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Double Toppy or Finally Poppy Tuesday?

SPY DAILY

When will I see you again?
When will our hearts beat together?
Are we in love or just friends?
Is this my beginning or is this the end? – The Three Degrees

Will the S&P see 1,420, will the Russell see 860 again?  

We need to see 13,600 on the Dow to flip our bull switch and we're happy to play that index bullish with something like the DDM (now $71.03 with the Dow at 13,264) $68/70 bull call spread at $1.15, which pays $2 (up 74%) if the Dow simply doesn't fail 13,200.  

The potential loss of $1.15 on the trade can be offset with the sale of the May $127 puts at $1.10, which is a bet the Dow holds 12,700 (down 4.25%) or you can pick a stock you would REALLY like to own if it gets cheaper like AAPL, and sell the May $460 puts (down 25%) for $1 or a stock I would love to buy cheap(er) like BTU May $28 puts (down 5%) for $1.25 or CHK July $21 puts (down 14%) for .90.  Assuming you offset $1 of the $1.15, then you are in for net .15 on the $2 spread with the potential for a 1,333% return on cash if the Dow simply doesn't go down from here.  If you are not willing to make that bet, then you are simply not bullish.

SPY 5 MINUTEWe still favor cash in this very uncertain market but we've been more enthusiastic about adding bearish trade ideas, on the whole.  Our very bearish, very aggressive, short-term $25,000 Portfolio gained a virtual $20,000 in the past two weeks DESPITE the fact that we're re-testing the tippy top of the market.  

That's because we are essentially doing the opposite of "buying the dips", which is "selling the rips" – taking advantage of the excitement of the bulls, who are whipped into an almost daily frenzy by these low-volume rallies.  

I'm happy to be bullish, really I am, but SHOW ME THE EARINGS!  We are now up 10% since January earnings and 25% since October's report so I am looking forward to some SPECTACULAR numbers to back up these new and vastly improved valuations for all these companies.  Heck PCLN (on our Long Put List and now in our $25KP) is up $250 (55%) since January alone so I have to believe that the intense disappointment of last Quarters' $225M ($5.05 per share) will be left in the dust and we'll finally see how well they justify their $720 price point with the $36Bn market cap that we showed last week is GREATER than all of the Airlines COMBINED.  

Would you rather own all 15 airlines in the Transport Index or PCLN?  Apparently, Mr. Market would rather own one of the many web-sites that book the trips than the entire fleet of hard assets.  Sure running an airline is a tough business, especially with sky-high oil costs but that doesn't bother the market either so why let it bother you?  Richard Branson certainly seems to have made a few bucks running an airline (almost as much as Shatner has pitching one) – it can't be that awful, can it?  

CMG raised the price of a burrito from $8 to $8.50, up 6.25% in the Fed's zero-inflation World (we get the minutes of the last Fed meeting at 2pm today).  That popped their stock over $400 this month and they are now up 23.5% since last earnings and up 40% since October, when they earned $1.85 per share.  Sure they only earned $1.83 a share in Q4, which is, I believe, LESS than $1.85 but if you string together even 4 $1.83s together you get $7.32 and you only have to multiply that by 57.37 to get to $420 – which makes perfect sense for a restaurant stock, doesn't it?  

Well, maybe not.  That's why CMG is also on our Long Put List with earnings coming up on the 19th.  Nothing makes the pumper cockroaches scurry away faster than shining the light of earnings on them and we're looking forward to a VERY exciting earnings season this year as expectations are, literally, through the roof.  

It's a good thing Branson is wearing his space suite because these charts are going to the moon baby!  That 5% drop in the Dollar has been rocket fuel for the indexes, as well as commodities – even gold didn't fall as much as it should have on the persistent Dollar weakness despite the fact that it's massively over-priced for a "healthy" economy.  Oil has also gotten a $5 lift from the falling Dollar as well as the constant pounding of the Iranian war drums by each of the GOP candidates and, of course, half the guests on CNBC.

Just this morning, PBOC's Governor Zhou Xiaochuan sad the Fed needs to recognize the dollar's reserve status and give some consideration to the global economy. "It's very difficult to control the flow of liquidity … inevitably, some emerging economies will suffer too much capital flow."  

The Governor warned that the global economy hasn't yet escaped the financial crisis, while cautioning the U.S. to take "more responsibility" for its monetary easing.  There are "new elements that could bring the global economy back into recession," the central bank chief said in a panel discussion Tuesday at the Boao Forum in the southern island province of Hainan, without elaborating on what the elements are.

While the market bulls tend to worship China for its infinite potential to expand revenues, they completely ignore anything the Chinese say and do that is not a bullish statement.  This China Blindness is going to be the undoing of many investor if it turns out that Chinese officials are not lying to us and their economy is slowing but, for now, the US Bulls believe they know better than the people who are actually in China.  

Meanwhile, Gene Munster has put a pencil to my theory that AAPL's gains are everyone else's pains and calculates that 1/2 of AAPL's next $400Bn in potential market cap (on the way to AAPL $1,000) would have to come from the hides of their competitors.  That's behind our (so far awful) theory on shorting the Qs – that AAPL has had a good run to $600 and should pause there over earnings while we get nothing but damage reports from their competition and that, finally, should be enough to give us a pullback in the Nasdaq.  

It's very easy to cover a short Nasdaq position – just go long on AAPL.  One trade idea we like is selling the AAPL 2014 $400 puts for $28.50 and using that cash to buy the Jan $600/665 bull call spread at $29 so you are in the $65 spread for .50 in cash and you are obligated to buy AAPL for $400 if it is below that price in Jan 2014.  Obviously, if you don't REALLY want to buy AAPL for $400 (35% off) then this is a foolish play but, if you do – then this trade can make $64.50 in profits if AAPL just gets to $665 by the year's end – that's up 12,900% on cash!  The best thing about this trade is it starts out $18 in the money so you're potentially up net $17.50 (3,500%) on day one – assuming AAPL just flatlines into Jan expirations.  

So a trade like that goes a long way towards paying for some QQQ May $67 puts at $1.08 and, if those drop to .60, then we roll to the July $67 puts (now $2.15) for maybe another $1 or less – as you can see, it will  be a long time before we even come close to eating into our AAPL money and it's VERY UNLIKELY that AAPL is heading down without our QQQ shorts paying off.  

That's hedging.  That's how we can be long-term long and short-term short while remaining "cashy and cautious" leaves us with plenty of cash on the side to buy stocks that do finally go on sale – like AAPL for $400!  


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  1. stjeanluc

    Oil Lines

    R3 – 109.70
    R2 – 107.59
    R1 – 106.26
    PP – 104.15
    S1 – 102.83
    S2 – 100.73
    S3 – 99.40

    The big spike yesterday is giving us some wide lines today!

  2. Pharmboy

    PP for today:

  3. stjeanluc

    Well, I had a bearish article on AAPL yesterday, here is a bullish one in an effort to be fair and balanced:

    http://notablecalls.blogspot.com/2012/04/apple-nasdaqaapl-why-we-believe-apple.html

    Munster believes shares of AAPL will reach $1,000 in CY14, which would imply a roughly 1 trillion dollar market cap, the first in history. While some investors believe the biggest issue for AAPL to get to $1,000 is the market cap along with excessive investor exuberance, which Munster addresses in this note, he believes the real story is earnings growth. Fundamentally, he believes shares can reach $1,000 based on his belief Apple will continue to win in global mobile devices. As a result, Munster remains confident in his $80.18 CY15 estimate. A 12x multiple (stock's current out year EPS multiple) on his CY15 EPS of $80.18 yields $960; however, this excludes an Apple Television, which the analyst believes could add more than $4 in EPS (5%) by CY15, which would yield over a $1,000 share price (12 * ~$84).

  4. stjeanluc

    Foolish things a trader can do:

    http://newtraderu.com/?p=678

     

    • Try to predict the future movement of a stock, and stay in it no matter what.
    • Risk your entire account on one trade with no stop loss plan.
    • Have a winning trade but no exit strategy to get out, no trailing stop or exhaustion top signal.
    • Ask for and follow the advice of others instead of trading with your own trading plan, method, rules, and system.
    • Trade your emotions instead of signals: buy when you are greedy and sell when you are afraid.
    • Trade your opinions, not a quantified method.
    • Do not bother to do your homework on trading, just jump in and trade, you are smart, you will figure it out.
    • Short the best and most expensive stocks in the stock market and buy the cheapest junk stocks.
    • Put on trades you are 100% sure are winners so you do not even need a stop loss or risk management.
    • Buy more of a trade that you are losing money in and sell your winners quickly to lock in small profits.
  5. stjeanluc

    Obviously the last one in that list is debatable as we sometimes DD on losers based on conviction and we take profits quickly on conviction as well….

  6. JRW III

    Good morning, nothing new,

     

    IWM    81.94,  82.12,  82.34,  82.66,  82.82,  83.18,  83.31,  83.57,  83.74,  83.97,  84.20,  84.36  and 84.64

     

    $ up this morning, so no gap over resistance;  good hunting !!

  7. stjeanluc

  8. stjeanluc

  9. stjeanluc

    Sorry Jabo…. FU CMG!

  10. stjeanluc

    So much for AAPL needing a correction or even a pause. That chart is just unreal….

  11. jabobeast

    Stjean… and don't forget ..  FU PCLN!!!

  12. Phil

    Good morning!  

    AAPL has the Nasdaq off to the races this morning, up 0.33% despite the Dollar back over 79.  IBM is making new highs, over $210, and that is helping to goose the Dow too (see DDM trade in above post).  

    The S&P is not playing and the NYSE is down 0.25 and the SOX are down 0.42 and the Transports are flat so I'm still thinking toppy here – so be careful – this could be just a blow-off top this morning. 

  13. stjeanluc

  14. stjeanluc

    Jabo – FU MoMos…. There you have it!

  15. jabobeast

    thank you stjeanluc…
     
    now if you could make them drop 10+ points please!!!

  16. morxlntway

    jabo, could you bomb GLL for me please

  17. Burrben

    Phil / WMT Trade
    Sorry to keep on asking you for hand holding, but I'm confused because the advice today isn't what we said in the past.  I'm really trying to "Plan the trade, trade the plan".  The June $60 calls were never mentioned.  The roll parameter I was always looking at was the $1 roll to the Sept $60 calls from your advice:
    "You have a net $6.80 entry and the $57.50 caller can be rolled to the Sept $60 caller ($2.75) for .65 so as long as that roll is under $1, you may as well keep the protection. If you do that roll, then you are in the bull call spread for net $7.80 and have a $2.20 advantage over your caller so $62.50 becomes the point at which you get in trouble."
    Once this roll was executed, THEN the advice was to enter a Jan 60/70 BCS and sell a 2014 $50 put.  
     
    I feel I'm still confused on the premise of selling calls for premium (or being bearish), and having a bull call spread (bullish).  Seems like we need the stock to finish in a narrow range.  I updated the spreadsheet with all of our comments regarding this trade since it's easy to keep track.  It's MY responsibility, so I'm not pointing fingers or anything.  I'm trying to really LEARN, document and PLAN on this trade.
    Spreadsheet:
    https://docs.google.com/spreadsheet/ccc?key=0AjlfETMAwklcdEowYTRldEhVMDZYMXhnYVV1dDBsQmc#gid=0

  18. shadowfax

    jabobeast
    Forget 10 points, how about 10%?

  19. stjeanluc

    FAS is obviously not helping today! And is AAPL in the XRT?

  20. stjeanluc

    Jabo – Trying the old Jedi mind trick now… 

  21. exec

    JR

     
    How are you positioned?

  22. stjeanluc

    For some ideas on valuation, Doug Short has some good articles:

    http://advisorperspectives.com/dshort/updates/Crestmont-PE-Ratio.php

    http://advisorperspectives.com/dshort/updates/PE-Ratios-and-Market-Valuation.php

    http://advisorperspectives.com/dshort/updates/Q-Ratio-and-Market-Valuation.php

    And puts it all together:

    http://advisorperspectives.com/dshort/updates/Market-Valuation-Overview.php

    As I've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for many years. But they can play a role in framing longer-term expectations of investment returns. At present they continue to suggest a cautious long-term outlook and guarded expectations.

  23. stjeanluc

    Expect bad earning growth this quarter. But that will be masked by AAPL:

    http://www.nasdaq.com/article/worst-us-earnings-growth-since-2009-seen-as-stocks-near-highs-20120330-00990

     

    Apple Inc. (AAPL), the world's largest company by market capitalization, will likely skew the broader corporate-earnings picture, as it has of late because of its large size and rapid growth. Analysts expect Apple's earnings per share to climb 53%. Excluding the company, S&P 500 earnings growth expectations fall to 1.8% from 3.2%. In the technology sector, analysts expect profits to slip 0.7% excluding Apple, compared with projections for 6.9% including the company.

     

     

    "Much like last quarter, [Apple] is expected to have another sizable effect on index earnings and margins, masking otherwise less-than-stellar trends," Barclays chief equity strategist Barry Knapp wrote in a note to clients this week.

  24. bobhu

    AAPL to $1000 and RIMM to ZERO by CNBC…. we will see.

  25. Phil

    OK, so where was I?  

    Essentially, we're in the same place we were yesterday, except yesterday the Dollar was failing 79.50 and today it's trying to hold 79.   

    We're still looking for 1,420 on the S&P and we're right on 8,250 on the NYSE and the RUT is right at 840 so those become our major watch lines today.  My comment yesterday stands today:  " if they can push the Dollar below 79 then a bounce in all of our indexes is not out of the question and above those levels we have to remain technically bullish. "

    Yesterday, we had a good ISM number to keep the bulls happy.  This morning we have the NY ISM, Factory Orders (which I think will disappoint) and Auto Sales throughout the day.  On the whole, we should drift into the Fed but I would short a rally or go long into a big sell-off ahead of the minutes because the minutes are not going to be a big surprise and the Fed speak is on tap to spin it anyway.  

    At the open: Dow -0.16% to 13244. S&P -0.1% to 1418. Nasdaq +0.91% to 3120.
    Treasurys: 30-year +0.23%. 10-yr +0.1%. 5-yr +0.03%.
    Commodities: Crude -0.26% to $104.95. Gold +0.09% to $1681.15.
    Currencies: Euro +0.03% vs. dollar. Yen +0.26%. Pound +0.25%.

    8:25 AM Spain(-1.4%) and Italy (-1.4%) are leading on the way down as Europe hits session lows, Stoxx 50 -0.8%. Banking shares are hit hardest – Unicredit (UNCFF.PK-3.6% in Milan. Santander (STD-2.5% and BBVA -2.8% premarket.

    10:00 AM On the hour: Dow -0.17%. 10-yr +0.11%. Euro -0.03% vs. dollar. Crude -0.57% to $104.64. Gold -0.04% to $1679.05.

    Market Preview: Stock futures are mixed, with the S&P 500 benchmark -0.2% after hitting a 4-year high in the previous session. CVR Energy +6.5% as Carl Icahn looks set to win his battle for the refiner. Later: ISM New York Business Index, Factory Orders, FOMC minutes

    Eddy Elfenbein points out that the S&P Total Return Index – which counts dividends – took out an all-time high yesterday. From the end of March 2000 to the end of March 2012, the S&P 500 lost 6%; with dividends, it gained 17.5%.

    March ISM New York Report on Business: 67.4 up from 63.1 in February. "March marked the fifth straight month that the Current Business Conditions index grew faster than the prior month, unprecedented in the survey’s 19-year history," the report says.

    Feb. Factory Orders: +1.3% vs. consensus of +1.5%, -1.0% prior. -0.3%. Shipments +0.9%. Inventories +0.6%.

    Redbook Chain Store Sales: +4.6% Y/Y vs. +3.8% last week. The rise in sales is attributed to warm weather and Easter demand.

    ICSC Retail Store Sales: +3.8% W/W, vs. -0.5% last week.+4.2% Y/Y, vs. +2.7% last week. The W/W rise in sales is attributed to Easter. The 1.5% Y/Y increase is strongest rate so far this year.

    Delinquent mortgages fell to 7.57% in February, a big drop from 7.97% in January and 8.8% a year earlier, according to the LPS Mortgage Monitor. The rate hit nearly 11% in January 2010. Bill McBride says a normal rate is in the 4-5% range, "so there is still a long way to go."

