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Thursday Thrust – Can $85Bn a Month From the Fed Top 14,000?

INDU WEEKLY

$85,000,000,000.

Where does it all go?  The key difference between last year's "Operation Twist" and this year's "QInfinity and Beyond" is the lack of what was called "sterilization."  In Twist, the Fed bought the long Treasury notes while selling the short ones thus "sterilizing" the net effect on the money supply to keep inflation down.  In December (when we were crashing – remember?) the Fed announced they would go back to making open-market purchases of long-dated treasuries AND mortgage-backed securities WITHOUT subsequent sales – ie. POMO – ie. MONEY FOR NOTHING! 

Yesterday was a $3Bn day, today is $1.5Bn, tomorrow $1.25Bn, Monday $1.5Bn, Tuesday $3Bn, Wednesday $1.5Bn, Thursday $5.5Bn ('cause it's Valentine's day, I guess) and next Friday will be the first business day of the month that the Fed will rest ahead of the holiday weekend (President's day on the 18th) but then MORE FREE MONEY comes in every other day of the month.

As noted by Evil Speculator: "That is not the end of the story – there is another factor we need to consider and it’s the actions of the ECB on my side of the Atlantic. Draghi has been cooking his own stew of sterilized injections by swapping a portion of the ECB’s on-balance sheet exposure for an unlimited off-balance sheet commitment via the Outright Monetary Transactions program. He’s doing this by concurrently offering one-week deposits to the banking system. Banks bid competitively for the deposits, thus permitting the ECB to withdraw from circulation an amount of money equivalent to what it has spent via OMTs."

As I said on Tuesday, the tide is coming in and the Fed is adding water to the Ocean and THEY ARE NOT GOING TO STOP until we are all swimming in so much cash that our $20Tn debt (by that time) is only 1/2 of our GDP.  Since our current GDP is $16Tn, that means the Fed is going to have to pretty much triple it through the end of the decade and that means we need China-like 10% annual growth and the way we get there is with our friend inflation. 

Sound like madness?  Not really.  Housing, for example, is 18% of our GDP and homebuilding activity is still down about 66% from it's early 2000's level.  Millions and millions of jobs were lost in that sector and millions and millions of jobs will come back as it kicks back into gear.  What happened to the S&P last time we recovered from a housing crash (Bush the 1st's S&L crisis, not to be confused with Bush the 2nd's Financial crisis)?  We went from 350 in January of 1991 to 1,469 in January of 2000 – that's UP 320% in a decade!

And how many jobs were added under Clinton during that time?  20M – a net of 2.5M jobs a year or about 200,000 jobs a month or just a bit more than the 196,000 jobs that were added in December or the 157,000 jobs that were added in the not-yet-revised January report last week.  

Sure, you might say, Al Gore invented the Internet in the 90s and that kicked off a massive boom in productivity but we're in the middle of another boom the MSM is trying hard to ignore as AAPL (the stock we don't talk about anymore) sold 22,900,000 IPads in Q4 – one out of 6 computers sold in the World!  They also sold 4.1M Macs and, for perspective, HPQ was 2nd with 15M and Lenovo (IBM's old PC division) about the same with Samsung selling a respectable (but not Apple-beating) 7.6M and AMZN 4.6M.

Typically research firms don’t count tablets as a PC, because they are quite different from traditional laptops and desktops. But when sales of these two categories are stacked side by side, the numbers give perspective for how quickly the tablet is dissolving the old-school PC.  The Canalys report certainly makes the late Steve Jobs sound prescient. When he introduced the iPad 2 in 2011, he said tablet devices were ushering people into a “post-PC” era, an era that can be as transformative for our economy as the Internet was 2 decades ago

US GDP climbed 50% in the 90s and, at the start of the run – none of us knew we were in the middle of such a major change.  There were plenty of bears at the beginning of the dot com boom and they had excellent reasons and were ultimately proven "right" about valuations – but as someone who was "right" when he said Yahoo wasn't worth $100 and then "right" when I said it wasn't worth $200 and still "right" when I said it wasn't worth $300 – I can tell you from experience I wish I was "wrong" and jumped in at $100.  

The market crashed 5 years ago now and people have put off buying homes, cars, washing machines, sofas, having babies, having operations, taking vacations, buying new PCs (or post PCs), hiring staff, painting their homes, getting a new job AND – investing in the market – for long enough and what if this isn't just a little irrational run in the market but just the beginning of another decade of growth?  What's your plan?

As you know, we have TRIED to get more bearish but our levels simply will not let us, so far and, even yesterday, we had to kill our NFLX short spread early in the morning (pointless with them included in the Nasdaq), and we cashed in our oil shorts (as planned at the $95 line, shorting again at $97 on /CL Futures) but we still liked long plays on HOV, ABX and RRD as well as reiterating our CIM longs – there's just nothing to short.  

We did do a shortish spread on AKAM as our earnings play of the day and my comment to Members was:

AKAM is a good earnings play as you can sell 10 Feb $43 calls (up 5%) for $1.45 ($1,450) against the 10 May $43/46 bull call spreads for $1.10 ($1,100) for a net $350 credit and, if AKAM fails to reach $43, the short calls expire worthless and you keep whatever value remains on the long spread (probably half unless they bomb).   Let's do that in the $25KPA.  

AKAM dropped harder than we hoped but we keep the $350 credit regardless plus whatever little may be left on the spread so another quick winner on earnings.  I can tell you now that we'll be jumping on IRBT as they take a nice hit from disappointing earnings.  Next to TASR and the stock that cannot be named, IRBT is one of my favorite 20-year candidates. 

RUT WEEKLYWe had a similar trade to AKAM set up for GMCR in our virtual $25,000 Portfolios where we shorted the Feb $50 calls for $2 and that's going to be money in the bank as GMCR drops like a rock this morning.  Earnings season has been like shooting fish in a barrel so far this year and we have tons of fun still to come with AGNC, ATVI, CSTR, HAS, LNKD, OPEN and SPWRA this evening.  

As you can see from Dave Fry's Russell chart, as well as the Dow chart above, these old barriers don't mean much to a Federally-Funded Index on the rampage.  I remember back in the 90s – we pretty much had to give up drawing lines on charts as they never held – the market just went up and up and up and up and, you know what – it was fun!  

So stop listening to the Fund Managers who want you to sell them your stocks so they can get back into the market and stop listening to the sore losers on Fox and other Conservative media – who are forced to endure another decade of relative prosperity under Democratic rule – with any luck, we WILL pop our levels and then we can party like it's 1999 or, hopefully, more like 1993 – when we were still in the early stages of a prosperous decade. 

Our general plan is to use a percentage of our ill-gotten gains on the way up to keep layering our hedges for the return trip.  If the pullback never comes – then we'll have given up some of our potential gains but it let's us keep playing while the market keeps floating higher on the ever-rising tide of loose money that is, currently, lifting all ships (except AAPL – so far).  


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  1. stjeanluc

    Oil Lines

    R1 – 99.44
    R2 – 98.21
    R1 – 97.50
    PP – 96.26
    S1 – 95.54
    S2 – 94.31
    S3 – 93.59

    Yesterday's high and low – 96.99 / 95.04

  2. hemas03

    All,
    Recently there were some comments about getting student loans for their children in college. Does any of you on this board have a reference on where I could read up on the options available, if any?
    TIA

  3. dplatt

    Good morning All,
    Hemas/Student Loans
     
    Bankrate.com
    google student loan options
    mint.com
    talk to your college of choice if you know.
    Google sallie mae.
     
    ofcourse I am assuming you are in the U.S. 
    bankrate.com is a decent starting point though regardless of where you live or which college you want.

  4. 1020

    Good Morning!

  5. albo

    David Einhorn to the resue of AAPL !

  6. albo

    rescue

  7. sgh225

    #next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; } Phil,
    Good morning.
    Do you have a recommendation or changes for a gold trade, I have June 145/170, /w short Mar 167 calls 5x and Jan14 155/170 calls 10x?
    Also for XLK.

  8. 1020

    Down Goes The Euro!…..

  9. diamond

    100 Startling Facts About the Economy

  10. yodi

    Phil Your IRBT looks as a good b/w the Mar13 call option pays more than 2.25 10% in 36 days??? Stock shows steady over a 1 year chart as well.

  11. Pharmboy

  12. Burrben

    Time for another BAC trade?  Scott thinks so…
    Around the 5:43 time frame
    http://www.t3live.com/videos.html
     
    Also honorable mentions of BA heading to 85 and LNKD heading up

  13. diamond

    AAPL – Springheel Jack

  14. rperi

    Bucky shooting up almost half a percent to $80.15 while oil still up 1/3 of a % and futures still green.  Now THAT'S bullish.

  15. yodi

    Yesterday I was asked some question on adjustment on a sharp stock drop.
    My AKAM trade of 3rd Jan13
    Buy 2x May13 37c @ 6.40 yesterday 6.52
    sell 4x May 45c @ 2.45 yesterday 2.27
    sell 2x May 35p @ 1.74 yesterday 1.22
    I have offerd to sell the 37c for 6.00 and buy the 35p at 1.50 just in case some fool has still oders open
    I will report after opening

  16. rperi

    With regards to the AKAM earnings play, the calls we will obviously wait for them to expire worthless, but in saying we will keep whatever is left on the spread, when is the optimal time to cash in on this?  Not this morning obviously as it sells off, but how close to expiration in May?  Is it advisable to wait for the bounce?

    As a side note, thank you Phil for giving me the push to dump this long time play of mine for a small loss a few weeks back.  Would have been a much worse hit after this morning.

  17. stjeanluc

    The Mar FAS 121 put didn't make it to $1.50. Maybe we should look at higher strikes.

