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Freak Out Thursday – Bernanke Drops the Ball

SPY 5 MINUTELooks like we picked the wrong week to get bullish

Good golly what a mess!  After Obama blew his jobs speech on the 8th and the market dropped a quick 5%, we thought SURELY the Fed can’t be so stupid as to make the same mistake and disappoint the markets with an inadequate stimulus – especially after such a big build-up of our expectations.  

Well, SURPRISE – what we got, as I told Members yesterday, was the VERY LEAST the Fed could do.  Nothing would have been kinder because, had they done nothing – then at least we could have held onto the hope that they would do SOMETHING at some point.  By doing something and that something being almost nothing – all hope is lost.  

We lost all hope at 2:27, when the Fed released their statement and my immediate note to Members was: "Killing short-term bullish plays including buying back DIA short puts in Income Portfolio!"  That same minute, my next comment in Member Chat was: "Game on for SQQQ plays and on any hedge with a bullish offset – stopping out the offset until we settle down is a good plan!" and, at 2:38, I put up an annotated view of the Fed statement and added the following conclusion in an Alert to our Members:  

 

This is not terrible if seen as a first step but it’s a disappointment and now we will face the wrath of the markets.  If you don’t have enough hedges then perhaps (in addition to our long-put list) and today and yesterday’s hedges:  

  • DIA Oct $108 puts at $2.20.  
  • DXD Oct $18/21 bull call spread at $1.05 
  • SQQQ Oct $22/25 bull call spread at $1, selling $20 puts for $1.20.  

 

SPY DAILYNeedless to say, those trades are all doing quite well this morning and, having been able to follow through with our plan to flip bearish on a poor Fed statement, we were then able to spend the last hour of the day doing a little bottom-fishing – picking up some speculative upside plays in case we bounce with the goal of getting neutral into the close because, in the end – it’s all up to the interpretation of the Fed and, of course, the ECB’s next step.  

I mentioned the Long Put list and we were tracking that in part two of our Range Trading post, so you can see them all there but a couple of plays that are ahead of expectations already are FCX Jan $37.50 puts at $2.40, now $5.45 (up 127%) and NFLX Jan $120 puts at $3.95, now $18.85 (up 377%).  Those, of course, come off the table and we switch horses (if we need covers) to put plays like BIDU, CMG, DECK or QQQ that got cheaper since we first identified them.  On the whole, we are still much stronger than we were back on August 23rd, when we used the long puts to cover the possibility of a breakdown below our 10% lines.  

We do the Range Trading reviews because we as STILL right inside our trading range and the best way to find a new play today is to look for the trades that worked last time we were in the same place.  Looking at our Big Chart, we’re simply back to where we were at the beginning of the month, on the way to retesting those lows.  If the NYSE and the Russell break down below those lines today – this will be a fine example of the meaning of the phrase: "Uncharted Territory!"   

Still, we look back at the trades of early September and what worked well?  We had SDS weekly calls that gained 217%, GLD Oct $160 puts that are cheaper now but made a quick 20% at the time (GLD is one of our major hedges), we shorted Oil Futures (/CL) at $88.50, we had the EDZ Oct $19/23 bull call spread for $1, selling the $17 puts for $1.15 for a net .15 credit on the $4 spread (that one is doing well), we grabbed a TZA next weekly bull call spread that made 1,100%, a QID bull call spread was ruined because we offset it with short Sept $25 puts on HPQ (much better now) and we shorted the Russell Futures (/TF) off the 700 line and the Nasdaq Futures (/NQ) off the 2,200 mark (where they are right now again!) for massive gains.  

One trade that didn’t work at all was TLT puts.  Those lost 85%, our only losing contract that day that wasn’t an offset to a winning trade.  Did we learn our lesson?  Sadly, no, we were still shorting TLT yesterday and will again today as they hit our max target of $122.  We took a brief shot at shorting them yesterday but wisely stopped out.  Today we will probably give it another shot but cautiously, as the EU is trading down 5% ahead of the US open.  I will repeat what I wrote in the Range Trading post about balancing your positions as it’s very important today (as we did yesterday):  

That is KEY when playing volatile markets.  FIRST makes sure you have an adequate hedge, in case you are wrong, THEN you can start balancing out your expected downside profits with some bullish speculation.

That’s going to be the game plan today.  We’re looking to hold those early September lows but now that we have no Fed support, it will be a lot less surprising to see those supports fail now than it would have been in September so we’re not as likely to play for the bounce until AFTER we see the bounce in place.  Cashy and Cautious is the plan once again and it’s fine to take a few pokes as positions but BALANCE is the word of the day.  In fact, in yesterday’s morning Alert to Members, our trade idea for the morning was to buy the QQQ weekly $57 calls for .45 AND the $56 puts for .40 on the expectation we’d get a $1+ move one way or the other.  The $56 puts hit $1.05 yesterday for a nice 35% gain on the first day but they should be much better this morning and we can take them off the table and whatever the $57 calls make on a bounce (if any) is just a bonus.  

We may have had a chance to recover but our friends in Congress once again are threatening to shut down our Government on the 30th.  Remember when the Dems wanted a long-term fix and the Reps said it would be fine to just re-vote in September and the Dems caved before our Government collapsed?  Well, here we go again as the simple (in theory) continuing resolution to keep our Government operating after September 30th was soundly struck down by the House last night.  Since they are all on vacation next week – they have 48 hours before we’re back to that crisis again – and isn’t this just perfect timing to wreck the economy and make Obama look bad (worse)?

I know a lot of people are disgusted by this and like to say "throw the bums out" as if they are all bums but we do have a 2-party system in this country and you do need to pick one to run it.  Back in August, I identified the Republican Party as the single biggest threat to this Nation’s future and it’s fine if you disagree with me and many people (including me) said the Democrats are no better in many respects but I will close today with a good example of why I am a Democrat and why I still do have hope for this nation’s future – because if we can find one good woman to lead us – we can find others as well.  But it’s up to us to make the effort to find them and help them succeed because the opposition is entrenched and it is strong and we’re going to have to fight to take back this country:  

 

 


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  1. Pharmboy

    Well, guess I picked a heck’uva time to go short…huh? I think I noted on Tuesday that the VIX bounced on the 50d MA, and it was setting up for a ‘massive short’……well, now we have it.

  2. Pharmboy

    Damn, look a the dollar and TLT….1% on the 10 yr……here we come

  3. champ87

    Phil
    With the likelihood of a spike down this morning, any thoughts on ditching or adjusting yesterday’s bullish BAC trade: long OCT 7 Calls, short Oct 6 puts. Thanks

  4. champ87

    Sorry about the poor cut & paste job on the above comment!

  5. rainman

    Phil / Hedging — Out standing hedging post this morning to Asaenz! A pearl of wisdom. Now, if I could only internalize it…

  6. morxlntway

    For one who didn’t grab enough shorts to stop the bleeding, if needed this morning (looks likely), what would be your recommendations?
    thanks

  7. stjeanluc

    Panic Day Oil Lines
    R3 – 90.77
    R2 – 89.38
    R1 – 86.83
    PP – 85.44
    S1 – 82.89
    S2 – 81.50 (we are here)
    S3 – 78.95
    Yesterday’s high and low – 87.99 / 84.05
    Breakout lines – 94.36 / 73.73 

  8. morxlntway

    Thanks rain, i was reading that but hadn’t gotten that far in. I will dig deeper.

  9. exec

    Oh my……this could get ugly.

  10. kinkistyle

    Funny how Moody’s picked YESTERDAY of all days to downgrade all the banks, huh?

  11. stjeanluc

    What is interesting this morning is the Gold move – it turns out that in a panic, people bid up the dollar and that has a negative impact on gold. Exactly the opposite of what would be expected of a "disaster" hedge. I am not talking about a long term move here (no one can accurately predict it) but that would be disheartening to me to hold gold if I bought it for that purpose! 

  12. jomptien

    Phil + anyone,
    I have EDZ Oct 20/25 BCS. Is there a chance I will get called away on my 25 short calls? Thanks

  13. stjeanluc

    TLT is now matching the highs of 2008. On 12/18/2008 it made a high of 123.15. We reached 122.5 in pre-market this morning! of course, 2 months later we were at 102… but as Pharmboy points out, we could be facing a longer period of low interest rates!
     
    TBT will open below 19.50…  

  14. jabobeast

    Phil--do you think there is any hope that we bounce? Capitulation? Or wishful thinking?

  15. jcaesar

    Jabo / bounce – Phil will always say there’s a chance of a bounce.  The question is how likely and how much.

  16. escohen5

     EDZ/Jomptien — I doubt it…with 29 days to go?  Too much premium.

  17. morxlntway

    jomptien – im no expert,but isn’t that what you want to happen?

  18. morxlntway

    oh, i thought you meant at expiration.

  19. rainman

    Jabo / bounce — We need huge volume in addition to any bounce we get. I think we’ll get the volume and I smell panic. Question now is if our august lows hold. I think we’ll at least pause there but bad news from europe at the bottom could push us over the edge into more fear and panic. Then we could be looking at last august lows.

  20. jomptien

    Thanks escoh5 – I thought so but wasen’t sure and can not afford a call away.

  21. jomptien

    Morex, thanks for reply but I don’t own any shares and would cost me alot to come up with them, not enough cash.

  22. kinkistyle

    All those short selling bans and the QE3 rumors did was guarantee a vacuum on the downside.  WAY TA GO!

  23. stjeanluc

    FAS Money Recap 
     
    Long Strangle –Jan 12 Puts (3.01 average now 3.85) and 15 Calls (2.75 average cost now 1.24). 
     
    Weekly – Full Cover October 13 Puts (1.98 average now 3.35)
    Monthly – Full Cover October 13 Puts (1.98 average now 3.35)    

  24. jr_mints

    iflantheman,  are you buying back your short AAPL covers on this selloff this morning?

  25. lflantheman

    jr mints…..You are one smart cookie for thinking that way.   No,not yet, but if the covers increase in value by 50% then I will be buying them back.

  26. 1020

    Phil – I’ve been wondering since yesterdays decline, if what we are seeing could be considered as "cover" for the Fed in light of the threats from republican leaders….

  27. lolobear

    Lflan…quick question. How come apple has a sell off but the calls haven’t dropped that much in value.  Pretty much where they were yesterday.  Does that mean that upside is still coming?  AAPL moving up btw….

  28. gmarts

    I’m really feeling the Hope and Change this morning.

  29. lflantheman

    AAPL upside is still ahead.   They have big event on Oct 4 and earnings on Oct 17.   The world economy slowdown is affecting AAPL very little.  Seems the LAST thing people are willing to give up is their AAPL electronics.  Oh, and jr mints, I meant to say when the covers LOSE 1/2 of their value if they do, I would buy them back.

  30. rainman

    lolobear / AAPL — Didn’t ask me, but the VIX is up 8.75% which will make the calls more expensive.

  31. rainman

    gmarts — Hope we Change direction? 8)

  32. morxlntway

    Phil – i have OCT FAS 13 sold puts and VLO 20s. Would you roll them now or wait closer to expir?

  33. Phil

    Good morning!  

    Clearly we’re breaking down and clearly the Nasdaq is our best short as they have not fallen as much as the others but previously they have proven they can bottom out with the best of them.  

    NFLX gave us stunning returns and yesterday we grabbed short plays on AMZN and we already have GMCR but PCLN, WYNN, DECK, CMG and GOOG are among those hanging tough from our Long Put list.  Keep in mind that this is INSURANCE we expect to lose – these are mostly good stocks that CAN fall a lot if the market collapses but, if the market doesn’t collapse, then you end up just betting against perfectly good stocks. 

    Meanwhile, things are not that bad!  

    The Dollar is at 79.40 – that’s very high, up 2.5% from pre-Fed simply because the Fed did not dilute the Dollar (much) based on their statement.  So of course the Euro is way down – against the Dollar.  Meanwhile, Cramer and the idiot brigade on CNBC are talking about Europe collapsing but they are also priced in Euros and getting cheaper against the Dollar so their 5% drop today is really a 2.5% drop repriced in Euros – our Dollar is magnifying the sell-offs – that goes for oil too (now $80.50 and a bull play (/CL) back over $81 with tight stops or off the $80 line).  

    The chance of the Dollar popping through 80 without a pullback is between slim and none as that’s a 10% move up from 73 at the beginning of the month.  That’s right, the US Dollar is up almost 10% in a month so the buying power of your life savings and exchange value of all of your Dollar-denominated assets is 10% higher than it was on the 1st.  Now, taking that into account – how are the markets holding up?  

    IF the EU "fixes" their problems, then the Dollar will drop relative to the Euro (the only other actual major currency) and that will goose our markets tremendously.  I am not saying we should be gung-ho bullish but I am saying I think the panic is overdone and, once we see it subsiding (VIX is about 38 this morning) then it’s a good time to look for some bargains again.

    Biggest bargain I see at the moment is still XLF at $11.50 but FAS is more fun and the Oct $12/14 bull call spread is .50 and those can be paid for (if a 300% return in 30 days is too dull for you) by selling C Oct $20 puts (20% down) for .75.  That’s a net .25 credit and the risk of owning C for net $19.75 with the possibility of a 900% return on your net .25 credit if things don’t completely collapse.  

    Obviously, these are not trades we want to go crazy on – we need to see the markets stop dropping first and maybe we’ll get better prices but, taking the Dollar into account, these moves are overdone.  

    On the short side, the SQQQ Oct $30/35 bull call spread is .60 and if the Nas can’t hold 2,470, that’s a good cover but we’re right at the 2,200 line on the Nas futures (/NQ) and, if that holds, things are simply not that dire.  

    The lines we need to hold from the beginning of the month are Dow 10,700, S&P 1,120, Nas 2,340, NYSE 6,900 and Russell 650.  Since we already blew the NYSE, crossing 650 on the Nas should be considered very bearish as should failing to hold 2,470 on the Nas.  

    Whether it is for good reasons or bad – once panic takes hold of the markets – all you can do is short them and wait for the bottom to form.  

  34. mrmocha

    TOS busted again for me today like the last crash, anyone else?  No orders trigger and when I change an order I get two copies.  Not a good trading platform…

  35. kinkistyle

    rainman: LOL

  36. stjeanluc

    Brutal time for the financials:
    http://www.bespokeinvest.com/thinkbig/2011/9/22/us-financials-turn-from-bad-to-worse.html 
    BAC making pre-Buffett lows now! 

  37. jr_mints

    Iflantheman, thanks.  Your guidance on AAPL and your trading style has been a positive influence on me and I appreciate your posts and commentary immensely.

  38. 1020

    Phil/good woman  
     
    Thankfully, Eric Cantor won’t run…..
     
    :)

  39. stjeanluc

    List of ETF furthest away from their 50 dma (lower and higher)
    http://www.bespokeinvest.com/thinkbig/2011/9/21/key-etfs-farthest-above-and-below-50-day-moving-averages.html
    Clearly good times for gold and treasuries and bad for emerging markets 

  40. 1020

    I wonder how many people mute the TV when the UPS commercial comes on…..

  41. gmarts

    Rain, I don’t believe this crew that’s in charge of my country has any intention or any clue how to change direction. Government has become the proud enemy of capital, and the great anointed leader just proclaimed yesterday that freedom from want is a basic human right. Really? As Bill Engvall would say, "There’s your sign". And they wonder why there’s no confidence in the markets?
    I’m seriously thinking about selling everything but the real estate, moving all the cash to Singapore, and buying a condo in Phuket. If I didn’t have 3 kids in college, I would already be there.

