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Wednesday – Rumors of QE Gather Steam

SPY DAILYWheeee – isn't this a fun ride?

I warned the bears on Friday that the drop was a bear trap and we told you Monday was "Time to Buy" as CNBC chased the last of the sheeple out of their bullish positions so all their fund buddies (and us) could scoop up shares at super-low prices.   Yesterday we targeted 1,284 on the S&P and we were off by a point as it rose to 1,285 at the end of the day – can't win them all, I guess

In Friday's post I mentioned that the ABX 2014 $30/45 bull call spread at $6.60, selling the 2014 $30 puts for $3.40 for net $3.20 that we had picked up on 5/3 was only at $3.40 and still made a nice entry – ABX has been having a lovely week and popped from $39 to $42 and the spread is now $4.70 – up a lovely 38% in three days but should be well on the way to $45 today and the max gain on that spread is cashing the spread at the full $15 and a $11.80 profit for a 368% gain on cash so being up 38% in 3 days is what we call at PSW being "on track."  

The other two trade ideas I singled out as still liking from Friday's post were both CHK plays and the 3 CHK 2014 $25/35 bull call spreads, selling a single 2014 $18 put netted out at a $1.20 credit on Friday morning but did even better as an entry on Friday as CHK fell all the way back to $15.60.  Yesterday they were back to $17 (on the way to $18, I imagine) and the spread is already netting another $1.95 for a very quick 262% gain on cash, which is why we love those!  

TLT WEEKLYI called for a short on TLT in the $130s and they topped out right at $130.36 at Friday's close, tested it again on Monday and fell back to $127.60 yesterday while our long point on XLF was $13.50 and, so far, not much excitement there.  Those were just the trade ideas from the morning post, of course – our real fun came in Member Chat where our aggressive bullish trade ideas during the panic Friday and Monday were:  

  • TQQQ July $43/47 bull call spread at $2, selling BA Jan $50 puts for $1.90 for net .10, now .46 – up 360%
  • XLF Jan $12/14 bull call spread at $1.20, selling $11 puts for .55 for net .65, now, .51 – down 21%
  • TNA June $41/47 bull call spread at $3, now $3.40 – up 13%
  • AAPL June $590 calls at $3, out at $4.25 (day trade) – up 41%
  • AAPL June $590 calls at $2.50, out at $4.25 (day trade) – up 70%
  • FAS July $65/66 bull call spread at .65, still .65 – even 
  • QQQ weekly $62 puts sold for $2.05, now $1.05 – up 48%
  • FAS June $69/74 bull call spread at $2, now $2.85 – up 42%

We also added our first 5 bullish trades to our Income Portfolio during Monday's (and another 5 yesterday gives us a great start to our first month) because, as I often say to our Members – if you're not going to take bullish positions when the market is low – when are you going to buy?  We are, of course well hedged and we had hedges ready to spring if we failed our technicals, which we post almost every day in our morning Alerts.  I summarized our top 5 bear hedges in Friday's Member Chat at 10:06, as we rode out the panic dip but my comment on them was:   

I am NOT in favor of chasing this crap around.  I like having a hedge or two and using that as a safety net for making a few bullish bets off our TWIL List or like the FAS play above, which is more aggressive since it's time-sensitive.  The conservative play is CASH – there is nothing wrong with CASH.

Have I mentioned how nice CASH is lately?  

That is why we will take a few non-greedy exits into this morning's pop while we move to fresh horses (longer-term bullish trade ideas that have yet to produce big wins, like the XLF Jan spread above) and, of course, we not only have more attractive entry points on our potential hedges but NOW WE HAVE PROFITS THAT ARE WORTH HEDGING!  See how that works?  This is not rocket science people – it just takes a little practice to get used to the rhythms of the market.  

CASH is still KING as all we have are rumors driving the markets and RUMORS will not do the trick this time – we need concrete action from the EU/ECB/IMF or down we go again.  The ECB met this morning and left rates steady at 1% and that's a bit disappointing but we're waiting on Draghi's press conference, where we expect him to at least extend some LTRO funding, time-wise.  

The big decisions come at next week's G20 meeting as the ESM takes shape next month, which significantly makes it possible for the ECB to bail out banks – rather than them having to go through their sovereign nations – who are generally broke.  

Oh sure, you can quibble that the ECB is broke too and simply printing money it doesn't have but isn't that what the fiat currency system is all about?  On the whole, we're just biding our time, waiting for hyper-inflation to kick in and we're getting our first positive signs of it in the US as Q1 Productivity dropped 0.9% while Unit Labor Costs rose 1.3% – indicating our Corporate Masters have finally squeezed the last drop of free labor out of the population and will now have to actually hire people or purchase more efficient equipment (both good for the economy) in order to produce more goods.  

Of course we need demand not to fall off a cliff or we end up with deflation instead of inflation (see Japan) so maybe it is time for Captain Ben to crank up the old helicopters and toss us another $500Bn before the economy goes back into reverse.  

As you can see from the chart on the right – giving money to the Commercial Banks has been lots of fun but now it's time to do something for the Public to stimulate demand and that's likely to come in the form of some sort of housing/mortgage assistance.  

Atlanta Fed President Lockhart (a moderate on the FOMC) tilted dovish this morning, telling a Ft. Lauderdale audience it's his "sense that material risks to the economic outlook are gathering … I am confident that the committee retains the capacity to act and the tools to promote stability."  

We have more Fed speak today from Tarullo at 10, Lockhart again at 2:15 (after the Beige Book at 2), Williams at 3:30 and Yellen at 7 – who is generally used to float trial balloons for Bernanke.  Big Ben speaks at 10am tomorrow, Lockhart yet again at 11, Kocherlakota at 1:15 and Fisher at 3:30 so, if you think you are confused by the Fed's positions now – just wait until you see how mixed up you are by tomorrow!  

Europe is just as clueless and the Dollar popped back to 83 as Draghi said nothing useful at his press conference but, as I said yesterday – we have "bad news fatigue" and the markets are tired of going down at this point and will tend to drift back up to test some overhead resistance in absence of actually NEW bad news between now and the G20, who MUST act if we want to hold these market levels and must act boldly if we want to make any actual progress this summer.   

As Draghi said this morning:  "Monetary policy can't fill the lack of action by European politicians."

 

 


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  1. 1020

    Good Morning!

  2. Pharmboy

  3. stjeanluc

  4. Pharmboy

    Futures were way up…not so much any more….did the helicopter crash, or did it never take off.  There will be no stimulus.

  5. stjeanluc

    Economic numbers:

    Australia GDP (QoQ) / 1.3% (0.6% expected)
    Australia GDP (YoY) / 4.3% (3.3% expected)
    Great Britain PMI Construction / 54.4 (54.5 expected)
    Euro-zone GDP (QoQ) / 0.0% (0.0% expected)
    Euro-Zone GDP (YoY) / 0.0% (-0.1% expected)
    Euro-zone Household Consumption / 0.0% (0.1% expected)
    Germany Industrial Production (YoY) / -0.7% (0.9% expected)
    Germany Industrial Production (MoM) / -2.2% (-1.0% expected) 
    ECB Rate Decsion / 1.0% (1.0% expected)
    US Non-Farm Productivity / -0.9% (-0.8%  expected)
    US Unit Labor Costs / 1.3% (2.1%  expected)

    Good numbers from Australia, but it's tough to be bullish when you see the numbers from Europe and the US unless you count on QE3 to save the markets.

    At 10:30 AM we have Oil Inventory and at 2:00 PM we have the Fed Beige Book!

  6. Burrben

    Short Stranglers
     
    Great information last night, I'm going to re-read through all the good advice.  Would it be helpful at all to keep a running portfolio?  Since the FAS Strangle portfolio is dead, maybe a SPX Strangle Port is in order.  Of course this would need to be a portfolio using Port Margin and starting with at least 100K.  Any thoughts?  I wouldn't mind keeping it updated, as long as we could learn from our/my mistakes.  I'm already trading IronC's each month, this wouldn't be a far cry, and a good learning experience.

  7. BruceE

    Your timing has been incredible lately, Phil.  Are you more comfortable bullish, bearish or cash at the moment?  

  8. jabobeast

    Wednesday, June 6, 7:05 AM Yum Brands (YUM) says Taco Bell will introduce more upscale items on its menu including black beans, cilantro rice, marinated chicken, and cilantro dressing. Celebrity chef Lorena Garcia is helping the company make the move into the fast-food gourmet Mexican turf – currently dominated by Chipotle (CMG) and Qdoba (JACK).

  9. jabobeast

    when is the big G20 meeting? TIA

  10. pstas

    Short strangles- I endorse the concept of a portfolio. Peter?  You are the consensus expert. it would be very helpful to see how you would trade over time. I believe we could all learn a lot.

  11. Burrben

    BANG SNAP!
    9:22 AM Hovnanian (HOV): FQ2 EPS of $0.02 beats by $0.31. Revenue of $341.7M (+34% Y/Y) beats by $43M. Shares +17% premarket. (PR

  12. sns1

    Phil- one of my brokers waspitching me a structured note on JPM that has a duration of 18 months (Dec 2013), pays a guaranteed return of 20.25% over period, with 40% downside protection…ie, if it's down more than 40%, i own stock but i still collect my guaranteed return. Two questions: (1) do you think it's a good deal? (2) do understand how they are structuring it? I looked at Jan 2014 options where i would buy stock at 32, sell 32 call for about $5, buy $32 put for about $7, and sell $20 put for about $2…the only thingi get is 5.64% from dividend (3.75% x 18 mos). Not sure how they are getting 20%
    Thanks

  13. stjeanluc

  14. stjeanluc

  15. exec

    Phil

     
    What's your opinion of the selling the  CSCO $15 Jan 14 puts for $2.30?

  16. kurtww

    Definitely interesting discussion last night! I would also love to see a strangle portfolio. 

  17. stjeanluc

    Someone talked about the 25KP CHK June 15 calls yesterday, but we have July in that portfolio. The Jun 15 are in this portfolio and they still show a loss. Did you guys close them?

  18. terrapin22

    Holy HOV batman.  nice move. 

  19. stjeanluc

  20. stjeanluc

  21. Phil

    Good morning!  

    Draghi did not say enough to give people confidence and that dumped the Euro back below $1.25 ($1.2463) while the Pound held $1.546.  The Yen is at 79 again as the BOJ is obviously back to their old tricks and that's put the Nikkei (/NKD) back at 8.550 – which is a good overall sign.  The ECB comments were so bad that EUR/CHF fell to $1.2007 (less Euros per Franc = stronger Franc, which Swiss don't want) so expect that to put a floor in and I'm sure much effort will be made today to get the Euro back over $1.25 once everyone shuts up.  

    Don't forget BBook at 2pm is big deal but Ben at 10 tomorrow much bigger.  ALWAYS sell into the initial excitement is our only real Rule at PSW – Rule #2 is "When in doubt, sell half" and Rule #3 is "I told you so!"  

    Let's watch S&P 1,300 as  a potential trouble spot along with Dow 12,250 but it's a long road to 2,850 on the Nas and 760 on the RUT just to get a bit more comfortable that we really have a floor to build off so BE CAREFUL!!!

    5:08 AM Eurozone Q1 GDP flat Q/Q, confirming the initial estimate; -0.1% Y/Y vs. unchanged in prior estimate. (PR)

    5:17 AM EU shares are higher in late-morning trading on speculation/hopes of coordinated central bank action, including from the Fed and the ECB, which is due to meet later today. EU Stoxx 50 +1.9%, London +1.3%, Paris +1.8%, Frankfurt +1.8%, Madrid +2.7%, Milan +2%

    7:28 AM European shares are at session highs before what is expected to be no action from the ECB. Stoxx 50 +2.2%, led by Spain+2.8%Hilsenrath's report of a shift in attitude at the Fed is presumably the driver of better action. How far would a surprise move by the ECB in 20 minutes go?

    7:45 AM The ECB leaves its benchmark rate unchanged at 1%. President Mario Draghi's press conference is set to begin at 8:30 ET.

    7:49 AM European shares and the euro shed a small part of their gains following the ECB non-action. While nothing was expected, the chance of a surprise rate cut had to be in the back of investors' minds. Stoxx 50 +1.9%, the euro +0.4% to $1.2500

    8:32 AM Now underway is ECB President Mario Draghi's press conference following the earlier rate decision (no move). European shares are off their highs, but remain up by nearly 2%.

    8:44 AM Draghi press conference: The gist of his prepared remarks suggests the ECB is holding firm in its insistence it won't come to the rescue of governments that (it feels) continue to dally. European shares are shedding some gains, the Stoxx 50 up just 1%. The euro takes a big dive, now back to flat at $1.2457

    8:53 AM Draghi press conference: "There is some question to whether additional LTROs would be effective," he says, noting a number of indicators of financial stress are far lower than in November. Shares shed a few more points, the Stoxx 50 +0.8%.

    8:56 AM Draghi press conference: Monetary policy can't "fill the lack of action" by European politicians.

    9:11 AM Draghi press conference: He appreciates the concern of George Soros (and others) regarding a demise of the euro, but says the chattering class consistently underestimates the strength of the political commitment to the common currency. The man has a point there.

    9:21 AM Draghi press conference: "A few (ECB board) members wanted a rate cut today, but not many." Bloomberg's Joe Brusuelas: "Listening to (the) tone and tenor of Draghi's comments, it sounds as if he is committed to defending an untenable status quo."

    In other news (is there other news):  

    At the open: Dow +0.8% to 12226. S&P +0.87% to 1297. Nasdaq +0.91% to 2803.

    Treasurys: 30-year -0.35%. 10-yr -0.1%. 5-yr +0.02%.

    Commodities: Crude +1.12% to $85.23. Gold +1.32% to $1638.25.

    Currencies: Euro +0.15% vs. dollar. Yen +0.45%. Pound -0.5%.

    Market preview: EU shares and U.S. stock futures pair some of their gains after ECB chief Mario Draghi offers no new goodies to liquidity addicted investors, with the S&P Benchmark+0.9%. The rise in markets has been attributed to a report that Germany is working on a deal to save Spain's banks. Ancestry.com is+16.2% on hopes of a buyout, although mattress stocks are tankingfollowing a couple of earnings reports. Later: Senate bank hearings, Beige Book

    Q1 Productivity and Costs: -0.9% vs. -0.8% expected. Unit labor costs +1.3% vs. +2.1% expected.

