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Friday Already? Surviving the First Week of 2012

SPY DAILYYay, we made it!

Last Friday the Dow closed at 12,200 and Monday we started the new year at 12,450 and yesterday we closed at 12,415 so all the people who caught that move in the futures between 6am Tuesday morning and 10:05 Tuesday morning had a great week and the rest of you can go suck eggs.  

What an appropriate way to start 2012 – screwing the Retail Investors over as the Big Boys jack up the futures and then spend the rest of the week unloading their stocks on the suckers who run in to chase the gains they never had a prayer of catching.  

You had about 5 minutes to catch BAC (our one trade for 2012) at $5.75 yesterday but it was below $5.90 for 15 minutes and that’s why I can’t put picks on the main page anymore – too many people jump in.  Some people are confused as to why we keep making bullish plays when I think the rally is BS and the reason is that we don’t fight the Fed.  

Yesterday, we were down and then suddenly there was a rumor (unsubstantiated) about Obama announcing a $1Tn mortgage refinancing program and it wasn’t long before it was $3.6Tn and, while it is something I myself have proposed to the Administration, it was hard to see how anything that actually helped the average American Citizen would ever be passed by the House.  Nonetheless, the market did a 2% flip-flop and finished the day slightly higher – painting a much prettier technical picture than it would have if we has remained at our gap-down open.  

SPY 5 MINUTEFortunately, we followed through with our plan to take the money and run on the morning dip as we didn’t know what BS was going to move the markets higher but we were pretty sure that there WOULD be some BS to move the markets higher.  My morning Alert to Members left our $25,000 Portfolio 100% bullish at 10:11 and I don’t want to sprain my arm patting myself on the back but just look at David Fry’s chart – that says it all, doesn’t it?  

We went officially bullish on BKS, as planned, at 10:19, selling the Feb $10 puts for $1.20 – another bullish play for the $25KP (5 contracts) –  and they recovered so quickly that the Feb puts are already down to .95, gaining $125 in a day on that one trade!  That’s pretty good for a small portfolio, right?  

More importantly, it demonstrates our core concept – which is what these virtual portfolios are all about:  ALWAYS sell into the initial excitement!  Not BUY, but SELL – we sell premium and the drop in BKS for reasons we felt were fundamentally overdone so we took advantage of the pumped up premiums on the puts and sold them to retail suckers who were panicking.  Our other trade idea for a larger portfolio was to just buy the stock for $10.50 and sell the 2013 $10 puts for a whopping $3 (net $7 entry on the put side).  The stock finished at $11.25 (up 7%) and the short puts fell to $2.70 (up 10%) – not bad for a day’s work…

THIS IS WHY WE LIKE CASH!   There are always opportunities like this but they are only opportunities if you are ready, willing AND ABLE to take advantage of them.  If you have your money tied up in positions that are just treading water for them and your daily purpose in following the markets is trying not to lose any money – then opportunities will pass you buy right and left.  

One of the things traders need to unlearn is the idea that it’s good to be fully invested – that’s just BS fed to you by Banksters, who make more money when you are more invested.  

Who are the richest people in the World?  Banksters?  Do Banksters take money out of their own pockets or do they ask you to put yours in so they can "help" you?  Why does Warren Buffett have $20Bn in cash and never likes to be below $10Bn?  Why is AAPL sitting on $60Bn in cash? MSFT $41Bn  CSCO – $40Bn…  In fact, the top 20 companies have $488Bn in cash on the books, AVERAGING $24Bn EACH!  Does Apple have $60Bn worth of gold?  Does CSCO have $40Bn worth of oil?  No, they are not idiots – they are staying in cash because NOTHING is more valuable than cash in uncertain economic times. 

According to Moody’s, US Corporate debt to cash ratio is at a 5-year low, at 3.06.  The Fed keeps pumping money into the economy but the "job creators" aren’t passing it along – they are just sitting on their piles and watching the World burn.  $1.2Tn is held in non-financials alone (half of that overseas, where they are waiting for a Republican President to forgive them the $200Bn in taxes they owe on the money).  

Don’t be fooled by the ridiculous right-wing spin that says companies are worried they won’t be able to borrow (which is the logic for the Fed putting you in more and more debt in order to give sweetheart 0.25% loans to their pals) – Do you think Apple can’t get a loan?  Cisco?  Microsoft, IBM??  It’s nonsense – its a good sound-byte on Fox unless you actually THINK about what they are saying.  

Never in human history has so much been held by so few and withheld from so many who are in need.  Capitalism is broken, and don’t let this morning’s 200,000 job gain in the Non-Farm Payroll fool you – 50,000 people were dropped from the work-force after 350,000 people were dropped last month and last month’s 120,000 was revised DOWN by 20,000 but hey, what’s 20% between friends, right?  Just wait until next month, when they switch to base data from the 2010 census (yes, it takes them a whole year) – that should give us a totally random number.  

Teenage unemployment is still 23.1% and, if you are Black (15.8%) or Hispanic (11%), you may have a slightly different view of the economy than White People (7.5%) but Asians laugh at all of us with a 6.8% unemployment rate.  13.1M people are officially unemployed but another 8.1M people are "employed part-time for economic reasons" – in other words, a guy who lost his $40,000 job and is now delivering newspapers (taking away a teenager’s job) for $7.50 an hour 25 hours a week ($9,750 a year) is not considered unemployed in the official Government gobbledygook (yes, it’s a word!).  

Even more telling, in December, the Average Hourly Earnings rose by 0.04 to $23.24 – but that’s for ALL employees.  The AHE for "private-sector production and nonsupervisory employees" was flat as $19.54.  ALL of the money goes to the top while the bottom 99% – that’s right, you guessed it – suck eggs.  Even as I write this, idiot Cramer is on CNBC (9am) telling the sheeple NOT to listen to people like me who "drill into the numbers" and distract you from a "terrific jobs report."

Pumpmaster General Cramer wants you to BUYBUYBUY because his Hedge Fund buddies need to SELLSELLSELL and, as we all know – the entire purpose of CNBC is to act as a propaganda vehicle for the top 1% – chasing the masses out of stocks when the Funds want in and chasing them into stocks when the funds want out.  If you want to see correlation – chart the rise in market volatility with the rise of the Financial "News" Networks and see how it culminates in the Foxification of the Wall Street Journal – which went from in-depth analysis to headline fear-mongering faster than you can say "Rupert Murdoch’s a crook."

The bottom line on Unemployment Data (see Table A) is that there were 14.393M "Unemployed" people in America in December 2010 and 13.097M Unemployed in December 2011.  BUT – in December 2010 there were 85.276M "Not in the Labor Force" and that number jumped to 86.697 in December 2011.  So, of the 1.296M people who went off unemployment in 2011, 1.421M of them left the labor force (whatever that really means).  

From an investing perspective – what it means is that people (bottom 99% people) don’t have more money and won’t be buying more stuff in 2011 because THEY DIDN’T GET ANY JOBS!  In Table B we see that those poor non-supervisory workers earned 1.6% more than in 2010 per hour and worked 0.6% more hours so, overall, 130M workers have about $50 a month more to spend than they did in 2010 – that’s $6.5Bn a month (before taxes) and $78Bn a year in a $16,000,000,000,000 economy or 0.4%.

Let’s keep that in mind as we watch the Dow with half of it’s components at all-time highs and Europe, Japan and China all sliding into recession.  If the pundits are counting on the US to be the engine that drives Global growth – it’s going to be a very slow year indeed!  

We’re still short the Dow Futures (/YM) below that 12,350 line but too dangerous to short oil into the weekend.  I still like the QQQ puts (next week $58 puts, at about $1) as I’m still concerned that Europe can melt down over the weekend but, then again, it can also be "fixed" so – CASH!

Cash is good, cash is king!  

Have a great weekend, 

- Phil

 


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  1. jcaesar

    Euro’s just getting beaten and battered.

  2. stjeanluc

    Oil Lines

    R3 – 105.51
    R2 – 104.62
    R1 – 103.08
    PP – 102.19
    S1 – 100.65
    S2 – 99.76
    S3 – 98.22

    Yesterday’s high and low – 103.73 / 101.30

    Breakout lines – 107.66 / 94.93 

  3. stjeanluc

    MampcsA, I saw your note last night (I was out) and I could use the help with the 25KP tracking. What I would need most though is AH a quick recap of the trades you made during the day – for example, yesterday, I assumed that the DIA and QQQ puts were stopped out as per Phil’s note earlier. And I DD the GLL calls based on your post. I’ll update the spreadsheet based on that. If that doesn’t work, we’ll setup something else, but for now I would rather not have too many editors in the files to avoid potential problems. Thanks for offering your help!

  4. exec

    Employment better than expected so why is IWM negative?

  5. stjeanluc

    Home builders seem to be recovering…

    http://www.bespokeinvest.com/thinkbig/2012/1/5/homebuilders-continue-their-surge.html

  6. stjeanluc

    Jobs / Exec – I think that ADP might have set the bar too high as expectations got raised and not matched. But the numbers are pretty good! 

  7. peedlew99

    @economistmeg: MT@MarkitEconomics: For orders to German manufacturers fell -7.8% m/m in Nov. Domestic demand was -1.1% lower>>Leading indicator. Yikes!

  8. angelcur

    my plan for the day: create some jobs…screw the poor…phone sister volcano for a date at the parish..get a few hondeling lessons from rabbi kapor..AND right now look to short 1300 is in  SP 500…. we might make another trip down to the 1265 area first….right now more interested in selling into any strength early on in the day and then buying more aggressively if we get a pullback…ok where are those gorsuch catalogues!!??
     

  9. lvmoda

    Looks like the DAX really dumped and is pulling our markets down.   Now that all the retail buyers are sucked in time to spit them out.

  10. lflantheman

    AAPL 50k portfolio:    Good morning!   Here is the present status of the AAPL 50k port and my thoughts.   Present holdings are 10 July 390/415 BCS,  10  Jan 410/420 BCS and 10 Jan 415/425 BCS plus about $47,000 in cash.   Phil’s comments above regarding holding cash are right on.  Only about 1/3 of our portfolio is invested.  This gives us flexibility to take advantage of an unexpected opportunity.   Also, in this portfolio, it means we are protecting our capital and only using house money for options plays.  Even if all of our options plays turn sour (not likely) we are still left with original capital and can rethink, regroup,, and reinvest.   This concept is extremely important for a one stock portfolio.  You MUST protect capital.  So I might deploy some of this 47k over the next few days, but it would be only in what I consider a very safe play with high likelihood of success.  So where is AAPL going?  I think that during the next 2 weeks it’s going up a bit more.  That’s the premise upon which I purchased the January calls.  I think they will come in for us while the pre-earnings excitement is still there.  Then on the 23rd, one day before earnings, we’ll likely be 95% cash.  Earnings, as you know, are many times a crap shoot.  Though earnings and guidance are sometimes predictable,  the post -earnings response by investors is less so.  So good trading to you all today.  I’ll be at my ‘other job’ much of the day but checking in when I can. 

  11. stjeanluc

    Some people still lost their jobs in 2011:

    The 183,064 government job cuts in 2011 represented a record high for that sector since Challenger began tracking it in 2002

    Maybe we will put the myth of Dems big government to rest now! At least after the election… 

  12. stjeanluc

    A analysis on how to play the gaps:

    http://www.thereformedbroker.com/2012/01/05/how-to-play-the-gaps/ 

  13. dclark41

    stjeanluc
    I am with Phil on the ADP number. Its complete BS when they never account for the people that drop out, the seasonal adjustments, and the constant change in how they derive the number.  I guess it is as JRW always says: "I trade what I see." But I still wonder what happens if those people that dropped out get motivated by the positive numbers and come back in. Won’t that just take the unemployment percentage back up? We also have to be leery of numbers during the Holidays. I just think that a month from now, we may see a return of unemployment near 9% again.

  14. bobhu

    What’s wrong with Cramer? he keep saing IphoneS4 and nobody correct him?

  15. stjeanluc

    Might have missed the boat a bit with AA, but still a good gain on the short puts.

    Phil, I guess we have until Monday EOD to close these puts as AA reports AH, but I am not sure it’s worth the risk over the weekend! 

  16. mampcsA

     Stj, not a problem at all. I have a 25KP spreadsheet that i’m keeping on my own that i update with the executions. You can access it here: https://docs.google.com/spreadsheet/ccc?key=0AsYMzpPXfKJUdHA3WXk5bmxQd182X1JBZ1ZmU19XdWc
    This is updated based on yesterday’s trades. There are 2 sheets in there, one for open positions and one for closed positions.

  17. stjeanluc

    Jobs / Dclark – I agree, the ADP number is BS, but not everybody sees that (some for nefarious reasons) and I am sure that it was used to raise expectations (and actually, the numbers were good). That the unemployment numbers come back up would not surprise me as people come back as you point out and historically speaking this is what has happened. But the trend is still going in the right direction. And BTW:

    With 10 months to go before election day, Obama is 332k private sector jobs away from showing a gain over his Presidency.

    Not bad considering the start…. The problem is government jobs (or a good thing depending) on your point of view!

  18. morxlntway

    Is this an opportunity to grab more GLL to hold into next week?

  19. nicha

    mamp – we also have MON $70 call naked @ $3.05.

  20. Phil

    Good morning! 

    NFLX back up today so all must be well, right?  

    As you can tell from the above post, I’m a little disgusted by all the BS that’s being slung at investors this week but, now that I’ve got it out of my system, we may as well take advantage of the suckers as well.  

    Of course my favorite is still the DIA puts (/YM futures below the 12,350 line), we talked about mattess plays earlier in the week and I think the DIA 3/31 $120 puts for $3.55 are excellent protection at the moment.  To establish a hedge.  

    SQQQ is cheap at $17.88 and we only need a tech name to miss for a payoff there so how about an aggressive short here, selling 2 Jan $19 puts for $1.45 ($290) and buying 6 Jan $17/18 bull call spreads for .55 ($330) for net $40 on the $600 spread in the $25KP.  

  21. stjeanluc

     

  22. stjeanluc

     

  23. Phil

    MA Feb $290 puts at $2 are a nice way to play for Financial misses.  MA doesn’t have earnings until 2/2, so those puts should hold value pretty well and if other financial miss in the next two weeks, they should go down as well and, at the level they are at now ($350) I don’t think they’ll go up very fast.  5 of those in the $25KP with a stop at $1.  

  24. mampcsA

     nicha, i closed the MON Jan 70 short calls yesterday because it wasn’t clear initially based on Phil’s comment that we should keep it open. I assumed he only wanted the 72.5 calls opened (he clarified later that he did not know that we also had Jan 70 short calls and he would have preferred to keep those open as well. I guess i can short them today and actually get a better price :-) .

  25. stjeanluc

     

  26. Phil

    Euro $1.2716 – cue R.E.M!  