  42. lolobear

    Lflan..i still don’t get it though…. Example: Jan 500 calls were at $5.50 when the stock was at $414 but are $6.20 now and the stock is at $401…  When does it get deflated?  Seems like there’s a lot of premium in it, no?
    Rainman – i’m a new and dumb investor.  Can you explain vix/aapl theory?  :-)

  43. gucci

    Hi is anyone have problem w TOS order today??? I cannot get anything filled at all

  44. danosu77

     TOS says they are having problems getting orders back from the exchanges.  I have no idea what my current portfolio is!

  45. Pharmboy

    TOS is broken, mrm.  I am pissed, as I cannot tell what I own and what I dont…….even on the Android platform, it is stuck…..

  46. stjeanluc

    If you dig deeper, China’s numbers were actually a bit worse:
    http://ftalphaville.ft.com/blog/2011/09/22/683141/chinese-exporters-starting-to-do-it-tough/
    Not that you can even trust the numbers to begin with! 

  47. jcaesar

    TOS Message just said "Orders are working correctly but we are having problems getting messages back from the exchanges."  So I guess they executed? 

  48. stjeanluc

    Always look at the bright side of life….. 
    http://ftalphaville.ft.com/blog/2011/09/22/683256/us-unemployment-is-well-not-so-bad/ 

  49. russellb73

    Phil
    What about VIX put at strike 40 exp Oct 22?  Seems like things are bad but this is getting seriously over done (from my rookie point of view).  Seems like Europe will be "fixed" for a moment in the next week or two, should drop the VIX a bit.

  50. Phil

    Now Cramer is talking down MS like they are about to fail.  2008 all over again.  Cramer’s foaming at the mouth (thinking about his payoff I’ll bet).  

    BAC/Champ – I’d say if the don’t hold 5% (and if our indexes don’t hold 5%) then they hell with it.  We COULD have a cascading panic failure or we could bounce back to down 2% by the end of the day but GS is at $94 and that’s BAD.  Watch XLF too – if they hold $11.50, then people are buying something.  

    Thanks Rain.  I forgot to mention in the post that we did have a very educational discussion in last night’s chat.  

    Shorts/Morx – Puts on CMG, DECK, GOOG, IBM – all in the Long Put List.  Generally you want to buy a put for about the price (not the strike) that we originally went for.  BIDU and GMCR are getting away already.  SQQQ is another one to play, of course (see above). 

    Holy smokes, those QQQ $56 puts are $2.40!  Now that’s a nice return considering we had no idea which way things would go yesterday morning!  Congrats to all the wishy-washy players who took that one… 

    Moody’s/Kinki – I think Buffett thought that it would be a GOOD day to do it because it would be washed out by the Fed’s announcement.  Since I’m sure Buffett knew what the Fed would say and since he’s pretty smart – I consider that another reason that we should be looking to bottom fish down here (carefully).   This reaction is very likely an over-reaction BUT, we’re not likely to get a massive pop over our Must Hold lines so we’ll probably stay range-bound and probably in the lower 10% of our range until/unless we get another kind of stimulus or Q3 earnings are some sort of upside surprise or Greece is REALLY fixed, not just the usual fix that lasts a week or two.  

    Gold/StJ – I don’t think it’s unusual, that’s what we expected.  My bearish premise on gold was a big Fed gift would calm the markets and the fear premium would drain out of gold or a poor Fed statement would freak out the markets and drive people back to the Dollar and TBills. Gold is so massively overbought for so many wrong reasons that is could head into an epic collapse but, right now, it’s just reacting to the Dollar and a bit of disappointment that the Fed isn’t going to goose inflation again.  

    EDZ/Jomp – Possible but you can then exercise the long calls so I wouldn’t worry.  You can just ask $4.90 to kill the spread – you should get it.  

    Oops, almost forgot TLT (thanks StJ!) – 10 Next week $121/118 bear put spread can be bought for .95 and paid for with the sale of 5 next week $122 calls at $1.75 in the $25KP.  

  51. nicha

    mrm – thanks for the weekly SLW trade! $41 calls expire worthless.

  52. Phil

    Also fun – TLT Oct $118/114 bear put spread at $1.05, selling TBT Nov $18 puts for .90 – 10 of those in the Income Portfolio.  

  53. stjeanluc

    The scope of swisstervention…
    http://ftalphaville.ft.com/blog/2011/09/22/682531/the-snb-presents/
    That’s a central bank not sitting on the sideline. Don’t look for the Swiss Franc as a safe haven… There are none left – no gold, no franc!  

  54. stjeanluc

    Gold / Phil – The move is not surprising to us (I don’t even trade it), but can you imagine all these guys who have been sold gold as a safe have and see the market plunge today and gold taking a dive with it? That’s gotta bring up some questions! 

  55. Phil

     Bounce/Jabob – It depends how panicked Europe gets.  They are holding up at 5%, which I maintain is 2.5% against the Dollar so that means that we should only be down 2.5% and we’ve already overshot the mark.  The volume on the sell-off has been very low (45M on the Dow at 10) so I am looking to hold up here but I won’t feel great about it until the EU closes.  

    Income Portfolio – 100 IYR Jan $50 puts at $4.40 are done (up $27,000) – seems silly not to take the cash, we can always find something else to play.  The DIA puts are half covered and that’s our open hedge.  If the Dow fails to hold 10,750, we can add 50 more March $100 puts (now $6.30).  

  56. Phil

     VXX back where we like to short them.  Next weekly $52 calls can be sold for $1.60 and that pays for most of the $51/48 bear put spread at $1.90 for net .30 on the $3 spread.  5 of those in the $25KP.  

  57. jromeha

    Phil- I’ve been swamped at work and haven’t been able to pay much attention to this mess. I did check in yesterday right after the fed meeting and was able to buy 3 dia puts you recommended… Just want to say THANK YOU! I only have 20k in my account and those puts have put my acct in the black today. To show my appreciation I’ll take it easy on you in the poker tourney if I make it to Vegas.

  58. lflantheman

    lolobear…..Go here:   http://en.wikipedia.org/wiki/Black%E2%80%93Scholes  and read about the way in which options prices are derived.  Very complex, but fairly well explained.  

  59. rustle123

    I’m starting to write premium way out of the money on some stocks I want today.  Figure I’m safe for another 10% drop and if I own them there I’ll write calls against it or just hold.  IMAX 15 puts for OCT sold for .90,

  60. rainman

    lolobear / vix — Try this.

  61. rainman

    gmarts / direction — If this is indeed a setup for mass refinancing at low interest rates, we could make a nice 180* turn. It would be a huge win for the economy.

  62. Phil

    Yesterday’s DIA Oct $108 puts are a double at $4.40 – no sense in blowing that!  The short $20 puts dropped to .60 so you can cash those and keep the spread at net .40 over the weekend.  On the DXD spread you should find an offset to sell like FCX Nov $27 puts for $1.20 (FCX at $32.70).  MADNESS! 

    Meanwhile, since JRW is napping, TNA Oct $35/37 bull call spread is $1.20 and you can sell the $23 puts for $1.45 for a .25 credit on the $2 spread and TNA is now $35 so has to fall 33% or an 11% drop in the RUT to 578 before it’s put to you and, as I said last time we made 800% on one of these plays – Don’t you WANT to be bullish on the RUT at 578?

     

  63. rainman

    Pharm / android — Does TOS on android really work? I installed it months ago and it was completely broken even with the destop running smoothly. Have they worked the kinks out?

  64. jcaesar

    Phil – Do you think the "how Europe closes, we close" rule applies today? 

  65. Phil

     Berkshire hit $65!  No need to buy the stock when you can take the 2013 $70/82.50 bull call spread at $4.70 and sell the $50 puts for $4.40 for net .10 on the $12.50 spread.  If you don’t REALLY want to own Berkshire Hathaway for net $50.10, then this trade is not for you but let’s allocate $50,000 to that in our income portfolio and take 10 of those spreads.  Once it’s on track, we’ll be able to sell naked calls as they are not a big mover to the upside normally (it’s not like someone will buy them).  

  66. rainman

    Phil / CL — have a bottom target for /CL? VLO looking tasty @ 19

  67. 1020

    Sen. Mark Warner’s perfect analogy of congress….
     
    Holding a gun to their own heads;  http://www.youtube.com/watch?v=Z_JOGmXpe5I&feature=related
     
    :)

  68. lolobear

    lflan/rainman – you just blew my mind.  Great reads!!

  69. lolobear

    lflan… any calls you recommend on AAPL?

  70. Phil

    NFLX not down today!  

    AA at $10.20, 2013 $10 calls can be sold for $2.25 and 2013 $7.50 puts can be sold for $1.05 for a net $6.90/7.20 entry.  

    Cover/1020 – It’s a reflection of massive uncertainty and the Fed did nothing to give us a floor so we’re back to the idiocy we have whenever Greece is having payment troubles and the Republicans are thumping their chests.  Maybe if we trade the Republicans for the Troika…  

    FAS/Morx – October is along way away and you need a 30% move back up in FAS and that would be a 10% move in XLF back to $12.50 so not really an unrealistic goal just yet.  As to VLO, you can do worse than owning them for $20!  

    VLO is at our sweet spot for ownership ($17) on short puts.  You can sell Jan $17.50 puts for $1.72 to raise cash for anything or, if you really like them, the 2013 $20 puts can be sold for $5 and that’s a net $15 entry on the assumption Americans still drive fuel-burning vehicles in 15 months.  

  71. David Ristau

    Phil -

    On VXX…I did that 53/55 Oct22 bear call spread yesterday, so I am down a bit here on my spread. But I could breakdown the spread and sell my 55s for a nice gain and go naked on the 53s…what do you think of that?

    Any rolls?

    Double down perhaps?

  72. Phil

    TOS/Mr. M – Slow and annoying.  What a shame as they used to be such a great platform.  Must be too many people on it with the AMTD people plus their clearly not as good clearing house.  

    Good ETF list StJ:

     

  73. angelcur

     aapl is officially starting to scare me….sell gold BUY AAPL!…if global economy continues to weaken…then aapl may put in intermediate-term top around next 2 weeks iphone release…i may hedge some out.

  74. kustomz

    FX Euro back to 1.35 is the bet being taken in the next 60 min, what happens after the short cover will be interesting.

  75. gmarts

    Rainman, nobody’s getting anything refinanced. No banker ever got fired for NOT making a loan. The banks are so afraid of Dodd-Frank, and so worried about the macro environment, that they’re not moving on anything. They remember 2008. The banks are AFRAID of mortgages, and mired up to their asses in lawsuits already. Yield curve is only gonna get flatter, and their revenues are seriously under pressure. Why would they refinance America into lower rates with even lower returns for themselves?
     
    In short they won’t and Obama can’t make ‘em unless we make him King, so people make all the speeches they want but it ain’t gonna happen until somebody believes there is some growth in our future.

  76. stockbern

    HCBK  holding up nicely today

  77. Pharmboy

    TOS works fine on my android.  I have had it for a year and have had very little issues with it.

     

    USO – Oct 33 calls, selling THIS weeks 32 Calls.  Roll to next weeks 32/33 by EOD tomorrow.

  78. angelcur

     with every hedgie in the world so in love with brics over last few years its hard to see how there wont be mass shutdowns next year

  79. angelcur

     VIX is just a hair above its upper Bollinger Band….. I’d prefer to see it spike much hgiher first and indicate fear has really gotten out of control….  It’ll probably take a move below 1100 on the S&P to do that.
     
    We are oversold on many short term charts.  But the 60 minute and daily charts still show plenty of room on the downside.
     
    No need to rush in and buy just yet.
     

     

  80. stjeanluc

    The global trend is not our friend…
    http://www.bespokeinvest.com/thinkbig/2011/9/22/a-global-bear-market.html
    The world is in a bear market. We are not there yet, but that might have something to do with the currency market! 

  81. morxlntway

    Pharm – does that mean roll to next weeks 32 or 33?
    thanks

  82. angelcur

    :CRAMER /MS… ms exposure to french banks is 60% greater than its market cap…and more than half its book value – zero hedge

  83. rainman

    SFD — any thoughts on why Smithfield is up 2.75%?

  84. rainman

    Never mind, it’s likely corn being down 2.4%

  85. lflantheman

    lolo…If you want to play AAPL with straight up calls, Oct ATM are as good as any.  Scale in.    I’m leaving for Boston to meet with some fellow traders.   See you guys tomorrow.  Be careful!

  86. Phil

    There’s your sign/GS – Freedom from want IS a basic human right.  Even the most basic of human colonies or even nomadic tribesmen SHARED their food and took care of each other.  The only time people starved is when they all starved and nothing could be done about it.  Even animal colonies have enough of a soul to take care of their own – even the sick and elderly.  Not respecting the rights of humans to have a life free of want is exactly what it’s called – anti-social.  Have we really devolved as a species to the point where we now debate the basic obligation of society to take care of it’s own – especially a society where many, many people have far more than they need?   

    Did you guys see that list of Billionaires yesterday?  The top 5 guys made, AFTER meager taxes, $30Bn last year.  That’s $30Bn for 5 people or enough money (if it was not pulled out of the economy and shoved in their vaults) to employ 600,000 people to $50,000 jobs.  Instead, the jobs are eliminated and the profits are squeezed up to the top 0.0000001% where the needs of the 600,000 many are extinguished to meet the greed of the 5.  I don’t blame specifically Gates for making $6Bn through his investments but between people like that and Corporations who take 100 times more than that out of the system each year – that’s the flaw in our system – money is pulled out of the productive middle and funneled up to to the top where it does very little good for society.  

    $30Bn is enough money to make 30,000 people millionaires and that’s just what was ADDED to their piles in a single year.  The money is not created out of thin air (except by the Fed) that money is TAKEN from other people.  Of course it is willingly handed to Steve Jobs or Bill Gates by people who can afford their stuff but the bottom line is money goes FROM us TO them so it is removed from our towns and goes to their vaults.  Even worse, when we give XOM $10Bn in profits EVERY QUARTER to add to their piles – they send most of that money overseas so the money that would otherwise circulate in our neighborhoods is gone forever.   These are the things taxes help to correct in a functioning economy – we have lost the entire concept of "excess profits" from the discussion of what’s right and wrong in society.  

    VIX/Russell – You have a VIX Oct $40 put yesterday that was $9 ahead of the Fed and is now $6?  You committed the cardinal sin of paying premium in the first place but you are just lucky it’s not much worse at the moment.  I’d get out of that with the $3 loss (or whatever but shame on you if you had profits at $9 and let it ride) and go for something like the VXX spread above which has a higher probability of success because you are SELLING premium, not buying it!  

    Gold/StJ – You can see the questions creeping in but I would think the big boys are watching the Dollar and, if you have Euros – Gold is looking pretty good today!  

    AGQ at $173!  Screw gold, that’s the place to go long if you want to play metals.  I’d love to find a play but TOS IS DOWN!  I can’t even get the app to reload – Arrrrrrrrgh!   

    Thanks Jrom – I appreciate that! 

    Las Vegas – Has anyone actually done anything about setting up a poker tournament?  

    OK, I generally consider it a bearish sign when brokers crash so make sure you are well covered.  This may just be selling into the EU close (they are down around 5%) but it’s not worth taking a chance so BE CAREFUL! 