    The problem of student loans is not confined to the young: Americans 60 and older owe about $36B, of which over 10% is delinquent, a recent NY Fed study shows. Some of the debt is because people studied later in life or co-signed for loans for their children or grandchildren, but some of it is also an overhang from when they were young. 

    Bankruptcy filings declined a more-than-expected 12% in 2011, says Fitch, which expects them to decline another 4-5% this year (they're already off 8-10% in Q1). Consumer credit is set to start rising again as the pendulum swings back away from tighter underwriting standards. (full report)

    Passenger air traffic rose 8.6% and cargo demand rose 5.2% in February from the previous year, says the IATA, but several factors inflated the results, including weaker traffic during the Arab Spring a year ago. "The outlook is fragile… Weak economic conditions and rising fuel costs are a double-whammy that an industry anticipating a 0.5% margin can ill-afford."

    Don't expect any more ease out of the ECB at tomorrow's policy meeting. Instead, look for President Draghi to use his press conference to throw the Germans a bone by reminding governments they have been a respite by the central bank and to use the time wisely.

    Spanish unemployment rose 0.8% in March to 4.75M. On an annual basis, unemployment was 9.6% higher in March of this year. Eurostat said yesterday that Spain's unemployment, at 23.6%, is the highest in the EU.

    Spain's debt/GDP ratio will reach 79.8% in 2012, up from the expected 68.5% in 2011. This will still be lower than the EU average, so what's the issue? It's a massive private debt strangling the economy as well as the debts of the banking system which will likely end up on the government books somehow, someway. 

    "The government is facing a lose-lose situation," says Spanish economy minster Luis de Guindos, as markets will penalize the country for not going far enough with austerity and also for going too far. "It's an absurd idea," he replies to the question of whether Spain will need the assistance of one of Europe's rescue vehicles.

    China's state firms are performing better than their private-sector counterparts, according to Moody's, pointing to a "two speed economy" where state firms have easier access to credit and are therefore squeezing out other parts of the economy. The divergence is "clearly of concern, as state-owned firms are less productive."

    The Wolfson Economics Prize names five finalists for its competition for papers about how a country might exit the euro. They include Record Currency Management's Neil Record, who says the only way would be to blow the whole thing up. There's also an honorabe mention for 11-year-old Dutch schoolboy Jurre Hermans, whose solution involves pizza

    CME Group's (CMEdaily average trading volume slumpedin March to 12.5M contracts amid a 13% Y/Y decline in trading of interest-rate futures. For Q1, trading volume fell 11% Y/Y to an average of 12.3M contracts a day. 

    The surge in video streaming, demand for high-speed trading connections, and soaring mobile phone use have caused aboom in the fiber-optic sector. Around 19M miles of cables were installed in 2011, and Corning (GLW) sold record volumes. However, skeptics bring up the bust of the early 2000s and wonder if history is "repeating itself."

    Push comes to shove as pricey life-saving cancer drugs run up against government austerity programs and private payers unwilling to share costs for drugs that run as high as $100K a year. While Big Pharma argues that advanced technology will save money on the development side, companies such as PFEBMY, RHHBY, and BAYRY.PK run the risk of seeing reduced profits with government-mandated price cuts for their most expensive drugs.

    deceleration in the growth of natural gas supply over coming years may be in the cards, posits Robert Sinn, noting the price has now fallen below the all-in production cost for Ultra Petroleum (UPL), one of the industry's lowest-cost operators. Combined with the potential for increased demand, "it's possible to see some light at the end of today's dark tunnel." 

  26. jabobeast

    FU CITIGROUP!!!
     
    Citigroup said Priceline.com remains one of the most attractive Large Cap Internet stocks despite the 53% year-to-date rally in shares. The firm reiterates a Buy rating on the stock with an $850 price target.

  27. Phil


    AutoZone (AZO+1.7% premarket after Goldman Sachsupgrades shares to Conviction Buy from Neutral and raises its price target to $435 from $405. The firm says AZO's commercial ramp "represents one of the single biggest predictable revenue drivers at any company in our coverage," and AZO is well positioned to meet or exceed expectations.

    AutoNation (ANreports a 15% Y/Y increase in new vehicle sales in March to 25,489, a haul that includes double-digit increases across all segments.

    Chrysler (FIATY.PK) Mar. U.S. sales: +34% Y/Y (exp. 31%) to 163,381 vehicles, the best monthly sales since March 2008. Chrysler brand sales +70%. Jeep +36%, Dodge +18%, Ram Trucks +18%. (PR)

    Ford (F) March U.S. sales: +5% to 223,418 vehicles. Cars +5.6% to 84,772: Fusion +3.6% to 28,562, Focus +64.7% to 28,293, Mustang +5.7% to 9,046. Utilities +3.3% to 60.366: Escape -5.4% to 22,679, Edge +13.5% to 14,058, Explorer +5.8% to 13,212. Trucks +5.6% to 78,280: F-Series pickup +9% to 58,061. (PR)

    GM (GM) March U.S. sales: +11.8% Y/Y to 231,052 vehicles. Chevrolet +16.8% to 173,073; GMC +12.2% to 34,337; Buick -16.3% to 13,105; Cadillac -13.4% to 10,537. Sales highlights: a record 100,000 cars and crossovers that achieve an EPA-estimated 30 mpg highway rating or better. (PR

    Best Buy (BBY] -0.3%) is downgraded from "Buy" to "Sell" at McAdams Wright Ragen, which notes waning confidence in the company's management. Best Buy is struggling against online competition and Apple. 

    Research In Motion (RIMM -3.3%launches BlackBerry Mobile Fusion, an effort to prop up its enterprise device management software business by adding support for Android and iOS devices.Critics have argued the solution doesn't support many of the advanced features found on RIM's BlackBerry Enterprise Server. The company still refuses to license its BlackBerry Messenger software for use on non-BlackBerry devices. (previously

    Netflix (NFLX -2.65% to $110.95) is cut to equal weight from overweight at Barclays Capital, although it affirms the company's price target at $115. Barclays cites competition from the likes of Amazon, Comcast and Dish at a time of increased content costs as reasons for the downgrade.

    Oracle (ORCL) and Google (GOOG) have reached an "irreconcilable impasse" in settlement negotiations, ruled U.S. Magistrate Judge Paul Grewal yesterday. Grewal says he won't convene any further settlement conferences in the patent and copyright lawsuit against Google over programming language Java. The trial is set to begin April 16. 

  28. cjji

    Phil,
    What is your take on VXX today?

  29. Phil

    Wheeeeee!  Nice dip in oil (/CL) from the $105 line.  Makes up for all those disappointing moves over our .50 lines yesterday.  Game on for the RUT too as they fail our 836 line (/TF). 

    Dollar 79.11, Euro $1.330, Pound failed $1.60 at $1.5965 and 82.23 Yen to the Dollar indicates the BOJ may have flipped to buying Dollars again so let's keep an eye on that.  

  30. flipspiceland

    "…..Risk your entire account on one trade with no stop loss plan…."
    For once I would welcome being called by any epithet, the most insulting one you can think of, had I put it ALL in AAPL at $79.00, found myself drafted into the U.S. Army, in 2008 for a clandestine mission that would have kept all information about stocks and options away from me, and been discharged today.
    What a fool I would have loved to be, crazy, lucky, and very very very rich. 
    This market needs more the talents of the "Hunter-Warrior" than an analyst, stock picker, or guru.

  31. biodieselchris

    PCLN and CMG are irking me.

  32. newbie

    stjean
     
    How do you pronounce your name? phonetically.
     
    I assume  "Saint Zhon Luke"  ?

  33. Kwan

    Chrysler sold more cars because that Romanian woman is hot. She's so recognizable now she didn't even need to say anything in the second Fiat commercial with Charlie "how much cocaine does it take to kill two and a half men" Sheen.

  34. Kwan

    biodieselchris – LVS is irking me but I'm trying to exercise patience. (But not to the point of stupidity.)

  35. jabobeast

    Phil--why would Citi come out and pump PCLN again today? Is it a conspiracy or are they really trying to tell people to buy it now because it is on sale in the 700s???

  36. Phil

    Foolish things/StJ – So it's OK to risk your entire account on one trade if you do have a stop loss plan?   Overall, good advice.  

    Gold dropped $10 very fast.  

    Kondratieve peaks/Angel – Interesting:

    kondratief commodity

    WMT/Burr – I was talking about the 3/2 clarification where I said (in answer to your question to clarify rolling plan):  

    Those April $57.50s are $1.77 today and the June $60s are $1.03 so, even if you give back .74 on the roll, you still have $1.03 in your pocket on the short June $60s and they roll up to the Sept $62.50s at .90 and those to the Jan $65s at .92. 

    If you want, you can do the Sept $60 roll for $1 and save the addition of the bull call spread and the DD roll for if WMT goes over $62.50.  Yes, the premise is that WMT trades in a fairly narrow range, as 70 year-old $200Bn companies should.  Just because the market is acting irrationally, does not mean you have to begin acting irrationally to match it.  This was originally meant to be a well-hedged trade so we are keeping it well-hedged.  If you want to flip it to be extremely aggressive, that's fine with me.  As I said on day one – $62.50 is the point at which you get into trouble.  WMT is at $61.16, and, a month later, it still looks like $62.50 is the point at which you run into trouble.  

    PCLN/Jabob – Wow, C really jammed it up today – 2%!  

    VXX/CJ – I like them down around $16, it's pretty low.   You just have to play for a pop – ONE DAY – don't put all your eggs in one basket and plan to roll for time before taking a big loss and the play is that some day, somehow – something will happen somewhere in the World that actually makes investors concerned enough to pull back just a little bit.  I know it seems like a fairy tale that can never come true but I have heard from reliable sources that once upon a time, the markets used to be volatile and people bought puts to protect their positions.  

    Chrysler/Kwan – I do like that commercial.  

    Dollar ditched now to 79 in a very sharp move and not looking like it will hold – that should take us higher. 

  37. stjeanluc

    Newbie – I am not good with phonetics. You should watch Star Trek NG for some hint. The ST stands for Star Trek, not Saint…. I am not that vain!   :-)

  38. stjeanluc

    Entire account / Phil – Technically you could risk the entire account on one trade, but you would need some very tight stops! 

  39. shadowfax

    When does the FED speak?

  40. stjeanluc

    Fiat / Kwan – It seem that Catrinel Menghia did better for Fiat than J-Lo…. But the original commercial (not with Charlie) is so much better!

  41. shadowfax

    stjean
    You also can't have a meltdown or flashcrash type event. They do go to market orders.

  42. JRW III

    exec / Position

    I've been partially short then long, in cash now; this may be just a small range day after yesterdays move, if so maybe IWM 83.55-83.97

  43. lolobear

    lflan – any new AAPL plays at all?

  44. dpastramas

    Isnt anyone noticing that Europe is imploding? IBEX -1.5%! Eurostoxx 50 -1%.  This is some divergence today between US and EU markets…

  45. danny3399

    Phil

    If you did the apple trade from above how many qqq puts would you buy for each sold apple put.

  46. Phil

    Conspiracy/Jabob – Of course it is. Look at all the upgrades coming out of the IBanks the last couple of weeks.  Either we are about to have the greatest earnings season ever recorded or they are pumping the crap out of the market so they can dump everything ahead of the reality of the reports.  We'll find out over the next few weeks…

    Oil back to $105 for a reload!  

    Dow having trouble holding 13,250, RUT right at 840, NYSE 8,250, SPY rejected at 1,420 – these are definitely significant spots.  

    Nothing to change on portfolios at the moment, just have to see which way we break but I do like adding 20 DDM May $70 calls for $3, selling the April $71 calls for $1.40 for net $1.60 on the $1 spread.  The $71 calls can be rolled to the May $73s ($1.40) if they don't expire worthless and that would be a double for us if the Dow keeps going up and, if not, it's a good cover we can work with.  

    PCLN July $530 puts ($5) can be rolled to the $560 puts at $7 for $2 more in the $25KP (thank you Citi!).  

  47. Phil

    PCLN – On the Long Put List (see Friday) we were up to the July $520 puts at net $7.10 so those too should be rolled to the $560 puts for $2.50 for net $9.60, which is what those puts were yesterday so we're keeping up (more or less) and no need to DD yet.  

  48. stjeanluc

    Orders / Shadow – Obviously this is not what I would recommend… 

  49. Phil

    Tight stops/StJ – And you'd have to be sure you can actually trigger them – that's a part a lot of people seem to forget.  

    Fed/Shadow – 2pm.  Just the minutes of the last meeting, where they said no QE3 for now.  I don't understand the fuss – they gave us their formula and clearly we're not there so why do people think the Fed is going to lay out the conditions for more easing for the first time in their history and then break those conditions within a few months – even The Bernank is not that crazy.  

  50. Phil

    Oh, forgot to mention – that video was from last Feb, when I was on a cartoon kick.  Funny how it still applies. 

  51. Inkarri1982

    Hi Phil – I read about gasoline retail sales declining rapidly and was wondering what your thoughts were whenever/if you have time.  Here is a link to the EIA's site:
    http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103600001&f=M
    Thank you.

  52. newbie

    stj
     
    you're gonna make me work for it?
    well,   ooooooh kaaaaaayy
     
    I'm going to have to ask my brother. He's a Star Trek / Star Wars kind of guy.   I most certainly am not.
     
    But I AM going to assume my original assumption that you are French Canadian is probably incorrect?

  53. stjeanluc

    Maybe Shadow would know why gasoline prices are more correlated to Brent prices than WTI. In any case, it's a problem for US drivers as Brent has gained more.

    http://www.bespokeinvest.com/thinkbig/2012/4/3/brent-wti-trades-to-highest-levels-since-october.html

  54. stjeanluc

    Actually French (by birth) / American (by choice)  Newbie….

  55. dpastramas

    OK still no-one noticing, IBEX -2% and Eurostoxx -1.5%… Oh boy…

  56. Phil

    Europe/Dpast – Shhhhhhhhhhhhhhhh!  

    AAPL/Danny – I would consider the AAPL trade a free $18 (because I don't own AAPL stock but would love to at $400) and put about $6 into the first round of the Qs so about 6:1 with the expectation of losing $9 if I'm wrong and probably stopping the bull call spread out at $15 if it goes the wrong way so at least I make something for my troubles against $40 in margin.  

    Gas sales/Ink – It's what I've been saying for ages.  They have destroyed demand and it's not coming back at these prices – especially without new jobs.  People simply can't afford these oil/gas prices.  We're at the point where every dollar the consumers spend on one thing is a dollar they have to not spend on something else.  

    Wow Newbie, how can you know nothing about Star Trek?  Jean-Luc Picard is the captain of the ship (post Kirk), he's in movies and everything – very easy to find clips where his name is spoken.  

    Brent/StJ – Because most fuel is Brent and we export gasoline so it's now seeking regional max prices, less mitigated by our cheaper WTI supply. 

    Europe/Dpast – Shhhhhhhhhhhhhhhhhhhhhhh!!!

  57. shadowfax

    Phil
    Other not so good indicators: most of todays volume is selling, money flow out, Xlf has lost 3/4 of yesterdays gain, and TBT is going down again. Even Algo futures has 3 sell signals.

  58. Dennis

    That video is great Phil, why don't you do those anymore?  

  59. mrmocha

    Check that chart on VRNG after Altucher wrote this article about his investment in the company, which is suing GOOG over search engine IP.  Wouldn't it be nice to be his editor and see stories like this right before they hit the wire?

  60. dpastramas

    Europe / Phil – Ooops. Really sorry, forgot you trying to turn bullish.  In any case Europe is no closed so back to irrational exuberance

  61. shadowfax

    Phil
    There are people around here that don't support local business. A few braged we go to Idaho Falls every week to buy groceries. That stopped but now there is a van pool that goes, I. F. is 150 miles R/T.

  62. ronresnick

    I am not typically one to swear . . . but . . . FU PCLN! : )

  63. jabobeast

    I don't swear either ronresnick..

  64. jabobeast

    but i agree with you ;-)

  65. projectwise

    I'm out half of my DIA

  66. kustomz

    Europe

    • DAX down 0.6%
    • CAC40 down 1.25%
    • Madrid down 2.3%
    • Milan down 1.7%
  67. stjeanluc

    Star Trek / Phil – Shouldn't that be part of the questionnaire for citizenship in the US? Name all the captains in Star Trek. Beats asking about the 3 branches of government since they now seem more fictional than Star Trek itself!

