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Tuesday Tokyo Take-Down Trepidation

I think I've seen this movie before.  

Or, more accurately, I've seen myself on TV before predicting intervention by the Bank of Japan as the Dollar fell to these lows (131 to the Dollar) against the Yen, to the point where it began to impact the earnings of Japanese export corporations and forced Japan's Central Bank to take action to boost the Dollar and weaken the Yen, which has the unfortunate side effect of tanking the markets.  

They did this on August 4th (link above) when I predicted the 20% correction on the button (down to 1,100) and again on October 29th, when we cashed out our White Christmas Portfolio after catching the run from 1,100 all the way back to 1,292 (17.5%) and once again nailed the Yentervention, that came just 2 days later and sent the markets plunging back to 1,158 into the Holiday. 

Since Thanksgiving, we have gone all the way back to 1,333 – and that's 15% up from pre-Thanksgiving and 24% up from the October low at 1,074 and almost exactly 100% up from the S&P low of March, 2009 at 666.79.  666, as we know, is the mark of the Blankfein, so we take our numerology seriously at PSW – hallowed be Lloyd's name!

SPY DAILY Anyway, so we're up 24%, which is a bit much without a significant correction and let's say 1,100 is the proper base and 20% up from there is 1,320 and you can see from Dave Fry's SPY chart that we're into a serious zone of resistance here with a very toppy-looking MACD and RSI accompanying this quadruple-top.  

Yesterday we discussed some of the Global Macro forces at play but this morning we only have to look at Toshiba and Honda's quarterly reports, with both companies down around 70% in profits and issuing poor guidance based, in large part, on the too-strong Yen – to get a pretty good idea of the pressure the BOJ is currently under to take some sort of action right away.  

 JFE Holdings, Japan's second-largest steelmaker  posted their first loss EVER – also on Yen strength and their outlook for next year is break-even.  Demand for steel is slowing in Asia and Japanese Steel is far more expensive than competing, weaker currency-based manufacturers.  

UUP WEEKLY Last week, Japan had it's first overall trade deficit since 1981, if this spills over to affect their borrowing costs — well, it can't spill over because that would be a catastrophic event that would likely lead us into a full-blown Global economic collapse with Japanese debt at 220% of their GDP.  So, there really is no choice – the BOJ needs to begin printing Yen and using it to buy Dollars ASAP.  This morning, in Member Chat, we shorted Oil (/CL) at $100 (again) and the Russell (/TF) at 800 (again) and gold (/YG) at $1,750 on the Futures with the Dollar testing 79 as I think that should be the floor from which we can expect some action.  

Today is the last day of the month so I imagine we'll have another day to paint a pretty January but, after this – it's anybody's game and I really can't imagine the Japanese are willing to drop the ball on this one.  

We'll be looking for a 4-5% pullback off the top on our indexes, a move that should bring us back to about 12,200 on the Dow against a corresponding move in the Dollar back to 81 as the Yen is reset to about 78 to the Dollar.  That's going to top the Euro out at $1.32 and the Pound at $1.58 so those are the lines we believe the BOJ will draw in the sand this week.  

At today's open they have driven the Dollar back down to 79 so we should see an attempt to keep the NYSE at our 7,866 level as well as Dow 12,749 and our premise is blown if we hold those for more than 24 hours so it's going to be an interesting last day of the month and I'm sure all the stops will be pulled out to close us at the highs and, of course, give us that fabled "golden cross" on the S&P.  

After that – I wouldn't count those chickens before they hatch…


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  1. Burrben

    FYI –  If anyone is in the X short put trade from a while back…


    (X): Q4 EPS of -$1.14 misses by $0.30. Revenue of $4.82B (+12.1% Y/Y) beats by $90M. Shares-0.8% premarket.

  2. stjeanluc

    Oil Lines

    R3 – 101.02
    R2  100.32
    R1 – 99.82
    PP – 99.12
    S1 – 98.62
    S2 – 97.92
    S3 – 97.42

    Yesterday's high and low – 99.63 / 98.43

    Breakout lines – 101.57 / 95.28

  3. stjeanluc

    Burrben, I read your comments this morning about the FAS trade and as Cwan said, I would certainly warn against taking big risk with a strategy like the strangle as it can blow up in your face quickly. 

    On the other hand and as Phil likes to say, when you sell premium, all you have to do is be right once. I said before, with the FAS strangle I am prepared to skip weeks to find premium "safety" and wait for a quick reversal to make the money back or get out with a more manageable loss!

    Also, to clarify things, when I and others selling premium talk about a 25% win, it doesn't account for the margin. We are talking about the price of the option. It's a nice gain for the day, but with an instrument like FAS that is so margin intensive, you might be talking about a 1% gain on margin. Not bad for a day (and that's 250% per year [without compounding] and we are on pace with the FAS Strangle Experiment), but not enough to take the rest of the year off! It does make it sound better though!

  4. Burrben

    StJ  - Yeah, I would NEVER do that.  I'm way to aware of Risk Mgmt to ever push that button.  In fact I think my heart would stop before the trade was over if I did.  
     
    But sometimes it would just feel good to bet it all on "black"….  

  5. jmm1951

    AAPL pipsqueak?
     
    http://www.guardian.co.uk/business/2012/jan/31/apple-poaches-dixons-chief-john-browett
     
    Story is that AAPL have hired their first outside executive, a guy who was the CEO of retail electronics chain Dixon's in the UK and a Tesco exec before that to be in charge of retail operations. The readers' comments are interesting and snarky. Anyway, this could be an indication that new boss Tim Cook  is starting to move in different directions from the ancien regime.

  6. dpastramas

    Even XOM missed their revenue target.  We are doomed!!!

  7. Pharmboy

    PP for today:

    This market is going round and round….

  8. roro

    went long USD/CAD at 0.9970 just before the GDP miss……..looked very O/S on most charts so a flyer trade, but parity should be tough for CAD to break for long.
     
    a theory………..with pain as a possible outcome, but also a hedge if equities sell off …..ever

  9. roro

    took a short on Italy's ITA45 at 15,985…………don't quite get it as to why Europe is acting as if the debt problem was fixed at the EU Summit because to best of knowledge it looks like there was;
     
    - NO agreement on PSI re Greek bailout
     
    NO finalization of permanent ESM bailout fund other than it comes before the European Fiscal Treaty gets put in place sometime later like maybe never if referendums are being demanded (Ireland) to get that passed

  10. Pharmboy

    PFE and LLY miss….big.  Cut guidance, and stocks are up…..

    But….here is the kicker and what needs to be done for the BerkB company here….Revenues from animal health unit grew 13 percent to $1.11 billion! THAT’s where the $$ is.

  11. kallenjr

    Is it possible we will have a 'gap and crap' opening today? More irrational than ever with major players missing earnings. I must be missing something.

  12. 2can

    Oil testng 101. so far rejected at first try

  13. crussell14

    Phil – what are your thoughts on movement of gold. I have a GLL Feb $16/18 BCS. Thanks

  14. kallenjr

    Phil,
    I am reading more and more analysis talking of market positioning due to 'inflation' – really since FOMC announcement last week. Have current/relevant are your published inflation hedges?

  15. Pharmboy

    crussel – I would take the 18s off, and roll out to the March contracts. I gives more time for the correction.  If gold hits $1600 (GLL) should pay back the losses at least, then get out.  That is a mjr support and gold could then rally to $2000….at least according to EW (Elliot Wave).

  16. Pharmboy

    Remember – lows at 7:30ish PST/10:30 EST right b'f the EU close.  Then it is UP from there…or least it has been more often than not…..

  17. stjeanluc

    All on black / Burrben – The temptation is there for sure!

  18. Pharmboy

    Or maybe it will be reversed today! (I can only hope)…..

  19. dpastramas

    As per Pharmboy's note, as of 10:30 EST all on black (or green for our case)

  20. lflantheman

    AAPL portfolio:   I uncovered 10 of the Aprils        Bought to close 10 450 Aprils for 24.25

  21. Phil

    Good morning!  

    $101 oil is a nice pop to short off.  As long as the Dollar holds 79 (now 79.10) I'm confident in that short.  Gold touching $1,750 again (/YG) and I like them short below that line as well.  Same old script as usual – jack up the pre markets and dump shares on the Cramericans in the morning.  

    Those QQQ weekly $60 puts are .29 and I still like them but not enough to DD yet – tempting though it may be. 

  22. Pharmboy

    WTF?

  23. stjeanluc

  24. 2can

    StJ  Thanks for the clarification of what you mean by a 25% gain in a trade.  I'm a relative novice to day trading, and I'm following you pretty closely.  Paper trading now and then.  Thanks again : )

  25. scottmi

    roro – stopped out on the AUD/CAD. prob just as well – looks like it hasn't quite given up yet.

  26. lolobear

    Lflan/AAPL – Remember last earnings when they hit 398 the day after earnings, then they dropped to 383 and then shoot to 421.  Is that what we are going to see this time… a run into the possible 460 or even 470 area?

  27. Lincoln

    Phil: 3AM
    interesting reading but I would have to live in GMT timezone to participate :)  Anyone calculate what percentage of the total markets gains over the past two years have come on "Greece Fixed" days vs losses on "Greece Crisis" days?

  28. lflantheman

    lolo…… Usually AAPL pulls back in the weeks after earnings, then ramps up into the next earnings.  I still think that could happen.   We're seeing it hold up pretty well but I still think we get some pullback soon.  That's why I said yesterday I would agee with taking some of the longs off the table the higher we go. 

  29. roro

    scott……….you get out at B/E?…….so, no loss other than the carry, right? i took the positions off in the money (wife was happy) and went long USD/CAD this AM at 0.9970 just before the GDP miss. also short OIL at 100.45…….also short Italy's ITA40 at 15,585
     
    1 more……….capitulated on USD/JPY…long at 76.38…………may but again if it drops to 75.50 area…don't know yet

  30. stjeanluc

    This reflects the new trade from this morning. Let me know if I missed anything lflan. I booked the trades from yesterday.

  31. jomptien

    XRT falling in line – down .55

  32. lflantheman

    Thanks stj……looks right  (for now)   :)

  33. lolobear

    Ok, thanks Lflan. 

  34. stjeanluc

  35. roro

    scott……..i think this EU thing is just total bs, and so is the FED
     
    The socialist running against Sarkozy is widening the lead and is promising to obliterate the agreements and austerity. Besides that the IRISH are demanding a referendum on the proposed EFT (European Fiscal Treaty) so aside from the PSI not being resolved with Greece and Germany demanding surrender of Greece's fiscal sovereignty and and and and and………..
     
    http://www.zerohedge.com/news/socialist-hollande-who-wants-full-european-treaty-renegotiation-increases-lead-over-sarkozy

  36. dpastramas

    Pharmboy, maybe i'll try the 10:30 trade after all ;-) Seems everything is going according to script

  37. Phil

    At the open: Dow +0.5% to 12718. S&P +0.54% to 1320. Nasdaq +0.46% to 2477.

    Treasurys: 30-year flat. 10-yr flat. 5-yr -0.01%.

    Commodities: Crude +2.32% to $101.08. Gold +0.86% to $1749.35.

    Currencies: Euro +0.16% vs. dollar. Yen -0.03%. Pound -0.46%.

    10:00 AM On the hour: Dow +0.16%. 10-yr +0.08%. Euro -0.08%vs. dollar. Crude +1.76% to $100.52. Gold +0.67% to $1745.95.

    Market preview: Despite being no surprise at all, the latest developments for EU bailouts and closer fiscal integration are sending equities in the EU and the U.S. higher, with S&P benchmark futures+0.5%. RadioShack (-32%) is getting hammered following a profit warning, while Archer Daniels Midland is -3.3% after profits plunge, but Paccar is +5% in the wake of its earnings beatLater: Consumer Confidence, Investor Confidence Index

    Nov. S&P Case-Shiller Home Price Index: -1.3% M/M vs. -1.2% in Oct. -3.7% Y/Y vs. -3.2% expected, -3.4% prior.

    U.S. housing prices keep sliding, as 19 cities in Case-Shiller's composite 20-city home price index posted monthly declines in November, with just Phoenix showing a gain. Atlanta, Las Vegas, Seattle and Tampa posted new index level lows (interactive chart). Y/Y, 18 of the 20 cities showed declines, with just Detroit and Washington D.C. notching gains. - I have simply run out of ways to say: LOOK AT THESE FRIGGIN' TERRIBLE NUMBERS PEOPLE!!!

    ICSC Retail Store Sales: +0.1% W/W, vs. -1.4% last week.+3.9% Y/Y, vs. +2.8% last week. "January sales got a lift from demand for cold weather goods, demand that was pent up during the unseasonable warmth of December". - Up 0.1% from down 1.4% is what they call "pent up demand"?  Jeeze…

    Redbook Chain Store Sales: +2% Y/Y vs. +2.5% last week. "This month's colder weather has been boosting demand for winter goods, demand which was soft during the unusual warmth of December". 

    Q4 Employment Cost Index: +0.4% for the past three months. Year-on-year, civilian worker costs +2% in December vs. a 1.8% increase among government employees. 

    Januray Chicago PMI: 60.2 vs. 62.3 expected, 62.5 prior.

    Jan. Consumer Confidence: 61.1 vs. 68.0 expected, 64.8 in December (revised). Expectations 76.2 vs. 77.0 (revised). Present situation 38.4 vs. 46.5 (revised). "Consumers' assessment of current business and labor market conditions turned more downbeat and is back to November 2011 levels," Conference Board's Lynn Franco says.

    Canada's November GDP declines 0.1% against expectations for a 0.2% increase and a flat read for October. The bulk of the decline was due to a 2.5% drop in oil and gas extraction. The loonie takes a quick dive, but at parity, remains slightly higher for the day against the greenback.

    Brazil's December industrial production rises 0.9% against estimates for a 1% gain, still the largest jump since May and giving rise to hopes the country can reverse Q3's shrinkage in GDP. 

    Selling in the Portuguese bond market takes a breather, with yields falling sharply from euro-era highs. The 2-year is down 78 bps to 20.23%, the 10-year down 99 bps to 16.4%. Keep in mind, bid-ask spreads on Portuguese paper are wide enough to drive a truck through. The yield curve in Portugal.

    Australia's major banks - needing to raise $100B in 2012, dealing with a reversal in the country's bubbly property market, and facing an economy gasping for air in all but the mining sector – have been put on negative ratings watch by Fitch. The good news is the RBA's 4.25% benchmark rate – there's a lot of room for funding costs to decline.

    Chinese shares complete their best January in 3 years, the Shanghai Composite +4.2% for the month. The surge follows a 22% decline for the index last year. Perhaps the most significant news is the government's aim to direct more of the country's savings into the stock market. 

    Irish banks swapped billions in government debt due in 2014 to paper maturing in 2015 earlier this month, according to Davy. The move will relieve funding pressure for the government when its aid package runs out next year. The government has a sizable (if not near complete) ownership of the major Irish banks, so the whole exercise is a circular one.

    Doubling Japan’s sales tax by 2015 won't be enough to conquer the country's debt woes, says S&P analyst Takahira Ogawa, as "no matter how high the sales tax is raised, there’s no point unless the government does something with the social-welfare system.” S&P has had Japan on a negative outlook since April.