    We’re right on the 10,750 line on the Dow and below that the 9/30 $102.75 puts are .95 and make a good momentum play as the $104.75 puts are 1.45 (50% up on a 200 point drop) and the $100.75 puts are .80 (20% down on a 200 point pop) so a good risk/reward for the uncertainty. 

  87. hoss18

     Thanks Phil, all the lessons you have taught me over the past couple of years have really paid off lately.  However, I’m hung up.  I bought the DIA 112 and 111 puts yesterday on the little pop right after the Fed statement came out, in the minute we were green.  Today, I sold the 112 puts for a double and moved down to the 108 puts, and I put a tight trailing stop on the 111s.
     
    To me, these are short bets, not hedges.  Craps money as you like to say.  Anyway, with those ringing the cash register, am I better off letting the TZA Jan 40/50 BCS and SDS Nov 21/25 BCS ride because they are hedges?  Or should I look to move them and put some of those profits in the bank?
     
    Hesitant to move them because I still think we could go down from here, scary to say but true……

  88. stjeanluc

    Billionaire List / Phil – I didn’t want to bring it up, but if you look at the list, out to the top 20, 10 made their money the old fashioned way – they inherited it! And surprise, most of the ones who inherited their money are backing conservative groups – for lower taxes, repeal of the estate tax, anti-union, you name it! The ones who made their own money have a more liberal tint – Buffett, the Google guys, Soros (no matter what you think of him). I guess growing up with nannies, butlers and gardeners probably gives you a skewed view of society! Having to work your way to wealth is another lesson altogether! 

  89. rustle123

    at the rate the DAX is falling, they’ll hit their lows for a couple years ago in about 6 days.  Phil, is there any upside from the EU in the next couple weeks?

  90. hoss18

     Also have the Dec UUPs @ $0.62 you gave us back in August, put a $0.10 trailing stop on them, but think I may just leave it there as flight to US$ does not seem to be abating.  Or should I adjust this also?

  91. jcaesar

    gmarts – I want to go back to the jungle too, except for all that hunter/gatherer cooperation nonsense. Every man, woman and child is on his own, just like in the Tea Party fantasy. ;-)

  92. Phil

    IMAX/Rustle – Good call.  Now that I have my system back up – I see the IMAX Nov $15 puts can be sold for $1.55 – a very nice net entry.  

    Europe/JC – I still think if they are down 5% then we should be down a dollar-adjusted 2.5% and that I’m hoping we get back to 2%, which would be a strong bounce that gives us some hope.  

    Oil/Rain – $80 is very nice and $78.50 is very strong support.  That to $87.50 has been the main range.  Don’t forget, cheap oil is good for VLO (input cost) as long as gas doesn’t fall faster than oil.  

    Boehner looks like he’s going to cry!  

    Warner/1020 – Did he actually play that clip?  That would be funny to do on CSpan!  That’s why I want to run for Congress – I would have a lot of fun until they kick me out…   8)  

    Those BIDU Oct $110s from yesterday are $3.20 (up 156%)!  Not bad for 2 hours of trading….  Don’t be too greedy.  

    GS $93.20!  

    XLF holding $11.50 so far on this nasty EU close.  

    VXX/David – As it’s the Octobers, I think maybe you want to wait to be sure that we’re heading up.  With that strategy, you have plenty of time to make a good return but you’d better be right.  Don’t forget – if Europe does blow up over the weekend, we could have VIX at 60, not 40!  

    BA $58.32!  This stuff is way too tempting.  BA 2013 $52.50 puts can be sold for $8 for a net $44.50 entry.  Even if you have 50% margin ($22.25 – $8 cash is $14.25), the return on margin is 56% in 15 months and your worst case scenario is owing BA for about 50% lower than they were in April.  It’s almost a shame to turn such a fine trade into something greedy but the 2013 $57.50/67.50 bull call spread is just $4 so you can add that and still have a net $4 credit with $14 of upside at $67.50 but as long as BA is over $52.50, you still get 28% return on margin.  By the way – did I mention this is  Boeing?!?  

    So where was I with AGQ?  Oh yes, the Oct $190/195 bull call spread is $1.50 and you can sell FCX Oct $30 puts for $1.38 for net .12 on the $5 spread.  Other than now, AGQ hasn’t been below $195 for more than a day since early July. 

  93. russellb73

    Phil
    Btw Thanks for the DIA puts yesterday!
    Sorry didn’t make clear I don’t own VIX currently but thinking about buying a little.  Just wanted to know if it was a bad idea or not.  Thinking about buying at $5-6 the VIX put at strike 40 exp Oct 22.   Maybe see how today goes though is a better idea.  Just seems like selling is overdone. 
    My account is not currently enabled to sell puts, and need to get that level of options enabled so I can sell premium on stocks I really would like to own.  Paperwork is in process.

  94. jcaesar

    TOS Indices Gadget showing the RUT down 148.32.  Obviously missing a decimal point.  I mean it’s not a great day but that’s ridiculous!  ;-)
     
    Not sure if you can blame this on TD Ameritrade, but not TOS’s finest day.

  95. pentaxon

    Phil don’t you think this could be a good time to revisit the trade you once suggested to me:
    GLD bull calls spread & selling ABX puts
    I think it could be.

  96. rainman

    Anyone follow VECO?

  97. exec

    Phil/Billionaires
     
    I didn’t see it. 
     
    Where did you fall on that list……closer to the top or closer to the bottom?

  98. gmarts

    Phil, an honest question, When in the course of human history, including times of great prosperity, has there ever been freedom from want? Seriously I think it’s a great aspiration, and I don’t wish to see anyone anywhere suffering, but I cannot think of an example ANYWHERE in human history. I don’t think it’s the case that  "It used to be like that". It seems that throughout all of evolutionary history that some organisms have thrived while others have withered.  My concern with the notion that none should "wither", is that it implies that someone or something needs to be the arbiter of who has too much, and then decided to whom to re-distribute this "surplus".
     
    History suggests that corruption will consume the re-distributors, and that malaise will consume the society involved. It seems to me that in a nutshell, with reference to our own society, what we need now is JOBS and productive engagement for our citizens, rather than another check, based on the value of someone else’s work and willingness to take risk. I don’t believe that we’ll see much job creation (risk taking by employers and investors) if those people do not believe they will be allowed a fair profit for their efforts. People have to believe they will be treated fairly in order to take risks, and right now I see a severe lack of trust in our government, and belief that the path we’re on will lead to a brighter future.

  99. jcaesar

    Phil – Not following you on the Euro / market front.  Their markets are priced in Euros, and they’ve had a dive of 5% in their own money.  Yes, because of dollar strength, the fall is less in absolute $ terms, but that doesn’t mean they’re markets haven’t lost 5% of their value.  Not sure what your argument is supposed to mean from a trading perspective.

  100. rainman

    Billionaires — Anyone got a link?

  101. kramer36350

    I think this market has achieved escaped velocity . . .

  102. rainman

    Phil / want — I think there might be a semantic mismatch. Don’t you really mean "free from need" and not "free from want"?

  103. rainman

    Look at copper go! -8%, 3.45

  104. grenowoods

    Rain – here’s a link from Forbes:
    http://www.forbes.com/wealth/billionaires

  105. gmarts

    jcaesar, I don’t want to go back to the jungle. I also believe that cooperation is the key to advancement rather than internecene  warfare of the sort being practiced in Washington.

  106. jcaesar

    rainman – Agree on the semantic mismatch.  The term arose from FDR’s Four Freedoms (at least he popularized it there) as he enunciated in his 1941 State of the Union address.  In 1941, what one wanted was probably a real need.  People wanted food, housing, old age pensions, etc.  They weren’t talking about the latest Ford, or best radio on the market.

  107. kustomz

    Pretty chity close in Europe
     
    FTSE -4.6%
    DAX -4.9%
    CAC -5.2%
    Banks, energy and commodities taking us down..Not only do we have a global slowdown but, we’ve got Sovereign debt and banks that are chained together and sinking quickly…a bit different than 08..and not in a good way.

  108. Phil

    No rush/Angel – Not at all but also no need to run from BA at net $48.50, is there?  If that’s your 1x entry and they drop to $28.50 – then you DD and you own 2x of BA at net $38.50 – I’m pretty sure I’d be happy enough to shove that in my kids’ retirement account and forget about it.  

    SPWRA failed $9!  

    BXP, VNO – not looking good but IYR did stop falling down.    BEN also in bad shape.  BCX making lows at $14.  HAS at $33.50 also super low – bad Xmas expectations already?  

    My stock of the decade (TASR) is green!  Still in the low end of the range at $4.26.  

    Global bear/StJ – Thanks:

    MS/Angel – That doesn’t sound good.  I still have to question how they are calculating that and we have no idea what the offsets are.  

    SFD/Rain – Rumors of insiders buying.  Also, they had great earnings a few weeks ago. 

    Woo-hoo on that AMZN hedge.  If we can keep them down tomorrow that’s a huge win. 

    CAT holding $75 is interesting. 

    CHK is good when they are cheap.  Jan $22.50 puts can be sold for $1.52 or 2013 $20 puts can be sold for $2.90 (which should at least give you confidence about the short Jan puts).  

    DIS has had nothing but good news this year but trading down to $30.14.  Selling 2013 $25 puts for $3 drops that to $22 so another 25% drop to get there.  

    No sense buying all this stuff without protection – QID Oct $56/62 bull call spread is $1.05.  QID now at $52 so 20% move up is 10% drop in the Nas but break-even is $57, just a 5% drop in the Nas from here.  If you allocate $25,000 worth to longs like DIS and CHK that have built-in 20% protection then you only lose $5,000 on a 40% drop so all you need to do is buy $1,050 worth of the bull call spread, and that pays back $6,000 if the Nas falls 10%.   It’s pretty much over-covering but it’s good to ride out the weekend uncertainty against new positions and, if we bounce and it drops to .50 and stops out – then next time you get nervous you’re only spending another $525 for another $6,000 of insurance.

    If you were playing 10 short of each of the above, that’s $6,000 in your pocket less the $1,050 you allocate to protection.  If we do get a 10% drop then you have $6,000 to adjust the $6,000 worth of hedges you sold so, unless they are down 100%, no big deal.  If you stop out the short puts at 50% (down $3,000) and collect $6,000 on the bull call spread – that too is a profit – even if it’s not the way you intended it to be!  

  109. rainman

    DJI 105M @ 9:10, can we get a 400M day?

  110. rainman

    Opps, that’s 12:10 for you righties.

  111. gmarts

    No linguistic misinterpretation on my part as I assumed the archaeic or "classical" use of the word to mean lack, or need, as is "For want of a better analogy…."

  112. revtodd64

     Rain – Freedom from Want
    Roosevelt used the term freedom from want to mean freedom from need.  I was just at the Roosevelt Memorial in DC over the weekend, and I walk through it every chance I get.  At the end of the path, The Four Freedoms are engraved that were essential to Roosevelt’s ideals – Freedom of Speech, Worship, Freedom from Fear and Freedom from Want.  These were part of his 1941 State of the Union Speech.  In Roosevelt’s vocabulary, freedom from want means that everyone should have an adequate standard of living – including decent housing, food, clothing and their basic material needs.  
     
    The speech can be heard hear:
    http://en.wikipedia.org/wiki/Four_Freedoms

  113. gucci

    hi phil TLT at 122 — do you rec any position on this one

  114. oakd

     Phil--what do you think about shorting TLT here? thanks

  115. jcaesar

    gmarts / when in human history?  – Plenty of times in modern human history (not so much before the 20th century).  Most of northern Europe would fit the bill.

  116. 1020

    Phil/Warner  No, they did not, though he was specific about the scene and it was from the movie – Blazing Saddles
     
    And Yes, you should run – or become a high profile, political/common sense blogger! 
     
    I can just see you at the "Excellence in Common Sense" networks giving Rush and Sean a run for their $$$$.  :)

  117. gmarts

    jcaesar, cite me a specific case and name a society in northern Europe without citizens in need. Then if it’s no trouble, name me another in another country with a non-homogeneous population where this condition exists. Seriously, I’m interested.
     
    I suspect your definition of freedom from want is a little looser than mine, and that it is more about aspiration than actual condition.

  118. jcaesar

    gmarts – So relatively homogenous societies don’t count?  Looks like you’re changing the goal posts.

  119. gmarts

    Actually, I was looking for an example in a country somewhat similar to our own.

  120. dflam

    Phil/YRCW: 2013 $1 P can be sold for $.92.What do u think?

  121. gmarts

    Homogeneous societies certainly count, but it’s simply a lot easier to create these conditions when all are members of the same "clan". The President was speaking to the U.N. when he lifted the FDR reference so I assume his intent was global.

  122. ajaytoo

     Phil, isn’t  sell 5 next week TLT $122 calls at $1.75 in the $25KP a lot of margin for such a small portfolio?

  123. gmarts

    Actually, I think there may be freedom from want in Monaco…. lemme check….

  124. jcaesar

    gmarts – I agree that heterogenous societies pose unique challenges.  But probably should save the discussion for another time (at least I should).  Big trading day!

  125. kustomz

    Great timing with this one..I smell a trade war brewing
    http://www.reuters.com/article/2011/09/22/usa-china-senators-idUSW1E7JT01H20110922

  126. gmarts

    Agreed, jcaesar…. we can save it for later.

  127. jmm1951

    gmarts/has there ever been freedom from want?
    In my wife’s case, no, but nations can set achievable and measurable goals. For example no children with malnutrition or malnutrition related diseases, population vaccinated against known communicable diseases, education provided for all children, all educable adults able to read and write, potable water available to all, sewerage systems, freedom from slavery or servitude, a reasonable day’s pay for a day’s work.
     
    Each of these things can be measured and compared to what is available to other populations. These things listed above are taken for granted in the developed nations of the Americas and Europe. Greece might be considered a bit backward in the light of the current economic situation, but I remember being paid to donate blood there more than 40 years ago, so not a total backwater.
    Now if you go to Haiti you find that almost none of them exist, or if they do they are not universal or very fragmented. I saw many black children whose hair was turning ginger due to inadequate diet and if these children have inadequate diet their brains do not develop to their full potential either.

  128. JRW III

    Good morning,

     

    IWM    63.04,  63.67,  64.74,  65.02,  65.31,  65.56,  65.93,  66.33,  66.56,  67.04,  67.47  and  68.10

    We are now sitting on a descending support trend line from July of 2007 @ IWM 64.30

    Here is my previous post :

    Good hunting !!

  129. stjeanluc

    VLO – Crack spread however are falling. They were around 37 or so a month ago and now are at 30 and change. That is still quite elevated historically speaking, but the trend is down! At 30, VLO and other refiners are still printing money though!
     
    And BTW, TOS is really FUBAR today! Now on the Trade tab they show the RUT down 150 points, not just the gadget bar, but the tab used to create trade for cryin’ out loud! That Ameritrade move… not working well so far! 