    MBA Mortgage Applications: +1.3% vs. -1.3% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) decreased to 3.87% from 3.91%. 

    The Discover U.S. Spending Monitor dips to 95.5 in May from 96.7 previously. Declining pump prices seem to be having positive effect, with 46% of respondents saying the high cost of gas was causing them to change spending/vacation plans vs. 53% a month ago. 

    Germany's industrial output -2.2% in April, way worse than forecasts of -1%.

    Spanish industrial production -8.3% Y/Y, worse than the -6.5% expected and March's reading of -7.5%. (via)

    Australia Q1 GDP rose 1.3% from the previous quarter, more than double the +0.6% growth expected and up from a revised +0.6% in Q4. GDP +4.3% Y/Y. The data prompted traders to pare bets of a rate cut next month, and boosted the Aussie dollar (+1.04%to $0.9845) and local stocks (ASX 200 +0.3%).

    We can stop worrying about the so-called 2013 "fiscal cliff." Weighted by confidence, 96% of America's leading economic experts agree or strongly agree with the idea that GDP growth is set to take a hit next year. 

    The Bank of England begins a 2-day meeting with some believing it could announce a re-start of its QE program to the tune of £50B. A cut in the benchmark rate (currently at 0.50%) is also a possibility.

    Germany is increasingly looking at a plan to combine much of Europe’s bad debt into a single fund that would be paid off over 25 years, the NYT reports. The idea is different from eurobonds, as the scope is limited and so could pass muster in Germany's Constitutional Court. In return, Germany would want even more power for Brussels.

    Germany is working on a deal to allow the the EU's ESM rescue fund, which comes into force next month, to provide Spain with the funds to recapitalize its banks but avoid the shame and strictures of a formal state bailout, Reuters reports. Any conditions would mainly be focused on the lenders, with the EU wanting to "cut the link between the banks and the sovereign."

    Those hoping for more stimulus from China, consider Guangdong, where labor shortages continue to persist, even if they're not as great as several months ago. Contrast that with 2008/09, when millions were thrown out of work as factories shut down.

    Under pressure from Dodd-Frank rules restricting trading, Morgan Stanley (MS) has been in talks with potential buyers aboutselling a minority stake in its commodities business, according to sources. The unit is said to generate $2-3B/year in revenues, putting its value at some multiple to that. One wonders how Goldman and JPMorgan plan to deal with the same rules.

    California's proposed tobacco tax has been been narrowly voted down, according to voting tallies on the California Secretary of State website. Tobacco names such as RAIMOLO, could get a lift as the initiative was viewed as having a big impact on the direction proposals in other states go as well.

    OPEC likely will cut production by 1.15 mmb/day at its June 14 meeting, Morgan Stanley says while noting the global crude market is adequately supplied even with a drop in Iranian exports. OPEC output has been at elevated levels of ~32 mmb/day due to increased output from Saudi Arabia, which seeks to balance out reduced supplies as the Iran embargo takes hold.

    Yay!!! Chesapeake Energy (CHK +3.7%) pops at the open on reports of advanced talks to sell CHK's interests in Chesapeake Midstream Partners (CHKM +5.5%) and other pipeline assets. Separately, Argus Research upgrades shares to Hold from Sell, citing the planned changes at the board level following Carl Icahn's investment as "incremental positives." 

    Barrick Gold (ABX +1.6%) fires CEO Aaron Regent, whopays the price for the company's stagnant stock  performance despite surging bullion prices. Barrick names CFO Jamie Sokalsky to replace Regent as CEO and as a board member.

    Yipee!!!  Hovnanian (HOV): FQ2 EPS of $0.02 beats by $0.31. Revenue of $341.7M (+34% Y/Y) beats by $43M. Shares +17% premarket. (PR)

    Monsanto (MON) declares a quarterly dividend and announces a share repurchase program for up to $1B of common stock. Positive results YTD have created the opportunity to reinvest in the business and to return value to shareowners, the company says. MON +1.5% premarket.

    A security breach at LinkedIn (LNKDhas exposed 6.5M passwords at the site, according to a Norwegian IT site.

  22. stjeanluc

    Strangles / Neverwork – Thanks for your explanation last night. Your setup looks a lot like what we had done with the old FAS Money – long strangle selling weekly strangles against it. The problem was that FAS is really volatile and you need to adjust the long strangle too much. But that's less of a problem with SPX.

  23. wappler

    Burrben/SPX Strangle,
    I think that's a great idea, I'd love to see an SPX portfolio modelled.  Who knows, this summer might be just as exciting as the last one, so we may have interesting times navigating through the adjustments!

  24. kustomz

    ECB chart porn
    http://graphics.thomsonreuters.com/11/04/ECB.html
     

  25. sagemm1

    So I am trying to understand decay and the vix as it relates to pricing while I know time makes an option cheaper and so does a falling vix
    I have a CHK JUL 15/17 BCS that I paid 1.37 (lets just leave off sets out) with CHK trading over 17.
    At what point will I realize max profit of .63 on the BCS…Only on day of expiration or at somewhat higher underlying? and at what point should the calls move in tandem due to them both being far ITM thanks for any thoughts

  26. morxlntway

    re CHK in 5K – that has been a confusing discussion. I don't think there was ever a clear trade requested by Phil (i may be wrong, forsure). I still have mine and am wondering whether to add a short call, hold or take the $30 and be happy.

  27. exec

    Phil,
     
    You mentioned selling into the excitement. 
     
    What is the intent of you're income portfolio, to hold until expiration, or buy back puts once they hit a certain profile level.   If sell, what % is dump worthy?

  28. wappler

    Stjeanluc / Neverwork back ratio,
    What's so intriguing about this setup is that you make tail risk work in your favor.  You make a little bit of money every week (Phil's Egg McMuffin!), but if the markets tank, you've got it made.  Very good offset to strategies that rely mostly on time decay and get hurt by increasing volatility.

  29. jasu1

    Phil, 

    I'm in a position and need help reducing my loss…..or rolling
    TNA  June 12 48/52 BCS net $1.75
    Sold June 42Put for $1.25
    Net entry .50.
    I know I Know about the 20 % rule….Thanks 
    jasu1 June 5th, 2012 at 10:38 am |  Phil
    Phil you answered yesterday, thanks…..How would I tweak this now that TNA is at 46.35
    Thanks for your patience…..

  30. microflux

    So are we more comfy in pushing more cash into TWIL positions :) ?

  31. jabobeast

    FU FB!!!

  32. Burrben

    I don't know about you all, and I'm glad Phil scored on some of his bullish bets, but I'm "Doing the Opposite" of what I would normally do here, which would be adding to longs thinking that a bottom is put in.  I'm FORCING myself to stay cashy, take off longs that were underwater and are now even, and adding a cheap downside hedge or 2.  I'm not trying to catch a bottom here.  I think we will see lower low's this summer, so I'm trading tactically bullish, but still macro bearish until we have something concrete from EU

  33. nicha

    Anybody got the EXC, RIG & NLY filled from the Income Portfolio?

  34. Phil

    Helicopter/Pharm – Still having it's pre-flight check.  

    Comfort/Bruce – Well, I just titled the Morning Alert "Rule #1: "Always sell into the initial excitement" – That\'s profit taking 101!", so that's my comfort zone.  If you went bullish on that bottom and made a quick 20%, 10% – even 5% – that's a great annualized rate of return so CASH OUT!  Then we can invest in the next obvious thing that comes along.  One of the biggest mistakes gamblers and traders make is letting previous successes lull them into a false sense of security.  5% in a month is 60% a year – we don't usually make 60% a year so that's BETTER THAN EXPECTED – so those are profits that should be protected.  Getting back to cash is a discipline that makes you more cautious.  The mode you are in riding out winners (euphoria/irrational exuberance) is very different than the "shopping" mode you go into once you cash out your gains and most people make much better decisions from shopping mode.   

    These are significant resistance levels at 1,300 and 12,250 and 760 on the RUT so let's make sure we pop them before we get all crazy.  Of this floor – 2% is only a weak bounce.  757 is the 200 dma on the RUT and 12,263 on the Dow – we need those to be more encouraged but take each rejection very seriously if we can't pop them.  Hopefully this continues to be a nice free money day – where we go up and up all day to make all the sideliners get market envy but mostly it's an oversold bounce that was due and expected – something about not looking gift horses in the mouth comes to mind…

    Qdoba/Jabob – Very surprisingly good guacamole at the one in our mall from those guys.  My kids still think Taco Bell gives you food poisoning because some incident happened when they were very young which left an impression (national news at the time) which I only vaguely remember but they won't go near the place and I'm sure not going to force them.  

    G20/Jabob – Actually it seems to be the 18th and 19th in Mexico.  Hopefully they all survive their visit to Yodi's lovely country!

    HOV $2!!!  

    JPM/Sns – Well, you can sell the 2014 $30 puts for $5.60 and that's 22.9% over the $24.40 you would have to commit, even if it were at full margin.  Obviously, the 22.9% is "guaranteed" as you get it up front no matter what the stock does and then you have protection to $24.40, which is a 25% drop and I'm not sure what you mean by 40% downside protection – are you saying that JPM has to drop more than 40% before you lose a penny AND you get the 20.25% regardless?  That seems good but, of course, if you have margin, you can sell the 2014 $20 puts for $2.15 and the net margin on those is just $2 so let's say you were going to put $100,000 down on JPM to make $20,250 – you could instead lay out $20,000 in margin to make $21,500 and JPM has to drop $12.70 (38%) before you take a loss that way and, of course, you are not locked so you can stop out any time.  So to me, you have more control with the puts, not to mention having $80,000 on the side to make more trades with (or use as spare margin for other trades) and you can see that, essentially, the broker is merely selling the put and keeping your $80,000 to play with – more really as they have PM, of course, so they pretty much get to play with the whole $120K (your $100K plus the $21,500 they sell the calls for) interest free.  

    CSCO/Exec – I certainly like that.  I love CSCO long-term.  

    CHK/StJ – You're right, July is no pressure to sell and our target is much higher than $17.77.  

    BBY $19.80!  

    FB red – ROFL, what a pathetic stock!  

    Good chart Kustomz:  

    Max profit/Sage – Yes, you always get a bit less than your $2 max until expiration day because your caller has more premium than you do and, as you go deeper into the money, your premium wears out while the caller keeps some.  If you go way in the money, you can often get $1.95 and sometimes $2 early on but when you do a vertical spread like that, you are pretty much locking yourself into the time-frame unless you want to get fancy and roll out the calls you own or roll the caller back and up to a higher strike that you don't feel will be reached but, with CHK, I'd just either sit tight or ask for $1.95 and see if you get it.  

    Toppy feeling here but mostly just testing overhead resistance but Dollar held 82.50 and we need it lower to really get going.  SO – these are our bearish ideas (adjusted for today) from Monday that we didn't need then but now we're up 2% and we have much cheaper entries – SO – if you are not cashing out, maybe it's a good idea to grab a hedge: 

     

    KO Aug $67.50 puts at .55 are a nice hedge – kind of like a long put as KO is still very high but depends on China and other emerging markets for a lot of sales.  Also, NY Big Gulp ban is silly but can impact sales.  Idea of long put is that shouldn't lose too much if market pops back.  $65 puts are .35 so .15 on an unlikely $2.50 pop in KO is not a bad penalty against a good triple if KO drops 10%.  

    T is s a flight to safety at the moment but there is no safety if we crash and the Oct $29 puts are .50 while the Oct $32 puts are $1.04 so a double on a 10% drop there.  

    V also getting interesting with the Sept $95 puts at $2.05.  The $105 puts are $4 so another one that can double on a 10% drop.  

    SDOW is 3x Ultra-Short on Dow.  July $21/25 bull call spread is $1.40 with SDOW at $23.14 so a nice way to play a further move down in the Dow with a $2.60 upside potential (185%) with no margin requirement so, even in an IRA, you could put $2,800 into 20 of the spreads, put a stop at $1,800 (.80) and risk $1,000 to make $5,200 on a further downturn. 

    SDS July $16/20 bull call spread at $1.20, selling Jan $15 puts for $1.15 is a bet that SDS doesn't fall 16%, which is an 8% drop on the S&P to 1,182 – otherwise it's a free look at a potential net $3.95 gain (if the S&P goes 8% the other way back to 1,387 by July) against $1.50 in margin.  

  35. morxlntway

    Phil – I bought the KO Aug 65 puts for .53c now .35. Shall i roll up? 67.5's are .56 and 70s are .95c. Or would you call it an insurance loss and move on?
    thanks

  36. Phil

    CHK/Morx – With July I'm comfortable holding on.  If you doubled down to lower your basis, of course take 1/2 back off but CHK was at $25 before all this BS with Nat gas lower than it is now so $18 is simply the 50 dma giving it pause – the 200 dma is way up at $23.50 because this stock is ridiculously undervalued – maybe the reason that I mention a new bullish play pretty much every single day for it!  

    Oil inventory not a big decline – disappointment and huge build in gasoline is a MASSIVE disappointment and distillates up too so demand in the US still sucks and oil should fall fast from $86 (/CL) and the USO June $32 puts are .55 and I like 20 of those in the $25KP!  

    EIA Petroleum Inventories: Crude -0.1M barrels vs. consensus of -1.1M. Gasoline +3.3M vs. consensus of +1.1M. Distillates +2.3M vs. consensus of +1.2M. 

  37. Burrben

    Phil / SDS Hedge   –   The writeup is still wrong on that hedge.  The SDS is a bearish hedge which will rise IF the S&P falls and will lose if the S&P gains.  The way it's explained is the opposite.

  38. jabobeast

    June 6 (Reuters) – Facebook Inc :
     
    * JMP Securities starts Facebook with market outperform rating and $37
    price target

  39. dclark41

    Phil:
    You selling half of the TQQQ's in the 5k? Now at ~.38

  40. 1020

    Phil/FTR  down due to dividend payout?  Thanks

  41. sagemm1

    TLT seems to be hanging tough…if all is well

  42. Phil

    TNA/Jasu – Well, yesterday I said you should invest $2 to roll to the July $49s, which were $2.60 at the time and let the June puts and June caller stand.  The July $49s are now $3.80, so up 46% on the day and the June $52 calls are only .40 with TNA at $46.54 and the short $42 puts are back to .90.  That was from 11:48 yesterday and I guess you're saying you didn't do the roll and you're still sitting on the spread but at least it's .30 now and could possibly do well if we break over the current lines.  I don't have any magic words to make up for your lack of action when there was an opportunity to adjust – you either need to stop out of a position at an inflection point or make an adjustment – staring at it like a dummy is not a good investing strategy – good to know for next time!

