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Sunday, January 29, 2023

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Thursday Thump – Brother Can You Spare 20 Trillion Dimes?

I hope it's going to be a Thursday thump

At least when you hear the "thump" you know you've hit something!  The market encountered virtually no resistance on the way down back to our mid-points and we could not be more thrilled as we went bearish at the top and we've been lining up our buys all week, expecting to hold 8,650 here but frankly happy to see us go back to 8,200 since we are a little bearish and looking for bargains

We're selling our short plays like SKF and FXP (a cover if you are in yesterday's spread leg) into the initial excitement this morning as we've had great runs and we're either going to be shifting long if we hold Dow 8,650, S&P 888, Nas 1,550, NYSE 5,750 and Russell 490 (the latter 2 being well above the 50 dmas as I look for leadership there).  I called a drop back to our midpoints in yesterday's member chat, 7 minutes after the market opened and it does not look like we will be disappointed this morning with some poor retail results, even from WMT, who shocked people with a profit warning.  We already grabbed ISRG on the dip and I urge members to check out the plays laid out in last night's comments as this is a great opportunity to get in cheap!

This is going to be fun because the crappy American economy will send investors scurrying back to our crappy American currency so we can expect the dollar to pop and that will put more pressure on oil with already (ROFL) dropped 12.5% yesterday – something I mentioned may happen in the morning post.  We'll see how oil handles $40 but, as I keep saying, we're going to have a very hard time sustaining any sort of rally until we get real capitulation in the energy sector (off 5% yesterday) and investors stop putting money back into it and rotate into other things. 

We saw the same thing happen with the builders as it took an agonizing amount of time for the sheeple to stop trying to call a bottom and move on but those same sheeple are now into energy stocks and looking for the next bubble to blow their money on.  Sadly, we have had no clear leadership for them to jump on top of and we have a parade of pundits on CNBC telling people how the smart money is parking oil in tankers and other ridiculous things to keep people invested while the big money dumps out (see "The Roach Motel Theory for Oil").

I read an article yesterday where FRO alone has 70M barrels worth of tankers rented out for storage so who knows how much oil is parked out there in addition to the 4Bn barrels of global storage (SPRs plus commercial) that we're already counting.  Yesterday's 11.8M barrel BUILD in inventories and we sent 9.7M barrels of product OUT of the country last week.  Imports surged by 1.6Mb per day as at least some of those tankers full of oil took the money and ran as oil ran up from $35 to $50 in the past two weeks.  That inventory report only covered through 1/2 so who knows how many more barrels were dumped this week – we'll find out next Wednesday but another massive build in product will be catastrophic for those poor tanker speculators…

I said yesterday, at only half a joke, that we needed to keep up our 30% monthly gain from December's picks into the rest of 2009 to keep up with inflation but, looking at the Deficit figures for 2009, maybe that's right in line!  Between the stimulus, the tax cuts, the war and existing unfunded TARP money – we are crossing the $2Tn mark for 2009 projected debt and that DOES NOT take into account the fact that tax revenues may be down considerably.  That means the US needs to auction off $150Bn a month in notes and MUST find buyers.  The auctions work by adding interest to the notes until the sale is filled and $150Bn a month is 3 TIMES more than we normally auction off in a mere $600Bn average Bush deficit.  THIS COULD BE A PROBLEM PEOPLE!  Have I mentioned I like gold lately?

Still, stocks are commodities too – there are only a limited amount of shares of ownerships in these little money making machines (well, the few that do make money) to go around and that means inflation will inflate stocks too, as well as the meager earnings they do manage to scratch out.  We have our list of 38 key positions we like and we have our daily gambles but let's not be idiots and think that tucking our money away in 10-year notes at 2% is "safe."  A few years of 9% inflation can chop those notes in half on you and by the time you cash you $100,000 note you may be lucky to be able to get a Prius with it.  Money MUST be put to work in this market.  Germany and Japan are already having trouble raising cash so it is not just us with our hands out for whatever change the global market can spare. 

Asia is a mess with the Shanghai falling 2.3% and they were the stars of the day.  The Hang Seng dropped 3.8% and the Nikkei gave up 3.9% (Bombay, who fell 7.25% yesterday, wisely took a holiday today).  European markets are off another 1.5% this morning but the global Dow is still hanging tough at 1,555 and we can maintain hope as long as they can maintain 1,500 so we'll be watching that closely in our next Big Chart Review.  As expected, the BOE cut rates to 1.5%, the lowest level since the bank was founded in 1694 so when we say these are once in a lifetime rates – we are NOT kidding!  The ECB meets next week and has rates on the continent at 2.5%, already down from October's 4.25% but the markets still want MORE (or less as the case may be).