  130. stjeanluc

    Sorry, link to crack spread - http://www.bloomberg.com/apps/quote?ticker=CRK321M1:IND 

  131. Phil

    Good job Hoss!   Very good job layering your protection over time – that’s perfect.  You did just what you are supposed to do – stopping out the near-term profits and letting the longer-term hedges do their work if we don’t bounce back.  The Nov SDS $21/25 bull call spread is $2.15 out of a possible $4 so still 100% to gain if we drop but the $21 calls are $5.45, which is more than you’ll get on the spread so you can take that off the table and roll the $3.30 Nov $25 caller out to the $4.60 Jan $24 calls and you can put yourself in the $6 Jan $21 calls and you have net $1.70 off the table and you have a free $3 spread that pays off UNLESS the S&P goes higher (now $25.90).  So now you can make $4.70 off your $4 spread and your max payout now comes at $24.

    TZA, on the other hand, is way out there but you do have $20 in the Jan $40s, which is a shame to not collect on a $10 spread.  If you want to assume the RUT won’t fail 500 (25% down) and that’s a 75% pop in TZA to $95 and you can cash your $20 and buy the 2013 $30/80 bull call spread for $11 and that’s $9 off the table and then you just wait out the premium on the caller and see where you have to roll him to but you have $60 of upside protection before he can burn you in 2013.  Once he expires whenever – whatever you have left on your long spread is your super-bonus!  

    Jim Rogers sounds very nervous, like a Chinese loan shark is holding his family…   CNBC selling that panic for the lunch crowd.  

    Billionaires/StJ – People who built things themselves generally understand what Warren is saying in the above clip.  Nobody does it alone and the people who are real successes don’t fear competition from others – the people who inherit their wealth only live in fear that others will come to take it because they often can’t imagine how they would ever earn it back.   Still, the main issue is we have to, as a society, decide how much is too much.  if you are playing monopoly and 3 people start the game with $1,500 and one guy starts the game with $15,000,000 – you really don’t have to play the game to know how it’s going to end.  That’s what "Capitalism" is like in America now – some people have THOUSANDS of times more money than others and there is no attempt to even out the game.  After a while, the other players wise up and realize the only way they’ll have any fun is to kill the rich guy…  

    EU upside/Rustle – Yes because Greece is a BS crisis and all it takes is the WILL from the ECB and the problem is solved.  They are very big on procedure there and they love to have their conferences – what the EU needs is a dictator – unfortunately both the French and the Germans have tried to give them that in the past and it didn’t go well at the time..

    UUP/Hoss – I doubt they go past 80 without pulling back to 79 again so I’d take money around there and you can always reenter if they break over (or if they hold 79 on the pullback) at this point, if you have the $20s, then it’s fine to set 10% trailing stops (.25) and let it ride but I wouldn’t let the profits slip away if we fail to hold 78.50 (and I hope for the sake of the markets that we do!).  

  132. Phil

     You’re welcome Russel!   On the VIX, then I like my little VXX play which made 800% two weeks ago so why mess with a good thing?  The VIX is — volatile and it’s a 50/50 play.  Why pay that kind of premium on a guess?  

    TOS/JC – That’s a good way to get people to capitulate.  

    GLD/Pentax – Well, since we can sell ABX 2013 $35 puts for $3 and I can’t think of any reason not to own ABX for $35, it’s pretty much free $3 and that means that you can sell 10 of those for $3,000 and buy the GLL Oct $17/16 bear put spread for .50 and that gives you a nice double if gold gets back over $1,800 and holds it.  If you want to play gold for inflation through 2013 – you can pick up the 2013 $175/185 bull call spread at $4 and that makes net $1 on the $10 spread but you can also just keep it in the family with the ABX 2013 $50/60 bull call spread at $3.30 (net .30).

    Dow volume 119M at 12:55 and it looks like lunch meetings went well for the bulls and they are doing some bottom fishing.  good thing we beat them to it!  

  133. kustomz

    Rebound in markets are Euro related…1.35 target and… bingo was his name O! Now it gets interesting….

  134. asaenz

    @ Phil, what do you think of CX at these levels? i know their biggest market is the US, and we wont get any infraestructure in the near term, but eventually the demand on cement will pick up worldwide, and they are now at 2009 levels. They have been downgraded and have sell-off in the last couple of days with heavy volume. Back in 2009 they tripled in a couple of months. Maybe even a buy-out is possible now a days….Thoughts? Thanks.

  135. jmm1951

    Phil/SH
     
    With the Vix being up, it is obviously very expensive to buy puts, but is there any merit in selling bull put spreads on SH? Maybe the implied volatility is too low--only 34%.

  136. zeroxzero

     JCaesar:  Northern Europe fits the bill because it is largely homogeneous culturally and racially, with very high social consensus on the duties of citizens as well as their rights.  Phil’s right about "nomadic tribesmen" taking care of each other — they represented extended family groups, and cooperation was essential to the survival of all.  In short, it was in the enlightened self-interest of each member to behave according to the social norms that protected the group.
     
    Where this "tribesmen" model breaks down is in large populations where the there is no perceived link between your own well-being and that of people entirely unrelated to you.  Humans have an innate sense of fairness, and when you are working and paying for someone else who doesn’t work — not because they’re old and infirm [as each person will be, so that triggers identification] but because they’ve developed a Cheetos habit and weigh 500 pounds — the link with each working person’s self-interest breaks down.
     
    I don’t deny that the idea of charity is built into both Eastern and Western cultures, be it Judao-Chrisitanity, Buddhism, Islam or secular humanism.  But large, heterogeneous populations that evolve social support systems that can be, and are, gamed extensively —  or in which it is perceived, rightly or wrongly, that they are being gamed [e.g., thousands living free in houses on which they can no longer pay the mortgage while working people's tax money is used to bail out the stricken banks]-- then citizens become very uncharitable in a hurry.  The fact that the wealthy may have gamed the system in the other direction tends to be ignored because it is obscured by the fact that they wear ties and appear to actually work.
     
    J Caesar is right in commenting "not so much in the 20th Century."  That is because the 20th Century has been characterized by the rise of large nation-states.  There were, of course, equally large "empires" in the past, but they tended to be run for the benefit of the founding ethnic group [Romans, Mongols]. The "tribesman cooperation" model loses its psychological underpinning when dealing with large, heterogeneous populations which tend to attenuate the social ties that would otherwise bind.

  137. lori13

    Anybody think intrest rates are going down more.?  I’m locking a 3.375 15 yr morgage, total cost the apprasal  $450.

  138. stjeanluc

    Wow, CNBC had a guest (in this case Ron Insana) who made the point that austerity (especially in the face of debt deflation – which lets face it we are facing the worst in a while) has never led to recovery in recent history – quite the opposite. I guess he won’t be back now… 

  139. abel1236

    i have the following hedge (BCS) 
    CALL FAZ 2011OCT22 60 for 6.50  now 16.25
    CALL FAZ 2011OCT22 65 for 5.15 now 14.10
    should i wait it out or cash out the long 60 calls and roll out the short 65
    thanks,
    abel.

  140. jcaesar

    ZZ – I said not so much before the 20th century.  In the 20th century some countries especially in northern/western Europe became much more civilized compared to their industrialization periods in the 19th century.  We too made the shift in the 20th century, but to a lesser extent than the Europeans.

  141. Pharmboy

    Morx – USO/yes…..sorry, getting caught up.

  142. stjeanluc

    That’s it …. the bottom is in!
    http://www.bespokeinvest.com/thinkbig/2011/9/22/the-down-market-has-hit-drudge.html 

  143. jcaesar

    ZZ – Also, the perception of gaming the system is really all that matters.  Facts never intruded when Reagan talked about the welfare queen in Chicago riding around in her Cadillac.  People who want to demagogue that issue will always find success, facts be damned.  And when they are successful, they push the public’s perception further in the direction that all people who receive public assistance are scammers.  That’s why we have one of the stingiest welfare states in the industrialized world, but people are just sure that it’s all going to waste and that people who receive assistance aren’t legitimately deserving.

  144. oncmed

    Phil,
    I have 3000 shares of TIF
    I sold 20 Oct 70C@3.20  currently $3.50
    I sold 15 Oct 72.50C@3 currently $2.40
    I sold 10 Oct 75C@3.90 currently $1.60
    I sold 10 Oct 80C@2 currently $.67
    Could you please advise what criteria one should use when deciding how to ighten up on these given the pullback in TIF from 77 to 69 over the past few days. If it bounces I will renter. I expect TIF to do well through the Xmas season IF we dont have a stock market collapse.
    TIA

  145. jabobeast

    Phil—any hope of a stick save today?
     
    FU market!!!

  146. daveo

    TOS is now a POS.  In one of my margin accounts I have negative buying power (it was quite positive a few days ago).  TOS won’t let me buy back short puts to reduce the margin or even sell uncovered shares of stock.  I keep getting "REJECTED: Your buying power will be below zero".  Yeah, no shit.  May I can make a mega-order with all of the adjustments at once so it will go through ;(  What a total POS.  Too bad as they used to be awesome.

  147. jcaesar

    TOS – Maybe we should short TD Ameritrade.  Hmm…

  148. stjeanluc

    Billionaire / Phil – Let’s recall the other Roosevelt – Teddy:

    The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes….

    That was the true voice of conservatism… 

  149. stjeanluc

    TLT within $0.15 of the 2008 highs! TBT under 19! Pathetic on top of pathetic…

  150. kustomz

    1.3455 failure would be bad, I was thinking higher lows in the Euro may be bullish if they can get the financials going..otherwise its off a cliff

  151. yshenhar

     Phil 
    I have XLF Oct 12/13 BCS bought at $0.5 now $0.32 (I didn’t sell any offsets against it).
    What adjustments can I make?

  152. rustle123

    Is there anyway to get a rough estimate on how much money was sent overseas to avoid taxation and what that amount would be in tax dollars if it was even taxed at 20%?  Would think it would be enough to start making a dent in the infrastructure idea.

  153. jcaesar

    Phil – If we match Europe’s fall (5%) at end of day, what do you think Europe’s and our markets do tomorrow? 
     
    BTW, I always hate asking that type of question because it assumes you’re some kind of Carac (which you very often are).

  154. jcaesar

    I meant "Carnac"!

  155. Phil

    Billionaires/Exec – I would not be proud to be on that list unless, like Turner, I was unable to give it away faster than it comes in.  I have nothing against earning a Billion Dollars – that’s fun, keeping a Billion dollars, on the other hand, is wrong.  

    Human history/Gmarts – Yes, there have been many happy and prosperous societies and, usually, they are murdered by other societies who want what they have.  Do you know what want is?  It doesn’t mean you have freedom from wanting a yacht, it means that you wake up and go to sleep fed, clothed and cared for by others in your tribe.  If you are a leader – a great hunter – then you are proud to bring home a kill that you eat 5% of.  You get the best cut but you don’t keep what others need – that would be wrong and even the most thuggish cave men knew it.  Pride used to come from CONTRIBUTING to your community – not from driving around in a flashy car to stick it in their faces.  Yes, someone should decide who has too much if the people who have too much are too anti-social to see it themselves.  When you check off a box to put a $12,000 upgraded leather interior in your car (because the standard leather isn’t that great) while someone is sleeping in a cardboard box in the lot of that car dealership – then you have too much and that person has too little – it’s not that complicated.  

    Saying that history suggests there will be corruption is a total cop-out.  Then it’s our job to come up with a fairer way to re-distribute, not to throw in the towel on the whole concept.  Yes, we need jobs but you can’t have jobs when the way people make money in this country is to merge two competitors that each make $1Bn a year and employ 100,000 people each and form one large company that makes $2.5Bn with 150,000 people and lays off 50,000 "redundant" people.  This is a total perversion of Capitalism, which is supposed to PROMOTE competition – not destroy it.  

    Take IBM’s Watson, for example – It’s going to put 50M people out of work at customer service jobs.  That will profit someone 50M $40,000 salaries a year ($2Tn) less whatever IBM gets paid (and yes, that means BUY IBM!).  That’s very nice but what happens to those people?  If, in theory, we could automate virtually everything if we could scale up and automate.  FDX can destroy UPS and the postal service and YRCW and 1,000 other trucking companies and then they can start delivering pizzas and chinese food too and there go another 10M jobs.  IBM can come up with a BlogBot that puts me and 10M other writers out of a job and we don’t need Coke AND Pepsi or MCK and Burger King AND Wendy’s – it’s not about risk – if you keep allowing this kind of corporate behavior because it’s "survival of the fittest" then less and less people will simply control more and more until there is really nothing left for anyone else.  

    What we really need to do is rethink society in general.  Half the people in this country, obviously, don’t NEED to work for us to have a per-capital GDP of $50,000.  That is 5 TIME what people live on in Brazil or Costa Rica, Romania, Turkey, Cuba, Columbia, Iran, Peru, Thailand (where you want to live!), Belize (very nice also), Jamaica…  5 TIMES!  That’s at $50,000 – how about if we say that the bottom 50% of those people – every man, woman and child, get’s $20,000 to live on – whether they work or not and the bottom 80% of the next 50% that work will be called the "middle class" and they get $70,000 per person for working (and it can be adjusted between $50,000 and 100,000 within the group.  That would leave 62% of the money ($9.3Tn) for the top 10% (14M) of the workers to fight over (an average of $664,000 EACH) and that STILL would be a MUCH MORE equitable distribution of wealth than we have in this country.  

    Do you see how screwed up we are?

    EU/JC – They have lost 5% of their price but their prices are pegged against the Dollar and of course it’s not a direct relationship but you can see the Dollar’s general effect on this chart.  The Dollar runs continuously and the DAX and CAC follow so there’s little doubt as to which is cause and which is effect but it’s a reinforcing loop:  

    Billionaires/Rain – Here’s the list. Speaking of inheritance, gotta love 3 of the top 10 being Waltons (poor Rob Walton is #11 with just $20.5Bn), then 2 Kochs.  And here’s the problem – Buffett and Soros are "liberal" and both 81 – when they die, they "foolishly" give their money away and then no longer in the top 10 so more inherited wealth moves up the ladder.  That’s another reason the Conservative rich want the Government out of the charity game (where they have to kick in their fair share) and shift the burden onto Gates and Buffett and others who "care" (most effective if you sneer the word care as if it’s a disgusting weakness).  The forces them to spend their money while the Kochs and the Waltons accumulate more by destroying the environment, crushing all competition and shipping millions of American jobs overseas.  

    Want/Rain – I didn’t start it but it’s a valid expression and also the title of this Rockwell painting from some strange country that actually used to have some silly ideals that we could be more than what we are:

    Poor copper!  And wait until China starts trying do dump in on the open market – ouch!  

  156. oburlacu

     My TOS is stuck on checking for new version. Anyone else facing this and how did you solve it?
     
    Thanks.

  157. escohen5

     Phil/Stjean….FAS…about to hit 10…..Oct 13 puts at $3.35…are we rolling them?

  158. JRW III

    Sell signal:

    Targets:

  159. JRW III

    And the Big picture:

  160. jcaesar

    JRW - Assuming you see this post, how did you play yesterday?  Did you wait to trade until after Bernanke?  I got lots of false signals before the speech.  I found it a difficult day to trade using the pivot point strategy.

  161. sparky123

    whoever wanted microsoft under $25 the other day, it’s there

  162. sparky123

    also i know we’re never going to drill for oil ever again so it’s too bad that DO is about down to its march 09 low

  163. stjeanluc

     79 looks a line for the dollar:
    http://lemoyne-mappingthemarket.blogspot.com/2011/09/dollar-fibonacci-retracement-9-22-2011.html
    Of course, a little more panic and off we go….

  164. jcaesar

    RUT just made low of the year!

