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Technical Tuesday – Red is Dead

OK, now we are pushing it.

Our danger zone is the bottom of the top of those "V" patterns that we formed in the early June dip.  Those lines must hold and they are roughly Dow 12,400, S&P 1,310, Nas 2,800, NYSE 7,450 and Russell 750 – all are holding so far but we really can't afford another red day here if we want to stay bullish.  

Although we reminded Members to watch our primary hedges (TZA and EDZ spreads) in the Morning Alert - both of them have bullish offsets (short BTU and USO puts) that will zero out the trade if the market recovers – so we do remain generally bullish as long as our levels hold (and we can stop out our short puts and go more bearish if our levels fail).  

Our other trades for the day were still bullish pokes from our very cashy positions – still hoping for the EU to lead us to the promised land – or at least give us a fix that gets us high for another day or two.  That's all we need man, just a fix, come on Angela – do us a solid!   

SPY DAILYWe added more CHK longs as they tested $17 again – that is one fun stock to trade if you have good range discipline!  TLT got high again so we went short on them in both of our $25,000 Portfolios and we reiterated Friday's AAPL play (see Stock World Weekly) and we went long on oil Futures at $78.50 for a lunch-time trade and got a quick .75 gain ($750 per contract) along with the Dow at 12,400, which gave us a quick 50 points but "just" $5 per penny per contract ($250) for that one.  

For the Futures-challenged, we added 20 USO July $29/30 bull call spreads at .52 to both our Aggressive and Regular $25,000 Portfolios and USO promptly shot up to $29.80, which is just lovely as we seek to turn $1,040 into $2,000 in 24 days with no margin required on the straight bull call spread.  FAS was also too tempting to turn down and we went with a more aggressive spread there and that's using margin to get a 500% return in 24 days if all goes well.  

So still bullish with what little cash we have in play.  At the start of the day, we had committed just $750 of our $25,000 Portfolio, which means we have TONS of firepower to grab bearish plays – IF WE LOSE FAITH.  But we still have faith – we still think our Global leaders are not going to repeat the mistakes of 2008 and they are not going to let the markets drop 20% through inaction but, if they do – oh boy are we going to make a fortune! 

UUP WEEKLYSpeaking of fortunes, SVU has been on quite a tear on buyout rumors and one of my favorite Stupid Options Trick is to sell a ton of long premium in a company that is going to be bought out because, even if the rumor just solidifies, the long premium gets crushed and we get to cash out early.  

SVU was one of our featured trades in the May 6th edition of Stock World Weekly and the trade idea at the time was buying the stock for $5.54 and selling the 2014 $5 puts and calls for $2.10 for a net $3.44/4.22 entry (we took the money and ran on that one when they popped and we went to cash).  The beauty of the trade is that, if SVU gets bought for $5 or more, you get your $5 early but, even if it simply holds $5 through 2014 – it's a very nice 45% gain anyway.    

Now SVU is at $5.11 and the higher VIX has made the 2014 $5 puts and calls $2.90 so net $2.21/3.61 is a better spread than we had at the time with a 126% potential pay-off.  We already have this trade in our Income Portfolio from when SVU was $4.45 on the 5th but the high VIX has pumped up the short puts and calls so still a great entry if you missed it earlier in the month.  

Those are the kind of trades we like to take in an uncertain market.  If SVU fails and gets put to us, we end up with 2x at $3.61 – that's 29% off the current price using our Buy/Write strategy feature in "How to Buy a Stock for a 15-20% Discount."  The beauty of trades like this is that they are self-hedging.  SVU can drop 10% and we still do very well, they can drop 20% and we're still not worried and 30% down is break-even on the trade (assuming we fail to adjust it) so we don't need to spend money covering them until/unless our worry lines do get broken.  It's the perfect way to play an uncertain market – other than cash, of course.

Don't knock cash - as you can see from Dave Fry's UUP chart, it's about 10% more valuable than it was last summer.  Can you say that about your stock portfolio?  Cash remains King as we wait for Europe to break one way or the other – as you can see, the whole World is testing their 50 dmas (and failing) but it takes more than a day or two to make a trend and we'll be just as skeptical of the run-up into Friday's close as we are about the 3-day sell-off that has sapped the bulls' wills:  

Even Wolfgang Schauble told Der Spiegel yesterday "We Certainly Don't Want to Divide Europe," which continues the long-standing policy of Germany to unite Europe that has been in place since 1936:  

The most important thing is that we create a fiscal union, one in which the nation states give up their jurisdiction in terms of fiscal policy. In addition, the problems of the Spanish financial institutions reveal, once again, that Europe would be better off with a bank union. We need a European supervisory authority, at least over the major lenders, which can then influence the banks directly. Then we can also save them with joint funds.

We should try to achieve all of this for the entire EU. Germany has always stood for an EU of the 27 countries. But in light of Britain's continued resistance to further integration steps, as we saw with the fiscal pact, there are limits to my optimism in this regard.

FXE WEEKLYThere are limits to our optimism as well and BoE Governor King has been laying the groundwork for further QE, telling Parliament he's "struck" by how much things have deteriorated in the last 6 weeks.  "I am pessimistic [about the eurozone outlook]. I am particularly concerned because over two years now we have seen the situation in the euro area get worse and the problem being pushed down the road," he said.

As I have been saying, this is like the end-game in chess and we are down to just a few possible moves – but I don't think the World leaders are ready to knock over their kings and resign just yet.  Slowly but surely, they are beginning to realize austerity is a dead end – something we discussed this morning in Member Chat as I proposed that hyper-inflation was certainly preferable to austerity:  

Death spiral – Without hyperinflation, we go down the drain.  The people who are "unrealistic" are the ones who think you can pay off $16Tn in debt by cutting spending (especially if you don't increase collections).  Cut spending and less money in circulation, less money in circulation means Governments have to offer more interest to attract money and then debt goes up anyway.  You can use austerity when you are 10% in debt, 20% in debt, even 30% in debt but when you are 100% of your GDP in debt – that ship has sailed long ago.  

Talk about kicking the can down the road – what's the austerity plan – 20 years of no spending until we pay off our debts?  Our Government (and Europe about the same) currently spends $3.2Tn a year and takes in $2.2Tn for a $1Tn annual deficit and we have $16Tn in debt.  So if we reduce spending by 66% and maintain collections (generally a mutually exclusive proposition) at the same level, then it will "only" take us 16 years to pay off the debt – if interest levels stay at 3% – otherwise we are totally screwed anyway.  

So we scrap the army and SS and Medicare (but keep collecting the money for SS and Medicare anyway because that's currently $800Bn a year (1/3) of the Government's revenues) and another $500Bn of discretionary spending and then we're down to spending just $1.2Tn a year and collecting $2.2Tn and THEN austerity works (as long as there are no natural disasters, attacks on our country, wars or infrastructure emergencies).  What a brilliant plan that is – so well thought out…

If we don't get our free money, look for one MoFo of a market withdrawal because we are hooked on stimulus and this is certainly no time to go cold turkey!  


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  1. 1020

    Good Morning!

  2. Gingbaum

    Phil,
    I have the SVU stock at $7.00, sold the 2013 $5 call for $2.25 and sold the $7.50 put for $1.75 – a trade you suggested back in January of this year.  Do you suggest rolling it or adjusting it in anyway given SVU has gone down significantly and the potential of a take over?
    Thoughts?
    Thanks

  3. stjeanluc

    Oil Lines

    R3 – 82.54
    R2 – 81.46
    R1 – 80.20
    PP – 79.12
    S1 – 77.86
    S2 – 76.78
    S3 – 75.52

  4. Gingbaum

    Phil,
    I was interested in potentially buying a silver bullion type ETF, any suggestions? I believe GLD is the gold one? Possibly ones that are optionable?

    Thanks

  5. Pharmboy

  6. wavecounter45

    Peter D or anyone – On your post yesterday on the SPX strangle, i.e. "This nets us $1,120 with $4,000 initial margin on PM and max margin of $35,000 on PM.
    What is "PM?"

  7. Savi

    wavecounter—pm=portfolio margin

  8. samz3700

    PM = portfolio margin – it's a more dynamic way to calculate margin requirements than a standard margin account allows for. you can check with your broker to see if they offer it – Interactive Brokers and Think or Swim both have this as an option - 
    If you go to the IB site, they offer detailed descriptions about how they calculate margin – don't know but sure TOS must offer an explanation as well. 

  9. jomptien

    Ging/silver SLV is symbol

  10. angelcur

     good chance  any bounce we get this morning will fail.  1325 looks like solid resistance….i am going to  take some shorts at that level…my peg on support is at 1295-1300.

  11. iTrade

    iflan – AAPL below $570 ! Just as you expected this 

  12. stjeanluc

  13. stjeanluc

  14. stjeanluc

  15. stjeanluc

  16. stjeanluc

    And here is the updated positions for Peter's Strangle portfolio since he made some adjustments yesterday:

  17. Pharmboy

    From Cobra…via SHJ…. the last five Tuesdays have closed higher, so it has been the most bullish day of the week recently.

