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Monday Market Momentum – Still Going Up

Say what you will about it, but this is one Hell of a rally!

After a very low-volume sell-off to close the year, we are now up about 7.5% since New Year's Eve and January ends on Thursday and could be one of the all-time great starts to a year if we hold it together for 4 more days.  

On Thursday, the Wilshire 5000 stock index, the USA's broadest market gauge, which includes almost 3,700 stocks, briefly topped its Oct. 9, 2007, record high of 15,806.69 before closing 21 points shy of a historic peak. Since the bear market ended in March 2009, stocks have generated paper gains of nearly $11 trillion, says Wilshire Associates. The Dow Jones industrial average and Standard & Poor's 500 stock index are just 2.4% and 4.5% below their respective peaks.

In Member Chat this morning, we discussed "The Mothers," the Japanese index of small-cap stocks, which have launched like a rocket from just over 400 at the end of December to just under 550 last week – an unbelievable (and unsustainable?) 37% run in 30 days.  To some extent, this Global re-pricing of equities simply reflects a waning of the crisis mentality we've had for the past 4 years – keeping prices depressed in what should be a forward-pricing mechanism.  As the massive volume of free money pumped out by the Central Banks finally begins to circulate through the economy – inflation becomes more certain down the road and that includes inflated stock prices.

imageAnother huge factor keeping prices down has been lack of retail participation in the markets as consumers struggled to repay debt and the 2008 crash left a lot of people feeling singed by the markets.  However, those who stuck it out now have it all back and they are sitting around the office saying "I just left it all in my 401K and now it's back".  That's a great commercial for long-term investing (our favorite kind) and a great incentive for those who still have jobs to start putting some into the markets again.  

As noted in this USA Today graphic, trade volume is rising, portfolios are back to 2007 levels (for those who stayed invested), money if flowing back into the market, bullishness is on the rise and fear is way, way down – probably too far down, as I warned last Friday, along with my hedging ideas, to be used if we can't hold our key levels.

Meanwhile, we're just amusing ourselves with earnings plays.  Friday it was CRUS, which we played in Member Chat on Thursday as my reply to a Member's question on them was:

CRUS/Willie – Fabless semis are all about the contracts and CRUS is a bit beaten-down of late and down 7.5% this morniing and not for any good reasons I can see.  With earnings tonight and expectations so low, I'd play them bullish by selling 3 Feb $27 puts for $1.90 ($570) and covering with 2 June $23 puts at $1.90 ($380) for a net $190 credit plus you get to keep whatever is left on the June puts.  If CRUS drops to $25, for example (down 10%), all you're doing is paying the short puts back and keeping the gains on the long put.  Anything up or flat is a winner.  Let's do that one with 4 longs and 6 shorts in both $25KPs.

CRUS did even better than we expected, popping 10% higher to test $30 on earnings and the short Feb $27 puts dropped quickly to .55 while the June $23 puts are still $1.45 so our initial $380 credit stays in our pocket and, if we were to cash in now, we have another $580 in value on our 4 June puts and we can leave the 6 Feb $27 puts to expire worthless because we were bullish on CRUS in the first place and this only confirms our desire to buy them below $27.  So $1,060 in our pocket after setting up a $380 credit spread is up 180% in 2 days – earnings are fun! 

Apple Earnings December 2012 QuarterI discussed our other earnings plays on GOOG, IBM, FFIV and AAPL earlier in the week and all goes well, except AAPL, of course but we've got a long view on AAPL and, as you can see from this excellent Dan Frommer breakdown, it's still our One Trade for 2013 as a ride back to $555 – even if we don't visit $400 first, is going to be a nice 26% up from here.  

$555 hardly seems unreasonable for a company that was trading at $638 with even lower earnings last spring and, of course, AAPL had $48Bn less cash last year so that, alone, should be good for a 10% bump in the stock price.  And, guess what, next year they'll have ANOTHER $48Bn in the bank and that's AFTER paying out a 3% dividend AND buying back more of their own stock at a TRAILING P/E of 8.6.  

That's going to be my last commercial for AAPL.  Possibly, if they do test $400, we'll have another round of buying but, if not, we won't need to discuss them until it's time for "I told you so" at the end of the year.  

Oh, and I guess, to be fair, I should remind you that this year's Dec quarter had 1 less week (7%) than last year's – so the comps are much better than they look – especially if you take into account the late November roll-out of the IPhone 5 and IPad Mini – AAPL's two biggest sellers missing the first two months of the quarter that was already a week handicapped.  Now I'm done…

On to other things.  We still have tons of earnings ahead with just about 1/4 of the S&P reporting so far so look forward to another week of fun earnings plays in Member Chat as well as some very lively action Thursday and Friday as we get a ton of key economic reports including the Big Kahuna – Non-Farm Payroll, on Friday.   180,000 jobs are expected to be added in January and that will keep our unemployment rate at 7.7%, or about 1/3 of Greece or Spain's.  

AAPL's (oops, was trying to move on)  26.7% gain in revenues, as measured by the S&P standard quarter, makes up most of the S&P's 3.8% reported gains so far.  While other reports have certainly been less than exciting – the market was preparing for much worse with the Christmas sell-off and we can expect a continued relief rally if earnings continue to simply not suck.  

As you can see from this Reuters chart, Q1 2013 expectations are worse than Q4 2012 so don't let the MSM tell you that forward guidance is disappointing – it's old news!  This, in theory, is our trough to earnings and the market is beginning to look ahead to that 2nd half of 2013 – all the way out to the Fed's QEAtLeast target of 2015.  Nothing to do but grow, Grow, GROW for the next 2 or 3 years unless there is hard evidence to the contrary.  

Wolverton - Cagle Cartoons - GOP Catfishing the Public COLOR - English - GOP, Republican, Gun Control, Austerity, Obamacare, Health, Debt Ceiling, We're not going to get overly excited about the market until we see these moves up sustained.  After all, these are nothing more than the targets we set back on Jan 11th and, as predicted that day: "For the Nasdaq to cross over 3,150, it's going to need AAPL to move up – or at least stop dragging it down."  That's still the case and hopefully AAPL has finally found a floor so we can see what the Nasdaq is really made of (finishing Friday at 3,149.71 – so I was off by 0.39 two weeks ago).  Of course, I also said about AAPL in that same morning's post:

"Maybe they still go to $400 and maybe it lasts another 6 months – you shouldn't care, you should be thrilled to OWN AAPL at that price.  But if you keep betting for a short-term pop, you can go broke while you wait."

Unfortunately, people only remember our $555 target and seem to think that, if we didn't hit that level days after earnings – then the prediction must be a failure.  The same goes for the markets – it's the beginning of a long year, and we're off to a great start – just don't let your expectations get too far ahead of you.

There was a long, hard time when I kept far from me the remembrance of what I had thrown away when I was quite ignorant of its worth.” - Charles DickensGreat Expectations


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  1. Pharmboy

  2. jasu1

    Phil,
    I read your post re: AAPL. I was not able to get out prior to earnings, or do a cover as you recommended. OK…I deserve a smack down, but please help….No, I am not too worried with the 2015 10 contracts 360 P sold for $41. I am however concerned about the purchase of 2015 10 contracts $500C for which I paid $110. Some sort of cover to mitigate the paper loss would help, and harvesting some short term call premium might ease the Halapino hurt AAPL has put on me. Thanks as always….I did harvest the 650 call Sale for a 21K realized gain.  

  3. 1020

    Good Morning!

  4. 1020

    Phil – On your early morning musing; Thanks for the ride in the Davis time machine!  :)

  5. stjeanluc

    R3 – 97.75
    R2 – 97.15
    R1 – 96.62
    PP – 96.02
    S1 – 95.49
    S2 – 94.89
    S3 – 94.36

    Friday's high and low – 96.56 / 95.43

  6. stjeanluc

    Just relentless move up…

  7. phil

    Good morning!  

    Oil $96.50 so another chance to short /CL and we should have 20 of the USO, Feb $35 puts, now .65 in our $25KPs.

  8. lflantheman

    Virtual MoMo trade:   BTO 1 March 16 NFLX CALL for 14.40

  9. lflantheman

    Stop-loss on the NFLX call  is 7.00

  10. stjeanluc

  11. stjeanluc

    Might want to keep this one AAPL free!

  12. stjeanluc

    What strike for NFLX lflan… I am guessing 165!

  13. stjeanluc

  14. Burrben

    AAPL Money – Holy Crap!  Is that the most down a port has ever been?

  15. cturb

    Hi Phil-I have some April $475 calls. I am wondering if I should roll them to July or if they are ok to hold. Thanks

  16. stjeanluc

    It looks like the CAT diagonal I suggested to Scott on Friday is working out OK. I didn't have any conviction then (and neither did Phil) and look at them. They miss but a wide margin and the stock is up 1.8%…. 

    But good econ numbers this morning!

  17. stjeanluc

    On CAT, I want to correct – they beat when excluding items!

  18. stjeanluc

    Earnings have been better than expected so far:

    http://www.bespokeinvest.com/thinkbig/2013/1/28/earnings-and-revenue-beat-rates-for-q4-2012.html

    This week we'll reach the mid-point of the fourth quarter reporting period, and so far, the results have been pretty good.  As shown below, 63.9% of the companies that have already reported earnings have beaten earnings estimates.  If this level sticks, it will be the highest beat rate seen since the fourth quarter of 2010.

  19. millcreek

    phil,
     
    great tutorial on the aapl thinking in the weekend entry.

  20. stjeanluc

    Not bullish for copper (and copper stocks_

    http://qz.com/48103/shadow-banking-is-the-answer-to-chinas-mysterious-slump-in-copper-demand/

     

    The answer to this conundrum may lie in the fact that Chinese copper demand has increasingly little to do with industry—and much more to do with financing. For much of last year, Chinese companies struggled to get bank loans. Concerned about a huge buildup of bad debts after lending a record 17.5 trillion yuan to economy-boosting infrastructure and property projects in 2009-2010, banks required borrowers to pledge something physical to back up loans. Copper was so popular a choice that copper-backed financing was the “main driver” of Chinese imports for most of last year, as Bhar explains.[...]

    China, it seems, has massive stockpiles of the red metal that companies are likely growing ever-more eager to unload. A worrying trend for anyone betting on a rise in the copper price.

  21. lflantheman

    stjeanluc…. 1 March NFLX Mar 16  180 call @ 14.40.  Excuse please.

  22. stjeanluc

    Thanks lflan… No problem.

  23. stjeanluc

  24. sgh225

    #next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; }

    Today Phil has in his letter:
    Sell 3 Feb 27 puts for $1.90
    Buy 2 Jun 23 puts for $1.90

    Where does he get those prices?
    The Feb 27 puts are selling for about $0.55
    The Jun 23 puts are about $1.43

    I'm not follow this.

    Help!

