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Tuesday – Unthinking the Euro Crisis

 

“It’s still absurd and unthinkable in many senses of the word for people who really understand what it means to have a monetary union, it’s really unmanageable and unthinkable.

“Some people that seem to think about it or have the idea of preparing for it, they don’t know what they’re talking about.  In my view, it’s still not going to happen.” – ECB Vice President, Vitor Constancio 

Finally someone official is saying what I’ve been saying for months!  The palpable fear that surrounds the Euro-zone is itself the problem – not the EU itself.  I pointed out to Members last year, when the Greek crisis first hit, that dumping Greece from the EU would be as silly as the US dumping Florida or California because they missed their budget goals.  

Constâncio said the ECB was determined to stick with its current policy of introducing new three-year funds to try to counter the freeze in interbank lending, and support greater fiscal integration in the euro zone. “What we decided is very recent and it’s enough, but we never pre-commit, so we will see,” he said. “So far, we think the decisions we made are very significant and should be enough for the objectives that we are responsible to attain.”

And what is it the EU has done recently?  Up to one TRILLION Euros has been pledged in 3-year funding at the (variable) ECB rate, which is currently 1%.  That is enough money to fund ALL the financing needed by ALL of the EU nations for the next two OR THREE years, according to GS analyst Jernej Omahen.  Keep in mind that all you have to do is borrow $1Tn at 1% and lend it at 4% and PRESTO! – you make $30Bn.  Do that 3 times and lever up the money you borrowed 10 times and suddenly you’re making a Trillion – nice work if you can get it!  

Just like the US, the Euro-Fed gives free money to the banks and the banks lend it to the EU nations at much higher rates and to consumers at much, much higher rates and everyone is happy – well, everyone who is a banker, that is…  The consumers/taxpayers, on the other hand, both pay the borrowing rate that is 300-1,800% higher than what the banks borrow at AND they pay, through deficits, the difference between what their Government borrows money for and the discount they give to the banks.  What a friggin’ scam!  

This is why we’re long on Financials (see yesterday’s post) – how can they lose?  I mentioned yesterday that we ended up 100% long in our White Christmas Portfolio and yesterday was a real test of our resolve.  Just before the close, Spiyer asked if it was worth going short and my answer was: "If we follow though (tomorrow), then plenty of time to jump on short train but hard to trust low-volume sell-off based mostly on Dollar up in more Euro-panic – it’s just getting old."  

This morning, Constancio knocked a major leg out from under the bearish stool but it remains to be seen how much effect it will have in this low-volume, pre-holiday period.  Keep in mind the year doesn’t end until NEXT week, so still plenty of time to paint the tape and get up back over 1,257 on the S&P, where we started the year.  The Dow is already over 11,577, where we began 2011 on that index.  The Nasdaq was 2,626 on December 31st, the NYSE was 7,964 and the Russell was 793.  

Both the RUT and the NYSE, our broad indexes, are 10% below where they began the year while the Dow is 2% over, S&P 5% under and Nasdaq 4% under.  Why the strong outperformance of the Dow?  IBM is up $45 and contributed about 350 points so that alone accounts for all of the Dow’s positive performance.  Without IBM and with C back in, the Dow would be tracking the S&P almost exactly.  

Speaking of C, we thought yesterday’s selling was overdone enough to finally take a plunge on BAC, with the 2014 $2/4 bull call spread at $1.17, which could be offset with the XLF April $12 puts at .90 for net .27 on the $2 spread, which has a 640% upside if BAC manages to hold $4, which is 20% LOWER than it is now.  

That’s what we call a self-hedged entry, which gives us a nice cushion on a long-term play that only ties up, according to ThinkorSwim, $2 of net margin, which is released in April if XLF stays above $12 (now $12.25).  After that, you have nothing but the .27 cash in the trade for the next 20 months – a nice, relaxing way to go long on Financials.  

As we expected (see 5:48 Alert to Members), the Dollar paused at 80.40 but is now (8:50) down to 80.15 and the futures are much improved, up around 1.5% with oil (/CL) flying up to $96.42 (looks like we picked the right week to go long!) and gasoline (RB) already at $2.54 for some whopping gains off our $93 and $2.50 entries.  We will, of course, take this with the same grain of salt we took yesterday’s sell-off as it’s all meaningless until we break out of the narow ranges (see Big Chart) we also talked about in yesterday’s morning post.  

We also have a bit of good news this morning with November Housing Starts up 9.3% but, at 685,000 annualized vs well over 2M a few years ago – it’s really nothing to pop the champagne over.  We can pop the cork on JEF (we’re long) as they are flying pre-market after reporting EPS of .17, a .03 beat (20%) and, more importantly, in a single quarter they were able to cut leverage 25%, from 12.9x to 9.9x and, more importantly for us Fundamentalists, the tangible book value is $14.40 a share – not bad for a stock that closed at $11.80 yesterday!   

I think JEF is the poster child for our view on the Financials, they are sold off to ridiculous lows based on irrational fears that cannot be sustained over time.  Not every bank is a winner but right now, they are all priced to be losers and, unless we’re moving back to a cash and gold society and we all begin keeping Trillions of Dollars under our mattresses – some bank, somewhere will find a way to make money on the lending spread.  

Meanwhile, the World Governments are funneling Trillions of Dollars, Yen and Euros through the banks to prop up the Global economy – you can complain about it all you want but, with return potentials of 628% on BAC etc – don’t you think you should stop complaining and start participating – at least just a little?

Remember, we don’t care IF the game is rigged, as long as we understand HOW the game is rigged and are able to play along!  

 


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  1. rainman

    My lord! Now that’s a clubbing on /DX!

  2. rainman

    Anyone finding the premarket volumes disturbing? I mean really, 7M shares of WFR traded? That’s up there with the 90 day average of 8.1M. CCJ with 2.7M and a 10 day ave of 2.2M?

  3. lol730

    @Pharm – is any hope for TRGT future?

  4. rainman

    There’s got to be a problem with the volumes, there is no way WFR has traded that many shares premarket.

  5. One_T

    Phil,
    Got assigned the short SWY Jan $17.5 calls (today is ex-dividend day).  I am still holding the long Jan $15 calls. How would you play the position. the dividend is $0.145/sh and it is trading at 20.37.  Thanks

  6. vsasanka

    I am thinking of CRM short @ 106.50 with stop at 107.50 via the 105 puts.
    -Sasanka

  7. rustle123

    I woke up around 5:45 this morning which is a rarity for me (real Rustle wanted to play), and I turned on CNBC and realized how incredibly Fox like it has become.  It should be called the Squawk Factor with Joe Kernan.  Now when someone proves Kernan’s views wrong with actual facts, he interrupts and screams over them.  And then eventually changes subject in the middle of discussing the current one.  Basic Fox tactics ala O’Reilly, Hannity, and the rest of the loveable gang.  Andrew Sorkin, clearly not a Republican, just stands there silent looking as uncomfortable as when another couple you’re going out to dinner with is fighting in front of you.

  8. rainman

    It would appear that SOME stocks are reporting the previous days volume in premarket (on TOS, Fidelity at least, Schwab seems to be having their own problems this morning).

  9. Pharmboy

    TRGT is dead…so unfortunately no.  Depression is a tough, tough nut to crack, and they will need more trials to show efficacy.  The SSRIs, many went through 10 trials, and I think to overall efficacy reads were 51%….or a very slim margin.  Big pharma does not have the stomach for that any more as the costs have soared.  Bad day for those that suffer from this horrible disease.  There is one or two more trials due out, but it does not bode well.

    PP for today:

  10. lvmoda

    Rustle,  that’s why I switched to listening to Bloomberg Radio Plus on my Iphone and leaving my tv dark.  Bloomberg Surveillance is pretty good in the morning pre-market with a good mix of interviews and what seems liked a more unbiased atmosphere with Ken Prewitt and Tom Keene.  I just can’t handle CNBC anymore and now I reallize I don’t need the visuals and senseless commercials!  They actually flash new breaks quicker than CNBC too.  Their Radio Plus app just won financial app of the year from Apple/Itunes.

  11. rustle123

    I am loving UCO today.

  12. rustle123

    @lvmoda
     
    Thanks, will download app today.  Good idea.

  13. Pharmboy

    Phil – since you compared Greece to Florida, I cannot resist……So, if the state that contributes little to the overall American economy (aka. Greece of the US states) was going bankrupt, would the Fed’s step in and rescue them – or let them reset?  They have let cities and counties go broke, where bond holders were wiped out….why not a state?  Each state is its own make up of people like the EU, but what makes you think that they would not kick the state out of the union….of course they would not!  The biggest difference is the thousands of years of history of the EU.  Why not let Greece default?  States all have their own rates of return, as do the EU countries, and if one goes, then they pay the price.  Right now, the EU will not let the inevitable happen….

  14. rustle123

    Tuesday pre-market – - 12-20-2011
     
    Dr. John L. Faessel
    ON THE MARKET
    Commentary and Insights
     
    Applicable Today
    Quote of the day
    “Broke nations are being bailed out by a broke transnational organization [IMF] bankrolled by a broke superpower in order to save a broke currency.”
    MARK STEYN
    ~
    Santa?
     
    Price remains in well defined coil ? denouement nears
     
    Key EuroLand Bond Yields Retreat
    Italy 10-year (gross) bond yield – 6.52% off from 7.26% on 11-24
    Spanish 10-year (generic) bond yield – 4.99% - off from 6.7% on 11/24
     
    Today’s market backdrop has French & German markets up around 1.3% as their bond yields pullback moderately (but are well of their recent highs) after another “temp fix”*. Our futures like it and the S&P futures are up 17 points.
     
    The Stock Market picture remains constructive as "price" works toward some eventual technical denouement in the apex of a triangle / coil. The wider oscillations of the past are now becoming constricted and price looks to go one way or the other over the next week or so. The top line is at 1260 and the low line is at 1191.So far, the "sure bet" Santa Claus rally hasn’t really materialized.
     
    Yesterday The Stock Market finished in the red and near their session lows on low and well below average volume.
     
    * EuroLand beefed-up its anti-crisis arsenal ‘overnight’ by adding $195 billion to the International Monetary Fund [IMF] as the European Central Bank [ECB] broadened its support for their weakening bond markets. Four Euro countries not using the single currency also pledged to add to the IMF war chest but, Britain refused to commit. This is a puny addition to the pot but it helps. Over the last week the ECB said it settled 3.36 billion Euros of bond purchases in the week ending Dec. 16, up from 635 million Euros the prior week.
    _____________________________
     
    The (SPX) closed yesterday at 1205
     
    Short term price support in the S&P 500 (SPX) is at 1203
    Support from a minor ascending lows line is at 1190
    Price support at 11/28 lows is 1158
    Price support at the August 8th lows is at 1101.
    Support at the October 4th lows is at 1074.
    Deepest ascending lows line off the (SPX) 666 (of 3/6/2009) is at 1109
     
    Declining tops resistance is at 1226
    50-day moving average resistance is at 1229
    Short term price resistance is at S&P 500 (SPX) 1212 & 1215
    The 200-day moving average resistance is at 1260.
    Lower level declining tops resistance is at 1261
     
    Again: “From a technical perspective the key declining Tops line resistance at (SPX) 1315ish that comes off last July’s top tick will be the major overriding wall of resistance.” Correspondingly the lower trend line off “the” lows of 10/4 and 11/28 is at (SPX) 1183.
     
    Monday’s  key indicators and metrics:
     
    ·     McClellan Oscillator is Neutral @ minus 134
    ·     VIX – 24.92

  15. tchayipov

     pharmboy / DCTH
    what do you think about them today? I still have some shares covered by Jan13 5s calls

  16. jabobeast

    phil on BAC is there $2 calls or $2.50s??

  17. Pharmboy

    tchay – I am going to take the loss on them by years end.  My patience with them is growing thin, as I wanted to see an improved revenue….but I am not sure they are going to get it.  If you have covered stock, then I would hold it for now if it small.  Mine were all sold puts, and I just don’t see any catalyst in the coming months so I am moving that loss over to YMI.

  18. roro

    went long NAS100 at 07:20…….in at 2235.
    also trade CFDs for flexibility of position sizing so shorted some of FXCM’s USDOLLAR at 10,000 (lot sizes are $10,000)…….currently 9950 so about equivalent to 80 USDX futures.
     
    CFD spreads are higher, but i like the the choices/flexibility offered and traded aggressively Spain’s IBEX last summer using CFDs
     
    available in Canada through licensed irroc dealers or by way of exemptions under sophisticated investor rules (real misnomer there but works for bureaucrats)
     
    thanks for early warnings/alerts, Phil

  19. jabobeast

    wowowowowow

  20. rustle123

    Doug Kass recap from this morning:
     

    The point I have been trying to make over the last week (that has clearly not been heard!) is that we are already seeing the benefits of the eurozone’s plans to defuse the debt contagion and crisis in the form of lower (in certain cases, much lower) sovereign bond yields.
    It is why, coupled with the dour investment sentiment and improving high-frequency domestic economic statistics, I have been expanding my net long exposure.
    I am fully aware of the structural problems of a debt-laden European economy (who isn’t?) and the disparate interests of the 17 members of the EU that is a headwind to a cohesive policy aimed at stabilization of the crisis. But the underlying problem in the eurozone is well-known by now, and quite frankly should have been a cautionary sign to market strategists a year ago and six and three months ago, as they would have avoided many of the stock market’s problems in 2011.
    As CNBC’s Steve Liesman quite accurately and succinctly said last week, financial calamity occurs when the problems (and depth of the consequences) are not known, not when the problems are universally known.
    The eurozone Cassandras are out in droves now, supported by an ailing stock market, Draghi’s hard line and Lagarde’s ominous rhetoric. But so were the U.S. Cassandras out in droves during our domestic bank, debt and financial crisis of 2008-2009, yet much of those threats were overcome with aggressive policy — and aggressive policy is inevitable in Europe, as the tension is kept on the weaker members of the EU until they respond responsibly in a fiscal sense.
    And, already, as measured by lower sovereign debt yields, policy is having a positive impact.
    The perma-bears missed the March 2009 generational low (666 in the S&P 500). Throughout the market’s ramp over the past two and a half years, observers such as Nouriel Roubini have been in denial, wearing blinders that block out the recovery in stocks, and they have been very wrong in expecting a U.S. double-dip.
    I am sorry, he and others plainly screwed up.
     

    Change is coming in Europe, and in the fullness of time, the aggressive policy employed in the U.S. three years ago will land on its shores.
    In the meantime, unusual value in stocks has developed, and I am exploiting that opportunity even as the stock market’s tone is terrible and as most classes of investors run for the hills and de-risk.
    Is it painful to watch stocks reverse lower every day over the last week of trading? Of course it is. But no one ever said investing should be easy.
    Remember: Bull markets are borne out of poor economic news, uncertainty and dour investor sentiment.
    A dispassionate accumulation of stocks is what I believe to be in order now.

