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Telling Tuesday – Top Tier Stocks Report Earnings

DD, EAT, FCX, JNJ, TRV and VZ

That's just before the bell.  We're hoping FCX misses so we can put it in our virtual Income Portfolio (see yesterday's update), which is now up so much (19.7% in 7 months) that we should really consider cashing out, because the chances of matching that performance for the next 7 months is statistically unlikely and our goal was to use a $500,000 account to make $48,000 a year in a conservative portfolio that would be low-touch and suitable for someone who is retired and looking to draw an income.  

Since $95,175 is almost 2 year's worth of our earnings goal in our first 7 months and, since we're only 50% invested so far (never had a chance to go full), we could just shut it down, take the cash and reward ourselves with a nice cruise or whatever it is old people do when they make bonus money.  

VIX And that's what it is – bonus money.  It's not NORMAL to make money this fast – especially in our conservative portfolios and that makes me very, very nervous and should make you nervous too.  Markets go up AND they go down – where's the down?  It took us two weeks to fully review the Income Portfolio positions for Members and, since I started back on the 7th, we jumped from +$58,660 to + $95,175 and that's up $36,515 on less than $250,000 invested ($480K in margin) in just two weeks – that's 14.6% by itself and THAT'S NOT NORMAL!  Certainly not with a hedged portfolio.  

One of the reasons we're out-performing is the low VIX (Dave Fry's chart, left), which is at multi-year lows.  Since we concentrate on selling premium (being the house) and not buying it (being the sucker), a falling VIX is very much to our advantage in a portfolio where we've sold a lot of long-term volatility.  That, of course, can be a temporary situation and paper losses can disappear as fast as they appear.  

To some extent, we attempted to lock some of our gains in by selling more calls and improving our TZA hedges (and adding an SQQQ hedge as well) but it's no substitute for good, old-fashioned profit-taking and, if we can't hold our tippy-top levels (the technical term) on our Big Chart – we need to strongly consider cashing out and taking that cruise and we'll come back to port when the market settles down.  

One of the hardest things for traders (and gamblers) to learn how to do is quit while they're ahead.  Depending on which way earnings blow this week – this may be one of those times.  Short-term, if the market falters, we'll have a blast on the way down – but that's not what our Income Portfolio is about and cash may be better than trying to ride these positions down.  And then think of how much fun we'll have bottom-fishing again on the dip!  

Meanwhile, we're going to raise the bar and say we've got to hold 13,600 on the Dow, 1,480 on the S&P, 3,100 on the Nas, 8,600 on the NYSE and 880 on the RUT.  Those are harsh upward adjustments, but that's because we'd like to keep our ridiculous gains so 3 of 5 of those fail and we're going back to cash – there will always be plenty of new trades to make tomorrow if we have cash in our pockets – especially when it's 20% more than we started with!  

NYSII am still long-term bullish on the market but we have to consider the possibility, maybe PROBABILITY, of a bearish correction.  As you can see from Dave's NYSI, we're not quite overbought yet but only one of the last 6 times did we wait to be overbought before correcting – the market doesn't always give such clear signals.  

Dow components TRV and DD reported good earnings already this morning (8:30) but VZ disappointed BUT they had hurricane charge-offs and lots of up-front payments made to AAPL and other smart-phone makers on strong sign-ups so perhaps a buying opportunity there and JNJ also had nice earnings but the 2013 outlook is disappointing so they are trading down a bit.  

That's 13% of the Dow reporting this morning and nothing, on net, to ruin things at 13,600 so far.  IBM is a Dow heavyweight and reports this evening but so does Google and AAPL reports tomorrow so, what else really matters this week?  Amazingly, with about 30 hours to go before earnings, AAPL is STILL trading at just $500 a share.  

In theory, they will earn roughly $13.42 per share (current estimate) and that estimate is down from $15.45 that was expected when they gave their last earnings and much lower guidance back in October and the stock is down 15% from there (around $600) and down 28% from the $700 high in September.  We thought $700 was too much at the time but we thought $555 was "just right" and that's still our target for after earnings and $14 a share (small beat) divided by $555 is 40 and divide that by 4 quarters (assuming they do no better in 2013) and we have a p/e of 10.  

Paying 10x the current earnings for a company that earned $14Bn in 2010 and $25Bn in 2011 and $41Bn in 2012 (year ends September for AAPL) with an anticipated $12Bn to kick of Q1 of 2013 – even with the harsh analyst downgrades – is pretty cheap.  Yes, there are 940M shares x $13.42 per share = $12.6Bn dropped to the bottom line in the first 90 days of their FY 2013 and you can buy this WHOLE company, which also happens to have $120Bn of cash sitting on their books and no debt – for $470Bn at $500 per share.  Take back the cash (and you don't even need to raid the pension fund) and it costs you net $350Bn to make $12Bn a quarter.  Quick – get me some LBO guys pronto!

No, I'm not kidding – really you can do that!  There's One Trade we won't be cashing our of our Income Portfolio – our AAPL 2014 $400/500 bull call spread at $58.05, against which we sold 4 2015 $350 puts for $34.97 for a net of $23.08 on the $100 spread.  If all goes well, this trade makes 333% on cash and just $11,762 in net margin on the put side for our 4 contract trade idea in the Income Portfolio.   

This was our "One Trade" for 2013 that I talked about on BNN (along with 2 other great trade ideas) last Tuesday (image above from TV spot), when we caught the dead bottom (we hope!) on AAPL at $585.  The next day, we added it to our Income Portfolio at slightly worse prices as it recovered back to $500, which it pretty much held the rest of the week.  Still – $500?  Are they freakin' kidding me???

Fortunately, if you are sick of me banging the table on AAPL – there's a good chance it ends tomorrow as earnings should either pop us back to realistic prices or really burst my bubble and make the decision to cash out of this entire rally a very easy one.  

Meanwhile, hope springs eternal and we have a low-data week (and a short one) so the focus will be on earnings with 82 S&P companies reporting earnings this week, which will make or break our index lines.  Nothing much to do this morning but sit back and watch our levels – and contemplate our exit strategy – just in case…


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  1. Pharmboy

  2. stjeanluc

    Oil Lines

    R3 – 97.05
    R2 – 96.63
    R1 – 96.35
    PP – 95.93
    S1 – 95.65
    S2 – 95.23
    S3 – 94.95

    Yesterday's high and low – 96.22 / 95.52

  3. yodi

    Phil Your suggestion to close the incomeportfolio is well taken. It is very difficult for any trader to chop the tree when it is half up. But in deed I have seen as well how brutal a short put can be in a falling market. I like to see which trees you want to chop. possible take out the putters first? Saludos

  4. stjeanluc

    Doesn't look like FCX will go on sale today… Conference call is at 10:00 AM so we wait for guidance. Still, not a bad entry point right here with some good support around $31. Might dip a toe in the water!

  5. 1020

    Good Morning!

  6. stjeanluc

    There are some good ones reporting after the close today (average move in parenthesis):

    AMD (8.3%) – In our Income Portfolio. It seems that Microsoft and Sony will use AMD chips in their next console.
    CREE (8.8%) – Traditionally big movers on earnings
    GOOG (6.7%) – We already have a play in the 25KPM
    IBM (4.7%) – Hoping for a miss for a better entry!
    ISRG (10.8%) – Could see $50 swing!
    TXN (4.8%) – Might also look for an entry here.

    We also get reports from CSX and NSC which might give us an idea on the strength of the economy through the rail traffic.
     

  7. stjeanluc

    The weekly options seem to have priced the following moves so far:

    CREE - 8%
    GOOG - 6%
    IBM - 3.3%
    ISRG - 8.5% (no weeklies)

    Not much of an edge there!

  8. scottmi

    Oil/phil – what might happen today to boost it over it's 96ish resistance? or anything it might be waiting for before running down a bit?

  9. wombatcreative

    Phil // Stand Down
    Morning everyone.
    Patience. Yodi wants to chop trees. Got it.
    For those of us that came in late, should we just stand pat with our TZA hedges ?
    I read through the port report last night and a few still look tempting. GE Puts, QCom 55/65 BCS, AMZN Bear spread. What are your thoughts ? Any strong reco's out of the line-up for those that show up after the beers gone ?

  10. hemas03

    Craigzooka/Stj
    I dont see the Feb BTU 24/14 put spread in the IRA portfolio from 12/27/12. It filled @ 1.04.

  11. stjeanluc

  12. stjeanluc

  13. Pharmboy

    Writeup here for those that may have missed it.

    Biotech Portfolio here. You need the link to access it.

  14. stjeanluc

  15. stjeanluc

  16. craigzooka

    @Hemas03,

     

    Hi Hemas, on options expiration it is a couple hour job to update the excel spreadsheet.  I am involved in so many projects right now that finding an extra few hours to update the spreadsheet is sometimes difficult.  I have some free time on the schedule today so by market open tomorrow the spreadsheet should be updated.

  17. mjjwo9b

    Anybody read the latest Jack Welch Tweet news story?   I didn't either…who cares.  Jack's iPhone Nanny must have gotten MLK day off.  

  18. stjeanluc

  19. craigzooka

    @Hemas,

    I have to aplogize,  thanks so much for pointing out the missing spread.  I don't know how that one slipped through the cracks.  Especially since it looks like a nice winner!

  20. Phil

    Good morning! 

    Didn't want to scare anyone but did want to slap you complacent people in the face as we're at a very dangerous point in the markets – hitting our inflection points in the high end of our range right when we get earnings and clearly, from the look of the VIX – not enough people are hedging their portfolios.  Please take a good look at the Income Portfolio's adjusted TZA play as well as the new SQQQ trade – to cover us into AAPL earnings – just in case.  

