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Tempting Tuesday – Starting the New Year off with a Bang

Wheee, what fun! 

The futures are up 200 points on the Dow (/YM) on a massive gap up after being closed since Friday at 6.  The Dollar was smacked down all the way to 79.97 at 6:30 and oil rocketed to the magic $101.50 mark and just because it’s a new year doesn’t mean we got stupider so my comment to Members in this morning’s Chat was:  

Futures finally opened with massive gap up of 200 on Dow (1.6%).  Dollar dove to 80.045 – total joke and my knee-jerk reaction is to short the Dow (/YM) futures below the 12,350 line (12,352 now) and the RUT (/TF) if they cross back below 750 (now 754).  Iran oil may have some legs so we may have to wait for inventories (Thursday) to short but we’ll see.  

Yep, new year – same BS is the story of 2012.  I made my market prediction yesterday and already today it’s panning out as we have the opportunity to sell to the suckers who think that China’s official PMI coming in over 50 for the first time in 3 months trumps the independent HSBC PMI of 48.7.  We have discussed the very flaky nature of PMI data in the past so I won’t get into it here but the key takeaway from that report is "The “festival effects” of western and Chinese New Year celebrations helped to boost the PMI reading."

So these are the BOOSTED numbers?!?  Oh dear.  “Europe’s debt woes, the austerity measures the European countries are taking and the sluggish U.S. recovery mean demand for Asian goods this year is likely to be weak, posing a downside risk,” said Yao Wei, a Hong Kong-based economist for Societe Generale SA.  Thank goodness investors don’t read the actual reports or check the analysis or we wouldn’t be able to make money betting against the reactions to headline numbers.  

In the Chinese PMI data, an index of export orders was at 48.6 from 45.6 in November, still below 50, the dividing line between contraction and expansion.  The rebound in the PMI “does not signal that the economy has turned around,” said Zhang Zhiwei, a Hong Kong-based economist at Nomura Holdings Inc. who previously worked for the International Monetary Fund. “Growth momentum will continue to wane this quarter, as the European crisis will hurt China’s exports and a cooling property market will drag down domestic demand.”

CHINA is the story of 2012.  Europe is a mess, Japan has been a mess for 20 years and is still a mess, America has been a mess we’ve all ignored for a decade and will remain so for the next decade so we’re worrying about the day when people stop ignoring what a mess America is (and, in election season, you may see some of the candidates bring it up) and, if America manages to somehow kick the can into 2013 – it will all be up to China, who will make or break the global economy this year.  

Which way will it go?  Who knows?  Even if we get data from China, the chance of it being an accurate reflection of their economy is very slim.  Predicting what will happen is pure nonsense.  As Barry Ritholtz points out in his excellent Washington Post Article this weekend

Do a quick Google search for “where to invest in 2011.” I read through the first dozen or so. For the most part, the performance was pretty awful. 

Whenever I see one of those “Buy this now for the new year” columns, I diary them in my calendar or use the free Web siteFollowupthen.com. A year later, I look back at these recommendations and forecasts, and, for the most part, they’re terrible.

Interestingly, China is not on Barry’s top 10 list of things people are predicting this year (although he does mention the "Buy Emerging Markets" camp, which we are on the other side of due to China) but the WaPo also carried an interesting list of the best performing S&P stocks of 2011.  Which analyst called COG (up 101%) as the year’s winner last January?  We had ISRG (up 77%) and BIIB (64%) but we didn’t like CMG (60%) and we gave up on MA way too early as they finished the year near their highs, up 67%.  

7 of the top 10 performers were things consumers HAD to buy – Energy and Health Care while MA, CMG and ROST all benefited from strong consumer demand.  MA, to some extent, reflects higher prices for gas and food, which most people charge and ROST is a discounter that found its groove but CMG is baffling to me – who buys an $8 burrito in this economy?  Barry had this nice, clickable graphic this morning with fun holiday statistics:  

 

>

It’s very nice but the statistics that matter to us begin tomorrow with earnings from MOS and TXI, followed by STZ, HELE, MON, APOL, DMND and FDO on Thursday.  Next week "officially" begins earnings season with (partial list) PTSM, SCHN, AA, OCZ and WDFC on Monday, just SNX on Tues, LEN and SVU Wednesday, INFY and ZZ Thursday and – hold your breath – JPM on Friday morning and then we are off to the races with C, CBSH, WFC, PNFP, GS, BAC, BK, PBCT, SIVB, PRSP, STI and GE all reporting from the Financial Sector next week.  If the World doesn’t end when BAC reports that Thursday morning (19th) – I might be inclined to get a bit more bullish!  

That is going to be a VERY exciting options expiration week so it’s a good thing we are kicking off our virtual 2012 $25,000 Portfolio with a cash balance after our White Christmas Portfolio finished up over $30,000 (200%) last week.  These are our aggressive, "fun" virtual portfolios, which are meant to be the aggressive carve-out of a larger, more sensibly balanced portfolio, like our Income Portfolio, which is going to have a busy month finally as we make our January adjustments.    

Meanwhile, after a dip down to 12,327, the Dow is back at 12,350 and we can short it all over again if it breaks below that line but the first Egg McMuffin of 2012 is paid for and there will more likely be a bullish squeeze at the open as those who took their money off the table last week in case of terrorist shenanigans over the holiday weekend (like us) rush to get back in today (not like us at all).  

Our job is to wait PATIENTLY and see what happens next.  The Euro needs to be over $1.30 (now $1.3042) and the Pound over $1.55 (now $1.558) and the Dollar needs to be below 80 (now 80.09) for us to get interested in making long plays.  

Tomorrow, we’ll discuss our levels after we get a chance to see where today settles out.  1,297 is where the S&P needs to be to impress up (+5%) but the Russell is likely to hit 774 (Must Hold) before that happens and the NYSE, our broadest index, is still a drag on the rest and needs nearly 400 points to make their Must Hold at 7,866.  This morning’s ridiculous Futures rally should get them halfway there, what matters then is what they do with it into the close.

Happy 2012 – same as it ever was:

 

 


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  1. jmm1951

    "Successful investing is anticipating the anticipations of others."
     
    [John Maynard Keynes]

     

  2. stjeanluc

    Speaking of performance for 2011, here is the list for the main ETF:

    http://www.bespokeinvest.com/thinkbig/2011/12/30/2011-key-etf-performance.html

     

    Foreign markets got killed, treasuries and utilities did great!

  3. kramer36350

    speaking of CMG, up to 342 this morning on upgrade PT to 390 from DB - wow

  4. stjeanluc

    First oil lines of 2012!

    R3 – 101.80
    R2 – 101.18
    R1 – 100.87
    PP – 100.26
    S1 – 99.95
    S2 – 99.34
    S3 – 99.03 

  5. stjeanluc

    lflan posted his AAPL 50k portfolio comments under the portfolio recap that I posted yesterday:

    http://www.philstockworld.com/2012/01/02/weekend_portfolio_recap01022012/

  6. Pharmboy

    PP for today.  

  7. rustle123

    Cramer very bullish today, must short.

  8. roro

    Did the hit and run with short Dows close to the gap high, and back in cash………the good news is I was able to jump back in and recover some lost profits after taking a hit by jumping in too early for shorts late last week….
     
    Lesson learned, …….until I forget to be patient the next time.

  9. bobhu

    For guys who shorting TLT, they pay dividend.  Just found out from TD Ameritrade.
     
    I got assinged TLT(I sold Calls) on the weekend(12/26/12 according to TD Ameritrade but shows on my asscount on 12/27/12), got charge for $759.72 on DIVIDEND SHORT SALE. 12/27/2011 is the ex-dividend day.  Is this right?  Should I talk with TD Ameritrade?   Thanks.

  10. kramer36350

    " . . . first trading day of 2011 saw the S&P rise from 1257 and close at 1272, something which #CarbonCopy2012 seems dead set on imitating"
    http://www.zerohedge.com/news/art-cashin-roller-coaster-commuting-and-early-2012-trading-patterns

  11. stjeanluc

    Phil, that Jan 68 calls is in trouble again… Still, lots of premium and time. 

  12. stjeanluc

    Good day for AA…

     

  13. 8800

    Phil,
    Thinking ahead – While we’re waiting for sht trm  directional confirmation, what are your thgts on putting on some covers now to take advantage of the higher inverse put prices (selling puts in TLT -@116/117 and EDZ @ 16/17) to fund possible/likely hedges later?
    Thanks

  14. lflantheman

    AAPL 50k portfolio:   Sell to close 2/3 of your Jan 400 calls and sell to close 1/2 of the Jan 390 calls. 

  15. stjeanluc

    The BCS is doing well, but the TNA 46 calls are now underwater…

     

  16. stjeanluc

    lflan, give me the price you got before I update the spreadsheet, thanks! 

  17. lflantheman

    Analysis of the above trade:  1.   Taking some profits with todays pop, but  2.   Leaving some to grow if we continue to move upward  and  3.  Expecting some muting of today’s upward action by…….http://www.forbes.com/sites/ericsavitz/2012/01/03/apple-citing-disappointing-ipad-sales-analyst-trims-target-ests/?partner=yahootix

  18. lflantheman

    stj…17.50 for the Jan 400s and 24.70 for the 395s. 

  19. nicha

    Rustle123 – IMAX in the low 18′s. You interested in selling puts?

  20. stjeanluc

    Great day for the AAPL portfolio… Good job lflan!

     

  21. Phil

    Good morning! 

    A nice, short week to get us going is just what we need.  As I noted in the post above, it’s all about $1.30 on the Euro, $1.55 on the Pound and the 80 line on the Dollar to tell us what to do.  At the moment, the 80 line is holding strong but so is the $1.30 line on the Euro so we look to the Yen, and that’s at 76.73 so we know the BOJ wants the Dollar higher and the EUR/CHF is $1.218, which is very close to their $1.22 target so not too much pushback from the Swiss means the BOJ can hold a successful Yentervention today – so let’s watch out for that knocking us down at some point.  

    Oil (/CL) already at $102.65 and $102.50 is the line we would love to short them at (on a cross back below) but NOT if the Dollar is below 80.  Yes, many, many conditional items this week as we are far better off sticking with cash in short-term trading and waiting to see how the week’s data and the next two week’s earnings pan out.  

    We are breaking those bearish M patterns on the big chart though so we’re going to take some bullish pokes if we hold up today.  Copper holding $3.45 is a bullish sign and if you want to have my first bullish play for 2012 – how about poor FCX, which is still down at $38.20, down from $60 last Jan, when copper was $4.25.    

    Since FCX is a stock that could pop significantly, I like selling the 2013 $35 puts for $5.85 and buying the Feb $40 calls for $1.42 with a stop at .80 so we only risk having a net credit of $5.23 on the 2013 $35 puts for a net entry of $29.77 if FCX does not do well between now and Feb.  Meanwhile, if they pop to $42, that puts a few more in our pocket and lowers the break-even further.  Nice, simple way to make a light commitment to a bullish position.  

    We have our disaster hedges from last week so it’s appropriate to begin looking for bullish plays but, as I said, no need to go crazy yet – I’m just putting up a few ideas on the assumption we are too bearish or in cash (in which case those disaster hedges are nice and cheap now!).  

    I’m still expecting this rally to fizzle but not worth being futures bearish unless we fail to hold Dow (/YM) 12,350 or RUT (/TF) 750, both of which are great lines to short off.  We have Fed minutes at 2, so let’s see if we survive those before going hog-wild just because we had a big move up in the Futures.  

    PATIENCE – it’s going to be a long year!  

    Tuesday’s economic calendar:
    10:00 ISM Manufacturing Index
    10:00 Construction Spending
    2:00 PM FOMC minutes

    At the open: Dow +1.78% to 12435. S&P +1.75% to 1280. Nasdaq +2.08% to 2325.

    Treasurys: 30-year -0.77%. 10-yr -0.39%. 5-yr -0.16%.

    Commodities: Crude +2.38% to $102.08. Gold +1.42% to $1593.25.

    Currencies: Euro +0.77% vs. dollar. Yen -0.18%. Pound -0.49%.

    Market preview: U.S. stocks are set to open the year higher following improved manufacturing data in China, India, Germany and other countries; S&P +1.6%. ISM factory data due out later is expected to show increased strength in the U.S also. Crude futures +2.4% on the PMI data and rising tension with Iran. Also ahead: construction spending, FOMC minutes.

    U.K. December manufacturing PMI rises to 49.6 vs. 47.7 in November. Analysts had expected a slight dip to 47.3. (see also)

    With today looking like a big move higher in stocks, Art Cashin prepares for the assured flood of stories reminding as the first 5 days in January goes, so goes the year. "Statistics can be less than useful and sometimes misleading … the safest form of travel in the U.S. is riding a roller coaster … (only) you wound up just about where you started and the ride cost you money.

    Oil prices push higher on concerns that sanctions against Iran over its nuclear weapon ambitions could disrupt supply, while data from China and India showing an expansion of manufacturing also provides upward pressure. Brent crude +2.6% to 110.13, WTI crude+2.7% to 101.46.

    Having test-fired two long-range missiles yesterday at the end of a 10-day navy drill in the Persian Gulf, Iran threatens action if a U.S. aircraft carrier that left the area because of the exercises returns. Iran didn’t provide details but has threatened to close the Strait of Hormuz if oil sanctions are imposed. 

    My main concern in Europe continues to be a concern:  A counter to the ECB’s lending facility, the amount left at the central bank’s deposit facility remains near record highs at €446.3B. This amount skied following the ECB’s LTRO two weeks ago. At this point it appears banks value liquidity above all else – borrowing at the LTRO at 1% and lending it back to the ECB at 0.25%. 

    A total of €14.8B was drawn on the ECB’s marginal lending facility on Monday night, down from €17.3B last Thursday, but still an extraordinarily high number. Such borrowings incur a penal rate of 1.75%, suggesting whoever is using it was havi8ng year-end difficulties that have yet to be resolved.

    Regulators are considering using OECD classifications to set bank capital levels instead of ratings from the likes of S&P and Moody’s, which the Dodd-Frank Act seeks to remove from the calculations. The tiny flaw is that the OECD assigns zero risk to most EU government debt, including that of Greece and Portugal.

    Spain goes against the morning’s good vibes, its shares reversing much of yesterday’s gains as the government launches renewed austerity measures amidst skying unemployment - this morning nearly touching 23%. Yesterday, the new finmin said the debt/GDP ratio for 2011 will top 8%, against hopes for 6%. Madrid-1.4%. Spanish 10-year yields +11 bps to 5.22%.

    Greece must finalize a deal on a second, €130B bailout from international lenders, or face an exit from the eurozone, says a government spokesman, adding the "next three to fourth months are the most crucial."

    Check please!  G7 countries will need to refinance over $7.6T of debt this year, with the amount increasing to more than $8T when interest payments are included. Japan leads the way with $3T, followed by the U.S. with $2.8T. Crucially, Italy will need to raise $428B and pay another $70B in interest.

    2012 is hardly a fresh start for the eurozone. A tightening of credit conditions reported in H2 last year will hit with a lag, and eurozone banks may pull back further given the region’s weak outlook and the need to shore up capital positions.

    Merkel and Sarkozy are planning a bilateral summit for next week, and will focus on new rules to enforce budget discipline ahead of an EU-wide summit at the end of January. EUR +0.4% vs. USD to 1.2984.

    Macau caps off a boom year in 2011, with December gambling revenue rising 25% from a year earlier, bringing the annual total 42% higher than 2010. At $33.5B, the figure is more than 5X the haul brought in by Las Vegas. Questions for 2012 center around VIP gambling in which operators issue gamblers credit – such debt isn’t recognized in China, meaning there are no legal means to collect.

    Research in Motion (RIMM +3.7%) moves higher amidst areport of a corporate shake-up in which co-founders Mike Lazaridis and Jim Balsillie will give up their position as co-chairmen of the board. Barbara Stymiest, a board member since 2007 and former chief of the TSX Group, is rumored to be the leading replacement candidate. 

    Flurry Analytics reports 1.2B apps downloaded in the final week of December, the first time ever surpassing one billion as users opened up their holiday packages. The U.S. led the way with 42% of the downloads, with China next at less than 10% – its number likely suppressed by the fact that most of the country doesn’t celebrate Christmas.

    Morgan Keegan cuts its price target for Apple (AAPL) to $513 from $530 following indications that iPad and Mac sales fell short of expectations in December. Morgan Keegan also lowers its GAAP EPS estimate for the latest quarter to $10.10 from $10.24. Shares +1.1% to $409.35 premarket.

