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Thursday Thump – Is BitCoin a Preview of the Market’s Next 60 Days?

2013 04 10 14h44 23 730x491 The only two Bitcoin charts that you needI warned you!

We had an extensive discussion about BitCoin as it went over $200 in Monday's Member Chat and I even decided to make a special note on the subject, which I tried to publish on Seeking Alpha but it's still sitting in the "pending publication pile" with no explanation as to why it was rejected there (you can read it from my tweet here).  

Interesting though as I had just warned people in comments on SA, before I left for vacation, that the arbitrary censorship of information on "free" sites like SA can make them very expensive for people who are hoping to trade with unbiased information.

The title of my proposed post was "Bitcoin – The Next Major Currency or Just another Ponzi Scheme" and, as I additionally noted that morning in Member Chat:

Oh yes, I forgot to link to "The Bitcoin Mining Guide" – Imagine if you were investing in a foreign currency and there was a guide for how you can print your own or, even worse, the Government in question was making money selling you "mining equipment" which, in fact, is nothing more than an algorithm you run on your computer!  You would RUN from that currency and never think about it again, right?  Not Bitcoin – it's going up and up and up.  

Seriously, this is no different than when my daughter gets gold in WarCraft for completing quests.  They have tons of "merchants" too who accept her gold and they give he cool potions and magical armor, etc, which in fact, you can get people on Ebay to buy for real US currency.  I should write an article based on pitting Madeline and her friends using WarCraft and Ebay against some Bitcoin miners and see who makes more money over a weekend….

While we were debating the issue in Member Chat, I was looking pretty stupid as BitCoin went to $220, then $240 and, finally $260 – before crashing yesterday all the way to $110 in (as you can see from the 2nd chart) a fairly textbook bubble run.  The only difference is, with modern technology – idiocy that used to take months to play out can now be cycled through in days.  

Which brings us back to the real markets:  Are we, in fact, also in a bubble or is this a real and sustainable rally?  

Look at the charts of the Dow and the S&P and then look at the chart of BitCoin and the Bubble Chart.  See any familiar patterns?  Fortunately, the time-frame on the indexes is days, not hours but it's the textbook pattern nonetheless and we've been setting up for the big drop as we add more short positions because the macro data simply doesn't support the currrent valuations – except for on thing.

That one thing is $1,400,000,000,000 that is being donated by the BOJ towards the Global Stimulus effort.  Currently, the BOJ's run rate is $75Bn a month, just shy of the Fed's $85Bn a month of QInfinity (though the infinity part is now subject to debate – see yesterday's post).  

Keep in mind that Japan's entire GDP is $6Tn so this is 23% of their GDP over two years, which would be like our own beloved Fed announcing another $3.7Tn in stimulus over the next 24 months ($153Bn a month). Clearly we would expect some of that money to spill out of Japan (their bonds pay 0.1%) and into other markets and, of course, that's why the Yen fell all the way to 99.9 to the Dollar yesterday but that was where we predicted the top would be (as noted in Monday morning's Alert to Members – also Tweeted).  

EWJ WEEKLYThe reality is that the BOJ's easing is a doubling down of QE3 BUT (and it's a Big But) their easing, of course, competes with our easing to some extent and our combined easing is terrible for Europe, who is going the other way with a "brilliant" austerity plan that has popped Greece's unemployment to a record 27.2% with youth unemployment at – get this – 59.3%.  That's 2 out of 3 people finishing school with no job – imagine the repercussions if those were your children and their friends.

Well, you may not have to imagine for long as President Obama signed the $108Bn sequester order for FY 2014, cutting discretionary spending by $91Bn (10%) to the lowest level since 2004.  Just as a point of interest, in April of 2004, the S&P was at 1,100 and the Dow was at 10,000 BUT (orignal flavor), don't worry folks, Government spending is only 20% of our GDP so cutting 10% of it is only cutting… oops… it's still 2%…

We'll see how comfortable our consumers are at 9:45 and we have a 30-year note auction at 1pm and then we see Consumer Credit at 3pm with a peek at the Fed's shocking Balance Sheet after the market closes.  Charlie Plosser sought to diffuse some of that shock this morning by discussing with a Hong Kong audience some of the possible ways in which the Fed might trim their current $3.2Tn in long-term securities (20% of GDP) down to a somewhat closer to manageable reality $1Tn without destroying life as we know it.  

We'll see how convinced people are at 1pm but I'm loving our currently-underwater shorts.  


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  1. Burrben

    StJ / Phil / ICPort
    What's really hurting my ICP (since I couldn't fill all the positions) is the short apr TSLA, BRKB, and WMT (from old port) calls.  Those 3 trades sucked all the life out of the positive trades that are working.  I still don't believe that I/we should have let BRKB/TSLA get over 200% negative.  Just my 2C.
    PS: Actually the GDX / ABX / X from the old port, and ACI from craig isn't very pleasant either  
    The full ICPort with cash PnL is here :  GoogDoc

  2. Burrben

    OT:  Many of my Prospoer.com loans are getting paid in full before they are due, in fact I've never seen so many being paid off.  Just a side note on what I must look at as a positive sign for consumers paying off debt.

  3. terrapin22

    Phil / CCJ – 15/20 BCS still looks cheap.  from Deano yesterday.  how would you play them?

  4. 1020

    Good Morning!

  5. stjeanluc

    Oil Lines

    R3 – 96.33
    R2 – 95.40
    R1 – 94.71
    PP – 93.78
    S1 – 93.09
    S2 – 92.16
    S3 – 91.47

    Yesterday's high and low – 94.48 / 92.86

  6. 1020

    Bitcoin – Thankfully, it did not appear that any PSW members chased that one…..

  7. dawnr

    Good morning all.
    Don't know if you all saw this in my morning post yesterday but I think it is pretty interesting the consistent divergences but the market churns ever higher…My reading last night the next level techs are looking at is 1600…oh my I am wayyyy short.
    http://seekingalpha.com/article/1331441-this-s-p-500-rally-does-not-have-good-legs

  8. millcreek

    morning,
    can anyone share the iwm put position phil mentioned as i cant find it………….tks

  9. stjeanluc

    ICP / Burrben – These short calls do hurt the portfolio but 1/2 the losses are actually from the Jun DIA puts that we use as hedges. Still 2 months to go so these might come in handy. But it's true, it's a tough environment to sell calls now! Well, except on VXX!

    On the other hand, we still have 20 months to sell more call and recoup that money….

  10. dawnr

    Phil in your morning posts your response to me on gold feels like you are convincing me to buy gold.  Scratching my head some as I actually BOUGHT ABX late yesterday (and posted it) because I FULLY agree with you.  These prices are ridiculous even if it drops some more the risk/reward is very yummy.  If it falls to $20 (its next technical #) I will buy more.
     
    From ABX CEO this morning…
    http://blogs.wsj.com/canadarealtime/2013/02/14/interview-barrick-ceo-says-still-looking-at-asset-disposals/?KEYWORDS=abx

  11. dawnr

    ABX link—sorry last post wrong one…this is correct one.  Chile 12% of their asset value company suspects.
     
    http://online.wsj.com/article/SB10001424127887323741004578414462569431352.html?mod=WSJ_business_whatsNews

  12. dclark41

    mills
    IWM Friday $92.50 puts at .15 – 100 in both $25KPs is $1,500 and let's take 1/2 off the table at .25, which would be a 5-point drop in the RUT back to 937.

  13. stjeanluc

    IWM / DC – Actually they were at about $0.12 when Phil called for them.

  14. dclark41

    stjean
    agreed.

  15. millcreek

    dc, stj
    tks……….

  16. stjeanluc

    Sounds like we have our priorities in order here:

    $0.26 on defense and $0.01 on science….

  17. dawnr

    IWM—FWIW my school just posted a short trade level where top of the level is 94.68.
    Too much coffee for me today…sorry guys

  18. stjeanluc

  19. Opesbridge

    HPQ/Phil – Do you see a play here as it's testing its 50DMA, down a quick 6%?

  20. stjeanluc

  21. stjeanluc

    Felling a bit forgotten lflan!

  22. stjeanluc

  23. Pharmboy

    Burr – if they are paying off debt, they ain't buying things!  Not good for and expanding economy.

     

    I am going the other way, as a blow off top.  QQQ next week Apr 71 calls for 11c.  20 of 'em.

  24. wombat

    Goog Blu // Morning !
    You guys obviously missed that the italic is blue. Now, that's 'moonshot' engineering.

  25. jabobeast

    FU PCLN!!!!!!

  26. Phil

    Well, the lines have been drawn. 

    14,800 on the Dow, 1,600 on the S&P, 3,300 on the Nasdaq, 9,200 on the NYSE and 960 on the RUT are levels at which we will HAVE to roll up our 5% Lines on the Big Chart and set a new floor at 10%.  We have 0 of 5 at the moment but the Dow is right at 14,799 and our IWM tomorrow $92.50 puts are .08 and our target is still 937 on the RUT, which is almost 1% down from here – so not sure it's going to play out this week. 

    This is a strong market.  Artificially strong, yes but strong nonetheless.  As I said recently, just because you know Mark MaGwire is on steriods doesn't mean you bet against him hitting 50 home runs in a season.  That's the whole point of the steriods!  You can think the steriods are wrong and you can think he's cheating and you can think that long-term it will do more harm than good but – at the moment – the reality is he's taking the steriods and hitting the home runs so unless the league cracks down or he just stops taking them – it's a pretty good bet he's going to keep on hitting them out of the park. 

    That's the same as the Fed injecting $85Bn a month into the economy and now the BOJ is injecting their own $75Bn a month and now Christine LaGarde of the IMF is drinking the Kool-Aid and coming out in favor if easy money:

    "At the moment government with their fiscal policies have limited space, and yet growth has to pick up," the IMF chief said. "So who bears the burden—central bankers with monetary policies that are unconventional."

    Notice CNBC burned this huge interview because LaGarde – despite Maria's best efforts – would not give them a quote they could use to scare people off QE.  Instead she said: 

    While it's for central bankers to decide how they're going to go about exiting this unconventional monetary policy, Lagarde said, "the path out of it should be gradual, it should be thought through and it should be adequately communicated."

    $VIXCramer is on again for the 4th morning in a row and I think I heard him say "Buy" about 100 times so far this morning and people are indeed still buying on the dips (but not AAPL so far) as AMZN zooms up to $267 and PCLN rockets up to $728 as they override a lot of weakness in the Nasdaq off yesterday's TERRIBLE PC report.  

    It does seem, however, that "THEY" are totally fixated on jamming us up into expirations and all we can do is look at the net effect, which is a market at all-time highs with a VIX at 5-year lows and that makes puts very, very cheap so our IWM puts may not have worked this week but until we're 3 of 5 over those breakout levels – I still like taking pokes at some short plays – just in case this is another bubble top.

    The relatively new flow of cash from Japan strongly argues for this being just a pause in a huge rally to come but we won't know the truth until after expirations next week it seems.  Cramer has also been talking up WFC and JPM, claiming they will post record numbers.  I suppose JPM is motivated to pain a nice picture after the whale disaster but I'm not sure what WFC is doing to justify all-time highs – 10% over where they flatlined ($34.50) after their Q1 Report.  

    Maybe that 10% is the BOJ's contribution but, even so, I just don't see what justifies a move higher than this. 

  27. wappler

    Military expenses/stjeanluc,
    If you include veterans benefits, military expenses actually total $0.31.  That's why we need to cut education ($0.03).

  28. stjeanluc

  29. stjeanluc

    Indeed Wappler… And with the war in Iraq, veteran's benefits will only increase! Of course, not our vets faults obviously as they should get the best possible care. 

  30. yodi

    Pharm,
    Please translate this in English for me Thanks
    I am going the other way, as a blow off top. QQQ next week Apr 71 calls for 11c. 20 of 'em.

