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Monday Market Madness

Oil is at $142.50.

That's it, I can end my column there.  What do you think is going to happen with oil over 100% higher than the high of Q2 last year?  You can cut back your consumption by 30% but if they drive the price to $200 a barrel, you'll be just as broke – only 30% less mobile than you were.  This morning we had the usual pre-market Nigerian rebel attack…  Well, that is to say according to CNBC there was a platform attack in which 5 people were killed.  I'm still waiting to see it pop up on a legitimate news source but I think it's just another case of CNBC reading Wednesday's copy by accident on Monday, ahead of the scheduled attack.  These mix-ups occur frequently in the summer when Rent-A-Rebel requires advanced notice of all attacks so as not to conflict with vacation schedules

Don Harrold made a scheduled attack on the Fed over the weekend and I can't say I disagree with him at this point.  Certainly the free market couldn't possibly screw the people of this country more than an active Fed has been doing lately.  The only possible way I could find a legitimate justification for the Fed's actions last week was if they KNOW, for an absolute fact, that the oil bubble is about to collapse and they are leaving liquidity in the market in order to lessen the devastation of the now $6Tn energy sector dropping 30% in short order. 

With oil at $142.50, it seems more likely that Don Harrold is right and even Cramer was right, after he was wrong, and then right, and then right even though he was wrong…  I spent the weekend reading lots of different viewpoints on the market and my conclusion is – nobody has a clue what's going on so I may as well stick to my guns.  My position is:  I think the markets are oversold.  I think that the woes of the world are entirely due to commodity prices, particularly oil, which is sucking up 10% of our Global GDP and 30% of the planet's disposable income, taking much needed money away from housing as well as goods and services.  I think the price of oil is greatly exaggerated due to speculation and I think that the price is unsustainable.  That is the crux of my bullish premise so if oil keeps climbing here, I can't be bullish.  

This isn't about the dollar, the dollar was just 3% higher last November when oil was 42% lower.  As I mentioned in today's article on the dollar, the entire S&P 500, when measured in the price of oil, is off 62% from last June – that's a pretty steep decline!  The S&P's value peaked out recently against oil in Jan '07 at 26.88 barrels of oil to the index (about 1,425/53) .  On Friday's close, you could get just 9.07 barrels of oil in exchange for the index.  That is a 66% decline from the peak – isn't that enough of a sell-off in the value of US companies?  If oil goes to $200 a barrel and the S&P falls another 20% we will achieve an exchange of just 5 barrels of oil to the index, another 40% effective decline in the S&P and we will have cut the value of our market by 80% to OPEC, who use oil to create their wealth.

That's how bad this situation is folks yet you allow it to go on every day that you don't do something about it, don't make other people aware, don't ask your elected leaders to act.  This is your country that is being sold down the river, one barrel at a time while this administration tells you that more drilling, not less consuming, is the answer.  This country does need to become energy independent but it is much faster to conserve.  In WWII rationing cut our use of fuel by 25% almost overnight.  I'm not saying we need to ration, but we sure need to start getting rational!

Asia continues to feel our pain as the Nikkei drops another 0.5%, most of it in a very steep drop after lunch, back below the critical 13,500 mark.  The Hang Seng flatlined for the day, holding the 22,000 line (down 50%) while mainland China dropped another half point and India took a 2.5% hit as banks fell out of favor around the globe. 

ChartOver in Switzerland, the Central Bankers got together to talk about inflation and the European markets are very mixed this morning, with the UK up a point and Germany down half a point.  Euro-zone inflation hit a record 4% and is driving the dollar further down as EU bankers HAVE to act to get back to their 2% target zone.  The Bank of International Settlements issued their annual report from Basel yesterday and they paint a dire picture for the global economy, stating we are at a "tipping point" where further increases in oil and commodity prices can lead to a global collapse and "urged most central banks to raise their key interest rates. 'With inflation a clear and present threat, and with real policy rates in most countries very low by historical standards'."

At home, things are going to be simple – our markets will do whatever oil doesn't, there's not enough data to suddenly buck that trend.  Even the cost of rebuilding the World Trade Center has gone up 50%, "just" 6.5 years after GWB promised to do everything he could to help NY get back on it's feet, the only thing we can say is thank goodness we're not New Orleans – those guys REALLY got screwed! 

We'll be hoping to rebuild our virtual portfolios this week but I'm expecting a flatline into the holiday with the real action coming next week as earnings season kicks in.  Would I like to trade a barrel of oil for a share of IBM plus $20?  Sure I would!  Would I rather have 10 shares of Apple or 8 barrels of oil, 21 shares of Boeing or 5 barrels of crude, perhaps a share of Google in exchange for 4 barrels?  Things have certainly gotten crazy but I think a prudent investor can skip a couple of $75 fill-ups to buy some VLO at $40 or INTC at $21 – there are so many things I would rather have than a barrel of crude and I don't think the speculators will be far behind me, now that we've knocked the S&P down 67% to the barrel.



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  1. Good morning everyone.  TOS now has crude oil quotes on their system:  /CLQ8.

  2. Good Morning Phil – With financials down so much would you buy XLF calls or SKF puts and why?  Option Volume on SKF is very low but it has high fluctuations.

  3. rymadsk- i think thats a sign of the topping process- maybe hope it is, but at least i grabbed some calls in case of iran attack last friday and went flat on the put side.

  4. G’morning all!  Fortune had this wonderful piece on defending oil speculation….

  5. Financials – I’m sticking with C, BAC and XLF leaps only for now untlil we see some earnings.  Very long way to play the upside if they are good.

    Flat will be a relief today!

  6. phil- u saw this?

    Energy-Book Frenzy Is Sign of Speculation in Oil, Birinyi Says

    Eighteen books came out this year, according to data from the Library of Congress compiled by Birinyi analysts Jeff Rubin and Patrick Sullivan. Thirty-six will be published in 2008 at that rate, the most since 1970, the first year in the study…………..

    …………The last time a similar pattern arose was in books on real- estate investing three years ago, just before U.S. housing starts began a 57 percent tumble to the lowest level in 17 years, Birinyi’s data show

  7. HK- Finally they make a statement on the well.  $$$$

  8. Phil, are you leaving Apple covered ?

  9. Speculators – that is so untrue!  What they are saying is that for a speculator to affect the price of oil, they have to take physical deliver but there is no "unspeculated price."  If you want a barrel of oil you buy the front-month contract along with the speculators so the price that is determined by 4Bn barrels worth of transactions IS the price of the 21Mb that are finally delivered.