    TWIL/Micro – As you see from the Income Portfolio (will summarize on weekend), we picked up 10 positions and we're happy.   If we make another leg up over our resistance, THEN we'll look for laggards (fresh horses) and pick up some of them but we deployed less than 20% of our margin to collect $9,000 in short-term money and establish a few long-term dividend payers and that's all you need to do in a conservative portfolio.  There's always going to be a CHK or a BP or a BA or a WFR to invest in – if you have CASH!  I'm "comfy" selling puts when the VIX is high (now 23.50) and the markets are low (now 2% higher) so I'm certainly not "more comfy" to chase things up here.  Again I will say – if you are not going to buy when things are low – when will you?  

    Tactics/Burr- I still think QE is coming and I'd be VERY careful about bearish positions.  Of course, once QE or whatever is announced – we rocket for months so as long as you have cash you won't miss much and lack of stimulus/QE will send us down – as would a sudden default or a $5Bn loss from JPM or whatever but it's certainly not the vibe we're getting at the moment as we plow higher.

    KO/Morx – It depends how you're using them.  They are long-term and if you had a good ratio, then you made more on the longs than you lost on the shorts and that means you can take some of the profits of the longs you don't want to cash out and use it to roll up your protection as it's good through August.  I picked KO because they are well over the 200 dma ($69.50) and just under the 50 dma ($75) so that's a good line to give up on if they're not rejected.

    SDS/Burr – Right – thanks!   At the time I had included it in a bullish list as I mixed it up with SSO and I didn't fix the statement so the language is still wrong but the BEARISH hedge is right – numberwise.  

    TQQQ/$5KP, DC – Yes, thank you.  We bravely bought 15 more at .23 to lower our avg to .41 and now the TQQQ $50s are .45 so let's sell 10 of them and set a stop on the other 10 at .30.  

    FTR/1020 – Yes, that's the ex-dividend move.  

  43. wappler

    Jabo/FB,
    Translation:  'Us folks here at JPM have a boatload of FB stock and we are looking for idiots who will buy this crap.'

  44. sagemm1

    some of those CHK shorts getting squeezed out, it seems

  45. kustomz

    BB short squeeze..MS BAC best performers on my screen

  46. sagemm1

    Phil/USO
     
    Do you think OPEc saying they are reducing output will counter some of the effaects of a high build?

  47. jabobeast

    Wasn't CNBC saying how CHK's sales were going so terribly?? Phil made the point that it had only just begun…
     
    Jerks.

  48. stjeanluc

    Ray Bradbury died it seems… One of the sci-fi masters!

  49. angelcur

    SP  made a new high after first hour usually leads to additional strength later in th eday…keep in mind we hav Beige Book @ 2… bernanke  tomorrow… two matches in a sea of gasoline… not adding positions here….actually trimmed a bit…. ultimatelyi think we are higher over the next couple of weeks heading into the greek vote and FOMC….as PHIL says: usually better to take profits into large spikes higher rather than chase the rally…. so willing to sellsoem positions a bit early perhaps.

  50. Pharmboy

    AZN/ond – (from yesterday) – I am not a big fan of them right now.  Their pipeline is the 2nd weakest of the big pharma's (after LLY).  Dividend is attractive, so maybe start by selling puts, but I would not be aggresive.

  51. Pharmboy

    From SHJ – 1310 or bust:

  52. Phil

    Check out the World Market Window.  

    OPEC/Sage – You would think so but all I hear is "1.5Mbd of spare capacity exists so Iran not a factor."  

    CNBC/Jabob – NEVER listen to them.  Sorry, make that ALWAYS listen to them and do the opposite.  They work for Cramer and his fund buddies and the top 1%'ers that pull their strings.  The job of CNBC is to act as a propaganda network for the top1%, especially the Financial sector and they push people in and out of whatever they are told to so Banksters can make their daily $100M off all the suckers who follow their "advice".  I wrote an article about this once with the math showing that, as a network – they are a total financial failure – the ONLY logical reason for their existence is that they have a hidden agenda (propaganda) that is more important than making money or getting ratings.  Larry Kudlow drives ratings down to less than 5,000 viewers during parts of his show (39,000 people TOTAL tune in during the hour) – STATIC GETS MORE VIEWERS!  Only 99,000 people watch Closing Bell – TOTAL.  Think about it…

    Transports testing 5,000 – up 2.6% for the day – would be very bullish if they take 5,000 but doubtful so you can't blame the markets for stopping here.  SOX up 2.82% and back to 370, RUT right on 760 line with S&P at 1,307 and Dow 12,327.  Nas is 2,832 and 2,850 was strong resistance and NYSE at 7,474 has a tough nut to crack at 7,500 so lots of good goals to shoot for but probably tomorrow unless we get some bullish Fed speak or a surprisingly good BBook. 

    Bradbury/StJ – That sucks.  Loved those books.  

     

    I know you've heard it a thousand times before. But it's true – hard work pays off. If you want to be good, you have to practice, practice, practice. If you don't love something, then don't do it. – Bradbury

    There was always a minority afraid of something, and a great majority afraid of the dark, afraid of the future, afraid of the past, afraid of the present, afraid of themselves and shadows of themselves. – Martian Chronicles 

    The gift of life is so precious that we should feel an obligation to pay back the universe for the gift of being alive.  - RB

     

    If you can't read and write you can't think. Your thoughts are dispersed if you don't know how to read and write. You've got to be able to look at your thoughts on paper and discover what a fool you were. – RB

     

    If you hide your ignorance, no one will hit you, and you'll never learn. – Farenheit 451

     

     

    Is it because we're having so much fun at home we've forgotten the world? Is it because we're so rich and the rest of the world's so poor and we just don't care if they are? I've heard rumors; the world is starving, but we're well fed. Is it true, the world works hard and we play? Is that why we're hated so much? – Farenheit 451 (1953!)

    Why would you clone people when you can go to bed with them and make a baby? C'mon, it's stupid. – RB

    People ask me to predict the future, when all I want to do is prevent it. Better yet, build it. Predicting the future is much too easy, anyway. You look at the people around you, the street you stand on, the visible air you breathe, and predict more of the same. To hell with more. I want better. – RB

     

  53. Pharmboy

    SGEN – Starting to buy back the June 20 pts for a nice, nice gain.  Also, if you want to buy back a few of the calls for even and use the funds for the Sept 20/25 BCS…then it is worth it….otherwise, wait for a signal, as they are at the top of the range I posted the other day.

  54. terrapin22

    come on down, TLT!!

  55. lionel

    Thanks Phil. Always nice to reread great quotes from great books

  56. bobhu

    Phil, what is your take on TLT? Do you think it will keep dropping?  TIA.

  57. jabobeast

    FB down again…. wow
     
    What a POS.

  58. flipspiceland

    @Pharmboy
     
    Do you think the new sleep drug developed by Merck —-and set for FDA review this year— could be a blockbuster?

  59. Pharmboy

    Wow, what a rally on nothing but hot air that will eventually run out of gas.  Oh, and I reiterate…QE(n) = quite extraodinary nothing…..get ready for more disappointment.  Treasuries backed up for better pricing, and I call 1.25% on the 10 yr and, gulp…0.1 on the 12 mo….that is a 50% gain folks…..get ready.

    and then you get this for a headline….

    Dow Industrials head for Biggest Gain of the Year on Stimulus (Bet)

    That is how you manufacture a short squeeze…..I call BS.

  60. Pharmboy

    Flip – blockbuster…well, a good revenue generator, but it is going to be very hard to enter a crowded market when Ambien is generic.  Mechanism is different, and it is supposed to eliminate a 'hangover' effect as well as 'addiction' properties, but I am not sure what the future revenue is…I do know it is 0.5B to 3B, and that is a big spread.  Others are in the market space as well (cough, JNJ).

  61. zeroxzero

    Pharm:  My feeling exactly.  Just upped my FXE shorts to hedge the next inevitable European bailout disappointment.  FCX and others have worked well, but this looks like a Wiley E. Coyote rally to me — one look down, and your falling.  Not that "prediction" is a valid investment strategy, being merely the flip side of "hope" [no, it's not "fear", which is omnipresent].

  62. Phil

    Nice Dollar dive back to 82.24.  

    10:00 AM On the hour: Dow +1.15%. 10-yr -0.23%. Euro +0.47%vs. dollar. Crude +1.96% to $85.94. Gold +1.27% to $1637.45.

    11:00 AM On the hour: Dow +1.41%. 10-yr -0.22%. Euro +0.37%vs. dollar. Crude +1.93% to $85.92. Gold +1.36% to $1638.85.

    11:46 AM European shares close sharply higher, as beaten-down values, the Fed, and more Spanish rescue rumors trump the ECB's inaction. Stoxx 50 +2.4%, Germany +2.2%, France +2.4%, Italy+3.4%, Spain +2.4%, U.K. +2.4%. One indicator of stress, the euro/Swiss franc exchange rate, shows no sign of relief as it edges closer to the CHF 1.20 floor

    12:00 PM On the hour: Dow +1.69%. 10-yr -0.39%. Euro +0.65%vs. dollar. Crude +1.6% to $85.64. Gold +1.41% to $1639.65.

    U.S. investor optimism fell to +24 last month, continuing a decline starting in February when the index hit +40, according to Wells Fargo/Gallup. The decline is particularly steep amongst retirees, who were 3X more optimistic than workers a year ago, and now are less optimistic than the working class.

    Squeeze time!  Hedge funds have doubled their net shorts of the S&P 500 in the last three weeks, reports SocGen. They're at record highs with euro shorts, and have turned net sellers of copper. "Waning support" makes the S&P and Nasdaq "highly vulnerable," says SocGen. Actually, it's the hedge funds that are vulnerable, writes Brendan Conway.

    Morgan Stanley (MS +6.1%) is not interested in selling a minority stake in its commodities ops, nor the unit as a whole, MarketWatch reports, although the bank has received approaches from P-E firms. The article refutes an earlier story that MS is considering a sale of a minority holding. Seems like some press manipulation is going on. 

    No formal announcements have been made, but signs of another wave of Wall Street job cuts are popping up. Trading volumes are low, M&A activity is falling, low rates are squeezing lending profits, and the IPO market – not strong to begin with – hit a wall 2 weeks ago. The revenue to keep staffing at current levels just isn't there.

    Lloyds (LYG +3.8%) continues its program of offloading non-core assets, confirming a report that it's agreed to sell £809M ($1.25B) of non-performing Australian real-estate loans to a Morgan Stanley (MS) and Blackstone (BX) JV for £388M. Lloyds, which lost £183M on the loans last year, will use the proceeds to repay its own debt.

    Property insurers have turned skeptical about hurricane models after one major modeler recently dramatically increased its estimate of losses. "They don't want to be held hostage to a model-version change or to an outside influence to their view of risk," says a property insurance specialist. 

    Spain's Attorney General opens an investigation into the creation of Bankia. The lender was formed 2 years ago from the rubble of several troubled banks and given a clean bill of health from stress tests ahead of its IPO. By 2011's end, Bankia was said to need €1.3B, and that number has grown to over €20B today. Shares are down 72% since the IPO. (via)

    Gold is moving nicely higher, +1.3% to $1,639/oz. as the Fed starts to stir, but the big action is in silver, +4.6%, and erasing all of May's losses in June's first few days.  SLV +4.1%.

    Dennis Gartman's recommendation of gold stocks after a couple of years of urging investors to buy bullion ahead of equities is the primary driver of their resurgence, Don Coxe says, adding that the shares will continue to climb: “Gold stocks are the cheapest they have been in the history of gold mining. That won’t last forever.”

    Kodiak Oil & Gas (KOG +9.1%), Comstock Resources (CRK +9.1%), Rosetta Resources (ROSE +6%) and Noble Energy (NBL +2.9%) rank among the day's top gainers in the energy sector after shares are upgraded to Add from Neutral at CapitalOne Southcoast.

    This is kind of funny because everyone thinks they are going to export LNG to everyone else:  GE (GE +1.8%) wins a $150M deal to supply LNG technology to Malaysia's Petronas and says it's aiming to double its oil and gas business in Asia in the next 3-5 years. The conglomerate is looking to exploit $40B of projects in Indonesia and Vietnam, as well as in Malaysia, with one area of interest being off-shore LNG ventrues.

    Chevron (CVX) and its partners, including BP and Eni (E), expect soon to load their first liquefied natural gas cargo from Angola using gas that previously would have been flared, opening up a new source of supply for Asian and European markets. The project is the world's only LNG gasification plant using associated gas, which is produced as a byproduct from existing oil fields and is mostly flared.

    Shaw Group (SHAW +5.1%plans to acquire up to 50% of NET Power LLC as part of a plan to build a new type of natural gas-fired power plant. Plans call for construction and commissioning by 2014 of a 25 MW nat gas plant that will capture all emissions and generate revenue from the sale of electricity and CO2 for enhanced oil recovery.

    As investors pile into risk assets, First Solar (FSLR +7.7%) is leading a rally in solar stocks (TAN +3.4%). Shares had fallen 89% over the prior 12 months as of yesterday's close. The rally comes even as the head of a French trade association warns solar vendors hold a year's worth of inventory, raising the prospect of widespread bankruptcies and consolidation. He adds panel demand might grow 18% in 2012 to 32GW, growth that will be more than offset by price declines. (previous)

    More on Hovnanian (HOV +14.7%): Contract signings +52.2% Y/Y with average price +7.8%. Deliveries +24.8% Y/Y with average price +13%. Contract backlogs +48.2% Y/Y with average price +0.3%. (h/t Conor Sen The company sold more homes in April 2012 than any month since spring 2006 (excluding a special promotion in Sept. 2007). Improvements were wide-based over geography, price points, and buyer profiles, says CEO Ara Hovnanian. Shares +22.4%. The XHB +1.5%.

    IMAX plans to run Prometheus on 421 of its outsized screens globally, including in 298 theaters in North America where the sci-fi movie debuts on Friday. Director Ridley Scott is purposefullystirring the pot on whether or not the movie is a prequel to his 1979 landmark, Alien, in a move that may help keep the box office churning. Shares of IMAX are up 1.5% on the day to $19.79, standing 45% lower than their 52-week high.