  27. dclark41

    I didn’t know GWB could sing!

  28. mampcsA

     Ok, got back into the MON 70 short calls. I’ll update the spreadsheet to reflect that we did not get out in the first place (and keep the extra change for me:-))

  29. nicha

    mamp – nice :)

  30. daveo

     iPhone:  I can no longer log into PSW from my iPhone.  Is anyone else having this problem?

  31. dclark41

    Phil:
    Wow, what did you do to MA?
    That trade was good for about a second! Would you still recommend those MA puts at $2.80?

  32. nicha

    daveo – yes, can’t log in from the iPhone on Phil’s page but Opt’s page loads. Getting ‘WordPress error’.

  33. dpastramas

     MA Puts rallied from 2$ to 3$ in 15mins.. damn what do i always miss the good trades!?!?!?

  34. Savi

    dpas—not just you—so frustrating

  35. mampcsA

     SQQQ trade went thru in the 25KP. Does not look like we are going to get the MA puts. They are off to the races.

  36. Canuck

    Phil/VXX Jan 32/35 bcs,
    ok to DD w/o offfset for $1 or with a next week 32p at 0.91 and a net 0.09 for the trade?

  37. mampcsA

     Stj, i’m going to highlight all new trades for the day in red and will only change them early next morning. That should give you ample time to find out what were the  new changes.

  38. nicha

    Funny, I am unable to fill the SQQQ bcs. Got the short puts though.

  39. mampcsA

     Phil, do we get out of half the GLL 18 calls in the 25KP at .95 since we had doubled down to get a .95 net?

  40. nicha

     AAPL staying strong in this mkt. Iflan was right. We could squeeze more out of those trades.

  41. stjeanluc

    25 KP Status

    I don’t think many people could have gotten $2.00 on the MA puts as they moved rapidly.

    MampcsA – In your spreadsheet, it would be better if you put in the prices you bought and sold the options rather than the cost of the rolls. For example on the QQQ puts, I can’t tell the prices of the current position and what you got when you sold the previous set. You can still make a note, but it would make for tidier admin. Thanks.

  42. morxlntway

    my iphone is working on PSW

  43. stjeanluc

    FAS Strangle – I am going with a 68/69 strangle for the day, trying to repeat last week’s performance. You should get over $0.80 for that trade.

    In case we need to roll, the 68 rolls to next week 60 and the 69 to next week’s 75! Those are the retreat lines.

  44. mampcsA

     Stj, done. I had kept it the original way because i know that’s how Phil likes to track them in his updates.

  45. Phil

    I’m sorry but this is just fantasy land with the Pound at $1.54 and the Dollar at 81.60 with oil and gold and the Dow pretending we should be 10% higher than we were at Thanksgiving.  I know this may come as a shock to some but the markets are supposed to make sense.   Reasonably intelligent people are SUPPOSED to allocate their capital based on verifiable FACTS that will best protect their assets while insuring them a reasonable rate of return on what they do invest.  This is nothing more than a casino where you bet on a gossip game! 

    CASSSSSSSSSSSH!!!!!!

    Cramer is in bonus time so you know it’s a pump and dump day.  

    We’re still "bullish" if we hold 12,200 on the Dow and that’s a long way down (150).  The RUT is closest to a 5% line at 735 so we’ll watch them to lead a major breakdown but it’s too early today and don’t forget we have Fed Speak today.  Dudley boosted us this morning (as we expected) but that faded fast and Rosengren (10:20) is not a dove but we get a one-two punch of Duke and Raskin at lunch so still a chance to save the day later.  

    Friday’s economic calendar:

    Monster Employment Index

    8:30 Nonfarm Payrolls

    9:00 Fed’s Dudley: New Jersey Economic Leadership Forum

    10:20 Fed’s Rosengren: Economic Outlook

    12:40 PM Duke: ‘Economic and Housing Market Developments’

    1:00 PM Raskin: ‘Community Banking Supervision’

    Pre market popper:  New York Fed chief Dudley remains worried about the economy. He says it’s appropriate at this stage to consider more monetary easing along with further housing-market intervention. He outlines a number of steps to "solve" housing, all of which sound great sitting around a table in D.C.

    At the open: Dow -0.11% to 12403. S&P -0.11% to 1280. Nasdaq -0.02% to 2349.

    Treasurys: 30-year +0.16%. 10-yr +0.11%. 5-yr +0.02%.

    Commodities: Crude +0.11% to $101.92. Gold +0.42% to $1626.85.

    Currencies: Euro -0.39% vs. dollar. Yen +0.03%. Pound +0.42%.

    Market preview: Stock index futures pull back after jumping into the green as payroll data showed the U.S. economy added more jobs than expected last month. S&P benchmark +0.2%. The reporttripped up Treasurys and sent the dollar higher. In Europe, commercial banks’ overnight deposits at the ECB hit a new record high, and 10-year Italian bonds yielded more than 7%.

    Iran plans to hold another round of naval exercises in the Strait of Hormuz in February, according to a report in the semi-official Fars news agency. The announcement was made late last night, following reports earlier in the day that thousands of U.S. troops are headed to Israel to take part in the largest-ever joint drill between the two countries. Crude futures +0.4% to $102.20. (previously)

    Analysts expect Q4 earnings for the entire S&P 500 to increase 11.6% Y/Y, but that’s not as impressive as it seems, Paul La Monica writes. At the start of the quarter, the consensus called for 18.8% growth, and companies such as Alcoa are racing to lower their own guidance. And the main reason for the expected growth: Analysts forecast a 74.5% jump in profits from the financial sector.

    Best Buy (BBY) says Dec. same-store sales fell 1.2%, hurt by declining demand for televisions and video games, with revenue remaining roughly flat Y/Y at $8.4B. The retailer continues to expect adjusted 2012 EPS of $3.35-$3.65 vs. $3.41 consensus. BBY +0.4%premarket.

    It’s often best not to get too cute with contrarian indicators. A longer term chart of the AAII sentiment indicator shows the last time bearish sentiment was this low was Dec. 2010. Fade it? Hardly, as the S&P rallied hard for another 5 months.

    Dec. Monster Employment Index: -7 to 147, reflecting a seasonal lull. The year-on-year growth trend remained positive, but "2012 hiring plans in the context of the global economic uncertainty remain cautious."

    California Governor Jerry Brown yesterday proposed to slash the state’s projected $9.2B deficit next FY with $4.2B in cuts to social services and $4.7B in tax hikes. Unlike previously, the tax measures won’t require legislative approval, so Brown will be able to pass the budget without the GOP’s input.

    Japan likely relapsed into contraction in Q4, according to the Japan Center for Economic Research [JCER], an independent analysis group. Pegging a 0.1% pullback in the economy, JCER points to a double-hit from the eurozone crisis: a strengthened yen which hurt exporters, and a drop in real demand.

    German new industrial orders -4.8% M/M in November vs. +5% in October and -1.7% forecast. Foreign orders -7.8%, domestic orders -1.1%. The euro takes a dive from earlier highs and is now-0.1% vs. the dollar. 

    Eurozone November retail trade -0.8% (0.2% expected) (.pdf). Eurozone December economic sentiment indicator 93.3 (93 expected) vs. 93.8 in November (PR). Consumer confidence -21.1 vs. 20.4. Business climate indicator -0.31 (-0.5 expected) vs. -0.42, the first improvement in 10 months.

    STILL GETTING WORSE!  Banks deposit a record €455.299B at the ECB’s overnight facility, but overnight borrowing falls to €1.861B, the lowest since Nov. 28.

    France is "wobbling" again, writes Mike Riddell, the 10-year OAT/Bund spread widening to 150 bps from 100 one month ago. Curious, though, is French paper now yielding more than that of the EFSF. With France a guarantor of the rescue fund, EFSF bonds are effectively subordinated French debt. "Personally I wouldn’t touch either of them, but shouldn’t EFSF bonds yield more than France?"

    Italian, Spanish and Austrian government bond yields are higher ahead of auctions next week due to the usual worries over Greece, Spain and Hungary, although  sentiment on the latter is improving. Despite ECB intervention, Italian 10-year yields +3 bps at 7.12%, Spain +5 bps at 5.68%, and Austria +12 bps at 3.49%.

    Fitch downgrades Hungary to BB+ from BBB-, citing "further deterioration in the country’s fiscal and external financing environment and growth outlook, caused in part by further unorthodox economic policies … complicating the agreement of a new IMF/EU deal." 

    Saying the euro is "endangering the political cohesion of the EU," George Soros believes its breakup would be "catastrophic" for both Europe and the global financial system. Not to worry, says IMF chief Lagarde, 2012 will not bring the end of the euro. 2013?

    Barclays estimates Lloyds (LYGfaces another £20B in credit losses in 2012, and RBS £13B. Such numbers would wipe out Lloyds core equity and shave off 1/3 of RBS’s, suggesting more capital injections could be necessary for the lenders, already significantly underwritten by the government. Both stocks are trading higher in London. 

    Wells Fargo downgrades Goldman Sachs (GS) to Market Perform from Outperform, with a price range of $95-$105. The firm cites the weak outlook for 2012 world global growth, noting Goldman’s recent share price has had a startling correlation with changes in consensus GDP forecasts. Shares -1.1% premarket.

    The U.S. office vacancy rate dipped to 17.3% in Q4 from 17.4% in Q3 and 17.6% at the end of 2010, Reis reports, as a 15-year low 12.3M sq. ft. of new office space came to market in 2011. "The office sector has assuredly turned the corner," Reis says. "Still, given the severity of the downturn… it will be years before the office sector climbs out of the hole." 

  46. Phil

    Sterne Agee initiates coverage of the defense sector with a negative outlook, due to the falling U.S. military budgets. However, Stern notes that the U.S. will still provide a market worth around $500B a year, "supporting near-term cash flows, dividend payouts and share buybacks." Sterne rates GDMRCY and KEYW at buy;LMTRTN and FLIR at neutral; and AVAV at underperform.

    Chevron (CVXvows to continue to try to overturn an $18B judgetment for the spilling of chemicals into the Amazon basin in Ecuador. Chevron’s options include appealing to the supreme court, while the company is also pursuing arbitration in the Hague. 

  47. crussell14

    StJeanLuc – not clear on the 68/69 strangle – can you spell that out. thx

  48. stjeanluc

    Thanks mampcsA! 

  49. stjeanluc

    FAS / Crusell – Sold the 68 put and 69 call.

    FAS is at 69 now, so it’s a bit close. You could try selling a 68/70 strangle instead for less, but with better protection. This Friday trade is really more of a gamble! 

  50. yodi

    stjeanluc
    FAS strangle to close to the fire for me but good luck
    He means sell the 68p and sell the 69 c JAN 1 0 days

  51. stjeanluc

    Yodi, as I said, a gamble… Looks like a roll now for the calls now. But I am guessing we’ll correct sometimes next week and I’ll collect then. 

  52. angelcur

    http://www.businessinsider.com/bank-of-america-has-a-unicredit-problem-2012-1
    why would  B of A underwrite this?

  53. crussell14

    St. JeanLuc
    why not do FAS today $67/69 BCS at $1.65 with FAS at $69.40 for 21% one day gain if FAS stays $69 or higher?

  54. Phil

    Builders/StJ – HOV still reasonable at $1.65 as a LONG-TERM play.  A good entry is just shorting the 2014 puts at .50 for a .50 net entry and you can use that money to buy a 2013 $1/2 bull call spread at .35 so still a net .15 credit on the $1 spread and worst case is you own HOV at 50% lower than it is now while best case is you make $1.15 (up 766%) if HOV hits $2 over 12 months (up 22%).  

    1,265/Angel – Pretty close!  Gorsuch?!?  You are such a top 1%’er!  

    AA Money/StJ – Yes, we lost track of the fact that we only have 25 short puts because the 10 short puts we originally sold creamed us so we adjusted.  Ahead of earnings, I say screw it and let’s kill them all and book the profit.  After earnings, we’ll see where we are and sell more stuff.  

    FAS Money/StJ – Wow, what a ride!  We’re dead center so not much to do here – gotta love those weekly put sales!  Let’s sell 2 next week $65 puts for $1.05.

    IWM Money/StJ – I guess I am bearish.  

     

  55. diamond

    crussell14 – Fas = Experiment = Selling premium every day!

  56. Phil

    $25KP Moves (so cool how fast that’s updated!):

    • GLL – fine 
    • MON – Holding higher than we like ($77.50) 
    • DMND – Long-term
    • FAS – Yay!  Should expire worthless. 
    • QQQ – Fine as long as those are next week.  
    • BKS – Yay!
    • SQQQ and MA are new and I’m done – that’s great! 
  57. stjeanluc

    FAS / Crussell – You could risk it, but it would be hard to adjust if FAS were to sell off toward the end of the day. With the strangle, the 69 calls might still show a profit if we stay below 69.55 and the puts will be worthless. And worse case scenario, I roll the calls to next week.  

  58. stjeanluc

     25KP / Phil – The QQQ puts are Jan2 so next week indeed. The MA trade is iffy because they shot up in a hurry. 

  59. rehat

    lflan and other AAPL option lover, 
     
    You may want to check this out
     
    http://www.appleinvestorsummit.com/

  60. stjeanluc

    AA Money – Buying back the Jan 9 Puts for $0.28. Booking a 66% profit on that trade. We are left with a strangle only.

     

  61. dclark41

    Phil:
    Very nice call on BKS.

  62. dmoroz

     Hello,
    Anybody looking yo go long with TLT? If so, what are the play you are looking? Phil, any words of wisdom on a TLT play? 

  63. stjeanluc

    FAS Money – Selling 2 FAS Jan2 65 Puts (now 0.92)

     

  64. sagemm1

    STJ/Google docs updates
     
    WIth the newer 25k portfolio and the aapl portfolio and perhaps others to be introduced; how does one see those? I have the aa portfolio but not sure how to see them updated or see the newer portfolios/ I am signed into google docs and can only see an older update, is there an auto update for AA and the newer portfolios, once I can see those? TIA
     
    Maybe this should be added to the wiki as I have seen many questions over the last 2 months looking for these updates.
     
    I would do this but I am severely technically challenged:)

  65. stjeanluc

    Spreadsheet / Sagem – Try this link:

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

    Copy and paste in your browser to make sure the links work. The portfolio each have a separate tab. I guess we could add it to the wiki. 

  66. stjeanluc

    Wow, FAS really running away now… With a move like this one, it’s worth waiting until the end of the day to squeeze every premium penny from the calls before we roll.  

  67. roro

    NASDAQ100 is holding up at the 2250s

  68. roro

    2350s……..correction

  69. yshenhar

     Phil, Stj – great save on the AA puts – they were looking pretty grim before the 2.5X roll last month!