  18. stjeanluc

  19. yodi

    AKAM here my reaction after the opening stk down to -+34 Obviously no bites on my offers!
    Now first sit back and do nothing. That is your best move. The calls and the callers are balancing of to sero.
    the 35 putter is 50% down but until May will be worthless. The 45 caller will not recover so I would not even pay .25 cents for it. The long 37 call will recover some after the initial excitement is over and will pay more . So I am looking to close the play with a profit just sit back and wait!
    You could have bought the stock at 33.95 now already up to 34.45

  20. yodi

    Phil Congrat on AKAM keep going shooting fish in a barrel

  21. stjeanluc

  22. Phil

    Good morning.  

    Dollar jammed up hard and fast to take the legs out of what was going to be a lovely open. 80.12, up from 79.60 an hour ago is a half a point of downward pressure to take the steam out of the market.  

    Great chance to short oil at the $97 line again (/CL) so we just play the ball where it lies. 

    AAPL with a nice little pop but we're not that impressed with the mid $460s but, then again, our goal is to gain $5 a month – not per week!  

    Apple (AAPL) can unlock $320/share in value assuming no PE expansion, says David Einhorn, speaking on CNBC after the release of his letter to shareholders. Apple has a "cash problem" and a "depression-era mentality … We own more Apple today than we ever have before." Shares +1.7% premarket.

    "We believe Apple (AAPL) must examine all of its options to unlock the growing value of its balance sheet," writes David Einhorn,opposing a proposal to eliminate preferred stock from the company's charter. One option, he says, would be the creation of perpetual preferred stock to be distributed at no cost to Apple shareholders.

    More on Einhorn and Apple (AAPL): The company needs to use the same level of creativity with its balance sheet as it does to produce products, writes Einhorn. Every $50B of perpetual preferred stock distributed would unlock about $32/share of value, he says, and Apple has the capacity to distribute several hundred billion. "Greenlight is alarmed that Apple is attempting to eliminate preferred stock from its corporate charter." Shares  +0.7% premarket.

    Q4 Productivity sucked, down 2% and Unit Labor Costs way up at 4.5% and that's GOOD, because it means they can't squeeze any more work out of the existing work-force and will have to start hiring again and you all know wage inflation is my favorite flavor of inflation.  

    Thursday's economic calendar:
    Chain Store Sales
    8:30 Initial Jobless Claims
    8:30 Productivity and Costs
    9:45 Bloomberg Consumer Comfort Index
    10:30 EIA Natural Gas Inventory
    3:00 PM Consumer Credit
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet
     

    4:09 AM Japanese shares pull back after ending at a four-year high yesterday, while Chinese and Hong Kong shares also fall ahead of the Lunar New Year holiday. European shares struggle for direction as investors stay cautious prior to BOE and ECB policy meetings today. Japan -0.9%, Hong Kong -0.3%, China -0.7%, India -0.4% to 19559. EU Stoxx 50 -0.2%, London +0.1%, Paris flat, Frankfurt +0.1%, Milan+0.25%, Madrid +0.5%.

    6:00 AM Overseas: Japan -0.93%. Hong Kong -0.34%. China-0.66%. India -0.30%. London +0.03%. Paris +0.13%. Frankfurt+0.40%. 

    At the open: Dow -0.14% to 13968. S&P -0.04% to 1511. Nasdaq -0.04% to 3167.

    Treasurys: 30-year 0%. 10-yr +0.02%. 5-yr +0.01%.

    Commodities: Crude +0.36% to $96.97. Gold -0.72% to $1666.75.

    Currencies: Euro -0.6% vs. dollar. Yen -0.11%. Pound -0.21%.

    Market preview: U.S. stock futures are flat following a fairly rubbish Q4 productivity report and slightly disappointing weekly jobless claims, with the S&P mini buzzing around the zero mark. Earnings continue to be the focus, not too surprisingly, with DeVry (+16.6%) and O'Reilly Automotive (+8.65%) leading the charge higher, but with Green Mountain sliding 9.3%Later: Bloomberg Consumer Comfort Index, Consumer Credit 

    Killing the rally along with the rising Dollar at the open:  Dealing a blow to precious metals, the Chicago Fed's Charles Evans – as dovish as they come – tells CNBC QE could end before unemployment sinks to 7%. As for the 6.5% unemployment rate that might trigger rate hikes, Evans doesn't see that happening until mid-2015. GLD -0.7%SLV -1.5% premarket. The dollar gets a bid as well, UUP +0.4% premarket.

    Q4 Productivity and Costs: -2.0% vs. -1.3 expected, +2.9% prior. Unit labor costs +4.5% vs. +3.1% expected, -1.9% prior.  More on Q4 Productivity and Costs: The slip in productivity factors in an increase of 0.1% in output and 2.2% in hours worked. In the manufacturing sector, productivity was up 0.5% with output rising 0.7% and hours worked creeping up 0.1%.

    What if the Fed is beating a donkey (an economy with 1% growth potential) for not being a horse (3% growth), writes Jeremy Grantham, wondering if the man (Bernanke) who missed the greatest macro event of our lives is also making an incorrect assumption about the economy. "Fine-tuning economic growth … is hardly likely to get any easier by badly overstating trend-line growth … The Fed will keep trying to whack the donkey for far too long." 

    Shinzo Abe's desire to appoint a Bank of Japan governor who will boldly go where no BOJ governor has gone before is hitting opposition in his own cabinet and among financial bureaucrats, who fear that radical new policies could spark a dangerous rise in bond yields. It could mean that the Japanese PM might have to settle on a compromise candidate, especially as he needs the consent of the parliament's upper house, where his LDP party lacks a majority.

    India's growth will decelerate this FY to 5% from 6.2% last year, the statistics ministry has said in a forecast that is lower than a recent finance ministry outlook of +5.8%. The slowdown is due to continued weakness in manufacturing and farm output, with the economy being hampered by lack of reform, wide fiscal and current account deficits, and high inflation.

    The ECB is close to agreeing a refinancing of Ireland's debt after the country's parliament authorized emergency legislation to dissolve the former Anglo Irish and Irish Nationwide banks, now merged into IBRC, and sell their remaining assets of up to €14B to a bad bank. Dublin wants to lengthen the payment schedule of a €31B promissory note that helped support the failed banks.

    The ECB leaves policy unchanged, its benchmark lending rate remaining at 0.75%. Mario Draghi's press conference begins at 8:30 ET.

    Draghi press conference (live here): The euro turns tail as Draghi talks about risks to the downside and specifically mentions the currency's strength as one of those risks. Up earlier, the euro now-0.4% and buying $1.3462. FXE -0.5% premarket. European stocks are at session highs, the Stoxx 50 +0.6%.

    Upstaging the BOE rate decision is future Governor Mark Carney's testimony (live here) to parliament. "The bar for (policy) alteration is very high," he says, suggesting the dove dream of NGDP targeting coming to the Bank isn't so sure. The FTSE (EWU) quickly gives up 30 points, now -0.3%. Sterling (FXB+0.3%.

    More from the Bank of England: Coming to a Fed decision near you? "CPI inflation is likely to rise further in the near term and may remain above the 2% target for the next two years … it (is) appropriate to look through the temporary, albeit protracted, period of above-target inflation." 

    Short Treasurys on and off for the past several years, Jim Rogers is giving it another go. He's joined – for completely different reasons – by stock bull Jim Paulsen, who says the 30-plus year era of bonds offering competitive returns relative to stocks has probably ended. TLT -3.5% YTD. A favorite of the bond bears, TBT +6.4% YTD.

    Boeing (BA) is reportedly proposing interim design changesto the lithium-ion batteries used in the 787 in order to minimize the fire risks and allow the Dreamliner to start flying again with passengers. If approved, Boeing hopes to send the new batteries to airlines by the end of the month. Meanwhile, the FAA has authorized one 787 flightwith a crew so that they can study possible changes to the plane’s electrical systems. 

    Costco (COST) comparable sales +4% in January vs consensus of +3.9%, and despite the month containing one fewer day of trading vs last year. Net sales +7% to $9.35B. U.S. comparable sales +3%, international +5%. Excluding gasoline and forex effects, total comparable revenue +4%, U.S. +4%, international +3%. (PR)

    Nordstrom (JWNJan. same-store sales: +11.4% vs. consensus of 6.0. Total sales +38.4% to $951M. (PR)

    Kohl (KSSJan. same-store sales: +13.3% vs. consensus of 3.1. Total sales +34.1% to $1.13B. Shares +2.4% premarket. (PR)

    Shares of Kohl's (KSS) move up 2.8% premarket after the retailer obliterated the same-store sale estimates of analysts by recording a 13.3% gain during the month. The company says the sales boost was broad with all lines of business except footwear achieving double-digit comparable sales growth. Doubting Thomas alert: Some retail analysts are far from dazzled by the number as they wait for the other shoe to drop.

    Macy's (M) says same-store sales rose 11% during January with its online channel a major contributor. As a result of the strong month, the retailer raises its guidance for Q4 EPS to $1.94-$1.99 from prior guidance of $1.91-$1.96. M +4.0% premarket.

    Target (TGTJan. same-store sales:+3.1% vs. consensus of 1.7. Total sales +29.6% to $5.97B. (PR)

    Herbalife (HLF) yesterday disclosed information about how much its distributors earn as part of its attempts to counter continued accusations that, in the words of Bill Ackman, it's just a "well-managed pyramid scheme." Just under 90% of distributors received no payments last year, while the average compensation for those who did ranged from $104 to $724,030, depending on  their levels.

    Green Mountain Coffee Roasters (GMCR) is teed up to be abattleground stock today after reporting impressive earnings (III) on some fronts but failing to smash lowered estimates as some bulls had hoped to see and offering tepid guidance for the current quarter A number of investments firms are in the fray with raised price targets while on the other side the perma-bears are as vocal as ever. GMCR-9.1% premarket, but the key players are just taking off their warmups.

  23. yodi

    This mornings SHFL play has been closed at 16.11 stk and .80 Mar13 caller

  24. Phil


    More on Teva (
    TEVA -2.1%Q4: net profit -37% to $320M as revenue falls 7.5%. U.S. sales -14% to $2.6B amid a sharp fall in Provigil (sleep disorder) due to generic competition. Copaxone global revenues +14% to $1.1B, but faces increasing competition. Expects to launch 23 generic drugs in 2013, as in 2012. Reiterates 2013 revenue forecast of $19.5-20.5B and adjusted EPS of $4.85-5.15. Declares dividend of 1.15 shekels (31 cents) a share, +15% from Q3.

