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Tuesday, November 29, 2022

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GDP Friday – Cramer Rips Me Off!

Boy am I mad!

It was brought to my attention last night that Jim Cramer has stolen my plan, which I called "The 3% Mortgage Solution" in my Feb 9th column, and simply added a point to it and claimed it as his own on national TV.  I’m not sure how to feel about that – I’ll be glad if the plan is used of course, but seeing Cramer take credit for my work is a little irritating.  In fact, "Cramer’s plan," as laid out, also lifts elements from my 2/16 article – the latest version of my year old plan for immediately ending the mortgage crisis by making the government an equity partner in the homes.  So congratulations to Cramer for sinking to yet another new low in broadcasting – I suppose only writers from TSCM, where Jim has overseen the loss of 87.5% of shareholder equity in the past 5 quarters, are worthy of being given credit by the great Cramer while the ideas of us independent bloggers are just his for the poaching

Other than being shocked last night by Cramer’s flagrant foul, yesterday was a pretty good day.  We executed our plan of buying out our short DIA puts into the morning run-up as we rolled up our long puts and we grabbed some XLF puts as our first trade of the day, which worked out well as a day trade.  We did a little bottom fishing with UNH and ISRG and caught the IBM rally for a quick momentum play all before lunch.  In fact, at 11:20, we were done being bullish as I said to members: "I do expect a big temper tantrum this week.  I know I threw one at Bush’s last budget (in fact it was BECAUSE it hid so many costs) and the GDP is going to back up the Doom and Gloom squad tomorrow so still balanced bearish off this level as we haven’t hit one of our goals yet:  Dow 7,400, S&P 780, Nasdaq 1,450, NYSE 4,850, Russell 415.  Keep that in mind."

We had added long QID puts as general virtual portfolio protection and those are working out so well we are becoming concerned with our April $64 covers – which seemed safely out of range at the time.   We had a bit of a false bottom after lunch but I said to members at 1:33: "Not good on XLF – see they tested $8.40 to upside and failed.   That puts them on path to test $8.20, which is light resistance on the way to a real test at $8 and below that we are back to $7.60 so be careful if this starts breaking down."  We ended the day picking up some FAS calls, just in case our bearish stance was wrong but it looks like there was no need as the pre-market (7:30) is already looking awful.

We are getting hit from all sides this morning with the government announcing a much larger stake in C along with the FDIC doubling fees charged to lenders and, of course, the upcoming 5% drop in GDP.  For Citigroup, the government is expected to match $25Bn in privately held preferred stock conversions, so $50Bn of preferred comes off the books and the conversion price is $3.25, a massive premium to yesterday’s close, which will immediately dilute C by 1/3, pulling down all the indexes they are a part of.  Running an onerous deal like this may be good for the government but it’s bad for confidence in the financials and we can expect our pals at SKF to fly back to $180 or better today – only this time I’m not so certain I want to be shorting them.  Contrary to Cramer’s advice, we had been using the SKF $230 calls at $7.30 as disaster protection and yesterday I suggested selling the SKF Apr $95 puts for $5 into the close – those should do very well at the open!

The XLF is miles above the low of $7 from last Friday and I warned members how easy it would be to have that 15% drop back that could send SKF up 30% ($240), this is the danger we fact when we have an ultra-ETF like SKF that is indexed to a broken ETF like XLF.  Of course that’s also our opportunity on the downside as a .35 bounce off $7 (5%) can send SKF tumbling $20 or more (10%) – that was the essence of our 1,300% gainer last Friday and here comes the set-up again so stay tuned in intra-day chat – hopefully we’ll get another swing at this one. 

Meanwhile FNM (if you are a taxpayer, you own it) lost $25Bn this quarter and says they need another $15Bn to get through the next one.  FNM lost $59Bn in 2008, making GM look efficient and we’re not even discussing bigger brother FRE (we own them too!), who may need $35Bn of their own to move forward.  The two mortgage companies hold about 200,000 foreclosed properties ($200K each = $40Bn), double last year’s rates but, once again, I will point out that delinquent loans account for just 2.4% of their total virtual portfolio’s of $5Tn – cash flow and mark to market is killing these companies, not bad loans

We’ll be watching XLF $7 to hold, also oil at $40 and copper at $150 as signs of the overall economy.  The Baltic Dry Index fell below 2,000, which was our watch level from last week and now we need to see them hold 1,900 or we may be looking at another big, global sell-off.  China is not buying our bonds, they are SELLING theirs as local governments are running out of cash.  India’s Rupee sank to record lows against the dollar as their economy slowed to 5.3% growth (from 8.9%) in Q4.  The rising dollar was good for the Nikkei, and that market gained 1.5% but they were alone in the region as the Shanghai went 1.8% the other way and the Hang Seng fell 0.7%.  "Asian economies have proved to be more vulnerable than most had been anticipating to the collapse in global export demand," said David Cohen, director for Asian forecasting at Action Economics in Singapore. "They have dropped at a pace not seen before. Exports just went over a cliff in the fourth quarter."

