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Wednesday – Signs of INTELigent Life in the Markets?

Hopefully Ben finally got the message.

The markets were NOT happy with another rate cut.  Today's Fed announcement led to a 150-point plunge as commodities rallied on the continued idiocy of Ben Bernanke, who says inflation is "under control" while knocking another 20% off the Fed Funds rate, reinvigorating the oil market where each $1 per barrel costs US consumers $7.3Bn a year in crude alone – add refining costs and factor in oil's effect on other prices and we're closer to $15Bn per $1 rise in crude that the Fed is fueling in order to increase the loan crack spread for the banks (after 3% of cuts we're STILL paying 6% for a 30-year fixed mortgage – who is benefiting?).

Nonetheless, I can't be too mad at Ben as my total lack of faith in him gave us a fantastic day as my 12:27 comment to members was: "General – I’m moving to mostly 3/4 covers ahead of the Fed, essentially with 1/2 covers that means buying the covers I would want to roll my lower covers into.   This gives me some money to roll the original 1/2 covers up to a higher strike if the Fed is good and, of course, gives me a little more coverage if they disappoint."  That gave us plenty of time to cover up our positions ahead of the plunge.

We also grabbed the very cheap GOOG $560 puts at $9, which made a quick 33% in 60 minutes – Not that's day trading!  It was almost a perfect day with all of my market calls working and we even added oil puts on the morning's pointless rebound (but I did chicken out of most of the front-month XOM puts).  I also called the day's moves in AAPL and FSLR to the penny, very helpful when you're playing options!

Just after the Fed, my take was: "Oh a cut!   They suck!  And another cut in the discount rate…  Very negative outlook.  "Expect inflation to moderate" but they are going to cut like fiends while they wait.   At least they say they are concerned about inflation and there were two dissenters so it is possible they will stop here but the discount window cut was ridiculous, more taxpayers bailing out banks."  We played accordingly, and by 2:39 I was ready to call the top on the Dow as we bought back the puts we sold and rolled our June puts up to higher strikes.  I'm satisfied with the 150-point sell-off but I remain concerned that a sober assessment of the Fed will send oil further down and crash commodities taking the markets down even further initially.

Hopefully the Dow can hold 12,750 tomorrow.  Our callers have done their jobs so let's keep tight stops on the lower callers, we can always re-cover but if it's just XOM and CVX dragging down the Dow, then we'll be BUYBUYBUYing on the dips!

On yesterday's earnings calls:

  • AKAM had a beat but traded down, good for GOOG though.
  • I was wrong about CTX, but I think they recover so let's sell 1/2 the $20s and more if they don't perk up.
  • IRBT is perfect for us, good growth but disappointing, should give us a good entry.
  • JDSU – Beat but lower guidance!  These guys may be worth a look at $12..50 (good one for CNBC challenge).
  • MUR was a beat but will it justify the price?  Not looking good for the puts though.
  • OII – A penny beat but it's not enough to justify $67, this could be good for our OIH puts.
  • SBUX – Like I said, hard to be worse than expected but they were as bad as expected and that's pretty bad!

No picks today, we have enough to worry about with our current positions!  It's all about XOM and economic data tomorrow.  If XOM misses, my world-view will be shaping up in much better focus!

 


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  1. nice GDP analysis


  2. Steven Place
    That’s a funny video you linked to….unfortunately it’s the truth although I haven’t been in a Walmart in about 2 years.



  3. GM boys.  MRO reporting now too:

    8:11 *MARATHON OIL 1Q U.S. UPSTREAM INCOME $244M             :MRO US
    8:11 *MARATHON OIL STILL SEES 2009 START-UP FOR GARYVILLE EXPANSION
    8:11 *MARATHON OIL 1Q INTL UPSTREAM INCOME $440M             :MRO US
    8:10 *MARATHON OIL 1Q ANALYST EPS EST. 83C                   :MRO US
    8:10 *MARATHON OIL 1Q EXPLORATION & PRODUCTION UNIT INCOME $684M
    8:10 *MARATHON OIL 1Q TOTAL  NET SALES 378 MBOEPD            :MRO US
    8:10 *MARATHON OIL 1Q PRODUCTION AVAILABLE FOR SALE AVG 375,000 BOEPD
    8:10 *MARATHON OIL 1Q PRODUCTION 375,000 BOEPD               :MRO US
    8:10 *MARATHON OIL 1Q SALES VOLUME AVG 378,000 BOEPD         :MRO US
    8:09 *MARATHON OIL 1Q SALES 378,000 BOEPD                    :MRO US
    8:09 *MARATHON OIL 1Q ADJUSTED EPS $1.07                     :MRO US
    8:09 *MARATHON OIL 1Q ADJUSTED EPS $1.07                     :MRO US
    8:09 *MARATHON OIL 1Q EPS $1.02                              :MRO US
    8:09 Indicated Dividend Yield Ranking for the S&P 500 by Industry
    8:09 *MARATHON OIL 1Q EPS $1.02                              :MRO US
    8:09 *MARATHON OIL 1Q 2008                                    :MRO US
    8:09 *MARATHON OIL 1Q EPS $1.02                              :MRO US


  4. I don’t THINK this is good for them or the DOW today besides XOM…

    8:17 *HOME DEPOT TO CLOSE 15 STORES, SCRAPS PLANS FOR 50 OTHERS


  5. Maybe I can buy back my LOW callers


  6. A very G-Morning to All.
    Phew, XOM <$90. I leave by undisputed fact that every other idiot is lucky. I had a lot of XOM naked puts. Now I am inno losing position with half left. Thx Phil your are brilliant.


  7. Mark – I want to sell few C callerrs b/c have naked LEAPS. Based on TA, do you think that $25 level will hold for next 2.5 weeks? Thx