  18. Phil

    Good morning!  

    Plenty of bullish bets on the board from yesterday so, once again in the morning Alert we will look at how to protect ourselves should things go sour.  

    Overall, the Dow is the outperformer of the quarter, running about 2% over the S&P and 4% over the other indexes (falling 4% less – they are all down 5-10%).  It will take one hell of a 4-day rally to get us even for the Q but we're still up about 2.5-5% for the year so far so I'm not sure the funds aren't willing to tank this quarter in order to have a major rally in the 2nd half. 

    Obviously, we're assuming the rally into Friday's close and our small portfolios are very bullish and our Income Portfolio is all bullish as we're using our 80%+ CASH positions as our hedge.  Keep in mind our levels are the bottoms of the tops of the V's at Dow 12,400, S&P 1,310, Nas 2,800, NYSE 7,450 and Russell 750 and we remain "constructively bullish" as long as we're forming a base above where we spiked down.  

    I still like MA ($433) puts for a breakdown, the Oct $335 puts are $5 and the $355 puts are $7.50 so a 50% possible gain on a $20 drop (5%) in MA.  THAT's LEVERAGE as you get a 10:1 payoff against an S&P drop (assuming MA moves with the S&P, of course) so you don't need to put a lot into a hedge like that to give yourself good coverage.  Going the other way, the $315 puts are $3.50 so a good risk ($1.50)/reward ($2.50) ratio on that strike and we expect the puts to hold up well through earnings.  I'm not gung-ho to take more bear bets with the Dow over 12,500 and the S&P over 1,310 – just something to keep an eye on.  The beauty of these is that, in a real crisis, MA can drop $100 and then you have a $25 put and a 500% gain and that's still "only" 25% down so it makes very nice catastrophic insurance.  

    A more aggressive hedge would be DXD (ultra-short Dow, now $55.36) Aug $51/55 bull call spread at $2, selling anything from our TWIL List to cover and, of course, CHK, BTU and HPQ are all in good spots at the moment with the CHK Aug $17 puts selling for $1.85, which nets you into DXD for just .15 on the $4 spread that's starting out 100% in the money

    We're not going to make much bullish progress if we can't get the Dollar below 82.50 (now 82.60).  The Euro is at $1.2489 and must get over $1.25, the Pound is happier at $1.562 so let's see which one moves towards which.  Only 79.46 Yen to the Dollar and that's got the Nikkei very upset at 8,690 and EUR/CHF is pinning 1.2009 again so $1.2389 IS where the Euro is WITH support – nasty!

    Speaking of nasty – NWS is flying today as Uncle Rupert is considering splitting the company.  That's a good lesson in never letting your feelings get in the way of making a profit.  I'm sure you remember last year the stock tanked during the scandal and no one was happier than me to see them twist in the wind but in July, the trade idea was the Jan 2012 $16/18 bull call spread at .70, which came in at $2 for a 185% gain on a simple spread.  I HATE NWS – but they got cheap and there was a bullish play to be made – end of story.  

    Shares of News Corp. (NWSA) move up 2.8% in premarket trading off of reports tipping off that the company may be split in two. Liberum Capital's Ian Whittaker speculates Rupert Murdoch'smotivation behind a potential spinoff of the company's publishing division is that it would enable a freed-up News Corp. to make another run at British Sky Broadcasting (BSYBY.PK). 

    Fox (NWS +6.5%) looks set to get a little bang for the buckfrom James Cameron as the Avatar director says he will film three sequels to the blockbuster all at once starting this fall. The first film in the series generated an all-time global box office record of $2.782B.

    Data not very sexy but so what – it's bailout or no bailout and everything else is just noise.  

    At the open: Dow +0.23% to 12531. S&P +0.26% to 1317. Nasdaq +0.35% to 2846.

    Treasurys: 30-year -0.42%. 10-yr -0.21%. 5-yr -0.09%.

    Commodities: Crude +0.19% to $79.36. Gold -0.67% to $1577.75.

    Currencies: Euro -0.2% vs. dollar. Yen -0.25%. Pound -0.18%.

    10:00 AM On the hour: Dow +0.08%. 10-yr -0.26%. Euro -0.15% vs. dollar. Crude +0.19% to $79.36. Gold -0.71% to $1577.05.

    Market preview: Shares are set to rebound from their losses yesterday, with S&P futures +0.1%, although EU stocks are mixed as Spanish and Italian debt yields again surge in auctions. New Corp +6.5% on a WSJ report that the company may split in two, while Apollo is +5.9% following its earnings beat. Later: Consumer Confidence, Richmond Fed Mfg.

    For all the talk about a flight to safe assets, Spanish shares (and Europe in general), and emerging market debt lead the global return scorecard thus far this month. In the negative column are Treasurys, Bunds, and the greenback.

    Apr S&P Case-Shiller Home Price Index: 0.7%M/M vs. 0.4 expected, 0.1% prior. -1.9% Y/Y vs. -2.3% expected, -2.6% prior.

    More on Case-Shiller: The increase in April home prices comes after 7 consecutive months of declines, with 19 out of 20 tracked cities in the green. Spring selling season? Maybe, says S&P's David Blitzer, but he notes the seasonally adjusted data were also positive (though less so). (full report, .pdf

    June Consumer Confidence: 62.0 vs. 63.0 expected, 64.4 (revised from 64.9) prior.

    More on Consumer Confidence: It's the 4th decline in a row for the index, which now stands at its lowest level since January (expectations at lowest level since November). "The failure of Bernanke's 'wealth effect,'" says Not Jim Cramer, noting the divergence since QE began between consumer confidence and stock prices.

    May. Richmond Fed Mfg. Survey: -7, to 3 (above 0 = growth)

    Redbook Chain Store Sales: +2.3% Y/Y vs. +2.4% prior week. Warm weather led to decline in sales. Inventories at some retailers are slightly higher than planned.

    ICSC Retail Store Sales: 2.0% W/W, vs. 0.0% last week.+2.7% Y/Y, vs. +3.6% last week.

    "Three words to define eurozone: Declining, whining, and nein-ing," writes The Globe and Mail's Michael Babad.

    Spain faces "bailout creep," the result of rescue loans getting senior status over private purchases on Spanish bonds (note the sharp rise in Spanish yields since the early June bailout announcement). Unless Germany (along with Finland and the Netherlands) relents, look for private money to continue to exit the paper. 

    Spain's borrowing costs again soar as the government auctions €3.08B in short-term bills, which was above its target of €2B-€3B. The Treasury sold €1.6B of 3-month paper at a yield of 2.36%, up from 0.85% in May, while the bid-to-cover ratio fell to 2.6 from 4. Spain also auctioned €1.48B of 6-month bills with a yield of 3.24% vs. 1.74% and a bid-to-cover ratio of 2.8 vs. 4.3. 

    China scraps much talked-about plans to let local governments directly issue bonds over worries it could aggravate an already-problematic debt problem. Unable to raise funds in the bond market, localities for years have set up thousands of opaque financing vehicles whose debt now totals about 27% of Chinese GDP. - Where's the Kaboom?

    Morgan Stanley warns that prices for premium automobiles are falling lower in China as manufacturers work to meet volume goals. Though the data isn't firm yet, the pricing drops could be enough to effectuate cuts in guidance. On watch: Chrysler (FIATY.PK), BMW (BAMXY.PK), Ford (F), and General Motors (GM).

    Macau gambling stocks slide lower in Hong Kong trading off of concerns kicked up by a report that new visa restrictions could be slapped on Chinese national traveling to Macau. Analysts stateside see the report as unsourced and don't expect any more collateral damage unless the Chinese government issues something official. Premarket: LVS -0.6%WYNN -0.8%MGM +0.7%MPEL +0.1%.

    More on JPMorgan's (JPMupgrade from Goldman: The Bank of Dimon is expected to earn $5.32/share in 2013, writes Eddy Elfenbein, meaning EPS could be higher next year than it was in 2006 and 2007 when the stock traded for more than $53 (yesterday's close $35.52).

    Drill baby, drill:  New drilling techniques will turn the U.S. into the world’s second-largest oil producer, according to a new report by former Eni exec Leonardo Maugeri. “The shale/tight oil boom [in the U.S.] is not a temporary bubble, but the most important revolution in the oil sector in decades,” though it won’t insulate the U.S. from global price swings in the oil market or Middle East problems. 

    You're welcome 1020!  James River Coal (JRCC-5.8% premarket following yesterday's 9.9% swoon after S&P cut its corporate credit rating one notch further into junk territory, expecting profits and revenues in 2012 and 2013 to come in lower than forecast.

    You're welcome lots of people:  Tesla Motors (TSLA) trades 4.4% lower in early action despite positive critical reviews for the Model S and rah-rah comments streaming out from Wall Street. The price action on TSLA has the large short interest held on the stock as a major backdrop.

