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Which Way Wednesday – Fed Edition

Wheee, that was fun!

There's nothing like a good sell-off when you are prepared for it.  Roll out of bed and drop 20 feet unexpectedly and it's terrifying but willingly climb to the top of a waterslide to plunge 50 feet and it's exhilarating.  By the way, if you do drop 20 feet rolling out of bed – it may be a good idea to move your bed and if your virtual portfolio took a big hit in yesterday's very minor correction, it may be time to move some of those positions as well.

We were not just prepared for a drop, we were almost bored stiff waiting for it but, in the end, the call to cash out our bull plays into the weekend was a very solid one and now we have 150 points to go before we have to consider a re-entry at those levels.  So far, we have a very minor 1.5% pullback off a 15% run since July 13th so 1.5% more to go for a 20% retrace.  That will give us 9,118 on the Dow which is, amazingly right about our 5% rule off 8,650 (9,082 to be exact) so let's call that 9,100 and VERY significant.  Our other 3% pullback lines are S&P 980, Nasdaq 1,950, NYSE 6,400 and Russell 550.  This is the great thing about being the creator of the 5% rule – I can round off if I want to because, IT'S MY RULE.

I'm sure if Fibonacci were alive today he'd say: "38.2%, 40% – what's the difference, it's just a guideline!"  Fibonacci discovered his sequences in his search for a way to blend math, art and nature.  Clearly the stock market is ruled by math and human nature but too many chartists forget the art of the thing.  That's why our 5% rule bends around psychological chart resistance points, the flexibility we have to take market psychology into account is what allows us to hit our targets on the nose a year in advance but it's the "art" of it that tends to bother people because it does require an intelligent person to look at a chart and decide which moves are real and which are not. 

Why did we predict the market would be 40% off the top at the end of Q2 earnings last November?  It was a combination of our fundamental analysis of the real damage that had been done to the economy as BSC, LEH and others imploded and the above Fibonacci series, that paints 50% off the bottom and 38.2% off the top as significant points as well as our 5% rule, which places great significance on 20% market moves.  That led us to conclude that the proper Dow trading range for Q2 would have a mid-point of 8,650 and 5% below it was (again, we round) 8,200 and 5% above was 9,100.  This is roughly equal to S&P 880 to 980, Nasdaq 1,750 to 1,950, NYSE 5,700 to 6,300 and Russell 500 to 550

Historic Dow Jones Chart

As I pointed out a few weeks ago, this does not make me bullish or bearish in my outlook, only "rangeish."  At the top of our range, we flip bearish until the market proves to us that our range should be expanded.  We've been very demanding with our breakout zone and I've insisted we need to see 100% of our indexes over the line.  When push came to shove – it was only the Russell that couldn't punch through 574, just like it was only the NYSE that couldn't break out for us in June and led us to flip bearish right at the top. 

The lack of a retrace was getting downright unhealthy.  As I often complain - rapid rises in the market, especially when accomplished through what we call "stick saves" create virtual air pockets in stock prices and make investing more and more dangerous as we move up.  A simple example I use for members is to imagine the stock market has just 100 total shares.  In March, those 100 shares were worth $1,000 and there was $1,000 sitting on the sidelines in cash.  Shares are bought and sold every day but it doesn't really matter as they are never all bought or all sold.  The bottom line is that perhaps 25% of the cash actually moved off the sidelines but the market has gained 50% since March.  Where does that leave us?  Well that means we now have 100 shares of stock "worth" $1,500 but now there is only $750 on the sidelines to buy it

That makes it exponentially harder to move the market higher as the values grow as it takes more and more sideline capital to grow the market each day.  Since low interest rates, unemployment and debt are still keeping the sideline capital from growing – the market holders face a diminishing pool of sellers.  In fact, the entire expansion of "value" of the market is an illusion as it WAS possible in March to exchange 100% of the stocks for the cash on the sidelines for $1,000 (assuming everyone on the sidelines would make the trade).  Now that we have USED 25% of the sideline money to inflate the apparent value of the stocks, we have a serious problem because, even if EVERY SINGLE DOLLAR of sideline capital were exchanged for stocks in a panic sale, there is only enough to pay out 50% of the market's current "value."