  31. Pharmboy

    Yodi – Phil is buying the IWM puts for 15c.  I am buying the QQQ Calls.  I think we go UP!

  32. sagemm1

    Yodi, he thinks the market is going to take off into expirations therefore buying next week QQQ calls (on the very cheap) to either offset or take a stab at some nice returns should he be correct

  33. yodi

    Pharm Thank you now we talk the same language

  34. yodi

    sagemm1
    Thanks got it!!

  35. jabobeast

    Any idea why is PCLN up 30+ the last 2 days?

  36. jerconn

    Phil and Pharm is a pair trade…

  37. Pharmboy

    Using TA, our favorite subject, the market was consolidating the past few weeks and consolidation more often than not are continuation patterns.  The longer the consolidation, the larger the move up.  The Yenervention was the shot that was needed across the bow to move us in the UP direction.  Coincidental?

  38. Pharmboy

    2 piss u off Jabo….that's why.

  39. yodi

    For all Apr WYNN players. I like you if you have TOS, to go to the monitor and click on the little arrow next to the symbol.
    You will notice that the 110 long call is up 1.20 against the 125c is up .71. the math is 2x 1.20= 2.40 as .71×4=2.84 so here we are starting to lose. I do expect however a somewhat draw back over the week end. You may close this position today as it might not be any better than is.

  40. stjeanluc

    If it was not for AAPL, the Nasdaq would be over 3300 already. NYSE is over our lines.

  41. dawnr

    PCLN—I am long TRIP so following this sector…mostly seasonality (its the buy/write/write I did)
    http://finance.yahoo.com/news/tripadvisor-reveals-results-fourth-annual-100000332.html

  42. Turning1

    BRK.B/Turning – OK so the spread is golden and the puts are great and you are burned on the short calls but not by too much so ahead on the trade overall.  Rally probably overdone but $100 was the ultimate target on the bull spread – only not this soon, right?  I'd just roll them along to the June $100s at $7.30 and pick up a buck when you have to and, if they keep going up, rather than pay $7 to buy back the caller, I'd do a $100/115 spread to cover it up to $115.  
    Thanks Phil, I have the order to roll the short April Call to June. Now 87c, and waiting for the $1. I am trying to get my 10,000 hours so I have a question. If the BRK.B 85/100 BCS is ahead of schedule with BRK.B  at $106.75, when and how do you figure when is the most profitable point to exit the BCS? Is it a way to analyze it with TOS?

  43. dawnr

    …also consumer discretionary which SHOULD rally when the market ralles and all the peeps feel $$ burning pockets for vacations.

  44. yodi

    Closed Apr WYNN for a credit of 10.60 We still have the Jun 110 putter open sold for 4.85 now 1.17 I have put a stop loss at 1.30

  45. Pharmboy

  46. Phil

    Income Portfolio/Burr – We're not doing the old Income Portfolio anymore – it was effectively cashed out.  I'm happy to discuss any trade from it if someone is in it but I'm not proactively making adjustments so we're not "letting" anything do anything in that one.  As to new positions, very early innings and, as StJ notes, most of our losses are from protecting ourselves and we're still at 1x on the trades – happy to DD on any current losers though I will do a full review later.  We just discussed the Berkshire trade yesterday in chat and I'll be thrilled if we have to buy a 2015 $100/115 bull call spread because our short calls are so in the money (down $4) that they will wipe our out $4 short puts and put our net $10.30 $85/100 bull call spread another $4.70 in the money.  

    Hindsight is a brilliant thing – I wish mine was as sharp as yours but these are conservative bets and we're generally kind of pleased to net $4.70 on net $3.46 cash investment and now we can use the $6.38 caller as a free hedge against our next 20 months of sales or against our brand new $100/115 bull call spread and then we can have the same discussion of what fools we are when BRK.B is up another $9 (to $115) and then we have 2 $15 spreads that are 100% in the money with another set of burned short puts.  If you think you should stop out on a short call – don't let me stop you.  It's a perfectly valid thing to do but this is a passive portfolio that's meant to grind out small gains over time with low risk – we don't tend to move in and out of trades.  

    By the way, the 2015 $115 calls happen to be $6.50, so that's an even roll from here and if we take out the current $100 caller at $14.70 and do that roll, then we have the $85/115 bull call spread with the short $85 puts at net $18.09 and now we'd have a clear spot to sell short calls for the next 20 months, like the May $105s for $3.  Would that make you more comfortable?  Me, I'm a Conservative – I'd rather see the earnings justify $105 first before I freak out about a $100 caller that's $6 in the money with 20 months to roll.  

    CCJ/Terra – We have them in the Hedge Fund but never got a good enough dip since the new Income Portfolio to add them.  $17.50 is my comfort price for them and, frankly, I don't know where Abe stands on nukes and I don't know if Europe can afford them at the moment and nothing's going on in the US so I'd need a better reason than $19.50 to buy in here.  They report on 5/1 (am) and they haven't warned but current projections are not that thrilling and they may be bidding for Urenco (private) and, while I appreciate the hedge against new reactors catching on – I think they'll over-pay and that might hit their stock so, in conclusion, not the best time to jump in without better evidence.  

    Oil took a nice dip from $94.50 to $94 and now back to $94.30.  Front-month barrels went from 178M to 159M at the NYMEX yesterday so about 20M which is right on track for the rollover (21st) with (counting today) 8 days to play.  So not enough contract pressure to make oil plays a no-brainer this week.  

    Dollar failed 82.375, which is a technical S1 line with S2 at 82.17 and the low was 82.14 so let's see if they complete that circuit.  Yen touched 99.10 but back to 99.55 now and Euro ($1.3116) and Pound $1.5388) both trying to get back to pre-market highs, driven by Swiss buying (obvious if you look at EUR/CHF) to get the Franc back to 1.22 (weaker).  

    Nat gas popping from $4.05 to $4.14 on very small draw in inventories (better than a build, I guess).  

    EIA Natural Gas Inventory:  -14bcf. Futures -0.17% to $4.08.

    The Bloomberg Consumer Comfort Index moved to -34.0 after registering -34.1 last week. High-earners registered the highest degree of confidence since 2010, but low-earners became more pessimistic.

  47. wombat

    alright, we'll i'm glad Yodi is clear ;> I'm getting mixed signals
    what's changed besides the 'its raining yen' campaign // 
    are we bringing our DIA puts back home after significant battle, to fight another day ?
    I'm not sure from Phil posts what the action item is. It;s clear he's drawn a line in the sand but …

    Buying QQQ's on the cheap to offset in case we're wrong and keep all our hedges ? Or pull up anchor, put the BULL TZA mask back on and full speed ahead // ??
    Bueller ?
     

  48. stjeanluc

    Zero Hedge is just really unreadable anymore – first it is negative wall to wall, always outlining the worst numbers and possible outcome and then they have guest writers posting crap like this:

    http://www.zerohedge.com/news/2013-04-10/guest-post-how-market-creates-jobs-and-how-government-destroys-them

    But as a society, we can insure that everyone who wants to work has a chance to do so by repealing minimum wage law, comparable worth rules, working condition laws, compulsory union membership, employment protection, employment taxes, payroll taxes, government unemployment insurance, welfare, regulations, licensing, anti-peddling laws, child-labor laws, and government money creation. The path to jobs that matter is the free market.

    Where do they get these guys? As Nietzsche said "Convictions are more dangerous enemies of truth than lies."

  49. shadowfax

    dawnr
    You school's high IWM 94.60 is about mine except I make a between of 94.38 and 94.92

  50. stjeanluc

    See, all we needed was a little push from AAPL and here we go, NASDAQ at 3302!

  51. Turning1

    TZA and VIX//
    TZA May $38 long Call down 60%. Are any adjustment require here? How about the VIX April $12 long Call down 62% also? 
     
    Thanks

  52. rustle123

    Very interesting commentary on the market with a slightly different perspective:
     
    http://www.mcoscillator.com/learning_center/weekly_chart/bond_cefs_now_saying_liquidity_is_in_trouble/

  53. sagemm1

    Daenr/ IWM
     
    So how are you going to play that 94.62 line buy some short dated puts at the breach or wait until it fails a few times?

  54. jelutuck

    Phil, what is the implication of setting new lines? Does that mean that the point at which you would flip bearish would be less far below where the markets are now (and therefore more sensitive to a downturn) or does it make you more bullish now and therefore LESS likely to turn bearish on a downturn? 

  55. yodi

    Phil after all the rolly polies with Burr, do I understand we still do nothing and hold exsisting positions.
    / NKD not that easy to play this future. To my opinion due to the easing of the yen the market should go up there. This morning I have been stop out twice from 13555 to 60 and from 65 to 70 showing on paper a loss of 50$ just for practise.

  56. biodieselchris

    0.26 on defense and 0.01 on science?  — and we wonder why nothing is coming out to solve the global warming crises

  57. chasw

    Shadowfax – IWM – how do you calculate your range?

  58. sagemm1

    sorry dawnr/IWM

  59. jelutuck

    Another basic question, Phil. You seem to talk about a strong discipline using the 5% rule to mark times to go bearish or bullish, but you often recommend bearish hedges when the markets are overextended but have not yet given any signal by dropping. After a year on this board, I am still trying to get my head around your process. Is there a 5% rule primer someone can send me to?

  60. dawnr

    sage I am way too short already…so gonna just watch it as my own canary of a potential market turn.  my indicators are still flashing divergence but market still grinds higher…frustrating.  The school playing it on a confirmation entry only if it breaks 93.70 to downside otherwise it is grinding in the zone.  They are playing it cash but mentioned buying puts at $95…FWIW

  61. biodieselchris

    bitcoin crash on-going
    http://bitcoincharts.com/charts/mtgoxUSD#rg10ztgSzm1g10zm2g25zv
     
    to be fair, it didn't crack 100 until April 1 though. It's not exactly considered "chasing" something if you buy it at 12 and sell it at 221.

  62. sagemm1

    Dawnr
    Thanks I have some old school technical trading with the turtles in futures but been a looong time

  63. wombat

    wow. appl given it all back.

  64. kustomz

    UK FTSE +0.4%
    German DAX +0.9%
    French CAC +1.0%
    Italy MIB +0.7%
    Spain IBEX +0.3%

  65. yodi

    wombat
    You forgot your yo yo strings with AAPL

  66. 1020

    Bitcoin/BDC  It's been a great trade….NEXT!….

  67. biodieselchris

    FHA loans are assumable. That's a nice feature if rates go up 5% in five years.
     
    But I could kill off 3.5 more years of FHA monthly payments if I re-fi. Is it worth $16,500 to keep an assumable loan??

  68. wombat

    yodi //
    i have to say – everytime Phil puts a short call out this happens ! ; > I don't do this often, but I've been watching a daily and this stock is nuts.
    From a T/A perpsective it's really crazy to watch the 'absence' of logic just bounce this thing around.
    Yo=yo is right.

  69. dawnr

    AAPL-technically the squiggly daily 20ema is causing some resistance.  I am looking at a potentially ugly scenario where a daily H&S may be forming with high of $470 with the 2 shoulders at the $438 level and the collar at $419. The extension could take you right to the $380-$360 level…(BTW I don't H&S trade patterns but those who read the books do) who freakin knows but giving me heartburn….rinse and repeat 2015, 2015, 2015…

  70. angelcur

    I AM NOT ONE PRONE TO CRITICIZE BUT REALLY ZH? I VE FOLLOWED THEM FOR YEARS AND THEY WRITE BRILLIANTLY BUT SO WHAT THEY SHOULD BE RE BRANDED ZEROEDGE
    that idc news on plunging pc shipments was out on twitter at like 3:30 yesterday and everyone acting like its new news!!!

  71. rainman

    Phil / PWER — What do you make of the put volume on PWER? There are high volume ATM trades across the series — that would imply selling, no?