  68. stjeanluc

    Jabo – Could you go long FAS, XRT and short VXX. We could use the help in the 25KP!  :-)

  69. Phil

    11:00 AM On the hour: Dow -0.11%. 10-yr +0.08%. Euro +0.14%vs. dollar. Crude -0.29% to $104.92. Gold -0.24% to $1675.75.

    European shares close sharply lower, with only the closing bell halting a straight-down late-day slide. Stoxx 50 -1.8%, Germany-1.1%, France -1.8%, Italy -2%, Spain -2.8%, U.K. -0.6%. Spanish banking shares: Santander (STD-4.1%BBVA -4.5%. European financial ETF: EUFN remains +17.2% YTD. 

    Citigroup's economic surprise index - whose bottoming out as stocks were sinking late last summer and early fall may have tipped better times ahead – has been sliding for several weeks. Thedivergence between it and a still rising S&P grows wider by the day.

    Shhhhhhhhhhhh:  "(A) material default risk remains in light of the still high level of indebtedness post-PSI," says Fitch in a special report on Greece, noting the government "assumed substantial additional liabilities to fund PSI and recapitalize its banks." European shares are hitting session lows, but it's hard to believe this non-news could be a catalyst. Stoxx 50 -1.4%, Spain -2.3%

    China's economy may have expanded 8.4% in Q1, says an official with the NDRC, 10 days before the data is due to be released (consensus forecast is 8.3%). It would mark the 5th consecutive quarter of slowing growth in China and a fall from 8.9% in 2011 Q4. Premier Wen famously lowered the government's 2012 forecast to 7.5% in early March.

     "The era of a predictable and steady RMB appreciation isat an end," writes UBS' Tao Wang, noting the sharp drop in China's trade surplus and the likelihood it isn't about to bounce back. This doesn't mean the yuan is about to fall in value, but "it's difficult to argue (it) is much undervalued anymore." 

    The Fed issues a consent order against Morgan Stanley (MS -1.4%) over "misconduct and negligence" in its residential mortgage loan servicing and foreclosure processing. The Fed expects to fine MS, which wasn't part of the recent $26B settlement with five major banks. (PR

    Morgan Stanley (MS -1.4%) is Dick Bove's new favorite bank stock, “so cheap right now, it’s overwhelming. It should be bought and bought very aggressively, right now.” Aside from an expected dip in May earnings, Bove thinks the rest of the sector looks good too, as “everything that could go right for these companies is going right at the present time.” 

    NYT's Joe Nocera ran into Jamie Dimon (JPM) in an elevator, and the results weren’t pretty. “Why does The New York Times hate the banks?” the JPMorgan Chase chief asked. But the problem, Nocera writes, lies in a pattern of “awful behavior” inside the credit card collection wings of banks like JPM. “It’s the country that hates the banks."

    The hotly-debated nuclear restart in Japan for two nuclear reactors sees another delay after PM Noda orders more analysis on safety standards. Eventually Japan will have to move definitively one way or the other with the intense demand for electricity in the warm weather months fast approaching. 

    A number of auto industry-related stocks are running hot amid reports from manufacturers of brisk March auto sales. Advancers: ABG +4.4%GPI +4.3%PAG +5.0%SAH +4.3%LAD+2.4%.

    Volkswagen (VLKAY.PK) March U.S. sales: +34.6% to 36,588 vehicles, strongest March sales since 1973. Jetta -11.8% to 14,966, Passat +26,300% to 10,032. (PR)

    This may be the shortable top we're looking for:  Sears Holdings (SHLDmoves up 2.8%, helped along in part by word that Eddie Lampert will regale the CNBC crew tomorrow morning with his presence in the studio. The trimmed-down retailing chain keeps defying the shorts not yet squeezed out with a dizzying 115% YTD return.

    Global Payments (GPN +2.4%) gains on an upgrade to Buyat Stifel Nicolaus, saying the stock has overreacted to the security breach news. The firm notes that fundamental exposure is much lower than the market is discounting, and valuation will recover. 

    A123 Systems (AONE -11.4%) crashes into penny stock territory after getting hit with a series of class-action suits, apparently related to last month's battery recall. Yesterday, the cash-strappedcompany fell on news customer Fisker Automotive had obtained new funding - investors weren't identified, but A123 has poured money into Fisker before.

  70. Phil

    Burger King launches the biggest menu expansion in its history with 10 new items hitting the menu this week. Nearly all the debuting items at BK mimic offerings from rival McDonald's (MCD+0.7%) which has stretched out its market share lead over the burger chain in recent years. Before it worries about challenging Mickey D's dominance, Burger King will set its sights on reeling in Wendy's (WEN+0.2%) – which passed it for the number #2 slot for sales in the sector.

    IBM unveils the latest version of its DB2 database software, and claims the product is 98% code-compatible with market leader Oracle's (ORCL) software (thus enabling easier migration). Big Blue is also introducing an upgrade to its data warehousing software, touting both its performance improvements and support for theApache Hadoop framework, which is often used in big data projects. The product competes with Informatica's (INFA) data warehousingsoftware.

    Herb Greenberg calls chatter kickstarted by Piper Jaffray's Gene Munster on a Research In Motion (RIMM -5.1%) bankruptcy absurd given the tech firm's balance sheet and cash flow.

    Amazon (AMZN) is testing an in-app purchasing service for Kindle Fire apps, further evidence of its interest in challenging Apple and Google's app stores head-on. Through the service, Amazon is targeting an in-app purchase market that IHS expects will reach $5.6B in 2015, up from $970M last year. Already, the company's Appstore for Android appears to be doing a much better job of monetizing apps than Google Play.

    How bad are the fragmentation issues facing Android (GOOG) developers? More than 4 months after the first device supporting Android 4.0 was launched, only 2.9% of all Android devices in use run the OS, according to Google's own data. 63.7% of devices are stuck on Android 2.3, and 30.1% are still using Android 2.2 or something older. Consider this a big reason why developers have mixed feelings about Android, in spite of its soaring share.

    Piper's Gene Munster isn't the only Apple (AAPL +2.1%) perma-bull giving its shares a lift today. JPMorgan's Mark Moskowitz (previously) is raising his PT to $715, arguing his firm's research indicates iPhone/iPad shipment activity within the supply chain "implies major upside potential" to prior estimates. In addition, Auriga's Kevin Dede is starting coverage with a Buy and $700 PT, while praising Apple for having an unmatched app ecosystem.

    Three lunchtime reads:

    1) How long will markets stay calm?

    2) Faber: Japanese stocks will outperform as U.S. margins deteriorate

    3) Investing in China for the long term

  71. dpastramas

    TEF / Phil – I was having a look for some nice cheap stocks in the IBEX now its getting pounded i found out that Telefonica is not getting too much love.  It's trading at 52 week low with a P/E of 3.  Do you have a POV on TEF?  
     
    I was thinking about the below Bull call spread
    Buy Sep 15/20 Calls and sell Sep 15 Put, so 5$ spread  for net 0.5$.  What do you think?
    Looking forward to your feedback

  72. jabobeast

    Guy Adami says PCLN is going to 800—he is never wrong…
     
    FU Adami!!!

  73. stjeanluc

    SHLD / Phil – These guys ramped up to $84 on earnings 2 weeks ago and back down to $64 yesterday I am not sure I would jump to short them at $68. That's one mofo stock….

  74. Pharmboy

    Interesting trade in WCRX…..  Sell the Oct $17 Ps for $2 or better, buy the $17/21 BCS for $1.3.  That is a 70c credit. 

  75. zeroxzero

    Guys — Haven't seen much about automotive.  Pent up car demand seems to be pushing sales, GM got hosed today, Ford looks a little pallid, it seems like tacos and old movies are stronger performers than the auto industry for the moment.  What am I missing?

  76. Inkarri1982

    ZXZ – Apparently Porchse sales were down 5% in March as well. 

  77. Gingbaum

    Anyone heard anything on Rimm – its down 8% today?

  78. Phil

    Indicators/Shadow – Not sure it's going to matter much this week, we're done on Thursday and there's no volume so moves are pretty meaningless at the moment.  

    Videos/Dennis – I don't know how I had so much free time last Feb but it was new and exciting to make a cartoon and I did it for about 3 weeks until it became repetitive.  My problem with things like that (any hobby) is that I'm a perfectionist so I like the early learning curve and can have fun but, if I'm going to stick with something, I start to get serious about it and then I NEED to get better and better and making incremental improvements in that system requires exponentially more time so the whole thing got annoying after a while.   To make them come out well you have to write for the actors – they each have things they can and can't do with their voice recognition (which then causes the camera cuts to work or not) and that's the really tedious part – constantly rewriting and testing the script.  

    VRNG/MrM – That is a nice pop.  I guess I should check Facebook more often as he's one of my buddies there and I could have gotten an early heads up (good reason to FB with people who actually move the markets!).  

    Europe/Dpast – What US worry about Europe – come on.  How could things in Europe possibly affect us?  

    Groceries/Shadow – 150 miles?  Is it that much cheaper?  I know on Fire Island – we don't support the local groceries with their 100% mark-up.  That's just logical.  Even the rich folks bring food with them rather than pay $8 for a gallon of milk and $2 for a bagel so it depends on the whole story but if I have to drive 150 miles for groceries – I'd relocate.  

    LOL on Star Trek StJ!  Your right, if you can't name at least two captains (three if you count Spock and Sulu) you just shouldn't be allowed in the country.  

    TEF/Dpast – Aren't they in SPAIN?  Let's practice our logic for a moment:  Everybody in Spain has a phone.  Everybody in Spain gets a phone bill.  23.6% of the people in Spain have no job and that's up 9.6% (68% higher) from last year.  What is likely to happen to TEF's revenues?  I think Spain is the new Greece and we saw how well the Greek bargain hunters did, right?  I agree that it's tempting but so is RIMM.  

    A look at the gaping divergence between Spain (EWP) and other major continental markets (with the S&P thrown in) this year – Germany (EWG), France (EWQ), and Italy (EWI). It reminds of the performance gap between the continent and a diving Greece this time last year, which meant little until all of a sudden it meant a lot. 

    PCLN/Jabob – Notice how relentless the positive comments are on them.  Every time they pull back, another person comes out supporting them and none of them have any particular numbers – they just "like" them.  At least with AAPL the bullish statements sometimes are accompanied by actual projected numbers but, with PCLN, there's no numbers they could put up that wouldn't seem silly.  

    SHLD/StJ – Oh I want them to double-test $85 as Cramer steers the sheeple in and THEN I will like them short.  I'm only sorry we didn't short that run-up once they popped $75 so now we get another crack maybe.  

    Oil holding $104.50 and maybe another run back to $105 but inventories tomorrow with low expectations so we're back to the dangerous time of the week to be shorting.  Gold behaving itself at $1,676 so good for those (/YG) shorts and they bottomed at $1,670, which was a good stop-out with a reload if they fail $1,675.  Dollar 79.02 and very bad sign that that's enough to drop the markets.  

    80 minutes to Bernanke

  79. shadowfax

    zeroxzero
    One thing that is missing from the talk is what about everybody else. Honda is still the most American made car. Those new trucks and SUVs don't get the advertised mileage in real world driving and they are a lot of their profit unlike the other auto manufacturers. I know for a fact that contractors are not buying new trucks, the ones that I know aren't driving their old trucks. Much cheaper to take the Honda, Toyota, or Subaru when there is no work.

  80. Gingbaum

    Thanks Willsons

  81. Pharmboy

    VRTX….nice.  Covering the stock with the $43 calls 1/2 cover by EOD  Trying for 75c/contract.   The $41/42 BCS is going to come in nicely with the sale of the 38 Ps. 

  82. kustomz

    Dick Bove on MS, isnt it like the kiss of death when Bove says buy.

  83. shadowfax

    Phil
     I was mostly relating to the price of gas. The other issue is a local sicknes of not supporting locals and then complaining how they have no jobs for them or pay enough. Never lived in a place that no one understands economics. When I have to go to IF for doctors or can't get it here, I shop at the winco and some things not all are much cheaper, they also have a Sam's club. Sam's club is a junk show and neither can justify gas which is a small part of what it costs per mile to drive.

  84. diamond

    PhilJim Cramer: "… If that's the case, we seem to be having growth with no inflation, something that seems inconceivable, but is the Holy Grail of future stock price performance."

  85. stjeanluc

    Dick Bove is a jackass….

  86. Pharmboy

    and MS is 'technically' insolvent.

  87. augrusot

    phil, since car sales are doing well, what do you think of SIRI?

  88. kustomz

    A guy in Italy says he has to pay 9000 EUR a year now to own his C63..some new tax. Anyone hear about this new tax?

  89. kustomz

    Sorry C63 is a Mercedes vehicle..^^^

  90. lflantheman

    stjeanluc….I love your list of foolish things a trader can do.  One of my favorite things to read about and think about is the psychology of trading.  Even on this site, where trading sophistication is higher than elsewhere, I see what I percieve to be trading errors occuring regularly.  And most relate to the inability of the trader to understand the psychology of trading.  A few relate to mismanagement of positions themselves.  We should concentrate more than we do here on trying to correct our trading errors as they relate psychological principles.  An example would be:  I believe that if you show ANY emotion whatsoever as regards the movement of a specific stock, then you are not a trader who is thinking clearly.  Instead of feeling emotion you should be analyzing emotion, the emotions of the herd who are driving a stock price extremely high or extremely low.   What are they likely to do next?  If you can get to the bottom of that question, then you may find a play in the stock itself.  Another example:  I think most traders stay with losers too long  and exit winners too soon.   Losers should be cut loose quickly.  The stock to double down on is not the losing stock.   You should double down on the winner!   Ride the strongest horse you can find until she fails you, then find another horse!   The list you have made is worthy of extensive weekend discussion.  Thanks stjeanluc.

  91. dpastramas

    TEF / Phil  - Just for discussion shake, Spain accounts only for 25% of its revenues. The other 25% is Europe and UK and the 50% is Latin America.  So still there is some hope for growth. Anyone, thanks for your opinion, will proceed with care.  And by the way i am also in RIMM with a Jan 13 Bull call spread. I know how to pick them eh :-)

  92. pstas

    Angelcur- MIL
    Found this statement in the recently released annual report- not sure what to make of it. Any insight?
    As we stated in our last quarterly report, we had completed a review of our assets and identified some merchant banking and other non-core net assets in the amount of approximately $100 million for potential divestiture. However, the divestment plans have now been put on hold indefinitely as we cannot predict our use of capital requirements in the short and near term with our new existing and pending projects that are underway.

  93. Phil

    I was just talking to a reporter who asked me about the AAPL trade and I think I made a good point.   Do you want to buy AAPL for $400?  If yes, then why would you not want to get paid $28.50 for agreeing to do so?  It drops your net (if it ever gets that low) to $371.50, which is 40% below the current price.  If I spend $62,750 now for 100 shares of AAPL, I need $656 to make $28.50 (4.5%) but if I sell 2 puts for $5,700, that's a 9% gain against $62,750 and unless AAPL drops significantly, I'm only tying up $8,000 in net margin to do it so my return on margin is 71% in two years.  Meanwhile, I have $54,000 worth of cash left to play with on short-term trades – in case another opportunity comes along.   

    You can be more aggressive, of course, the $500 puts can be sold for $59 with about $50 in net margin so a better return for taking more risk but $400 is a level at which you don't even need to hedge until the Nas drops 20% as you STILL have another 20% below you before you GET TO BUY AAPL for $400.  

    No, it's not sexy – but it's a great way to put unused margin to work in a cashy portfolio.  To put it in a simple context:

    • If I REALLY, REALLY, REALLY WANT to own 200 shares of AAPL for $400 ($80,000)
    • Then I sell 2 2014 $400 puts for $28.50 ($5,700).
    • I use that money to buy 1 NDX 2,800/2,600 bear put spreads for $9 ($9,000) and I'm in the $20,000 spread for net $3,300 with $16,600 of upside and that's ANOTHER 20% discount to my net purchase of AAPL (net $317) and now we're around 50% off. 