    While hope is not a valid investing strategy, I do hope we hold up here and we're looking to stay above 3 of our 5 new, aggressive targets but, in truth, we don't want to lose any:

    • Dow 13,600 (Must Hold)
    • S&P 1,480 (7.5%)
    • Nasdaq 3,100 (2.5%)
    • NYSE 8,600 (7.5%) 
    • Russell 880 (10%)

    Keep in mind the tug-boat model, the Dow is still dragging us but the Nasdaq has fallen from the front to the back of the pack so that means less pull on the Dow now – just when we need more reason for it to go higher.  Since we are close to the upper end of our ranges – those 2.5% lines start to matter more as it's harder for each index to slog through that upper resistance around 10% than it is for them to jump up and down around the Must Hold lines.  

    QQQ WEEKLY We need the S&P and NYSE to confirm those 10% lines but that's probably not going to happen until and unless the Nasdaq pops and the Nasdaq doesn't pop unless AAPL pops and that brings us full circle back to earnings tomorrow night and there's nothing we can really do but watch and wait – although GOOG will be a good preview this evening.  

    I wish I had a better crystal ball than that but it really is all up to AAPL and, as you can see from the chart – it would be so easy to NOT break higher and form a technical top and roll over the indexes – just another failed attempt at new highs.  Breaking up is, indeed, hard to do…

    The Dollar is floating at $80, the Euro is at $1.33 with everyone at Davos this week.  The Pound is not confirming a Euro move up, falling to $1.585 (should be within 0.03 of the Euro) and the Yen failed at 90 and is now 88.85 after testing (stronger) 88.5 this morning.

    Oil bottomed out at $95.50 but back to $96.25 now that the NYMEX pump crew is back from their break.  Gold is $1,689, silver $32, copper $3.68, Nat gas fell back to $3.58 and $3.50 to $4 is still the right range for them this winter.  Gasoline went from $2.78 on Friday (and this morning, for that matter) to $2.835 and is now just under $2.83 – they don't need a reason – same pumping at the same NYMEX with no inventories until Thursday this week.  

    We SEEM to have a debt ceiling extension (still needs official vote) and China and Japan SEEM to be heading to war over those silly islands but, otherwise, it's business as usual and, if anything, the news is on the upswing, which really puts the pressure squarely on the shoulders of our 88 reporting S&P companies this week to make or break us and, of those, you can probably add the market caps of 80 of them together and not equal AAPL in size or in impact.  So we're WAITING

    Tuesday's economic calendar:

    8:30 Chicago Fed National Activity Index

    10:00 Existing Home Sales

    10:00 Richmond Fed Mfg.

    At the open: Dow -0.06% to 13642. S&P -0.07% to 1485. Nasdaq +0.07% to 3137.

    Treasurys: 30-year +0.05%. 10-yr +0.05%. 5-yr 0%.

    Commodities: Crude +0.1% to $96.14. Gold +0.07% to $1688.15.

    Currencies: Euro +0.01% vs. dollar. Yen -0.83%. Pound -0.2%.

    Market Preview: Stock futures tilt higher after being flat earlier as investors return from the long weekend, with the S&P benchmark +0.3%. Factors that could be boosting sentiment include GOP moves to extend the debt ceiling and surprisingly strong optimism among German investors. RIM jumps 6.4% on news it mayeventually sell its hardware production and license its software. Following earnings, Verizon is +0.8%, DuPont is +1.1% and J&J is-0.7%Calendar: Existing Home Sales, Richmond Fed Mfg., major tech earnings

    3:14 AM Asian are mostly lower, with Japanese stocks falling as the yen rises after the BOJ announced well-telegraphed further easing measures but said it will wait until next year to begin open-ended asset purchases. "The big question now is will the combined fiscal and monetary stimulus work?" asks investment strategist Stephen Corry. "The yen does look oversold and the Nikkei looks overbought." Japan -0.3%, Hong Kong +0.2%, China -0.6%, India -0.1%. 

    In addition to buy the rumor, sell the news action in the yen, Japanese shares sell off after the expected BOJ decision to up its inflation target to 2%. If getting busy ending deflation is of such import, the decision to wait until 2014 to being open-ended QE is a curious one. The Nikkei -0.4%, bringing its 2-day slide to about 2%.

    4:33 AM European shares are lower as investors absorb the BOJ's announcements of further easing and ahead of some big U.S. corporate results later, including IBM and Google. EU Stoxx 50 -0.8%, London -0.4%, Paris -0.7%, Frankfurt -1.2%, Milan -0.7%, Madrid-0.7%

    5:36 AM European shares pare their losses and even start to turn positive in some cases following a way better-than-expected ZEW survey of German investor confidence. EU Stoxx 50 -0.2%, London flat, Paris -0.2%, Frankfurt -0.5%, Milan +0.4%, Madrid -0.3%.

    House Republicans will attempt to pass a measure tomorrow that would extend the debt ceiling until May 19 by allowing the government to borrow what it needs to meet its obligations rather than by specifying a dollar amount for the limit. The Treasury would also be allowed to top up its emergency borrowing capacity, effectively pushing the debt deadline into the summer.

    The number of unemployed worldwide is forecast to rise by 5.1M this year to over 202M, the UN's International Labour Organization says in its annual report. It's worth pointing out that the ILO has cut its jobless figures down each year, although that's because of an increase in the number of people leaving the labor market. Since before the financial crisis in 2007, the total "jobs gap" is 67M.

    Dec. Chicago Fed National Activity Index: +0.02 vs. consensus of +0.28; +0.10 prior. The index's 3-month moving average increased to -0.11%, from a level of -0.13% in Nov. More on Chicago Fed National Activity Index: Production and Employment contributed +0.12 and +0.09 to index respectively. Personal consumption and housing impacted index by -0.17. The three-month moving average print at -0.13 is tenth consecutive reading below zero suggesting economic activity below its historical trend. The diffusion index increased to -0.05 from -0.12 in Nov.

    With S&P 500 companies retiring 8B shares through buybacks in the 18 months to October 2012, EPS figures are likely to get a surprisingly strong boost. It would be surprising because, as Robert Baird's Brian Rauscher says, analysts don't often factor in stock repurchases when making their forecasts.

    The NAAIM Survey of Manager Sentiment rises to 84.67 as of Jan. 16, up from 83.27 previously. Thanks to a big dip in the year's first week, the index remains below the "off the charts" bullish level of 88.1 hit just after Christmas.

    Investors are the most bullish they've been in the 3.5 year history of the Bloomberg Global Poll, with 53% picking equities to offer the best returns over the coming year, a 17-point jump from the November survey. Enthusiasm over Europe is a key, with just 45% believing the economy there deteriorating, down from 70% two months ago.

    Germany's ZEW index of investor economic sentiment rises to its highest since May 2010, jumping to 31.5 in January from 6.9 in December and coming in way above consensus of 12. Economic perspectives have improved on the 6 month horizon and the upbeat sentiment could lead to more companies investing, although the situation with Germany's trading partners is still considered to be weak. (PR)

    "Huuuuuge demand for Spain's new 10-year bond – order book of over €17B for the expected €3-4B deal," tweets Reuters' Jamie McGeever. Earlier, Spain sold more than €2.8B of 3-6 month bills, above its target of €2.5B, with yields falling also.

    Canadian retail sales unexpectedly rose 0.2% in November vs. a forecast of flat. In volume terms – which feeds into GDP calculations – sales rose 0.8%. Showing a small loss in early trade, the loonie pops back to flat

    China's automobile exports topped the one million vehicle mark for the first time in 2012 as total units delivered increased almost 30% for the year. Slowing demand in China has more domestic automakers looking to sell abroad and partner with western companies such as Volvo (VOLVY.PK) and General Motors.

    The GE of Europe:  Siemens' (SI) FQ1 net profit from continuing operations was reportedly little changed at €1.3B, above consensus of €1.14B, while revenue was also flat at €17.9B and missed forecasts of €18.1B. Earnings were hurt by a triple-digit million euro hit following delays in the delivery of high-speed trains to Deutsche Bahn, and by Siemens' exit from its solar business. New orders were above sales. Shares-1.6% premarket.

    Freeport-McMoRan (FCX): Q4 EPS of $0.78 beats by $0.04. Revenue of $4.51B beats by $0.03B. (PR)  More on Freeport McMoRan's (FCXQ4 results: Consolidated sales for full-year 2012 totaled 3.65B lbs. of copper, 1M oz. of gold, 83M lbs. of molybdenum, vs. 3.7B lbs. of copper, 1.4M oz. of gold, 79M lbs. of molybdenum for 2011. Estimates 2013 sales of 4.3B lbs. of copper, 1.4M oz. of gold, 90M lbs. of molybdenum. FCX+1.5% premarket.

    More on Brinker's International (EAT) FQ2: Comparable restaurants sales rose moderately by 1% at Chili's and 0.6% at Maggiano's with higher prices offsetting a company-wide 1.9% slip in traffic. International sales were up 2.7% during the period. (PR)

    PetMed Express (PETS): FQ3 EPS of $0.23 beats by $0.06. Revenue of $49.6M (-1.8% Y/Y) misses by $0.37M. Shares+2.2% premarket. (PR)

    More on Verizon (VZ): Higher pension costs and the impact of Superstorm Sandy drove the company's quarterly loss to more than double last year's mark. Pension liabilities shaved off $1.55 a share and the widespread damage from the storm cut another $0.07. Verizon added a net 567K FiOS digital connections during the period, 31% less than the number added during the same period a year ago. VZ -2.0% premarket. (PR)

    RIM (RIMM) shares +7.1% premarket after hitting a 13-month high in Canada yesterday following a German newspaper interview with CEO Thorsten Heins in which said the company could sell its hardware production or license its software to rivals.