So the world banks will be lending money at 0% and borrowing money at 2%, then 3%, 4%, 6%, 8%, 10%, 14%, 18%… at which point I think we'll flip our position but, for now, we are firmly bullish on interest rates over the long term.  We'll hear from Obama at 11 and we're hoping his speech on the economy firms up a floor at our mid-point so we can at least move back to a 5% test of the upside.

Jobless claims for last week were way better than expected at 467,000 (540K expected) so that's good news and we get a report on Consumer Credit at 2pm, which almost certainly grew in November by about $2Bn vs a $3.5Bn decline in October as holiday shopping trumped recession.  Earnings are off to a rotten start with big misses by GAP, HELE and TXI this morning but BBBY, BLUD and RT were good last night so we have to give it some time before we draw conclusions.  Volume is still very low, hopefully today we'll have some decent action and, of course, next week earnings season starts in earnest so it's going to be a wild ride.

As long as every man, woman and child on earth can scrape together 3,333 dimes for the US collection plate – everything will be fine!

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Last week I entered into a SKF July110 call at $30, against a February 140 caller at $9. I now realize I have entered a long position of its’ own, rather than a hedge against my financials. Having been hit hard by an implosion of DXD options implied volatility last month, I look at all that empty premium “air” above my July 110 position, and am concerned. Could you please a suggestion or two, which makes this hedge much tighter

ATVI looks interesting

TD Ameritrade Buys Thinkorswim to Expand in Options
http://www.bloomberg.com/apps/news?pid=20601110&sid=a1AOXRsTz0kw

DRYS is insane!

phil:  what do you recommend as a play for isrg?  just buy the equity and forget it :)?

phil, does that mean buy ISRG??

Phil: with selling feb 12.5 for DRYS, there could be initial excitement now to sell a call ???

 ISRG, pretty big miss on the street’s numbers.  Perhaps an over reaction to the down side here though..

nav as insane as drys & not pulling back either?
 
Time for PUTS?

As a happy Swimmer I’m concerned about TD Ameritrade’s buyout of SWIM.  Although I don’t imagine they will do anything to hurt TOS’s awesome trading platform, but I do fear commission hikes down the road.   Everytime I see Sam Waterson pitching $9.95 trades as a bargain I realize how good my rates are (1-cent/share, $3 minimum) for my trading level.  
Anyone use TD Ameritrade’s platform?  Just in case they do do (hehe "do do" hehe) the unthinkable and fold the TOS platform in to TD Ameritrade’s, how bad would it be?

Phil:
my march 93 DIA puts are 30 % green, is some of this gain to be cashed ?

SWIM   I’ve got a call spread with + 5 Jan 10 5s / -2 Jan 7.5; -2 Feb 7.5.   First, how mad am I that I didn’t take out my 2 Jan 7.5 callers yesterday (they went from .025–>.55, what’s a mere 2100% among friends) especially since one of SWIM appeals is that you can close shorts for .05 or less without commission?   Second, there’s really nothing for me to do, right?  I wait for the premium to run out of my shorts and then close ’em along with a long?   At least I was naked on one LEAP.  Sigh….

FSLR on a $7 15-minute pump; gonna recommend a short to 150 here …

thanks phil

Great bottom play and great call Phil but the reason Xbox is doing so well…..ATVI COD4 COD5 Guitar Hero…they should have a great Q….unless they’re using the money they make to heat the building

 Cap, be careful shorting FSLR  – could be an Obama friendly stock.  I gave up playing FSLR roulette wheel last year, been burned too many times.

Phil/ISRG:  Gotta give you a shout out on that call last night.  Thanks!

GS good to buy puts for MOMO?

Ameritrade & TOS – I have had Ameritrade for years – they are OK. After their last big buy/merger with TD Waterhouse, they merged the two software platforms over months quite OK and now offer both. I suspect they are buying TOS for the software and I expect down the road they’d fold it into TD’s platform. As for comissions, I guess they’d be rationalized after a while to be same as current TD’s commissions, but not right away.
In fact, I was considering moving one of my IRA accounts to TOS but am going to pause to think it over as I don’t want to have IRA & non-IRA at same place and am concerned about starting an account at a place that just got bought over as transition may affect things adversely. May go to TradeKing instead – anyone have suggestions/opinions?