    So the Nasdaq EITHER goes up and wipes out my spread (and, in theory AAPL costs me nothing) of net $3,300 or it goes down and I have up to $16,600, which is, in theory, 5% protection against $300,000 at risk.  That's all a hedge is.  We like to do things fancier than that but you don't HAVE to go with ultras or make out of the money plays for leverage but you CAN instead buy 20 TQQQ June $110/100 bear put spreads for $2.20 ($4,400) which pay $20,000 if the Nas falls about 6% and, if not, you still have money left to short for the next 6 months and HOPEFULLY, if the Nas doesn't fall 6%, then the $300,000 worth of long positions you are protecting, make MORE than $4,400 over 6 months – which they will do if you CONSERVATIVELY sell premium.  

    None of this is really rocket science.  We spend a lot of time talking about exotic and fancy forms of hedging but those can get overused and turn into bets.  All you really need to do is take sensible entries and hedge against a disaster and you'll likely outperform the market by a wide margin – year after year.. 

    LOL – Obama once again being censored by CNBC.  After 8 years of having to hear every sound that came out of Bush's mouth, I really miss the equal time rules….

    Automotive/ZZ- We're up against very easy comps from last years Japan quake/tsunami.  Also the car co's are throwing money at anyone with a pulse who walks into the dealership, not discounts but the financing.  If the economy tanks and jobs get worse, those companies are right back to needing bailouts so people are a bit less than enthusiastic about GM at $26 or F at $13.   It's a sea of rationality in an otherwise irrational market.   Also, small cars are selling, not big – less margin.  

    RIMM/Ging – If you read the AAPL comments by Munster, you'll see he's figuring AAPL wipes out RIMM to pick up their sales.  He was very blunt about it on TV too (see news above and Greenberg commentary saying Munster is dead wrong).  

    And what Willsons said!  

    Bove/Kustomz – I agree, was particularly funny how bad his timing was today.  His previous call was BAC was a bargain at $10 – that was our clue to take that money and run. 

    Gas/Shadow – At 150 miles, even round trip, that's at least $20 added to the bill.  

    Cramer/Diamond – Yes, now he's just telling fairy tales.  Same crap he did in 2008 to convince people to buy at the top – sickening…  Never forget this video and notice how all the same tricks are being used now:  

  94. shadowfax

    AAPL stock price is expecting to earn $13.90 even though earnings were down in Q4 vs Q3. If that was solid all year the P/E would be around 11 about last years but average estimates are $44 for the year a P/E of 14. With the new dividend are these numbers sustainable? What if AAPL disappoints and today the only top mover up is you know who. How many days can it at least tripple the market? Phil points out without AAPL the NASDQ is a flop. What happens if the NAS flops? I don't know what is happening around the world but I do know were the money isn't there are no new ipads and phones. So when does AAPL disappoint Q1 or Q2?

  95. Pharmboy

    DFS looks a bit like it could start rolling down the hill.

  96. jmm1951

    China won't be needing any more steel for a while now, but the paint industry might have something to look forward to.
     
    http://www.dailymail.co.uk/news/article-2124376/Anzhaite-Long-span-Suspension-Bridge-Worlds-highest-bridge-gets-finishing-touches.html

  97. Phil

    SIRI/Aug – I like SIRI but, having last bought them for $1 (after much delay since before that we got them at .11), it's VERY HARD to get excited about them at $2.35.  They are reasonably priced at this level but not cheap so they are more of a watch-list thing for me, where a disaster that takes them back to $1.50ish would probably be a good reason to buy.  

    Trading Psychology/Iflan – Good time to bring up our friend Dr. Brett's site.  He doesn't update it much anymore but the archives are fantastic.  

    TEF/Dpast – That's a good fact.  I did not know they were that diversified.  Still, I'd wait to see where the bottom is (it was $15 in the crash) and then scale in with caution.  If all goes well, we'll get a better VIX to sell puts into soon.  

    $104.25 on oil again (/CL), that was our bounce last time back to $105.  

    Watch that $15.75 on XLF as a bad break. 

  98. stjeanluc

    Thanks lflan – You should write an article! I'll be happy to help and post it.

  99. exec

    I see they fleeced a bunch of people today with the news release on Ford. 
     
    I'm sure that wasn't by design.

  100. kustomz

    This market and the EUR look ready to rock, you know Bernanke will not say anything to hurt the market sooooo…

  101. stjeanluc

    I guess consumers are back… Very strong chart!

    http://blogs.stockcharts.com/dont_ignore_this_chart/2012/04/consumer-staples-sector-hits-52-week-high-xlp.html

    120402xlp

  102. Phil
    Top 10 XLP Holdings (65.97% of Total Assets)  
    Company Symbol % Assets
    Procter & Gamble Company (The) PG 14.22
    Philip Morris International Inc PM 11.11
    Wal-Mart Stores, Inc. Common St WMT 7.89
    Coca-Cola Company (The) Common KO 7.11
    Kraft Foods Inc. Common Stock KFT 5.15
    CVS Caremark Corporation Common CVS 5.03
    Altria Group, Inc. MO 4.74
    Pepsico, Inc. Common Stock PEP 3.78
    Colgate-Palmolive Company Commo CL 3.77
    Costco Wholesale Corporation COST 3.17
  103. Canuck

    TEF – 3% institutional ownership… that says a lot!

  104. stjeanluc

    It's incredible how many ways they found to get money to the top 1%:

    http://www.footnoted.com/my-big-fat-deal/no-equivalent-for-dividends-at-invesco-others/

     

    One of the more curious executive compensation practices to develop over the years is the “dividend equivalent,” also sometimes called hypothetical, unvested or deferred dividends, among other terms. These are dividends, or payments in lieu of actual dividends, that are paid on on shares of stock that the executive doesn’t yet own — a fascinating state of affairs that makes the most sense if you look at it from a perspective of entitlement.

    After all, why wouldn’t you also get the dividends on shares you don’t own yet, if you feel it’s destined that you’re going to get them? [...]

     

    In other words, they not only get dividends on shares they don’t yet own, but they get an eye-popping interest rate on top of that, to make up for the time they didn’t yet own the shares. (Got that?) Granted, the interest rate is lower than the total annual return on McKesson stock in recent years, but they’re getting that, too, on the shares; and an interest-bearing cash account doesn’t carry the same risk as an investment in stock. Just try finding 8% interest for a cash account at your local bank.

    Other examples of steep hypothetical dividend accruals we’ve run across over the past year: $616,166 for Pepco Holdings (POM) Chairman and CEO Joseph M. Rigby for 2011 (thanks ratepayers!); some $590,000 for NYSE Euronext (NYX) CEO Duncan L. Niederauer, also for 2011; more than $500,000 apiece for four Booz Allen Hamilton executives (or nearly $2.5 million combined) for the fiscal year ending in March 2011; $482,690 for the CEO at Robert Half International (RHI) in 2010; more than $460,000 for the vice-chairman of Realty Income (O) in 2010; and $411,364 for Activision Blizzard(ATVI) CEO Robert Kotick in 2010.

    As a workaday employee, I’d love to accrue interest or dividends on pay before I’m entitled to it; it might be a nice perk for shareholders, as well — buy some shares, get last year’s dividends, too! But for us, at any rate, that kind of hypothetical dividend is more like fantasy.

  105. exec

    Oh my…..was that you JR……getting out of dodge?

  106. Inkarri1982

    No Qe…..if only it sticks

  107. newbie

    phil wrote>
    Wow Newbie, how can you know nothing about Star Trek?  Jean-Luc Picard is the captain of the ship (post Kirk), he's in movies and everything – very easy to find clips where his name is spoken.
     
    ——-Well, when my younger brother was watching this junk on TV, I was trying to read "Goedel-Escher-Bach".
     
    ————Yes, now that you explain it, I'm sure my brother will have the very same reaction tonight when he reads my email in which I ask him to explain how "jean-luc" is related to Star Trek. He's going to fall off his chair, laugh 'til he passes out, then ridicule my "lack of cultural kowledge".
     
    stj wrote>
    Star Trek / Phil – Shouldn't that be part of the questionaire for citizenship in the US? Name all the captains in Star Trek. Beats asking about the 3 branches of government since they now seem more fictional than Star Trek itself!
    ____
     
    now, lemme see if I got this right………..
    a week ago, I was supposed to pay attention to (according to Phil's instructions)  the nuances of what Angela Merkel said, and what her facial expression was when she said it.
    Then, I was supposed to master currency exchange rates (to understand the markets and learn to be a semi-competent trader).
    Well, yeah, I can sorta see that if I wanted to Master the Universe.
     
    But now, I gotta know about the freakin' characters in Star Trek?
     
    AND, all that stuff about the three branches of government that I worked so hard to learn about in high school (because they told us it was important)  has now become subservient to an encylclopedic knowledge of some 35 year old TV show that was made with cardboard sets?  I mean, you could see the words "Liberty Carton Company" on the sides of the "moon rocks" on the set!
     
    ____phil said——-""very easy to find clips where his name is spoken""
     
    Crikey…….like I ain't got nothin' else to do, so to be socially fluent and acceptable I gotta go look for this crap?
     
    ………..so, the last three years, all the time I've spent  learning the difference between a Stop Loss order and a Covered Call, and the fact that Cramer is a lying psychopath,  has all been a large waste of time?
     
    You guys get paid for this?
     
    Good to finally learn what's been ailing me all these years about my values system.
     
    Jeez, thanks for straightening me out.  I gotta go take a nap………..

  108. Phil

    Fed Minutes – Wow, no QE3 – what a shocker!  Amazingly, it seems to be for the markets – ROFL!

  109. dpastramas

    TEF / Phil – Very very good point on the puts.  Wow, maybe its finally time…

  110. Phil

    Oh here's the link, I'm going to annotate soon.  

  111. Inkarri1982

    No New Twist either Phil.

  112. dpastramas

    EUR/USD Parity here we come!!! 

  113. exec

    Newbie

     
    You will respect the Bots……you will BTFD's…...resistance if futile!!!

  114. exec

    JR,

     
    Where's your trend line support?

  115. newbie

     

    pstas
    April 3rd, 2012 at 1:24 pm
    Angelcur- MIL
    Found this statement in the recently released annual report- not sure what to make of it. Any insight?
    As we stated in our last quarterly report, we had completed a review of our assets and identified some merchant banking and other non-core net assets in the amount of approximately $100 million for potential divestiture. However, the divestment plans have now been put on hold indefinitely as we cannot predict our use of capital requirements in the short and near term with our new existing and pending projects that are underway.
     
    I don't speak "annual reportese" but I think it might mean "we counted our money and our junk, and we decided we had too much junk and not enough money, so we looked under the bed and in the back of the closet, and we found a hundred million dollars worth of extra junk, so we were gonna sell some of the junk, but now we're not sure, 'cause we're trying to build some new junk, but we're not sure if, to do it, we need the old junk more, or the money more……"
     
    -at least I think that's what it means……
     
    maybe Greenspan could tell you for sure.

  116. stjeanluc

    That was one nasty move in the dollar… Not reflected perfectly in the index though – less violent.

  117. jabobeast

    FU PCLN!!!!!!!!!!!!!!!!!!!!!!

  118. jabobeast

    new all-time high on PCLN… WTF???

  119. JRW III

    exec,

    Trend line at IWM 83.29, R/S at 83.31

  120. shadowfax

    exec
    The big 3 joke is they all look good compared to 2009, or this is this or that between them but in ways that most Americans don't look they have changed very little. It will be interesting to see what happens when the new mileage laws take effect. They still cut every corner they can so that pride in what we make is just anouther lie.

  121. button

    If that was a double top on PCLN, we should see a fairly fast retracement to the 680's.  If not I guess it goes straight to the moon.

  122. shadowfax

    Selling with volume everywhere!

  123. rpme

    Phil, I still find it hard to grasp that the dollar could climb that far that fast on an announcement that seemed like a foregone conclusion. Is all this run up based on peoples belief that QE is coming? If so, how far do we fall when they figure it out?

  124. flipspiceland

    "…. Obama once again being censored by CNBC.  After 8 years of having to hear every sound that came out of Bush's mouth, I really miss the equal time rules."
    AT least with Bush's addled brain, twisted language, and trademark smirk there was a certain sickeningly humorous entertainment value, but with theBamster, a 3 month old's speech is more compelling to watch and hear.
    I can't for the life of me figure out what anyone sees in him that's in the least Presidential; he is but a goofy looking teleprompter reader with the personality of tea towel. 
    I guess "Not Bush"  is just about the only bar that he has to reach.  He's pathetic.

  125. dpastramas

    The oil seems to be stuck at 104$. Tomorrow euro open will be sooo much fun

  126. jabobeast

    not everywhere shadow ;-(

  127. dpastramas

    Jabo i think your time is coming.. This FOMC is a game changer.  Just give it a couple of days.

  128. button

    Phil,
     
    Could you explain why TLT and the 30 year are dropping so dramatically on this fed statement? 

  129. jmm1951

    AAPL trade
     
    It is difficult to trade AAPL as the stock is so unpredictable in the short term. I mentioned before that I was experimenting with way out of the money trades and had sold the 2013 $500/$490 spread for $3. Today the stock met my buy back target of $2:20 and my order was filled. So that was a nice little 25% profit in less than a month without a lot of risk.
    Unfortunately I made the beginners error of  not investing  my entire account on this trade.

  130. biodieselchris

    boy is it frustrating to see the markets tank and CMG, MA, PCLN and AAPL continue go nowhere but up.

  131. biodieselchris

    at some point this just gets ridiculous: is PCLN really worth $800M more in market cap than yesterday?
     
    That's a whole other airline right there…
     
     
    (or is AAPL worth another $8.7B or is CMG another $52M?)

  132. shadowfax

    jabo
    After I posted that I said to myself why didn't you add except AAPL. I don't ever check your F U stocks so maybe they defy gravity also. And a few!

  133. jerconn

    Phil – the DIA puts are up a lot with this selloff (almost 50% by me) but still I'm thinking an overnight hold might be a good idea here because this market is anyway due for a sell-off – what would you say?

  134. biodieselchris

    obama and bush both share a special quality with me: I can't stand to hear either one of them speak.
     
    Maybe it's just me and politicians in general…

  135. danny3399

    Button
    I think it is because if there is no QE3 then the fed will not be buying anymore bonds which will allow interest rates to move up.

  136. Burrben

    Phil / WMT – Thank you for the continued help.  Not a great day to do the call rolls unfortunately.  The June 60's dropped in price much faster than the Apr 57.5's, so the roll got more expensive to do today.  Anyway I'm still working the trade and will update the spreadsheet when the rolls are complete and the new spread is entered into.  Hard getting fills today…. but a good learning experience.  

  137. gmarts

    Jerconn, I took the 50% gain… looking for a bounce to reload on, but that's just me

  138. button

    Danny,
    Thanks and I guess the dollar is going up at the same time because they won't be printing any more $$. The question then is we have bonds, stocks and commodities all dropping today.  That seems kind of rare.  Where is the money flowing?

  139. yshenhar

    Why is TLT down today in a down market?

  140. button

    Oh sorry, I see Its going into PCLN and CMG!

  141. shadowfax

    If IWM looses 82.90 ish we could see 82.40 to 81.90 and  that won't be good for tomorrow morning's open. It all depends on the almighty allpowerfull un compromising APPLE! To bad Lloyd lost his mojo.

  142. danny3399

    Ya don't forget apple

  143. jerconn

    gmarts – smart move!

  144. Lincoln

    Anybody?: when momos continue to diverge
    Anyone have a play for situation where the highfliers are the only gainers. XOM, INTC MSFT down all the FU's up

  145. shadowfax

    Lincoln
    The safe thing is avoid them and go with the flow. Aren't most of them on Phil's short/put list?

  146. Pharmboy

    Big sell, slow ramp.  Wash rinse, flush, repeat.  Out of DIAs as well, for now.

  147. shadowfax

    pharm
    If Mr Stick stays hiding and you believe in trend line resistance a good spot to get back in is 131.75

  148. Phil

    FOMC Minutes – 3/13 (Green is good, red is bad, Fed BS is purple):

     

    Developments in Financial Markets and the Federal Reserve's Balance Sheet
    The Manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets during the period since the Federal Open Market Committee (FOMC) met on January 24–25, 2012. He also reported on System open market operations, including the ongoing reinvestment into agency-guaranteed mortgage-backed securities (MBS) of principal payments received on SOMA holdings of agency debt and agency-guaranteed MBS as well as the operations related to the maturity extension program authorized at the September 20–21, 2011, FOMC meeting. By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account over the intermeeting period.