  70. JRW III

    Good morning, still nothing new:

     

    IWM    73.51,  73.92,  74.28,  74.61,  75.12,  75.57  and  75.82

    Levels working very well today, good hunting !!

  71. stjeanluc

    AA / Yshenhar – Credit goes to Phil… 

  72. mampcsA

     I think we are going to get our MA 290 puts at 2 at some point today.

  73. Phil

    Did we really make $600 already in the $25KP?  That’s pretty good for a 4 days!  

    StJ – For the weekend please, I need a log of all transactions so I can write them up if you have it.  

    GLL/Morx – At the time, that was the right move.  Now back to .80 so not as good a price.  As a rule of thumb in the $25KP, if I’m in a $500 allocation, it means I’m scaling in or at least thinking of it.  Generally, with a small portfolio, you don’t want more than 10 open positions so our allocation in a $25KP is $2,500 per position but I don’t like to go more than $1,500 because, if we are forced to DD to save a $1,500 position, then we are fully allocated and backed into a corner so most of my entries are $500-$1,000 and, as those of you who followed last year know – when they work we take the small money and run and, when they don’t – THAT’S when we consider making it a serious position that we’ll stick with.  

    This is the pain of Fundamental investing – if the PRICE changes but we still see the VALUE – we need to swim against the current to build our positions and you’ll see ugly things like – 190% on the MON $72.50 short but, given my outlook for Q1 (not MONs but the whole economy), we’re likely to want to DOUBLE our commitment and roll the $5.50 (avg) short calls to 2x the Feb $77.50 puts (now $2.75) while we wait for MON to drift to the VALUE we place on it.  

    So, getting back to GLL in the $25KP – Yes, we want to DD at .65 if that price is actually gettable.  

    BAC/Angel – This happens all the time.  Underwriters assume some risk to get the deal but that’s IF the sale doesn’t go well THEN BAC is ONE OF the underwriters on the hook for 10% of the deal, not to mention it’s not a fine – they get shares pretty cheaply for the cash.  I hate these stories where they construct scenarios based on thin premises that can’t be resolved for weeks to try to influence stocks today – such lame attempts at manipulation by people who missed the BAC move yesterday because "someone" pointed out to the public how obvious it was to invest in them.  

    MA/StJ – Up is good, up means cheaper entry on the puts.  

    AAPL summit/Rehat – I’d want to hear what Woz has to say and then leave.  I’d love to get a summary of last year’s but, judging from the lineup – it’s a fanboy conference so I’m sure they are in the $500-550 camp this year.  

    AA/StJ – Damn, I had it in my head it was a bull call spread and didn’t even look at those numbers!  Since it’s a strangle and not a bull call spread, then it’s foolish for us not to sell options into earnings.  Let’s sell 5 Feb $9 puts and calls for $1.05 as the primary goal is to pay for the long strangle on that play.  

    BKS/DC – Thanks!  As I said above, this is why cash is great to have.  If you are all in cash and just make one trade like that a month, you’ll have an excellent year.  

    TLT/Dmor – You have to talk to Pharm if you want to long TLT – I’m a hater.  Realistically, the Fed does support $118 so, when we dip, it’s a reasonable place to go long but I prefer to wait for it to get silly in the low $120s and play for the ride back down because that’s a move I believe in.  Pharm is my counterparty on that one, doing pretty much the opposite but we both make money because he wins from $118-$123 and I win from $123-$118 – both of us playing a trade we firmly believe in – even though we’re on opposite sides.  

    81.57 with Europe in last 1/2 hour.  Euro back over $1.27 is a small victory (very small) and Pound bounced off $1.537 and back to $1.541 – also pathetic.  Yen on the 77 line and they should defend that which means this (81.50) should be the low for the Buck.   Swiss totally lost control with EUR/CHF down to $1.2159 and they will be fighting the BOJ to get the Euro back up (Dollar weaker) but BOJ has MUCH more money than SNB so I think we hold 81.50. 

    AA/Yshen – That’s why you have to trade stocks where you have a real conviction.  You may be wrong, but at least you are able to make the moves you have to make when the market PRICE goes against you.  Notice we got new information yesterday (AA cutting capacity) so THAT made us less certain on our $9 floor and led us to decide to cash out.  Conviction is a nice thing but it’s not supposed to be blind faith.  

  74. yodi

    Phil Do you mean buy 2x 77.5 FEb p on MON and buy back the Jan12 72.5c
    190% on the MON $72.50 short but, given my outlook for Q1 (not MONs but the whole economy), we’re likely to want to DOUBLE our commitment and roll the $5.50 (avg) short calls to 2x the Feb $77.50 puts (now $2.75) while we wait for MON to drift to the VALUE we place on it.

  75. stjeanluc

    25KP / Phil – I’ll update the spreadsheet and post the transaction list AH. All the information you need should be there. 

  76. ban2

    Hi Phil

    How about a play on STD??
    This Tues (1/3/12) they annonc’d. a .16 div with ex-date of  1/11/12 and the stk has dropped .90 since then!
    Seems the euro hype has this thing down at interesting levels.

    Presently @ $6.85 that’s  a 9.5% div.
     
    tia

  77. nicha

    stj/AA – Phil was talking about selling $9 puts and calls for $1.05.

  78. Burrben

    Stop / Stop Limit
    On the MA puts, when you are putting on a STOP are you using a STOP or STOP LIMIT and entering a limit price.  The problem I see with the StopLimit is that it might not get filled.  With a STOP it’s selling at the market, so it may be a bad price.
     
    Just wondering since I’m into being detailed today :)

  79. mampcsA

     Phil, we have 10 GLL 18s at .95. I take it you want to double down at .65 (it’s there now)? That makes it 20 at an average of .8.

  80. stjeanluc

    AA / Nicha – Thanks. Already late in the day here in Europe…  

  81. stjeanluc

    AA Money – Selling the AA Feb 9 puts and calls

  82. NF**X

    DEO – I tend to like this as a long term accum in an IRA. But, of course, it’s expensive. Do I look to buy stock over time using PD 15-20% program? Or look to long term option low maintenance plays that mimic and add additional value to it’s already decent and steady dividend yield? (Like a LEAP-ish bull call spread financed with the help of a short put position.) I noted a chart here from days ago re how good dividend stocks tend to perform better over the long haul. But, I’ve also learned – I think – from PD that we can take advantage of such a “fact” in more cost effective ways than just ponying up for shares out of the gate.

  83. dpastramas

    Are we really rallying on the SETI annoucement?

  84. barfinger

    Phil is correct, TLT is cycling in a fairly predictable way (for now). I have been strangling TLT for months now, and recently I decided "why not take delivery", and I started selling extra puts weekly. I wanted to own my first piece at 112, and I was able to sell Jan 112s which will probably expire. I am now short next week’s 116s, and if I have to, I will roll until I get to 112 where I will accept assignment. TLT pays something over 3%, but weekly put expirations are worth far more. Just one way to do it.

  85. roro

    Phil………what do you think of the decoupling theory floating around?……..the dollar and equities rally together on the premise US ec numbers are showing broad based improvement……..(US economic numbers are improving seems to be general consensus being touted as I scan about – not your view or the one from the recent FOMC minutes unless I am misreading)

  86. exec

    JR,
    Are you still looking for a pullback in Jan/Feb?

  87. randers1

    I am looking at a CSTR trade- Now at 41.77
    Earnings due 2/2, PE 13.
    Sell Feb 40 puts for 2.50
    Buy Feb 40-45 BCS for 2.25
    I also found a Tea place from an Amzon local deal – sorry deal just ended, But they seem to have good variety.
    http://www.espemporium.com/

  88. cwan120

    Phil,
    With your current outlook of the markets, what would be a good hedge for IRA?

  89. cwan120

    barfinger,
    What’s your range for TLT strangle?  That is, what strike do you sell calls and puts for strangling?
    Thanks.

  90. Phil

    FTSE up half a point, Germany down half a point and France in between at the EU close.

    Euro $1.2727, Pound $1.5417 and 77.06 Yen to the Buck, which is at 81.54 (gee, who’d a thunk it).  

    Meanwhile, our indexes are getting it all back and more from the opening drop with the Dow now lagging just under our 12,350 line again after a very profitable trip down to 12,275 so congrats to the Dow shorters – again.  

    Oil at $101.53 bounced off $101 like a champ but it would have been more shocking if they failed on a Friday.  Europe now considering letting Iran go on the embargo (wimps!), probably in exchange for the nuclear talks Iran hinted at yesterday so we’re on track for our SCO plays expecting oil to calm down over the next few weeks.  

    Now we move into a light lunch and the Fed doves so I assume we top out in early afternoon and then profit-taking into the close. 

    MON/Yodi – Yes, a 2x roll of both puts to the same strike which should be even but we’re standing pat over the weekend – just discussing the exit strategy if they stay strong.  

    Thanks StJ!  

    STD/Ban – I would have said yes except for the BCS/LYG news item earlier.  I think BAC is the way to go if you want to take a risk on a bank.  It’s hard enough figuring out if a top US bank is solvent or not, Spain is going to be a total crap-shoot.  

    AA – What Nicha said!  

    Stops/Burr – Well I never like to use hard stops because, no matter what you broker SAYS about them not showing – they sure seem to get tripped a lot.  Also, as you note, you end up getting the worst possible price on even a brief spike against you so no, when I say stop I mean a mental stop and generally I don’t consider a stop broken until I see two full 10-minute candles form past my line but, of course, that depends on the momentum and news and the rest of the market – I’m just saying I’m not quick on the trigger if it can be avoided.  

    Another reason to keep positions sizes small because, if I’m holding something to a stop, then it means I think that’s the right VALUE so if, for some reason, the move went way past my mark – I may change my mind and roll and DD instead of stopping out because I think the PRICE is wrong.  That’s why it does not pay to be dogmatic with stops and targets – every hour of every day you know more about the position than what you knew when you set that PRICE – it’s really just a trigger to prompt you to make a firm decision but that decision should be based on the new information you’ve accumulated, not some arbitrary price you set days/weeks earlier (see the Nobel Prize-worthy "Microwave Oven Theory of Behavior"). 

    GLL/$25KP, Mampcs – Ah, I forgot we already did a DD but that’s fine to have 20 at .80 average of course but that’s a fairly full position so any additional adjustment would have to be a roll or stopping out.  

    DEO/NF – STZ had crappy numbers and outlook so I’d be very careful with DEO.  They curve upscale and that’s a tough market to count on if the economy gets worse.  

    SETI/Dpast – Hey, if they discovered life on other planets – then maybe they’ll loan us some money or at least come here and spend some money (or even invade us and give us an excuse to ramp up military spending).  8)  

    Good TLT strategy Barf!  

    Decoupling/Roro – I don’t think anything of a theory that is based on a 3-day low-volume observation.  

    Equities are priced in Dollars – how do you "decouple" from an absolute fact?  Commodities are priced in Dollars too.  So, if the Dollar is going up and equities are going up, then the only logical conclusion is equities are stronger than they look with their appreciation masked by a move up in the Dollar but if commodities are also going up – then it’s just a general inflow of cash into dollar-denominated assets and it does nothing at all for our buying power – whether you stayed in cash or invested – your situation improved and the logical thing to do then is to wait PATIENTLY to see which of the currencies and markets that relatively crashed give you the best opportunity to play for a bounce but shuffling your money around from one rising asset to another is kind of a waste of time if we’re miraculously "lifting all ships" simultaneously.  

    Speaking of commodities collapsing – oil back to $101.  

    IRA hedge/Cwan – I’d go for the long DIA puts (3/31s above) over the weekend and then sell Jan puts and roll up and back in time if we are still up next Wednesday morning.  

  91. scottmi

    MSFT – good day to sell premium on Microsoft.. sold April 30 calls. 

  92. Beaufleurs

     Hi guys.  Does anyone have a rule of thumb that they use regarding making a decision on whether it is still ok to jump in on a trade idea.   Meaning if the price has run up a bit from the price that you first considered it a good idea,  or if the price has moved even lower but you still believe in it?  I know it would have a lot to do with the conviction you have regarding the stock’s direction and overall market conditions etc., but just wondered if some of you might have a guide line.  Thanks very much for all the help, it’s really starting to come together for me.  

  93. JRW III

    exec / Pullback

    Yes, just about now, in fact !!  And then a rally, but not to new highs, and then………………………………….

    Fibonacci Series :

    1932 low to 1966 high = 34 years

    1966 to 1987 = 21 years

    1987 to 2000 = 13 years

    2000 to 2008 = 8 years

    2008 to 2013 = 5 years

    We are oscillating in the time fib series since 1932 low. And if history is of any guide, the next peak should come mid to late 2012 and this later peak should form a negative divergence with the March top.

  94. JRW III

    exec

    You can see #15 is late March or April

  95. exec

    JR/Pullback,
     
    Wow…..you called that….:-)

  96. exec

    JR,
     
    However, it never ceases to amaze me the amount of BS and rabbits they can pull out of their hats to keep the market rising.

  97. sagemm1

    Phil/BKS
     
    would you sell Feb calls against the long position in anticipation of the dump before the fed auctions next week?
    I was looking at the Feb 12 BKS calls@1.10-1.15

  98. peedlew99

     Seeing a funny anomaly in some options I trade.  I’ve been selling premium of NXPI for over a year.  Today stock is up over 1% but the calls are down and the puts are up for Feb options.
     
    haven’t seen that before, seemed interesting.

  99. JRW III

    Great chart from Mr BachNut:

    Attachments
    Divergences between SPX and NYMO.png
  100. rustle123

    Funny or Die did a mock GOP debate that’s hilarious.  Mike Tyson is Herman Cain and really good.  Also, make sure you watch the Obama response to it at the end:
     
    http://news.yahoo.com/cyber-debate-parody-funny-or-die/

  101. sagemm1

    NAS is flying comparatively speaking might have to add some more puts

  102. malsg

    So what your hinting at is JR,  the world ends around December …..  I can see it now.  CNBC … the world is ending today … whats the trade?
    :-)

  103. jrod0725

    Hi Phil, do you think we’ll get a bounce on MA? I missed the $2 entry. Thanks

  104. sagemm1

    JRW / future technicals
     
    Out of curiousity do you have any charts from the last 7-9 period it lookls like in 2008ish to see how closely reality was to chart predictions at the time

  105. NF**X

    NFLX – Jeez. On another day with no rational reason for popping – and a day PD calls them criminals (perhaps) – I hate them even more. However, there’s no drop in them on such a day that would inhibit unbridled put selling all day. All f-ing day. I feel like a whore.

  106. NF**X

    NFLX – It’s disgusting. I’m at the 85 ws now with house money just 2 1/2 hours out.

  107. NF**X

    NFLX – Sorry. Just to be clear, PD, at this level after cashing at 77.5, 80 and 82.5. Now with tight stop to lock in gains. I never even SAID stop before I met ya.