  22. rustle123

    still waiting, think this market can come down and IMAX being down today is not a vote of confidence for upcoming earnings.  Would like to see the RSI in low 30′s on it.  Currently 41.

  23. Phil

    Very dangerous play ahead of our ISM numbers but oil (/CL) just crossed $102.50 and the S&P (/ES) is at 1,275 and that’s a good on/off line to use for a short as well.  Dow (/YM) 12,385 is playable as 12,400 should be a barrier but keep in mind that’s $75 per contract away.  

  24. yodi

    Good morning Phil First I wish you and every one here a good new year.
    AAPL Last week you showed a negative out look for AAPL puts where I am holding Jan 13 320 put short as well as Feb 12 360 put short. Are you still thinking AAPL will go down to these levels again in the given time thanks.

  25. Phil

     Oops, BTE ISM so premise is blown and a quick escape on Futures.  Now we see how high they can take us.  

  26. pentaxon

    I have updated my adjusted charts. The non-USD chart is still running perfectly within it’s uptrend channel. Very clear and healty run-up still – however I wouldn’t be suprised if we would revisit the lower bound of this trend during the next days or weeks.
    http://www.pentaxon.com/psw/spy_worldcurrency.html

  27. jmm1951

    Phil/SPY spread
     
    What is the best way to handle this? As we know verticals are tricky, because they don’t attain their full value until expiration or very close. This is a specific situation, but would appreciate any comment on the general concept.
     
    I have SPY January $120/125 BCS. Cost was net $3.20 net. Now $4.20. Is it best to sell at this price and take the profit, set a trailing stop, or set a stop loss order. My own inclination is to set a stop loss order if SPY goes below $124.75 and hold to maturity, but no doubt this is theoretically unsound. I also have downside hedges with February and April expirations in place.
     
    If it is best practice to sell the spread at $4.20, is it ever right to hold a $5 spread to full maturity?

  28. dpastramas

     Hey Phil, quick one, is the above FCX play part of the new 25K Virtual portfolio?

  29. exec

    Phil/Dollar    
     
    By the 80 line holding, are you saying that if it breaks down to go long?

  30. Phil

    Good quote JMM.  

    ETFs/StJ – Brazil 40%, Russia down 30%, India down 25% and China down 20% is why BRIC was a great short for us last year.  That means they have a ton of catching up to do this year if things get better.  Why is India worse than Italy?  I would certainly rather have my money in Brazil than Italy – lots of strange things on that list..

    CMG/Kramer – I guess people think this new Shop House spin off will be a hit so sky’s the limit as they now have two chains and one with a heavy growth track.  

    Oil lines/StJ – Not much use when they are blown out.  

    Hit and run/Roro – Best way to play.  Indexes flying now so a nice example of how quickly giving up on positions when new data doesn’t match our premise.  

    Now the Dollar is right on the 80 line with Dow (not futures) at 12,471 (futures 12,405), S&P 1,283 (1,278), Nas 2,664 (2,327), NYSE 7,601 and Russell 758 (756).  The discrepancies are because the Futures are 3/31 expirations, so that’s the "bet" but generally the futures predict close to current prices with Dow the most volatile.  

    Oil right at $102.50 and I do like them short here if the Dollar can hold 80.  Gold $1,598.90 so gold going over $1,600 or the Dollar below 80 are both signs oil can go higher but, if they don’t cross their lines, it’s worth shorting oil here.  

    AA back to $9!  

  31. l4real

     Phil, is the FCX play still good? That’s selling jan2013 $35 puts @ 5.65 now and sell Feb 2011 $40 calls @ 1.42

  32. exec

    JR/1st Day
     
    Nice call on your statistic for first day of New Year. 
     
    Do you have a statistic on the second day of New Year?

  33. lflantheman

    AAPL 5k:   Put a sell order on your remaining January calls .   On the 390s, place it at 28 dollars, and for the 400s, 20 dollars.   We will, of course, be coming back into bullish positions on AAPL at EOD, but in a different form than the 390s and 400s.     The above orders, incidentally, probably will not fill.   But if they do, then…..    :)

  34. rainman

    IMAX — Keep an eye on the 17.50 support. This is one I parrallel Phil’s CMG thoughts on. Who’s paying $6.50-11 for movie tickets in this economy? China? And as Phil noted, at least CMG is something the consumer HAS to buy (food vs. movie tickets). Having said that, if it takes a nice tumble through that 17.50 line, I might get interested depending on the severity. Earnings can really move IMAX. I last owned IMAX around 16.23 in June/July of 2010 last year and sold at 27 in Dec ’10. If it finds support at 16.25 on a tumble I’ll likely enter.

  35. rustle123

    with gas going up and in NJ tolls that just went up 50%, retail will not be doing well in NJ this month.

  36. exec

    BMY,
     
    Does anyone know why it’s dropping today?

  37. pentaxon

    Phil, the delta between the futures and the indices are not a bet. It’s a precise function of the costs of carry for the contract until expiration. they will be on the indices on expiration date. before that the cost of carry is calculated as a diffence of the interest rate for the equivalent cash-market position less the dividends paid (by the companies in the index). Otherwise you could e.g. keep stocks, earn dividend and hedge the market price with the specific futures.

  38. roro

    Don’t the positive PMI/ISM prints out of  China (faux number), the UK, Europe and the US along with the equity rally kind of make the argument for a QE3 just slightly more difficult at this point?

  39. nicha

    IMAX/ rainman, rustle – I hold 200 shares @ $20. Any suggestions? thanks!

  40. jabobeast

    CMG new all-time high?
     
    FU CMG!!!

  41. stjeanluc

    FAS Strangle – Wow, running out of room on the call side. I am not in love with that move now! The somewhat risky thing to do is to sell a 65/73 strangle now betting on the fact that we’ll correct that fake move. The 73 calls can roll to the Jan 81 or even the Feb 90 so plenty of room there. So I am jumping in, but I am not in love with that setup… 

  42. Springheel Jack

    Happy New Year everyone :-)

    I have rising resistance on ES at 1284 and possible rising channel resistance at 1294. 

    The key thing I’m watching today is whether DX can hold support at 80. A break below would be very supportive for equity bulls. 

  43. Phil

    Cramer/Rustle – Yep, that’s a definite sign that this rally is BS.  

    Dividend/Bob – If they had you short into dividends then you pay the dividend but, in theory, it’s made up for by the drop in the ETF corresponding to the dividend pay-out.  That doesn’t correlate too well with TLT but they are down $3 since then, so I think that’s a fair trade for a .38 dividend.  

    Carbon Copy/Kramer – Volume at 10:20 on Dow is anemic 37M – how can you pop a $40Tn market 2% ($800Bn) with that kind of volume?  So silly…

    FAS Money/StJ – Wow, $71 on FAS – that was quick!  Of course we can ditch the $50 puts and that makes up for the loss on the $68s and we can roll the $68s (now $7.60) to 2x the $73s (now $3.50) and IF we head over $72.50, then we can sell one $68 put (now $3.50) to help pay for the next potential roll.

    AA Money/StJ – Back on track.

    IWM Money/StJ – At $48.40 on TNA (and up $4 today) I think it’s prudent to take out the $39 puts and the $35 put ($2) and we can wait and see if we pull back as the RUT is near 2.5% for the day and that should be a stopper.  After the Fed, if things are still looking up, then we can look for a new put sale but no reason to roll the callers here as I’m not as worried about the RUT flying up as I am about XLF.

    Put selling/8800 – I was just looking at TZA puts for that purpose.  EDZ not a bad choice and we ASSUME the Fed will support TLT but, on the whole, I’d rather wait and see how at least one of the 250 trading days of 2012 plays out before jumping on things.  

    AAPL/Iflan, StJ – Wow, amazing job there guys!  

    AAPL/Yodi – Thanks, I’m not negative on AAPL, I just don’t see the merit in betting they won’t go below $350 when they CAN.   I don’t think it’s less than a 25% possibility that AAPL doesn’t fall 20% (to $330) so there are plenty of things I like better – that’s all.  

    Dollar tested 79.90 but now heading back to test 80 from the other side – stay on your toes.  

    Whenever CNBC has Cramer on for extra innings I’m very suspicious that it’s just a pump day to reel the suckers in.  

  44. rainman

    nicha / IMAX — BTW, in general, I don’t like to take bullish positions on issues in a down trend (which IMAX has been in since the dec 5 peak). It’s sitting on the 100 DMA wich might offer support (look at the 3 year chart). 
     
    Why not sell the Feb $20 calls for $70? That’ll get you 3% or so in 6 weeks.

  45. rustle123

    Nicha/IMAX,
     
    I’d look to average down by waiting to see if it continues to drop then writing 2 puts on it which will either lower your average from the expired premium or from a much better price on the stock.  If the stock falls to 17.15, you should have a nice price on a 17 put and if it falls below 17, I would write the 17 put still.

  46. scottmi

    SQQQ/Phil – with this dip in price, any adjustment to consider for a Jan 21/24 BCS with orig cost of .62?

  47. nicha

    rainman, rustle – excellent suggestions! I will also pay attention to RSI and down trends in the future. Thank you.

  48. angelcur

    so far… this looks like another gap and hold day -stocks gap higher create overbought conditions..barely give back anything throughout day.. then close at the highs…. next day usually sells off some.. if this morning’s gains hold then 1325 looks like a good upside target over the next couple of weeks..how can this be

  49. stjeanluc

    FAS Money – Buying back the 50 puts and the 68 calls. Selling 2x the 73 calls ($3.25).

     

  50. Phil

    Thanks Pentax!

    SPY in world currency

    SPY/JMM – SPY is at $128 and this trade is "on track".   You are up about 30% so now you are risking 130% of your original trade to make 20% more.  Are you that sure the S&P will hold 1,250 for 3 more weeks?  Your risk/reward has turned very much against you and it seems to me there are safer ways to make 20% on $4.20 between now and Jan 20th.  If, on the other hand, you are hedging your downside hedges – then why not let it ride until you get a signal that the S&P can’t hold?  I would wait until the Fed and put a stop on the $120s (now $8.50) at about $7.50 and leave the $125s (now $4.25) naked at $3.50ish with a stop at $4 (or you can cover with March whatevers that cost $4 or less so you have $3.50 back off the table (profit!) and what would currently be a March $129/Jan $125 spread at net 0 and your original cash back in pocket, which would be enough (mostly) to cover a move up to $129 anyway.  

    FCX/Dpastram – If something were for the $25KP, I would say it is for the $25KP.  We currently have that and the Income Portfolio (outside of what StJ is tracking) as active tracks – any other picks I have are just trade ideas I see at the moment and you can use them or not but, unless someone asks, I won’t be looking back at them.  

    Dollar/Exec – Yes, I’d say Dollar below 80 is a sign to get long but it would take more than one day to convince me.  It’s an immediate sign not to go short though!  

    FCX/L4 – Sounds good to me.

    IMAX/Rain – I like them long-term.  I think the question is more, why would I pay $10 if the movie isn’t in IMAX?  Around us (NYC), IMAX adds $3-5 to the price of the movie but since the whole thing of tickets and popcorn and stuff for me, Tina and the kids is $100 anyway – I’d damned well rather pay $20 more to make a cool experience out of it.  My kids know I will only go to certain theaters (stadium seating, good sound, good popcorn, coke slurpees, not the first week a movie is out) so they have gotten good with Fandango at picking things they know I’ll agree to.  I think, once the decision is made to go to the movie – the extra IMAX fee is not an issue.  What’s key though, is they eat a lot of up-front costs on new installations and THAT is why they trade down sometimes and THAT is when it’s a good time to buy.  

    There goes $102.50 with the Dollar at 79.995 – Game on!  

  51. dclark41

    Phil
    Would you short USO here or SCO?

  52. rainman

    Nicha / IMAX — What rustle and I are suggesting aren’t mutually exclusive and in fact I was thinking along the same lines as russle even though it didn’t come out in my post. Selling the calls also drops your cost basis. Right now I’m short term bearish due to the trend so selling calls makes sense and waiting for the turn to sell puts. Anyone have a confirmed earnings release date?

  53. dclark41

    I have IMAX earnings date: 2/23/12 AM

  54. Beaufleurs

    Iflan, enjoying learning via your aapl portfolio and with my busy job and life I like your thoughts on learning and following one stock like aapl. Starting now, I will be executing the trades in my virtual account to continue to learn and practice. What would you recommend for people joining in at this point with regard to the July position for example,… or disregard current positions and start with your next recommendation ? Thanks in advance.

  55. stjeanluc

    IWM Money – Buying back the 35 and 39 put (0.45 and 0.85).

  56. stjeanluc

    AAPL / Phil – All the credit goes to lflan, I am just the scribe…. 

  57. rainman

    Phil / IMAX — I agree with you and the same thing can be said for CMG. If you’re taking your family out for fast food anyway, than the delta to go "healty" with CMG parrallels the delta to go "cool" with IMAX.

  58. rainman

    dclark / IMAX — Thanks. Perfect for the 2/18 expiration.

  59. Phil

    BMY/Exec – There is a GS Health Care Conference on Thursday that BMY is presenting at – may be just rumors of something not on track over there.  

    Futures/Pentax – But aren’t futures essentially an option on the index through 3/31?  Maybe it’s my background that makes me think of them that way but why would the Dow have such a high "carry cost" compared to the others?  

    $102.39!  Well, at least it’s a quick .05 or better now and we have money to lose on the next cross.  

    ISM/Roro – Only if you believe them.  They are surveys of what manufacturers THINK the outlook is for the next couple of quarters – it’s not hard data and won’t play much with the Fed.  

    IMAX/Nicha – If you are willing to DD, you can sell 2013 $20 calls for $3.50 and $15 puts for $2.50 and you end up in a net $14/14.50 buy/write with a $6 upside if called away at $20 (42%) – not a bad way to play them.  

    As a new play, I like IMAX at $18 selling the 2013 $17 calls for $5 and the $15 puts for $2.50 for net $10.50/12.75, which is a LOVELY 29% discount if put to you and a ripping 62% profit if called away $1 LOWER than it is now.  

    Dollar testing 79.90 again and oil back over $102.50 of course.  Just a hit and run trade on oil so far…

  60. Burrben

    lflan-THE MAN / AAPL
    Thanks dude, you are "THE MAN" on AAPL!  Just paid my rent down here for the next 4 months with those call profits.  

  61. stjeanluc

    Apparently the first day of the year has been good the last 4 years. That didn’t mean much at the end though…

    http://www.bespokeinvest.com/thinkbig/2012/1/3/another-strong-start-to-the-year-been-there-done-that.html

     

  62. flipspiceland

    @exec
    BMY is generally a place to ‘park’ gains in other securities, and it rarely acts BETA in a steep rise such as we have had this morning, as money moves out of BMY when spikes occur in the general market
    But even a .25 cent move down is meaningless.
    Don’t give it much weight at all.
    IMHO
    Phil was right once again in October  recommending selling 1-3 month out 28.00 puts which I hope you did.

  63. Phil

    Happy new year Jack – We totally agree on the Dollar, that tells the tale this week but I see no reason for 80 to break.  The only reason we’re at 80 now is happy talk about a Merkozy meeting – as if they will suddenly figure it all out on Thursday.  

    SQQQ/Scott – Sure, if you plan to stick with it, the roll to the $19s (now .65) is just .30 or .35 – if you don’t like improving your position by $2 for .35, then that means you’re bearish and should be out of the trade, right?  

    1,325/Angel – I’ll be pretty shocked if they break 1,300 without some amazing earnings.  

    SCO/DC – Assuming that was an "or" question, I prefer SCO because you can take advantage of the premium to go for the Jan $35/38 bull call spread for $1.35 and sell the $34 puts for $1.10 for net .25 on the $3 spread as a simple bet that oil won’t hold $100 (SCO currently $36.15).  

    Dollar dropping and not helping to hold things up.  

  64. angelcur

    coke slurpees?…ok don’t forget the honey badger
    http://www.funnyordie.com/videos/e858312f83/the-crazy-nastyass-honey-badger

  65. Phil

    Scribe/StJ – Still an important role! 

    $102!  That should be a bounce but below that line we can short them again.  

    Dollar 78.89, gold $1,608.  

  66. jmm1951

    Another MF Global?
     
    I’m seriously thinking about changing my IRA account from TradeKing, though I do like their trading interface. Last week I wanted to send some money from my margin account to my bank account via ACH transfer. There was a delay for a couple of reasons, but the money was removed from my TradeKing account early Friday morning.
     