    S&P warns it may downgrade "a number of highly rated" G20 countries starting in 2015 if governments fail to curb rising healthcare costs and other costs related to aging populations. Japan, the U.S. and some European countries are likely to experience the largest deterioration in their public finances if no action is taken.

    Eurozone unemployment at 10.4%, unchanged from November's revised figures. Spain clocks in with the highest unemployment, at 22.9%, followed by Greece and Lithuania. At the other end of the scale, Austria, with 4.1%. 

    A new poll shows Francois Hollande beating Sarkozy in a landslide in a 2-man race in May's Presidential election. Hollande's platform of nixing the EU's austerity drive must be drawing smiles in Brussels (Berlin) as they remember Ireland's Enda Kenny – promising to tear up deals in late 2010 – reversing himself within hours of winning office. 

    An expected round of German solar subsidy cuts may be implemented as soon as April. An unexpectedly high level of late-2011 spending in the world's largest solar market (not enough to keep prices from crashing) is contributing to pressure for a new round of cuts. A surge in installations is expected to occur ahead of the cuts, which may be in the 35% range.

    Contrary voices from the growing consensus that the ECB's LTRO has saved the day argue it will not work past the short-term. Earnings from the carry trade are not enough to improve bank capital ratios, meaning additional sovereign holdings are crowding out other assets. It's something to keep in mind amidst chatter February's operation may blow through €1T.

    fantastic infographic, via Zero Hedge and Demonocracy.info, showing the truckloads of cash needed to rescue the PIIGS.

    With the average age of U.S. cars and trucks rising to a record 10.8 years, analysts believe pent-up demand boosted auto sales in January to a third straight annual gain. January light-vehicle sales, set for release tomorrow, may have run at a 13.4M seasonally adjusted annual rate, better than the 12.7M year-ago rate while automakers’ spending on incentives held steady or slid. 

    Rare earth firms are up premarket after yesterday's WTO ruling that China must eradicate its export taxes and quotas for industrial minerals. While rare earth elements were not part of the ruling, the firms anticipate a similar appeal will be filed requesting the Chinese abolish their export quotas for rare earth elements. MCP+4.4%AVL +5.3%REE +5.2%. - This makes no sense as more exports from China will LOWER the prices.  

  38. yodi

    Phil AAPL long Apr 380 pd 36.25 now 79.60 short Apr 400 sold for 27.06 now 61.30 still holding extrinsic value of some
    3$ Would you close the play or let it run it;s course ? thanks

  39. pentaxon

    Are this bears sneaking out of their caves?

  40. Phil


    Archer Daniels Midland (ADM): FQ2 EPS of $0.51misses by $0.26. Revenue of $23.3B (+11% Y/Y) misses by $0.2B. (PR)

    More on Archer Daniels Midland (ADMFQ2net profit plunges 89% to $80M, which includes the impact of LIFO, PHA-related impairment charges. "Ongoing weakness in global oilseeds margins, lower results in corn and poor industrial merchandising results hurt our second quarter profits," says CEO Patricia Woertz.. Shares -3.2%

    Eli Lilly (LLY): Q4 EPS of $0.87 beats by $0.07. Revenue of $6.05B (-2.3% Y/Y) beats by $60M. (PR

    More on Eli Lilly's (LLYQ4: Decreased Y/Y revenue tied to loss of patent exclusivity for Zyprexa. Operating expenses up 2% Y/Y, led by fees from health care reform legislation. R&D decreased 6% Y/Y to $1.36B. Reconfirms 2012 EPS guidance of $3.10-$3.20. (PR)

    Oshkosh Truck (OSK): FQ1 EPS of $0.42 beats by $0.11. Revenue of $1.88B (+10.5% Y/Y) beats by $20M. (PR)

    Pfizer (PFE): Q4 EPS of $0.50 beats by $0.03. Revenue of $16.7B (-4% Y/Y) beats by $90M. (PR)

    More on Pfizer's (PFEQ4: Revenue growth led lower by segment losses in Primary Care (-8% Y/Y to $5.4B) and Specialty Care (-5% to $3.82B). Animal Health sales up 13% Y/Y to $1.11B, helped out by a strong performance in the global livestock portfolio. Sees 2012 revenue of $60.5B-$62.5B, down from prior guidance of $62.2B-$64.7B. Lowers its 2012 EPS estimate by $0.05 to $2.20-$2.30. Shares -0.2% premarket. (PR)

    UPS (UPS): Q4 EPS of $1.28 beats by $0.03. Revenue of $14.17B (+5.6% Y/Y) misses by $280M. Shares +0.5% premarket. (PR)

    More on UPS (UPSQ4: net profit falls 30% to $725M, hurt by a large after-tax charge following an accounting change. Guidance: FY EPS $4.75-$5.00 vs. consensus of $4.80. "Looking to 2012, our expectations are for mixed economic growth around the world, with modest improvement in the U.S.," says CFO Kurt Kuehn. Shares+1.5%.

    U.S. Steel (X): Q4 EPS of -$1.14 misses by $0.30. Revenue of $4.82B (+12.1% Y/Y) beats by $90M. Shares -0.8%premarket. (PR)

    U.S. Steel (X) steel reverses losses from what looks to be anugly earnings report, perhaps on comments from CEO John Surma. He says the company "expect(s) to report a significant improvement in our operating results in Q1," even with the continued difficult environment in Europe. Shares +2.6% premarket. 

    Valero (VLO): Q4 EPS of -$0.21 misses by $0.58. Revenue of $34.6B (+56.4% Y/Y) beats by $2.3B. Shares -1% premarket. (PR)

    Exxon Mobil (XOM): Q4 EPS of $1.97 in-line. Revenue of $121.6B (+15.6% Y/Y) misses by $4.2B. Shares -0.7%. (PR)

    More on ExxonMobil's (XOMQ4: Profits at the upstream unit, which produces oil and natural gas, +18%, helped by higher prices. But downstream unit, which makes engine lubricant, -13%; chemical unit, which makes plastics and related products, -49%. Results were "mediocre," with earnings down after breaking out $810M gains from asset sales, Edward Jones says. Shares -1.2%premarket.

    As Amazon (AMZN) gears up to deliver its Q4 report, it provides more evidence of the staggering growth seen by its web services business (AWS). Amazon claims its S3 cloud storage service held 762B objects at the end of 2011, up 192% Y/Y. Zynga, Netflix, and many others have come to rely on AWS to provide them with on-demand computing and storage resources.

    Amazon's (AMZN) Q4 results are due out after the bell, withanalysts expecting EPS fell 79.1% to $0.19 due to the company's prodigious spending. Revenues are seen +41% to $18.2B. Investors will be looking out for sales of the Kindle Fire, for which Stifel Nicolaus has predicted 6M vs. Apple's 15.4M. 

  41. Phil

    And wheee already!  Aren't convictions fun?

  42. scottmi

    roro – pretty much. the whole bit of fun had me up then out at a whopping $30 loss. tried to get clever and laid on another when it got under 1.60. should have taken my 50+ pips instead.  i am noticing that have a still rising 5dMA on one set of TOS charts (first time using these for forex, shows just bid), and another chart tool has it tipping down for last couple days.

  43. roro

    scott…………may sell it again up around current price 1.0645

  44. jmm1951

    Phil/TZA bid spread
     
    April $18 call bid/ask $2.41 (sic) /$5.45
    April $22 call bid/ask $2.76/$2.81
     
    Why such a large spread on the $18 bid/ask? Presumably the MM does not want to buy them back?

  45. Phil

    79.27 caused all that destruction – imagine what 80 will do!  

    Lots of good reading at the end of yesterday's post if anyone missed it.  

    Dixons/JMM – I guess they are looking for a guy who knows EU distribution markets because I'm quite sure they aren't looking to model stores based on Dixons.  

    Europe/Roro – It's just too strange, isn't it?  

    PFE & LLY/Pharm – Not just then, all kinds of strange green stocks that missed.  I like that animal health idea.  I think we should look into the insurance end.  

    Gap and crap/Kallen – Exactly. 

    GLL/Crussell – See yesterday's late commentary on gold.  Only thing holding gold up is irrational doom and gloom for currencies but that can last a long time so you have to look towards a roll of your Feb $16s to the April $17s, now .65 for about .30.  I'd offer .25 and give it a few days to see if it fills. 

    Inflation hedges/Kallen – I don't have any other than the FAS and TNA we discussed last week as upside hedges because I VERY FIRMLY believe we will first have a correction so there is nothing I really like taking long-term speculative positions on – unlike last year, when I was excited to do so.  I think we may, right now, be at the top of the S&P for the year.  It depends how Europe shakes out but I think better than 50/50 that this ends up as a train wreck.  

    AA Money – Fine and dandy.

    FAS Money – As planned

    IWM Money – I thought we took out the TZA puts yesterday?  "No more than $1.25"   Well, they are back to $1.15 so let's take them out now please.  

  46. lflantheman

    AAPL port:    10  April 425 calls sold for 41.15

  47. roro

    i want to see a clean break of 12, 565 on real DOW for a NICE correction

  48. stjeanluc

    FAS Strangle – I am going to sell the 75 puts now (around $0.58) to close the strangle again.

  49. roro

    Phil…….what i find even stranger than Europe is the NASDAQ100

  50. Phil

    Greece fixed/Lincoln – Last week we had those gains in pre-market vs gains during trading and it's something like 150% of the gains come in pre-market.  Of course, you can participate by buying at every close and selling at every open if you have the stomach for it overnight.  

    $56,000!/Lflan – Wow!  

    $25KP – WTF?  That was a quick loss of $2,000.  

    MON is killing us and I would pull the plug but for ADMs very weak report giving me hope MON will get real. 

    DMND is bullish and on track.

    BKS is bullish and on track.  

    SQQQ is not so bad and we just shorted Qs more. 

    MA has earnings Thursday and we'll be dead on earnings as our premium dies so this afternoon we'll probably quit.

    XRT is just silly.  

    GLL also silly but we'll have to give up if we don't get a break below $1,700 by Friday. 

    SLM is bullish and on track.  

    SCO is bearish and on track

    FAS is bullish but I doubt even fixing Greece will get us to $88 but it's March and it's an upside hedge we need so we'll leave it for now. 

    TZA I like as a new bearish hedge.  

    QQQ – Gotta go for a DD is we can get it for .21 like it says on the spreadsheet!  

  51. scottmi

    WTF!? dashboard is all green and i'm down 2%?? i ain't got that many hedges…

  52. rainman

    "S&P warns it may downgrade "a number of highly rated" G20 countries starting in 2015 if governments fail to curb rising healthcare costs and other costs related to aging populations. Japan, the U.S. and some European countries are likely to experience the largest deterioration in their public finances if no action is taken."
     
    Am I missing something here? Since when are the rating agencies consultants on what line items need to change in order for a rating to change? Saying that health care costs need to be curbed or we'll downgrade you is akin to saying a consumer can't get a mortgage because they drink too much soda. WTF?

  53. stjeanluc

    IWM Money / Phil – The 21 puts never made it to $1.25 yesterday (they topped off at $1.20) and I was watching to see if the RUT would fail 785 which obviously it didn't. They reached 1.25 at the open but we got out at 1.12 this morning so no harm done….

    IWM Money – Buying back the TZA 21 puts (now even better at 1.02)

  54. roro

    charts – technicals………fwiw……..2 Hr DOW chart looks like sell……all indicators crossing down from O/B
     
    scott………..FXCM has a very nice chart pkg for currencies………

  55. stjeanluc

    QQQ Puts / Phil – That train has left the station around 10:00 when I filled the sheet… Now these puts are up 50% to $0.32!

  56. scottmi

    Euro Bailout infographic/Phil – isn't that another case FOR gold?

  57. jabobeast

    Rabbi Phil--that was lots of good reading in yesterday's post. Market hours so I will save my comments for later other than isn't covet and envy sort of the same thing?
    will you please make CMG and EEM go down now!!!

  58. rainman

    scottmi / red — maybe your losses are due to the vix being up?

  59. stjeanluc

    Niall Ferguson admits that Krugman was right when they argued a while back about debt and austerity…

    http://www.businessinsider.com/niall-ferguson-paul-krugman-was-right-2012-1

    The interview is well worth the read…

    I think the debt crisis in Europe is unresolved and may be very close to going critical. The Greek default may be a matter of days away. And we heard from Angela Merkel, a speech at the beginning of the conference that really filled me with foreboding, because it suggests that she doesn’t get—or doesn’t want to admit—that the only way out of this short of disbanding the single currency is for substantial commitment of resources to the peripheral economies. All she’s offering is austerity, austerity, and more austerity. And that just isn’t going to work. So I think the debt crisis in Europe is an even bigger problem than it was 12 months ago. [...]

    But the Federal Republic of Germany isn’t based on an austerity pact that requires countries never to run a budget deficit. It’s based on a transfer union. The money goes from the richer Bavarians to the poorer north Germans and, of course, to the East Germans. And it’s based on a central treasury with things called Bunds. Now, if you apply the analogy to the European level, it means there has to be a proper European treasury and European bonds. And that’s just what the Germans have been opposing. So the German position is inconsistent. They want a Federal Europe, that’s now clear. But they’re not prepared to will the means. And you cannot base fiscal federalism exclusively on a pact—a kind of pact of death that nobody ever runs a budget deficit. [...]

    Well, certainly Japan is a terrible warning to the United States, that you can get into an awful equilibrium of very, very low growth and an inexorably growing debt mountain. And that is not where the U.S. wants to go. There are various forces in [the United States'] favor. It's socially not Japan. It's demographically not Japan. 

  60. lflantheman

    aapl port:   bought  20  feb 3 (weekly)   QQQ 62 puts for 1.64  for some downside protection.  I like these because only 4 cents of  time value.

  61. Lincoln

    Futures Players: do any of you folks use options to hedge your futures trades to prevent catastophes, ie you lose internet connection? ie long a CL call if you are going to to be selling the futures short  TIA

  62. stjeanluc

    lflan – What, downside protection…..

  63. lflantheman

    stj…….even AAPL will correct sometime!    :)

  64. zeroxzero

    Stj:  Pact of death indeed.  The points about East/West transfers within Germany is very apt.  "Austerity" is a crock; funny it's taking so long for it to be recognized as such.  Even if All Peripheral Debts were paid off today, they would be running a deficit by tomorrow — olive oil and kalamata olives will never go for BMW prices.

  65. lolobear

    Lflan – AMZN – you bought puts?

  66. zeroxzero

    Phil:  Thank you, I threw my wallet on the table with SCO and took two wallets off.  Nice.

  67. lflantheman

    lolo….I did.  And I note the stock crowd is selling AMZN, but the option buys are buying mostly calls.

  68. stjeanluc

    Europe / Zero – There was a German professor on CNBC this morning making the argument that Greeks and Spaniards raised their salaries over the last 10 years while Germans kept theirs stable and that it was one of the problems. But what was the baseline? Sure salaries are up in Spain, but still lower on average than the Germans. And the passage to the euros screwed up everything there price wise – you were there I am sure before. You could buy a decent meal in a restaurant for the equivalent of a couple of euros when it was pesetas. Well, no more since we have moved on to the euros. So salaries had to keep up! Nothing we can do. As they say in France and as Ferguson points out, you can't have the butter and the money for the butter. If you want a more integrated Europe, there will be compromises and sacrifices to be made on each side. 