  165. Pharmboy

    AND WHEEEEEEEEEEEEEE

  166. Phil

    Thanks Rev! 

    TLT/Gucci, Oak – Sure, see above.  You have to be willing to ride out a spike and roll it up though, we are in a strange spot and it probably won’t last but who knows what will happen if we collapse at this point.  

    I wish I had time 1020…

    Naming societies/Gmarts – Now you are just being silly.  No one starves in the UK, all get medical care and housing as well.  What do you call that.  They are, in fact, just like us but with a $35,000 per capital GDP, so they can afford it 30% LESS than we can – yet they do it and they strive to do better – the Government plans for it and raises their expectations so not only do none NEED but none should be disadvantaged by their circumstances.  Any EU nation takes better care of their poor than we do – it is sad that you really think there are not examples when there are so many.  

    YRCW/Dflam – I still like that play.  We thought they would go down to .10, the question is, where do they end up as they reorganize.  

    TLT/Ajay – The $25KP is not meant as a portfolio that is $25,000.  As VERY CLEARLY stated from day one, it is the aggressive RISK portion of a $250,000+ portfolio.  Taking those kinds of risks when that’s all the money someone has to play with would be nuts!

    Wow, this is just sad.  IYR resuming downward trend so we need to protect Income Portfolio again.  Dow puts triggered, of course but let’s add 50 SDS Jan $24/30 bull call spreads at $2 ($10,000) to give us another $20,000 of downside protection if things turn ugly and damage our Jan short puts further.  

  167. jcaesar

    We appear to be having magneto trouble.

  168. rainman

    RUT and DJT now below august lows.

  169. JRW III

    jcaesar / yesterday

    Exactly, my first trade of the day was at 2:25 !!

  170. jcaesar

    JRW – I think some people think you just trade mechanically, but there is art to your approach as well (e.g. the way you come up with those lines).  I need to think about the art piece too. 

  171. l4real

     Good info JRW! Thanks!

  172. angelcur

     volume is heavy in the ultra short etfs….that usually means no big bounce on close.

  173. stjeanluc

    FAS / Escohen – Right now, it looks like we might have to roll down the long puts and use that cash to roll the short puts. That roll might buy us $2 strike down on the short puts in October or $3 in November, but it would be shame to push it back another month especially in this panic! 

  174. livingfull

    In the midst of all the doom may I offer some contrary economic data/projections.  For what it’s worth, Port of Long Beach on the west coast just informed us they have new 2012 contracts for imports and exports that will compensate for any drop in containerized cargo ops next year.  They project overall tonnage in 2012 to be the same as 2011….which has been a decent year for all west coast ports.  Considering Losa Angeles/Long beach port complex is nearly 40% of commerce into and out of the US, 2012 may not be an economic castastrophe.  It seems to me, other than containerized cargo (consumer goods mainly), the entire west coast and Pacific Rim trade will weasther 2012 better than currently expected.  Armed with that finger on the pulse data that we love at PSW, perhaps we can collectively puzzle together a much better projection for 2012 than any "experts".  If we are correct, we’ll be hoping for a capitulation market crash to use all the cash (if we’ve followed Phil’s advice) to buy every great company we can.  I for one am excited about those kinds of opportunities. 

  175. tuscadog

    Phil / 2008  Is this now a full blown 2008 stil panic with nothing to stop an acceleration.  Ben is still in the wings and can’t allow a total collapse, surely?  Maybe the bankers are now calling their GOP friends and telling them to get off Ben’s back?
    JRW / Do you reall think S&P goes to 600 per your chart?  It’s hard to believe Ben will sit still for that as he then authors a Depression (and he knows the GOP Congress won’t help him, or the 22% unemployed)

  176. exec

    Phil/Billionaires
     
    Oh come on Phil…..you can’t fool us. 
     
     Rumor has it that you’re just another in the closet Rich Republican……is it true that you have GOP in bold letters tattooed on you butt?

  177. jcaesar

    livingfull – Could that be just a localized west coast phenomenon? After all, most of world economic growth is coming from Asia and the US is still the largest economy in the world.  That we have decent / growing trade with them, even in bad times, I think would be expected.
     
    That said, you may be on to something. 

  178. l4real

     Phil, good points on how Europe takes care of their people better than us. Case in point: My daughter got ill in Rome last year while we were vacationing. We phoned a Doctor who walked up all 107 steps to the condo we stayed in ( None of us could figure out how to get the elevator to work!) Examined my daughter, diagnosed her with an ear infection and fever, prescribed an antibiotic and was out the door for less than $200 U.S. Dollars!
    Lost vacation time was one day! Didn’t miss a beat! 
    Someone explain to me why we can’t do the same here with our system!

  179. stjeanluc

    XLF failing $11.50. We are getting in lows of December 2008 and July 2009 territories now! Scary! What followed Dec. 2008 was not pretty but financials are losing traction all over the world!

  180. lapper

    sticky sticky sticky

  181. kustomz

    There goes the Euro!!

  182. rainman

    Now that’s a dollar clubbing!

  183. stjeanluc

    RUT still down 152 on TOS! Hope not a sign of things to come! 

  184. danosu77

     What about buying a DIA bear put spread Oct 107/102 for 1.68 and selling 1 October $96 put for 1.38?  That would be another 500 points down on the dow to get the spread ITM giving you that money to adjust?
    Can some one please give me some feedback?

  185. Pharmboy

    That was a joke of a move.

  186. sparky123

    jcaesar east coast port volume was also up and last time i looked railcar traffic isn’t showing crash symptoms either 

  187. jcaesar

    What just happened with currencies?  Actually I know what happened, but I am curious about who did what and why. 
     
    Angel?

  188. angelcur

    eu looking to recapitalize 16 banks-ft…xlf jumped off lows

  189. Pharmboy

    yeah, that money is not going into the market……..re: recapitalizing banks.

  190. revtodd64

    EU Set to Speed up recapitalization of 16 banks  - Financial Times
    http://www.ft.com/intl/cms/s/0/49d6240e-e527-11e0-bdb8-00144feabdc0.html
    Stick material even on a terrible, no good, awful day?

  191. escohen5

     FAS — maybe roll to the Nov 10s?  $2.15 or so…

  192. angelcur

     S&P right at low end of recent range…if true we could bounce for day or two, but doesn’t change big picture at all

  193. stjeanluc

    You really wonder what BAC was thinking when they acquired Countrywide
    http://www.iwatchnews.org/2011/09/22/6687/countrywide-protected-fraudsters-silencing-whistleblowers-say-former-employees
    And why Buffett is taking any part of this… 

  194. stjeanluc

    And common, these guys voted for a new CEO and didn’t even meet the guy:
    http://www.nytimes.com/2011/09/22/business/voting-to-hire-a-chief-without-meeting-him.html
    Shareholders should be outraged… How much do these clowns make to show up a couple of times a year to board meetings. In the meantime, the stock tanks 44%! Corporate America for you! 

  195. samz3700

     Phil – I want to layer in some more disaster hedges – sorry if i missed this post – started a new job on Wednesday and had already put portfolio on auto pilot. Found a job after a year of working part time or consulting !!!
    In TZA 30 – 40 jan bull call – I am happy to ride this out bc i think we have a nasty recession with euro banks being insolvent and Greece having to default.

  196. jcaesar

    TOS still hasn’t fixed that little glitch with the RUT.  I mean really!

  197. stjeanluc

    Can I have a big currency wheeeeeeeeeeeee!
    http://www.bespokeinvest.com/thinkbig/2011/9/22/non-dollar-currencies-tank.html
    Crushed by the mighty King Dollar! 

  198. kustomz

    That lasted all of 2 min..someone tell me we’re not primed and ready for a bigger drop.

     

  199. yshenhar

     interesting that RUT & financials are down less than the dow / s&p / comp.
    Phil – Another great call on SQQQ yesterday – it ofsets all my ‘losses’ for today!

  200. danosu77

     TOS is getting on my nerves today.  OptionsExpress was better than this!

  201. jmm1951

    No reason why stocks are down today, says Felix
     
    http://seekingalpha.com/article/295341-there-s-no-reason-why-stocks-are-down-today
     
     I would say that it has something to do with Greece. It was the Greek god Pan who gave us the word Panic.

  202. mrmocha

    I started with TOS a few months ago and in both the prior downturn and this one it’s proved unreliable, so I ignore now it on big days and trade my OXPS account, which is simple but solid.  Glad I didn’t move all of my accounts to TOS.

  203. Pharmboy

    Oh Feilx, the real question is, why were stock UP knowing things were not ‘fixed’. 

  204. Izega

     JR – from your graph of the future, I see that we could expect a rebound on the S&P to above 1200 to then resume downtrend?

  205. Phil

    Crack/StJ – Good point!  Of course, it’s hard to make $37 when a barrel is $70. 

    CX/Asaenz – No one is building anything.  I’d wait until construction turns around or we pass an actual infrastructure bill (but even then make sure it doesn’t push US suppliers).  If anything, I’d say selling the 2014 $3 puts for $1.30 is a fun way to enter them but that’s about all the risk I would want on them.  

    SH/JMM – It’s always good to find something to sell but I like the Jan $45/50 bull call spread at $1.65 and you can sell 1/2 Oct $50 calls for $1 to knock .50 off that price.  By the time you have to roll the caller up you are 100% in the money and up $390.  Alternately, you could sell 5 Oct $46 puts for $1.60 against 3 Jan $46 puts at $3.10 for net $130 and, if the S&P stays down you have no problem other than seeing how much of that long $930 is left.  If the S&P goes up, hopefully you have longs but, if not, you can set a stop on a couple of the short puts or buy more long puts.  

    ROFL ZZ (and excellent points made):  "The fact that the wealthy may have gamed the system in the other direction tends to be ignored because it is obscured by the fact that they wear ties and appear to actually work."  Keep in mind that the right-wing propaganda teaches us that we are not all one American family and that the Government does not work for the good of the people, that poor people are lazy, etc.  It’s all tied together when they MAKE you not care.  

    Rates/Lori – I’m holding out for 3% but my stop is 3.5%.  It all depends on your switching costs. 

    Insanna/StJ – Wow, he really went off the reservation…

    FAZ/Abel – Now the $60s are $18.  I’m bullish on the Financials holding it here so I would roll out to the Jan $50/85 bull call spread for $10 and put $8 in your pocket and then roll the $65 caller if you have to.  If you can’t have the naked call, then you are more stuck but you could do the same trade and cover with and Oct $70/80 bull call spread at $3.20 but you have to make sure that your trading system would consider it a butterfly – otherwise there’s no point.  Failing that, you just have to wait and maybe ask for $3.50 on the spread and be happy if it triggers.  

    Good Drudge signal, StJ. 

    TIF/Oncmed – Ouch on those this week!  Looks like you sold a lot more calls than you have stock, you should be thrilled to get out of it.   If you think they are going up, why not kill them all for a nice profit and just set a stop, say if they fail $67.50 to layer back some covers.  Realistically, the Oct $75s and $80s are probably toast but why give them the opportunity to burn you again in the next 30 days on the lower ones.  As you expect to collect about $12,500 on 45 contracts (the $80s are toast) if TIF stays low, you could leave them out there and invest $4,000 in 10 Jan $67.50/77.50 bull call spread because, if TIF goes back to $77.50, those are $6,000 in the money and that will help pay for the rolls ($1+ per contract) and, if TIF stays low, you collect your net $8,500 plus whatever remains of the long $4,000. 

    Stick/Jabob – Not looking good at 2:30 but I still think it’s an overreaction but we can overreact another 2.5% down tomorrow and 5% on Monday too.  

    TOS/Daveo – It’s very frustrating.  I can’t believe they can’t be sued over this BS.  

    Roosevelt/StJ – Good one. 

    XLF/Yshen – I’d give it the weekend IF AND ONLY IF you intend to sell a put for .50 (to get even) if we drop 10% on Monday.  If we drop 10% and the spread is .16 and you are going to just wish you had cashed it because you are too scared to sell a put – then it would be silly not to take a .18 loss and live to fight another day.  

    Overseas/Rustle – Only $50Bn was brought back when they did it in 2004.  Likely, since they have been expecting to get another chance at it again and, of course, Corporate profits are through the roof and so many jobs have gone overseas – there is more like $200Bn sitting around now so $40Bn if they taxed at 20% but I don’t think Corporations would bring it back for 20%.  In general, the Bush repatriation deal not only didn’t create jobs but it began a frenzy for US corporations to offshore their profits as they now know that they only have to wait for a political cycle or two and then their friends are back in power and they save $70Bn (on $200Bn) in taxes.  Isn’t that worth waiting (and making campaign contributions) for?  

    5%/JC – The 5% rule says we expect 2.5% follow-through if we finish between 4-5% down.  If it does not come in one day, then you can assume the trend is reversing (1.25%, 0.67%…) but if 2.5% the next day, then at least 1.25% the next etc but, if the next day is another 5% or more, then you assume you are in a progressing trend and likely to have a 10% plus move ahead.   As it stands now, we fell 2% yesterday, which is 2.5% with a 20% retrace and now we’re falling 3% so even back to 2% is a pretty bad trend.  Over 2% is accelerating and that’s not good at all.  Europe clearly doubled up today from the prior day – the chance of reversing a 2.5% drop followed by a 5% drop is VERY SLIM.  So – we can expect the DAX to retest 5,000 (down 3%) tomorrow and what they do there is the most important thing in the markets (we went long on their last test).  

    Dollar flatlining at 79.  Oil low was $79.66, now $80.50.  Gasoline $2.56, gold $1,746, silver $36.36, copper $3.45 – Carnage!  

  206. JRW III

    tuscadog / 600
     

    Ben should take us to 1230-50ish first, from either 1123ish (here) or 1100ish (1093) imho !!

    I simply said we would break the August lows, then have a rebound. (my post on 9/9)

  207. lolobear

    HPQ might be going with Meg.. announcement tonight maybe. 
    http://ca.finance.yahoo.com/news/Report-Hewlett-Packard-fire-capress-3017576966.html?x=0

  208. asaenz

    @ Pharm, at what levels will you be a buyer? i still believe that we can have a bs rally for a couple of months if we somehow manage to avoid a panic meltdown…
    btw, could you remind me which biotechs you still like for the short term (i am holding arry, cris, plx)….Thanks!

  209. Izega

     Phil -
    What would you recommend to do with 2013 Short Put RIMM sold at $5.6 (now $8.05)?

  210. morxlntway

    5% – just curious, does length of day play in? Yesterday was 2% in 1.5 hrs, I think. So our drop has almost all been in one day??

  211. barfinger

    I will soon be forced to capitulate on TLT/TBT. It appears the Fed was directly attempting to cause the price of TLT to soar. Is betting against TLT a square up case of fighting the Fed? Can you tell me what would stop TLT from getting to 140? By then, I will be broke.

  212. JRW III

    Major support line now down to IWM 63.80ish; R/S support at 63.67 !!

    And WHEEEEEEEEEEEEEE !!

  213. Izega

     Excuse me, I meant short 2013 $25 RIMM puts sold at $5.6

  214. JRW III

    barfinger / TLT

    We’re almost there !! (Target 145)

  215. barfinger

    OK, beginning capitulation, closing my most ridiculous TBT puts.

  216. jcaesar

    morx – Keep in mind that more than half of our move down came from our close yesterday to our open today.  IMO the market doesn’t care if the move happened overnight, in 2.5 hours, or in 6.5.  It just registers that from one day to the next, there was an x percentage change. 