    Position: Long SPY

     

    Douglas A. Kass
    Seabreeze Partners Management Inc.

  21. stjeanluc

    FAS Strangle Experiment – Closing the 53 Put from yesterday for a 58% win. I’ll open another strangle later today. 

  22. roro

    what was that 100 point pop on the Dow? up to 12,010!??

  23. Phil

    Good morning! 

    80.14 – that’s the story of the morning.  I doubt the Dollar will fail to hold 80 on just this but it’s a start and we’ll see how today’s 5-year auction goes ($35Bn being borrowed on your behalf today) at 1pm. 

    Minn Fed Gov Kocherlakota is the guest on CNBC this morning and he’s a bit of a hawk but Lacker is worse and we got him out of the way yesterday.  Of course the Fed wants the hawks out ahead of the 5-year note sale and tomorrow they need to peddle 7-year notes but then we are free and clear to ditch the Dollar into the Holidays.

    Thursday morning we have the GDP report at 8:30 – so that should be fun!   

    We had nice housing numbers this morning and retail sales were decent, with traffic shifting to smaller stores:  

     ICSC Retail Store Sales: +3.4% W/W, vs. -0.1% last week.+4.6% Y/Y, vs. +2.9% last week. The giant shopping surge came as consumers race to finish their holiday shopping although the report mentions "consumers are still behind in their shopping which points to strong gains in the ongoing week".

    Redbook Chain Store Sales: +3.4% Y/Y vs. +2.9% last week. "The moderate growth do not confirm the enormous strength seen earlier this morning in ICSC-Goldman’s report". 

    Also, for me, the best news of the day is that GOP voters may not be completely insane

    That’s not a poll, that’s InTrade betting but those guys are GOOD!  

    So, we’re back where we started from yesterday morning and back to looking at the little squeezy pattern forming in the Dow, S&P, etc between the 50 dma and 200 dma so we’ll simply continue to watch our lines and pick up a few bargains here and there but we didn’t chase yesterday’s move down and we’re not going to chase today’s move up – we need better reasons than this to pull our cash out from under the mattress!  

    Tuesday’s economic calendar:

    7:45 ICSC Retail Store Sales

    8:30 Housing Starts

    8:55 Redbook Chain Store Sales

    1:00 PM Results of $35B, 5-Year Bond Auction

    Notable earnings after Tuesday’s close: CTASJBLNKE,ORCLPAYX 

    At the open: Dow +1.43% to 11935. S&P +1.53% to 1224. Nasdaq +1.72% to 2253.

    Treasurys: 30-year -0.62%. 10-yr -0.3%. 5-yr -0.15%.

    Commodities: Crude +3.2% to $97.06. Gold +1.19% to $1615.65.

    Currencies: Euro +0.98% vs. dollar. Yen -0.32%. Pound -1.1%.

    Market preview: Strong U.S. home building, a successfulSpanish debt auction, and happy German consumers and businesses help send EU shares and U.S. futures higher, with S&P +1.4%. AT&T-0.3% after giving up on T-Mobile but Sprint jumps 6.5%. Following earnings, Navistar +6% and Jefferies +6.7%, although Red Hat -9.2.Later: Nike, Oracle earnings.

    Bank shares move higher premarket, boosted by favorable news from Europe (III) and a strong quarter from Jefferies. BofA (BAC) will be watched after yesterday’s close just below $5, a mark beyond which some money managers might have to sell the stock. Will the bank’s defenders – including big institutions such as BRK.A, JPM and C – be able to reclaim the $5 handle? BAC +2.5% premarket. 

    Reuters’ Scott Barber provides a little perspective on the housing starts beat. Does anybody have a microscope?

    Bill Gross posits the Fed’s ZIRP may be doing the oppositeof what it intends by de-levering instead of relevering the financial system. One example: At  current yields, money market funds lose money (ask Chuck), assets decline, and system-wide leverage is reduced. Gresham’s law needs updating from "bad money drives out good," to include "cheap" money as well. 

    Sill think the new rescue didn’t have the desired effect?  The cost of Spanish short-term borrowing falls sharply, as Spain sells €5.64B ($7.38B) of 3-month and 6-month bills. The 3-month debt carried a yield of 1.735%, down from November’s 5.11% average. The 6-month debt had an average yield of 2.435%, down from 5.227% in November.

    As mentioned yesterday, the ECB may talk hawkish, but the expansion in its balance sheet says otherwise. The acceleration over the past few months looks like a chart of the S&P 500 on one of those days when a "Europe is saved" rumor hits the tape at 3 PM ET.

    Jean-Pierre Jouyet, the head of the AMF – France’s securities regulator – says it will take a miracle for the country to retain its AAA. His remarks carry a bit of politics as he is seen as close to the country’s opposition Socialist party, but congrats to France for making a rating cut a fait accompli - at this point, the actual move won’t be news.

    Risks to the eurozone’s financial system have risen "substantially" in H2, the ECB said yesterday in its twice-yearly Financial Stability Report. Contagion from the eurozone sovereign debt crisis could hit other countries in the EU and across the globe.

    Confidence in Germany’s business sector unexpectedly improved in December as the Ifo index rose to 107.2 from 106.6. The slight uptick, though welcome, does little to change the outlook for Germany’s economy.

    House Republicans scupper plans for a direct vote today on the payroll tax cut, and instead will hold a vote this morning on whether to call for a conference committee with Senate negotiators to work out a compromise on the legislation. 

    More Yentervention planned: Japan is stepping up its efforts against the appreciating yen, with plans to raise the issuance limit for bills to fund currency intervention to ¥195T ($2.5T). Finmin Jun Azumi says the increase will allow him to take "decisive" actions when needed. The yen is little changed this morning, at 77.95 to the dollar.

    Barclays lines up an Overweight rating on the tech sector for 2012 as part of its equity outlook for the coming year. The firm takes a shotgun approach to find growth stories across the hardware, software, clean tech, and semi sectors. Favorite picks: AAPLCTXS,GLWQCOMTERTSLAALTR.

    The CEO of publishing house Simon & Schuster provides more evidence of how the Kindle (AMZN) and Nook (BKS) are upending the publishing landscape, stating e-books are expected to account for 17% of her company’s 2011 revenue – up from 10% in 2010. Nate Hoffelder expects Q4′s e-reader releases (IIIIII) to lead to another jump in e-book sales. 

  24. checho

    Phil,
    Shorting oil using the 97 line any good today?

  25. Phil

    Why has Research In Motion (RIMMstumbled so badly? Horace Deidu suggests it has a lot to do, ironically, with the company’s phenomenal success in selling high-end devices meant to deal with the technology constraints of the pre-iPhone era. This success fooled RIM to believing all was well even after the iPhone debuted, whereas less successful rivals quickly overhauled their strategies. (yesterday)

    Though Apple (AAPLscored a victory in its ITC battle against HTC, it may prove to be a narrow one. The ITC’s ruling (.pdf) only declared HTC to be infringing on a subset of claims related to one patent (USPTO filing) involving the formatting of unstructured data, and it’s generally believed HTC will be able to alter its phone designs so as to sidestep an April import ban (III). 



     

  26. stjeanluc

     

  27. stjeanluc

     

  28. stjeanluc

     

  29. stjeanluc

     

  30. exec

    Phil/Newt,
     
    What don’t you like about him???
     
    This should be good.

  31. Phil

    80.085 – look at FAS fly!  

    Volume/Rain – Can’t be right. 

    SWY/One – So you are left short the stock?  I’d sell the calls ($5.60) and wait for the dividend to take down the stock and then buy it back.  I assume that’s a success now that the premium was wiped out on the $17.50s so not a terrible thing at all.  If you want to get back in, the 2014 $17s are $5 and you can sell the $15 puts for $1.70 and the 2013 $20 calls for $2.70 for net .60 on the $3 spread with plenty of time to roll.  

    RUT rejected at 728, Dow at 12,000, Transports 4,950, NYSE 7,320, S&P 1,234.  These should all be tough retakes as the Dollar is also at probable bottom for the day, now 80.10.

    VIX flew down to 23.24 so all must be well, I guess.  

    CRM/Vsanka – I don’t like them in general but down 35% from the top is a tough spot to go short – especially when the markets are rallying.  

    Sorkin/Rustle – He should be ashamed of himself for participating in that farce.  He’s gone from being a respected journalist to being Colmes!  

  32. acobra65

    Phil/In-Betting
    AS the major news media outlets – the graph has IGNORED RON PAUL – maybe Ron Paul is the invisible line dark horse on the graph….. ??? My money is on Ron Paul in the Iowa Caucuses… LOL

  33. roro

    took the quick money, and put sell orders on the dollar back at this mornings entry point.
     
    nice hit to start the day
     
    thanks again.

  34. stjeanluc

    FAS Strangle – I am going for a 55/64 strangle today. I won’t be around at the end of the day so I’ll keep it open overnight and risk it. But for everybody else, the plan is to close the winning side again. Or both if FAS stay around the current price the entire day. 

  35. angelcur

    NEWT/MITT …they are completely insane there is no way MITT can win in a ntional election no way no how..gingrich is their only hope and hes no obi won..so its a win won for DOHbama..pathetic i wish hillary would challenge him..she is just great..sad..meanwhile resistance at 1230 i hope everyone got in around 1200 yesterday

  36. rustle123

    Election
     
    When push comes to shove, Obama should sail into a second term, the challenge is getting a Democratic Congress again so things can get done, and the Republicans are making that easier and easier for the Dems.

  37. yodi

    stjeanluc
    FAS are you trading the weekly or monthly strangle thanks

  38. Phil

    UCO/Rustle – Great call!

    EU/Pharm – The main point is they won’t dissolve the union and that’s the theory behind dumping the Euro to this level – that it will no longer be a liquid currency in the future.  If you don’t buy that premise, then why the huge discount to the Dollar because, as you say, we could just as easily let a state default as they could let a country default but it doesn’t change the monetary union, does it?  

    By the way – Goldman’s "Global Themes and Risk Report" for 2012 – a good thing to browse through.  

    BAC/Jabob – In 2014 they just have $2 and $3 calls.  

    Your welcome Roro!  

    Kass/Rustle – That’s what I’ve been saying – at a certain point, panic fatigue sets in.  Once you know what the wall of worry looks like, it’s time to climb it.  

    FAS/StJ – Nice job on the strangle.  

    80.11

    Short oil/Checho – Off $97.50 or on a cross below $97 (/CL), it’s worth a toss but with very tight stops.  After inventory tomorrow is probably the best time to short this week but, into the holiday weekend, they will probably do their best to jack it up.  

    FAS Money/StJ – Going to be a tight one!  I’d say let’s take advantage and sell a Jan $68 call for $2.30 and put a stop at .80 on the short Dec $62s (now .68).  

    AA Money/StJ – $8.76 is going to be a nail-biter.  GS just downgraded aluminum forecast for next year but obviously people knew it was coming so now it’s a buy on the news event I think…

    IWM Money/StJ – Looks good to me.  

    RIMM managing to go lower despite the rally. 

    Newt/Exec – I hope you are kidding.  I certainly don’t have time for that.  

    Ron Paul/Acobra – That chart wasn’t inclusive, just a Newt vs. Romney thing.  

    AAPL $390! 

    Good job Roro – proper exit.  

  39. scottmi

    BAC 2013 spread/Phil – no 2/4 spread for 2013 that I can see, but is for 2014. Did you mean a 2.5/4 spread for 2013 or a 2014 2/4 spread?

  40. bobhu

    Good morning, stjeanluc, I was away for few weeks, can you tell me when did you guys start to trade IWM BCS and TNA/TZA short option so I can go to check out the details and can I get in now?   TIA.

  41. spiyer

    Good call, Phil.
    I still have shorts. Do I cover or let it ride for a day or 2

  42. scottmi

    BAC – ok, the 2014s..!

  43. David Ristau

    Sold UCO stock this morning for 7% gain…blew through my target of 38.00 from yesterday and opened up well above it. Hope some took advantage of that recommendation from yesterday.

  44. stjeanluc

    FAS Money – Selling the Jan 68 Calls (now 2.45). Setting a stop at $0.80 for the Dec4 62 Call (now 0.78)…. 

  45. Pharmboy

    Phil – unfortunately, they will kick out someone from the union…that is the very difference of the two unions.  I never thought it may be dissolved, but it will be altered….and that is what I am preparing for.  Again, if your sister kept going into default, would you rescue her every time?  Once, maybe, twice, hard to say, third time …. no way.  Either way, they need to let Greece default, that was my other point.

     

    Nice short squeeze.  Staying long oil and pharma/biotech.  Dumping all other longs.

  46. yodi

    stjeanluc

    yodi
    December 20th, 2011 at 10:20 am | PermalinkIgnore this user
    stjeanluc
    FAS are you trading the weekly or monthly strangle thanks

  47. lflantheman

    AAPL traders:   You should have sold by now the Jan 380 calls for 18.50 and 1/3  (5) of the Jan 390 calls for 13.00.   We will be buying some calls back later this afternoon.  You now hold (if you are in the 50K portfolio) the jan 390/385 bull puts spread (10) and 10 of the July  390/415 bull call spreads plus 10 remaining Jan 390 calls.  stj …….    my  Jan 380s sold for 18.50 and the 5 Jan 390s for 13.00.  

  48. stjeanluc

     

  49. dmoroz

     I did take advantage of the UCO only with USO. Thanks David R. 

  50. stjeanluc

    IWM Money / Bobhu – We started trading that portfolio on 11/14. You can find the list of the trades in the portfolio spreadsheet:

    https://docs.google.com/spreadsheet/ccc?key=0Anwf9je9MizqdGQzN2NZUjNfdjhrbjFwWlc1eDYtWnc

    Cut and paste that link in your browser as clicking on it doesn’t always work! There is a tab for the IWM Money portfolio. 

  51. stjeanluc

    Thanks for the information Iflan. I’ll update the spreadsheet. 

  52. pat_swap

    Phil,
    TLT making some nice move down. Was planning to take in a short position yesterday but did not do it  – just wanted to be cashy. Do you think it makes sense to chase them down with the 5 year and the 7 year auction?
    thanks

  53. jromeha

    Good morning Phil – I was thinking of adding RIG to my Kabul set it and forget it portfolio (along with csco and some of Pharm’s biotech picks). Was thinking of buying the 2013 or 2014 $32.5 or $35 calls and selling front month out of the money calls to lower my cost basis. Your thoughts?

  54. stjeanluc

     

  55. matt1966

    Morning folks! 
     