    Are you freakin' kidding me?  AAPL $500???  Verizon (VZ) states on its Q4 call it activated 6.2M iPhones in Q4, good for 63% of total smartphone activations (up from 46% in Q3, and 56% in the year-ago period). Big Red had previously disclosed it activated 9.8M smartphones in the quarter. CFO Fran Shammo says about half of the iPhone sales involved the iPhone 5 – that remark comes as UBS points to survey data indicating a mix shift towards older and lower-capacity iPhone models. Apple (AAPL)+0.8%. (AT&T smartphone sales)

    Three breakfast reads:

    1) What Nobody Tells You About Goldman Sachs 

    2) UnitedHealth And WellPoint Are Well-Positioned For Obamacare 

    3) Applied Micro: Recent Developments Fuel Heavy Skepticism

  21. Maya1

    Phil/AAPL
    Good morning!
    "after earnings and $14 a share (small beat) divided by $555 is 40 and divide that by 4 quarters (assuming they do no better in 2013) and we have a p/e of 10. "
    However, you have to remember that the 1st quarter is their strongest quarter. No way they report same earnings in Q2 and Q3 as Q1.
    so, maybe a PE of 12 or so?
    Still cheap given their growth rate but the 'market' is fixated on their margins and competition, more than pprofits.
    so, if they do not perform tomorrow, do you plan to simply 'get out' ?

  22. jerconn

    PHil – what do you think of some long puts on GOOG?  They're in a down trend for the few weeks or so before earnings tonite and I'm not aware of any catalyst (outside of earnings) to reverse that trend…

  23. stjeanluc

    FCX up big today but they seem to be hitting a resistance line around 34.90. That area acted as resistance and support last year.

  24. rexx

    Phil/ Income Portfolio  – Thanks for the update.  At moment I'm missing or half-missing, CSCO, F, RIG,SBUX.  Would you chase any of these at the moment?  Vix is low, prices are high so I'm inclined to wait, but if I had to do something I'd only
    (1) sell F 2015 10 Puts
    (2) sell SBUX 2015 40 Puts

  25. 8800

    Phil,
    When you have a moment, trying to further my understanding of selling calls to incr return. In yes'd post (BXP 1/14 100/110 bcs @net $3, selling 1/2 Apr 105 for $5 with Bxp @107), my questions are:
    (1) with BXP in an uptrend, what is the reason to sell ITM (vs otm) calls? – (more prm but grtr risk of assignment). I understd that the bcs protects to 110 but since we are so close to 110, are you expecting an imminent pullback?
    (2) If you roll forward and up, what is your plan if BXP continues to rise (with a RE recovery) ?My understdg is that you would buy back Apr calls at a loss and sell a forward mth call which, if the uptrd continues, you would also repurchase at a loss.
    What am I missing?
    Thanks in advance

  26. stjeanluc

    Another open to fade with AAPL – thankfully only 2 more trading sessions before earnings. Getting a little tired of the AAPL rumors now.

  27. yshenhar

    Phil – what hedge do you like as a new play on TZA?
    Or maybe EDZ?

  28. Phil

    Chopping the tree/Income Portfolio, Yodi – Unfortunately, the VIX is too low to make selling calls worthwhile to cover and we're half invested so a big drop (20%) would force us to go at least 75% invested and we'd have lost much of our profits – why risk that possibility vs. making $50K more.  If we take the $600K we have and re-invest sensibly, we can easily make another $50K on brand new trades as we PATIENTLY wait for opportunities to re-deploy our cash.  

    So StJ may not feel this way as it's a lot of work, but I think I would almost be relieved to have an excuse to pull the plug with a 20%, 7-month profit and simply go back to adding 3 trades a month in a new portfolio, rather than trying to milk this set.  

    FCX/StJ – No sale is right, up 3.5% and testing the just "death-crossed" 50 dma at $35.  We have this one at Opesbridge (shorted 2015 $28 puts at $5, now $3.85) not in the Income Portfolio, and I was hoping it would come down so we could add it to the Income Portfolio and double dip at the hedge fund but no sale, I guess.  IF FCX breaks over the 200 dma at $35.50 AND our indexes are holding their levels, THEN I think selling the 2015 $30 puts, now $4.55, would be fine for an initial entry – so we'll keep an eye on those. 

    Earning/StJ – I'd like to see how GOOG goes but IBM could be fun as that 1.2% difference is huge for arb purposes.  They fell from $210 to $190 last earnings, so that must have jacked up the average though, so maybe 3.3% is the right number.  That being the case, I'd say bad new is priced in from last time and certainly outlook is better now than October and you can buy 5 IBM July $190/200 bull call spreads for $5.25 ($2,625) and sell 3 March $200 calls for $2.60 ($780) and 3 July $180 puts for $4.70 ($1,410) for net $435 for the $2,500 worth of long spreads if all goes well.  Let's put that in the $25KP.  

    VIX sneaking up 7% this morning to 13.31.  From the weekend (end of Friday's comments), I had a VIX hedge (as well as a trade idea for JNPR):

    BAM!/Kinki – I know, at this point it's tempting to hedge with VIX longs.  The July $17/20 bull call spread is $1.15 and you can sell the (for example) JRCC 2014 $2.50 puts for $1.05 for net .10 on the $3 spread.  Obviously, the July $17 calls (now $3.60) can be rolled out well before they fall below $10 and, if the VIX goes worthless in July, a coal stock like JRCC should be doing well.  

  29. Savi

    Phil—--GOOG reports today—should we buy back the weekly 725s today?  thanks

  30. diamond

    Phil – I am interested in UNH for a long term play as I believe they are one of the best in their field. What do you suggest for an initial entry?
     
    UnitedHealth And WellPoint Are Well-Positioned For Obamacare – Seeking Alpha

  31. Phil

    Oil/Scott – I saw no news at all – just manipulation at the moment but no inventories until Thursday gives them the opportunity to play games at the NYMEX.  

    Nas futures back to where we liked the long play at 2,725 (/NQ).  Very tight stops if they can't hold it but it's also AAPL $500 with last chance to buy ahead of GOOG earnings. 

  32. rj_jarboe

    Phil/USO
    Think the $35 Feb puts are still ok to hold?

  33. jasu1

    Phil,
    Assigned ABX at 35.00, with Jan 2013 35 put for which I received 2.15…so basis now 32.85….500 shares.
    Plan to sell 2015 35Call for 4.80, and Jan 2015 35 Put for 6.50…..
    Does this trade pass your smell test or can we do better cash flow wise…..Thank you for your help as always…

  34. stjeanluc

    Income Portfolio / Phil – Actually liquidating this current portfolio and starting a new one is less work! Updating the current position is time consuming with everything we have opened.

    At the same time, I can keep the current set open (but hidden) and update it on a regular basis (every quarter) for people that want to stick with the long term positions.

  35. jasu1

    Phil
    Assigned GLW at 12.5, with Jan 2013 12.5 put for which I received 1.55…so basis now 10.95….1000 shares.
    Plan to sell 2015 12Call for 1.90, and Jan 2015 12 Put for 2.35…..
    Does this trade pass your smell test or can we do better cash flow wise…..Thank you for your help as always…

  36. dclark41

    Phil
    Alot of the positions in the income portfolio are new. Perhaps you would consider  just removing all the trades from 2012?

  37. rperi

    In an actual portfolio, would you just quit while you're ahead and start over (in step with what you are proposing for the virtual portfolio) or would you keep it as a low touch portfolio and only add short calls and/or puts when the VIX rises and the sale of these options is worth the risk?
    These are great portfolios, and I follow them closely, I am just having a tough time grasping how they become easy to adjust because we haven't really ever gotten to that point, rather we usually just make more than we set out to (not that that is a bad thing) and begin again.  Just trying to follow along here, mostly because my portfolio, though with different trades, is at a point where I am up 26% for the year (that's 21 days) with only 40% invested.  Without asking you to be a financial advisor, please offer your general thoughts .  I like St. J's suggestion of keeping it open to track it quarterly, if it's not too much work burden.

  38. kustomz

    UK FTSE flat
    German DAX -0.6%
    French CAC -0.5%
    Spain IBEX -0.4%
    Italy MIB +0.5%

  39. Burrben

    The USO Feb 35's are down about 23%.  Roll or close out?
    I got em for .93 and I think they reached a max of 1.04 for a blip

  40. stjeanluc

    I guess these 2 charts could be seen as bullish:

    http://www.thereformedbroker.com/2013/01/22/chart-o-the-day-chinese-electricity-production/

    Aliance Bernstein is out with a note today talking about how many of the downside risks have been flipped over into "upside risks". The chart below shows US home sales data juxtaposed with China's electrical usage (from AllianceBernstein):

    china electricity

  41. Burrben

    Oil at 96.67.  If hit's 97, short?

  42. 8800

    Folks,
    Anyone have the contact info for the designated go-to-guy @ TOS (TD Amer) for PSW members new accts?
    TIA

  43. Phil

    TZA/Wombat – Not if you mean stick with Income plays that haven't performed yet just because you came in later.  That makes no sense.  If we're liquidating, you want to consider it as a better safe than sorry move.  If the market falls – you'll be thrilled you cashed out.  If the market goes up, then we have a very long rally ahead of us to play.  Meanwhile, HOPEFULLY, we won't have to cash at all – it's just good to be ready and think about what you'll have to do if we start getting moves we don't like.  So far, no worries:  

     

    • Dow 13,600 (Must Hold) – now 13,642
    • S&P 1,480 (7.5%) – now 1,482
    • Nasdaq 3,100 (2.5%) – now 3,124 
    • NYSE 8,600 (7.5%) – now 8,777
    • Russell 880 (10%) – now 892

    So of course we need to have hedges in place – in case we get caught with our pants down but, for the most part – this is yet another show of strength on a morning pullback as all of our aggressively bullish levels are holding, so far.  As to the Income Portfolio – I highlighted all the entries I still liked and, obviously, we have a bunch of brand new trades from the last week or so.  Outside of that, if something else comes along – it will be right here first, in Member Chat. 

    FAS Money – What did we top out at?  $7,000?  Not bad since we cashed a $6,258 profit now and we essentially are working with a better than free 20 contract spread that we have 2 years to sell calls against now.  

    $25KPA – AAPL $550 or bust!  Literally, that's the whole loss in the portfolio and we're letting it ride, other than our SQQQ hedge.  SHLD looks good, USO iffy, SQQQ is a hedge, RIO is a hedge through AAPL earnings now and GOOG is an earnings bet.  

    $25KPM – So much more relaxing without AAPL and no crazy earnings bets.  That nice, disciplined QQQ sale was the way to go, of course. 