    Nordstrom (JWN +1.8%) execs are painting a bright picture of a growth story at the company in comments at the Piper Jaffray Consumer Conference. Not only is business strong and credit card accounts trending 50% higher, new mobile shopping initiatives are also starting to contribute. (webcast

    Analysts at both KeyBank and Suntrust move off their Buy ratings on Tempur-Pedic (TPX -46.7%) after admitting they were blindsided by the company's guidance bombshell. To give credit where credit is due, last week channel checks by Barclays tipped off that a problem could be in the making.

    A number of coffee stocks are perking up in early trading, with Krispy Kreme (KKD +5.6%), Green Mountain Coffee Roasters (GMCR +4.4%), and Coffee Holdings (JVA +2.5%) all posting gains. Analysts have stoked the M&A fire in the sector a bit, while themes of global growth prospects and lower wholesale coffee prices also hold sway.

    Speaking at the Jefferies 2012 Global Healthcare Conference in New York, Questcor Pharmaceuticals' (QCOR +7.5%) says its only product, Acthar, remains strong, and the company is poised for solid Q2 sales numbers. Scripts figures for the drug are up on a M/M basis for treating patients with both multiple sclerosis and nephrotic syndrome. (presentation)

    The $7.9B that Abbott (ABT) earned from arthritis drug Humira last year could be at risk after Roche's (RHHBY.PK) Actemraperformed better in a trial of patients who couldn't take methotrexate. In another study, Bristol-Myers' (BMY) Orencia performed as well as Humira in patients who hadn’t taken a biological rheumatoid arthritis treatment before.

    Sterne Agee simultaneously trims its revenue forecast for IBM (IBM +1.5%) due to a strong dollar and weak Euro sales, and increases its EPS forecast on account of a mix shift towards software. Big Blue's software revenue rose 5% Y/Y in Q1, compared with flat overall growth. The firm continues to view IBM as one of the best enterprise tech plays due to its analytics, big data, and cloud positioning (ed: IBM has exposure to these areas, but unlike someother names, it's far from a pure-play).

    Global chip sales totaled $24.1B in April, the SIA estimates, up 3.4% M/M but down 2.9% Y/Y, as the chip industry's recovery from a major inventory correction proves a slow affair. The SIA claims the industry's outlook remains one of "cautious optimism," Chip stocks are now pricing in a far amount of caution, following a raft of bad news related to PC salesIT spending, and Euro demand. (March sales) (Canaccord)

    Pandora (P +3.8%) rallies after posting its May audience metrics. Listener hours totaled 1.1B, +4% M/M and+87% Y/Y (April's growth was also 87%). The company's share of U.S. radio listening was 5.80%, up from 3.08% a year ago and down from 5.95% in April (there was a smaller decline from April to May last year). Active listeners stood at 53.3M at month's end, +3% M/M and +52% Y/Y. Pandora has also struck a distribution deal with Mazda. (previous)

    JMP's Mark Harding becomes the latest analyst to come to Facebook's (FB +2.1%) defense (previous). He's starting coverage with an Outperform and $37 PT, and (like Topeka) touts Facebook's monetization potential. Shares have spiked higher over the last 20 minutes after underperforming early on.

    EMC is partnering with Verizon's (VZ) Terremark subsidiary to deliver cloud hosting services that leverage EMC's storage hardware and software. EMC, like many of its peers, hasmade a lot of noise about its cloud ambitions, though its track record is mixed. While some cloud services firms value the rich feature set of EMC's Symmetrix and VNX lines, others such as Amazon and Facebook prefer cheaper home-grown solutions and/or flash memory-based systems from upstarts.

    Though Symbian's market share has been 

  63. Phil


    Though Symbian's market share has been 
    decimated by Android and the iPhone, Nokia (NOK) continues to support the OS at the low end of its lineup. The company's just-released Asha 305 and 306 phones run on it no-frills Symbian S40 platform, and though sporting touchscreens, are declared to be feature phones. They'll be sold for just €63 ($79) and €68 ($85), respectively, and will doubtlessly be aimed at emerging markets, where low-end Android vendors aregobbling share.

    Android's (GOOG) smartphone share will peak in 2012 at 61% before falling to 52.9% in 2016, IDC predicts. It sees Windows Phone (MSFTNOK) as the biggest culprit, forecasting its share will grow to 19.2% in 2016 from 5.2% in 2012. The iPhone's (AAPL) share is expected to slip to 19% from 20.5%. Making 4-year smartphone forecasts is no easy task – Android was a blip on the radar back in '08. IDC sees total mobile phone sales rising 4% in 2012, and smartphone sales 39%. (previous

    Though few expect an Apple (AAPL) TV set to be announced at next week's developer conference, Jefferies' Peter Misek thinks it's possible. Misek says his checks indicate Foxconn has begun manufacturing an iTV (this is in-line with a Chinese report) and expects the product to be available in 2H. He also believes the iTV is being tested by pay-TV providers AT&T (T), Verizon (VZ), Bell (BCE), Rogers (RCI), Deutsche Telekom (DTEGY.PK), and France Telecom (FTE). (more)

    More from Jefferies on Apple: Misek also predicts Apple will sell 30M iPhones in the June quarter (more than some expect), and thinks production is steady at 28M-32M (if accurate, that's a positive for iPhone component suppliers). He also doubts Euro carriers will follow the lead of Telefonica's (TEF) Spanish unit ineliminating phone subsidies, given the share losses that resulted, and expects NTT DoCoMo (DCM) to eventually carry the iPhone, in spite of statements to the contrary.

  64. Lincoln

    Pharm: TLT
     1.25% on the 10 yr and, gulp…0.1 on the 12 mo….that is a 50% gain    Had do you correlate the drop in rates to a % gain or loss in Treasuries/TLT?  TIA

  65. newt

    TNA help: I have a Jun BCS 47/52 and a July 42/49.  I know I should have been pro-active with the June…. so damage control tips? Also is it a good idea to break up the July BCS- I have a nice profit on the long call and in all the spread has yld. 37%.
    Thank you.

  66. jthoma

    Pharm- could not agree more- not even slowing down at resistance levels and all on hope that Ben will hit a home run tomorrow- how fickle we are- thinking he might do something that is because the world sux and we rally like no tomorrow.

  67. Phil

    TLT/Terra – Money flying out of bonds.  Could get another nice move over 1,310.  

    TLT/Bob – I hope so.  Anticipation of QE3 action is taking us lower at the moment (short-term, it devalues the Dollar, which TBills are priced in) plus the TBill "sideline money" has to be liquidated before people miss the rally they didn't expect.  

    I do think for the $5KP and $25KP, we should take $1.70 and run on 1/2 the TLT Sept $115 puts as they were rolls that had losses so nice to lock back in some gains and put money back on the side that we can re-deploy to roll again if things go against us.  

    Wiley Coyote/ZZ – Good analogy.  

    TNA/Newt – .The June $47s are $2.55 and they can be rolled to the July $54s at $2.30 for a .25 credit so follow my logic – you roll those out and you have the July $54s covering the short June $52s (.60) while you wait for them to expire.  Should TLT zoom higher, you can roll the short $52s to the July whatevers (the $62s are now .60) and then you'd have two vertical in July.   Not to make it too complicated but, if all goes well, the June $52s expire worthless and you then can either keep the 1:1:1 spread in July as TNA goes higher or put a stop on your lower calls (the July $42s) and leave the short $49s in a bear spread with the July $54s you rolled to.  At the moment, you can cash those $42s for $8.50, which is $1.50 more than the max spread and the most you would give back on the short vertical (if it happens) is net $5 and you currently owe the July $49 caller $4.30 so we're talking about a net .70 difference at worst.  Obviously, many things can happen along the way but it's a nice, flexible way to rearrange the position so you don't get burned on time decay on your June calls and you can lock in your gains on your July $42s at the same time.  

    Lagarde plan/Rain – I'm all for that.  Room should have no food or AC and a few loose scorpions running around as well as we don't have all day to wait for these jokers…

  68. angelcur

    gold just got smacked 10 bucks somebody peeing on the qeeee ing parade?

  69. newt

    TNA / Phil: got it thanks.  Its this very reason why I joined the PSW universe.  Thanks coach!

  70. Pharmboy

    Lincoln – TLT being a 20 yr treasury has a mixed bag of holdings, as there is no "20 yr" treasury that I know of.   So, I do not know how to correlate the TLT price with those.  All I know is it means UP for TLT, with intermittent stops along the way.  Think of the amount of capital it takes to move 5 yrs down to 0.1 (from 0.18) or 10 yrs to 1.25 from 1.66…where is it going to come from?  Not from the printing press……

  71. Phil

    Be careful folks – someone's getting a no QE message as a whole bunch of stuff moved at once but now we just need to hold the same levels we were trying to break over.  

  72. Phil

    Anderson Cooper makes you realize what fools these birthers are (and the birther interviewed does a good job of doing it to himself):

  73. Pharmboy

    WTF is a 'birther'?  Oh….

     

    No QE message, well, they could have read that here, this morning…first hand.  Bonds, bonds bonds, give me a sign!

  74. jromeha

    Phil – We have the income list, and you have published a small set of 10 or so stocks you like, are you going to do a buy list pretty soon or are we waiting for another leg down? Just curious b/c it is a lot harder to trade from Kabul!

  75. lflantheman

    MoMo portfolio:   Players…..LNKD is the only stock on my MoMo watch list that is NOT UP TODAY.      It looks weak to me.  Should we short it?    

  76. jabobeast

    Priceline (NASDAQ: PCLN) continues to be a top pick amongst hedge funds and with good reason. Even in the face of a deteriorating macro economy in Europe and the highly competitive nature of the online travel business, PCLN has a risk/reward skew that is satisfactory to us. It remains the leading online travel agency for hotel reservations, which is the fastest growing revenue source for travel intermediaries, second to airline bookings. Booking.com does well in Europe, offering the lowest commission rates, which we think has potential to scale in the US as well. It’s a low capex business with strong cash flow numbers as well as upcoming catalysts. We see PCLN as being best positioned to take market share in Europe and Asia as the offline to online secular trend continues to provide a tailwind and we see booking.com disrupting the US hotel market with its low take rate. With all these strategic opportunities and financial strength, we think PCLN can trade to ~15.0x 2013 EPS, which is around $800 a share.

  77. zeroxzero

    Pharm:  That you have to ask the question is a large part of the answer.  "Birther? Uh, against abortion? Against birth? For natural birth? Against sex without birth?  Against birthdays?…. oh, against Obama because he has a "b" in his name and was born on an island that wasn't a state when I was Born…."  The U.S. public really has an instinct for the capillary. 

  78. morxlntway

    re income list, i too was wondering abt FTR today?

  79. rpme

    As I recall, we did this last summer. Big run up to the Bernak then no candy and down we went….

  80. rperi

    birther – that's a great video!  absolute fool! so now that the long form birth certificate was presented in April of 2011, 6 months after this video, what now?  What's really great is that he introduced a bill back then that would “require any candidate for president or vice president of the United States to show his or her birth certificate to the Texas secretary of state”.  So now the country has to report to Texas and its secretary of state?  Really?

  81. rperi

    no wonder why he was defeated 58-42 percent in last week's Republican primary

  82. newt

    TNA/ PHIL: the TNA's position are part of the 25k portfolio.  My platform aligns holdings in inaccurate strategies.. Pain in the ass. So the 42/49 July is correct.  the Jun 52's are long calls (20) and the Jun 47 is short.  how does this change your above advice?

  83. amalficoast

    Howdy Phil – Just joined yesterday. Liking what I see. Any thoughts on going long GLD?

  84. rustle123

    Anderson Cooper/Phil
     
    Unfortunately this seems to be the attitude of most Americans, they say something, you prove without a doubt they're wrong with direct facts and it's still not good enough.

  85. stjeanluc

    LNKD / lflan – I would not do it now! 

  86. lionel

    Short oil/ long SDS
    Spain has a very good reason to flunk  its auction tomorrow (they could have postponed it – meaningless amount)
    It looks to me that They jacked up the markets for a little cushion (above 200MMA – our sacred bottom signal) so Spain can ruin the party and get its point across the continent to Frau Angela that the markets are closed for Spain – ie Europe will have to come to the Spanish banks rescue
    I cant imagine a positive Bbook or Ben saying anything new tonight – No QE for you as Phil would say!
    FWI, I think we will go down tomorrow and Friday into French election weekend.

  87. jabobeast

    beige book????

  88. scottmi

    Birthers – LOL! What, more campaigning? Well, hope is burning, regardless…

  89. lionel

    "moderate activity"….

  90. etradingsignals

    RSS readers: Are any of you using a RSS reader on iPhone that has good push capability?

    I am hoping to find something that will push notifications whenever Phil posts something.

  91. Burrben

    FAS Money –  What do you think about closing down the June 89 Call?  Just in case we DO get QE3 tomorrow, FAS will blow up.
    PS:  On another note, kicking my self for not selling the Jun 70 puts last week….but who knew…I didn't want to get longer.

  92. sagemm1

    Phil/USO
     
    wasn't sure of your overall plan with those Jun USO 32p at .55 but bought them at .52 and sold them at .65 using your 20% in a day rule

  93. l4real

    Pretty funny video! It's almost as funny and stupid as the House  Republican-sponsored Incandesent light Bulb repeal bill, H.R. 2417!

  94. kinkistyle

    lnkd/lflan: Rumor floating around that LNKD may have been hacked and leaked 6.5mil passwords that is as of yet unconfirmed:


    LinkedIn Cannot Confirm Reported Security Breach of 6.5M Passwords

  95. Pharmboy

    Okee dokee….

    The Federal Reserve said today that the U.S. economy maintained a moderate pace of growth as factory output rose and the real-estate market improved.

    “Overall economic activity expanded at a moderate pace” from early April to late May, the Fed said in its Beige Book business survey, which is based on reports from its 12 district banks. “Hiring was steady or increased slightly.”

  96. Phil

    LOL Pharm – That's great.  My new go-to link when I get dragged into one of those discussions (maybe I should just make it a perma-link on my Facebook page to save time). 

    You're welcome Newt!  