  69. jthoma

    TOS must be broken- I am showing the market down- should be fixed shortly I guess!

  70. roro

    Spain's IBEX has been stuck at 8525 pretty much all morning ???? – Dow selling. Oil selling, ITA selling) and since the European open. it is sitting right at support on an uptrend line from 7600 and then 8000 (nov 30 2011)……….nothing underneath it………..
     
    just dumped it and doubled down……….if it crashes that is worth a lot to the downside and merci pour le Niall Ferguson article, stjeanluc.

  71. roro

    scott……..sold AUD/CAD again at 1.0645

  72. Phil

    AAPL/Yodi – $18.50 out of $20 is not really worth keeping open unless you have nothing better to do with $18.50 than make 10% between now and April.  As I think we're due for a correction and as you have $79.50 in the $380s, I'd roll the calls to 2x the 2014 $420/480 bull call spreads at $29 and you pull $21.50 off the table now and you're left with the bull call spreads ($120) covering the caller that's $56 in the money.   If all goes well, we get a pullback and you roll up the caller and eventually he expires worthless.  The long calls give you about a $70 cushion and you are flexible enough to make a 2x roll if you have to but, if you do, you would need to buy more longs to stay safe.  July $445 calls, for example, are $40 and you can do a 1.5x roll there and add 1x the 2014 $450/520 bull call spread for $30 etc.  If the only reasons you end up adding more long calls is because your lower spreads are deeper and deeper in the money, this trade can be fun to stick with. 

    TZA/JMM – That's ridiculous.  Only a few sold yesterday around $4.40 so all you can do is ask for your price and see if you get it.  The $17s are $4.90/5.30 and the $19s are $3.90/4.00 – ONLY the $18s have such a ridiculous spread so he's just messing with you.  I'd offer to buy for $2.50 and $3 and $3.50 to force his hand but I like messing with MMs….

    EuroNas/Roro – That's a whole other silly thing going on.  Again, though, this is what I mean by a fake rally.  You can just feel it's wrong. 

    Ratings/Rain – I think they do that to 3rd World countries all the time.  We just never got downgraded before so you never took it personally – as if we're SUPPOSED to tell other countries what they'd better do but God forbid anyone tells US how to run things….  

    IWM/StJ – Not a tragedy, I thought they triggered yesterday. 

    QQQ/StJ – Well, good rule of thumb if we're in for less than $500 is we're looking to DD on a spike against us.  

    Gold/Scott – Did you read my comments from yesterday.  Gold is as much of a fantasy currency as anything else.  The fact that it's fairly easy to identify and hard to reproduce are what made it a good currency once upon a time and, since it's pretty and fairly rare, it has always had a place in human society but from a utility standpoint – there is no practical reason it would ever be adopted as a replacement for currency since it can be decreed by any government at any time that whatever they want to produce is the new "hard" currency.  Gold love is a religion from a World that simply doesn't exist anymore but like Catholicism or Judaism or whatever – you can't count it out as there are still many people who practice it but it's a long stretch from there to expecting your religion to dominate the planet – no matter how many signs you think you see.  

    Covet and envy/Jabob – Well we talked about that and you have to look at the context but no, you can't substitute the two in a sentence can you?  I may envy you but I certainly don't covet you and even that is just a translation from the ancient Hebrew – the main distinction is that the commandment refers specifically to your neighbor's house (wife is covered separately, stealing is covered separately) and all the BS to make it SOUND LIKE envy has been added by modern conservatives to make the poor people keep their hands off their stuff.  I think the 10th commandment is the most abused of all commandments as it's 4 simple words in Hebrew and you can see many instances in many Christian bibles where it has been turned into a rant – much like any Fox News embellishment of the facts.  As to CMG – down $1 today is a big deal!  

    VIX/Scott, Rain – Yes, when you sell a lot of Premium in a low VIX and the VIX jumps up, you can get some ugly-looking results for a while.  

    Austerity/StJ – Neither Krugman or I can understand how seemingly rational people can believe austerity would work.  I think a lot of us were kind of slow coming off the block with strong arguments simply because it's hard to process that there are still people out there who believe you can cut back spending and grow your economy.  That experiment has been tried and failed so many times it's like having to tell people that leeches don't suck evil spirits out of the body – you just sort of assume EVERYONE else knows the person arguing for austerity is crazy so there's no point in berating them….  

    Futures/Lincoln – I know I would never trade futures without knowing the phone number to call to kill the trade.  Hard to hedge a directional trade you probably won't be in for more than 30 minutes.  

    Very nice ZZ – Congrats

    Kaufman/Rain – Did you have money there? 

  73. jmm1951

    Tourism economies
     
    Maybe tourism economies like Greece, Spain, and Portugal depend on tourists coming from countries with stronger currencies and then spending generously. Also take into account the remittance economy. I know that many families in the Dominican Republic and  Haiti receive regular cash infusions from family members in US or Canada.  Maybe when you put the tourism economies on the same currency as the industrialized economies, then this is the inevitable result when your surplus products of feta cheese and retsina are no longer cheap vacation treats for folks with pounds, schilllings, and francs weighing heavy in their pockets.

  74. Pharmboy

    Hello PLX.  SeekingAlpha crowd are helping that one….too bad they did not read PSW for the past 6 months when it was 30% cheaper. 

     

    PFE and LLY/Phil – yes, they are green b'c they lowered guidance, same ol' lang syne.  Hell, I can do that in my sleep.  LLY loses their patent protection (60% of revenues), and PFE loses theirs (Lipitor – 15% of revenues)….it's gonna hurt.

  75. roro

    is this about to pick up steam and really get rolling to the downside?………if you read Niall Ferguson and look at OIL then maybe.
     
    the DOW is getting close to testing that 200 MA on the 2 H chart at 12,565 too

  76. Pharmboy

    FDA approves VRTX's CF drug…OH MY!  What is the FDA thinking….????  YEAH!

  77. stjeanluc

    Austerity / Phil – Well, that was the plan lined up in 2008 by the GOP if they had won. Who knows where we would be today if that had been the case – 12% unemployment? Krugman said it many times, if you can borrow at 0% against 2.5% growth, you should borrow as much as you can… 

  78. rainman

    Phil / ratings — I really didn't pay much attention to ratings agencies until the colapse and the more I hear, the more I find I was better off not paying attention. Although their ability to move the markets is bewildering when they are usually a day late and a dollar short but I'm sure there are funds that use the ratings as criteria so they can force trades by moving ratings. It's not personal for me, it's the bottom line that matters, not how we got there.
     
    Kaufman / money — No money there.

  79. stjeanluc

    Apparently we are getting ready to slap tariffs on Chinese solar panels for dumping practices. I wonder who will be profit stock wise.

    http://idealab.talkingpointsmemo.com/2012/01/solar-trade-war-looms-as-us-considers-tariffs-on-china.php

  80. scottmi

    roro – AUD/CAD.. i think i want to play this as a position trade and looking for more confirmation that 5ma and other indicators are turning DOWN..   but i sure am tempted. watching..

  81. Pharmboy

    OK, so VRTX news hits at 8:04 PST…..they jack it up $3…THEN the hault trading.  What Gives?  They better be bought out, otherwise the SEC needs to look into this stuff.  That is crazy that they halt AFTER the news release.

  82. zeroxzero

    Jmm:  Tourism contributes around 11% of Spanish GDP.  Significant, but not determinative.  Spain has fairly well-run companies — Inditex [Mango] is an apparel leader, I've seen them all over the U.S. — and cannot really be compared to Caribbean tourist destinations, which are underdeveloped countries in an industrial sense and export little or no manufactured goods.  For example, wind energy installations in Spain have produced, at peak, over 50% of it's electrical demand, for example.  The Dominican Republic, with lots of wind, has yet to install more than trifling quantities of renewable energy, even though the island runs on diesel fuel!
     
    When the Euro was adopted, every salaried person became @ 20% wealthier, and this kicked off an epic real estate boom that actually made the U.S. boom pale in comparison — with dire results, unfortunately. But Spain is an order of magnitude more sophisticated, culturally, politically and economically, than any Latin American nation, and isn't even remotely comparable to Caribbean island nations.

  83. pentaxon

    So far it's a really picturesque "rejection at resistance" on the adjusted chart:
    http://www.pentaxon.com/psw/spy_worldcurrency.html

  84. Burrben

    EDZ – Why is EDZ down today with all of the other index's down as well?  Doesn't make much sense as a hedge if that's the case.
     
    At least TZA is up small..

  85. rdn4evr

    Hi Pentaxon, Have you updated the VIY indicator lately?  It did a pretty bang up job of predicting the ramp from the end of November to now.

  86. Pharmboy

  87. jthoma

    this could get interesting if the financials give it up.

  88. Phil

    Tourism/JMM – I don't think tourism suffered in Italy and Greece from the EU.  They were screwed up countries before it started and they used to print their way out of trouble.  Joining the Union took away the ability to print money but did nothing to address their structural issues – it was only a matter of time.  

    What the heck is AAPL doing?  The chart must be broken as it's going the wrong way…  I forgot they could go down.  Not good for the Nas though…  

    Picking up steam/Roro – If AAPL goes, the Nas will drop like a rock tied around another rock.  

    Ratings/Rain – You could say they are careful and don't make rash decisions.  There is lots of bad stuff to say about ratings industry and I've often said the process has been corrupted BUT, they also have a lot of top-notch serious people there who do their very best to get things right and they do not lightly move the needle on major countries.  When they do, you can bet it's over a long-term structural issue that cannot easily be fixed.  Their note about what the US needs to do was released now because there is a window of opportunity for us to act that does not extend to 2015 – that would be far too late to make the changes required and, according to their models (again, the best), that will be too late so they warn us now.  Have I mentioned how nice Jersey is?  

    Solar/StJ – Our US companies should do well but that has to balance against Germany and others cutting back spending.  Not really the year I'd want to jump on solar – especially if oil crashes.  

    79.60 on the Dollar, $98.50 on oil is – Goaaaaaaaaaaaaaaaaaaaaaaal!  Let's see if it holds.  Wow, a $3 move on the Dollar during the session – that's the gift that kept on giving for $3K per contract!  

    EDZ/Burr – China pushed more money in so good day for EEM but it's fading and EDZ is coming back.  

  89. zeroxzero

    Stj:  Bottom picking Spanish real estate will be a very good idea at some point.  Europe has lousy weather, an aging population, and Spain is, among other things, fairly empty — the Catalan coast [Costa Brava] has great weather, and one simply has to be selective.

  90. pentaxon

    rdn: yeah, I know. it always makes me sad, when my indicator is that right. smells like big market manipulation. who's game are we playing here? it predicted that top for 23rd of January already before the mid of December. Ain't that sad???
    will update tomorrow. gotta run.

  91. roro

    DOW (real) bounced right off of the 12,565 at that 200 MA on the 2H
     
    it the 50 MA on an 8 Hr chart……nice break of that and next level down looks a lot like 440 and then 350.
     
    might look to sell a bounce from here back to 12, 625/40………..about the NL on that H&S

  92. rainman

    Phil / Jersey — Thought you already lived in Jersey :) What do you need to do to move there?

  93. zeroxzero

    Damned with faint praise: "Jersey is well known for experiencing the most annual sunshine in the whole of the British Isles."

  94. Phil

    11:00 AM On the hour: Dow -0.43%. 10-yr +0.15%. Euro -0.4% vs. dollar. Crude +0.58% to $99.36. Gold +0.27% to $1739.05.

    12:00 PM On the hour: Dow -0.59%. 10-yr +0.23%. Euro -0.69% vs. dollar. Crude -0.39% to $98.39. Gold -0.18% to $1731.35.

    12:05 PM European shares close mostly green, but well off their best levels, dragged down by a weak U.S. open. Stoxx 50 +0.6%, Germany+0.2%, France +1.2%, Italy +0.5%, Spain -0.1%, U.K. +0.2%. The euro -0.7% at $1.3053. Of greatest interest today is the apparentmounting of a challenge to the SNB's euro/franc exchange rate floor.

    Jan. State Street Investor Confidence Index: 92.4,down 2.1 points from December's revised reading of 94.5. Regional breakdown: North America -0.1%, Europe -10.1%, Asia-Pacific +3.3%.

    A worse-than-expected reading on consumer confidence was highlighted by a 5.2 percentage point jump to 38.7% in respondents labeling business conditions "bad." Though more consumers now see the job market improving over the next few months, the proportion expecting wages to increase fell off. 

    Tales from an insolvent country: Today's 8.8% rise in the Athens 20 puts the index +17.4% YTD. The banking index rises 16%today, giving it a gain of 125% in the last 3 weeks. National Bank of Greece (NBG +12.4%+83% YTD. The Greek ETF: GREK +36%YTD. 

    Key numbers from the CBO report: GDP growth will slow to 1.1% in 2013 after 2% this year. Unemployment will stay above 7% until 2015 after rising to 8.9% at end of this year and 9.2% at the end of 2013. The Social Security Disability Insurance trust fund will be exhausted in 2016; Medicare hospital insurance trust fund will be exhausted in 2022. - Did I mention how nice Jersey is?  .

    The U.S. homeownership rate fell to 66.15% in 2011, the lowest level since 1997's 65.7%. The number got as high as 69% in 2006, notes Mark Perry, fueled by political obsession that "turned good renters into bad homeowners." He expects the rate to continue falling to the 64-65% that prevailed for decades prior to the mid-1990s.

    S&P downgrades the credit ratings of several U.S. mortgage insurers, saying the outlook continues to be negative as the economy continues to show weakness in the job and housing markets. The ratings agency cuts Radian Group (RDN -5.1%) and MGIC Investment (MTG -1.1%) both by a notch to B (III), five ticks into junk territory.

    DoubleLine's Bonnie Baha compares the big banks to the legacy airlines, suggesting they have yet to find a sustainable profit-making model in a new world. Focus on the balance sheet – the "good news" of stronger capital ratios – is misplaced, she contends. "Deleveraging … is not a business model."

    Traders are testing the will of the SNB, driving the euro/franc exchange rate to CHF 1.2037, the lowest level since the bank set a CHF 1.20 floor on the pair last fall. Since that bombshell move, the euro has mostly traded above 1.20 as punters waited for the SNB to raise the floor even higher. With Hildebrand's ouster, 1.20 may look challengeable.

    Portugal's 10-year bond yields have soared to about the same levels Greece's were at (17%) last August when the country was already negotiating a haircut on its debt and a 2nd bailout. "The path of least resistance (for Portugal) seems to be more repricing towards a potential Greek-style PSI," says Commerzbank's David Schnautz.

    At Davos, Wall Street’s top bankers found a curious ally in fighting to end the Volcker Rule preventing banks from engaging in prop trading: foreign governments. U.S. banks and some foreign banks doing business in the U.S. would be restricted in trading foreign government bonds, yet the rule exempts U.S. government securities – every other country is out of luck. 

    As we expected, pros getting out – climbing over the backs of retailers coming in:  In spite of this month's rally, polls from Reuters found U.S. asset managers to have slashed their equity exposure in January, often due to eurozone-related fears. A typical "balanced" portfolio in the U.S., Europe, and Japan is believed to have held just 50.5% of its assets in equities in January, the lowest level since October. Bond allocation surged to 36.2%, fueled by Japanese demand.

