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Tactical Tuesday – Learn to Stop Worrying and Love the Rally

RUT WEEKLYWe're still waiting for Russell 1,000.

Last week, I said Russell 1,000 or bust and bust we did – having the first losing week since April in the US markets and, as you can see from Dave Fry's chart, there's no excuse this week as the top of that channel has moved well above 1,000 so there should not be any more upside resistance to a truly bullish market.  

Already, in pre-market trading, the Russell is up 10 points as Europe is up over 1% this morning, following Asia's bounce back on no particular news other than Japan has stopped falling.  China's Industrial Profits in April were up 9.3%, which is the opposite direction that HBC pegged their PMI BUT March had very easy comps (5.3%) and profits are actually DOWN 2.2% from April of 2011 – which is the way rational investors like to look at things but, shhhhhh – that will be our little secret.

There are few rational investors left in the market these days, least of all US Corporations, as FactSet shows us they spend $93.8Bn buying back their own stocks at near record-highs in Q4, topping off a year in which they bought back $384.3Bn in shares.  

That's enough share repurchasing money to hire 11M full-time workers at $35,000 a year but don't be silly – that's not the way US Corporations make money!  Our Corporate Citizens are in the business of making money, not stuff and you don't need workers to make money.  In fact, they generally just get in the way and moving away from the production model entirely is allowing our markets to soar.  

Emerging and developed markets’ share of global GDPHow are they doing it?  We (US Corporations) have become very, very good at "Logistics," which is essentially where we outsource low-wage foreign labor to drive down the cost of manufacturing and shipping our products all over the World and, while we tend to focus on the things that we (in the US and Europe) buy and use every day, we are missing the bigger picture in which the bottom 80% of the Global Economy (5.6Bn people) are buying more and more things every day.  

As you can see from the chart on the left from the IMF, this is the year that Emerging markets surpass us in GDP.  Sure the average person in an Emerging Market nation only earns $4,000 a year but there's 5 times more of them than there are of us and WMT doesn't care if you go in there and spend $50 for a few outfits for the kids or if someone in Africa spends their week's paycheck there – it's the same $50 to them.  

Logistics has shrunk the planet faster than our minds are able to hold the idea in place.  Even as I write the above note on Africa, you are probably thinking "what about shipping costs" but shipping costs are LESS from China to Africa than from China to America and WMT doesn't make things in America, do they?  That's what logistics really is – it's what we used to call outsourcing but now it has a much friendlier-sounding name that it's hard to put on a sign and protest against.  

Meanwhile, the Global Middle Class is growing at a pace that sets them to double by 2030, from $28Tn to $56Tn and that's going to bump up Global GDP.  It won't do squat for the average American or European worker because the jobs are all going out of country but it's fantastic news for our multi-national corporations like MCD, KO, JNJ, PG, WMT…  

If you want to make money in the next 20 years, there are going to be two good markets and they are top 10% consumers in the developed World (the people who own the mega-corps, either directly or through stock investments or Finance, of course) and the companies that sell things that poor people can afford – because we are making more and more poor people every single day – especially in the developed nations.

As you can see from the chart on the right, it's been a rough quarter-century for the bottom 60%, giving up 7.5% of their wealth so the top 5% could gain 81.7% there are 12x more people in the bottom 60% and 12 times 7.5 is 90  and you can see how that extra 8.3% was distributed to the rest of the top 20% with a few scraps falling to the "upper middle fifth," which is the 50-60% block.  

Anyone below that median cut-off had their stuff taken away from them in the US and you can see how rapidly our GDP is falling (as a percent of Global) as the jobs melt away in the developed World and we'd better learn to play the top 5%'s game real soon or we're going to end up down in that red zone for the rest of the century.  

I've done a lot of reading this holiday weekend and THIS is the most important thing I've learned.  We have been worried about income inequality leading to problems and it probably will down the road – or even this summer – BUT, until then, there's real money being made catering to the impoverished masses who don't, on the whole, feel that impoverished.  

 Many of the world's most destitute people own more stuff than they used to. Take Madagascar, a very poor country that has technically been getting poorer over time. Between 1992 and 2009, the country's real GDP per person fell from $843 to $753. But the percentage of households with a phone climbed from less than 1 percent to 28 percent, the proportion with a motorbike climbed from 4 percent to 22 percent, and the percentage with a television increased from 7 percent to 18 percent. People in Madagascar, as well as in much of the rest of the developing world, are living better and longer with more possessions to their name. That's true even if, officially, they are as poor as they've ever been. And Madagascar doesn't even have a Walmart — yet.

As China gets richer, labor will inevitably get more expensive and factories will migrate. Some already have — to places like Vietnam and Indonesia. And if retailers like Walmart continue to seek the cheapest, most efficient suppliers and manufacturers, those Asian production centers will eventually shift to Africa in search of cheap labor. That may take decades. But in the meantime, China's efficiency means that poor people's scarce resources can go a little bit further.

That's good for them, very good for WMT and TERRIBLE for the bottom 90% in developed nations as they end up FORCED to shop at WMT because their part-time, minimum-wage jobs no longer allow them to shop anywhere else.  

Meanwhile we (and that includes me) need to think about corporate profits differently and get out of our US/Euro-Centric boxes.  We can't let the chart on the left make us worried or jealous – we need to look at these numbers and say "how do I get into that orange area?"  

If you are already in the red zone, the top 10% that make an average of $161,000 per family – you have a pretty good chance because you will be able to, through your investments, take part in the Global Exploitation Boom that is driving the yellow income to an AVERAGE (some do much better) of $23.8M per year (at that level, the 0.8 matters!).  

If, however, you are in the bottom 90%, where your AVERAGE income per family is $29,840 – and that's in America, one of the World's richest countries – then you are pretty screwed and are likely to get much more screwed over the next couple of decades.  

Our biggest worry, as members of the top 10%, is that the people in the bottom 90% who, on the average, earn 1/5th of what we do, will one day get pissed off enough to pick up a bunch of rocks, bash our heads in and take our stuff.  Or, even worse, they may vote to tax us – to redistribute some of our wealth and create a more equitable society.  Fortunately, we've nipped that nonsense in the bud by taking control of the political process in this so-called Democracy but I still like TASR ($9.55) as a long-term play on crowd control – both here and abroad.  

EWZ is the ETF for Brazil and we already have them in our Income Portfolio as a long-term play (as well as TASR since $7.05) and we have AA & X and AAPL and INTC, CSCO & BRCM (6Bn people have cell phones, only 1Bn are smart phones so far) and BRK.B and GLW and, of course, CAT along with US real estate, energy, AAPL and some Finance so we're already well-positioned for the global growth story I've outlined above.

What we were not positioned for was TSLA flying over $100 and that's what we're getting this morning as GS puts out yet another bullish note on the company, calling their target of selling 500,000 cars by the end of the decade "realistic."  Currently, TSLA is able to produce, at most, 25,000 units and it's taken them 10 years to get this far so they have 6.5 years to sell 450,000 more cars which means capacity has to hit 100,000 a year by 2017 or there's no way.  GS says it will only cost TSLA $25-50M of CapEx to ramp up to 50,000 cars, which is amazing as it cost them $500M to get to 25,000 but let's assume a lot of that was development (90%?) to get to GS's figure.  

Our bullish back-stop on TSLA was the 2015 $85/115 bull call spread at $7 and that spread was only $9 on Friday, despite being $10 in the money.  Even at $9, it's a pretty good 3:1 pay-off if TSLA makes $115 and holds it to Jan 2015 and we'll be buying some more to back-stop some more (maybe higher strikes) if TSLA holds $100 as our short-calls are killing us but I stand by my now silly-sounding warning that TSLA is not worth $90, let alone $100.  

That's the one stock we need to fix in our Income Portfolio – the one that is doing way too well!  

As to the markets – it's Tuesday – Tuesday's are always up days.  Last Tuesday was an up day but we finished the week in the red (for the first time in more than a month).  So let's not go all crazy because the market is up on a Tuesday.  We still want to see the Russell up over that 1,000 line for 2 consecutive days without failing it.  THEN we'll be looking for more bullish plays.  

Meanwhile, we'll look for those Global growth stories to add to our long-term collections.  


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  1. stjeanluc

    Oil Lines

    R3 – 94.81
    R2 – 94.43
    R1 – 94.13
    PP – 93.75
    S1 – 93.45
    S2 – 93.07
    S3 – 92.77

    These lines are based on yesterday limited action.

  2. jomptien

    Phil or SJ – are we still in the June AAPL 450 short calls?, I think so but just wanted to be sure. Thanks

  3. jabobeast

    whatr just turned the miners?
     
    gold weakened and miners moved up? weird…

  4. 1020

    Good Morning!

  5. stjeanluc

    Water will certainly be the next oil:

    http://qz.com/88420/thousands-of-fish-float-to-the-surface-of-a-chinese-river-in-another-mystery-mass-death/

    China’s rivers are under assault on multiple fronts. In attempt to supply a power hungry country and reduce dependence on coal, Beijing is pursuing a relentless program of hydropower projects, many of which are in Yunnan province. Damming, combined with heavy demand for water from farmers, has caused the disappearance of over half of China’s 50,000 rivers in the last 20 years.

    The level of anger among Chinese people is palpable, as recent protests have shown. One last year even ended in a riot. Beijing has doled out fines to misbehaving countries and promised to do more by holding party officials responsible, but another batch of dead fish will do nothing to help its image, whatever the cause.

    And they better start treating it better in China!

  6. stjeanluc

    Maybe the end game is nearer for Japan:

    http://qz.com/88306/a-rapid-rise-in-rates-foils-abenomics-and-even-the-boj-is-worried-about-it/

    So what’s going on here? Recall that the BoJ is is buying assets, like bonds, to drive down their yields—i.e., interest rates. That’s supposed to encourage households and investors to take their money out of these low-yield bonds and put them into riskier assets, like stocks or real estate. But the ultimate goal—and the reason some BoJ members worried markets might find the whole thing contradictory—is to increase the amount of money in the system and stoke expectations of higher inflation, which tends to drive interest rates up.

    The worry of monetary policy skeptics like Koo is that the recent spike in yields shows that, once inflation starts to pick up, the BoJ will be unable to keep the lid on rates. Not only would this hurt growth—it would make credit more expensive—but with Japan’s government debt at around 230% of GDP, higher rates would make the government’s debt-servicing costs spiral out of control.

    Koo’s criticism is a legitimate one, but it also somewhat misses the point. A rise in rates is an inevitable consequence of a pickup in investment activity, relative to savings, and a sign of gathering inflationary pressure. So rising rates are a good thing, as long as they don’t rise too high. Even with the past month’s increase, they’re still exceptionally low.

    Or maybe they'll be able to keep the lid on rates!