  72. wombat

    dawnr // kilroy
    i was always taught that an H&S was a long term signal, not a daily. What I'm showing is 438 ( probably you're 20ema ) is wrestling with the 200 right now – wont give it up. grrr.

  73. Phil

    Charts/Dawm – So my takeaway from this is "stimulus works":

    IWM/$25KPs, Mill – Was the now .04 $92.50 puts in the $25KPs that are down from .12.  I still like them at .04 but not at .12 anymore so we'll take our loss (assuming) after the 30-year auction.  Would have been great if the RUT had gone down 4 instead of up 4 but not looking promising with the non-stop buying.

    Gold/Dawn – Aw, and I thought we were doing so much better?  It's not all about you, you asked a question that was worth making a point about to the group so I highlighted it and made general bullish commentary about what I consider a fantastic opportunity to go long ABX (not gold – we had previously laid out ABX's holding but I forgot you don't actually read those things).  Anyway, I was agreeing with you but, fatally, from a Fundamental standpoint so I can see how you think I'm disagreeing since we speak different languages.  On the other hand (thanks for the link) ABX's CEO and I speak exactly the same language: 

    This isn’t about production for production sake… Returns are going to drive production. Production is not going to drive returns. It’s about a higher return. It’s about enhancing shareholder value. It’s not about ounces.

    We’re looking at all of our assets, but we’ve said that the assets that ultimately are the ones that make sense for us to potentially divest are the ones that are higher cost, shorter life, lower return, low free cash flow generating types of assets. This isn’t about ‘everything is for sale,’ it’s really to optimize the portfolio. We have a core of fantastic, world-class, great assets that ultimately represent huge value for the company.

    Taxes/StJ – Great visual.  If we cut half our military we could pay off our debt (in 30 years!) and then we'd all get a 26% tax reduction (or maybe we could just let the bottom 80% pay 50% less).  

    FAS Money – All about Friday

    AAPL Money – All about earnings

    $25KPs – Adjusted yesterday. 

    Dollar completed that circuit on the button, now heading back up (82.22).  

    950 on the RUT is a very tempting short but we're already short.  

    Education/Wappler – Don't worry, the army will eductate them.

    PCLN/Jabob – You need a reason?  Boy, you really don't understand this market.  8)  

    Consolidation/Pharm – I'm coming around to that view.  If earnings start coming in ahead of expectations or even in-line, I think we move a lot higher.  

    WFR popping 7% today – nice bit of catch-up with solars.  

    If not for AAPL/StJ – How different life would be…

    Good call on BRK.B Turning.   See my notes above.  There's really not a plan to exit the BCS early but we can adjust it to make it more aggressive (as above) if we really thinkg BRK.B is going to do 15% better than we planned.  The real idea of a play like that is to sell calls for income but, if it keeps going up and up and up and up, then we're not to upset to make our money by laddering into more bull call spreads.  By the time we have to add $115/130 spreads, it's likely the $85/100 spread would be at $14+ and then we could and should close it and just do 2x the $115/130s and put tight stops on the $100/115s that would automatically flip us bearish (against short calls) if BRK.B finally has a pullback 30% higher than we forecast.  If not – time to add $130/145s! 

    Consumer/Dawn – It looks like we can expect low-end consumer stocks to struggle while the high-end should be pretty pleased.  

    BitCoin halted again.  $120 was last.  

    Shorts/Wombat – If we're over 3 of 5 of the levels noted in the post, then it's time to question all shorts.  If WFC and JPM have great earnings, then it's time to question all shorts.  Until then, it's that dreaded patience thing you hate so much.  

    ZH/StJ – This is the problem with anonymous "news" sources.  For all we know, ZH was bought out by Karl Rove for $10M a year ago and he and his lackeys now write under the name Tyler Durden.  Actually, it's a clever idea…

    The press is our chief ideological weapon. - Nikita Khrushchev 

    TZA/Turning – The May $38s are $1.70 with TZA at $36.83 so to get back to $4.22, we need TZA $42.22, which is up $5.39 from here (15%) so a 5% drop in the RUT from 950 to about 900.  If that is unlikely to occur between now and May, then we should change the bet.  If it is very likely to occur, then we should press the bet.  If we're not sure – then we should leave it alone as long as we think it's 50/50 that we get a 5% correction.  Same with VIX.  

    Good notes Rustle: 

    Bond CEF A-D Line 2007-13

    New 5% lines/Jet – Actually, if we raise the must holds 10%, then our current levels are about where we'd get bearish if they fail but our expectations for a rally move up 10% and we'll be very bullish from 2.5% to 7.5% and get cautious again at 10%. 

    NKD/Yodi – Too bad they didn't hit 13,600 – that one would have made your money back (now 13,560).  

    Science/BDC – We don't "defend" against environmental catastrophe or disease – we defend against guns which we have the God-given right to shoot people with.  Also, from the Daily Show last night, our friends in the GOP were siding with Syria, Iran and North Korea, the ONLY COUNTRIES ON EARTH voting to block a UN resolution to stop the sale of arms to terrorists and drug dealers (as I guess we need to protect their 2nd ammendment rights too).  

  74. dclark41

    womb
    Did you do the short AAPL $430 calls yesterday? There are a lot more things that could "given it all back" and do me a favor!

  75. dawnr

    wombat-aapl H&S is on the DAILY chart.  This is a longer term view…
    Phil-we ARE doing better! I am agreeing with you more ;-0

  76. Pharmboy

    5% rule is here.

    Protective DIA puts are here and here.

  77. 1020

    BDC/FHA  Something to checkout would be, would you, the original borrower, remain liable on the promissory note if the buyer can't pay? 

  78. wombat

    dclark //
    hey man. yes, i'm watching it – having a T/A moment
    not sure what your post means ==

  79. dawnr

    Interesting Treasuries up today…VXX up today…$DXY holding its demand zone at 82.  One of these index suckers needs to break to the downside!

  80. shadowfax

    IWM range is by using daily highs, lows, with trend lines. About April 1 IWM failed twice at 95. Confuence with a .1% correction factor. Dawnr's school with 94.60 and today high 94.575 has me wondering, average my range 94.65 -.1% 94.55. The BOTs are running this circus by numbers, PSW may be the only traders left, at times we dominate USO options.
    I ponder if PSW traders and hedge fund cleared all AAPL options would the price change, are they waiting?

  81. biodieselchris

    1020 – FHA liability / wouldn't that be something!
     
    Phil – you can't "halt" Bitcoin. A major exchange may crash (I assume you mean MtGox). Just goes to show — major market opportunities exist here. You could make PhilTrade the #1 crypto exchange site ….

  82. dclark41

    womb
    Just agonizing because I find myself a bit too short. It just seems every time this market tries to go south there are buyers to prop it back up. Volume is still not significant. So the it could still go either way in to the weekend, or not.

  83. albo

    Now would be a good time for AAPL to increase their dividend.  3.5% should do the trick.

  84. Pharmboy

    Dc…..major move down is not here yet. Either wave a-up is still underway, or c-up has started. Wednesday suggests more upside is likely. Thank you Japan and Dr. Benny and the Jets.

  85. rpme

    April Longings

    Good article by Kevin Flynn on SA.

  86. shadowfax

    Pharmboy
    A real crash is not in the near but how long before a healthy market correction?

  87. dclark41

    Pharm
    Hard to argue with that…since that seems to be what's happening. On the other hand, without volume it's hard to believe that the move is very sustainable. Did you ever buy QQQ calls?

  88. wombat

    Pharm // PSW
    whoa. Pharm pullin out the PSW threads from 2008 !!! Wow.
    Thanks – those were really interesting.
    Phil // Groundhog Day
    I can't imagine how gratifying / frustrating it must be to go over the same stuff over and over and over. 
    One of the things you've taught me is always know what you're going to do two steps ahead of 'x' and this market has been really challenging for me. 
    I feel like one of those pirate movies where I've got one foot on either ship and they're moving. the only consolation is schaudenfreude, as we have the same Puts ; >

  89. Pharmboy

    QQQ has been a lagger in this one thx to AAPL.  That is my hedge with all the puts I am accumulating.  When, don't know, but it will be swift correction which will make everyone believe this is the 'one'.  Then we will go up again reading the tea leaves and Elliot wave.  THEN, the water fall begins.  Later this year, next year?  Don't know.  but cheap, OTM puts are my premise on both sides of this BS thing we call a market.

  90. Pharmboy

    wombat – 2008 was my first year here, and it was a fun year to be involved.  I think we are 'there' again.

  91. Pharmboy

    Shadow…sell in May?

  92. wombat

    dclarke // QQQ
    I hear ya brother. I think we're in the same boat ( no pun intended from above )
    What I took from Phil's response is 'steady as she goes' until JPM and WFC report and the smoke has cleared from earnings. It seems no one really beleives in this rally, but here we are.
    I suspect that Phil's rigor is having the lines moved but his spidey-sense is still cautious ( my words )
    Yes, I bought the QQQ's as an Ambien ; >

  93. Pharmboy

    Yesterday, the June 135s were 30c, now 25.  I am rolling mine to the 140s for 14c if possible.  $5 for 14c.  What's not to like.

  94. dclark41

    Pharm
    I agree. I am not expecting a large correction either, although that little fellow in NK could do something really stupid and change everything. Just a healthy correction as Shadow said. There is simply too much money coming in to envision a collapse.

  95. shadowfax

    Pharmboy
    Now it seem I was understanding you wrong. I agree with the latest. Cheap OTM puts sounds OK. To avoid premium I have some deep ITM options as I expect the correction before summer. How much correction do you think?

  96. jromeha

    Lol, as a member since 2009 I find it mildly entertaining to read the same questions posed to Phil. Over and over…. And over! 

  97. dclark41

    womb
    Yes, here we are. :(

  98. biodieselchris

    Pharm - we had some fun with PGNX no?

  99. Phil

    Oil did end up falling off sharply – $93.16 at the moment.  Not the Dollar's fault (82.225).  Nat gas backed off to $4.11 and gasoline even lower at $2.825.  Clearly one of the things that makes me worry in this super-strong market is why are oils and metals still in the tank?  Seems like BOJ money buying stocks and avoiding commodities (as they import those) and that's why the rally is so across the board – they (Japan banks) are just buying indexes, not individual stocks.  

    5% Rule/Jet – Not sure anything that answers that question but, basically, if you are bullish and the market goes up 5% then it's a good idea to take 1% (20% of what you made on the longs) and invest in some protection.  If you lose it – so be it.  Since our intention at a 5% line is to ride out a 20% retrace (1%) the hedges let us do that without fear of a loss.  At 10%, we look to ride out a 2% retrace and at 20% (now) we look to ride out a 4% retrace.  So far, we've lost money at 5% and 10% lines and the 20% lines aren't looking good either but, if we hedged 1% and lost it and 2% and lost it and 4% and lose it here – we still capture 13% of the upside – even if we're completely wiped out on the hedges.  Markets don't usually go up over 20% without a re-trace but, when they do, this strategy of locking in your gains can be very annoying – which is why I called for cashing out winners this week (less gains to have to hedge against).  

    BitCoin/BDC – Now we can test my $100 theory for a viable floor (but doesn't mean it can't go lower first before settling there).  I still see plenty of suckers who are saying "well I might buy one just for kicks," which is what I expected would happen under $100.  

    AAPL/Wombat – See how nice it is to pre-sell at $437.50?  

    Europe/Kustomz – Thanks, rally continues over there but winding down a bit.

    Assumable/BDC – That depends how likely you are to want to sell within 10 years – when we're pretty sure rates will be significantly higher.  The assumable could be a fantastic kicker on the home if rates are 7% or more but, of course, I'm sure the buyer needs to somehow qualify so read the rules carefully and put yourself in the buyer's shoes to think if it's something the would make you pay $20K more for the home for.