    However it did not show up in my bank account on Saturday, so I waited until today (after the holiday yesterday) to call the bank and they said there was no ACH transfer pending.
     
    I then called TK customer service, and they said that "technically" it could take 3 business days for an ACH transfer to go out due to "processing". I asked if it was not transmitted electronically. Silence at other end. I pointed out that when I had transferred money by ACH transfer from my bank to TradeKing, it did not take three days, the money moved immediately. They apologized and reiterated that "technically" it could take three business days, and there may have been a delay due to the holiday. I repeated that the money had been drawn from my account on Friday morning, and that Friday was not a holiday.
     
    I think I may have to change to a brokerage that has more advanced technology.

  67. Phil

    CMG/Rain – I look at the choice as different but I stay away from CMG as it seems to have that Whole Foods thing going for it and those guys were unstoppable selling to the same people (us) who have plenty of money and just want the best when they consume.  My problem with CMG is I don’t think much of their food compared to the many fine Mexican places we have in this area while IMAX, to me, is clearly an event sort of thing.  

    Congrats Burr! 

    First day/StJ – Meaningless, especially when we get the majority of gains in the futures.  March 2011 was 1,250, so back to the end of year level and Feb 2010 was 1,050 so a 6% drop there and, of course, March 2009 was a catastrophe at 666, 26% below the 12/31 close so 0 for 3 after "good starts" on the first day of the year is why we’re not too keen on committing here!  

    Honey badger/Angel – What the hell kind of things do you watch?  

    Transfers/JMM – That is a major scam they pull on large investors world-wide.  

  68. stjeanluc

    The latest plan in France – a so-called social VAT. The plan is to lower the employers portion of the social programs that s usually paid with salaries and to make up for the revenue loss with an increase of the VAT by a couple of percentage point. The idea is to lower the cost of production of many products (labor costs will be lower) so that they can be more competitive at the export while the increased VAT will make imported products (and domestic ones as well) more expensive to the consumer. Funny enough, business people love the plan and unions don’t… As usual, the bottom 90% will pay the cost! 

  69. lflantheman

    Beaufleurs…..10:58 post/ AAPL port>    For anyone just now wanting to get on board I would wait for the next entry.  I will probably keep the July spread, but the Jan 390s and 400s are going to be released sometime this week, and new positions will be established.  

  70. stjeanluc

    Not committed / Phil – Well, Barry seems to share your skepticism:

    http://www.ritholtz.com/blog/2012/01/the-cotton-candy-rally/

    Unfortunately, this New Year’s rally does not seem to have any of those features. The cash getting put to work can move markets, but it is ephemeral — not typically a lasting trend. I am happy to see markets go higher — I have a decent slug of equity holdings in my portfolios (>50%) — but I am more concerned about the damage of the next leg down than the gains of the present rally.

    What would increase my enthusiasm stocks? As noted, I prefer conviction driven, not calendar focused moves. I want to see stronger, not lighter volume. And, I prefer to see the leading sectors of the economy lead the market — that means financials, technology, and consumer goods. As we noted Sunday, sentiment has gotten pretty negative. But its not at levels associated with long term rallies.

    The bottom line is this: These rallies are for traders, not longer term investors. We remain mired in a long term secular bear market — and that means preserving capital and managing risk. Yes, you can be opportunistic, but that is a secondary, not primary objective.

    Be smart, think out your goals, have a plan and trade safe in 2012

  71. cjji

     Still holding DIA Jan $118 puts in at $1.81, now $0.45.  Should I roll to Jan $123 for $1.05?

  72. pakdog

    jmm1951 – ACH is a bit dicey that way but that would make me hella-nervous, too. When in doubt wires are a little expensive but you should get same-day delivery. On the other hand, I put in a wire request from one of my brokerage accts on 12/23 first thing a.m. and it took all day to process. It was to close a real estate purchase, and the seller got a bit jumpy toward the end of the day. The custodian is Pershing so no excuse technology wise but was told that going into the holiday they may have been on limited staff and got backed up entering and tracking the orders. Do they know where your money is right now?

  73. stjeanluc

    Amazing how much damage we have done in the relatively little time we have been around this planet.. as pictured on a 24 hour clock. Midnight is about to ring I think!

    Screen shot 2011-12-30 at 3.48.22 PM 

  74. Phil

    10:00 AM On the hour: Dow +1.91%. 10-yr -0.38%. Euro +0.77%vs. dollar. Crude +2.71% to $102.41. Gold +1.78% to $1598.95.

    11:00 AM On the hour: Dow +2.04%. 10-yr -0.37%. Euro +0.92%vs. dollar. Crude +2.77% to $102.47. Gold +2.1% to $1603.95.

     "As goes the first 45 minutes of trading in January, so goes the year," tweets Justin Lahart, goofing on the coming line of analysts sure to be implying an import to today’s action which statistics do not back up. It turns out the 1st day of trade isn’t much of a guide for the 1st week or month, and the "January effect" is a myth.

    Morgan Stanley says the S&P 500 will drop 7% in 2012, ending the new year at 1,167. The firm cites as catalysts a global economic slowdown, weak company results and a stronger U.S. dollar. Consequently, it cuts the energy sector to Underweight and ups industrials to Market-Weight, removing Baker Hughes (BHI +4.2%) and Walgreen (WAG+1.3%) from its portfolio and adding United Technologies (UTX +3.1%), Fresh Market (TFM +0.7%) and Target (TGT -0.1%).

    Gold and silver erase the entirety of their late year dives in a few hours of 2012 trading, with silver making a particularly dramatic move, +6.1% to $29.64/oz. Gold is 2.6% higher at $1,607. An effective hedge against stock declines earlier in 2011, gold and the S&P 500 have mostly risen and fallen together since the October equity lows.

    Dec. ISM Manufacturing Index: 53.9 vs. 53.5 consensus and 52.7 prior. Prices index 47.5 vs. 45 prior. Employment 55.1 vs. 51.8. Inventories 47.1 vs. 48.3. New orders 57.6 vs. 56.7

    More on the ISM survey: At 53.9, the headline number remains above 50 for the 29th consecutive month. One year ago, the index stood at 60.8 and prices were percolating – the ECB was set to tighten policy and markets believed the Fed and BoE might hike before year’s end. Today finds the ECB easing, the BoE in the midst of QEII, and the Fed twisting and making noises about QE3.

    Nov. Construction Spending: +1.2% to $807.1B/year vs. consensus +0.5%, October revised down to 0.2% drop from 0.8% increase

    More on the Construction Spending report (previous): The monthly increase was the largest since August, but spending is still just barely over half of the $1.5T level that economists call "healthy." Strength was seen in government spending and housing, while nonresidential construction declined. 

    Global stocks may be fired up today by improved factory activity around the world (III), but Barry Ritholtz reckons that it’s an emphemeral "Cotton Candy Rally" that is due to fund managers holding excess cash after they dumped their losers at the end of Q4.

    U.S. banks (XLF +3.5%) shoot higher, responding to optimism about economic growth in emerging markets. The cost of insuring against the default of European sovereign debt was up this morning, but CDS protection actually fell for U.S. banks. At Bank of America (BAC +5.5%), CDS spreads fell to 397 bps vs. 404 a week ago and nearly 500 in November. Also: MS +6.2%JPM +5%C+7.6%.

    Despite chatter about an impending downgrade, Francegets off to a good start in its first bond auction of the year, attracting strong demand and obtaining very low rates in a sale of three lines of €8.715B ($11.375B) in short-term BTF bonds. This was towards the top end of the €7.6-8.9B range France had indicated. 

    Berkshire Hathaway (BRK.A) suffered a rare "loss" vs. the S&P 500 in 2011, slipping 4.7% while the index ended the year unchanged. Still, since 1990, Berkshire has gained about 17-fold while the S&P has nearly quadrupled, highlighting the tough task new investment manager Ted Weschler may face should he succeed Warren Buffett. 

    Winner, winner, chicken dinner!  Shares of Peabody (BTU +9.2%) and Alpha Natural (ANR+8.1%) rally after a U.S. court ruled late Friday the EPA must delay implementing its Cross-State Air Pollution Rule. Brean Murray analysts say the ruling marks the "first positive event for domestic thermal coal producers in quite a while," although the threat of the air pollution rule "still looms later this year." PCX +7.4%JRCC +7.8%.

    Altria (MO -2.8%) is among a small handful of S&P 500 stocks performing poorly today, stung by a Barron’s article pointing out the company’s key Marlboro brand is losing market share in an already declining market. That, combined with a lofty valuation for a "value" stock, may not be a great mix.

    Chipotle Mexican Grill (CMG +3.4%) is upgraded to Buy at Deutsche Bank as "the best growth story in the restaurant industry given a 13% unit growth rate, industry-leading same store sales, industry-leading new unit returns, and a long runway for new stores." Deutsche expects even stronger earnings growth in 2012 than 2011 and higher share prices even after last year’s 60% gain.

    Six Flags Entertainment (SIX +2.3%) says its board of directors has approved an expanded stock buyback that will allow the company to repurchase an additional $250M of its stock through 2015. The company just recently completed a three-year $60M program.

    Speaking of tea:  Sara Lee (SLE +0.4%announces that it acquired privately-held Tea Forte for an undisclosed amount to beef up its lineup of premium teas. A company exec says the purchase fits perfectly with its plan to spin off CoffeeTeaCo as a "pure-play" coffee and tea company sometime during H1.

  75. Phil


    Overreaction:  Shares of Vail Resorts (MTN -6.1%) lose ground afterweather reports show an extended period of light-to-no snow for the region. The ski resort in Vail reports only an 18-inch base of snow, with just 29% of its 1,521 acres open. -  Anyone want to give me their place in Vail for half price just because there’s no snow?  No?  I thought not…

    The FDA fast tracks a pneumonia vaccine from Pfizer (PFE +1.4%) for use by adults aged 50 and older, drastically extending the reach for the drug beyond just use in children. Prevnar already stands as one of Pfizer’s fastest-growing drugs since launching in 2010, topping the $1B sales mark in Q3 last year.

    ROFL!  Groupon (GRPNdives 7.4% to $19.10, below its IPO price of $20, after a survey of 400 merchants showed that 52% aren’t planning to feature deals in the next six months. Another 24% only plan to carry one offer.

    Cisco (CSCO+4.3% to $18.79 after JP Morgan raises the stock to Overweight from Neutral and its price target to $21 from $19. The bank explained that in 2011, Cisco suffered a "perfect storm of multiple small issues," but the situation has now changed. E.g., U.S. federal spending is forecast to rise in 2012 and "act as a tailwind."

    Worldwide chip sales totaled $25.1B in November, down 2.4% from October and 3.1% Y/Y but up 0.8% YTD, the Semiconductor Industry Association says. However, it’s “no surprise,” J.P. Morgan’s Chris Danely writes, given the many negative pre-announcements from chip companies last month. Danely sees chips bottoming this month and peaking in December of this year. MU+9.1%

    Though most analysts seem inclined to look past the bad news in weak chip sales, Barclays now expects semiconductor revenue growth to come in flat to 4% in 2012, worse than its prior view for a 2%-5% rise. The firm lowers its ratings on INTC +0.8%AMAT+0.9%FSL +1.9%MCHP -1.6% and CODE +0.8% to Equal Weight from Overweight.

    Morgan Keegan’s estimate that iPad (AAPL +1.5%) sales came in for the holiday quarter at a lower-than-forecast 16M can be linked to strong Kindle Fire sales, according to analyst Travis McCourt. He sees 1M-2M of Amazon’s (AMZN +2.4%) holiday season Fire tally of 4M-5M coming at the expense of the iPad.

    DigiTimes reiterates a claim that Apple (AAPL +1.5%will introduce two different versions of iPad this year, carrying different screen resolutions. DigiTimes’ James Wang speculates on whether pricing will be lower for an “entry-level” iPad that might use the existing screen resolution of iPad 2 rather than an enhanced resolution, and thinks that a $299 price could upset competitors’ plans.



     

  76. pakdog

    StJean – Are you confirming a bearish premise for the coming year or just trying to cheer us all up?

  77. rainman

    Phil / CMG — I stay away from that one too. I do have a position in WFM. I agree with the parallel parallel of WFM and CMG though and it’s a theme in my portfolio along with protein exports. I also don’t think McDonald’s is any better than the local burger joint but look were they are today. I think there is a general trend of more people paying attention to what they eat (for various reasons) and those people are showing that they are willing to pony up for what they believe is healthier. WFM also stresses the localvore mentality which appears to be gaining traction as well. The rise of localvores, vegans, soy free, gluten free, corn syrup free, GMO free, orgainic, and similar have traction I believe.

  78. angelcur

    anything is tolerable if you wash it down with a cloke slurpee..that honey badger vid is funny

  79. angelcur

    anything is tolerable if you wash it down with a cloke slurpee..that honey badger vid is funny

  80. jabobeast

    that was funny angel!

  81. stjeanluc

    Bearish / pakdog – Just passing along the information. Myself, I am neutral, just looking to sell premium either way! 

  82. jmm1951

    pakdog/ACH
     
    No, I think they just didn’t sent out the ACH transfer yet after 4 days. The thing was I wanted to send it out on Wednesday, but there was some crap reason why I could not, then on Thursday I had funds transferred into the margin account from my IRA account which is done automatically two times a month, and they said you cannot have a transfer in and out on the same day, but you can do it tomorrow (Friday), so I did it early on Friday, and they still did not transfer it out even though they must have known there was a holiday coming up. Probably they are just lazy f*ckers and took a 4 day holiday.
     
    I don’t know. I worked most of my life in health care and we (hospitals) would generally go out of our way to try to satisfy the most unreasonable demands of patients and their families in an attempt to provide a "satisfactory customer experience" even if the family member ended up dead. Not much notion of customer service in the financial world.

  83. stjeanluc

    Speaking of neutral, the FAS Strangle sold this morning is now looking good. My premise was that we would give back some of the gains and we have. I am tempted to close and collect the profits…

  84. l4real

     jmm1951,
    I totally understand you on the  brokerage ACH transfers and Phil is correct about this happening industry wide.
    In this day and age there is no reason why  electronic fund transfers should not occur instantly.
    After experiencing this a few times myself, I decided to write checks from the brokerage which seem to clear much faster than the ACH transfers. Might be something to consider.

  85. stjeanluc

    Some RIMM news:

    http://www.engadget.com/2012/01/03/financial-post-report-suggests-rims-balsillie-and-lazaridis-may

    Nothing is official just yet, but Canada’s Financial Post is reporting that RIM co-CEOs Jim Balsillie and Mike Lazaridis may soon be relinquishing their positions as co-chairmen of the company’s board. According to the paper’s sources, RIM board member and former TSX Group head Barbara Stymeist is the leading candidate to replace the duo. Notably, the report makes no suggestion that there would be any change to Balsillie and Lazaridis’ status as co-CEOs, as some have also been pushing for, although it would still be a fairly big change for the company. As the paper notes, Balsillie and Lazaridis have long resisted previous attempts to divide the Chairmen and CEO roles and, if appointed, Stymeist would be the company’s first ever independent chair. 

  86. Phil

    VAT/StJ – Tricky to make changes in that system.  The whole point used to be that Corporations couldn’t make loopholes in it.  

    Skepticism/StJ – In this case, the very definition of healthy skepticism.  

    Wheeee – nice head fake on oil for a good re-entry!  79.96

  87. Phil

    DIA/Cjji – Sure, I’d roll $5 for $1.05 against this move.  In fact, for the brand new $25KP, let’s make the 5 DIA Jan $121 puts at $1.05 our first play.  

  88. Pharmboy

    BMY drop – Jeremy Levin, who was responsible for many of the acquisitions at BMY is leaving to be the CEO of TEVA.  That means to me that TEVA is going to be aggressive in buying up assets.  IMHO.

  89. l4real

     Phil
    Are we buying or selling the Jan $121 puts?

  90. samz3700

    With IB -  I get my ACH transfers same day – usually in two hours - 

  91. Phil

    Clock/StJ – Sure but another 5Bn years from now and humans will be half the clock and all the rest will be shoved into the other half.  On the other hand, I’ll bet the Dinosaurs thought the same thing…

    WFM/Rain – I buy all my fresh stuff there but still go to the supermarket for boxed things.  The Earth is not worth saving if it means we have to use organic toilet paper!  8-)

    79.97

    5 GLL Jan $18 calls for $1.10 in $25KP 

    DIA/$25KP, L4 – Buying puts.  If selling, I would say that but good to ask if you are not sure and haven’t been following the context of the day.  