  7. cturb

    ABX going ex dividend tomorrow. Maybe that's why they're up

  8. stjeanluc

    Is JCP at $0 yet? Could get there soon:

    http://seekingalpha.com/article/1463441-estimating-the-j-c-penney-risk-of-insolvency-using-the-altman-z-score

    Put simply, J.C. Penney is, according to the Altman Z-Score, headed towards bankruptcy. It's in quite worse shape than Sears, and has been experiencing much stronger revenue losses.

  9. bgbigelow

    Phil,
       Good Morning!  Speaking of tactical tuesday, I could use some tactical help on TSLA.  I have Jan 15  +1 85/115 vert and +1 92.5/120 Vert.  I sold short Jun 85 C and Jun 92.5.  I would say I'm not at a full position yet, so I can increase exposure with an adjustment.  Any thoughts are welcomed.
    Thanks!

  10. stjeanluc

  11. Imho

    Great article Phil.  I finally got off the wait list and look forward to participating in your chat room.  

  12. stjeanluc

    STP / Phil – The ABX calls didn't go below $0.87 after you called for DD on Friday so I didn't change the position.

  13. jabobeast

    FU GDX!!!
     
    FU PCLN!!!

  14. Burrben

    Phil / StJ
    It might be helpful to get an offical stamp on what the position is in the IC2013.  Here's the last comments I thought might be "official".  But now that it's at 102, it might require another look.
    STJ:
    Speaking of TSLA, here is a recap of where we are in the Income Portfolio after all the moves:
    Short 10 Jan 15 45 Calls
    Short 20 Jan 15 70 Calls
    Long 20 Jan 15 85/115 BCS
    We sold the long Jan 15 60 Calls yesterday to finance the new BCS after they ran up 80% in 2 days.
    PHIL:
     

    TSLA/StJ – Looks about right and TSLA is back at $91 and the $85/115 spread is $6 and the 2015 $45 calls are $46 and the 2015 $70 calls are $33 and we can roll them to 60 of the short Jan 2014 $95s at $18 and sell 30 of the 2015 $60 puts for $15.   TOS has net margin on the short puts and calls at $60K, so it's a heavy position and it would be offset in PM by the long bull call spread to some extent. 
    For those who want less margin, you can balance out the short puts and calls, roll to less of the 2015 $95 puts at $25 instead of the Jan $95s at $18 or buy more of the 2015 $85/115 bull call spreads for $6, which (in a PM account) will knock $24 off the margin charged against the short calls.  

     
     
    So, in our Income Portfolio, for example, we are long 20 of the 2015 $85/115 bull call spreads and we'll want to go long 20 more if TSLA is topping $95.  

  15. jerconn

    Phil I'm long USO July calls and of course pretty happy this morning…how long do you think this party is going to continue for oil? 

  16. craigzooka

    @gerryf

    re:"Why do the AAPL 430-380 Put spread instead of the 430-250. The 380 is now is 1.84-1.93 and the 250 is .35-.45."

    Hi gerryf, first let me say that there is absolutely nothing wrong with the spread you chose to sell.  The choice of which long put to buy is really up to personal preference.  It is my personal opinion that the market is way over heated and due for a pullback.  Because of this opinion I decided to tighten up the spread to reduce my risk.  My spread has a risk of about $400 with a credit of $99 while yours has a risk of about $1650 with a credit of $150.   

  17. stjeanluc

    Income Portfolio / Burrben – I found this comments which I used to update the portfolio this morning:

    http://www.philstockworld.com/2013/05/16/thursday-thoughts-fed-speak-moves-the-markets/#comment-3189811

    TSLA/Income Portfolio – The 2015 $85/115 bull call spread is still $7 so let's get 20 more of those and roll the 20 short 2015 $70s ($32) and the 20 short 2015 $45s ($48) to 60 of the Jan $80s at $20.50 and sell 30 of the 2015 $60 puts for $12.50 with a stop on 1/2 at $15.  That takes $160,000 worth of short 2015 calls and moves them to $123,000 worth of short Jan calls and offset by $37,500 more of the short puts for an even roll with less premium and a better chance for a profitable expiration (the longs are free as we took profits off the table already. 

  18. Phil

    Good morning!  

    Wheeeee – what a market!  What's going to stop this crazy train – or even pause it?  

    Before we do anything else, we need to do something with TSLA and the obvious thing to do is sell some 2015 $75 puts for $19.90 because that pays for a $50 roll of some short calls down the line and, of course, if you are $20 or $30 underwater on the short calls, then TSLA has to totally crash to get you in big trouble.  So that's a good way to raise quick cash against short naked TSLA calls and, frankly,

    I think the Income Portfolio is wrong but it needs to be resolved BUT, in any case, let's sell 15 of the 2015 $75 puts (to cover 1/2 of our exposed short calls) and, IF TSLA holds $100 for a day, we'll use 1/2 of that money to buy another set of long bull call spreads (the $90/120 bull call spread is $10) and then you have $50 of additional upside coverage between the short put and the long call against the longs.  That and PATIENCE will keep us out of trouble.  

  19. Phil

    Oh, I just say StJ's comment.  Thanks StJ – can you put up the official TSLA position please?  

  20. Pharmboy

    GM!  Please tell me why we are up again?  I mean from sleeping.  Pfizer must have sprinkled Viagra on the stock market floor.

  21. Pharmboy

    Most Shorted Stocks

  22. stjeanluc

    Income Portfolio / Phil – As far as I can tell, this is where we stand now:

    There was a lot of back and forth as TSLA was moving around like crazy, but this is based on what I found that didn't involve conditions like "if we go over…., if we go under….."

  23. Pharmboy

    Market up….AAPL not so much.  How obvious is that?

  24. craigzooka

    @deano

    re: GCI

    I have decided not play GCI.  I put in an order two days in a row and didn't get filled when I thought I should have.  This has led me to the conclusion that the options are not liquid enough for us to play.  Watching during the day the spreads fluctuated between .05 and .10.  This means that we would be loosing $10 every time we tried to enter or exit a spread.  Thus, I have decided not to play it in the IRA Portfolio.  However, one trick you can use to kind of get around the spread issue is to enter the covered call as one trade with a limit price.  Since you are mixing a stock and option purchase, a couple penny tick in the stock might entice someone to give up their full $.05 in edge on the option and fill the order when they only have $.02 in edge.  If the stock were in the $40 range I might consider trading it with with $.05 spreads in the options as we would have to trade less contracts.  But I feel like we are giving up too much on spread with it trading around $20.  Maybe we should call the board of directors and tell them to do a reverse split ;)

  25. qcmike

    Phil
    Any trade on KORS (Michael Kors ) earning they are on the 5/29 before markets opens?
    Thanks

  26. Phil

    Oil just tapped $96, gold $1,379, silver bounced off $22 again and now $22.38, copper is flying from $3.27 back to $3.34 and I still like those FCX 2015 $25 puts at $3.50 that were an early entry in the Income Portfolio as a general play on copper and gold.   FCX is now $30.75 so a pretty good cushion to net $21.50!  

    Nat gas fell to $4.15 but gasoline is UP from $2.82 to $2.87 and I don't see anything other than OPEC rumors (production cutbacks) driving things higher so maybe time to short oil again.  

    How about 5 SCO June $34/37 bull call spreads at $1.85 in the STP.  SCO is at $37.16 with oil at $95.62 so we're just betting they don't hold $95 with the holiday catalyst now past.  If oil jams higher, I'll get interested in USO puts as well, probably June $33.50 puts, now .55 for .50 or lower.  

    Dollar is 83.92 and over 84 will not make the market happy.  Euro $1.291, Pound $1.511 and 102.15 Yen to the Dollar with the Nikkei back to 14,575, which is about where they were when the madness began two weeks ago.  The Nikkei topped out at 15,942.60 last week and bottomed at 13,981.52 – that's a hell of a range (13%) for 2 weeks!  The Dow has ranged 360 points (2%) over the same period. 

    Keep in mind, we've had just as many Central Bank pronouncements as Japan has over the past couple of weeks but NO ONE really believes our Fed will cut back on the QE.  In fact, clearly they are more apt to believe QE will accelerate down the road.  

     

  27. Phil

    Consumer Confidence flew up to 76.2 but Richmond Fed is down 2 so a mixed bag but Consumer Confidence is a blow-out number.  Rally on!!!  

  28. gerryf

    CRAIG
     
    Thanks Craig, I understand.

  29. scottmi

    EXC – just about the only thing down. on sale?

  30. mjjwo9b

    Craig:  Any thoughts on BTU?  Numbers look similar to GCI with the added benefit of penny increments.  Similar volatility, though a reduced dividend.  

  31. deano

    Craig – thanks for the follow up, and for your efforts. Well considered.

  32. scottmi

    O/Phil – maybe stopped going down. still not seeing any news to push it down other than a flimflam GS downgrade.

  33. Phil

    NFLX took a nasty dive all of a sudden.  

    Money flying out of Treasuries again – could be more rally fuel coming to the sidelines.  TLT just failed $116 – bonds are spiking.  This is not something the Fed wants to see as they are overheating stocks and running up bond costs for US borrowing.  There's a 2-year note sale at 1pm so we'll get some quick feedback on that as it's $35Bn and the Fed can't buy it all (they have to save it for long-term notes).

    AAPL/Jomp – Until we see the RUT hold 1,000 (1,003 now), we can't take this rally too seriously so the light (1/3) cover on AAPL remains the prudent thing to do.  

    Miners/Jabob – I think partly it's people going for the only cheap things that are left in a broad-market rally.  

    Water/StJ – The undoing of many nations in the past.  Do not read "30 Facts About the Coming Water Crisis" if you want to have a nice day.  

    Japan/StJ – MAYBE.  

    ABX/Cturb – Oops, down again already.  At least they are reliable.  

    JCP/StJ – I can't believe they are at $19.06.  Very tempting to short, especially as $20.22 is 200 dma.  

    TSLA/Bgb – Good job layering your bull spreads.  As noted above, I'd sell the one offsetting put and use that money (if necessary) to buy another bull spread.  As long as you are getting paid 3:1 on the longs then every $10 TSLA moves up, you buy another $30 spread for $10 and you are fine (putting a stop on your lowest spread, of course).  There should be no additional margin cost to the offsetting short put. 

    STP – SCTY up with TSLA at $51.20.  Of course, we sold the July $42.50 calls for $12 so net $54.50 there.  Meanwhile, our bull call spread is very in the money at $4.35 x 2 so I think it's time to shut that down and we'll add one Jan $50/60 bull call spread for $3.30 to cover our open short caller.  ABX is not good today but still time there.  CLF testing $20, TZA is a bust so let's buy back the $38 calls (now .72) and we'll accept our loss on the long calls if we have to tomorrow.  SHLD looking OK at $49.81 but watch them if they can't get back over $50.  