    Buy list/Jrom – Well the TWIL List is a buy list, isn't it?   Those are great initial entries on a whole bunch of stocks that we simply did not think would go any lower (and X, for example did).  The idea is, if you have cash to deploy, look there first for fresh horses.  There's a limit to how may lists I can do at one time.  At the moment, I'm trying to concentrate on getting the Income Portfolio up and running although we certainly find the odd thing here and there to trade on most days as well.  

    Beige Book very little changed from last time – I'm certainly not in the mood to go through it as Europe matters a lot more than we do at the moment.  No particular reason for the Fed to rush in based on these notes.  

    PCLN/Jabob – Well, since the actual expectations are for PCLN to earn $39.50 a share in 2013 (and that's assuming 25% income growth from this year's projections of 33% growth that have yet to be proven) – if we multiply THAT number by 15 we don't even get $600 so the analyst is an idiot or a liar – maybe both.  

    No candy/Rpme – That will certainly make a lot of babies cry.  

    TNA/Newt – Well they're only at $47 now so it's all premium with 7 trading days to go so not much to do but watch for now.  If they go over 766 on the RUT, you might want to add a few July longs and then a few more until you feel comfortably covered.  

    Welcome Amalfi (and Lerici is one of my favorite towns!) – I am not at all a gold person.  We picked GDX about two weeks ago and ABX last week because they were too cheap but don't confuse that with me liking the shiny metal itself.  Gold is "worth" (if that's even a thing) about $1,150 and maybe $1,450 if you consider the "safe harbor" argument.  As a hedge against inflation – there is no inflation and gold is up 100% in 3 years so, if it's a hedge against the 6% inflation we've had in that time – then it's due for a pretty major return to the mean pretty soon! 

    Facts/Rustle – That's why I found that video fascinating, the guy just kept going.  Didn't matter how wrong he was – he just went on to bring something even dumber up and then that was irrefutably disputed and he went on to the next thing – too funny.  And this guy is a Congressman – you would think he would have some sense of shame but he then THANKS Cooper for having him on.   It's such a great example of that Fox news-style of "fact-checking" that the right embraces.  "If it says so in the Drudge Report or on some KKK blog – it must be true (as long as it agrees with you) because it's right there on the INTER net!"  If, on the other hand, there is irrefutable proof vetted by multiple sources that don't agree with you – it's all part of the vast left-wing conspiracy.  Would be very, very funny if this wasn't the country we live in…

    FAS Money/Burr – 20% is pretty far away.  7% on XLF is $14.87, almost $15.  I don't know if I can motivate myself to be $75 afraid (the price to buy them back) of that outcome but nothing wrong with doing it if you are worried.  And, of course, I'll be so happy that the 6 short $75 puts expire worthless for $2,760 – I can't even imagine being very upset if I get burned for a few hundred on the long side – not to mention the XLF longs will go up too.  

    You can always buy back your callers/putters for $200, $100, $50 at some point but, if you are hedged on both sides and you don't let your hedges do their job 20, 30 or 50 times, then that's thousands flushed down the drain, isn't it?  We get burned on one side or another all the time with these set-ups but we ALWAYS collect our premiums.  Yes, sometimes we do take advantage and buy back a caller or putter – but only because we think the risk of leaving them outweighs the potential reward of leaving them.  

    USO/Sage – Good man.  Making 20% in a day is a lot and nothing wrong with taking them off.  I'm officially leaving them on because it's an aggressive portfolio and that inventory report was a huge disappointment and of course $85 was going to hold up on first try and now they make a good downside hedge if the market crashes against our very bullish $25K Portfolio.  

    Light bulb repeal/L4 – What is up with that?  Do they get paid to find ways to waste energy?  I guess the Kochs are concerned about declining power bills and they must be way below their quota for dumping carbon into the atmosphere if no one want's their coal-fired electricity.   Don't worry though, Global Warming will get people to double up on air conditioning and all will be well…

    FB still green!!!  Now you know Bots are just indiscriminately buying any crap…

  97. rustle123

    Cooper/Phil
     
    I didn't realize that guy was a Congressman, that is friggin' scary.  I wonder what his feelings are regarding if OJ was guilty, if Neil Armstrong really did land on the moon and Area 51.

  98. newt

    TNA/ Phil: Thank you.

  99. angelcur

    LIGHT BULBS: i wish they would ban certain colgnes while they are at it…and maple/bacon flavored pepto.\
    no real surprise out of the ISM…. pulled in a bit, but are holding most gains…usually leads to another push higher into the close…schtick schtack schtuck

  100. Phil

    3 GOOG July $590/620 bull cal spread at $11 can be a good stand-alone play with almost 3:1 pay-off potential but you can also sell 1 $590 put for $31 and then you have net $2 on 3 $30 spreads ($88 potential upside at $620) and, of course, if you can do a 2x roll on the short puts, the Sept $520 puts, for example are $16 so that's your 2x roll and the Jan $405 puts are $8.40 so that's the 4x roll.  So, if you are willing to own 4x GOOG at less than net $410 (30% off), then not much of a reason not to go for $88 on the bull side here into earnings.  

  101. Pharmboy

    Oh boy….

    Kurt Lauk, a former European lawmaker who heads a business group in Merkel’s Christian Democratic Union, said he would support euro countries pooling debt with a repayment period of as much as half a century.

  102. rustle123

    I feel bad for TPX (tempur-pedic) down almost 50% today because I have had unbelievable and countless hours of comfort and sleep on their mattress.  By far the best in my opinion out there.

  103. Pharmboy

    GDX and GLD falling like the rocks they are……

  104. Phil

    Moon/Rustle – I don't know about Neil Armstrong but Buzz Aldrin punched out some moron who kept saying he didn't land on the moon.  We should let Buzz "talk to" all these nutbags:  

  105. rustle123

    Aldrin/Phil
     
    CLASSIC!  LOVE IT!

  106. Pharmboy

    BHI – 5% swing…and a miss…..

  107. jthoma

    rustle- I mentioned it to a buddy the other day as a short candidate as I watched it go to nothing in 2008-09 market but alas- I did not own any puts- very discretionary purchase when consumer spending gets tight- people just live with a bad back for a little longer or go to the couch!

  108. boltdude

    Phil — would you consider an FTR entry today?  I am already long Jan14 $3 calls and short Jan14 $3 puts that paid for them.  Looking for a nearer term income play for someone who doesn't mind owning the stock to sell calls against.

  109. millcreek

    phil,
    a couple of questions.
    regarding income portfolio.  your note said execute the five positions …are we still holding off on the other five or shojuld we attempt to fill ?
    did i understand an earlier post  that do not chase prices …use a 5 % band on fills…..?.
    also repair question
    i like cjes (3 ebitda) at present i am
    short jun 15 puts basis 1.30
    short jun 17.5 puts basis. 1.40
    long jun 17.5 calls basis 3.15 (ouch)
    since joining i have read there are some rules of thumb like dont let a option lose more than 50 or so % before closing or rolling etc… little late for now but looking to learn…
    i also am cjes again
    short sep 15 puts at 1.00
    long call spread 17.5 22.5 at  1.85 net
    would appreciate your thoughts and insights/why on positioning going forward.  tks mc

  110. mrmocha

    Pharm, one of my favorite signs was on a road in northern India: "Accidents are prohibited on this road."

  111. nicha

    signs/mrmocha – lol…where was that?

  112. rustle123

    TPX/JTHOMA
     
    I just bought some shares at 22.30 hoping for a small bounce tomorrow or will get out.  It's a very low RSI (14) and P/E is now about 7 of projected earnings.  Can't believe this was over 87, insane.  Hoping lots of funds are dumping it today because they don't want to show they hold it and stock might get a couple point bounce back.

  113. lflantheman

    I'm moving the MoMo account to cash.   Prices later.

  114. jromeha

    THis whole day has been a stick, do we need another damn 30 points going into close!!!?!!?

  115. mrmocha

    nicha - many years ago, but up north I think, perhaps Ladakh.

  116. Pharmboy

    Let's see, my TOS sign shows SPY Put/Call ratio of 369:1….That cant be good.

  117. Phil

    Stick adding insult to injury for the bears…

    FTR/Bolt – Yes, I like them long-term and $3.32 is more of a drop than the dividend deserved so a nice entry point.  

    10%/Pharm – That's sick.  Can't get a good job without college.  College costs $100,000.  Entry-level jobs pay $25,000 after taxes, interest on loan is $10,000 a year and, by the way, you are no longer covered under your parents health care so another $3,000 a year for that…  What the hell kind of society are we building? 

    1:00 PM On the hour: Dow +1.84%. 10-yr -0.48%. Euro +0.86% vs. dollar. Crude +1.82% to $85.83. Gold +1.2% to $1636.25.

    2:00 PM On the hour: Dow +1.76%. 10-yr -0.39%. Euro +0.80% vs. dollar. Crude +0.99% to $85.13. Gold +0.83% to $1630.25.

    3:00 PM On the hour: Dow +1.86%. 10-yr -0.4%. Euro +0.75% vs. dollar. Crude +0.93% to $85.07. Gold +0.18% to $1619.75.

    The CBO's latest sobering outlook on the U.S. economy says cumulative federal debt will reach nearly 70% of GDP by year's end, up from ~40% in 2008, and would reach ~200% of GDP in 25 years without changes in current policies. With the retirement of Baby Boomers and the rising cost of medical care, the U.S. government would become mostly a provider of annuities and medical insurance.

    Last month's big jump in consumer borrowing was little more than a jump in educational loans, according to the FBRNY. While education may be more productive than buying a new car, recent data suggests the borrowing isn't doing a lot more than putting a lot of students into debt they can neither pay nor discharge.

    Fed Beige Book: The report paints a more optimistic picture of the economy than much of the recent data. Growth continues at a moderate pace in all districts with just Philadelphia reporting a slowing in the rate of expansion. Residential real estate activity improved in most districts, although the recovery remains fragile.

    More on the Beige Book: There is little in the report suggesting the need for additional Fed stimulus, meaning – if the there's been a "shift" at the Fed – it's from the weight of events here and across the pond over the past few days. Stocks remain near session highs, the S&P +1.7%. The 10-year Treasury yield +8 bps to 1.65% (vs. 1.44% on Friday).

    Gold tumbles after relative optimism from the Beige Bookcools thoughts of additional Fed action. GLD flat after being higher by nearly 1% before the report.

    "Worse than 2008," is the conclusion of Credit Suisse analysts of Asia's metal and mining industry after having spent a couple of weeks on the ground. "Our discussions suggest a significant loss in growth momentum … especially for steel makers." An expected China stimulus program "would bring temporary relief at best."

    Maybe what's really hurting Angela Merkel politically arerising electricity costs, up more than 10% with more price hikes to come as the country phases out nuclear energy in favor of trendier sources. Much of the increase is to finance solar subsidies, which Merkel would like to end, but as of yet has been unable to.

    When the going gets tough, the tough cut the retirement age. New French President Hollande announces he's rescinding Sarkozy's 2010 bump from age 60 to 62. While the reforms could cost the strapped government billions, a cabinet minister says it will be paid for through higher worker and employee contributions. 

    China's direct investment into Europe tripled to $10B in 2011, still small, but – according to a Rhodium Group study – just starting to ramp up. China is mostly interested in technology, brands, and high-end manufacturing. Not on the list is the sovereign debt of Europe's troubled states.

    Among the stocks making new 52-week highs today are two mortgage REITs, the sector proving itself on both risk-on and risk-off days as short rates look to be anchored near zero for pretty much forever. American Capital Agency (AGNC) is up 17% YTD while yielding 15.2%, and CYS Investments is up 6.9% YTD while yielding 14.2%.

    Oil service stocks (OIH +1.7%) hold up well despite Halliburton's (HAL -2.4%operational update, which said the price of guar gum "has inflated more rapidly than previously expected due to concerns over the potential for shortages for the commodity later in 2012." It seems unlikely HAL would be the only firm in the sector with tight supplies, Jon Ogg notes. BHI -0.9% but SLB +2.6%WFT +0.7%.

    BofA Merrill Lynch lowers its oil price forecast but says the selloff in oil stocks has opened up attractive opportunities, viewing top pick Hess (HES +4.6%) and others - MRO +3.7%CHK +5.3%APC+4.8%OXY +3.7% - as offering the best upside potential. Many of the downside risks facing those companies are already priced into the stocks, the firm says. (earlier)

    The London Olympics will air live via YouTube for viewers in Asia and Africa on ten different IOC channels in what makes for a nearly perfect demonstration of the risks that broadcast networks face in the future to streaming options. In the U.S., Comcast's (CMCSA+1.9%) NBC will also offer a live broadcast of events as it tries to recoup part of its multi-billion investment for the rights to the games.

    Supervalu (SVU -0.5%announces plans to reduce the workforce at subsidiary Albertsons by 2.2K-2.5K across stores in California and Nevada.

    As the SIA talks of "cautious optimism" regarding chip sales, JPMorgan's Chris Danely is slashing estimates for Intel (INTC) and 4 other chipmakers (AMDONNNTXN, and VSH) due to pessimism about PC demand. Danely notes contractors Wistron and Quanta have cut their Q2 notebook forecasts, and that checks indicate overall demand is slowing. He still likes ADI and XLNX, believing their margin profiles and dividend yields can allow them to outperform. (Baird)

    More on JMP's Facebook upgrade: Mark Harding's $37 PT values Facebook (FB +0.7%) at 54x his 2013 EPS esimate. Hepredicts Facebook's share of the display ad market will grow to 22% in 2015 from 11% in 2011, and that the market itself will increase rapidly as more offline ad spending moves to the Web. Harding also notes daily engagement rates for Facebook users have been rising across geographies. A recent Reuters survey suggests U.S. engagement may be peaking.

    The selloff in Facebook and other social networking names has led Twitter's valuation to fall 15% on private markets. This leadsNicholas Carlson to speculate Twitter, which was valued at $8B in a funding round, will now be more open to selling to Google (GOOG) – a source recently hinted Twitter was open to a deal. Also: co-founder Jack Dorsey is now reportedly spending less time at Twitter than at Square, and CEO Dick Costolo has already sold a startup (FeedBurner) to Google.