    AAPL Money – AAPL $550 or bust!!!  

    Fantastic job on Biotech Portfolio, Pharm – thanks!  

    AAPL/Maya – Well, I was being generous and ignoring the cash and last Q1 AAPL hit $13Bn and, for the year, they booked $41Bn so not a huge drop-off.  If they blow it tomorrow (perish the thought) then we'll have to get out and wait to see where the bottom is and then I'll still most likely want to get back in.  Don't forget they disappointed last Q by 1% and in July by 10% and neither one kept them down for too long before a nice bounce.  That's why I like having the SQQQ spread to cover – just in case.  

    GOOG/Jerconn – We have a GOOG spread in the $25KPA and I like that better.  I don't see any reason they should have a bad Q with the huge increase in on-line XMas sales.  

    Income Portfolio/Rexx – There's no such thing as "missing".  We start the portfolio on an arbitrary date and simply elect to put in some of the long-term trade ideas that we select almost every single week for various reasons.  There's nothing "perfect" about that set – we make many, many great selections every month and these are some of them.  So don't feel a need to fill ones that don't give you an ideal entry, there will always be something to trade tomorrow if you keep your cash handy.  Especially during earnings season – you never know who will be going on sale.  Even the VIX itself got so cheap that, this weekend, I decided I liked playing a bull call spread on it.  

    BXP/8800 – That trade idea (and there were a couple of REITs in chat for people who missed them) reflects the uncertainty of earnings on the 29th.  Keep in mind, paying out a $2.40 dividend is a 2% handicap to their PRICE over the course of a year and they were harshly rejected at $108.89 just last week and collecting $5 for a half sale of the April $105s with the stock at $108 means you have $3 of downside protection and $2 in premium but only on a 1/2 cover AND we sell the $90 puts for $3.50 so those also protect (2x) the $105 calls from breaking up to $7 higher AND the $105 calls (still $5) can be rolled to 2x the July $115s (now $2) almost even so this is not so much a bet that BXP can't go over $105 (already is) but that it probably won't go over $115 (it's all-time high) by July and, if it does, the bull call spread, which cost net .50 on entry, would be worth $10 before you have to pay the July $115 callers their first penny.  So we don't really EXPECT anything in particular, but this trade set-up makes us READY for anything, with a good chance of turning a profits unless something drastic happens to the stock.  

    AAPL rumor/StJ – It really is endless nonsense.  Today it's Samsung coming out with a mini so, of course, it must be all over for the IPad mini.  And Forbes says AMZN is attacking ITunes in a very interestingly-timed article. 

    TZA/Yshen – In our Income Portfolio, we have worked our way into the the July $13 calls, now $1.18 and, as a new trade, I'd sell the April $15s for .40 and use that .40 to make it the July $12s, now $1.43 for net $1.03 on the $3 spread.  You can offset that with the JRCC short puts suggested above for the VIX or just leave it as it's a triple if the RUT falls enough to pop TZA from $11.45 to $15, which is 31% or about a 10% drop on the RUT, back to about 800.  So, if you have $100K portfolio that's going to lose $10,000 on a 10% drop in the RUT and you want to protect against it, just $2K on this spread should pay you back $6K while you lose $10K on your longs but a 10% gain on the RUT should make you $10K and you sacrifice $2K of it on the insurance (or, better yet, get 1/2 off the table before it's all gone).  

    This is why the KEY to hedging is to have bullish positions that make money if the market goes up OR stays flat – that way, you have all 3 possibilities covered and your insurance is free, even in a flat market.  

    GOOG/$25KPA, Savi – I had decided not to but may change my mind.  They are still $9 and, if we buy them back, we raise the net on our $35 bullish spread to $28 AND leave it unprotected with GOOG not even at the top of the spread.  If we leave the short $725s in place, we have a net on our $35 spread of $6 with $29 of upside before we have to pay back the weekly $725 callers and, of course, we have 6 months to roll them AND we can easily buy more longs and roll the callers to 2x and our break-even is $754 and StJ says GOOG only averages 6.7%, which is $746 so we have many, many ways to win by leaving the spread as is whereas, if we pull the short calls – we only have one way to win – and we win a lot less.  

    UNH/Diamond – I do like them and we missed them when they were cheap early this month, unfortunately.  Since I wish we had gotten them at $50 and since they pay a crappy dividend (.85), we can go artificial and sell the 2015 $45 puts for $3.90 and buy the 2014 $45/55 bull call spread at $6.75 for net $2.85 on the $10 spread that's 100% in the money to start.  That gives you a nice $7.15 upside before even selling calls and that's 12.7% of the full $55 in the first year and you can re-run the set-up next year after you have another $7.15 in your pockets if all goes well and your break-even is way down at $47.80 and, as UNH gets closer to $60, you can sell the March $57.50 calls (now .60) for $1 or so to bring in a bit more cash while you wait. 

    USO/RJ – I'm very worried about them but we still have 3.5 weeks so waiting and seeing. 

    ABX/Jasu – Are you sure you want to own 1,000 shares at net $28.28?  You got your cheap entry on 500 and, as long as that's what you wanted, sure, I love the accumulation but ABX only pays .80 in dividend, so you don't miss much by cashing your $16,425 and selling 5 of the 2015 $28 puts for $3 and buying 5 2015 $25/33 bull call spreads for $4.90, so you end up a net $29.90 entry on 5(00) and an upside of $3,050 at $33 vs your net $21.55/28.28 entry that pays $6,725 at $35.  Obviously, if you played 10 of the spreads, you'd net $6,100 at $33 so getting very close to the returns of the buy/write.  This one's a toss-up and very much depends on how much you want to commit to ownership. Certainly not a bad stock to own in the long run (and gold up to $1,694 now).  

    Income Portfolio/StJ – Well then it will be strongly considered but, hopefully, far less work if we do keep it as the recent flurry of activity was mainly the end of year rollover and our returning confidence that led us to get more invested (as 50% invested is our general goal anyway). 

    GLW/Jasu – Didn't we just do this?  Oh, that was ABX…  Same thing, really, your basis is $10.95 and the sale of more puts and calls risks you ending up with 2,000 shares at net $6.70/9.35 vs a 2015 $10/15 bull call spread at $2.10, selling the $10 puts for $1.30 for net .80 and the $4.20 upside with a possible 1x assignment at net $10.80.  The only caveat on this one is, if GLW were to fall below $10 – I'm not sure I would want to DD on them, whereas with FCX, unless it turns out to be fool's gold in those mines – I'm happy to DD on their 140M ounces of proven reserves ($238Bn at $1,700 per ounce less extraction costs) while their market cap is just $35Bn at $35.  

  44. stjeanluc

    TOS / 8800 – Used to be Scott Sheridan (scott@thinkorswim.com). Not sure that he is still there though as that was a while back.

  45. craigzooka

    The IRA Portfolio has been completely updated.  I just went through and made a gazillion updates to it, so if anyone spots something that looks weird, please let me know.  All transactions have been posted as comments so if there is anything that doesn't match up let me know and I can go back and fix it.  

    Here is the link

  46. scottmi

    SODA – yay!  phil, it may be the next fondue pot..which of course i have, and so do most of my friends.. but not i, nor any of my friends/acquaintances have yet to acquire a SODA machine.. anyone here get one for xmas?  ;-)

  47. samz3700

    Anyone know why CHK is up over 3% today?

  48. denlundy

    Chopping the tree/ I would also like to keep the young twigs and see if we can grow it into a full blown forrest over 5 to 10 years. I'd like to see the lessons on pruning and fertilizing it over several years.
    I'm not against starting a new virtual income portfolio from scratch so the newbies but also would like to keep the existing one and learn how to maage and add to it over a longer period of time.

  49. Phil

    Income Portfolio/DC – As above, people don't have to match it up entirely and I won't arbitrarily restart it ahead of schedule (June/July) as we like to run them a year, until they are so ridiculously mature that a chimpanzee can maintain it.  Since we're only halfway done and since it is possible to blow 2 years' profits in a big dip – it would be foolish not to take profits off the table rather than try to cover ourselves if this turns out to be a top and not a proper breakout.   By June, if we don't get a downturn – we won't care if the market falls 20% – we'll be pretty bullet-proof by then and happy for an opportunity to buy more. 

    Quitting while ahead/Rperi – Good question.  We just had a hedge fund review and, for the most part, the trades we have there mirror the Income Portfolio but it started in September, not June, and that was a top so the first 3 months we were managing a downturn in the market and then a slow recovery through now.  We are also less invested so still happy to DD if we get good prices AND it's an actively managed fund with a guy (not me) whose job it is to watch it all day, every day.  That's very different than a retirement portfolio, which we try to keep low-touch.  As I noted above, the positions aren't so mature in the Income Portfolio (or the fund) where we're not worried about a pullback and, since the goal of the Income Portfolio is simply to make $4,000 a month and we've made $95,000 in 7 months – it is very tempting to quit while we are ahead as the move up was unnatural, and we KNOW it.  

    Let's say we're playing Russian roulette and we have a goal of one round and our goal is to live.  There is a 1/6 chance we will fail (lose $48,000 instead of making it) and we pull the trigger and live and then the other guy pulls the trigger and lives (our first $48,000) and then we decide to go again with 4 chambers left (25% chance of losing $48,000) and we both live and it's another $48,000, guaranteeing us 2 good years ahead.  Do we then go for 3 with only 2 chambers left and a 50/50 chance of blowing our brains out on the next round or should we take the 2 years in the hand and not play for another in the bush?  

    Markets don't go up forever.  Just ask…. well, anyone, I guess.  They also don't go down forever and you can make very good money playing for the middle from either side and, rarely, you can make money playing for the ranges to break up or down but it's a much less reliable way to play.  As you note, you are up 26% in 21 days with only 40% invested.  You KNOW that won't last.  You're not going to be up 400% at the end of the year – not very likely anyway.  That means, at some point, there will be a correction and the question is, are you willing to risk it?  