    Staff Review of the Economic Situation
    The information reviewed at the March 13 meeting suggested that economic activity was expanding moderately. Labor market conditions continued to improve and the unemployment rate declined further, although it remained elevated. Overall consumer price inflation was relatively subdued in recent months. More recently, prices of crude oil and gasoline increased substantially. Measures of long-run inflation expectations remained stable.

    Private nonfarm employment rose at an appreciably faster average pace in January and February than in the fourth quarter of last year, and declines in total government employment slowed in recent months. The unemployment rate decreased to 8.3 percent in January and stayed at that level in February. Both the rate of long-duration unemployment and the share of workers employed part time for economic reasons continued to be high. Initial claims for unemployment insurance trended lower over the intermeeting period and were at a level consistent with further moderate job gains.

    Manufacturing production increased considerably in January, and the rate of manufacturing capacity utilization stepped up. Factory output was boosted by a sizable expansion in the production of motor vehicles, but there also were solid and widespread gains in other industries. In February, motor vehicle assemblies remained near the strong pace recorded in January; they were scheduled to edge up, on net, through the second quarter. Broader indicators of manufacturing activity, such as the diffusion indexes of new orders from the national and regional manufacturing surveys, were at levels suggesting moderate increases in factory production in the coming months.

    Households' real disposable income increased, on balance, in December and January as labor earnings rose solidly. Moreover, households' net worth grew in the fourth quarter of last year and likely was boosted further by gains in equity values thus far this year. Nevertheless, real personal consumption expenditures (PCE) were reported to have been flat in December and January. Although households' purchases of motor vehicles rose briskly, spending for other consumer goods and services was weak. In February, nominal retail sales excluding purchases at motor vehicle and parts outlets increased moderately, while motor vehicle sales continued to climb. Consumer sentiment was little changed in February, and households remained downbeat about both the economic outlook and their own income and finances.

    This is what we've been pointing out all quarter.  It's all about the autos and cars do wear out – at a certain point, people HAVE to buy new ones.  3 years with almost no car sales and one year with a rebound is not something we base a bull premise on.  Who else is doing well?  HD, LOW, SCW…  Of course people who don't move eventually have to fix the holes in the roof, etc – that's not a recovery, that's survival.  

    Housing market activity improved somewhat in recent months but continued to be restrained by the substantial inventory of foreclosed and distressed properties, tight credit conditions for mortgage loans, and uncertainty about the economic outlook and future home prices. After increasing in December, starts of new single-family homes remained at that higher level in January, likely boosted in part by unseasonably warm weather; in both months, starts ran above permit issuance. Sales of new and existing homes stepped up further in recent months, though they still remained at quite low levels. Home prices were flat, on balance, in December and January.

    Real business expenditures on equipment and software rose at a notably slower pace in the fourth quarter of last year than earlier in the year. Moreover, nominal orders and shipments of nondefense capital goods declined in January. However, a number of forward-looking indicators of firms' equipment spending improved, including some survey measures of business conditions and capital spending plans. Nominal business spending for nonresidential construction firmed, on net, in December and January, but the level of spending was still subdued, in part reflecting high vacancy rates and tight credit conditions for construction loans. Inventories in most industries looked to be reasonably well aligned with sales in recent months, although stocks of motor vehicles continued to be lean.

    Data for federal government spending in January and February indicated that real defense expenditures continued to step down after decreasing significantly in the fourth quarter. Real state and local government purchases looked to be declining at a slower pace than last year, as those governments' payrolls edged up in January and February and their nominal construction spending rose a little in January.

    The U.S. international trade deficit widened in December and January, as imports increased more than exports. The expansion of imports was spread across most categories, with petroleum products and automotive products posting strong gains in January. The rise in exports was supported by shipments of capital goods and automotive products, while exports of consumer goods and industrial supplies declined on average. Data through December indicated that net exports made a moderate negative contribution to the rate of growth in real gross domestic product (GDP) in the fourth quarter of last year.

    Overall U.S. consumer prices, as measured by the PCE price index, increased at a modest rate in December and January. Consumer energy prices rose in January after decreasing markedly in December, and survey data indicated that gasoline prices moved up considerably in February and early March. Meanwhile, increases in consumer food prices slowed in recent months. Consumer prices excluding food and energy also rose modestly in December and January. Near-term inflation expectations from the Thomson Reuters/University of Michigan Surveys of Consumers were unchanged in February, and longer-term inflation expectations in the survey remained in their recent range.

    Measures of labor compensation generally indicated that nominal wage gains continued to be subdued. Increases in compensation per hour in the nonfarm business sector picked up somewhat over the four quarters of 2011. However, the employment cost index increased at a more modest pace than the compensation per hour measure over the past year, and the 12-month change in average hourly earnings for all employees remained muted in January and February.

    Recent indicators suggested some improvement in foreign economic activity early this year after a significant slowing in the fourth quarter of last year. Aggregate output in the euro area contracted in the fourth quarter, but manufacturing purchasing managers indexes (PMIs) improved in January and February relative to their low fourth-quarter readings, and consumer and business confidence edged up. Floods caused steep production declines in the fourth quarter in Thailand and also had negative effects on output in other countries linked through Thai supply chains. However, economic activity in Thailand recovered sharply around year-end, and manufacturing PMIs moved up across Asia through February. Higher prices for energy and food put upward pressure on headline inflation in foreign economies, but measures of core inflation remained subdued.

    On wages – I consider it bad but the Fed considers it good as the inflation they are paid to fight is WAGE INFLATION – and they do that job VERY WELL!  PMI's (same as my issue yesterday) are only up compared to TERRIBLE Q4 numbers (when the markets gained 20% anyway).  

    Staff Review of the Financial Situation
    On balance, U.S. financial conditions became somewhat more supportive of growth over the intermeeting period, and strains in global financial markets eased, as domestic and foreign economic data were generally better than market participants had expected and investors appeared to see diminished downside risks associated with the situation in Europe.

    Wouldn't you fire someone who gave you a BS report like this?  

    Measures of the expected path for the federal funds rate derived from overnight index swap (OIS) rates suggested that the near-term portion of the expected policy rate path was about unchanged, on balance, since the January FOMC meeting, but the path beyond the middle of 2014 shifted down a bit, reportedly reflecting in part the change in the forward rate guidance in the Committee's January statement. On balance, yields on Treasury securities were little changed over the intermeeting period. Indicators of inflation compensation over the next five years edged up, while changes in measures of longer-term inflation compensation were mixed.

    Broad U.S. equity price indexes rose significantly over the intermeeting period; equity prices of large banking organizations increased about in line with the broader market. Aggregate earnings per share for firms in the Standard & Poor's 500 index declined in the fourth quarter, but profit margins for large corporations remained wide by historical standards. Reflecting a narrowing of spreads over yields on comparable-maturity Treasury securities, yields on investment- and speculative-grade corporate bonds continued to decline over the period, moving toward the low end of their historical ranges. Prices in the secondary market for syndicated leveraged loans moved up further, supported by continued strong demand from institutional investors. The spreads of yields on A2/P2-rated unsecured commercial paper issued by nonfinancial firms over yields on A1/P1-rated issues narrowed slightly on balance.

    Bond issuance by financial firms was strong in January and February, likely reflecting in part the refinancing of maturing debt that had been issued during the financial crisis under the Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program. The issuance of bonds by domestic nonfinancial firms was solid in recent months, and indicators of credit quality remained firm. Growth of commercial and industrial (C&I) loans continued to be substantial and was widespread across domestic banks, though holdings of such loans at U.S. branches and agencies of European banks decreased further. Financing conditions in the commercial real estate sector continued to be tight, and issuance of commercial mortgage-backed securities remained low in the fourth quarter of last year. Gross public equity issuance by nonfinancial firms was still solid in January and February, boosted by continued strength in initial public offerings. Share repurchases and cash-financed mergers by nonfinancial firms maintained their strength in the fourth quarter, leading to a sharp decline in net equity issuance.

    That's interesting as they are basically saying that lack of new issues and massive buybacks (using Free Money from the Fed) of stock have decreased the amount of shares outstanding and so, more dollars chase less stock and drive the prices up (and make EPS seem better than it really is).  This is a game that can't be played forever – just another bubble on top of all the other bubbles waiting for the big pop.  

    Although mortgage rates remained near their historical lows, conditions in residential mortgage markets generally remained depressed. Consumer credit rose in recent months, with the growth in nonrevolving credit led by continued rapid expansion of government-originated student loans. Issuance of consumer credit asset-backed securities remained at moderate levels in the fourth quarter of 2011 and in early 2012.

    Gross long-term issuance of municipal bonds was subdued in the first two months of this year. Meanwhile, spreads on credit default swaps for debt issued by states were roughly flat over the intermeeting period.

    Bank credit rose at a modest pace, on average, in January and February, mainly reflecting strong increases in securities holdings and C&I loans. Commercial real estate loans held by banks continued to decline, while noncore loans--a category that includes lending to nonbank financial institutions--grew at a slower pace than in previous months. The aggregate credit quality of loans on banks' books continued to improve across most asset classes in the fourth quarter.

    M2 advanced at a rapid pace in January, apparently reflecting year-end effects, but its growth slowed in February. The rise in M2 was mainly attributable to continued strength in liquid deposits, reflecting investors' preferences for safe and liquid assets as well as very low yields on short-term instruments outside M2. Currency expanded robustly, and the monetary base also grew significantly over January and February.

    More money chasing less stocks – there's your rally.  

    Foreign equity markets ended the period higher, particularly in Japan, and benchmark sovereign bond yields declined. Spreads of yields on euro-area peripheral sovereign debt over those on German bunds generally continued to narrow, and foreign corporate credit spreads also declined further. The staff's broad nominal index of the foreign exchange value of the dollar moved down modestly over the intermeeting period.

    Funding conditions for euro-area banks eased over the period, as the European Central Bank (ECB) conducted its second three-year refinancing operation and widened the pool of eligible collateral for refinancing operations. Spreads of three-month euro LIBOR over the OIS rate narrowed, on balance, and European banks' issuance of unsecured senior debt and covered bonds increased. Dollar funding pressures continued to diminish, and the implied cost of dollar funding through the foreign exchange swap market fell moderately further. Reflecting the improved conditions in funding markets, demand for dollars at ECB lending operations declined and the outstanding amounts drawn under the Federal Reserve's dollar liquidity swap lines with other foreign central banks remained small. Several other central banks in advanced and emerging market economies eased policy further. In particular, the Bank of England increased the size of its existing gilt purchase program in February, and the Bank of Japan scaled up its Asset Purchase Program. The Bank of Japan also introduced a 1 percent inflation goal.

    Staff Economic Outlook
    In the economic projection prepared for the March FOMC meeting, the staff revised up its near-term forecast for real GDP growth a little. Although the recent data on aggregate spending were, on balance, about in line with the staff's expectations at the time of the previous forecast, indicators of labor market conditions and production improved somewhat more than the staff had anticipated. In addition, the decline in the unemployment rate over the past year was larger than what seemed consistent with the modest reported rate of real GDP growth. Against this backdrop, the staff reduced its estimate of the level of potential output, yielding a measure of the current output gap that was a little narrower and better aligned with the staff's estimate of labor market slack. In its March forecast, the staff's projection for real GDP growth over the medium term was somewhat higher than the one presented in January, mostly reflecting an improved outlook for economic activity abroad, a lower foreign exchange value for the dollar, and a higher projected path of equity prices. Nevertheless, the staff continued to forecast that real GDP growth would pick up only gradually in 2012 and 2013, supported by accommodative monetary policy, easing credit conditions, and improvements in consumer and business sentiment. The wide margin of slack in product and labor markets was expected to decrease gradually over the projection period, but the unemployment rate was expected to remain elevated at the end of 2013.

    The staff also revised up its forecast for inflation a bit compared with the projection prepared for the January FOMC meeting, reflecting recent data indicating higher paths for the prices of oil, other commodities, and imports, along with a somewhat narrower margin of economic slack in the March forecast. However, with energy prices expected to level out in the second half of this year, substantial resource slack persisting over the forecast period, and stable long-run inflation expectations, the staff continued to project that inflation would be subdued in 2012 and 2013.

    WOW!!!  Look how many maybes have to come true for this not to be a friggin' disaster.  Oh wait, sorry – it is a friggin' disaster but if A & B and C all work without D & E happening – THEN MAYBE things will not suck in 2013.  On this basis we're at S&P 1,400?  Is this a joke???

    Participants' Views on Current Conditions and the Economic Outlook
    In their discussion of the economic situation and outlook, meeting participants agreed that the information received since the Committee's previous meeting, while mixed, had been positive, on balance, and suggested that the economy had been expanding moderately. Labor market conditions had improved further: Payroll employment had continued to expand, and the unemployment rate had declined notably in recent months. Still, unemployment remained elevated. Household spending and business fixed investment had continued to advance. Despite signs of improvement or stabilization in some local housing markets, most participants agreed that the housing sector remained depressed. Inflation had been subdued in recent months, although prices of crude oil and gasoline had increased of late. Longer-term inflation expectations had remained stable, and most meeting participants saw little evidence of cost pressures.

    With respect to the economic outlook, participants generally saw the intermeeting news as suggesting that economic growth over coming quarters would continue to be moderate and that the unemployment rate would decline gradually toward levels that the Committee judges to be consistent with its dual mandate. While a few participants indicated that their expectations for real GDP growth for 2012 had risen somewhat, most participants did not interpret the recent economic and financial information as pointing to a material revision to the outlook for 2013 and 2014. Financial conditions had improved notably since the January meeting: Equity prices were higher and risk spreads had declined. Nonetheless, a number of factors continued to be seen as likely to restrain the pace of economic expansion; these included slower growth in some foreign economies, prospective fiscal tightening in the United States, the weak housing market, further household deleveraging, and high levels of uncertainty among households and businesses. Participants continued to expect most of the factors restraining economic expansion to ease over time and so anticipated that the recovery would gradually gain strength. In addition, participants noted that recent policy actions in the euro area had helped reduce financial stresses and lower downside risks in the short term; however, increased volatility in financial markets remained a possibility if measures to address the longer-term fiscal and banking issues in the euro area were not put in place in a timely fashion. Inflation had been subdued of late, although the recent increase in crude oil and gasoline prices would push up inflation temporarily. With unemployment expected to remain elevated, and with longer-term inflation expectations stable, most participants expected that inflation subsequently would run at or below the 2 percent rate that the Committee judges most consistent with its statutory mandate over the longer run.

    So the inflation is not a problem because it's offset by LOW WAGES.  Doesn't that make you feel better about the Fed's view of their own mandate?  

    In discussing the household sector, meeting participants generally commented that consumer spending had increased moderately of late. While a few participants suggested that recent improvements in labor market conditions and the easing in financial conditions could help lay the groundwork for a strengthening in the pace of household spending, several other participants pointed to factors that would likely restrain consumption: Growth in real disposable income was still sluggish, and consumer sentiment, despite some improvement since last summer, remained weak. A number of participants viewed the recent run-up in petroleum prices as likely to limit gains in consumer spending on non-energy items for a time; a couple of participants noted, however, that the unseasonably warm weather and the declining price of natural gas had helped cushion the effect of higher oil and gasoline prices on consumers' overall energy bills. Most participants agreed that, while recent housing-sector data had shown some tentative indications of upward movement, the level of activity in that sector remained depressed and was likely to recover only slowly over time. One participant, while agreeing that the housing market had not yet turned the corner, was more optimistic about the potential for a stronger recovery in the market in light of signs of reduced inventory overhang and stronger demand in some regions.

    Reports from business contacts indicated that activity in the manufacturing, energy, and agriculture sectors continued to advance in recent months. In the retail sector, sales of new autos had strengthened, but reports from other retailers were mixed. A number of businesses had indicated that they were seeing some improvement in demand and that they had become somewhat more optimistic of late, with some reporting that they were adding to capacity. But most firms reportedly remained fairly cautious--particularly on hiring decisions--and continued to be uncertain about the strength of the recovery.