    Thanks Imho and welcome!  

    ABX/StJ – No problem but still we want to if we can.  

    TSLA/Burr – Thanks for helping to straighten it out, officially, we're going with what StJ has and, obviously, if you want to follow it, you just need to roll to that position, which was simply rolling all the short calls to the Jan $80s and 2/3 covering them with long bull call spreads and 1/2 covering them with short puts (now the 2015 $75 puts).  Not too complicated to fix.  

    As we're short the $80s and we have 2/3 $30 upside protection and 1/2 $20 of short put protection that's net $30 of protection against each short call so we're covered to $110.  Of course, the Jan. $80s are $30 at the moment, so already reflecting the worst case while our bull call spreads haven't moved (net) and the short puts hold value (since many, many people think they'll blow up still) which makes the balance look ugly.  In reality, we can roll the 2014 $80 calls to the 2015 $97.50 calls which raises our current trouble spot to $127.50.  

    USO/Jerconn – I think $96 is a bit much.  I did not hear any good noises re. summer driving yet but that Consumer Confidence number makes it sound like we could get an upside surprise.  Inventory not until Thursday but I'd call this a "when in doubt, sell half" kind of thing.  

    Dow at 15,500 in Futures so let's watch that line (15,517 on index).    That's up 1.4% for the day (214 points).  

  34. craigzooka

    IRA Portfolio

    Thanks mjjwo9b.  I had forgotten about BTU.  Lets sell 1x of the JUL 20-15 PUT Spread for credit of not less than $86.

  35. craigzooka

    Also, Just so everyone is prepared for it, once the market has any kind of significant drop and we can get some decent volatility I will probably widen the spreads out more than 5 strikes.

  36. vedanomics

    NFLX had a very busy weekend with the re-launch of Arrested Development. It caught a lot of negative to mixed  press on that as it was not as impressive. Plus what a great day for a fund (ICahn??) to exit.

  37. denlundy

    TLT at 115.16.  any suggested play?

  38. craigzooka

    @Phil

    I really liked that article on Water.  However, and this is just my opinion, I have a really hard time taking anything seriously that is published on a site with so many ads.  Especially when the content of those ads is mostly "BUY GOLD NOW!" and credit refinance scams.  I know that websites also need to generate an income and that the scammy adds pay the most per click but there must be some kind of middle ground. 

  39. Burrben

    Holy crap, so many good things not on our radar.
    Fannie, Freddie climbed 25% on Tuesday to continue their surge. Year-to-date, Fannie Mae shares have leapt 1351% and Freddie Mac shares have gained 1246%

  40. tommyt

    does anyone know why agnc is down again?

  41. Burrben

    Anyone for a liitle F?
    http://seekingalpha.com/article/1463311-2-stocks-to-buy-1-stock-to-sell-weekly-outlook-for-the-market?source=email_rt_mc_related_0
    Share of Ford (F +3.4%) rev higher as any concerns about an USTA investigation over acceleration issue with F-150 pickup trucks gets left in the dust. The focus of investors seems to be on a price target increase from Merrill Lynch to $24 and more bullish forecasts for demand in the U.S. Read comments
    Any good trades on them?

  42. jabobeast

    The miners are kind of volatile…

  43. zeroxzero

    Why is FedEx such a dog?  I don't have any, but wonder if I should.

  44. rustle123

    TSLA wants to come out with a competitor to the Nissan Leaf.  Also sounds in this article like Elon is counting the days till he can sell the company:
     
    http://www.valuewalk.com/2013/05/tesla-motors-inc-tsla-ceo-hints-entry-level-rival-to-nissan-leaf/

  45. zeroxzero

     Senility is a cruel mistress:   "On the eve of her Senate confirmation hearing, commerce-secretary nominee Penny Pritzker alerted Congress that she mistakenly understated her 2012 income by at least $80 million."

  46. Phil

    Shorted Stocks/Pharm – I'm surprised there are still that many people willing to short anything. 

    TSLA/Income Portfolio – Thanks StJ!  OK, so the official position is this:

    Per above, our plan is to buy back the 30 short $60 puts but I'm very confused at those are $11.50, not $4.50 and, obviously, we couldn't have lost money on TSLA short puts.  I think we sold the 2015 $60 puts for $12.50 and now we're just taking the $1 profit and selling the $75 puts for $19.80 instead (30 of them to offset the 60 longs).  That puts more cash in pocket and we use that cash ($30,000) to buy 20 more long spreads IFF (if and only if) TSLA holds $100 for a full day.  Once we have 60 long bull spreads, we have at least $60 x $20 of upside on those and 60 x $10 (1/2 of $19.80) of upside on the short puts so now we're covered to $110 on the short TSLA calls.  Worst comes to worst, we sell 30 more short puts and do it again and cover another $30 of upside and we're good to TSLA $140 and, if you think $140 isn't safe – we have some $80 calls we'd love to sell you for $30!  

    KORS/QC – Luxury has been doing well and KORS is pretty flat so worth an upside toss with the weekly $60 puts at $2.40 and you can cover that with the July $57.50/52.50 bear put spread at $1.35 for a net $1.05 credit so the entry on KORS is net $58.95 with a downside stop at $57.50 that protects you for the next 10% (ish) down.  So risk $1.45 vs reward of $1.05 plus whatever value remain on the bear put spread if KORS closes over $60 (now $61.74). 

    O/Scott – You know why I don't follow them – try putting "O" in GOOG and see what you get.  Seriously, they are a pain in the butt to do research on!  I don't see anything that makes me question the $2.17 dividend, which is 4.4% of the $49.64 price.  O has been spending a lot of money to grow and that's not a bad thing unless the rental market turns sour on them – maybe that's part of the issue.   I think people just took profits at $55.48 but they go ex-dividend on the 30th (just .54) and you can scoop that up by buying the stock and selling the Dec $50 calls for $2.35 and I wouldn't even sell the puts unless they take a dip.  That's a net $47.29  entry and, IF they drop to $45, then you can sell the Dec $45 puts for about $3.65 (the price of the $50 puts now) and then you'd be in a buy/write at net $43.64/44.32 with a call-away at $50 and if you can sell $5 of premium a year and collect $2.17 in dividends, you're only 6 years away from free stock!  

    Markets holding up well with Dollar 84.29. 

    NFLX/Vedan – When you act like a studio, you will eventually be priced like a studio (8-10x earnings) as it's a hit or miss business.  

    TLT/Den – We like to go long here usually but I'm a little concerned the tide is turning on TBills.  Of course, if rates spike, the market will fall, sending people back to bonds so I don't think it's going to be a catastrophe to take a stab at selling the June $115 puts into the excitement ($1.75) and you can pick up the $112/115 bull call spread for $1.90 for net .15 on the $3 spread that's 100% in the money at the moment ($115.18) and, if they fail $114.50 – probably time to give up on it.  Let's do 5 of those in the STP.  

    Scammy ads/Craig – Well, there are many articles like that, that one just put together 30 major worries.  Google once banned me from having ads on this site (old version) because I wanted to block those scammy advertisers.   They actually said I was overusing the veto function (as I would veto a dozen ads a day) and not using it for it's intended purpose (which I'm still not sure what it is if not to remove objectionable ads, but I guess my definition of "objectionable" was the bone of contention).  So, I don't fault people for the ads that are displayed – even now I leave the ad stuff up to my web guys (you can see them if you log out and view our site) – GOOG's system, as well as others' make is so you have little choice about what gets displayed on your site – it's generally based on whatever you talk about.  I mentioned going to Killington in a morning post once and there was nothing but ski resort ads for a week…

    FRE and FNM/Burr – Those guys have gone totally crazy.  Back to the bad old days, I suppose.  

    AGNC/Tommy – They had disappointing earnings and the whole sector is in abandon ship mode at the moment.  AGNC, in particular, lost $1.57 per share but $2.20 of it were unrealized losses on agency securities, marked to market because they chose to realize $26M of real losses on some securities – so it was conservatively extrapolated across the portfolio.  They also lost another .55 on a change in taxes.  I think, on the whole, the sell-off is a great opportunity to get in – like it was in November, the last time similar issues spooked investors.    We already have short 2015 $28 puts in the Income Portfolio (sold for $5.20, now $7.30) and I still like those as an entry point as you get the dividend up front and you only have to buy 1x of the stock at net $21.80 (or $20.70 now) and THEN you can do a buy/write and collect your dividends going forward.  

    F/Burr – I didn't realize they weren't in the Income Portfolio – they were my first Inflation Fighter pick last month with shorting the 2015 $12 puts for $1.95, now $1.  Our more aggressive trade idea on them was buying 1,000 shares for $12.93 at the time and selling the 2015 $12 calls for $2.25 in addition to the puts at $1.95 for net $8.73/10.36 with the call-away at $12 for an almost 50% gain.  I think this may not be the best time to re-enter but I do still like them long-term and you can sell the 2015 $15 puts for $2.25 and that nets you in for $12.75 – not too crazy as that's then back to where we wanted to get aggressively long.  

    Miners/Jabob – To say the least!  

    FDX/ZZ – I just think $100 is a tough nut to crack and gas hasn't really come down in price – even though oil has.  Their year ended in May and is looking down 20% on earnings from 2012 as Government went with less-expensive options for delivery and Europe and Asia crashed but this year they should be up over 20% from last (this?) year and we'll see on Jun 18th if they are on track to make $7.50 this year.  I think it's a good opportunity to get in if you think you missed out and want to own them.  You can sell 2015 $90 puts for $9.50 and that's a good 1x entry to start.  

    $80M/ZZ – That's a rounding error to Pritzker.  

  47. jerconn

    Zero – is that Pritzker quote for real?  Where is it from?

  48. millcreek

    phil
    are you rolling the tsla 60 to 75 ..the initial post sounded like you were just adding more …tks

  49. scottmi

    TSLA – just can't be new money going into TSLA at this price. momentum traders adding to winners? if so, when this breaks, will be fast…

  50. Opesbridge

    The Opesbridge LP April 2013 Comment Letter has been released.  Please write to me at Ron@Opesbridge.com if you would like to receive a copy.
    Ron

  51. Jbur

    Portfolio Beta Weighting: I know many of you have expressed interest in this technique. Don Kaufman is discussing it now in  Swim Lessons.