    All hail Kim Jong Uhh!  He’s fixed out market!!   ufb.

  56. mampcsA

     Yay on TLT!!! Persistence pays (along with adjustments off course). That’s the greatest thing i learnt from Phil (along with always having a balanced portfolio). Thanks Phil.

  57. stjeanluc

    FAS Money – The Dec4 62 Calls just got taken out at $0.80…. 

  58. Pharmboy

    So, competing money for equities or more bonds…..now, if equities continue to go up, why would anyone buy these?  When they need bonds to go….then they pound the market (competition for funds).  Yes, things are going down on low volume, but the up volume is just as anemic.  Retail is rushing in for the Santa rally……

  59. yodi

    stjeanluc
    I am sorry to trouble you again with my question.

    yodi
    December 20th, 2011 at 10:42 am | PermalinkIgnore this user
    stjeanluc

    yodi
    December 20th, 2011 at 10:20 am | PermalinkIgnore this user
    stjeanluc
    FAS are you trading the weekly or monthly strangle thanks

  60. Pharmboy

    Housing starts was almost entirely rental units…..and last months were revised down.  Invest in REITs……although NLY & CIM reduce their dividendz…..

  61. Savi

    yodi—-weekly

  62. stjeanluc

    FAS / Yodi – No problem. Weeklies is what I trade for the quick decay! You can see all the trades on the spreadsheet. I just posted the link above for bobhu. 

  63. alik

    Euro went down not on expetations of a dissolution of EU but on expetations of a massive quantitative easing by ECB ( that was supposed to start today) – similarly to how US $ went down
    during the first stages of QE 2.

  64. yodi

    ^Thank you savi and stjeanluc

  65. lflantheman

    AAPL port:    Place an order to sell 5 more of the AAPL Jan 390 calls for 16.00 or better.    Remember, we will be buying back calls at EOD. 

  66. JRW III

    Good morning, nothing new……………….

     

    IWM  71.87,  72.15,  72.56,  72.98,  73.24,  73.61,  74.02,  74.62,  74.80  and  75.06

    I have descending trend lines at IWM 72.96 and 72ish; the lower should hold.

    I expect a Santa Rally to begin later this week or early next; this from Bespoke:

  67. JRW III

    And as I said 2 weeks ago IWM 73.61 is a key level so please respect it as such !!

  68. l4real

     Pharm,
    Which REITS would you suggest? Also would you buy them outright and sell calls against them?

  69. stjeanluc

    Santa Rally / JRW – I saw that Bespoke chart but looks more like we’ll get a Santa rally, a Santa crash, a Santa rally and a Santa crash in the next week!

  70. yshenhar

     GO AA!

  71. Pharmboy

    SBRA – is the only one I own – senior living!  NLY is fine…but invest in ones that pay their dividend on income rather than issuing new debt or share dilution.

  72. TheChaser

    I don’t know about USO and UCO but the futures were up thousands per contract since Phil’s call yesterday.  Why don’t we play these more often and how do you know when it’s the right time?  Stjeanluc, do you trade futures and would it be something we could track?

  73. kustomz

    If they cant stop the $ then /ES rich by at least 10 here..1218 possibly

  74. exec

    JR/Key
     
    Are thinking a breakout above triggers start of Santa

  75. exec

    Phil/Newt,
     
    I just sent him 2 million bucks to shore up his campaign.

  76. rustle123

    Looks like the new Batman movie has an OWS message, great trailer, can’t wait to see it:
     
    http://insidemovies.ew.com/2011/12/19/the-dark-knight-rises-trailer-explosive-scary-political/#more-56090

  77. exec

    Wow…….JR.….did you just jump in?

  78. exec

    What the hell was that?

  79. l4real

    Phil,
    Do you have any bullish spread ideas for IWM, XLF, NLY and CVX, in case we do have a nice short term rally before the storm?

  80. Phil

    Wow, nice burst higher and without the benefit of the Dollar failing 80, too.  

    BAC/Scott – Sorry that was 2014 – it’s the play from yesterday’s chat.  

    Shorts/Spiyer – It depends on why you have the shorts.  Directionally, the bear premise is shot but certainly there is still a need to hedge bullish bets at the moment. Same answer as yesterday really – we don’t do anything based on a one day move, one way or the other.  

    UCO/David – Very nice.  

    52M is not very exciting volume at 11:30. 

    Sister/Pharm – This is once.  10 years from now, we’ll talk about whether they’ll do it AGAIN.  

    TLT/Pat – I love that silly thing!  I wouldn’t chase it now, it’s the kind of thing you want to take a chance on and then press with rolls until it pays off so we chase it UP, not down.  Don’t worry, there will be many more opportunities to short TLT when it gets excited – at least until Pharmboy capitulates!  

    RIG/Jrom – Still a lot of choppiness ahead but I do like the 2014 $30 calls for $13, selling the 2013 $40s for $6.50 and the May $35 puts sold for $2.60 for net $3.90 on the $10 spread with lots of time to roll on both ends.  If RIG heads lower, the 2013 $25 puts are $2.10 so, as long as you can make that roll for $1 or less it’s not a problem.  If RIG heads higher, you have a $2.60 contribution from the short puts to put towards rolling the short calls to a higher strike.  

    You’re welcome Mampcs!  

    Bonds/Pharm – That’s why, ultimately, the bonds will fail.  There isn’t enough money to go around and that will leave them no choice but to bite the bullet and inflate.  

    EU/Alik – That is not true.  It is absolutely impossible for the EU to catch up to us in money supply expansion in the foreseeable future.  Currency values are, by definition, relative and the Euro was not at all priced on relative supply – it was a demand panic that knocked them down and that was based on nothing but irrational fear.  On what basis could the Dollar possibly rise 10% in two months – name any policy the US has enacted that would justify that move?  There are 3 times more Dollars in circulation than Euros.  Did the ECB increase the amount of Euros by 30% in 60 days?  Even if they did (of course not) the Euro is only part of the Dollar basket and you can see by the relative Dollar/Yen valuation or Dollar/CHF or Dollar/AUD or Dollar/CAD that this had nothing at all to do with actual Dollar strength and only with Euro weakness.  Our Fed has created AT LEAST $7Tn and possibly $29Tn in the last few years – a 30% expansion of our money supply.  The EU can’t touch that kind of figure.  

    80.30 and we didn’t go down – very strong sign.  

    Futures/Chaser – Very fun but very dangerous, always keep that in mind.  

    Newt/Exec – I’ll remember to call you when I’m building my war chest!  

    Batman/Rustle – Can’t wait! 

  81. kustomz

    exec…signs of an illiquid market…maybe

  82. Phil

    Speaking of oil (/CL), just hit $97.50 target for the quick short!  

  83. Phil

     

  84. kdubbs

    RIG is quite tempting at this price.  Any reason not to do a medium term buy/write here.  I’m thinking 6 months but would it be better to do the write for a year out?   I’m assuming they have good defense lawyers…

  85. kdubbs

    See above? lol

  86. David Ristau

     

    Went long on GBX for our Earnings Alpha Portfolio. We are looking for a secondary breakout above 23.00. The stock could fly into earnings at the beginning of January. 5% stop loss. Target #1 is 2% on top. Target #2 is 5-10% gain.

  87. enni_82

     Google dumping more money into clean energy… Now around $915 million. Maybe Apple should use some of that cash and do the same!
    http://googleblog.blogspot.com/2011/12/ending-year-with-another-clean-energy.html

  88. Pharmboy

    FWIW (From Main Line Investors): We got a Hindenburg Omen observation Monday, December 19th, the first one in a year. This is not an official H.O. as we need two observations within a month to have an official H.O. But this is the first, qualifying in all respects. The thing about H.O.’s is, we have only had one stock market crash in 25 years without one, and that was the crash this past summer. In every instance of a stock market crash since the mid-80′s, an H.O. was on the clock, warning of the increased possibility of a stock market crash. The presence of a confirmed H.O. is not a guarantee of a coming stock market crash, but it puts us on high alert for one, and raises the odds of one occurring. The point of the indicator is that it tells us something is very wrong with the internal condition of the stock market, something very unhealthy. So we will be watching carefully for the second observation over the next few weeks. It would make sense to get one now, as wave 3-down starts.

  89. stjeanluc

    Gotta to get out of here now… The FAS Strangle looks OK now and the Put side is looking like the winner today. In any case, I am keeping the entire trade open overnight (risky though!).

    Iflan, can you summarize the trades you are making starting with the last trade at 11:19 after the market close and I’ll update the spreadsheet tonight. Thanks. 

  90. winningdean

    Phil, thank you for the TLT trade adjustments yesterday. I closed the weekly 123 Put for $1.32 early in the morning via sell into the excitement lesson, obviously it was early but a profit is a profit. Still have the short Jan 123 Call which I sold it at $2.74 and is now at $1.755. Do you think I should just take the money and run at this point or hold out for a while? Overall, I am down in the trade with rolls and adjustments. Thanks again!

  91. kinkistyle

    4-week T-Bills auction went for a yield of 0.00%.  NICE.

  92. Phil

    10:00 AM On the hour: Dow +2.01%. 10-yr -0.36%. Euro +0.89%vs. dollar. Crude +2.84% to $96.72. Gold +1.17% to $1615.35.

    11:00 AM On the hour: Dow +2.19%. 10-yr -0.41%. Euro +0.86%vs. dollar. Crude +3.49% to $97.33. Gold +1.24% to $1616.45.

    11:46 AM Europe closes sharply higher as plummeting sovereign yields give rise to the idea the ECB’s eased collateral requirements combining with longer-term loans is QE, a bank capital replenishment operation, and the crisis-ending bazooka all rolled into one. Stoxx 50+2.6%, Germany +3.2%, France +2.6%, Italy +3%, Spain +2.3%, U.K.+1.1%.

    Expectations for tomorrow’s results of the ECB’s first offering of unlimited 3 year loans (LTRO) are growing exponentially, with some forecasts for the take-up rising as high as €600B. Alongside those expectations are hopes this will be the crisis-ending bazooka as bankers take the near-free money and play the "Corzine trade" by buying sovereign paper. (see also

    Morgan Stanley’s Huw Van Steenis gets a good idea of the result of tomorrow’s ECB LTRO by looking at the amounts coming due (that need to be rolled) on existing loans. He sees a number of €290B-€360B, with any amount above that likely being used for the vauntedcarry trade that’s supposed to rescue EU sovereign bond markets.

    12:00 PM On the hour: Dow +2.35%. 10-yr -0.43%. Euro +0.58%vs. dollar. Crude +3.11% to $96.97. Gold +1.11% to $1614.45.

    Minneapolis Fed chief Kocherlakota sticks to his script, telling CNBC he’s not sure monetary policy can do a lot more to cure high unemployment as the reasons for it are structural. Kocherlakota has been occasionally critical of Fed easy money policy, even dissenting at a couple of FOMC meetings this year. He will no longer be a voter in 2012.

    ATTN Pharmboy!  Like Wile E. Coyote once he’s run off the edge of a cliff, anybody long Treasurys may not want to look down. Mike Riddel points to the staggering divergence between Citigroup’s Economic Surprise Index and 10-year yields. With the economy doing okay, any signal Europe has stopped deteriorating could send Treasury prices plummeting

    Felix Salmon takes a healthy swipe at the cavalcade of execs fighting back against the attack on wealth – highlighted most dramatically by Home Depot-founder Bernard Marcus’ ill-received retort to protesters of "who gives a crap about some imbecile?" Salmon on the 1%: "The fact is that the ultra-rich really aren’t productive, and instead mostly collect rents from people who are. This is what capital always does, of course: it buys labor (some people call that “job creation”, even if the jobs being created are mostly in China), and then extracts dividends from it."

    Today we are ignoring Fitch:  Fitch makes the obvious official, warning the AAA rating of the eurozoe’s bailout fund is at an increased risk of being downgradedafter the agency recently revised France’s outlook to negative. Fitch’s comments follow a similar warning from S&P earlier this month.

    U.K. Shuns Crisis Aid as Europe Channels $195 Billion to IMF. Europe bolstered its anti-crisis arsenal, channeling 150 billion euros ($195 billion) to the International Monetary Fund as the European Central Bank widened its support for sagging bond markets. Four countries not using the single currency also pledged to add to the IMF war chest while Britain refused to commit, in a sign of the difficulty of attracting outside cash to ease the euro area’s home-grown debt burdens. The U.K. will “define its contribution” in early 2012, euro finance ministers said in a Brussels statement after a conference call yesterday. The IMF track is “obviously a small-scale solution,” former UBS AG Chairman Peter Kurer told Maryam Nemazee on Bloomberg Television’s “The Pulse” program. Germany continued to oppose an early decision to raise the limit of 500 billion euros on overall emergency aid. European leaders plan to tackle that question by March.

     U.K. to EU, IMF: Drop Dead (Bloomberg)

    German Debt Sales Set to Swell as Economy Falters: Euro Credit. Germany is poised to overshoot its 2012 borrowing target as the growth outlook in Europe’s largest economy worsens and the cost of bailing out banks and troubled neighbors increases. As the euro region’s debt crisis enters its third year, the German economy is buckling. S&P said Dec. 5 it may strip the nation of its AAA rating and demand at a bund auction last month fell to its lowest since 1995. The debt agency is scheduled to reveal next year’s funding plans this week.

    Just Don’t Call It a ‘Bailout’. European Governments Devise Unusual Measures to Prop Up Their Ailing Banks.Governments in Europe are tying themselves in knots to prop up their banks, desperate to blunt the cost and embarrassment of a fresh wave of taxpayer-funded bailouts. In Italy, for example, the government is encouraging banks to buy public properties that the banks then can use to borrow money. As part of a broader deficit-reduction program in Portugal, the government essentially is borrowing money from bank pension funds and could use some of the funds to help state-owned companies repay bank loans. Governments in Germany and Spain also are using unorthodox measures to support their ailing banks.

    Brian Moynihan (BAC) on why he sees another year that’s "a grind" in the economy: “Never have middle-market and large companies been as profitable, had as much cash on their balance sheets, had as much availability on their lines, but they haven’t done anything with the money. They don’t feel the certainty of opportunity to make big investments.”

    Home builders rally on news that housing starts hit their highest annual rate since April 2010, and reinforcing recent numbers showing gains in builder sentiment and increases in sale prices: LEN+4.9%DHI +4.8%PHM +7%TOL +5.4%RYL +4.6%KBH +5.5%. - They never mention HOV, up 15% today!  