    Though it has had a rough time lately due to a tough mobile capex environment, Ericsson (ERIC) claims it has grown its share of the mobile infrastructure market to 38% from 32% over the last few quarters, as the company takes advantage of Alcatel-Lucent (ALU -previous) and Nokia Siemens (NOKSI) troubles. Ericsson alsoforecasts global smartphone subscribers will total 3B in 2016, up from 700M in 2011. There are currently over 6B mobile subscriptions worldwide- That seems like a lot, doesn't it?  Hard to project growth when 6/7 humans already have a phone

    Apple (AAPLisn't satisfied with the changes made to HTC's One X and EVO 4G LTE Android phones to avoid an ITC import ban caused by their infringement of an Apple patent related to creating e-mail and phone-dialing links within an app (ed: this patent is incredibly broad, and could apply to hundreds of phones, browsers, PC apps, etc.). Apple declares the One X and EVO to still be infringing the patent, along with 27 other HTC devices, and wants the ITC to ban all of them. (HTC Q2 warning)

    Three lunchtime reads:

    1) Cold water on QE3?

    2) This part of the bond market has real value

    3) Five reasons to buy stocks now

  118. rainman

    Pharm / weed — Or sell it while in college to pay for your tuition. Kill two birds with one stoner.

  119. rainman

    Phil / building — Building?  We're in the remodel stage.

  120. lflantheman

    I've taken the MoMo and most other accounts to cash.  It has to do with my trading style and tomorrow's Ben party.   Most accounts on my end up significantly today, and …..I'll be unavailable to trade all day tomorrow…..and ……..potentially Ben could move the markets in a negative direction……so for me ………CASH for the next few days. 

  121. rainman

    Dang, can't get volume up or down.

  122. Phil

    Income Portfolio/Mill – There were two sets of 5 trades to fill.  One Monday from the TWIL list and then 5 yesterday with a couple still on watch but not interested in the others without better prices.  Our goal in the Income Portfolio is to generate $4,000 a month to live on – we don't need to add more trades so why would we?  CASH IS KING!!!   CJES does seem like a good deal but, for some reason, they are being dumped – even today.  Hopefully both puts will expire worthless and you let the calls die and killed the trade – there's no real fix here – it's just going to be a new trade if you like them.  They don't have very long options and the VIX just died on you but you can sell the Dec $15 puts for $1.70 and buy the $12.50/17.50 bull call spread for $3.25 for net $1.55 on the $5 spread and then you're not the sucker paying the premium, like you were in June – because you see how well that worked out…

    Accidents/Mr. M – Now why don't we get some signs like that?  Funny how these very obvious solutions just don't occur to people.

    Wow, was that the bell already?  Nice big stick day:  

  123. Pharmboy

    That's what I call krazy BS….2.25% dead cat bounce….

  124. terrapin22

    Phil – great calls this past week, esp. friday and monday.  in the old days I would have let Prechter et al scare me into trimming my longs and going short at just the wrong time.  your feel for the markets is Tiger-esque.  CHK, HOV, BX, TLT and  XLF are big winners for me today.   My biggest up day in a long time.  Thanks! 

  125. lflantheman

    Pharmboy…..SPY put/call ratio is WHAT?   

  126. Lincoln

    Ouch! That Buzz Aldrin is too funny.  I saw him on Colbert ripping off a hundred push-ups so I'm sure that was no old man punch.  wonder if the guy stood there and turned the other cheek?

  127. lflantheman

    Buzz Aldrin clip…..Mr. Aldrin was trying to get away from the guy, but he continued to chase and harass.    A man can take just so much bullying, then he snaps.   Simple flight-or-fight physiology.    

  128. Peter D

    Hey short stranglers, what a short squeeze.  I have too many meetings today, and will be back in 2-3 hours.

  129. smala766

    Lflan what price you cashed out the MoMo?

  130. deano

    Think about what those guys did, basically strapped to a bomb with a few HP calculators with the combined computing power of an abacus or two, and got there, & got back safely. American/human heroes, inspired by a dead president's 10 year goal, which challenged the entire country to get its math & science act together – where can we get a few more of those guys? I always thought Obama could give a speech like that president did, but all we got was an empty suit. 
    Hit him again Buzz!

  131. Phil

    Excellent Terra, thanks!  

    That's great Jabob:

    Aldrin/Iflan – The guy said "you're a coward and a liar and a thief" and that's what finally got him punched – in the good old days Aldrin could have run that jackass through with a sword and no one would have though badly of him for it!  

    At the close: Dow +2.33% to 12410. S&P +2.29% to 1315. Nasdaq +2.4% to 2845.

    Treasurys: 30-year -1.29%. 10-yr -0.46%. 5-yr -0.21%.

    Commodities: Crude +1.19% to $85.29. Gold +0.26% to $1621.05.

    Currencies: Euro +0.97% vs. dollar. Yen +0.66%. Pound -0.78%.

    Market recap: Stocks rallied to their biggest gains of the year as dovish comments from the Fed's Lockhart and Williams spark already smolderling hopes that Uncle Ben will soon ride to the rescue. Also part of the mosaic was Scott Walker's victory last night, which traders say bodes well for Mitt Romney in November. Treasurys and the dollar fell. NYSE gainers led losers five to one.

    RALLY: Fed Considers More Action Amid New Recovery Doubts (WSJ)

    Barbell Approach Only Way to Lift Heavy Economy (Bloomberg)

    Is the bear around the corner? (Market Watch)

    Five reasons to buy stocks now (Market Watch)

    ECB’s Fix-It Kit Is Running Out of Tools (WSJ)

    Greece Warns of Going Broke as Tax Proceeds Dry Up (NYT)

    Former FDIC chair Sheila Bair Forms Group to Urge Strict Oversight of Wall Street (NYT)

    MF Global and the Risks Looming in the Repo Market (DealBook)

    Wal-Mart (WMT) exec Joel Anderson says the company isgetting a boost in sales from its Pay with Cash initiative that allows customers to order merchandise off its website and then pick it up in stores within two weeks. Though it's only a bit of anecdotal evidence, it does suggest that the Death-by-Amazon theory on big box retailers isn't a foregone conclusion across the sector. The company is also utilizing a new search engine on its website and mobile technology to help keep shoppers engaged. 

    Can Mom-and-Pop Shops Survive Extreme Gentrification? (NYT)

    Tesla Motors (TSLA) CEO Elon Musk pumps up shareholders at the company's annual meeting (webcast) with his proclamation that he sees the EV automaker selling 20K cars in 2013, a mark that stands well-above its break-even point of 8K units. The rubber hits the road very shortly for the company, with analyst forecasts that 90% of its 2012 revenue will hit in H2 about to get put to the test.

    Men's Wearhouse (MW): Q1 EPS of $0.53 misses by $0.01. Revenue of $536.7M (+1.1% Y/Y) misses by $56M. Shares-23% AH. (PR

    More on Mens Wearhouse (MW): Q1 misses on both EPS and revenue due to stagnant sales. Retail segment sales were weak, increasing just 3.1% versus the prior year, while corporate apparel sales dropped over 16% during the same period, primarily due to later launch dates for customer new uniform programs. The company also guides FY12 EPS expectations lower, now anticipating earnings in a range of $2.70 to $2.78 per share. Street estimates are for an EPS of $2.85. Shares -19.2% AH.

    Shares of Amedisys (AMED +6%) finish higher after making a compelling case about the long-term potential for the home-nursing sector at Jefferies' Global Healthcare Conference yesterday. The key takeaway was that managed-care prospects are good and should be an increasingly greater driver of growth for the company. One caveat however, the company acknowledged a lack of visibility regarding Medicare reimbursement over the near-term. (webcast)

    Let’s just agree the VC bubble has burst (VentureBeat)

    Appsurd: In Silicon Valley, It’s Hard to Make a Joke (WSJ)

    Apple's (AAPL) upcoming Mac refresh will be a big one, if an Australian pricing matrix obtained by 9to5 Mac is accurate. New MacBook Pro, MacBook Air, iMac, and Mac Pro models are listed. The prices appear steep, but that could be an Australia-specific issue.

    Cognitive Democracy (The Monkey Cage)

  132. lflantheman

    MoMo postions cashed out at :    Oct 600 calls sold to close  for 35.00    Oct 550 calls sold to close  for 58.90  And Oct 650 calls bought to close for 18.10    So I am in cash in this account.  

  133. Burrben

    Question on "Cashy"
     
    So let's say I have a 500K account, and use portfolio margin to sell puts and buy bull cs's on various stocks.  When I look at my Account Value window it says that my maintaince margin is 110K.  Would I be correct assuming that I'm currently using 22% of my cash?  The reason I ask is that PM Margin can change depending on how the vol and underlyings move against you, and it can also move based upon what positions are offsetting each other.  What's do you think?  What % of margin would you have a risk in this environment?

  134. Peter D

    never/regarding double diagonal,
    I like the double diagonal too as we used to call it an IRA scheme that works with non-margin accounts.  Like you said, we'll need good timing to enter the long leap strangles and the paper loss is not shooting through the roof on flash crashes.  I kinda dropped it when at times the long leap premium is more than all the front months added together and the leap takes forever to fill.  Selling the weeklys would help with the premium, but that's a lot more work.  I remembered that this strategy is helpful when volatility is increasing, but would incur loss if volatility is decreasing, i.e. losing more on the longs than gaining on shorts.  However, it is a good hedge for Vega, so I will do more analysis on this arrangement in the next few weeks.  

  135. Peter D

    kurt/ratio spreads,
    Thanks!  I do it with credit spreads on both sides and it's been profitable.

  136. Peter D

    barf, good to know how you felt back in 2001.  Black swan events have occurred every year since 2008 now.  Due to its regularity, we should call them gray swan event?!  Protection is the name of the game for short strangles.

  137. kurtww

    Peter – so you do a credit back ratio on both sides as a stand-alone trade, or primarily as insurance against short strangles? I've been doing the back ratio condors for credit, but I'm interested in juicing it up with short strangles. I don't like big paper losses. I tend to panic out at the worst time. This sounds like a good strategic combo to me. I'm going to try paper trading it, but I'd love some words of wisdom too.

  138. Peter D

    pstas/short strangle portfolio?
    We can do a 500k iron condors/back ratios/short strangles/crazy plays portfolio, but it is more work for stjeanluc!  Stjean?
     
    Note that this portfolio can be boring as the goal is to let them expire OTM to save commission costs.  We only get busy on large market swings.  If our goal is 1% a month, there may not be any adjustment needed most of the time.  If the goal is 3-4% a month, then we will be quite busy.  I have hardly touch my 1% a month portfolios with IB and OptionsXpress since I sold the June options a month ago.  Didn't even log in to how they perform as the short strikes are still way out.  However, with my TOS portfolios, I make regular adjustments, just to see how much I can get out of them.  These aggressive portfolios are now up 20%+ YTD, so I'm scaling them back also, getting 1% for the rest of the year is a nice 27%.  Greed is not good, especially during this summer time with possible crashes, along with "fast and furious" rallies.

  139. Peter D

    kurt,
    I do a combination of back ratios and short strangles.  Since we have the extra long puts with the back ratio spreads, we can sell some short strangles with limited risks.  I also do the "crazy plays", where we use some of the credit from short strangles to buy long put verticals that is roughly 5% OTM.  Those long put verticals have paid out handsomely in the past 2 months as the market did drop close to 5% or more on both occasions.  So the profit was more than the initial credit that I got.  These 5% drop months are rare though, and we expect to loose on those long put verticals.  Both the back ratios and crazy plays can take a while to fill, so patience is required.

  140. pstas

    Peter- My thoughts are something simple to see how the trades are conducted. Basics of short strangles (SPX)  with put vertical protection plus some Iron Condors on the RUT for fun. As  you say, a conservative portfolio is low maintenance but it can be tweaked from time to time to increase returns without assuming too much risk. For example, I was just looking at my June contracts and I have a SPX put vertical 1260/1250 and I am going to sell the long and ride the short as it is 5% out of the money which means my vertical protection for the month of June will be paid for. (Assuming nothing changes over night)  It would also be interesting to see what trade adjustments you would make given market swings that present such opportunities. Boring is just fine with me taking home 1 to 1 1/2 % per month.
    Another example is selling shorts 2 months out and then cashing in at a 50% gain. I am sure you and others have many more. We all can learn from seeing the expert execute real time.
    I think there is a lot of interest in short strangles since the comments are numerous everytime the subject  is raised.

  141. Burrben

    PeterD , Kurtww  -  When you say "back ratios" are you referring to a Ratio Butterfly?  I just watched a presentation DanS did on CBOE tv.
     
    Ratio Butterflies for Monthly Income
     
    Kurtww, Could you check my thinking on the back ratio construction?  I put it into IB's "what if", which isn't as good as the TOS analyze tab..  
    https://picasaweb.google.com/lh/photo/ysbV37RdisoJ6skS4UqOb3NLJEdTq20IeksyP_kMH6Y

  142. 1020

    Phil – Your boy Trump may sue Miss Pennsylvania for calling the Miss USA pageant "fake and trashy"…..
    http://today.msnbc.msn.com/id/47702741/ns/today-style/t/trump-were-suing-miss-pennsylvania-over-claims/
     
    Surely you remember that one classic from (teen) pageants past…..
    http://www.youtube.com/watch?v=lj3iNxZ8Dww
     
    I like that one…. :)

  143. Rms5114

    Phil- Do you have a CRUS trade that you like? thanks.

  144. zeroxzero

    Deano:  Actually, I think the current President can give an inspirational speech.  What he can't do is lead.  Leadership isn't management —  management is taking a process where it needs to go, leadership is deciding where it should go, and, through persuasion and force [which are variants of the same thing] providing the impetus and energy is needs to get there, usually against formidable odds.
     
     Obama just doesn't have the right personality for it.  Intelligence is useful, but not at all essential, to effective leadership.  I have watched very effective leaders that were not terribly bright, who they knew they weren't, but unhesitatingly drew upon people that were intelligent to plot a course that could reach a desired goal.  Once that was established, a good leader is must be a strategist and tactician with a fine instinct for human strengths and weakness, and a kind of blind certainty that will not admit of defeat.  They are rare, and the democratic process serves them up only by accident.  I would name FDR, Churchill, DeGaulle,  Eisenhower, LBJ, Bush I and Clinton as effective leaders, whatever their respective foibles. Of course one can reach back farther, but their names are well known.  
     
    There's some possibility that Romney could work out reasonably well, but there's no way to know right now.  Let's hope so, because he's going to win.

  145. stjeanluc

    Portfolio Tracking / Peter – Not a problem for me, the template is set!