    Thanks
    Steve

  25. stjeanluc

    The Feb USO 65 P are now $0.83 which is our goal if you DD at $0.65. They need to be watched if you don't close them…

  26. sgh225

    #next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; } That was for CRUS

  27. phil

    AAPL (soon to become "The Stock Which Must Not Be Named" – as I grow sick of it)/Jasu – Well, you bought a lot of premium, lightly covered and took a hit – which is the part that you are surprised about?  Obviously, it would have been a lot nicer for the calls to be up $63.50 instead of down $63.50 but at least you got $21 of it back with a single call sale so maybe the right thing to do would be — sell some more calls?!?  Ignoring the puts (assuming you will be happy to own 1,000 AAPL at net $319, you have the 2015 $500s at net $89 and, if you sell those $500 calls to some other sucker for $46.50, you can spend that to roll down to the $380 calls at $97.50 for another $5 and then you are in the $120 spread for net $94 and it's $66 in the money.  That's not so awful, is it?  And you still would have the $41 from the short puts so if, by some miracle, AAPL is over $500 in 2015, you get $120 back from a net $53 position.  Oh yes, and you can still sell calls to knock that basis down a bit in between.  

    So SHOULD you do that roll?  Only if you are ready to give up on AAPL coming back in the near future, of course – as $500 is a smallish (10%) bounce back up from a 37% drop. As an aggressive player – I'd do the roll down while it's cheap and hold off on selling calls as long as AAPL holds $440 and then I'd move that stop to $450, $460, etc – as long as it keeps going up.  Since you know you'll be happy with being in a $120 spread for net $53, perhaps you judge your tolerance that way and say you MUST get at least $45 for the $480s (now $53) and just spend $40 to roll yourself down to the $400s, which would leave you – if that triggers – in a $100 spread for net $43 – and still you can sell calls every month.  

    The key, as always, is to look ahead and think about what you are comfortable with.  Since the "bad" outcome resulting from taking a risk isn't actually very bad – there's no reason not to take the risk and maintain a bullish stance for the moment.  Keep in mind we don't think the VIX, or AAPL are likely to go lower so there's lots of reasons to remain patient in such a negative cycle.  

    Time machine/1020 – It's called the WayBack Machine.  

    Wheee on oil already – that was a quick one!  Maybe because I tweeted it – gotta be careful wielding this new power.  

    FAS Money – You have to understand how options work within a portfolio.  We have a potential $3,150 additional gain on the short $142 calls but, at the moment, the loss we took to roll them show up as a realized loss while the brief (we hope) $222 spike in price shows up as an unrealized loss so your portfolio LOOKS like you made a massive mistake but our logic was that XLF should top out around $17.50 and that's right on the line of FAS $142 so we did a heavy premium sale above the line.  Note even StJ comments "Just relentless move up" but it's just a move to the top of a new range we're conceding as the markets test their highs.  Our premise is the Big Banks had great earnings but we don't think Regionals and Locals will be as exciting and XLF will calm down.  Meanwhile – Don't Get Excited!  

    $25KPA – Not much to do here as the overall theme is to expect things to pull back a bit.  We'll see how the day goes. 

    $25KPM – Same deal.  

    AAPL Money – What money?  Just waiting for the worm to turn.  

    Yes, I'm in a rock and roll mood today…

    AAPL Money/Burr – Yep, for sure.  It also may be the most profitable down the road but what an ugly start.  

    AAPL/Cturb – Of course you shouldn't have calls that are 10% out of the money when you are the sucker paying all the premium.  Our $25KPA position is most like yours but note we sold puts to pay for our roll – honestly, if you don't have the premium to do that and sell calls against your position – you shouldn't be playing AAPL in the first place (or any other $500 stock, for that matter).  

    $95.50 is goaaaaaaaaaaaaaaaaaaaaaaaaaaaal on Oil Futures – Congrats to players on that one!  

    Also a half out on our USO puts as we had .90 + .65 = $1.55/2 = .78 average so we take 1/2 off at .85 and now we're left with 10 at net .70(ish) and we can hold on and maybe DD again next time they go low on us or, ride out the 10 for a nice profit.  That goes for both $25KPs.  

  28. rperi

    I am a little envious as I have a smaller portfolio and I am looking at the AAPL Jan 14 $450/550 bull call spread selling the 2015 $350 puts for a net credit of $3.10.  I would love to own APPL at $350 and then sell 2017 calls and puts, but the entry would take up 1/4 of my portfolio.  The thought of APPL falling another $100 from here is almost unfathomable. 
    How about the 2014 $450/500 bull call spread selling the 2015 $300 puts for about even?  TOS says margin is about $47.50 and I would net in a $300 (a simply ridiculous 33% down from here), which is a smaller portion of my portfolio. Selling the ATM calls and puts for 2015 is about $143 right now, so if put to me my net would be reduced to $157/$228 selling 2017 calls and puts, no?  At $500 I would make 105% on cash.

  29. lflantheman

    Virtual MoMo trade:   BTO  5 SODA March 16 52.5 calls for 3.40

  30. jasu1

    Phil,
    Thanks…..I shall not make you sick talking about AAPL,,,,I will study your missive and understand what needs to be done….but be prepared, I will keep asking….you may lose it, but I'll take the smack downs…..just learning the process….practice, practice…..etc. thankyou

  31. sgh225

    On CRUS
     
    Today Phil has in his letter:
    Sell 3 Feb 27 puts for $1.90
    Buy 2 Jun 23 puts for $1.90
    Where does he get those prices?
    The Feb 27 puts are selling for about $0.55
    The Jun 23 puts are about $1.43
    I'm not follow this.
    Help!
    Thanks
    Steve

  32. phil

    CAT/StJ – Durables, as we expected, up 4.6% this morning so doesn't matter what CAT thinks anyway – things are clearly picking up.  

    Dec. Durable Goods: +4.6% vs. +1.6% expected, +0.7% prior. Ex-transport +1.3% vs. +0.4% expected, +1.6% prior .

    TSLA having a good morning:  U.S. Electric-Vehicles Sales May Soar 130%

    NRG is doing something interesting with something called "eVgo", where they apply a NFLX-type subscription model to public charging stations for electric cars.  So, if you have an electric car, you subscribe to the network and then, in theory, there will be (in their plan) 1,000 plug-in stations in California, over the next few years.  I don't know if it makes NRG a buy, but it's a nice, new way to solve electric car charging without relying on the Government.   Let's say, for example, that they purchase prime parking spots at malls for their customers (no different than valet spots they already use) and wire them.  I could see this model working very well and NRG is a wholesaler of electricity moving up the chain to retail sales direct to consumer – that's not too dumb either.  

    If I knew I could drive to Whole Foods and park in front and do my shopping or see a movie or go to a mall and come back to a fully charged car – I'd be pretty inclined to do that.  We could reserve them in advance with an App like Fandango (and now you can reserve actual movie seats, so easy for them to do).   

    Pending home sales gave markets a spook but that's a random-number generator and the hurricane screwed things up.   

    Dec. Pending Home Sales Index: -4.3% to 101.7 vs. -0.3% expected; +1.7% prior.

    Dallas Fed good, as expected (well, by us, analysts missed it by a mile):  

     Jan. Dallas Fed Manufacturing Outlook: +5.5 vs. +2.7 prior.

    Beats/StJ – Looking good.

    You're welcome Mill.  

    Copper/StJ – That's been building up for years.  Hopefully infrastructure spending over there will suck up some of the excess.  

    CRUS/Sgh – That was the play from last Thursday – you can't get those prices now, those are the today prices, which I also discussed in the context of the whole few paragraphs.  Sorry but, if you just read the highlights looking for trades – you won't learn much here.  

    Good call on USO, StJ. 

    Dollar rejected at 80 – that's a bit bullish.  Euro back over $1.345 but Pound still sucking at $1.571.  Yen bounced off $90.60 very sharply so BOJ probably defending $90.50ish (weaker (up) is goal). 

    AAPL/Rperi – Resist the urge!  Do the QQQs if you want a proxy (like in $25KPA) or just be happy with a bull call spread that's within your budget, like the 2015 $500/600 bull call spread at $23, which needs no margin and makes over 300% if AAPL gets back to $600 in two years.  If you're going to gamble on AAPL – that's a pretty good way to go. 

    Damn, I was supposed to stop talking about them…

  33. rperi

    Sorry :(    Why the heck is GLW so beaten down? :)

  34. qcmike

    Phil
    GLW any  trade into earnings ?
     
    Thanks

  35. kevinb63v

    Phil,
      After DD then rolling to the USO Feb $35 puts from the original $34s, I have 20 at net $1.49. What should I be looking to do to salvage the position?

  36. Peter D

    Virtual Short Strangle Portfolio updates – rolling AAPL down:
    - Roll 10 AAPL 430/410 Bull Put verticals to 23 AAPL 415/395 Bull Put verticals for $2.15 credit ($215 credit)

    - Pricing for the puts for the spreadsheet (jumping all over the place) -  430/415/410/295 puts: $5.6, 2.4, 1.8, 0.73

  37. rpme

    Watching that 3 minutes with the Iceland President makes you wonder why all other countries politicians could be so wrong. Of course, facts and empirical evidence have never been the strong suit of politico's.

  38. albo

    We often talk about AMZN's excessive valuation; TSLA selling at over 200 times 2013 earnings est. !
    They have a very limited market at 50k per. 

  39. yodi

    sgh225
    CRUS I call that the horses have left the stable to late to close the door!! It would help if Phil would write the new recommendation in red as it looks he writes his past recommendation in blue, you can just kick yourself you did not see the play at the day it was current.

  40. yshenhar

    Was this morning the end of NFLX flight to the moon?

  41. sgh225

    #next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; } For QQQ, how about a Jan15 65/70 call vert. and sell a 55p for a total credit?

  42. yodi

    Peter not following your plays on AAPL to closely, may I ask you fro which month to which month are your rolling? TIA

  43. 8800

    Peter D/Stjeanluc,
    Can either of you post a current Strangle Portfolio?
    Muchly appreciated,
    TIA

  44. stjeanluc

    Strangles / 8800 – I'll update the portfolio this afternoon following Peter's update and post it then.

  45. Pharmboy

    Yodi – Febs. 

    I think they use AAPL to move the market to all time highs.

  46. revtodd64

    Smaller APPL players:  What about Jan 2015 $400/$450 spread for 26.85.  If APPL holds for the year, it makes nearly 90%.  If you have the margin to sell a few calls here and there it can be a free spread in a few months.

  47. sgh225

    #next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; } Phil,
    What do you think about a QQQ buying Jan15 65/70 call vert. and sell a 55p for a total credit?

  48. Pharmboy

    Gold stocks also have to get things going up…..IMHO.

  49. stjeanluc

    Bruce Bartlett argues that the deficit is not as bad as we all think:

    http://www.thefiscaltimes.com/Columns/2013/01/25/Why-Government-Spending-Is-Not-Out-of-Control.aspx#page1

    In conclusion, it is silly to obsess about near-term nominal budget deficits. What matters is the deficit as a share of GDP minus interest spending, which economists call the primary deficit. On that basis, we are much closer to fiscal sustainability than even most economists realize. Relatively small adjustments to the growth path of federal revenues and Medicare would be sufficient to eliminate the primary deficit. Taking a meat ax to every federal program, as Republicans demand, is neither necessary nor desirable.