    Solar stocks are heading lower following reports that German subsidy cuts could arrive by April (TAN -2.3%). Chinese names are among the biggest losers: SOL -7.2%CSIQ -8.5%TSL-7.8%CSUN -5.5%

    Bullish stock markets are pulling along shares of some of the most criticized companies, as nine of the 10 most shorted stocks – including DMNDLNKD and CSTR - are +12.3% YTD. The shorts are getting squeezed for now, “but those who started shorting three months ago are probably still in the money," one trader says, "and generally speaking, longer-term shorts are right.”

  95. Phil


    RadioShack's (RSH -28.45%profit warning is not only hitting the retailer's shares in a big way, but it also appears to be pulling down some of its peers. Best Buy (BBY-5.4%, Conn's (CONN-1.3%, Aaron's (AAN-3.8%, and hgregg (HGG-4.2%. Dixons' (DSITY.PK) ADRs -10.1% on the loss of its CEO to Apple.

    RadioShack (RSH -28.9%) shares are downgraded to Neutral from Buy at Janney, which says RSH is "seeing a somewhat dramatic shift to a structurally lower gross margin, and we are unclear where this shift will bottom out." The firm cites concerns over RSH's post-paid business with carrier partner Sprint (S), which the company blamed for much of its weak guidance

    Deep value retail stores such as Dollar General (DG) and Family Dollar (FDO) have taken significant market share from Wal-Mart (WMT) in recent years. Rocco Huang explains how they do it and why it's likely to continuethe growing number of poor U.S. consumers who buy low-priced single-use packages, even though the profit margin is much higher than for larger sizes.

    The on again, off again financing deal dance between Sears (SHLD -4.2%) and CIT Group (previous) continues with a new report tipping off that CIT may have pulled its factoring arrangement again.

    Research In Motion (RIMM -2.9%) takes on a barrage of criticsm (IIIIII) for a cartoonish superhero-inspired marketing campaign aimed at spreading the word about the firm's products. The common theme across the tech media: "RIM is completely out of touch."

    Is a bubble forming in the mobile app space? Ad firm Fiksuestimates the cost of obtaining a "loyal" iOS app user rose to $1.81 in December, up 65% from May's $1.10. That's good news for Google (GOOG), Millenial Media, Velti (VELT), and other mobile ad firms, but less so for developers. The download volume for the top 200 free U.S. iPhone apps is believed to have grown 60% over this time, to 6M downloads/day. (previously)

    Facebook has rapidly outdistanced Yahoo (YHOO) in the online display ad market, but Yahoo's 1,100 patents, many of which relate to search and social networking, could prove a thorn in its side. Yahoo thus far hasn't been aggressive in trying to monetize its IP, but the company's recent management and board changes could soon lead to a strategy shift.

  96. checho

    Yentervention/ Phil,
    If there is a developed country which is fu***d it has to be Japan, aging population, huge deficits, nuclear mess clean-up, declining exports etc….the only big thing in their favour is strong YEN, why wouldn't they just go 'ALL IN' on a shopping spree (printing) and lap up some big companies/ commodity assets with their strong currency and then when the currency becomes sane their inductry would pick up and the assets in local currency would be worth higher……
    I am sure there is some idiocy in my argument, which you will flash out but the point, can't Japanese cos be agressive and buy assets abroad especially emerging economies?
    I am long USD-JPY, short GBP-USD, short Gold….

  97. rainman

    Anyone follow CNH? Know why they are being punished?

  98. kinkistyle

    checho:  If everyday your cash gains purchasing power (as in a deflationary environment) why would you want to use it.  You can buy 2 pairs of jeans with your 1000 yen now, but maybe next year you can buy 3 pairs and maybe in 2 years you can buy 4 pairs.  Better to just save it up to get a better deal later.

  99. Phil

    Spanish Property/ZZ – Depends how broke the country gets and what kind of taxes etc they use to try to make it up.  That possibility crossed a lot of places off my future home list.  

    Senate/Rain – It's the House that may vote it down.  

    NFLX falling fast and we didn't get a chance to short them.  8(  

    Jersey/Rain – Yes, I like the consistency of the whole thing.  People know I live in Jersey so most won't notice the change.  

    Japan/Checho – Funny story there.  That was pretty much exactly what they did in the 80s and then the market crashed around them and they were caught holding trillions of dollars of commercial paper that dropped 50% on them and it destroyed their economy for 20 years.  Not sure if they are dumb enough to fall for that one again. 

    CNH/Rain – I think the whispers were better after CAT and MON and they only beat by a little and ADM's report was not good at all.  

     

    Panic begins (again): After a brief run above 2%, the 10-year Treasury yield touches a new YTD low of 1.8%. No matter what might be happening in equityland, the Fed's pledge to hold overnight rates at 0-0.25% for seemingly a generation allows carry traders to finance government securities for next to nothing, making even 1.8% look attractive. AreTBT holders foiled again? 

    While the knee-jerk reaction following the Fed's lateset rate pledge was based on the belief that low interest rates forever = high stock prices, Barclays Capital's Barry Knapp says history shows that the Fed's policy is actually bad for stocks. This is due to the uncertainty surroundng the direction of inflation and the role it plays in in PE multiples.

    Short China: Its commodities bubble is set to pop (Market Watch)

  100. BertII

    ST J /oil Lines
    Line were almost perfect for oil today up over R3  and almost to S2  sucks that I had to work at my day job

  101. Phil

    Keep in mind those Case-Shiller charts are WITH record low borrowing rates.  Imagine what will happen if rates ever rise…

    Dollar down to 79.50, oil testing $99 from below.  

    It's still a window-dressing day, if the sellers are gone, the bulls may try again.  Dow volume just 57M at 12:30 so not even 20M an hour (30M an hours is "normal").  

  102. terrapin22

    Pharm / ARRY – i'm still in this one from a year ago.  hold on or get out when i breakeven at $3.20?

  103. stjeanluc

    Day job / Bertll – What gave you that bad idea?

  104. diamond

    From the Chart Room: AMZN

  105. zeroxzero

    Agree Spanish property.  Miraculously, I don't own any.  But I will, after tax increases push values down further.  But the best stuff always has a limited downside.

  106. stjeanluc

    Spanish Real Estate / ZZ – I think I told you that my sister lives in Barcelona and my plan is to retire there sometimes so I am keeping my eyes open. But the bottom might still be way off and who know what happens to the euro in the meantime.

    And Phil, I know Jersey might be more appealing tax wise, but the night life there can't compare the night life in Barcelona, sorry! Not even talking about the weather of course. My sister's first apartment there had no heat or A/C. When it was a little bit chilly in the winter they used a space heater in the bathroom and that was it… Try that in Jersey! And besides, way to small. I would be claustrophobic even outside there!

  107. Pharmboy

    ARRY/terr – data are due out sometime in late Q1 or early Q2.  THAT will make or break them.  I am holding on to my formidable investment in them (1K shares from a dd that I am still down a bit on.)

  108. lflantheman

    diamond/AMZN:   supports downside earnings play, eh?

  109. yodi

    stjeanluc
    How much night life and bar hopping you are thinking of when you retire???

  110. Phil

    Time to put my foot down on GLW again.   I was going over my watch list and this one keeps jumping out at me.  2013 $12.50 calls are $1.80 and you can sell the $12.50 puts for $1.78 for net .02 on the $12.70 position.  Yes, with margin it's the same as buying the stock but with cash, you spend nothing for 100% of the upside.  More relaxing way to play is selling 2014 $10 puts for $1.50 and buying the 2014 $12/17 bull call spread for $1.75 for net .25 on the $5 spread and worst case is you're in 1x for $10.25 (19% off).  TOS say net margin on puts is $1 so not much to tie up on a $5 upside, even for 2 years.  

    Night life/StJ – I have learned from where I live now that I'm very happy living on a mountain and traveling when I want to be entertained.  I've live in NYC and London and Paris and I'm turning 50 next year so, on the whole, I need a nice village I can walk around with a good pub I can walk to where I can play chess and watch sports with some friends and I need an airport or train that can take me to a major city or a mountain for a long weekend but, at home, I'd rather have fresh air and water and trees and animals running through my yard.  

  111. scottmi

    diamond – thanks for that AMZN chart link.. introduced me to the Ichimoku cloud. i like it!

  112. diamond

    lflantheman – Yes … you seem to be in tune with the zeitgeist!
     
    scottmi – No problem, hope it helps.

  113. zeroxzero

    Stj:  Hard to imagine Jersey rather than the Caribbean. Plus you don't escape U.S. taxes unless to expatriate, and even then the IRS will haunt you.  Sis in Barcelona?  Cool.  I'll get back there within six weeks.
     
    Phil:  Jersey weather better be good!:  "If a U.S. citizen or long-term resident expatriates on or after June 16, 2008, he or she is deemed for tax purposes to have sold all of his worldwide property for its fair market value the day before leaving the United States. This deemed gain is subject to U.S. tax at the capital gain rate. The gain is taken into account without regard to any ameliorative tax provisions in the Internal Revenue Code. None of the exemptions, exclusions, or nonrecognition or rollover provisions that might provide tax relief will apply. These helpful (but in this case non-applicable) provisions include, for example, the inability to benefit from the $250,000 per person ($500,000 per couple) exclusion from gain on a principal residence (Section 121) and many other rules. The exit tax is analogous to an estate tax. Just as all assets that would be part of one’s estate would be included in one’s gross estate, the expatriate’s assets will be subject to income tax on unrealized gains as of the day before the person expatriates."

  114. yodi

    lflantheman
    Zeitgeist as a German it does not mean very much Ghost of the time ????

  115. 8800

    Phil,
    In the lunch hour lull, what would be your favorite downside hedge of the more liquid, narrower spread options?
    Thought it would be great to be prepared in the event of a late in the day EOM, window-dressing rally.
    Thanks

  116. sagemm1

    Phil
    The pacific NW is pretty amazing and describes your wants/needs to a tee…but I understand when you find that place you are most comfortable

  117. dpastramas

    GLW / Phil – I am not familiar with this company. Why do you like it so much to be part of your watchlist? Would you recommend a play for GLW in the $25K portfolio?

  118. yodi

    stjeanluc
    FAS strangle it looks as we will take the puts home again if nothing else

  119. rainman

    Greece 'a step' away from twin rescue deals
     
    (AP:ATHENS, Greece) Greece has all but concluded a crucial deal to write off half its privately-held debt and is now working on new austerity measures needed to secure continued bailout loans, Finance Minister Evangelos Venizelos said Tuesday.
     

  120. rpme

    Phil and Rain, I own CNH and perplexed as well, they beat on sales and EPS and guided up…and they are down 9%. I have looked at as many reports as I can find and cannot figure it out.

  121. zeroxzero

    FT: " the company’s valuation puts it at an astounding sales-to-market cap ratio:

    A billion dollars in sales is huge for such a narrow category. But even that is small compared to lulu’s stock price. You see lulu market cap is now almost $10 billion. The stock is priced at 10 times sales. That is amazing for a fashion company. Nike by comparison has a market cap of $46 billion and a price to sales ratio of just over 2. And Nike is not a thin margin business. No other clothing company comes close.

    But woe betide the short seller who gets in the way of a yoga aficionado and his or her coveted threads. "

  122. diamond

    yodi – Zeitgeist

  123. stjeanluc

    Retirement / Yodi – I am not talking about clubbing, but at least there are people in the street and in the restaurants and most of them are actually nice…

  124. stjeanluc

    Spain / ZZ – I have plans to go there in in the spring to spend a month… Maybe we can meet there!

  125. stjeanluc

    FAS / Yodi – We'll take what the market gives us and roll the rest!

  126. rainman

    diamond / Zeitgeist — The movie. First one was interesting but then it went downhill from there.

  127. yodi

    diamond
    thanks one always can learn something

  128. stjeanluc

    Night life / Phil – That could be found in Spain as well and probably cheaper now. And with better weather. But I hear you…

  129. terrapin22

    Pharm – what are your favorite buy and hold stocks now?  PLX, CRIS…..

  130. rainman

    rpme / CNH — I think Phil is on the right track. I think the ADM results are taking down the entire sector (I'm long AGCO). The indication seems to be that the USDA will reduce crop outlooks.

  131. Pharmboy

    terr – for lower basis, you have them.  SGEN, IMGN, ARIA and VRTX are higher beta ones I like.

  132. Pharmboy

    Amazing volume since the 8:50 PST low…..

  133. zeroxzero

    Stj:  Sure.  My schedule is a fractured mess this year, but I need to get there rather desperately, so will look for a hole and make an appearance before the summer break, when everyone disappears.  We'll stay in touch on this.

  134. l4real

    Pharm
    What do you mean by "Amazing"? A lot? a little?

  135. Pharmboy

    l4 – sarcasm font….no volume, oh, until now of course, and that volume is red.

  136. lunar

    phil,
    i'm holding a few june 300 puts on CMG going into earnings.  any suggestions for a reasonable way to hedge this one way bet? thx.

  137. Pharmboy

    Dr. Ben to all of us….

    Don’t be disappointed child, if your prayers go unanswered
    We are not responsible for these sad circumstances
    Secret agents and freedom fighters on those impossible missions
    Better put your toys and games away, maybe take the kids out fishing
    For a family treasure, in your early years, behind your veil of tears
    So frustrated, get up anyway, so complicated, changes every day
    So the darkness fades
    And the light will come shining through
    I heard the eyes that look to a better world
    always hide beneath the veil of tears

  138. kallenjr

    Phil,
    TOS shows MA earnings on their chart tomorrow 2/1 before market with conf call on 2/2 at 8am. I assume your info that MA earnings are 2/2 is correct.

  139. jabobeast

    I am really starting to 'envy' the guys who are long CMG…
     
    FU CMG!!!

  140. kallenjr

    MA is shown for earnings 2/2 before market from other sites. Good.

  141. dclark41

    Phil:

    Looks like we are finally getting some movement (in the right direction) in XRT. I remember struggling with this last year.
    http://seekingalpha.com/article/246840-how-we-re-dealing-with-rally-pressure
    "Back on January 3rd we had $30,737 in virtual cash against and unrealized loss of $4,810. All the moves since then (originally from daily Member Chat) are detailed under the main $1050 Portfolio post in our Portfolio Tab but the short story is we killed the XRT January $46 puts, even on the 4th. That turned out to be a bit early as they flew all the way to $2.50, and even now are at $2.03. But it doesn’t pay to have regrets. It does pay to review your actions to see if you could have timed things a bit better though!"

  142. roro

    OIL is a barrel of fun!

  143. kurtww

    And FU RUT and EDZ!! I hope this is just window dressing… ugh. One day soon I will learn not to be a permabear. 

  144. silentstorm44

    Phil, Re:  no nightlife and "animals running through my yard".  You need to live in Lancaster County, (amish country) PA !        ; )

  145. BertII

    ST J / work
    Kids in school dictate having to work
    Nice down action on oil down to S2 then back to S1 maybe back to S2

  146. BertII

    Phil /BWLD
    we are on track with that BWLD Feb 75/65 spread with BWLD at trending back to almost 67 should  I wait it out or take the money and run on the next dip

  147. cwan120

    GLW for IRA / Phil: Do you think GLW is good for IRA?  How about buying GLW here and selling Jan 2013 $12.50 calls, 14% in one year if called away?