    Energy books – no I didn’t see that one but, since the lag time on those books is a year, I’d say we’re way past a logical peak already….

    HK – way to go!

    I don’t know what all this buying is about, oil is still $142, I’ll be really surprised if we sustain a rally like this.

  10. So yes to Apple and GOOG covers for now.  I did my bargain hunting last week and I think that’s what this is for the most part, not quite a real rally yet. 

    WFMI getting killed on UBS downgrade.

    I’m seeing buyers in some insurance names and big oil is doing well and VLO picked up so I think crude is stalliing out at $142 for now, that should be good for the market (a bit).

    XLF getting killed yet again though, what kind of rally can we have without them.

  11. Hi Phil,
    What about shorting HBC into earmings.  They haven’t written off anything yet, and put option volume is picking up big (got this from Fast Money Friday)…

  12. In the spirit of $4.00 gas
    Proud to be an AMERICAN

    A recent study conducted by Harvard University found that the average American
    walks about 900 miles a year.

    Another study by the American Medical Association found that Americans drink,
    on the average, 22 gallons of alcohol a year.

    This means, on average, Americans get about 41 miles to the gallon.

    Kind of makes you proud to be an American!!!!

  13. BBD – Very clever !

  14. LOL

  15. "I think crude is stalliing out at $142 for now, that should be good for the market (a bit)."
    I never thought I wouldm hear you say that.  This market is crazy.

  16. I’ve been out of the constuction game (for the most part) for about a year now. This weekend, I met up with an old freind I used to collaborate with. He was cathing me up with the status of some guys I know. The annecdotal eveidence of the housing crunch is unbelievable!!!! People that I know that used to drive Lamborghini’s and Bentleys 2 years ago are getting foreclosed on and moving back in with thier parents!!!!!! It made me feel very uneasy about the economy.

  17. As a sign of true patriotism the NYMEX speculators will present America with a $150 oil for this July 4th and promises of $200 oil in a month or two. Way to go f&*kers!!

  18. BBD — Thanks for the laugh!

  19. KHAANNN!!! -That is Maimi for ya!

  20. housing inventory - buy 1 get 1 free

  21. HBC/Patrick – They took their hits last year, down from $100 to $70 and they mostly have Euros, which are actually worth something so I wouldn’t get too excited about shorting them.  Earnings aren’t until Aug 4 so you have lots of time and you can do a pretty good Aug $75 butterfly, which is pretty bearish at .80 to $4.20 possible win ratio and you have a month to work it.

    LOL BBD – that’s why the ancient world ran on people power, very effective on the whole.

    Well Emo, we have to adapt to survive and if the market is going to remain irrational then we have to start understanding the irrational philosophy.  Luckily, I have plenty of practice discussing things with my daughets, who are both certain the world works the way they see it, even if they don’t see it the same way.

    Khan – A yes, I’m having the same conversations with title insurance guys, amazingly dead business for all the same reasons.  I was pitching someone on buying LFG for $350M and NO ONE wants to touch it.  That is amazingly sad!   They have $3.5Bn in revenue and only lost money last year on some way bloated SG&A and they are sitting on $2Bn in cash and investments against maybe $1.5Bn in liabilities.  People are so freaked out about anything that touches real estate they are running from these guys and FAF and FNF, pushing them back to 10-year lows.  I’ve been short on LFG for quite a while and I’m amazed every week they can’t put in a bottom.

    Wow, oil dops .50 and the market rallies!

  22. The Pharma sector is being rotated into.  AMGN is really coming back after all the negative news the past 6 mo.
    CELG is topping out and may be a good short.  Seems to bounce off of about 64 and then rotate down to 58.
    I still like BRL and their potential entry into the women’s health area. Should be a booming market for them.

  23. CNBC- Thanks for the nice bump in HK.  See they aren’t all bad.  LOL

  24. Worst June since 1930 – that’s encouraging!

    AMGN is a nice pick, they have a lot of good things going for them (under all the crap they’ve been buried under).  I’d like to see them break the 200 dma at $48 and see them hold it though because they have been so pathetic for so long.

    Quite the yo-yo day…

  25. FIG, HOV, QID, PCX – Phil, are you still playing any of these? I bailed on CROX, TASR, BA, EDU a while back, too ugly.

  26. All,
    For all those planning trades this week, here is the economic calendar

    Jun 30
    Chicago PMI

    Jul 01
    Auto Sales

    Jul 01
    Truck Sales

    Jul 01
    Construction Spending

    Jul 01
    ISM Index

    Jul 02
    ADP Employment

    Jul 02
    Factory Orders

    Jul 02
    Crude Inventories

    Jul 03
    Average Workweek

    Jul 03
    Hourly Earnings

    Jul 03
    Initial Claims

    Jul 03
    Nonfarm Payrolls

    Jul 03
    Unemployment Rate

    Jul 03
    ISM Services

    Good luck!

  27. UK market up quite a lot now. FTSE + 1.56%

  28. Its real sad when Oil bears (myself included) consider an up $1.5 day a victory.

  29. Phil,
    What is your opinion on buying puts on HMC?? It looks like it has not followed TM yet. Recession or not, buying new cars will be on hold for sometime

  30. Nasdaq is just doggin’ it.  Probably because they were leading for a while.   AAPL is being no help.

    XOM is breking out, maybe setting up for another dollar up from here, should help the Dow.  CVX will follow  and test $100 and that could be good for getting the Dow back to 11,450.  Hard to tell whether high oil or low oil is good for the integrated majors at this point.

    Solid buying coming in now all around…

  31. Rogers is now my vendetta.

  32. Phil:
    Thanks again for weekend Index Put comments,

    you said that you cover DIA PUTs overnight with the frontmonth putters,
    DIA is up, the SP turned green, if they go further I will buy them back, now have 23 cent gain.
    if the protective LPs go down 35%, will DD.

    Are these the right moves ?

  33. Damn BA ppl being stubborn. Havent been able to roll 75 2010′s to 70 at 1.75!

  34. John Bolton

    I guess he must be long oil.

  35. Housing Anecdotes

    Boston area seems to be picking up.  I had five houses on a tour scheduled for this afternoon and two were dropped from the list as they went under agreement last week.  Also, condo market in Cambridge is really strong, five offers on a condo we were looking at this weekend and it went for above 10K above ask price.