    Sony (SNE): FQ3 net loss ¥10.8B ($115M) vs ¥159B a year earlier and consensus for profit of ¥21B, with the company recording its eighth quarterly loss in a row. Swings to operating profit of ¥46.4B from loss of ¥91.7B but below forecasts of ¥72.1B. Revenue +6.9% to ¥1.95T. Despite the net loss, Sony reiterates FY guidance for net income of ¥20B, which would be its first profitable year in five. (PR)

    LinkedIn's (LNKD) Q4 earnings are due out after the bell, with analysts expecting that EPS climbed to $0.19 from $0.12 a year earlier and revenue 66.6% to $279.5M as the firm continued to grow its hiring-services business. "We believe the company's focused and calculated approach to expanding the recruiting and marketing product portfolio is laying a great foundation for highly leverageable growth," says Piper Jaffray's Gene Munster.

    Alcatel-Lucent (ALU): Q4 net loss €1.37B, €0.60 per share; revenue -1.3% to €4.1B. Takes €1.41B charge "related to the depreciation of goodwill and fixed assets." Swings to FY net loss of €1.37B from net profit of €1.1B in 2011, with revenue -5.7% to €14.45B. Won't pay dividend for 2012. As expected, CEO Ben Verwaayen will step down when a successor is found; Verwaayen has been in the job for 4 1/2 years but he's been unable to turn the company around, with the stock price falling 70% during his tenure. 

    Vodafone (VOD): FQ3 revenues -2% to £11.39B vsconsensus of £11.29B. Profit figures not provided. Results "continue to reflect very difficult market conditions in Europe," with Spain and Italy particularly hit, although growth in emerging markets continues. Data revenue +12.8% as European smartphone penetration rises to 33.4%. Shares +2.1% in London. (PR) 

    BlackBerry (BBRY+3.6% after: 1) Announcing two new board members: former Verizon CTO Dick Lynch, and former Sony Ericsson CEO Bert Nordberg. 2) Receiving an upgrade from Wells Fargo, which likes BlackBerry's risk/reward and thinks its "valuation already discounts limited BB10 demand." Bernstein upgraded BlackBerry on Monday.


  25. stjeanluc

    Probably could unwind that GMCR trade now for a nice gain….

  26. Burrben

    Phil / BIDU
    Might not be a bad short.  It's trading below it's 50Day and has resistance above.  

  27. deano

    Phil – just an idea: how about a quick webinar on how to use the wiki? Would hopefully educate a few of us and help us gain some traction. I'm not sure who the resident expert is, but perhaps you could suggest and we could promote some participation.

  28. Burrben

    TWO reported earnings and is down to 12.05.  
    Here is the earnings highlights
    http://finance.yahoo.com/news/two-harbors-investment-corp-reports-212000067.html
     
    I'm guessing they are down since they declared a div or 0.55?  Not really sure…
    http://www.rttnews.com/2052166/two-harbors-investment-q4-profit-more-than-triples-quick-facts.aspx?type=ern&utm_source=google&utm_campaign=sitemap

  29. stjeanluc

    The GOOG Jun BCS is now at $28 out of a possible $35 with 4 months to go! All 3 of the earnings play this week are doing what they are supposed to!

  30. Phil

    The Bloomberg Consumer Comfort Index improves for the first time in several weeks, rising to -36.3 from -37.5 previously. Notably, the CCI among the lowest earners (< $15K) has now risen to a level equal with its long-term average. For those earning from $15K-$50K, the index remains far below the long-term average.

    GLD/Sgh – I don't know what you are doing with your comments.  Are you pasting them in from another app?  Lots of strange junk in your text.  Anyway, GLD is at $161.37 and you have a $145/170 bull spread and you sold March $167 calls so the only thing you should have done is covered more when we were higher.  This morning we dipped again and I'd buy back those March $167 calls and look to sell at least a 1/2 cover (of the total position) of the $164s (now $1.30) for $1.50 or better.  That pays you .75 per long for 36 days, which is a nice dividend while you wait.  You also may want to consider taking the $17.25 off the table for the June $145s, since the best they can do is $8 more, and buying more Jan $155/170 bull spreads (now $7), which can also gain $8 but tie up 60% less money and give you 7 more months to sell short calls with the same $170 goal. 

    Keep in mind, selling net .75 a month against the long spread is 10% a month back.  Do that all year and it doesn't matter what price GLD is at as your longs are free. 

    10 facts is my limit, Diamond… ;)  

    ALU with a big pop on CEO change.  

    IRBT/Yodi – Right on the 50 dma at $20.25 and you can now sell Sept $17.50 puts for $1.50 so I have to do 20 of those in the Income Portfolio because it's just silly not to.   TOS says ordinary net margin is $1.67 to make $1.50 in 7 months – what's not to like?

    This is why I love having cash – you never know what's going to go on sale.  

    BAC/Burr – I said last month I think they are good for another 30% this year but no fun to play with low VIX.  BA you know I was banging the table on and LNKD I'm not so sure about.  

    AAPL/Diamond – Thanks for SHJ chart:  

    Dollar 80.17 – huge one-day move accounting for 200% of the market drop so far.  

    AKAM/$25KPA, Rperi – This is not a RULE because you have to actually consider the earnings and think about the value of your leftovers but, with yesterday's AKAM play, the Feb $43s are now .02 so no sense in not buying them back and they are mainly down as they invest in future growth and back at the same $34 they fell to in November so, assuming they hold this – they could bounce back quite a bit so we may as well buy back the May $46 calls for .25 and that leaves us with a few pennies of credit left and free May $43 calls (now .50) and, if we're lucky, they pop to a buck and we make $1,000 and, if we're unlucky, they fall to .25 and we end up with about the same $350 that was our worst case.  

    And wheeeeeeee! on oil again ($96.48) but, unfortunately, all is being dragged down by Dollar 80.25.  

    That's OK – nice opportunity to test the lows again.  

  31. scottmi

    CRIS/Pharm – any update? good place to add more or put in a stoploss?

  32. rperi

    Thanks again, Phil, good tutorial and it helps for future earnings plays that are similar.  Love those earnings plays!

  33. Burrben

    I'll chuck a BAC trade out there:
    Sell BAC Jan14 12P, Buy BAC Jan14 10-15 Bull Call Sp for 0.48.
    Risk is owning BAC for 10.20 (11.76-1.56 put)

  34. stjeanluc

    AKAM / Phil – I actually think that it might be a good entry point around here. There is good S/R around $32 (not far down). The forward P/E is around 20 but if they can keep growing sales at around 20% it's OK. I doubt that we'll reduce our global bandwidth usage anytime soon! Their competition is LVLT with a forward PE of 65 and LLNW and they don't make any money! Might be a bad couple of week as downgrades will come in though.

  35. yodi

    Thoughts on IRBT selling just the Sep13 17.5 putter 1.30 actually cost the same or more on PM margin as your credit, so may I suggest to set up a 17.5/25 stangle your credit will be 530.00 on 2 of with a PM margin of 153.00. Obviously the caller could be a risky venture! your thoughts Phil

  36. Phil

    You're welcome Rperi, I'm very glad we had that talk re. AKAM!  

    AKAM/Rperi – Quite a ride on those.  Considering they were under $20 in 2011, losing $561 not a bad deal.  If you were so determined to stick with it, doubling down then would have let you out long ago.  People tend to forget the time cost associated with holding a position – especially if it's one that requires your attention.  I always recommend people take some side jobs where they bill by the hour if they can – so they can learn to focus on what their time is worth.  In this case, the time you will worry about this position in the future isn't worth the $561 you're trying to win back.  Do you even remember your original premise?  Next time they sell off to the low $20s – THEN you know the stock well enough to take a look but, at $40 – it's not too sexy…

    FAS/StJ – Or be more patient…  Hit $1.50 at 9:45.  

    Thanks Yodi.  

    Good time to remember our levels (3 of 5 flips bearish):

     

    • Dow 13,600 (now at 13,890)
    • S&P 1,480 (now at 1,503)
    • Nasdaq 3,150 (now at 3,144)
    • NYSE 8,800 (now at 8,875)
    • Russell – 880 (now at 904)

    So far, these are all higher than the levels we decided not to worry about on Tuesday morning so:

    For now…

    SHFL/Yodi – Nice and fast!  

    BIDU/Burr – Too dangerous for me.  

    Webinar/Deano – That would be great if someone knows Wiki well enough but, on the other hand, don't you think we can just find a nice instructional thing somewhere that's already been done?  

    TWO/Burr – Nothing wrong with that report.  Looks like you can buy the stock for $12.12 and sell the Jan $12s for at least .50 and the Jan $12 puts for $1.50 and that nets you down to $10.12/11.06 with the company just affirming the $2.20 dividend.

    DIA next week $140 calls at .24 – 20 in both $25KPs. (were .50 yesterday and .75 on Tues) 

    BAC/Burr – I'd go longer and sell the 2015 $10 puts for $1.40 and buy the stock for $11.78 and sell the 2015 $10 calls for $3.10 for a net $7.28/8.64 entry as it's pretty low-risk and you still make 37% if called away, which is nice money over 2 years. 

    AKAM/StJ – Well, that's what we're backing into by leaving the long call.  

  37. Burrben

    Phil / IRBT
    The high on the Sept 17.50P is 1.30, and it looks like it just might have opened for trading today.  Are you thinking just keep a GTC order out there to fill at 1.50?

  38. stjeanluc

    Wiki / Deano – It's really not that difficult once you find out how to do it. I mentioned that I would add some stuff this weekend and I'll see if I can write some notes as I do it or even capture the screen and post that.

  39. yodi

    Burrben BIDU hate to tell you but look at my play of  2/5 up today by 204$$$$

  40. stjeanluc

    Patient / Phil – Hehe, I had my nose in the portfolio updates! I guess we are in now!