  217. Pharmboy

    buyer/asz – 10K on the DOW.  you hold the biotechs I really, really like.  Big pharmas for safety at a reasonable income: BMY, MRK, GSK and AZN.  Small lots on any new positions fwiw. I have started selling Ps on some of these OTM in Oct/Nov @ 5-10% down from here.  With the VIX so high, it is hard not to do.

  218. jcaesar

    Man, the RUT is down over 160 points today!  According to TOS that is.

  219. joemayo

    That tlt chart doesn’t look good.  I’ll have to roll my calls out to 2013!

  220. JRW III

    Oh Noooooooooooooo, now this looks more likely:

  221. rpme

    Phil, sold everything except NLY at the open this morning with the intention of rolling….can you call the bottom for me or I might need to visit Rollers Anonymous. LOL

  222. danosu77

     What about buying a DIA bear put spread Oct 107/102 for 1.68 and selling 1 October $96 put for 1.38?  That would be another 500 points down on the dow to get the spread ITM giving you that money to adjust?

  223. jcaesar

    Phil – When do you reset those market ranges you and Ilene publish every day?

  224. stjeanluc

    TLT / JRW – What would be the rate on the 10 year if we had TLT at $145? Would people pay us to keep their money?

  225. stjeanluc

    Not a good sign as we have been making lower lows and lower highs all day! 

  226. exec

    JR,
     
    You are painting an ominous picture

  227. barfinger

    people would rather pay us to keep their money instead of losing it completely. I forgot about that aspect.

  228. Phil

    FAS Money/Esco – Nope, just have to wait and see if there is ever going to be a bottom (JRW seems to think there is not).  30 days left to October means making quick decisions not a good idea.  

    DO/Sparky – Looks appealing but so do a lot of things and so did they in Sept 2008 so now I’m waiting to see if the bleeding stops before we try to get clever with more longs.  

    Oh no, NFLX turned down too!  TASR still green.  

    Tonnage/Living – That’s in-line with what I expect.  Meanwhile, we just have to let the sell-off run it’s course.  As long as we stay mainly in cash and keep layering our hedges, we’ll have plenty of cash to spend when there is a real bottom.  You are riight, if we are going to have an insane drop like 2008, it won’t change the underlying Global fundamentals very much and the opportunities will be tremendous so patience is our biggest asset right now.  

    2008/Tusca – 2008 was a bit different because the rally was built on an insane run-up in financials, builders, energy and commodity companies as well as anything having to do with China or the Web (GOOG $800).   Auto companies were huge, X was $100, etc….    That is not at all where we are now.  Not fundamentally, anyway – but that doesn’t stop people from panicking out of positions and then there are margin calls etc so the best thing to do is make sure you have cash and that you don’t enter ANY position that you won’t be happy to DD on when it drops 40% from here and is properly hedged for a 20% drop.    

    GOP/Exec – That’s a girl I used to date in college – just a coincidence, really…

    Doctor/L4 – That reminds me of a time in Jamaica.   Got sick, went to a clinic in town that was nicer than the one in my town that no longer takes my Blue Cross plan and all they charged in Jamaica was $20 for the visit and antibiotics.  

    PCLN finally falls.  CMG holding up pretty well but BIDU trashed.  GMCR coming down nicely as well.  Thank goodness for those long puts – they are making this enjoyable…

    DIA/Dano – I like part A but I don’t think now is a very good time to sell naked Dow puts.  Not when we’re down 500 in a day.  

    Recapitalizing banks – Smacks of desperation, not really a good thing because there are a lot more than 16 banks in the World.  

    VIX 44 – We are heading towards insanity at a rapid clip now.  

    More hedges/Samz:  Good idea!  

    TZA Oct $55/64 bull call spread at $3, stop at $1.50 risks $1.50 to make $6

    TZA Jan $53/60 bull call spread at $2, stop at $1 risks $1 to make $5

    CMG Jan $170 puts for $1.90, stop at $1 

    MA Jan $170 puts at $2

    PCLN Jan $220 puts at $2.20 

    V Jan $60 puts at $1.55

    Keep in mind these are INSURANCE plays but they are ones I see that can be used if you are undercovered.  I still favor being neutral at about 15/15 invested.  If your 15 bearish side is using these puts and our ultra spreads while your 15 bullish side is sensibly hedged long positions, then you should be making more money on the way down than up but ALWAYS know where you can pull the plug to get to 20/15 and then 20/10 when we turn (first bottom fishing, then cashing in/stopping out puts on the way up) – I’m still thinking we can put in a bottom around here but we have to be realistic as to the possibility that the Global markets collapse. 

  229. stjeanluc

    Some information on the bank recapitalization in Europe from Barry’s site:

    Here are more details in what looks like a response to the European bank stress tests, “A senior French official said the 16 banks regarded to be close to the threshold would now have to seek new funds immediately. Although there has been widespread speculation that French banks are seeking more capital, none is on the list. Other European officials said discussions were still under way. The move would affect mostly mid-tier banks. Seven are Spanish, two are from Germany, Greece and Portugal, and one each from Italy, Cyprus and Slovenia. The 16 institutions that are now the focus of attention ended up with core tier one capital ratios of 5-6%. The pass mark was 5%. The EBA had given those banks until Apr ’12 to implement plans to shore up their capital buffers.” They seem now to want it done before Apr ’12. 

    And just last week we were told that no one needed new capital… 

  230. Pharmboy

    stj – operation twist is going to do just that, as you well know.  145 on TLT would be a 10 yr yield of about 1.2 -1.3%….I have said it all summer, and early this month, my bond junkie sees the 10 yr at 1%…….maybe even lower if things do not improve…so, there is a ton of pressure on the markets right now.  I also noted GS to 80 and Cat to $68 as fair value a while ago.  Well, those are 10% or so away, and that leaves the DOW  at about where?  10K.  Not saying we will that 10K will hold, but that is a good place to dip gingerly back in.

  231. angelcur

     rumors flying of coordinated intervention this weekend…this is why we cant ever bottom

  232. Phil

     Who would have thought?  

    SQQQ/Yshen – That’s great.  That’s what a hedge is meant to do.  As I said yesterday, if the market drops 20% but you still have 100% of your money – that’s WINNING!  

    Good point Pharm – We are just heading back to the pre-QE2 levels due to lack of artificial support.   That was 1,050 so another 6% or so down from here and maybe we deserve 10% more (S&P 1,150)  for improving earnings but what else has changed without artificial supports?  

    HPQ Oct $22/23 bull call spread for .53, 20 in $25KP.

  233. joemayo

     
    SPX is currently down 3.6% following yesterday’s -2.94% performance. The last time the market saw two consecutive 2.5% or worse down moves was in Nov2008. Looking back to 2001, the last time we saw 3 consecutive days with these moves was in July2002 with 4 days in a row of -2.5% or more moves. Since then, there have been 6 other instances of 2 days in a row, all of which were in 2008 – in all but one of these instances (which happens to be the furthest back), SPX was up the 3rd day by an average 3.5% (excluding the 1 down time, average is 4.4%). In one of the instances, the 3rd day’s move was even enough to erase the prior 2-day loss – data below.

    SPX Performance
    Date Day1 Perf (%) Day2 Perf (%) Day3 Perf (%)
    11/19 – 11/20/08 -6.12 -6.71 6.32
    11/14 – 11/17/08 -4.17 -2.58 0.98
    11/5 – 11/6/08 -5.27 -5.03 2.89
    10/24 – 10/27/08 -3.45 -3.18 10.79
    10/22 – 10/23/08 -3.08 -6.1 1.26
    10/6 – 10/7/08 -3.85 -5.74 -1.13

  234. Pharmboy

    Oh, and as for MS and Cramer….that is one he IS right on FWIW.  They are technically insolvent.

     

    BMY was rumored to be a PFE target.  If that happens, I would be SHOCKED.  PFE has issues with integrating all their past companies, and I do not see them doing another big swallow right now.  Thus, think of any upgrades as those banks that are SELLING those companies against a competitor….at least, that is the way I am looking at it.  The banks are going to push the stocks that they want to sell to others, so, why not upgrade them?!

  235. stjeanluc

    Pharm – As you know, I am on your side of the TLT/TBT trade, but 1.2% would be almost 1% negative yield! Of course, I would love to refinance my mortgage as mortgages would be below 3%! That would be a big stimulus as long as you qualify which is not a given unless you and an 800 FICO score! 

  236. JRW III

    exec / Picture

    You can always change the channel !!

    All I’m saying is that I think we go up, then down; but there is a chance of just strait down !!

    And, btw, strait down is great if you’re SHORT !!

    But I’m not smart enough to figure this stuff out, that’s why I’m in cash every night !!

  237. GSsucks

    Phil-  I  have a bunch of X Nov $25  short puts that are worth $4.60 (I sold them for $2.30).  I can either roll them to Apr’ 12 $22 puts for about even or just buy them back taking a huge loss and hope to make the money back some other way.  At this point, do you think it would make more sense to just take the loss and start on the road to recovery by making $500-$1000 on small trades or do you think X gets back to $25 by Nov and I walk away from the noose I created for myself?
     
     
    I was convinced that the QE3 statement was going to blast the markets and went ALL BULLISH with many uncovered positions (greed I guess) and now most of my portfolio is wiped out.  It’s looking like 2009 when I used SRS options to wipe out everything.

  238. sparky123

    Phil besides fundamentals improving the other thing that has changed is inflation, and one day the bond market may suddenly wake up and discover it. 

  239. rpme

    Stjeanluc, that is so reminiscient of the bank crisis here. Of course, we found out later that everyone was taking in Billions.

  240. bobhu

    BBY is green today,  any news??

  241. sparky123

    BBY is green and so is AEO. The sky is falling quick go buy new jeans and an i-pad.

  242. stjeanluc

    Taking billions / Rpme – Speaking of:
    http://www.nytimes.com/2011/09/21/business/global/spain-examines-emilio-botins-hidden-swiss-account.html
    And now Spanish banks need new capital! 

  243. Phil

    BEN still getting crushed!  

    AMX getting killed, that’s a few Billion out of Carlos’ pockets.  What’s the Wold coming to when you can’t count on a Monopoly? 

    RIMM/Lzeg – I’d wait until 2013.  RIMM is at $21.20 and the 2013 $25 puts are $8 so half of that money is premium.  If today was Jan 2013, you’d be up $1.60, not down $2.40 – you have to have faith in the process.   You could take advantage and roll to 2x the 20123 $17.50 puts at $3.70 and that would leave you in the $17.50 puts at net $2.50 each for a $15 entry on 2x vs your net $19.40 entry on 1x.  Overall though, there will be 2014 puts eventually and then you’d likely get a 1x roll to the $17.50s even or better – if you are still worried by then.  The key is NEVER sell a put against a stock you don’t REALLY want to own at the net price.  If you do – you end up making many bad decisions on a dip.  If, on the other hand, you REALLY wanted to own RIMM for net $19.40 then, like any regular stock investor with a buy target, you would be EXCITED that you may get your entry and DISAPPOINTED if you do not.  If those are not your feelings – then you are doing it wrong.  

    Length/Morx – They say it doesn’t matter but I think it does.  You are right, it’s a lot like any physics equation and time and velocity are factors to take into account as well as mass (volume of sales).  On the whole, I think we should look at the move on the Fed as the drop from about 1,200 to 1,120 this morning as being the reaction to the Fed (6.66%) and we’re finishing above that mark so today has already been a bit of a reversal but we can’t draw any conclusions until we see what the rest of the World does tomorrow and next week.  

    10,750 came back!  

  244. rainman

    And drink some milk — DF +4.25%

  245. Jbur

    Barfinger/TBT:
    I guess you didn’t read my ranting in pain about TBT last month? The problem is this, TBT took more than my $$, it affected my confidence… and I think I know which loss is more painful. As I’m sure you know, financial capital is just one of the may assets we have that can be lost or whitteled away.  I wish you well.

  246. rainman

    Nice silly 666 spike on IWM

  247. kinkistyle

    HCBK GREEN! :D

  248. JRW III

     

    One has to love a market that provides the opportunity for double digit gains on a daily basis !!

  249. GSsucks

    JRW – Are your daily TNA/TZA trades virtual or real?  I see you making 4-5% a day even on non armageddon days like today.  If those are actual trades, have you considered trading for others [and charging them a percentage of profits of course]?  I’m wondering if you could salvage wrecks like my portfolio.

  250. stjeanluc

    I mean, common!
    http://tpmdc.talkingpointsmemo.com/2011/09/on-capitol-hill-rise-of-the-warren-buffett-birthers-video.php
    Don’t they have better things to do?
     
    And can we please stop that stupid argument:

    "If he’s paying taxes on capital gains, taxes have been paid by the corporations before they gave it to him," DeMint said. "He may not be paying it personally, but the tax is being paid at a higher rate than his secretary’s making."

    If I make $200K, pay $60K in taxes and decide to spend $50K to buy a new car, does the dealer pay taxes on the profit? I have already paid taxes on that money! You make money, you pay taxes… What should we only tax work! Our founding fathers are rolling in their graves – especially Jefferson! As E. Warren said it, no one got rich in isolation in America – I guess except in Tea Party Fantasyland. 

  251. stjeanluc

    I guess it’s official at HP now:
    http://www.engadget.com/2011/09/22/hp-names-meg-whitman-new-ceo-gives-leo-apotheker-the-boot/
    That is one screwed up company right now! Wonder what severance package they offered to Leo! They might regret Mark Hurd now! 

  252. barfinger

    Jbur: I remember your TBT pain. I didn’t have so large a position that I couldn’t ride it out, but that was before Ben squeezed it some more. You are absolutely right about the confidence thing. If I survive my current bad positions, I will limit my trading to my good old SPX strangles exclusively, which is where I started many years ago.  I latched onto trades just because they sounded good, and even though I think TBT/TLT will eventually return to some sort of normal, I now realize there’s no limit to how far against me they can go. 

  253. Phil

    TLT/Barf –  Panic markets can do funny thing but these rates would seem to be unsustainable.  What is the position you have and let’s see if there’s an adjustment to make.  

    Bottom/Rpme – This is the bottom unless it isn’t.  8)  

    Ranges/JC – Only when I think we’re really going into a new range.  I have no reason to think that yet, this is a panic drop and, while we have to give the crowd a wide berth or get trampled – that doesn’t mean we have to believe they know what they are doing. 

    Banks/StJ – Sounds like BS rumors to me.  

    Turnaround/Joe – Let’s hope so! 

    MS/Pharm – They are ALL insolvent if you pick them apart.  We know that from 2008 and nothing has changed since then except the suspended mark to market to make the lies more official.  If they start attacking MS, then who will be next because they are all the same.  

    X/GS – They are not "worth" $4.60, X is at $22 so they are PRICED at $4.60 and worth $3.  The only sucker willing to pay $1.60 of premium for them on a spike down might be you if you move to lock in that loss.  I think November expirations are 57 days away and X has been below $25 for for 24 hours.  X 2013 $20s are $5 and if you don’t REALLY want to own X for net $17.70 THEN you do have a problem down the road but you certainly don’t have one now that you don’t make for yourself.  All bullish – obviously never a good idea – as you know. 

    Inflation/Sparky – That’s what really amazes me, how unrealistic bonds are priced to inflation.  Now people buying bonds should also be deathly concerned about the Dollar backing down 10% as that in itself is a huge haircut.  