    Heartburn/Dawn – Yep, AAPL is agony to hold on to.  An abusive relationship if ever there was one but we know, deep down inside, it's a good stock…

    IDC/Angel – It's not news until CNBC says so.  We really are back to 2007-08 style trading at this point.  Tyler is on TV now saying Dow 15,000!  

    1/3 of the Dow is hitting all-time highs today and 140 of the S&P 500 hitting all-time highs – this is nuts! 

    PWER/Rain – Could be people just locking in gains ahead of binary earnings event on 4/29. 

    Agreeing/Dawn – And I with you!  8) 

    There goes the 30-year.  2.998%, not strong demand and of course 3% was tough to cross but doesn't seem as bad as people were fearing and there's even more buying.

    Dow volume 68M at 1:05 so another strongish open but it's faded hard into the last 3 hours.  

  100. jerconn

    Pharm, where can we can get concise explanation of Elliot wave theory?  I mean, in a few paragraphs for one who just wants to get familiar with basic concepts and will look into it more later?

  101. jromeha

    Anyone- is there any huge news between now and Friday?hard to search on my phone (bad reception in this concrete building)and can't get on Internet elsewhere. I'm looking at going long oil or gas into Friday and selling for the weekend pump. 

  102. dawnr

    For my trading log/notes for 'what I could do better' on the exposure and pain I am feeling on my underwater shorts…tight stops when at a market top because if it breaks it is gonna break hard and fast. sucks. (I had no stop because of course the market had to stop at the top!  grrrrr!!)

  103. dawnr

    jromeha—forex factory my most reliable and easy source.  There are retail and PPI #'s and consumer sentiment out tomorrow and Bernake speaks. 

  104. Phil

    Thanks for links Pharm.  

    IWM/Shadow – That's my concern too but seems like a lot of fuss just to blow us out of positions.  Surely the live trading can't be that thin? 

    Philtrade/BDC – If the MtGox people don't end up getting lynched – I'll be interested.  

    Frustrating/Wombat – Not really, I like to think I get better at explaining things over time (like a teacher, I guess).  As to the Groundhog Day aspect, that's what I'm feeling with the markets at the moment – we're hopped up on stimulus while the data is deteriorating around the World – just like 2008.  Yes to steady as she goes – painful though it may be, it's better to be prepared than caught with your pants down. 

    AAPL/Pharm – They might just be "saving" it to give the markets a super-spike higher.  

    Friday/Jrom – We have Japan's Industry Index tonight, Euro-Zone Industrial Production tomorrow morning followed by our PPI, Retail Sales, Consumer Confidence and Business Inventories.  As I said earlier – I'd be super-careful on oil in either direction but gasoline above $2.82 (/RB) with tight stops is not a bad bull play into the weekend.  

    And Bernanke?  I missed that one – thanks Dawn.  That's usually good for the bulls, no wonder traders are so brave today. 

  105. Pharmboy

    Jerconn – Theory is here.  Pretzel is a good one to follow, and McHugh's is another good one.

    10% Shadow.  And it will be swift/fast as Dawn notes.  When is the question.  Bradley turn date is 6/22, so maybe up til there?

  106. Pharmboy

    Wall Street is suffering b'c retail is 'under invested', but they are coming back in.  Wall Street NEEDS retail.  When retail jumps in and drinks the Kool Aid, we will know that it is time to stop drinking the punch as it will be spiked.

     

    AAPL/Phil – that has been my premise for a month.  Until then, they will yank it around.

  107. biodieselchris

    Phil – I sold one to a guy for just that: hey, I want one for shits and giggles.
     
    $80 cash on the barrel head (a month ago..). Trading digital nothing for US backed fiat nothing. Beautiful!

  108. jabobeast

    1:28 PM Shares of Chipotle (CMG -2.2%) move lower after Jeffrey Gundlach calls the restaurant operator a "good short" idea and ITG Majestic says March sales are running below consensus.

  109. wombat

    Phil / Amateur Hour
    AAPL/Wombat – See how nice it is to pre-sell at $437.50? 
    So I'm assuming you're referring to the $430 short calls we've been tracking. I'm wondering what your mindset is on this.
    I am assuming that you're adding the premium of $7.50 to the $430 call, and you're thinking anything below that is just profit, right ? I know Theta and decay is on our side but I'm looking at a loss right now and wondering why you're so damn confident ; >
    I always get paranoid about short call selling and getting assigned, but is that how you're training your head ? Everything I've read is wrong. I have $300 Longs I'm writing against //

  110. dawnr

    China Q/Y GDP and industrial production out on Sunday night…usually good for some Monday volatility!

  111. biodieselchris

    If you've followed my posts, bitcoin is old news since I posted about here and there for over a year. Seeing it pop up in the media is therefore nothing shocking (being early is the point of being a PSW member anyhow).
     
    The REAL story in the last six months is Litecoin. It went from 9 cents to 5.40+ and is now at 1.89 even after the BTC crash. That's 2000% in 6 months (5000%+ at the peak). A year ago it didn't exist. And the story really is how a me-too coin gets released and is thriving in the shadow of the market leader (and what that means for return potential, of course). 

  112. Pharmboy

    PGNX/BDC – yes we did, and that was the Vegas trade.  How's we doin'?  We are 1/2 out, and the rest are sitting pretty, as it appears to me that we are going to get another pop up to fill that gap to $10….maybe?  Aug $7s are 20c.  How about a few for ur S&G!!!  I am in, or trying to get in.

  113. dclark41

    Phil/VIX
    Turning asked about the VIX trade in the 25k earlier. I think you thought that was an May trade like TZA, but it expires April 17 and needs to be rolled.
     
    Turning1
    April 11th, 2013 at 11:05 am | Permalink | Tweet this Ignore this user TZA and VIX//
    TZA May $38 long Call down 60%. Are any adjustment require here? How about the VIX April $12 long Call down 62% also?
     
    PHIL
    TZA/Turning – The May $38s are $1.70 with TZA at $36.83 so to get back to $4.22, we need TZA $42.22, which is up $5.39 from here (15%) so a 5% drop in the RUT from 950 to about 900.  If that is unlikely to occur between now and May, then we should change the bet.  If it is very likely to occur, then we should press the bet.  If we're not sure – then we should leave it alone as long as we think it's 50/50 that we get a 5% correction.  Same with VIX.

  114. Pharmboy

    ARQL – buying a few hundred shares.  Easing into them.  More later on their early development program.

  115. Pharmboy

    AFFY – I may be completely wrong on them, but I think they come back….and with a vengeance.

  116. dclark41

    Phil:
    The VIX can be rolled to the May $11/$14 bcs for ~$1-$1.10.

  117. Pharmboy

    AFFY – I have the Jan $5 calls for net 75c, now 10c.  I am tripling down. 

     

    GO PADRES!

  118. angelcur

    AAII BULLS BEARS 54% BEARS..19% BULLS
    THAT IS SUCH A CRAZY SPIKE IN BEARISHNESS I HAVE TO WONDER IF ITS EVEN TRUE GIVEN DJIA RECORD
    BUT THATS WHAT MY BLOOMY SAYS
     
    http://blogs.barrons.com/stockstowatchtoday/2013/04/11/taking-the-pulse-of-the-bull-market-what-does-the-data-tell-us/

  119. dawnr

    market rolling over now you may want to wait on closing your VIX at a loss?

  120. Phil

    CMG/Jabob – That had to come from somewhere.   Now PCLN. 

    AAPL/Wombat – I'm confident that, no matter where it finishes, our $430 short caller WILL lose 100% of their premium.  If AAPL is below $430, we'll call it profit, if AAPL is above $437.50 then we lose a very small percentage of the gains we make on our long AAPL positions (and we're going to roll him anyway – as I outlined when we entered the trade).  You can only learn to ignore assignment risk by simply being assigned a few times, going through the process and then realizing "is that it?"  

    China/Dawn – Always interesting but also hard to believe their numbers. 

    Me too Coins/BDC – Next time there's a new one, let's buy a bunch of those (assuming BitCoin holds $100ish and doesn't destroy all confidence).  Then we can each use the profits from that new currency to create our own and we can all buy a bunch from each other and then sell those to suckers and start new ones and, before you know it – we'll all be Trillionaires!  

    VIX/DC – Yes, we'll have to roll it if JPM and WFC keep the rally going. Good roll idea but we're not there yet.  

    Dollar 82.30 and that hurt the market so 82.25 was the correct bull/bear line on the buck today.  

  121. wombat

    dawnr // roll
    what r u looking at ?

  122. dawnr

    On my tradestation I have in my banner the IWM, QQQ, DIA and SPY % on the day…I can tell when market moving as the IWM weakens first (generally).  So right now it is up on the day .14% where the DIA and SPY both up .30%.  This morning the IWM was the strongest.
     
    Also, I have 5/15 and 60m charts up.  IWM broke its 5m and 15m uptrend.  Still trying to hold its 60m…I use a 20ema.
    Last, on same chart I have the CCI and they have finally broken down too
    With that said, this could just be a retrace to the 60m level and bouncy up we go again.  The 60m level will be key ti gikd.

  123. dawnr

    ..to hold

  124. stjeanluc

    Where are people going to put their money when we don't need to sell $1T of bonds every year:

  125. angelcur

    global economy decelerating..at same time stocks soaring….and what worries me is why are individual stocks getting slammed on bad earnings yet market doesn't acknowledge….meaning….what happens when earnings really start rolling in? will stocks quit dropping on negative guidance or does all the downgrades to guidance hit the market?

  126. shadowfax

    dawnr
    I have IWM holding a 2 day SMA and to break back up must get over 94.20 today.

  127. dawnr

    my 5m IWM pivot point to resume uptrend is 94.40
    60m still not breaking down though

  128. Pharmboy

    OH MY!  We are turning technical!!!  LMAO!

  129. dawnr

    sorry pharma

  130. wombat

    thanks Phil // watchin.

  131. Pharmboy

    Don't be sorry.  I love it. 

  132. jelutuck

    AFFY/Pharm
    So you disagree with this guy that lawsuits could BK the company?
    http://seekingalpha.com/article/1315861-upcoming-lawsuits-will-likely-leave-affymax-shareholders-with-nothing?source=yahoo

  133. randers1

    I’m taking a mini flyer on WFC weekly 38 calls.
    I think they increased their share of mortgage market
    & Uncle Warren owns & that is good enough for me..

  134. Phil

    Yen 99.95 again. 

    Dollar 82.35 but markets hanging tough.  

    Scary chart Angel:

    Very hard to imagine we'll just blow through that 1,600 line.

    85M on the Dow at 2:45.

    Where to put it/StJ – That's when the inflation will come hard and fast.  Don't forget, at the same time, the Fed should be trying to get out of their bonds too ($3.2Tn) plus Bill Gross with at least $1Tn – they think they're going to be able to control that?  No way.  

    Stocks/Angel – I am currently working on the theory that this is Japanese index-buying bots and that's why the gains aree so uniform and why only one stock gets hit on earnings and not the sector.  Look how MSFT is down 5% but the Nas is flat – there's 40 years of following the markets out the window as, apparently, everything we ever thought we understood is trashed.  

    At this point, I'd rather gamble the $300 remaining value of the weekly IWM puts on a 1.5% drop tomorrow than take the loss.  RUT 947 has to pop 950 to go higher and Nas 3,297.  Still, prepare to lose because all they have to do is ram AAPL up 3 or 4% and that's a point on the Nas and the rest will follow. 

  135. Pharmboy

    AFFY – well, let's see.  The patients have CKD, and most likely would die without AFFY or AMGN's drug.  Risks are real, but we don't know the cross comparators b'w patients, as many are at different stages of the disease.  So, my premise is that they find out what the issue is (manufacturing?), or they go under.  I know my downside, but for 10c and a bottle of whiskey, this thing will FLY if they sniff a whiff of good news.  I have 8 months to let things play out.