  41. yodi

    NFLX well well looks like they are just about below my 180 caller again here again sit back and smell the roses! Do not panic!

  42. 1020

    PLX looking to fill the gap @ 5.50…..

  43. yodi

    NLY players it is a good time to sell some PUTTERS !!!

  44. yodi

    AMZN down 5$ Phil's prediction!!

  45. yodi

    CHL selling Jan15 40p still looking good!

  46. yodi

    CMI down 2$ Jan15 85p canbe sold for 7.80

  47. Phil

    FAS Money – $145 on FAS with XLF at $17.47 and those $142 calls are already back to $5 (and worth $3 if we finish here next week).  Keep in mind we are "in trouble" now because we chose to take our paper gains off the table in our original XLF spreads and went to a lower-delta set of longs in anticipation of a pullback that, so far, hasn't happened.  The key is looking ahead though and the Feb $142s, now $5, can be rolled even to March $150s and April $158s (now $4.90).  So it's not a matter of whether we are worried about $142 holding so much as we're sure FAS won't go up another 10% without a pullback and that's 3% on XLF to $18.  Painful as the paper losses may seem – as long as XLF remains under $18 – we don't really need to make any adjustments until we decide that  we need to raise our expectations.  Of course, FAS $158 would make those calls $16 each for a $6,600 loss – ON PAPER – that's just the way these things work so best to cash out now if that is likely to make you quit.  Meanwhile, all the more reason to see the value of spending another $2,000 on long spreads to buy more protection.  A trigger we would have to pull if we're forced to roll early (maybe XLF $17.75). 

    AAPL Money – Remember Tuesday when we were down $101,746?  That was only a $10 move in AAPL to knock of $17,000 of that loss.   Again – paper losses are things you have to deal with in aggressive options trading but, as long as we REALLY want to own AAPL for net $400ish in 2015 – then what's to worry about?  This may be the SQQQ drop we've been waiting for so let's cash the March $36 calls, now $2.50 and leave the naked, short $41 calls to hopefully expire worthless.  

    $2KPM – Wow, almost even.   That was a damned good recovery since the AAPL losses.  That merits a very close look to see why we are in our trades now:  

    • QQQ Jan $65/Feb $67 spread – That is our little money-maker for people too queasy to play AAPL.  Working like a charm so no reason to dump that but let's buy back the Feb $67s on this dip (.43).
    • USO  - Topped out just under $1.50 yesterday.  Next time, we should take it
    • IBM – $199.24 is dead on target.
    • CRUS – Short puts look safe to expire worthless and we don't need the long puts anymore so let's take that and run at $1.65 as they were just the protection
    • SCO – That's two oil shorts we've got.  I still like the target so we'll see.  SCO now $37.09 with oil at $96 (and another $1,000 per contract gain on the Futures – too bad we can't just play those here).  
    • GMCR – While it's already a nice gain, no reason to kill it as the short calls will expire worthless and GMCR can bounce and pay us more than $1.40 for the spread.  Since it is our intention to buy out the spread early and since the short $55 caller is $2.40 and our long $50s are $3.80 and we started with a .48 credit – let's buy back the June $55 callers for $2.40 and that leaves us in the long June $50s at net $1.92 and we set a stop at $3 so we make at least $1 and maybe we get lucky and get to $5.  

    $25KPA – Next.  

  48. hemas03

    Thanks dplatt!

  49. wombat

    rplatt //
    jfawcett//
    thanks for your input – really appreciated. you guys make the list worthwhile – seriously. i'm doing the same thing ( ripping quotes here and there into notes or categories – haven't really explored going to the next level – let me know how i can help because i think it's worthwhile)
    phil didn't really mean to call me stupid ; > and he did answer my question this time ( which btw was merely hypothetical – no panic involved )

  50. Phil

    It's Europeans buying gold – will probably drop now that they are closing from $1,680 line so /YG is a fun Futures short off that line.  

  51. Pharmboy

    CRIS – holding.  For a DD play, sell some Sept 2.5 Ps.  $3 has been holding.

  52. Pharmboy

    PLX…just a matter of time.  I will take the stock from the Feb $6 puts sold.

  53. terrapin22

    PSW Atlantic City conference April 27-29 – We have 6 members paid in full, 1 committed at #10 spot and waiting to book flight, 1 whom is 90% likely and 3 maybes.  The deadline is Friday Feb. 22nd to get to 10 attendees.  So we basically need 2 more to sign up over the next two weeks to make this happen.  If we get to 10, then the conference is definitely on.  Email me with any questions.  I will provide the link to original conference post.  

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

  54. kustomz

    UK FTSE -1.0%
    German DAX +0.1%
    French CAC -1.0%
    Spain IBEX -0.7%
    Italy MIB -1.1%

    Another close to the downside

  55. wombat

    "QQQ Jan $65/Feb $67 spread "
    I must have missed this. I am still holding a Jan14 $52/60 Bull Call spread with $50 puts sold. 
    Anyone of the veterans have any advice on how to keep up on trades ? I totally missed this.
    It's too easy to blame it on my 2 year old.

  56. stjeanluc

    This is really tempting now:

    http://www.engadget.com/2013/02/07/tesla-model-s-review/

    So, then, the Model S is an amazing machine. Not perfect by any stretch of the word, but such a massive leap beyond the Roadster in almost every regard that it's tempting to call it so. That leaves us wondering: have we entered a time where cars have truly caught on to the digital revolution? Where major automotive advancements will finally start to come with the sort of regularity we see on the mobile device front? Is it time to draft an automotive equivalent of Moore's Law? How about this: the available range of an electric vehicle at a given cost will double every five years.

    And they seem to be well organized:

    http://www.engadget.com/2012/10/19/tesla-supercharger-network-goes-live/

    The solar powered stations from SolarCity are designed just for Tesla vehicles, with Model S sedans being able to charge for free. According to Tesla, a Model S can be charged in about 30 minutes if you want to get around three hours of 60mph driving out of it, so you'll have plenty of time to grab an In-N-Out Double Double on your way to Sin City.

  57. Phil

    $25KPA: 

    • AAPL – Strangely, the position is up for a change.  Of course we absorbed the losses that got us there but, if someone was crazy enough to sell us Jan $425 calls for $61 at any point before the last two weeks (since earnings) – we would have laughed our asses off and mortgaged the house to buy them.  All we had to do to get these was mortgage our other profits and use up some margin….
    • SHLD – Does not seem at all likely that we won't realize the remaining .74 of profits ($370) in 36 days so I'm going to do the correct thing and not close it out for no reason but, obviously, done with this one.  
    • USO – As above, next time we are offered $1.50, we take it.  
    • SQQQ – Same as AAPL money, take $2.50 and run for the March $36 calls and we're naked short on the $41.  
    • GOOG – StJ is right, $28 out of $35 is tough to keep for 4 months but only because we feel very confident we can make more than 25% in 4 months with the cash.  Of course, that extra $7 we are guaranteed to make if GOOG holds $700 is also an offset to the $7 in losses we currently have on the short calls (and another $11 to gain on our second set) so we leave our "boring" protection in place until we can get rid of those callers.   
    • IBM – On track.  
    • FFIV – Time to take the money on our April $100 calls ($9) and we have the naked short $110s left at $3.70 to replace the long SQQQ calls that were covering those short calls.   Balance is good! 
    • CRUS - Short puts look safe to expire worthless and we don't need the long puts anymore so let's take that and run at $1.65 as they were just the protection
    • VMW – Just leftovers although interesting amount of insider buying on them at $77.50 by EMC (significant shareholder) so let's sell 5 April $75 puts for $3 and buy 5 April $72.50/80 bull call spreads at $4.30 for net $1.30 ($650) on the $7.50 ($3,750) spread.  See what's nice about leaving those little placeholders in a portfolio is it forces you to pay attention once in a while…
    • SCO – On track. 
    • FB – Wow, lost track of this one.  $28.50 today so dead on with the short puts but let's take a stand and buy back the short April $35 calls (.28) and cash in our April $31 puts ($3.35) and that leaves up pretty bullish on FB – so we'll watch $28.50 closely but that's the 50 dma so a good spot to take a chance.  
    • GMCR - GMCR – While it's already a nice gain, no reason to kill it as the short calls will expire worthless and GMCR can bounce and pay us more than $1.40 for the spread.  Since it is our intention to buy out the spread early and since the short $55 caller is $2.40 and our long $50s are $3.80 and we started with a .48 credit – let's buy back the June $55 callers for $2.40 and that leaves us in the long June $50s at net $1.92 and we set a stop at $3 so we make at least $1 and maybe we get lucky and get to $5.  
    • EXPE – Gotta wait for this one to play out with all this premium still in it.  
    • AKAM – As above:  The Feb $43s are now .02 so no sense in not buying them back and they are mainly down as they invest in future growth and back at the same $34 they fell to in November so, assuming they hold this – they could bounce back quite a bit so we may as well buy back the May $46 calls for .25 and that leaves us with a few pennies of credit left and free May $43 calls (now .50) and, if we're lucky, they pop to a buck and we make $1,000 and, if we're unlucky, they fall to .25 and we end up with about the same $350 that was our worst case.  
  58. 1020

    Model S, Double Double, Sin City….nothing you folks have on the east coast…too bad…. :)

  59. rj_jarboe

    1020
    You need to come to the middle part of the country where we have …um…er…um…er…nevermind.

  60. jromeha

    Lol Rj! I lived in Omaha for 4 years and Dayton for two, I'm also aware of all the Midwest has to offer. 

  61. jelutuck

    ALU down today. Is this another chance for a good entry on the Income Portfolio play? Or maybe a Jan 14 $1/$2 BCS selling the $1.50 put?

  62. scottmi

    Midwest – oh, now, it has those farmers daughters, one of whom i am very thankful for! :-)  

  63. Pharmboy

    LNKD – buying Feb 130s (1 of 'em).  Selling Feb weekly 135s (2 of 'em). 