    HPQ disappointing reaction on Meg news.  May have to kill $25KP trade if we aren’t better tomorrow.  

  254. lori13

    Speaking of TBT, I have 300 shares at 36.  Any thoughts on selling covered calls Phill?   Also have Dec 31 puts.  Should I roo or just wait?
    Thanks.

  255. escohen5

     Barfinger/Jbur/TLT — I know the pain, too.  Like maybe around 110!  As Jbur said last time, "I wish I had been a sucker and bought a put on TBT."  This time, the same, with calls on TLT.  But, one day, we’ll ride this back down to 90!

  256. JRW III

    GSsucks,

    All my trades are for real; sometimes I win, sometimes I lose. ( But I make sure that I win more when I win than I lose when I lose)  !!

    I have no interest in becoming a hedge fund, although I did look into it; besides why pay me when I’ve already given you my system ?

    My goal was originally to earn back the wealth I lost in 2008 and 2009 (done); in addition I enjoy making a small contribution to you, the community at large, by posting here.

    But thank you for the kudos 8-)

  257. rpme

    Phil, ok, if your not calling the bottom, then I am off to read my Jesse Livermore book and see if it provides some inspiration for me.

  258. sns1

    Phil- Just to expand on your comment re going to pre-QE2 levels, could you look back in your old posts and see what people were saying about trend before QE2 got announced? I think at the time people were concerned that we would roll over to 850-900 on S&P. So 10% better than that gets you to max 935-990. thoughts?

  259. barfinger

    Phil, I really appreciate your offer to help me figure this one out. I realize my positions can be rolled one more time, maybe twice, but it was rolling and doubling that got me into this mess in the first place, so I closed out half of my positions today without rolling, and if this moves any further against me, I will close out more next week. I’ve learned a lot on this board, but the technique of rolling and doubling only extends a mistake and holds the potential to wipe you out completely. GMCR was a big mistake (so far), but betting on rising interest rates when the Fed is absolutely committed on the other side of things is flat out stupid. I allowed myself to believe that it was "impossible" for rates to go any lower. Now, I realize that’s not so.

  260. JRW III

    sns1 / SPX 990

    I see very strong support at SPX @ 1000, fwiw !!

  261. Burrben

    Whenever I see a trade with the following symbols : TBT, TLT, FAS, GMCR or NFLX  
     
    I RUN…..
     
     
    (not to say the very experienced and sometimes lucky traders can’t profit, but after 38yrs I have found that I’m neither very experienced, or very lucky)

  262. scottmi

    HPQ/Stj – leo severance? they were going to set him up with jamie fisher unless he left!

  263. elliotteldrich

  264. JRW III

    Any short from my comments on the 15th would have given you a healthy return, say 40% on EDZ !!

  265. williex

    Phil I will take you up on your offer to review a tbt trade.
     
    I have one postion left  I have -10 dec 11 $30 puts.  I sold them for about 1.20 in premium with a roll to Dec for a credit of .10 for a net of 1.30.   I am leary of an adjustment that involves DD.  I am willing to continuing to roll to the future if at $30 if it will come back.  If I can roll out and down for a credit all the better.  I am willing to DD if the plan makes sense. 

  266. scottmi

    SVM – Silvercorp has been under attack. Summary of the fight against nefarious shorts at company website and interview with SVM Corporate Secretary and other industry execs with conclusion that silvercorp is a real company and a buy.

  267. JRW III

    Tomorrow’s Bull target looks like IWM 66.56, fwiw !!

  268. Phil

    You mean 666 of course, JRW.  

  269. rustle123

    overseas/Phil
     
    I’m pretty sure it was Sen Carl Levin who proposed that instead of a tax holiday, that corporations get cut off from using that cash unless it comes back into the country and gets taxed. 

  270. scottmi

    SVM – and one more discussion with various industry types re fraud/manipulation, with particular focus on Silvercorp.

  271. Burrben

     IB
     
    After hearing all the reports of TOS lately I decided to move fully to IB.  TOS to IB ACAT started.  Their execution is awesome, but one thing that sucks is once you execute a spread using the spread trader function in OptionTrader, the portfolio page no longer prices it as a spread, but prices it as two individual options.  This sucks to quickly track your PnL.
     
    Therefore many of the short put, long bull call spread that we do here becomes ugly to track performance.  
     
    Anyone else use IB and have a good solution?  I am starting to work with their ActivX spreadsheet via their API, but now I’m going to have to do some coding and such.  Uggh.
     
    And Phil, how do you so quickly calculate the PnL %’s on the trades that you put up in chat? 

  272. Phil

    At the close: Dow -3.59% to 10726. S&P -3.2% to 1129. Nasdaq -3.38% to 2182.
    Treasurys: 30-year +1.95%. 10-yr +0.64%. 5-yr -0.744%.
    Commodities: Crude -6.55% to $80.3. Gold -3.76% to $1737.95.
    Currencies: Euro -0.74% vs. dollar. Yen -0.28%. Pound +0.86%.

    Market recap: Stocks around the world dive as realization sinks in regarding Operation Twist that there is no there there. Adding to worries in the U.S. and Europe is the idea that China isappreciably slowing. Precious metals, copper, and oil were all down sharply. Long-term Treasurys continue to rally, the yield on the 30-year diving 20 basis points to 2.80%. U.S. shares manage to bounce well off the lows into the close. 

    Good news no one seemed to care about today:  August Leading Indicators: Leading Index +0.3% vs. +0.1% expected, +0.6% prior. Coincident Index +0.1% vs. +0.1% prior. Lagging Index +0.3% vs. +0.3% prior.

    Near panic moves to the upside in Treasuries (TLT) and the dollar (UUP), "coupled  with outright liquidations in commodity, tech, and financial related names, has me thinking something very ominousis looming," writes The Fly. The only reason he’s holding onto any stocks is his expectation for an imminent announcement by policymakers to try and goose the markets. 

    Credit Suisse says the yield on the 30-year will fall to 2.5% by year-end, wadding up an early prediction the long bond wouldincrease to 3.03%. Analyst Carl Lantz’s logic is pretty simple to follow: "Almost the entire supply of bonds will be offset by Fed purchases through June 2012."

    "Inflation is going to absolutely melt," says uber bond bullDavid Rosenberg, strutting his stuff today (forgetting his boner of a call to get long stocks ahead of the Fed meeting). We haven’t seen anything yet, he says, and 2% on the 30 year Treasury "is not at all out of the question." TLT +30% YTD. 

    The yield on the 30-year Treasury is down the most over a two-day period since the crisis of 2008, moving from 3.00% to 2.85%. One bond trader says the Fed delivered "shock and awe" with its commitment on the long bond. "They will be buying 90 percent of the 30-year sector for the next nine months, so that’s more than anyone anticipated." 

    At a sub-3% yield, risk/reward for buyers of 30-year Treasurys becomes dangerously skewed, Robert Sinn writes – unless you believe the U.S. is Japan redux. Investors pouring money into Treasurys face negative real yields, Barclays’ Hans Olsen adds, believing they’re more likely to maintain purchasing power with corporate debt and dividend-paying stocks instead of government bonds.

    Recently retired Fed staffer Nathan Sheets says not to expect more action from the bank at its next meeting in November. Not just any staffer, Sheets was the Chairman’s right hand man during the financial crisis. Showing his fitness for government work, he says he’s puzzled by market reaction to The Twist. 

    Operation Twist fizzles, what’s next? U.K. PM David Cameron adds support to coordinated action by G-20 nations to stimulate economic growth, joining leaders from Australia, Canada, Indonesia, Mexico and South Korea. It doesn’t have a cute nickname quite yet, but it could emerge as Plan B if the U.S. and the eurozone jump on board.

    "Monetary policy is overextended due to the absence of fiscal policy … One without the other is like a crippled duck," says Brazilian finmin Mantega. He believes Operation Twist is just more QE, and likely to again create imbalances in emerging markets. 

    The Fed’s blunt language was telegraphing a message to Congress, Barry Ritholtz wirtes, but don’t count on any help from politicians who have reacted to recent economic cycles "precisely backwards": cutting taxes and raising spending during the 2003-07 expansion, and threatening to raise taxes and cut spending now. "There is no cavalry coming to the rescue…"

    Bespoke notes today’s worldwide stock decline brings the Bloomberg World Index into bear market territory, -21% from its May 2 high. The S&P 500, though, is not quite there. Finishing today at 1,130, the index would need to sink another 3.5% before reaching the bear threshold. - So we have that to look forward to

    "The market’s current malaise again highlights the lunacy of both public and private pension funds continuing to believe on average that they can generate annual returns of 8%," writes David Reilly. At some point contributions must  increase – putting stockholders, taxpayers, and municipal-bond investors "at even greater risk than they realize." 

    The CBOE Volatility Index, +15% today, crossed 43 intra-day as the market’s fear gauge heads into territory not seen since the S&P downgrade of the U.S. Barron’s Steve Spears makes an evenscarier point: VIX November 50 and 60 calls are pricing-in a major downward market move between now and expiration.

    The CDS spread on Bank of America’s (BAC) debt rose 9% today, reaching a record high of 400 bp. Other major banks also saw their CDS spreads take off: Morgan Stanley’s (MS) increased 10.6% to 397.5 bp; Goldman Sachs’ increased 9.4% to 292 bp; and Citigroup’s (C) increased 9.6% to 285 bp

    Barclays’ Roger Freeman expects Goldman Sachs (GS -5%) to report a loss in Q3 as its investments lose value and trading and banking fees decline. "Nearly every line is being marked down from our prior forecasts, which were not particularly optimistic to begin with."

    More from Barclays: Freeman and team also cut Q3 earnings estimates for Morgan Stanley (MS -8.1%) from  $0.43/share to $0.12. In addition to the financial market tumult is the Fed’s mission to lower long rates. Banks and brokerages tend to borrow short and lend long – if Twist works, they get squeezed.

    Art Cashin thinks stocks may not have hit bottom, because only a small part of the selloff is a reaction to the Fed; news that China’s factory sector contracted for the third straight month is the "third leg of the trouble stool" with Europe and the U.S. "Maybe the world economy is going to hit the wall here."

    Sources say participation in the Greek bond swap programhas risen to 85%, just short of the 90% level the government has mandated as a condition for its participation. The exchange would give bondholders paper worth 21% less than their original holdings.

    Mexican shares and the peso continue to tumble as a government and central bank that were thought to be making a lot ofright moves finds maybe they were just lucky to have been on the right side of the global risk trade (and now on the wrong side). Mexico shares ETF: EWW -7.2%, Peso ETF FXM -2.6%.

    The growing trade deficit with China has eliminated or displaced 2.8M U.S. jobs since 2001, or ~2% of all domestic employment, the Economic Policy Institute says. Rising imports are only part of the picture; since the yuan is pegged to the dollar, the currency remains artificially low, making U.S.-made goods more expensive in China and pushing down exports.

    The long-term trade’s not done in gold, says Dennis Gartman. In fact, it’s just begun. Over the near-term however, everything’s going lower, so stick to the sidelines. He expects the yellow metal could trade as low as $1695, "then you can probably be a buyer."

    XLF drag:  Insurers are getting clobbered today on fallout over the Fed’s plan to purchase long-term bonds, plus renewed concerns about their global exposure: Genworth (GNW -7.6%), Lincoln National (LNC -7.5%), Prudential Financial (PRU -4%), American International Group (AIG -4.6%), MetLife (MET -6.5%). 

    According to a SEC filing an insider at Patriot Coal (PCX -11.1%) bought shares this week into weakness, as the coal sector (KOL -8.6%) got blown to bits on production and demand scares (III,III). Reflective of the carnage, shares of PCX are down 38% over the last 5 trading sessions.

  273. Phil

    We need to watch this one:  Boeing (BA -4.5%) hits a new setback after Atlas Air Worldwide (AAWWcancels orders for three new 747-8 jumbo-jet freighters due to “lengthy delays and performance considerations.” After a two-year delay in completing the plane, the first few 747-8s Boeing made may not meet performance guarantees.

    Lockheed Martin (LMT +0.5%announces it will raise its quarterly dividend to $1.00 from $0.75, and increase its share repurchasement program by $2.5B. The new dividend yield on shares of 5.5% looks juicy for income investors, and almost doubles theyield on a 30-year Treasury.

    Monsanto (MON -1.8%) says it has successfully completed a three-year collaboration with Evogene designed to enhance crop yields for farmers. The firm’s genetically-modified corn seeds are becoming a bit of a juggernaut, as it successfully navigateslawsuits and reports of "super bugs" to plow ahead and commercialize engineered crop enhancements.

    Nike (NKE): FQ1 EPS of $1.36 beats by $0.04. Revenue of $6.1B (+17.5% Y/Y) beats by $0.35B. Shares +6.9% AH. (PR)

    More on Nike (NKE): FQ1 earnings beat estimates on an 18% jump in Y/Y revenue that was boosted by currency gains. Futures orders jumped 13% ex-forex. Gross margins declined to 44.3% of sales vs. 47% Y/Y, due to higher product costs and larger discounting. Shares +5.7% AH.

    Like IHS iSuppli, Gartner sees Apple (AAPL) remaining the tablet market’s leader long-term, predicting the iPad will still have 45.6% of the market in 2015, via 116M shipments. Android (GOOG) is expected to have a 35.6% share, and Microsoft (MSFT) 10.5%. For 2011 (a little easier to forecast), the iPad is expected to have a 73.4% share. (IDC forecast

    UBS’ latest list of its clients’ 15 most shorted stocks:FSLRGCINFLXCTRPCIENJCPGRMNGMCRBBYFTR,CRMGMCBACJNJ.


  274. zeroxzero

     FT discussion:  No clear strategy in sight, Italy and Spain essentially insolvent, austerity killing demand, Europe depending on the U.S. continuing to live beyond its means, as Europe deleverages and Germany backs away from directly capitalizing the banks of other Euro countries.  The inability of Greece and others to devalue a domestic currency has proven fatal.   http://video.ft.com/v/1176264513001/Debate-A-new-global-recession-
     
    Bottom line takeaway:  The Euro is toast as sovereign debt crises inevitable.  U.S. equities will struggle in the face of a Euro falling to par.  Germany is very unlikely to throw its wallet on the table on behalf of the Peripheral countries.  
     
    To me is seems extremely risky to be long U.S. equities with any confidence unless fully sterilized against a soaring dollar.  Who would have thought that the dollar might become a poster boy for fiscal strength on the basis of America’s "stimulus"  approach to the Great Recession.  Maybe Phil can temporarily abandon his dislike of unpredictable currencies as tradable instruments now that the Euro trajectory is looking increasingly predictable.

  275. Kwan

    kurtww/vegas – I can’t make it this year but perhaps next… I actually have to go pick the wife up from the airport in a little bit. It’s our monthly visitation time (we live in two different states).
    matt – have you ever stumbled across filteringwallstreet? Your talk of ema crossovers last night made me think of it. I’m not sure if there’s anything there or not that will help but something may trigger that ‘eureka!’ moment for you. It’s a few years dated, however and may not be applicable anymore since the bots now run everything.

  276. rustle123

    Wish we could reelect Bill C
     
    http://thinkprogress.org/politics/2011/09/22/326264/bill-clinton-slams-tea-party/

  277. jcaesar

    ZZ – Good analysis, but I don’t follow your last sentence.