    Barclays analyst Meredith Adler still sees Supervalu (SVU) as the most attractive buyout target in the sector despite its recent runup in shares. Her analysis suggests that a buyer could snap up Supervalu at over $6 a share and still earn a 40% return even in the face of sluggish same-store sales at the grocery store chain.

     

  19. scottmi

    HPQ – Jan 14 $ 20 puts.. selling for 4.35

  20. jerconn

    Pharm – what are your thoughts on some VVUS puts?

  21. 1020

    Phil/the coal hole     I should have taken the advice…… :)

  22. Gingbaum

    Thanks jomptien

  23. Phil

    SVU/Ging – The danger is they get bought for less than $7.50 and it's put to you.  As I said above, the opportunity is to sell premium and the 2014 $5 puts are $1.70, so I'd certainly do that roll to 1x – just to recover your loss – or to 2x if you are willing to risk a 2x assignment at net about $4.15 (on the put side only).  Same goes for the calls, you can roll to the 2014 $5s at $1.25 and pick up .45 and that drops your long side entry to $4.30 and then just hope they get called away at $5 sooner rather than later.  

    If you want to go for it with SVU, you can cash the stock and pick up the 2014 $3/5 bull call spread at $1.05 and sell the $3 puts for .70 for net .35 on the $2 spread that has a chance of an early call away for a 471% gain on cash and the worst case is owning SVU at net $3.35 and the margin, according to TOS is just .57 – so a nice return on margin – even if you do end up having to hold it.    

    Silver/Ging – If you want to play a QE pop, how about AGQ July $42 calls at .80, selling the $32 puts for .65 for net .15 with AGQ at $37.35.  Silver can pop to $30 on some QE and that's 10% and that's 20% on AGQ to around $45 – that would be a very nice pay-off and the puts are very rollable if you REALLY like silver.  When AGQ was $38.25 in December – they popped to $60 by the end of Jan!  

    Great call on bounce failure Angel! 

    TASR marches on – $5.40.  Lots of people stocking up on riot gear I imagine…

    HPQ/Scott – Priced like they are RIMM.  

    Coal/1020 – Gotta go with the top tiers in commodities.   They may not be as exciting on way down but they are the ones that M&A all those little guys when things get rough.  

  24. 1020

    TASR – The New American Fashion Accessory….
     
    http://www.taser.com/products/self-defense-products/taser-c2

  25. angelcur

    s(pain) 10y yld back to 6.84%..if no large can kicker materializes by fri…that blows through 7% and market freaks

  26. rkyroma

    My wife says she would feel bad shooting someone, but would love to tase them.  She has a metallic pink C2.  It is quite stylish.  

  27. angelcur

    rkyroma:ok whats a c2?.(.i wouldnt care except the metallic pink part hooked me)

  28. 1020

    Stand Your Ground – Makes more sense to encourage the use of TASR than SWHC…..
     
    At least a person can survive if poor judgement was used…. (read:FLORIDA)

  29. 1020

    rkyroma – Nice!  :)

  30. rkyroma

    angelcur – It's this one.
    http://goo.gl/46bi2

  31. 1020

    A little humor from the web….
     
    Economist's joke: German econ adviser Lauk:Cyprus should not be given EU presidency that's like "the dog being put in charge of the sausages"!
     
    Sausage production = Euro crisis
     
    :)

  32. revtodd64

      TASR – Just confiscated one of those from a resident.  Nasty little bugger.  

  33. angelcur

    Wow very fancy looking device..could be confused for a monkey spanking contraption

  34. rainman

    TASR — Problem is that tasered people can sue for emotional distress (or whatever else) while dead people don't talk. 

  35. kevinb63v

    Phil,
      Back in Feb I did a buy/write on SVU (bought at $6.99, selling the JAN 14 $7 puts and calls for $3.60 for net $3.39/5.19). In light of the possible buyout, should I make some adjustment?

  36. jasu1

    Phil,
    The FAS trade from yesterday: July80/85BCS with a July65 Put still  a viable trade for net $.55?
    Thank you

  37. Pharmboy

    VVUS..well, can't decide.  My Spread did not fill a while ago, so I am looking at the Aug/Jul $18 Put calendar for 24c.

  38. rexx

    Old economists joke, updated – Merkel and Hollande make a visit to the fortune teller.  "If we create a central fiscal authority, will we save the Euro? Will there still be a Euro in 10 years
    "Yes" says the psychic
    Hollande asks – "What will the French Unemployment rate be in 10 years"
    "8%" says the psychic, "not bad"
    "Wonderful" says Merkel " Just one more question – how much will a loaf of bread cost?"
    The seer says – "Not much, only 2000 Euros"

  39. 1020

    angelcur – monkey spank?  :)

  40. angelcur

    VIBRATOR

  41. 1020

    My favorite Merkel joke:
     
    Angela Merkel at Greek immigration: Passport Officer: "Name?" "Merkel." "Occupation?" "No, just visiting."

     
    :)

  42. 1020

    angelcur – My best Edith Bunker impersonation:  Ohhhh…..

  43. revtodd64

    Rainman – Very good point.  I had a client who had a seizure while getting into an ambulance.  A rookie police officer flipped out, thought  the client was attacking the paramedics and tasered the guy – TWICE!  It looks like a case will be million dollar lawsuit against the police department, but a wrongful death suit by the family would be far worse for all concerned.

  44. angelcur

    1020…imagine archie's reaction!

  45. Phil

    TASR/1020 – That new C2 looks nice!  Designer colors and everything.   They are getting closer and closer to the classic Phaser design.  

    7%/Angel – Yep, that's the general freak-out line although very silly since the only reason it's below 7% is a lot of artificial manipulation.  That's like saying a 5-foot guy can play center for the Knicks because he's 7-foot tall when he's on another guys shoulders – at some point the guy's going to have to play by himself.  

    TASR/Rky – That's the problem – it's very, very tempting to zap people.  Kind of like original Star Trek, where they pretty much stun everyone they meet.  

    SVU/Kevin – Same as above comment to Ging.  

    FAS/Jasu – Of course.  

    LOL 1020 – that one I like!  

    Oil (/CL) coming off $78.50 again for those who missed the pop yesterday.  Dow coming off 12,400 again all hitting lows (again) as the EU closes so no reason not to expect more of the same (but tight stops if we don't).  

  46. angelcur

    the only "solution" the market thinks there is to eurozone crisis is Germany sharing debt…merkel just shot that down completely and market barely down….ha! discounting mechanism is soooo broken…. merkel "no shared liability for eurozone debt in my lifetime"
     we should be down 200 on that!…merkel "no shared liability for eurozone debt in my lifetime"

  47. angelcur

    given how the bankers have been would you make a statement like" not in my lifetime"?

  48. Pharmboy

    VVUS calendar went through for 30c.  C if U all can do better IF U want to play with me?

  49. zeroxzero

    Phil:  HPQ — why are they not RIMM?  Now that MSFT is making its own device[s], it seems MSFT's prospects are even dimmer than their CEO.  I know you have a good reason for thinking so, I just can't see it myself.

  50. angelcur

    monti threatens to quit..tantrums now being strategically implemented to save europe…

  51. angelcur

    FOLLOW UP: What Merkel actually said: Europe will have no shared TOTAL liability for debt as long as she lives… Still a pretty firm "no".
    Worth bearing in mind who Merkel was speaking to, a meeting of her own party. Maybe she'll nuance it at the summit. 

  52. rkyroma

    So now that the bad news out of Europe is outpacing the good rumors, are we back to the old pattern of going up after EU market close every day?

  53. stjeanluc

    HPQ / Zero – The problem I see with HPQ is that it seems that they have not yet decided on a long term strategy. Last year they were ready to get out of the PC business and then Meg came on board (on a temporary basis!) and they still have not clarified what they will do with that. It's not making money and even the printer business is seeing margin compression. They still have some 'splaining to do!

    As far as MSFT is concern, I believe they are doing much better than could be expected with Ballmer in charge. Their Xbox business is doing great and they look poised to do well in the family room with new devices! And Windows is going through a refresh this year. Yes, they have missed the boat in the mobile business, but it's not over yet. And they have tons of cash….

  54. angelcur

     i genuinely think germany could say they are leaving the euro…and if the euro rose…stocks would rise….every computer in the world seems to only follow the euro in order to know when to buy stocks…. how can these funds ever hope to outperform over an extended period of time

  55. stjeanluc

    It's actually interesting Angel that the only country that truly benefited (I mean in a durable way) from the euro (Germany) would be one to leave now…

  56. angelcur

    STJEAN:..germany is merely acting like an investment banker..they facilitated a series of transactions they made a bundle all costs were born by the clients and its over..quite brilliant as you pointed out last night they know WHAT they are they just don't understand that what they are DOING is going to lead to a massive put against the continued rule of the elite in europe…and that's the least impactful aspect of this

  57. Phil

    Merkel – WTF?  Is she short the market? 