  36. Hi Phil,
    Would dug be worth a play here?  It has been trading fairly reliably between 26.50 and 28.50 the last month or so, but not sure if this has broken down…

  37. Phil, for the 10kp, do you still like the AAPL 175s?  For 25kp, do you still like HOV?

  38. FIG, HOV, QID (puts), PCX (puts) – Yes I’m still gritting my teeth on all of those.    There’s a huge overreaction to housing but my timeframe needs to be long for HOV.  FIG is the biggest gamble I think.  The Nas will bounce at some point and PCX cannot justify that price through an earnings report.

    PRU is getting hit very hard.  Flooding bad for homeowners insurance. 

    HMC puts/HP – No way, I think they’ll do very well long-term.  Short-term its all about the dollar but I’d have to see over 1.60 per Euro and less than 100 yen to the dollar before I believe the dollar can break to lower lows.  I’m pretty close to shorting gold up here – if they hadn’t opened lower I would have gone for GLD puts so I’m waiting for them to test $92 agian and I’ll grab the $90 puts.

    DIA puts – It very much depends on why the Dow is up and if I think we can sustain it.  Don’t forget they have nice, juicy premiums that we want to expire and I do feel strongly tat this is a bottom so I’m more likely to cover more than uncover.  Once I’m up 50% or more I’m more likely to cash them out.

    BA – I can’t get my roll either from Nov $70s to Nov $65s….

    DUG/Patrick – We need a real breakdown in oil for DUG to be worthwhile.  $140 or even $130 doesn’t cut it.  I think I like DIG puts better as the front-month premiums you can sell are huge.  Dec $131 puts are $25 and you can sell June $119 puts for $5, that’s a good deal.  XXX

  39. I know everyone will say BS.
    MADRID, June 30 (Reuters) – Oil prices at record highs have
    helped boost tax revenues of western governments and that money
    could be used to help to ease the consumers’ suffering, OPEC’s
    President Chakib Khelil said on Monday.
    “Taxes on petroleum products are 80 percent. So for every
    dollar that OPEC gets, western countries get $4. They could
    actually transfer some of the revenues to sectors which suffer
    the most,” Khelil told reporters on the sidelines of the World
    Petroleum Congress in Madrid.
    Khelil, who is also Algeria’s oil minister, said the
    international oil industry faced several challenges in producing
    He said during the era of low oil prices during the
    mid-1980s to late-1990s, the global oil industry did little to
    spend money to boost production.
    International oil majors shed their workforce and thousands
    left the industry for good. Companies also spent a lot of their
    cash in buying back their shares from the market.
    “Now everybody is going and investing at the same time. The
    big problem is to find people as there are not enough people to
    do projects,” he said, adding that a glut of orders meant that
    crucial equipment was taking longer to produce, the price of
    steel had tripled and oil service companies were harder to find.
    “So the industry is facing a big problem in meeting demand.
    But I think it’s just a question of the period. There is no
    problem about the world having enough oil and gas to satisfy the
    needs of the world for the next 50 years,” Khelil said.
    Khelil reiterated comments made last week that the price of
    oil, which hit a record high above $143 a barrel on Monday,
    could rise to $150-$170 during the summer, but ease toward the
    end of the year.

  40. pHil – whats your opinion of OIH ?

  41. BBG – the drinking study you mention indicates the average american drinks 12.85 beers a day.

    Seems high to me.

  42. BBD – Major fallacy in the tax argument is most of the tax is on gasoline.   Price of gasoline
    has doubled while taxes are assessed on a per gallon basis.

  43. Phil,
    I have a long position on ADM.  It has been looking stronger the lasst couple days.  Do you think it can fill the gap to 37?

  44. biod – beer

    22 gallons, 128 ounces in a gallon is only 234 beers if 12 ounces a beer, that’s not even a case a month.  Granted you need to account for adult population, but I believe bbd stats must be for adults only.

  45. CNBC
    This woman stole Mick Jagger’s lips.

  46. Biod- I thought it was a spirits comment.  But really I just thought it wa funny so I posted it.

  47. I bet BDC is actually counting the alcohol, so a one-ounce shot of 80 proof shot of alcohol is only .4 oz of alcohol.

  48. Hi, I’m back from a job meeting planning an I.T. ressources on a customer and see my INTC waking up.. good
    didn’t know PetroMasters were in Madrid.. they will face troubles way back to Hotel, we’re in party celebrating our national soccer team is the best in Europe 44 years Later.. well not really sure they can afford an Helicopter taxi ;-)

  49. I know….
    I was working the calculation using the "DMV deifinition" of alcohol content (0.6 oz 12 oz of beer, 5 oz of wine, 1.5 oz of hard liquor). The idea was I was assuming ethanol provides the energy content. On second thought it was a dumb post  … sorry

  50. You can tell we like our alcohol.

  51. A lot of "Super duty" trucks sitting on the lot in the mountain west where I am right now.  Not nearly as many trucks on the road too. This is not just anecdotal evidence, I travel out here quite a bit.  My wife’s gas-stingy car is up $500 according to Kelly bluebook. Demand destruction right in front of you!

  52. Romney tops VP list for McCain.  The guy knows the economy and I’m sure McCain is looking hard at this issue since he doesn’t know much about this economics "stuff".

  53. are we going to plan on rolling HOV anytime soon?

  54. Kill Knight Rider, demand will drop.

  55. Fredrang, are you able to use option trader pro @ Fidelity? tks

  56. I saw Ritter and Fruedenthal on Meet the Press. I like Fruedenthal — amazing the in roads these "independent" Mountain West dems have made in state govs. Brokaw really pounded on poor Arnie though.

  57. AAPL/$10KP – I’m hanging on for now, missed selling at the open, that was silly.

    OIH – I like the OIH overall but I think they’ll trade down with a big break in oil (if ever).  So, for the most part, I won’t short them although tempting sometimes.

    Picked up GOOG $550s for $14 for fun, not really ready to buy yet.  XXX

  58. Potter – I have used today OTP few times. Three trades are filled.

  59. Phil:

    any suggestion where GOOG< AAPL< RIMM  will be heading the next few weeks?

  60. Oil tax – I think he was talking about Europe where I think they are about 1/2 taxes on oil prices.

    ADM/Patrick – Oh they are way too cheap!   It might take a while but the overall usage trend for them is up.