  50. yodi

    Thanks Pharm

  51. wombat

    just noticed – posted on the previous day – sorry //
    Phil // AAPL stock  ( yes, bringing it back again – apologies guys ) 
    Thanks for reading through the position. Yes, I was early and heavy – lesson learned. The reason the shares are there is kinda funny. I also beleive in buying shares through short puts – do it most of the time. I bought a few AAPL shares last week so all the price movement and basis of the underlying would show up on my position page. It's the only way Fidelity will show me underlying. I know – silly, but I dont mind as I think it was a good entry and its not much. So, I just ignore them, but good catch – it doesnt make much sense in the bigger picture.

    Phil – I was not talking about the puts, you have to pay to roll those down and you can't roll out to 2016 yet so, unless you feel that AAPL is heading to $350 (your higher net) and can't possibly recover over the next two years – there's really nothing to do but wait. 

    And the big picture is … the short puts. My intention was always to ride these out. I never would have believed that Apple would have dropped this far, this fast, so it's now become a margin discussion. Golden handcuffs as I"m really bullish on AAPL long term, but frustrating becasue when these dropped my buying power goes with it. My intention was to either roll/down or roll/out the $400's simply to protect from being assigned. Yes, I hear you that 'you should never sell puts unless you want to own at that price', and i would profit from the $400's being exercised anyway by just selling them right away all the way down to $350. But, are you saying you would never pay to roll 'sold 'puts' to temporarily avoid assignment ?

    The 'other $400 CALLS' we talked about are in the "One Trade' spread. I DD last week on the spread so I did scale into this ( see… monkey does learn ; > ) My question was theoretical. I read through your 'rolling tome' on PSW this weekend. Perhaps by the 3rd – 4th read it'll stick. 

    Phil -As to clarifications – When the roll to take your calls (and the only calls you have are the 4 2014 $400s, from the spread) down $50 in strike (to $350) is less than $25, THEN it's worth considering.  

    My question was why 25 ? Where did that number come from ? Is it 50% of the spread change ? And you say 'consider' – whats the trigger that says.'yes, this is a good move for the spread'
    And, of course, the implied question, is it totally acceptable to screw/break with spreads – roll the calls up/down/out if you need to ?
    I guess what I'm looking for here is theory behind the 'under $25 is OK' and how/when to roll. I would love some theory on this – if you want to throw a few books at me instead type, that's cool too.
    Teach a man to fish, really.

  52. wombat

    Hey guys -
    There's something wrong with stock charts.com
    AAPL is green.

  53. phil

    AAPL/Jasu – Oh I'm just venting.  Of course we're going to talk about the biggest stock in the World and, if you have a question, then ask – I may get snippy sometimes but I do recognize it's an important trade to many and, so far, it's not going our way and not everyone considers that nothing more than a fantastic opportunity to load up the truck – nor did they when it was $85 and languished there for a few months after we started jumping on it at $120 (40% down from $200) and kept buying at $85 while most people and the MSM made fun of us for sticking with a dead company (complete with a dying CEO). 

    GLW/Rperi – TMF and TheStreet are both dissing their earnings (29th) ahead of the game.  I hope they miss as we missed them for the Income Portfolio as they gapped up sharply last earnings and we didn't want to chase.  

    GLW/QC – I was just looking and no, no particularly good plays as they are middle of the range with crappy premiums to sell so we hope they miss and we can sell puts into the drop.  

    USO/Kevin – I guess you missed the other 2 or 3 times we sold at .90 and got back in at .65, right?  I think we started with the Feb $34 puts at .85 on the 10th and we took $1 and ran on those.  Then we went with Feb $34 puts again on the 9th at $1 and we added more at .84 and we rolled those at .56 to the $35 puts for .90 so +.34 to .92 is $1.24.  Not sure how you got to $1.49 and certainly, since then, we've done a few in and outs.  But, if you have 20 at $1.49, you should have doubled down at .65 for a $1.07 average and then been happy to take .85 off the table for half earlier and been happy to have whittled .20 off your net basis.  If your net is significantly higher than the net you are tracking –  you probably have a problem and need to address it sooner than later.  Oil is popping up again but you have too many to make a good DD so I'd spend $1 to roll out to the Mach $36 puts ($1.72) and look to sell the Feb $34.50s (now .52) for no less than .40 (if we go higher) but hopefully for closer to $1, to pay for you roll.  If all goes well,  you'll be in the $1.50 spread for less than $2 with a 30-day time advantage and hopefully, at some point, you'll be able to get out even. 

    TSLA/Albo – But they are growing and ramping up production and R&D and other SG&A expenses drop significantly over time.  They are essentially a start-up, selling $200M worth of cars this year with a $110M loss while F, for example, sells $136Bn worth of cars and makes $9Bn (net of a tax rebate).  TSLA is valued at $4.3Bn and F is valued at $52Bn (which itself is probably too low) so let's say TSLA eventually gets to 10% of Ford's size.  Then $4.3Bn is still very cheap.  At 20% of Ford's size (and if you've seen the cars, you'd believe it's possible), then $4.3Bn is ridiculous and TSLA probably has many cost advantages over F going forward as well (no legacy entitlements, etc.).  So be careful focusing on a single thing like p/e to value companies – you have to think of the big. long-term picture. 

    CRUS/Yodi – I indent important paragraphs so they are white against a blue backround and the original CRUS trade looked like this:

    CRUS/Willie – Fabless semis are all about the contracts and CRUS is a bit beaten-down of late and down 7.5% this morniing and not for any good reasons I can see.  With earnings tonight and expectations so low, I'd play them bullish by selling 3 Feb $27 puts for $1.90 ($570) and covering with 2 June $23 puts at $1.90 ($380) for a net $190 credit plus you get to keep whatever is left on the June puts.  If CRUS drops to $25, for example (down 10%), all you're doing is paying the short puts back and keeping the gains on the long put.  Anything up or flat is a winner.  Let's do that one with 4 longs and 6 shorts in both $25KPs.  

    So – unless they come up with a font that has flashing neon lights with audio that blares "Attention Yodi!!!" and little hands that come out of the screen and smack you in the face – this is going to have to do.  

    NFLX/Yshen – Not to be paranoid but I do think they were trying to shake us out of our bear put spread.  

    SQQQ/Sgh – The problem with long-dated spreads on ultras is that they tend to decay over time and giving SQQQ two years is not a likely formula for success.  Check out SQQQ performance vs. the Nasdaq over the past two years (around the time of it's introduction in 2010).  Like most ultras – it starts off with a reasonable track but then the sort of go off kilter and go into a long-term death spiral.  

    I'd say it would be more logical to short TQQQ over a long time-frame – and let the decay work in your favor.  Still, TQQQ can go crazy to the upside if the Nas breaks up to new highs so you probably don't want to go selling short calls against that one – just in case! 

    AAPL/Rev – Nothing wrong with that and you are buying yourself some nice insurance in exchange for not over-reaching on your target.  

  54. 1020

    Pharm/all time highs  Did you get an AAPL in your lunch?  :)

  55. albo

    Phil -Good points.   I agree that you have to look at more than the PEs on young companies.  However, there is many a slip between cup and lip in a company trying to establish scale in the auto industry.  The other problem that I see, in addition to higher price points, is  because electrical vehicles pay little or no gasoline taxes, govts are going to have to figure out how to charge them for use of the roads.  If by excise tax, that adds to an already higher price point.  Will be interesting to see how all this develops, but I would lean toward natural gas vehicles being the more viable alternative.  We'll see.  Not ready to shor Tesla just yet.

  56. revtodd64

    APPL $400/450  -  I should have noted that is a call spread, not a put spread, cost me only 26.85, and pays off nearly 90% if APPL holds $450.  Good for smaller accounts like mine who still want to play AAPL.  

  57. yodi

    Phil how about some gogo girls jumping up and down? But I think we all got it!

  58. yodi

    Looks like our Weekly GOOG play is coming more our way

  59. 1020

    An interesting take – Like AAPL, MSFT pockets billions (not as many) every quarter as well…..
    http://finance.yahoo.com/blogs/breakout/apple-microsoft-182333686.html

  60. stjeanluc

    My quote for the day:

    Joe Fahmy, “The second you get cocky and think you are good, the market has a unique way of humbling you.”

  61. stjeanluc

    Interesting earnings tonight (average move / priced into options):

    STX - 7.3% / 6.75% (Expected to meet estimates)
    VMW - 7.6% / 8% (Expected to beat by $0.01)
    YHOO - 8.2% / 6% (Expected to beat by $0.04)

    Estimates from the whisper number so not a prediction!
     

  62. scottmi

    Humbling/stj – no kidding..  Biderman has a good commentary on arrogance, too.

  63. stjeanluc

    Looking at this chart, you understand that the Bush Boom was only built on a mountain of debt! Amazingly enough few besides Krugman saw that as a problem. And it's a wonder that the economy has been so resilient looking at the deleveraging that has happened since then:

    http://www.thereformedbroker.com/2013/01/27/household-deleveraging-illustrated/

    household debt service

    We seem to have reached an historical bottom and that would be bullish. Hopefully we can avoid another bubble!

  64. stjeanluc

    How are you managing you CAT trade Scott? Rolling calls?

  65. phil

    Deficit/StJ – As Cheney said – they don't matter.  Until they do.  It's all about growth and Japan is now on a path to grow their way out of a 240% deficit.  If they pull it off – it lights the way for the rest of us. 

    Puts/Wombat – You know it takes me about 10 minutes to figure out what the current question is.  Sure I would roll puts but only if there is something reasonable to roll to or a very good reason.  Your problem is that your problem is artificial – you are rolling to avoid margin issues and not because AAPL is going to $350 or will never recover so your decisions are bound to be bad as the underlying action is based on a bad premise.  If you overdid it on the margin, the best thing to do is take your losses and then buy that amount of Rev Todd's nice, safe(ish) 2015 $400/450 spread, which pretty much doubles at $450.  Then you get your money back and, hopefully, you learn to stop getting involved with stocks you can't afford to play.  This is like sitting down at a $5,000 poker game with $50 and then wondering why you didn't win – you don't have enough money to play the game so ANY bit of bad luck coming your way wipes you out, while others can ride it out and play their hands – waiting for the cards to turn in their favor.  

    When you are short-staked in poker – you are forced to take risks and make bets you wouldn't make if you had the money to be patient.  Options are not very different.  The trade will go against you often enough – even if you made the right bet.  The trick is to take your losses and move on and also to know when to take your winnings off the table, after you've had a run of good luck.  But, if you play from a position that forces you to make all or nothing bets constantly – you only have to be unlucky once and you have nothing – and you don't get to play another hand, when perhaps the cards may have gone your way.  