     

    (Reuters) – Germany's Angela Merkel was quoted as telling a meeting of one of the parties in her coalition on Tuesday that Europe would not have shared total debt liability "as long as I live".

    The chancellor said there would be no shared liability of debt in Germanyeither – after her government agreed plans with federal states to issue joint "Deutschland bonds" – in comments reported by participants in a meeting with the Free Democrats (FDP), junior partners in her centre-right coalition.

    11:00 AM On the hour: Dow -0.15%. 10-yr -0.14%. Euro -0.27% vs. dollar. Crude -0.3% to $78.97. Gold -1.1% to $1570.95.

    11:35 AM European shares close mixed in quiet action 2 days ahead of another summit. Stoxx 50 flat, Germany +0.2%, France -0.2%, Italy-0.8%, Spain -1.%, U.K. -0.1%. The euro -0.3% to $1.2464.

    12:00 PM On the hour: Dow +0.01%. 10-yr -0.07%. Euro -0.26% vs. dollar. Crude -0.5% to $78.81. Gold -0.95% to $1573.25

    Princeton’s Blinder Says Fed Has Weak Weapons for Growth. Princeton University economist Alan Blinder said remaining options for Federal Reserve policy probably won’t provide a powerful boost to the U.S. economy. “The basic problem for the Fed is it’s used all the heavy artillery a long time ago and it’s down to relatively weak weapons,” Blinder, a former Fed vice chairman, said in an interview today on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. “Even a full-scale QE3 in mortgage-backed securities is not that powerful a weapon these days with mortgage rates as low as they are” and impediments to the market, including borrowers who can’t refinance because their mortgage is larger than their home’s value, he said

    Biderman On The Bernanke Put, Black Swans, And The Failure Of 'Perceived Truths'.

    Time to Sell Treasurys? (WSJ)

    With No Vote, Taxpayers Stuck With Tab on Bonds (NYT)

    Asset class correlations, rather than the VIX, have recently done a better job warning of upcoming turbulence, writes Nicholas Colas. Right now, S&P industry correlations are running at 88%, up from 75% in February, he says – "a very visible warning flare" for now, but a contrarian buy signal once it gets into the mid-90s (like last fall).

    Barclays says $8.2 bln Pulled from Commodities in May.

    Nervous Investors Fill Swiss Safes With Cash, Gold (Reuters)

    Moody's Warns on Canadian Mortgage DebtThe federal government’s attempt to cool the housing market “may have come too late” to prevent a harsh landing for residential real estate, Moody’s Investors Service is warning. After Finance Minister Jim Flaherty announced last week that Ottawa is tightening the rules on government-backed mortgages to keep the housing market from overheating, Moody’s said it is concerned the efforts may not be enough. High levels of household debt in Canada have left consumers with little flexibility to adapt to shifting markets, the credit rating agency said.

    June State Street Investor Confidence Index: 93.5, up from May's 86.5, hitting its highest level this year. Regional breakdown: North America +5.7 to 93.8, Europe +4.5 to 102.5, Asia-Pacific +1 to 90.4.

    More on State Street: despite the rise, the main index remains well below the neutral level of 100. Institutions began purchasing equities in mid-June at "a pace not seen for almost two years," with the buying "relatively broad-based." The appetite for stocks is strongest among the Europeans, which may say more about the their euro concerns than about hopes of high returns.

    Weber Sees Euro Zone Surviving Crisis IntactThis week's long-anticipated European Union summit will fail to deliver a lasting solution to the euro-zone's economic and financial woes, according to former German central banker Axel Weber. In an interview with The Wall Street Journal, Mr. Weber, a former president of the Deutsche Bundesbank and former member of the European Central Bank's governing council, tamped expectations among some investors of a decisive deal at the meeting of European leaders Thursday and Friday in Brussels. "This is another policy meeting," Mr. Weber, who is now chairman of the Swiss bankUBS AG, said.

    EU Could Rewrite Eurozone Budgets. The European Union would gain far-reaching powers to rewrite national budgets for eurozone countries that breach debt and deficit rules under proposals likely to be discussed at a summit this week, according to a draft report seen by the Financial Times. The proposals are part of an ambitious plan to turn the eurozone into a closer fiscal union, giving Brussels more powers to serve like a finance ministry for all 17 members of the currency union. They are contained in a report to be presented at the summit, which will also outline plans for a banking union and political union.

    Heaped atop already announced tax hikes for businesses across the country, the French government announces a 2% increasein the minimum wage. The minimum wage vs. inflation in France over the past 2 decades; it's not a fair fight – let's hope productivity has made up the difference.

    Moody’s Downgrades 28 Spanish Banks on Sovereign RiskBanco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s largest lenders, were downgraded by Moody’s Investors Service because of the country’s sovereign debt and souring real-estate loans. At least a dozen lenders were lowered to junk status, Moody’s said yesterday in a statement.

    German Lawmakers to Meet in July on Spain, Rheinische Post SaysGerman lawmakers will probably extend their current session into July to vote on Spain’s request for European Union aid to its banks, the Rheinische Post said, citing Hermann Otto Solms, the deputy president of the lower house of parliament, or Bundestag. 

    China’s Economy Needs ‘Structural Change,’ Hang Lung Says (Bloomberg)

    Chinese Data Mask Depth of Slowdown, Executives Say (NYT)

    The New Egyptian President Reportedly Said 'Jihad Is Our Path And Death In The Name Of Allah Is Our Goal'.

    With large banks set to submit their "living wills" – plans for how they could be liquidated in the next crisis – FDIC vice-chair Thomas Hoenig isn't optimistic this vaunted new regulation will end TBTF. They remain too big and too complex, and exert too great an influence on the economy, he says. 

    Members of Congress trade in companies while making laws that affect those same firms (Washington Post)

    Nov. 9, 1999: Robert Rubin Rewrites the Rules – Prescient! (MoJo)

    The Battle for the Soul of Occupy Wall Street (Rolling Stone)

    Middle class could face higher taxes under Republican plan, analysis finds (Washington Post)

    Shipping Bears Ascendant as Fleet Growth Swamps Cargoes: FreightShipping analysts are getting more bearish on the outlook for rates to haul iron ore and coal as China, the biggest consumer of both commodities, grows at the slowest pace in three years at a time of record fleet expansion. Capesizes, each holding about 180,000 metric tons of cargo, will earn an average of $11,709 a day in 2012, the lowest in at least 14 years, the median of 10 analyst estimates compiled by Bloomberg shows. They predicted $15,000 in a December survey. The fleet will expand 13 percent this year, compared with a 4 percent advance in cargo volumes, according to London-based Clarkson Plc (CKN), the world’s biggest shipbroker.

    As the world's largest consumer good producer, Procter & Gamble (PG +0.1%) has felt some of the sharpest stings from foreign exchange fluctuations as investors flee the BRIC markets where P&G sales thrive. Though the company employs hedging strategies, it has already reduced 2013 earnings growth targets due to the issue, and many traders warn that key currencies will weaken even further.

    BRICs Biggest Currency Depreciation Since 1998 to Worsen (Bloomberg)

    publicity stunt by McDonald's (MCD +0.1%) to temporarily open its largest restaurant ever in London as the hype over the Summer Olympic starts up backfires to a degree when local official complain over the company's ties to obesity issues at an event that stresses physical achievements. The company has defended itself by pointing to healthier options on its menu and asking rhetorically why beer companies are seemingly given a pass.

    Royal Dutch Shell (RDS.ARDS.Bwill begin drilling off Alaska’s north coast in Q3, Interior Secretary Ken Salazar says in outlining U.S. plans to advance Arctic energy production. Shell is awaiting U.S. approval of the final permit to develop leases bought in 2005 and 2008; COP and STO also have won Arctic rights and plan to join Shell in the area last explored in the early 1990s.

    LDK Solar (LDK -8.4%) slides towards its all-time lows after badly missing Q1 estimates and issuing bleak guidance thanks to the solar industry's overcapacity and pricing issues. LDK expects Q2 revenue of $220M-$270M ($370.4M consensus), and 2012 revenue of $1.5B-$2B ($2.07B consensus). Moreover, the company has a history of being too optimistic with full-year forecasts. Other solar names trading lower: YGE -4.6%STP -3.9%SPWR -2.7%. (PR

    In addition to LDK Solar's poor Q1 report, Yingli (YGE-5.3%) is getting stung by a downgrade to Sell from Goldman's Amy Song, who declares the ugly down-cycle faced by Chinese solar names to be the result of a "vicious circle" of government-supported expansion, international dumping, foreign tariffs, domestic dumping, and further expansion. Song doesn't see crashing polysilicon prices bottoming until late 2012/early 2013, and expects module prices to remain pressured in 2013.