    Oil popping yet again and it’s not even 1 yet.  $102.88 was the top so, if you are scaling in on the short side, you can pick up 1 at 102.65 and 1 at $102. 85 for a $102.75 avg entry and then, if you get out 1 at $102.60, you have a net entry of $102.90 on 1 and then you can add another at $102.70 for a $102.80 average, etc…  When it’s this choppy, you just have to work it.  

  92. CaFords

    ACH transactions use a third party clearing service, 1-3 business days is normal.

  93. diamond

    stjeanluc – Spreadsheet correction:
     
    FAS Short Options: Date Sold should be 1/3/2012 on Jan 12 Call 73 (not 12/20/2011).
     

  94. stjeanluc

    Apparently Total (TOT) the French oil group is getting together with Chesapeake in a big nat gas project in Ohio. At this time, TOT is cheaper than XOM or CVX. And they pay a 6% dividend. 

  95. zeroxzero

     Iflan:  Great AAPL call today. Dumped 6/7ths of my position .70 above its current level, thanks.

  96. Phil

    SONC looks too cheap at $6.95.  Last year they earned .12 in Q1 and this year expectations are for .09 and they were $11.50 at the time (and dropped hard after).  Insiders were buying in November at around $7 and we can play earnings by selling the June $7.50 puts for $1.15 and buying the June $7.50 calls for .55 so the net is around $6.90 anyway if forced in but no limit to the upside if they take off.  

    MON was $75 last year and now $72 but earnings should be better and overhang down so I like buying 3 April $70 calls for $5.80 ($1,740) and selling 1 Jan $70 call for $3.05 and 1 Jan $72.50 call for $1.68 for net $1,267 ($4.22) on the 3:2 spread and that one I like for the $25KP as well.  

    DMND is super-risky so it’s take the money and run if you were already in them.  Still cheap at $32. 82 if they have resolved their issues so nothing wrong with the speculative June $37/45 bull call spread at $2.10, selling the $20 puts for $1.85 for net .35 on the $8 spread – 2 in the $25KP.

  97. Pharmboy

  98. zeroxzero

     Stj:  I would refer you to Agent Smith:  "  I’d like to share a revelation that I’ve had during my time here. It came to me when I tried to classify your species and I realized that you’re not actually mammals. Every mammal on this planet instinctively develops a natural equilibrium with the surrounding environment but you humans do not. You move to an area and you multiply and multiply until every natural resource is consumed and the only way you can survive is to spread to another area. There is another organism on this planet that follows the same pattern. Do you know what it is? A virus."

  99. jmm1951

    I4real/samz3700brokerage
     
    Yes, writing checks might work, and they have a debit card, but you can’t use it outside the US, so useless for me.  When I accidentally sent money from my bank account to my brokerage account by ACH, it moved instantly. There was no "technically" three business days of processing. They (TradeKing) are technically capable of sending an ACH transfer immediately if they want as long as it does not interfere with their Christmas party. Anyway, I am not starving.

  100. Phil

    TOT/StJ – Good company to invest in long-term.  

    Good point on 2015 Pharm!  

    What recovery?  

  101. l4real

     That’s funny Pharm!
    Now if only we could get a hold of that Sports Almanac!

  102. Phil

    See how it drives them nuts when you scale in and out on oil – they don’t know what to do!  

    12:00 PM On the hour: Dow +1.84%. 10-yr -0.28%. Euro +0.98%vs. dollar. Crude +2.67% to $102.36. Gold +2.12% to $1604.25.

    1:00 PM On the hour: Dow +1.47%. 10-yr -0.22%. Euro +0.91% vs. dollar. Crude +2.93% to $102.63. Gold +1.99% to $1602.25.

    Europe makes it 2 for 2 in 2012, closing solidly green after yesterday’s big rally. Stoxx 50 +0.7%, Germany +1.5%, France +0.7%, Italy +1.4%, Spain +0.1%, U.K. (closed yesterday) +2.3%. Euro +0.9%to $1.3049. Germany’s Dax is 4.5% higher two days into the new year.

    Spanish 10-year bond yields jump 18 bps to 5.29% as traders cash in on debt that they say looks expensive vs. that of Italy. In addition, the grim outlook for Spain’s public finances is starting to affect its outperformance over Italy, whose yields rise slightly to 6.9%.

    Canada’s December PMI rises to 54.0 from November’s 53.3, led by solid rises in New Orders and Production. As with Europe, order backlogs continue to fall, suggesting some of the jump in production is coming from satisfaction of orders already on the books. EWC +2.1%

    Turkish CPI breaks double digits in December and hits 10.45% Y/Y, above forecasts and the highest rate in three years. The inflation will only increase fears of a hard landing, and strengthen criticsm that the central bank has been too sanguine about inflation and too reluctant to increase its central policy rate.

    Brazil’s December PMI rises to 49.1 from the previous month’s 48.7. It’s the 3rd consecutive monthly increase, and the strongest print in 7 months, "suggest(ing) the worst of the current economic downturn may indeed be behind us." says HSBC chief Brazil economist Andre Loes. EWZ +3.9%.

    Bruce Bartlett delves into the latest Financial Report of the U.S. Government and finds that the country’s total indebtedness is $51.3T, including future liabilities such as Social Security and Medicare. And the really rapid growth of future spending is not for programs but for interest on the loans. 

    Bankers in Asia are bracing for even bigger job cuts as sluggish markets force managers to rethink heavy investment in the region. "People feel compelled to talk about top-line growth in Asia because you’re bound to grow more here … the real question is how profitable they are," says JPMorgan’s Asia-Pacific CEO Gaby Abdelnour.

    Chris Woodyard suggests last weekend’s expiration of a 30-year federal subsidy for ethanol could impact pump prices to the tune of 4.5 cents this week as most gasoline contains 10% ethanol; without the $0.45/gallon subsidy, 4.5 cents have to be eaten somewhere. Unmeasured, however, is the impact of eliminating the $0.54/gallon tariff on ethanol imports. 

    Gulf Oil CEO Joe Petrowski warns (video) drivers that gas prices are heading higher, as he sees $3.50/gallon shortly and $4.00/gallon if an event occurs in the Strait of Hormuz. He calls out the $3.80/gallon mark as the level where consumers start to pull back on spending.

    Yet $3.80 a cup bothers no one?  Starbucks (SBUX -0.1%) says it’s begun raising prices at its outlets in the Northeast and Sunbelt regions by about 1% to offset higher commodity and shipping costs. Previously, the company had noted that rising commodity costs would lower FY12 earnings by about $0.21 per share.

    Citigroup sends hospital stocks lower with an in-depth report in which it downgrades eight firms in the sector and provides a gloomy forecast for government health-care spending. THC -2.73%,SUNH -1.03%LNCR -2.94%AHS -5.6%HCA -1.7%HMA -1.9%,LPNT -1.88%, and UHS -2.75%.

    Gannett (GCIclimbs 4.3%, perhaps benefiting from the general happy mood but also possibly gaining because of USA Today’s app making its debut on Amazon’s Kindle Fire, meaning that it is now available on all major platforms and devices. (PR)

    Another nice one for one of our favorites:  Closing its Ohio JV with Total (TOT) just before 2011 ended gives Chesapeake Energy (CHK +3.9%) nearly $2.5B in cash from three Q4 deals, and analysts “expect to see substantially all of the cash infusion be allocated to paying down" CHK’s $3.2B balance in its revolving credit line. If it can reduce long-term debt to $10B or below, “it can assuage investors who remain wary of the company’s debt level.”

    Can’t wait to short these guys again!  Sodastream (SODA +5.1%) rallies after Monness, Crespi, Hardt & Co.’s Jim Chartier tells clients that channel checks indicate "widespread stockouts" of the firm’s carbonation systems. The analyst keeps a Buy rating and lofty $70 price target on shares firmly in place.

    Three lunchtime reads:

    1) Five significant themes that will affect market action in 2012

    2) Economists see bleak year ahead

    3) Why do stock prices rise every January?

  103. biodieselchris

    Yes, CMG is indeed baffling: it’s a 53 PE, 10.7B market cap freight train that never runs out of track.
     
    My prediction for 2012 (posted as a question) 2012: The year maturing debt begins to matter? I doubt bonds make 11% this year. That is all.

  104. BertII

    St J / TOT
    I’ve been buying around 48 and selling around 51/52 in my 401k as I can’t sell options in my companys program and only aloud to trade 10% on my own rest has to be invested in approved mutual funds.

  105. Tarpoon88

    Phil, re SONC, is this a play into earnings tomorrow, or a more medium term proposition? 

  106. exec

    Thanks Flip

  107. BertII

    Gulf oil CEO said average price was 3.20 a gallon on CNBC this morning. It has been 3.49 here in my part of Ohio for a week. It was 2.99 for one day on 12-19 then jumped to 3.39 on the 20th up to 3.48 on the 26th

  108. pakdog

    Pharm/Phil – Time travel…Another perspective I read the other day posited that the fact we pay interest on loans proves that time travel is impossible (currently, at least). The proof being that the time traveller would loan out his money, immediately jump forward in time to collect his interst, zoom back to the present time and relend his earnings. Lather, rinse, repeat to infinity. As a result interest rates would be driven to zero. Interest rates are not zero, therefore, time travel is impossible. Not very convincing but intriguing.

  109. Pharmboy

  110. dpastramas

    SONC / Phil – How many contracs for the position? I assume 10Puts and 10calls are enough right?

  111. Highlander

    Hey Flan,
    Been out of AAPL for a while and missed the damn bottom, but based on your info on Friday I went back in for 60 AAPL Jan 21 $420′s @ $5.22 and cashed out today @ $6.65 and am now back in @ $5.80. Up $ 10,000 for the day. Thx for getting me going. I probably will be all out prior to earnings since the stupid market will baulk to the lower sales of the i-pads!!!

  112. Phil

    CMG/BDC – I think they can roll that over for pretty good prices.  If I were them, I’d sell stock to pay the debt off at these prices.  

    SONC/Tarpoon – If it works, it’s an earnings play and if it doesn’t, it’s a long-term hold!  ;)  

    79.85

    Time travel/Pak – I would imagine that would be illegal so only proof there are not Bankster criminals in the future or maybe just not money (a la Star Trek) so no point in the crime.  

    SONC/Dpastram – Depends on your position sizing but certainly consider it speculative (ie 1-2% of portfolio max).  

    Fed Minutes:

    Language seems to indicate they are laying a foundation for easing but nothing concrete so maybe a small rally here but then disappointment is my prediction for the afternoon.  

  113. zipla

    Hi Phil,
    Minor New Year hangover from the White Christmas Portfolio.
    Remember we closed out the long leg of a FAS $67/72 Jan BCS and left the short hanging hoping to get out for $1. Never went that low so I’m still short the 10 calls. Is it a matter of waiting it out for a while or thinking about rolling now?
    Thanks

  114. pakdog

    Time travel – Was actually wondering if today’s near-zero rates suggest that we’re on the verge of a great break-though or if the Banksters had cracked this and weren’t sharing it with the rest of us.

  115. stjeanluc

    FAS / Diamond – Thanks! Cut and paste error… 

  116. lflantheman

    Highlander/AAPL/      Glad you are profiting from AAPL.  Yes, I will probably keep the AAPL 50k portfolio  primarily in cash at the time earnings are reported.  Expectations are so high for this stock that ANY sign of weakness will be an excuse for a selloff.  So right now we are more or less playing the excitement; we will likely not have any significant position on the day earnings are announced.  Having said that, I will note that if AAPL ever had a chance for a huge post earnings pop, it would be this quarter.  But, protecting capital if first and foremost for any portfolio, so we must remain disciplined at earnings time.   

  117. Phil

    Nice, oil (/CL) hitting $103 into the NYMEX close – you have to be brave but it looks like BS to me!  

  118. dpastramas

      SONC/Phil thanks for the heads up.  Will pass this trade, dont know much about this company, not very confident on what i am routing for

  119. jrod0725

    Hi Phil, quick question about the 25KP, when you make a trade suggestions such as DMND that may not get filled right away, do you still consider it as part of the virtual portfolio even if you didn’t get an actual fill? Just wondering if at some point you say kill the order if we don’t get the price we’re looking for? I don’t want to chase the price but I’d like to keep the same position allocations along the way, if possible. Thanks

  120. roro

    Took an OIL short at 102.95

  121. l4real

     Phil
    What are the PSW commissions for transferring to Think or Swim platform?

  122. lflantheman

    AAPL 50  Buy to open 15    Jan 400s…..

  123. Beaufleurs

     Phil, if we are not online for a while after you suggest a trade for our virtual portfolios should we enter the trade at the current price for the trade suggested?  Say for instance the 5 1.05 $121 January puts  when I looked at the chain just now, the $121 january puts are at .97, and the GLL  $18 calls are at $1.15     Thanks. 

  124. BertII

    Im short oil  average 102.80

  125. jromeha

    Greetings from Kabul Phil….. I need some good 3 AM trades tonight to cheer me up bc this place is a sh!thole and im going to have black lungs sometime in the future! They burn tires, old furniture, and beds for heat which makes the already dusty air here downright toxic… Oh, and how can you not like honeybadger!?!? Either way, honeybadger don’t give a f?ck!

  126. morxlntway

    i am moving my IRA to TOS. From what i have gathered Scott is the person i should talk to and dropping the PSW name gets a somewhat better cost. If this is so, anyone know Scott’s last name?
    thanks

  127. lflantheman

    stj….my price on those 400s was 17.30

  128. zeroxzero

     Burrben:  Thanks for your kind comment. I wish I knew what the H I was doing as a trader.  But PSW is indeed a great teacher.

  129. rehat

    AAPL is lagging the nasdaq — it seems strong but weaker then the market bounce.. hmm

  130. jmm1951

    Why do stock prices rise every January?
    Mildly interesting article. Last week I mentioned that I thought there was a lot of year end selling of coal stocks for tax reasons, and that they might rebound. Today with BTU up about 9% and ANR about 8% I have reason to congratulate myself on my incredible foresight, but of course tomorrow coal will most likely be back in the cellar.
     
    It certainly seems reasonable to think that people and funds would sell losing stocks and then buy them back in the New Year for tax reasons. The window dressing theory seems less plausible. Personally I think the fact that January 1st is the first day that you can make IRA contributions for 2012 would be a factor, plus the fact that people are stuck at home over the winter holidays with nothing to do but read Phil Davis articles on Seeking Alpha and dream of brilliant stock portfolios that return over 1000% by St. Valentine’s Day. People start to receive  tax refunds after the end of January, and that  puts a lot of money into the economy, the thought of which inspires people to take a gamble in January in the hope that this will be the last year they have to say "Have a Great Day" and "Come Back and See Us" several hundred times a week.
     
    On his deathbed John Maynard Keynes is supposed to have said: "My only regret is that I did not drink more Champagne", and I imagine that those who invest in January are hoping that they will never have to repeat those last words.

  131. stjeanluc

    FAS Strangle – Just closed my strangle. The put even and 23% on the call side. I was not crazy about that position so I’ll take what I can now. Missed some gains on the call side as it was much lower earlier… Tomorrow is another day.

  132. tangledweb

    What does a super dovish fed mean policy wise?

  133. stjeanluc

    Thanks lflan, here is the updated position:

     

  134. cwan120

    Hi, Phil & All,
    Is Phil or any PSW member interested in demonstrating a virtual IRA portfolio?  We have Phil running a 25KP, StJ running FAS/AA/IWM Money, and lflan running AAPL 50K.  It would be very interesting and educational, AND challenging to run an IRA portfolio.
     
    Let’s say we use a TOS IRA account as a model (because TOS’s IRA policy is more liberal on trading options), and let’s start with, say $100K.  I don’t know what would be a reasonable profit target.  Is 20% in 6 months too high?  It’s going to be challenging, because we need to put up with full cash margin for short puts, and we can’t sell naked calls.  Want to take the challenge?
     
    In fact, I saw Phil’s SONC trade a good candidate to start.  Yes, you do have to put up with cash margin for the $7.5 short puts.  But it’s not too much cash.

  135. scottmi

    Oil – i can’t wait for someone to say "BOO!" to the oil longs! ;-)

  136. dflam

    Phil /FCX: nice bounce today. Still like sell 2013 $35 P and buy Feb. $40 C with $.80 stop you mentioned this morning?