  136. cslanson2

    Phil,
    Many people have expressed concern about the size of the Federal Reserve's balance sheet and what will happen when they begin to unload. I've read that the average duration of their 3.2 T is around 7.3 years and of course, the Federal Reserve has no requirement to "mark to market". My question is: Why wouldn't they just let all those bonds run off thereby not disrupting the market, receiving 100 cents on the dollar and earning some interest income for the Treasury?

  137. lionel

    ACADIA thank you!

  138. dclark41

    Phil
    Seems like everytime we get close to going red, back up we go. Seems very contrived. Volume really dropped off.

  139. jabobeast

    Phil—do they really need AAPL higher when they pump PCLN up 40 points in 2 days?

  140. Pharmboy

    The comparators that the SA article geezer wrote vs. what has happened to AFFY are horrendous.  Patients die, but using GSK, MRK, BAY and WYE (PFE now) drugs are plain vanilla stoopid!

    All drugs there are for large swaths of patients.  GSK was used for diabetes, MRK for pain (VIOXX should NEVER have been pulled from the market, period), BAY for birth control – and blood clots are a known side effect of all birth control pills, and Fen-phen for weight loss.  Come on, AFFY patients are SICK, and have few options. The others are big markets with many options.

    Some things do not come out until more patients are on the drugs, and  AFFY could be a good example.

  141. Pharmboy

    ACAD – yes, that was completely unexpected…..their failure a few years ago was unreal.  Does show you that the 'resurrection' can be real, sometimes.

  142. rustle123

    Reed Hastings gave a little pump to Netflix with his post an hour ago on his FB page.  One more instrument for him to pump the stock up.

  143. rustle123

    That combined with GS very interesting raising of the PT today from 125 to 184 while cutting their earnings estimates for this year.  GS never plays games, that is one candid, sincere firm.

  144. rainman

    Pharm — Follow OPK? Ship load of insider buying.

  145. Turning1

    Phil you wrote…"which is why I called for cashing out winners this week (less gains to have to hedge against).  "
     
    What threshold percentage do you use as a gauge as to when to cash out the winners?
     
    Thanks

  146. Pharmboy

    Rain – Frost has been buying stock for several years.  We played them a year ago, and did fine.  They are a conglomerate of different technologies and have a foot in several different biotechs with interesting science.  They also are a generic maker in Brazil if my memory serves me correct.  Too expensive here, but selling puts at the $5 range would be just fine.

  147. jabobeast

    FU GDX!!!

  148. Pharmboy

    THLD – they are not moving, so let's sell Sept $5s for 0.8 against the stock.  Cover all but 100 shares JIC they blast off.

  149. Pharmboy

    MACK is another that is flat-lining  Sept 7.5s for 50c or better.  Covering the same way as THLD.

  150. mjjwo9b

    BioDC:  Assumable FHA…  Many years back, we originated an FHA loan.  The assumable aspect was "good" in our thinking.  In fact 2 years later, it was key to selling the house.  We happily allowed the loan to be assumed.  4 years went by and we were contacted by the loan holder as our buyer had gone belly up and guess what?  We were next in line to make good on the loan.  It all worked out fine but it made for an exciting 2 or 3 months.  Just be aware of the problem. 

  151. Phil

    Fed/CSL – But if the bonds begin to pay better rates, the values of the bonds the Fed holds (mostly long) begin to go down in price very rapidly.  Let's say you have a 10-year note at 3% and rates go to 5% – you're not just losing 2% but 2% PER YEAR in interest so the present value of your fixed note drops 20% to compensate.  Nasty, right?  The Fed does not want to end up booking a $600Bn loss on rising rates – it would be quite the scandal.  

    Of course, the big problem is that the Fed has $3.2Tn in 3% notes (simplicity's sake) which is a 3-year supply but, in reality, it's at least a 6-year supply because the Fed has been the buyer of at least half the notes since 2009 so think about demand for $50Bn (optimistic) while the Government is trying to sell $50Bn (way optimistic) and the Fed is trying to sell their $3.2Tn 3% notes WHILE the rates are ticking up and up and up (as you need to keep raising the rates you offer to get people to buy your new notes – especiallly when old notes are being offered at a discount).  Then China has notes and Japan has notes and Bill Gross has notes and none of them want to be in 3% notes when rates are back at 6%.  Wheeeeeeeeeeeeeeeeeeeeeeeeeeee!!! 

    Contrived/DC – Very much so but not much we can do about it but hope we manage to have a trade on when the dam finally breaks.  

    AAPL/Jabob – Well it's 20% of the Nasdaq at $400Bn while PCLN is is 4% at $36Bn so it is more efficient to pump PCLN than AAPL but, at a certain point, those MoMos get ridiculous and they have to switch horses but, as I noted this morning, they didn't need AAPL today.  

    AFFY/Pharm – Good points but such a complex sector with all those variables – I do tip my hat to you for navigating it. 

    NFLX/Rustle – Yep, it's all legal now.  Yet another way to push the Nas up to 3,300. 

    Winners/Turning – If you are naked with under a year  - a very low threshold as there's few things where I wouldn't rather have cash (except Basic Materials and a few laggards like AAPL).  If you are hedged, then as long as you are comfortable with where you'll be on a 20% drop – no big deal.  Same goes for short puts – if you REALLY want to own AAPL, for example, for net $310, there's no reason to take out the 2015 $350 putter at $40, even if you did sell them at $50 but, if $60 would make you stop out – then it's just a trade and you should be thrilled to be up 20%.  

  152. shadowfax

    Pharmboy
    Good for you!! VIOXX was the only serious pain reliever to work, I took it. Bextra was may 1/2, celebrex still sold, worthless but caused a clot heart attack for my father. Seems to me the goal is not to help people makes the most money, selling snake oil, docs recomending herbal remedies, eliminate the docs? Robot surgery will end the last need.

  153. biodieselchris

    I think I'm doing a re-fi into a conventional.
     
    Bitcoin a massive buying opportunity right now …. if you can stomach it.
     
    Is it 61? https://btc-e.com/exchange/btc_usd
    is it 58-70? https://vircurex.com/welcome/index?locale=en
     
    MtGox still down I've read. When that comes back on it'll be over 100 again. Wish I could sit around and write algo's all day to capture these massive inefficiencies. Somebody you never heard of is getting rich right now. C'est la vie!

  154. Pharmboy

    CRIS – Sept 5 calls STO for 15c or better.  2/3 cover.  I have a ton of stock, and most is from the sale of the $5 puts.  So, i am banking that I can reduce my cost basis some more.  IF called away, it reduces my load some.

  155. gerryf

    Pharm  SGEN Thank You!
    For the May Sell 30 P Buy 40 C for a credit of .10   Also for  SGEN  JUNE BCS 30/40!
     
    Making my day!

  156. Phil

    Dow 102M with 12 minutes to go.  Dollar 82.345, Yen 99.83, Euro $1.3104, Pound $1.5387.

    Oil $93.44, gold $1,560, silver $27.60, copper $3.43, nat gas $4.15 (back to day's highs) and gasoline is a winner at $2.841 already.  

    FHA/Mjj, BDC – If that's the case, then you only want to do that if you're selling to family (or, even then, it's risky). 

    VIOXX/Shadow – They give me Hydrocodone for my kidney stones – is that a good one?  Certainly works for me but usually I'm asleep in an hour.  I try to use only if seriously in pain.  

    Damn, if we could get .06 for those damned IWM's I'd take it (50% loss) rather than risk tomorrow.  That's official for $25KPs but I'm not holding my breath with 5 mins left.   

  157. rustle123

    NFLX/Phil
     
    It might be legal, but if earning come out bad for NFLX and the stock gets pummeled (I will be on the sidelines, no way I'm touching this into earnings), you can bet their will be a class action against Hastings and NFLX for manipulation.

  158. Pharmboy

    SGEN is a frickin' beast.  UR welcome.

  159. dclark41

    A lot of volume at the close.
    Today's Volume: 144,140,060
    Average Volume (3mos): 122,366,294

  160. dawnr

    IWM just grinding in the zone still holding its 60m levels…until tomorrow folks!

  161. Phil

    Wow, 145M on the Dow at 4:01 (maybe more coming).  Dave had a good chart yesterday showing how the pump during the day (102M) gets dumped on the ETFs, 401Ks, etc. who HAVE to buy at market close:

    SPY 5 MINUTE

    So, if you have the ability to control the pump, keep in mind you don't need to buy all 102M shares – you just need to create a 10-20% bullish imbalance to move the market higher, so 20M shares at various prices on the way up and, if you can keep above your average entry into the close – you get to dump out clean (plus unload 20M shares of your existing surplus) into the close and then you can start pumping and dumping again tomorrow until you've cashed out at the fake top you've created.  

    If you pick up some puts against the low VIX you created by pumping the market every day – so much the better!   The trick is figuring out when the music is going to stop and making sure you're not the sucker who didn't grab a chair in time.

      

    NFLX/Rustle – Maybe, it will have to be decided by the courts at some point as it's ridiculous for CEOs to be able to tweet out market moving comments.  It's so ridiculous, I can't even believe we have to have this discussion.  No matter how many people are on Twitter or could be on Twitter, it's no different than if Hastings decides to stand up at a football game and give an earnings preview on the premise that "anyone could have gotten a ticket if they wanted."  The laws that protect ordinary investors are being thrown out the window and it's very scary.  

    SGEN/Pharm – Congrats on that one.  

    Tomorrow will be very excitng.  I'm going to get some rest!

  162. shadowfax

    Phil Hydrocodone
    That is one I will not take. Gets me silly high or like you asleep. I know more than a couple that got hooked 1 to methadone all others a version of Hydrocodone. Oxycodone and fentenyl as far as I have seen and myself don't get you high and if limited to only what works no problem to walk away after years. I stopped Oxydodone about 2 weeks ago after 16 months continuous. My back and neck still hurt but way less than before surgery. Now I need to relearn walking and using my left arm as much as can be recovered. First day without a brace today!!!!!!

  163. stjeanluc

    I guess we need to see what earnings will bring but based on this chart it is hard to argue that stocks are grossly overvalued:

    Definitely nothing like like the late 90's for example. 

  164. Canuck

    RNF/Phil,
     
    Is RNF a good buy/write candidate with an 11% dividend?  Especially if it pulls back into the $20's?

  165. Phil

    Hydro/Shadow – Yes, I'm well aware how nasty they are.  I've taken a total of 11 since first given them in 2009, when I was in the hospital on Thanksgiving.  Since all they do at the hospital is give you one of those and wait and see what happens, I just take one only if the pain is so bad I feel like I need to go to the hospital and, so far since then, that 6-hour break from the pain usually gives the stones enough time to get past critical.  

    Profits/StJ – Wow, much better than I thought but, keep in mind that in 2007, there was the assuption that profits would keep going higher and nothing could derail the rally so the forward p/es were generous.  Now earnings are up about 33% and the question is are we 33% more cautious than we used to be.  Logically, you also have to consider that these Corporate profits are also based on QE (probably 1/3 is bank profits) and, of course, we have rapidly declining conditions in Europe and Asia along with 100% more Global Debt than we had then AND the IMF just dropped US GDP projections for 2013 from 2% to 1.7% (not affecting the Futures so far).  

    There – that's my post for tomorrow, thanks! 

    RNF/Canuck – The $20s?  High $20s I guess you mean.  $32.73 now.  I love these boring little specialty companies.  I think they are down with DBA and the Ags and a great choice for a long-term hold and you can structure a reasonable buy/write by selling the 2015 $30 calls for $4.50 and the $25 puts for $3.80 for net $24.43/24.72 so really no need to wait if you do a 1x (of 4x) entry because, even if they fall to $18 and you get assigned 2x at $24.72, you still get the $2.60 dividend twice, so net/net $22.12 on 2x and then you can buy/write again.  