    Why $25/Wombat – Yes, it's rolling down for 50% of the strike price (and gaining at least 50% of the intrinsic value doing so so that you are simply buying $25 or more of intrinsic position for $25 or less).  I shouldn't have to explain the logic of that, should I?  With AAPL, we find it moves so much that we wait for a $50 or $100 move before taking action – otherwise we'd be making daily adjustments against $10 or $20 moves.  And consider means consider – WHY did AAPL drop $50?  Is that the bottom or are you now chasing or "catching a falling knife".  What is your next move going to be and can you afford it.  If you can't afford the next adjustment, then making and adjustment that forces you to make another adjustment may be a very bad idea.  You end up back in the poker problem, where you back yourself into a corner where you are unable to do the prudent thing because you don't have any more chips to spend.  Unfortunately, there are no books on this.  This is why Sage and I are writing a new one.  

    Stock Charts/Wombat – Experiencing some sort of TA difficulty today.  

    Slips/Albo – I agree.  That's what kept us cautious last year as I was worried that a recall (a la Boeing) would kill them.   But they did their new roll-out like champs and I've kicked the tires at their showroom and asked questions and I'm now feeling a lot better about the company.  That nonsense about a tax on electrical vehicles is nothing but right-wing, Koch-sponsored BS.  The government PAYS YOU to drive an electric car because, by saving 12-20 barrels of gasoline per vehicle, per year – we cut our dependence on foreign oil, improve our balance of trade, improve the value of our currency, and LOWER the cost of the remaining oil and gasoline for everyone else.  If 100M cars in this country were electric – we would no longer need ANY imports – not even from Canada or Mexico.  Do you really think that potentially missing out on $25Bn worth of gas taxes (about 3 days in Iraq) would sway the Government to stop people from converting to electric?  Again – this is what the conservative media count on – the inability of their viewers to do math and think through the crap they spew out at you. 

    PhotobucketGo-Go Girls/Yodi – From now on, I'll include this with every trade.  

    MSFT/1020 – Oh if it wasn't for Ballmer, they'd be another undervalued company.  As it is, he's like a major tumor on an otherwise healthy organ.  

    9:31 AM At the open: Dow +0.51% to 13896. S&P +0.54% to 1503. Nasdaq 0% to 3150.
    Treasurys: 30-year -0.45%. 10-yr -0.27%. 5-yr -0.15%.
    Commodities: Crude +0.77% to $96.62. Gold -0.09% to $1657.25.
    Currencies: Euro +0.09% vs. dollar. Yen +0.03%. Pound +0.39%

    Market preview: Stock futures are in the green after a better-than-expected durable goods report and Caterpillar said it expected profits to improve during the year after missing its Q4 earnings and revenue numbers. S&P futures +0.2%. Asian markets were mostly higher, highlighted by a 2.4% jump in Shanghai after strong profit data out of China. Still ahead: pending home sales, Dallas Fed. 

    10:00 AM On the hour: Dow -0.13%. 10-yr -0.17%. Euro +0.01% vs. dollar. Crude +0.03% to $95.91. Gold -0.03% to $1658.25.

    11:00 AM On the hour: Dow -0.1%. 10-yr -0.25%. Euro +0.06% vs. dollar. Crude flat at $95.88. Gold +0.03% to $1659.35.

    12:00 PM On the hour: Dow -0.01%. 10-yr -0.21%. Euro +0.04% vs. dollar. Crude +0.48% to $96.34. Gold -0.19% to $1655.65.

    $55B poured into equity mutual funds and ETFs this month, according to TrimTabs, the largest amount since the epic peak of the tech bubble in February 2000. Corporate treasurers and insiders are selling, with a net $11.9B in share offerings and insider sales. Garnering the bulk of flows in the ETF space are emerging market (EEMVWO) and global stock funds (EFA).

    More on Dallas Fed Manufacturing Outlook: Production rises from 3.5 to 12.9; consistent with faster growth. New Orders shot to 13 from 12.2. Production index improve to 12.9 from 3.5. Capacity utilization improve to 14.0 from 2.1. - Leaping and bounding.  

    The National Retail Federation forecasts 2013 retail sales will increase at a rate of 3.4%, lower than the 4.2% rise seen in 2012. Consumer attitudes will be influenced by higher payroll taxes and the ongoing fiscal cliff drama before improving in the second half of the year, according to the trade group. Retailers with strong online businesses should be able to ride out the moderate growth period adequately with online sales forecast to rise between 9% and 12% for the year.

    A sweet deal, Fannie and Freddie launch a new program to allow certain underwater homeowners to walk away and face a so-called deed-in-lieu rather than foreclosure. "Extraordinarily generous," says University of MD's Phillip Swagel. "We're giving people an incentive to walk away right when the housing market is starting to right itself."

    The nearly-always bullish Tom Lee of JPMorgan made news a couple of weeks back by actually sounding cautious. No more, the strategist takes to CNBC to talk about Dow 20K and S&P 500 2.5K in the next 4 years. "There's still a lot of investors fighting the tape … We still have a taint on owning stocks." 

    More "crisis over" signs emerge from Europe where German T-Bill yields turned positive for the first time since June at today's auction. The government sold €2.07B of 12-month paper priced to yield 0.1319%.

    "It is vital that both the government and the BOJ each commit to … achieving the 2% (inflation) target as soon as possible," says Japan PM Shinzo Abe in his first address to parliament since taking power. His words signal no backdown despite the near-universal international unease with the policy expressed by the Davos crew last week. – Here's the official BOJ policy video.  8)

    Incoming BOE Governor Mark Carney suggests he'll outdo even Mervyn King on stimulus. Monetary policy is far from "maxed out," he told the big shots at Davos, and  more should be done even if inflation is above target (no worry, the British are used to it). FXB -0.7%.  – Here's the British policy video.  

    Yay – justice!  In a landmark case, Iceland wins an unexpected major victory as an EU court rules the country did not violate rules on deposit guarantees when it failed to reimburse overseas depositors in its failed banks. The ruling – which cannot be appealed – seems to remove a moral hazard in a world where governments are constantly creating them.

    But they never learn:  Bank debt is back with lenders' paper set to overtake that of industrial companies as the safest in the U.S. corporate bond market for the first time since the financial crisis. Investors are currently demanding just 16 bps more premium over a benchmark from banks, compared to 365 bps 4 years ago. 

    AIG is "a once-in-a-generation opportunity," according to Bernstein, predicting a revaluation of the shares now trading for about 0.5x book value. Bernstein compares post-bailout AIG to a "demutualized" insurer – think MetLife, whose former CEO happens to be AIG's current one, Bob Benmosche. If AIG is a buy, says Todd Sullivan, the TARP warrants surely are too. Shares +2% today.

    Natural gas (UNG -4.1%) tumbles as Weather Group LLC revises its forecast and predicts above-normal temperatures in the eastern U.S. from Feb. 7-11.

    Royal Dutch Shell (RDS.A) and Kinder Morgan (KMI) will team up to export liquid natural gas from the Elba Island LNG terminal near Savannah, Ga. Financial terms were not disclosed. El Paso Pipeline Partners (EPB), a KMI unit, will own 51% of the new entity and Shell will own 49% through affiliates and subscribe to 100% of the liquefaction capacity, expected at ~350M cu. ft./day. - That's over 2Bcf a week they'll be taking out of inventory – very clever!

    Some notes from the Caterpillar (CAT +2%conference call: Q4 construction order pick-up was largely due to dealers seeing 'light of day' on need for inventory reductions, as mining orders were slow. Anticipates better growth in FY13, but cautious on how quickly sales will benefit; U.S economic growth likely to come in at 2.5%, China at 8.5%. Europe however, will continue to struggle.

    So who's a bully now? Carl Icahn steps up as the friend of Transocean (RIG +1.7%) investors as the drilling rig contractor'slargest shareholder, offering the hope of a $4/share dividend (it's now $0). Under Swiss law, a shareholder has the right to propose a dividend at a company's annual meeting, and if a majority of shareholders support it, the dividend is declared with or without board support. 

    Shares of Herbalife (HLF -3.5%) go down after the FTC announces a press conference today to discuss an alleged pyramid scheme. The conference will be held out of the Kentucky Attorney General's office in Lexington, Kentucky, and is scheduled for 1:00PM EST. It's not yet clear whether the conference has to do with HLFhowever, and the speculation is hitting the stock hard. 

    From Live Blogger (1:05 pm):   FTC announcement has nothing to do with  — nothing at all "

    Chipotle (CMG) catches an upgrade from Lazard Capital to Buy from Neutral. A lush new price target from the firm of $388 implies 28% upside for shares and should add a little support heading into the restaurant's operator's earnings report. CMG +1.8% premarket to $308.90.

    You mean just having "coffee" in your name doesn't make you the next SBUX???  Coffee Holding (JVA -9.7%) trades lower on heavy volume after its FQ4 earnings report underwhelms investors. The company only added two cents per share to it profit from a year ago.

    Execs with Starbucks (SBUX) say the company's drive-through locations continue to be highly profitable and think that over the next five years more than half of 1.5K outlets slated to be opened in the U.S. will be of the drive-through variety. SBUX +0.5% premarket. 

    Powerwave Technologies (PWAV -76.1%files for bankruptcy protection after losing money in four of the past five years. The maker of antennas and amplifiers for wireless communications lists debt of $396M and assets of $213M in its Chapter 11 filing.

    Citi upgrades Sony (SNE) to a Buy rating, up from its current stance of Neutral. The firm says a weak yen has Sony finally making moves which should help it improve profitability in its consumer electronics division. SNE +7.2% premarket.

    Facebook (FB +1.1%) catches an upgrade to Buy from Raymond James' Aaron Kessler, who cites his expectation for "Increasing monetization driven by mobile, new ad formats, and international."

    Amazon (AMZN -2.4%) continues to see margins at its International division fall lower while the North American division slowly improves, according to a chart breakdown by Tiburon Research Group. The firm thinks the consensus EPS estimates for Amazon's current quarter is too low, but maintains a full-year FY13 forecast below that of the Street. (Related: AMZN Q4 earnings preview)

    Three lunchtime reads:
    1) Why deleveraging still rules markets in 2013
    2) Weighing the week ahead: time to take the plunge?
    3) Shiller: A new housing boom? Don't count on it
     

  66. phil

    PhotobucketPhotobucket

    VMW/StJ – That one could be fun as it's not too likely they'll pop $100 but you get paid $3.20 for the short Feb $100 calls so we can sell 5 of those for $1,600 and buy 3 April $105s for $3.40 ($1,020) for a net $580 credit on the spread.  That's good for the $25KPA.  

    Sorry Yodi – almost forgot to draw your attention to this earnings trade…

    Deleveraging/StJ – That's because Government debt has gone a few Trillion the other way – along with a $2.5Tn pop in the Fed's balance sheet that doesn't even count as debt (yet).  No magic beans – it goes out one way and comes in another.  

  67. scottmi

    CAT/stj – yeah, closed my short (but looking to sell another as a roll up) but keeps dropping away from my order. Not sure how bullish this day really  for CAT.

  68. stjeanluc

    Deleveraging / Phil – Sure, but between 2001 and 2009 our government debt doubled and consumers debt went from 12% to 14%. That was clearly unsustainable. At least one of the 2 pillars or growth has now gotten back to a more normalized debt load. And as Bartlett argued, the government debt might not be as bad as we thought anyway.