  52. zeroxzero

    Jerconn / Pritzker:   Read it and laugh:  http://online.wsj.com/article/SB10001424127887324659404578499951071913328.html?KEYWORDS=penny+pritzker

  53. jerconn

    Zero – that is rather unbelievable.  The WSJ deadpans it, like "hey, we're just reporting the facts."  Must have been hard to keep a straight face while writing this, tho…I guess the IRS was too busy investigating conservatives to notice a measly $80 million mistake…oh, and the woman in charge just "isn't very good at math…"

  54. Burrben

    scottmi / tsla
    With the Jun 4th investors meeting coming up, I don't see them falling here.  Elon is a master marketer, and while TSLA is now based on speculation not fundamentals, take it from me, it HURTS to bet against Musk.

  55. biodieselchris

    Housing – wow, seattle +3% in one month. That's crazy!

  56. yodi

    STJ trust you follow my IOC  May4 sold for 3.64 bought back for 11.49 sold Jul 97.5 for 10.29 today 4.22 anf falling!!!!!
    Super MOMO plays!!!

  57. newt

    SCTY/ STP: how come we are only buying one Jan50/60 bcs when we are short 5 Jul 42.5 calls?  I don't get the ratio…

  58. stjeanluc

    IOC / Yodi – When it comes to premium, it's the ultimate MoMo. I look for them to retrace back to around 77 now.

  59. qcmike

    yodi 
    what is your position in IOC  MOMO play
    Thanks

  60. yodi

    CAT not to late to enter the original back ratio from Friday night. Only hold back on selling the putter I offered 4.30

  61. biodieselchris

    so, AIBYY is at 1.24 and has a market cap of $64B. 5 years ago it was at 300. There's no way they had a market cap of $15T right? So they've diluted the stock?

  62. biodieselchris

    if BLDP is watching costs in a Buffet-esque sort of way way (e.g. counting the squares of toilet paper), this could be a strong buy.

  63. Phil

    TSLA/Mill – In the original post, I was looking at Friday's print on the Income Portfolio, where we didn't have any short puts listed as sold.  It was not my intention to sell 60 short puts as I am, essentially, short on TSLA but willing to compromise by taking $20 for the $75 puts (net $55) as we kind of like them there (though would rather not own 3,000 shares for $55!

    TSLA/Scott – I still think the whole thing's a sham.  This price is so beyond rational that even the guys on Fast Money get it.

    Pritzger/ZZ, Jerconn – Imagine having a Commerce Secretary that knows how to make money – scandalous!   Of course, after greats like Don Evans and Calos Gutierrez – I guess we're a little spoiled…

    Seattle/BDC – We need that nationwide before all our boomers hit 65!

    10%/StJ – Case in point.  Guy is 55 years old in a $300,000 home with a $200,000 mortgage of $1,500 a month and he makes $50,000 so $35,0000 after taxes leaves $2,000 a month to live on with nothing saved in the bank.  10 years from now with 10% increases in price, his home is worth $778,000 and maybe $100,000 left on the mortgage so he clears $678,000 to retire on and, even though rent on an apartment may have gone up from $1,500 to $4,000 in proportion – rates in the bank would be around 10% and he gets $5,000 a month off his housing profits to pay for it.   Learn to love inflation – it's our only possible exit strategy!  

    Dollar over 84.25 and markets finally noticing.  

    SCTY/Newt – Because we're not bullish on them at this price, we're only adding a little upside coverage, just in case.  When you get paid $12 for $42.50 calls, you sold for net $54.50 so you only need to protect OVER that price – anything below it is profit on the short calls.  

    AIBYY/BDC – They've re-issued, can't be compared.  

    BLDP/BDC – Or they are micro-managing the company to death.  

    Oh – 2-year note auction didn't go well – that's what sparked the selling.  See, I told you it was a self-correcting problem:

    1:05 PM The Treasury sells $35B in two-year notes at 0.283%. Bid-to-cover ratio of 3.04, vs. a recent average of 3.41; indirect bidders take 21.9%, vs. a recent 21.1%. Direct bidders take 12.6%, vs. a recent 27%. 

  64. stjeanluc

    Housing / Phil – I think that it has been part of the retirement plan for many over the years. Buy your house, sell it for 2x when you retire and rent a small condo in Florida paid by the interest on the money. Of course, in the meantime we had a little market crash and now the interest you collect don't even pay for the condo fee… 

    But it seems that we might be back on track soon… If my house would be worth 2x what I paid 17 years from now when I have to retire, it will be a welcome surprise!

  65. Burrben

    AGNC / TWO / MTGE / NLY
    Be careful adding here.  My IRA's just got killed.  I don't understand how no tapering can boost equitys, and kill reits!  Everything I literraly own is a**backwards.
    Bear Market in Bonds Could Crush Mortgage REITs and Their High-Yield Dividends


    1:33 PM  Growing thoughts of a tapering and then ending of QE∞ triggers panicky selling in the mREIT sector (MORT -2.3%) as Treasury yields hit their highest level in more than a year (the 10-year at 2.12%) and mortgage prices slide as well (MBB -0.4%). Leading the way is a 5.3% decline in American Capital Agency. Annaly (NLY -2.7%), Two Harbors (TWO -3%), Anworth (ANH -2.2%), Western Asset (WMC -4.7%), Apollo Residential (AMTG -3.7%), Javelin (JMI -4.3%), Invesco (IVR -1.8%), MFA Financial (MFA -1.5%). Read comments

  66. Phil

    Housing/StJ – It's always the general plan but it's very useful when you have a nation of 110M homeowners who have an average of $40,000 in the bank to retire on. 

    TSLA drop-proof so far.  

    Tapering/Burr – Any increase in rates hurts REITs, who are the the guys who get the FREE MONEY when rates are low.  Also, if rates are up then bonds compete with the dividend-payers for money.  As usual, the market is making an extreme, immediate reaction to a possible long-term scenario but, if you are in REITs for the short-term, you will always get knocked around like this.  It's a LONG-TERM investment only on these.  

    VIX 14.38.

    Chart

    Chart

    Hey, this is great:

  67. zeroxzero

    StJ:  Will the U.S. real estate market perhaps become more stratified in the future?  If the middle class has falling real income, appreciation differentials should become obvious among residential price points going forward.  Unless banks wash/rinse/repeat their past stupidities.  Come to think of it, I suppose that's exactly what I should expect.

  68. Phil

    Here's oil failing the $95 line (/CL) always good for a short on Futures (tight stops).  

  69. yodi

    qcmike
    IOC NOT a play for week at heart !!! I have sold all my stock for a good profit and purchased synthetics
    All Jan15 such as 50/65 and Jan 75c long against some Jan14 75 short against these positions I play weeklies and month short term callers. at present holding the Jul. 97.5 caller sold for 10.29 5/24/13 now 3.80

  70. jerconn

    Phil – imagine a commerce sec'y who knows how to "report" money!  She didn't make the money, it was offshore stuff stashed by family a long time ago.  she's "old" money.

  71. newt

    Phil: Thanks.

  72. stjeanluc

    SLW / Jabo – It certainly sounds like a better deal for Silver Wheaton than for ABX!

  73. samz3700

    Bur - 
    One way to hedge your reits would be to short tlt – bc as Phil said as interest rates go up and bond (tlt) goes down – the yield on REITs is less attractive -
    Got to remember that all of these people have piled into REITs because they cannot get any yield on traditional bond portfolios

  74. Phil

    At the open: Dow +1.01% to 15457. S&P +1.17% to 1669. Nasdaq +1.16% to 3499.

    Treasurys: 30-year -0.27%. 10-yr -0.08%. 5-yr -0.01%.

    Commodities: Crude +1.69% to $95.74. Gold -0.35% to $1382.65.

    Currencies: Euro -0.14% vs. dollar. Yen +1.16%. Pound flat.%.

    10:00 AM On the hour: Dow +1.34%. 10-yr -0.4%. Euro -0.46% vs. dollar. Crude +1.42% to $95.49. Gold -0.88% to $1375.25.

    2:00 PM On the hour: Dow +0.52%. 10-yr -0.46%. Euro -0.51% vs. dollar. Crude +1.14% to $95.22. Gold -0.32% to $1383.05

    May Richmond Fed Mfg. Survey: -2 vs. +2 expected, -6 previous.

    May Dallas Fed Manufacturing Outlook: -10.5 vs. -8.0 expected, -15.6 prior.

    May Consumer Confidence76.2 vs. 71.5 in consensus; 69.0 in Apr.

    May State Street Investor Confidence Index: 94.8 vs. 93.6 in April

    Mar. S&P Case-Shiller Home Price Index: +1.1% M/Mvs. +1.0% expected, +1.2% prior. 

    More on Case-Shiller: Prices for the 20-city composite rose 10.9% Y/Y, with all 20 cities posting gains, and 12 out of 20 garnering double-digit increases. Phoenix, San Francisco, and Las Vegas all had gains greater than 20%. NYC (2.6%), Cleveland (4.8%), and Boston (6.7%) trailed the pack. Nationally, prices are back to mid-2003 levels. (full report)

    The Fed's job has turned to cooling market expectationsabout asset purchases, writes the WSJ's Jon Hilsenrath, picking out a line from last week's FOMC minutes. Some on the committee were concerned primary dealers are upping expectations for the size of QE "despite a notable decine in the UE rate and other improvements." A recent survey shows most expecting a full $85B/month being purchased through year-end, a level the Fed is seemingly getting less comfortable with.

    "Tech (XLKQQQ) is where cash goes to die," says Bill Smead as research shows massively over-capitalized companiesdon't perform any better than undercapitalized ones. "There's not enough tension – you don't make very good decisions what to with cash when you've got too much of it – unless you're Warren Buffett." Example #1 is Microsoft (MSFT): "They've probably lost more money in the last 13 years in the online business than any single corporation  … in history."

    Heavy selling hits a number of Pimco income funds, notably the High Income Fund (PHK -4.3%) with heavy exposure to high-yield paper and the financial sector. The decline narrows the fund's premium to NAV to a still-whopping 34%. The Income Opportunity Common Fund (PKO -2.2%) trades at just a slight premium, while the Dynamic Income Fund (PDI -2.8%) sells for about a 5% discount. Others: (PTY -3.6%), (PCN -2%), (PGP -5.3%), (PFN -1.5%).

    Can't make this stuff up. Moody's upgrades its outlook on the U.S. banking system (XLF) to Stable from Negative, citing "continued improvement in the operating environment and reduced downside risks to the banks from a faltering economy." The outlook had been Negative since 2008.

    Mastercard's (MA +0.9%) price target is upped to a Street-high $790/share from $613 by Evercore's David Togut as he sees 2015 earnings coming in well ahead of consensus thanks to an improving U.S. economy.

    A cancellation or continuing delay of the Keystone XL pipeline (TRP) could endanger more than $9B of oil sands investment over the next seven years, RBC says, with U.S. construction, engineering and project management companies affected more than Canadian contractors since most of the pipeline is being constructed in the U.S.