I'm not saying that the market is drastically overvalued but I am saying that, if we were to have a panic event, we could have a drop that makes last year look like practice.  This is the problem with moving the peg of market value up the field without letting the growth be fueled by real earnings and real capital inflows.  In a normal market, stocks and sideline cash keep pace with each other as buyers and sellers balance out and the rises in the market are driven by capital inflows which come from the creation of additional REAL wealth, not the paper wealth of a virtual portfolio increase.  None of that has happened here.  Real wealth was destroyed by the Trillions, the market dropped to reflect that fact but now over 25% of the stocks are back within 20% of their all-time highs.  It does pay to consider that we may have gone a bit too far, too fast… 

So color me skeptical and let's move on to review today's markets:

Apropos of the above discussion, China's Shanghai Composite plunged to the 5% rule today on concerns that a pullback in bank lending will drain the liquidity that has, so far, fueled the 100% rally in 2009.  Yes the Shanghai was at 588 in 2007 so 350 may not seem too extreme but I'm sure anyone who owned a home in 2007 knows what would happen if you tried to get that price now.  The same is true in the US markets – they were never WORTH what they were selling for in 2007 so get returning to those levels right out of your head.  Your 1,000 square-foot Manhattan apartment was only worth $1M to an idiot and if you found that idiot and sold it to him 2 years ago then congratulations and, if you were that idiot – you may in fact be the last link in the chain of the "greater fool theory."  As a disclosure, a long FXP position (ultra-short China) is a mainstay hedge in our $100,000 Virtual Portfolio

China does not do things in half measures, bank lending didn't just pull back a bit in July – it was off 77% from June!  That's only 23% away from zero… "Even though the Chinese government insists it'll keep a loose monetary policy, the reality may be that some credit tightening measures have already been implemented," said Ben Kwong, chief operating officer at KGI Asia. "The market is worried that a significant slowdown in lending means less liquidity and [investors are] taking profits."  Mr. Kwong also listed the fall in commodity prices because of the U.S. dollar's recent strength as a contributor to the slump. "Investors seem to be nervous after sizable rallies recently, and they also want to check whether the Fed hints at an 'exit strategy' timing during the meeting," said Choi Seong-lak at SK Securities in Seoul, referring to the potential for the Fed to reverse monetary easing measures.

The Hang Seng dropped 3% (638 points), back to last week's low at 20,400 and the Nikkei dropped just 1.4% back to fill the gap to Friday's close at 10,400 but that index was clearly saved by the bell as the dollar came under attack iin overnight trading and sparked a sell-off in exporters.  The Baltic Dry Index hit the 2.5% rule and finished the day at 2,623, falling below our 2,750 line and likely on it's way to retesting 2,000, where we'll be happy to buy shipping stocks again.  What's wrong in Asia?  Well one fine example is this Bloomberg story that lead inventories in China are now double the size of the global stockpiles held at the London Metal Exchange.  Evidence suggests that the entire Q2 materials rally was little more than China stockpiling raw materials.  That means, at best, there will be much less demand going forward as China works off their inventory or, at worst, the global metals market are under constant threat of collapse should China shift policy and decide to sell back some of what they bought. 

Europe is hanging on ahead of the US open (9am) depsite reports that the UK jobless rate hit a 13-year high of 7.8%.  Bank of England Governor Mervyn King warned when presenting new economic forecasts Wednesday that totals will continue rising "for the foreseeable future."  20% of the people aged 16-25 (not in school) are out of work with 925,000 people under the age of 25 looking for jobs in a country the size of California.  Even the U.K's best-qualified graduates are struggling to find work as the employment situation deteriorates. Oliver Courtney, an Oxford graduate about to complete a master's degree from another elite college, said he has been sending out applications for the past year and has secured only two interviews.  "Pretty much every student, no matter how qualified, is in the same boat. There's going to be a real sense of despair unless things start to pick up," he said.  The UK actually has one of the LOWEST rates of unemployment in the EU

We'll be watching our 3% levels to hold on the pullback as well as our usual breakout levels which we went over in the morning post but keep in mind we have the Fed at 2:15 and a single word one way or another can send the market flying.  In all likelihood, we'll be working our way into a DIA spread today, those usually work well on Fed weeks but we reamain cautiously bearish as down still seems like the easier path for the markets.  Like any good waterslide, we're in the tunnel and we're not sure where it's going to stop – Wheee! 

 


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  1. is everyone at the beach?


  2. Well it is August.  Vacation time for lots of folks.  Raining here in Scotland though, not beach weather.


  3.  PD – Dig into your black box and throw the diehards an non-index money-makin’ play this morn.  3% is good.  : )   


  4. KBH on yet another tear premarket.


  5. Does it make any sense to try and time the selling of a cvrd call just before earnings, thinking the stock (JNJ) will be moving up towards that date?


  6. Chat.  I’m worried I, among others, spend so much time peppering you with questions that you have little time to think about and throw us some daily gems, baby.  


  7. I’m going to go from 4/5 to 3/5 cover on my SPY call spreads this morning. I’m betting that the SPX 990 area will hold. If it  fails, I’ll go to full 5/5 cover and try to wait patiently for a pull-back to around 970.