    Next!  Hedge Fund Alarm Bells Are Ringing Over China. The past few weeks have seen China loom large in the nightmares of many hedge fund managers still smarting from a less-than glory-filled 2011. Concerns are rising for the global outlook over the increasingly negative economic signals emanating from the country. As the Emerging Sovereign Group, a $1bn hedge fund backed by Julian Robertson and half owned by Carlyle, one of the world’s biggest private equity groups, told its clients in a recent note: “[we have a] gathering sense that the next act of this rolling global debt crisis may well play out in the East.”

    China Governments in Hole as Land Sales Plummet. Property market slowdown is chilling China’s local governments. The development-ready land market, long a reliable revenue source for local governments across China, has suddenly turned cold. 

    Crude futures (+3% to $96.67) rallying after being oversold but also receiving support from a variety of sources: the strong housing data, unrest in an oil-producing province of Kazakhstan, and a meeting of world leaders in Rome to discuss Iranian oil sanctions.

    Why Oil Prices Are Killing the Economy.

    What inflation?  AK Steel (AKS +5.6%says it’s increasing its spot market base prices for all carbon flat-rolled steel products by $50 per ton, effective immediately with all new orders.

    I don’t see any inflation, do you?  Default Swaps Jump Most in BRICs as Gandhi Subsidizes Food: India Credit. India’s plan to boost food subsidies by 50 percent is threatening efforts to cut the budget deficit, extending the biggest jump in bond risk among the largest developing nations. The cost to protect the debt of State Bank of India, seen as a proxy for the nation, against non-payment rose 234 basis points in 2011 to 395 basis points, the most in three years, according to data provider CMA. 

    Barclays believes oil service shares may stand out as outperformers in 2012 and beyond as the industry begins its next "mega cycle." As the world becomes increasingly short energy and hydrocarbon prices rise further, "oil services companies are the bottleneck and likely to capture the economic benefit of this unfolding trend.” Most attractive stocks: BHIHALSLBWFT. - What about RIG?

    Interesting idea:  Michael Glickstein calls for formally splitting Barnes & Noble (BKS -2.2%) into three separate firms to create shareholder value to the tune of 800% upside potential. He sees the current configuration of the company a "blind spot" for investors, with three distinct stories – pure-play e-reader technology, secular growth in the college bookstore division, and capital cycle opportunity – being held back by sitting encompassed within the same stock.

  93. Phil

    Green Mountain Coffee (GMCR -1.3%) isn’t joining in on today’s rally after Piper’s Nicole Miller Regan trims her FY13 (ends Sep. 2013) EPS estimate, citing slower-than-expected sales growth for Green Mountain’s K-Cups. However, Regan believes sales of Starbucks’ (SBUX +3.1%) Via single-serve coffee product are performing well, which leads her to lift her 2012 EPS estimate for the coffee chain. (previously)

    When Oracle (ORCL +1.6%) delivers its FQ2 report today, investors may want to keep an eye on information provided about sales of high-end Exadata systems: JMP’s checks suggest Oracle is pushing its sales team hard to move Exadata boxes. Meanwhile, Piper’s survey of 41 Oracle partners indicated their FQ2 sales were only 1.5% above plan – a level that suggests decelerating growth. (yesterday)

    Phones that translate conversations and sensors that enable the mental control of objects are on IBM’s (IBM) annual tech forecast list. Other than being a PR ruse, says Quentin Hardy, the list is worth looking at for what IBM says about itself – it doesn’t develop these techs but it does make the necessary network software and services. 

    On a day when everything is rising, Research In Motion (RIMM -1.4%) continues its "long, slow death spiral," falling to new eight-year lows. As Therese Poletti puts it: "It may take awhile, but RIM seems to be clearly headed in the same direction as Palm, towards eventual extinction, unless its board of directors does something soon to change its direction."

    Today’s WTF headline: As Banks Start Nosing Around Facebook and Twitter, the Wrong Friends Might Just Sink Your Credit (BetaBeta)

    Alarm as Dutch lab creates highly contagious killer flu (Independent)

  94. Pharmboy

    SGEN – Buying more stock in here, selling the March 17.5 Calls.  I (and mrm) have the 20/15 bull put spread, so I will not be selling puts….

    VRTX – bouncing off the 50d MA.  Waiting to buy more and selling some puts. 

    DEPO up on nabbing ALXA’s CFO…..hum, guess no one wants ALXA.

    IMGN signs a nice deal for their TAP technology.  MITI getting more an more love.

    AMLN holding b’w 10 and 11, nice for our C/P sale….PLX remains under pressure, but consolidating nicely.

  95. Pharmboy

    Oh Phil…U R so funny….

    I stood by my 2% call on T-bills, I stand by my 1.5% call on T-bills, and I will wait for the 1% call when we hit my 1.5% call, then we can talk about shorting TLT for a sustainable time.  Gold is NOT participating!  You always note sell into the excitement….that I am doing!

  96. Pharmboy

    From Pike Trader – Bull flag on the dollar…81.5 is the target.

  97. bobhu

    Phil, I got SCO Jan, 12 $36/44 BCS and short $34 put, should I close the $36/44 BCS and let the $34 put expire?  TIA.

  98. roro

    so, we are back to where i shorted the DOW off the FOMC at 12, 080. it paid to take the money and run.
     
    DOW is streaking up to 12,100 already.

  99. jerconn

    Pharm, do you have an upper limit on SPY before your projected "fall off the cliff"?  Or it’s just a time thing, as in next week…

  100. Savi

    Phil—any adjustment to theTZA  Jan 30/39 bcs @ net 2.17 dr—
    Thanks

  101. angelcur

    BAZOOKA/ if that were true their indices would be up MUCH more and credit gauges wouldn’t be mixed…with some key ones worsening!

  102. Pharmboy

    Jer – like JRW, I am not into predicting, just seeing the waves of color (undrugged, of course).  IF there was QE in the EU, gold would be rocketing – why is it not?  No, they are selling their gold (or did already).  China, the same story and still no info on the pegging to the dollar – why? 

    I am a bear right now, and have been for several years.  I admit, I have not done well being a bear, but my time will come.  Volume is horrible on the way up, little better on the way down, but overall, this is robot against robot.  I am very careful being long, as again, one morning, we will be down big time.  I don’t want to find myself wiped out by governments inability to make a decision – whether it is the EU or US. 

    The printing presses will not start until someone else falls over that Wiley cliff…then and only then, will I start to "believe".  This year is over for many, and WS needs a golden egg, no matter how small to pat themselves on the back and say good job.  We are barely ‘up’ for a year of work, wages are compressed, unemployment is horrid, land grabs by the rich…etc.  What happens when the printing press gets going?  Buy land and real estate now for depressed prices, lock in low rates then inflate the hell out of it all – that is how to do it. Game on!

  103. rustle123

    Volume this week will be horrible in either direction we were to go.  One of the lighter trading weeks of the year.

  104. Pharmboy

    Oh, and to answer your queston – 1270, then 1300 then 1320 if they ‘can’.  1270 is a good target.  WOW, big SPY shadow bar to 120.28.

  105. Phil

    Bullish ideas/L4 – We did FAS 10% ago, I hate to chase XLF on a 3% up day.  NLY is not a short-term play, it’s a dividend play and lousy for options trading, VNO might be a way to go, maybe March $80 calls at $2.35, whcih can be offset with the sale of the $70 puts at $3 for a net .65 credit and good upside potential if we really get going.  CVX I don’t like as oil is still too high without QE3 over here and you can play the RUT back to 800 with a TNA Feb $46/51 bull call spread at $2, selling the Feb $30 puts for $1.80 for net .20 on the $5 spread.  

    RIG/Kdubs – Medium term, I wouldn’t risk it because they have all the legal BS and it won’t go away quickly and you won’t have time to recover from a set-back. 

    Now we’re at the point where this rally is looking a bit fake.  Volume just 71M at 1:15 on the Dow and we’re up on a flat Dollar 80.23 and oil stopped going up ($96.34) and gold too $1,617.  Just a little fake, Fake, FAKE to me but there may be a bit of a short squeeze after yesterday’s head fake.  Or, as Pharm notes, something is very wrong with the internal conditions…

    TLT/Winning – It depends.  If you were in over your head and couldn’t stand the pain – then be glad to get out alive.  If it was a sensible bet with sensible adjustments, then nothing happening today has changed our feelings that TLT is way too high at $120.   The 5-year auction was not strong at all but they will certainly do whatever they can to keep TLT high until tomorrow’s 7-year auction but, after that – why spend effort propping it up when there’s no auction to protect for another couple of weeks?

    SCO/Bob – I think the $34 puts are safe enough but it would have been nicer if you closed the spread yesterday.  Rather than pay the $44 caller $2 to buy him out early, I’d take the April $46/56 bull call spread for $2 and cash out the $36 calls for $5.25 so you get $3.25 in your pocket and a spread that should hold up and, if oil flies up and knocks SCO lower, you can roll the spread lower cheaply and set up for the next nice dip.  

    Back to test $97.50 on oil (/CL) again, still a good short if they fail but a .50 run last time means .25 this time should make us very happy.  

    DIA FRIDAY $118 puts at .63, 10 in the WCP to lock in some gains. 

  106. nicha

    Iflan/AAPL port – $390 calls sold for $16. Now $15.50.

  107. mrmocha

    This is the time of day where They often dip things down to hit my tight stops and then turn and run again, we’ll see how the script plays out this time…

  108. JRW III

    We will either bounce North off the 1 minute SMA (200) or fail it in the next 10 minutes or so !!

  109. Phil

    $97.50 on the button!  

  110. kallenjr

    Phil,
    DIA 118 Puts? Only date I see in ToS is Fri 12/30 (Dec5). Am I missing something? 

  111. Pharmboy

    ESPN has Pardon the Interruption, SIRI has Opie & Anthony….PSW has Phil & Pharm! :)

  112. kallenjr

    Phil,
    Assume you are buying DIA Dec5 118 Puts at 0.63 to take advantage of market being up as opposed to ‘locking in gains’ (sounded like we are selling Puts that we had bought earlier).

  113. mampcsA

     Phil, do you still feel TLT has support at 118 due to the Fed’s operation Twist?

  114. mrmocha

    Pharm, et al - as I’ve documented here, I’ve been doing well selling SLW calls on mid-day pops and closing at EOD.  It looks like we could do the same with ARIA - selling ARIA calls at 1pm each day and buying back at close would have been a winning trade in 7 of the last 10 days, FYI.

  115. jerconn

    Pharm, thanks for the detailed analysis…I understand the macro picture only in the vaguest terms, what I hear is that they are funding Europe "thru the back door," whatever that means (the IMF, I guess) – but could it be that since it’s not the same direct obvious way as the US (the Fed prints) therefore it doesn’t create the same waves and therefore gold is not rocketing, etc…so maybe they have more of a "stealth rally" over there…anyway the takeaway is to buy insurance – what do you suggest at this point?

  116. yodi

    Phil the other day you were talking to one member about the little seed of HOV Can you see the first little leave today?

  117. angelcur

      cnbc reporting new fed big bank rules

  118. angelcur

    ‘cheat every other day’
    ‘lie every other other day"
    ‘practice spankin bankin 101′

  119. Phil

    DIA/WCP, Kallen – You are right, they were 12/31 puts, not Friday.  

  120. Pharmboy

    I like Phil’s EDZ hedges for protection.  I am in the SPX 1200-1150 and SPY June 120-115 P spreads.  UP on them b’c of the vix falling and eating the premium from the lower dated option. I also have a ton of 1100-1000 SPX June puts as well.  The rest is biotech, oil and a few bond funds.

  121. 1020

    The Prez is pissed….
     
    I don’t blame him.

  122. zeroxzero

     Pharm:  I have to disagree; the EU is engaging in QE.  They are going about it differently: putting money into the banks while imposing "austerity" on the GIIPS to shrink their bloated public sectors[s] — the right hand giveth while the left hand taketh away.  This buys the support of the Germans, who have no intention of suffering inflation in order to pay GIIPS public sector workers, while willing to do so to prevent a GIIPS banking collapse, which would run up Germany’s tab much higher than 300-400 bp of inflation stretched over the next 5-10 years.  Gold is not a good measure of QE, because it is a yield-free, fear-driven purchase.  I look at basic materials and energy  -- and housing — all frothy at the moment, despite the fact that nothing has really been fixed. 

  123. Pharmboy

    I like the idea mrm – unfortunately I am not around due to meetings every day.  IMGN has been following that as well.

  124. kustomz

    trying to get .15 out of TZA is a real battle.

  125. cwan120

    Pharmboy,
    How do you play TLT (or equivalent)?

  126. jerconn

    Pharm – not sure why, but the spreads haven’t worked well for me, I prefer directionals so I buy SPY puts, but I thought a little earlier than June – how about March?  And what is the difference bet SPX and SPY – SPX doesn’t come up for me in Zecco…

  127. JRW III

    From Rustle earlier today:

    Quote of the day
    “Broke nations are being bailed out by a broke transnational organization [IMF] bankrolled by a broke superpower in order to save a broke currency.”
    MARK STEYN
     

    Eventually fundamentals DO matter !!

    Kathleen Brooks, London-based currency analyst at Forex.com,  wonders if  “this is the last ECB-fuelled swan song for the markets.”

    “Banks are trying to boost capital levels and de-leverage so why would they want to buy sovereign debt from the currency bloc when there seems no end in sight to the debt crisis?”

  128. exec

    JR
     
    How are you positioned?

  129. Pharmboy

    In part, yes zero, but it is not printing per se and they are using Gold as collateral.  Our Fed is ‘giving’ though…..

  130. Phil

    DIA/WCP, Kallen – Yes, it’s buying them, not selling them. We have 3 bullish positions and, rather than sell them into the excitement at what I think is a top, we protect some of today’s gains by covering with puts.  

    TLT/Mampcs – Yes, I think it’s hard for it to get below about $117.50 and maybe $115 but I don’t see them getting a real move down until the Fed goes away (which may be never).  

    There’s $97.25! 

    HOV/Yodi – A bit early to be counting leaves.  It’s a VERY long-term play, you have to wait for the whole housing market to recover, not for a one-day market rally.  

    Obama ain’t going to take it no more!  This is why I can’t be President – I’d be cursing them all out, you wouldn’t get me off camera until I ran out of things to say about those jackasses – which could take a while.  

    Boehner hiding behind procedural BS – are voters really this stupid?  

  131. sns1

    Phil/Pharm/Zero- I dont get it…they announced this ECB TALF-like repo program a few days ago and the market was disappointed…now everyone likes it? what changed?

  132. Savi

    ok out at 97.25—-thanks Phil for making it abundantly clear  :-)

  133. Phil

    $97.50 again but you don’t want to short oil into the 2:35 NYMEX close but, if we cross over and head back under – that’s still a good spot. 

    Dollar 80.27.