  108. terrapin22

    Pharm – do u know anything on ANIK or CPIX?

  109. zeroxzero

     Maybe you should change your handle to CM**G, Nettie! :)

  110. cwan120

    JRW,
    We’ve got #13 already, right?  Remember you called 1266 as the top in December?  That seemed to be #13.  If so, what level and time frame will be #14?

  111. JRW III

    sagemm1/ Chart
     

    The chart does cover 2007 and 2008. Here is the full chart:

  112. cwan120

    IRA Hedge / Phil: I need a little clarification: You said: "IRA hedge/Cwan – I’d go for the long DIA puts (3/31s above) over the weekend and then sell Jan puts and roll up and back in time if we are still up next Wednesday morning."
     
    Selling puts require full cash margin in IRA, so, if the market does go higher next week, what can we sell to finance the roll?

  113. Phil

    I love the Geiko commercial with the pig that says wheee while the market drops!  

    VIX at 20 has always been a good time to go long.  VXX is at $31.63 so the next week $32/33 bull call spread at .30 is a fun way to play, selling the next week $30 puts for .35 for a .05 credit on the $1 spread and you only get burned if the markets are heading up and everything is great so a nice hedge to generally bullish positions.  

    Chasing/Beau – Too many variables but the rule of thumb is don’t pay more than the net of the trade but, if the trade is cheaper and nothing has changed – those are often the ones you DO want.  If your average entry is $1 and you only enter trades where you get a .10 better entry than I mention – then that random assortment of trades is 10% better right from the start.  Going the other way and chasing dimes, you are at a 10% disadvantage.  Which side of the 20% spread would you want to be on?  

    BKS/Sage – No as I think it’s outside the influence of the markets at the moment and more driven by news but that’s me.  A conservative play would be to very happily sell the calls and protect the profits.  

    NXP/Peedle – Might be something to do with this:  

    EINDHOVEN, NETHERLANDS--(Marketwire -01/03/12)- NXP Semiconductors N.V. (NASDAQ: NXPI - News) announced today that its wholly-owned subsidiary, NXP B.V. (the "NXP Subsidiary"), filed a Form 15F with the U.S. Securities and Exchange Commission (the "SEC") with the intention of voluntarily terminating the duty that the NXP Subsidiary has to file reports in accordance with section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") in relation to its outstanding Euro-denominated Floating Rate Senior Secured Notes due 2013, U.S. Dollar-denominated Floating Rate Senior Secured Notes due 2013, 85/8% Senior Notes due 2015 and 9 1/2% Senior Notes due 2015 (collectively, the "Notes").

    Some people think it’s a good thing but not a lot of people are going to pay premium to speculate long when it may be a sign of problems somewhere and, of course, some people are buying puts to hedge their bets.  

    Charts/JRW – Do all your charts end in a wipeout?  Very depressing…

    Dollar right on the 80.60 line – not good if they poke over.  RUT blew 750, Dow (/YM) gave us yet another entry at 12,350 and yet another nice dip – it’s like old faithful this week!  

    MA/Jrod – If not, we’ll find another one to short .  As it is we’re right on schedule, hitting the high of the day on the 2 Fed doves and now comes the profit taking into the weekend but Monday they might jack up the futures again.   

    NFLX/NF – Just walk away!  More to the point, on the same way Time Warner refuses to give discounts on DVDs for rental AND double the waiting period for rental distribution.  Just more suckers biting on the stock this year but, like all fools and their money – they will soon be parted.  

    Funny or die/Rustle – Must have been the wrong link, this seems to be the actual debate except the candidates make more sense.  Larry King is kick-ass and the guy playing Bachman’s wife too.  

  114. randers1

    Phil,
    Is CSTR low enough (41.8 ) to like here?
    Earnings Feb 2. PE 13
    Sell Feb 40 puts @ 2.50
    Buy 40/45 BCS @ 2.3
    I also found a tea place with an Amazon local deal that just expired.
    http://www.espemporium.com/

  115. sagemm1

    JRW / chart 
    Thanks but I was looking for the guess of where we were going vs. how it really panned out back 3 years ago…if you were looking at this same chart to use as an overlay then looking at today’s fundementals vs that time to try to add a better conviction that we may see the number 20 position in what looks like early 2013. If you do not have or too much trouble no problem…I just like to trade on technicals, fundementals and of course gut.

  116. NF**X

    Fools – Indeed. I am scribing from a “business meeting” in a bar after all. Lol. All good. I know not to risk actual losses on these geeks. Walking. Thanks, brother.

  117. rainman

    GLW seeing some love since 1:28

  118. JRW III

    sagemm1
     

    A break above SPX 1325 invalidates the projection !! 

  119. JRW III

    BTW trend line support at IWM 74.76 !!

  120. JRW III

    All in TNA again !!

  121. JRW III

    Phil / Depressing

    Well, technically we did break to the upside !!  8-)

  122. escohen5

    lflan — AAPL pinning 425?

  123. peedlew99

     THANKS PHIL!

  124. barfinger

    Cwan: generally with strangles I try to have approximate balance between the short puts and calls. I tend to sell calls if it aids my balance and then, I usually look for more TLT positions when Phil starts bringing it up at 121 or 122. I force the puts in there when the time is right or I am overbalanced with calls. With puts, I am looking at a reasonable path in time and price that gets me to my 112 target for ownership. Sorry, it’s not more evolved than that.

  125. jmm1951

    cwan120/IRA selling puts
     
    Yes, that is the problem with an IRA, but if you sell puts on DIA or SPY you can reduce the margin a lot by making the short put a bull put spread by buying puts about 30% lower than the ones you sell for virtually nothing and reducing the cash margin requirement by 70%.

  126. scottmi

    Gold/Phil – you have said on several occasions recently that you like gold at $1200, but not here.. 1200 seems very arbitrary to me. i don’t see where there is any particular support there, but i am really trying to understand this. What calculations or how are you arriving at 1200 as a ‘value’ number? Thanks.

  127. Phil

    IRA/Cwan – Now why would you sell DIA puts as a downside hedge?  It’s buying the 3/31 puts first and THEN, MAYBE selling Jan puts to COVER.   If the margin of the $3-5 spread is an issue, then you are too invested with not enough margin.  

    NFLX/NF – Earnings are 1/25 so you can sell 5 Jan $90s for $3.50 ($1,750) and buy 3 March $100s for $6.60 ($1,980) for net $230 on the spread.  The March calls should hold up well ahead of earnings and hopefully the Jans expire worthless and you cash out a head of time but, if NFLX shoots up, you can just add on long call and roll the 5 Jans to the Feb $110s, which are now $3 for even or better and then you are in a $10 spread into earnings that cost very little.  

    12:45 PM Europe gives up sizable early gains as investors "sell the news" following the positive NFP report. Stoxx 50 -0.9%, Germany-0.6%, France -0.3%, Italy -0.9%, Spain -0.6%, U.K. +0.4%. After big gains Monday and Tuesday, the Stoxx 50 closes down a hair for the week. The week’s big winner is Germany, +2.7% - its export machine loving the plunging euro

    See, all FIXED!  They had a meeting and resolved to have another meeting:  Following a meeting in Paris, Merkel, Sarkozy, and Monti issue a statement announcing another summit between the three, this one in Rome on Jan. 20. Sarkzoy: Italy and France have identical views on solving the crisis.

    1:00 PM On the hour: Dow -0.32%. 10-yr +0.25%. Euro -0.53% vs. dollar. Crude -0.63% to $101.17. Gold -0.15% to $1617.75. 

    2:00 PM On the hour: Dow -0.21%. 10-yr +0.25%. Euro -0.52% vs. dollar. Crude -0.49% to $101.31. Gold -0.08% to $1618.75.

    More bad data to ignore!  The ECRI’s weekly gauge of U.S. future economic activity falls to 120.2 for the last week of 2011 from 120.7 previously. The growth rate slips to -8.2% from -7.6%, the lowest level in 8 weeks. (fulldata set in Excel)

    Oil prices slip lower as European concerns outweigh more saber-rattling by Iran about maneuvers in the Straights of Hormuz. Analysts say the market is starting to discount how much of a spike in prices a show of force by Iran would actually cause. Brent crude -0.4%to 112.27, WTI crude -0.8% to 100.99.

    An eye-catching chart shows the hiring of delivery workers spiking every December, then fading quickly. "The BLS once again looks to have failed to properly adjust for the seasonal hiring of holiday couriers," RBC&nb… [This year] 42K jobs such were added, so expect "about the same number [to] fall out next month. Accounting for this anomaly, today’s +212K [private sector payroll gain] loses a bit of its luster." 

    Looking at the composition of job gains – employment pickups in transportation and warehousing as well as the hotel and restaurant sectors – Diane Swonk curiously suggests it was companies, not consumers, picking up holiday spending which drove the payroll increases.

    Mostly a whole lot of nothing is Caroline Baum’s assessment of the Fed’s decision to publish its interest rate forecasts. The Fed’s forecasts may be more important than others, but they certainly aren’t any better. What happens when it’s forced to change policy because things aren’t unfolding as expected? "Goodbye, certainty; hello volatility."  - Good point.  

    People are cutting back on everything:  Imperial Sugar (IPSU -5.4%) gets hit after its Q4 beats on revenue but misses on a per share basis. Losses widened due to impairment charges, continuing high costs for raw and refined sugar and a 27% drop in the refined-sugar processor’s sales volume

    Alcoa (AA -2.7%) is selling off after announcing arestructuring plan meant to cope with a weak demand/pricing environment, and is taking some other aluminum makers down with it.NOR -5.6%ACH -3%AWC -2.6%Dahlman Rose (Buy) thinks Alcoa’s move will help stabilize aluminum prices; other aluminum producers have also been cutting output. (previously)

    Sabrient Systems reveals its “Baker’s Dozen” list of 13 stocks to buy and hold through the calendar year: STXWNROCN,WPIUTHRCLDGSMDANAGCODXPEKROURIASCA. Sabrient’s lists have easily outperformed the S&P in each of the past three years

    Apollo Group’s (APOL +5.9%first growth in new enrollments in at least a year shoots shares higher and propels other major for-profit education companies: EDMC +2.7%DV +6.1%,WPO +1.2%STRA +1.4%BPI +2.6%.

    Insider Monkey ferrets out 7 stocks that are rated Buys or better by analysts and claim dividend yields of over 10%, as it keeps the basic formula in mind that undervalued company plus high dividends equals "incredible upside potential." Picks to click: AGNC,EXGHTSMFANLYNRGY

  128. cwan120

    IRA short puts / JMM:
    Good idea!  Since you mentioned it, now I recall you shared an example of selling bull put spreads where the log leg is bought for $0.01.  I’ll keep that in mind next time.
     
    In fact, I am thinking of trading my IRA account a little more actively that before.  The reason was: Near the end of December, I looked over my wash sell records of my regular (non-IRA) accounts, and discovered that I had some losses accumulated over quite some years that I could not take due to wash sell rules.  I had to close some positions before the end of the year in order to take those losses for the tax year.  In an IRA account, this is not a problem.

  129. Phil

    Oil with a nice .50 pop of $101 that time.  NYMEX closes in 10 mins so maybe $102.50 if they push hard.  Dollar 81.57, gold $1,618. 

  130. cwan120

    IRA hedge / Phil: Ouch!  My bad!!  I thought it was buying DIA calls!!!  If that were the case, selling puts wouldn’t make sense.  Fortunately, my trade was correct.
     
    What the hell was I thinking when I asked the question???
    Pharm: Is there a drug to fix that kind of brain problem? :)

  131. Phil

    GLW/Rain – They announced "Gorrilla Glass 2" today. We’ve loved them since below $10 but bailed at $20, now interesting again at $13.50.  GLW is a LONG term trade but good potential for a big move so I like selling 2014 $12 puts for $2.35 and buying the 2013 $10/15 bull call spread for $2.85 for net .50 on the $5 spread that’s $3.50 in the money to start (up 600%) so you can only blow massive gains from here – even a flatline is a huge winner!   TOS says ordinary margin on the short puts is net $1.20 – pretty reasonable…

    So much for oil – someone is very happy to sell at $101.60-70 range, big volume spike and too late now. I was really hoping for more so we’d have a relatively safe short but not happy about $101.50 into the weekend. 

    You are welcome Peedle!  

    Gold/Scott – They have a proper base of $800 and I am generously giving them 50% to allow for inflation and overall global nervousness from a Fundamental perspective but I don’t know what kind of chart you look at that doesn’t show you support at $1,200 when they spent the better part of Nov ’09 – Aug 2010 around that level before spiking up 50% to $1,800 and then pulling back $200 after overshooting $120, which is 20% of the $600 proper run and now down $200, which is a 33% retrace so double that and around $1,400 is your expected Fib pullback anyway and I’ll like them closer to $1,200 but probably $1,250 is where I’d dip my toes in.  

    Brain problems/Cwan – You have to find something that is engrossing but fun.  For me it’s skiing, poker and cooking.  Has to be something that takes up all of your attention so you don’t drift back to thinking about what you spend the other 16 hours a day thinking about.  Most nights, I look forward to spending time putting a dinner together – it’s a great break for me after the markets.  I just went skiing and that is my favorite thing but, if I lived near a casino, I’d play a lot more poker at nights -since I don’t sleep much anyway.   

  132. deano

     MF Global inquiry tours to the CME – now this is getting really ugly – and mainstream media coverage as well:
    http://dealbook.nytimes.com/2012/01/05/mf-global-inquiry-turns-to-its-primary-regulator/?ref=business

  133. SellPremium

    Pharm-  What are you holding these days?  Any thoughts on HGSI?
    Happy New Year and best wishes for a prosperous 2012 to everyone.

  134. jmm1951

    cwan/IRA
     
    However I would not get into too many spreads to save margin in an IRA, or else you might find yourself overleveraged in the event of the market collapse that is arranged by our financier friends for our entertainment every so often like the Olympics or the World Cup.

  135. scottmi

    Gold/Phil - that does help.  i’ll be looking over the charts with the breadth of considerations you mentioned.. thanks!

  136. jmm1951

    " I just went skiing and that is my favorite thing but, if I lived near a casino, I’d play a lot more poker at nights -since I don’t sleep much anyway. "

    I am not a gambling addict or anything, (in spite of my interest in this site!) but I have just moved to a new apartment at the beach in Puerto Plata where there is a casino onsite less than 100 yards from my apartment. I don’t think they have poker, but I will check it out.  They are open 4pm to 4am only.
     

  137. danny3399

    What do you guys think is the best way to hedge an overall portfolio in an IRA is though. It seems like in the past with some of the hedges PD has used he sold out of the money spy puts and used the premium to purchase a bull call spread on SDS. In an IRA account you would have to use full margin for the sold puts. Would this still be a smart strategy. 