    The secret now is not let the GOP near the levers of power for a long time as they would squander all the work done so far!

  69. julianz

    Iflantheman – do you have a stop on the SODA calls? TIA

  70. stjeanluc

    CAT / Scott – I guess it doesn't matter how bullish it is, the stock is going up… Thankfully not too much. Not a big mover so you should be able to roll out of trouble without too much trouble.

  71. scottmi

    Option pricing today – is it just me or anyone else see prices acting weird today?

  72. Pharmboy

    LOL – Japan grow its way out of its 240% deficit….now THAT is funny!

  73. Pharmboy

    US Defense department says it has already begun laying off most of its 46,000 temporary employees……that's gonna help the NFP#s on Friday…..not.

  74. Pharmboy

    Oh, and Tomorrow is a Bradley turn date…..but can be a +/- a few days.

  75. lflantheman

    julianz  SODA/  Trade is  $1700 in cost.  ( 5  times 3.40).   Don't want to lose more than about $700, so set stop loss at 2.00.  

  76. Pharmboy

    Hello, Major Tom…

  77. edro00

    BDC
    I've been impressed with your OTM earnings picks.  Got any for tonight??

  78. Pharmboy

    IDIX partners with JNJ on new Hep C drug.  JNJ also shares sales of VRTX's Hep C drug.  VRTX down today, IDIX reacted and then falls back. 

    VRTX Feb $41 Ps – STO for 35c.

  79. Pharmboy

    Those two dancing ladies….my computer stops on the scroll on it every time! :)

  80. scottmi

    AUY – buying the stock at 16.16 and selling a Jan14 15/17 strangle for 3.41 gives a $12.75 entry (21% discount). That makes moves the dividend to a 2% yield and if called away for 17, a 33% gain, or if put, avg entry of $13.87 (still a 15% discount to current price). More conservative, sell the Jan15 $15 straddle for 6.48 giving  $9.68 entry (40% discount!) bumping div yield to 2.6%, and if called in 2015, a 55% gain, or if put an avg entry of $12.34.   

  81. yodi

    Phil first you talking than you slipping up!!! the only think I do not like on this trade is the margin of 5100.00

  82. phil

    GOP/StJ – As noted in the morning's cartoon. 

    Prices/Scott – I think a lot of programs taking profits at the moment.  A healthy bit of consolidation as we head up to test the highs.  Also, VIX is up 6% so messes with the internals. 

    Japan/Pharm – Well they jacked the Nikkei up about 20% in a couple of months.  If they can do that with their economy about 10x – presto!  

    goldman japan

    The True Story Of The 1980s, When Everyone Was Convinced Japan Would Buy America

    Layoffs/Pharm – That's a worry.  Good one on Major Tom.  

    HLF down more, even though the FTC thing turns out not to be about them.  Not low enough to call it an opportunity again but worth watching.

    Fordow

    Oops:  Reports of an explosion at Iran's Fordow nuclear facility surfaced late last week and have been independently confirmed today.  The Jerusalem Post cites a report by Reza Kahlili who said: “The blast shook facilities within a radius of three miles. Security forces have enforced a no-traffic radius of 15 miles, and the Tehran- Qom highway was shut down for several hours after the blast.”

    It's only illegal once you actually shoot someone:  A man who witnesses say walked into a Kroger grocery store in Charlottesville armed with a loaded semi-automatic rifle will not face any criminal charges.  Police say he did nothing illegal, but it created quite a scare.

    Monica Green, a witness, said she thought something was wrong when she saw people crowding at the front of the store. When she heard there was a man with a gun in the store, she ran out the door and called 911.

    "At first it seemed like the police didn't believe me," said Green. "I was like 'No, no they told me it was someone with a gun and to get out of the store.' And so no sooner than I got in my car, the police had came up and had their guns drawn on a man with an assault rifle."

    Police restrained the man to ask him questions. They released him after they confirmed he is not a convicted felon, owned the gun legally and it was not concealed. Police say he was cooperative and did not break any laws.

  83. lflantheman

    The EBAY Feb 52.50 calls that we hold carry a time value of -0.04.   Not seen very often  with 19 days left to expiration.

  84. scottmi

    NFLX – no one really wants it at these prices..

  85. wombat

    You know it takes me about 10 minutes to figure out what the current question is
    perhaps i should stop using BOLD and start using GoGo Girls

    BTW – I think you misread my post. My problem is 'artificial' because I'm trying to anticipate worse case and learn.
    I have no problem taking the profit if my $400's are assigned.

  86. escohen5

    CNBC has AAPL bears on all day, egged on by the staff, spinning tales of woe.

  87. phil

    Speaking of new things.  I was in a restaurant yesterday and they took my cell # along with my name on an IPad the host was holding and I immediately got a message saying there were 5 people ahead of me and the wait was 15-20 minutes.  I was able to text back for an update whenever I wanted.  I don't know what app that was but how simple – compare that to what restaurants willingly spend for those little vibrating things.   Put more devices in more people's hands and they will come up with more ways to use them.  Another way we can actually move forward to a more productive economy than the one we had before.  

    I don't know why my kids drag books back and forth from school when we could put IPads on their desks that are linked to their IPads at home so all their homework goes instantly back to the teacher and all their classwork goes instantly home and they don't have to carry devices (or books or papers or pencils) anywhere.  Tests can be instantly distributed and collected, reading materials never need to be copied, we can create helpful tutorials over time as well…  I don't have time for it but let's revolutionize education….

    Margin/Yodi – Oh come on, it's just 255 lap dances (in keeping with our go-go theme).  

    NFLX down nicely now.  

    INTC getting tempting as it hugs the 50 dma ($20.50) at $21 with the 200 dma way up at $23.50 and no reason to be long-term bearish on INTC.  March $21/22 bull call spread is .32 with 200% upside at $22 and that can be offset with the sale of the 2015 $20 puts at $3.10 and you still net $17.22, which is 18% off so I'd say let's sell 20 of the long puts and buy 50 of the call spreads in the Income Portfolio as we're happy to DD if they go lower at those prices and thrilled if they pop and pay us a quick $5,000 while we wait.  

  88. wombat

    Phil // Tablets
    I dont know if it's becasue we live in SF or its just the trending, but most restaurants we eat at are using iPads and third party software for reservations, updating, ordering, etc. There are about 3 or 4 popular ones here in the Bay ( I can dig them up for you if you're interested but I don't think their public )
    This is why I have been so bearish on OPEN in the last year – restaurants are not renewing their contracts because they're expensive and, as you know, margins in restaurants are razor thin to start.
    The educational uses are already happening out here in the charter schools.

  89. Savi

    Good Afternoon—wow looks like I missed an exciting day—what with AAPL up— and go-go girls

  90. lionel

    Iflan & Phil/
    DDD is down a lot today. Will you consider it for your MoMo portfolio?
    - 55 Puts Jan 2014
    + 55/65 Mar call spread (after earnings)

  91. newt

    PHIL: The Go- Go girl is now on my desktop.  Great distraction. Thanks.

  92. yodi

    Savi
    Phil is in high spirits today just now we all get showered with a discount on membership!!!

  93. phil

    Tablets/Wombat – They are just like computers – only useful.  I agree on OPEN, never liked them and we did well shorting them back when they were $100 but haven't been interested either way since.  Glad to hear some schools are getting involved – book publishers won't like it much but, judging from my cut of the book deal – AAPL's content sharing deals are very generous by comparison so all we need to do is cut out the publishers and it works for everyone. 

    AAPL and Go-Go Girls/Savi – Sounds like a theme for our next Vegas conference!  

    DDD/Lionel – Not something I'm interested in.  It's a bit of a fad right now.  In 20 years – it will be like star trek but who knows what technology will win out over time?  This is a cool company but, as evidenced by today's action – a bit ahead of itself and a bit early to be calling a bottom off a one-day drop.

    You're welcome Newt.  

  94. phil

    Nice 8 point summation (a monthly series) from Russell:

     

    Source: Russell Investments

  95. yodi

    NFLX Today it looks like I am making money on both sides with Phils bear put and my bull call hope Womb will get all the bears and bulls. Bulls have horns bears have theeth!

  96. yodi

    Sorry Womb I mean teeth

  97. Pharmboy

    How are those IWM Feb weekly!!!! $91 calls doing?  :)   Selling another 1/3.

  98. lflantheman

    Virtual MoMo trade:   15 Feb 16 EBAY calls sold for 3.70 (+35%).   This is not the end of this trade.  We'll re-enter long further out calls at a later date.   

  99. lflantheman

    lionel/DDD/ Not a stock I follow.   But now I'll watch it, as this pullback looks odd. 

  100. wombat

    Yodi //
    Yep – ridin it with you – closed out the bull at $170 – keepin the bear until another MACD tells me not to.
    Thanks again !!

  101. dclark41

    Phil:
    Those USO puts back to .66. Time for another round?

  102. lionel

    DDD/ Phil I knew you wouldnt be interested :)

  103. craigzooka

    If these mini options have a decent spread I may be doing a 10 share AAPL covered call in the IRA Portfolio come March!

  104. phil

    Mini options/Burr – How silly and confusing.  Might be best to stay away from companies trading those (after going long before the retail rush, of course). 

    Womb/Yodi – Is that Freudian or Germanian slip?  

    USO/$25KP, DC – Not overnight if we don't have to.   We're getting a bit close to expiry so it may be time to roll to March if we don't get a nice inventory move down this week.  As to no overnight – maybe oil goes up and we get a better entry or maybe it goes down and we make money – only not 2x – so, either way we're OK but, if we DD now and it goes against us, then the roll/adjustment is much more expensive and we've backed ourselves into a corner so – not worth the risk. 

    Very tight ranges – possibly setting up to flatline into month's end.  Which will make for a boring few days ahead. 

    2:00 PM On the hour: Dow -0.04%. 10-yr -0.13%. Euro -0.03% vs. dollar. Crude +0.31% to $96.18. Gold -0.15% to $1656.35. 

    3:00 PM On the hour: Dow +0.04%. 10-yr -0.13%. Euro +0.01% vs. dollar. Crude +0.64% to $96.5. Gold -0.14% to $1656.55.

    The backup in Treasury yields – with the 10-year hitting 2% today for the first time in nearly a year – is a buying opportunity, according to Capital Economics' John Higgins. One datapoint of interest: In 7 major tightening cycles since the early 1970s, the trough in Treasury yields occurred an average 7 months before the first Fed Funds tightening. 

    Things are as good as they can get in high-yield, with a default rate in 2012 of 1.9%, according to Fitch, above 1.5% in 2011, but well below the long-term average of 4.6%. Fitch expects the default rate to rise to 2% this year. "The constructive outlook … is heavily dependent on steady, if not stellar macro conditions." No worries there!

    Six Canadian banks get a one-notch downgrade from Moody's as high levels of consumer debt and bubbly housing prices leave the lenders "more vulnerable than in the past." The agency also notes banks' reliance on "confidence-sensitive wholesale funding, which is obscured by limited public disclosure." Among those cut:BMOBNSCMTD.