  134. Pharmboy

    Jer – march is fine.  Just sell puts against a company you like – oil, pharma etc..  I like June b’c it gives more time for the wrapping to come off and I want to see first Q earnings.  March is too tight for me.

  135. nicha

    jercon – how is zecco working out for you? Are their prices comparable?

  136. Pharmboy

    sns – ‘hope’ for a bigger gun – $600B – ….remember the media fabricates numbers so that things ‘appear’ better’ or ‘fixed’.  Look at housing…those numbers are horrid, but who reads the details when the headline says everything is ok (and forget the revisions down from prior weeks/months).

  137. JRW III

    exec

    1/3 TNA waiting for direction; sold 2/3 at noonish at IWM 73.61, but not failing and thin volume may take us higher today !!

  138. Savi

    Phil—would you adjust the Jan  TZA  30/39 bcs net dr 2.17 or wait  ?
    Thanks

  139. randers1

    Phil,
    What do you think about selling some VIX puts here, or a BCS, just as a kicker  for moves the other way in the next month?

  140. jerconn

    PHil, I have the Jan SCO 51/56 bull call spreads, which is starting to look "off target" to me, esp if oil goes up and stays up during holiday season.  I’m in for 1.26 and current spread is only .65 – what should I be doing to adjust, if anything, at this point?

  141. sank1

     SPY Weeklies / Pharm,
    Perhaps a bit late in the day to be asking this. Do we just close out the 122 weekly call shorts? I hadn’t had an opportunity to close out the 119 Puts yesterday and that has helped offset some.
    Would you hold for another day to see if we have a pullback tomorrow?

  142. lflantheman

    AAPL port    Bought back 15    Jan 390 calls for 15.65

  143. Pharmboy

    sank – I will hold those for a while.  They can be rolled.  Show me volume, and I would buy more SPY longs.

  144. rustle123

    Got rid of TNA and half UCO.

  145. Phil

    That’s interesting, very brief cross over $97.50 and then a plunge back to $97.25 and now breaking below – a game only the very quick on the trigger can play.  

    Still a few more minutes to NYMEX close but some rats are leaving the ship at least.  

    ECB/Sns – The market doesn’t know crap until the pundits spin it.  Very sad but true.  As I said in the Alert this morning, having a high official state clearly that maybe the Emperor does have some clothes on works wonders to beat back the rumor-mongers but now the bears will circle their wagons and get their pundits to tear down that statement and start another fear cycle until they are once again ovewhelmed by facts.  I look at very simple things like a Trillion Euros is A LOT of money – it does wonders for clearing up your outlook to focus on some key, simple facts…

    Nice job Savi, I don’t think we could have squeezed another penny out of that one.

    80.25 and the Financials are flying!   Even C is going up!

    1:00 PM On the hour: Dow +2.5%. 10-yr -0.41%. Euro +0.69% vs. dollar. Crude +3.35% to $97.2. Gold +1.28% to $1617.15

    2:00 PM On the hour: Dow +2.69%. 10-yr -0.51%. Euro +0.62% vs. dollar. Crude +3.58% to $97.42. Gold +1.31% to $1617.65.

    Perhaps today starts the Santa rally, two days early. Eddy Elfenbein compiles historical data for the Dow from 1896 through 2010, and finds Dec. 22-Jan. 6 is the best time of the year for stocks.

    The House rejects a plan to extend the payroll tax cut for another 2 months, with Republicans in that chamber demanding immediate talks with the Senate to turn it into a year-long extension. The Senate has left town, and majority leader Reid says no bargaining until the House passes the 2 month plan. (previous

    The Fed releases its package of proposals detailing new rules for big banks, including a measure that would prohibit a financial institution with more than $500B in assets from having a credit exposure of more than 10% of its stock and surplus to other large banks. The Fed will implement the Basel agreement on bank capital but release details later.

    The watch is on the see if Brazilian inflation – 6.64% through November – can nose under 6.5% for the year, within the central bank’s goal of 4.5%, plus or minus 2 points. Like the the BoE’s Mervyn King, Alexandre Tombini of Brazil’s central bank will have to write an explanatory letter if it misses. 

    Bruce Bartlett dismisses the idea that cutting corporate taxes would jump-start growth, as over 90% of business are are not really affected by it, while of large firms that are, only 25% pay anywhere near the 35% statutory rate. Even lowering the tax on dividends – essentially another tax on profits – would only have a modest impact. 

    Retired firefighters and police officers of bankrupt Central Falls, RI agree to a cut in their pensions as part of a plan that will see bondholders getting 100 cents on the dollar. The deal could be groundbreaking as it appears to be the 1st time police and fire retirees have ever accepted a reduction in benefits. "I know there are other places watching," says an attorney for the group. 

    Facing an increasing capital flight problem, the Argentine government puts into service 100 specially-trained dogs at border crossings to sniff out hard currency begin spirited out of the country. Central bank data shows $8.4B dollars left Argentina in Q3, a sharply higher pace than earlier this year.

    Japanese auto sales, expected to drop 14% this year thanks to the March earthquake/tsunami, may rise 21% next year, according to a local trade association. The introduction of $3.8B in subsidies is expected to give sales a lift. Nonetheless, the likes of Honda (HMC), Toyota (TM), and Nissan (NSANY.PK) have been contending with along-term slump in Japanese demand.

    Honda (HMC +3.5%expects U.S. sales to jump up 23% in 2012 with dealer inventories getting restocked to normal levels following this year due to natural disasters. The carmaker is in recovery mode after its U.S. market share fell off to 9% from 10.5% and the just-released Civic model was blasted by critics. 

    Shipping stocks get a lift today as better-than-expected economic data out of Germany and some encouraging housing data out of the U.S. spark hopes for light at the end of the tunnel: Overseas Shipholding (OSG +6.4%), Frontline (FRO +4.9%), Ship Finance (SFL +4.2%), Knightsbridge Tankers (VLCCF +2.4%) and Teekay (TNK +1.5%). 

    Electronic Arts (EA) bets that the force will be with it after itinvested more money and energy into Star Wars: The Old Republicthan any game in the firm’s 30-year history. Baird analyst Colin Sebastian sees the endeavor as an "all-in" bet for the firm. "This caps years of development and hundreds of millions of dollars. It’s a very important part of their pipeline for the next several years. If it’s a failure, it’s a huge loss for EA."

    The ho-hum sales reported for Sony’s (SNE) PlayStation Vita in its first days of availability in Japan (where smartphone penetration still lags) makes Tero Kuittinen think the end times are approaching for the handheld console industry. Smartphone gamesare cheaper, don’t require an extra device to be carried around, and can address a much larger customer base. (also)

    A day after issuing a downbeat outlook for telecom equipment makers, Morgan Stanley’s Ehud Gelblum suggests the endof AT&T/T-Mobile is a positive for the group, given investors feared the deal would lead to capex cuts. Ciena (CIEN +10.1%), Juniper (JNPR +9.6%), and Adtran (ADTN (ADTN +8.9%), whom Gelblum singles out as being "exposed to AT&T," are all posting big gains. (UBS comments)

    Kick ‘em while they’re down: J.P. Morgan downgrades AT&T (T +1.2%) with a Neutral rating and $31 target, vs. a previous Overweight and $33. "We view AT&T favorably given its solid cash flow characteristics, potential for stock buybacks and low EPS multiple, but continued pressure on wireless margins, need to acquire spectrum and invest in its network keep us on the sidelines." (more)

    Apple (AAPL +2.9%) rises on its patent victory, but would-be loser Google (GOOG +1.3%) also moves up, and analysts are mindful that AAPL didn’t get all it wanted as far as specific claims. The ruling is a “small dent against Android in the grand scheme of the smartphone patent wars," RBC writes; it "won’t disrupt at all… HTC’s and Android’s business," Sanford Bernstein says.

    Three lunchtime reads:
    1) Buckle up! 12% rally next year, mostly in second half
    2) China’s Hooverian twist and the new Asian financial crisis
    3) A former Treasury adviser on how to really fix Wall Street

  146. nicha

    Iflan – what do u think of Jan 410/430 bcs for $3.30?

  147. scottmi

    Voters/Phil – Are voters so… Jeepers, Phil, that’s some strong bait you are throwing out here!

  148. Savi

    Iflan—bought back 390 calls for 15.65—did you mean 10.65?

  149. Savi

    Iflan—-ignore question

  150. kongen

     Boehner hiding behind procedural BS – are voters really this stupid? Unfortunately, yes.  And unbelievably ignorant as well.  As far as I know, there are only two decent newspapers left in the US, and nobody reads them.

  151. lflantheman

    AAPL port  :   Sold 10  Dec 23    395 calls for 3.10.    

  152. rainman

    scottmi / bait — I wouldn’t feed the troll if I were you :)

  153. Phil

    VIX/Randers – The VIX is crazy but, logically, selling some below net $20 puts seems like a good bet. 

    SCO/Jerconn – I’d say it’s way off target now.  30% just to get to 51 is about as off target as you want to be!  It’s too bad, we flipped bullish on oil yesterday and the correct move at the time was to pull the $51s for $1.95 and leave the short $56 calls open with a stop.  Now the $51s are just .70 and the $56s are still .45 so pretty hopeless.  We still don’t think oil’s going to go over $100 but we don’t see it falling 15% either ($80) to hit $56 on SCO so I’d leave the $56 caller open and roll the $51s to the $40/45 bull call spread at $1.50 (+.80) so you’re in for $2.06 on the $5 spread and maybe keep a stop on the $56 caller at $1 or just offer .30 for them and see if you get a bite there.  

    Dollar drifting at 80.28, oil hanging at $97.30 after the close, gold $1,617 and our indexes up around 3% with SOX up 4.5%.

    AAPL $395!

    Senate will not come back unless House passes 2-month extension.  AMAZING!

  154. JRW III

    This is what seems to be the problem:

    But we’re not going down either !!

  155. ocelli7

    Phil,
    My day job has gotten more busy and interesting, so I have less time to follow during the day. Consequently, (and sadly), I will be exiting my subscription for a while. I have not been able to contribute the way I wanted and the slot should go to someone who has time to contribute.
    First, let me say thanks. This is the best site out there in my view and your insights and intuition are unparalleled. I have learned a lot and made a lot of money from your teaching. The site is ever more fun as I share your view of financial and political issues.
    There are many things you do well, but it seems that you maximally excell with your focused portfolios. These have always ripped and I think the challenge brings out the best in your wizardry…….just look at the results, they speak for themselves.
    My only push would be to urge you to write your book(s) as has been discussed here often over the last two years. Your approach is unique enough and there is a vacuum with options education that does not focus primarily on the nuts and bolts, but rather the strategy in a live setting.
    best regards, and I will return at some point.
    ocelli7

  156. Phil

    Bob on CNBC says "forget about volume" because it’s always weak this time of year.  On Friday, which was sort of the same time of year, volume was about 5x what it is today and the Dow barely budged from 11,850.  On 20% of that volume, we are up 250 points from there and we’re supposed to believe THIS is the real move?  

  157. zeroxzero

     Sns:  What Phil said.  His market logic is very highly developed, he overlays it with reason, but the reasons are often fairly arbitrary — half the time he can’t describe why he knows something, which fully accords with the Bayesian principles on which his judgement operates.  It would take a lot more than 10,000 hours to duplicate our Sensei’s abilities, if ever.

  158. rainman

    Ok, now they just need bleed off that /DX run up and knock this thing out of the park. The santa rally all in one day!

  159. rainman

    Even Bill Griffith on CNBC said "they" might try to push it up here. :)

  160. scottmi

    We’re supposed to believe THIS is the real move?/Phil – Well of course! After all, you are a -voter-, aren’t you! Those voter’s will believe anything, stand for anything, and no matter what, always seem to think it will all get better if we just elect the right people this time!  It’s so funny it makes me sick.

  161. Phil

    Very sorry to see you go Ocelli but glad you have something cool going on.  I’ll work on the book one day but more into my Build a Berkshire Workshop at the moment.  

    Arbitrary/ZZ – I don’t know that it’s arbitrary, just that there are so many diverse facts in my head that sometimes you just have to say it’s your gut.  To me, reading a lot is the most important thing – not so much practicing winning and losing money – the real practice is studying the markets, drawing conclusions and seeing how they follow through over time.  Writing down what we were thinking when we make an investment (something we all do by participating here) and then going back and reviewing our reasoning is VERY valuable too.  

    They are working very hard to punch 12,100 now.  Someone is selling but soon he will be exhausted and we can poke higher.  

    Don’t forget, anything over 2% for the day is a good sign on the 5% rule and 3.75% pulls back 20% to 3% so, if we finish up 3%, we’re already sitting on support for a run to 5% and that puts us back over the next lines on the Big Chart and suddenly we’re all technically bullish again.  Funny how this morning – 800 on the RUT didn’t seem like a realistic goal for the year’s end – now it’s just 2 days like this away!  

    GMCR and RIMM should be ashamed of themselves today!  

    80.265

    Sickness/Scott – That’s why we have to get down with it!  

  162. JRW III

    As long as Germany does not occupy Italy and Greece, there is nothing really in the way of Lloyd’s BONUS !!

  163. dclark41

    zero:
    …and no one explains it better than you! Thanks for your article from GS yesterday. It looks like others may have re-read it as you! I rolled my EDZ longs out yesterday morning to knock out some of the delta and take some money off the table. Some of Phil is rubbing off……….only some.

  164. Phil

    Look how everything lines up:  2,600 on the Nas along with 1,240 on S&P, and 735 on RUT – amazing how we hit these levels on the nose, isn’t it?

  165. scottmi

    RIMM/Phil – at 5 year lows and 8.13% dividend, why not a straight out buy/write rather than the synthetic play you put forward? Just Expecting more near term market downside or is there "trouble at the rig"?

  166. yshenhar

     AA Money – too early to sell calls?
    The Jan 12 $9 are $0.38

  167. Phil

    RIMM/Scott – Well you can make a hell of a lot more than 8% with the artificial and we’d rather get stuck with 1x of RIMM if it gets worse than 2x.  At some point, where there’s this much smoke – you should at least consider the possibility that there is a fire.  

    AA Money/Yshen – Yes, way too early at $8.86!  We’re looking for $10 but maybe at $9.50 we’ll do some.  

    Ah – finally the seller got rid of his remaining shares – now let’s see how convicted our buyer is…

    80.245

  168. JRW III

    Phil / Coincidence

  169. lflantheman

    AAPL port:   Analysis of the 1/2 cover………If AAPL pulls back a bit before its next leg up then we pick up an extra 3 k.   If it doesn’t pull back then with the 1/2 cover we just continue to go to see profits.   AND, should AAPL kick over 395 within the next day or two, we can always roll part of this cover forward.   