    In FAS Money, we were up $7,000 (200%) and we didn't mind risking $1,000 to play out XLF into earnings and we lost it but that doesn't in any way hamper our ability to make another $3-4,000 over the next 6 months so no worries.  In the Income Portfolio, however, if I know the market is going down the same 10% it went up since November – then we could assume we'd lose about $45,000 and that means we can either spend $10,000 to hedge it out completely (and that only keeps us even) or keep the entire $95,000 in profits and, on that same pullback, jump back in and buy at the lows and make another $95,000 on the next 10% recovery and, even if we don't recover, at least we're back in 10% cheaper than we are now.  

    Fortunately, so far, the day's action is making the decision unnecessary – but it's a very good thing to think about what you really want to do if it all hits the fan.  

  50. Phil

    Happy 5 points on the Nas futures already (/NQ)!  That's $100 per contract, not too shabby for lunch money…

    Oil $96.66 is a good spot to play for a break-down (/CL).  Dollar holding the line at 80 so should weaken oil if it holds but right out at $96.71.  

  51. Phil

    USO/Burr – As I said above, still 24 days to go and we think the macro is weak and we're willing to roll to March.  If you're not, of course cut and run but, if that was the case, you should have had a stop at 20%.  

    Charts/StJ – I'd say home sales very bullish.  China electricity chart is just strange.  How can they cut back like that?  Seems like it can't be the whole story.  

    TOS/8800 – Scott was the only guy I knew there but someone took over our account.  

    IRA Portfolio/Craig – Thanks!  

    SODA/Scott – That is true, I only wish I owned stocks in the Fondue Corporation in the 70s – who cares if no one ever uses it, as long as they buy them?  Of course, that has become GMCR's problem with their machines and they ran from $35 to $115 before the model became exposed and they crashed back to the teens.  SODA is in an echo boom as they IPOd to great fanfare and went from $27 to $80, then back to $27 and now double back to $52 and now have 15% of GMCR's market cap, despite having 1/10th their sales and even less than that in income.  Anyway, I wouldn't short them at $50 because the story is too good but I do hope they hit $80 again so I can short the crap out of them there.  

    CHK/Samz – TheStreet reiterated a hold, which may have been better than expected as most have been trashing them.  We got off that ride a while ago but I think mid-$20s is fair for them.  

    Long-term management/Den – Well, feel free to volunteer to maintain an older version of the Income Portfolio but, if it's working right, there should be almost nothing to do with older positions for months at a stretch, sometimes just once a year we sell calls to cover.  That doesn't really teach people anything and, as I've done it in the past – it leads to a lot of people complaining that they can't possibly get our entries so I prefer doing a refresh once a year – as long as we're well on track which, so far, we have been each time.  Look at Jasu's trades above – his biggest problem is whether or not to roll to a an additional 30% discount and risk 2x or take a 10% discount on the same 1x – THOSE are the kind of problems you want to have, long-term!  

  52. terrapin22

    PSW Atlantic City Conference April 27-29.  I have seven members signed up so far.  So there are 3 spots left in the first group of ten who will get the best rate if we get to fifteen attendees.  Please see my original post on Friday.  Feel free to email me with any questions.   

  53. terrapin22

    Phil – maybe you can provide a link to my post on Friday.  Thanks.  

  54. Pharmboy

    TSRX….a few more shares @ 4.98 order in though, so don't chase.

  55. 1020

    I posted this story last night:
    …Tell me again,….What do you do for a living?
    http://www.forbes.com/sites/leonardburman/2013/01/21/phil-mickelson-stop-whining-and-give-thanks-for-your-good-fortune/

    Folks, you may want to reach for the kleenex on this one…..
     
    Woops!  (I must say that I appreciate the way "Lefty" handled it, instead of "My comments were taken out of context" Mickelson owned it.)
    http://msn.foxsports.com/golf/story/phil-mickelson-apologizes-for-tax-comments-says-he-should-have-kept-it-private-012213

  56. stjeanluc

    Here you go Terra:

    http://www.philstockworld.com/2013/01/18/fridays-fantastic-finish-what-next/#comment-2838731

    Thanks for your work!

  57. 8800

    Phil,
    Thx for the add'l guidance on the BXP trade, the finer aspects of which I will do my best to appreciate …in time.

  58. 8800

    All/TOS,
    Thx for the info re Scot S.

  59. revtodd64

    Hello Phil and group!  I've been away for a few months and coming back in.  I look forward to participating again.  I'm not a daily trader but will pop in a couple times a week.

  60. stjeanluc

    Apparently there is a 75% correlation historically between what IBM does after earnings and the broad market over the next 5 weeks. The correlation was 100% last year. As IBM goes, so does the market apparently. Tonight will be interesting! Bespoke speculates that IBM correlates so much to the market after earnings because of the fact that their service unit is in so many of the of the S&P500 companies. 

    So IBM goes up tomorrow, look for a 5 week rally! There is of course that little AAPL date tomorrow night. But AAPL has been out of sync with the market lately anyway.

  61. 1020

    Welcome Back Rev!

  62. Pharmboy

    Well, ain't that timely….ZLCS….saves me the write up…as it is quite good.

  63. Pharmboy

    Um, DD on ZLCS.

  64. hemas03

    Phil, I would like to get in on the income Portfolio AAPL combo trade.  In order to get about the same net I could do the following: BTO BCS Jan 14 410/500 and STO Jan 15 380P.  I'd like to know what you think about this adjustment.  Original was 400/500 BCS and 350 Put.  The main change has been that the put price dropped about 10%.
    TIA

  65. scottmi

    NLY – even at today's pathetic prices due to low VIX, selling the Jan 2015 $13 puts nets $200 for only $326 regular margin, or about 30% on your margin, annualized.

  66. Phil

    Terra's original comments on our PSW Investors Conference – East Coast Edition:

    PSW Atlantic City Conference April 27-29.

    The date has been set and conference room booked.   It will be at the Harrah’s Resort.  It will follow a similar schedule as the Las Vegas conference with dinner and poker with Phil on Sat. night, all day conference on Sunday and live trading on Monday. 

    I have a block of rooms at the Harrah’s Waterfront Tower at $279 for Sat. and $65 for Sun which you can book on your own.  What I need from interested members is payment up front.  We will have a breakfast spread and lunch both days.   

    We will a have a reverse auction process in terms of the conference fee:  the first ten to sign up pay $400.  The next five pay $300 and the first ten get $150 back.  The next five pay $300 and the first fifteen get $50 back.  

    So on the first twenty participants, the cost to first ten is $200, next five is $250 and last five is $300. 

    We have a big conference room (at no extra charge) so certainly have room for more beyond that and could then probably have enough to pay for the dinner on Sat.  Phil does not have a lot of free time as we know so this is a special opportunity for us to learn from him in person during a live trading day. 

    I have not been to the Las Vegas conference but have heard many positive reports about it.  Six members had expressed interest a few weeks ago when the conference was first announced so it’s only fair to hold them a spot in the first ten until I hear back from them.  Craig is planning to hold an IRA discussion.  

    My paypal is: james.e.bragg@gmail.com  Thanks and I hope we get a good turnout!!

  67. Jbur

    Scott Sheridan/ Stj and 8800: Last time I asked for Scott I was told that he was cashed out during the TDA buyout. He's probably on a South Pacific Island with an umbrella drink.

  68. scottmi

    BNN/phil – are they quashing your AAPL trade? over here on the west coast the BNN link not working today, can't get your segment to run even after searching and clicking on the result..

  69. Savi

    TDA/TOS—--you can contact James Ferland or anyone on his concierge team and say you are a member of PSW and that I gave you his name—phone no 866-839-1100
    hope this helps

  70. scottmi

    BNN/phil – whoa! using their site navigation to go through videos, and teh Jan 15 Business Day PM is .. missing!

  71. Pharmboy

    VIX Apr 16/18 BCS.  55c…..

  72. stjeanluc

    I know it's so yesterday but I would bet Greece comes back on the front burner once Europe recognizes that they'll have to write off part of the debt:

    http://qz.com/45085/the-imf-admits-its-current-plan-for-greece-isnt-enough-sorry-germany/

    Apparently the IMF didn't foresee the fact that austerity would make things worse:

    Greece’s recovery is now projected to start later, and the path for medium-term potential output is expected to be lower… Given the revised policy framework and deeper recession, and assuming no actions to reduce debt, Greece’s debt would be unsustainable. Greece’s debt would be considerably higher than in the original EFF-supported program, peaking at close to 200 percent of GDP and only slowly declining to 150–160 percent of GDP in 2020.

  73. Phil

    Mickelson/1020 – I think that nasty backlash is a good lesson for all 1%'ers – this game isn't over by a long shot.  

    BXP/8800 – It's kind of like asking why make a certain move in chess and then I have to explain all the possible moves and counter-moves for the next 5 turns – at a certain point, it takes longer to explain all the possibilities than it would to play the game.  Once you get used to living trough the various outcomes, the set-up moves come naturally but trying to jump the gun and get a head of the learning curve is never going to substitute for experience.  No one can read a chess book and then go play at a championship level – no matter how good the book is, right?  Same with options – you have so many possibilities in so many endless combinations – that the best thing to do is learn what you can and then go practice until you've seen enough moves and outcomes to begin to get a feel for what works and what doesn't and, like chess – moves that work for one player (your positions) against one opponent (varying market conditions) may be totally inappropriate for the same player against a different opponent and certainly not for another player as we all have to learn to play in a way that we are comfortable and suits our personality – or we end up second-guessing ourselves to the point of defeat.  

    Hey Rev, what's up?  I owe you an Email, in fact, from your nice Christmas message.  

    IBM/StJ – Would be hugely important if not for AAPL.  The weighting of that stock is just silly.  

    AAPL/Hemas – I think that's fine as it's splitting hairs between $380 and $350, which is the main issue.  Just be sure you can live with the consequences of AAPL dropping $50 on Thursday and maybe down to $400 and those puts jumping to $82 (price of the $480) with a $90(ish) increase in margin requirement.  As long as you REALLY want to be long-term on AAPL under those conditions, the adjustment is fine.  