    Participants touched on the outlook for fiscal policy and the export sector. Assessments of the outlook for government revenues and expenditures were mixed. State and local government spending had recently shown modest growth, following a lengthy period of contraction, and declines in public-sector employment appeared to have abated of late. However, it was noted that if agreement was not reached on a longer-term plan for the federal budget, an abrupt and sharp fiscal tightening would occur at the start of 2013. A number of participants observed that exports continued to be a positive factor for U.S. growth, while noting risks to the export picture from economic weakness in Europe or a greater-than-expected slowdown in China and emerging Asia.

    Participants generally observed the continued improvement in labor market conditions since the January meeting. A couple of participants stated that the progress suggested by the payroll numbers was also apparent in a broad array of labor market indicators, and others noted survey measures suggesting further solid gains in employment going forward. One participant pointed to inflation readings and a high rate of long-duration unemployment as signs that the current level of output may be much closer to potential than had been thought, and a few others cited a weaker path of potential output as a characteristic of the present expansion. However, a number of participants judged that the labor market currently featured substantial slack. In support of that view, various indicators were cited, including aggregate hours, which during the recession had exhibited a decline that was particularly severe by historical standards and remained well below the series' pre-recession peak; the high number of persons working part time for economic reasons; and low ratios of job openings to unemployment and of employment to population.

    Most participants noted that the incoming information on components of final spending had exhibited less strength than the indicators of employment and production. Some participants expressed the view that the recent increases in payrolls likely reflected, in part, a reversal of the sharp cuts in employment during the recession, a scenario consistent with the weak readings on productivity growth of late. In this view, the recent pace of employment gains might not be sustained if the growth rate of spending did not pick up. Several participants noted that the unseasonably warm weather of recent months added one more element of uncertainty to the interpretation of incoming data, and that this factor might account for a portion of the recent improvement in indicators of employment and housing. In a contrasting view, the improvements registered in labor market indicators could be seen as raising the likelihood that GDP data for the recent period would undergo a significant upward revision.

    Many participants noted that strains in global financial markets had eased somewhat, and that financial conditions were more supportive of economic growth than at the time of the January meeting. Among the evidence cited were higher equity prices and better conditions in corporate credit markets, especially the markets for high-yield bonds and leveraged loans. Banking contacts were reporting steady, though modest, growth in C&I loans. Many meeting participants believed that policy actions in the euro area, notably the Greek debt swap and the ECB's longer-term refinancing operations, had helped to ease strains in financial markets and reduced the downside risks to the U.S. and global economic outlook. Nonetheless, a number of participants noted that a longer-term solution to the banking and fiscal problems in the euro area would require substantial further adjustment in the banking and public sectors. Participants saw the possibility of disruptions in global financial markets as continuing to pose a risk to growth.

    While the recent readings on consumer price inflation had been subdued, participants agreed that inflation in the near term would be pushed up by rising oil and gasoline prices. A few participants noted that the crude oil price increases in the latter half of 2010 and the early part of 2011 had been part of a broad-based rise in commodity prices; in contrast, non-energy commodity prices had been more stable of late, which suggested that the recent upward pressure on oil prices was principally due to geopolitical concerns rather than global economic growth. A couple of participants noted that recent readings on unit labor costs had shown a larger increase than earlier, but other participants pointed to other measures of labor compensation that continued to show modest increases. With longer-run inflation expectations still well anchored, most participants anticipated that after the temporary effect of the rise in oil and gasoline prices had run its course, inflation would be at or below the 2 percent rate that they judge most consistent with the Committee's dual mandate. Indeed, a few participants were concerned that, with the persistence of considerable resource slack, inflation might be below the mandate-consistent rate for some time. Other participants, however, were worried that inflation pressures could increase as the expansion continued; these participants argued that, particularly in light of the recent rise in oil and gasoline prices, maintaining the current highly accommodative stance of monetary policy over the medium run could erode the stability of inflation expectations and risk higher inflation.

    That last part is very anti-QE3.  Notice how all the good stuff is generally things that are good for Banks?   You have to understand this about the Fed.  It is a cartel of BANKERS – they only care if Banks do well.  Why do they care about inflation – because they lend money and don't want to be paid back in worthless money.   Why do they care about employment – because they lend money and want to be paid back.  They like to have wages to attach!  That's their whole motivation – they don't give a crap about you or America and their policies are only aimed at improving the situation for their Member Banks – no matter who else is hurt by their policies.  

    Committee Policy Action
    Members viewed the information on U.S. economic activity received over the intermeeting period as suggesting that the economy had been expanding moderately and generally agreed that the economic outlook, while a bit stronger overall, was broadly similar to that at the time of their January meeting. Labor market conditions had continued to improve and unemployment had declined in recent months, but almost all members saw the unemployment rate as still elevated relative to levels that they viewed as consistent with the Committee's mandate over the longer run. With the economy facing continuing headwinds, members generally expected a moderate pace of economic growth over coming quarters, with gradual further declines in the unemployment rate. Strains in global financial markets, while having eased since January, continued to pose significant downside risks to economic activity. Recent monthly readings on inflation had been subdued, and longer-term inflation expectations remained stable. Against that backdrop, members generally anticipated that the recent increase in oil and gasoline prices would push up inflation temporarily, but that subsequently inflation would run at or below the rate that the Committee judges most consistent with its mandate.

    In their discussion of monetary policy for the period ahead, members agreed that it would be appropriate to maintain the existing highly accommodative stance of monetary policy. In particular, they agreed to keep the target range for the federal funds rate at 0 to 1/4 percent, to continue the program of extending the average maturity of the Federal Reserve's holdings of securities as announced in September, and to retain the existing policies regarding the reinvestment of principal payments from Federal Reserve holdings of securities.

    With respect to the statement to be released following the meeting, members agreed that only relatively small modifications to the first two paragraphs were needed to reflect the incoming economic data, the improvement in financial conditions, and the modest changes to the economic outlook. With the economic outlook over the medium term not greatly changed, almost all members again agreed to indicate that the Committee expects to maintain a highly accommodative stance for monetary policy and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. Several members continued to anticipate, as in January, that the unemployment rate would still be well above their estimates of its longer-term normal level, and inflation would be at or below the Committee's longer-run objective, in late 2014. It was noted that the Committee's forward guidance is conditional on economic developments, and members concurred that the date given in the statement would be subject to revision in response to significant changes in the economic outlook. While recent employment data had been encouraging, a number of members perceived a nonnegligible risk that improvements in employment could diminish as the year progressed, as had occurred in 2010 and 2011, and saw this risk as reinforcing the case for leaving the forward guidance unchanged at this meeting. In contrast, one member judged that maintaining the current degree of policy accommodation much beyond this year would likely be inappropriate; that member anticipated that a tightening of monetary policy would be necessary well before the end of 2014 in order to keep inflation close to the Committee's 2 percent objective.

    The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run.

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

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

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

    "Information received since the Federal Open Market Committee met in January suggests that the economy has been expanding moderately. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The housing sector remains depressed. Inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.

    To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

    The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability."

    Voting for this action: Ben Bernanke, William C. Dudley, Elizabeth Duke, Dennis P. Lockhart, Sandra Pianalto, Sarah Bloom Raskin, Daniel K. Tarullo, John C. Williams, and Janet L. Yellen.

    Voting against this action: Jeffrey M. Lacker.

    Mr. Lacker dissented because he did not agree that economic conditions were likely to warrant exceptionally low levels of the federal funds rate at least through late 2014. In his view, with inflation close to the Committee's objective of 2 percent, the economy expanding at a moderate pace, and downside risks somewhat diminished, the federal funds rate will most likely need to rise considerably sooner to prevent the emergence of inflationary pressures. Mr. Lacker continues to prefer to provide forward guidance regarding future Committee policy actions through the inclusion of FOMC participants' projections of the federal funds rate in the Summary of Economic Projections (SEP).

    Monetary Policy Communications
    As it noted in its statement of principles regarding longer-run goals and monetary policy strategy released in January, the Committee seeks to explain its monetary policy decisions to the public as clearly as possible. With that goal in mind, participants discussed a range of additional steps that the Committee might take to help the public better understand the linkages between the evolving economic outlook and the Federal Reserve's monetary policy decisions, and thus the conditionality in the Committee's forward guidance. The purpose of the discussion was to explore potentially promising approaches for further enhancing FOMC communications; no decisions on this topic were planned for this meeting and none were taken.

    Participants discussed ways in which the Committee might include, in its postmeeting statements, additional qualitative or quantitative information that could convey a sense of how the Committee might adjust policy in response to changes in the economic outlook. Participants also discussed whether modifications to the SEP that the Committee releases four times per year could be helpful in clarifying the linkages between the economic outlook and the Committee's monetary policy decisions. In addition, several participants suggested that it could be helpful to discuss at a future meeting some alternative economic scenarios and the monetary policy responses that might be seen as appropriate under each one, in order to clarify the Committee's likely behavior in different contingencies. Finally, participants observed that the Committee introduced several important enhancements to its policy communications over the past year or so; these included the Chairman's postmeeting press conferences as well as changes to the FOMC statement and the SEP. Against this backdrop, some participants noted that additional experience with the changes implemented to date could be helpful in evaluating potential further enhancements.

    It was agreed that the next meeting of the Committee would be held on Tuesday-Wednesday, April 24-25, 2012. The meeting adjourned at 4:10 p.m. on March 13, 2012.

    So nothing shocking here but certainly nothing to rally over either.  No help from the Fed means it's all up to earnings now to prove we're going higher.  The Dollar has jumped up to 79.60 and didn't do too much damage to the indexes so far but we'll see what happens tomorrow as the rest of the World digests the fact that Europe just eased without us – surely that's going to push the Euro lower (already down to $1.322 with the Pound at $1.59) tomorrow, especially as the BOJ (82.88 Yen) has clearly switched to the Dollar (see my early morning theory).  

    Gold took a lovely dive to $1,640 and that's a big winner on the Futures (/YG) – I'll get back to other trades later but clearly a huge disappointment for the bulls.  

  149. kustomz

    BTFD, this market wont be allowed to go down. If CNBC were to report an asteroid the size of New Jersey was heading straight for Manhattan they would continue to buy shares. Whens the last time the markets had more than a 2.5% sell off in a single trading day?…yea I cant remember either.

    Phil if you ran one of the larger funds would you sell here? Never mind, your not high on cocaine on a yacht in the middle of the Caribbean. Why panic and sell if its not your money. Grrrr I hate being angry!!

  150. Phil

    Compensation/StJ – LOL, that's a good one.  

    Star Trek/Newbie – This will help you catch up.  

    Dollar/Rp – The point is that it was artificially depressed.  With Europe easing and us not easing, how could the Euro go up against the Dollar – the whole move since the EU expanded the bailout two weeks ago is just silly.  At some point, even FOREX has to have some rational basis in reality.  

    $103.50 was support that time on oil.  Good sign for the bulls there.  

    TLT/Button – No more twist.  First reaction is dumping out of Treasuries on fear that the Fed (essentially the only buyer) may not cover the auctions.  Now we need a bit of panic into the Dollar and TBills to take us the other way.  

    Let's DD on the TLT April $110/111 bull call spread at .57 in the $5KP (5 more).  

  151. Phil

    DIA/$25KP, Jerconn – I think we can do better.  $1,000 isn't going to make or break us and, as I noted above, I think we can drop further.  

    $5KP – Let's take $1.70 and run on the DIA $132 puts as, unlike the $25KP, a $500 gain is not to be taken lightly.  Also, as we doubled down on GLL – let's get 1/2 off at $1.55 to reduce our basis.  

  152. stjeanluc

    The 25KP USO puts are back to their average cost after DD ($1.03)

  153. shadowfax

    Phil Star Trek
    You don't get it, neither do I. A friend found a perfect DVD of it Saturday. Forget the past and get on with the New World Order. For your own good and the world, "STOP THINKING!!!!!!!!" Your not  helping the plan work out.

  154. jerconn

    Thanks Phil…great minds think alike…

  155. angelcur

    does shanghai open back up tonight? been closed 2 days…premier talking about breaking up their banks today

  156. Pharmboy

    IHS on the 3 min, won't finish today, but 141.90 is the target…..unreal how it can be done, day after day after day.

  157. stjeanluc

    And the word cloud for the FPMC statement:

  158. jerconn

    Markets closed Friday – for Passover?  Doesn't start til nightime…

  159. kustomz

    Markets are closed Friday.

  160. Pharmboy

    VRTX -40/43 BCS, selling the 39 Ps for 10c debit (May).

  161. jfawcett

    Phil – An after market close Buy/Write question: 
    I have an investment in the form of a Jan13 35/40 buy write where the underlying was at 38.11.  6.10 credit for a 32.01/33.51 entry.  Underlying is currently at 35.90.  Fundamentals have not changed.  Learned not to panic (thanks).  The question in general is:  What would the strategy be, if any, should the underlying move farther against you?  I am not concerned about owning more (the Put) as that gives me another contract to sell Calls against.  For scaling in, I planned a few more buys.  Just trying to learn what the options could be for this type of strategy as the underlying decreases.  Thanks.

  162. Phil

    WMT/Burr – It's really not an emergency if they can't pop $62.50.  As we still expect the markets to pull back, the short calls do what they are supposed to do – protect the gains on the long spread.  Always be patient.  If you get .05 better on the entries and exits of 4 rolls this year, that's .40 in your pocket.  Unless you think it's a real emergency (and it's not if you plan well ahead and set conservative action points), then better off making an offer and seeing if it gets filled over days, not minutes. 

    LOL Button – When in doubt, buy the Momos does seem to be the new paradigm.  Actually the Momos are relatively small cap and  they are used to mask the massive outflow of money from the real stocks like AAPL, INTC, MSFT, etc.  That's why you'll see the index defy gravity until, very suddenly, it drops like a rock.  

    Anger/Kustomz – I wrote "Sell in March and Go Away" on 2/24 – no reason to deviate from that plan yet.  

    USO/$25KP, StJ – Those I have more faith in than $1.03 but had we caught $1.13 earlier, I would have liked to have lightened up.  

    Shanghai/Angel – I thought it was just the 4th?  Now that I look at it, they do seem to be closed but wasn't on the schedule, nor have I heard anyone mention it.  

    Nice word cloud, StJ.  When I do a cloud, I eliminate common words like January and committee, etc.  Helps focus on actual things they discussed.   

    Friday/Jerconn – Also Good Friday so a double-whammy but the Futures are open.  

    Dollar testing 79.50 from the other side now.  Oil seems determined to be at $105 for inventories tomorrow (now  $104.19).

    Volume on Dow just 91M with 5 mins to go – pretty weak but we'll see what they jam in over the next 5 mins.  

  163. Pharmboy

    Holy Shmoly batman….look at PCLN go.

  164. Pharmboy

    Heavy volume in PCLN as well.

  165. gmarts

    reloaded on the SPY 132 puts at 1.50, put that 37 cents right in my pocket LOL

  166. shadowfax

    Pharm that 131.75 hit at 15:59 for the gap down open.

  167. kustomz

    Going to be an interesting morning in Asia.

  168. Lincoln

    Phil: adjustments to short calls
    I need to roll out some short call positions that I have scaled into but am now at what I consider a full position.  LOW (up 20% ytd) 40 APR 27’s and LULU (up 60% ytd) 35 Apr 65’s, putting aside for now what the market says,(I know at my peril) both these retailers seem too pricey to me. Do you have a suggestion for selling puts in the case of LOW I wouldn’t mind owning at lower price but LULU not so much.  Or should I consider bull call spreads to mitigate the bleeding if this move up should prove relentless?  TIA

  169. Phil

    Two bullish notes on PCLN this afternoon (that appear as news on Yahoo Finance).  

    Motley Fool

    priceline.com (Nasdaq: PCLN  ) , up 40%, has been enjoying explosive growth in its international division. Some see the stock as overvalued, but it has long looked that way, while it has kept growing. The company is focusing a little more on its traditional travel-booking services, as well.

     

    Seeking Alpha:  

     

    Last on the list is one of the leading monster stocks currently in the stock market. Priceline.com (PCLN) is a Norwalk, CT provider of airline ticket, hotel room, car rental, vacation package and cruise services through priceline.com.