  64. newt

    Wimbat: Premium membership.

  65. Phil

    IRBT/Yodi – Nothing wrong with that play either but, for the Conservative Income Portfolio – just the short puts with the downside of a cheap entry is a fine way to play them this soon after a disappointing report.  If they fall further, then we'll want to establish something firmer and, if not, we'll enjoy our $3,000 (almost a full month's goal).  I just don't like to be short on stocks I like – what if sequestration is lifted and they get a fat contract?  Could hit you over a weekend. 

    IRBT/Burr – Yep, we just have to wait for the downgrade police.  If they never go lower and get back over the 200 dma ($21.50), then maybe we sell $20 puts ($2.40) instead as the net is $17.60 vs $16.20 but if we only sell 5 we still get $1,200 (vs $1,300) and if IRBT for some reason falls below $17.60 then we can take the assignment and sell $15 puts and calls and then we're probably in for net $13.60/14.30 on 10, which is cheaper than we would have been if assigned the original 10 so nothing to lose by being patient.  

    CHL/Yodi – My favorite China stock (my only China stock).  Bottom of a very strong rising channel at $55.  I like selling the 2015 $45 puts for $3.50 and TOS says net margin on those is $4.60 so margin-efficient way to make $3,500 in the Income Portfolio on 10 of those.  By the way, for those following Income Portfolio trades – keep in mind our goal is to make about $4,000 a month so, logically, if we have 24 trades between now and 2015 designed to make around $4,000 – we're going to be on track in a flat to up market with very little hassle. 

    Stupid/Wombat – Surely that wasn't today?  You're been getting smarter fast.  

    AC Conference/Terra – Thanks, I'm looking forward to seeing people down there. 

    Goaaaaaaal on GLD, by the way – nice $5 drop already on /YG Futures for a lightning-fast $166 per contract profit.  If you want to learn how to do this stuff – COME TO THE ATLANTIC CITY CONFERENCE – where we'll be doing live Futures Trading on Monday!

    QQQ/Wombat – That's miles in the money – what's the problem?  The other spread is an income-producer from the $25KPM because people wanted a way to make back AAPL losses without pressing the risk on AAPL so that was our alternative trade.  Works like a charm so far.  

    Electric cars/StJ – I don't think Moore's law can be so flippantly applied to cars.  It doesn't even work with solar cells and those are essentially just chips.  The difference is, of course, that speeding up processor power allowed for unlimited energy INPUT whereas trying to improve upon energy OUTPUT in a closed system runs afowl of much older laws regarding the conservation of energy.  Those charging stations will be fantastic if they catch on.  

    Oh damn, Obama's speaking again but you wouldn't know it if you watch CNBC.  Good thing I keep Bloomberg on in the living room.  Let me rephrase that – the President of the United States is speaking and the so-called "First in Business" network doesn't think it's worth paying attention to.  

    AAPL/Rpme – Good article.  I think the chart says enough:

    Apple

    SELLSELLSELL, right?  How ridiculous…

    Middle/Rj – Hey, we do not have drive-through liquor stores on the east coast.  Or bear wrestling

    ALU/Jet – Wow, that was a nasty drop all of a sudden.  Yes, I still like them but not very good prices being offered for short puts (just .35 for the Jan $1.50 puts for net $1.15) although, I guess if it were a $15.80 stock (10x) and you could sell the Jan $15 puts for $3.50 that would seem pretty exciting.   It's nowhere near as good as the entry we got in the Income Portfolio though.  

  66. stjeanluc

    Correlation or causation:

    http://www.capitalspectator.com/archives/2013/02/mr_markets_abno.html

    Why is the stock market up? Or down? There are countless theories, but one that resonates in recent years is linked to what I refer to as the new abnormal. This is the positive connection between the stock market and the implied inflation forecast via the yield spread between the 10-year Treasury Note and its inflation-indexed counterpart. In the grand scheme of economic history, higher inflation isn't all that inspiring for the equity market. But this relationship has been turned on its head in recent years. Why? Well, a few things changed in the wake of the Great Recession. As a result, higher (lower) inflation expectations have remained closely bound with higher (lower) stock prices. This odd connection won't last forever, but reviewing the latest numbers reminds that this abnormality continues to dominate… for now.

  67. newt

    Phil/ AKAM: Thanks.
    Flan/ GMCR: Thanks.

  68. crussell14

    Phil – IRBT beat estimates by 39%. Was there a revenue miss or gloomy forecast that took the stock down today?

  69. stjeanluc

    Earnings today (average move / priced into options)

    CSTR - 8.16% / 13% (Feb options – whisper is for a $0.10 beat)
    OPEN - 9.39% / 11% (Feb options – whisper if for a $0.06 beat)
    LNKD - 8.55% / 7.6% (weeklies – whisper if for a $0.03 beat)

    Remember, whisper is a prediction, not an exact number!

  70. Phil

    You're welcome Newt. 

    IRBT/Crussell – Consumer going like gangbuster but Defense not spending money so outlook very cautious.  Set up for a very nice beat if the Government ever starts spending money again.  

    Meanwhile, airfare keeps going up and up.  Going to cost me a good $600 to fly to LA this time.  I was getting used to $300 for the past few years…

    Fortunately, oil at $95.60 helps pay for it!  

    Dollar 80.30 but as long as it's just calming down, the market buying trend can resume.  

    63M on the Dow at 1:45. 

    VIX 14.12, TLT 117.10.  

    AXP making new highs – doesn't seem too concerned.  

    RYAAY making new highs on those ridiculous airfares.  

    GMCR with a huge come-back. 

    Transports almost green.

    BA just under $77.  

    DIA next week $140s at .37 already – up 54% in a day is not bad, right?  

  71. wombat

    Phil // QQQ Cool – thanks for the clarification. Why do you always think theres a problem ? : > Yes, the QQQ is fine, just being patient for 'the stock that we do not mention' to lift it up and out.
    Phil // SHLD – I see your logic on the puts, but did you keep the spread as well ?
    Also, I can't stress enough my own experience here on the west coast with both OPEN and LNKD. I think both have very limited shelf-life. I would like to consider SF both an incubator and bellwether for tech plays like this.
    What doesnt get mentioned with OPEN is that their growth is all international, everyone here has already caught on. Their model is flawed in the sense that they are really expensive and they OWN the contacts that come trhough their system – not the restaurants. Couple that with razor thin margins, and most new restaurants here have options. I'm very convicted about this but I'm waiting for your call on timing, becasue when I usually get emotional or sure about a play – thats when I get into trouble ; >
    LNKD is simply playing balance sheet games and trading on emotion out here so tough call. Again, it's the deferred rev that makes me so bear. But I'm out Jan15.

    Phil // IRBT – cool call. I'm in and if they drop again I'll DD

    // Pharm – you're bull ? They don't make no money and their deferred revenue is an issue ( at least for me )

  72. scottmi

    ORCL/Phil – bounced off highs last week. is this a dip to buy?

  73. Phil

    $4.50 is close enough to take money and run on our GMCR $50 calls in both $25KPs.  We can leave the short $50s naked but $4.50 is just shy of the most we could have taken out of the spread so let's be happy.  

  74. scottmi

    DIA/phil – great call on the Feb 140s and i even got filled on those! low for the day on those was .22

  75. jabobeast

    Phil— is there a TLT spread or anything that would make sense with your recovery theory?
    Shouldn't TLT take a hit within a couple years if the "inflation" scenario finally happens?

  76. jelutuck

    phil/ALU  I missed the old entry but I'm liking buying the stock at $1.60 and selling the Jan 14 calls and puts at $.80 for an $.80 entry a $1.10 break even (30%) down from here and nearly a double if it  just holds $1.50 (am I figuring all that correctly?) Do you see anything wrong with that?

  77. partha

    Phil – Musk is trying to play a longer game – with vertical integration … whether it make sense financially is to be seen.  If you have a Tesla in build (order places), a Solar City rep calls you to offer a free estimate for installation of the charge station as well as a Solar system for your house.
    Musk is also an investor (with others) in a new Solar fab. company – doing thin film cells on Silicon substrate.  I think the Fab is in China … so the panels from that venture – feed into the Solar City installation company, which does the Solar plants for commerical, residential and for the Tesla charging stations etc. … 
    A complete renewable energy chain (lets not look too closely at the Lithium Ion batter manu or the solar cell manu …).

  78. wombat

    Scaling in more DBA === Selling $26 puts @$1.70

  79. Pharmboy

    wombat….LNKD – just a play for $$.  The front premiums are ripe for taking and I think they move up.  So, yes I am a bull, on this one….I use it a ton for outreach to people.

  80. wombat

    Pharm // LNKD
    Oh man, don't get me wrong – I love the company, I use it everyday. I assume you're OpT on this. If you go SA, there are some pretty compelling articles 
    in short, good company – insane valuation

  81. ariveraA

    Phil:   For your collection: 10,000 hours of practice.
    http://dilbert.com/dyn/str_strip/000000000/00000000/0000000/100000/70000/7000/100/177172/177172.strip.gif

  82. tophytooth

    Phil: IRBT is dipping it's toes into the 3D printing are

  83. stjeanluc

    Good one ariveraA:

  84. cdtbud

    tophytooth: I've been looking for a 3D printing play.Quite the interesting area.

  85. Pharmboy

    LLY, FRX….jokes….but the joke seems to be on me….

    Just weeks after throwing in the towel on one of three late-stage studies of the rheumatoid arthritis drug tabalumab, Eli Lilly ($LLY) has opted to dump the remaining two studies and scrap the whole RA program after concluding that the drug's efficacy failed to measure up to expectations. Lilly wrote off $50 million on the decision, yet another Phase III setback for a company that has suffered a string of late-stage setbacks over the past year.

    Lilly, never quick to completely abandon any late-stage product, says it will go ahead with a Phase III trial of tabalumab for lupus, convinced that its BAFF-targeting approach continues to hold significant promise. But the Phase III failure marks another disappointing end for one of Lilly's 13 late-stage assets. Lilly's most spectacular failure in recent months was solanezumab, its Alzheimer's candidate which is being steered back into another Phase III after failing to demonstrate significant efficacy in mild to moderate patients. The company is staring down one of the biggest patent cliffs in the industry, with Cymbalta about to follow Zyprexa off the patent ledge.