  137. lflantheman

    AAPL port    I have sold the remaining 5 Jan 390 calls for  25.10

  138. jmm1951

    cwan120/IRA
     
    Funny, I just wrote a post on how I adapted that trade for an IRA, then deleted it, because I thought it was of no interest except to me.
     
    Sell the June $7.50/$2.50 put spread and buy the June $7.50 calls in a ratio of 5 to 8 for net zero. This reduces the IRA cash margin to $2500 and if the stock hits $9 on expiration, it returns 100% annualized on cash used. If the stock tanks badly, sell the $2.50s while you can still get something for them and accept the assignment then do the old sell a LEAP call and put routine.

  139. lflantheman

    AAPL port:   I have sold all 20 of the Jan 400 calls for 17.50.   This leaves only the July BCS in the portfolio.  Analysis:  I am following my general rule that if a portfolio goes up by 10% or more, that it should be converted mainly to cash, and some time given to contemplating what should be done next.  So, the AAPL port is about 90% cash now, and we shall expend a bit of time and effort deciding the next move.   

  140. David Ristau

    The Oxen Group got our clients into longs on $MON today at 71.98 as we expect a nice push into earnings, looking for a 2% gain..stop at $71.

  141. lflantheman

    that sentence should read……’if a portfolio goes up by 10% or more in a single day’ ………….

  142. scottmi

    AONE – wow up 25% today!  getting some love..

  143. stjeanluc

    AAPL 50k / lflan – I made a mistake in the spreadsheet  - I had reduced the July 390 calls, not the Jan 390 to 5. I have corrected the mistake and reflected the latest position. Let me know if that matches what you have. This is actually better for the portfolio…

     

  144. lflantheman

    stj…..I actually noticed that this morning but decided not to bother you with it until after hours.  Thanks.   And now I’ve left only the bull call spread.   See my last 2 posts.  I’m going to have to pay you a fee to do all this recording.      But I really appreciate it.   If you want me to take over the task at any time just email me and we’ll figure out how to do it.   

  145. stjeanluc

     OK, so much for that last one… New position in the AAPL 50k portfolio:

  146. stjeanluc

    lflan, no problem… today is a bit crazy, but usually it’s not much work. My payment is the trading experience! Thanks. 

  147. lflantheman

    stj….we can go over all of today’s trades after hours if you like, just to make sure the figures are exact.   

  148. Phil

    Fed Minutes:  

    Developments in Financial Markets and the Federal Reserve’s Balance Sheet
    The Manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets during the period since the Federal Open Market Committee (FOMC) met on November 1–2, 2011. He also reported on System open market operations, including the ongoing reinvestment into agency-guaranteed mortgage-backed securities (MBS) of principal payments received on SOMA holdings of agency debt and agency-guaranteed MBS as well as the operations related to the maturity extension program authorized at the September 20–21 FOMC meeting. By unanimous vote, the Committee ratified the Desk’s domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System’s account over the intermeeting period.

    Staff Review of the Economic Situation
    The information reviewed at the December 13 meeting indicated that U.S. economic activity expanded moderately despite some apparent slowing in the growth of foreign economies and strains in global financial markets. Conditions in the labor market seemed to have improved somewhat, while overall consumer price inflation continued to be more modest than earlier in the year and measures of long-run inflation expectations remained stable.

    The unemployment rate dropped to 8.6 percent in November, and private nonfarm employment continued to increase moderately during the past two months. Nevertheless, employment at state and local governments declined further, and both long-duration unemployment and the share of workers employed part time for economic reasons remained elevated. Initial claims for unemployment insurance moved down, on net, since early November but were still at a level consistent with only modest employment gains, and indicators of job openings and businesses’ hiring plans were little changed.

    Industrial production rose in October, reflecting in part a rebound in motor vehicle production from the effects of supply chain disruptions earlier in the year. Factory output outside of the motor vehicle sector also continued to rise, and the rate of manufacturing capacity utilization moved up. However, motor vehicle assemblies were scheduled to only edge higher, on balance, in the coming months, and broader indicators of manufacturing activity, such as the diffusion indexes of new orders from the national and regional manufacturing surveys, were at levels that suggested only modest increases in production in the near term.

    So not much good to say other than an uptick in factory output that is mainly the backwash from the Fukushima slowdown.  Our data (PMI today) has ticked up but not much and if this is only catching up from that trough last Summer – then this data rally has no legs.  

    Revised estimates indicated that households’ real disposable income declined in the second and third quarters, and the net wealth of households decreased in the third quarter. Nonetheless, overall real personal consumption expenditures (PCE) rose modestly in October following significant gains in the previous month, as spending for consumer goods continued to increase at a strong pace while outlays for consumer services were roughly flat. In November, nominal retail sales, excluding purchases at motor vehicle and parts outlets, expanded further, and sales of light motor vehicles stepped up. But consumer sentiment was still at a subdued level in early December despite some improvement in recent months.

    The Fed may think it’s a good thing when consumption EXPENSES (due to the inflation they can’t see) outpace income but I think it sucks and it’s NOT a plus for the economy other than giving commodity pushers a green light as they can see their users are hooked so bad they’ll give up everything else to get their next fix.  What’s the summary of this paragraph?  "Consumers are getting poorer and are unhappy but at least they are spending themselves into more debt – yay!"  

    Activity in the housing market continued to be depressed by the substantial inventory of foreclosed and distressed properties and by weak demand that reflected tight credit conditions for mortgage loans and uncertainty about future home prices. Starts and permits for new single-family homes in October stayed around the low levels that prevailed since the middle of last year. Sales of new and existing homes remained slow in recent months, and home prices moved down further.

    Real business spending on equipment and software seemed to be decelerating. Nominal orders and shipments of nondefense capital goods excluding aircraft edged down in October, and the slowing accumulation of unfilled orders suggested that increases in outlays for business equipment would be muted in subsequent months. Also, survey measures of business conditions and sentiment remained at relatively downbeat levels in November. Real business spending for nonresidential construction moved up in October but was still at a low level, reflecting high vacancy rates and restricted credit conditions for construction loans. Inventories in most industries looked to be reasonably well aligned with sales, although motor vehicle stocks continued to be lean.

    Real estate still a total catastrophe.  How on Earth can we have a recovery with Real Estate dead.  That’s DEAD (see above chart).  

    In the government sector, real federal defense purchases appeared to have stepped down in October and November from their level in the third quarter. At the state and local level, real purchases seemed to be decreasing at a slower pace in recent months than earlier in the year.

    "Decreasing at a slower pace"  - you know you’re in trouble when that is the best thing you have to say about the situation!  

    The U.S. international trade deficit narrowed in October, as imports decreased more than exports. Declines in imports of petroleum products (reflecting lower prices and lesser volumes), non-oil industrial supplies, and automotive products more than offset increases in capital goods, consumer goods, and food. Reductions in exports of industrial supplies and consumer goods, led by a few particularly volatile components, outweighed the gains in capital goods.

    Inflation continued to decrease relative to earlier in the year. Indeed, the PCE price index edged down in October. Consumer prices for energy decreased, and survey data indicated that gasoline prices declined further in November. Increases in consumer food prices in October were substantially slower than the average pace in the preceding months of this year. Consumer prices excluding food and energy also continued to rise at a more modest pace in October than earlier in the year. Near-term inflation expectations from the Thomson Reuters/University of Michigan Surveys of Consumers declined in early December, and longer-term inflation expectations remained stable.

    So the energy price situation has COMPLETELY reversed, which means ALL of their conclusions here are based on a completely blown premise.  Notice the BS language (BS Fed language is in purple) that "Increases" in consumer food prices were "slower" – they could say it more clearly but more fun to confuse people into thinking prices were going down but all they are doing is increasing slower (also a reversed data point since October).  And why are they using October data at a December Fed meeting?  

    Measures of labor compensation indicated that nominal wage gains continued to be subdued. Compensation per hour in the nonfarm business sector increased moderately over the year ending in the third quarter, while the 12-month change in average hourly earnings for all employees remained low in October and November. Unit labor costs edged up over the past four quarters.

    This is an early indicator that productivity gains are peaking out.  Unit costs are going up indicating you can’t do more with less people anymore. 

    Foreign economic growth, especially in the euro area, appeared to weaken in recent months. Real gross domestic product (GDP) in the euro area barely edged up in the third quarter. Moreover, industrial production in the region fell sharply in September, and indicators of manufacturing activity in October and November pointed to lower output. Measures of business and consumer confidence in the euro area continued to decline in recent months. In other advanced foreign economies, real GDP in Japan rebounded in the third quarter from the effects of the earthquake in March, and real GDP recovered in Canada as oil production picked up after several months of shutdowns; however, available indicators of manufacturing activity in both of these economies pointed to declines during the fourth quarter. Among emerging market economies, real GDP in Brazil was flat in the third quarter, while exports from China slowed in recent months, although Chinese domestic demand appeared to remain strong.

    Staff Review of the Financial Situation
    The risks associated with the fiscal and financial difficulties in Europe remained the focus of attention in financial markets over the intermeeting period and contributed to heightened volatility in a wide range of asset markets. Investor concerns about developments in Europe intensified early in the period but subsequently eased a bit amid signs that European authorities were moving toward agreement on a comprehensive framework to address fiscal and financial vulnerabilities and after the Federal Reserve and five other major central banks announced enhanced currency swap arrangements, including lower charges on existing dollar liquidity swap lines. Nevertheless, investors appeared to remain cautious.

    Yields on nominal Treasury securities were little changed following the release of the November FOMC statement. Over the following weeks, movements in yields were reportedly driven by shifts in investors’ assessments of the European situation and by U.S. economic data that were somewhat stronger than they expected. Both short-term nominal Treasury yields and the expected path of the federal funds rate implied by money market futures quotes were essentially unchanged, on balance, over the intermeeting period, while longer-dated Treasury yields ended the period slightly higher. Yields on current-coupon agency MBS also ended the period about unchanged. Indicators of inflation expectations derived from nominal and inflation-protected Treasury securities posted mixed changes, on net, over the period and remained at the low end of their recent ranges.

    Early in the intermeeting period, conditions in short-term wholesale funding markets appeared to deteriorate somewhat. Following the six major central banks’ currency swap announcement, some measures of short-term funding costs moderated, but they remained elevated. In dollar funding markets, the spread of the three-month London interbank offered rate (Libor) over the overnight index swap (OIS) rate of the same maturity widened noticeably during the intermeeting period. Some European financial institutions reportedly faced significant pressures in unsecured dollar funding markets. By contrast, in secured funding markets, spreads on asset-backed commercial paper were relatively steady for U.S. and most European-based issuers, and rates on repurchase agreements across various types of collateral were stable.

    So we have liquidity problems, but not 2008-level problems.  

    In the December 2011 Senior Credit Officer Opinion Survey on Dealer Financing Terms, dealers reported a moderate tightening of credit terms over the preceding three months on securities financing transactions and over-the-counter derivatives markets trades, particularly for financial counterparties. Dealers also noted that demand for funding all types of securities decreased over the same reference period.

    Credit default swap (CDS) spreads and equity prices of large U.S. banking organizations remained volatile over the intermeeting period. While the S&P 500 index ended the period slightly higher, on net, equity prices for most major U.S. banking firms were lower and their CDS spreads widened.  CDS spreads for European banks remained elevated as these institutions faced increasingly strained conditions in short-term funding markets. In the wake of the bankruptcy of MF Global, market participants also expressed renewed concerns about securities dealers that rely heavily on short-term wholesale funding markets, particularly those institutions not affiliated with commercial banking institutions.

    Yields on investment-grade and speculative-grade corporate bonds rose, on balance, over the period, and their spreads over yields on comparable-maturity Treasury securities were somewhat wider. The debt of nonfinancial firms increased in November, with corporate bond issuance particularly robust, as some firms reportedly were eager to issue bonds before year-end. Nonfinancial commercial paper outstanding and commercial and industrial loans continued to expand at a moderate pace. In the leveraged loan market, the extension of loans stepped up somewhat in November but remained sluggish relative to its average pace earlier in the year.

    Financing conditions for commercial real estate appeared to remain strained over the intermeeting period. Issuance of commercial mortgage-backed securities (CMBS) was light amid deteriorating liquidity conditions in the CMBS market. Prices of most types of commercial properties continued to be depressed, while both vacancy rates and delinquency rates for commercial properties stayed close to their recent highs.

    Interest rates on residential mortgages were little changed, on net, over the intermeeting period and remained at historically low levels. But low mortgage rates appeared to have only modest effects on the rate of mortgage refinancing, likely because of tight underwriting standards and low levels of home equity. Indicators of home prices and the credit quality of older mortgage loans remained weak. The rate of newly delinquent prime mortgages--the pace at which mortgages transition from "current" to delinquent--seemed to have slowed,  but overall delinquency rates on residential mortgages remained elevated. Market reaction to the announcements by Fannie Mae and Freddie Mac on November 15 regarding the expansion of the Home Affordable Refinance Program was limited.

    I suppose it could be worse.  They could have said "and peoples’ homes were spontaneously combusting." (just trying to find a bright side…)

    Consumer credit rose slightly in the third quarter. The aggregate volume of credit card solicitations in recent months remained at levels comparable to those before the financial crisis in 2008, though the volume sent to low-income households was still well below the levels at that time. Meanwhile, consumer credit quality improved further in recent months, with delinquency rates on credit card loans declining nearly to historical lows and delinquency rates on nonrevolving credit at commercial banks retreating to pre-crisis levels. Issuance of consumer credit asset-backed securities increased substantially in November.

    M2 expanded at a solid pace in November, likely reflecting increased demand for safe and liquid assets, given concerns over European financial developments. In part, offshore deposits, which are no longer excluded from the Federal Deposit Insurance Corporation assessment base, appeared to be shifting to onshore offices. In contrast, the monetary base declined in November. Although currency increased at a robust pace, reserve balances declined by more, reflecting a temporary decrease in the size of the SOMA as a result of lags in the settlement of MBS reinvestment transactions.

    Over most of November, yields on many euro-area sovereign bonds--including those of Italy, Spain, Belgium, and France--along with yields on debt issued by the European Financial Stability Facility, rose sharply relative to the yield on German government bonds. But these spreads subsequently narrowed in anticipation of the European Union (EU) summit meeting on December 9 and in reaction to the swap announcement by the Federal Reserve and the other central banks on November 30. Near the end of the period, sovereign spreads widened again amid market participants’ apparent concerns that the actions announced at the EU summit would prove to be less effective than they previously had anticipated. Spreads of yields on most peripheral euro-area countries’ debt over yields on German debt ended the period higher on net. German sovereign yields increased as well.

    Implied basis spreads from the foreign exchange swap market rose substantially over November, but reversed a portion of that increase immediately following the central banks’ swap announcement. Against the background of higher dollar funding costs in the market and the reduction in the charge on dollar liquidity swaps, demand at the tender by the European Central Bank (ECB) of three-month dollar liquidity in December jumped to more than $50 billion from less than $500 million at the November auction. Euro funding pressures also moved higher over the period, with euro Libor--OIS spreads continuing to rise. In addition, maturities for repurchase agreements involving sovereign bonds of euro-area countries other than Germany reportedly shortened. Several European banks announced large declines in third-quarter profits, in part reflecting write-downs of their holdings of Greek sovereign debt. Equity prices in both advanced and emerging market economies fluctuated widely, with advanced country equities little changed, on net, and emerging market equities ending the period lower. The foreign exchange value of the dollar appreciated, on balance, over the intermeeting period.

    With inflationary pressures waning and the downside risks to the global economic outlook increasing, some central banks eased policy. China’s central bank cut its reserve requirements by 50 basis points, and the central bank of Brazil lowered its policy rate by the same amount. The ECB reduced its minimum bid rate by 25 basis points at both its November and December meetings, relaxed its collateral and reserve requirements, and stated that it would begin to offer three-year funds at fixed rates. As a precautionary measure, the Bank of England announced a new liquidity facility that will auction term sterling funds against a wide range of collateral.

    LOTS of FREE MONEY in Q4 – what happens when they run out of punch?  

    Staff Economic Outlook
    In the economic forecast prepared for the December FOMC meeting, the staff’s projection for the increase in real GDP in the near term was little changed, as the recent data on spending, production, and the labor market were, on balance, in line with the staff’s expectations at the time of the previous forecast. However, the medium-term projection for real GDP growth in the December forecast was lower than the one presented in November, primarily reflecting revisions to the staff’s view regarding developments in Europe and their implications for the U.S. economy. Nonetheless, the staff continued to project that the pace of economic activity would pick up gradually in 2012 and 2013, supported by accommodative monetary policy, further increases in credit availability, and improvements in consumer and business sentiment. Over the forecast period, the gains in real GDP were anticipated to be sufficient to reduce the slack in product and labor markets only slowly, and the unemployment rate was expected to remain elevated at the end of 2013.