    As gold futures extend losses to a fourth straight session, gold-, silver- and commodity-related stocks are in full-blown bear territory. Sinking to new 52-week lows today: NEM -1.3%AU -0.5%,BVN -2.7%HMY -3%. Even as Global Hunter offers an upbeat outlook for silver, citing expected increases in industrial use, SLW-1%PAAS -1.5%.

    SodaStream (SODA -3.5%) sees a little extra trading volatility after its initial Super Bowl is sent back to the company by CBS for being "too provocative" toward the bottle soda industry (KO,PEPDPSCOT). Despite being forced to go with a back-up ad, the publicity from the rejection may end up helping the company and promote its David vs. Goliath image.

    An alternative explanation for today's plunge in shares of 3D Systems (DDD -12.4%): Fellow 3D printer ExOne sets IPO termsat 5M shares at $14-$16 each. But Piper Jaffray's Troy Jensen isskeptical of competition concerns, noting just 2%-3% of DDD's total sales overlap with ExOne. "This is noise," Jensen tells Dow Jones. "I've never heard of ExOne until they filed." (earlier)

  105. dclark41

    Phil:
    Those Go-Go girls may have helped us find a bottom in AAPL.  I like them. Guess I should wait to see if AAPL holds its gains or sells in to the close. Who cares, more Go-Go girls!

  106. dclark41

    Apple users against Google.
    http://finance.yahoo.com/news/google-sued-uk-over-safari-203649270.html
    This guy needs to find a new job. I wonder what he say next?
    http://tech.fortune.cnn.com/2013/01/28/apple-analysts-price-targets/?source=yahoo_quote

  107. wombat

    wow. $449.89
    i smell a white whale.

  108. stjeanluc

    These mini options might be cool for strangles on SPY in smaller portfolios! I guess we'll see in March!

  109. phil

    Volume on Dow just 80M coming into the close.  

    Indexes generally green and look to be jamming the Dow to a green close.  NYSE worst off, down 0.25%.  

    There's the bell and a quick jump to 100M on the Dow but not too much higher, I think – super-lame overall. 

    Dow turned our red by 13. 

    AAPL $450.00000, S&P 1,500.000  - You can do that with low volumes like this.  Oops, a little dip right on the close…  Don't want to be too obvious, I guess.  

    Nas over 3,150 by 4 – that's all we wanted to accomplish today.  

    Oil $96.50 on the dot. Gold held $1,650.

    112M on the Dow now (2 mins after close).

    More Go-Gos/DC – I don't know about more go-go girls but AAPL definitely needs more cowbell!  

  110. ed3524

    Thanks Phil,
    it looks like you got it right again—-VMW is down 11

  111. yodi

    Phil Womb I don't think he is German. Just hope he gets the bulls and bears right. Looks like he is closing the bulls already at the first sign of gain.

  112. stjeanluc

    These Tesla cars not only look cool, but they seem to run fast as well:

    http://jalopnik.com/5979588/watch-a-tesla-model-s-spank-a-dodge-viper-srt10-in-a-drag-race

     

    Yes, we know the Tesla Model S is faster than a BMW M5, we just didn't know how fast it really was. Here we see it facing off with the older Viper SRT10 and handily demolishing it.

    The Model S Performance model managed a 12.371 quarter mile at 110.84 MPH with a 0-to-60 MPH time of just 3.9 seconds, according to DragTimes. Impressive numbers.

    This was the best run on a full charge, with slightly slower times when it wasn't charged, although it was still in the '12s regardless of the amount of juice in its batteries. To put it context, that's roughly as fast as a brand new Porsche 911 Carrera S.

    I was worried we would not have fun anymore with these electric cars, but it seems I was wrong!

  113. Burrben

    AAPL's Flash Dump
    http://www.zerohedge.com/news/2013-01-25/apples-flash-dump-last-second-trading-caught-tape
     
    Nanex is amazing….

  114. wombat

    LOL
    "Those were my 800,000 shares.
    I had to unload those to cover my NFLX position and because I lost my good faith deposit to buy Atari prior to its bankruptcy filing.
    Sorry, everyone."

  115. millcreek

    phil. props on the vmw

  116. terrapin22

    Phil and Savi – no need to wait for Vegas.  I can arrange for some go-go girls at the AC conference lol.  and I agree, more cowbell for Apple!!

  117. phil

    How CNBC And Fox News Misinformed Viewers About The Dangers Of The Debt Ceiling

     

    House Republicans recently agreed to raise the debt ceiling, preventing a self-inflicted economic calamity. Experts agree that failure to raise the debt ceiling would have catastrophic consequences for the U.S. economy. The debt ceiling debacle of 2010, during which the U.S. did not actually breach the debt limit and default, will wind up costing U.S. taxpayers $18.9 billion and one million jobs.

    But television watchers going to CNBC, Fox News, or Fox Business for their news may not know just how dangerous a weaponized debt ceiling really is. As Media Matters’ Alan Pyke showed, those networks were very likely to discuss the debt ceiling without noting the negative effects that breaching it might have:

    Only 100 segments out of 273 mentioned the negative economic effects of failing to raise — or threat of failing to raise — the debt ceiling. MSNBC most frequently mentioned negative effects in 41 of 68 segments (60 percent), while CNN mentioned them in 13 of 23 segments (57 percent). The remaining networks lagged far behind, with CNBC, Fox Business, and Fox News mentioning macroeconomic consequences in 26, 23, and 25 percent of segments, respectively.

     

     

    The debt ceiling, of course, hasn’t gone away, and will need to be dealt with again in May. Economists largely agree that the debt ceiling should be abolished.

  118. stjeanluc

    MSNBC / Phil – Sure, these guys are biased to the left (I guess it's still legal!) but I think that in general the information is presented with more facts (which is easy when facts are actually in your favor) and some humor which is not something you find on Fox News… Some like Ed are blowhards but hey, still better informed than Limbaugh!

  119. stjeanluc

    I didn't think we would see another red candle on these indices… If AAPL were to wake up, we could over the 10% lines in the S&P and NASDAQ in a hurry.

  120. wappler

    Phil,
    I think we've got a serious problem: I found myself so drawn to the twin version of the go-go girls that I never saw the VMW trade in the middle.  Can we change the setup a little bit so that the go-go girl catches catches our interest but we still end up looking at the trade?
    Maybe the go-go girl, then a flashing red arrow, and then the trade?  That way I'll still have a fair chance to eventually end up putting on a trade, lol!

  121. Savi

    I guess it is a really a good thing you used the go go girls or none of the guys  would have put on the winning trade on VMW—enough already with the go go girls  ;-)

  122. Pharmboy

    Savi –

  123. jfawcett

    Yodi / NFLX – Open Interest and Volume, just as I thought.  I normally look at open interest to see there are buyers for my short puts and in this case, there were sellers for the bear put spread.  However, the JAN15 170's show 64 & 10 (Open Interest & volume) in TOS.  I read that as 60 open active contracts. I don't see that as very many thus the spread may be wider than if there were lots of interest in the Jan15 170 Puts.  Am I missing something?

  124. jelutuck

    I'm trying to understand the VMW trade from today. We sold five of the Feb 100 calls and bought 3 of the Apr 105 calls and the premise was poor earnings, which did occur. We were hoping the Feb calls would drop, but it seems like the Apr calls will also drop, but not as much? Overall it doesn't seem like a trade with much profit potential and I am wondering why structure it like this instead of a straight bear put spread or bear call spread or something else? Thanks.

  125. yodi

    jfawcett
    Back from the jungle NFLX On my previous comments I was talking about Feb13 weeklies and monthly options (this is the present play) so I do not know where you get the Jan15 options from. But yes there is not yet to much open interest in these options put now 20 and call 60 The spread on that put Jan15 is about 3$. I am not sure I would go out that far with this stock.

  126. bai2r

    Lflan – re: trade exits
    Thanks for yesterday's post on exiting trades – clear guidance and examples.  I'll need to read it a couple more times to pound it into the little grey cells.  Yodi – thanks for your comments on stops.

  127. bai2r

    Wombat – thanks for yesterday's cheat sheet on spread plays.  I also found useful the summaries of  options strategies on the Tradeking site – I like having the aliases, P&L and summary of each play on one page.    Here's link to check it out:
    https://www.tradeking.com/education/options/strategies/long-call-spread
    https://www.tradeking.com/education/options/strategies/long-put-spread

    (click on the 'All option strategies' button towards the top, center of page to get list of strategies).  
     
    Appreciate your questions on the board – been accumulating lots of notes!

  128. jfawcett

    Phil / GoGo Girls – ROFL … thanks.  made my day!

  129. jfawcett

    Phil / INTC income portfolio investment – What… no gogo girls :)

  130. zeroxzero

    Stj / Tesla:  Wonderful to have electric cars, nice clean things that they are, no smelly, smoky gasoline or, worse, diesel fuel.  And we have so much cheap, clean, natural gas-fired generation in our future!!  There's really nothing like progress.  Time to shut down those nasty nuclear plants, that's for sure……oh, wait…..
     
    "Natural gas is a naturally occurring hydrocarbon gas mixture consisting primarily of methane, with other hydrocarbons, carbon dioxide, nitrogen and hydrogen sulfide."
     
    "According to the IPCC Fourth Assessment Report (Working Group III Report, chapter 4), in 2004, natural gas produced about 5.3 billion tons a year of CO2 emissions, while coal and oil produced 10.6 and 10.2 billion tons respectively (figure 4.4). According to an updated version of the SRES B2 emissions scenario by 2030 natural gas would be the source of 11 billion tons a year, with coal and oil now 8.4 and 17.2 billion respectively because demand is increasing 1.9 percent a year.[54] (Total global emissions for 2004 were estimated at over 27,200 million tons.)
     
    "In addition, natural gas itself is a greenhouse gas more potent than carbon dioxide. Although natural gas is released into the atmosphere in much smaller quantities, methane is oxidized in the atmosphere into CO2, and hence natural gas affects the atmosphere for approximately 12 years, compared to CO2, which is already oxidized, and has effect for 100 to 500 years. Natural gas is composed mainly of methane, which has a radiative forcing twenty times greater than carbon dioxide." http://en.wikipedia.org/wiki/Natural_gas#Environmental_effects
     
    But then we know those Wiki people are a bunch of Luddite Commies!!  And at least it doesn't seem very sooty!!
    Science 25 January 2013:
    Vol. 339 no. 6118 p. 382
    DOI: 10.1126/science.339.6118.382

     


    Soot Is Warming the World Even More Than Thought
     

    "The roughly 8 million tons of soot produced each year by burning everything from coal in power plants to oil in ship's boilers is bad news for the planet. A new study finds that soot is warming the climate about twice as fast as scientists had estimated and, for the first time, points policymakers to the soot sources that will make the best targets for climate regulations"
     
    But technology solves the problems that technology creates, as we all know:  http://www.pureairsystems.com/index.php;    http://www.luxuryrealestate.com/destinations/rocky_mountains; http://www.hinckleyyachts.com/ http://www.thirtythousandfeet.com/airships.htm ; http://www.gasmasks.net/  :)
     
     

  131. scottmi

    VIX – for you VIXaholics.. IVolatility.com's update today had this to say: 
    The VIX put-call ratio increased from .38 to .46 and the SPX equity only put-call ratio increased from was .54 to .64 making the spread between the SPX equity only put-call ratio and the VIX put-call ratio .18 compared to .16 the previous week for slight increase of .02. A wider spread is market bearish while a narrower spread is bullish since means the VIX put-call ratio relative to the SPX put-call ratio is lower. As the SPX put-call ratio increases it becomes more bearish while the VIX put-call ratio is more bearish (for the SPX) as the put-call ratio declines making the spread between them wider. However, comparing to the previous Friday, the VIX futures volume declined by 39,819 contracts and the open interest declined by 7,518 contracts. The combination of a lower VIX premium and declining open interest suggests moderately less professional hedging enthusiasm although one would expect to see more hedging in anticipation of a correction as the index continues advancing.