  148. BertII

    FU gold those 10 GLL puts are looking like rolling material if gold keeps going up

  149. barfinger

    For the last month, CMG has more or less corresponded with QQQ, which has been our strongest index. Oh, and the day after GOOG reported their big miss, GOOG was down 45 points and AAPL down 9, while QQQ was almost even on the day. Interesting….

  150. Phil

    Expat/ZZ – Oh no, I won't be able to vote!  Yeah the tax laws are tough – they do not give you a break in this country at all.  

    Downside Hedges/8800 – Still TZA or EDZ.  TZA Apr $19 puts can be sold for $1.70 to fund the $20/25 bull call spread at $1.95 for net .25 on the $5 spread that's $1.42 in the money to start.  EDZ is crazy low at $14.28 and you can sell July $12 puts for $2.05 and that pays for the April $12/18 bull call spread at $1.80 with a net $11.75 entry (17.5% off) as your worst case.  

    Pacific/Sage – I like Vancouver (the trick is to get out of the US) but nowhere to travel from there.  I think Europe survives best in the long run as they know how to buckle down if they have to and the people still have a Social Conscience, which I think is essential in the long run.  There are lots and lots of places I like to go for trips that are within a half day's travel.  My Grandfather lived in England until he was 98 and I have always been able to see myself enjoying my retirement there – more so than he did as he would have loved to have a 100mbs multi-screen set-up for trading! 

    GLW/Dpast – I like the trade even if you have a small amount but it's too long-term for our $25KP.  They make glass for LCDs and phones and tablets and they make fiber cables and insulation for emission control systems in cars and trucks – all good stuff.  They took a hit because TV sales died on them even as tablet sales became a new revenue source but one day they'll be firing on all cylinders again and, meanwhile, they pay a 2.4% dividend (not in that play) with a forward p/e of 8.5.  

    CNH/Rpme – Expectations were just too high – they ran from $35 in late Dec to $47.50 yesterday and they guided in-line, not up.  They are a nice long-term hold but nothing very sexy about them.  

    Spain/StJ – Also, I'm awful with languages.  Can't see living in a place where they don't speak English.  I know I'd probably get used to it but, at the moment, I'm just not in the mood.  I spent a summer in Japan once and loved it, but you end up seeking out other English speakers anyway.  Never got past about two dozen catch phrases in Japanese and my three years of High School French were totally wasted when I spent a summer in France and quickly realized I couldn't actually speak French, despite my good grades.  

    Volume/Pharm – Yes, now just 74M on the Dow at 2:30. 

    CMG/Lunar – There's no reasonable way to hedge it.   You have far out of the money puts and you'll need a huge move to get paid.  If that's not what you're willing to roll the dice on – why play at all?  

    MA/$25KP, Kallen – I had them down as 2/2.  They are up again today and I never thought they'd drop that far, just hoped they'd have a sell-off into earnings but apparently people think they can't possibly lose.  Now they would have to drop about $15 (5%) by tomorrow for us to get even (and that was a roll) so it's a dead trade and we should take .75 off the table in the $25KP.  

    XRT/DC – Thanks, I just remembered we have to give them a chance. 

    Lancaster/Silent – I have all that where I am now but I can get to NYC in 30 minutes if the traffic Gods are with me.  I have a 40 acre park with a lake in my backyard and nice restaurants and such all around me so things will have to get pretty bad around here before I give all this up and hightail it for foreign lands but, if the Reps win in November – who knows how fast this country can self destruct (but we'll certainly get a good live test!).  

    BWLD/Bert – That spread is about $7 out of $10, which is very nice, up what, about double?  So you are now risking $7 to make $3 more but I don't see any particular reason to think our target was wrong and we still think the market sells off so I'd put as stop on the $75 puts at $8 (now $9.20) and cash them in and leave the naked puts if BWLD heads up but, otherwise, steady as she goes.  

    GLW/Cwan – Sure, I like them long-term and it's extremely doubtful that something will replace glass for screens in the next decade while fiber is a good infrastructure play.  Nothing wrong with your boring play. 

  151. nicha

    Phil and all- I am leaving for india tonight. I will be back on March 9th. Have a great month!

  152. jabobeast

    travel safely Nicha ;-)

  153. sagemm1

    hmmm setting us up to finish at even for the day???

  154. stjeanluc

    FAS / Yodi – Unless we see some late action, I am tempted to leave that strangle open overnight! There is about 7% downside protection and I would leave the calls open anyway… Might be worth a shot. Decay will kill about $0.30 overnight.

  155. stjeanluc

    Safe travel Nicha… send postcards!

  156. yodi

    stjeanluc
    Not much in the put at the moment but still an other hour to go

  157. stjeanluc

    Work / Bertll – I was of course just kidding – I have 2 of them in school now as well. I do work as well on a more limited schedule now!

  158. biodieselchris

    Does anyone have an email for lvmoda? I wanted to contact him regarding Las Vegas and real estate (my parents are looking in the area). I'm just trying to get a few data points.

  159. biodieselchris

    Jabo – I was short NFLX in Nov and the same position in July of the next year would've easily been worth $250k.  Only nibble and apply the hammer when the time comes.
     
    Patience with this one.

  160. stjeanluc

    EDZ / Phil – This one is also a 3x ETF that is getting killed by decay. The wild gyration in EEM are just taking a toll now. In September, EEM was at 42 and EDZ was then at 20 and change. EEM tanked but is now back at 42 and EDZ is now trading at 14 or so. That's 30% in 5 months… The problem is that the underlying instrument is just too volatile. This is like TBT but maybe even worse! Great for short term trade, but I would say unreliable for a long term hedge. Just my $0.02…

  161. oburlacu

    We closing the weekly QQQ in 25kP?

  162. 2can

    Have fun Nicha! 

  163. jmm1951

    DG vs WMT
     
    Article linked to makes some good points. Poverty is one of the few sectors of the economy seeing significant growth in the US. Businesses like DG are well placed to exploit this exponential growth opportunity. In third world countries you are more likely to buy a pair of aspirins rather than a bottle of 200, so clearly the mark up per pill is much higher. DG used to operate out of strip malls in Florida, but now I see them building their own larger free-standing  stores and selling a wider range of crapware, usually close to trailer parks. Just like AAPL really, in its own way.
     
    Stjean/Barca
    Down the Ramblas, the wide central artery of the town where crowds of
    people streamed constantly to and fro, the loudspeakers were bellowing
    revolutionary songs all day and far into the night. And it was the aspect of the
    crowds that was the queerest thing of all. In outward appearance it was a town
    in which the wealthy classes had practically ceased to exist.

    [Description of Barcelona in 1936 from George Orwell's memoir Homage to Catalonia.]

  164. lolobear

    Any play on GMCR?  Earnings tomorrw and i'm thinking they will fly!

  165. rainman

    Nicha — Safe travels and enjoy yourself (forward pictorial proof! :)

  166. kallenjr

    Anybody else got MA Puts in 25kp? I'm trying to sell at 0.75 (can't – it's at 0.66). But no volume. I would be the biggest seller today if I sell these.

  167. dmoroz

    Didn't the QQQ puts get sold @ .38 earlier in the afternoon?

  168. zeroxzero

    Phil:  FWIW, there's no reason to formally expatriate from the U.S.  I've lived abroad and only rarely sought formal residence permission — only when I had to work for companies. No one really cares, U.S. driver's licenses work well in most places, and in any event, residence isn't citizenship.  Besides, the world's a dangerous place, and you already know I think this hemisphere is a better place to be when the fireworks start.  Not that anyone would actually invade Jersey — neither of the two Jerseys, now that I think about it, since they could never find the one, and would rather not find the other!

  169. sagemm1

    dmoroz/QQQ
     
    I don't think so, there was talk of DD if spike against but that is my recollection and sometimes that is not quite what it used to be

  170. bbates

    Phil do you think ADM is at a good enough price to sell some puts on

  171. Pharmboy

    couBSgh couBSgh cough…..what a joke….

  172. scottmi

    roro -  AUD/CAD  when in doubt.. wait.   sometimes i hate waiting. ;-)

  173. bbates

    Phil do like any QQQ puts for EOD in case there is a plunge tomorrow

  174. l4real

    Nicha
     
    Have a great trip! Enjoy the good food!

  175. rainman

    bbates / ADM — Phil will likely tell you to wait to see if the downgrade police show up.

  176. Phil

    Have a great trip Nicha!  Feel free to check in with an economic report. 

    LV/BDC – I believe he had it in the Build a Berkshire Workshop.  

    EDZ/StJ – Yes it decays but it went from $15.78 last April to $37 in October so I'm not thinking $13.50 to $18 is a big stretch.  

    QQQ/$25KP, Obur – If you didn't get out even, at .25 again, I like them as a play on AMZN disappointing so one more night.  Had we gotten the chance to DD, I would have been happy to get out.  

    GMCR/Lolo – I hope they fly and then we can short them.  There's no long-term buisiness there but, up front, they sold a ton of machines this Q.  

    QQQ/Dmor – That was the smart play.  

    MA/Kallen – Someone got .73 but you could cross your fingers on tomorrow morning and maybe do better, maybe do worse.

    Invasions/ZZ – That's one of my considerations.  Close enough to the UK to be well protected, far enough from France that we don't get swimmers.  

    ADM/Bbates – I'd wait to see if the downgrades take them lower.  They're not talking about a one-time thing, they think all of 2012 is going to suck. 

    QQQ/Bbates – I like the same Friday $60 puts that we have in the $25KP on the premise that this is yet another pump job and, eventually, that downside dam will break. 

    LOL Rain – good call! 

  177. dmoroz

     

    sage, I think i may have jumped the gun on that one. I figured we went from a negative to a small profit. With only 3 days left, market already down for the day (so how much more can it go for today?) and 10%+ gain ( got in @ .30 out @ .35), it was an easy call for me. I can take the money and if the puts dip again I can buy a fresh bunch. I have been bit before too many times waiting for someone to tell me to take the money.  

     

  178. Pharmboy

    MRX – selling Feb 30 Ps for 25c…..something is going on there.  May have to do a BCS on them out in time.

  179. dmoroz

    WPRT – kicking myself for getting out in upper twenties. 

  180. stjeanluc

    FAS Strangle – It's settled, we ride the night…. What's the worse that could happen – decay or one side pays off!

  181. rainman

    Pharm / Metallica — Good timing on the dose of Metallica.

  182. yodi

    stjeanluc
    set an offer of .45 so we see FAS

  183. stjeanluc

    EDZ / Phil – Sure, $18 seems OK as a target if EEM were to only go back where it was in December. A nice little correction should take care of that!

  184. sagemm1

    Dmoroz/taking profits
     
    …I know this month of not one single 1% down days has really bitten me, still waiting for a real dip to at least inspire confidence in getting long except for a few things that I am already long

  185. stjeanluc

    Got a chance Yodi…

  186. Pharmboy

    MRX – July 35/30 strangle 4.05 (sell), buy the stock. 

  187. yodi

    stjeanluc
    NO no stick

  188. Phil

    1:00 PM On the hour: Dow -0.39%. 10-yr +0.22%. Euro -0.55% vs. dollar. Crude -0.18% to $98.61. Gold -0.07% to $1733.15

    2:00 PM On the hour: Dow -0.45%. 10-yr +0.2%. Euro -0.5% vs. dollar. Crude -0.7% to $98.08. Gold +0.29% to $1739.45.

    3:00 PM On the hour: Dow -0.22%. 10-yr +0.2%. Euro -0.49% vs. dollar. Crude -0.4% to $98.38. Gold +0.32% to $1739.95.

    Short of a late-session slide, the S&P 500 will end January without even one session decline greater than 1%. Joe Weisenthal notes the last such fall was on Dec. 28. A quick check of 2011 shows no months claiming such lack of movement to the downside.

    The latest in Greek restructuring talks has private debtholders taking a 70% haircut, but getting a sweetener in which they would recover more should the economy bounce. The extra recovery would still be minor, leaving holders with losses far greater than the 50% agreed to 3 months ago.

    The National Restaurant Association's performance index jumped to its highest level in nearly six years in December. Aided by favorable U.S. weather conditions, a strong majority of restaurant operators reported higher same-store sales and customer traffic levels; operators are "solidly optimistic about sales growth," with the most positive economic outlook in nearly a year- We saw this happening in our Holiday Shopping Survey.  

    Pres. Obama's stimulus package succeeded in kicking upinvestment and production in the electric vehicles, but the lingering question of long-term success remains unanswered. Investments in the industry by China and South Korea outpace that of the U.S., while it's also unclear if strict mpg rules set for the future will stay in place. But insiders still say ambitious EV goals can be met with longer-range, cheaper batteries to help drivers adopt a new paradigm. EV-related plays: AEF, AVAVECTYFGACR.PKKNDINRG,NSANY.PKGMTSLAZAAP.OB

     

    If corporate profit margins really are "as good as it gets," what then becomes of the bullish case for stocks? Every time profit margins have climbed this high – which has happened only twice since the 1950s – they've collapsed, taking profits down with them, Henry Blodget observes. "And when profit margins collapse, stock prices generally collapse."

    TARP will swing to losses of $23B in FY 2012 from gains of $37B last year, the CBO predicts. The reversal will largely reflect steep declines in the share prices of AIG and GM. Still, as of October, the Treasury had recouped $316B of the nearly $411B it used for bailouts. (See also III

    Don't be fooled by apparently cheap valuations for financials and the sector's finest January performance since 1997, writes Brian Belski. The "whole new world" of increased regulatory scrutiny and higher capital requirements is sure to hurt profits and share performance for anyone looking to hold for the longer-term.

    The U.S. Senate Banking Committee is due to vote today on a new round of sanctions on Iran, including those targeting its oil sectors. In addition U.S. companies whose foreign units do business with the country would be penalized, as would firms involved in uranium-mining JVs with Tehran in other parts of the world.

    Saudi Arabia's oil production looks to be "ramping up" in response to potential shortfalls due to Iranian sanctions, CIA chief Petraeus tells a Senate committee. He also claims China is reducing its imports of Iranian crude, though "it remains to be seen whether that continues."

     With an already difficult operating environment not looking to improve soon, Qantas (QUBSF.PK) has its credit rating cut to Baa3 from Baa2 by Moody's. U.S. traffic is holding up, but fares have been subject to price wars, while routes to Europe are suffering and Asia is "patchy." Rising fuel costs complete the bleak picture.

    More of that Buffett plot revealed!  In a positive sign for the economy, U.S. railroads will invest a record $13B and hire 15,000 workers in various infrastructure upgrades this year, the Association of American Railroads says: “Unlike trucks, barges or airlines, America’s freight railroads operate on infrastructure they own… this year they are investing at a record rate to meet the demands of the recovering economy.”

    Goldman Sachs downgrades Intrepid Potash (IPI -5.9%) to Sell from Neutral, noting concerns that "further production cuts likely needed in order to balance the [potash] market," and anticipating the potential for downward Street EPS revisions. Goldman alsodowngrades Potash (POT -2%) to Neutral for similar reasons.

    VC firm Andreessen Horowitz, which has invested in Facebook and Twitter, has raised a whopping $1.5B in two new funds. It's an astonishing amount, especially as Andreessen Horowitz has only been around for 2-3 years and would have a very short track record of exits, and because other firms have struggled to raise cash.