    And what happened, we mention strangles and suddenly you have 6 posts in one day! Was that the magic word?

  146. stjeanluc

    A QE driven bounce to our lines!

  147. stjeanluc

    Facebook is actually cheap compared to these winners…

    http://www.bespokeinvest.com/thinkbig/2012/6/6/companies-with-worse-valuations-than-facebook-fb.html

    LinkedIn (LNKD) has been a social media stock that many have contrasted Facebook (FB) with over the last two weeks.  This is because LinkedIn soared on the day of its IPO, and it has continued to trade higher ever since.  What hasn't been mentioned to go along with this, however, is that LNKD has a forward P/E of 120, which is nearly three times as high as Facebook's.  If Facebook had the same valuation as LNKD, it would be trading at $67.11.

  148. stjeanluc

    ISM full report

    http://www.bespokeinvest.com/thinkbig/2012/6/6/ism-services-vs-ism-manufacturing.html

    Lastly, combining the ISM Manufacturing and Non Manufacturing Indices and weighting them for their overall weight in the US economy (last line) shows that the pace of economic activity in May was the same as in April (53.7).  Therefore, according to the ISM reports, while economic activity in the US did not accelerate during the month of May, it did not slow either. 

    I guess we should feel lucky as comparable numbers in Europe are in the 40's!

  149. stjeanluc

    Another Ray Bradbury quote:

    I don’t believe in being serious about anything. I think life is too serious to be taken seriously.

    Good stuff…

  150. stjeanluc

    Martin Wolf at the FT is not optimistic:

    http://www.ft.com/intl/cms/s/0/74f3017e-ac15-11e1-a8a0-00144feabdc0.html#ixzz1x2DXwtjr

     

    How much pain can the countries under stress endure? Nobody knows. What would happen if a country left the eurozone? Nobody knows. Might even Germany consider exit? Nobody knows. What is the long-run strategy for exit from the crises? Nobody knows. Given such uncertainty, panic is, alas, rational. A fiat currency backed by heterogeneous sovereigns is irremediably fragile.

    Before now, I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate and failure to stay ahead of events. Perhaps the panic will vanish. But investors who are buying bonds at current rates are indicating a deep aversion to the downside risks. Policy makers must eliminate this panic, not stoke it.

    In the eurozone, they are failing to do so. If those with good credit refuse to support those under pressure, when the latter cannot save themselves, the system will surely perish. Nobody knows what damage this would do to the world economy. But who wants to find out?

    Emphasis mine!

  151. jfawcett

    Phil / TNA – On Monday you put out the TNA BCS 41/47.  As I mentioned I work during market hours so on Tuesday morning on my way out the door (premarket) I put in an advanced TOS '1st trigger sequence' order to fill the BCS.  I can control the entry using this method vs. the vertical entry that TOS allows for the BCS.  I filled the June 41 long call but never filled the 47 short call.  I let that ride into today.  OMG ..TNA popped 7.5%!… the 3.60 entry is almost a double!  Tomorrow will be a OCO bracket to get out of TNA before Ben speaks.  I should be able to preserve 85% – 100% on the trade.  This makes up for some losses on DIA calls that I was early on in by cash (aggressive) account.  For the income portfolio plays in my IRA's, doing very well… I do like collecting premium!  Well done and thanks!

  152. jabobeast

    Yelling is yelling more QE!!!
     
    http://www.cnbc.com/id/47714134

  153. jabobeast

    I meant Yellen ;-)

  154. crussell14

    Jon Corzine is ?the smartest guy I know in terms of the economy,? Vice President Joe Biden said not so long ago. President Obama praised Corzine as a key architect of the ?national recovery plan? he implemented after taking office back in 2009.
    Oops.
    Read more: http://www.foxnews.com/opinion/2012/06/06/jon-corzine-clueless-or-crook/#ixzz1x4p5aeYEhttp://www.foxnews.com/opinion/2012/06/06/jon-corzine-clueless-or-crook/

  155. kurtww

    Burr — that looks pretty good. That is pretty much the classic p&l curve for that kind of trade, and you can see the weakness with it. If the market trends up slow and steady (with a likely drop in IV) you may end up down on the trade. That happened at the beginning of the year and my trades did not do very well. If you think that is likely you can set the trade up more conservatively on the call side (sell a few less, or do a 10 point spread instead of 20). It brings in less credit, but that's OK if your primary goal is as an insurance play to the downside. The trade seems to work better if you do the put and the call side, like an iron condor. One variant I have wanted to test out but never gotten around to really testing is doing a front ratio on the call side and a back ratio on the put side. That would benefit from falling vols on the call side and rising vols on the put side. Peter — any thoughts on that style? Have you ever tried that?
    Anyway, look at that p&l if the market crashes and the vols spike up. One trade like that and I'd be happy for the year!  

  156. Peter D

    Burrben,
    Yup, that's the type of P/L profile for the trades.  I too got the terminology mixed up.  What we do is a Put Back Spread:
    https://www.thinkorswim.com/tos/displayPage.tos?webpage=lessonRatioBack

    That is there are more long puts at lower strikes than short puts.  Since there are more longs than shorts, increased volatility is good for the spreads, provided that the short strike is not overrun, which is a real weakness with the Put Back Spread.  We can see the huge spike of loss at the short strike at expiration, so we need to pick conservative strikes and make adjustments if the short strike is in any danger.
     
    kurt, please give example of your "front ratio on the call side and a back ratio on the put side" as I may get the shorts and longs mixed up!  My thought is that having more long puts than short puts are always helpful in a crash, so a strategy that follows this rule of thumb is good.

  157. Peter D

    stjean,
    Very cool, thank you for your help!
     
    pstas/stjean,
    Let's start the $500k portfolio tomorrow (with Portfolio Margin of course).  It's a bad time to start, compared to last Friday, but as with any income portfolios, we need to get the income no matter where the market is, right?  I'm going to be in a bunch of meetings tomorrow morning, so my post will be later in the day.  If I don't get to post, here is how we get the $5k (1%) for the next month:
    - Sell 20 RUT July 610 Put at $1.825, Buy 20 RUT July 580 Put at $0.90, netting $0.92, $1,840.  Initial Margin is $8,100 with PM, going up to $60,000 max.
    - Sell 20 RUT July 860 Call at $0.975, Buy 20 RUT July 880 Call at $0.425, netting $0.55, $1,100.  The combine RUT spreads initial margin is $15,000, going to $60,000 max.
     
    That's $2,940 for just over 6 weeks.  Now let's add SPX short strangle with a Put vertical, i.e. a "crazy play" (All July expiration):
    +7 SPX 1265 Put/-7 SPX 1260 Put/-7 SPX 1125 Put/- 7 SPX 1430 Call for a net $3.85 credit, $2,695 without commissions.  The value for stjeanluc's spreadsheet are $20.75/19.55/3.95/1.125.  Initial margin is $17,000, increasing to $81k if SPX drops to 1,120, or $123k if SPX jumps to 1,512.  We've used up $31,000 initial margin for RUT and SPX, and the margin may go up to $140,000 if the market drops 15%. 
     
    The SPX short strangle are "naked" without downside protection for illustrative purpose.  The total credit for SPX and RUT is $5,635.  If the SPX put vertical is ITM at expiration, we'll get 700 x 5 = $3,500 extra, making it $9,135 maximum profit.  Most of the shorts would go down to near zero quickly if they are still that far OTM in a few weeks.
     
    BTW, these short strangles and Back Spreads can take a while to fill, so the paper portfolio will often have better numbers than actual fills.  And if you follow this portfolio, please select different strikes, as we won't get fill if we all use the same strikes!
     
    Now we just sit back and see the trees grow, hopefully!  This is easy 90% of the time.  The 10% of the time when the market crashes or jumps that we need to make adjustments. Like barf said, we are expecting those difficult situations to come and will use our $360,000 remaining margin to make adjustments.  Note that we'll see paper loss if the market drops or jumps more than 5% within a week.  But the Theta decay is our friend and it would be able to bring the profit back as time goes by.

  158. neverworkagain

    PeterD:  I think everyone is excited to see the master at work with this virtual portfolio!  Your effort is much appreciated!

  159. kinkistyle

    China’s Easing Grip on Gas Opening Door to North America Exports

    "Chinese consumers may buy natural gas at more than five times current U.S. futures prices as the government eases control over domestic costs, opening the world’s biggest energy market to more overseas sellers."

  160. kinkistyle

    At least 30 vessels of unsold coal cargoes float off China's coast

     
    '"The situation is really very bad and is getting worse," one industry source said.

    A source from South Korea said he is surprised about the number of vessels that cannot discharge coal in various ports in China, saying he was previously aware that there were only 12 such vessels lying in wait.

    Chinese traders who bought and already paid for the coal from the international shippers and producers are now desperately trying to re-sell the cargoes to Chinese end-users or to other north Asian coal buyers whose company does not require a tender process before it can buy coal cargoes, the industry source said.'

  161. Phil

    Good morning!

    Not much exciting happening.  Asia up a point EXCEPT Shanghai, which is down 0.7%.  We know China's going to hit the fan and I'm worried that it's going to be sooner, rather than later.  This should be a huge story, but it's not but read between the lines and we're clearly in stage one of a cover-up:

     

    BEIJING—Beijing has curtailed access to information often used by investors and short sellers to evaluate Chinese companies, which could further cloud an often murky market for foreign investors.

    A Chinese government agency that compiles extensive Chinese corporate records has begun to withhold information that includes financial reports, shareholder changes and assets transfers, according to lawyers, investors and research companies.  "Last year and the year before, getting SAIC financial documents was basic and easy and a very fundamental part of our research," said Dan David, vice president of GeoInvesting LLC, an investment fund. "Over the last six months they got progressively harder to access."

    Europe is in a pretty good mood with Spanish Bond sales not failing (but expensive) and French Bond sales a big success at lower rates than last time.  Here's a very nice interactive graph from the WSJ to give an overview of the EU Economy.

    Oil tested $82.50 earlier and now $82.84 – I thought those USO puts were a no-brainer yesterday after that report but hard to say what will happen with Ben at 10.  

    Dollar down to 82.28, Euro $1.2577, Pound $1.5496, 79.46 Yen to the Dollar and EUR/CHF $1.2010

    Gold is $1,618, silver $29.23, copper $3.34, Nat gas back to $2.397 ahead of today's inventory and gasoline $2.67.  

    Huge data and Fed day (Bernanke at 10):

    Thursday's economic calendar:

    5:45 Fed’s Rosengren: ‘Global Outlook and Risks’

    8:30 Initial Jobless Claims

    10:00 Quarterly Services Report

    10:30 EIA Natural Gas Inventory

    11:00 Fed's Lockhart: U.S. Economy and Monetary Policy

    1:15 PM Fed's Kocherlakota: Monetary policy

    3:00 PM Consumer Credit

    3:30 PM Fed's Fisher: 'Implications of Renminbi Internationalization for the U.S. and Global Economy'

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet 

    2:53 AM Asian stocks continue to climb, mostly, as investors speculate about global stimulus measures. China is off, despite news that tighter bank capital rules won't go into effect until next year. Japan+1.2%. Hong Kong +0.8%. China -0.8%. India +0.6%.

    6:00 AM Overseas: Japan +1.2%. Hong Kong +0.8%. China -0.7%. India +1.2%. London +0.8%. Paris +0.6%. Frankfurt +0.5%.

    Is this a sucker's rally? Stocks have gained after breaking a minor head-and-shoulders pattern but the rebound will be short-lived, Art Cashin says: "I might be ready to start getting defensive as we walk into next week."

    As the S&P 500 plows back above its 200-day moving average, technical bulls once again are coming out of the woodwork. But, will this rally turn into something real or just peter out? Skeptics argue Europe is still a problem and the gains aren't sustainable. Dennis Gartman agrees, saying the recent bounce is going to be short lived. "Usually bottoms are not formed in a pattern of a 'V'… Usually you get a bounce, then the market goes back and tests its lows again and again. I'd have very little exposure to equities." - I think we can summarize that as "Cashy and Cautious!"

    Hiring Hiccup Sets Off Alarms in Lousy Recovery by Caroline Baum.

    In her speech last night at the Boston Economic Club, Fed Vice Chair Janet Yellen suggested the Fed may be close to taking more easing steps this month in response to ongoing housing problems, a weak jobs market and the escalating euro zone crisis. "There are a number of significant downside risks to the economic outlook," Yellen says, "Hence it may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest."

    Morgan Stanley(MS) Sees QE3 Rally Lasting Hours Not Weeks.

    Draghi Stresses Limits of ECB Tools as Pressures MountThe European Central Bank may be running out of options it can stomach. With the euro area assailed by spreading recession, financial-market instability and political impasse over the direction the single currency should take, ECB President Mario Draghi yesterday stressed the limitations of his current policy tools, from standard interest-rate cuts to bond-buying and liquidity injections. Moves such as quantitative easing or capping bond yields to calm markets remain taboo for the ECB, which says its main job is to ensure stable prices. “It’s clear that they are very low on, if not completely out of, ammunition,” said Nick Kounis, head of macro research at ABN Amro in Amsterdam. “There are options that would have a more significant effect, but they’re outside of the ECB’s comfort zone. There’s an element of helplessness.”

    EU Lenders Plan Relies on InvestorsThe European Union proposed legislation for dealing with failing banks that aims to shift the cost of future bank collapses away from taxpayers and onto investors. The plan, drafted by the European Commission, the EU's executive arm, is the latest effort to ensure that the massive government-funded bank bailouts of recent years aren't repeated. It includes a controversial idea that delayed the proposal for months: forcing bank shareholders and even bank creditors to absorb losses if a firm runs into trouble.

    The euro’s 'guilty men’ are now steering Europe to catastrophe. Remaining in the single currency is no longer a rational choice for many countries – but will its creators listen?

    Germany's five-year credit default swaps rose yesterday, exceeding Japan's for the first time in two years, according to CMA prices. Germany's CDS were at 104.94 bps yesterday, while Japan's were at 103.79. That's the first time Germany's were more expensive than Japan's since May 29, 2009.

    U.K. PMI Services comes in at 53.3 in May vs. 52.4 expected and 53.3 previous. Employment increased at a solid rate, despite a fall in confidence to a five-month low.