  8. Good morning.
    Dunno if you guys are interested on , just in case:

    World Agricultural Supply and Demand Estimates (WASDE) report is released:
    Link : http://www.usda.gov/oce/commodity/wasde/


  9. KBH up 1.10, 7%? On what?   What rumors are going around?


  10. I’m in the UK and I’m hiring (Halliburton petrophysics) and I have recieved hundreds of apps for the position.  A DJ with absolutely no geology experience at all sent me an app.


  11. KBH – I think TOL reported an increse in signed contracts


  12. Looks like another risky asset/commodity pump.  Dollar getting weaker and oil def up over yesterday.


  13. Beach/Morx – Good idea, later guys!

    Actually it is August and Europe is closed.  Very smart of them too…

    Black Box/Dstill – Still waiting to see if 9,220 holds on the Dow, then an upside leg of the eventual strangle on the Fed minutes.  The DIA $94 calls are .56, I’d like to get them for .50 or less and then get the $91 puts for .50 or less on a rally.  A 150-point move after that should let us get one side out up 100% and then we can decide if we want to ride out the losing end.

    Wow, builders are flying.  That’s really strange as mortgage aps FELL 3.5% this week and rates ROSE from 5.17% to 5.38% – those are the kind of things that usually get a negative reaction, not positive. 

    JNJ/Morx – it depends what you are covering and what your goal is but you’ll get a way better price before earnings than after. 

    Chat/Dstill – that does happen sometimes but not too often.  Believe me, I let people know when I’m fed up with the questions – usually when they get over 300 comments in a day and that’s not likely in August, it’s our slowest month generally. 

    Yawn I know but our breakout levels remain:  Dow 9,297, S&P 1,000, Nasdq 2,017, NYSE 6,438, Russell 562 and SOX 308.  Don’t forget it’s just as significant that the NYSE held up as it was that the RUT couldn’t break over the 33% line at 574 so those are our critical breakouts in either direction.

    On the more exciting front, we have our 3% pullback lines, which would be a 20% retrace of the 15% rally off the July lows:  Dow 9,100, S&P 980, Nasdaq 1,950, NYSE 6,400 and Russell 550.

    We’re still pathetic if the SOX can’t get back over 300 and S&P 1,000 is a must, of course.  Qs are a good directional signal around 39.50 and XLF below 14 continues to signal danger. 


  14. Hi Phil, I see those DIA $94′s have shot up past .70 right quick, would I be foolish to pick ‘em up or should I hold out?


  15. Phil, what do you think about KFT for a long term boring income producer – you know kicking it old school, buy leaps and sell calls.


  16. N/M, see we’re past the breakout now. I picked some up and am looking towards puts now.


  17. Phil: had rolled DIA putters from aug93 to sep 93, and am fully covered, probably will close some for a gain now. ok ?


  18. WASDE/Spider – Thanks!

    UK/Where – Must be getting a little worrying over there with 1M uneployed youths running around.  Isn’t that pretty much what led to riots in the 60s?

    Bulders – Yeah an increase in contracts and a decrease in actual mortgages – which is the investable premise? 

    Something good must have happened because the market is flying.  Oil back over $70, gold still below $950.  Dollar is getting hit this morning but not even a point off the highs.  The Dow is up almost 100 points off the open already!

    DIA/Skasiah – The idea it to buy whichever is cheap so we look to buy the puts on the turn for .50 or less.  Once we have the puts, we look to buy the calls.  IF we get a sell-off that lets us by the calls for no more than .60, then we do it.  If we have the puts but don’t get enough of a sell-off ahead of the Fed, then we proably kill the play as it is too risky as a directional bet. 

    KFT/Jo – I have PG on my list for the new $100KP, not KFT but I don’t remember why.  I think the deciding factor was I thought the recent pull back in PG presented a more compelling buying opportunity but they are both very good long-term plays.  


  19. Thanks, Phil!


  20. Phil any stops on WHR?


  21. Phil – Why not close the Aug 93′s 1/2 cover now instead of waiting for a drop below 9220?


  22. Phi- If we have Aug SRS calls left, should we be rolling them over to Sept?  I know the answer is obvious but it’s sooooo tempting (despite the 15% a day decay thats going to kick in) to stick with Aug calls where you can get the same delta as Sept Calls at HALF the price :) .


  23. ERY.  I know these 3xs can move fast, but is there any evidence (I’m looking at some short-term charts) that the odds are STRONG that it can pass $20 by expiration?   The premium is still attractive.  If it’s better than an even prop it will (maybe even up to a 70% chance) I may write against ‘em anyway.  Hell, maybe even $19?   Frankly, I guess I can afford to get called away at $19 – def at $20.   I don’t want to write anything longer cuz I want this crap outta my hair the last week-plus of August – or at least for now.


  24. What a joke …


  25. Yay on SPY. Very few buy the dips opportunities in this market.


  26.  Moning Phil,
     
    BAC has hit the $15 line you wanted to see tested.