  170. Phil

    Oil $97.50 yet again – the gift that keeps on giving so far!  

  171. jerconn

    Phil, pull the DIA p’s or leave them overnight?

  172. JRW III

    Trend line resistance, taking profit here !! ( shy of  IWM 74ish )

  173. angelcur

    phil the plane crash sounds as htough it was near your area?

  174. l4real

     Phil
    Is there a play using USO or are u only doing Futures?

  175. sns1

    Thanks guys

  176. mrmocha

    JR, is that the dinghy for your dinghy? 8)

  177. rainman

    mrmocha / dinghy — that’s the piano from JRW’s dinghy. :p

  178. Pharmboy

    Seems that Adam F. and I are finally in some agreement.  One of his 2012 predictions: By the end of the year, one or more of these companies will be gobbled up in an M&A deal: Seattle Genetics(SGEN_), Celgene(CELG_), Biomarin Pharmaceuticals(BMRN_), Amag Pharma(AMAG_), Onyx Pharma(ONXX_), Momenta Pharma(MNTA_).

  179. deano

     Pharm – have you totally given up on ARNA?

  180. lflantheman

    Dow and Nas volume picking up in the last hour with uptick…..I’m calling for tomorrow another  up day.  

  181. JRW III

    Nailed the 377 SMA on the daily !!

  182. Pharmboy

    Sheeze – BMY is at 5 yr high…..

  183. scottmi

    Cash – then again,  the expanding money supply argues for sticking with stocks, gold, etc.

  184. Pharmboy

    deano – not yet.  I am in them…but will be selling them soon.  I am not going to play that game again for FDA’s blessing.  Just riding the wave.

  185. mrmocha

    Rain - ROFL!

  186. JRW III

    mrmocha / dinghy

    No, the dinghy for the dinghy is an inflatable !!  8-)

  187. angelcur

    no negative divergences at all today

  188. JRW III

    Rain - ROFL as well !!

               rofl smileys

  189. Phil

    I hate it when that happens, JRW. 

    DIA/WCP, Jerconn – Yes, they are now our hedge as we have 3 longs against it.  Also, they are 2 weeks out so attractive to roll and hold for weekend, even if they don’t work out this week.  

    Plane crash/Angel – Yep, not even 20 miles from me.  That’s why I stopped flying, once I had kids I realized I didn’t mind risking my life but there was no way I would take my kids in those planes.  

    USO/L4 – I think we’re too all over the place.  We’re playing the futures because we can hit and run and make a few hundred a contract and get out with $10 fees – on the options it’s not really worth it in this chop.  

    Another up day/Iflan – That’s what it should be with the 5% rule, we should now see another 1.5% at least and probably another 2.25% over 2 days but, as I said earlier – a lot of this seems fake and there was forced short covering to get us here so we’re still very news-driven overnight.  

    ORCL and NKE after the bell will matter too.  

    80.25

    Money supply/Scott – Absolutely, that’s my whole bullish premise.  At least stocks should hold their value.  

    Wow, that was fun!  

    12,101 – Just to prove they could do it!  

    2,603 on Nas 1,241 on S&P 737 on RUT and 7,360 on NYSE – all the buttons were pushed.  What we really need is Dow transports (4,955) to confirm with a move back over 5,000.   

    Oil finished smack at $97.50.  

    Light data tomorrow with existing home sales at 10, oil inventories and the 7-year auction but the handing out of FREE MONEY in Europe will be the big story of the morning.   Thursday the data hits the fan with GDP, Unemployment, Chicago Fed, Corporate Profits, Consumer Confidence, Consumer Sentiment, Home Price Index and the Money Supply.  

    ORCL missed!   Now we’ll see how well we hold these gains.  

  190. lflantheman

    stj……Here are today’s AAPL trades for the AAPL port:   They are in chronologic order:   Sold 5 Jan 21   390 calls for 13.00      Sold 5 Jan 21 380 calls for 18.50       Sold 5   Jan 21  390   calls for 16.00   Bought  15   Jan 21  390 calls for 15.64     Sold  10  Dec 23   395  calls for 3.10      Thanks.  

  191. lflantheman

    AAPL port participants:      Great day, huh?   AAPL doing what it’s supposed to be doing the last 4 or so weeks before earnings announement…..going UP!      So the port is " repaired"…. I never considered it broken, but I know my AAPL trading style must scare the crap out of some of you.   So right now we are positioned for another drive upward, or a bit of a retraction.   Holdings are:    July 390/415   bcspread  10            Jan 390/385   bpspread    10      Jan 390 straight up calls   20     and     these 1/2 covered with     Dec 23   395 calls   10      Inception date for the acct:    Dec 6, 2011.     stjeanluc will be posting a summary, and I thank him for his efforts in this regard.   And stj….if you get tired of doing this, send me an email and let me know so I can pick up on doing the entries.   

  192. pstas

    lflan- must have missed something – where did the Jan 380 calls come in?
    Also, have you given consideration to issuing trade alerts?

  193. lflantheman

    pstas……yes, those were bought last week and sold today.   And I’ve got to talk with Phil’s staff I presume as to how trade alerts might be done. 

  194. Pharmboy

    scott – that expanding money supply is going where exactly?  Have you seen it?  Right into bonds or sitting on the sides so that banks can lever 10, 20, 50 or 100:1…..until that gets into our pockets, it can continue to go up…but it is not being used except to postpone the inevitable.  OK, no more bearish speak from me until 2012…..

  195. Pharmboy

    iflan – under your box to type in, do you have a ‘send alert’ section?

  196. lflantheman

    Pharm….NO

  197. Pharmboy

    OK, I will talk with Ilene.

  198. elliotteldrich

  199. lflantheman

    Pharm…Thanks. 

  200. celesteschein

    What happened with RIMM? It shows 12.91 in after hour trading

  201. angelcur

    Look at orcl after-hours…how can that surprise people that much given what other tech cos. been saying…RHT just last night.

  202. Kwan

    Phil/book – when you want to do that it might be helpful if you can make an outline of sorts. Or may I can try to extract a rough outline that will serve as a starting point programmatically by using some statistics to determine what your longer comments are. 
    Whenever you’re ready. Of course I have plenty on plate with other things at the moment, but I can squeeze that in. Just need to link up with Matt (the non-permabear).

  203. matt1966

    Pharm,  can you get me an alert box, too?  Have ‘em put ‘SELL!’ on the button.  ;-)  
     
    Thanks, your buddy bear.
     
    Btw, where was Phil’s disclaimer that on days like today he’s embarrased to play such a rigged market?  I particulalry loved how CNBC was crediting Europe’s up day to our positive housing data.  Their regular propoganda machine must be on break for the holiday. 

  204. Pharmboy

    matt – ROFL matt.  Miss your rants around here, so I decided I needed to pick up the slack.  I think you can type one word per box, then maybe it will be one long red candle.  I can ‘light’ the way.  I am increasingly becoming more and more bearish the longer this goes.

  205. stjeanluc

    Iflan, no problem updating the portfolio. It’s a bit harder now with the time difference for me, but it takes almost no time! 

  206. Pharmboy

    watching the AH moves in SPY. BIG blocks are going through for 120.3X.  How does someone hit the sell phor 120.38 @ 499,567 shares.  Is that a stop target hit and someone just hit it?  What idiot would put that in, or have a phat phinger? phucking cwazy.  PH is the new F.  Try it out!  Lots of phun.

  207. stjeanluc

    FAS Strangle – It looks like the put side was the winner today (close to 50% I am guessing). I am still in and we’ll see what happens tomorrow. 

  208. Pharmboy

    AMZN talked of buying RIMM….last summer…and now it trades up.  Holy shmoly…what a crock.  I am posting that YMI is being bought by Novartis as we speak on SA…..no not really, but how fun would that be…why is this not illegal?

  209. Savi

    go ahead Pharm and I will sell all  my YMI—and will give the Klink defense

  210. kustomz

    Rumors surrounding take out of RIMM after ORCL drops the ball….right…

    Research in Motion shares are surging more than 5 percent after Reuters announced RIM turned down a takeover bid from Amazon Inc. .  Shares of RIM have plummeted more than 70 percent this year.

     

  211. stjeanluc

    Sometimes, government does help…

    http://www.washingtonpost.com/opinions/a-boom-in-shale-gas-credit-the-feds/2011/12/07/gIQAecFIzO_print.html

    Many often point to the shale gas revolution as evidence that the private sector, in response to market forces, is better than government bureaucrats at picking technological winners. It’s a compelling story, one that pits inventive entrepreneurs against slow-moving technocrats and self-dealing politicians.

    The problem is, it isn’t true.

    The breakthroughs that revolutionized the natural gas industry — massive hydraulic fracturing, new mapping tools and horizontal drilling — were made possible by the government agencies that critics insist are incapable of investing wisely in new technology. 

  212. kallenjr

    iflan,
    Is there any data on how well AAPL pins to strike price on Friday for the weekly options?

  213. roro

    still playing catch up and lots of work to get up to speed, but GREAT site! love it! thanks, all.

  214. lflantheman

    kallenjr…..Yes, I reviewed AAPLs tendency to pin the strike for the last 13 fridays.  It pins within .70  of the strike, usually under.   Normally one would expect a variation of +/- 1.25, with 1/2 under 1/2 over, but there certainly is a tendency to pin at less than a dollar under strike.  This can probably be traded, with some careful observation and thought. 

  215. kallenjr

    iflan,
    Have you looked at predicting the strike it will most likely pin to based on open interest the Thu afternoon before? I am thinking of buying a butterfly around nearest strike based on highest open interest.

  216. Burrben

      lflantheman / stjeanluc
     
    One of the beautiful things about google docs is that you can allow multiple people to edit the spreadsheet in realtime, and actually do the real-time collaboration that MSFT has always promised.  So if you just want to shrare it with each other, click the SHARE button, and change the permissions to "Anyone with the link can edit".  Then you guys use the Editing link, and everyone else will just have the View link.
    Make sense?  I do it all the time with other people.  

  217. lflantheman

    kallenjr…..I’m studying that prospectively starting this week. 

  218. Pharmboy

    OK, so the money supply from scott above….my points now taken into context from from oftwominds:

    The velocity of money rose in the stagflationary 1970s, even as stocks yielded negative returns when adjusted for inflation, i.e. to real returns. Velocity declined in the mid-1980s and then exploded higher in 1990s, topping out several years before the stock market topped in 2000.
     
    Velocity and stocks were highly correlated from 2000 to 2009, when the market staged a sharp rebound even as velocity continued down to a historic low. This suggests stocks have some catching up to do with velocity, that is, the S&P 500 should decline significantly.
     
    Many people have noted the explosive rise in money supply (not shown) since the 2008 financial crisis; this chart shows that this "new money" isn’t entering the real economy at all, as money velocity has plummeted to zero.

  219. roro

    Pharmboy………..
     
    not that i know and i don’t pretend to, but i did see QE1 and objected to it and did not make money for morals, and then did QE2 for round 2 and was smart enough to get off being short but not smart enough to get long big although i did get a BIG tip to do it and eventually did.
     
    the moral of my story is this; big mo will and can pull all tricks out of the bag at will and bury it deep.
     
    i think this is a 3peat………..by stealth.

  220. roro

    i did mean to add that i read the Felix Salmon story once over……….what is that called?……..re-frame the deal and memory is short and gets altered.
     
    Greece has defaulted how many times in the last 100 years?………

  221. jmm1951

    Phil/spreads
     
    Is it possible to construct hedged spreads that will show a guaranteed proft? Or is it like covering 35 numbers on the roulette wheel--you will usually make a bit of money, but when you lose, oh boy!
     
    I was playing with some numbers and it seemed to me that you could buy something like a January ’12 SPY $120/$125 BCS for $2.78 to return $5 (current value of SPY = $123.93) and then hedge that with another in-the-money spread on something like EDZ, perhaps using the $18/$23 spread.
    If both spreads are in the money and will give your premium back to you if there is no move whatsoever between day of purchase and expiration day, then almost any movement at all will put one spread or the other into the green, and very little percentage movement would be required for either spread to pay out the maximum on expiration.
    In one scenario I looked at, it seemed like you might be able to pay out $8500 to get a return of $10,000 on a 2% swing to either the upside or downside.
    Of course, I haven’t developed the idea very thoroughly and can see various pitfalls, such as that SPY and EDZ may not correlate adequately, or that I may not have adequately calculated a worst case scenario. Just wondered if you had any thought on the optimum way to construct and evaluate such a spread?

  222. lflantheman

     jmm…..Phil will answer your question but I found it interesting because a few weeks back I stumbled onto a complex spread on I believe AMZN that had absolutely no possibility of loss at any stock price.   And the spread involved AMZN only.  I made the play and made a few bucks.  It was fascinating, to say the least.  I haven’t seen such a possible setup very often.

  223. sns1

    Pharm/velocity- isn’t the reason for lack of velocity that simply the increased money supply has been plugging a hole created by a destruction of wealth combined with no new economic growth drivers (eg, chips/pc in 80s, telecom/internet 90s, etc)?

  224. vsasanka

    CL at 98.15 .. shorting it with a stop at 98.35

  225. dclark41

    Big draw down in API report. Looks like we are heading back to $100. As always, it doesn’t take too much to get there.
    SAN FRANCISCO (MarketWatch) — Crude-oil supplies fell by 4.6 million barrels for the week ended Dec. 16, the American Petroleum Institute reported late Tuesday. Gasoline inventories also declined by 394,000 barrels, while distillate inventories fell 2.8 million barrels, the trade group said. Analysts polled by Platts expected data to show that crude-oil stocks fell by 2.25 million barrels for the week ending Dec. 16. They also forecast a rise of 1.75 million-barrel in gasoline supplies and a decline of 600,000 barrels in distillate inventories. Following the data, February crude /quotes/zigman/2203132 CL2G +3.69% was 24 cents higher in electronic trading. The contract had closed at $97.24 a barrel on the New York Mercantile Exchange. The API’s figures come ahead of Wednesday’s more closely watched Energy Information Administration report.

  226. scottmi

    Money/Pharm – dead right. Velocity (V)  has ground to a halt.. But the money pumping is going on all the same. it’s like concentrating tinder and soaking it with petrol… The Bernank says he can dry it up in 15 minutes if he has to.. has talked aboust "sterilization".. if there is any sterilizing going on, it’s already at full tilt to keep V at a minimum. And how many times has he been right on what he could actually do? The great danger is this all LEAPS into hyperinflation..as it always does when things go that way. When we get flash crashes, well, damn, you can’t get out in time if you are not balanced.. if you in mainly cash, well damn, now it’s all suddenly worth a LOT less. The ‘game’ we all play now is chicken…and our opponent is whatever will spark the hyperinflation. It’s a scary game. Thankfully, the ‘balance’ concept that Phil teaches here is a first and best defense. Second defense is that it is a stock picker’s market. And i very much thank YOU, Parm for some excellent biotech plays in the last year!  ok.. enough ‘contribution’ from me.. 
    I am grasshopper.