  278. kurtww

    TLT/TBT/Short put financials – I agree with you guys posting about this. I made a mistake earlier in the summer selling TBT short puts at 32, and not getting out until around 30. It felt like it hurt then, but man am I glad I did. I vowed to stay away from it completely, but something possessed me to try a "small" TLT spread and sold short put last week. I had the opportunity to get out flat right before the fed, and was telling myself I should, but I didn’t listen. Yesterday I closed out the spread at a loss and rolled the TLT puts to October, but earlier today I bit the bullet and closed them out too. Net I think it cost me $2100 to buy back what I sold for $333. I am officially done doing that kind of thing! I feel like I have learned a lot on here, but I haven’t made any money. Just when I feel like I hit my stride, I make a stupid mistake and it costs me. Closing out here was possibly one of those mistakes, but I’m not willing to keep getting burned on that hot stove. Fortunately most of my accounts and our IRAs are in cash, and I only have a small amount "in play" until I learn the ropes. The other thing that has not worked out so well is hedging with spreads. Fortunately most of my hedges are October spreads, so unless we rally soon they will all expire in the money and I’ll get most of my losses back. Ah, well. Live and learn! That’s what I’m here for, after all. At least I don’t have a 50 contract iron condor on RUT to be trying to get out of! 

  279. sns1

    thanks JRW

  280. tyro66

    Phil,
    What would be a good play (now or in the future) for dollar vs euro?

  281. Burrben

    Phil / BA
    I just opened up the BA trade you listed today, selling the puts and buying a BCS on the stock.  It looks to me like they are only down -3.77% today, and up small after hours to 58.80. 
     
    Would you recommend keeping the trade on, or taking it off for even if possible tomorrow?

  282. chasw

    Phil,
    Elizabeth Warren, very impressive video

  283. vic55

    Phil,
    I have EDZ oct 22/26 bcs, it is a momentum trade, not a hedge. EDZ at $34 now. I think that EDZ may go higher in the very short term. Any suggestion how to improve position?

  284. zeroxzero

     JCaesar / Euro currency:
     
    Bernanke’s failure to commit to additional massive U.S.-dollar printing seems to be calling a halt to the long dollar slide, over 20% since the end of 2010.  At the same time, it has become increasingly clear that Spain and Italy — the "Too Big to Bail" countries of Euroland — are in a very poor and potentially irremediable fiscal state,
     
    The fact is that a strong Euro has been giving the under-employed Peripheral nations much more purchasing power than they would have had with their own local currency, which level would have reflected their dismal fiscal and employment situation. This has tended to lower the cost of food, fuel and other essentials that have, correspondingly, skyrocketed in the U.S. on the back of a weak dollar.
     
    If the dollar has now reversed course — if international markets are no longer willing to favor the Euro over the dollar, sensing that the worst of Bernanke’s dollar-dumping has run its course, while Euroland appears to be sliding down the chute of serial sovereign defaults without the slightest indication that Germany is prepared to step in as guarantor — then how to play equities becomes a very interesting question.  Phil doesn’t trade currencies, so there will be no forex hedge ideas forthcoming.
     
    But we’ve already seen what a Eurodrop from 1.45 to 1.35 has done to commodities and much else. I’m therefore scratching my head about how to buy equities that are trading at very attractive prices relative to bond yields in historical terms, without getting flattened by the Giant Currency Train that appears to be hurtling down the track towards the U.S. [the Swiss were already run over by it] as Italy/Spain-driven Euro devaluation grips Europe and world markets.  
     
    There’s probably a bright side.  You would think that hard-pressed U.S. consumers would be quite grateful to see food, fuel, commodity and foreign import prices drop by 20-25% on a rising dollar and falling global demand. The U.S. imports more than it exports, after all.    In short, forex seem to have been pushed to center stage, and I’m not a clever enough fundamental stock analyst to put together a portfolio that would escape the effects of this large exchange of purchasing power among countries that I suspect is imminent.  I could easily be wrong.  But markets really hate the word "default", and the Too Big to Bail story on Spain and Italy is gaining traction, so I can’t help but think that there’s a pony in there somewhere

  285. jabobeast

     I hope these futures are not a tease! 
    today was torture.

  286. angelcur

    well zero you know i ve been by far the most euro bearish on the site..i ve also been by far the most bullish on the bonds….so for ME it has been confusing that there has been no fx positions suggested..however   youre not shorting europe while shorting us treasuries and phil has been bullish on europe fixing its problem…and bearish on bonds…but the site is pretty much an option site and phil does a very nice job with that….i make fairly concise suggestions on the site several traders read them and hopefully find my feedback useful..i offered phil more than he makes off the site to trade for me..he is completely committed to his site and subscribers..but aside from an occasional trade here and there in futures he is an options maven…where do you live?

  287. zeroxzero

    A meeting this afternoon in Washington D.C. of the finance ministers and central bankers of Russia, China, South Africa, Brazil and India expressed their "concern" with Europe’s sovereign debt crisis, but did not broach the subject of financial aid to advanced countries.  The Russian minister of finance, Alexey Kudrin, said that the representatives discussed the issue "in terms of cooperation", "but we avoided using words such as ‘assistance’ or ‘help."
    http://www.lavanguardia.com/economia/20110922/54220334786/los-paises-emergentes-evitan-la-idea-de-una-ayuda-financiera-a-la-zona-euro.html

  288. lvmoda

    So now we are in a bearish trend with all markets voting disapproval of the status quo.  When will the capitalists realize that the state of debt and indebtedness cannot continue to exist in its current form, and monetarist moves to devalue it away will do nothing to solve the core problem: a lack of spending and consumption by the mass market due to fear, unemployment, poverty and other barriers that have not been touched in the last three years?   
     
    I think we have a long way to go before it will be acceptable to default on bondholders, to allow banks to fail before being recapitalized (with debt forgiveness), and to reset the equilibrium between bankers, multi-national corporations and the rest of us.  Populist ideologies need to surface to confront conventional capitalist thinking, before real consumption and growth are re-established for the future.  I fear that the system needs to be on the edge of collapse before bankers and leaders give up on their existing ideologies, thus my continuing bearishness until fresh, new and real solutions begin to surface…

  289. Phil

    Good morning!

    Futures were looking up but Moody’s downgraded Greek Banks (which I don’t see how it could have surprised anyone) and the Journal reported that US Funds have cut Europe exposure and that has sent the EU markets down 1%, which is 2% off their up 1% open.  

    U.S. money market funds have slashed their exposure to Europe’s banking sector to the lowest since at least 2006. For now, the ECB is stepping in to soak up much of the lost funding with unlimited three-month dollar loans.

    Greece on Edge of Biggest Insolvency 24 Centuries After First City Default. History’s first sovereign default came in the 4th century BC, committed by 10 Greek municipalities. 

    What might a Greek default look like? (BBC News)

    Merkel Lessens Fears Over Greece (WSJ)

    The Euro took a harsh turn back down below $1.35 and that shot the Dollar back over 79 (now with support at 78.75) and that is bye-bye for gold ($1,719), oil ($80), silver ($33.79) and copper ($3.22) and even gasoline is $2.55.  Futures are too dangerous to play other than using the $78.50 line for a bullish play on oil (/CL) with tight stops but not if the Dollar is over 79.25.  If oil fails to hold $78.50, then XLE, OIH and the Dow will make good shorts.

    "Dr. Copper" is sending an ominous signal to the equity markets. After hitting a high in early April, the metal has taken a hard turn south, and with today’s hammering has led stocks very near, if not already into, bear-market territory. Metals strategist Jeff Hirsch takes this – along with weak manufacturing data out of China – as a sign of impending global recession, and forecasts financial markets capitulating over the next few weeks as investors begin to panic.

    Asia finished at highs but still down with the Hang Seng dropping 1.36%, Shanghai down 0.4%, Nikkei down 2% (but improving from 8,280 on a spike low to a rejection at 8,500 and then back to 8,450) and BSE down 1.2%.   

    Global Stocks Enter Bear Market as Debt Crisis Outweighs Profits. Stocks fell, pushing the MSCI All- Country World Index of 45 nations into a bear market for the first time in more than two years, after the worsening European debt crisis and threat of a U.S. recession erased more than $10 trillion from equities since May. 

    Analysis: Emerging Market Face Capital Exodus AgainA sell-off precipitated by global recession fears and the deepening euro zone debt crisis has resurrected the specter of capital flight, a threat that still haunts emerging markets for all their vaunted strengths.

    6:00 AM Overseas: Japan closed. Hong Kong -1.4%. China -0.4%. India -1.2%. London -0.3%. Paris -1.2%. Frankfurt -0.6%

    6:25 AM Overnight gains in futures have evaporated over the last hour and the euro has slipped back to breakeven. Yen and dollar seenmost likely to benefit from safe-haven flows as investors deleverage and move out of emerging markets. S&P futures now -0.2% to 1121. Euro flat at $1.3465.

    European Banks Head Towards Another Meltdown. Shares in some of Europe’s largest banks fell by 10pc as the cost of insuring European lenders’ senior bonds rose to record levels, according to credit default swap prices. The Markit iTraxx Financial Index of contracts on the senior debt of 25 banks and insurers climbed to an all-time high 315.5 basis points.

    The G-20 issues a statement pledging a "strong and coordinated international response to address the renewed challenges facing the global economy." Shares in Asia get a bit of a lift, with most indexes about 1% off of their lows. Hong Kong -2.0%, Australia -1.0%, China -0.5%. Japan closed. S&P 500 futures +0.5%.

    How To Prevent a Depression (Slate)

    A few weeks down the road, investors will see that yesterday’s Fed action is actually good for stocks, says Barclays’ Barry Knapp. Equity markets will eventually catch on and rally "because it’s a loosening of financial channels.” Right now, investors are just dialing into the fear of what the Fed may know that we don’t.

    WTF? GOP To Fed: Let Economy Fail (Capital Gains and Games)

    "Stocks are now more undervalued than at the generational bottom back in 2009," says Doug Kass (we covered that call). The key for Kass: Growth is slowing, not stopping. He also thinks banks are about to have a La Dolce Vita moment in which they get their act together. The final ingredient, he says, is falling commodity prices – especially oil. 

    Eurozone policymakers have repeatedly followed the wrong policy shifts, says George Soros, creating a situation in Europe "more dangerous" to the global financial system than the collapse of Lehman Brothers in 2008. However, he adds, when push comes to shove, policymakers "will do whatever it takes to hold the system together, because the alternative is just too terrible to contemplate."

    No. 9 of Josh Brown’s "10 Crash Commandments": "Suspend disbelief. ‘Bank of America (BAC) could never be a $5 stock’… Anything can happen in a crash, there are machines making the trades, and they have no respect for the prestige or standing of a particular company." It’s gut-wrenching but can pay off big for the level-headed who bought Apple (AAPL) in the 100s.

    Dealmakers say M&A has slowed significantly in Q3 as companies postpone deal ambitions and/or find financing hard to come by. Announced M&A deals for Q3 are down around 23% from the previous quarter, and analysts are paring their expectations for the rest of the year. 

    Bernanke Battling Housing Collapse Shows Fed Has Few Tools to Heal Economy (Bloomberg)

    A bipartisan group of senators says they expect to overwhelmingly pass a bill next month to crack down on China’s manipulation of the yuan. The bill would include a provision allowing U.S. companies to seek countervailing duties on Chinese goods on a case-by-case basis. President Obama doesn’t support the bill.

    CFTC May Alter Dodd-Frank Speculative Trading Limit CME Opposed. U.S. derivatives regulators may pull back from a January proposal setting speculation limits that CME Group Inc. (CME) said would reduce spot trading on the world’s largest futures exchange, according to a person briefed on the discussions. The proposal, issued under the Dodd-Frank Act by the U.S. Commodity Futures Trading Commission, aimed to curb speculation by limiting the portion of the derivatives market controlled by any one trader.

    GE(GE) Put Ratio Surges to Highest Since 1997 as Growth Jeopardized: Options. Options traders are the most bearish onGeneral Electric Co. (GE) in 14 years, speculating its streak of quarterly earnings increases won’t survive Europe’s debt crisis and slowing global growth.

    Perry, Romney Go on Attack at Debate. Republican presidential front-runners Rick Perry and Mitt Romney, taking up where they left off in their last on-stage meeting, attacked each other over Social Security and health care in a televised debate Thursday, with the Texas governor on defense for much of the contest.

  290. Phil

    TBT/Lori – We gave up on them a while ago and switched to shorting TLT with mixed success.  The bottom line is you are down $5,345 with $5,655 worth of TBT – do we expect TBT to double?  No, especially not if you cover it but probably not either way.  That means you are probably better off doing something else with the money.  The TLT March $120/115 bear put spread is $2.20 but, of course, you risk the whole amount if TLT stays high but you get out with a profit if they don’t hold $115.  If you did want to stick with TBT (and this is a good trick for anyone who wants to make up losses in a stock), what you can do is cash the stock ($5,655) and sell 3 Jan $18 puts for $1.75 ($525) and buy 6 $17/19 bull call spreads for $1 ($600).  So you spend $75 out of pocket but now you make $1,200 if TBT just gets to $19 and holds it through expiration.  With 300 shares of stock at $18.85, you would need to get to $22.85 to make the same $1,200.  The worst case is you get re-assigned the stock at $18 ($5,400) and that leaves you with $180 in cash plus 600 x whatever there is between $17 and $18 so it’s no worse off than you are now and it’s about as good as if you sold a $19 call for $2 ($600) because that would only cover you to $17 as well.  

    Old posts/Sns – You can just hit the Phil tab and go back in the archives.  

    Positions/Barf – Hopefully, we’re getting to that capitulation point but the trick is to make sure you are hedged well enough to ride that out.  

    TBT/Willie – See above note to Lori.  You’re in a bit better shape than she is percentage-wise and no, I would not increase exposure to TBT – it’s a broken ETF (something we’ve been saying for a while) and I no longer have faith in it because the relentless Fed intervention grinds the ultra ever-lower.  TLT, is not an ultra and therefore you can short it without the decay but it’s still a very frustrating play when we have nonsense like this.   Clearly no one in their right mind would by our long-term notes so the Fed is volunteering to prevent our auctions from failing and causing yet another major crisis.  This is what the EU did for Greece and now their notes fetch 110% EXCEPT at auctions, where they are sold for 5%.  

    Living and learning/Kurt – Sounds like you are learning the ropes!  Taking losses off the table is as important as taking wins.  Do keep in mind that yes, the spread hedges don’t pay off (especially if you don’t sell puts in the same direction) until they are near expiration but, if you are protecting bullish positions, then if the market comes back and kills your hedges but you avoided capitulating on your bullish positions on the sell-off – then that was the whole point.  For us, the sweet spot is a real disaster, when we get a chance to layer in the hedges and then the hedges begin to outpace the losses as we end up 15/20 or 15/25 on the way down.  As we keep bouncing off the bottom of our range, that hasn’t happened in a very long time.  

    Dollar/Tyr – If the Dollar hits $80, then a Euro up play would be good for the bounce back but if the Dollar goes over 80 – the Euro is doomed.  

    BA/Burr – It’s a 2013 trade, unless we hear definitive bad news from them, I’m not inclined to change my mind after a day.  

    EDZ/Vic – I have to get my post up, remind me under new post.  

    Gotta run….

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