  132. Jbur

    Go-go girls/Phil:  I showed the go-go's to my wife and she burst out in laughter. And the cowbell was great too.  Thx for adding some levity to my day.

  133. diamond

    Two Important Dates for Bank Stock Investors
     
    The Federal Reserve on Monday announced plans to release the results of its latest annual round of supervisory bank stress tests on March 7, with released data including "capital ratios, revenue and loss estimates under a severely adverse scenario and assuming a common set of capital actions that is used in the analysis of all of the firms." More importantly to bank stock investors, the regulator on March 14 will announce the results of its annual Comprehensive Capital Analysis and Review (CCAR), which will apply the large banks' capital plans to the severely adverse economic scenario.
     
    That means March 14 is likely to include announcements from many of the best-known banking names of Federal Reserve approval for dividend increases and share buybacks, running through the first quarter of 2014.
     
    Both announcements will be made at 4:30 p.m. EST.

  134. phil

    News/StJ – It's interesting how consistent the lack of information is on Fox, Fox Business and CNBC, with roughly 25% of the segments mentioning the threat (and usually they love to talk about threats of any kind) while it's over 50% on both CNN and MSNBC.  If people rely on one or the other for their news, they simply get a completely different view of the issue.  We have certainly crossed the line between news and propaganda here.  

    Big Chart – Have to imagine what a 5-day flatline will look like.  I think it would seem like the kind of top that is ripe for a pullback to test those lines we just crossed so we need to poke up a bit and not just flatline this week.  As to AAPL, in the past, it has been held down to be used like a coiled spring – to boost the market when needed.  

    Great article by Bob Reich pointing out why the rich would do better with a smaller share of rapidly-growing economy:

     

    Almost a quarter of all jobs in America now pay wages below the poverty line for a family of four. The Bureau of Labor Statistics estimates 7 out of 10 growth occupations over the next decade will be low-wage — like serving customers at big-box retailers and fast-food chains.

    At this rate, who’s going to buy all the goods and services America is capable of producing? We can’t return to the kind of debt-financed consumption that caused the bubble in the first place.

    Get it? It’s not a zero-sum game. Wealthy Americans would do better with smaller shares of a rapidly-growing economy than with the large shares they now possess of an economy that’s barely moving.

    If they were rational, the wealthy would support public investments in education and job-training, a world-class infrastructure (transportation, water and sewage, energy, internet), and basic research – all of which would make the American workforce more productive.

    If they were rational they’d even support labor unions – which have proven the best means of giving working people a fair share in the nation’s prosperity.

    Go-go/Wappler – Just a one-time thing.  As Pharm noted, it messes up some browsers.  I'm happy with my usual system as I do almost always remember to indent my boxes to highlight them and now I've been trying to remember to highlight portfolio moves in blue.  Better people should learn to read than I should crap up what I write with distracting nonsense.  

    Go-go boys/Savi – OK, here's one for you and the girls:

    VMW/Jet – I call that a ratio backspread and they are useful around earnings to take advantage of a premium crush.  The Feb $100s will lose all of their value quickly while the April $105s will retain some of theirs.  The $105's were insurance, in case we were wrong and VMW went up $15 instead of down.  It's a short-term trade on a stock we don't REALLY want to own or, as would be this case, a stock we don't REALLY want to end up long-term short on.  

    As to not much profit potential – it was a $580 credit, TODAY, against $5,000 of margin and tomorrow you will be able to cash it out for better than even so more money in your pocket and let's say it's $220 for an even $800 – that's 16% return on otherwise unused margin in a single day.  That outperforms the ANNUAL performance of all but the top few funds in America.  Truly you guys are way too spoiled if you think this is "limited profit potential".  In a $25,000 Portfolio, making $800 in one day is HUGE.  In a $250,000 Portfolio, making $8,000 in a day is – HUGE too!  I wish there were earnings every day so we could do this every day and we'd make $160,000 a year on our $25,000 Portfolio – would that be enough for you? 

    INTC/Jfaw – Sorry but I had already moved on by then.  

    Soot/ZZ – That makes sense because the Koch "scientists" keep trying to say that we didn't burn so much CO2 100 years ago yet the warming was there but we sure as hell did make a lot of soot.  Long before they worried about peak oil people were worried about hitting peak coal and, before that, peak trees and, in much of Europe – you can see why they were worried about peak trees when you fly over a lot of population centers around there.  Actually, it's almost enough to get you to believe there is a guiding hand to all this the way we seem to always find what we need to keep going as our needs evolve…

    VIX/Scott – Thanks.  

    You're welcome Jbur.  Glad Mrs Bur has a sense of humor.  

    Banks/Diamond – Thanks, good to keep in mind.  Probably a bullish outcome but should be some concerns leading up to it.  Good chart from BAC but look at Sept 2010 – can stay overbought for quite a while:

    Equity fund flows

    Dow was under 10,000 that September and had jumped to 11,000 at the month's end and, if you reacted to that overbought line being hit, you would have missed the move to 12,391 in Feb and 12,876 in April and it wasn't until May, long after the equity flows had left the building, that the bottom finally fell out and we had a major pullback (1,000 points).  I prefer the oversold signal as a good indicator to begin buying but, then again, we give ourselves a 20% cushion so timing isn't all that critical – just knowing we're not likely to fall another 20% is good enough to establish longs.  

  135. yodi

    Phil
    Go-go boys/Savi I think you need some new glasses!

  136. yodi

    Surely hard to get an answer out of  terrapin22
     

  137. jelutuck

    Phil/VMW 
    Thanks for the explanation. I guess I am used to losing money in a more spectactular fashion before I joined this site 
    ;-)

  138. phil

    Good morning!

    Futures turned a bit stronger as the Dollar gathers a bit of strength – one of the points made in Diamond's BAC article:

    Real money selling USD

    Keep in mind that, in the short-run, a rising Dollar can crush commodities and equities usually follow but it's good for keeping rates down (as TBills are priced in Dollars, of course).  Anyway, Dollar only at 80 but over 80 can start to make a dent. 

    Oil just poked back below $96.50 and is playable again (/CL) and, if you want to know why we don't do it overnight, $96.97 was the high at 2am so what would you have done sweating out a $497 loss after you've been watching it for 12 hours and you're totally exhausted?  See, it's no fun to trade futures 24/7 – always best to close out, get some sleep, and just get back in at the next good entry the next day. 

    Now we're just buried in earnings.  To be frank, there are so many earnings reports it's like noise trying to read them all so I tend to shift at this time to a 30,000-ft view and just sort of try to get the big picture.  Kind of like counting cards so I see EDU with a (-) and HW with a + and TYC -, LLY +, etc.  Just trying to get the feeling for sectors at this point but, off course, there's always some we do care about – either as something we play (or a competitor of someone we play) or just an economic indicator like HOG or JBLU this morning:

    Tuesday's economic calendar:

    FOMC meeting begins

    7:45 ICSC Retail Store Sales

    8:55 Redbook Chain Store Sales

    9:00 S&P Case-Shiller Home Price Index

    10:00 Consumer Confidence

    10:00 State Street Investor Confidence Index

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

    7:43 PM Japanese stocks dip in early trading as the yen strengthened against the dollar for a second day, with the Nikkei Average down 0.4% at 10,784. Insurance firms lead declines, with Tokio Marine Holdings (TKOMY.PK -2.3%) and MS&AD Insurance Group (MSADY.PK -2.6%). Exporters are also weak: Nissan (NSANY.PK-0.8%)

    6:00 AM Overseas: Japan +0.39%. Hong Kong -0.07%. China+0.53%. India -0.56%. London +0.01%. Paris -0.35%. Frankfurt-0.17%.

    Notable earnings before Tuesday’s openAKSARLP,ASHBSXBTUCITCPDHIEDUEMCFGLWGNTXHOG,HRSHWIP

    ITWJBLUKLICLLYLXKNEENUEPFEPHGPII,PNRTROWTUPTYCVLOWRBX

    Notable earnings after Tuesday’s close: ACEAMZNBNNYBRCMBXPCSEDLBFSLHAHLITMPWPOLRHIRYLUISVRTX

    The Shanghai Composite enters bull market territory, with last night's 0.5% gain putting the index up 20% since Dec. 3. In addition to ideas the slide in economic growth has bottomed out are the continuing efforts of Beijing to funnel domestic and overseas money into common stocks. The latest is chatter individual Taiwanese will be allowed to invest in Chinese shares. 

    Japan small business confidence rose for the second straight month in January to an index level of 44.3 from last month's reading of 43.8. Manufacturing confidence rose to 41.1 from the last month's reading of 40.7 and nonmanufacturing confidence rose to 46.9 from 46.4 last month.

    Mostly expected, the Reserve Bank of India cut its benchmark rate 25 basis points to 7.75% overnight. At the same time, the bank also lowered its forecasts for growth and inflation. "It is critical now to arrest the loss of growth momentum without endangering external stability." EPI -0.6% premarket.

    The German GfK consumer sentiment index rose to 5.8 for February from January's 5.7 reading. The economic expectations sub-index rose to -11.3 from last month's reading of -17.9. On economic expectations, GfK said, "The downward trend of the indicator has come to an end. It is becoming ever more realistic to hope that the tide will soon turn."

    The backup in Treasury yields – with the 10-year hitting 2% today for the first time in nearly a year – is a buying opportunity, according to Capital Economics' John Higgins. One datapoint of interest: In 7 major tightening cycles since the early 1970s, the trough in Treasury yields occurred an average 7 months before the first Fed Funds tightening.

    Capital Economics: Bull Market in Treasurys Far From Over (MarketBeat)

    "We Are Doneski Gorgeous!" – How Bond Trading On Wall Street Really Works.

