spread is $1.70 and can be offset with the above short puts or the Jan $19 puts sold for $1.10 for net .60 on the $2.50 spread that’s 100% in the money (up 316% if they hold it).  
    Nov $21 calls at .78 (earnings play) can be offset by short sale of Oct $20 puts at .83.  

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