    Priceline.com continues to grow at an unbelievable rate with EPS gaining 56%, 53%, 54%, 71%, 56%, 78%, 87%, and 58% the past eight quarters. Fueling this rapid growth in earnings is sales. Sales have grown 26%, 27%, 37%, 35%, 38%, 44%, 45%, and 35% the past eight quarters. This explosive growth is expected to continue well into the future. 2012 and 2013 annual EPS estimates are for gains of 33% and 23% respectively.

    Priceline.com has 0% debt to shareholder equity, an extremely huge cash flow of $24.75 a share, a giant EPS growth rate of 56%, and an extremely impressive return on equity of 55%. These numbers are quite stunning. What I find more stunning is that the P/E ratio is only 31. While that is an overall low number it is in the upper end of the 5-year range of 8-35. However, savvy investors realize that a "high" P/E ratio is useless when it comes to finding monster stocks like Priceline.com. How often from 2003 to today did Priceline.com have a high P/E ratio, yet still gain over 8,000%? The answer is almost the entire time.

    Mutual fund ownership continues to rise almost every quarter for the past two years, growing from 1159 to 1554 funds. Management only owns 1% of the shares outstanding, but that is normal for a company that has existed for over 10 years.

    Priceline.com announced on March 6 that it is repurchasing up to $200 million worth of its common stock outstanding. It appears mutual funds and ownership understand that the sky is the limit, even if many individuals investors believe that the stock is "too expensive."

  170. Phil

    Mystery stock/Jfaw – Do you really think it doesn't matter what stock it is or what sector it's in?  Until the stock is below $33.50, it's really a non-issue, especially if you are happy to DD and get that net.  At around $33.50, you may want to consider rolling the short puts or, if bullish, taking out the long calls – it very much depends on the stock, the sector and the market outlook at the time.  WHY is the stock down $2.21 (6%) from where you bought it?  Did the whole sector go down, did the whole market go down?  Was there some particular bad news.  You say the Fundamentals didn't change and we have 8 months to expiration and you get called away at – well, I don't know – $35 or $40 but I'll guess $40 based on the math of your entry.  Is $40 (up 11.4%) still a realistic goal for 8 months?  If not – then you do need to make adjustments.  If so, then it's watch and wait, which is what you should be doing 99% of the time with a buy/write. 

    Short calls/Lincoln – Wow, you shorted LOW?  That's not good.  April $27 calls are $4.10 but I don't know what you sold them for but let's assume $2 (and if you scaled in, it better be) so, at this point, it's really about rolling the loss.  You can sel the Jan $25 puts for $1.05 and roll the calls to the July $29s at $2.80 and that's $3.85 out of $4.10 covered and you push them up $2 and you have another $1.05 of rolling power if they are still high and you have to go to Jan.  LULU April $65s are $11.75 and you are hopelessly deep in the money there.  June $72.50s can be sold for $7.70 and the other $4.05 can be made up by selling the Jan $55 puts.  As you added your 2nd and 3rd rounds, you should have been doing this already, not waiting until you were massively committed to a trade where your short call is $11 in the money and the only possible way they go even if if the stock drops 15%.  You can also cover with a bull call spread but I'd save the additional cash for the next leg up….

    Dow finished at 123M so 32M of that came in last 5 mins – certainly all of the up move and more was dumped out in the close – great trick if you have co-location at the exchanges!  

  171. stjeanluc

  172. Phil

    At the close: Dow -0.55% to 13191. S&P -0.42% to 1413. Nasdaq -0.41% to 3107.

    Treasurys: 30-year -1.09%. 10-yr -0.65%. 5-yr -0.36%.

    Commodities: Crude -0.98% to $104.2. Gold -1.93% to $1647.35.

    Currencies: Euro -0.67% vs. dollar. Yen +0.9%. Pound +0.69%.

    Market recap: Stocks rebounded from session lows but still ended on the downside after the latest Fed meeting minutes showed more muted enthusiasm for further quantitative easing. Crude oil slid 1.2% to $104.01/barrel, the dollar rose vs. the euro, and 10-year Treasury yields climbed to 2.29%. NYSE decliners led advancers by more than two to one. 

    S&P 500 Beating Gold Most Since 1999 on Positive Earnings (Bloomberg)

    Worst US Earnings Growth Since 2009 Seen As Stocks Near Highs (Nasdaq)

    While the last recession is often referred to as the worst since the Great Depression, the recovery "pales in comparison" with most others," writes Edward Lazear, "including the one following the Great Depression." Lazear, who was an advisor to President Bush, blames government policies over the last three years. 

    Five Years After Crisis, No Normal Recovery (Bloomberg)

    Manhattan Apartment Prices Decline (Bloomberg)

    In Manhattan Pizza War, Price of Slice Keeps Dropping (NYT)

    Why London, New York Draw the Wealthy (Barrons)

    State of the World Economy: The Emperor Has No Clothes (Triple Pundit)

    San Francisco Fed President Williams says "it's essential that we keep strong monetary stimulus in place," but makes no mention of additional ease. It's of particular interest given Williams' dovish attitude. "Our unusually stimulative policy won't last forever."

    Long-term Treasurys continue to sell off following the FOMC minutes. In a normal world, tighter (or at least less loose) central bank policy would be a buy signal for longer-dated debt. In this world, with the Fed being the marginal buyer at that end of the curve, its caution on additional purchases is, for now, a reason to sell. The 10-year +9 bps to 2.27%. TLT -1.6%

    Individual investors increased their allocations to stocks by 1.6 points to 60.7% in March – right around their historical average, but nowhere near has high as the years prior to the GFC or during the late 90s – according to the AAII. Bond allocations fell 3.6 points to 19%, the lowest level since October, but above their historical average of 16%.

    Michael Mauboussin: Shaking the Foundation: Revisiting Basic Assumptions about Risk, Reward, and Optimal Portfolios (Legg Mason Capital Management)

    Pensions Find Riskier Funds Fail to Pay Off (NYT)

    Japan's monetary base fell last month for the first time in 3 years, raising questions over how serious the BOJ is about ending the country's deflation. "A shrinking monetary base is equivalent to monetary tightening," says economist Yuji Shimanaka. The yen initially strengthened on the news, but has since gone back to flat vs. the dollar.

    The Japanese political class can't help itself – anytime during the past 15 years the economy shows signs of life, taxes get raised. Yoshihiko Noda, the 6th PM in 6 years, is doing his best to bring about #7, submitting a bill to double the national sales to 10% despite threat of a revolt in his own party and from a public tired of seeing its money wasted by Tokyo.

    Dollar in demand, Euros not so much:  Central bank holdings of dollars increased 1.4% Q/Q and 9.9% Y/Y at the end of 2011, according to the latest IMF data. In contrast, central banks cut their holdings of euros by 1.5% during Q4, though still recording a Y/Y bump of 5.3%. (full table, .pdf

    The IMF approves activation of another 6-month period of emergency credit lines funded by 38 member countries in addition to their normal commitments. "This renewal reflects the membership's commitment to ensure the IMF has adequate lending capacity." 

    While the Wolfson Economics Prize requested ideas about how a euro breakup can be manageable, writes Dow Jones' Richard Barley, the proposals from five finalists "seem only to confirm that theeurozone's best interests lie in the opposite direction: greater political and fiscal integration." Anyway, the bigger problem is "what to do with the debt."

    China's large banks are able to make profits "too easily," says Premier Wen Jiabao, calling for the monopoly posed by the country's giant lenders to be broken.

    How China Steals Our Secrets (NYT)

    Vodafone (VOD -0.8%) is lowered to Neutral from Buy by Davenport, which says Europe’s recession and an EU mandate for carriers to cut roaming and interconnection fees will push down revenue this year. The firm also says that after spending $19B to develop its market in India, VOD will need to spend billions more and risks not making a return on its investment. 

    Sales figures for new vehicles at the big three U.S. automakers (IIIIII) topped year-ago levels and were near their best levels since before the financial crisis, but General Motors (GM -4.6%) lagged Edmunds.com estimates, posting 12% sales growth in March vs. 21% predicted. Ford (F +0.2%) and Chrysler (FIATY.PK -2%) were in-line.

    Shares of Tesla Motors (TSLA +2.9%) kick up a gain after a flood of auto sales reports tips off that fuel-efficient cars are gaining more favor with consumers. 

    Bill Luby's chart of YTD returns of the various VIX ETPs shows those with dynamic allocations (VQT, XVA) or offsetting long and short volatility legs (XVIX) were able to manage gains in a brutal quarter. Also of interest are the inverse funds, whose gains were greater than the losses suffered by the long funds. 

    Sterne Agee says it's time to buy Schlumberger (SLB-0.3%), upgrading the stock to Buy on valuation and setting a $94 price target – despite trimming estimates for FY12-13. The firm says the industry titan should benefit from a number of catalysts, including rising global deepwater activity, penetration of its HiWAY frac technology and strong potential for sales during the upcoming Central Gulf lease auction.

    And warning season gets under way:  SanDisk (SNDK-6.1% AH after warning it expects Q1 revenue of $1.2B, below a guidance range of $1.3B-$1.35B. The NAND flash memory vendor, which blames the shortfall on weak pricing and demand, also says its gross margin will be below a guidance range of 39%-42%. Rival Micron (MU), which mentioned seeing weak NAND pricing during last month's FQ2 earnings call, is down 1.1% in sympathy.

  173. Phil


    As another round of 
    solar bankruptcies hits the news, First Solar (FSLR -7.8%) shares skid to new multi-year lows, dragging down other solar stocks (TAN -3%) despite sunny views from Suntech's CEO. 24/7's Jon Ogg points to Wall Street estimates: "Margins in the sector have been compressing to the point that we just do not believe" the consensus.

    After getting clobbered by rival Home Depot on same-store sales growth for 11 straight quarters, Lowe's (LOW -1.1%) says itspulling out all the stops to win back customers. Two areas in particular targeted by the home improvement giant for growth are e-commerce – which could account for 5%-10% of sales within 5 years – and aggressive expansion in Canada, according to CFO Robert Hull.

    Shares of Hovnanian (HOV) move 4.9% lower AH after the firm announces an offering of 25M shares of its common stock with an over-allotment allowance of an extra 15% for underwriters. 

    Zynga (ZNGA -4.6%) announces it sold 49.4M shares in its secondary offering (insider sales) at $12/share. That's 6.4M shares more than what Zynga officially priced last week, the result of underwriters exercising options to purchase additional shares. All those extra shares may have contributed to today's selloff in Zynga, which closed at $12.29. 

    The Grumpy Old Accountants blog takes a look under the hood at Groupon (GRPN -0.3%) to find a bit of a mess beyond just itsQ4 revenue restatement. While the "usual suspects" of goodwill valuations and operating cash flow still stand front and center, new minefields now include income tax accounting and accounting for equity method investments. "Management continues to amaze us with their aggressive and non-transparent financial reporting," say the accounting profs. (previously)

    Groupon looking like Pets.com of current tech boom (Market Watch)

    No Deal: Why you shouldn’t believe the theory behind Groupon’s business model (Slate

    Why Groupon is poised for collapse (Venture Beat)

    UBS' Brent Thill looks beyond Windows 8 and even Office 15 in making a bullish call on Microsoft (MSFT -1.6%). Mister Softee is carrying out a massive product refresh this year, notes Thill, with less-discussed offerings such as System CenterLync, SQL Server, Exchange, and SharePoint also benefiting from an upgrade cycle. In addition, SQL Server will shift to a per-CPU-core licensing model that stands to boost revenue.

    Research In Motion (RIMM -9.3%), hammered thanks to bearish comments from Doug Kass and Gene Munster, is also beingsued for patent infringement by chipmaker NXP (NXPI). NXP alleges RIM's phones and tablets infringe patents related to design and data transmission, and is seeking royalties and triple damages. An IP consultant speculates RIM might try to settle quickly to keep the suit from complicating sale talks. 

    "My Gnome is hearing that all bidders have walked from RIMM," tweets Doug Kass, and in doing so contributes to today's selloff in Research In Motion (RIMM -7.6%). Gene Munster did his part courtesy of a CNBC appearance (video). 

    A sign of booming business, new management, or both? Apple (AAPL) has changed scheduling rules for Apple Store employees, requiring more weekend shifts and increasing the minimum commitment required of part-time workers. The changes comes after Apple reported a 58% Y/Y increase in retail revenue in FQ1, and made a surprising decision in January to hire Dixons CEO John Browett to run its retail ops.

    Apple Fever’ Prompts Predictions of $1 Trillion Value (Bloomberg)

    Apple and the Return of the Gimmicky Price Targets (TRB)

  174. diamond

    Apple and the Return of the Gimmicky Price Targets – The Reformed Broker

  175. Phil

  176. dclark41

    Phil/HOV
    Do you think today’s offering of 25 mil shares is anything to worry about or is this just the normal course for a company like HOV in a still crappy re market? Looks like it may take a few more years for real estate companies to return to normal.

  177. newbie

    stj
    phil
     
    as I predicted, regarding Star Trek, here is the exact quote from my brother to me, tonight:
    ____
    Oh, my dear culturally illiterate brother. You poor thing.
    Star Trek Next Generation
    Captain Jean Luc Picard of the U.S.S. Enterprise. No William Shatner no more.
    He is a very well known British actor. Can’t remember his name.
    There were several continuations of the Star Trek saga. You are correct in the pronuciation. The name is French.
    Later,
    Try not to ask those guys any more moribund retarded questions.
    ____
     

  178. dclark41

    Here is some gloom to sleep on.
    http://www.philstockworld.com/2012/04/03/the-15-trillion-dollar-party/

  179. oknoman

    Newbie- ROFL. Great thread.
    Oh, and Patrick Stewart, thought of as one of the very best Shakespearean actors of his time (Royal Shakespeare Co.), along with being known as the best captain of Star Trek,

  180. jabobeast

    Now PCLN is up almost 300 points this year? I might not wear a space suit but will certainly need a straight jacket if this continues ;-(

  181. scotbraze

    Phil, I had a question about VXX that I traded in a paper account when you have a chance.  I missed the chance to sell the May $17 calls you did.  I also have the Apr $21 puts you have.  I originally had 5 of each.  Now I have 5 sold puts and 10 May $17 calls traded @ $1.67 (to match your ratios).  What would you suggest?  Would it make sense to sell calls against them (weekly or monthly), or just wait for a peak and close out and look to enter a spread like the $25KP?  Or just any advice you'd have in general.  Thanks. 

  182. Phil

    HOV/DC – 25M is a lot of shares (float was 77M) and if they are doing it at $2.35 then raising less than $60M that doesn't put a dent in $1.6Bn of debt is not a good sign.  It's strange because they just reported a decent Q a few weeks ago and they did announce the possibility of selling shares then but the assumption was WHEN they got more valuable, not now.  After earnings, they shot up to $3 but now we're back to $2.35, where we were into earnings.  Lacking better information, I'd say this makes them tough to stick with in anything other than a speculative position.  

    Star Trek/Newbie – I like your brother!  

    $15Tn party/DC – Yep, very good points by Mike, which is why we love him (don't shoot the messenger): 

     

    And the consequences will be dramatic when the party ends.  During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.  That means that the U.S. government spent about 1.3 trillion dollars that it did not have.  It is important to understand that even if the U.S. government spent that 1.3 trillion dollars on really stupid things, that money still got into the pockets of ordinary Americans who then spent it on things like food, gas, housing, etc.  In turn, most of those that received money from providing those goods and services would spend it on other things.

    If the U.S. government tried to go to a balanced budget now, our standard of living would crash and there would be riots in the streets.  The American people have been enjoying false prosperity for so long that they have lost any notion of what "normal" actually is.

    Basically what we have done is we have committed future generations to a life of endless debt slavery to pay for our debts and for the financial promises that we have made.

     

    Of course this entire fraudulent system is going to completely collapse before we get too much farther down the road anyway.  Right now the whole thing is essentially being held together by chicken wire and duct tape.

    Most Americans do not realize this, but the Federal Reserve bought approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.

    Patrick Stewart/Okno – And he has a good sense of humor.  Stewart's comment at the end is perfect for Newbie…

    PCLN/Jabob – Just take the AAPL $1,000 articles and replace AAPL with PCLN and THEN you'll see things can get worse!  