Phil – what do you think of LINE (Linn Energy).  They locked in prices last year, and the dividend is safe (for now).
 
http://seekingalpha.com/article/113097-double-digit-dividends-linn-energy-dow-chemicals-40-86-strategic-income-fund?source=yahoo

Phil: ok, the DRYS shares were taken away from me, then I sold feb 12.5 puts for 2.34$, so I am NAKED, have no DRYS shares,
with DRYS rising again, how about selling feb 12.5 for  3.4 $ ??

Phil: of course selling DRYS feb 12.5 and having no shares is very risky.

phil:  new to all of this..your UYG trade..is that a buy the Feb5 puts and sell the Feb5 calls?

SWIM/Eph – …. Oh well, thank goodness you have position advantage at least…  There is something you can do, you can roll out to the same Aug spread which is + .60 and + 40 for your callers and + .14 for you.  When the deal goes through, it’s the same net cancellation.
 
Since it is a cash and stock deal, what will happen at expiration?  I’d have a + 5 / -7.5 vertical.    It will probably be simpler & cheaper to sell the position rather than go through a complicated assignment.  Also, I might as well hold onto my naked LEAP because it will move based on the market’s assessment of the deal and since AMTD appear to get a good deal it might very well move higher, right?

Rlogan – sell calls and puts for cash in UR pocket. 

Pharm – Ref Line. I hope that it is basing right here, at least that how I interpret TA. B/C of hi yields options are cheap, even with IV=60, so it is not a good candidate for CC.

Phil my man: I stick to my MAKED position on DRYS with only the puts,
just got the UYG hedged stock position, RoR is 31 %.

Phil: did you comment on my PART 2 of my 2008 review yesterday ? I still had questions.

Bro – thx.  I see a few gaps that it filled going back in the 6 mo charts.  ~ $15 is a floor from back in Oct, and if it breaks it, back to 11 or so we go.  I will ease into it, and sell some puts along the way hoping for an upside move.

 phil, your thoughts on wmt here? should i wait for some downgrades before initiating a new position?

Phil/GLD
 I have the JAN10 $80 calls (I’m up 37%)… Looking at selling front month against them? Any suggestions?

Like the US the UK has recovered from the lows. -0.5% with 15 mins left. I’m again amazed that people are shruging off the data especially with the job data tomorrow. Why buy ahead of that nightmare ? I’m still bearish I’m afraid, look at the retail woes for december , that surely will feed through to more job losses and the like. Worse to come methinks !

Barack’s at GMU today.  Bout 30 mins from my house.  Of course, his new house is alot closer to me at just 10 mins.  🙂
 
Really curious what he says about stemming foreclosures.. I REALLY hope he doesnt’ reward the risk takers.  Cept for those they already have (banks, builders).  Btw, his proposal for allowing taking current/future losses against previous profits is hitting big headwinds.

 phil, i like axp as  a company but they look like a good short here.  can buy feb 20 puts for 2$ and sell jan 20 puts for a $1 to reduce the basis.  should provide good downside protection?

TM I’ve got 65 callers so I’d like a little slippage in the next week, but the stock just keeps on truckin’

GLD/texas    One of the nice thing about GLD is that with $1 strikes it’s easy to adjust.   Which to sell depends on yoru short term opinion on gold, but the Jan 87s for $1.10 can’t be that bad.  It gives you almost a 3% cushion for 8 trading days and you still earn over $100 per contract.

GLD/Texas    If you’ve got the money, you might want to roll your calls from Jan 10 80s –> Jan 11 70s.   It’s cost you just over $10, but you pick up a $10 in strikes and a whole year of time.   It’ll make the adjustments easy if GLD drops down into the mid-70s.

Phil
In your opening comments today you said   "We already grabbed ISRG on the dip and I urge members to check out the plays laid out in last night’s comments as this is a great opportunity to get in cheap!"  I cannot find your comments for last night please help  thank you

Thats it 🙁

GLD   whoops, I have the 2010 70s….Phil should I take my own advice to Texas and roll out a year for < $6?

ISRG/Bill   It took me a while also to find Phil’s comments…they are in yesterday’s comment section, starting about 4:15 and going forward, he’s makes several different comments.

I thought they had a fireworks show lined up after the speech.

GOOG resistance 320 but its been bought up all morning if this bad boy can break above 320 and hold we may go green today….900 on the S&P scary line

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