    A federal judge rules BP (BP +2.2%) can't make Halliburton (HAL +1.2%) pay part of the $40B in cleanup costs and economic damages that are owed on account of the Deepwater Horizon disaster. However, any punitive damage awards made against Halliburton don't have to be paid by BP. The ruling comes shortly after a decision stating BP must indemnify Transocean (RIG) against damage claims. (previously)

    With a market cap of $9B, the FT's Alphaville calls yoga and sports clothing retailer LuLuLemon (LULU -0.4%) the biggest company you’ve never heard of. The valuation is around 9X annual sales - well above Nike's 2X+ and even Apple's 3X+ – while its P/E ratio is 55.2. But despite the high multiples, it's been a graveyard for shortsellers.

    SA author Saj Karsan weighs in on SuperValu (SVU -0.9%), calling shares "cheap" after considering the supermarket operator's improved debt situation and ongoing play as a LBO opportunity. Working to the company's advantage is its ability to repay and refinance debt through its steady cash flow.

    Meritage Homes (MTH -11%) tanks on heavy volume after its Q4 misses across the board, despite posting stronger home closings and an increase in orders. Losses widened sharply on write-downs, related mostly to the winding down of its Las Vegas operations. 

    A deal in which cash-strapped Catalonia was to unload €500M in property to foreign buyers falls apart over investor demands for a clause in which rents would be paid in greenbacks in the event of a euro collapse. "Public institutions can't speculate

  189. kurtww

    Speaking of Metallica and Spain, how about Rodrigo y Gabriela covering Metallica's Orion… am I just getting older or is this awesome for anyone else?
    http://www.youtube.com/watch?v=L0CsLefLisE

  190. Phil


    A deal in which cash-strapped Catalonia was to unload €500M in property to foreign buyers falls apart over investor demands for a clause in which rents would be paid in greenbacks in the event of a euro collapse. "Public institutions can't speculate on a currency breakup," says a top government official.

    Vertex Pharmaceuticals (VRTX) comes off a trading halt after tripping circuit breaks still showing a solid 7.4% gain on momentum built from the firm's FDA approval for Kalydeco. Sanford Bernstein analyst Geoffrey Porges sees more than just hype off the news: "The FDA is trying to demonstrate a willingness to move quickly on medicines that make a big difference and this is a big difference maker."

    Coinstar (CSTR +1.2%) edges higher after renewing a dealwith Wal-Mart to feature Redbox kiosks at over 3,700 U.S. Wal-Mart locations. Overall, Coinstar says it now has over 28K Redbox kiosks nationwide, and that 2/3 of all Americans are within a 5-minute drive of one. In addition, the company is ending its relationship with Warner Bros. (TWX), rather than submit to its 56-day window for new DVD releases.

    More bad news for Microsoft's (MSFT) tablet efforts: The Verge reports the next release of Office won't include a version based on its Metro tablet interface, due to time constraints. With the iPad and the Kindle Fire claiming huge head starts, a tablet-centric version of Office for Windows 8 may have had the potential to be a "killer app" that could lift Microsoft's enterprise tablet prospects. 

    At first glance, Apple's (AAPLhiring of Dixons CEO John Browett to run its retail ops seems a curious choice. Whereas Apple Stores are known for their elegance, Dixons' stores are anything but. Moreover, while Apple touts Browett's commitment to customer service, a 2009 survey gave Dixons' PC World chain very low marks. However, Browett has shown a knack for keeping Dixons' margins up in a difficult environment.

    Three lunchtime reads:

    1) A few policies to expect soon

    2) Growing wealth in a capital-preservation market

    3) What to look for in Facebook's S-1

  191. scottmi

    FTR – someone is all over this last minutes here..

  192. stjeanluc

    And the cartoon of the day…

    Jerry Holbert

  193. yodi

    stjeanluc
    FAS no go

  194. jmm1951

    BP up 4% today, XOM down 2%. Someone has a sniff of what BP is going to announce at earnings next week. Further dividend restoration, probably.

  195. Phil

    Someone sold the RUT hard into the close.  Another day where 1/3 of the Dow volume traded at the bell.  Went from 104M to 134M while the bell was ringing.  Now 143M, this is nuts – it means they have these massive imbalances and are probably holding up sell orders looking for buyers all the way until the last minute.  

    AMZN Misses!  

  196. stjeanluc

    From your news Phil – Good stuff for the railroad. $13 billions in their infrastructure is the way to go… As opposed to airlines, they might actually make good long term investments!

    And that IPI and POT downgrade might be good for MON and we need it!

  197. yodi

    AMZN from 193 to 175

  198. stjeanluc

    And AMZN down $20.00 in a hurry….

  199. rainman

    kurtww / Rodrigo y Gabriela — Those two are amazing. There are better videos but I can't find them at the moment.

  200. stjeanluc

    The miss seems to be on the revenue side…. again this season! Estimates were for $0.19 on earnings and they got $0.38. 

  201. Phil

    Wow, 159M now on the Dow – that's now 60% of the day's volume slammed into the bell – what a prop job this is.  

    BP/JMM – They are just getting arbed as they have not civil liability to support HAL or RIG.  Earnings probably better than XOM because they have less downstream and nat gas, where low demand and margin pressure killed XOM. 

    Rails/StJ – I was all gung ho on rails in the big crash.  So far up now I don't like them anymore and Warren stole my favorite.  If you are interested, I'd suggest checking out rail car makers as they need to add capacity at this point.  

    At the close: Dow -0.16% to 12634. S&P -0.07% to 1312. Nasdaq +0.07% to 2814.

    Treasurys: 30-year +0.74%. 10-yr +0.28%. 5-yr +0.11%.

    Commodities: Crude -0.36% to $98.42. Gold +0.45% to $1742.15.

    Currencies: Euro -0.47% vs. dollar. Yen -0.17%. Pound -0.29%.

    China's Communications Construction, the country's largest port builder, cuts its IPO by 75% to $790M, a victim of a weak market. Choosing to go forth with the IPO despite adverse conditions suggests the company is desperate for cash, making the offering even more unattractive, says an analyst. 

    Amazon.com (AMZN) Q4 EPS of $0.38 beats by $0.19. Revenue of $17.43B (+35% Y/Y) misses by $780M. Expects Q1 revenue of $12B-$13.4B, largely below $13.4B consensus. Expects operating income of -$200M to $100M. Shares -8.5% AH. (PR)

  202. Phil

    I don't think that .38 earnings is clean.  

  203. samz3700

    Anyone trade interest rate futures? trying to understand the relationship between price of bond and price of the futures contract – any reading suggestions appreciated.

  204. jromeha

    Pharm- I’ve held ARNA for awhile now… Reading the FDA will review ARNA’s loracasin again in June makes me want to load up…. Although we probably won’t see 7.50$ before the review, does 3$ seem like a possibility in the days before the review?

  205. diamond

    Congrats to lflantheman and all who shorted AMZN! :-)

  206. kallenjr

    AMZN miss should also affect XRT?

  207. dpastramas

    I damn hope that the Qs pay us dearly tomorrow

  208. barfinger

    Pharm: sell the strangle, buy the stock? Is that what we call the buy/write (yes, I know. just saying). Those interested in US politics should read today's Mauldin. The new book "American Gridlock" outlines alternative ways we can extract ourselves from the mess. I always suspected our solution rested in doing things smarter, rather than more or less of this and that under the old model.

  209. kurtww

    Rainman – I was listening to my Rodrigo y Gabriela station on Pandora all day today. Good stuff for sure. Sorry I missed them at Red Rocks a while back.

  210. barfinger

    Please let me observe that lflan's AAPL success story could be made into an article demonstrating how much money you can make with a relatively low investment using options, when your premise was correct. In every way, better than just buying the stock.
     

  211. diamond

    After the GOP attacks Newt, President Obama gives him campaign strategy advice …
     
    Mike Luckovich cartoon: Un-American

  212. kurtww

    stjean – Have you checked out Madrid? Really nice people as well, and I think I'd rather live there than Barcelona. Of course I might be biased as my wife is a Madrilena… On the other hand, if I had to pick a soccer team I'd go for FC Bayern Muenchen. I could live there too, but I have to make lots more money first. 

  213. samz3700

    Kurtww -
    I second that thought on Madrid – its wonderful like Italy but without any attitude – but that was a decade ago. Summer might be kind of brutal

  214. roro

    Phil,
     
    Can you elaborate on what you wrote about at the DOW close and just post the close? Thanks.
     
    "Wow, 159M now on the Dow – that's now 60% of the day's volume slammed into the bell – what a prop job this is."

  215. kurtww

    Samz – we were there last July, staying in a rooftop flat with no a/c, but it was surprisingly tolerable with fans. My only complaint was the internet access we had with a USB modem with a crazy low daily cap. I had to go to Starbucks. But I found the trading hours kind of nice. My wife has her Spanish citizenship now (dual), and our kids can get it easily. I'd rather get my German citizenship, but for convoluted reasons I can't easily get it. I'd love to live over there. I'm with Phil, if we get a president Gingrich I think I'll seriously consider it. 

  216. roro

    Art Cashin – Vaporize 100,000s of jobs…………BLS Birth/Death revisions due January……….NBD always weakest in Jan.
     
    http://www.zerohedge.com/news/art-cashin-explains-why-several-hundred-thousand-jobs-are-about-vaporize

  217. zeroxzero

    kurtww:  If you're wife is Madrilena, you are certainly biased.  They are both wonderful cities.  I favor Barcelona because I like the sea and it's moderating effect on weather — Madrid is alternatively much colder, and much hotter, than Barcelona. And the Costa Brava is just magnificent, Cadaques sublime.  But the "Catalan thing" is a little weird — there's not a single sign on a historic monument or ruins written either in English, French, German….or Castilian.  On the street, it makes no difference — everyone speaks them both perfectly, but foreigners rarely do. I also like the proximity of the Pyrenees and southern France — Languedoc — where the people are about as far removed from Parisians in character as one could imagine.  And I would venture to say that Barcelona is more "architectural", although Madrid has the Prado.  The best part of both is that there's a no-reservation air shuttle between them — 45 minutes. Each have art fairs worth flying to.  It may come down to whether you eat more fish, beef or pork. 

  218. elliotteldrich

  219. kurtww

    zero – all beautiful places with nice, friendly people. My wife just reminded me of the comment she got when she was an intern in Madrid. "We work to live, Americans live to work." Of course Germans take it easy too when they're not working but they're still a lot more uptight than Spaniards. Intellectually I'd rather live in Germany, but I have a feeling if I actually moved there I might not like it as much. I was a little kid when we last actually lived there, and since then I've only visited. I'd fit right in, but I think my wife might have a harder time of it. I'm not very social but even I have a good time going out for sangria, tapas and flamenco! My biggest concern with moving there is the kids and school. Right now we have a 7-year old in a private school he loves, and a 2-year old who'll start soon. The German schools in particular I think are quite different, and if they were to do well there they would need to start pretty soon. I can work from anywhere, but my wife has an art gallery and it would be a bit harder for her to move. Spain wouldn't be a problem, but Germany might.
    What's your situation? I gather you go back and forth regularly.

  220. Burrben

    Phil – GLW Trade
    Thank you for the trade suggestion.  Quick question, how would you decide which trade to put on for GLW?  I normally opt for short put, long bcs, but when would choice #1 be better?
     
    Also, would this be a good one to add to the Income Port?

  221. Maya1

    AMZN
    lost $336 on the AMZN Feb3 BCS, an earnings play that did not work.
    Question is, what made LFLAN short this stock?
    Wonder if he will share his analysis before he entered the trade?
    and LFLAN, how would you recoup $336 in AMZN?

  222. stjeanluc

    Madrid / Kutrww – I am biased toward Barcelona because of my family and like ZZ, the weather! It's probably better that we don't speak about football as one of my 2 favorite teams is Barça (the other Arsenal – same type of football). 

    But Madrid is very nice… I would not be unhappy there!

  223. pstas

    Lflan- your batting avg. puts you on the All Star team. Care to offer your opinion on CMG? Earnings release on 2/1 EOD.
     

  224. Burrben

    Phil / Income Port  -   Would it be possible to publish a update to the Income Port this weekend?  I think many of the positions changed with Jan expiration.  I've been trying to assemble a spread sheet for the Income Port like the others, but I thought I would wait until after this JanEx since it will get much simpler.

  225. Pharmboy

    ARNA….yes I can see them starting to creep up. I was looking at a few BCS on them. Just waiting for the right time.

  226. kramer36350

    Dead Market Exhibit A: January Volume
    Presented with little comment except to say that the total lack of volume (and massive concentration of what volume there is at the close) is hardly reflective of a market that is anything other than broken and dying. Last January (2011) the average number of stocks traded on the NYSE per day was 891mm shares vs 661mm for this January (a 26% drop YoY!) and this is down an incredible 59% from January 2008. (Chart is in the link)
    http://www.zerohedge.com/news/dead-market-exhibit-january-volume

  227. rpme

    Phil, friends that own a bunch of restaurants have been doing well in Dec and Jan in sales, unfortunately commodities have eaten all their profits.
    It seemed appropriate that your NRA comments were followed by Blodgetts that the profits will not last.

  228. lflantheman

    Maya…..Your 6:43 pm post……I shorted AMZN for the following reasons:   Sales this season were not spectacular overall;  that's what Amazon does…they sell stuff.   I knew they were buying stuff too…..warehouses, etc., spending lots of money.      And I knew they weren't  making money on their tablet, which they spend more to make than they sell it for.  Finally, their P/E is over 100, so ANY perception of weakness is going to send them down.  It just looked to me like they were going down.    So I shorted the stock.  
    How would I recoup 336 lost on an AMZN trade?     That's real easy……  buy AAPL.     :)
    pstas….6:56 post…..All Star Team?    Highly doubt it, but I'll take a look at CMG this evening and take my best shot.  

  229. Burrben

    lflantheman – BRK post
     
    Just read through the comments on Build BRK.   I love your comment "…as less than a doubling of my personal investments  per year would not be attractive…"
     
    Good job sir!

  230. zeroxzero

    Kramer:  It does seem that this low volumes bespeak a dying market.  And the lower the volumes get, the more easily manipulable the market appears to be, which drives away even more investors that sense their being gamed.  When does it turn around?  Given ultralow interest rates, I would guess that there will be a time when the bottom will clearly be in on the U.S. economy, rates will begin a slow rise, and equity volumes will rise with them, pulling in investors on the sidelines.  Maybe the year 3000, at the present rate.

  231. scottmi

    ..damn those trailing stops…!

  232. zeroxzero

    Kurtww:  I have enjoyed my stays in [southern] Germany, but have been advised by friends that living there would not be to my taste. I spent a lot of time in Sweden, and was told "if you think Sweden is regimented [the local saw is that you can't build a sand castle on the beach without a permit] — you won't last very long in Germany."  Northern Spain has just the right mix of efficiency and laissez faire for me.  Italy — wonderful place, I lived in Rome for years, but, well, there is a chasm between Spain and Italy in their public treatment of women, to leave it at that.  
     