    HOV roll, no more money in that one for now, maybe if XLF stops going down one day.

    GOOG/RMM – Well I’ve started with the $550s and I will roll down at about $4.50 per $10 if they head down from here.  AAPL I’m 1/2 covered with $160s now (just took out 1/2 with a tiny profit) and RIMM I like the Aug $120s.

  61. Bronek ,tks… just tried it successfully was unable to log on until now

  62. Phil,
    What are your thoughts on GME at this level. I know its a retailer, but it has been exibiting sales strength through the economic downturn.

  63. Phil:

    missed CLF again,

    what is your view on steel stocks: X, NUE and of course CLF ?

  64. SUN-look at this dog howl today

  65. KHAANN…you read the Motely Fool this weekend!!!!  I think they will do well…beer, cigs, and games…people can’t afford to go to the movies, out to dinner, so why not stay at home and play games….

  66. Yahoo is trying to claim that MSFT wasnt serious about the bid. ROFL!!!!!

  67. Phil:
    using what I learned from you (correctly I hope):
    checking with you on DIA SP: it has gained now 43 cents which is 18 %, that does not fit yet your criteria of killing them, you agree ? premium is 1.73 which will  change by about 10 cents/day towards expiration .

    But what is chance that DIA goes even higher? slim.

  68. Potter
    Had difficulty with OTP at the opening but restarted my computer and 5×5.

  69. If every American were to drink 24 beers every day then we would reduce the price of gasoline.  If everyone were too drunk to drive then gasoline use would go to zero.

  70. Phil
    R U actually bullish on RIMM at this time?  Assume you are talking Aug 120 naked calls?

  71. Phil:
    when the DOW changes 100, 200, 300 points:
    what is the typical change in in cents/$
    frontmonth Short Puts
    Long Puts ?

  72. GME/Khan – they are a retailer.  Retail bad!   This is a good spot to take an entry on a leap though.

    Steel stocks – I’ve been staying away.  High input costs and a global slowdown not a good combo for them.  Also, aren’t all the auto companies cutting back production.  I’m not sure what’s keeping them up this high really.

    SUN – crazy stuff! 

    DIA/RMM – Actually it depends on how well covered you are otherwise.  If you have a good amount of callers then you can take buy back the front-month puts and roll yourself up and wait a bit, if it keeps going up, sell the next strike up.

    RIMM – not bullish but not THIS bearish.  I’ve said for some time that Apple will kick their ass but they have a great base and good.  As to change in front month pricing – just look at the strikes around it.  Each 100 Dow points is $1.

  73. HK-Petrohawk Energy-HK target raised to $60 from $40, reiterate Buy@MLCO
    GDP- another leg higher

  74. Does anyone have an opinion, fundamental or otherwise on IR (Ingersoll-Rand)?

  75. Phil:

    I really dislike verticals, but I got into one, just bought back GOOG call short july520.

    now I have and wonder what to do:
    GOOG call July 530 and 540, base is 22.8 and 25$

  76. bbd, don’t you get tired of saying that?  You must be having a career year so far.

  77. Film- It kind of gets boring playing by yourself all the time. LOL    Remember I started buying POT at $150 last year  and VIP was up 4x so last year was awesome.

  78. RMM – DOW option pricing (1:13). One of the Delta definitions is a relation of the price of the option to the underlying. Note that delta vary with distance to ATM.

  79. IR – Tied in with trucking and transports to some extent, that hurts them but I think they are a great deal down here but the way the market is turning down again as oil crosses $141, I don’t see how anything is going to survive if crude doesn’t ease up. 

    GOOG/RMM – You just need to pick a spot to take out your caller and take a chance.  If they hold $525 against this run down I like them there, otherwise I’ll look for a retest at $515. 

    On Apple, I’m looking for them to hold the line at $167, otherwise $165.

  80. Lehman collapsing…

  81. so much for AAPL 167, lets hope 165 holds…

  82. Whoa!!! Dennis just called maria a "slot"

  83. GOOG – had to cover with $500 calls to make a vertical, stopping those out at $39, happy to make $2 or $3 on the way down.  XXX

  84. Anemic volume overall, financials killing us yet again.

    AAPL holding the line so far as is GOOG but I’m more worried about GOOG if the Dow turns red..  Oil at $141.15, we need below $140 and they need $142.

    CROX making new lows.  SNDK 52-week low.  NDAQ at lows (very bad sign for the index).

    Cool, selling pressure picking up on the NYMEX into the close – that’s 3 days in a row!

  85. RMM lol

  86. Although I am very happy about the US Sugar deal, I think its an attempt by Crist to secure the repulican VP spot, and gain favor of the eviromentlists ahead of the election. I’d like to hear what every one else thinks.

  87. Yes, oil broke below $140!!!

  88. Does the nymex close at 2:30pm?  I never quite understand the closing price for oil….?

  89. Phil,
    C – at what price would you buy more?

  90. stork
    yes, it closes at 2:30.  then it continues to trade after hours, and lately even after hours POO affects the direction of stocks in general.

  91. CROX making new lows.  SNDK 52-week low.—--Are you really surprised?

  92. stork timezones

  93. Oh that sucks.  Whoever is dumping stops at 2:30 and let’s them pump it back up right into the close so they are going to pring a "record close" by pushing it back to $140.50ish….

    $10KP – Standing pat through tomorrow.
    ANG – Rolling to Aug $65s for $1, selling 4 (1/2) July $65s for $1.80
    CROX - Rolling to Sept $7s for .45
    VLO - Rolling to Aug $40s for $2.20 (will sell current $40s on a good bounce)

  94. Do you think that the start of the quarter tomorrow will have an effect, good or back, on this market?

  95. Phil… are you going naked on any of your positions?

  96. Khaann, I thought that deal sucked.  That was our government making yet another TERRIBLE deal for the taxpayers.  I say they offer them $20 million dollars to sell it now, or they remove subsidies and import tariffs on Brazil.  That’s how you do a deal.  Sugar has screwed us for years and will continue for at least another 6 years (the phase out timeframe).


  97. albo – Not a fallacy. 