  138. charliesurf

    Pharm – I got out of YMI after daytrading around a core position. Just too much manipulation. The bid & ask they show on level II are just phantasie numbers. For example: Attempted a short position on the way down recently 1 cent below the bid and got no fill !! Before a sold a long position (10K shares) at the bid, and it was filled in 26 lots over ~ 10 min, including 1 (!!!) share being filled at one time. I am trading with TDAmeritrade over a decade now, and their MM routing and price discovery seems to be getting worse and worse every year. But YMI is really the king of nonsense…By the way, I have been trading (small-cap) bio-tech for awhile now with good sucess, but his is not worth it.
    I know Phil recommends TOS, which I use as part of TDA. Any suggestions by the pros here ?

  139. scottmi

    Energy – Forbes’ Josh Wolfe interviews Dr Arun Majumdar, the head of ARPA’s erergy research division.

  140. exec

    JR/Target?

  141. kevinb63v

     Phil,
      In light of your reiterated recommendation of HOV as a LONG TERM pick, what would you do with 20 JAN 12 Sold $2.50 Puts? I started with $5 Puts and went to the $2.50 as it was about the same money to get more shares. Roll to the 2014 $2 or $1 Puts? I wouldn’t mind accumulating several thousands of  shares and holding them for several years as they seem to be recovering slowly as you have been predicting.

  142. revtodd64

     F – Now here is why I love discount buy-writes.  On Oct. 19, Phil recommended buying Ford at $11.73, selling the $10 puts and calls for $4.40 .  Today F climbed back from the dumps and is at $11.74.  I bought 500 shares and entered the trade, and now I am up $400 on time decay on the puts and calls, as F is basically nowhere after a big drop.  Nice call Phil.  You may make a patient, long-term trader out of me yet.

  143. barfinger

    CNBC just showed an AA chart with a descending triangle squeezy thing. Sound was off so I missed the point.

  144. revtodd64

     AA – Marketwatch is liking AA right now.
    http://www.marketwatch.com/story/buy-alcoa-on-the-dip-before-earnings-2012-01-06?dist=countdown
    Phil, I held those sold puts (Jan $11) from the summer and it looks like it could be worth holding them to expiration.

  145. jmm1951

    danny/IRA
     
    Same as above, you could sell the out of the money SPY puts in a spread to reduce the margin. Or you could sell IN the money SPY puts and use the proceeds to buy out of the money SPY puts in a ratio spread, thus creating a bull put spread. If SPY goes up, then you can buy back the short puts and sell even further out of the money SPY puts thus creating a bear put spread.
     
    Presumably you could also apply the same principle in reverse by selling in the money calls on a triple leveraged fund and buying a greater number of lower priced calls out of the money calls to complete  a RATIO bull call spread, and then finance that by selling puts on the same triple leveraged short fund. If the portfolio goes down, then your short fund hedges skyrocket, but if the market goes up enough the worst case is that you have to buy the short fund cheaply.

  146. etradingsignals

    Phil:
    I have a AAPL 2013 330/400 BCS (bought for 33.50 several months back) paid for with a Jan 2012 250 put sale @ 10. It has been very profitable. Now that my put is going to expire this month, would you advise selling any other puts?
    Would advice me to move the BCS to a different spread? Thanks for your advice.

  147. zeroxzero

     Phil:  If you like to ski, I have a place out west with actual snow.  I don’t rent it, nor live closer than 2000 miles from it.  A house, not a condo, 8.650 ft. altitude.

  148. stjeanluc

    FAS Strangle – I will be closing my call side soon as we might be correcting a bit. The put side will expire worthless. Not a great trade, but we might still be OK today after all. 

  149. stjeanluc

    FAS Strangle – Closed the 69 calls for 0.68. A small loss, but it was much worse earlier and the the put will make the day… 

  150. angelcur

    zero i like to ski!

  151. pat_swap

    Phil,
    Anything you want to add for the weekend? USO puts / QQQ Puts? What’s your take for Monday?
    thanks

  152. Savi

    stj—closed the call side a bit too early but put side made up for most of the loss-
    thanks

  153. scottmi

    Oil – could use a jabo cheer for oil..

  154. stjeanluc

    Cool Savi… Looks like it’s getting even better now, but I would rather be safe than greedy! We really got lucky at the end! But another productive day in any case.

  155. barfinger

    Jmm: those are interesting ideas on SPY. For the non-expert spreaders (such as myself), could you give an example?

  156. sparky123

    Hey Zero I like to ski too!

  157. angelcur

    i think oil deserves a "YABO "cheer the way its been brass poling it the last few weeks

  158. Savi

    stj—I have not closed many positions this late in the day --do you normally wait for the last 10 minutes to decide to roll or not on these strangles?
    TIA

  159. Phil

    You’re welcome Scott.  

    Gambling/JMM – I don’t consider poker gambling per se (although maybe that means I’m an addict in denial).  When I got back from Vegas, Tina asked me why there was nothing on the AMEX and I told her the whole trip was paid for with poker winnings (and I still had plenty of cash).  As I said yesterday, I’m good enough to be in the money in most tournaments I enter and I can pick up money in a cash game but I don’t like to take money from people who have less than me so I prefer to play tournaments where the people who put money in already lost it.  Anyway, it’s certainly not about the money (usually $100 to enter, possibly win up to $2-5,000 depending on how many players), win or lose, I just find it to be a very entertaining game that I can relax and enjoy playing for hours.  What I need to do is spend 10,000 hours playing multi-day tournaments and that’s something I won’t really be able to do until I retire but I’m pretty confident it won’t be a waste of my time.  

    IRA hedge/Danny – See yesterday’s discussion on Mattress Plays.  You take a long DIA (or SPY) put and, when you get a nice dip or you think the market is going up, you can sell a short put (or partial) for income.  The margin is just the spread when you sell the short put but usually not more than $5.  

    Sell-off into the close – kind of boring when you can predict the action a day ahead…

    HOV/Kevin – Those are just .85 and you can roll them to 2x the 2013 $1.50 puts at .60 and pick up .35 more for your trouble and your put-to price is hardly changed.  You could be more aggressive and go for the 2014 $2 puts but, at just $1.25, I’d rather do the 2013 $2 puts (.95) and roll if forced as you have potential to do it twice and get $1.80, which is 50% more over 2 years.  Still, I’d start by the more conservative 2x roll lower and, if HOV goes over $2, then you can buy some 2014 $2/3 spreads (now .15) so you don’t feel like you’re missing anything.  

    F/Rev – Good job.  You gotta love the buy/writes…  I agree on AA, nothing wrong with owning them long-term anyway.  

    AA/Barf – They want to chase people out ahead of earnings, throwing the book at them for 2 days now.  

    Well that was a dull finish to a week that went literally nowhere since Tuesday’s open.  

    Have a great weekend everyone – I’ll be around!  

  160. stjeanluc

    FAS / Savi – Last Friday I closed it at 1:00 PM because it was showing a 50% profit. But today the calls were underwater almost from the start so it’s best to squeeze them as much as you can before you roll and you could always get lucky with a move in your direction at the last minute like today…  

  161. Phil

    AAPL/Etrad – I think they are too high in a dangerous market to sell puts.  I love AAPL.  I think AAPL will go to $500, but I also think the market will drop 20% and take AAPL with it and THAT’s when I will want to sell AAPL puts.  Why not just take your massive profits and relax?  When AAPL goes on sale, you know you are a fan and you can buy it.  Otherwise is your strategy to just keep spinning the chamber on the gun and pulling the trigger until it finally goes off?  If it makes you feel better to gamble on AAPL, why not buy 5 March $425/450 bull call spreads for $10 ($5,000) and sell one July $350 put for $12.50 ($1,250) and 2 Feb $450 calls for $6.25 ($1,350) for net $2,400 on the $12,500 spread.  If  AAPL does go over $450 on earnings, you will be ahead $10,100 on the bull call spread before you owe your 2 callers a penny so anything under $400 is profit and even if they disappoint, there’s a lot of ways to salvage the spread.  

    House/ZZ – Where?   I have a place in Tahoe and never go there either (too much hassle with the kids and changing planes).  Same reason I haven’t been to Aspen in 10 years but we still go to Keystone/Vail as it’s an easy shot to Denver and not a big ride to the mountains.  I doubt I will be able to take you up on it as I’m going to be in Build a Berkshire Workshop mode for the rest of the Winter but thanks!  

    Weekend/Pat – Sorry, no last minute adds but we had plenty of bear bets for the weekend.  I think we should hold up Monday but it’s Tuesday when there should be some bad news to scare people into Treasuries and for sure on Wednesday as a failed US 10-year auction is a disaster the Fed is certainly not willing to risk.  

    Skiing/All – I would love to get together for a Seminar in Aspen.  They have the Comedy Arts Festival in late Feb and the conditions are fantastic that time of year.  We used to go every year pre-kids.  The only problem is, there might not be a lot of venue space available due to the Festival but, on the other hand, there are probably a ton of rooms that are set up for something at night that are open during the day.  Not this year, of course but if we had enough skiers who wanted to do it – I’d be up for that.  

  162. stjeanluc

    Phil, here is the recap of the 25KP portfolio trades and position:

    The yellow options are part of a spread. Some of these options are thinly traded so the day to day tracking won’t mean much as you know. The spreadsheet is up to date for all our trades. 

    The AAPL 50k is up almost 50%. This is really impressive work by lflan!

  163. rdn4evr

     Good format STJ, really easy to follow.  I don’t know how you find time to track all these things!
    Separately, VIX fell below 21 today, absolutely nothing out there could go wrong, now could it?

  164. angelcur

    what about Jackson Hole?

  165. gardling

    I’m sorry to repeat a question but I probably asked it too early Friday morning (Thursdays article) for anyone to read it.

    Can anyone recommend an online service for transferring money from the US to a foreign bank ?  In my case I need to transfer money to Sweden. Any help would be appreciated.
    Thanks
     

  166. lflantheman

    Good evening!  I missed most of the trading day while attending to other matters, but looks like it was sort of a ho hum day anyway.  I hope you all had some success trading today.  I’m going skiing (again!) and I’ll see you all on Monday.  Have a great weekend!

  167. NF**X

    Poker – Yep, prob wouldn’t want you at my tourney table, PD. If you’re regularly in the money, you’re very good and I can tell you’re tight-aggressive. Not so hard to read but very hard to play against.

    Not sure if the game has moved past Dan Harrington in the last few years – probably not entirely – but his collection on NL tourney play is great. I was about to give my set away. Holler if you want them. There is, tho, an internet-poker effect now that makes the young guns the most formidable – and not just because of their endurance. They have changed some precepts – and they’ve all done 50,000 hours in the span of 2500. The old cats play online too – but they’ll never catch-up again. Imagine how long an under what circumstances Brunson logged his 10,000 hours.

    My experience, which probably is similar to yours – tho I’m not a complete math player – says that you can’t make final tables or win tourneys without being in some all-in 50-50 races – and playing position over cards. A fun online training tool is to cover your own cards with a sticky note – and just play your position and your opponents. Hard, but killer training for getting over the hump.

  168. barfinger

    I have been in a buy/write for XLF for several months. The 13 calls are headed for exercise, which is OK – the thing paid off just fine. If we still expect QE3 or some such trickery, maybe I should roll the calls out and sell new puts. Phil, what would you advise?
     
    I also entered SVU and sold the always-likely-to-be-exercised 2013 5 calls (and puts). Well, here’s another trade that is fine, but I was thinking to roll up the calls where there is some premium again. I do not benefit any more from up movement in the stock since the calls are deep in the money. Phil? any thoughts there?

  169. zipla

    Hi Phil,

    An out of market question about how to properly manage buy writes in a long term investment portfolio.
    I’m using Ford as the example — although it looks any advice you give will likely apply to some of my other acquisitions too.
    I bought 500 shares of F at $11.02 in November, selling Jan 13 $10 puts (1.58) and calls (1.92) for net entry at 7.52/8.08.
    With the stock at $11.56, the call is about 2.62 ( down 36%), and with the ex-div day late January,it would seem to me to be in danger of being assigned if the stock is north of, I’m figuring, 11.92.
    Now I think I get the idea that I’m getting a .90 profit or 8% if called away and I can just start over. BUT are there other ways of playing this to take better advantage of the premium sold, and making sure of not being called away before getting dividends.
    I thought buying far out in time — 2013 — made a difference, and lowered the chance of being called away, but learned the hard way with AGNC in December that this is not the case. Ugh!!! Got called away early morning ex-div day and understood there and then with startling clarity your point about there not being much point or percentage in selling premium on REITs — as there isn’t much of it around.
    Anyway, I’d be grateful if you could let me know if there are ways to play these situations as I’ve been accumulating at the best low costs and want to hold on to what I’ve got the best way possible.

    Thanks
     

  170. Canuck

    Phil/GLL
     
    seems to be some discussion today about this trade going sideways.  What if we sold a Jan 19c against the 18c   and turned it into a bcs.  My cost is $1.00 for the 18c and I did not dd.  If I sold the Jan 19c for 0.25, I recoup 25% of my cost and give myself 0.25 upside after the adjustment.   Of course, left alone, it could pop up over $19, but that seems more like hope.  Your thoughts?

  171. ricpar

    Hi Phil,
     
    A new member here and have really enjoyed watching the member chat this week, learning and doing my first trades. I am a commercial casualty insurance broker in CA and specialize in selling insurance to contractors and related businesses.
     
    Doing my new member homework I read about your ”Build a Berkshire” project and like it a lot. The 10% to charity is a prime idea.
     
    With a substantial loss of revenue from a shrinking client base my capitol to invest is limited. Hoping PSW will help remedy that.
     
    One idea came to me when you mentioned check cashing.
     
    Insurance Premium Financing for small businesses is a racket with huge returns and limited risk. The risk is limited because the lender gets 20% down and has the power to re-poses the insurance premium if the client does not pay.
     
     Example $100,000 premium for a 1 year liability insurance policy.
     

    In this low interest rate environment interest rates go from 5.5% to 15% and higher. ( Saw 24.9% 9 months ago.)
    The lender gets 15% to 20% down and pays the insurance company the $100K.
    The client makes monthly or quarterly payments.
    If the client is late or does not pay the finance company sends the legal notice and a 10 day cancelation notice goes out form the insurance company. .
    The insurance company refunds the balance to the finance company and they return what is left of the deposit to the business owner.  
    Insurance brokers can get a piece of the action by selling the business owner a higher interest rate. The majority of brokers take advantage of the higher rates.  Clients are stuck because financing is purchased after the insurance sale and too late for the business to go elsewhere for that policy year.