    I have three children from 5 to 10, and wouldn't put them in a foreign school. I attended international schools in Rome, Italy and Santiago, Chile, growing up, and it was just fine; my children attend one now.  That would be my suggestion wherever you end up.  As for your wife, I would think Germany would be difficult for her — my wife is neither American nor Germanic, and I know she wouldn't be happy living there — the weather is reason enough.  Coincidentally, she also runs her own art gallery!  I keep an apartment in Barcelona, where I lived for almost a decade running a company, have many friends there, and get back whenever possible, since I also can work from anywhere.  Fortunately, I never bought real estate there — but I'm negotiating!  My children all speak Spanish fluently as a second language, so it's pretty easy for us.

  233. pstas

    News Alert
    from The Wall Street Journal

    Mitt Romney handily won the Florida Republican primary Tuesday night, striding closer to the presidential nomination as the support of women, Hispanics and a broader range of conservatives boosted him in the state.

    Tuesday night’s results halted the momentum from rival Newt Gingrich’s win in South Carolina and returned Mr. Romney to the familiar position of the race’s clear front-runner.

  234. lflantheman

    pstas/CMG……..I've looked.   Things I know.   People like it.  They are expanding.  They have little debt.  They have a high p/e.   They go up 6/8 times last 8 earnings, sometimes > 14%.  Food costs rising; thus expenses rising.   They seem like a really good company, but overvalued.   Could literally go either way.  Unless I have a good sense of which way a company will go with earnings, I won't play.    So for CMG, I won't be playing earnings.  But, I'll tell you what I would do.  That would be do an 'after-earnings' play.   Sell into the excitement, no matter which way it goes with earnings.   If it pops up, I might then short it.  If it gets punished and drops, I might then even buy it.  But for earnings itself…….me no play.      

  235. Maya1

    LFLAN
    Thanks for your time and the reply.
    100% eh?
    I am happy to bring a few millions and come work for you?

  236. lflantheman

    Maya….Well, it's not all that great.  The federal and state government gets about half, and the wife takes care of the other half.   Then I start over again about where I left off.    :)

  237. Kwan

    Fujitsu slashes profit target by 42 percent, blames Thai floods I doubt their the only company with operations in the region facing this problem, so place your bets accordingly!

  238. Cap

    Hello people.

    Hope no one got burned on AMZN.

    i have been negative on it for some time.

    Some interesting discussions on Twitter.

  239. pstas

    Lflan- thanks. Agreed on CMG- just too unpredictable.

  240. zeroxzero

    Zero Hedge article cited above on CBO estimates coming out much worse than the Fed's projections is a real bucket of cold water.  The question is not whether the U.S. government will work overtime to engineer some debt-eroding inflation, but how they will make that money circulate.  Ben may yet find himself pushing bales of currency out of helicopters over Main Street, U.S.A.  IMHO, the mortgage mess is the Gordian knot at which our government needs to point its sword — all those people trapped in high interest, underwater mortgages have frozen the real estate market solid.  You would think the Fed would get a clue.  

  241. cslanson2

    flan
    Re: CMG
    I have total respect for your recent track record and perhaps a much longer track record that I'm not aware of.  However, CMG is a fairly mature restaurant chain trading at 50+ forward earnings?  I'm reminded a little of Boston Chicken!
    Is it not more than an even bet that if a person were short with a modest short position and had available, adequate margin and was dead wrong on tomorrow's earnings, eventually one could roll out and up into a profit?  Or do you think it even remotely likely that a Mexican Restaurant chain with a 50 PE can become a 15 PE within any foreseeable time frame?
    Don't wish to be argumentative but would like to provoke further elaboration of your thought process?

  242. Phil

    Rate futures/Samz – That's some wild, crazy stuff to trade.  
    ARNA/Jrom – I like how sure you are they pass.  If the rumors go their way, they could shoot up, they spiked to $2.62 in Dec on a rumor and then crashed.  Of course they could go to 0.62 just as fast on a rumor against them.  
    XRT/Kallen – AMZN had nice numbers, not likely to knock XRT other than AMZN had higher expectations and XRT is running way ahead of reality.  

    Amazon.com (AMZN) Q4 EPS of $0.38 beats by $0.19. Revenue of $17.43B (+35% Y/Y) misses by $780M. Expects Q1 revenue of $12B-$13.4B, largely below $13.4B consensus. Expects operating income of -$200M to $100M. Shares -8.5% AH. (PR)
    Never mind what's happening in Europe, a Giants victory over the Patriots in the Super Bowl this Sunday may be all we need for these markets to really take off. The Super Bowl Indicator – which has an 80% predictive success rate – says that if an NFC team wins, the stock market will post significant gains for the year. Meanwhile, an AFC win signals a negative year for the markets. 

    AAPL recap would be a nice post idea, Barf.  
    Romney 46% to 32%, by the way:

     
     "A competitive primary does not divide us," he said. "It prepares us. And we will win.  Together we will build an America where hope is a new job with a paycheck, not a faded word on an old bumper sticker." Says Romney's new bumper sticker…

  243. kurtww

    zero – that's very cool. Funny about the art gallery. I also like northern Spain, we were in Asturias on our honeymoon and loved it, also the Picos de Europa area. Reminded me of the alps. I could enjoy living there, though it's fairly remote. Funny you mentioned Sweden, I have a sister who's lived there for over 20 years and loves it. I don't care for the long nights in the winter, sunrise at 10 or 11, sunset at 3pm… ugh. Beautiful to visit though. I'd love to find a nice old castle somewhere out in the countryside (probably in Spain) that I can fix up when I'm ready to retire. That's probably better in theory than in practice, but it sounds good to me. I love our life here in the US for the most part, but something about the idea of living in Europe makes me go "Ahhh… that'd be nice." Probably just greener grass and all that. 
    stjean – don't worry about that too much, I like Barca's style better than Real Madrid too. Just don't tell my wife or son I said that!

  244. Phil

    Volume/Roro – There's a way funds can execute orders, known as "Market on Close" that essentially fills their order at the closing price at the end of the day.  This essentially circumvents the bidding process and exploits what we call "the stick", where the funds tend to ram up the prices of equities into the close.  They don't do this just for fun – they do this so they can dump their orders into the close at a profit so they accomplish the dual goal of jacking up the price of the equities and cashing out to all the retail suckers who follow them.  MOCs can lead to very large imbalances at the end of the day and that's why you sometimes see that very big correction just after the bell as there is no way to fill all the sell orders at the last price and a portion of the stick action is reversed.  The more volume (percentage) you see into the close, the more likely it is that funds were stuffing orders and whatever rally you saw was BS – unfortunately, as with today, we don't find that out until the bell rings as the Dow went from 104M at 3:59 to 168M at 4:05.  

    As a practical example, if I am a fund and I want to jack up V and it's at $97 with 1M shares traded, I can buy 333K at $98 then 333K at $99 and 333K at $100 and a lot of people will think something is up with V and hopefully will begin to follow me in – meanwhile, even as I'm buying 333K at $100, I'm selling 333K at $100 – even if it's to myself, I don't care as my average purchase goes from $98.50 to $99 but I'm establishing a big "demand" for V at $100 and, as long as SOME of my sales go to other suckers who are following me, I don't care.  So now V has volume of 2M and it's 3:55 and I stop selling and now whoever is following the excitement on V has to find someone who is willing to sell but the real people who own V are still looking at the news to try to figure out why V jumped 3% into the close.  I put in an MOC order to sell 666K of V and, as long as V doesn't fall more than $1.50, I'm going to come out ahead on my manipulation and, if I also hold 10M shares of V in my Fund portfolio that I bought for $95, my fund now gets to report a Jan gain of 5% instead of 2% on V and I look like a genius.

    That's just the simple view because, in a low VIX environment or using those weekly puts that expire on Fridays, I can cover myself while I buy or I can sell calls to suckers on the way up (selling deep calls locks in gains and if you know the move up is BS, you are simply screwing the guy you sell calls to into locking in the price you manipulated in the first place).  Also, keep in mind that, if I have a whole portfolio of Nas stocks that I want to goose – all I have to do is push 10 of 100 Nas components like AAPL, BRCM, QCOM, INTC…  and I can jack up my whole portfolio as I force the index funds to follow my leaders higher and do some broad index buying while I dump all my small stocks into the move up and pump and dump the leaders as above.  Again the weeklies can be my best friend as I use QQQ puts to cover my tracks.  

    Here's Cramer with his cold-blooded account of how easy it is for even a small fund to yank the markets around at will:  

  245. Phil

    Birth/death/Roro – Yes, those can be some nasty adjustments.  

    Big Chart doing exactly what we expected – too bad bears are so impatient.  

    GLW/Burr – The first trade is just more aggressive and short-term, the kind where you make 10% and start looking for the exit.  The other spread is more of a set and forget type that could be in the Income Portfolio, where we already took a bath on them at $17.50.  

    Income Portfolio/Burr – If I have time.  Usually I wait until we're closer to monthly expirations as I just did the last update on the 12th with fairly clear instructions for all January adjustments.  

    Volume/Kramer – Picture speaks volumes: 

    Restaurants/Rpme – My impression during shopping season was simply that people were spending less on gifts and more on themselves (eating out) this holiday.  Not something that will last as consumer confidence dips back down. 

    CMG/Pstas, Iflan – I only want to short them on a pop, anything else I'd stay away.  They should have benefited from the general trend of eating out in December and ShopHouse is so small that they can extrapolate amazing things in the CC and that can lead to wild price moves and they are already priced for 100% growth so I'd love to short them close to $400 on the expectation that they eventually miss expectations.  

    CMG/CSL – They earned $5.64 last year, project $6.85 this year and $8.68 next year.  Sales have been going up 20% a year and they are tweaking efficiency and, with just 1,100 restaurants, they are nowhere near saturated.  Even at $9 in earnings, it's hard to see paying 40x but the justification is the ShopHouse spin-off, which means that in maybe 5 years you have earnings at $18 as the regular restaurants grow and there are 500 ShopHouse restaurants as well.  Then you have a p/e of 20 with still a solid growth profile but, of course, that's putting bullish estimates on top of bullish estimates just to get you to 20 – eventually, which is still high for a restaurant so I think it's ridiculous but so was $199 and $299 on this stock and that didn't stop them from going higher anyway, did it?

    Castle/Kurt – I looked into that in Scotland – WAY better in theory than practice.  Unless you have someone local who's an expert and a fairly unlimited budget – well, I decided renting is better than buying

  246. Phil

     



    Holidaymakers have been warned to watch their words after two friends were refused entry to the US on security grounds after a tweet.

    Before his trip, Leigh Van Bryan wrote that he was going to "destroy America".

    He insisted he was referring to simply having a good time – but was sent home.

    Trade association Abta told the BBC that the case highlighted that holidaymakers should never do anything to raise "concern or suspicion in any way".

    The US Department for Homeland Security picked up Mr Bryan's messages ahead of his holiday in Los Angeles.

    The 26-year-old bar manager wrote a message to a friend on the micro-blogging service, saying: "Free this week, for quick gossip/prep before I go and destroy America."

    The Irish national told the Sun newspaper that he and his friend Emily Bunting were apprehended on arrival at Los Angeles International Airport before being sent home.

    "The Homeland Security agents were treating me like some kind of terrorist," Mr Bryan said.

    "I kept saying they had got the wrong meaning from my tweet."

  247. roro

    Phil……..THANK YOU!………. never would have known.

  248. roro

    Pros and cons of LTRO 2 for a Trillion Euros
     
    one thing that got my attention in this article was the notion of Fitch and Moody's following S&P and downgrading Italy to BBB+, which means triggering a 5% margin call………..also, that the diversion of LTRO towards govt bonds is crowding out private loans.
     
    http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100014543/the-perils-of-mario-draghis-e1-5-trillion-blitz/

  249. Phil

    Amazingly, Europe is opening up 1% and that's reversed the dip in our futures (now up slightly).  That article makes a great point because the European banks are completely playing a scam where they borrow $1.5Tn at 1% and then lend it to the PIIGS at 6-20% because, if the PIIGS fail, they feel they will be able to say it's not their fault as the same government that lent them the money also promised them that they were rescuing the PIIGS and that their bonds were so safe, they threatened the ratings agencies with criminal charges for downgrading them. 

    This is "moral hazard" to the max.  The banks can't make that kind of return lending money to people and businesses so why should they?  

     

    While the banks are buying more sovereign debt, they are cutting credit to the rest of the economy, with falls of 2.4pc in Italy and Portugal in December, and 0.8pc for the eurozone as a whole.

    The whole LTRO scheme increases "debt cross-holdings and systemic risk", and ultimately lowers recovery rates for creditors. Mr Gallo thinks the next spasm of the crisis may hit as Italy redeems €97bn in February and March, and Spain redeems €30bn, with Portugal sliding into ever deeper debt as the economy contracts violently.

    Guy Mandy from Nomura said the Draghi LTROs have certainly averted a liquidity shock and prevented a financial disaster, but the effect of the policy "is increasingly punitive" over time. "It is a Pyrrhic victory," he said.

    Banks have to provide assets to the ECB as collateral, with a haircut depending on quality. The more they use the facility, the more collateral they hand over, crowding out their balance sheets.

    Since the ECB has senior status, everybody else faces "subordination". This process cannot be pushed much further before investors take fright. At that point it becomes counter-productive, causing private credit to tighten. If so, an extra €1 trillion in February would be a very bad thing indeed.

     

  250. msf65

    Good morning, 
    maybe you have seen it already:
    http://www.cnbc.com/id/46160875
    "What’s more, the Pentagon can’t find documents to explain what it spent as much as $1.7 billion on from funds held on behalf of the Iraqi government by the New York Federal Reserve, the report says."

  251. Phil

    79.15 should hopefully be the bottom on the Dollar so $99.20 oil (/CL) is an interesting short.  We're at 76.03 Yen so I have to think the BOJ will put their foot down before hitting 76 on the Yen or 79 on the Dollar. 

  252. roro

    closed the long USD/JPY for a small loss……maybe look for 75.50ish.
     
    closed the AUD/CAD short at pretty much even……….
     
    made nice money on OIL and the ITA40 yesterday, but am stuck in a short ESP35 at an average cost of 8525 so need to work that out, but a relatively modest position size and will look to add higher up

  253. Phil

    Berlin-Athens Tension Grows

    Germany is continuing its push for controls over Athens' budget, despite being rebuffed by Greece and other euro-zone countries at Monday's European summit.

     

    Greek Talks Pressure ECB

    The European Central Bank, Greece's biggest creditor, is finding it hard to stay on the sidelines as the country negotiates a debt restructuring deal with its private-sector bondholders.

    Greek Bondholders Are Said Set to Get GDP-Revival Sweetener in Debt SwapBondholders negotiating a debt swap with Greece may get a sweetener tied to a revival in economic growth that would ease the impact of accepting a lower interest rate on the new bonds, people with knowledge of the talks said.

    Wednesday's economic calendar:

    Auto sales

    7:00 MBA Mortgage Applications

    7:30 Challenger Job-Cut Report

    8:15 ADP Jobs Report

    10:00 ISM Manufacturing Index

    10:00 Construction Spending

    10:30 EIA Petroleum Inventories

    4:22 AM EU shares are higher early on following better-than-expectedChinese manufacturing data, with the downturn in the sector in Europe also easing. London +1.2%, Paris +1.5%, Frankfurt +1.5%, Madrid+1.4%, Milan +1.8%.