  98. C/Fab – I’m buying here ($16.50) and then not again until $14.50.

    BBD – I am surprised because CROX’s current quarter should give them a great indication of summer sales and the expectations are very low (down 27%) even though they missed last Q by just a penny.  They are being punished for poor management, which is a valid reason, but revenues keep going up so somebody, somewhere is wearing CROX.   As to SNDK, they are underperofming the SOX by about 35%, that’s pretty significant and almost certainly unwarranted.  I’ve been hearing pretty good numbers on PC deliveries, especially notebooks.

    Start of Q – Yes, I’m betting that the market is being held down for EOQ so either tomorrow or Wednesday I’d better get a pop!

    CCJ got a nice pop today.

  99. Nakedness  I’m happy with – AAPL I now have naked, GOOG 3/4 cover.  BA, C, GE, SNDK, VLO, XLF (that’s been a terrible idea for weeks), FDX, COH, HOV, INTC, MCD, MRVL, PEP, SHLD (bought back caller), SNE, TM, TXN, UTX, VZ,

  100. I’m still very happy that the Everglades has a better chance of survival now. I grew up in Miami and spent a good bit of time exploring that area as a kid. Also, if the Everglades was ever drained completely and God know’s ‘they’ tried, all of South Florida would turn into a desert.

    Anyone remember the Cross-Florida Barge Canal? Yep, believe it or not in the 1960′s, our politicians approved an west-to-east canal across some of Florida’s most pristine wilderness for this vital economic project.

  101. film ,nice thought processes;however, unfortunately the sugar lobby is way too powerful for that  to play out that way

  102. Film,
    I’ve been saying for years that free-trade, and ultimately resumed dealings with Cuba would kill the florida sugar industry. I hate them too, they’re ruining the enviroment. The execs at US sugar knew that it was going to be hard to stay competitive with increasing free trade and enviromental regulation, so they did the right thing. The deal is going to do wonders to restore the everglades, and also eliminate south-florida water shortage problems
    I had a few investments in Clewiston, where us sugar is based,  that I was ungraciously forced out of by my partners who are now left holding the bag. If that deal goes thorugh, that place is going to turn into a ghost town. (Follow this link for an article). Karma is a bitch!!!!

  103. Josesph,
    There is a plan in state legislature now (which i think will get approved) which will actually evelate Tamiami Trail so water would flow under it. See this link

  104. CROX- RETAIL is BAD as you said earlier
    SNDK-Chips are bad and these guys have warned how many times in a row now?
    June 30th, 2008 at 1:31 pm |

    GDP- another leg higher= good

  105. Hi all,
    Greg had a few bits flipped in my favor, and finally changed my screen name.
    Benjamin Miller <==> stratdaddy

  106. Khaannn – very interesting…thanks for the link

  107. DNA- The dead has woken up

  108. Yes, VERY good for the environment.  US Sugar is powerful because (totally unsubstantiated accusation) they roll their subsidies back political interests who keep it going.  There is absolutely no reason that this industry has to be supported or even encouraged.  Whatever, it will all be underwater in 6 years anyway.  Truly a stroke of great stroking on their part.  But it makes me sick.

  109. Not too much to get excited about but 1,285 was an old goal on the S&P and 11,400 on the Dow would be nice as would clearing 8,700 on the NYSE.  RUT 6 points below 700, still not good and Nas holding 2,300 at least if we can’t hold up these modest levels, it’s going to be hard to stay bullish but I really want to give tomorrow a chance.

  110. SUN making another leg up.  That’s 8% today and climbing.  I think a lot of stocks are that underpriced and that we are primed to explode to the upside on little news.

    GOOG is making me nervous because C called them their top pick for the 2nd half of ’08 and this is all they can do?

    Now everything is making me nervous, big sell program just hit but it’s EOQ so I’m going to gut it out – hopefully I won’t regret this as I had a nice chance to cover just then…

  111. Phil,
    Is it possible that the general acceptance of ETFs as trading vehicles - especially double shorts like QID – can change how a market bottoming process looks?  (i.e. change the dynamics of Capitulation?).  For example, I have a long portfolio, and instead of selling the longs or shorting individual stocks, I am hedging with QID and SDS.  As I understand it, this has two major consequences.  The first is that I will not get a margin call in my short position, no matter how badly it goes against me.  Second, ETFs use constant contract futures not puts / calls to trade (I think), so there is less of a tie to the undgerlying.
    Anyway, if my thesis is correct, perhaps we should look for high volume in these as an indication of capitualtion or perhaps a divergence between the futures and the underlying as another possible indication?

  112. Well, hopefully this is the last day of this nonsense.  Amazingly, this is only the 10th worst first half in market history and I don’t think we had a lot of 30% down years so the odds are in our favor, although looking at RIMM and SHLD at the moment I’m not so sure.

    TGT at 52-week low, HD new lows, Dow red now…

    What an awful way to end the day/month/quarter!

    Ah well, day of reckoning is tomorrow I guess.

  113. Pew- in reference to the Fri concerns, it was a good day.

  114. QID/Patrick – It’s a good thought but they are generally thinly traded and index ETFs offer simily protections and have been around for a long time.  It’s certainly worth watching.

  115. CNBC- said earlier today that the AVE bear market dropped 30%.  But what do they know.  Have a good night

  116. Maybe Bill but no in one year.

  117. Just finished my daily TA on AAPL, USO, DIA, SPY, RUT, XLF, EEM, and GLD. If there is any blue sky out there it is certainly not apparent in any tecnical indicator that I use.

    I have 100% bearish call spreads on all of the above except for bullish put spreads on USO and GLD. I would love to see a rally so I can complete building Iron Condors on all before July premiums run dry. However, I believe any rally is nothing but a bear trap.

  118. Bear Market-very true Phil, I hope not but there is always a first.

  119. On technicals I have to agree with you Joseph, this is one ugly looking set of charts but I think we’ve attained a fair price level for the markets and I think there is a ton of money on the sidelines looking for a bottom to start buying but if it isn’t coming by next Tuesday, it’s not going to happen.

  120. Phil
    What is magic about next tuesday.  Start of earnings season?

  121. Traders Prayer:
    Lord, just give me one more dot com boom, and I swear I won’t piss it all away this time.

  122. Bear Markets – Good Info & Charts

    Difference between "standalone" bear market and a "recession induced" bear market;  the latter being much more severe in terms of total decline.  Also, it provides relative P/E before the decline so while the 2000 decline was huge, it started from a very high base.

  123. No doubt upside earnings surprises, especially in hated things like financials would be very positive. Misses in the oil patch would also probably evoke a rally as well. But it’s hard to see a rally getting real momentum as for every dollar trying to get in, there would shortly be many dollars trying to get out at some point.