    The market's misinterpretation of InterOil's (IOC -1.2%) Friday announcement of exclusive talks with Exxon Mobil (XOM) on development of its Elk/Antelope resource resulted in a 7.5% stock price drop but now presents an "extraordinary buying opportunity," Resourcearb writes. But the latest news only "raises more questions than answers," Keubiko counters, reflecting the prevailing view.

    More on Seadrill's (SDRLQ1 results: Says Q1 was its best-ever operating quarterly result and expects continued strength in Q2. Operating profit for floaters – SDRL's largest segment – was flat, but operating profit for jack-up rigs was $145M vs. $67M a year ago. Overall operating margin narrowed to 38.8% from 43.4%; operating expenses jumped 30%. Shares +2.8% premarket.

    Central bank buying of gold (GLDIAU) is but "a drop in the ocean" of investor sales of gold ETFs, says Commerzbank. The team says banks bought about 30 tons in April vs. 117 tons pulled out of ETFs thus far in May, and 290 tons in Q2. On a more bullish note, this chart shows gold's current move bears close resemblance to the 1976 bear market that set the stage for explosive gains later that decade.

    Barrick Gold (ABX +1.2%) founder and chairman Peter Munk puts some money where his mouth is, buying 100K ABX shares for ~$2.1M earlier this month. Munk has long complained the stock is undervalued, and the purchase shows he sees better times ahead, but his 0.2% ownership position remains small given his influence.

    The Indonesian government allows Freeport McMoRan (FCX) to re-start most production at its Papua copper mine in the Grasberg complex, two weeks after a tunnel collapse killed 28 people. FCX can resume open-pit mining but remains prohibited from underground production. Open-pit mining at Grasberg normally produces ~140K/day metric tons of copper ore; underground output is ~80K/day. FCX +1.5% premarket.

    A sale of European uranium enrichment powerhouse Urenco could occur late this year or early next, DealBook reports, but there are few companies with the deep pockets needed for the ~€10B price tag. Two contenders: Canada's Cameco (CCJ), which has shown interest in working with Urenco in the past, and France's Areva (ARVCF.PK), which began switching over to Urenco’s technology in the mid-2000s. 

    2013's giant solar stock rally continues (TAN +3.9%) as the EU faces a backlash over Chinese tariff proposals, and Canadian Solar (CSIQ +15.2%soundly beats Q1 estimates with the help of a 470 bps Q/Q increase in gross margin to 9.7%. Though CSIQ's opex would only have fallen 3% Y/Y if not for the reversal of a $30M arbitration award, it still fell 17% Q/Q (exc. one-time events) thanks to 25% Q/Q drop in selling expenses. Also: CSIQ is guiding for module shipments to rise to 380MW-410MW in Q2 from Q1's 340MW, and (like JA Solar) is seeing surging Japanese shipments – they rose 76% Q/Q in Q1, and made up 25% of total shipments. TSL +8.4%JKS+4.6%YGE +6.9%LDK +4.8%DQ +7%SCTY +2.5%. 

    Jim Cramer is encouraged about the U.S. economy after speaking with Union Pacific's (UNP +0.8%) Jack Koraleski, since the CEO is "at the heart of the changing face of American industry due to the energy boom." UNP is shipping ~90M barrels of crude oil per year, and Koraleski sees oil transport remaining strong, as rail can move cargo wherever it needs to go and it is price-competitive vs. pipelines.

    General Motors (GM +3.1%) will keep a plant building large crossover SUVs open all summer and will only idle a heavy-duty pickup plant for a week, according to sources at the automaker. Execs with GM say the company will take a more strategic approach to summer shutdowns instead of idling all of them at once.

    Shares of Ballard Power (BLDP +17%) rally again today, racking up a 40% gain just since last Thursday. It's worth noting that he stock has been a powerhouse lately, soaring over 185% since the beginning of the year. TheStreet.com contributor Roberto Pedone notes the stock as one of his top five picks under $5 that is "set to soar."

    Capstone Turbine (CPST +13%) moves up today after saying it's received a significant order from New York-based Related Companies for an undisclosed amount. The initial order includes multiple Capstone C65 and C200 Dual Mode microturbines that are projected to be installed over the next two years in several new office buildings, apartments, and mixed-use properties.

  75. Phil


    As stocks move broadly higher, utilities (
    XLU) lag following downgrades of Exelon (EXC -7.1%) and First Energy (FE -6.7%) by Deutsche Bank based on "the ugly reality of the 2016-17 RPM auction results." The firm sees downside in all integrated power names as the "uncertain path to a power market recovery forces investors to reconsider the multiples paid for commodity cyclical power generation assets." (earlier)

    McDonald's (MCD) will partner with pasta maker Barilla in Italy to offer more pasta dishes at restaurants in the region. Though called a "strange alliance" by the Italian media, restaurant sector analysts see quite a bit of synergy from the combination. 

    Wal-Mart (WMT +0.1%) will roll out Fatburger patties at stores over the next month as the retailer scores the first licensing agreement with the popular West Coast-based chain. What to watch: Though Wal-Mart's grocery sales have been strong, margins have been tight. A few more deals like Fatburger could provided some relief.

    Sears Holdings (SHLD -2.3%) trades lower as sentiment stays muted following the retailer's disappointing Q1 earnings report. SA contributer Paulo Santos ran Sears Holdings through the rigorous Altman Z-Score to find the risk of insolvency at Sears puts it in a category where "dramatic action" may be required to effect survival according to the model. Does Eddie Lampert have anything up his sleeve that could jumpstart a turnaround?

    Home Depot (HD +1.9%) and Lowe's (LOW +1.3%) are higher after a reading on home prices comes in above expectations. It's more good news for the housing sector on top of the pickup in the growth rate of the pro customer segment for home improvement specialists during Q1 which looks particularly intriguing to some analysts.

    Heard during Tiffany's (TIF +3.6%) earnings call: 1) The higher-than-expected sales tally was driven by a strong performance late in the quarter. 2) On store count, Tiffany's says it ended the quarter with 275 company-owned stores and plans to open another 16 this year – including 4 in China. 3) The Great Gatsby brand helped provide a sales bump, even though the quarter ended before the movie with the tie-in debuted. 4) The company says it will likely keep a dividend payout ratio in the high 30s. 5) No Q&A as the retailer goes with the pre-recorded call format. (transcript)

    Nike (NKE +1.5%) officially cuts ties with the Livestrong cancer organization to end a nine-year relationship with the charity created by fallen cyclist Lance Armstrong. The retailer sold a number of products under the Livestrong brand, but thinks the effect on revenue will be minimal from the end of the partnership.

    Dole Food (DOLE -6.1%) craters after suspending the $200M share repurchase program it announced earlier this month. The company has decided to purchase three new refrigerated container ships instead for $165M, replacing three existing ships which are nearly three decades old. DOLE also says it expects "full-year losses in [the] strawberry business to be ~$23M below plan." (PR)

    Shares of Michael Kors (KORSadd 3.6% in premarket action after a promising report from Tiffany lifts enthusiasm for high-end sellers. The retailer has its day in the sun when it reports earnings later this week.

    More from Jefferies' "proprietary sum of the parts analysis" of big pharma: Price target on Bristol Myers Squibb (BMY +0.7%)raised to $53.50 from $45, Buy rating reiterated; price target on Johnson & Johnson (JNJ +0.6%raised to $97 from $90, reiterated at Hold; AbbVie (ABBV -0.5%) reiterated at Buy, price target raised to $54 from $51; Novartis (NVS -1.5%) is "top European pick"; price target for Abbott (ABT +1.3%), the "top U.S. pick", is raised to $46 from $43. (More big pharma: DB upgrades GSK)The European Commission grants marketing approval for Gilead Sciences' (GILD) single tablet HIV-1 treatment Stribild — the product can now be marketed in all 27 countries in the EU. Shares+2.1% premarket. (PR)

    Scientists have established that a new strain of bird flu that has killed 36 people in China has become resistant to Roche's (RHHBY.OB) Tamifulu and other medicines that use neuraminidase inhibitors, until now the only known treatment option for the virus. In one patient, evidence exists that the flu's resistance may have occurred as a result of the drug treatment. Roche shares are -0.2% in Zurich. (Lancet report)

    Western Digital (WDC +0.8%) is hoping its new Se hard drives will find their way into Google, Facebook, and Amazon's data centers (among others). Meant for NAS storage systems and (more importantly) "scale-out" data centers (they typically feature thousands of cheap, densely-packed, energy-efficient servers), Se drives features many high-reliability and high-performance features associated with enterprise drives, but cost just $160-$310. Web/cloud services firms have avidly embraced scale-out architectures, and are accounting for a growing chunk of server sales. The announcement comes as IDC forecasts PC shipments will fall 7.8% this year.

    Sonus (SONS +5.4%) jumps after announcing a hardware/software partnership with Juniper (JNPR +1.1%) that covers the networking industry's favorite buzzphrase, software-defined networking. Sonus' 5000 series VoIP session border controllers(SBCs) will be paired with Juniper's MX Series edge routers andSRC Policy Engine software to give carriers the ability to offertiered IP video and unified communications services, as well as more efficiently use network capacity. The announcement comes a couple weeks after Sonus, which competes with Oracle-owned Acme Packet in the SBC market, refreshed the 5000 series to include more modular systems.

    In a weekend battle of franchises, Universal Pictures sawFast & Furious 6 beat The Hangover Part III from Warner Bros. over the four-day holiday weekend by a wide margin ($120M vs. $51.2M). Though at times a weekend win at the box office is more about bragging rights than trickle-down revenue to the parent company, for Comcast (CMCSA -0.2%) and Time Warner (TWX +1.2%) the box office scorecard over the Memorial Day weekend could reveal the death of one franchise and the survivability of the other. 

    Netflix (NFLX -4.5%) slumps after releasing all 15 episodes of Season 4 of Arrested Development over the weekend (following a 7-year break) to mixed reviews, at best. "If you truly loved [the first 3 seasons], it's hard to imagine being anything but disappointed with this new rendition," writes the NYT's Mike Hale. The WSJ's Nathan Rabin: "The pacing is notably slower than during its original run and the show lacks the breathtaking density that characterized its glorious past." The LA TimesRobert Lloyd is more positive. "I have … watched it all – and not with grim determination, but rather great, increasing satisfaction." (The Daily Beast) (The Guardian)

    Already China's eBay (and then some), Alibaba now wants to become the logistics backbone of China's e-commerce industry (worth an estimated $190B in 2012). The company's China Smart Logistics Network (CSN), officially launched today, promises to eventually deliver goods between any two cities in China within 24 hours. Alibaba is promising to invest CNY100B ($16.3B) in the network, and expects it to be able to handle CNY30B ($4.9B) in daily transactions when completed in 8-10 years. If CSN proves a success, it could go a long way towards justifying the huge valuations being thrown around for Alibaba ahead of an IPO Yahoo (YHOO) investors can't wait to see happen.