    NLY/Scott – It's not so much where you start off, but where you end up if we drop.  If you sell the $13 puts on TOS ordinary for $2, the net margin is $1.30, indicating $3.30 in margin, less the $2 you collect.  But, let's assume a 25% drop in NLY, from $15 to $11.  Then we could assume your short puts would jump to $5 (price of the $17 puts) so now you have a loss (no longer credit) of $3 PLUS the full $6.50 margin (margin on $17 puts is $8, so extrapolating for the $13 puts) for net $9.50 – up from net $1.30.  That's the danger of counting on those margin plays and I'm not saying it's not a good play – just encouraging you to be careful and make sure you REALLY, REALLY, REALLY are ready, willing AND able to own the stock for net $11 – if so, who cares what the margin is?  

    Sheridan/Jbur – Based on today's earnings, he should have kept the stock!  

    Sarkozy/1020 – Hey, he didn't back the hikes.  He lost to the Socialist and he's getting out – if only our GOP leaders had the good manners to leave the country now that they've lost the election, we'd all be happier.  

    BNN/Scott – That's strange.  It's not my video anymore.  

    TOS/Savi – Thanks, glad someone has that!  

    VIX/Pharm – Calmed right back down to 12.66.  

    Greece/StJ – Nothing anywhere is fixed, just cans kicked down the road.  

  74. lolobear

    GOOG – what about their rare warning on Friday?  Is that any indication of a miss?

  75. Pharmboy

    Thar she blows….SGEN going for it!!!

  76. rj_jarboe

    Since the VIX is back down and there are no worries in the world it might be time for another quote:
    "it is human nature when the sea is calm not to think of the storms" – Machiavelli

  77. scottmi

    NLY/phil – i'm good with that. even if a 100% cash cover necessary (such as in IRA) still only $1300 so worst case, get 8% on your margin, annualized… and who wouldn't want NLY at $11 net entry (assuming they don't pull an Enron).

  78. Phil

    Oil was very exciting but finished at $96.64 in the end. 

    GOOG/Lolo – Nice low expectations now but I think baked in.  The crux of the warning is that they have classified Motorola Home, which they are selling, as a discontinued operation, which means they will technically miss on revenues by a mile from projections, which include the unit.  Profits, however, may actually improve.  It's funny because, when MOT was near bankruptcy, I figured they couldn't possibly lose any more money than they already had – yet GOOG bought them and proved me wrong!

    SGEN/Pharm – The gift that keeps on giving.  

    Rally fizzing a bit but we're safely up now for the close, I think. 

  79. angelcur

     its normally not a good sign when a stock that has been so loved just sits near its lows like it is…usually a v-bottom occurs..which it hasn't yet….but its insane that investors ignore EVERY market negative and pay attention to EVERY aapl negative with valuation so low.

  80. angelcur

     PHIL:you see US economic surprise index just turned negative?
     means data is surprising on the downside…usually precedes market drops when dropping

     http://www.zerohedge.com/news/2013-01-22/us-macro-turns-negative-worst-almost-5-months

  81. roberthjrfl

    Phil, I have the Feb SPX 1470 / 1490 Call spread (basis $4.50 now 13.15) and  SPX 1450/1435 put spread ($3.00 now $1.90).  I am wanting to provide more cover.  I would like your opinion on which course of action you like the best.  1) roll the 1450/1435 put spread up to the 1465/1450 for $1.00, or 2)  sell the 1470 call for 27.25 and buy the 1495/1515 Call spread for $7.60 which covers the short 1490, or 3)  just add another short SPX call at 1500 for $9.35 to cover the 1470/1490 spread.  Thanks for your guidance.

  82. Pharmboy

    IWM Jan 25 $90s.  Fun, exciting….and should be profitable if they goose this up….seems to me they are going to.

  83. Pharmboy

    GO GO GO

  84. Pharmboy

    C, now they are profitable……

  85. Phil

    KKR's 2013 Outlook.  

    Lots of good stuff – in line with our general outlook (bullish housing rebound drives economy starting with durables, manufacturing and jobs to follow)

    Australia with record heat-wave now.  Boy, they really go all out to spread that Global warming myth. 

    NLY/Scott – That's good.  Just wanted to warn you as you seemed to be leaning on the margin aspect. 

    AAPL/Angel – Remember last year when we finally gave up on RIMM because people couldn't take it any more and I was tired of hearing about it?  RIMM was failing $10 and we liquidated and now it's $17.50 but we didn't DD because we listened to the analysts and looked at the charts instead of paying attention to our own valuation, which clearly showed the impact to their subscription streams simply didn't jibe with all the negative projections coming from the MSM.  But still, it was a relentless fall and people just gave up – right at the bottom it turns out.  I won't be doing that with AAPL, that's for sure. 

    My 12/16/11 comment on RIMM (at $12.50) was:

    RIMM/Kyw – I feel about RIMM the way I do about WFR (see end of yesterday’s comments.).  It’s too annoying to put more money into but too good to walk away from at this ridiculous price so I’d take $13,500 off the table ($9,500 loss, right?) and pick up 20 2013 $5/13 bull call spread at $5.35 ($10,700) and sell 10 2014 $10 puts for $2.30 ($2,300) for net $7,400 with an upside potential of $16,000 and that gets most of your money back if RIMM just holds $13 through next Jan.  That way, you have $6,100 on the side and your worst case is having to buy 1,000 shares of RIMM for $10 ($10,000) so you risk another $3,900 to get even at a much lower strike.  If RIMM crosses below $13, you can buy something like the June $17 puts ($4.70) as a momentum play to cover as well. 

    That was our rescue play for RIMM but, sadly, RIMM then became our reason for staying away from NOK, who also made a stupendous recovery.  

    Surprises/Angel – Well, as you can see from KKR above, it's all subject to interpretation.  Still, I do think we need to be cautious.  Without AAPL, GOOG, IBM and a few others picking up the ball here – it's over for a while. 

    SPX/Robert – Well that's very aggressive.  Glad it worked out. Wouldn't taking the profits off the table be a good cover?   You had net $7.50 in and now net $15.05 for a double and now you are talking about spending money, trying to protect the profits so you can max out at $20 on the bull side – what's the sense in that?  We have to assume some sort of rejection at 1,500 so it's just a question of timing and quite the wild-card with upcoming earnings.  Wouldn't you be better off pocketing your 100% gain and seeing what happens the next couple of days and then re-establishing your spread once you have more data to move on?  

    Assuming all goes well with AAPL and GOOG, the S&P has 10 points to go to 1,500, which is only 1% so it's either going to do it this week on a positive AAPL/GOOG/IBM move – or it won't get there at all.  A big move up in AAPL, which is 4% of the S&P, should punch it over by itself and that 1,500 is up from 1,400 since 12/31 so 7% without a correction (but we did consolidate right at 1,470, which is 1.05x 1,400), hitting 1,500 is a good indication that we'll get a 20-point correction, back to our 7.5% line at 1,480 and, if that holds – THEN we can go bullish on the S&P for a breakout but – as I've said since last week – all we really have to do is watch the $555 line on AAPL, which should make or break the market.  

     

    Goose/Pharm – Nice call – big pop into the close.  

    Nuclear war/Angel – Fortunately, we all know what to do over here.  

  86. yodi

    GOOG what give Bloomberg 705 and TOS 725 ????

  87. Pharmboy

    Up up and away…..things are peachy in Corporate land.

  88. yodi

    GOOG OK Bloomberg shows now as well 731 looks like we have to do some rolling this week! But this is inicial excitement !

  89. yodi

    IBM up to 201

  90. scottmi

    BNN/phil – was tryign to share this with brother in law and  i swear they just took it out. can't have any bullish AAPL talk out there…  love to hear if they have an explanation for you.

  91. Phil

    Dow closed at 144M, normal(ish) day.  Transports kicking ass.  

    Nas futures now up 25 from our entry ($20 per point per contract).  

    At the close: Dow +0.38% to 13702. S&P +0.4% to 1492. Nasdaq +0.27% to 3143.

    Treasurys: 30-year +0.47%. 10-yr +0.29%. 5-yr +0.13%.

    Commodities: Crude +0.65% to $96.66. Gold +0.19% to $1690.25.

    Currencies: Euro +0.03% vs. dollar. Yen -0.99%. Pound 0.%.

    Market recap: The Dow and S&P recovered from a morning slide to extend their multi-year highs, as earnings from materials stocks such as DuPont and Freeport beat expectations, which could mean the economy is stronger than realized. The dollar fell vs. the yen as the Bank of Japan plans to start asset purchases sooner than expected. Crude oil pushes past $96, highest in more than four months.

    "It's as good as it gets in the U.S.," a wildly bullish David Tepper tells Bloomberg. "This country is on the verge of an explosion of greatness." Be long the "risk things," he says, and avoid Treasurys, the Swiss franc, and the yen. He's as blunt as ever: "I'd rather work at McDonald's than the sell side."

    Sterling takes a big drop as BOE Governor King hints at additional QE, telling an audience Q4 GDP will likely be considerably weaker than Q3, and the bank stands ready for more stimulus "if needed." Cable is flat and buying $1.5840 vs. $1.5870 moments ago.

    Google (GOOG): Q4 EPS of $10.65 beats by $0.13. Revenue (exc. traffic acquisition costs) of $11.34B (+39% Y/Y, boosted by Motorola) misses by $1.12B. Shares +3% AH. (PR) GOOG looks like $730 already on earnings.  

    IBM (IBM): EPS of $5.39 beats by $0.14. Revenue of $29.30B (-0.6% Y/Y) beats by $210M. Expects 2013 EPS of at least $16.70, above consensus of $16.63. Shares +4.1% AH. (PR)

    Intuitive Surgical (ISRG): Q4 EPS of $4.25 beats by $0.23. Revenue of $609M (+23% Y/Y) beats by $24.79M. Shares+3.2% AH. (PR)

    KB Home (KBH) says preliminary quarter-to-date net ordersfor FQ1 were 750 through January 18, representing an increase of 54% Y/Y. However, the home builder notes that relative improvement is expected to moderate as the quarter continues. It also announces a $250M secondary offering consisting of $100M in common stock and $150M of convertible senior notes due 2019. Citigroup, Credit Suisse, BAMA and Deutsche Bank will act as joint book-running managers. Shares -3% AH.