  124. I have been at a crossroads as I am going to be on a roving vacation for several weeks, but still would like to make some money.  I think I have to go with Joseph and selling verticals for July as the leading candidate.  Especially if we don’t get some MAJOR movement starting tomorrow.  I agree with Phil that the EOQ has to be pivotal.  If this selling doesn’t subside then it wasn’t just the banks and funds deleveraging, and we are in real trouble.

  125. dan
    through today was the end of the quarter/half of the year.  all manner of manipulations at play.
    through the remainder of the week is pre-4th of july, hesitant trading.
    next week earnings resume in earnest, and a renewed perspective on the markets.

  126. didnt watch markets today…more lab stuff- but found this…pretty funny:

    Supreme Court Rules Death Penalty Is ‘Totally Badass’

  127. May ABX Loan Performance: More Encouraging News 
    early-stage delinquencies keep on falling
    Ironic, I know. The data in question come from the June servicer reports, filed last week, for the loans that make up the ABX subprime loan indices. The numbers support our belief that the leading indicators of subprime credit quality are improving (yes, improving) and that the soaring loss forecasts being thrown around by some observers, most notably the rating agencies, will almost surely turn out to be too pessimistic.

  128. fredrang- that’s a sweet link- thanks

  129. Next Tues – Yes start of earnings, I expected at the beginning of the year we would bottom out at 12,500 and then recover to 14,000 after Q2 earnings turned out not to be so bad.  I’m off by 1,000 on the first part and recovering to 13,000 won’t be much of a recovery but, at this point, we’ll take it if we can.

    Amen Yogi!

    Bear markets – the question is are we "stand alone" or not.  This isn’t quite a recession yet.  Note that only 7 bear markets of any type dropped more than 25% with just 4 making it to 30% while 9 were under (and 7 under 20%).  I believe our p/e is just about 15, also way on the low side.  Probably with the builders and financials so beaten up and the actual earnings of oil companies so high, our p/e may be lower than that now.

    ABX report – good stuff Xian!  That’s been my thinking only it’s taking a long time to play out but the premise of Whitney et al is to extrapolate the averages out forever whereas I’ve been assuming the model peaks, which means the loss estimates are WAY high for the financials but it looks like another quarter before we can really confirm a trend.

  130. Phil:
    tried to roll my aug Dia puts 115 to 116 for 40 cents, did not work,
    these are covered 2/3 with july113.

    any comment ?

    again a bad day in the market. my aapl is naked.
    hope july 1 brings better things.

  131. While YHOO worries about its survival, GOOG is moving on to the Next Big Thing.  Very interesting article.

    "Google is experimenting with a new method of distributing original material on the Web, and some Hollywood film financiers are betting millions that the company will succeed.

    In September, Seth MacFarlane, creator of “Family Guy” on television, will unveil a carefully guarded new project called “Seth MacFarlane’s Cavalcade of Cartoon Comedy.” Unlike “Family Guy,” which is broadcast on Fox, this animation series will appear exclusively on the Internet.

    The innovative part involves the distribution plan. Google will syndicate the program using its AdSense advertising system to thousands of Web sites that are predetermined to be gathering spots for Mr. MacFarlane’s target audience, typically young men. Instead of placing a static ad on a Web page, Google will place a “Cavalcade” video clip."

  132. Commodity Bubble Bursting (Bloomberg)

    Somebody finally noticed that the oil producing countries have been pumping the price of oil by having their sovereign-wealth funds buy up commodity index futures.  Of course it’s the London Times, US papers wouldn’t print things like this…

    Chinese factories idling as demand dries up, this is my point that $125 (not even $140) oil is the point at which there is no money left in the world to pay for it so it has to start being taken away from other things.  Marketwatch says Asia will be disproportionately effected by high oil prices and, of course, US equities outperformed the rest of the world in the first half, scoring on my prediction that we would be the least sucky place to put money.

    Iraq to add 2M barrels a day output by 2013.

    T Rowe Price’s Rogers says it’s time to buy.

  133. DIA/RMM – Well good lesson for you as it would have been great if you bought back your putters for .40 right?  No big deal, the market goes up and down at different times.

    That GOOG thing could be huge if it works.  As long as the ads aren’t annoying.

  134. That’s what I was thinking about GOOG in posting the article.  If the ads aren’t annoying, they’ve definitely found a good medium in the "Family Guy".  Just imagine what others could do with this new medium – like Colbert, et al.

  135. Investors Losing All Their Blue Chips
    So called blue-chip stocks have struggled mightily over the last year.  The total loss in market cap from their 52-week highs for stocks in the S&P 100 (largest 100 S&P stocks by market cap) is now $2.5 trillion.  Below we highlight stocks in the index that are the furthest from their 52-week highs, as well as the loss in market cap from their 52-week highs.  As shown, GM is 75% from its 52-week high, Lehman is 72.4%, and Wachovia is 71.7%. 
    Looking at market cap, GM has lost $18 billion (it is now worth a little more than $6 billion), which ranks it 42nd in terms of losses.  General Electric has lost the most in market cap at -$168 billion.  Citigroup (C) isn’t far behind GE at -$167 billion.  BAC, AIG and MSFT round out the top 5 in terms of market cap losses.

  136. Phil:
    when the DOW changes 100, 200, 300 points:
    what is the typical change in in cents/$
    frontmonth Short Puts and Long Puts ?

  137. RMM – Depends on the strikes and time of month.  At any given time you can look at the surrounding strikes and get a pretty good idea of what will happen to your contracts as they move up or down $1, $2 or $3 – it’s very simple….

  138. phil i hate tell u but i was watchin cramer and he expects us to rally at the beg of the quarter adn into earnings. Im scared cuz thats was u think. maybe we shud go short adn do the opposite of cramer lolllll

  139. Shouldn’t sovereign wealth funds from big oil companies be trying to diversify out of oil?! I’d love to know who is ultimately responsible for each of these funds.

  140. The Age of Ubiquitous Media is THE reason to own AAPL/GOOG.  I know I have been wavering on GOOG lately, but I like the chart.  I believe they are smart and have a master plan.  I just need to hold my nose and buy.

    It is hard to go against Jim Rogers.  Of course, I believe he is right that prices will go higher over the next ten years, but that isn’t really helpful to us ST traders, is it?