    VXX/Scot – So you sold 5 April $21 puts and I assume it's the same $1.42 since you don't mention it.  Those are now $4.40 but who cares what they are priced at?  The June $19s are $4 and VXX is at $17.10 so we're not too worried about the roll and it's only 5 so we could roll down to 2x (10) the June $16 puts ($2.05) and, if we don't think VXX can hold or exceed $16 by June – then why didn't we stop out ages ago?  Notice in the $25KP, when we were down $32,000 – ON PAPER – that I went over each position only caring if I thought they, individually could be saved.  That goes for your spreads too – you have to evaluate each leg and decide if it's worthwhile.  This one is easy to fix and, even if it does take until June, we still make $1.42 so no catastrophe.   Moving on to the calls.  You don't have a spread and the May $17s are now $2, so you're up there.  You have a little cushion to see how tomorrow goes but the bottom line is you can roll down to the May $13 puts ($4.30) for $2.30 and sell the May $19 puts for $1.40 and then you're in a $6 spread that's $4 in the money for net $2.67 – that's not bad.  I'd roll all 10 down and just cover 5 May $17s ($2) and see how it goes.  Obviously, you can easily roll the 5 $17s to 10 $19s for almost the same net and that way you have more flexibility, in case the VIX takes a dive again and you want to sell lower calls.

    AAPL/Diamond – That means selling April calls should be EZ money! 

    Meanwhile, speaking of great moments in Star Trek history – here's my favorite thing of Shatner's:

  183. Phil

    Here's the kind of stuff you find if you follow those links at the end of a video:  

  184. Phil

    Oh, also features Captain Picard saying his own name for Newbie's pronunciation lessons.  

  185. Winston

    Phil/PCLN dilemma/crock of gold?
    An out of hours question on a great problem to have. But through analysing this PCLN trade I was confronted with some thoughts that I have not had before. Your take much appreciated and I am sure it would add to how to (or not to) adjust long dated BCS.
     
    I placed the following trades and adjustments on PCLN:
    03/16 Buy Jan 14 PCLN 700/800 BCS for $38.10 net debit
    03/16 Sell Jan 14 PCLN 410 Put for $26.80 credit, so net $11.30 debit for this combo
    03/28 Sell May 12 PCLN 750 C for $26.40 credit, so now net $15.10 credit running total
    03/29 Roll Jan 14 700 C to Jan 14 650 C for $25.90 debit, now $10.80 net debit running total
    03/29 Sell May 12 PCLN 750 C for $24.30 credit, final running total net $13.50 credit
     
    Although I don't normally like to adjust BCS so soon after placing the trade, I felt increasing the $100 BCS to $150 and financing with another short cal which I posted at the time could be easily rolled (July, Oct etc) – and is still the case, was worth it. I honestly thought PCLN could go irratioanally up, but not ballistic like it has done since I put on the trade.
    Now, the nub of the question. Why wait until Jan 2014 to see whether PCLN will continue smoothly upwards and weather all the inevitable storms in the coming 20 months. I looked at the possibilities of rolling down in time, using the October options set. The following looked attractive:
    Roll the Jan 14 PCLN 650 C to the Oct 13 PCLN 650 C for a $56.30 credit
    Roll the Jan 14 PCLN 800 C to the Oct 13 PCLN 800 C for a $63.70 debit, net debit $7.40 for the adjustment
     
    So after this whole exercise I would be in an Oct PLCN $150 BCS which is nearly $94 ITM, and the whole exercise has produced a CREDIT of $6.10. Now, there is the small problem of rolling the 2X short May 12 750 Calls, but they can be rolled to the Jan 13 800 C for a net credit of $28.55.
     
    Your take would be most appreciated on this, as I had not thought of rolling up long dated BCS to a shorter time period.

  186. Winston

    Phil PCLN – typo in the above, the Roll of the Jan 14 650/800 BCS should be to the Oct 12 650/800 BCS.
     
    Apologies for the confusion.

  187. Burrben

    Phil / HOV  -   From reading your above post, then I would assume that we should try and get out even if possible or take a small loss now with the HOV trade from a few days back.  No real reason to roll puts, etc…
    HOV is consolidating under $3 and is my favorite builder and you can buy the Jan $1.5/2.50 bull call spread for .60 and sell the $2 puts for .50 for net .10 on the $1 spread that's 100% in the money for a 1,000% return and the worst case is you own them for net $2.10, which is 27% off even if you don't roll (the 2014 $1 puts are .30). So I LOVE this spread as a bullish trade idea and, as we're over 4 of our 5 new Must Hold levels – we need a new long play today.  

  188. Burrben

    Winston – Great job on the trade, I love reading your write up's on the way you manage spreads.  I saved your last PCLN write up as great reference material!  

  189. scotbraze

    Phil, sorry about not mentioning the value of the VXX puts ($1.78) but the wealth of information you provided even with me forgetting is excellent as always. Thanks.

  190. malsg

    Sisko, Archer, Janeway,

  191. Winston

    Burrben, txs for the encouragement. Of course I don’t post the details of the BCS that I make a dog’s breakfast of – but that’s another story :)

  192. Phil

    Good morning!  

    Sisko/Malsg – Now there's a guy and a series that does not get enough respect in my book.  I love DS9 but it's like the forgotten step-child of star trek.  When I moved to Englewood Cliffs, many years ago, I was lucky enough to score a nice apartment because the previous tenant was an agent and his client, Avery Brooks, had just gotten picked to be the Captain of the new Star Trek so he was moving out to California.  I never got to meet Brooks, but I do have his head shot…

    PCLN/Winston – Gosh, my problem with the whole thing is I'm just not that confident PCLN will hold $650 and then your whole plan sort of unravels if that happens…  You have a 2014 $650 ($186)/$800 ($113) bull call spread at $73 that you paid $38.10 + 25.90 = $64 for and you sold the 2014 $410 puts ($23) for $26.80 an you sold the May $750 calls for $26.40, now $35.50 so not really much net profit in it so far and I don't see the particular advantage in the adjustment, especially as the fees and bid/ask spreads you pay are likely to net you less than $7.40 and it puts you at risk of a sharp pullback.  

    If I understand this correctly, you sold the May calls twice and are possibly over-covered if PCLN flies up but, since PCLN is at $743 and your 2014 $650 caller is $186, I'd say the adjustment to make would be rolling the 2014 $650 calls ($186) UP to 2x the 2014 $750 calls ($134) for net $82 and roll the $800 caller ($113) up to 2x the $850s ($94) for net $75 and then you have $200 of long spreads for $7 more and a better net delta to your callers (all assuming I understand correctly that you sold 2x the May $750s).  

    The problem is you are misinterpreting the main point of this trade, which is to SELL premium and WAIT patiently.  The long spread should be just a backstop to finance your call-selling operation.  On the whole, you just want to sell as much front-month premium as possible and THAT is your revenue stream.  Overall, you don't give a crap whether PCLN goes up down or sideways as long as you can sell $20 worth of premium every other month for 20 months, which is 10 sales = $200 vs your net $40 long spread.  You are putting way too much time and effort and MONEY into trying to "win" everything.  It doesn't matter what the long spreads do, all they are there for is to make sure you don't get burned to the upside.  

    What you need to watch for is PCLN not going too low and getting put to you (doubtful on $410 puts) or putting your long spreads so far out of the money that they no longer provide coverage for your next sale (obviously, you would have won the current one).  Anyway, I wouldn't do any adjusting until/unless PCLN goes over $750 because the short callers are 100% premium so who cares what PRICE is currently placed on them?  If you are rolling because you NEED $7.40 for margin reasons – then this entire trade is a TERRIBLE idea for you because this stock can jump $50 for no reason at all and if you end up forced to act to cover your account – you are very likely to be forced to buy high and sell low.   

    If you roll those May $750 calls now, then YOU are the sucker paying $35.50 in premium (5%) that we all laugh at with PCLN not even at $730.  If the margin is your issue, take the $10 loss on one of the $750 callers and chalk it up to experience and wait for the other $35.50 to expire and you'll net about $15 anyway on your May short sales and hopefully you'll do better on the next sale.  

    HOV/Burr – I still like it as a speculative long but I wouldn't make it a major play, especially as we are now failing those Must Hold levels – aside from HOV's individual issues.  As it's so cheap and still pretty much in the money, I'd rather give them a chance to prove they can hold $2 in a crisis before pulling the plug.  This is especially effective if you can afford to just sell the $1.50s (as a stop) for .75 (now .95) and leave the naked $2.50s or buy the 2014 $2.50s (now .75) for hopefully around .55 so you net into those for about .40 and then you have a more bearish 2014 $2.50/Jan $2.50 spread plus the short $2 call, which can be rolled to the 2014 $1.50 (now .55) put for probably even.  Since you began at net .10 and you (in theory) pick up .20 and drop the short puts to $1.50, you then net into HOV at $1.40, which is a pretty good margin of safety but not much consolation if there is real trouble and they go BK so still speculative overall.   Obviously, if that outlook doesn't appeal – of course take the .10 loss and wait for a better opportunity.

    $1.78/Scott – Well better than I thought then.  You're welcome.  

  193. Phil

    Things are looking good for Da Bears this morning.  Dollar 79.80, Euro $1.316, Pound $1.587 but Yen hit 83 and was harshly rejected back to 82.28 but possibly because their huge Euro buys are biting them in the ass.  

    Oil $103.20, gold $1,631, silver $32, copper on the magic $3.85 line, nat gas $2.18 after touching $2.07 yesterday and gasoline $3.40 will continue to punish consumers for as long as possible.  

    China was closed today but Japan (and weren't people just yesterday saying the Nikkei was the place to be?) dropped 2.29% to 9,819 making a massive killing on our /NKD shorts (10,050) for those still playing that line (and notice how they dropped like a rock when it broke so it's a good line).   India was only down half a point but failed to hold 17,500 into the close so could turn ugly if we don't pull it together.  

    Europe continues to drop like a rock tied to a bigger rock this morning – down about 1.25% so far.  

  194. Winston

    Phil / PCLN: yes, it was the sale of 2x the May 12 750 Calls. The reason I pay the subscription for PSW is commentary like this. As the ad man said ‘It’s priceless!’ I need to process the info, take a long look at myself in the mirror. And if you have to ask who is the smartest person on the board, it’s not you (meaning me:). Thanks Phil, much appreciated.

  195. malsg

    Phil, I am with you on DS9.  Great series and concept that dealt with some pretty racy stuff for a ST franchise.  Avery Brooks Agent's apartment … I like it!

  196. Phil

    No problem Winston – You certainly are on the right track, just need to focus on the premium selling aspects of the trade.  It's all about getting into the long-term mind-set and letting go of day to day stuff.  Watch "The  Man Who Planted Trees" again – always helpful! 

    Apartment/Malsg – Best thing was he had a media room in the basement with built-in couches and a bar – I loved that place, perfect bachelor pad.  

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    7:30 Challenger Job-Cut Report

    8:15 ADP Jobs Report

    10:00 ISM Non-Manufacturing Index

    10:30 EIA Petroleum Inventories

    2:21 AM Asian markets fall after Australia posts a surprise trade deficit, raising questions about possible spillover effects to the broader region. Japan -2.1% to 9843. India -0.4% to 17522. South Korea -1.5%. Hong Kong and China closed.

    6:00 AM Overseas: Japan -2.3%. Hong Kong +1.3%. China +0.5%. India -0.6%. London -1.2%. Paris -1.1%. Frankfurt -1.8%.

    7:00 AM On the hour: S&P -0.76%. 10-yr +0.31%. Euro -0.54% vs. dollar. Crude -0.66% to $103.33. Gold -2.31% to $1633.35.

    7:28 AM European shares leg down to new session lows, today led by the core. Stoxx 50 -1.5%, the German Dax -1.9%, Spain's IBEX off "just" 0.7% after being the big laggard thus far in 2012. The euro -0.6% to $1.3151.

    Treasurys quickly regain much of yesterday's loss as Europe sinks, dragging down U.S. stock futures with it. While the FOMC minutes showed members lukewarm towards another bout of QE, all is data dependent with that crowd. A couple of stock market jitters and/or weak economic prints and QE is right back on the table. The 10-year -6 bps to 2.24%. 

    FAIL!!!!  Spanish and Italian bond yields surge after Spain moves just €2.6B in paper at an auction this morning (had hoped to raise €3.5B). Spanish 10-years +22 bps to 5.67%. Italian 10-years +19 bps to 5.34%. Even the 2-years, where the ECB's LTRO is artificially sitting on the yield, are higher. Spain +23 bps to 2.76%, Italy +16 bps to 3.05%.

    EU February retail sales fall 0.1% vs. consensus for a decline of 0.2%. Y/Y sales are off 2.1%. Picking out 2 countries (much of the individual state data is confidential), Germany -2.5% Y/Y, Portugal -9.6% Y/Y.

    German factory orders fell 6.1% in February on an annual basis, after falling 4.9% in January. Economists had expected a slightly more moderate 5.5% fall.

    MBA Mortgage Applications: +4.8% vs. -2.7% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) decreased to 4.16% from 4.23%. 

    China surpasses the U.S. as the world's top spender on food. China's supermarket sector was worth $970B in 2011, pushing past the U.S. sector's $913.5B value. China's grocery market is forecast to expand to nearly $1.46T by the end of 2014, driven by China's economic growth, an increase in its citizens' wealth and inflationary pressures.

    Australia posted a surprise trade deficit for February of A$480M ($493M), with exports down a seasonally adjusted 2% and imports down 4%. Economists had expected a surplus of A$1.1B. - Only a 150% miss.

    The EU should be prepared to provide "some kind of bridge" to Portugal when it returns to the markets, Economics Commissioner Olli Rehn tells a TV station in Finland, which is probably one of the last places that would want to here that. One assumes Rehn doesn't mean Portugal might need another bailout.

    The Financial Stability Oversight Council yesterday voted to adopt a rule that will classify some non-bank financial firms as "systemically important" and put them under stronger supervision. The council will now start the process of deciding which firms fit the bill. Possible contenders include BlackRock (BLK) and Berkshire Hathaway (BRK.A).

    Moody's lowers its credit rating for General Electric (GE) and its financing subsidiary, pointing to risks connected to GE's lending unit. GE's senior unsecured debt was cut one notch to Aa3, Moody's fourth-highest rating. GE Capital is now two notches lower at A1.

    GE (GEdefends its credit-worthiness, saying it has more than $80B in cash and a healthy balance sheet, following Moody'sratings cut. "Moody's actions are based on a change in their own methodology rather than our credit position, which has only improved in the past few years."

    The CFTC is expected to file civil charges against JPMorgan (JPM) this week for its actions during the collapse of Lehman Brother's. In a case with similarities to that of MF Global – in which JPMorgan is also involved – the accusations will include improperly counting Lehman’s customer money as belonging to the firm.

    Paul Taylor, Fitch Group's new chief executive, starts the job with some fighting words, saying Credit Suisse (CSdumped the firm's rating on a mortgage-backed security after Fitch took a "materially different" (i.e. harsher) view than two rivals who assigned triple-A ratings. Taylor says Fitch plans to issue more reports raising concerns its rivals may have played down.

    Are these guys for real?  Goldman Sachs upgrades Starbucks (SBUX) to Conviction Buy and takes its price target up to $66 from $49. The firm sees Starbucks kicking growth back into a higher gear to help it double EPS by 2015 to $3.50-$3.60. Shares +0.4% premarket.

    Analysts at Bank of America take their rating on IBM down to Neutral from Buy, citing limited upside potential for EPS growth. Shares -1.5% premarket.

    Chevron (CVXsuspends its shale gas exploration in Romanian due to widespread concerns in the nation over the risk of hydraulic fracturing. The company says that over the next year its only activity in the region will be seismic data surveying. - Funny how Romania has a more powerful environmental lobby than we do!

    US Airways (LCC) has reportedly told some American Airlines (AAMRQ.PK) creditors that a merger of the two firms could yield $1.5B in synergies. US Airways is trying to pull together support for a tie-up, but its stepped-up campaign could end up complicating and prolonging American's bankruptcy proceedings.

    Disney (DISsigns a deal with U.K. firm Blinkbox that will allow it to offer content to be released straight to customer's laptops, tablets, or smart TVs on the same day titles are released on DVD.

  197. yodi

    Hallo Phil Back in Mexico,
    Reading up on your Comments on WMT I simply rolled the Apr 57.5 direct to Jan 13 62.5 Hope is OK. Doing well on the short puts and the Vertical Jan 14 as originally set out.

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