     
    Our firm feels differently and is large enough to negotiated lower rates which we pass on to our customers.  When a business is struggling to meet their cash flow it pisses me off to see insurance broker’s pickup another 5% above their normal 10% commission at the clients expense. Would love to see some tough competition for these sharks and a finance company that cuts the broker out and goes direct to the business owner.
     
    Worth a look any way.
     
    Phil, your giving me the confidence I need to get back in the market and replenish my retirement account. I have a lot to learn but can see how to get there. .  

  172. biodieselchris

    I like this movement in HOV!

  173. roro

    Phil………when i wrote the Nighshift thing it really was intended as a compliment.
     
    If it came across as being edgy  you can attribute that to my IrishCatholic/German Protestant/English whatever upbringing.
     
    You are a brilliant thinker/writer/entrepreneur/social contemporary, and I love reading your prolific work.
     
    Thank you again.

  174. diamond

    A Historical Cycle Bodes Ill For the Markets – NYTimes.com
     
    Charts (from above): Similar Cycles for Stocks – NYTimes.com

  175. diamond

    Job creators working hard:
     
    "Trying to convince workers in Canada to accept a pay cut, Caterpillar (CAT) is citing lower wages … in the U.S., as wage and benefit costs at its rail equipment plant in Illinois are less than half those at its locomotive assembly plant in Ontario. U.S. manufacturing is becoming more competitive, with manufacturing labor costs per unit of output now 13% below decade-ago levels."

  176. dclark41

    Phil
    Great idea about Aspen. We won’t be going west this year because of other commitments, but next year sounds great!

  177. sparky123

    Snowmass has  "something for everyone" kind of slopes. Also, you can’t beat Park City/Deer Valley/Canyons during Sundance if you can get a place to stay. The slopes are deserted during the festival. 

  178. peedlew99

     I’m in on the ski trip

  179. stjeanluc

    Barry’s weekly recap:

    Succinct summation of week’s events:

    Positives:

    1) Dec Payrolls surprise to upside with 3rd 200kish print of yr, unemployment rate falls to 8.5% although in part due to another drop in labor force

    2) Initial Jobless Claims 4 week avg drops to lowest since June ’08

    3) US ISM mfr’g rises to best since June

    4) US vehicle sales hang in with estimates

    5) Mfr’g PMI in China, India, Australia, Taiwan and UK all rise from Nov

    6) German unemployment rate falls to lowest since reunification in ’91 to 6.8%

    7) UK and Indian PMI services rises to 5 month high and China’s jumps back over 50

    8) Euro zone CPI moderates to 2.8% from 3.0%

    9) Euro basis swap, US$ 3 mo LIBOR and euribor/ois spread all moderate as yr end funding stress eases

    10) Van Halen announces 2012 tour

    Negatives:

    1) Bond yields continue higher in Europe, Italian 10 yr yield at 5 1/2 week high

    2) Unicredit stock falls 38% after rights issue details are released. At what cost will the European banking system recap come to?

    3) German Nov factory orders fall more than expected

    4) EC economic confidence falls to lowest since Nov ’09

    5) US ISM services a touch light, employment component remains below 50 and doesn’t confirm jobs data pace of growth

    6) Refi apps fall 2.5% and purchases down by 9.6% even as mortgage rates fall to new low and the Fed’s Dudley still thinks that even lower rates is the magic solution

    7) US Dec retail sales below expectations and margins get clipped. 

  180. pakdog

    Let’s try that again!
    http://www.thefiscaltimes.com/Articles/2012/01/04/The-New-American-Dream-Rent-Dont-Buy.aspx#page1

    Here’s a good piece on the trend away from home ownership to renting as a financial and lifestyle decision perhaps most importantly economically for boomer retirees. The implications are significant and a great investment opportunity in distressed real estate in markets when boomers will be migrating over the next 15-20 years (assuming they can afford to retire before reaching 80).
    One thing I don’t like is it references studies that show home ownership as an investment subtantially lagging returns from stocks and bonds. Our savings rate is so abysmally low I don’t think many renters are realizing those gains. No savings, no investment returns. But if you own your house long enough you have a built-in savings program as your amortizing mortgage adds equity on top of the downpayment.
     
    Not arguing for owning over renting really, because there is something to be said for an investment made prudently, thriftily, and frugally in something like, say, a bank.
     
    http://www.youtube.com/watch?v=Lvn0fH3hgeU

  181. revtodd64

     What Works on Wall Street (WWWS) – I have been reading James O’Shaughnessy’s fine book that back-test various value and growth strategies over long histories.There is much wisdom worthy of weekend discussion, so I thought I would post a few tidbits worth sharing.
    WWWS has a good discussion on why at least 70 percent of mutual funds don’t beat "the market."  The really are not failing the market, just not as good as the S& P or whatever benchmark.  The S&P 500 and the DOW are really investing strategies.  The DOW strategy is simply this, invest in the 30 largest cap companies across wide sectors at all times, no matter what the economic conditions.  Russell does the same thing with small caps.  Having this basic discipline beats most funds because humans do not have the discipline to invest in the face of fear like a computer or index does.  (By the way, more funds beat the indexes than ever before because of the use of computers and indexing.)  The main message of the book is that using reliable, time-tested strategies and sticking to them when they are lagging does much better than most investors ever do.
    For example, Dogs of the Dow, is a simple strategy where simply investing in the 10 highest yielding stocks in the DOW every year makes 11.22 %, beating the index itself by 2% every year.  It makes sense because this will put money to work in the more beaten down DOW stocks, and a simple value/dividend strategy beats investing in the whole index.  
    He gives several ideas to tweak dividend strategies, adding a few favorite fundamental stock criteria, that produce 12-14% returns historically.  This is without the aid of selling puts and calls as part of the strategy.  This convinces me that selling puts and calls on solid dividend stocks, especially those that grow dividends for more than 10 years straight, is a great strategy that beats more risky strategies over time.  Beating 20% a year in an IRA just using dividend growers, selling calls and even cash secured puts when you can get 2% per month, seems doable on a regular basis.  
    For now that is my plan, adding a few buy-writes in my margin account, plus some small positions through BCS trades Phil recommends like SONC, OXY and BBY the past week.  (only about 10% of my margin account at most.)  I fore swear all short-term day trading and risky investment strategies until I prove to myself I can pound out 20 percent for a whole year in 2012.  I started selling covered calls in September 2008 (boy was that a blood bath to learn option strategies!)  If I had stuck with my strategy for 2009 – 2011, I made at least 20 percent every year on just my covered calls and short puts.  The problem is I lost money other places on greed and speculation.  I get the picture.  Lay a foundation and keep it simple.
    In the mean time I am delving more into WWWS, and going through the various value strategies.  I would be interested in what other PSW readers use to value stocks.  Do you like PE, Price to Sales, Price to cash flow?  Other fundamental criteria?  I will try to post a little bit each weekend if people are interested in discussing various fundamental indicators.  I would also be glad to discuss dividend strategies.  Anyone play around with FINVIZ?  What a great screener for checking out various indicators.  

  182. nicha

    revtodd – i would in interested in discussing what you learn from WWWS.

  183. diamond

    Mike Luckovich cartoon: Corporate cash

  184. pakdog

    rev – I’m interested too. I have a lot to learn but am thinking value investing is more of a mindset than a formula or set of formulas. Screening is used to reveal opportunites for further research. To me a low p/e, p/s, or p/b suggests there may be some value but you have to investigate further. Those kind of metrics applied to the wrong industry or company can cause a lot of pain. For example, the big shipping companies have looked like awesome bargains for some time but further research tells a different story. And the great value investors see the value that the numbers don’t necessarily reveal. A good example of this attitude, whether or not it works out, is this week’s pick of SONC which Phil eventually explained he liked more for it’s real estate in the long run than it’s burger business. For my part I’ve had too many misses, but my time here is making me a more sensible and disciplined investor.
     
    Thanks for the tip on FINVIZ. I look forward to checking it out further when I have some time. I’ve used Yahoo Finance for many years in spite of all the annoying ads. It’s a useful starting point, though, and gives a quick overview of a company’s business, and financial and stock perfomance. Eventually if I want to research further I end up at EDGAR reading through the company SEC filings.

  185. craigzooka

     @revtodd, I completely agree that 20-30% is very doable in an IRA.  That is what I am planning on demonstrating with the very low touch IRA portfolio.

  186. jmm1951

    rev/WWWS
     
    Sounds like it is worth getting that book. While I was looking it up on Amazon I also found another title that might be worth a look. It is called
    Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term
     
    I have not read it but what attracted me is that the price of the Kindle version is $0, so you can’t really go wrong at the price, and it may contain some interesting ideas. I have ordered it, but not yet looked at it.

  187. revtodd64

     jmm – I picked up Buy and Hedge at the same time I got the other book.  It is a fairly quick read and I would recommend it to PSW new members as a good hedging overview.  There are a few nice tricks of the trade for more experienced hedgers, so it is worth the Kindle price, though I think Phil could write a much better advanced book.  He makes better use of selling premium to actually hedge his hedges.  It is a good source of hedging strategies for IRAs where you can’t use margin in the same way for selling options.  The book filled in some blanks for me, so I would recommend a good skim.

  188. revtodd64

     Craig – I’m following your IRA portfolio with great interest.  I’m in VLO with you, though I’m staying more conservative for the moment.  Currently watching for entries in NUE, ITW, MDT, EMR.  I like these as solid dividend growers and I try to avoid any stocks that have earnings before expiration day.  I shoot for 3% a month on ATM calls.  I may also do some calls OTM about 3 months out of some stocks if I like market conditions and want capital gain and dividend potential.  I like your experiment and hope it goes well.  I started something similar about a year ago.  You can click on my user name and see what criteria I was using and some of my ideas from then.  I got swamped and it was too time consuming to keep up, so I let the regular blogging go.  I applaud you for taking the time and sharing your trades.

  189. zeroxzero

     Phil/Sparky:  Agree Park City/Canyons/Deer Valley.  My place isn’t up there, but even closer to the airport.  Access is everything for me; I started skiing there when I realized I could get on a NYC flight on a Friday night and be back in the office on Monday morning.  My sister was an Aspen instructor, and I only managed to get there a handful of times — the commuter plane assault landing into the Aspen airport being only one of it’s drawbacks.
     
    But I have no opinion on a seminar location, never having been to one.  I just like deep powder and dislike changing planes.

  190. kinkistyle

    revtodd: I always love to see you on this board, because I feel like we are skipping down the same road and falling into the same potholes (and sniffing the same flowers) along the way.    I also have been through the "trial by fire" and learned the harsh lessons of greed and fear more times than I care to admit.    But I feel like starting last year I finally started "growing up" financially, and learn to be a more prudent investor.   2011 was almost a turning point year for me because I finally realized in actual terms the power of selling premium in a market that remained completely unchanged on the year yet had a 300 point range.

  191. zeroxzero

    Oh, dear.   Maliki in Iraq is trashing the Sunni minority, pushed along by Iran’s desire to improve its geopolitical position in the Middle East through Shi’ite-dominated Iraq and its neighbor Syria, giving Iran friendly Mediterranean access, something the Persian empire gained and lost at various times in it’s history.  This is increasing ambient instability in the Middle East, as if  assorted "Arab Springs" weren’t enough.  And now Iran is fomenting the political circumscription and, from the look of it, slaughter of Iraq’s Sunni political establishment.
     
    Not that Iran is necessarily  "the bad guy;" it hasn’t invaded another country in over 200 years, and is a Shiite country in a Sunni Muslim world – the religious split is around 85/15, with Sunni majorities in Saudi Arabia, Yemen, Kuwait, Turkey, Pakistan, Afghanistan, Oman — majorities that are, by and large, circumscribing and attacking their Shia populations. The old saying applies: whether a gun is an offensive or defensive weapon depends which end of it you’re on.  
     
    Iran is also the subject of a covert war by the U.S., France, Britain and Israel [and who knows who else], aimed at Iran’s nuclear ambitions — whatever they are.  -- a campaign of assassinations of Iranian scientists, cyber warfare, attacks on military and missile installations, and, recently, the killing of an Iranian general.  Recently, there have appeared reports of a "son of Stuxnet" in a holding pattern within Iran centrifuges, waiting to be triggered.
     
    Russia apparently supports Iran in a "the enemy of your enemy is your friend" sense, since the rapid and radical Islamization of the "Stans" between the the Black and Caspian Seas, and in central Asia puts the Soviet Empire’s [sorry, "Russian Federation's] long-term prospects east of the Urals in serious doubt.  Actually, I have little doubt — there are quite arguably more Chinese than Russians in Siberia already, Russia’s population has dropped precipitously since 1989, now 142 Million, down another 2.3M since the 2002 census, with only Chechens, Armenians and Avars increasing in numbers, and average age up another 2 years since 2002.  And the history of Russia and Persia has rarely been a friendly one — the Russian Empire actually occupied Tabriz and a host of other Iranian cities at the end of the 19th century.  Eurasia is a crowded place.
     
    I have no political point, rather an economic one. Given the downward trajectory political stability in the Middle East,  a shift from oil to natural gas, renewables and conservation in the U.S. would be the most intelligent industrial stimulus program upon which Fed could lavish a QE3 — or maybe QE4, since cleaning up the mortgage mess with QE3 seems to be the buzz these days, also not a bad idea.   So Iranian machinations, offensive or defensive, and the Islamisation of Central Asia seem to be yet another brick in the wall of my entirely unsubstantiated hypothesis about a Westward shift in investment flows over the next decade.  Of course, the farther out you predict something, the more precise you can afford to be.  We’ll see.

  192. Savi

    with re to the 2nd annual PSW meeting—because Lvmoda  gave us his place and did all the set up the cost was very reasonable—I do not know how the cost will increase if we go elsewhere--but of course if we make tons of money on all these various portfolios  who cares what we spend to learn more from our Maharishi  :-)   —
    also Phil—based on your premise that market will be knocked down for the auctions next week, tue and wed should we consider going long /zb or the 10 yr—-be kind, no smack down please

  193. sparky123

    Zero,
    Colorado has some really great slopes, but Utah became our favorite when a Delta agent told us frankly "the odds of all of our skis making a flight change were slim to none."  

  194. sparky123

    ….that was after we spent two days in a condo with teenagers who flew in flip flops and checked their coats.

  195. diamond

    kinkistyle – "revtodd: I always love to see you on this board, because I feel like we are skipping down the same road and falling into the same potholes (and sniffing the same flowers) along the way."
     
    Not that there is anything wrong with that! ;-)

  196. jmm1951

    zerox/shift to natural gas
     
    Most of the taxis here in the Dominican Republic run on propane and I don’t think the operators are regretting it. More mileage for less money than the gasoline we get from that nice Mr.Chavez.