    Facebook is trying to hijack your email address (CNN/Money)

    In-line with an earlier note, William Blair's Anil Doradia claims Motorola's (GOOG) Droid RAZR MAXX outsold the iPhone at Verizon Wireless (VZVOD) in June, thanks to Big Red's efforts to promote 4G device sales. The next iPhone (AAPL) is expected to support 4G, and could lead to a change-of-heart at Verizon. Meanwhile, a T-Mobile (DTEGY.PK) exec has reportedly told employees the struggling carrier won't receive the iPhone this year.

    The Verge's review of Nokia's (NOK808 PureView phonedeclares its camera, replete with a 41MP sensor, to be "astounding, breathtaking, stupefying." It adds, "this phone’s image quality is so far ahead of the competition that it really has no competition." It isn't crazy about the phone otherwise – the 808 runs Symbian, and has a mediocre display – but the camera comments could bode well for upcoming Windows Phone (MSFT) devices that are expected to contain PureView tech

    The patent system is in crisis, and it endangers the future of software development in the United States. Let’s create a system that defends innovation, instead of hindering it. (Defend Innovation)

    Forget Edison: This is How History’s Greatest Inventions Really Happened (The Atlantic)

    Blade Runner: Which predictions have come true? (BBC News)

    What facts about the United States do foreigners not believe until they come to America? (Quora)

  58. rainman

    rev / TASR — Ah, but would the officer really have shot the victim if he didn't have a taser?  Phil articulates the point better than I did -- that it's very tempting to zap people that you wouldn't normally shoot.

  59. boltdude

    Phil / BTU – getting pummeled again today, down around 20% just in the last month.  I'm short September $22 puts, sold for $2.25, now around $3, so down roughly 20%.  Add, adjust or leave them alone?

  60. Phil

    Oh, I forgot I have to leave at 2 today for a meeting!  Hopefully not too much excitement into the close.  

    HPQ/ZZ – Totally different company.  HPQ is massive and diversified, RIMM is pretty much a one-trick pony and that trick isn't working too well lately.  

    Monti/Angel – The other day he said if the crisis isn't solved this week, Europe is doomed.  

    Pattern/Rky – That would be nice as it's so profitable to follow (Oil already $79, Dow 12,456) – we can just do those two trades every day and be very happy, right?  

    Now we hit upside resistance at 12,550, 1,320, 2,850, 7,500 and 765 – between those and our downside lines we will have a breakout at some point.  

    HPQ/StJ – Since Meg is very much a "listen to the customer" kind of person – I'd say that's what she has been doing so far and they will come out with a series of major initiatives once she gets a clear picture of what people want.  

  61. zeroxzero

    Germany appears to be in full "take the money and run" mode.  No one had predicted this.  It's rational, viewed narrowly.   Abandoning the Peripherals to their fate would be a "soft Blitzkreig", and it's arguable that it would be the best thing for the Peripherals in the long run.  Cui bono?  That's interesting.  Returning to a lira and peseta would undoubtedly trigger a massive default on their Euro-denominated debt.  It would be "payback" for Germany's exploitative, decade-long monetary maneuver.  And the dollar rally would move at light speed.  Jeez, I hope Angela was just kidding!

  62. stjeanluc

    Taxes / Phil – Thanks for the WaPo link. I guess the way to look at it from the GOP point of view is that tax rates are lower (in effect, they can say they are not raising taxes), they are merely closing down deductions:

     

    So although households earning $100,000 to $200,000 a year would save about $7,000 from the lower tax rates in the GOP plan, those savings would be swamped by eliminating major deductions, according to the report by the Democratically controlled congressional Joint Economic Committee.

    The net result: Married couples in that income range would pay an additional $2,700 annually to the Internal Revenue Service, on top of the tax increases that are scheduled to hit every American household when the George W. Bush-era cuts expire at the end of the year.

    Households earning more than $1 million a year, meanwhile, could see a net tax cut of about $300,000 annually.

    It's really not their fault that they hit the middle class harder. I would say, more a feature than a bug though! Them breaks!

  63. stjeanluc

    Euro debt / Zero – You wonder what will happen to the people in Spain, Greece and Italy who have their mortgages in euro if they were to leave the euro-zone. If you are in Spain, you could gamble and bet that they will all default and load up on debt now, but seems risky!

  64. stjeanluc

    Our housing bubbles looks like a small one…

    http://www.motherjones.com/kevin-drum/2012/06/norway-gets-ready-relive-past

    You can say all the usual things about this, but what's most interesting from the "this time is different" perspective is that Norway hasalready had a gigantic housing bubble. Not the one a century ago in 1890, but the one a mere 20 years ago that led to a banking crisis starting in 1988. It's the red oval in the chart on the right, and even though it looks like a blip compared to the current bubble, it was anything but. It led to the collapse of Norway's banking sector, an all but total collapse of the housing market in Oslo, a taxpayer-led bailout, and Norway's exit from the ECU (the precursor to the euro).

    It's just incredible how history repeats itself and it seems that we repeat our errors even faster. Is that Moore's law at work?

  65. iTrade

    Phil how do you like selling the Jan 2014 BTU $18 Puts for $4.20 ?
        – that's $13.80 if assigned, that's nearly 30% below this price

  66. newt

    FB- any plays on this stock

  67. revtodd64

    Rain – good question.  I don't have an easy answer.  We regularly call the police at the shelter and very few situations escalate to weapons of any kind.  I think police departments have strict protocols on taser use.  I can think of three situations where people were taken out of here with tasers, and it was certainly much easier than using either clubs or guns.  Any weapon can be misused, even a well-trained fist.  For most police business not gang related, tasers seem effective with less risk.  In the end, law suits like to one pressed by our former client will decide these things.

  68. livingfull

    Re/Death spiral.   If hyper inflation is a possibility, is hyper stagflation?  Or is that from the Yogi Berra School of Economics?

  69. Amalfi

    Newt / FB – Cody Willard is bullish. Not that I'm giving good advice. lol. FB has been moving up though.

  70. terrapin22

    FB – Cody was bullish at 26 and stock is up ~30% and his call options up around 100% or so he says.  i'm not a subscriber.  sounds like he is holding on for now.  he should take the money and run!!

  71. Pharmboy

    livingful – hyperstagflation – yes.  It's called bullets, smokes and alcohol.

  72. boltdude

    Phil / WFR – considering WFR's strong chart correlation with LDK over the years, WFR is showing relative strength in the face of LDK's beat-down today.  Is the worst already baked into WFR?  Would you be looking to take profits, or stay the course?  I am short July $2 puts (sold for .33, currently at .15).

  73. Phil

    BTU/Bolt – As long as you REALLY don't mind owning them for net $19.75, no reason to do anything.  You can roll them to the 2014 $13 puts at $2.10 or even 2x that many as you net about $11.50 on 2x if you do that and if you don't REALLY want to own BTU for $11.50 – why the Hell are you in them at $20.80?

    Germany/ZZ – I've done many, many M&As and restructurings and Germany is at the stage in the negotiations where the bank/creditor/debtholder/contract holder goes a little mental over the concessions and blows off steam by screaming that they'll just walk away and let the chips fall where they may etc.  It's just a little temper tantrum before they sit back and take a sobering look at how screwed they are, own up to the losses they'll have to take and sign the damned contract…  

    Taxes/StJ – Oh yes, they're all for eliminating SOME loopholes – like the ones that affect the little people (who earn under $250,000 a year).  As to EU mortgages, that would be quite the headache.  Again, this cannot be allowed to happen – it would be catastrophic.  

    BTU/Itade – See above.  I like them long-term but it's going to be rough until nat gas turns around, which could be a year or two.  

    FB/Newt – Nope, they are worth about $25 but such a silly Momo that it isn't worth shorting until they get back to $40-45.  Maybe at $25 I woudn't mind a long play.  

    TASR/Rev – The turning point will come (and I have said this for years) when police departments begin to get sued for NOT using a TASR.  Suddenly the cost of using a gun when a TASR could be used will be prohibitive.  

    Hyper-stagflation/Living – Doubtful.  To get proper inflation going you need wage inflation to drive it from the bottom.  That's the problem with these commodity rallies, they eat into discretionary incomes and drag the economy to a halt and reverse the advances.  You have to kick-start the economy by creating demand for labor – the old "shovel-ready" jobs thing.  

    Saving AAPL for a big push again?  

    WFR/Bolt – I see them as a LONG term trade back to $5 one day but, short-term, they are going to be very dicey until they can prove they can take $2.50.  

  74. morxlntway

    if one could combine angel's reference with a taser someone could be smitten with pleasure and rendered unaggressive

  75. zeroxzero

    Stj:  I dunno, you think the Spanish & Italian authorities would let German institutions throw people out of their houses and take possession if the mortgagors defaulted, after the Germans bail out on the Euro?  As if.  This is all Fantasy Football, from what I can understand of it.  A negotiation, by any other name.

  76. Phil

    12:00 PM On the hour: Dow +0.01%. 10-yr -0.07%. Euro -0.26% vs. dollar. Crude -0.5% to $78.81. Gold -0.95% to $1573.25.