    John Taylor: Fed Policy Is a Drag on the EconomyWhile borrowers like near-zero interest rates, there is little incentive for lenders to extend credit at that rate. As they meet this week, Federal Reserve Chairman Ben Bernanke and his colleagues will be looking at an economic recovery that has been far weaker than expected. Early in 2010 they predicted that growth in 2012 would be a robust 4%. It turned out to be a disappointing 2%. And as the recovery fell short of their expectations, they continued and then doubled down on the emergency interventions used in the panic in 2008.

    Fleckenstein: The Fed knows nothing: Who knew? (MSN Money)

    Why the Founding Fathers Loved the National Debt (Echoes)

    CITI: Here's Why The World's Rich Countries Will Always Win A Currency War

    Great for us!  Stock pickers relish the end of the tight correlations across asset classes of the past few years in which everything on the planet swung together based on some economic report of dubious accuracy or whatever a Eurocrat leaked to the FTOne indicator of correlation has dropped 31% since June, the biggest decline since 1993. Morgan Stanley, for one, is sending more money to bottom-up 

    Hedge fund managers raise bets on stocksHedge funds raised their bets on stocks in January, according to Credit Suisse, adding to the sense of optimism on Wall Street as traders become willing to take more risk. It comes as TrimTabs predicted inflows of $55bn to US equity mutual funds and exchange traded fund for January, an all-time record for the first month of the year, suggesting broad based support for the stock market rally among investors. Gross leverage of hedge funds trading with the bank was 2.65 times their underlying assets, above the highs of last year, he said. The net proportion of trades that are long stocks, rather than short, is at its highest since early 2011, before the European debt crisis began to roil markets.

    Good premise on chemical producers:  Cheap natural gas and increasingly competitive labor costs are bringing factories and jobs back to the U.S., Barron's says in identifying eight stocks it believes should prosper - particularly chemical producers and steelmakers – in a gas-fueled manufacturing upswing: SWNLYBNUEDOVCPNCFWMBUNP. 

    Draghi-Inspired Rally Risks Nations Dodging Reforms: Euro Credit. ECB President Mario Draghi's success in driving down borrowing costs for the most indebted euro nations risks lowering their incentives to tackle budget deficits, revive growth and reduce unemployment. "Having taken away the breakup risk for Europe, what they've got now is a crisis that is chronic rather than acute," said Stuart Thomson, who helps oversee $109 billion at Ignis Asset Management in Glasgow. "Europe is doing exactly what Japan has done. When there is a crisis, there will be a response, improvement and then complacency. Europe is in a complacency period now." 

    France 'totally bankrupt', says labour minister Michel SapinFrance's labour minister sent the country into a state of shock on Monday after he described the nation as “totally bankrupt”. Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage. “There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”

    Time for a good purging:  China Communists to Control Size of Party Amid Corruption FightChina’s ruling Communist Party will control the size of the organization as it seeks to weed out “unqualified members,” the official Xinhua News Agency said, citing a meeting overseen by party leader Xi Jinping. Some party members are “corrupt and degenerate,” members of the ruling Politburo said, affecting the party’s “vigor and vitality,” according to the Xinhua report. The party had 82 million members as of last year.

    Beijing Recommends Residents Stay Indoors as Pollution ‘Serious’. Beijing recommended the city’s residents stay indoors today to avoid exposure to “serious” levels of air pollution in the Chinese capital.

  139. phil


    China is 
    unlikely to impose tariffs on polysilicon imports despite an escalating trade depute that pits China vs. the U.S. and Europe, Maxim Group says, as a tariff would badly hurt China's own firms – including LDKTSLYGECSIQ - and harm global demand for price-elastic solar. As such, the recent rally in Daqo New Energy (DQ-6.4%) "has gotten ahead of itself."

    IMF Set to Pare South Korea 2013 Growth Estimate to About 3%. The full-year expansion may be about 3 percent, compared with a 3.9 percent estimate in September last year, country mission chief Hoe Ee Khor said in an interview in Seoul after meeting with South Korean officials last week.

    Tanker Glut Worsening as OPEC Cuts Most Since Recession: Freight. OPEC's deepest output cut since the global recession in 2008 is creating the biggest surplus of oil tankers in the Persian Gulf in at least three years and lowering earnings for Frontline Ltd. and other ship owners. OPEC reduced daily supply by almost 1 million barrels in the four months through December, equal to one fully loaded supertanker every two days, Bloomberg data show. Saudi Arabia, Iran and Iraq led the retreat, leaving 22% more ships than cargoes in the world's largest oil-producing region, the most for the time of year since at least 2010, according to weekly surveys of shipbrokers and owners by Bloomberg. 

    Good housing sign:  Plum Creek Timber (PCL): Q4 beats across the board on a 12% jump in total sales. Net earnings rose 30% Y/Y on higher revenue across all segments. Sales continue to rise, with improving demand for lumber and wood panels expected to translate into higher demand and pricing for logs in 2013.

    DR Horton (DHI): FQ1 EPS of $0.2 beats by $0.06. Revenue of $1.23B beats by $1228.9M. (PR)  More on D.R. Horton (DHI) FQ1 earnings: Net sales of 5,259 homes +39% Y/Y. Sales value was even stronger, rising 60% thanks to pricing power, geographic mix, and larger homes. Backlogs +62% to 7,317 homes. Shares +1.2% premarket. (PR) 

    10% beat!  Ford Motor (F): Q4 EPS of $0.31 beats by $0.05. Revenue of $36.5B beats by $3.33B. (PR)  More on Ford's (F) Q4: Strong results in North America drove overall profitability with Europe piling up losses of $732M for the period. Total company production of 1.5M units was up 9% from a year ago. Ford China saw a 41% increase in sales and boosted its market share. For 2013, the automaker sees increasing market share in the U.S. and China while Europe stays the level. Full-year 2013 pre-tax profit of close to $8B is forecast. F +2.4% premarket. (PR)

    And they gave me crap about billing them for a 1st class trip once:  Caterpillar (CAT) says it’s considering “all options” to recover losses from the $580M false accounting fiasco at Siwei. In its conference call earlier today, Chairman and CEO Doug Oberhelman said CAT's aggressively looking into how it can hold those responsible to account for the “multiyear, coordinated accounting misconduct.” “We are not done,” Oberhelman says. CFO Brad Halverson adds: “When we put our own team in place, the way we operate, we get to the bottom of it.” Review the rest of the call here:CAT Earnings Call Transcript.

     Pfizer (PFE): Q4 EPS of $0.47 beats by $0.03. Revenue of $15.1B beats by $0.7B. (PR)

    Ah – there's the connection:  The hits just keep coming to Herbalife (HLF -8.4%), as the shares sank into the close following the FTC's announcement thatregulators have seized the assets of Fortune Hi-Tech Marketing, alleging the company is a pyramid scheme. Although HLF wasn't mentioned in the announcement, Fortune Hi-Tech's Chief Analytics Officer, Simon Davies, worked at Herbalife for 11 years and was the company's Director of Internal Audit.

    More on VMware's (VMWQ4 results: Issues downside revenue guidance for Q1 and FY 2013; sees Q1 at $1.17B-$1.19B vs. $1.25 consensus, and 2013 at $5.23B-$5.35B vs. $5.43B consensus.Plans to streamline operations, including exiting certain lines of business and cutting ~900 employees; expects to result in total charges of $90M-$110M. Shares -13% AH; EMC, majority owners of VMW, -4.7%.

    VMware's (VMWweak Q1 guidance sparked an AH selloff in enterprise IT names. CTXS -3.1%RHT -2.2%CRM -1.2%WDAY-1.3%FFIV -1.3%NTAP -2.4%.The guidance comes amidst concerns the virtualization software market is becoming saturated, and that Microsoft's free Hyper-V platform is proving a tough competitor. On the earnings call, VMware boasted of strong vCloud sales, but added it's seeing soft demand in the U.S and remains worried about Europe. Headcount is expected to grow by 1K in 2013 in spite of the job cuts.

    Corning (GLW): Q4 EPS of $0.34 beats by $0.01. Revenue of $2.15B beats by $0.08B.

    Note how lack of confidence is contageous (and possibly wrong):  Seagate (STX) guided on its FQ2 call for FQ3 revenue of $3.25B-$3.45B, below a consensus of $3.58B. Gross margin is expected to be at the low end of a range of 27%-32% after coming in at 27.8% in FQ2. "We're trying to give a conservative outlook, because our customers [PC OEMs] are giving us conservative input,"says CFO Pat O'Malley. A $40M investment has been made in server flash memory module maker and Fusion-io (FIO) rival Virident. STX-4.8% AH. WDC -2.6%MRVL -1.4%FIO -3.8%. (transcript) (WDC guidance)

    Yahoo (YHOO): Q4 EPS of $0.32 beats by $0.04. Revenue (ex-traffic acquisition) of $1.22B (+4% Y/Y) in-line. Shares +3.9% AH. (PR)  More on Yahoo's (YHOOreport: Annual revenue growth was the first in four years. Full-year revenue (ex-TAC) was $4.47B, up 2% from 2011. Display revenue ex-TAC of $520M for Q4 down 5%; ads sold on core properties down 10% Y/Y but up 3% sequentially; price-per-ad on core properties up 7% Y/Y. Paid clicks up 11%; Price-per-click up 1%. (5 p.m. conference call) 

    Yahoo's (YHOOQ4 earnings conference call: Guides for Q1 revenue ex-TAC of 1.07B-$1.1B; for $4.5B-$4.6B full-year. Expects adjusted EBITDA of $340M-$360M in Q1; $1.6B-$1.7B for full-year, and GAAP income from operations of $155M-$175M in Q1; $810M-$850M for full-year. The "back half [of 2013] should reflect operating leverage." Shares now +1.2% AH. (live call)

    Yahoo's (YHOOQ4 earnings conference call: Search is an area where the company has lost share in recent years, CEO Marissa Mayer says, and they'll push to regain it, adding that most search innovation ahead will happen at the "user interface level." She says they have small, "nimble" teams working on new products. - Not sure I like them trying to win search back – better to move on to new things than waste a Billion trying to beat GOOG (MSFT couldn't do it with Bing).  

    Wall Street keeps an eye on Amazon’s sales tax hit (Yahoo News)

    Apple Is Stronger Than Ever (Slate)

  140. terrapin22

    yodi – what's your question?  best if you email me.  

  141. wombat

    StJ
    I'm not seeing a $21 strike call listed on the March INTC ?

  142. wombat

    StJ
    Disregard  // Human Error.

  143. wombat

    So, $F beats up and down by 10 % !!   / adeguate to positive guidance, and the shares are down 4% 
    Anyone ?
    "No good deed goes unpunished. 

    Some analysts and investors look only at the fact that Ford's after tax profits for 2012 were "only" $5.596B or $1.41 per share, which is down from $6.119B or $1.51 per share last year. Never mind that Ford provided adequate guidance, and the average of analysts were predicting $1.34 per share, and that the high end estimate was for $1.39 per share."

  144. wombat

    bai2r
    you're welcome – i  keep it on my desktop for quick reference just to make sure we're talking the same language.

  145. wappler

    Go-go/Phil,
    I was just kidding, I don't need any flashing red arrows or go-go girls.  But thanks for the laughter yesterday!

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