    Spain beats its auction target, selling €2.07B of bonds vs. an expected €1B-2B. Borrowing costs for 10-year bonds rose to an average yield of 6.04%, up from 5.74% in a previous sale.

    Meister Calls on Spain to Seek Aid Soon, Rheinische Post SaysMichael Meister, the deputy floor leader of German Chancellor Angela Merkel’s Christian Democratic Union party, urged Spain to seek aid from the European Financial Stability Facility as quickly as possible, Rheinische Post said. Every day that the Madrid government continues to wait “just makes the whole matter more expensive for all of us,” Meister said, according to an interview with the newspaper. If Spain doesn’t apply for aid soon, it will have to seek a bigger amount in a few weeks, Rheinische Post cited Meister as saying. 

    My Self-Esteem a Mess Is Spain Refrain for 4 Million Unemployed. Four years ago, Wendy Atkinson Navarro, 36, had a job, a husband and a home. Now, she is divorced, out of work and living with her mother near Madrid, a casualty of Spain's recession that has driven unemployment above 24 percent and is unnerving young people. "My self-esteem is a mess," Atkinson said. "My nephew is 15 years old, and the only difference between him and me is I have kids. That's how I feel."

    European banks under pressure are cutting their lending to municipalities. Since Europe's local governments carry out the majority of public infrastructure investments, the cash squeeze is directly limiting job creation and a possible source of economic growth.

    Seeking to tackle its high debt problem, Japan's top political parties have agreed to open talks on a controversial hike to the nation's consumption tax, a make-or-break issue for Prime Minister Yoshihiko Noda. Noda has vowed to pass the reforms in the current legislative session, with the current 5% consumption-tax rate to double by October 2015 in two stages. 

    "Unless you owned a company in Japan to see this up close and personal, you'd never have believed we'd be where we are today," says an insurance exec of the difficulties low long-term rates are posing for life insurers. Some firms are making adjustments, others (MET) shifting focus to emerging markets, and others (INGAV) looking to exit the market altogether.

    India's Economy: How Bad Is It? A 52-year-old handyman who has lived in New Delhi for 30 years, Ram Samujh has seen bad times before. But these days, as India faces an economic slowdown amid double-digit inflation, the future looks especially bleak.

    Chinese sovereign wealth fund CIC has scaled back its holdings of European stocks and bonds, and CIC Chairman Lou Jiwei says he sees mounting risks of a eurozone breakup. The remarks underscore China's dismay at how eurozone leaders are handling the crisis in China's largest export market.

    China's overseas investment surged in Q1 to $21.4B, more than double Y/Y, as state-owned companies snapped up energy- and resource-related assets around the globe. South America was the top destination for investment, at 43% of total foreign M&A activity by Chinese firms; Europe was second at 16%, including 83% of non-resource deals. 

    China delays tightening bank capital rules until next year, with new draft rules from the China Banking Regulatory Commission that seek to set "reasonable" schedules for banks to meet capital targets in a way that helps "maintain appropriate credit growth." Shares of Chinese banks climbed.

    China Rate Cut Would Be 'Wrong Move'. China cutting interest rates would be a "wrong move," 21st Century Business Herald said today in an editorial. A rate cut would deepen inflation expectations and cause banks to lose deposits that could be lent to support economic growth, according to the editorial. A lending rate cut would reduce lenders' net interest margins, increasing risk exposure, the editorial said. A cut wouldn't likely improve domestic demand or ease pressure on production overcapacity, according to the editorial.

    Carmakers Aggravate China Glut as Dealers StruggleChina’s biggest auto-dealer association said carmakers need to scale back their sales targets or sweeten incentives because the worsening glut of vehicles across the nation’s dealerships is unsustainable. Average inventory carried at Chinese dealerships bloated to a level exceeding two months of sales by the end of May, compared with more than 45 days at the end of April, Luo Lei, deputy secretary general of the state-backed China Automobile Dealers Association, said in an interview yesterday. That’s forcing dealers to deepen discounts and sell cars at a loss to meet mandatory sales targets set by automakers, he said. “Dealers can’t shoulder the burden anymore,” said Luo, whose association is authorized by the central government and represents 2,100 dealership groups. “Their backs are broken.”

    Small businesses are waiting longer for their big customers to pay, as many large corporations are trying to hold onto their cash as long as possible to bolster their own working capital. The trend is squeezing small companies that often have fewer resources to rely on during the wait and less access to credit.

    Federal officials are widening their probe into mortgage lenders to include potential violations of FHA program rules. If violations are discovered, banks could be forced to help cover some of FHA's losses. Sources say subpoenas were recently issued to lenders including MetLife (MET), SunTrust (STI) and U.S. Bancorp (USB).

    Saudi Arabia signals it's ready to rein in oil production after starting to scale back shipments and raising the selling price to Asia of its main crude grade. The Saudis have been pumping more than 9.5M bbl/day since June 2011, the longest stretch for at least 11 years, but having achieved their $100/bbl Brent target they'll need to defend it, analysts say.

    If sliding gasoline prices spoil your argument, then call it a jobs plan, as House Republicans unveil a broad energy bill that expedites permits and expands Alaska drilling leases. The bill has no chance of passing the Democrat-led Senate, but one piece might eventually become law: the Keystone oil pipeline (TRP). Proponents see the weak May jobs report as forcing Pres. Obama's hand.

    Copper Buyers Balk as Europe Crisis Unfolds, Top Producer SaysCodelco, the world’s largest copper producer, said buyers are delaying metal purchases amid concern that Europe’s debt crisis will slow global growth. Declining prices, including a 12 percent slump last month, reflect global demand that is falling short of Codelco’s estimated 3 to 3.5 percent annual growth rate, said Thomas Keller, the state-owned company’s chief executive officer. “Everybody is more cautious about making decisions both on the demand and supply side,” Keller said in an interview in Santiago yesterday. “The somewhat lower copper price these days is a reflection of that situation.”

    "Clearly we didn't succeed here" and we "owe the industry an apology," said Nasdaq OMX (NDAQ) CEO Robert Greifeld yesterday in reference to the botched Facebook debut. As compensation for the technical errors that plagued the IPO, Nasdaq will pay market makers and brokers $40M, partly in the form of credits for reduced trading costs. (previously)

    A short-seller agitating for positive change at a target company? In an odd twist, Green Mountain (GMCR) short-seller Daniel Yu of LongShortTrader joins other critics complaining of GMCR's poor sales forecasts, lack of explanations and poor cash flow management. He says he's been shorting the shares since it was $110, "but at this point it's not about the money, it's about the other people who are invested in it and are going to get hurt…I just want people to see what I'm seeing."

    MicrosoftMSFT) is in Serious Danger of Flying Straight into a Mountain With Windows 8.

    Nokia's (NOK) Lumia 900 is a "very decent seller" at Best Buy (BBY), claims mobile VP Scott Anderson, but it isn't selling nearly as well as some Android (GOOG) models. He adds pre-orders for Samsung's (SSNLF.PKGalaxy S III have exceeded expectations, and that HTC's EVO 4G LTE, which runs on Sprint's (S) network, has also seen strong pre-orders. Pac Crest recently claimed the Lumia 900 is doing good business.

    Apple's (AAPL) legal team is staying busy. The company is now seeking a U.S. ban on Samsung's (SSNLF.PK) flagship Galaxy S III, which is due to be sold by all 4 nationwide carriers. Apple claims the phone violates its widely-applicable phone number-linking patent (previous), and also a unified search patent. The efforts come as Samsung prepares to launch the S III in China with all 3 major carriers (CHLCHU, and CHA).

    The JOBS Act Offers Huge Opportunities to Hedge Fund Managers.

    The euro and the “hope” trade. (graphs) One other thing from Wednesday’s SocGen Hedge Fund Watch that’s worth noting, especially given the ECB’s decision to hold rates steady earlier today

  162. kinkistyle

    Ok, now it kind of feels like beating a dead horse…
     
    Another Railway Official Held For Graft Inquiry

     
    "The general manager of the contractor that built most of the country's high-speed network detained by police"

  163. Phil

    Cashy/Burr – Well, for an options portfolio, you should be around 1/2 cash at the best of times and currently, I'd say 80% cash is a good place to be – assuming you want to play in this crap market in the first place.  Frankly, 100% cash and on vacation is a perfectly valid stance too!  

    At the moment, we have been lucky enough to call a top and we are "poking" at what we HOPE (not a valid investing strategy) is a bottom but the SOLE premise to that is that Uncle Ben and the other Central Banksters will save us with MORE FREE MONEY.  Even if we are "saved" – it won't do crap to fix the overall global situation which will, one day, either blow up in our faces or dissolve in a massive wave of hyper-inflation.  

    Either way, there is not much to be missed by sitting on the sidelines and waiting for clarity.  No financial advisers will tell you this as they need the fees and no newletter writers will tell you this because they need the subscriptions and no TV people will tell you this as they need the viewers and not many people watch CNBC on the beach but I'll tell you this because I do this for fun more so than money and this is simply not a good time to be in the markets!  

    Can we make money trading the chop?  Of course we can – look at our trades of the last few weeks…  But those are not investments, those are trades like going long with ultras at a possible low (or I guess we could say probably low – given how well the lines are conforming to our Big Chart) and going short on oil on yesterday's misguided move up etc. – that's not investing though – never confuse investing with gambling!  

    LONG-term, we could go up or down 20% and it's a total coin flip because we need bullish action by the Central Banksters AND we need it to work AND we need our G20 leaders not to undo it all with misguided policy decisions based on their impression of the artificially stimulated economy.  That's a lot of conditions to move the market higher.  To move it lower – well, pretty much what we're doing now will work just fine…

  164. Phil

    Sorry Burr, cash/margin = same thing.  If you are in highly leveraged positions, you are making things more dangerous for a possible black swan which, as Peter points out, should just be called "swans" as I think we see massive market moves more often than we see actual swans of any color at this point (at least in my neighborhood).  

    Woops, and up goes the Futures on a China rate cut (0.25%) so another $100Bn worth of stimulus thrown on the Global fire buys us another 10 on the S&P – THANK YOU CHINA!!!  That's why we do like to gamble – we're pretty good gamblers sometimes!  

  165. pstas

    Peter- great job. Thanks. Should be fun.

  166. Phil

    Wow, you are getting great at teaching this stuff Peter!  

    Trump/1020 – Sounds like kind words to me.  I saw some of that because my Mom was watching it – nauseating…  That clip is both funny and tragic – how does she know how to breathe?  Good little clip of the various contestants' views on evolution - very scary stuff!  

    CRUS/Rms – I'm not a big fan of fabless operators but they seem to have a decent book and steady growth.  They certainly are not cheap at $28.50 and have been prone to many sharp pullbacks in the past so I wouldn't want to bet that this time is different for them.  If you want to establish a position, selling the 2014 $20 puts for $4 is a nice net $16 entry.  with the stock at $28.39, you can sell 2x of those and collect $8 rather than buy a single share at $28.39 and your worst case is you net an entry on 2 at $16 while your best case is CRUS doesn't fall below $20 (down 28%) and you collect $8, which is a 28% profit on the current price.  Meanwhile, TOS says the net margin on the short $20s is $2.15 so for net $4.30, you collect $8 in cash and make 200% on margin if CRUS manages not to be 28% worse than what you think is a good entry and, worst case, you own 2x at 44% off.  THAT's how I like to enter a stock!  

    Big Chart shaping up for a nice, potential V pattern – the kind we do get when there's intervention. 

    Ray Bradbury/StJ – I think possibly Stranger in a Strange Land may have been the single book that most influenced my thinking when I was younger.  My World view was formed looking at it from that outside perspective and Jubal reminded my of my Grandpa Max, who also liked to stay home and not be bothered but God help anyone who made him get up from his chair to have to fix something that was wrong in the World…

    Religion is a solace to many people and it is even conceivable that some religion, somewhere, really is Ultimate Truth. But in many cases, being religious is merely a form of conceit. The Bible Belt faith in which I was brought up encouraged me to think that I was better than the rest of the world; I was 'saved' and they were 'damned' — we were in a state of grace and the rest of the world were 'heathens' and by 'heathen' they meant such people as our brother Mahmoud. It meant that an ignorant, stupid lout who seldom bathed and planted his corn by the phase of the Moon could claim to know the final answers of the Universe. That entitled him to look down his nose at everybody else. Our hymn book was loaded with such arrogance — mindless, conceited, self-congratulation on how cozy we were with the Almighty and what a high opinion he had of us and us alone, and what hell everybody else was going to catch come Judgment Day. - SSL

    "…You know how Fair Witnesses behave."

    "Well . . . no, I don't. I've never had any dealings with Fair Witnesses."

    "So? Perhaps you weren't aware of it. Anne!"

    Anne was seated on the springboard; she turned her head. Jubal called out, "That new house on the far hilltop – can you see what color they've painted it?"

    Anne looked in the direction in which Jubal was pointing and answered, "It's white on this side." She did not inquire why Jubal had asked, nor make any comment.

    Jubal went on to Jill in normal tones. "You see? Anne is so thoroughly indoctrinated that it doesn't even occur to her to infer that the other side is probably white too. All the King's horses and all the King's men couldn't force her to commit herself as to the far side . . . unless she herself went around to the other side and looked – and even then she wouldn't assume that it stayed whatever color it might be after she left . . . because they might repaint it as soon as she turned her back.

    Wolf/StJ – Good read! 

    TNA/Jfaw – Better to be lucky than good sometimes!  

  167. stjeanluc

    Stranger / Phil – That was Heinlein… but these guys were close! And it was a great book! One of my favorites as well!

  168. jacalynm

    Good am Phil. Well Sensei, I put my time in and have been reading alot.  Was finally ready to pull trigger in Income Port on Monday and unfortuantely found out Scottrade does not allow put selling UGH.  It took till today to set up and fund my account and now everything you recommended (congratulations on awesome calls) is half off.  And that's not the kind od sale a girl wants!  I know your mantra is tomorrow is another day.  So do I stay in cash?  Thanks J

  169. Peter D

    pstas,
    There is no significant reason for a $30 put spread versus $20 call spread.  Basically, the short Put strike is 20% out of the money and the market is unlikely to get that low next month, so a $30 spread is comfortable, saving some commission costs (with less number of contracts).  On the call side, the premium curve is steep, and they are closer to the money, so a $20 gives a bit more upside protection.  Yeah, upside hedge sounds strange, but it can be helpful on a surge.

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