  227. scottmi

    Obama/Phil – I find Cenk Uygur’s commentary here re the NDAA to be rather compelling. The guy is darn right while being so left. So i wonder, as Cenk says, it’s an interactive thing. Let him know if he is wrong… Well. Is he?
    Note/disclaimer: I have a low opinion of ‘voters’ in general, and despise the ‘left’ and the ‘right’. In this current fiasco, I consider Ron Paul to be the only candidate who is a functional human being.

  228. zeroxzero

     Pharm:  The article you cite essentially posits a "Prisoner’s Dilemma" setup for Euro banks.  If they all buy sovereign debt with the ECB 1% loan money, yields will fall and all will be well.  For now, anyway.  But if a significant number of Euro banks refuse to buy Italian or Spanish sovereign debt, opting for Apple shares or U.S. Treasuries, the Euro banks who step up and buy the now-lower-yielding sovereigns will be destroyed as the Euro continues to tank and sovereign yields rocket again.
     
    Too simplistic.  I don’t buy it.  There are too many forms of regulatory suasion that can brought to bear on those banks.   Imagine BBVA telling the Spanish finance ministry to "get stuffed, we’re buying U.S. Treasuries and good luck rolling over those Spanish bonds." You would have to have a near-mystical faith in "free markets" to believe such a fairy tale.  Pharm, I know you think that the Euro should rightfully tank and U.S. equities along with it. And, given time, perhaps they will.  But I very much doubt that, in an arm-wrestling match over the use of those wonderfully cheap ECB loan proceeds, that Adam Smith’s "invisible hand" will win out against the strong-arming of Euro governments run by their country’s elites.
     
     I owned a European company once.  I was made a generous buyout offer by a major utility [read: the government].  I asked if I could refuse.  My close friend and Spanish partner cheerfully retorted, "they buy us or they crush us."  We took the check; you best believe that "choice" was never part of the equation.

  229. Pharmboy

    sns – in part yes.  There is very little growth, and money is sitting on the balance sheets to keep the banks solvent.  Also, money is involved in the carry trade, where the banks are barrowing at 0%, and earning X% depending upon which T-bill they buy. I could borrow 100M or 1B and loan it back to the government at 1%…. why not….?

  230. zeroxzero

     Phil:  I would never suggest that your reasoning regarding market matters is "arbitrary", since that is clearly not the case.  I am saying that, in response to a given market movement, the factor to which you publicly attribute the move is fairly arbitrary, precisely for the reason you cite — there isn’t "a reason", there is a complex of elements which you interpret in the Bayesian fashion cited, a method that is both highly subliminal and, for someone who reflects the right set of probabilistic biases based on his observation of past events, potentially very accurate.  
     
    That’s a long way of saying that I form my own opinions, but I never fade your market sense, even if I have no idea why you see what you do  - and am not sure you do, either.   Hence the Michael Jordan quote of mine you’ve posted.

  231. Pharmboy

    Zero – I can understand your suasion….and cannot say, for certainty, which way things will go.   The one thing I can say is that for the Spanish to be force to buy Greek Debt, or Germans to buy Greek, or French to buy Spanish, etc etc etc, To buy the sovereign debt of another country is a completely different game than a the debt of a company….and there is no ‘collateral’.   It may work once (well has been for a few years for Greece)….but for how long?  I think the EU takes shape differently, and it will be smaller.  Borrowing at 1% to take all the risk is a fools game.

    Asking for austerity is like asking a cancer patient to take less meds for their cancer b’c there is not enough to go around.  150B is not enough, nor is 500B.  I get it, we can kick it down the road, but fundamentals will win.  T-bills tell me everything right now, and their direction is up (yield down).  I think the Germans will revolt from an inflationary proceeding….they have been there before, they will not be there again.

  232. zeroxzero

     Pharm:  Couldn’t agree more on austerity, a disastrous idea.  I think the Euros know that, and I’m well aware of Germany’s inflationary horror history, and their antipathy to anything that looks inflationary.  But let’s face it: they have a greater antipathy, when push comes to shove, of losing their largest export market, which is tariff-free and pays in a strong currency [their own] to boot.
     
     As written earlier, I think Germany will accept a measure of inflation, because it is rational, given the trade-offs mentioned, and because they will not be able to kick the can very far down the road, in contrast to the U.S., with an austerity-based "economic recovery" program.  The only way to lower real salaries of the GIIPS is to inflate the currency.  So Germany’s between a rock and a hard place, and I maintain that they will choose the hard place — accepting some inflation so that their poorer neighbors can take the real income hit they need to take to bring salaries into line with worker’s real productivity — and that the existence of a common currency is now preventing.  
     
    But if you’re right — and the Germans bail out Italian and Spanish banks, which may serve to salve past sins but does absolutely nothing to restore a measure of competitiveness to GIIPS economies — then they are just kicking the can up a steep hill, and it’s going to come rolling right back at ‘em in the form of continuously falling GIIPS GDP and an inability for housing prices {Spain] and employment to recover.  Pointless; and the Germans know that.
     
    So what’s the plan?  Phil has suggested that the Germans are just negotiating, trying to get a better deal from the rest of Europe in exchange for their support.  I would add that they are also wrestling with internal political opposition and, perhaps, waiting for the rest of the world — the U.S. and China, in particular — to signal the printing of more moneythat will further inflate away their debts — a consensual arrangement in which all three major economic regions debase their currencies concurrently.  Einstein was  pretty clear on the point: everything is relative.  It’s a guess, really, but we both know that the accumulated debt burdens of Europe and the U.S. will never be paid back in oil, wheat or Monet’s..

  233. zeroxzero

     Pharm / P.S. – Make that "oil, wheat, Monets — or large cap energy, materials, industrial and technology companies."  This is, perhaps, the different in our respective opinions — I’m bullish, and wonder over what time frame you are bearish?.

  234. Pharmboy

    Zero – a few things to know according to D. Stockman: The real story of the present is the shadow banking system, the unstable and massive repo market, and the apparent daisy chain of hyper-rehypothecated collateral. It looks like the sound bite version amounts to the fact that the European banking system is on the leading edge of collapse for the whole system. These institutions are by all evidence now badly deficient of the three hallmarks of real banks—deposits, capital and collateral.

    • the three big French banks have combined footings of about $6 trillion compared to France’s GDP of $2.2 trillion.  3X the debt…even in ‘our’ crisis, the banks were not that bad.
    • Deutsche Bank is levered 60:1 on a tangible common equity (TCE)/assets basis, and that its Basel "risk-weighted" assets are only $450 billion, but actual balance sheet assets are $3 trillion? In other words, due to the Basel standards, which count sovereign and other AAA assets as risk free, DB has $2.5 trillion of assets with zero capital backing!
    • BNP-Paribas has $2.5 trillion of asset footings vs. $80 billion of TCE or 31X leverage; it has only $730 billion of deposits or just 29% of its asset footings.

    Do you think that they can create $5T out of thin air?  Not yet anyway.

     

    I am bearish until the EU gets their house in order.  Then China, Japan yada yada yada..So looks like a few more years if we are in year 11 of the 14 to 16 yr cycle.  I will not say there will not be ups, but the down side risk is much greater than any upside swing.  With the E in P/E decoupling, I think the next shoe is coming untied.

    Finally, politics are really coming to a head, Repubs, Dems, Socialists, and the like all over the world.  Germany will cave when they lose a few banks….think Bear Stearns like…or maybe Lehman….

    Oil, real estate, pharma/biotech and smokes….yes, agreed.  I noted that I was in them, as well as munis.  I think the EU banks use their money to buy local debt or invest in their own areas, not necessarily Greek debt, Portuguese, etc.

  235. vsasanka

    Covered my CL shorts at 97.66
    -sasanka

  236. Phil

    Good morning!  

    Futures holding up nicely (about half a point).  We are up at 12,105 in futures, with the Dollar bottoming at 79.80 so far.  Probably a good short below the 12,100 on (/YM) line if the Dollar bounces here but, obviously, not below that line!  

    Hang Seng was up 1.86% but the Shanghai fell 1% on liquidity concerns over there.   South Korea bounced back 3% after panicking yesterday and boosted the region and Taiwan was a booster after saying they will have their Sovereign Wealth Fund invest in their own market.  The Nikkei was up 1.4% and the big winner was the Sensex, up 2.12%.   Europe is just opening and strong, up 1.25% ish, which is the 5% rule follow-through we expected after yesterday’s 2.5% gain (decelerating 50% per day as it stutters to complete a 5% up move with no additional catalyst).

    Oil shot up to $98.50 and made a good short there but now testing $98, which will be iffy if the Dollar doesn’t get back over 80 so the Dow short is safer at the moment if you must hedge.  Gold is $1,.633 but also a dangerous short with a lot of inflationary concerns in the air in Europe.  

    Wednesday’s economic calendar:

    7:00 MBA Mortgage Applications

    10:00 Existing Home Sales
    10:30
     EIA Petroleum Inventories

    1:00 PM Results of $29B, 7-Year Bond Auction 

    Notable earnings before Wednesday’s open: KMXSHAW,WAG

    Notable earnings after Wednesday’s close: BBBYMU,TIBX

    Backing up November’s relatively healthy NFP data, the Labor Department claims the jobless rate dropped in 43 of 50 statesduring the month. However, some states still have unemployment rates well above the 8.6% national average – Nevada leads the pack at 13%, followed by California at 11.3%. Moreover, the declines seen by many states were aided by notable decreases in the number of people looking for work.

    U.S. online retail sales rose 14% in the latest week from a year ago to $6.3B, placing e-commerce spending for the holiday shopping season on track to top 2010 levels, comScore reports. Sales during the final shopping weekend before Christmas reached $1.04B, the second heaviest weekend of online spending on record.

    Reuters reports sources as saying more than 10 Italian banks may apply for the ECB’s new 3 year loans today. As collateral, the lenders are interested in presenting bank bonds issued with state guarantees, according one of the sources. Expectations for this operation are seemingly ratcheted up as high or higher than any of the EU world-saving summits from this year.

    China’s growth momentum is "generally sound," says Premier Wen Jiabao, but the economy is facing several challenges. Additional comments suggest China is bracing for a prolonged downturn in the U.S. and eurozone by boosting domestic demand and focusing on emerging markets.

    Taiwan’s benchmark index posts its biggest gain in more than two years, climbing 4.6%, after the government said it will let its National Stabilization Fund buy equities to support domestic markets.

    Japan’s trade deficit widened in November for a second consecutive month to ¥685B, as exports fall by 4.5% and imports jump 11.4%. The yen is currently trading flat with no significant reaction to the report. 

    BoJ lowers its outlook (.pdf) for the economy for the second month in a row, saying that the pick-up in activity has paused and that there are spillover risks from the U.S. and the eurozone. Separately, data released today showed Japan’s exports fell 4.5% in November from a year earlier, the second consecutive month of declines. - Notice everyone blames the other guy’s economy!  

    Pointing to "recent developments in global money markets and their potential repercussions on liquidity conditions in the yen money market," the Bank of Japan announces the establishment of temporary bilateral liquidity swap arrangements with Bank of Canada, BoE, ECB, SNB and the Fed. Dollar -0.15% vs. yen. (.pdf)

    Maybe trying to get on France’s good side, Moody’s fires a shot at the U.K., warning its deteriorating public finances and growth outlook have seriously crimped its ability to retain a AAA rating. Being outside the euro is no help: "No EU sovereign rating can be considered immune to this crisis." 

    Jamie Dimon joins billionaires to defend themselves and the 1% against "acting like everyone who’s been successful is bad and because you’re rich you’re bad." Josh Brown’s retort: "No, we don’t hate the rich. What we hate are the predators… America hates unjustified privilege, it hates an unfair playing field and crony capitalism… it hates rule changes that benefit the few at the expense of the many."

    Finance and insurance firms accounted for a record 8.4% of U.S. GDP last year, prompting Thomas Philippon to say the sector is hugely outsized. Despite IT advances since the 1980s, he says the financial sector has become steadily less efficient; gains in computing power and communications networks have been negated “by increases in trading activities whose social value is difficult to assess.” 

    Jefferies (JEF +23.3%) shares surge as the firm’s FQ4 report shows its total balance sheet reduced by nearly one-fourth andleverage lowered to 9.9x from 12.9x. A further boost comes as critic Sean Egan says he’ll back off a request that JEF raise $1B in equity: "We’ll see how the things look after they release the 10-K, but reducing assets by a significant number is very helpful."

    Pimco’s Total Return Fund, managed by Bill Gross, looks to suffer its first ever net client redemptions this year as investors have pulled between $2.3B and $3.6B through November. It’s barely a dent in the $241B fund, but a big change from gains of $26B in 2010 and $51B in 2009. Gross’ bearish bet on Treasurys contributed to the fund’s trailing about 90% of its peers thus far this year. 

    Venture capital firms poured $6.95B into 876 deals in Q3, according to data compiled by FindTheBest.com. That figure is well above the $1.7B VC firms are estimated to have raised in Q3, but well below the $25B+ the industry was investing each quarter at the height of the Dot.com bubble. Only 2.6% of all funding went to startup or "seed" stage investments, and nearly 70% went to expansion or "later stage" investments.

    Although pump prices have been falling, consumers have spent more money than ever on gas this year. Based on recent demand trends, consumers will have spent ~$481B on gas in 2011 vs. $389B last year. Break it down, and each U.S. household will havespent an average of $4,155 on gasoline, 8.4% of an average family’s income. 

    Value investors Chris Davis and David Winters share theiroutlook and top ideas on Consuela Mack’s Wealthtrack. Davis’ top pick is Berkshire Hathaway (BRK.A), while Winters’ favorite is Norfolk Southern (NSC). Both like Google (GOOG).

    Old favorite of ours:  Gambling-equipment maker Shuffle Master’s (SHFLFQ4 results easily beats estimates as net income jumped 71% Y/Y on stronger sales, especially in its electronic gaming segment. Overall revenue has continued to improve, up 12% Y/Y, as the company focuses more on its equipment leasing and royalties business with casinos.