    Only real flaw in that logic is if cutting the dividend is why they go down but they're pretty clean with good cash flow (after paying 90% out in dividends) and manageable debt.  It does look like the borrowed some money to meet 2012's dividend goal and that's what tanked them and I'm not a big fan of that.  So, on the whole, I'd be a lot more interested at $27.50 (your original premise) as I'd be quite comfortable with moving to a full position at $18, even if they cut dividends but here it's a bit risky but fine for a small, measured entry and, if they don't hold $32.50 through earnings, then you can just pull the plug rather than try to gut it out.  

  166. Phil

    Not so easy to just make a smart-phone, is it?

    Several U.S. retailers have seen a pickup in Z10 returns, says Detwiler Fenton in a note that could be pressuring BlackBerry (BBRY -5.2%). Detwiler, which also issued a downbeat note on Z10 demand last month, adds the pace of returns in some cases is exceeding the pace of sales, and that users are complaining about the Z10's UI, Maps app, and app availability. Separately, Amazon has cut its subsidized Z10 price to $99. (AT&T launch)

  167. stjeanluc

    Profits / Phil – That's true but you can see that markets powered up 350 points (about 30%) after profits started declining in 2007! There was at least a year disconnect between profits and markets and the markets were already ahead while they are running slightly behind the profit curve now. And that's nothing compared to the disconnect in the 90's. Looking at that chart, it's unreal that more people were not concerned then…

    In any case, there could still be a lot of juice in the market before reality sets in.

  168. stjeanluc

    4 out of 5 over the hump… I guess we see what happens tomorrow but we need new lines! Also interesting is that volume has been rising all week.

  169. stjeanluc

    For reference, here was the line chart on 3/16/2012 when we decided to move them up:

    Interestingly enough, the broader indices were lagging on the line chart then while the Dow and Nasdaq were way over the 15% lines.

    Since then the Dow has gained 12%, the Nasdaq 8%, the S&P 13.5%, the NYSE 11.65% and the Russell 14%. So pretty much in step with each other except for the Nasdaq, but it's mostly because of AAPL. We might have been a bit aggressive with the new Dow lines though as the new Must Hold line is 17% higher than the old one while it's only 3.35% higher on the Russell for example. Our new 10% line on the Dow is 31% higher than the old Must Hold line as well. On the Russell, it's only 13.69% so clearly we had lower expectation for the lower indices and they more than match them! If we have used the same factor in the Dow, the new 10% line would have been at 13212 so we would be way over!

  170. cslanson2

    Re the FED
    Not to put too fine a point on it but there is vast difference between Bill Gross and the FED. Gross has to mark to market and the FED can tally the bonds at face value. Additionally, Gross has to make a profit, answer to owners and follow the rules of GAP. Finally, the FED has no limits on holding to maturity no matter how long the duration.

  171. Phil

    But they cheated on the Dow by switching components.  Was taken into account.  

  172. jelutuck

    SGEN/Pharm
    Are you going to AC? If so, I need to buy you a drink or dinner as a token of appreciation for your SGEN recomendation. Banked some nice profits and reloaded with a 35/40 BCS now. Btw, do you still lke PLX?

  173. stjeanluc

    Dow Components / Phil – I don't know that it mattered that much. Since the new lines they have only replaced Kraft by UNH. The new Must Hold line is 1000 points higher (7%) than the old 10% line – I picked the day we switched just to be sure. It might have been too aggressive then. It would be like having a new Must Hold line on the S&P at 1625 today. It might be too much to ask. We probably need to go over the charts and identify lines of support over the last couple of years like we did last time.

  174. zeroxzero

    Pharm:  I know this is getting boring, but my "pharm" portfolio is now up over 44% since Jan. 1 — that's over 3% per week.  Strangely — to me — one of the secrets has been to stay underinvested — I probably average no more than 35% exposure [which means returns of 9% per week, but who's counting] which gives me the flexibility, and the stones, to concentrate on promising positions over shorter time frames.  If there is something to learn here about managing a larger portfolio, I've not been able to generalize it — brilliant stocks picks are not something one can "generalize" about, although my exposure levels in my larger portfolio — which too often have losers sucking the life out of winners — is a persistent problem that may not have a structural solution.  In all events, you have my [continuing] thanks, and if you don't fall off the pace at some point, you'd better wear a helmet to work before the Men in Black have you bronzed!!!

  175. jromeha

    Hey pharm, why the jan 14 calls instead of the Jan 15 calls? Are you sure this issue is going to be resolved (bk or huge pop) in the next 8 months?

  176. mrmocha

    PLX / jetluck – Yes, Pharm is still in PLX stock in the bio portfolio, 1/3 covered with sold AUG 7 calls, and he also has AUG 6 and 7 sold puts.

  177. mrmocha

    AFFY / jromeha - I agree with you on buying time, I've had an order in for the AFFY JAN 15 3/5 BCS at .10 for a few days with no fill.  I'll post when / if it fills.

  178. jasu1

    Phil,
    Any trade on /NKD . Been watching at 13465 with yen at 99.00. Thanks

  179. Phil

    RUT WEEKLYGood morning!

    Europe pulling back a bit on lots of bad data.  We're set up for big fall if banks disappoint.  

    Oil in the crapper at 92.38 but Futures not reflecting much of a slip so far, down about 0.3%.  Gold also down at $1,547, silver $27.34, copper $3.41 despite good news on supply declines (less mining, not more demand) but nat gas stays positive at $4.16 (lots of speculation that LNG scam will be pulled off since Japan news) but gasoline died after testing $2.85 and now all the way back to $2.807.

    Dollar 82.50 again, Euro smacked down to $1.305, Pound smacked down to $1.5357 and 99 Yen to the Dollar barely held (stronger) and that dropped /NKD from 13,600 to 13,475 but I'm not sure I'd short at 13,500 today unless we catch it just right (lagging a US breakdown or Yen under 99) because the BOJ has just been relentless in it's attack on 100.  

    These are very fake, very manipulated markets – makes it very hard to call small moves and, if we can't call 'em, we shouldn't play them.

    Zell"We're debasing our currencies around the world, which ultimately translates into a lot of inflation. What we are seeing here is like a giant tsunami of liquidityPeople look at the market and think things are better. The level of uncertainty has reached a point where people are just throwing money [at risky assets] because they don't know what else to do with it. I would not be adding money to the stock market. This is a very treacherous market. Yes, it's gone up every day. Yes, you're not supposed to fight the Fed, but sitting on the sidelines is preferable. In our businesses, we are not seeing strong conditions. The problems leading up to 2007 haven't been dealt with.

    WSJ's front page trying to temper down expectations for JPM and WFC at the last minute:

     

    J.P. Morgan, Wells Fargo to Set Pace

    J.P. Morgan and Wells Fargo kick off earnings season Friday, with reports that promise insight on how banks' revenues from trading fees and mortgages are holding up.

    For those that are bearish – a defensive bullish play would be going long on oil (/CL) at $92.50 (NOW!) with tight stops below.  

  180. Phil

    Dow/StJ – I did a whole workup of the new 5% levels and the Dow adjustment but it was a while ago now so I forgot.  If the Nas holds 3,300 today, we'll have to find it one the weekend to make our adjustments.

    Oh, found it: http://www.philstockworld.com/2012/03/17/5-rules-finally-time-for-a-new-chart/ - no, wait, that's 2012, I thought it was 2013 but, if you read the predictions – it's right where we are now.   Here's the one I was thinking of:  http://www.philstockworld.com/2013/03/12/toppy-tuesday-can-we-break-on-through-to-the-other-side/

    Using those lines, all our numbers change and our goals will become our "10% Up" lines – the top of our new expected range – and then we're forced to redraw all our lower numbers accordingly and our Must Hold lines become -10% from the top at Dow 15,300, S&P 1,530 (already over), Nas 3,240 (just over), NYSE 9,000 (over) and Russell 900 (over).  As noted last Thursday, 15,200 is where we calculate the fair value of the Dow into earnings so that shouldn't be holding us back either – even with the aggressive adjustment.  

    Europe off more than 1% across the board, led down by banks.   

    I like that Big Chart from last year, StJ – always good for perspective.  Note stronger volumes – and we used to call that weak.  

    Gross/CSL – So he'll be the first mover to dump out but dumping $1Tn worth of bonds when the Government is selling $100Bn a month at rising rates is going to be tricky for them.

    Dow/StJ – I went back to 2007 as those were the old highs.  AIG going so well they might want it back now. 

    Congrats Pharm and ZZ!

    NKD/Jasu – You can always play those 100 lines (13,500, 13,600) in whatever direction you like with tight stops as they generally either hold or they don't.  It's very easly to lose $25 when you are wrong but very easy to make $250 (50-point move) when you are right so just try to be right more than one out of 10 times.  Again, market is so fake at the moment, I'm not even sure we're going to follow Europe 1% down unless we get real disappointment from JPM and WFC but the key to trading the Nikkei is watching the Yen (now 99.15) and you want to see that breaking down if you want to be bearish and up for bullish – so not complicated.  

    Friday's economic calendar:

    8:30 Producer Price Index

    8:30 Retail Sales

    9:55 Reuters/UofM Consumer Sentiment

    10:00 Business Inventories

    12:30 PM Bernanke Press Conference

    Notable earnings before Friday’s openJPMSJRWFC

    4:39 AM Asian and European shares fall as investors take profitsafter a week of gains and ahead of a meeting of eurozone finance ministers today and tomorrow, when Ireland, Portugal, Cyprus and even Slovenia will or could be on the agenda. Japan -0.5%, Hong Kong -0.1%, China -0.6%, India -1.6%. EU Stoxx 50 -0.9%, London-0.5%, Paris -0.6%, Frankfurt -0.8%, Italy -1.1% and Madrid -1%.

    6:00 AM Overseas: Japan -0.47%. Hong Kong -0.06%. China-0.58%. India -1.71%. London -0.54%. Paris -0.77%. Frankfurt-1.24%

    7:00 AM On the hour: S&P -0.21%. 10-yr +0.19%. Euro -0.26% vs. dollar. Crude -1.09% to $92.5. Gold -1.06% to $1548.35.

    Shorts Getting Longer as Stock Market Bears Throw In the Towel.  Short interest as a percentage of total available shares reached a 12-month low of 3.6 percent as a profitable March ended, according to Bespoke Investment Group. The finding sends two potentially important messages: that investors are finally buying into the rally (a contrarian signal); and that a good portion of the recent move probably came from a short-squeeze in which those betting against the market had to cover their positions.

    There Is No Risk Left… Anywhere. (graph)

    Suckers! Tech Execs Selling Stock as Nasdaq Hits High

    Investors give just $1.4 bln to stock funds despite rally -Lipper

    Average 30-year fixed-rate mortgages fell to 3.43% in the past week from 3.54% in the prior week, Freddie Mac says in itsweekly report, following the lackluster March employment report. The average 15-year fixed mortgage dropped to 2.65% from 2.74% in the prior week. A year ago, the rates were 3.88% and 3.11%, respectively.

    As expected, the IMF has cut its 2013 GDP growth outlook for the U.S. to 1.7% from 2%. The dollar and euro are called moderately overvalued, and the yuan moderately undervalued. Thanks to Shinzo Abe's efforts, Japan's GDP is now expected to grow 1.5%i n 2013, up from a prior 1.2%.

    Eurozone industrial production recovered to increase 0.4% on month in February from a slump of 0.6% in January and beat consensus of +0.1%. On year, output was -3.1% vs -2.4% and -2.5%. The growth in output, which has been fairly volatile over the past few months, was driven by a 2.6% rise in energy production and a 1.3% increase in durable consumer goods. (PR

    BOE stimulus dilemma persists as inflation seen higher

    European investment-grade corporate bond yields hit record lows, as "global liquidity grabs what it can." Demand for corporate bonds has been strong for much of the financial crisis in Europe, but yields also have been falling due to limited sales of new bonds YTD and expectations the Bank of Japan's easing measures will send Japanese funds facing falling yields on their home bonds looking to invest elsewhere. 