    The staff’s projection for inflation was little changed from the forecast prepared for the November FOMC meeting. The upward pressure on consumer prices from the increases in commodity and import prices earlier in the year was expected to continue to subside in the current quarter. With long-run inflation expectations stable and substantial slack in labor and product markets anticipated to persist over the forecast period, the staff continued to project that inflation would be subdued in 2012 and 2013.

    But that is not what is happening, is it?  Now what is the question.  

    Participants’ Views on Current Conditions and the Economic Outlook
    In their discussion of the economic situation and outlook, meeting participants agreed that the information received since their previous meeting indicated that economic activity was expanding at a moderate rate, notwithstanding some apparent slowing in global economic growth. Consumer spending continued to advance, but business fixed investment appeared to be decelerating, and home sales and construction remained at very low levels. Labor market conditions improved some in recent months, but the unemployment rate remained elevated despite a noticeable drop in November. Inflation moderated from the rates earlier in the year, and longer-term inflation expectations remained stable.

    Whuck?  If you ignore all the data, then the data looks good?  Look at the next P – IF all goes well, then we’re hoping for a slow decline in unemployment.   

    Regarding the economic outlook, participants continued to anticipate that economic activity would expand at a moderate rate in the coming quarters and that, consequently, the unemployment rate would decline only gradually. The factors that participants cited as likely to restrain the pace of the economic expansion included an expectation that financial markets would remain unsettled until the fiscal and banking issues in the euro area were more fully addressed. Other factors that were expected to weigh on the pace of economic activity were the slowdown of economic activity abroad, fiscal tightening in the United States, high levels of uncertainty among households and businesses, the weak housing market, and household deleveraging. In assessing the economic outlook, participants judged that strains in global financial markets continued to pose significant downside risks. With the rate of increase in economic activity anticipated to remain moderate, most participants expected that inflation would settle over coming quarters at or below levels consistent with their estimates of its longer-run mandate-consistent rate.

    In discussing the household sector, meeting participants generally commented that consumer spending in recent months had been stronger than expected, and several reported cautious optimism among some of their business contacts about prospects for the holiday shopping season. A few participants thought that the recent strength in motor vehicle sales and other consumer spending could reflect pent-up demand from households for goods and services, and so thought that it might persist for a time. However, others noted that real disposable personal income had weakened and that households remained pessimistic about their income prospects and uncertain about the economic outlook. As a result, a number of those participants suggested that the recent stronger pace of consumer spending might not be sustained. Moreover, some participants mentioned that households were likely still adjusting to the loss of wealth over the past few years, which would weigh on consumer spending going forward. Participants generally saw few signs of recovery in the housing market, with house prices continuing to decline in most areas and the overhang of foreclosed and distressed properties still substantial. Several participants observed that the ongoing weakness in the housing market came despite low borrowing rates and government initiatives to resolve problems in the foreclosure process. However, one participant noted that some homebuilders were reporting that land prices were edging up and that financing was available from nontraditional sources, suggesting that conditions in the housing market could be improving.

    REALLY?!?  

    Reports from business contacts indicated that, in addition to the rise in consumer spending, activity in the manufacturing, energy, and agriculture sectors continued to advance in recent months. Nonetheless, businesses generally reported that they remained cautious regarding capital spending and hiring because of a high level of uncertainty about the economic outlook and the political environment. In particular, some contacts raised concerns about the uncertain fiscal outlook in the United States or the possible drag on sales and production from an economic slowdown abroad, while others cited uncertainty about the cost implications of potential changes in regulatory policies. Several participants noted that their contacts had ready access to credit at attractive rates. However, some participants continued to view credit as tight, particularly in mortgage markets or among small businesses in their Districts that were facing difficulties meeting collateral requirements and obtaining bank loans.

    A number of recent indicators showed some improvement in labor market conditions:  Payroll employment had posted moderate gains for five months, new claims for unemployment insurance had drifted lower, and the unemployment rate had turned down. One participant noted that the series of upward revisions to the initial estimates of payroll employment in recent months was an encouraging sign of sustained hiring, although several participants remarked that they saw the labor market as still improving only slowly. Others indicated that because part of the recent decline in the jobless rate was associated with a reduction in labor force participation, the drop in the unemployment rate likely overstated the overall improvement in the labor market.  Moreover, unemployment, particularly longer-term unemployment, remained high, and the number of involuntary part-time workers was still elevated. Some participants again expressed concern that the persistence of high levels of long-duration unemployment and the underutilization of the workforce could eventually lead to a loss of skills and an erosion of potential output.  Another participant suggested that the unemployment rate was a more useful indicator of cyclical labor market developments than the level of employment relative to the size of the population, which was more likely to be influenced by structural changes in labor demand and supply.  Participants expressed a range of views on the current extent of slack in the labor market. It was noted that because of factors including ongoing changes in the composition of available jobs and workers’ skills, some part of the increase in unemployment since the beginning of the recession had been structural rather than cyclical. Others pointed out that the very modest increases in labor compensation of late suggested that underutilization of labor was still significant.

    Meeting participants observed that financial markets remained volatile over the intermeeting period in large part because of developments in Europe. Participants noted the recent moves by the European authorities to strengthen their commitment to fiscal discipline and to provide greater resources to backstop sovereign debt issuance. But many anticipated that further efforts to implement and perhaps to augment these policies would be necessary to fully resolve the area’s fiscal and financial problems and commented that financial markets would remain focused on the situation in Europe as it evolves. It was noted that the changes to the central bank currency swap lines announced in late November helped to ease dollar funding conditions facing European institutions, but such conditions were still strained. However, participants generally saw little evidence of significant new constraints on credit availability for domestic borrowers. The balance sheets of most U.S. banks appeared to have improved somewhat, and domestic banks reported increases in commercial lending, even as some European lenders were pulling back. Several participants commented on strains affecting some community banks, which reportedly had led to tighter credit conditions for their small business clients.

    Participants observed that inflation had moderated in recent months as the effects of the earlier run-up in commodity prices subsided. Retail prices of gasoline had declined, and prices of non-oil imported goods had softened. In addition, labor compensation had risen only slowly, and productivity continued to rise.

    All reversed now – so where does this leave us?  

    Some business contacts suggested that pricing pressures had diminished. Longer-run inflation expectations were still well anchored. Most participants anticipated that inflation would continue to moderate. Although some energy prices had recently increased, many participants judged that the favorable trends in commodity prices might persist in the near term, particularly in light of softer global activity, and one noted that expanded crop production, if realized, would hold down agricultural prices. More broadly, many participants judged that the moderate expansion in economic activity that they were projecting and the associated gradual reduction in the current wide margins of slack in labor and product markets would be consistent with subdued inflation going forward. Indeed, some expressed the concern that, with the persistence of considerable resource slack, inflation might run below mandate-consistent levels for some time. However, a couple of participants noted that the rate of inflation over the past year had not fallen as much as would be expected if the gap in resource utilization were large, suggesting that the level of potential output was lower than some current estimates. Some participants were concerned that inflation could rise as the recovery continued, and some business contacts had reported that producers expected to see an increase in pricing power over time. A few participants argued that maintaining a highly accommodative stance of monetary policy over the medium run would erode the stability of inflation expectations.

    Committee Policy Action
    Members viewed the information on U.S. economic activity received over the intermeeting period as suggesting that the economy was expanding moderately. While overall labor market conditions had improved some in recent months, the unemployment rate remained elevated relative to levels that the Committee anticipated would prevail in the longer run. Inflation had moderated, and longer-term inflation expectations remained stable. However, available indicators pointed to some slowing in the pace of economic growth in Europe and in some emerging market economies. Members continued to expect a moderate pace of economic growth over coming quarters, with the unemployment rate declining only gradually toward levels consistent with the Committee’s dual mandate. Strains in global financial markets continued to pose significant downside risks to economic activity. Members also anticipated that inflation would settle, over coming quarters, at levels at or below those consistent with the dual mandate.

    In their discussion of monetary policy for the period ahead, Committee members generally agreed that their overall assessments of the economic outlook had not changed greatly since their previous meeting. As a result, almost all members agreed to maintain the existing stance of monetary policy at this meeting. In particular, they agreed to continue the program of extending the average maturity of the Federal Reserve’s holdings of securities as announced in September, to retain the existing policies regarding the reinvestment of principal payments from Federal Reserve holdings of securities, and to keep the target range for the federal funds rate at 0 to 1/4  percent. With regard to the forward guidance to be included in the statement to be released following the meeting, several members noted that the reference to mid-2013 might need to be adjusted before long. A number of members noted their dissatisfaction with the Committee’s current approach for communicating its views regarding the appropriate path for monetary policy, and looked forward to considering possible enhancements to the Committee’s communications. For now, however, the Committee agreed to reiterate its anticipation that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.  A number of members indicated that current and prospective economic conditions could well warrant additional policy accommodation, but they believed that any additional actions would be more effective if accompanied by enhanced communication about the Committee’s longer-run economic goals and policy framework. A few others continued to judge that maintaining the current degree of policy accommodation beyond the near term would likely be inappropriate given their outlook for economic activity and inflation, or questioned the efficacy of additional monetary policy actions in light of the nonmonetary headwinds restraining the recovery. For this meeting, almost all members were willing to support maintaining the existing policy stance while emphasizing the importance of carefully monitoring economic developments given the uncertainties and risks attending the outlook. One member preferred to undertake additional accommodation at this meeting and dissented from the policy decision.

    So one dove was so pissed that he dissented.  The question is – how many are "a number of Members" that want more action and how many are "a few others" who feel more action is inappropriate and which ones still have the vote this year?  On the whole, my premise of QE3 is intact per these minutes – the data is worse than they thought and it is probably only the price of oil that is keeping them from acting at the moment but another problem in Europe or poor Q4 earnings and they will have no choice.   Meanwhile, things need to get worst before the Fed acts is the bottom line.  

    With respect to the statement, members agreed that only relatively small modifications were needed to reflect the modest changes to economic conditions seen in the recent data and to note that the Committee would continue to implement its policy steps from recent meetings.

    At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance with the following domestic policy directive:

    "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve’s agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability."

    The vote encompassed approval of the statement below to be released at 2:15 p.m.:

    "Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth. While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed. Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

    To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

    The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

    The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability."

    Voting for this action:  Ben Bernanke, William C. Dudley, Elizabeth Duke, Richard W. Fisher, Narayana Kocherlakota, Charles I. Plosser, Sarah Bloom Raskin, Daniel K. Tarullo, and Janet L. Yellen.

    Voting against this action:  Charles L. Evans.

    Mr. Evans dissented because he continued to view additional policy accommodation as appropriate in circumstances where his outlook was for growth to be too slow to make sufficient progress in reducing the unemployment rate and for inflation to drop below levels consistent with the Committee’s dual mandate. He continued to support the use of more-explicit forward guidance about the economic conditions under which the federal funds rate could be maintained in its current range, and he suggested that the Committee also consider additional asset purchases.

    Monetary Policy Communications
    After the Committee’s vote, participants turned to a further consideration of ways in which the Committee might enhance the clarity and transparency of its public communications. The subcommittee on communications recommended an approach for incorporating information about participants’ projections of appropriate future monetary policy into the Summary of Economic Projections (SEP), which the FOMC releases four times each year. In the SEP, participants’ projections for economic growth, unemployment, and inflation are conditioned on their individual assessments of the path of monetary policy that is most likely to be consistent with the Federal Reserve’s statutory mandate to promote maximum employment and price stability, but information about those assessments has not been included in the SEP.

    A staff briefing described the details of the subcommittee’s recommended approach and compared it with those taken by several other central banks. Most participants agreed that adding their projections of the target federal funds rate to the economic projections already provided in the SEP would help the public better understand the Committee’s monetary policy decisions and the ways in which those decisions depend on members’ assessments of economic and financial conditions. One participant suggested that the economic projections would be more understandable if they were based on a common interest rate path. Another suggested that it would be preferable to publish a consensus policy projection of the entire Committee. Some participants expressed concern that publishing information about participants’ individual policy projections could confuse the public; for example, they saw an appreciable risk that the public could mistakenly interpret participants’ projections of the target federal funds rate as signaling the Committee’s intention to follow a specific policy path rather than as indicating members’ conditional projections for the federal funds rate given their expectations regarding future economic developments. Most participants viewed these concerns as manageable; several noted that participants would have opportunities to explain their projections and policy views in speeches and other forms of communication. Nonetheless, some participants did not see providing policy projections as a useful step at this time.

    At the conclusion of their discussion, participants decided to incorporate information about their projections of appropriate monetary policy into the SEP beginning in January. Specifically, the SEP will include information about participants’ projections of the appropriate level of the target federal funds rate in the fourth quarter of the current year and the next few calendar years, and over the longer run; the SEP also will report participants’ current projections of the likely timing of the first increase in the target rate given their projections of future economic conditions. An accompanying narrative will describe the key factors underlying those assessments as well as qualitative information regarding participants’ expectations for the Federal Reserve’s balance sheet. A number of participants suggested further enhancements to the SEP; the Chairman asked the subcommittee to explore such enhancements over coming months.

    Following up on the Committee’s discussion of policy frameworks at its November meeting, the subcommittee on communications presented a draft statement of the Committee’s longer-run goals and policy strategy. Participants generally agreed that issuing such a statement could be helpful in enhancing the transparency and accountability of monetary policy and in facilitating well-informed decisionmaking by households and businesses, and thus in enhancing the Committee’s ability to promote the goals specified in its statutory mandate in the face of significant economic disturbances. However, a couple of participants expressed the concern that a statement that was sufficiently nuanced to capture the diversity of views on the Committee might not, in fact, enhance public understanding of the Committee’s actions and intentions. Participants commented on the draft statement, and the Chairman encouraged the subcommittee to make adjustments to the draft and to present a revised version for the Committee’s further consideration in January.

    It was agreed that the next meeting of the Committee would be held on Tuesday-Wednesday, January 24-25, 2012. The meeting adjourned at 4:00 p.m. on December 13, 2011.

    Videoconference Meeting of November 28
    On November 28, 2011, the Committee met by videoconference to discuss a proposal to amend and augment the Federal Reserve’s temporary liquidity swap arrangements with foreign central banks in light of strains in global financial markets. The proposal included a six-month extension of the sunset date and a 50 basis point reduction in the pricing on the existing liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the ECB, and the Swiss National Bank, as well as the establishment, as a contingency measure, of swap arrangements that would allow the Federal Reserve to provide liquidity in the currencies of the foreign central banks should the need arise. The proposal was aimed at helping to ease strains in financial markets and thereby to mitigate the effects of such strains on the supply of credit to U.S. households and businesses, in support of the economic recovery.

    The staff provided briefings on financial and economic developments in Europe. In recent weeks, financial markets appeared to have become increasingly concerned that a timely resolution of the European sovereign debt situation might not occur despite the measures that authorities there announced in October; pressures on European sovereign debt markets had increased, and conditions in European funding markets had deteriorated appreciably. The greater financial stress appeared likely to damp economic activity in the euro area and could pose a risk to the economic recovery in the United States.

    Meeting participants discussed a range of considerations surrounding the proposed changes to the swap arrangements. Most participants agreed that such changes would represent an important demonstration of the commitment of the Federal Reserve and the other central banks to work together to support the global financial system. Some participants indicated that, although they did not anticipate that usage would necessarily be heavy, they felt that lower pricing on the existing swap lines could reduce the possible stigma associated with the use of the lines by financial institutions borrowing dollars from the foreign central banks, and so would contribute to improved functioning in dollar funding markets in Europe and elsewhere. A few noted that the risks associated with the swap lines were low because the Federal Reserve’s counterparties would be the foreign central banks themselves, and the foreign central banks would be responsible for the loans to banks in their jurisdictions. However, some participants commented that the proposed changes to the swap lines would not by themselves address the need for additional policy action by European authorities. Several participants questioned whether the changes to the swap lines were necessary at this time and worried that such changes could be seen as suggesting greater concern about financial strains than was warranted. It was also noted that the proposed reduction in pricing of the existing swap arrangements could put the cost of dollar borrowing from foreign central banks below the Federal Reserve’s primary credit rate and that non-U.S. banks might be perceived to have an advantage in meeting their short-term funding needs as a result. However, U.S. banks did not face difficulties obtaining liquidity in short-term funding markets, and some participants felt that a cut in the primary credit rate at the present time might incorrectly be seen as suggesting concern about U.S. financial conditions.