    Oracle (ORCL): FQ2 EPS of $0.54 misses by $0.03. Revenue of $8.8B (+2% Y/Y) misses by $500M. Shares -7.8% AH. (PR)

    More on Oracle’s (ORCLFQ2: New software license revenue up 2% Y/Y, down sharply from FQ1′s 17% growth (.pdf). Software license update and product support revenue up 9%, down from FQ1′s 16%. Hardware revenue fell 14%, worse than FQ1′s 5%. Services revenue flat Y/Y, down from FQ1′s 10% growth. Sales of high-end Exadata and Exalogic systems grew strongly. A new $5B stock buyback has been authorized. ORCL -7.7% AH. (PR

  237. Phil

     

    Some major enterprise software names are trading lower following Oracle’s (ORCL) FQ2 miss (III). SAP -2.7%CRM -1.4%.IBM -1.3%HPQ -1.6%. Given Oracle’s reputation as a "safe harbor" during times of macro weakness, concerns about slowing IT spending will likely be on many investors’ minds tomorrow.

    Nike (NKE): FQ2 EPS of $1.00 beats by $0.03. Revenue of $5.73B (+18% Y/Y) beats by $100M. Shares +0.8% AH. (PR)

    More on Nike’s FQ2 report: Revenue growth in China of $650M (+35% Y/Y) outpaces other regions, Europe lags with only a 2% increase. Gross margins slip to 42.7% from 45.3% last year. Worldwide futures orders for Nike brands total $8.9B for delivery from Dec. 2011 through April 2012, 13% higher Y/Y. Shares +1.6% AH. 

    Research In Motion (RIMM+7.2% AH after Reuters reports the company turned down takeover overtures from Amazon (AMZN) and other potential buyers because it prefers to fix its problems on its own. Amazon reportedly hired an investment bank this summer to review a potential merger with RIM, but it didn’t make a formal offer.

    The report that RIM nixed takeover queries from Amazon (AMZN) and others only confirms that RIMM management is "ignoring both reality and the need to act as shareholder fiduciaries," Eric Savitz reacts. "I’m actually not sure what is more shocking: the idea that Amazon was interested in buying RIM, or the fact that RIM cut them off and said no."



     

  238. stjeanluc

    Google Docs / Burrben – The spreadsheet is actually already setup for shared edit. Iflan has edit privileges already but I have been making the changes for the sake of convenience.  

  239. Phil

    Scary/Iflan – It sure scares me!  Nice recovery.  

    Big Chart – Right back to test the same old lines and same old tops – YAWN!  

    RIMM/Celeste – Head fake before heading higher.  Gotta flush the retailers or they might accidentally make some money…

    ORCL/Angel – Most investors only look at the stock they invest in, not even their own sector.  Sad but true.  That’s why everything comes as a shock to them all the time.  I’d say, these days, that most don’t even look at their own stock’s news until AFTER it moves against them (not even in their favor to determine if it’s overdone).  

    Book/Kwan – Hey, anything you can think of to get something in motion would be great.  I was hoping the Wiki would form a bit of a base but not too many people contributing so far – I guess this crowd isn’t geeky enough to use Wikis.  Whatever you need Matt for – feel free.  

    Alert/Matt – I think you just need one button!  8-)   I’m in too much of a holiday mood to be angry about manipulation.  This is the time of year to enjoy the Santa Rally – there will likely be a Hell of a hangover after New Year’s.  

    YMI/Pharm – I’m pretty sure that is illegal if you trade it off rumors you start.  Otherwise Drudge would be a Billionaire.  

    Good Government point StJ!  That’s the problem for Fox propaganda and an uninformed public.  They attack the failure in solar investing and ignore the success in gas investing although they were both "alternative energy" projects the Government sought to push forward – one worked and one didn’t and the one that worked will advance our energy security for decades yet it’s all about the one that didn’t work 24/7 (and even that is blown out of proportion because of course not every company you fund will succeed).  According to Conservatives – our Government should be held to standards no VC firm could ever match – not even Berkshire could match – or they are a failure and any success they have is attributed to the private sector.  It’s worse than a no-win situation for the Government because the goal is to dismantle the Government and remove even the possibility of success from the system – that’s just crony Capitalism, protecting those who are already on top from potential competitors and it has nothing at all to do with real Capitalism or what’s actually good for America.  

    Speaking of Capitalism – Oil back to $98.50, Dow back to 12,100 so another opportunity to short below the line if they cross again, with the Dollar currently at 79.865 – so failing to hold 79.85 is a good indicator to get off a bear trade.  BOE minutes show a lot of support for more QE in the UK and that should boost the Buck once people read it over.  Overall, though, I don’t see any reason we won’t open up 1% or better so far so we’re just playing for a short-term pullback unless something happens but something already happened to pop up up 70 points and that’s the main premise of the bet – down is easier than up at the moment and we have a nice, fat support line to play off – it’s as simple as that.  

  240. Phil

    Note on Futures trading:  Our last trade caught the cross from 12,105 below the 12,100 line and we bottomed out at 12,082 with a stop out at 12,085 (once you move halfway below a nickel line, you drop the stop to that line) and we did consolidate at 12,085 and now just completed a move back to 12,105 and now back at 12,100.   

    As  a rule of thumb, if we just had a 30-point drop – you need to be very careful at a 15-point drop so 12,090 now is the line we may bounce at if we’re consolidating bullishly and, if we do hold there and head back up, it no longer makes sense to play bearish until we see 12,090 fail to hold.  Once we hit 12,092, then 12,095 becomes the stop and 12,098 is the stop anyway as we’d rather make $10 than lose $10 waiting like dumbasses.  

    Another rule of thumb is you can add one point to the trailing stop for every 5 you move down so below 12,087, you can wait until 12,091 is blown and  then at 12,082, you can set the stop at 12,087 etc.  So you lock in 4 of every 5 you fall on the way down but, after a 50-point drop, you end up with a trailing stop of 10, which is pretty generous in the Futures.  

    As I demonstrated in Vegas, a good futures trader may have a buy and a sell order open at the same time – that’s why the system lets you do it!  I don’t like hard stops, as you can get spiked out but it’s good to put one contract up at a stop level to keep tabs if you are trading a bunch.  Seeing it triggered is a good reminder of what you are supposed to do when your premise is blown…. 

  241. Phil

    Euro debt/Pharm – Do you think that the borrowing isn’t contingent on lending it back to the Sovs?  How do you explain Spain’s 60% drop in rates in yesterday’s sale?  As I said, the bears will circle their wagons and get whatever they can into print to tear down the bullish reaction to yesterday’s news, as well as the very obvious FACT that it had a profound and immediate effect on the Spanish auction.  There will be another auction and another and another and, after a while, people like Felix will begin to feel silly writing speculative articles about how throwing $1Tn at $400Bn in rollover debt isn’t going to help.  

    I agree it doesn’t fix anything – all it fixes is Bankster profits.  Why not just give the money to the PIIGS and be done with it instead of this ridiculous game that uses Banks as middle-men when you can’t even be certain of their actions?  That’s the influence Banks have over policy – they force a system that benefits them and doesn’t even accomplish the original goal other than kicking the can down the road but, from a market perspective (and the Banks want a robust market, of course), kicking the can down the road makes it tomorrow’s problem and we can be all shocked all over again next time they run out of cash.  

    Thanks Roro!  

    Strike predictions/Kallen, Iflan – This is fun to play with.  Historical view is interesting.  

    Oil hit $98, likely bounce back here but a nice $500 move down is pretty good before breakfast.  If oil moves up then the Dow moves up so bad time to stick with those puts (12,095).  

  242. Phil

    Wow!  Dollar just fell hard to 79.60 as Euro popped on huge participation in Free Money giveaway (they were worried banks would not want to appear weak by taking the loans).  That’s good for a 50-point pop in the Dow and, of course, too scary to short the Dow now but it’s no reason for oil to be at $98.50 again so game on for the /CL short below that line (tight stops).  

  243. Phil

    Velocity/Pharm – Well there’s your inflationary premise right there.  What else can possibly happen when that velocity bounces off the 60-year lows?  What it doesn’t show is that we have tripled the supply of money to keep our GDP alive while the velocity fell 75% so we’re set up for an EXPLOSION of money if the velocity kicks up before the Fed figures out how to take $20Tn in cash out of circulation.  It doesn’t do you any good to take away the punch bowl after its empty and the party is in overdrive.  

    And what Scott said!  

    Wow, speaking of floods of money.  489Bn Euros was just lent out at 1% to banks who can lever it 10x to 5Tn Euros ($6.5Tn).  There’s ANOTHER round scheduled for February, in case we lose interest between now and then…

    Hedged spread/JMM – Yep, it’s just like covering 35 number in Roulette, there are still two you missed or, if you cover 37, you DEFINITELY win – but it’s 35:1.  Your combo is good and yes, they may not correlate.  FAS, for example, is at $61.49 and you can pick up the April $54/61 bull call spread for $4 on the $7 spread and FAZ is $38.96 and you can pick up the April $32/38 bull call spread for $3 on the $6 spread so you risk $1 on a big move down in the financials and you break even on a big move up but something in between and you can collect on both sides as they are both 100% in the money to start.  That’s just an example, of course, if you hunt around, I’m sure you can find something like that where you break even on moves off in one direction but the middle is where you make money.  That’s being the house.  

    AMZN/Iflan, JMM – Yes, on occasion, with options being so volatile, you may catch a spread that can’t lose if you get the right fill but it’s not something I’d say you can just find – it’s more like something you stumble upon occasionally when you follow a stock closely enough to check options all the time and recognize something strange in the pricing that leads you to discovery.  

    Oil $97.80 and still falling – That was easy!  

    API/DC – That report is very inaccurate.  It’s not an inventory, it’s a phone survey of people who sell oil asking them if supplies are tight or not.  Coming into a holiday weekend, I don’t think they’ve ever admitted to having anything in stock.  Crude stocks legitimately get pulled down as they make more gasoline for the driving weekends and distillates also may decline as production shifts to more gas – it’s certainly not anything you want to base an investing decision on.  

    Detention/Scott – We don’t know the whole story.  How bad is the terrorism situation inside the US?  How many cars full of bombs have they stopped and how many people that Obama considers horribly dangerous are currently detained that would be released if this passes?  I’m against torture but I watch 24 and I think thank goodness there are people who are willing to torture people to save other people’s lives.  It’s wrong as a concept but if you had a guy on September 10th, 2001 who you knew knew something but you couldn’t get it out of him by threatening to take away his TV privileges – what would you do?  And, more importantly, what would you authorize if you were President and, would you be willing, in the current environment, to give up the ability to do it?  

    I hated many, many things about Bush, but this was not one I complained about.  While many abuses were carried out in the name of protecting our homeland – some were certainly necessary and I never felt like I was in a position to say which were and which were not.  As Turk boy says, even Al Franken signed this bill and Al Franken is a guy who goes with his conscience – probably for the same reasons I would vote for it – it’s an awful and terrible power to give to someone but we live in a World where awful and terrible things do happen.  Also, what is not understood by unqualified yahoos on TV is that this is an issue of Presidential Authority and the specific point about detainees is not the real issue here.  The objection the White Hose had to the bill was in the  mandatory language in the bill that limited the President’s discretion – in this case of whether or not the President could decide to put people into a military prison, where, by their nature, people can be held without charges.  

    Obama feels that executive authority must remain absolute and imagine what would happen if he allowed Congress to tie his and future Presidents’ hands and then we have another attack – who will be vilified then?  This is why Presidents go grey.  

  244. lflantheman

     AAPL port:   Plan for the day……Futures are up, so I’ll probably buy back the 10 short Dec 23 calls at market at open then watch the long calls fly.  I only buy something at market (rather than bidding) when I absolutely want to get out immediately.  I’ll look to get the short call loss back later with a roll, which I’ll post when it comes to me.  

  245. Phil

    Good point on EU banks ZZ.  As to arbitrariness, I agree it’s a complex thing to pick apart but I don’t think I’m an idiot-savant of anything – I just think it’s a matter of paying attention and that it can be taught but, unfortunately, it’s also a lot of work and most people want the cliff notes so they can just place their bets.  

    Dollar 80.075 and not killing the markets but that spike up was erased.  Oil held $97.50 and back over $97.80 now so that’s done and the Dow bounced off 12,080 again and now back at 12,110 but that’s strong against the rising Dollar.  The dollar spike came after the EU money drop when it suddenly occurred to people that $650Bn in freshly minted Euros was A LOT OF MONEY!  

    Copper is over $3.40 but silver was rejected at $30 and gold failed to hold $1,640.  Oil testing $98 again and nat gas is $3.12 with Gasoline rejected at $2.60.  

    Gemans/Pharm – Kick the can down the road for 10 more years and the last person who remembers inflation will be dead.  We had runaway inflation in the late 70s – who remembers that in this country?   Our freakin’ President had a button that said "Whip Inflation Now" – THAT’S runaway inflation!  Zimbabwe had bazillion percent inflation and they’re fine now.  So did Brazil – so fine that they are the B in BRIC.  You imagine Germans are so fixated on the past that they are unable to understand that this is a completely different paradigm and they are simply driven by fears of repeating the mistakes of the past to the point that they will sacrifice the future to avoid the possibility of a worst-case scenario that no rational economist believes will happen again (and, of course, Germany was forced to make reparations at the time – so a COMPLETELY different situation).  I know plenty of people in Germany – none of them are as worried about inflation as the rest of the World seems to believe they are but I guess it’s a convenient stereotype – just not a good investing premise.  

    Inflation is a transitory event – by itself it does not destroy a country.  Without some inflation, there is no growth and nobody wants deflation – that’s just less for everybody and, in a society that judges people based on how much they have – it’s generally unacceptable to plan on having less, isn’t it?  

  246. kinkistyle

    Quick! Someone make a cartoon of talking bears with robot voices discussing LTRO!

  247. Phil

    Ah, now the indexes are coming down and oil just failed $97.50 as the Dollar hits 80.15 – so much fun!  

    Hyper-rehypothecated collateral/Pharm – So how else will tens, maybe hundreds of Trillions of Dollars ever be unwound?  There clearly are not hundreds of Trillions of Dollars worth of assets on the planet so the ONLY possible way out is to inflate everything until there is.  Yes, the alternative is a collapse of the banking system, which is a collapse of fiat money, which essentially puts up back to the bullets, beans and bullion trade.  While survival of the fittest may sound great to some of us – not too many fat bankers or political hacks want to take their chances walking around with a pocketful of gold coins and a Baretta for protection whenever they go to the store so they will probably vote, in the end, to preserve the fiat money system that pays them all so well.  

    Can $5Tn be created out of thin air?  They just created more than 10% of it this morning (all of it with leverage) – give them a few months and you’ll be covered….

    Talking bears/Kinki – I’m sure it’s coming.  I played with those for a while but it’s just too damned tedious once the novelty wears off.  

  248. kinkistyle

     Its terrible. I find that I have become so accustomed to learning new concepts by a Stephen Hawkings-like animation, that I automatically find myself yearning  for one..  My search so far has only popped up Lord of the Rings references. LOL.

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