    1:00 PM On the hour: Dow +0.17%. 10-yr -0.12%. Euro -0.08% vs. dollar. Crude -0.21% to $79.04. Gold -1% to $1572.45.

    1:03 PM The Treasury sells $35B in two-year notes at 0.313%. Bid-to-cover ratio of 3.62, vs. a recent average of 3.95; indirect bidders take 31.7%, vs. a recent 31.7%. Direct bidders take 7.9%, vs. a recent 11.8%.

    Treasurys trim losses on the long end just a bit after the two-year note auction; the 30-year yield now +0.01 to 2.69%; 10-year +0.01 to 1.62%.

    Not in my lifetime, says Angela Merkel of shared eurozone debt liability, Reuters reports. Merkel was speaking at a meeting with one of her party's coalition partners. Her continued steadfastness comes as Mario Monti denies threatening to resign over eurobonds.

    So much posturing:   "We can implement new currencies at the drop of a hat," says Visa Europe exec Steve Perry, of the company's eurozone breakup contingency plans. He says customers should see little delay in being able to use their cards in the event of an individual country leaving or even a collapse in the currency. - Banks would actually love this, imagine how much they can steal on a mandatory currency conversion on Trillions of assets!  

    Mario Monti blinks, denying - through a spokesman – a report he threatened to resign as Italian PM if Merkel doesn't give in on eurobonds. From the original Il Giornale report: "If the Chancellor does not give up, I will tell you that I resign because if things do not change (we won't be) able to bring Italy out of the abyss."

    Vodafone (VOD +0.1%) has avoided paying a £1B in U.K. taxes over the past decade even though the company's revenues have soared, a Reuters investigation finds. Among the accounting techniques Vodafone uses to reduce its profit in Britain are inter-company loans, the interest payments on which are tax deductible.

    Siemens (SI) will have a tough time meeting its 2012 targets thanks to Europe ("basket case") and China (growth not picking back up this year), according to CFO Joe Kaeser. A break-up of the euro? Siemens could re-allocate its resources "within weeks," if necessary.

     UBS cuts estimates on Harley-Davidson (HOG -4.5%) after the company's management team underwhelms analysts in a meeting. The motorcycle maker plans to reduce inventory to match cooling demand in an environment not ripe for a seller of luxury products.

    As Boeing (BA) reduces R&D spending and ramps up production to meet a record backlog, its free cash flow could reach $18B in 2012-14. That, analysts hope, should give it plenty of money to return to shareholders, although EarlyBird's Alex Hamilton says the looming defense cuts mean Boeing should hold on to its cash.

    Ouch, right by my house!   Roche (RHHBY.PKplans to close an R&D site in New Jersey with the loss of 1,000 jobs, and consolidate its research activities at sites in Switzerland and Germany. Roche's Genentech unit won't be affected by the reorganization.

    For whom Apple and Samsung toll: Horace Deidu provides charts (IIIIIIIV) detailing the recent progression of Nokia (NOK), Research In Motion (RIMM), Sony Ericsson (SNE), and HTC's respective shares of mobile phone industry shipments, revenues, and profits. It's not a pretty sight.

    Three lunchtime reads:

    1) The new case for corporate bonds

    2) Some fallacies about mortgage REITs – and why they're ideal for income investors

    3) Do falling commodity prices imply disinflation ahead?

  77. zeroxzero

    Phil:  Don't understand your answer to Living.  Agreed, no price inflation possible without wage inflation.  But you can always print money and find a way to give it to people, right?  Dig holes and fill 'em up again, that kind of thing, no?

  78. jerconn

    Anyone share my gut feeling they're gonna let this market drop like a rock sometime today?

  79. Inkarri19

    For AH – Kansas City – Hello all.  If anyone here is/is from/knows of a good attorney in Kansas City for a real estate/contract matter, please let me know.  Greatly appreciated.     

  80. i zega

    Are we doing anything with AAPL now that is braking through 568?

  81. sagemm1

    RUT seems to be slowly creeping up..leading??

  82. iTrade

    Apple quickly approaching a P/E 14 and $555 all in level!

  83. iTrade

    Bought back my July $600 calls on this R1 level.
    Used the profits to buy more of the July $580 calls @ $9.70!

  84. iTrade

    Sorry the Support 1 level (S1) not the R1

  85. Phil

    Print money/ZZ – Yes you CAN print money and give it to people.  Now explain that to Congress and the Fed because, so far, all they've done is print money and give it to Banksters and our Corporate Masters – hence, no inflation.  

    Gut/Jerconn – Nope.  I saw the faces on the Congresspeople in 2008 – they were terrified.  I was down in DC several times, met with Treasury etc – it was panic.  They don't want to do that again – it wasn't fun for them.  

    AAPL/Izega – bouncing off a bit of support at $565.  Not too much worry unless they fail $555.  

    RUT/Sage – They have been the bounciest, with the Nas – but the Nas is being held down by AAPL at the moment – perhaps intentionally.  

    XLF moving up – that's a good sign.  

    OK guys, gotta go.  Don't let the market fly without me!  

  86. stjeanluc

    Mortgage / Zero – The problem is that these euro mortgages are issued by Spanish banks and I guess they would be tasked with the foreclosures. Like Phil said, this would be quite the headache! 

    There are so many ways that this thing can go that it's getting really impossible to guess. Yes, it's negotiations right now, but who knows what card one's holding because the deck can be shuffled almost every day.

  87. stjeanluc

    Growth predictions have been revised to 0.4% in France for 2012. Not recession, but far from what is needed to plug the budget holes!

  88. stjeanluc

    And the next earning period could be rough as estimates are dropping:

    http://www.bespokeinvest.com/thinkbig/2012/6/26/sp-500-q2-earnings-growth-estimates-tank.html

  89. zeroxzero

    Thank, Stj — That is an interesting problem, Spanish banks evicting Spaniards in the interest of German lenders.

  90. stjeanluc

    Another one for you Zero:

    http://www.interfluidity.com/v2/3359.html

    It is certainly true that there are groups in our society whose purchasing power we ought to collectively insure: retirees on fixed incomes, savers with moderate nest eggs. It is great that Social Security payouts are indexed, so that retirees enjoy some protection of purchasing power. But indexing is a visible, and visibly costly, form of social insurance. Because it is visible, we transparently ration its provision and allocate its costs. I do not argue that purchasing power insurance is immoral. On the contrary, we need purchasing power insurance and the state should invent explicit means to provide it. What is immoral is to hide what is arguably the government’s largest social insurance program behind the technocratic phrase “price stability”. This a scheme that forces the most precarious members of our society to insure the purchasing power of the most secure, without any limit or even any accounting of the scale of the transfer.

  91. Pharmboy

    Yeah, but the problem is StJ, the companies that have lowered guidance will beat those forward looking warnings to make it appear better than they actually are.

     

    Man, this move up is re-stick-u-lous.  Nice cup/handle formation, thus 133 on SPY is target.

  92. stjeanluc

    Pharm – It's the same game every quarter… I still think that the numbers won't come out that great.

  93. cdel360

    Any theories on why MET is trading at a 5 multiple?

  94. newt

    FB- Thanks every one.

  95. angelcur

    PHARM restickulous! too funny
    http://www.youtube.com/watch?v=lmDTSQtK20c

  96. Pharmboy

    jerconn – well, there you go.  A good punch in the gut goes a long way. 

    angel – very funny….

  97. Pharmboy

    And they say HFT provides liquidity to the market…..well, they sure supported R1 on that volume surge.

  98. angelcur

    AGAIN JONES downgrades germania

  99. Pharmboy

    Jones who? ?….they all have opinions.  It just doesn't matter, now, does it?

  100. sagemm1

    Jones likes to do that in the last hour of trading don't they?

  101. Pharmboy

    CLDX…well, I accidently bought the Aug 4s with the 3s, instead of the 3/4 BCS.  So, I am selling all the calls and holding the stock.  I will not cover the stock until the 5d MA starts to turn.

  102. Pharmboy

    Duhh…….Credit Suisse warns that a sale of Dendreon (DNDN -0.7%) is not likely in the near-term, and said it doesn't appear that any major players are interested in acquiring the company. The firm adds that Dendreon has been quietly reorganizing its business development team and believes its head, David Ghesquiere, left the company over a week ago.

  103. zeroxzero

    Gun battle in Damascus:  Not proof of anything, but it sort of hints in the direction of "regime change, here we come."
     
     The Turkish jet was a fatal mistake in terms of the weltgeist.  Torturing your domestic adversaries evokes a yawn from the community of nations, since most of 'em do it, too.  Shooting down an unarmed NATO country jet is another kettle of schwarma entirely —  now the risks of Syria becoming an extremist Sunni state are outweighed by the instability of a Syrian regime whose last days or months are now clearly in sight.  That changes Russian and Iranian perceptions of Syria from a regional ally to an embarrassing inconvenience, since lining up against Turkey is not in their interest.  They will point out to Assad the risk of going out like Gaddafi, and recommend a long vacation.