    German Financial Advisers Call for Abolition EU500 Note. Reiner Holznagel, president of GermanyTaxpayers Association, says move would make it harder to take money out of the country.

    Italy’s bond rally threatened by political realityAs an Italian bond rally wraps up a sixth week, investors risk having their enthusiasm jolted by the country’s political gridlock

    Bank of Japan Governor Haruhiko Kuroda has reiterated that the BOJ will continue with its aggressive easing policy for "as long as it is necessary" to achieve its inflation goal of 2%. "It is not appropriate to say that the monetary easing will only last for two years," said Kuroda. Two years is the time Kuroda reckons it will take to reach the BOJ's inflation goal. Notwithstanding his comments, the yen is +0.4% vs the dollar at 99.40.

    Japan, World Economy at Risk If Abenomics FailsThe Bank of Japan’s strategy to end almost two decades of stagnation through unprecedented monetary stimulus may set off a ticking time-bomb for financial markets if it’s not followed by extensive structural reforms. 

    All aboard the Kuroda easy money bandwagon: Goldman upgrades Japanese equities looking for a 20% upside to Nikkei 16,000. The BOJ has launched a "credible attack on deflation" and the economy will "emerge from an environment of falling to rising prices." Furthermore, domestic "retail investors are gradually beginning to sniff around looking" for yield.

    Tepco Faces Decision to Dump Radioactive Water in PacificTokyo Electric Power Co. (9501)’s discovery of leaks in water storage pits at the wrecked Fukushima atomic station raises the risk the utility will be forced to dump radioactive water in the Pacific Ocean.

    Portugal's finance minister says the country will ask for more time to repay bailout money in order to "create enough space to issue a 10-year bond successfully," WSJ reports. This may not be the best time for Portugal to ask for concessions from international lenders as a court decision to strike down certain austerity provisions (IIIIII) is set to derail April's planned €2B aid disbursement by jeopardizing budget deficit targets.

    Debt spiral could push Portugal into new bail-out, admits EU-IMFPortugal could face a second bail-out as the country, mired in recession and deeply divided over eurozone austerity measures, is caught in a debt spiral of soaring costs and borrowing to pay back EU-IMF loans

    Bovespa Index Tumbles Most in the World on Brazil Growth ConcernThe Bovespa index tumbled the most among the world’s major equity gauges as a report showing retail sales unexpectedly dropped in February rekindled concern that Brazil’s economic recovery will falter.

    Slovenia will attempt to allay grave doubts about its financial situation by rolling debt maturing in June early with a €500M 18-month bill auction set for April 17 and the repurchase of €855M in June 6 bills for 99.525% of par. The country's 10-year borrowing costs have spiraled higher since the Cyprus bailout (or bail"in") and most of the demand for the newly issued debt is expected to come from state-controlled banks. (Previously: NPLs rise sharply in Slovenia)

    Who Goes Next: Portugal Or Slovenia – The Forensic Take.

    EMU plot curdles as creditors seize Cyprus gold reserves.

    Not good:  Singapore's GDP contacts in Q1Singapore's economy unexpectedly contracted in the first quarter of 2013, hurt by a sharp decline in manufacturing. Singapore: Advance estimates indicate that in the first quarter of 2013, the Singapore economy contracted by 0.6 per cent compared to the 1.5 per cent growth in the preceding quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy contracted by 1.4 per cent, down from the 3.3 per cent growth in the previous quarter noted the Trade and Industry Ministry. Market watchers had expected 1 per cent growth and point out worries in the manufacturing sector.

    Chinese bank lending nearly doubled in March compared to February and total social financing (which includes lending outside of the official banking sector) leaped 139% during the month, to ¥2.54T. The rapid expansion of credit underscores Fitch's concerns that credit growth may be out of control in China, a suspicion which led the ratings agency to cut the country's domestically traded debt by one notch Tuesday.

    Chinese officials even more pessimistic on local debt than Fitch.

    China's shadow banking boom rings alarm bellsLoan growth in China’s shadow banking system surged to near record levels in March, prompting fresh warnings that the country’s credit bubble is spinning out of control.  

    The True Chinese Credit Bubble: 240% Of GDP And Soaring. (graphs)

    China Rebound at Risk as Xi Curbs Officials’ Spending.

    China Customs Official Apologizes for Incorrect Data

    China reports five new cases of the H7N9 avian flu including a death in Shanghai. What to watch: Keep an eye on Yum Brands (YUM +0.5%). Though the restaurant operator has already reported on the negative impact of the bird flu on March sales, many of the most alarming headlines have been April events. In addition, thebuzz from Weibo is that some Chinese consumers are debating giving up chicken on safety concerns. 

    A vaccine to fight the H7N9 bird flu in China could provedifficult to create, according to health experts. So far none of the confirmed cases of flu involved human to human transmission. (H7N9 impact: AirlinersYum Brands)

    Kerry Said Ready to Ask China to Obey UN North Korea Sanctions. The U.S. will ask China to abide by United Nations sanctions against North Korea and shut off the flow of money that could be used to develop weapons of mass destruction, a State Department official said

    N Korea May Be Able to Make Nuclear Missiles, U.S. SaysThe U.S. Defense Intelligence Agency has reported that North Korea now has some nuclear weapons small enough to be delivered by its ballistic missiles

    California has raised $2.7B in a general-obligation bond offering, selling $1.25B for capital projects and $1.5B to refinance existing debt. The state took in $700M more than it initially intended to, although it had to raise the yield on 10-year paper to 2.37% from 2.33%, or 0.58 percentage point above the rate on benchmark 10-year munis. - Damn!  How do I borrow $2.7Bn at 2.33% for 10 years?

    Parts of the muni bond market are especially disturbed with two parts of Pres. Obama’s proposed budget: (1) capping the tax exemption on muni-bond interest at 28%, which bond issuers say would raise borrowing costs for state and local government; and (2) raising taxes on cigarette sales, which would threaten payments that back tobacco bonds, a high-yielding subset of the muni market.

    Bitcoin Instantly Plunges 35% As Exchange Reopens. (graph)

    This year likely will mark “the start of a prolonged and potentially significant rise in U.S. rates," Goldman Sachs says via a pitch for an unconstrained fixed-income investing approach that reduces duration risk and looks to diverse, global yield opportunities for positive total returns as rates rise. Total return prospects via traditional fixed-income portfolios are modest at best and probably negative, Goldman says.

    "I am amazed every day at this rally," says Jim Cramer. "It's very unusual to have the cyclicals, the techs, the financials and the drugs all move at once. It's reminiscent of other times where we saw a radical revaluation in the market." While others may see it as signs of another bubble developing, Cramer sees little evidence. "The S&P is only at 15 times earnings," he notes, and the bond market continues to be a place where you can't get any return. This rally Cramer says, is for real.

    With no. 1 U.S. mortgage lender Wells Fargo (WFCset to report Q1 earnings tomorrow and several regional banks reporting in coming days, analysts expect results to take a hit from an expected drop in mortgage revenue. Jefferies estimates banks' revenue from originating mortgages could decline 15%-20% Q/Q; "the magnitude of potential declines could catch some [investors] off-guard

  181. Phil


    JPMorgan Chase (JPM):
     Q1 EPS of $1.59 beats by $0.21. Revenue of $25.8B misses by $0.07B. (PR)

    JPMorgan(JPM) Analysts Say Big Investment Banks Are ‘Uninvestable’. JPMorgan Chase & Co., the largest U.S. bank by assets and the top investment bank by fees, is questioning the so-called universal bank model’s future. Top-tier investment banks are “uninvestable at this point with a risk of spinoff from universal banks,” JPMorgan analysts led by London-based Kian Abouhossein wrote in a research note today. They cited potential rule changes and curbs on capital and funding. Investors should avoid Goldman Sachs Group Inc., once the world’s most profitable securities firm, and Deutsche Bank AG, Germany’s largest bank, because of pressure on earnings and the unknown impact of new regulations, according to the report

    New Drive for Tougher Testing of European Banks. Europe is embarking on a new attempt to pull its banks out of the molasses of its debt crisis, hoping an aggressive cleanup of toxic assets will get banks to lend again and kick-start its flailing economies. The push is being led by several key officials in Brussels and Frankfurt, who want to see a new round of much-tougher stress tests before the European Central Bank becomes the euro zone's main banking policeman next year, according to four European officials familiar the talks.

    Crude futures give back a bit of recent gains after the IEA cuts its outlook for global oil demand growth to 795K bbl/day from a previous 820K bbl/day, reflecting weak demand from industrialized countries and especially Europe, where 2013 consumption is seen at the lowest since the 1980s. Still, political threats to supply and an imminent recovery in refinery operations mean it's "too early to call a bear market."

    Oil Outlook ‘Bearish’ on Demand Drop, U.S. Shale Boom. Crude prices will probably drop, at least in the first half, amid rising U.S. shale-oil production and slowing economic growth, according to analysts. “I’d stay moderately bearish from here,” Seth Kleinman, head of energy strategy at Citigroup Inc., said at the Bloomberg Oil Forum in London today. “Everything looks pretty weak,” he said, citing downward revisions to global demand growth forecasts by the International Energy Agency and the Organization of Petroleum Exporting Countries. Global crude production will be “robust” this year as output rises in the U.S., Iraq and Kazakhstan, while demand growth may slow in consuming nations including China, he said.

    Phillips 66 (PSX -2.9%) shares slump as it reports an emission at its Rodeo refinery in California related to an unplanned unit shutdown. It's part of a broad slump in refiners today, picking uppessimism in the sector which has led to sharp recent losses: VLO-4.8% (despite a plug by Jim Cramer), HFC -4.4%TSO -3.3%MPC-3.2%WNR -2.9%CVI -2.4%ALJ -2.3%NTI -2.2%.

    Exxon (XOM) and Rosneft (RNFTF.PK) say they could spend $15B building a gas liquefaction plant on Russia's Pacific coast in a move to jump start the country's attempts to ship the fuel to Asian markets. The companies in February said they would study the feasibility of the plant, but the new comments provide the first indication of the scale and timing of their plans. 

    With Russia awash in cheap natural gas, Gazprom is leading a push to massively expand the use of the fuel in vehicles. A 1998 Lada sedan can drive 140 miles on as little as 120 rubles ($3.80) of natural gas, or around the cost of a gallon of gasoline in the U.S. The Toyota Prius would need three gallons to make the trip. Problems abound, though, including a lack of filling stations and fears of the cars blowing up.

    Societe Generale is pricing in gold at $1,500/oz. and cuts its forecasts for mining stocks accordingly. The firm downgrades AngloGold (AU -2.4%) to Hold from Buy, as the miner's desire to split its South African assets from its other mines looks less likely. Barrick (ABX +1.5%) is maintained at Sell (also), and Iamgold (IAG -2.2%) is added to the Sell list. The firm's top pick: Randgold (GOLD -1.4%).

    Gold doesn't have many friends left, but Julian Jessop, head of commodities research at Capital Economics, still sees "plenty of upside" with gold possibly hitting $2,000/oz. Worries about the Fed curbing its bond-buying efforts earlier than expected as well as Cyprus being the first eurozone country forced to sell its gold reserves are both overblown, he says.

    Barrick Gold (ABX) hopes its Pascua-Lama project will enter production in 2014, but don't count on it, TD Securities says; the firm now assumes first production in 2016 along with $1B additional capital costs after suspension of the Chilean portion. ABX is unlikely to cancel the project because of the importance to its long-term future, but a cancellation would be a "significantly positive impact" on its balance sheet. 