  197. dclark41

    revtodd
    Thank you for your contributions. Like you and Kinki I too grew up financially last year. I actually reviewed my holdings today and am enthused at what I reviewed. I still have a few biotech issues that I have to solve, but ultimately, I would like to have a dividend-driven portfolio made up of fundamentally solid stocks that I can sell puts and calls on. I might have 1000 hours towards my 10000 goal, but I still run a small business too. I look forward to reading more from your study.

  198. pstas

    Another list of good dividend payers/value plays:
     
    Dividend Champions a Rare Undervalued Opportunity
    http://www.gurufocus.com/news/157622/dividend-champions-a-rare-undervalued-opportunity

  199. roro

    i like your geo/pol reads zeroxzero, and right down my alley………….zxz………is that all right as short form for an address?

  200. zeroxzero

    Roro:   Any form of address is fine.  You should hear what my friends call me.
     
     I only comment on lines of thought that I don't read anywhere and which seem to have investment relevance.  I'm unemployed, so investing is more than an avocation.  Ideas are always sporadic.  I keep an informal collection of hypotheses-in-progress, which sometimes intertwine, and are often abandoned as dead ends. I find that a lot of economic and market commentary is naive in respect of the political realities underlying life on our planet, which can producing pricing anomalies. 

  201. zeroxzero

    Diamond/Seinfeld:  Very funny. The "skipping and sniffing" was a bit kinki. :)

  202. Pharmboy

    BMS on the move again….INHX for $2.5B.  Hep C is VERY hot and I was going to do a write up on them…..  VRTX next?

  203. Pharmboy

    I will go over comments/questions tomorrow.  Phil – did wordpress update?  I like the new feel in Firefox with it!

    TLT – I have been a believer when they were at $88….tell me that was wrong!  $88 to 120 was plenty.  I still see $130s in the future, but that move is not enough for me to play anymore…..

  204. kinkistyle

    What Has Worked/Revtodd:
     
    Just to follow up to your post, here is a very enlightening paper by the venerable fund, Tweedy, Browne, on "What has Worked in Investing":  http://www.tweedy.com/resources/library_docs/papers/WhatHasWorkedInInvesting.pdf
     
    It is basically 60-someodd pages of historical data and research backing up the success of these attributes:
     
    1.) Small Cap / No Debt
    2.) Low Price/Book
    3.) Low Price/Earnings
    4.) Low Price/Cash-flow
    5.) High Dividend Yield / Low Payout Ratio
    6.) Insider Buying
     
    Pretty much sounds like what Benjamin Graham and Warren Buffett have been espousing for decades.  Some of the attributes tend to occur in clusters i.e. stocks with High yields and low Price/CF also tend to be low P/B, P/E.  Also by their nature, they tend to be stocks that have had poor price recent price performance which of course leads to Insider Buying and they are most cognizant of their company's true value.
     
    It sounds easy, but putting it into practice is much more difficult as the best bargains tend to pop up when the world seems to be falling apart, and the very thought of buying stocks makes you want to throw up.   Which leads me to my next question:  Has anyone here every tried meditation or some sort of self-hypnosis therapy in order to control their emotions?    Many times value-investing feels akin to making free-throws or clutch-hitting — which is why I suppose momentum trading is so much more popular despite the proven success of value investing.

  205. droptimator

    I just love the manipulation, announcements on the weekends are so 2011:   http://www.marketwatch.com/story/qe-not-likely-now-given-data-feds-bullard-2012-01-07?link=MW_home_latest_news

  206. roro

    zeroxzero,
     
    my body clock must be adjusting itself to the 'nightshift' hours…..up at 0300 which i intend to make a routine for at least the next several months as i find myself in a position to really apply what i have learned and give a real shot at seeing where i can take the trading, especially more so since having found this mind rink to skate on.
     
    i really enjoy your writing and the way you connect the dots across the spectrum, and no, i am not looking for a boyfriend but there is a place on Hudson just below 13th called Bar and Books i used to visit on frequent trips to New York back in my living in Boston days. maybe you know it. you write like you would know a place like that if that makes sense.
     
    another place i used to hangout a lot was the Museum of Natural History
     
    i was working in design in those days and had clients like Barneys and Kate's Papery. the roro was a necessary  identity invention which i have kept………simple and different, noted quickly and remembered by the buyers…..my initials repeated 2x.
     
    there is roro in your handle too……..i kind of like zero for short form……..zxz is cool too………..not so formal as the long form, but that is also cool.
     
    thanks for your reply.

  207. stjeanluc

    Weekend update:

    http://www.philstockworld.com/2012/01/08/weekend-virtual-portfolio-update-182012/

    lflan, if you want to add comments to your moves this week, I just posted the list of trades and results. Fantastic week overall…

  208. stjeanluc

    Looks like looking for big dividend was the way to go in 2011:

    http://www.bespokeinvest.com/thinkbig/2012/1/6/2011-in-a-nutshell.html

  209. pstas

    Price increase- My business deals with L&W Supply, the distribution arm of USG- they have notified me of price increases effective 1/30/12 for ceiling panels products – up 5%;  steel studs- up 10%.  These components are primarily found in commercial/institutional structures as opposed to residential.
    No evidence this is demand driven as activity is still very slow. These are mfg. pass-thru's which are typically modified for competitive quotes. Cost push and margin repair is the word.
     

  210. stjeanluc

    What has worked / Rev – In my research, I have found that one of the best systems was the one based around the Price/Sales ratio. I had outlined the premises in a blog post:

    http://lemoyne-mappingthemarket.blogspot.com/2011/01/fundamentals-what-to-screen-for.html

    I list a couple of books that I read and used for the post. I did some screening using that with decent results last year but stopped due to time constraints.

  211. pstas

    ZXZ-
    I happen to agree with your "hypothesis about a Westward shift in investment flows over the next decade."

    While North America has its share of problems, they pale compared to the political turmoil, demographic headwinds and cultural constraints facing the other regions.
    Fundamentals will out.. 200+ years of freedom and democracy trumps the naysayers and doom and gloomers. If I recall correctly, Warren Buffet characterized his purchase of Burlington Northern RR as a long term bullish bet on America. Goodenuf for me.
    I am particularly encouraged by the yet not commonly accepted notion that North America can  become an energy powerhouse which will be a game changer. This will happen. Solar, wind, etc are here to stay but decades away from significant impact. Meanwhile, fundamentals of "right in our back yard" energy sources will , in the near term drive the economy in a positive direction.

  212. crussell14

    Phil
    is it time to roll the Jan VXX $32/35 BCS entered on 12/23 for $1.44, currently $0.76. The Jan $32 VXX can be rolled to Jan $30 for  $1.18 and paid for by selling the Jan $31 Put for $1.11 for net $.07 debit? what are your thoughts? Thanks

  213. wappler

    @stjeanluc, kallenjr,
    Please check your email – let's talk about the next steps for the options data project.

  214. stjeanluc

    Jeff Danziger

  215. pstas

    http://online.barrons.com/article/SB50001424052748703831604577131333978647796.html?mod=BOL_hps_mag#articleTabs_article%3D2
    ZXZ- this guy , at least partially, agrees with the premise:
    Do your expectations for equities follow the same idea of emerging markets versus developed markets?

    Very much so. Within our global multi-asset fund, one of the secular themes you will see is an allocation of capital to the faster-growing parts of the world. So we have a large investment in emerging-market equities within our equity allocations and our equity investments. Within our global multi-asset fund for this year, we had almost all of our equity exposure within the United States and emerging markets. And very little exposure to developed Asia and Europe—less than 6%.
     
     
    What about U.S. bonds?

    The U.S. bond market has very much benefited from a flight to quality–what [Pimco Co-CIO] Bill Gross calls the "cleanest dirty-shirt" phenomenon. While the U.S. debt levels are certainly high, financial markets have witnessed a shifting of investments away from European government bonds, away from some of the European, Asian and emerging equity markets and the U.S. bond market has been a beneficiary. So as long as risk aversion remains high—and our expectation is that, given the potential problems in Europe, risk aversion will remain high—the U.S. bond market will continue to benefit from this flight to quality.

  216. revtodd64

    Stjeanluc/ Chart on Dividend deciles performance in 2011.
     
     Interesting chart.  I'm keeping a dividend focus for my core holdings this year, however not necessarily on the top dividend payers.  Last year may have been a bit of an an anomaly for the highest decile generating the best overall return.  O'Shaughnessy notes that deciles 2-4 of dividend paying stocs generally outperform decile #1,with decile #3 having the best long-term performance.  So perhaps a good long-term strategy would be to focus on dividend paying stocks with the best price-to-sales ratio (I look forward to reading your article and research on that criteria) or stocks that consistently grow their dividends year-to-year may offer more stable returns.  My guess is that some of the REITS like NLY, which I do hold, are tipping performance on the top end.  I hope to read your article later in the week.

  217. zeroxzero

    pstas:  I have increased my allocation to Brazil considerably over the last year.  I bought Brazilian 5 year bonds yielding 9.5% some years ago, which have held up well, and am now scaling in to ARX Mellon, a long/short hedge fund that concentrates on Brazlian debt and equity and is quite well managed.  As I become more convinced as to the timing of my proposed shift in capital concentrations, I'll look harder at Canada and other LATAM countries, but I'm not really increasing my basic materials positions right now, preferring domestic companies.  Even Mexico might hit my radar screen at some point, but I know little about them.

  218. jmm1951

    Dividend dilemma
     
    In the US companies that pay dividends higher than about 3% are regarded as suspect, as they may be forsaking growth in favor  of dividend payouts. The mortgage REITs are the supreme example of this, paying out 90% in dividends and expanding by selling new stock, not by reinvesting profits.
     
    Companies overseas in places like Europe and Brazil seem to pay slightly higher dividends, and one might look at something like EWZ which pays a decent yield, though this will expose you to currency fluctuations.
     
    Companies in the UK, like BP do not tax dividends at source, but in other European countries they do, which may reduce the attraction for some stocks in IRA accounts that would otherwise look like great dividend plays. For example Telefonica.
     
    The question with the slightly lower paying dividend stocks in the US is whether they really will succeed in growing the business in the future or will they dividend gradually increase as a percentage of the stock as their businesses mature and they become ever more REIT like.
     
    When stocks can frequently bounce up and down by 2% or more in a day, a 2% annual dividend does not look like a very important factor, though the fact that the company is paying a dividend at least suggests that the company is mature and profitable and is operating on more than a wing and a prayer.

  219. zeroxzero

    P.S.- Euro companies are a lot cheaper than U.S. companies right now, while my hemispheric idea has a pretty long fuse, so there's every possibility that oversold European large caps, including Euro banks, are the cool play over the next 24 months. Just saying.

  220. jmm1951

    Something like Aflac look reasonable for an IRA where the stock is $44 and you can sell the  2013 $40 call for $8, giving you 9% return plus the 3% dividend if you are called away, and 10% downside protection. However this is not quite 20%. But with a bit of judicious buying and selling of the short calls, it could be, as on a pullback you can buy back the short call for a profit and then sell it again on the bounce. Or you could use some type of ratio play, perhaps buying 200 shares to start and selling a call on half of them and waiting a while to see which way the cookie crumbles before trading on the rest.
     
    For example on the AFLAC trade above, if the stock moved up a couple of dollars over the next month, you could sell the other $40 call for more, and get a bit more downside protection too. However I think the same rule goes as for selling puts, which is don't do it unless you really want to own the stock.

  221. roro

    zeroxzero,
     
    i need to get up to speed with options trading having done it fairly rarely, but if i read your take correctly then the oversold European large caps and Euro banks you mention  may be worthwhile for a look at way out of the money call……….inexpensive at this point too, right?
     
    i did this once buying way out of the money puts on the Australian dollar futures contracts in late summer of 2008. that worked out all right

  222. Phil

    Hey guys!  

    Hope the new comment box is working for all.  

    I've been so sick, I couldn't go to the Giants game but I'll try to catch up later.  

  223. Pharmboy

    ANIK & CPIX/terr – no, don't know much about them.  ANIK looks like a small Smith & Nephew for wound repair.  I will have to look more at them, but this is becoming a hot area, but no options on them.  They make money and looks like good revenue growth  CPIX – not as sexy to me, and they need more in the pipeline.  Revenue growth is low, and appears to be slowing, but I have not looked real close at the revenue streams. Options are horrible.

    HGSI/SP – well, at 7.7X, why not sell the Jan13 $8 Ps.  I don't know if GSK will buy them, as GSK will need to see how well sales are picking up, but starting there in case the stock goes lower, we can then do a buy write knowing that $6 is a very good price for them. 

    As for the rest of my portfolio, nothing has really changed.  I own BMY, MRK for my dividend kings, and YMI, CRIS (started easing on them a bit as they look toppy), DEPO, GTHP, NSPH, VRTX (puts sold), IMGN, SGEN (large also with options, stock etc).  There are others, but mostly smaller positions.

    YMI/Charlie – I like the stock right now for the price.  The mechanism works, and if the anemia plays out in future trials, they will not be around.  Further, I think they announce a deal soon…..too much at stake for such a small company and I continue to buy on pullbacks.  Just put the order in and let it sit.

  224. stjeanluc

    AFLAC / Jmm – In an IRA, why not buy a diagonal with a deep ITM long dated call like for example, the Jan 14 20 strike. They have almost no premium in them and you can sell 2 calls a year (for example, August and January) for a pretty good return, some decent downside protection and lower investment for the same number of potential shares. And it works in an IRA. Yes, you don't own the stock so it's a choice you make, but for example, the Jan 14 20 calls, selling the August 12 40 calls against it makes you 15% in 6 months as long as AFL stays above 40 with about 15% downside protection on the break even point. Most likely, you'll get called away, but 15% every 6 months is not bad in an IRA. It's obviously a different  approach but mixing and matching works. Obviously it's better suited to stocks who don't pay great dividend because you lose that out. 

  225. jmm1951

    stjeanluc/AFLAC
     
    Yes, that makes sense. Actually I have a similar play going on with MSFT having bought in the money LEAP calls some time ago at almost no premium. I think something like that may be more effective in an IRA than the classic PD manoeuver of writing a covered call and selling a put, because of the cash tied up in selling the put. It gives you a lot more leverage.

  226. Burrben

    Phil / Put Selling Question
    I was doing a bit of reading this weekend on the topics of selling options in general.  From a few different sources, everyone that I read seems to feel that selling a put 2-3months out is optimal instead of selling it 1yr out, like we do many times.  When I posed the question to a few people, they thought that if you would sell a 3mo-out put, 4 times a year, you will be able to collect more than if you sold it 1yr out.  Also you'll be about to "get your money" quicker if it expires and then choose to re-initiate or re-evaluate the sale.  I think all of their basis is that Theta decay's quicker closer to expiration…
     
    Just wanted to get your opinion on this topic, and if you agreed or not?  Or if it's just a grey area, and it's up to each trader.