  104. angelcur

    it will be interesting to see that mrs ASSad with piano wire bracelets

  105. angelcur

    shes quite affable i hear

  106. diamond

    Pharmboy – RE: "…I accidently bought the Aug 4s with the 3s …"
     
    I believe those are "call stupid spreads" ;-)

  107. Pharmboy

    diamond..Sir, yes sir!

  108. stjeanluc

    Assad / Angel – My guess is that she leaves before they get to her… Doesn't she have family in England?

  109. sagemm1

    Dow at 75mm with 20 mins to go

  110. iTrade

    Hey, STICKY, STICKY, STICKY…. Where are you Mr. Stick?

  111. rkyroma

    QQQ – Taking some profit on these, or letting them ride?

  112. grant

    Quick poll from the group.  Tomorrow – Up day or down day?

  113. dclark41

    rkyroma:
    Profit? I don't show any profit yet on these in the 25k portfolios? Do you have a different position?

  114. jabobeast

    bby..

  115. grant

    I am voting, Down day.

  116. Inkarri19

    BBY founder exploring buy out – ZH

  117. zeroxzero

    Grant:  No idea, of course.  I'm net long.  But Merkel's "death to Eurobonds" comment worries me that the Euro could dump, taking U.S. equities with it.  So I'm also Euro short.

  118. rkyroma

    I guess I got in late.  Several buys.  My cost is  .28.  Heck, it's only Tues, right?

  119. dclark41

    Still no volume. 80 mill. shares.  Ho-Hum.

  120. cdel360

    Net long…

  121. dclark41

    rkyroma:
    Half out if you are uncomfortable holding overnight.

  122. Savi

    rkyroma—-I would take half off

  123. threeputt

    Watching AAPL today is interesting.  It looks like someone forgot to tell the MM that options don't expire at the close on Tuesday.  With many other leaders running, AAPL is stuck and any run up is immediately met with selling.  Getting over 572 today looks to be a minor miracle, but I guess they still have a couple minutes until close.

  124. dclark41

    rkyroma:
    Congrats on the better price. The rest of us will probably have to bail or unless, of course, some talk of FREE MONEY happens overnight or tomorrow. NOT LIKELY.

  125. rkyroma

    I was too slow, so that wonderful close has me still in with the group.

  126. lionel

    Zero/Netlong
    I am netlong like you but I am still very optimistic about Europe finding a solution soonish.
    My understanding of Merkel position is that debt mutualisation will happen only iif linked to Budget deficit control at the European level and more likely it will just be up to the allowed Maastricht debt level of 60% of GDP.
    Above that national debt will most likely be subordinated national bonds.
    Germany is no fool and they will also press for a regional budget control (similar to the one put in place in Germany)
     
    With that in place core Europe will most likely push a few countries outside of the Eurobonds/Eurozone.
    I doubt Greece and Ireland will be able to follow and most likely will opt out of the Euro altogether.
     
    Euro area Maastricht debt stands at the end of 2011 at 87% GDP. That leaves 27% GDP of Euro debt will still be not covered by the new Eurobonds.
    http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=0&language=en&pcode=teina225
    The extra amount of debt could be reduced over 20 years with a 1% above real growth inflation and small budget cuts
    Will it work? Time will tell. The remaining problem is that this scheme doesnt take into account the possibility of a new banking system collapse similar to the one we have experienced 3 years ago and which has added 20-50% GDP debt to some countries.
    They need to implement very stringent banking rules in continental Europe.
    And that will hurt mostly London…
    I have read Phil's arguments but I don't buy an hyperinflation scenario for Europe. {Pension funds/Savings in Europe are mostly in life insurance-type investments. Every Europeans will be against it.
    It took 15 years for Europe to fight inflation after the first oil shock (1973). People remember still.
    Maybe it will happen in the US.
    The only thing I am betting on is that the tandem Euro/CNY will appreciate.

  127. jerconn

    PHarm, back on board…you're right nothing like a gut punch…but in this case it didn't do much harm and look how they dropped it into the close…not looking good for tomorrow…what's your prognosis?  PHil is right perhaps, they won't let it tank like in 2008, but here another 150 point drop is in the cards, or so I think…

  128. stjeanluc

    Volumes still lame….

  129. williex

    Phil
     
    Do you have the link to the posting about why fuel prices were higher than they should be?   I get a free email from the motley fool and the idiot is telling everyone that the prices in the US are more than fair.  did not even talk about speculation.  Would you mind if I either link or summarize a comment in their post?

  130. lflantheman

    Good Evening!     No trades today, or yesterday.    I almost pulled the trigger today on some more AAPL longs when it got to 568 but I resisted, thinking it might be cheaper later this week, and I've got enough of AAPL anyway.   The  short puts on LNKD and FB in the MoMo are looking fine.  I likely won't cash these out until Thursday or Friday, and if I think they might expire worthless I will just leave them alone.   Remember, these can be easily rolled because we keep enough margin in reserve to do so.  One of my acquaintances who frequents the site said to me today that he'd figured out my trading style…….."Buy AAPL and sell premium on everything else."    Not far from the truth.  And where will the market go from here?   Who knows, and who cares.   We will work the trades to profit whether up, down or sideways.  Later.

  131. stjeanluc

    I am sure you could find something else to buy lflan….

  132. Lincoln

    "Stupid Spreads":
      Would that be a bull call stupid or bear call stupid?  Glad to see even Pharm does that kind of cr#p too occasionaly.

  133. boltdude

    WFR July $2 puts — stacks of orders in the queue, but not one contract changed hands today.  The bid and ask just magically danced at arms length.  How do they do that?  
    I realize low — or no — volume is normal for OTM strikes, but it seems odd that there is so little front-month action when the stock is so close to the $2 strike.  Call volume was almost non-existent as well, only nine contracts.  Does this mean anything or nothing?

  134. angelcur

    LIONEL your thinking that the euro AND the renminbi to appreciate or the euro to outperform the cty?

  135. rkyroma

    Peter D, group – Has anyone considered a calendar / diagonal strategy on TBT to play the eventual decay in Bond prices, and collect premium while waiting?

  136. lionel

    Angel/
    I am betting both currencies will move along in tandem.
    I believe the US will spur its economy by any means. Cash handouts to every tax payers could even be the next step.
    Right now we are experiencing US investors fleeing overseas assets and taking shelter in US government bonds.
    I think USD is at his peak the same way I think risk-off is almost over.
    Pharm's position short market and short Euro long bond is very coherent.
    I used to be on that side of the trade but I have switched side recently and I believe that we are closer to a solution than ever before even if the relief could just be temporary.
    This market is waiting for a reason to fly.

  137. zeroxzero

    Lionel:  Both the U.S. and Europe will move to spur their economies at some point, but you can lose quite a bit trying to guess when — your point about risk-off ending is agreed.  That is because, while there are potential "fixes" for the Europe and for the U.S. economy [job creation, by any means], when those measures are announced there will not be unanimity of opinion on the potential results, with fears of inflation, deflation, and no-flation dueling among the indices.  
     
     Europe is particularly tricky [not all the Peripherals are going to get to play the new game]  while the U.S. can, as Phil often points out, simply fire up the helicopters and start building stuff and/or messing with mortgages and off we go. It's an election year, fer crissakes — Obama must have the executive power to at least announce an initiative, and I'll be out at the speed of light [hopefully] before the Republicans vow to trash it.   Meanwhile, Merkel is probably just negotiating with her "not while I'm alive" comment, but I'm betting on at least one more "Euroscare" taking us down in the direction of 1.20.  But it's no better than a 50/50 bet, only made because I need the cover in case my Apple  and JPM positions get crushed by a soaring dollar. Phil is right to bang the "did I mention cash recently?" drum, methinks.

  138. zeroxzero

    P.S. – Supreme Court Obamacare ruling on Thursday — Romney vows to repeal it if elected. http://www.ft.com/intl/cms/s/0/7ef1848a-bfd3-11e1-bb88-00144feabdc0.html#axzz1yxVyVNxQ

  139. Peter D

    rkyroma,
    I used to play TBT when it was $35+, but now liking TLT better.  At $15.58, the options premium is very small for TBT to construct profitable spreads.  I would stay away and just sell calls on TLT when it spikes up.

  140. iTrade

    Colorado Springs Fire
    http://www.denverpost.com/news/ci_20945863/several-fires-explode-across-front-range
     
    Don't think my parents house will be standing in the morning!
     
    Pretty scary, I grew up there… wonderful place… sad and scary night.

  141. kinkistyle

    Pockets of rioting breaking out in the Guangdong and Foshan provinces of China over secret land deals and migrant workers righs:
    Riot in Guangdong Village Over Sale of Land

    Riots in Guangdong Escalate, Overwhelm Shaxi

     
    Looks like they are flipping cars and violently clashing with riot police -- forcing the police to retreat!  I wonder if the Communist Party still has the balls to call in the tanks on there own citizens, or if they're lost that iron grip.