    Two Firms Amass Much of World's Copper SupplyCommodities Traders Pay to Divert Shipments From Other Warehouses; Manufacturers Worry About Access. Two major commodities-trading firms have amassed much of the world's copper supplies in their warehouses, partly by paying to divert shipments away from other storage hubs, traders and analysts say. This concentration of copper supplies has sparked concerns among industrial consumers of the metal

    Automobile stocks (CARZVROM) hit a higher gear with apositive report on sales in China and ongoing enthusiasm over sales stateside helping to tip sentiment. Advancers: Toyota (TM+3.6%, General Motors (GM+3.1%, Honda (HMC+2.7%, Tesla Motors (TSLA+3.2%. 

    Tesla Motors (TSLA +5.5%) wins a court battle in New York when a judge dismisses a case against the automaker trying to prevent it from selling directly to consumers.

    Close to a third of all consumers who expect to receive a tax refund will use the funds for the purchase of a vehicle, according to a study by eBay. It's more good news for the Big Three (GMF,FIATY.PK) automakers with the average refund amount going to auto-related purchases tabulated to be more than $1,000. 

    Spirit Airlines (SAVE) reports traffic or revenue passenger miles increased 19.1% in March on a capacity increase of 16.5%. Its load factor was 87.9%, 2 points higher as compared to March 2012. It's preliminary completion factor was 99.6%. For Q1 the company estimates its total revenue per ASM increased 0.5 to 1.5 percent year-over-year.

    Siemens (SIintends to axe 3,000 out of over 100,000 positions at its industry division as part of a plan to save €6B company wide and to increase productivity by €1.1B at the division itself by 2014. Meanwhile, China's industrial markets appear to be stabilizing, although expectations for Asian growth are "less enthusiastic" than in the past, while visibility in the U.S. is limited. (Siemens Capital Market Day) (See also) 

    Shares of Infosys (INFYsink 22.9% premarket after the company reports disappointing Q4 results and issues soft guidance for FY13. The Indian IT concern sees revenue growing between 6% and 10%, compared to the 12% rate expected by analysts.

    Retail watch: Due to the timing of Easter and a slow start to the spring selling season a two-month snapshot of sales covering March and April is appropriate before drawing major conclusions, according to analysts. Retailers looking for a March surge in home and garden (HDLOWTGTWMT) spending and spring clothing purchases expect April to make up some of the slack. Of the 14 retailers reporting March numbers yesterday, comparable-store sales averaged a 0.6% gain with Costco (COST) and Ross Stores (ROST) standing out as outperformers.

    Topeka Capital gives retailers a boost upgrading Tiffany (TIF +2.5%) to Buy and initiating Gap (GPS +1.9%), and Zumiez (ZUMZ +15.7%) at Buy. TIF's "earnings are poised for recovery", GPShas "returned to consistent sales growth," and ZUMZ is "one of the few retailers with growth in its core domestic business [and an] international expansion strategy." (Earlier: ZUMZ rips higher on strong sales)

    Score one for slavery!  A judge yesterday refused to dismiss Macy's (M) claim that Martha Stewart Living Omnimedia (MSO) breached the companies' contract when the latter designed goods for J.C. Penney (JCP), even if the products aren't labelled as being from Martha Stewart. The judge is expected to decide today whether to temporarily bar Penney from selling those products, which are branded "JCP Everyday."

    J.C. Penney (JCP) is trying to raise $1B and is hiring Blackstone (BX) for advice on how it can shore up its fast-eroding stockpile of cash, WSJ reports. One option could be to sell a minority stake in JCP, and the company reportedly is reaching out to possible investors including P-E firms.

    Myron Ullman "is the right guy at the right time," Bill Ackman says of the man who replaces Ron Johnson, the guy Ackman previously thought was the right guy at the right time. Speaking at a luncheon Thursday Ackman (whose comments were supposed to be off the record but were quickly disseminated) maintained that shares of J.C. Penney (JCP) are still worth $75 and expressed a belief in the retailer's future.

  182. Phil


    Eli Lilly (
    LLYto lay off around 30% of its U.S. sales force, which accounts for about 1,000 positions.

    Affymax (AFFY) rebounds from early morning weakness after the company disclosed in a regulatory filing that it has entered into a fourth amendment to its collaboration and license agreements with Takeda Pharmaceutical. The amendment, which is a part of the company's ongoing restructuring efforts, changes the economics from a profit-sharing arrangement to a milestone and royalty-based compensation structure, and stems from the voluntary recall and FDA suspension related to Omontys.

    Herbalife (HLF +3.8%) pops on reports from CNBC that the criminal complaint filed against the charged former KPMG auditor Scott London inferred the company was going to go private. However, the SEC complaint doesn't appears to discuss a takeover of HLF, but instead refers to London passing information to Shaw on mergers involving RSC Holdings and United Rentals, and Pacific Capital with Union Bank. 

    Medical Marijuana (MJNA.PK +17.2%) rallies after reporting Q1 gross revenue of $8.45M (+66% Q/Q and +377% Y/Y) and net income of $5.52M. The company adds it plans to deliver a 24-month audit history of its financials by the end of Q2, and asserts it has "positioned itself to become fully reporting" with the SEC once the audit history is complete. MJNA plans to reports its audited Q1 financials by May 15. (PR) 

    "The move to digital audio/video and the rise of powerful smartphones/tablets is shrinking the overall [semiconductor addressable market]," writes Barclays' Blayne Curtis in a gloomy note about chip stocks influenced by ugly Q1 PC data. "The growth profile in semis is much slower than many expect (low single digits vs. the 7-8% 20yr trend line)." Curtis has cut Broadcom (BRCM) by two notches to Underweight on a belief its combo chip business could be hurt byintegrated platforms (ed: Broadcom seems to have a tech edge for now), but has left his other ratings intact. 

    I'm not sure this is smart:  Notwithstanding its potential buyout, Dell (DELL) plans todouble its sales outlets in China to 20,000 over the next 2-3 years as it looks to overcome the global slump in PC sales. And as as Lenovo has done, Dell intends to focus on smaller "tier 4 through 6" cities where markets are still developing. The company is also exploring designs for different tablet sizes.

    The pace at which new technologies are disrupting companies makes it dangerous to be a value investor, argues VC Ashvin Bachireddy. As mobile devices, cloud software, e-commerce, and much else upends old business models, investing in a BlackBerry or an OfficeMax/Office Depot due to a low P/E can prove painful. "While there may still be opportunities for value investing, you need to be cautious of businesses that appear to be on a slow decline." His remarks seem prescient in light of what happened today to several PC-related names with low multiples.

    IBM is following up on last year's acquisition of flash storage OEM Texas Memory by promising to invest $1B in flash storage R&D. Plans include the development of 12 "centers of flash competency," the inclusion of flash support in IBM's integratedPureSystems hardware, and the expansion of IBM's new (Texas Memory-based) FlashSystem storage line. The plans represent extra competition for EMC (XtremIO) and NetApp (NTAP - FlashRay), and could be both a positive and negative for OEM partner Fusion-io (FIO). (PR) (IBM's storage strategy)

    That was quick: Shortly after Netflix (NFLX) disclosed it may share company info via Facebook/Twitter, Reed Hastings has used his Facebook page to boast Netflix streamed 4B hours of video over the last 3 months. The July '12 Facebook post that (temporarily) got Hastings in hot water with the SEC bragged of 1B hours in the month of June. Shares +3.2% AH.

    LinkedIn (LNKDconfirms it has bought iOS/Android news reader app Pulse. The purchase price is $90M (90% stock, 10% cash – LinkedIn's valuation might have something to do with that), in-line with the $50M-$100M reported last month by AllThingsD. If the SlideShare acquisition is any guide, look for LinkedIn to keep supporting Pulse's apps – the startup claims 30M+ people have used them at some point – while looking for ways to integrate its tools with its site, as it keeps looking for ways to bring user engagement closer to that of consumer-oriented social networks. 

    PayPal's (EBAY +1%partnership with Discover (DFS+0.1%) will launch on April 19. That's well ahead of a prior eBay forecast for the end of Q2. The tie-up will allow PayPal users to make payments using a phone number and a PIN at ~2M stores handling Discover cards – that's almost certainly playing a role in MasterCard's sudden interest in digital wallet fees. But questions remain about whether users will embrace the concept – cashiers at a Home Depot carrying out a PayPal trial report even early adopters sometimes went back to card-swiping, viewing it as more convenient.

    No mercy has been shown to Microsoft (MSFT -4.3%) today in the wake of IDC's figures (blamed in part on Win. 8) and Goldman's downgrade. Goldman now sees the PC/tablet sales ratio falling to 59/41 in 2014, and thinks Microsoft could respond with price cuts or SG&A spending cuts. Nomura's Rick Sherlund wonders if a breakup or privatization is possible for Microsoft. He notes March was better than Jan. or Feb. for PC sales, but is still downbeat. "It really takes your breath away, just how bad the quarter was." Separately, Argus has downgraded Intel (INTC -2%) to Hold.

    Z10 returns are in-line with those of other high-end smartphones, BlackBerry (BBRY -7.8%) insists, addressing a reportthat returns were now exceeding sales at some top retailers. Meanwhile, Pac Crest's James Faucette, who has been bearish on BlackBerry for some time, estimates today the weekly sell-through rates for the Z10 at U.S. carriers are only around 60K units. He forecasts just 2.9M BB10 shipments for the May quarter, with half that total consisting of channel fill.

    Foreign mobile phone vendors such as Apple and Samsung are being outgunned in India by local companies Karbonn Mobiles and Micromax offering smartphones for as low as 3,599 rupees ($66). That compares with 26,500 rupees for the iPhone 4. While India is forecast to become the world's third-largest mobile phone market by 2017, 800M people survive on under $2 a day. "We don't see any point in offering a Ferrari," says Micromax CEO Deepak Mehrotra.

    In case the 5.5" Galaxy Note II isn't big enough for you, Samsung (SSNLF.PK) is launching its Galaxy Mega line. Aspreviously reported, 5.8" and 6.3" models are offered. However, the specs appear inferior to those of the flagship 5" Galaxy S IV. Whereas the S IV has a 1080p display, the 5.8" Mega has a 960×540 display, and the 6.3" version appears to have a 720p display (not yet confirmed). The processors and cameras also appear inferior to the S IV's quad and octa-core CPUs (depending on model) and 13MP camera. This could give challengers such as Huawei an opening.

    Apple (AAPL -0.1%) roundup: 1) 9to5 Mac has noticed an Apple job listing for a "display specialist" to work on "emerging display technologies such as high optical efficiency LCD, AMOLED and flexible display." iWatch rumors have mentioned a flexible display. 2) In-line with earlier scoops, the Korea Times reports Apple has shut out Samsung from A7 processor development in favor of TSMC (TSM) and its 20nm process. This suggests A7-based hardware will arrive in 2014. 3) Morgan Stanley expects a "killer app" to be launched for the iPhone 5S, and names a mobile payment solution as a possibility. 


  183. dawnr

    good morning
    Smart guys are bonds, right!?!
    http://www.marketwatch.com/story/bonds-vs-stocks-only-one-can-be-right-2013-04-10
     
    Slovenia: read this morning (cant find the link now) that they could not even get full subscribed on their sale of bonds this week and they hope to sell 5x that next week…?
     
    Also, wondering Phil what you think of Slovenia potentially dumping gold into the market to pay their increasing debt bill and if other small countries in dire straights start doing this too?  Could put real pressure on gold in short term if so much supply hits market. thoughts?
     
    JPM beat but mainly on cleaning of their reserves to juice their returns…not impressed.

  184. dawnr

    very interesting Bespoke charts this morning…Wombat, the correction IS coming…lol
    http://seekingalpha.com/article/1337111-extreme-overbought-territory
     
    (Guys I am up 6am catching up on news, thus my morning posts in spirit of sharing…)

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