    As opposed to many other lenders, Regions Financial (RF+4.4%) saw no deterioration in its net interest margin in Q4. It remained at 3.08% and it may improve in 2013, thanks to $8.3B in maturing CDs (CC transcript) with rates in the 0.5%-1.5% range that could be replaced with ones in the 0.20% area. (earnings presentation)

    R.R. Donnelley & Sons (RRD +4.5%) trades higher with some chatter out that Morgan Stanley has put the company on a list of possible takeover candidates. Shares of RRD trade at their low end of their 52-week range with losses still piling up.

    Freeport McMoRan (FCX +5.1%) is among the day's top gainers after posting better-than-expected earnings and copper sales. CEO Richard Adkerson foresees improvement in U.S. copper demand, predicting 20% volume growth in 2013 followed by another 15% in 2014, and says copper costs should drop ~10% to $1.35/lb. by year-end 2013.

    CHK pop explained – they discovered winter!  Shares of natural gas producers Chesapeake (CHK +5.3%) and Southwestern Energy (SWN +2.9%rally as a dangerous cold snap hits the eastern and midwestern U.S., boosting demand and prices for the fuel. The east coast is seeing "some of the coldest weather in two years," Kilduff Report analysts say. The cold is expected to continue, according to extended forecasts

    Heard on Brinker International's (EAT -1.8%) earnings call: 1) Execs forecast commodity inflation will increase by 2% in FY13, but that the company will be able to keep prices elevated and hold the line on margins. 2) Previous FY13 guidance is reiterated with earnings still expected to improve in the back half of the year. 3) The moderate pace of unit growth at Chili's appears set to continue with the chain already "deeply penetrated" in many markets. 4) The company sees 370 company-owned Chili's restaurants being redesigned this year. (webcast)

    Analysts warn that with the economy so fragile and pricing competition fierce it will hard for restaurants to pass on the higher wholesale beef prices that are forecast down to consumers. Though quick-service chains will toy with their menus (more chicken) and try to use forward purchase contracts to lower costs, the impact of last year's drought could take a few seasons to reverse.

    The investigations launched on Boeing's (BA) Dreamliner by regulators on both sides of the world center on two distinctly different searches. Depending on how it works out, the results could have a resounding effect on the company. Japanese regulators are investigating the batteries themselves and whether the planes received faulty batteries. Contrarily, U.S. regulators are focusing on the complex fly-by-wire systems. If the problem is simply a bad battery batch, BA needs just to replace the defective ones with new ones. However, should the problem be more systemic, the costs to Boeing could be tremendous.

    Tesla Motors (TSLA +2.1%) exec Jerome Guillen says the company's plant in California is running at full capacity in another indication the EV automaker could reach its production goals in 2013. The production schedule is critical with 20K orders reportedly already in the books for Model S vehicles. - "Ship 'em all, we're gonna take 'em out a whole new door!" – Musk

    Best Buy (BBY +4.2%) trades higher to reach a two-month high without any specific company news pushing sentiment. The buzz over Dell's own P-E deal could be bringing some investors back into the fold.

    The BlackBerry Z10 (RIMM +8.9%) will sell at a subsidized price below $199, BGR reports. The site has also provided 100 new photos of BB10's controls and settings – they cover everything from touch gestures to parental controls to search options. The BB10 launch event arrives next Wednesday. (earlier) (prior leaks: III)

    "We hope to see RIM remain a global leader and player, and make sure it grows organically," says Canada's Industry Minister, suggesting his government might object to a sale of RIM's (RIMM+9.6%) hardware ops. Thorsten Heins suggested a hardware sale is possible in his interview, but it doesn't look as if one is planned over the near-term. RIM remains sharply higher following Heins' interview,new BB10 leaks, and an upgrade to Sector Outperform from Scotia Capital – Scotia upgraded RIM to Sector Perform only 4 months ago.

    Three lunchtime reads:

    1) Will Europe kill the rally?

    2) A confidence hit for U.S. housing?

    3) Four ways to become a better self-directed investor

  92. stjeanluc

    IBM looking at earnings of $15.53 for 2013. Even at $201, that would be a P/E of 13. They have been around 14 the last couple of years so not too unrealistic to look at around $220 as a target for end of year.

    Definitely will look at entering a trade tomorrow.

  93. stjeanluc

    And it looks like GOOG might fall in where our earnings play will work out well.

  94. stjeanluc

    Transports are really taking off… Another 1% today!

    http://www.bespokeinvest.com/thinkbig/2013/1/22/transports-defying-gravity.html

    The Transports index is now 9.3% above its 50-day moving average.  While very high, this spread has actually been higher four other times during the current bull market.  The last two times the Transports index got this extended, it stalled out once it got to 10% above its 50-day, which isn't very far off from where it is now.

  95. roberthjrfl

    Phil, thanks for the input, you always have great insite on these spreads.  These spreads are hedging the weekly selling of premium so it is not entirely being greedy or that aggressive.  These spreads were bought when the market was at 1403 at the end of December and I have rolled the put side up a couple of times similar to what you do with the mattress play (buying $1 of strike value for $.4 or $.5) the whole time while selling weekly premium.   What do you think about selling the 1470 call for $30.70 and buying the 1495 call at 13.55 for a net credit of $17.15 converting the bcs into a call credit spread setting up for a market pullback.    If the market continues to march upward you still pocket $12.15 (credit less the difference between the strikes)  If the market pulls back and ends below 1490 at expiration you pocket the entire credit of $17.15.  Thanks for the your guidance.

  96. scottmi

    RUT – interesting swimlesson on Fibonacci tools today, and one example they pulled up for fun when getting into next segment was a TOS charts Fib extension study.  Starting with point A at 6/5/12 low, point B at 9/14/12 swing high, and point C at 11/16/12 swing low it painted a Fib extensions plot with 100% extenstion at 903… i,e, we're pretty much there.  will it hold? time for some (more) TZA cover?

  97. wombatcreative

    Phil // Energy / Coal
    Made some pretty good money on these guys this year – wondering your opinions about re-enter.
    ANR ( $9.94 – strong charts )
    WFT ( $12.84 – first pop off a possible bottom – been selling $10 puts with much success, but the VIX is not playing )

    Best 
     
    Wombat

  98. hemas03

    thanks, phil

  99. jelutuck

    Phil/income portfolio.  Trying to reconcile your comments today on the IP with what you've often said about this type of portfolio.  It is supposed to be a long-term, low-risk, self hedged (mostly) portfolio.  Those of us trying to build our own may be confused about your talk of closing out most of the positions because you see the market at risk of topping out.  I know  many of my positions are now halfway to full profit, deeper OTM and shorter time to expiration, so they seem "on track" and I don't want to be trying to time the market and avoid a 20% correction that may or may not come.  When you say they should become low maintenance, shouldn't that mean we hold these positions and even build on them if the market dips, taking profits by rollling to longer options, selling calls, etc?  I know for me those kind of moves would be more instructional than selling half the positions and sitting in cash until June!

  100. zeroxzero

    Google is a strong company, among other reasons, because it has been successful at monetizing the identity of its users.  I think Google maps is great, but I have uninstalled Google Chrome [and Google Plus, oh Jesus]  from all computers — it tracks, it attempts to "unify' my data [use of youtube and other related accounts], target me with ads [they change language and sell location depending on where I am and which language I write in.]  So owning Google is like owning shares in a funeral home monopoly — great dividends and growth, but you don't want to be a subject of their attentions.

  101. zeroxzero

    Google — Oh, great — mobile makes them even stronger -- 
    http://online.wsj.com/article/SB10001424127887323301104578258323326457316.html?mod=djemheard_t

  102. Phil

    QQQ WEEKLY Good morning!  

    Holding steady from yesterday's excitement so far.  

    Dollar at 79.85 so no major effect there with the Euro at $1.3328, the Pound at $1.586 and 88.31 Yen to the Buck.  

    Oil is $96.69 (first official day of new contract), gold $1,691, silver $32.18, copper $3.70 ($3.75 is serious improvement), nat gas $3.57 and gasoline $2.836.  

    There's no major news to distract us from earnings and both GOOG and IBM came in impressively, so we're in pretty good shape as we wait for AAPL – and even that stock is up to $507 this morning.  

    Earningspalooza today and they come hot and heavy after this one:

    Notable earnings before Wednesday’s open: ABBVABT,APDATIBHICHKPCOHDGXFNFGGDLCCMCD

    MSINVSPXRESSAPSTJTELTXTUTXWLP

    Wednesday's economic calendar:
    7:00 MBA Mortgage Applications
    7:45 ICSC Retail Store Sales
    8:55 Redbook Chain Store Sales
    10:00 FHFA House Price Index

    Notable earnings after Wednesday’s close: AAPLALTR,AMGNBKWCBSTCCIFBCFFIVHXLINVNJEC

    LOGILRCX,LSIMIPSMLNXNENFLXPLCMSWFTSNDKSYKSYMC,TERURIVARWDC

    IBM WEEKLY We have our IBM earnings play in the $25,000 Portfolio to keep an eye on, that one was from yesterday morning:

    I'd say bad new is priced in from last time and certainly outlook is better now than October and you can buy 5 IBM July $190/200 bull call spreads for $5.25 ($2,625) and sell 3 March $200 calls for $2.60 ($780) and 3 July $180 puts for $4.70 ($1,410) for net $435 for the $2,500 worth of long spreads if all goes well.  Let's put that in the $25KP.  

    IBM is right on target at $203.50 and, of course, we needed $200 to get the full $2,500 on our spread and the puts seem safe so now it's just a matter of dealing with the short calls – and we don't need to make any quick decisions but we'll see what rolls there are at the open.  