  227. craigzooka

    Hey everyone, I am going to be in new Zealand for two weeks but the good news is we shouldn’t have to touch the iIRAportfolio anyway. The only activity I can see happening next is if we crash. If there is a crash and anything gets cheap I will find a way to get Internet access and post a trade. Otherwise, sit back relax and let that theta work for you.

    @phil, I will volunteer to take care of planning the psw Vegas meet up this year. If you want to shoot me a message we can start talking about details. I plan on building a pswvegas meetup website so that we don’t crowd up the main posts with questions.

  228. roro

    Took a short AUD/CAD at 1.0500 on the nose prior to the retail sales report.
     
    NASDAQ100 looking very O/B on the technicals………

  229. zeroxzero

    roro / Euro banks:  Firstly, I know quite arguably less about options than you, so I would never answer an option question.  Secondly, neither am I a stock analyst — Euro banks may be oversold because they're about to go under, i.e., not oversold at all — Phil seems to think that stock prices reflect available information pretty accurately as a rule, and I am no one to argue with that.  So we are in the domain of pure, airy-fairy speculation — that QE-Europe will be launched at some point, despite the strenuous opposition of most Germans, and that Europeans believe that their banks are too big to fail — and which ones, exactly?
     
     More concretely, I worked and lived in Europe from the 1990's well into the 2000's, and have a European financial advisor who wouldn't even answer the question when I asked last week which Spanish banks might be decent bottom plays — and he's based in Madrid!  Attractive large caps like Nestle have only moved in a narrow band, Nestle itself 45-55 over the last 12 months, denominated in Euros — e.g., flat — and stocks like Areva are suffering from TEPCO incompetence, so it would a braver investor than I to wing it in Europe with my hard-earned cash at the moment.  But if clever people start whispering Euro bank names, or European equities just do a major across-the-board swan dive, I might dip a toe in.  Sorry I don't have a better answer.
     
    There are old mushroom hunters, and bold mushroom hunters, but there are no old, bold mushroom hunters.

  230. revtodd64

    Kinki – thanks for the reference to the Tweedy research study.  I downloaded it to look at later and compare to O'Shaughnessey.  He does make similar points about value investing, but challenges the small cap bias, due to the lack of liquidity of small caps that make them harder to buy at certain prices than back-testing with historical data.  More next weekend.

  231. Phil

    OK, feeling better now but not likely I'll catch up on everything.  

    Futures down about 0.5% as Dollar hits 81.775 on Euro down below $1.27.  Oil $101, gold $1.608.

    Jackson Hole/Angel – Too out of the way and nothing for non-skiers to do.

    Online Transfer/Gardling – I'm not sure I'd want to do that on-line.  I'd use a Swedish bank with a branch here and move the money to that bank with a normal transfer and let them deal with it.

    Poker/NF – Is that a poker set or a book set?  I'm not much for reading about poker, prefer to just practice.  Generally I play to stay alive until final table, then I gamble but, of course, you have to go with the flow and when the opportunity is there, I'll go for it.  On the whole, as with options, I like to stay in cash and stay out of most hands (but I do like to see flops when it's cheap) and not pay to play unless I have a couple of ways to win.  You're right about on-line, it's a paradigm shift but there's a false sense of accomplishment people get from being "good" at on-line that doesn't really help them in real games.  If you want to really piss off pro player, try playing a few hands without looking at your cards – that's fun!  

    XLF/Barf – Could go either way but I lean towards up from $13.  On the whole though, I would wait for either a dip to buy back or QE3 to make a long-term trade bullet-proof.  On SVU, with a year to go you can roll the short puts (.20) to the 2015 $7 puts for $1.90 and that pays to roll the 2013 $5s ($3.40) to the 2014 $7s ($2.40) for $1 so you put $1 in your pocket and that lowers your net on SVU to less than $3 (I'm guessing) and then your net put-to on 2x would be $5 or less but you stand to make $2 more on the $3 so that's worth waiting a year for.  

    F/Zipla – F is at $11.71 and the 2013 $10 calls are $2.60 (effective $12.60) and the dividend is 5 cents so PLEASE – beg them to call you away and pay you $10 and cancel their .89 of premium in exchange for a .05 dividend!  You are well protected as it is and a 10% drop in F puts you right back in danger (unlike SVU above) and it's a whole year away and we have an uncertain market (to be kind).  So F is a bad example but SVU is a good one above of when it does make sense to do a roll – as long as you realize what you are doing is making a more aggressive play – supposedly because you have better information now and a higher 1-year target. 

    GLL/Canuck – Yes, some adjustments to that effect but we still have 3 weeks so I'm waiting until Weds or the Dollar fails 82. 

    Welcome/Ripcar – That's an interesting concept and will be worth discussing once we have the project underway.  It wasn't meant to be a major focus but a lot of interesting opportunities in that space.  

    HOV/BDC – We had one false rally already so we'll see if this one sticks.  

    Nightshift/Roro – I didn't take it negatively at all.  Just reminded me to rant about job seekers.  

    Sundance/Sparky – I've been and the town is too crowded for my taste for the festival.  Aspen not like that (or I guess it has more capacity). 

    Owning/Pak – See "Interest Scams and How to Avoid Them – Mortgage Madness!"

  232. sparky123

    Phill,
    Sundance, town crowded, that's the point. The town is jammed with non-skiers. The slopes are deserted. You can sleep till nine and still put the first tracks down.

  233. sparky123

    Hope you feel better!

  234. Phil

    FINVIZ/Revtodd – Works well.  Try YCharts, excellent stuff there as well. 

    Assault landing/ZZ – I used to be afraid of flying and then took lessons and was never afraid again until one winter when we had to land in Aspen during a blizzard.  I was praying for the pilot to stop the madness and go back to Denver or south to some non whited-out airport but the guy landed the plane when I couldn't even see the lights on the wing from 15 feet away and the skiing was, of course, fantastic the next day.  

    10-year/Savi – I don't like to go long on things I'm long-term bearish on, even when it is logical but yes, going long on the 10-year or TLT off the $118 line does seem to be a good play, as we discussed last week. 

    Delta/Sparky – The odds of getting all your bags on any Delta flight are slim to none.  I don't know if they've gotten better over the years as we pretty much only fly Continental out of Newark but between flight cancellations and lost bags over and over and over through the years – we avoid Delta like the plague.  

    Bullard/DC – See how the game is played – the markets shut for the weekend and suddenly the hawks come out to play.  We know the data isn't really improving so that means he's wrong but the statement is firm so it can be taken either way so it seems the Fed doesn't want to cause a panic and are just trying to nudge some people into bonds.  That makes sense as the auctions this month are fairly light and perhaps they don't think they need to do anything drastic.  

    Value investing/Kinki – I don't know about meditation but practice long enough and build up that body of "proof" of concept and you'll find it just gets easier and easier to fight the crowd.   Not surprisingly, making free-throws and hitting are also very much a matter of practice, practice, practice.

    VXXCrussell – The $32s are still $1.40 so I'd spend $1.80 more to go to the Feb $31s ($3.20) rather than the Jan $30s as you get $1 in position and one month for $1.41 and of course you can sell another Feb call for more than .41 if the Jan expire worthless,  Selling the put is a good option but don't forget you can 1/2 cover for now and that leaves you a lot of room for a 2x roll to Feb short puts (not that I think the VIX will go much below $20 but QE is possible).  

    AFL/JMM – My favorite insurer (other than Berkshire).  

    Puts/Burr – If the VIX is high, you have to take into account that it may not continue to be high down the road, then your next 3 sales may end up being at much lower prices because you waited.  Also, if I think RIG is too cheap at $39, I can sell the Feb $37.50 put for $1.32 or the 2013 $37.50 put for $6.40."  What if RIG pops to $42 between now and Feb?  Do you want to sell the June $37.50 puts for maybe .50 or are you now going to risk selling the $40 puts for $1.30?  As with everything, it's situationally dependent and people who tell you that this or that is "better" as if there is some master key to the universe are hacks but, unfortunately, that's true of most people who give advice on such matters.  

    Vegas Baby!/Craig – Absolutely fine with me.  My job is to show up.  

    Good commentary on Euro banks ZZ. 

    Sundance/Sparky – Yes, so it's great for a ski trip but terrible for a conference. 

    Much better thanks – I made the mistake of going to my daughter's basketball game on Friday and sat in the stands where there had to be about 30 different strains of active flu virus flying around.  Makes me think Howard Hughes wasn't so crazy after all..

  235. jabobeast

    Phil-- do you know  if there are mortgages that let you pay bi-monthly now? You pointed out in that great mortgage madness article about how much it saves you but I never heard about them before and was wondering if they still are offered by those kind banks out there?

  236. Burrben

    Ok, this is Funny……
     
    Overheard on the Goldman Sachs Elevator
     
    An anonymous career banker inside Goldman Sachs opened a twitter account (@GSElevator) with the intention of revealing the hilarious banter that takes place in the privacy of the GS elevators. Since then, the account has evolved…
     
    Excerpt :  I never give money to homeless people. I can’t reward failure in good conscience.
    http://totalfratmove.com/769302

  237. kinkistyle

    small-cap/Revtodd:   I believe the Tweedy Browne conclusion was there was a tendency for there to be more under-valued small cap stocks than under-valued large caps.

  238. kinkistyle

    practice/Phil:  I guess there are no short-cuts to getting those 10,000 hours in.

  239. kinkistyle

    Great Op-Ed in the NY Times on the "The Myth of Japan’s Failure"
     
    "Time and again, Americans are told to look to Japan as a warning of what the country might become if the right path is not followed, although there is intense disagreement about what that path might be. Here, for instance, is how the CNN analyst David Gergen has described Japan: “It’s now a very demoralized country and it has really been set back.”

    But that presentation of Japan is a myth. By many measures, the Japanese economy has done very well during the so-called lost decades, which started with a stock market crash in January 1990. By some of the most important measures, it has done a lot better than the United States. "

    I agree with this article.  The way some people talk about "The Lost Decade" it makes Japan sound like Afghanistan, while nothing could be farther from the truth.   Japan has a quality of life and technological advancement that is almost unrivaled in the world. The fact that Japan didn't get caught up in the Dot.com bubble and then the Subprime housing bubble doesn't make it a "failure".    As anyone who has lived in Japan as well as other countries these past two decades can attest to — a lot of countries in the world should be so lucky to have a "Lost Decade" like the one Japan has had.  

  240. Phil

    Good morning!

    Huge move back up in the Futures as soon as I went to bed but topping out now at the Dollar tested 81.25.  Oil was back to $102 and now back to $101.38, gold $1,620, copper $3.42, silver $29.02, Nat gas $3.02, gasoline $2.75.

    Euro rallied up to $1.278 (not sure why yet), Pound $1.544 and the Yen lost the 77 line and is back to 76.82.  Nikkei Futures had a 100-point rally into the close that stopped them from having a down day into the close but Japan was actually closed today so a whole lot of nothing to people who slept through it.  Shanghai was up and up all day to 2.89% and the Hang Seng gained 1.5% with 2% of it coming in the last hour so the 3am trade was in Asia this morning.  Seems to be about SPECULATION that China will ease monetary policy to save failing economy – not sure how excited we should be getting about that.  

    Mortgages/Jabob – Sure, they are called Bi-weekly Plans (not that there's anything wrong with that) and it used to be unusual for a Bank NOT to allow it so I'm certain that many do offer it.  According to Bankrate.com:  

     

    Biweekly payment programs are easy, but the convenience comes at a cost. Many lenders offer two ways to pay: upfront or as you go.

    Of the top five mortgage-servicing institutions, four charge enrollment fees that range from $295 to $379. Three also levy additional charges on every transaction. If you want to pay as you go — without the hefty upfront charge — fees from the same top five servicers average from $4 to $9 a month.

    They also have suggestions for getting around fees and point out that you have to be careful with the contract, so worth reading.  I'd get a good mortgage broker to help you find the best overall program, we negotiated our mortgage that way at inception from WFC and another at BAC but years ago.  

    Goldman quotes/Burr – Pretty funny.  Don't know if they are genuine but:

    Blacking out is just your brain clearing its browser history.

    Groupon… Food stamps for the middle class.

    #1: She’s only about 3 weeks of anorexia away from looking hot.

    #2: Maybe 4.

    #1: When it doesn’t matter how much the drinks cost, it’s always happy hour.

    #1: From my experience, most people really should have lower self-esteem.

    #1: My garbage disposal eats better than 98% of the world.

    #1: Hermes ties are like Jordans for white people.

    #1: I don’t care how into the environment she says she is. No chick wants to be picked up in a Chevy Volt.

    #1: Fact. Nearly 50% of all American workers have less than $10k saved for retirement. 

    #2: Fuck. That wouldn’t cover a ski weekend.

    #1: My charity work begins & ends with black tie galas. And if drunk me is the highest bidder on a signed Springsteen guitar, so be it.

    #1: By now, protesters just look like pigeons to me.

    Short-cuts/Kinki – That's really the point.  Why do 90% of small businesses fail?  Not because they are bad ideas (maybe 1/4 are) but because 90% of the people are not really prepared to put in the TIME and EFFORT it takes to make them a success.  After just 3 years, 50% of small businesses last for over 10 years (success) and what is 3 years of 50 hour weeks?  7,800 hours and most people with a start-up are well over 10,000 hours by the end of 3 years – IF THEY ARE DOING IT RIGHT.  

    Again, there is no short-cut and there is no formula – it's just hard work.  I used to explain this to F500 CEOs who would moronically start new divisions and then declare them failures if they don't hit arbitrary goals in the first year – as if there's some magic formula they can follow.  When I ran my own company, I treated my employees like entrepreneurs and we grew division after division successfully by simply treating them like they were start-ups.  

    That's why there are "serial entrepreneurs" and why VCs like to invest with them – they have cleared the most important hurdle – the willingness to work as hard as it takes to be successful.  This can be applied to anything and everything in life but work seems to be a 4-letter word to most people and "hard work" is like 2 4-letter words put together – it's not what people want to hear when they say "how can I get rich?"  

    There is no "system" and there is no scam that will make you rich (although some people do luck out and attribute it to whatever they did).  Once you realize that and begin blocking off the time it's going to take to get you to your goals – you'll be halfway to all the success you hope for and the rest will come, one day at a time if you simply stick to your schedule and keep working.  

    Japan/Kinki – I agree, it's still quite nice over there but it's a failure for Capitalism as the people don't borrow money and go into debt just to consume and that keeps prices low and the currency strong – oh the horror!  Once upon a time, Americans took pride in being savers and being "frugal" and we had a strong Dollar and a strong economy.  That was beaten out of us by decades of media propaganda driven by, of course, our Corporate Masters (and anyone who hasn't seen "The Century of the Self" really needs to have their eyes opened).  

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