    At the conclusion of the discussion, all but one member agreed to support the changes to the existing swap line arrangements and the establishment of the new foreign currency swap agreements and approved the following resolution:

    "The Federal Open Market Committee directs the Federal Reserve Bank of New York to extend the existing temporary reciprocal currency arrangements ("swap arrangements") for the System Open Market Account with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2013.

    In addition, the Federal Open Market Committee authorizes the Federal Reserve Bank of New York to enter into additional swap arrangements for the System Open Market Account with the Bank of Canada, Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank to support the provision by the Federal Reserve of liquidity in Canadian dollars, British pounds, Japanese yen, euros, and Swiss francs. The swap arrangements for provision of liquidity in each of those currencies shall be subject to the same size limits, if any, currently in force for the swap arrangements for provision of liquidity in U.S. dollars to that foreign central bank. These arrangements shall terminate on February 1, 2013. Requests for drawings on the foreign currency swap lines and distribution of the proceeds to U.S. financial institutions shall be initiated by the appropriate Reserve Bank and approved by the Chairman in consultation with the Foreign Currency Subcommittee. The Foreign Currency Subcommittee will consult with the Federal Open Market Committee prior to the initial drawing on the foreign currency swap lines if possible under the circumstances then prevailing.

    The Chairman shall establish the rates on the swap arrangements by mutual agreement with the foreign central banks and in consultation with the Foreign Currency Subcommittee. He shall keep the Federal Open Market Committee informed, and the rates shall be consistent with principles discussed with and guidance provided by the Committee."

    Voting for this action:  Ben Bernanke, William C. Dudley, Elizabeth Duke, Charles L. Evans, Richard W. Fisher, Narayana Kocherlakota, Sarah Bloom Raskin, Daniel K. Tarullo, and Janet L. Yellen.

    Voting against this action:  Jeffrey M. Lacker. Mr. Lacker voted as alternate member for Mr. Plosser at this meeting. Mr. Lacker dissented because of his opposition to arrangements that support Federal Reserve lending in foreign currencies, which he viewed as amounting to fiscal policy. He also opposed lowering the interest rate on swap arrangements to below the primary credit rate.

  149. jmm1951

    January effect.
     
    It certainly looks like stocks that took a real beating last year are having an exceptional day. BTU is now up more than 10% and NOK is another that got taken to the woodshed last year, but is up 7% today, perhaps on the promise that their Windows phones will be winners later in the year.

  150. craigzooka

    @cwan120
    I don’t mind running an IRA portfolio and keeping track of it.  Mostly because I already do this for myself and it would’t be to hard to share all the excel files.  Just to keep you forwarned, the IRA portfolio is very boring and consists of all covered calls.  I just keep rolling every month until the trade eventually works and I get called away.  I started one along with a website about mid December.  
    http://projectira.blogspot.com/
     
    The strategy is really simple, I scan for stocks that pay at least a 2% dividend, have decent volatility, and liquid options.  I am keeping track of it using TOS’s paper money so I can always log in and check how we are doing.
     
    I don’t mind doing a slightly more in depth write up if anyone is interested.

  151. Phil

    OK, those were long minutes, now I’m behind!  

    Still, at least everything is proceeding as I have foreseen…

    Dow Futures (/YM) right back at 12,350 and Russell right back at 749 – so the whole day was nothing in the end and all we have is the run-up we got in the Futures this morning.  

  152. craigzooka

     Oh, the portfolio is up about $2900 on about $50000 invested in two weeks.  I guess I got lucky when I started it. 

  153. 2_can

    morxlntway/ Scott      His last name is Sheridan.  He’s a senior VP, and they told me he was hard to get on the phone, so I asked the pperson who took my call and they gave me the $1.50 per contract Phil had mentioned

  154. dflam

    craigZ: sounds good to me

  155. qcmike

    craigzooka
     
    The IRA wpuld be a good idea

  156. Phil

    FAS/Zip – Oh, we shut those down a while ago.  Now you have to ride it out as FAS popped.  At  $69.74, there’s no reason to give up time if you don’t have to.  You need XLF to stay below $13.50 and, if they go over, you can buy something like the Jan $12s (now $1.45) to cover but keep in mind you need 3x to fully cover but 15 would moderate your delta loss on FAS by 50% while you wait out the rest of the premium expiration (down to 25% of current price) and THEN you can roll using the profits from the 15 XLF calls to pay to shove the Jan calls to higher Feb calls (right now the Feb $80s are an even roll at $3.25 and that’s up another 15% on FAS which is another 5% on XLF to about $14.  

    79.94 on the Dollar and they are pretending to want to buy oil (/CL) for $103.10 – no sense not selling it to them!  

    Fills/Jrod – If nobody gets a fill, I call it a no-trade but we don’t need to fill right away, just before earnings.  I can verify intra-day trading on options so generally I can see if our prices are met or not.  Chasing is a big no-no, of course, especially in a small portfolio where we’re just looking to make a couple of hundred Dollars.  Also, the purpose of the portfolio is to teach short-term trading techniques so it’s not about whether or not everybody perfectly follows every trade – that wouldn’t be possible in the best of cases – it’s about learning WHAT we are trading  and WHY we trade certain things at certain times and learning HOW we adjust and WHEN we adjust over the course of the portfolio so that, over time, you will be able to make trades on your own IN THAT STYLE.  It’s a kind of teach a man to fish concept….  

    TOS/L4 – Not sure what they are now but our contact is scott at thinkorswim dot com.  

    Trades/Beau – See above.  Not really, I think you would learn more by deciding how the omission affects your overall balance and trying to find something else to fill the gap – you can always run that by me but I’ll bet you learn a lot faster doing that than just mimicking what I do.  Another thing you need to learn is patience – the problem with people following a portfolio is, as soon as I mention something – the price goes up as people jump in.  So you have to learn to scale in as well as wait PATIENTLY to get your price.  Just because the GLL $18 calls SAY $1.15, doesn’t mean you have to offer $1.15, does it?  In fact, it’s 3:45 now and the last sale was at $1.10 and the bid is $1.05 (from a patient person) and the ask is $1.15.  If you are the sucker who pays the ask 10 times – you will have created a 100% loss for yourself before you even see the trade! 

    If you look at a depth chart of the bids on GLL Jan $18s at the moment, you can see that $1.05 is the high bid, mainly from CBOE but other bids are .95 and $1 – so $1.05 is a GENEROUS offer for the GLL $18s and there is no reason at all to offer more than that.  

    Oops, even as I wrote this, someone filled at $1.05.  

  157. mampcsA

     Phil, In 25KP, only the DIA (1.05), GLL (1.1) and MON (5.8, 3.1, 1.7) trades went through. Unable to get the DMND to fill so far (2.1, 1.85).

  158. rpme

    Phil, when you say, "everything is proceeding as I have forseen", you sound like the Dark Lord of the Sith.

  159. morxlntway

    Thanks 2_can.
    IRA – i look forward to participating. Have to wait til $ is moved from Vanguard.

  160. Phil

    Hey Jrom – happy new year!  Things must be dire over there if you are excited about the honey badger…  The 3am trade will be all about the Euro tonight but, so far, it’s holding $1.30.  

    Scott/Morx – Sheridan 

    Interesting take on Jan, JMM.  I think taking tax losses is a factor as well as investing tax free but the markets are so unpopular and the move in the FUTURES was so pronounced that I have to go with Window Dressing as the number one mover for the month so far.  As goes January, so goes the markets is the BS they pump into the retail traders who the pros call on the phone to get them to part with their hard-earned money so the Banksters can churn it for fees the rest of the year.  How effective is that pitch going to be if the market is tanking this week vs. having your boiler rooms call their list and saying – "Hey, if you don’t wire me your money by Friday – you might miss the rally…"

    Super doves/Tangle – It means QE3. 

    IRA/Cwan – I think 20% a year is very doable but 20% in 6 months means you are risking 20% in 6 months and that just does not seem wise for an IRA, does it?  Feel free to make one and you can always ask me if I think a trade is IRA appropriate but DON’T expect me to track another Portfolio right now.  

    FCX/Dflam – I like it but keep in mind that’s a bullish offset to what I assume are generally bearish positions based on the idea that IF we are recovering, THEN copper should do well.  Ha!  And they told me that my year of Basic Programming was wasted…

    Oil $103 at the bell.  I shall continue to catch up.  Dollar 79.92, gold $1,604 – same as it ever was….

  161. mampcsA

     Phil, can you give more details on the 3 am trade idea? I recall reading it had something to do with yentervention.

  162. qcmike

    Phil
     
    On ToS  where is the chart ?
    "If you look at a depth chart of the bids on GLL Jan $18s at the moment, you can see that $1.05 is the high bid, mainly from CBOE but other bids are .95 and $1 – so $1.05 is a GENEROUS offer for the GLL $18s and there is no reason at all to offer more than that."
    Thanks

  163. ccsincsd

     TDA/2_can
    Hi 2_can.  What do you mean on TOS $1.50/contract ? in ref to their advertised rates of $9.99 + $0.75/contract?

  164. 2_can

    /CL/Phil  What is a reasonable price to stop out of my 2 oil contracts?  (Asuming it gets to that point today or tonight).  I’m in at 103.01 average, but it cost me to work my way up to that point today.  It’s been a hard learning day for me in /CL.

  165. 2_can

    $1.50 per/ccsincsd ,  Sorry, the discounted price for futures contracts is $1.50 each.  They gave me a discount on options too, but I’ll need to check to see what it is for sure.  I’ll post that when I have it in a minute

  166. stjeanluc

    AAPL / lflan – Here is summary of the trades (buy and sell) dated today. If this is OK, we should be up to date. Let me know otherwise.

     

  167. Phil

    AONE/Scott – That’s why this environment is great.  Kudos to LOL, who called this one in November:

    AONE 

    Volt doesn’t use their batteries.

    AONE supplies to BMW and somebody else

    My AEON trade was from the August dip, selling the 2013 $5 puts for $2.20 and buying 2x the $4/5 bull call spread for .50 for a net $1.20 credit on the $2 spread.  Currently, the $5 puts are $3.50 so bad trade so far.  As a new entry, you can still sell the $2.50 puts for $1.20 for a net $1.30 entry and the $2.50 calls are .45 and the $5 calls can be sold for .20 for net .25 and a 1:1 spread like that is a net .95 credit on the $2.50 spread and worst case is you own them for net $1.55 (now $1.95).  

    Thanks Mampcs – very helpful! 

    Sith/Rpme – That’s what I was going for.  At least not all my references are lost to the ether….  

  168. cwan120

    JMM:
    I just saw your comment on SONC for IRA account.  Your trade seems to be more appropriate for IRA.  However, I already did the trade as Phil recommended, which ties up more cash than yours in IRA.

  169. ccsincsd

     TDA Fees/2_can
    Thanks for that info.  The best I’ve been able to negotiate for options is $0.00 + $0.75/contract.  Was wondering if being a PSW member could improve that.

  170. 2_can

    $1.50 per/ccsincsd,   morxlntway … Sorry for the confusion.  The options rate I have is $1.50 per, with no break for quantity.  It works out better for me since I’m usually working with 10 contracts or less.  I’m glad you asked  for this clarification, because I’m still paying $3.50 per contract for futures.  I was promised they’d drop it to $3.00. 

  171. scottmi

    Alt energy/ZZ – and then you have fuel cells..
    https://www.listbox.com/post/20120103/8210E2CA-363D-11E1-90B5-B1929455336F/15743716-04349b24

  172. cwan120

    Craig:  Yes!  It would be really nice if you start an IRA portfolio.
     
    JMM, and Others:  Let’s share ideas on IRA.  It will be very interesting.  As I recall, someone has another strategy of buying DITM calls and selling front month calls.
     
    PS: I admit that 20% in 6 months is too aggressive.  Let’s try 20% in 1 year, as Phil suggested.

  173. stjeanluc

    IRA / Cwan – I wrote an article about diagonals in an IRA account where you buy LEAPS and sell calls against it. It’s in the IRA Strategy section. 

  174. nicha

    Cwan/IRA – great idea. I have been thinking about a structered strategy for myself too. I am in for smaller priced trades as I have a really small account or buy LEAPS calls against it.

  175. Phil

    3am/Mampcs – WHEN IT’S WORKING, what tends to happen is the BOJ does whatever they can to support the Dollar (weaken the Yen) while the Nikkei is open and before Europe opens.  That changes at 3am when the flood of EU trading makes it too difficult to manipulate the Dollar and it tends to go back to where it should be (dropping when weak) and the Yen rises (less Yen to the Dollar).  Sometimes we get streaks where it works every day for months but it’s best to confirm it for a few nights in a row before getting ahead of it.  

    Depth/QC – On the Options Chain screen, pick a strike and right-click and a menu comes up with "market depth" as one of the choices.  That then displays in your active gadget box on the left (assuming your screen is set up that way).  

    Anyone using TOS should make sure they go to one of their live seminars – it is freakin’ amazing how much stuff this platform can do.  I am lousy at remembering all these things so I just end up doing the 5 or 6 things I need but every time I go to one of their shows I add one more thing that’s so cool I then "need" it as well.  

    Oil/2can – If you are worried, then $102.95 (current price) is a fine time to get out.  Futures trading is insanely dangerous and you should never walk away from the screen and even when you are watching it, it can still gap up $1 and cost you $1,000 per contract.  Generally, we try to find a line, like $103, and work ourselves into a couple of contracts that are over the line (through a series of quick entries and exits to drive up the net entry) and then we keep a VERY strict stop over the line.  

    It very much depends on what you can afford.  I like to start with 2 contracts and hopefully max out at 20 but my goal is to have 2 at my target.  So, if I had 2 at $103.10 and it went up to $103.30, I’d add 2 ($103.20 avg) and then 4 more at $103.40 (8 at $103.30) – ASSUMING I thought that we were stopping there, of course.  If I thought oil was heading much higher, I would stop out the 4 and wait for the next time I thought it was turning, keeping mental track of my loss to add to my cost of the next 4.  Once we lose money, we do nothing but try to get it back.  Once we are even, we can gamble again.

    Anyway, so if I went to 8 at $103.30 avg it was because I felt $103.50 would not break and, if it does, my premise is blown and I’m down .20 x 8 = $1,600.  If, on the other hand, oil spiked up to $103.65 on some silly news item I knew was BS – THEN I might go for 8 more to bring the average up to $103.45 on 16 but I’d be THRILLED to cut half of them for a .10 loss at $103.55 (-$800) and have a basis of $103.35 on 8 so that now if we pop back to $103.65, I can grab another 8 and average out at $103.50 for 16, which is still a lot more than I would want to keep open but at least in the ballpark.  

    At that stage, I’d have a very serious stop at $103.75 and that loss would totally suck ($4,000) but you have to keep in perspective that it can be all made up by catching a $1 move on 4 contracts some other time and here we’re talking about riding out a .75 move against us.  Of course, if we start with 1 contract, all moves are 1/2 and losses are 1/2 so, as a rule of thumb – if you start with one futures contract, you had best be prepared to lose about $2,500 without breaking a sweat or it’s smarter not to play at all.  

    20%/Cwan

    "The man who begins to speculate in stocks with the intention to make a fortune, usually goes broke, whereas the man who trades with a view of getting good interest on his money sometimes get rich." – Charles Dow

  176. Phil

    Also to note on Futures – it’s very hard to keep in perspective but your goal in the futures should be to make $200-$500 and be THRILLED to get out.  If you make 2 trades a day, that’s 500 a year and let’s say you manage it properly and get out even about half the time (250) and win 1/2 and lose half but, because you have discipline, your winners outgain your losers 2:1.  Let’s say that’s +$200 on average and 125 trades represented as profits – that’s $25.000!  Not chicken feed…  

    It’s the same discipline we use for our small, quick trading in our aggressive portfolios – get in, get out, make the next trade.  If you are there and learn to keep yourself even day after day after day – one day lighting will strike and you’ll catch a really good wave so maybe it’s $50,000 instead of $25,000 – never a bad thing for a few hours’ work.

    It’s good to have a goal like making enough to pay for your car this month or your mortgage – something realistic and obtainable to keep you focused.  

  177. lflantheman

     stjeanluc….those are all correct.  thx.