  141. film- ive been waiting since JAN for a commodities selloff to go long term on grain stuffs and the like- probably just go w/ DBA.. a serious USD rally is my requisite for the buying op.

  142. U.S. Won’t Let Iran Shut Strait of Hormuz, Fleet Says

    June 30 (Bloomberg) — The U.S. won’t allow Iran to shut the Strait of Hormuz, through which the bulk of Middle East oil is shipped, a spokesman for the Fifth Fleet said.

    “They will not close it,” Lieutenant Nate Christensen said in a telephone interview today from Bahrain, where the fleet is based. “The Strait of Hormuz is vital international waters.” Vice Admiral Kevin Cosgriff, Fifth Fleet commander, made similar remarks to reporters in Bahrain today, Christensen said.

    The narrow waterway between Iran and Oman at the mouth of the Persian Gulf handles the shipment of about 20 percent of the world’s daily supply of oil, according to figures from the U.S. government’s Energy Information Administration. The oil’s main destinations include the U.S., Western Europe and Japan.

  143. Cocaine, Marijuana Tried by More Americans, Researchers Find

    …………In the U.S., 42 percent said they had used marijuana and 16 percent had tried cocaine, according to the study published today in the journal of the Public Library of Science. In the Netherlands, where people can go to cafes to smoke marijuana, 20 percent have tried that drug and 1.9 percent sampled cocaine……….

    “Drug use is related to income, but does not appear to be simply related to drug policy, since countries with more stringent policies toward illegal drug use did not have lower levels of such drug use than countries with more liberal policies,” the study’s authors wrote.

  144. Only 145 posts today!  Is everyone at the beach?  Hey Singapore Steve, you still in Manila?

  145. James i think everybody is counting their dolla dolla bills ( or atleast what they have left)

  146. xian – I think it’s more of a personality trait rather than an environmental one. More is better.

  147. EXCELLENT- sorry, film i searched for a non bloomberg copy, but no luck- yet u can c how smart he looks, here (this is also a source to the video, but it links to bloomberg thru

    Polar Pacific’s Bensimon Says Oil Prices Are `Peaking’ (5min video)-

    very nice video-  technical analysis on futures market, crude falls to $115 in 2 months, $85 in 1 yr, last 6months rise in price happened on decline of open interest,

    also, some real world economic actions, predicted the crazy $200 price targets from everywhere, companies beginning to charge extra fees, etc

    he just looks smart- also, called $128 top 2 yrs ago (i think)

    going to keep this guy on my watch list

  148. DM-  i think our nature unfolds in response to the environment. true, an orange tree will never yield tomatos, but the quality, quantity etc interplay w/ the environment (w/in their limits)

  149. james- i was thinking the samething, but notice i wasnt watching markets today, so that’s about 30 posts right there

  150. Xian – I agree, but I would argue if you legalize pot, drug use will increase in America. Perhaps overtime it’ll stabilize lower.

  151. This has been a trying couple of weeks for my portfolio…sure I’ve been able to buy back my short positions and they’ve protected me quite a bit, but the last 7-10 days my positions have fallen so fast that the shorts haven’t been able to cover all my losses on my longs. To make matters worse, once we got "low" I was real hesitant to sell more covers (I broke down today and sold 1/2 covers on all my positions). Thank goodness my long positions are all Jan 09 or later.

    I hope I’m not the only one feeling a pinch…misery loves company ya know…

  152. xian, nice video.
    I watch Bloomberg almost every night, it is very interesting to see what the guys in Asia and Europe are saying. Yesterday the european guys stopped using the US slowdown/recession, rather they were talking about US enterring a depression.

  153. doubleclick

    When is the next round of accepting members to the PSW INVESTMENT CLUB

  154. Seriously, am I the only one who cannot get bloomberg to work on a mac?  Thanks for looking xian.

    DM, drug use may increase, but I would bet that drug abuse would drop.  I also think drinking would drop as well.  

    Personally, I think they should legalize EVERYTHING and sell it all at the pharmacy.  But, you can only buy one dose a day or a week and you have to register for every intoxicant that you would like to use.  Also, I would make them reasonable expensive, like $10 a unit.  And you can one free a month, but when you ask for a second free in a month, you go to rehab.  Something like that.  We all know the use will continue.  The important thing is to control how it affects society and allows medical professionals to monitor users for abuse and the problems that come with it.  And if that money gets funneled back in to the health care system rather than drug lords and cops, I think the world would be a better place.

  155. Film – America is free to eat, but now we have an epidemic. America is free to spend, but now we have a crisis. If Americans are not taught how to choose, then there’s no point in giving free-choice.

  156. DM – I don’t think legalizing pot would make it much more available than it is right now.  You can buy it practically in every neighborhood – no matter what color the collar.  All legalization would do is reduce the load on the justice system – not a bad thing.  I doubt serioulsy we would increase the amount of consumption from the extraordinary levels we already are experiencing.

    Frankly, I think Film’s got it right – legalize it all and sell it at the pharmacy.  Most of the drugs that are illegal today used to be sold at the pharmacy anyway.  Makes sense to me.

    As for Film’s contention about drinking … hmmm, not so sure.  :-)

  157. xian – great video!!  $112 in two months?  That sounds doable.  And tradable.  According to your formula, that would mean USO at about $90.  Right?  If so, very cool.

  158. Personally, I hate drinking.  Always makes me feel… hungover.  I know a ton of people who would use pot if it was legal, but since it is not they drink and most of them to excess, IMO.  I think any drug that can double the dose without exponentially increasing the damage to your body is a winner.

    DM, I cannot argue with those absolutes, and I cannot argue with the premise.  America is incredibly under-educated.  Of course that leads to abuse of all escapes as your life sucks and you see no way out of your crappy job.  At least if we let those people get high, they will sit around and be content.  If you make them all go out drinking, bad things happen.

  159. Fantastic article on pay option loans in CA:
    A large chunk of these are held by Wachovia

  160. … like reproduction!

  161. Good one, FIlm!  :-)

    Manana to all.

  162. Happy Canada Day.

    Best part is that the US markets are open.

  163. good morning folks…

    Milton Friedman and "The War On Drugs (45sec blurb- pretty sensible)

  164. boiling the frog…they’re just trying to get us used to the idea, so we accept it more easily- just like iraq

    Israeli Attack on Iran Likely, Pentagon Official Tells ABC News

    July 1 (Bloomberg) — Israel is increasingly likely to attack Iran’s nuclear facilities this year, ABC News reported, citing an unidentified Pentagon official.