    IDC has again raised its tablet forecasts: the firm now expects shipments to grow 58.7% in 2013 to 229.3M units. That's up from a March forecast of 190.9M units, which itself was up from a forecast of 172.4M. 55% of shipments are expected to involve sub-8" tablets vs. 27% in 2012. With IDC estimating Q1 shipments rose 142% Y/Y to 49.2M, further hikes don't seem far-fetched. Meanwhile, following a 13.9% Y/Y drop in Q1, IDC now expects PC shipments to fall 7.8% Y/Y in 2013 to 321.9Mand predicts tablet sales will outpace PC sales by 2015. Revenue crossover could take longer, given IDC forecasts a 2013 tablet ASP of $381, and a PC ASP of $635. AAPL and GOOG must be pleased, MSFTINTCAMDDELL, and HPQ less so.

  76. Phil


    Samsung (
    SSNLF.PK) has scheduled a June 20 London even to show off new Android and Windows Phone hardware. TheWSJ reports the expected Galaxy S4 Mini will be one of "several new products" to be unveiled. Will the Galaxy Note III also be launched? A Samsung exec speaking with South Korea's ETNews has confirmed the Note III will launch later this year, while adding the oversized phone will be thinner than the Note II might feature a camera with optical image stabilization and a 3x optical zoom.

    Citi's Glen Young is raising fresh gross margin concerns about Apple (AAPL +0.1%), which is trading near break even on an up day for tech. Yeung, who cut Apple to Neutral last December and issued another downbeat note last month, sees margins pressured by the arrival of a cheaper iPhone and a "sub-$250 iPad Mini," as well as an iPhone mix shift towards older models. Apple is guiding for its gross margin to fall to 36%-37% in FQ3 from 37.5% in FQ2 (-990 bps Y/Y), as lower revenue and mix offset a drop in component costs. (more margin commentary: Horace DediuGene MunsterWells Fargo/BMO)

    Three lunchtime reads:

    1) Globalization isn't just about profits; it's about taxes too

    2) A too-big challenge for Dimon

    3) Accounting fraud targeted

  77. stjeanluc

    This seems to make it clear what should be done:

    http://blogs.reuters.com/macroscope/2013/05/28/why-a-german-exit-from-the-euro-zone-would-be-disastrous-even-for-germany/

    The study concludes that annual German GDP would be 0.5 percentage points lower between 2013 and 2025 if Berlin had a separate currency. This would amount to an economic loss of  €1.2 trillion, or €14,000 per inhabitant, in the 13-year timeframe, a figure equal to about half the size of the German economy in 2012. The lower growth would also mean 200,000 fewer jobs in Germany.

    The economic benefits of the euro arise from lower transaction costs in the absence of currency conversions and exchange-rate fluctuations, greater price transparency that stimulates cross-border trade and enhances price competition, and the lack of a strong deutschmark that would replace the euro. The advantages of lower interest rates brought on by re-introducing the deutschmark would not be sufficient to offset the gains from using the euro.

    The common currency’s economic benefit also extends to an alternative scenario in which Germany stays in the eurozone but takes a hypothetical 60-percent haircut on loans extended to Greece, Portugal, Spain and Italy. In this case, Germany would experience a minimal decline of no more than 0.05 percentage points in its GDP growth rate. The small impact of the haircut stems from the benefits Germany would gain from higher exports to the debtor nations, which would see more favorable economic conditions following the write-off.

  78. zeroxzero

    StJ:  "…small biotechs, which struggle to generate interest from credit investors since they lack cash flow, are pursuing US initial public offerings at the fastest pace in nearly a decade.  Ten biotech companies have listed on the US market so far this year, accounting for 14 per cent of all US IPOs, and at least another seven are preparing a float in the coming months, according to data from Dealogic."   [From FT]

  79. biodieselchris

    there's so much M3 still to come running in. Years worth. TSLA is overpriced, but it'll hit 1000 before it hits 50

  80. zeroxzero

    Come to think of it, have your listed recommended holdings lately?  Should I have VRTX, e.g.?  FYI, the fund discussed [Biotech Growth Trust Plc., BIOG:LSE] has the following principal holdings equaling 60% of its portfolio:
     
    Top holdings

    Holding
    % of portfolio

    Gilead Sciences Inc

    9.00%

    Amgen Inc

    8.80%

    Infinity Pharmaceuticals

    7.50%

    Biogen Idec Inc.

    6.80%

    Celgene Corporation

    6.70%

    Regeneron Pharmaceuticals Inc.

    5.00%

    Incyte Genomics

    4.70%

    Vertex Pharmaceuticals

    4.60%

    Alexion Pharmaceuticals Inc.

    4.50%

    MYLAN

  81. scottmi

    Oil – the most recent John Carter seminar (May 21) on TOS (Support/Chat > Seminars) is a good one and at about 25 minutes in he starts looking at oil (/CL) and points out what he sees on monthly chart as a giant consolidation and setup for a strong move upward…

  82. Phil

    Oil was down just a little but jumped back to $95.20 now.  Still a good short but difficult territory here.  

    LOL ZZ – I see you get the banking cycle.  

    Pritzker/Jercon – Obviously, you have no idea who she is if that's what you think.  Also, people with $2Bn in assets and dozens of businesses don't sit down and fill out their own 1040s.  She had professionals do her taxes, she had auditors double and triple check it to make sure nothing was amiss and an error was uncovered, which she reported.  Now watch her vilified by Conservative jackasses right before they get back to criticizing the IRS for checking to see if SuperPacs were posing as non-profits because it's none of their business.  

    Good ABX/SLW article Jabob.  

    You're welcome Newt.  

    Good point on Germany, StJ. 

  83. randers1


    Here is a pretty funny article for those who are not Cramer devotees.
    I like the idea of a long/short fund of the inverse of his recommendations.
     
    http://www.cbsnews.com/8301-505123_162-57586105/a-statistical-look-at-jim-cramers-skill-level/
     

  84. jabobeast

    FU GDX!!!!
     
    Can't this Mofo ever stay green for more than a couple of hours?!?!?!

  85. jerconn

    Phil – I don't know who she is?  Here you go…(from Wikipedia) Born in 1959, the daughter of Sue (Sandel)[8] and Donald N. Pritzker (1932–1972), co-founder of Hyatt hotels, which grew dramatically under his leadership as President from 1959 until his death in 1972. Pritzker is a member of the Pritzker family of Chicago, an influential business family.
    She didn't make the money, it's family money…as Zero's article says…

  86. Pharmboy

    Ring ring – Zero….you rang?  Biotechs.  Sheesh.  ;)

  87. newt

    TSLA/ Phil: I have=
    10 Jan15 85/115 BCS
    -10 Jan15 75 puts
    -20 jan14 80 calls
     
    I need to add another 5 BCS so the ratios work out as in the Income Port. should I add the 85/115 at a ND of $10.25 or the 90/120 at ND $12

  88. Burrben

    TSLA 107+

  89. yodi

    Newt TLSA I entered the Jan15 87.5/120 and sold the 75p if you wait a bit longer you need to be looking at the 110/150
    I think the only stock which has not lost a cent today look at AAPL up to 450 down to 442 what a joke!

  90. angelcur

     russia saying it will send missiles to assad if eu arms rebels…israel saying it will attack any shipments to syria from russia

  91. yodi

    TSLA they going for 110 like the reinvented the wheel, is this for real???

  92. Burrben

    109

  93. deano

    Anyone familiar with TAL?

  94. deano

    With "O" – as you review, please keep in mind they pay a monthly dividend – a nice feature – so you may want to play it a bit more tightly than normal.

  95. newt

    yodi- thanks.  insane isn't it.

  96. Burrben

    StJean / TSLA
    Is there any way to update the prices tonight on the TSLA positions and get a PnL for it?  
    If you don't have time, I could copy the spreadsheet and update it.  
    I took the large loss's on the Sept 80C's today around TSLA 102… I can't believe they are 109.
     
    The scary thing about TSLA too, is we are putting on longer term positions on a stock we don't believe in to mitigate the damage of short term spike in price (or maybe not short term).  This is the toughest trade I have ever done.

  97. yodi

    deano
    TAL entered a play in Mar bought stk at 43.15 and sold Oct 45c and 35p doing well so far You might like to enter the Jan14 play 45c and 40p for about 5.20 total plus div

  98. yodi

    TLSA 110 offering free cars with stk purchase (8

  99. deano

    Thanks Yodi!

  100. palotay

    TLT is looking ugly.

  101. Phil

    TSLA $109!

    TSLA $110! 

    Soon it will be one share per car!  

    20% of the stock rolling over today.  

    Cramer/Randers – So HPQ and BBY were two of my top pick – will this guy write an article about me?

    GDX/Jabob – Gold hit $1,400 and fell back to $1,379 this afternoon.  Crazy as TSLA.  

    Pritzker/Jercon – So are you now purposely misleading or don't you know how to read a bio?  

    • 1987 – founded Classic Residence by Hyatt, now called Vi.
    • 1991 – created Pritzker Realty Group
    • 1991 – chairman of Superior Bank, until 1994.
    • 1998 – co-founded The Parking Spot, the fastest growing company in off-site airport parking management,[12] with CEO Martin Nesbitt.
    • 2005 – became Chairman of the Board, TransUnion, LLC. She served as chairman until 2012.
    • 2010 – co-founded Artemis Real Estate Partners, a real estate investment management company, with CEO Deborah Harmon
    • 2012 – founded PSP Capital Partners[13]
    • Pritzker is involved in Chicago's public education system. She was a member of the Chicago Board of Education and is past chair of the Chicago Public Education Fund.
    • Pritzker is Advisory Board Chair of Skills for America's Future (SAF), a policy initiative of the Aspen Institute.
    • Pritzker is past chair of the Museum of Contemporary Art in Chicago.
    • Pritzker is a member of the President's Council on Jobs and Competitiveness. She also served on the President's Economic Recovery Advisory Board.
    • She is also a director of the Council on Foreign Relations,[34] a nonpartisan think tank focused on world affairs and U.S. foreign policy.

    How does your resume stack up?  No one is saying she wasn't born with a silver spoon in her mouth but she didn't sit on her ass as you and the jackasses on Fox like to insinuate.  Please try to come to the table with more than regurgitated talking point zingers if you feel compelled to talk politics.  

    Top/1020 – It's still May!  

    TSLA/Newt – You need to add another spread.  The $100/130 spread is $8 at the moment and pays $30 at $130 so that helps cover the $80s for another $20 up.  I'd add 10 and put a stop of 10 of your $85s at $37.50 and then add more $100s (with trailing buy-stops) as they get cheaper to re-balance.  