It’s 8:30 now and Europe is off their own cliff now that our -6.2% GDP Report came out.  That is way worse than the preliminary reading of -3.8% and way worse than the -5% analysts were expecting.  EU markets are down about 3.5% across the board, an indication of broad-based program selling that is hammering the US pre-markets as well.  We will certainly be testing our last week/November lows at the open and it’s going to be very hard to make bullish plays into the weekend but now is certainly the time to buy if we can hold our levels again (hedged of course!).

One of the best ways to open a position in a falling market is by selling out of the money naked puts.  In addition to our usual "Buy List," I had 4 nice-looking candidates in yesterday’s chat:

  • AMGN took a nice dive today.  $50 puts are $1.75 but let’s make sure they are done going down.
  • RAH fell back to the 50 dma crossing the 200 dma, nice spot for a rally.  Apr $55 puts are $1.58.
  • APOL got whacked for no reason I saw: $65 puts are $1.62, wish I’d seen this $4 ago this morning!
  • GMCR in an interesting squeeze on the charts: $35 puts are $1.43.

We should get even better pricing on the morning dip and these are all stocks that I like for the longer term.  Remember, scaling in is the key to survival in this market!

The November lows were:  Dow 7,449, S&P 741, Nas 1,295, NYSE 4,607 and Russell 371.  Those are our "lines in the sand" for today but, more importantly, we are closing the second month of the year today and let’s keep an eye on our 20% off levels from our Jan 2nd open.  Those are Dow 6,995, S&P 724, Nas 1,260, NYSE 4,600 and Russell 400 and we should get some good resistance there with expected bounces of 4% above those marks before March expiration (20th) or we are going to have a very, very long way to the bottom!

 

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Phil: what is the point of the alert system: I did get a mail, where is there inormation ?

Good stuff Pharm!

 Phil, I’m getting it *twice* – I was also amongst the small group of people that was being flooded with 80+ a day at one point when they were testing the system a few weeks ago. I suspect the two are probably linked so if you want to pass this along to the programmers…

 Phil, I got two of the earlier ones and got the latest one as well.  FYI, I get my investing e-mail on my phone during the day so graphics are a nuisance for me, perhaps you should survey the members and ask if they want rich alerts or plain text.  Have a great weekend.

Phil: it worked, the alert, all came thru. Salud/

The alert sent at 5:37pm came in at 5:38pm to my gmail account and I got it just once, it showed the cartoon image and the red letter text, so I consider this second test a success.

Matt – U crack me up….I was on the same page as you…  😎

Phil – I can agree on some accounts, but drugs are like cars (glup), the first one is not always the best one.  Mevacor to Zocor to Lipitor to Crestor – it is the same thing, just different potency at the target (or other targets in the case of Crestor).  Not that we need that many choices, but there are distinct differences between the drugs – even for this class.  Also, people respond differently to the same drug (e.g., anti-depressants (Prosac, Zoloft, Zyprexa), aspirin vs NSAID vs tylenol for pain relief, etc.).  Biotech is acutally much more efficient at bringing the things to phase I/II, we just don’t have the capital to bring things to market (aka the safety thing).  Once things make it through Phase IIb and work, most likely (80% or so the stats say), a drug should make it to market (unless you are Neurocrine of course, and screw up the clinical trials….morons and same goes for Pfizer for letting them run the trials).  The statistics were 1:7000 researchers for biotech vs. 1:35000 for big pharma to bring things to market.
Again, biologics are a different beast.  Humera and Remicade are different mAbs (monoclonal antibodies) to the same target (TNF).  JnJ/Amgen/Roche are also the same for anemia.  That is were COGs and competition can drive the price on the market.
While I am on the topic of drugs, much of the healthcare could be solved if they just legalized street drugs and taxed them like alcohol.   LSD, ganja/mara/hash, heroine, uppers/downers etc…they are all over rated anyway…(I did not ingest any of these 😉 )

NIH and academic research grants also drive much of what we do in biotech, b’c those academics drive the cutting edge science, targets, etc.  Biotech/Pharma then pick it up and run with it.  Courts need to overturn the patents on DNA things.  U should not be able to have a patent on a receptor to block others from working on it. Thats like me patenting the protein for hair and trying to charge you for growing it.  We all have the same ‘targets’ more or less.