  142. Phil

    Good morning! 

    Looks like I didn't miss much yesterday – just kind of drifting along since I left.

    Flat this morning  with mixed markets and Dollar back at 82.57:

    4:08 AM European shares move higher out of the gate. London+0.5%. Paris +0.6%. Frankfurt +0.6%.

    6:00 AM Overseas: Japan +0.8%. Hong Kong +1.0%. China -0.2%. India +0.4%. London +0.3%. Paris +0.3%. Frankfurt -0.1%

    Europe was doing better at the open and is drifting down.  Euro can't get over $1.25 – testing the line all morning, Pound $1.56, 79.55 Yen to the Dollar and EUR/CHF 1.2009.  

    Oil $79.23 actually tested $78.50 yet again early this morning, gold down and down at $1,568, silver choking at $26.81, copper lame at $3.31, Nat gas popping at $2.83 and gasoline doing well at $2.516 with a nice bounce off $2.50 a while ago.

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    8:30 Durable Goods

    8:30 Chicago Midwest Mfg. Index

    10:00 Pending Home Sales

    10:30 EIA Petroleum Inventories

    1:00 PM Results of $35B, 5-Year Note Auction

    MBA Mortgage Applications: -7.1% vs. -0.8% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) increased slightly to 3.88% from 3.87%.

    Market fears may be reaching a crescendo, which, to contrarians at least, may wind up being good for stocks over the long run. In the most recent consumer confidence survey, the percentage of those who believe stock prices are going to fall shot up from 32.4% to 42.6%. This surge of pessimism is just what's needed, says Bespoke's Nadav Baum. "We're stuck in a trading range … You need to get that pessimism on the retail side to get the market to break out."

    The Germans are making "a tragic, historical mistake," says George Soros of the country's refusal to offer something like a Marshall Plan to its troubled neighbors. In an outstanding interview, Soros stands much of the conventional wisdom regarding the crisis on its head. "(Merkel) is trapped (realizing) the euro is not working, but she cannot change the narrative she has created."

    Stockton, California approves a spending plan it would use to operate under bankruptcy, moving closer to becoming the largest city to seek Chapter 9 protection in U.S. history. (previously)

    Spain is considering scrapping a rebate for homeowners that PM Rajoy introduced six months ago to meet a campaign pledge. A spokeswoman says the government may also introduce an environmental levy and may raise the sales tax as officials work to rein in the budget deficit. 

    Barclays (BCS) could today announce a settlement with the CFTC and the U.K.'s FSA regulator over allegations that its staff tried to manipulate the Libor interbank lending rate, the FT reports. The agreement wouldn't cover the EU's investigation into whether Barclays and its peers acted as cartel to affect the Euribor rate.

    JPMorgan (JPM), BofA (BAC), Citigroup (C), Goldman Sachs (GS) and Morgan Stanley (MS) are among the banks that are completing their "living wills" ahead of a deadline on July 1. The exercise could lead to the banks becoming less complex, as the law empowers regulators to order a firm to sell units if it cannot plan an orderly bankruptcy. 

    The U.S. Court of Appeals for the D.C. circuit unanimouslyupholds the EPA's proposed rules governing greenhouse gases, stating the agency's interpretation of the Clean Air Act to regulate CO2 regulations is "unambiguously correct." The ruling appears to clear a path for sweeping regulations affecting vehicles, coal-burning power plants and other industrial facilities.

    The solar-panel industry faces three more lean years as it works work off excess production capacity, a new report from consultancy GTM Research predicts. This year's capacity of 59 GW is almost double the 30 GW expected to be sold, while 21 GW is expected to be retired by 2015 as panel prices continue to slump.

    The growth of new sources of oil, helped by the widening use of fracking, is expected to enable the U.S. to halve its reliance on Middle East oil by 2020 and possibly eliminate it completely by 2035. By the end of the decade, 50% of oil will be produced domestically and 82% on this side of the Atlantic.

    The question, with exports of natural gas, is how much is too much? Both sides of the debate are wary of a public brawl, either for not wanting to be seen as opposing exports in general, or for advocating a policy that would boost consumer prices. It's getting to the point, though, that "it's not going to be economic to produce as much gas here," as one GOP aide puts it.

    Standard & Poor's downgrade of James River Coal (JRCC-15%), which forecast deteriorating liquidity for the company based on the likelihood of weaker coal markets through 2013, is reverberating through the coal sector, also sending peers plummetingPCX -7.6%,ACI -5.1%ANR -2%BTU -1.1%.

    The key difference between the energy sector’s current correction and the one last year is that companies appear to be finally waving the white flag by announcing capital reductions, Martin Pelletier writes in seeing a bottom for the group. He says this self-correcting mechanism should result in a more balanced market with higher prices.

    New car sales in the U.S. in June are expected to reach theirhighest in five years, according to a new TrueCar.com survey, in part reflecting recovery for Toyota (TM) and Honda (HMC) following last year's Japan earthquake and tsunami. Retail vehicle sales are expected to climb ~16% Y/Y but down 6.9% M/M.

    As Boeing (BA) reduces R&D spending and ramps up production to meet a record backlog, its free cash flow could reach $18B in 2012-14. That, analysts hope, should give it plenty of money to return to shareholders, although EarlyBird's Alex Hamilton says the looming defense cuts mean Boeing should hold on to its cash.

    Lennar (LEN): Q2 EPS of $0.21 beats by $0.04. Revenue of $930.15M (+21.7% Y/Y) beats by $44.44M. (PR

    Best Buy (BBY) founder Richard Schulze is reportedly considering taking the company private. Schulze, who abruptly resigned as chairman and director earlier this month, is the retailer's largest shareholder with a ~20% stake and sources say he's concerned his holdings will continue to lose value unless major changes are made.

    Barclays joins Goldman in cutting its mobile industry forecasts. Total mobile phone shipments are now expected to grow 6% in 2012 and 2013 (8% prior), and smartphone shipments are expected to grow 42% in 2012 (46% prior). Nokia's warning and signsof slowing iPhone sales are cited as reasons. The firm is also cutting its June and September quarter estimates for Qualcomm's (QCOM) baseband chip shipments (already pressured by supply issues) by 3M-4M. (previous

    Deutsche's Chris Whitmore questions the ability of the ARM-based/Windows RT version of Microsoft Surface (MSFT) to halt the iPad's enterprise momentum. His argument: the RT version will have limited app support, no backwards-compatibility with Windows apps, and (probably) a higher price tag than the iPad, and has lingering questions about its 3G/4G support and Office implementation. He's more positive on the Intel-based Pro version, but expects it to cost $900+. (more)

    A California judge issued a preliminary injunction yesterday banning Samsung (SSNLF.PK) from making or selling its Galaxy Tab 10.1. The judge said Apple (AAPL) had made a strong case that the Tab's design violates its patents. A trial is set for July 30. In the meantime, analysts are playing it cool and say the injunction is unlikely to have a significant impact on Samsung. 

    A study from CIRP estimates Sprint (S) accounts for just 9% of iPhone sales at Apple Stores, and 19% of sales at Best Buy. This compares with 63% and 60%, respectively, for AT&T (T). Also, 94% of Verizon and AT&T iPhone subs bought a second iPhone from the carrier, thus limiting Sprint's ability to poach. The study raises fresh questions about whether Sprint can hit its iPhone purchase commitments, and also helps explain why Verizon felt comfortablehiking service plan prices. (also)

  143. Phil

    MET/CDel – Insurance companies need to invest in "safe" instruments like bonds and bonds aren't paying so their profit projections drop.  AFL ($40.22) is one of my favorites but MET ($29.44)  is another good one for a long-term investment.  Whether we go up or down after the EU meeting – it might be a good time to add positions in these guys to our Income Portfolio.  

    Jones/Pharm – LOL!  

    Nice overview Lionel.  

    Big Chart – Constructively bullish!  

    Fuel/Willie – Huge topic but try http://www.philstockworld.com/2009/11/11/goldmans-global-oil-scam-passes-the-50-madoff-mark/   - that article was so popular that a guy made a slide presentation out of it:  http://www.slideshare.net/theoilman/25-trillion-oil-scam

    WFR/Bolt – That's strange.  Plenty of open interest on them.   

    TBT/Rky – We hate them (decay issues).  

    Sorry Itrade – that really sucks.  

    Jersey/Diamond – LOL, you can see why I like them!  Notice how you poke them and quickly realize how powerful that little island is:   

    In the face of ferocious political attack, Jersey is for the first time opening an office in London and frantically building lobbying contacts in Washington in an effort to repair relations. It has hired a top London public relations firm, Brunswick.

    Meanwhile, the island's powerful finance lobbying arm, Jersey Finance, is looking at ways to reduce the heavy dependence on UK and continental Europe, recruiting representatives in Abu Dhabi, China and are considering a new bureau in Brazil.

    China/Kinki – That's interesting.  Not very well covered here.  

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