  86. scottmi

    PFE/Pharm – just sold off shares from the kid's accounts. RIght now, not holding any biotech majors. Any your would recommend today?

  87. Phil

    No hidden gems in CSTR likely to turn up and the 200 DMA is going to be tough to pop at $53.40 so I think selling 5 Feb $55 calls for $1.90 ($950) against 10 April $55/57.50 bull call spreads at .80 ($800) is a $150 credit plus whatever is left on the spreads if they don't make $55 or there is $2,500 of upside coverage for the net credit so CSTR would have to pop over $60 (up 15%) before the trade is in trouble.   BRILLIANT!  Let's do that in both $25KPs. 

    OPEN too scary and contracts don't pay enough for the risk. 

    LNKD same boat – not getting paid enough to risk $12+ move. 

  88. Pharmboy

    BMY and WCRX.  TEVA is getting attractive again, but not liking the Copaxone issue, as BIIB is going to crush them, and Copaxone is going generic (if someone can figure out how to make it).  It is TEVA's biggest revenue stream.

  89. Phil

    Why/Wombat – Just a felling I guess…  On SHLD, that note was re. the remaining profits on the WHOLE TRADE – hopefully that little math hint will answer your question.  I think LNKD is a nice, real company that offers a useful, valuable service but OPEN is just another middle-man to be eliminated.  Actually LNKD is a middleman too but they are a middle-man replacing a much more expensive middle-man (executive recruiters) as well as some of your HR staff – that's the kind of middle-man business that does work. 

    ORCL/Scott – Not until the next corporate buying cycle kicks off.  What kind of dip is this when they drop from double top at $36 to $34.50?  Are we that desperate for deals that you're going to call that a pullback?   Glad you got the DIAs – congrats.

    TLT/Jabob – Sure, if they go up to the top of the channel – I'm thrilled to short them.   At the bottom of the channel – not as much fun because lots of things can give them a brief pop.  LONG-TERM, I think back below $100 by next year the latest.  

    ALU/Jet – Nothing wrong with it – just not as good as our sub-$1 entry in the Income Portfolio and you know I hate to buy anything that I already bought cheaper.  Anyway, as long as you are ready, willing and able to DD if they go to $1 again – sure I like it at that net.  

    Integration/Partha – He should buy IRBT ($600M) and build Roomba-type robots that are giant batteries that a store can keep in their parking lots and, when a TSLA owner pulls into a parking spot anywhere, they can press a button on the car and the robot scoots out and parks itself under the car and docks to give it a charge.  That way, no fancy infrastructure and you could service an entire shopping mall with a dozen robots (or airport or car park, etc.).  It would also be really cool…

    DBA/Wombat – Need to be patient, not much support until $26.  Scaling in means you turn 40% loss into 20% loss with a DD generally, not 20% into 10% if it's a long-term investment. 

    ROFL Arivera!  

    IRBT/Tophy, Cdtbud – That's a bit too long-range for my taste.  3D printing is one day going to rule the World but we're about as far away from being able to make really useful things as Morse Code was from Video Conferencing.  Still, it's amazing how quickly 100 years goes by (said the guy turning 50 next month!).  

    LLY/Pharm – Seems they are becoming impatient.  I assume their pipeline must be packed and they are concentrating on more likely winners?  

  90. Phil

    Looks like I'm snowed in this weekend.  1-3 feet predicted.  

  91. dclark41

    Phil
    Want to hold the DIA's overnight?

  92. ariveraA

    Phil – Pardon the ignorance, but what  would preferred stock in aapl mean for us?

  93. stjeanluc

    Snow / Phil – Looks like 3 to 6" here. Looks more like 12" where you are. Could go either way. I am selling a 1-3' strangle now!

  94. Pharmboy

    LLY/Phil….they have nothing…..

  95. Pharmboy

    Apple issues statement: as of next week co will have executed $10 bln of $45 bln repurchase plan

  96. Phil

    DIA/$25KP, DC – That's why I got next week.  I think we're finishing strong enough to hope for a double tomorrow.  

    And go AAPL – again!

    I like the nuance in that statement they put out:  "Of course, aside from our ridiculous mountain of cash – we just made $23Bn IN A SINGLE QUARTER!!!!"  Nice and subtle answer to their critics.  

    Preferred/Arivera – Depends what they do but if they do a special dividend-type thing, it will cause options to adjust.  

    LOL StJ.  Not worth stocking up for 6" (that's what she said…)

    I wish I had $10Bn to buy AAPL stock with at these prices! 

  97. Phil

    CSTR looks worse than expected.  

    Dow volume just 118M for the day – super lame.  

    Gotta run to a meeting – later all.

  98. randers1

    cdtbud-
    3d printer :
    Check out PRLB- it has been on a run since going public. Overpriced, but nice potential.

  99. zeroxzero

    Great opening essay, Phil! On the road, only USA Today to read, but Jimmy Fallon tweeted: "Hackers have hit the Federal Reserve Bank, and it's bad — they stole USD negative $14 Trillion!"

  100. silentstorm44

    cdtbud-   I have been watching DDD but have not done the DD (due diligence) yet.    8 )
    I do hope to be in the stock sometime this year.

  101. Burrben

    Phil for CSTR, I'm a little confused.  Is the premise that CSTR won't pop, there ore the front month sold calls will get crushed, and then CSTR will move up through the 200dma and hopefully get to 55.80 before Apr ex?
     
    I'm trying to wrap my head around betting a stock isn't going up in near term, but will move forward in medium term.  How did you find that one?  Looking at high front month vol vs back month?

  102. palotay

    Phil/OPEN – Thanks for your recommendation on OPEN, I know you didn't make it an official play, but I went ahead and did it, and it is looking real good so far.  

  103. yodi

    Burrben
    CSTR as Phil said you got a free Feb caller and you can sell what is left of the spread.

  104. Burrben

    yodi, free shot at the upside i guess

  105. Pharmboy

    how about them bones…Now if LNKD stays right in here….I will be sittin' pretty.  Butterfly by weeklies were also being done, with 135 being the body.

  106. stjeanluc

     

    This is looking more and more like consolidation around these levels… It would be nice to punch through though and maybe AAPL gets going!

    BTW, no one told me that I forgot the lines yesterday… sheesh!

  107. stjeanluc

    CSTR / Burrben – Actually the play is that if the stock goes nowhere as Yodi mentions you just keep the credit for the naked call and whatever is left of the vertical. If the stock moves up, then we catch them with the vertical and if it goes to high you need to roll (or close) the short call. You can setup these plays around earnings because the premium in the front month gives you enough juice to go far OTM with the vertical so that you have little risk upside and no risk on the downside.

    Every day I try to list stocks that have big moves on earnings like CSTR where you get good premium and Phil makes a play or not like today with OPEN and LNKD. 

  108. stjeanluc

    Cool list:

    http://www.fool.com/investing/general/2013/02/05/100-startling-facts-about-the-economy.aspx

    Some samples:

     

    9. "U.S. oil production grew more in 2012 than in any year in the history of the domestic industry, which began in 1859," writes Tom Fowler of The Wall Street Journal.

    14. Including dividends, the S&P 500 gained 135% from March 2009 through January 2013, during what people remember as the "Great Recession." It gained the exact same amount from 1996 to 2000, during what people remember as the "greatest bull market in history."

    19. From 2006 to 2011, Hewlett-Packard (NYSE: HPQ  ) spent $51 billion on share repurchases at an average price of $40.80 per share. Shares currently trade at $16.50.

    51. According to a study by two Yale economists, if state and local governments acted like they had in the last five recessions, they would have added at least 1.4 million jobs since 2007. Instead, they cut more than 700,000.

    55. The IRS estimates that illegal tax-evasion reduced government tax revenue by $450 billion in 2006 (the most recent year calculated). That's roughly equal to what the government spends annually on Medicare.

    83. "By 2050, workers' median age in China and Japan will be about 50, a decade higher than in America," writes Robert Samuelson.

    88. We are used to hearing how much faster the earnings of the top 1% grow compared with everyone else's, but we often forget that it used to be the other way around. From 1943 to 1980, the annual incomes of the bottom 90% of Americans doubled in real terms, while the average income of the top 1% grew just 23%, according to Robert Frank.

    96. In the 1960s, wages and salary income made up more than 50% of GDP. By 2011, it was less than 44%, as dividends, interest, and capital gains made up a growing share of the nation's income.

    99. Japan's working-age population is on track to decline from 62.6% of its population in 2012 to just 49.1% by 2050.

  109. stjeanluc

    Not good news for FB:

    http://www.salon.com/2013/02/06/is_facebook_over/

    According to the Pew Internet and American Life Project, as many as 61 percent of Facebook members have tuned out the website for weeks and sometimes months at a time. The reasons listed for these extended breaks are as banal as they are predictable: 21 percent of those surveyed “are too busy/don’t have time for it”; 10 percent “just aren’t interested/just don’t like it”; and another 10 percent simply think it’s a “waste of time.”

  110. 1020

    Phil/$600toLAareyoukiddingme!  Have you checked out http://www.kayak.com/ ?
     
    Use the "flexible days option" if you can. I bagged roundtrip tickets from LAX to TXL (Berlin) leaving the middle of June, back after July 4th on Lufthansa…..$810 each. No baggage or seat fees.
     
    My favorites, JBLU and LUV have gone ridiculous….

  111. dclark41

    stjeanluc
     
    This blurb was on SA Wednesday. Coupled with your post, iit looks like the Facebook fad may be waning. I get bored with it whenever I use it.  I wonder what the average age of the survey participants was?
     