    Rumor du jour:  President Obama is expected to detail today a program to let millions of homeowners refinance their mortgages with lower-interest federally insured loans. Borrowers would qualify even if they were in negative equity, although Obama is likely to face opposition over plans to levy a bank tax to pay for the proposal. - This is a good one as it weakens the Dollar and boost the markets at the same time.  Even if Obama says he wants to do it (and I hope he does), I don't see where he gets the funding approved

    Markit eurozone manufacturing PMI 48.8 in January vs. flash reading of 48.7 and 46.9 in December. There were signs of recovery in Germany (51) and Austria (51.8), where PMIs rose back into expansion territory, while contraction eased in Italy (46.8), Spain (45.1) and the Netherlands (49). (PR .pdf)

    China's official PMI 50.5 in Jan. vs. 50.3 in Dec., indicating expansion and beating expectations for a contraction. HSBC PMI (.pdf) 48.8 in Jan., broadly in line with its flash reading. The official figure supports hopes China will avoid a hard landing, but HSBC said its survey "confirmed the still weak growth momentum of manufacturing."

    China's Commodities Bubble Is Set To Pop.

    South Korea's Exports Decline, Inflation Moderates on Europe. South Korea’s exports unexpectedly fell for the first time in more than two years and inflation moderated to the slowest pace in 12 months as Europe’s debt crisis dimmed the outlook for demand, giving the nation’s policy makers scope to hold interest rates. Overseas shipments dropped 6.6 percent in January from a year earlier after a revised 10.8 percent rise in December as Europe and the Lunar New Year holiday disrupted shipments, the Ministry of Knowledge Economy said in a statement today. Consumer prices rose 3.4 percent from a year earlier, the slowest since January 2011 when they gained at the same speed, a separate report today showed.

    Ugly chart of the day: European youth unemployment has reached shocking levels – Spain, 51.4%; Greece, 46.6%; Portugal, 30.7%. Zero Hedge: "If there is no hope for tomorrow, what is the opportunity cost of doing something stupid and quite irrational today?"

    It's the ECB – not the Fed – that is running and will continue to run the looser monetary policy, writes Vince Cignarella, who thinks the euro has at least another 10% downside vs. the dollar this year. Keep your eye on February's LTRO – if it comes in towards the top of skying estimates, the euro's a sell.

    Why Europe Really Must Pursue 'Structural Reform': Clive Crook.

    Fed Bank Presidents' Holdings Range From Ranchland to EquitiesFederal Reserve regional bank presidents provided unprecedented disclosure of their wealth, revealing assets ranging from a Missouri farm and Texas ranchland to stocks and Treasury Inflation Protected Securities

    good chunk of January's stock market success comes courtesy of Apple (AAPL) and Caterpillar (CAT): AAPL's blowout quarter boosted overall S&P Q4 earnings growth to 9.4% from an otherwise lackluster 3.7%, and CAT's 20% surge contributed a third of the Dow's 415-point advance

    Oil Trades Near One-Week Low on Rising Stockpiles, U.S. Outlook. Oil traded near the lowest price in more than a week on signs that consumer confidence and demand for fuel are slipping in the U.S., the biggest crude consumer. In the U.S., we have seen long-term demand destruction on gasoline that may never come back, even if the economy improves,” Phil Flynn, vice president of research at PFGBest in Chicago, saidin an e-mailed response to questions. U.S. drivers bought 8.51 million barrels a day of gasoline in the week ended Jan. 27, according to MasterCard Inc.’s SpendingPulse report on Jan. 31. While that was up from 8.48 million the prior week, fuel demand fell below year-earlier levels for the 22nd consecutive time last week, declining 5.5 percent from 2011, the report said.

    Fracking Boom Could Finally Cap Myth of Peak OilThe U.S. oil market could be on the verge of its own fracking revolution, similar to what the natural-gas market is already experiencing. As a result, domestic production is now projected to rise significantly over the coming decades, reducing the relative share of imports in U.S. oil consumption.

    California's cash may be exhausted by March as tax collections trail budgeted amounts, according to Controller John Chiang. The state needs $3.3B for March and the first two weeks of April, but will not need to issue IOUs to creditors as it did in 2009; Chiang says the current shortfall can be managed through payment delays and external and internal borrowing. 

    Hong Kong Homes Face 25% Drop in Year of the DragonThe Year of the Dragon, representing wealth and power in China, is shaping up to be the opposite for the world’s costliest housing market, Hong Kong. Mortgages (HKMGLEND) that need to be insured by the government because of risk experienced the steepest plunge in six years in 2011, a sign the biggest home price decline since the global credit crisis is accelerating. Property prices that have slid 6 percent since June may fall as much as 25 percent by 2013, estimates Andrew Lawrence of Barclays Capital, who predicted the initial slide in April.

    Record Slump in Australian House Prices in 2011Australian house prices plunged by the most on record in 2011 as global economic uncertainty and concerns about its impact at home kept a lid on demand. An index measuring the weighted average of prices for established houses in eight major cities slid 4.8 per cent from a year earlier, according to the Australian Bureau of Statistics, the biggest calendar-year drop since the data began in March 2002. They fell 1 per cent in the three months to December from the previous quarter, when they retreated a revised 1.9 per cent. Economists had predicted a 0.6 per cent quarterly fall.

    MasterCard (MA +1%urges merchants and banks to upgrade checkout systems to handle high-tech credit and debit cards that store information inside a computer chip rather than a magnetic stripe. “We’re moving toward a world beyond plastic, where consumers will shop and pay… with a simple tap, click or touch in-store, online or on a mobile device," MA's U.S. president enthuses. 

    MasterCard(MA) Is Planning To Usher In The Digital Age Of Consumer Spending.

    More on Aflac (AFL): Q4 misses estimates across the board, despite a 25% Y/Y rise in revenue on higher premiums in Japan and fewer investment losses. The company issues a cautious outlook for 2012 however, forcasting operating earnings that are below Street expectations. Shares +0.4% AH.

    Broadcom(BRCM) Forecasts First-Quarter Sales That May Beat Analysts' EstimatesBroadcom Corp. (BRCM), a maker of chips that help mobile devices connect to the Internet, forecast first-quarter sales that may exceed analysts’ estimates amid stronger demand for parts for Apple Inc. (AAPL)’s iPhone

    Boston Properties (BXP): Q4 funds from operations (FFO) of $1.21 beats by $0.02. Revenue of $452.8M (+15% Y/Y)beats by $26.3M. Expects Q1 FFO of $1.12-$1.14 vs. $1.14 consensus. Expects 2012 FFO of $4.65-$4.78 vs. $4.76 consensus. (PR)

    Mentioned during Amazon's Q4 earnings call: The company ended Q4 with 56,200 employees, up 67% Y/Y. 17 fulfillment centers built in 2011, raising total to 69. Plans to keep up its aggressive investment pace. Video game revenue fell Y/Y. Company willing to buy back stock "at the right value." Still no details on Kindle Fire sales.AMZN -8.7% AH. (live blog) (webcast)

  254. Phil

     


    The ITC 
    grants Microsoft's (MSFT) motion to dismissantitrust claims lobbed against it by Barnes & Noble (BKS) over its alleged "misuse" of patents relevant to Android. With the antitrust claims out of the way, Microsoft is free to pursue its patent infringement case against B&N. The odds are likely in Microsoft's favor, given the long list of Android vendors to have struck a deal with the company.

  255. roro

    Phil,
     
    do you think the rally off the European open is probably related to Obama's plan to propose mortgae refinancing at much lower rates for the distressed?
     
    side note……….seems like an obvious to rescue real estate and no doubt it was thought about before but nixed somewhere down the line.

  256. samz3700

    Roro – no its about the PMI data in Europe and china
     
    http://www.marketwatch.com/story/europe-stocks-rise-after-manufacturing-data-2012-02-01

  257. matt1966

    Morning Phil, busy night?  The reduction in lending by European banks because of instead wanting to use their money for buying soveriegn debt is just one of those unfortunate, unintended consequences.  Kind of like the cost of gas and milk going up.  The central banks don't want it to happen but it's less important than recapitalizing their banks and propping up failed economies.  In the end, it simply means more printed money as the sovereigns fail to repay their bonds and the ECB steps in to bail out the very banks they manipulated into buying the smelly things in the first place.
     
    As I said a long time ago, it's a global race to the bottom.  Currency devaluation is the new protectionism of the Depression era.
     
    Care to expound on your statement below?  I haven't been able to follow close enough lately to undertand exactly what you're predicting other than Yentervention.  Is there more?  Thanks.
     
    "Big Chart doing exactly what we expected – too bad bears are so impatient. " 

  258. lionel

    Ilene has  posted a very interesting article from Bruce Krasting about the CBO annual report.
    I am just at the beginning but that will definitely help the political debate in the US.
    Thanks Ilene

  259. mampcsA

    Phil, i had shorted a 117/118 TLT Feb 03 CALL spread (for .95), but just got assigned from the short 118 calls. It looks like TLT has a dividend that get's paid with and effective data of 2/1 (which is today). What's the best way for me to get out of this? Since the dividend date is today, i guess as long as i can close the position today, i should be fine and won't be accountable for the dividend? Reason i want to do this is that i got burned a little the last time something like this happened to me with SPY. The stock did not drop as much as the dividend was supposed to be and i lost money on that trade when i was not supposed to lose anything.
    I guess i should try for a Buy Write of TLT stock and TLT 118 calls to get out of the trade? I hope it means that i won't have to pay the dividend as long as i close out the trade today since the Ex dividend date is today (and unlike last time where it immediately showed that i owe the dividend in my account, it does not show that this time).

  260. flipspiceland

    CMG
    Won't go near the restaurant after one very disappointing visit.  It was crowded doing nice business, mi esposa loves it.
    BUT, Love the stock.  The short puts have been like a very very high quarterly dividend for nearly a year.  Don't stop this train.

  261. zeroxzero

    Lionel:  Help it go in which direction, would you say?  Austerity? QE? Denial and strife?

  262. Phil

    Rally/Roro – Mostly it's about fixing Greece and their own data.  The refinancing idea is something we've been kicking around since 2008 (I actually gave Geithner my version of the idea in 2009 and they said it was politically unworkable then) but it's been used recently to give us a pre-market boost – all false alarms so far.  

    Anyway, whatever the case, we're back at the usual pre-market highs – if you did a volume to price chart of the Dow, I'd say we're down 300 points this week on any volume that matters but, thanks to the pre-market pumps – we're flat.  PMI is an opinion survey more than anything and 48.8 isn't good – it's just better than poor expectations.  

    Big Chart/Matt – Well it still looks very much like we're topping out here, that's all.  When you consider that each day we are pushed back up on low volume and then fail, it does not look like we're consolidating for a move up.  They forced their golden cross and it may be fooling the Europeans but it's not triggering the TA machines over here and that's a big danger sign and God help us if something causes us to sell off on volume as we're about 5% above any real support.  

    TLT/Mampcs – Looks to me like they are down about .80 pre-market and what can you do except buy them back?  I could say for the 9,000th or 10,000th time that I hate short-selling verticals but clearly you guys are all too smart to listen to me and it continues to be the number one thing people get in trouble over.  So I am SHOCKED that you might lose money because you took a position where you bought more premium than you sold.  I would certainly check with the broker because I don't know what responsibility for the dividend would be but you own a $117 call that you can sell for (at the moment) $120.15 (+$3.15) and you sold a $118 call that you got paid $118 for and you say you had a .95 credit?  I don't get that at all but I'll go with it and that's $4.10 and you are forced to buy at yesterday's close ($120.95) and that's still net .15 off the $118 I suppose and you just buy to cancel this morning.  

    6:00 AM Overseas: Japan +0.1%. Hong Kong -0.3%. China -1.1%. India +0.6%. London +1.2%. Paris +1.6%. Frankfurt +1.8%.

    More room to ease?  Eurozone January inflation holds steady from December with a preliminary reading of 2.7% Y/Y. (PR .pdf

    European shares and U.S. index futures are at the morning's highs with the headlines giving stronger-than-expected manufacturing data as the reason, but shares were up nicely before that. It's a bull market, you know. Stoxx 50 +1.8%, Germany +2%, S&P 500 +0.7%.

    U.K. January PMI 52.1 vs. an expected 49.8 and 49.7 in December. It's the best print since March, with new orders ticking above 50 for the first time since June. Sterling is a shade higher vs. the dollar, and lower by about an equal amount vs. the euro.

    MBA Mortgage Applications: -2.9% vs. -5% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) decreased to 4.09% from 4.11%. 

    Investigators have worked out what happened to nearly all of the $1.2B of client money that disappeared from MF Global (MFGLQ.PK), tracing it to the firm's banks, trading partners and securities customers, the NY Times reports. However, recovering the cash will be tricky, as some of the recipients were entitled to it.

  263. Phil

    79.00 on the Dollar – 76.04 Yen, Euro flying to $1.3167, Pound $1.5808.  

    We're down from 79.60 yesterday so of course we have a 1% market "rally".  

    Oil $99.35 again – where we topped out earlier so tempting again.  

  264. roro

    samz…………..all of the pmi data was below 50 which indicates ec in contraction with the exception of the UK and that number was expected.
     
    not buying that argument.
     
    i am more inclined to think it was a bounce off of an uptrending support line (DAX, ITA40, ESP35, CAC UK100) which looks pretty similar/identical to the uptrending support lines also obvious on the Daily Levels as are seen in Elliot's charts for NA indexes
     
    in other words central planning with the CBO report as a justification for FED QE along with Obama's proposed IR rate reduction for residential real estate mortgages…….fwtw

  265. mampcsA

    Phil, actually i've been doing quite well with these trades before. I usually sell the verticals short for .9 to .95 and account for the premium i paid by selling short puts in this case. My net is actually 0, and i cannot really lose money on the trade (the short puts is usually a spread as well where i cannot lose more than what i gain by the call vertical.
    This is the first time i actually got assigned on it though.
    Since TLT has been so volatile and range bound for the most part, playing this on TLT has worked out quite well.
    I've learnt enough on this site to not pay premium unless i have to. This play is essentially a free play most of the time and pays off quite nicely when it does, with no harm done when it does not.

    I might get lucky today hopefully with TLT dropping, since my long calls might retain some premium now that i can benefit from.

  266. zeroxzero

    From FT: "The eurozone debt crisis has triggered a severe credit squeeze across the region with banks imposing significantly harsher loan terms and demand for credit tumbling, a European Central Bank survey has shown.
     
    Banks’ weakened finances and worries about the eurozone’s future led to an aggressive tightening of credit standards faced by businesses and households at the end of last year and early 2012. Demand for mortgages and loans to fund corporate investment also fell sharply, the survey showed. Germany, however, remained immune.

    The results suggested December’s unprecedented injection into the financial system by the ECB of €489bn in cheap three-year loans had failed to prevent a retrenchment by banks that could hamper the region’s economic recovery. The effects of the central bank’s actions are still feeding through, however…..”

  267. angelcur

    SP 500 is looking to gap higher toward 1320 this morning…solid resistance at 1324…. I dont expect the upside gap to hold….  isn't much new to say this morning…market remains vulnerable a sharp… fast pullback…. VIX looks like ready to break higher… are multiple technical warning signs… but as phil and i know buyers keep showing up….sigh… 1312 remains a magnet for the SP.
     

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