    The strike could be triggered by the production of enough enriched uranium at Iran’s Natanz nuclear facility to make a weapon, ABC cited the official as saying. The second possible trigger for an attack would be the delivery of a Russian SA-20 air defense system, the installation of which would make an Israeli attack more difficult, the official told ABC.

    Pentagon officials say a strike on Natanz would only temporarily damage Iran’s nuclear program and could spark a wave of attacks on U.S. interests, ABC said. The officials said an Israeli air force exercise last month was carried out to prepare for an attack, the network reported.

    Admiral Mike Mullen, chairman of the U.S. Joint Chiefs of Staff, was in Israel last weekend for meetings with Israeli military leaders, ABC said.

    Israeli Defense Ministry spokesman Shlomo Dror, in a telephone interview from Tel Aviv, declined to comment today on the ABC report.

  165. crude up 2 .00, now 142.00 on israeli attacke fears—

    Oil Trades Above $141 on Concern Iran May Face Military Attacks

    July 1 (Bloomberg) — Crude oil rose in New York on concern that Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, may face military attacks over its nuclear program, disrupting Middle East supplies.

    Oil climbed above $141 a barrel after U.S. officials urged tighter sanctions on Iran and a military spokesman vowed to keep supplies moving through the Strait of Hormuz. BP Plc, Europe’s second-largest oil company, said it’s “very disappointed” that many expatriate TNK-BP Holding staff will have to leave Russia following refusal of work visas.

    “We’re really in the world of geopolitics right now and don’t know what can happen,” Edward Meir, a commodity analyst with MF Global Ltd. in Stamford, Connecticut, said in an interview with Bloomberg Television. “Demand is really receding quickly, especially here in the United States. That will make the overall supply demand balance more comfortable.”

  166. Broad Says Investors Are `Better Off in Cash’ Right Now (9min video)

    Broad Says U.S. Economy in Worst Recession Since World War II (news story)

    July 1 (Bloomberg) — Billionaire investor Eli Broad said the U.S. economy is in the `worst period’ of his adult life as a housing market recovery remains “several years” away.

    “This is worse than any recession we’ve had since World War II,” Broad, 75, said in an interview yesterday. Broad, the founder of homebuilder KB Home, said the U.S. should avoid a depression on the scale of the 1930s because the country now has sufficient “safety nets.”

  167. Wheeldon of BGC Says Banking Stocks `Close to Bottom’ (4min4sec)

    makes a valuation argument, 2010 story, writedowns largely over, oil 140 can stabilize and b ok

  168. Bad Morning all :-(

    UK down a murderous 2.35%. They’re blaming the banks but everything is getting hit. Bad Bad Bad. Back to 70% cash and proble all out if this continues for the rest of the day.

    Should have sold in May and gone far, far away !!!

  169. Pound/Dollar almost back to 2 !!  (1.9998).  The dollar must be really weak to loose against the pound given the state of our economy. Dread to think whats going to happen on Thursday if the ECB carry out their threat to raise interest rates.

  170. ECB – if they raise rates on Thu as promised, it may create a capitulation bottom right before earnings begin.

  171. DB- dude, i dig it. oil now 142.65 over here…israel is making a mess of things w/ all their war lust. my USO position is going bullish…sadly.

    the entire region will blow up- a total free for all. if their leadership think they’ll b safer afterwards, they r sorely mistaken. israel will b in more danger- also, iran has really good air defense systems and israel cant deal w/ them alone, they’re going to need our support/involvement

    further, whoever says the strait of hormuz will b left open is either lying, kidding themselves or an idiot.

    although, its not israel’s fault.  we’ve set the agenda and tone of how to deal w/ enemies and "threats" (quotations b/c our NIE said iran had paused it’s weapons program in 2003). now any uber-right-wing group can seize control of their respective govt and claim "security"

    poor israel, their leaders r taking them into something they dont really want- while 60% of israelis dont like iran w/ nuclear tech, only 31% like the idea of attacking and 34% rather sanctions/diplomacy

    from march 2008
    Declining Support for Tough Measures against Iran’s Nuclear Program: Global Poll

  172. fabregas- capitulation in the USD?

  173. Watch out USA – if the dollar goes down much more I may have to come live over there !!!

  174. DIA futures now down 120

  175. richard/USO- yup, crude at 112 gives me USO at 90.61

  176. Cramer/Shahir – I wish either one of us was right looking at this morning’s pre market!

    Sov Wealth – We are talking funds that are controlled by actual governments so it”s easy to see who’s doing what.  Just our press seems disinterested in looking into it like the Brits do.

    Solar Freeze/Sam – Yeah, total insanity.  Drill a hole right through the heart of a caribu but don’t put a mirror in the desert…  I can’t even begin to see a rational for this outside of the usual conspiracy stuff that even I am tired of…

    Bensimon – nice find Xian

    I’m with you JB – this has been a nasty, unrelenting fall and this morning is either the blow-off bottom we need or the next leg down.

    Film – you should go to Amsterdam one day, it’s amazing how "no problem" the whole thing is and that’s with them jammed with tourists who are there just to party.  If we had a national legalization I really don’t think it would be much of an issue, other than for the liquor companies, who would certainly be hurt (in Amsterdam, it’s pot and coffee).  All we have to do is let SBUX start selling weed and we could roll back to the 60s in no time!

    Iran – this is seriously the 3rd year of that same rumor.  I can’t believe it still works.  Of course it works because our Presiden doesn’t simply come on TV and say, I would not condone an unprovoked attack on Iran as there is no way Israel would do it without US support.  You also have to realize that these guys (Iran) have a President who IS building an atomic bomb while saying "Israel and the United States will soon be destroyed."  From Israel’s perspective, this is like Canada saying that about the US while setting up a bomb-making facility 300 miles from NYC so I wouldn’t say that their leaders are way off base here.  The entire country has to do monthly air-raid drills and Iranian-made missiles are fired by Hezbollah into Israeli cities on a daily basis.

  177. futures – you’re not kidding. YMU8 off -97 now, ESU8 -12. Inflation brings down the fair values which may offset some of the earnings "bullishness" (if there is any). Something has to break.

  178. test

  179. What are the chances of us mkt turning green by EOD?