  178. 2_can

    Oil futures/Phil  Thanks,  that helped a great deal.  I got lucky the first month I traded /CL, but the last few trades have made me more humble :)

  179. jromeha

    Phil- lol, NO, honeybadger just rocks! It’s not too bad… We have wireless Internet for 80$ a month ( good enough to see your trade ideas but too slow to Skype with my 3 y/o daughter), decent bathrooms, food, showers usually have warm water, a good gym, etc…. Not much more one could ask for being it is Afghanistan. The worst part (besides choking on the air outside) Is working 17 hour days and not being able to sleep. My name isn’t Phil Davis, I can’t handle those hours without a little rest!

  180. elliotteldrich

  181. projectwise

     Hello Phil and everyone ! New member here, I’ve been reading all comments (but with the 7 days delay) for 1 or 2 months but I just got my premium membership, so looking forward to… bother you with a lot of questions :)
    I did play the fcx play this morning but with a further otm put, and I was happy to close the call with a good 10% profit in less than 2 hours. I also did enter the dia play late in the day, and I’ll be looking to close the dia or the fcx put tomorrow morning if we got a good move either way.
    I also did short /cl once and then sat on my nickel win to be sure to start with a good day :)
    Projectw

  182. jmm1951

    cwan120/IRA
     
    Phil already has his retirement portfolio, though this is for a margin account,  not an IRA portfolio. There are a couple of tricks you can use in an IRA to get around the margin requirements. For example the MSFT $15 put sells for about 1 cent, so you can do a $25/$15 bull put spread for about $1000 in cash margin instead of $2500 and get the same return. Another "trick" is to use an iron condor, because there is no extra cash margin required for the additional spread. For example with your $25/$15 MSFT spread you could add a $30/$40 bear call spread without any additional cash outlay. However you have to be careful which stocks you use for iron condors. MSFT is unlikely to be subject to a takeover bid or to explode upwards, so is a good subject. Then you can further reduce the risk to your iron condor by making the spreads ratio spreads in which you buy more long puts than you sell short puts, and by never holding the spreads to maturity, always rolling to the second month. I think you can probably make 20% a year or more that way with very little risk, but I will have to check out the maths and do some trial runs (which are underway already, sort of.)
     
    However in general, if you like the look of Phil’s trades and want to own those companies, you can usually figure out a way to adapt them for an IRA. But it would certainly be an interesting project to design a whole IRA portfolio that included hedging strategies. The only problem would be that it would run itself, and then I would have nothing to do all day!

  183. Burrben

    Interesting article on SA today.  Some of the stocks we have been playing, AA, BTU, FCX, and CHK.  I have plays on AA (from income port) and BTU (from a few days ago) and CHK (short put, looking to add a BCS).  Going to try and get into FCX tomorrow, at least the buys.
     
    Mark My Words, These Stocks Will Double In 2012
    http://seekingalpha.com/article/316812-mark-my-words-these-stocks-will-double-in-2012

  184. Weasle

    I recall seeing in a previous thread something about a referral bonus at Think or Swim (ToS) for PSW subscribers.  Could someone tell me what, if any, bonuses there may be or who I should talk to?  Thanks!

  185. jrod0725

    Thanks Phil. I know it’s going to be trade specific but do you have any lessons learned or rules of the road in the event you can’t get a fill on part of a spread? Using DMND as an example, if the 37/45 bull call spread fills but you can’t get a fill on the $20 puts would you revise your entry, change the strike, etc.?
    Last question, what are you looking for when you select the 37/45 spread vs. say 36/45 or 37/44. Are you using technical analysis or factoring in some other option data ie. open interest, intrinsic/extrinsic value, etc.?
    Thanks

  186. Cap

    Hello all. Not much to add to today’s BS that hasnt aleady been said.

    CMG – have no fear and short it. Its not Health Food and its not Whole Foods. Its barely edible high calorie burrito crap. Like Phil, I get much better and fresher in local places. It has a 50-60x PE that wont be sustained by new store openings. Virtually all high PE momo stocks have been re-priced and CMG should be no exception.

    jmm- i think you should move your acct from Tradeking. I would not put up with that BS about transferring your money. Never had such problem w Schwab or even Etrade. Checks I write on my accts typically clear in one day and transfers are immediate if funds are there. I doubt your company is being lazy, they may have liquidity issues that you want no part of.

  187. craigzooka

     We have had some requests for it so Tomorrow I will create a virtual IRA portfolio.  I will track it using TOS paper money to make sure we can get the fills I quote.  I will also work on a post to go over the details of trading in an IRA along with what are in my opinion the rules to successfull covered call writing.  Don’t expect updates to the portfolio every day.  This is something we really only have to touch once a month, on what I like to call Pay Day.  See everyone tomorrow witht the first trade ideas.  Just as a heads up, this is going to be a 100,000 portfolio and I am going to try and find a good place to deploy our first 25,000 worth of capital tomorrow.  At the end of each month I will post how the portfolio is doing.

  188. knightpilot

    Just throwing out a little info.
    Jade Air Cargo just went under and parked all airplanes.
    Omni Air just announced furloughs.
    Cathay Pacific Cargo more than 20% behind target (whatever that means)

    Is Chinese manufacturing really expanding?

    On the other hand all the Chinese mainland carriers seem to be hiring.

  189. BertII

    I cover my short oil positions at 102.75 taken the money and calling it a day

  190. deano

     Pharm – Did you listen to the ARNA call today? Looking for your thoughts – thx!

  191. roro

    Still short OIL at 1.2.95. Also long USD/JPY at 76.75 with another entry order at 75.70 so average 76.25.
     
    Stops are placed below the 10/30/2011Yentervention low of 75.55, and limit sell at 79.45.

  192. roro

    AUD/CAD is back to the top of a range close to 1.0500 for the 6th time with a brief spike high of just > 1.0600 on 11/28/2011.
     
    There is a carry to short this pair and primary support comes at 1.0250/1.03 region, 1.01 and then parity which has been hit several times corresponding with equity selloffs.
     
    I like shorting this pair near range tops for 100 to 200 pip moves although it can move relatively slowly compared to the AUD/USD

  193. Phil

    Good morning!

    We’ve got some violent action this morning with oil bouncing between $102.50 and $103 and the Dow bouncing between 12,300 and 12,350 – both closer to the highs now as the dollar fails to hold 80 at the moment.  

    When you get nasty, unpredictable swings like this, the smart move is not to play the futures – which are back to yesterday’s open so we can pretty clearly see what level "THEY" want to be at (Dow 12,350, S&P 1,275, Nas 2,325, RUT 750, oil $102.50) so we look at those levels and we look at yesterday’s highs of (on the futures:  Dow 12,415, S&P 1,279, Nas 2,328, RUT 759 and oil $103.18) and THAT’s where we want to go short if they fail to break over those levels. 

    Otherwise, unless we see something very interesting, we’re looking at the same breakdowns from the Dow (/YM) at 12,350, Russell (/TF) at 750 and oil (/CL) at $102.50 IF the Dollar pops over $80 and with very tight stops to protect ourselves.

  194. Phil

    The Euro has been holding $1.30 and that’s keeping the Dollar below 80.  No move by the BOJ has let the Yen drift to 76.6, almost 2% below what we assume is the BOJ’s minimum target at 78.  

    Perhaps they didn’t think they needed it as the Nikkei gapped up 200 points today but they were just playing catch-up with us.  The Nikkei finished up 1.2% but Shanghai dropped 1.4% and the Hang Seng dropped 0.8% and that’s WITH rumors of more free money from the PBOC coming into Chinese New Year – when they like people to be happy.  

    FTSE is up 0.3% but CAC is down 0.3% and DAX is down 0.4% so mixed over there.  These are the stories:  

    Euro-Zone Private Sector Shrinks

    Private-sector activity in the euro zone shrank in December, giving a clear sign that the region’s economy sank back into contraction in the fourth quarter as its leaders grappled with the debt crisis.

    French Consumer Spending Falls

    French consumer spending fell unexpectedly in November, data

    Greece Stresses Gravity of Talks

    The Greek government said that Greece must successfully complete negotiations with its creditors on a second bailout package to remain in the euro zone, adding to the stakes as officials prepare for new talks.

    Turkish Inflation Soars

    Turkish inflation broke double digits in December to reach the highest level for three years, fueling debate over whether one of the world’s fastest growing economies could be headed for a hard landing.

    Documentary: Europe at the Brink

    Editors and reporters examine the origins of Europe’s debt crisis and why it spread with such ferocity to engulf much of the continent and threaten the entire world.

  195. Phil

    AUD/CAD/Roro – That’s a very strange pair to trade as they have such similar economies although I think Canada has a better chance of weathering this year’s storm than Australia does.  Dollar over 80 will take all of them down.  

  196. roro

    It is a strange pair but it has a nice range and up at 1.05 ish close to a significant year range high. The pair correlates to equity selloffs/US dollar strength so the CAD tends to do very well against its down under counterpart when selling risk is in vogue.
     
    Also in favor of CAD is the perception that the RBA is more likely to lower its central bank rate so therefor the spread gets skewed in the Canadian.
     
    A runaway dollar over 80 and the AUD/CAD can be a very nice short with 400 to 500 pips potential and perhaps more if things got crazy.
     
    I think the risk is 1.06 topside and even at that I would probably look to add to a short trade unless there was MASSIVE in your face audacious printing by coordinated central bank interventions. Then I would probably reassess.
     
    Thanks for the feebbacks, Phil. Very educational and I am on my New Year’s schedule…….up at 0230 and then roll into New York sessions. This will be a very busy year for me I think……….a lot to learn too.

  197. roro

    On the YEN trade, FoerexLive reported this AM that decent buy orders for USD/JPY were confirmed down at 76.50/60.
     
    Name of note is KAMPOO sitting on 300 to 500 million.
     
    V shall see as my German relatives used to like to say.

  198. Phil

    Learning is good.  One thing you might learn is why I could care less about currency trading.  

    Look how easy is was to pick those lines this morning and already paying off nicely.  When I retire, this will be my whole day – get up early (or go to bed late) make an early morning trade and take the rest of the day off.  If I move to Europe, this will be my breakfast trade!

  199. Phil

    Luck/2Can – Better to be lucky than good but, if you can’t count on luck – practice can make you good.

    3am/Jrom – So where are you?  Didn’t know about the air quality issue, that sucks.  Does FaceTime work?  That might be a solution as I THINK it’s lower bandwidth.  You can do it on the IPads/Ipods too – just needs wifi.  

    Dollar 80.28 but running out of gas as Euro falls to $1.2975 and Pound finds a floor (for the moment) at $1.56.  Yen rocketing up from 76.6 to 76.71 but I don’t think it was Yentervention – looks more like Europe PMI still negative is a dissapointment:  

    Eurozone PMI increases to 48.3 in December, topping a preliminary estimate of 47.9 but still in contractionary territory. Despite the uptick, "forward-looking indicators suggest that a further decline is on the cards for the first quarter of 2012."

    Eurozone December CPI +2.8% Y/Y (in line) vs. 3% in November. The fall might give the ECB further room for easing after it cut interest rates back to a record low of 1% in December, especially with the economy heading into recession (.pdf)

    Germany sells €4.1B ($5.3B) of 10-year bonds, with a bid-to-cover ratio of 1.3. The yield drops to 1.93% from 1.98%. 

    China’s home prices fell for a fourth month, dropping 0.25% in December from the month before. Premier Wen Jiabao said this week that business conditions may be “relatively difficult” this quarter and monetary policy will be fine-tuned as needed. 

  200. roro

    The thought did cross my mind…….about the currency thing, I mean. I intend to open an account for my wife this week and am thinking about using it to only trade Oil, the US Dollar and an equity index or 2.
     
    Kind of a keep it simple approach and use it to prove your point, with which I very much agree and have for a long time it is just that I love to learn and dig.
     
    That is how I found you.

  201. Phil

     Big Chart – Dow making new highs but we ignore them, especially when the S&P and the Nas have not matched and, of course, the RUT and NYSE aren’t even at their Must Hold levels so the Dow is now our focus short – if any of the big components miss – they will drop like a rock and they are already priced for great performance so it’s a good bet to use for cover into earnings season.  

    Welcome Projectwise!  Good attitude on quick trading – as I often tell people, even if it’s just 10% of your portfolio, if you make 10% in a day that’s a 1% gain in your whole portfolio and you’re on track for 250% a year.  Unless you usually do better than that – then you are ahead of the curve and should probably take the money and run.  

    Doubles/Burr – Other than C, I agree with the whole list.  C is a tricky one, I’d rather play BAC to double and F is no sure thing but a nice long-term play and, of course, AA, BTU, CHK and FCX are our usual playbook for a reason.   A very good article for people who want to know why I like these stocks – thanks!  

    Bonus/Weasle – I don’t know about that.  We (PSW) don’t take anything from TOS or any other broker1 as I have this thing about staying completely independent.  

    Fills/Jrod – I assume you didn’t get the fill on the short puts because the stock is going up so that means the call spread is on track so you don’t need to offset it with short puts.  IF the stock takes a dip THEN you will get a good price on the short puts and, if it never does, then you don’t need them.  As to what I’m looking at when I pick a spread – mostly I’m starting with where I think the stock will be (on the assumption they work out their accounting issues) and then determining how sure I am about it (coin flip with DMND) and then picking the appropriate risk/reward combination.  Since I felt good about the short $20 puts at $1.85 as a floor – even if there is a further scandal and fines – that $1.85 then becomes my budget to buy a call spread.  DMND was in the $80s so $45 seemed like a reasonable top to a recovery spread and $2 more than the $45s was the $37s.  

    Another reason to be out of the money is that – if we’re wrong and DMND drops to $25, we can assume the $37s will fall to the price of the $42s ($3.50) and we can pull those off the table and leave the naked short strangle with $5.35 in our pocket ($3.50 + $1.85) which pays off between $20 and $45.  If we’re wrong on either side – we have $5.35 to contribute to the cost of a roll.  

    Spend less time worrying about all the minutia of the position you are looking at and more time thinking about what you will do NEXT if the stock is up or down 20% or flat and what, from those new positions, you will do the next time the stock is up or down 20% of flat.  When you are HAPPY with where you will end up in the WORST, WORST case (for this trade, it would be owning DMND for about net $10 in 2014) – THEN you have a good initial position.  

    Master Yoda says you must unlearn what you have learned and that is good advice for you new people who think it’s all about gamma, delta and theta.  That’s all nice but until you learn to manage your trades OVER TIME (the 4th dimension!) – you are just throwing darts at a board and hoping to make a score.  

    CMG/Cap – They whole premise for them is their new ShopHouse Chinese roll-out.  The Buzz is good and until the numbers say otherwise, CMG can keep going up as you have to cut that forward p/e in half as optimists feel they can double in size pretty quickly with 2 restaurants rolling out in each town.  Frankly, ShopHouse sounds better than Chipolte as I’d love to be able to drive up to a place and get a bowl of tofu, veggies and rice for lunch.  You can make that steak or chicken and get noodles instead of rice and add sauce…  Hard to complain about that.  That’s why I stopped shorting CMG.  I won’t go long but I don’t want to mess with them short either.  

    Cargo/Knight – Maybe they are just getting crushed by lower-price competition but it’s easy to imagine China just not busy enough these days. 

    Wow, $2.50 a day for the NYTimes – up .50 this morning!  At this point, it feels like I’m supporting PBS except PBS doesn’t bother me for money as often…

    Learning and digging are always good things, Roro.  

    Gold back to $1,600 – let’s see if they hold it.  Dollar 80.24 (told you they were out of gas), oil $102.22 (bounce off $102 as expected), Dow 12,314 (off 12,300), S&P 1,270 (off 1,268), Nas 2,316 (off 2,313) and RUT 747 (off 745).  Good lines to guid us today.  

  202. Burrben

    Futures
    Does anyone of a recording of the Live Futures demo Phil did from Vegas? I’ve been having some issues with IB trying to scale in and set stops quick enough for the movements of /CL.
    I’d like to see how the "master" is doing it.  If I could wake up every day around 5am, make a few bucks trading futures and then have a long term low touch portfolio, I think that’s a winning proposition.  
     
    If there isn’t a video, I wonder if we could convince PD for a early Xmas 2012 present and he could do a "live" show that we could keep in the archives :)

  203. roro

    I am scaling in short Dows and NASDAQ100s

  204. spiyer

     It is so true for New members to unlearn what U have learned.
    Do U think doller cannot sustain to remain above 80 for long. Toward end of Dec there was disconnect between Euro and stock market(Dow & S/P). It seems trade directions depends more on currency movements.

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