    Not a good finish but up half a point to keep our Tuesday streak going at 20 in row.  

  102. jerconn

    PHil – so what's your point?  I said she was born to money, I proved it and you agree!  What have you added with your list?  That she didn't just sit on her tuches?  Fine, but my point is borne out – as you said, she was born with a silver spoon in her mouth.   I don't often talk politics, especially on this list, and as a matter of fact I might very well favor Pritzker as Sec'y of Commerce, but I did find it highly amusing that this very wealthy woman comes to Capital Hill with an $80 million mistake. Moreover, it is very difficult to deny that she is getting this job offer as "payment" for her financial services to Obama.  You need to be able to swallow a few zingers if you want to dish them out. 

  103. newt

    Phil: Thanks. Crafty.

  104. zeroxzero

    Phil / Jabob — You are overstating Pritzer's bona fides.  She stated that she had understated her income by $80M, which is a simple declarative statement.  She didn't say "the IRS have disagreed with PriceWaterhouseCoopers regarding my characterization of a capital gain  based on a alternative interpretation of the wash sales rules, which might result in a re-stating of the gain as ordinary income with an $80M adjustment.".
     
      And, given her resume that you helpfully laid out, I'll bet she was intimately involved in the discussion with PWC [or whomever] and directed them to take a chance that the IRS wouldn't come back at them.  That's how this stuff works.  I would take her at her word; she's doing what Nixon called "the hang out thing," which is the proper strategic response to stepping over the line.  So Phil's right, she's no dumb "Trustafarian,", but she did pretty clearly cheat on her taxes or she wouldn't have said so.

  105. angelcur

    I AM ASSUMING THAT "TRUSTAFARIANS" SMOKE THEIR WEED BY MAKING AN INCANDESCENT HYDROCARBON WITH THE LEGAL TENDER?

  106. biodieselchris

    I just like watching Fox blather on about Benghazi. What a bunch of useless morons.

  107. Phil

    War/Angel – Cool, we need a new distraction.  

    TAL/Deano – They have 2 of the same letters at TSLA so must be a buy!  Actually, they are a nice, boring company that should make money as commerce picks up.  They pay a nice 6% dividend ($2.64) but they're not particularly cheap – up 50% since the fall.  Not overpriced, just not cheap.  As with many big dividend payers – the premiums aren't very exciting, which is why I usually ignore them.  If you are looking to get in, I'd go with the buy/write as they are at $44.21 and you can sell the Jan $45s for $2.40 and the $40 puts for $2.60 so net $39.21/39.60 and you get your nice dividend.  

    O/Deano – Very good point, I didn't see that.  

    TSLA/Burr – It's very important to keep in mind that the losses are caused by the intense premium of the out of the money short calls in the spread.  The $85 calls, which are $25 in the money, are now $40 but the $115 calls, which are $5 out of the money, are $30 – that's $120,000 of pure premium charged against your $100,000 of fully intrinsic value on the long calls.  It's not actually possible for the $115s to be in the money and for you not to net $30 on the long spread but, currently, it's showing $11.  This is the problem with fixating on the "balance" of a position – it's meaningless other than for margin constraints because it doesn't reflect the reality of a position if it actually expired at these prices.  So, at $115+ the 40 $85/115 bull call spreads make $80,000 and the 60 short $80 calls that were sold for $22.50 lose $12.50 x 6,000 for $75,000 (assuming we don't roll them, of course) and the puts that we sold become all profit.  That's the plan to the upside.  If we think they go higher than $115, we buy $100/130 spreads for $10 and those make another $20 at $130 and then we're covered to $125 on the short calls etc. etc etc….

    This stuff is not complicated if you understand how the options work but if you only look at numbers on a broker statement and let that rule your actions – you will end up making some very poor decisions to try to prevent phantom losses.  While this is a tough trade – it's also a great learning tool as stocks like this very rarely jump 100% in a month.  It will be very interesting to see how this plays out but, so far, it's like BitCoin and could be back at $60 in a couple of weeks.  

    LOL Yodi.

    TLT/Palotay – Very nasty at $114. 

    Pritzger/Jerconn – You said she didn't make the money when, in fact, she did make a lot of it herself.  She had a great start but did well on her own.  She happens to be a wonderful, charitable person who I've met and you can now go back to trashing her to your heart's content if it makes you feel good somehow.  And yes, without wealthy backers like her, people like Obama could never get elected and, again, who is more qualified to be Commerce Secretary?  How do you think people get those jobs – qualified people the President knows and trusts.  It's called a cabinet,  Washington picked his friends Jefferson and Hamilton along with Henry Knox (his artillery officer) and Edmund Randolph (his aid-de-camp in the war) so blame him for setting the precedent…

    You're welcome Newt.  You always want to look for ways to turn spikes to your advantage (lock in profits, sell more premium).  

    Cheating/ZZ – I don't have all the particulars but any questionable item has to be moved over the line BEFORE it becomes a bone of contention in these things.  

    LOL Angel.  They do have Torpedos – cigars wrapped in gold leaf.   About $200 a piece if you want to impress someone….  It's stupid because, of course, the gold doesn't burn well but it does leave a very cool golden ash.  

    Benghazi/BDC – So funny, I just looked at foxnews.com and the headline is:

     

    Issa Subpoenas Kerry for Missing Emails on Benghazi Attack

    The man wasn't even there at the time!  

  108. zeroxzero

    My preferred quote of the day [from FT's Lex column]:  "If you put all the critics of QE in a room and took out everybody with a workable better idea you'd still have a pretty f**king crowded room."

  109. denlundy

    RUT fails again to close above 1,000.  

  110. albo

    Phil – The TSLA trade may be a great learning tool, but give me a good old stop loss order anytime.  I'm out of TSLA with two failed attempts selling OTM calls, but alive and well and waiting for the stock to turn down on the weekly charts knowing full well that I'll miss the top but will be able to get in for a good portion of the downturn.  Different strokes for different folks. 

  111. stjeanluc

    So close on the NYSE and the Russell…

  112. stjeanluc

    TSLA / Burrben – Here is the updated position on TSLA in the Income Portfolio.

    Phil – We did sell the Jan 15 60 Puts for $12.50 and they traded around $11.10 when you call for rolling them to the 75 puts. If I understand well, if they stick over $100 tomorrow we will add another set of call spreads.

    The current P&L for TSLA in the Income Portfolio is -$122K. We are down around $150K  now so the biggest chunk is obviously TSLA right now. I have entered the various cost in TOS and this the risk profile for the current position:

    It shows both the Jan 14 and Jan 15 expirations. Ideally, we want TSLA under $80 now. This will change if we add some long spreads. This ties up a lot of margin though – probably over $200K. Adding the long spreads would reduce the margin requirements.

  113. jfawcett

    F – On any auto play, the auto companies are giving away loans for 60months, no money down  F, GM, etc.  Come on down!  What is that telling you?  I thought a bundle of their money was made on the financing end.  Seems to me they are trying to extend their rally on giving loans to anyone that can qualify.  Does this signal the end?  Comments?

  114. jfawcett

    To be clear…. that is a 60 month loan, 0% interest.  More Free money!

  115. zeroxzero

    jfawcett:  Wow, I didn't know any of that.  I don't live in the U.S., but I'm getting there [and renting cars] a lot lately, and have a garage available.  That makes it pretty simple.  Free money  – zero interest?  It amortizes, I assume  – I wouldn't think they would lend me a 60 month bullet, but who knows? .  Jeez, can I buy a Tesla with it? [joke, joke -- I don't want to add to the IP misery!!!]

  116. dclark41

    http://news.yahoo.com/apple-ceo-sees-more-gamechangers-hints-wearable-devices-032146295.htm
     
    Cook stopped short of saying if Apple was working on wearable products, but added that wearable computers had to be compelling and that Google Inc's Glass — a cross between a mobile computer and eyeglasses that can both record video and surf the Internet — is likely to have only limited appeal.
    "There's nothing that's going to convince a kid who has never worn glasses or a band or a watch to wear one, or at least I haven't seen it," he said. "So I think there's lots of things to solve in this space."
    Cook also said he has a "grand vision" for television that goes beyond an existing $99 Apple TV streaming device, but did not go into details. The company has maintained for years that it harbors an interest in the TV arena.
    When asked if Apple has lost its cool, Cook said "absolutely not" and went on to list statistics of device sales and usage. He, however, acknowledged that he was frustrated with the sudden downturn in the firm's stock price.
     
    We can only hope that he has something "cool" up his sleeve for fall.

  117. Phil

    Tim Cook at D11: Apple Television – There is a Grand Vision
    http://www.macrumors.com/2013/05/28/tim-cook-at-d11-apple-television-there-is-a-grand-vision/

  118. Phil

    China Builds EU Beachhead With $5 Billion City in Belarus
    http://www.bloomberg.com/news/2013-05-26/china-builds-eu-beachhead-with-5-billion-city-in-belarus.html

  119. Phil

    CHART OF THE DAY: The Absolutely Insane Explosion Of Tesla’s Stock
    http://www.businessinsider.com/chart-of-the-day-tesla-stock-2013-5

  120. Phil

    Why millionaire investors are holding cash
    http://www.usatoday.com/story/money/business/2013/05/27/millionaires-cash/2351629/

  121. Phil

    From Bloomberg, May 29, 2013, 12:09:48 AM

    The International Monetary Fund
    lowered its forecasts for China’s growth and said making
    “decisive” policy changes would put the economy on a more
    sustainable path.

    To read the entire article, go to http://bloom.bg/18xMxCK
    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8

  122. Phil

    From Bloomberg, May 28, 2013, 7:00:00 PM

    German inflation (ECCPEST) probably accelerated
    in May after falling to the lowest level since August 2010 the
    previous month.

    To read the entire article, go to http://bloom.bg/11nJ7vY
    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8

  123. Phil

    From Bloomberg, May 28, 2013, 11:49:40 PM

    Chinese banks are adding assets at the rate of an entire U.S. banking system in five years. To Charlene Chu of Fitch Ratings, that signals a crisis is brewing.

    To read the entire article, go to http://bloom.bg/11nEfHm
    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8

  124. Phil

    From Bloomberg, May 29, 2013, 2:50:19 AM

    Expectations for the widest bond
    price swings in more than four years and the weakest demand at
    an auction in nine months added to signs of waning debt market
    confidence in Bank of Japan Governor Haruhiko Kuroda.

    To read the entire article, go to http://bloom.bg/11o1wZD
    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8

  125. pstas

    Reposting the following from the weekend -
    ABX-Phil,looking for some help on adjusting in an IRA account. Entered this back in late Mar/early April- impeccable timing. Long 5 15-Jan 25/33 BCS @ $3.20; Short 5 15-Jan 15/25 put spreads @ $2.78. 