    Facebook (FB) roundup: 1) 61% of respondents to a U.S. Pew survey said they had taken a break of at least several weeks from Facebook at some point. 28% said the site is less important to them vs. a year ago, and 12% said it's more important. U.S. Facebook users are much more lucrative than international users. 2) Instagram user photo streams are finally available on PCs. 3) A Wiredarticle looks at how Facebook's control of user data and APIs across mobile platforms could strengthen its monetization efforts, and diminish the value of Apple and Google's platforms.

  112. stjeanluc

    FB / dc – I honestly never got into it myself. I have an account but that was mostly to keep an eye on the kids. Even my oldest one is not using it that much anymore. They will have to keep on innovating I guess. That moat is not that wide anymore. Remember MySpace?

  113. Burrben

    Re FB :  Most of my SF, NY, and FL friends barely use it anymore.  Too much concern over privacy and too many changes in settings, and security of photos, etc.  Also, it's no longer "secure" to post cool photos since jobs will search it for you're name, and many people can't secure their page.
     
    Lots of people I know from Russia and Nicaragua still use it, but just here and there.  It's really a shame, since it was such a fun and awesome platform for keeping up with friends.

  114. stjeanluc

    Some interesting charts:

    http://www.bespokeinvest.com/thinkbig/2013/2/7/sp-500-breadth-levels.html

     

    A widely followed short-term breadth indicator has actually moved back into neutral territory from overbought levels.  Below is a chart of the 10-day advance/decline line for the S&P 500, which measures the average daily number of advancers minus decliners over the last ten days.  As shown, after trading overbought (the red zone) for most of January, the 10-day A/D line is now neutral.

    While it may seem like this market remains overheated, it has definitely taken a breather, just not in the typical sell-off fashion.

  115. Phil

    Good morning!

    No big moves in the Futures.  

    Dollar 80.11, oil $95.90, gold $1,670, silver $31.43, copper $3.73 (over $3.75 is "healthy" demand), nat gas $3.27 and gasoline $3.006 and I doubt they let it drop below $3 for the weekend so a good day to play /RB Futures bullish off that $3 line.  

    Euro $1.34, Pound $1.57, 92.67 Yen to the Dollar so Euro weakness is the story but that played out yesterday and $1.34 is holding.  Chinese New Year is next week so we're on our own as they take a holiday.  Nikkei was rejected at 11,500 yesterday morning and all the way back to 11,100 now, down 1% yesterday and 2% today – a fate we've avoided so far on our pullbacks but that's exactly what we do need to watch out for. 

    4:13 AM Strong Chinese trade data and falling inflation help send Asian and European shares higher. "The Chinese economy is gathering momentum, but at the same time inflation remains well contained," says economist Savanth Sebastian. "Effectively, this is the sweet spot." However, Japanese shares skid following disappointing earnings from Sony and other heavyweights. Japan -1.8%, Hong Kong+0.2%, China +0.6%, India -0.1%. EU Stoxx 50 +0.7%, London+0.6%, Paris +0.6%, Frankfurt +0.4%, Milan +0.4%, Madrid +0.6%

    Monday's moderate slide shakes a few bulls from the AAII Investor Sentiment Survey, their number falling 5.3 points to a 5-week low of 42.8%. Bears rise the same amount to 29.6%. In response to a special question about valuation, less than 10% think stocks are undervalued.

    Airlines have canceled at least 2,200 flights for today and another 500 for tomorrow ahead of a blizzard in the North-Eastern U.S. that's forecast to dump up to 2 1/2 feet of snow, with affected airlines including United Continental (UAL), JetBlue Airways (JBLU), Delta Air Lines (DAL) and AMR (AAMRQ.PK). Power utilities bracing for the storm include National Grid (NGG), PSE&G’s (PEG) and Connecticut Light & Power (NU). 

    Euro Near 2-Week Low, Poised for Weekly Drop, on Draghi WarningThe euro was poised for its biggest five-day drop in seven months after European Central Bank President Mario Draghi said recent currency gains may slow inflation and growth, damping demand for the region’s assets.

    Draghi Finds Powerful Weapon in Words as Markets Heed His VoiceEuropean Central Bank President Mario Draghi has found his most effective weapon is the sound of his own voice. Draghi yesterday caused the euro’s biggest drop in seven months by suggesting its recent appreciation could damp inflation, a signal that further interest-rate cuts remain a possibility. His pledge in July to buy government bonds precipitated a sea-change in sentiment that helped to shore up the 17-nation euro area economy, yet the ECB hasn’t spent a cent so far in its so-called Outright Monetary Transactions program. 

    Zinc Leads Metals Slump as Europe Crisis Fuels Demand ConcernsZinc fell to the lowest price this week, leading a slump for industrial metals, on renewed concern that Europe’s debt crisis is worsening and will curb demand. Industrial output in Spain dropped for a 16th month in December, a report showed today. European Central Bank President Mario Draghi said risks to the region’s economy remain on the “downside.” The dollar rose against a basket of six currencies including the euro, reducing the appeal of metals as alternative assets. Financial markets in China, the world’s biggest metals user, will be shut next week for Lunar New Year celebrations.

    Nikkei falls, may snap 12-week winning streak on euro zone worry.

    Japan Posts Back-to-Back Current-Account Deficit in DecemberJapan posted back-to-back monthly current-account deficits for the first time since 1981, highlighting challenges for Prime Minister Shinzo Abe’s campaign to revive the economy. The shortfall in the widest measure of the nation’s trade was 264.1 billion yen ($2.8 billion) in December, the Ministry of Finance said in Tokyo today. The median estimate of 23 economists surveyed by Bloomberg News was for a deficit of 144.2 billion yenThe last consecutive monthly current-account deficit was in February 1981, according to the ministry. Exports to China in 2012 fell 10.8 percent from 2011, as slower Chinese growth and a territorial dispute affected a merchandise trade relationship worth 26.5 trillion yen in 2012, according to ministry data.

    Will Japan's "Attempted" Reflation Succeed And Will It Spill Over Into Full-Fledged Currency War?

    China's trade surplus -7.6% M/M to $29.2B in December vs consensus of $26.6B; exports post their fastest growth since April 2011, rising 25% Y/Y vs +14.1% in December and consensus of +17.7%; imports +28.8% vs +6% and +21.4%. However, the figures are distorted by the Chinese New Year, which is in February this year rather than January. 

    Just How Skewed Is China's Trade DataChina's January trade data on Friday appear impressive at first glance, but beneath the favorable Lunar New Year distortions, the global and domestic demand picture remains fragile, economists tell CNBC. "The import data suggests that underlying demand domestically is not as strong as we think," Liu Li-gang, chief China economist at ANZ told CNBC

    RBA Cuts GDP, Inflation Outlook on Currency, InvestmentThe Reserve Bank of Australia reduced its economic growth and inflation forecasts as investment outside the mining industry remains elusive, the labor market softens and a high local currency contains prices

    Malaysia December Exports Unexpectedly Fall, Output Growth SlowsMalaysia’s exports unexpectedly dropped in December amid fewer shipments to the U.S. and China, while industrial production rose less than economists estimated. Overseas shipments fell 5.8 percent from a year earlier after rising a revised 2.3 percent in November, the Trade Ministry said today. The median of 17 estimates in a Bloomberg News survey was for a 1.4 percent increase.

    BRICs Fall From Google(GOOG) Favor as Searches Drop With Brazil. The BRICs are falling off the investment map. The term for Brazil, Russia, India and China, where stocks gained 424 percent during the decade ended 2010, appeared in the fewest news stories last month since November 2008, according to data compiled by Bloomberg. BRIC searches on Google Inc.’s website fell to a seven-year low in December, while mutual funds that invest in the biggest emerging markets had outflows in 46 of the past 47 weeks.

    Scant Pickup in Economic Growth Seen for 2013. Economists are forecasting the same steady, if unspectacular, growth this year that they were expecting in 2012. Last year's predictions proved too optimistic, but they say this year the economic fundamentals are sturdier. At the start of last year, economists surveyed by The Wall Street Journal were on average predicting 2.4% year-over-year growth in gross domestic product for 2012. The Commerce Department last week said the expansion was a more tepid 1.5%. It was the second year in a row that actual GDP came in below economists' forecasts. For 2013, the economists again expect the economy to grow 2.4%.

    "An Economy Built On An Illusion".

    Fed Has Bought More U.S. Gov’t Debt Than Treasury Has Issued So Far in 2013.

    FED FOCUS-When time's ripe, Fed officials see tapering bond buying. The U.S. Federal Reserve should scale back rather than abruptly end its massive bond-buying stimulus once the labor market gets its legs, a growing number of Fed policymakers say. Chicago Federal Reserve Bank President Charles Evans, one of the central bank's most aggressive doves, became the latest top Fed official to publicly embrace such a strategy.  

    Hedge fund guru Jim Rogers has made no secret of what he thinks of the Fed's monetary stimulus. It's "outrageous," he says. Now he's putting his money where his mouth is, saying that he's begun shorting U.S. government debt. "It's all artificial," Rogers quips. "The Federal Reserve is printing money as fast as they can. The Bank of Japan said 'we're going to print unlimited money.'" – If he's right, that bet could pay off big.