Phil, did you do anything with these two trades today:
SKF $100 puts are $1 – that’s a fun play!
and
Sellling WFC $12 puts for $1.90.
What is the plan as to closing these trades, mental stops, etc.

Steve S,
You used to send out a list of stocks that have high premium for Cover Call plays, but I have a reverse request.  Could you please create a list of stocks with low options premium, preferrably in leaps or further out months, for Long Strangle plays.  Even better if you know which ones could have wild moves, but have low premium.  I need to balance my Short Strangles with long strangles.  I looked in my watchlist and most of them are "good" stocks (at least to my perception).
 
Others, please post possible candidates for long strangles if you know some too!
 
Thanks!

OT:  Politics.
Phil & others, I invite you to read all about what’s wrong w/ Obama’s economic and foreign policy moves.
Go here and read the last two days of comments and analysis of the budget (including the sheer dishonesty and hypocrisy of it) , Iraq, his non-handling of the financial crisis, and some of Obama’s simply atrocious appointments.
http://corner.nationalreview.com/
 
Phil, I hope you will avail yourself of this opportunity to challenge your own beliefs and that you appreciate that I did not simply cut and paste a bunch of stuff that makes my blood boil.
 
In one short month, Change you can believe in has turned into, OMG, WTF did I do ?
 
Enjoy and have a good weekend all. 

Doug Kass has it right — read here:
 
http://www.thestreet.com/_yahoo/story/10466702/1/kass-kill-the-quants-punish-the-probears.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
 
A snippet:
 
Don’t Laugh at the Next Paragraph !
SEC mission statement, "The Investor’s Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation" (taken from the SEC Web site)
Most investors (who are long-biased), and indeed the very U.S. stock market as a whole, are disadvantaged in a market dominated by momentum-based quant funds and by ultra bear ETFs, both of which prey on a weakening hedge fund industry riddled by redemptions and by a community of individual investors whose confidence is badly broken.
These quant funds and ultra bear ETFs, which bypass Federal Reserve Regulation T margin rules governing the extension of credit by securities dealers and brokers in the U.S., wreak havoc in a market that needs all the regulatory support it can get.
Today’s investors no longer walk tall as they have seen their portfolios shrivel up. For several years, institutional and individual investors have been competing on an uneven playing field dominated by the powerful quant funds and ultra bear ETFs that not only have a disproportionate role in total NYSE trading but, more importantly, have had an undue influence on pushing stocks lower during the course of the bear market.

XLF:   Flat for week:   Open 7.60    Close 7.60
 
SKF:  Slightly down for week !    Open 180; Close 177
 
Dow:    Down for week.    Open 7400+    Close 7063
 
S&P:   Down for week:  Open 777;   Close 735
 
Nasdaq:     Down for week:   Open 1450;   Close 1377
 
 
Conclusion:    DIE   SKF    DIE   !!!!
 
😆

Phil, thanks for that powerful speech! I hope everyone listens!
Wow, there is an iPhone view? Awesome!

Peter D
I see what i can come up with.  Will start at about 9 monyths out and screen for low volitility, those should have less premium.  Any particular strikes? can screen by any number of strikes from ATM.

Pharm
I agree, the litigation is what is killing us.   How we can have some states with no helmut laws and just ignore the people that get killed but focus in on a few deaths in the pharm industry….   Like how many people die in coal accidents vs nuclear accidents.  But the good news with no helmut laws is that we have plenty of donars.

Peter D
A few stocks that poped up with low premium are
DNA, NKE,,GSK, GIS, BA, ABT,OSIP, JNJ, UTX
I even have a search for long strangles, just a whole bunch of variables that you can scan for.

Listening to my iPod this weekend….and these lyrics just rang a bell..(Alan Jackson).  If anyone wants the song, I can send it out as an MP3.  Cheers!
In this modern age we live in it’s hard to figure out.
If anybody out there talking has a clue what they’re talking about.

There is twisted trends and psychic friends and tabloid UFOs.
The wisest man with the best laid plans might still say, "I don’t know."
Whatta you think? I say well..

"They must not be that different. The ass and the hole in the ground.
They often are mistaken for each other I have found.

Life rewards the ones who try until they got it down….

The difference between the ass and the hole in the ground."

Politics and OJ, Everybody’s heard enough.
But no amount of talking can change a mind that’s been made up.
We got Presidential pillow talk, they know just what to say.
Whatever side you are on, one thing’s for certain either way.

"They must not be that different. The ass and the hole in the ground.
They often are mistaken for each other I have found.

Life rewards the ones who try until they got it down….

The difference between the ass and the hole in the ground.

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