     

     

    pstas 
    May 25th, 2013 at 8:03 am | Permalink | Tweet thisIgnore this user
    Someone posted the following high dividend stocks the other day. Would appreciate you opinion on each: PSEC: DX; FGP; WIN.
    I entered a B/W on WIN; I like FGP but will watch for a better entry; Neutral on the other two. 
    Your take and how to play (IRA)?

  126. denlundy

    Add Thailand to the list of countries lowering interest rates.  Volatility in US Treasury market (both 10 & 30 year rates moving sharply higher yesterday) would appear to insert a little more anxiety into market. Can this result in a mini panic out of treasuries as principal value falls as rates are rising? Question is will stampede out move more money into US stock market or will the money remain in cash stuffed under mansion mattresses.

  127. denlundy

    Yesterday's biggest story without doubt had to be US Treasury rate moves. TLT not only didn't hold at $115, but broke down to 52 week low to finish at 113.838. This morning's early indications are that it will open lower this morning.

  128. Phil

    Good morning!

    Nothing too eventful so far.  The Hang Seng fell 1.6% on China downgrade but Shanghai was flat as were most other indices.  Europe was less happy and is down about 1% and we're down about 1/3%/

    Dollar back to 84 line but won't go below it.  Oil $94.50 after bottoming at $94.09 but still looking weak, gold $1,383, silver $22.18, copper $3.29 can't hold up, Nat gas $4.15 but down from $4.275 peak on Sunday's open and gasoline $2.836 is still expecting demand numbers.  

    OPEC gives the official word on production on the 31st but are unlikely to cut as they need the money and it's summer so they are also helpful summer driving will boost demand.  I don't think anyone understands the massive change the US fleet is undergoing – that demand is never coming back.  They have already lowered estimated for Thursday's report to a draw of just 1.5Mb of product, split about even between oil and gasoline.  Any kind of build will send bulls running out of this strip:

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Jul'13 95.05 95.11 94.14 94.61 06:05
    May 29

    -

    -0.40 23545 95.01 317332 Call Put
    Aug'13 95.22 95.25 94.35 94.81 06:05
    May 29

    -

    -0.39 4863 95.20 145444 Call Put
    Sep'13 95.21 95.21 94.34 94.80 06:05
    May 29

    -

    -0.37 2730 95.17 137536 Call Put
    Oct'13 94.62 94.68 94.08 94.36 06:05
    May 29

    -

    -0.52 1512 94.88 81569

    Nov has a normal 51,000 contracts but they've already jammed December with 246,000 – that's going to be a train wreck when we get to that rollover in November. 

    TSLA about $112 – I'm just glad it didn't pop $10 overnight – but the morning is young..

    Is Tesla Motors Really Worth $100 a Share?  At current prices, Tesla's market cap is almost $12 billion. That's about a fifth of BMW's, and BMW sold 1,845,186 vehicles last year. Tesla expects to sell 21,000 in 2013, and BMW will probably sell around 2 million.

    Tesla $110: A Game Of Musical Chairs

    TSLA/Albo – I agree, certainly not for everyone but we have a good plan to roll it along and, if they never fall, we'll accidentally find ourselves very long on TSLA with a lot of short calls for protection. 

    Big Chart – RUT 1,000 not looking like friendly territory but, if we dip back to 975 and hold that, then we're consolidating for a massive breakout to the upside with that 25-points being just a normal pullback off the last 100-point run.  As you can see, that pattern's repeating on all 5 indexes, which are all trading in lock-step and, therefore, controlled by machines and our 5% Rule (which comes from the machines).  So we'll see how things go in this short week but no reason to get more bearish if we don't get lower lows than last week.  

    TSLA/StJ – That's fine, imperfect fills or non-fills help me learn to make better calls during trading hours.  Strategy for TSLA should now be:

    1. Putting a stop on 20 of the 2015 $85 calls at $37.50, will raise to $40 at $42.50 and etc after that ($2.50 trailing stop).
    2. As soon as those execute we buy 20 2015 $100/130 bull call spreads at $9.  If those spreads go to $10, we buy 20 of them regardless (without waiting for stop on $85s).  
    3. We collected $54,450 from the short puts and can collect $54,000 more if we fill them out (against the short calls) but $54,450 let's us spend $9 on 30 $110/130 bull call spreads and $5 rolling 60 short $80 calls to $90 calls or $5 rolling 60 short $115 calls to $135 calls, which would widen the spread/protection on our existing 40 spreads by $80,000.  

    So, that's the plan that I do want to execute on the STP, I can't watch TSLA 24/7 so please don't wait for me to say it again and feel free to ask when we're in action but, of course, I can't always see questions right away.  

    By the way, they just printed 2015 calls all the way up to $165 this morning (not priced yet)!  

    Loans/Jfaw – Sure but what's wrong with using FREE MONEY to sell cars?  They're using it to sell houses and washing machines etc.  This is, of course, why I'm very concerned that the US "recovery" is a complete house of cards that will collapse 10 seconds after the Fed either stops QE or QE stops working (more likely to happen first).  

    Dollar diving now and masking more market weakness (down about 1/2 a point in Futures). 

  129. Phil

    From Bloomberg, May 29, 2013, 3:20:36 AM

    European stocks and commodities fell
    with Treasuries on concern the Federal Reserve will pare debt
    purchases as strength in the U.S. economy gathers pace. The yen
    rose against most major peers.

    To read the entire article, go to http://bloom.bg/18xD7XT
    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8

  130. deano

    On 0% Interest on vehicles: You all probably know that this is just a margin share between the manufacturers and the finance companies, that is, the manufacturer subsidizes, or buys down, the interest rate that the finance company would normally charge the consumer. This is done all the time in auto finance as well as other industries. This, combined witht he residual games played by the lessors allows suburbanites to pay less monthly for their autos than would otherwise be required. In sum – the end user pays – have no doubt.

  131. Phil

    TSLA/ZZ – That is how they're selling them.  The whole pricing and sales strategy is based on the premise of ultra-low cost leasing AND extremely high residual values.  Of course, a logical person would ask how a car with a $45,000 battery with a lifespan of 10 years max can have a high residual value 5 years down the line but TSLA "guarantees" it.  It's very easy to guarantee things you won't have to make good on for a decade in hopes that, by then, you'll have taken in so much money that you can bury the damage as the problems begin costing you money.  A lot of car companies tried that with crazy extended warranties over the years and they all blew up in their faces. 

    Wow, Dollar diving to 83.75!  Euro flying ($1.295) with Pound at $1.508 and Yen taking a dive to 101.12 which, of course, the Nikkei does not like at all and has now dropped from 14,500 at midnight to 13,955 at the moment (down 3.33%).  

    ABX/Pstas – The Jan $25s are still $2.27 and you can spend about $2 to roll them down $7 to the $18s at $4.35 and then you are back in the money at net $5.20.  I wouldn't change the put spread unless you are able to take the money off the table for the $15 puts ($2.40) but I assume you can't do that.  If the target fails, you will still be able to roll to a lower 2016 or 2017 spread so no reason to spend money to make changes there.  This is why I hate bull put spreads or anything with a 4:1 negative risk/reward ratio.  Had you just gone with the bull call, you'd be out less than $2 and no big deal, selling someone $25 puts and buying the $15 puts means you were the sucker paying more premium than the putter and now he's in the money and you're not.  This is also why I hate IRAs – they force people to make poor decisions in order to save taxes on profits they are far less likely to make because they have to trade in a straight-jacket.  

    Dividend stocks/Pstas – PSEC is a good one, I like them but options are worthless to play.  You can just sell Nov $12.50 puts for $2.30 to net in at $10.20 but it's just .60 lower than current price – that's why we don't bother with them (or many of the high-dividend payers).   Nothing wrong with them but it's just a stock play.  DX is too little and not too predictable – also option challenged.  FGP sells propane and propane accessories so I love them but also no fun to play with poor option premiums.   WIN we've played before – with all these stocks, the trick is to wait for a dip that takes you right to a strike line that you can sell calls on (puts are not usually a problem but you're not selling those in the IRA) – as that gets you the best premium but, with all of them, they're very expensive to protect so you'd better be certain you are in for the very long haul.  

    Keep in mind how silly this is though as you are doing flip-flops to find a 10% dividend with essentially no downside protection in an IRA, which doesn't pay the tax on gains anyway so why the fascination with dividends when a covered call is just as good?  In a proper account, you can buy WIN for $8.47 and sell the 2015 $7 puts and calls for $2.55 for net $5.92/6.46, which means you have 30% downside protection built in and, if WIN simply holds $7, you get called away with an 18% profit on 1x plus another $1.50 in dividends (18 months) for a 43% total profit – at $7, which is 20% lower than we are now.  

    So you make $2.58 as a long-term gain and pay 20% tax vs knocking yourself out to make $1.50 in the IRA for no tax IFF the stock manages to hold $8.50, of course.  An IRA should be used for buying long-term plays like IRBT or HOV or BA or GE – straight stocks that you think will double or triple over time that you want to own for 20 years – not for eeking out 10% dividend gains as dividends are low-tax impact anyway and the money you make in a normal account from dividends can be put to better use than leaving it in a restricted IRA.  

    Dollar bottomed out at 83.50 briefly, now 83.72.   Futures sill floating down around half a point.  

    TLT/Den – Tapped $113.67 after hours.  Scary how fast that thing can fall apart.  Back to $114.22 at the moment – the Fed is still there to catch them.  

    0%/Deano – We all pay in the form of an enlarged Fed balance sheet that taxes (through inflation) all citizens in order to give Corporate Citizens low-interest loans, which they then use to buy up and drive up the price of their stocks.  Very clever!  

    132363 600 Scandal Blame cartoons

    132352 600 Postal Woes cartoons

    132248 600 Obama painted as NIxon cartoons

  132. shadowfax

    Where they have to use gas! Even Teton County Wyoming paid a pile of money to replace cutbacks at Greand Teton and Yellowstone Parks to clear snow. It was a total bomb, nobody came or for free entrance before that. I did get out 2 days and had the roads to myself. The weather was good. Also got help planting a garden and both Nurseries, 3 visits only one other customer. One place appologised for having very few tomatoe plants, will get more next week and larger selection when business picks up. To mulch and prepare 100 sg. ft cost $150, labor was free oweing vegtables plus seeds and plants. Ya think that has anything to do with business? Or how much money people have? May be different in the high end states but 2 tourist states are hurting.

  133. qcmike

     
    Shadowfax
     
    I have a portable TV that may be of interest to you send me a email qcmike@hotmail.com
    And I will send a photo if you are interested.

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