    Our other earnings play for this morning was GOOG and that one was from the 17th:

    GOOG;/Itrade – Big deal on GOOG is going to be mobile search.  Doubt there is much growth in desktops. Earnings are on the 22nd (next Tuesday) and don't forget Monday is a holiday so I kind of like the June $665/700 bull call spread at $21, selling the next week $725 calls for $15.50 for net $5.50 and the plan would be to roll those Tuesday (hopefully picking up some premium crush over the long weekend) and sell Feb calls to cover, hopefully for another $5 to make a net free spread.  If GOOG has good earnings, we can deal with it by rolling and if GOOG has bad earnings, the caller goes worthless and it's a free(ish) spread and we can salvage what's left or sell puts and roll down if we think it bounces back.  Let's do 3 of these in the $25KPA as it will be a good thing to follow along.   

    Savi asked in Member Chat yesterday if we should buy back the short calls and my response at the time was:

    GOOG/$25KPA, Savi – I had decided not to but may change my mind.  They are still $9 and, if we buy them back, we raise the net on our $35 bullish spread to $28 AND leave it unprotected with GOOG not even at the top of the spread.  If we leave the short $725s in place, we have a net on our $35 spread of $6 with $29 of upside before we have to pay back the weekly $725 callers and, of course, we have 6 months to roll them AND we can easily buy more longs and roll the callers to 2x and our break-even is $754 and StJ says GOOG only averages 6.7%, which is $746 so we have many, many ways to win by leaving the spread as is whereas, if we pull the short calls – we only have one way to win – and we win a lot less

    GOOG WEEKLY GOOG is right about $735 pre-market so perfect if they hold there or just a bit lower.  We paid a net of $1,650 and max pay-off is $10,500 and that bull call spread looks safe enough, and we didn't even sell puts, so it's all about how well we roll the short puts, which expire on Friday and we've got 5 more months to deal with them – we can even turn a bigger profit on this trade selling more calls but that's just greedy when we're on track to make 536% on cash already!  

    As I said in yesterday's morning Alert, it's Apple $555 or bust on earnings later and that's very true in our AAPL-bullish $25KPA and AAPL Money Portfolios – we'll press our SQQQ hedges this morning but an insurance pay-off would be a bitter pill to swallow if AAPL misses!  

    Of course, AAPL only has to hold $500 to make our Income Portfolio happy but that sure won't get the S&P over that 1,500 mark so we REALLY need AAPL to pull it out this evening for the good of the markets. 

    Without that catalyst, I don't see how we're going to avoid a pullback – so let's be careful.  Last night's action gave us a great buffer and eliminated part of the need to hedge heavily against AAPL earnings tonight but don't make any plans for tomorrow morning – it's very likely to be wild – either way:  

  103. stjeanluc

  104. yodi

    Phil just one little correction on GOOG it is the 725 call and not the put to roll if needed so we will see for a day or two if the excitement will go down.

  105. lvmoda

    Just an anecdotal point on this:
    Tesla Motors (TSLA +2.1%) exec Jerome Guillen says the company's plant in California is running at full capacity in another indication the EV automaker could reach its production goals in 2013. The production schedule is critical with 20K orders reportedly already in the books for Model S vehicles. - "Ship 'em all, we're gonna take 'em out a whole new door!" – Musk
    My Model S reservation #14909 converted to an order last week, and is now scheduled for delivery in Feb/Mar time frame (about four months sooner than I had expected – too soon for my option play to pay for it).   So, I'd say their factory is seriously cranking them out – potential for an explosive pop at earnings, especially if they raise their production forecast and commit to another plant.  
    Parenthetically, it seems like Tesla is not having problems getting orders even at the higher price point of the Model S – and the Model X and future models will be sold at lower price points.  Most of the investor attention is on execution risk, ie. getting the product built and shipped.   So, I think TSLA could set a new high in their next earning report, if my anecdote is any indicator.

  106. lvmoda

    OMG,  John Sculley on Bloomberg this morning talking AAPL….FAIL!

  107. Phil

    SPX/Robert – I think it's usually a fine idea but this particular week, you risk a blow-out on a huge market move (the House could reject the debt deal today aside from an AAPL shocker).  I don't think you have a trade that pays off no matter which way the market goes though.  If you sell the 1,470 call for $30.70 and buy the 1,495 call for $13.55 (I take it these are Febs), you do have a net credit of $17.15 but, with SPX at 1,492 now (and up another 4 this morning as a good example of how you get blown out) you have to pay back $22 if the S&P flatlines and up to $25 if the S&P moves up slightly.  You are the sucker paying premium as you need the S&P to drop to 1,487.15 just to break even and you are giving the index 22 full days to bury you.  That's the new spread you're rolling to – no magic beans – you are confusing the issue by calling it a roll from the other spread but you're still risking your profits, which you could just pocket ahead of the uncertainty and then go back to sensible premium selling once we get past the very volatile period that can wipe out all your profits overnight.  

    903/Scott – RUT closed at 899.24.  I think those psychological points, like 900, trump all that TA nonsense and 900 will be the tough nut to crack while 903, if it holds, would confirm a move up by adding a technical layer of support to the already compelling story of Russell 900.  The real question is – on to 1,000 next?  

    Coal/Wombat – Note JRCC from earlier today.  Other than that, it's BTU, BTU, BTU and, when in doubt, BTU.  It's at $26.26 now so you missed $20 when we were buying coal stocks last summer but you can still sell the 2015 $23 puts for $4.40 and use that to buy the $20/30 bull call spread at $4.70 for net .30 on the $10 spread that's $6.26 in the money to start and your net, if put to you is $23.30, which is still an 11% discount to the current price (this is an aggressive spread) while you get 3,233% of your cash back at $30 and your break-even is way down at $21.65 (17% off) due to owning the $20 calls.  

    Why mess around with junior coals when BTU is so cheap?  

    WFT/Wombat – is a different matter, of course, but the fact that they are up 50% in 3 months makes them a bit less attractive than they would have been then for bottom-fishing.  I'm not a fan of the supply companies and this particular one has lost more money than it's made in the past 4 years with $600M disappearing this year.  Debt is going up ($7.6Bn), Liabilities are through the roof ($11.6Bn) and, despite borrowing $670M last Q, they still had $16M of negative cash flow.  So, without some very compelling reasons to play this company – it's a stay away from me and would be a short if they weren't so beaten-down already. 

    Reconciling/Jet – I bought my house in 1998 as a long-term investment for $400,000.  I had no intention of selling it until my kids were out of college and, perhaps, not even then.  In 2006, some idiot offered us $950,000 for it and you sound just like my wife, who said it was supposed to be a house we settled down in and just because we could take a 115% profit off the table, it wasn't the purpose of the investment so we should hold onto it.  Well, it's 2013 now and I'd be lucky to get $650,000 for it (and it was maybe $500,000 in 2008).  As it's a house, it's OK, I don't mind so much but, if this were my retirement account – I'd be a moron for not taking the money.  Get it?  

    Yes, the Income Portfolio was SUPPOSED to be a long-term portfolio but we ACCIDENTALLY made more money in 7 months than we were SUPPOSED to make in 2 years.  Now you have to deal with the ugly fact that we have an extra $100,000 and you can TAKE THE MONEY and get back to cash and then start accumulating a sensible set of stocks as bargains present themselves (like BTU above) with no pressure at all to make money for the next two years – or you can risk all of your gains by leaving it on the table – not because you feel the market will not pull back but because you are SUPPOSED to be a long-term investor.  Does that really make sense?

    These are ridiculous, out-sized gains that are not likely to be sustained and that means we are likely to have a pullback.  When we were offered $950,000 for our house, I said to Tina we should take the money, rent for 2 years ($120,000 for two years for a spectacular 4br/4ba penthouse apartment in my old building at the time) and then come back and buy the house again for $600,000.  My plan would have worked perfectly (assuming they wanted to sell at a loss, of course) and at least we could have bought a similar house but it wasn't worth the net $230,000 profit (speculative at the time) against the disruption of our family (and losing a home we think is perfect) but, as an investment, it may take me another 10 years just to get back to the $950,000 I could have taken off the table 7 years ago.  

    So, Jet, you want to learn how to be an investor then LEARN how to be an investor – and step one is – DON'T FALL IN LOVE WITH YOUR INVESTMENTS and step 2 is – DON'T FALL IN LOVE WITH YOUR STRATEGY.  Conditions change, surprises happen – those who do not adapt and change become evolutionary dead-ends over time.  That's the instruction you need to be taking from this.  We stick out positions and adjust them when we're behind but, if we don't have the smarts to take the money when we make it – what is the point of any strategy?  

    GOOG/ZZ – Well, when the hunter-killer robots are tracking the last of us down, you will be one of the few who are able to avoid their detection.  Other than that, I think privacy is an illusion people cling to these days so I try not to worry about it.  On the one hand, I'd rather have ads that are targeted to me (if they MUST advertise) than random crap cluttering up my screen.  Either way I don't really pay any attention to them but I think it will be a great improvement if they ever fix TV ads and tailor them instead of making me watch ads for stuff I will never, ever buy and don't care about at all.  If TV commercials told me about new sushi restaurants and what concerts were in town and where the ski conditions were good this weekend – I probably wouldn't skip them on my Tivo.  So please, Google, target me…

    GOOG/Yodi – Of course, if we're lucky, they die on Friday worthless but, if we're heading over $740 today, we may want to roll while the next week/month premiums are excited.  

    TSLA/LV – Congrats on delivery, I'll certainly be out there to give it a spin!  

  108. Phil

    Sculley/LV – The original Steve Ballmer.  

  109. wombatcreative

    Phil // WFT IBM BTU
    WFT – money made off the bottom, I'll move on – thank you so much
    IBM – HAD the order on the creeen and they jumped to 204 – some big fish you just cant get — great call
    BTU – done, on a net .30 !! on a $10 spread into 2015. I'll sit and watch this one grow.
    Thanks man !

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