    December Revolving Credit Slides By Most Since July As Student Loans Surge By A Record. (graph)

    More on American Capital Agency (AGNC) Q4 earnings: Book value of $31.64, down 2.6% from Q3. As comparison Annaly BV dropped 4.5%, CYS by 7.9%. 7.0X leverage as of Dec. 31. Net interest spread rises 24 bps to 1.63, management taking advantage of favorable financing in the TBA dollar roll market. 2.7M shares repurchased (less than 1% of the float) at average of $29/share. Shares off a hair AH. (PR)

    Annaly (NLY -1.4%) CEO Denahan strikes a hopeful note (CC transcript) on the company's interest rate spread (down to just 95 bps in Q4), noting new money spreads are more like 150-200 bps. Additionally, the company has an $18B two-year swap position about to roll over – its currently priced 182 bps above current swap levels. The roll should have a positive impact on cost of funds. (presentation)

    More on LinkedIn: Growth remains torrid: Talent Solutions (jobs) +90% Y/Y in Q4 and 53% of sales (+95% in Q3). Marketing Solutions (ads) +68% and 27% of sales (+60% prior). Subscriptions +79% and 20% of sales (+74% prior). International 38% of sales, up from Q3's 36%. Costs/expenses +76% thanks to sales/marketing and R&D investments. Registered users up by 15M Q/Q to 202M, unique visitors by 6M to 116M. LNKD +9.3% AH. CC at 5PM ET (webcast). (PR) (slides)

    SunPower (SPWR): Q4 EPS of $0.18 beats by $0.03. Revenue of $784M (-3.3% Y/Y) beats by $5M. Issues mixed guidance for Q1, seeing EPS of $0.05-$0.20 vs. consensus $0.08 loss and revenues of $475M-$550M vs. $552M consensus. Shares -1.2% AH. (PR)

    Zynga's (ZNGA -2.8%) U.K. real-money gambling titles (offered in partnership with local player bwin.party) will be available on the Web, PC apps, Facebook (FB), and perhaps also mobile apps, says chief revenue officer Barry Cottle. A Facebook spokeswoman states her company is comfortable with supporting U.K. online gambling, which could provide a boost to (slowing) Facebook Payments growth. Two sites – ZyngaPlusPoker and ZyngaPlusCasino – will launch by the end of June. (previous) (Nevada) 

    Fragmentation’ leaves Android phones vulnerable to hackers, scammers (Washington Post)

     iTunes Store Sets New Record with 25 Billion Songs Sold (Apple)

    ‘Bailout’: Neil Barofsky’s Adventures in Groupthink City (TAIBBLOG)

  116. Phil

    LOL ZZ, I like that tweet.  

    CSTR/Burr – The point is that anything left on the bull spread is a bonus off the initial credit.  It doesn't have to recover, if we can pull $200 (out of $800) back from the spreads – it's all profit plus the initial $150 credit.  IF we feel it's oversold, THEN we might ride out the bull spread but never confuse the leftovers from an earnings hedge with a bet – because it was NOT our original intention to be bullish on CSTR – the essence of that spread was a bet they would not go higher BUT, if they did, we were well-hedged.  As it turns out, they did worse than we thought but we should have no opinion on that matter as we weren't bullish in the first place – we just wanted our $150. 

    As to how did we find it.  I don't think you were here at the time, but I once begged Carl Icahn to give me money to buy CSTR when it was way undervalued back in 2007, back when they were $30 – so it's one of the stocks on my radar – not a random pick.  That goes for almost anything I play for earnings – you keep looking for "signs" on charts or whatever but all I care about is whether I understand the company's business, how I think it fits in with reports from their competitors/suppliers/customers and if I think there is an options play that has a high percentage probability based on my post-earnings target.  In that last regard, StJ's list of usual and expected volatility is very useful to help us see where we can focus but I think at least 2 our of 3 of those aren't even worth pursuing for various FUNDAMENTAL reasons BUT, we've been having phenomenal success with those 1 out of 3's.

    You're welcome Palotay!  I felt a lot better about it with the additional premium sale.  

    LNKD/Pharm – Big move up.  As I thought, a very good business.  

    Big Chart - Knock, knock, knockin' on Heaven's door

    AAPL is like a coiled spring that can be released and kick the market up 1-2% on a 5-10% move higher or a full 5% on a 20% move up in AAPL – like the time they went from $85 to $200 in 2009 or the time they went from $200 to $300 in 2010 or the time they went from $315 to $400 in 2011 or the time they went from $400 to $600 in 2012 or that other time in 2012, when they went from $550 to $700…  Have I mentioned that AAPL is my stock of the year lately?

    I literally could not pick a single bit from the Daily Show yesterday - it was excellent in all 3 segments, with even Neil Barofsky making me want to run out and buy his book.  The thing about tanks in the first segment is an all-time great, followed by a really good bit on the post office and then the interview.  

    FB/StJ – Good news for the economy if people tear themselves away from that nonsense and go do something productive.  That was another good point on the Daily Show – given the choice between choosing a Helicopter, Guitar, Robot or a Cat as the new Monopoly piece – social media voters went with cat!   And no more iron.  I don't even think my kids know what an iron is.  

    Kayak/1020 – Yes, but when I book Delta on American Express (ended up at $550, stopping in Vegas for a couple of days on the way – wouldn't want to get tired on one big trip!) I have an excellent chance of getting an upgrade to 1st class. 

    So LVModa - I'll be in Vegas next Friday/Sat – I expect sushi!  

    FB/DC – And the worst part is, as more people opt out of FB, the more it's dominated by those people who have positing diarrhea.  I think part of the problem is that, unlike Twitter, it's kind of personal when you cut someone from FB (my mother has called me on several occasions to ask my why I won't "friend" this or that distant relative I have no interest in) so, in Twitter, you only have to read what you are actually interested in and, what I used to hate about Twitter, the lack of space to write – actually turns out to be a good thing as it forces people to get to the point.

    Although Twitter will jump the shark as it accepts what it's now calling "promotional tweets" – in other words, now people can pay to get their tweets in your face – whether you want them or not.  

    Speaking of random things - here's a movie I'll see based solely on their excellent remake of a Floyd song.  Seems to be from the Dragon Tattoo people so it's probably great anyway and you can tell they get it because they respect the song and just show their clips silently – great choice.  

    6:00 AM Overseas: Japan -1.8%. Hong Kong +0.2%. China +0.6%. India -0.5%. London +0.4%. Paris +0.6%. Frankfurt +0.2%.

    Gee, you think?  Japanese Finance Minister Taro Aso has said that the yen's sharp drop since November has been too fast. "The yen's sudden move from 78 or 79 to 90 was not something we anticipated," Aso said. His comments come amid international criticism of the falling yen and talk of "currency wars," and might be a sop ahead of a G20 meeting next week. Following the remarks, the yen is +1.2% vs the dollar at 92.464. 

    Financial crises tend to start abruptly and end by surprise. Three years ago, the euro crisis began when Greece became a cause for concern among policymakers and a cause for excitement among money managers. Since the end of 2012, a sort of armistice has prevailed. Does that mean that the crisis is over?

     

    60% of the people believe that there is a “new normal,” a tough new reality where workers have to take jobs below their skill level, at lower pay, and with less job security—because they’re lucky to even find a job.  To survive in this new normal, workers raided their savings. Even after all these years since the recession officially ended, 38% have “a lot less” money in savings than they had before, 18% have “a little less.” But the piggy bank is hard to refill as workers earn less, while prices continue to rise—thanks to the “bold” and “courageous” actions by the Fed.

    Why is US Oil Consumption Lower? Better Gasoline Mileage?

    Brilliant analysis by Yves with great overview of Daioyu/Senkaku Island issues :   We should be suspicious of a narrative that presents the US and China’s neighbors as innocent victims of China’s bullying. By presenting the US pivot to Asia as a response to the invitation from Asian countries worried by China, it obscures the US strategy of re-asserting hegemony over East Asia; it too easily elevates China in place of the Soviet Union as the looming external threat to peace-loving democracies, helping the leaders of those democracies to boost their internal support; and it too easily justifies a military build-up all around China, to the benefit of militaries everywhere.

    And more good bitching from Naked Capitalism:  The New York Times comes in on the side of the whining rich in a piece titled, “Two-Tax Rise Tests Wealthy in California.” It starts by depicting how hard pressed the wealthy are in California because they pay higher income taxes than in any other state in the US, and are also being hit by Federal “tax-the-rich” levies. Funny how there’s no mention of increased taxes on middle class folk, namely the increase in regressive payroll taxes and coming benefits cuts in Medicare and Social Security. Nor do we see a word of how many of the top rich are private equity or venture capital fund managers, and already organize their lives to have virtually all of their labor income subject to capital gains treatment. If the Times could be bothered to talk about effective income tax rates, as opposed to marginal tax rates, it would puncture the pretense that the rich are being abused.

    Weekend Fiction Reading - Greece Unveils 2013-16 Budget Plan.  

    Why Gold Stocks are Cheap and Why You Should Be Buying Them (old news to us but maybe a trend soon).

    Also not news to us, US Media Controlled by Washington

    Nigel Farage is always good at summing up the EU mess. "There is not enough money in Europe to bail out Italy." Why can't this guy be our President?  

    Another one from Nigel:  "A decade of unending, unwinnable misery."  also "The words 'legal" and "Europen Union' don't fit together….  What remains is a fanatical, political belief that we have to build a European state… and to Hell with what the people of Europe think…."

    Bill Gate's Annual Letter.

    Things that make you go hmmmmmm: Asteroid going to miss Earth next week by LESS than the circumference of the Earth (17,200 miles).  “With an estimated size of the order of 50 meters, (2012 DA 14) is comparable in dimensions to the object that destroyed over 2,000 square kilometers of forest in Tunguska, Siberia, on 30th June 1908,” Mark Bailey, director of the Armagh Observatory in Northern Ireland, told AFP.

    If you want to know why Apple is holding onto all that money (aside from obvious tax considerations), just look at Dell. It is a cautionary tale than any technology company can m,ix the next shift in trend and become irrelevant, the next Maytag. Even Microsoft’s history offers a foreboding look at using special dividends as a salve to investors concerned only with their quarterly P&L and compensation via 2 & 20.

     

    Stiglitz:  If there is a single topic that concerned the assembled leaders at Davos the most, it is economic inequality. The shift in the debate from just a year ago seems dramatic: no one even mentions the notion of trickle-down economics anymore, and few are willing to argue that there is a close congruence between social contributions and private rewards.  While the realization that America is not the land of opportunity that it has long claimed to be is as disconcerting to others as it is to Americans, inequality of opportunity at the global scale is even greater. One cannot really claim that the world is “flat” when a typical African receives investment in his or her human capital of a few hundred dollars, while rich Americans get a gift from their parents and society in excess of a half-million dollars.


     

  117. biodieselchris

    Bitcoin is up 77% since I called it as the best currency play of the year on Jan 1st (23.92 versus 13.50).

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