  27. Phil: cannot see what drove the market up, probably will drop now,
    the best comments/advice I can get from you is paying attention to my callers and putters, I tend to neglect them at times and then they cost me,
    look at these now:
    SPWRA PUTTER aug29
    WMY CALLER aug50
    MDT CALLER aug35
    DHI caller aug 12.5
    DE caller aug 45,
    what’s the action Phil ?


  28. WHR/Bigs – I want to see how they handle $60.  Unless the Fed is giving away more money this afternoon, I can’t see us holding this gain but I don’t want to be emotional about it – levels are levels and if we break out, we just have to get more bullish. 

    Amazingly unreported by MSM – Congressional Oversight Report on "The Continued Risk of Troubled Assets:"

    If the economy worsens, especially if unemployment remains elevated or if the commercial real estate market collapses, then defaults will rise and the troubled assets will continue to deteriorate in value. Banks will incur further losses on their troubled assets. The financial system will remain vulnerable to the crisis conditions that TARP was meant to fix.

     

     

     

     

     

    The problem of troubled assets is especially serious for the balance sheets of small banks.  Small banks’ troubled assets are generally whole loands but Treasury’s main program for removing troubled assets from banks? balance sheets, the PPIP will at present address only troubled mortgage securities and not whole loans.

     

     

     

     

     

    The problem is compounded by the fact that banks smaller than those subjected to stress tests also hold greater concentrations of commercial real estate loans, which pose a potential threat of high defaults. Moreover, small banks have more difficulty accessing the capital markets than larger banks. Despite these difficulties, the adequacy of small banks? capital buffers has not

    been evaluated under the stress tests.

    It goes on like this for 145 pages but you get the idea…

    YRCW still facing BK according to Stifel Nicolaus.


  29. Phil: have BUCY stock which today is moving up, also have sep30 caller and sep30 putter,
    caller is now DITM, how would you deal with this now ??


  30. This pump is such BS !   I am looking for stuff to short; can’t really find anything; did hit KBH for a couple of quick hit swing shorts and but can’t find anything else…. maybe AMZN


  31. I covered FXE puts on Phil’s wise Fed warning yesterday. However, if there is a post-Fed surge in the Euro vs. dollar, I’ll uncover. That may be a good time to get long FXE puts for anyone interested (again, this assumes a post-Fed announcement surge in FXE).


  32. is BK = bankruppsie?
    i know, i m a dufus, but i liked whhat you were saying abt allowing the hidden artist within read the charts and you being allowed to adjust your rule. I tried to tell my math teachers that all through school. And spelling, grammer, etc but they are just so limited on their creativity.


  33. Looks like SPWRA is heading back to support at 27.5-area. Possibly a quick short there.


  34. Large build in crude inventories/gasoline and distill.  That ought to put a little damper on things.


  35. DIA/Concreata – Because at the moment they are $1, which is 15% of the price of our Dec puts and will 100% expire next Friday if the market holds up so why should we buy them back if the market isn’t failing?  Even if we rolled to a Sept $93 put at $2.40, they will only lose about .60 in premium by next friday at most so we make 66% more on the Aug $93 putter than we could on the Sept $93 putter over the same timeframe. 

    Speaking of time.  Don’t forget you really want to be out of any Aug calls you have RIGHT now.  Not the calls you sold, the ones you own.  It was very lucky to get this kick back up – don’t push your luck

    SRS/GS – I wouldn’t roll them now, but by the end of day, yes – it’s too risky to hold. 

    Damn, Oil back at $71!

    ERY/Dstill – It could pass $20 or $15 easily, the trick is knowing which.  I do like the naked sale of the Sept $17 puts for $1.25.

    SPY/Eric – Well played. 

    BAC/Micro – Thanks, now let’s see what they do with it today.

    RMM list:

    • SPWRA – right on the money, what is the issue?
    • WMY – doesn’t exist.
    • MDT – No premium, costs .70 to roll to Aug $37s so not much to worry about.
    • DHI – Also no premium, easy roll to Sept $13s so no worry there.
    • DE – right on the money, also what is the issue?

    Oil up 2.5Mb, Gas down 1M, Distillates up 800K so a surprising build in oil, that should drop it here.  We’ll see if $70 holds.


  36. Phil: WMY should be WMT, caller aug 50 ?


  37. Oil – LOL. They’ve gotten their acknowledgement of the reality of demand down to about 10 minutes per week (10:30 – 10:40 EDT, to be precise).


  38. ERY.  Oh, thanks.  Trick indeed.   <<It could pass $20 or $15 easily, the trick is knowing which.>>   I’m going with what it’s not likely to do, I think – which is pass $20 in August.  And if it does, I guess my cost is down enuf that getting called would be a blessing.   If it dumps into the mid-teens?  Oh well – I’ll keep writin’.


  39. Phil: on MDT roll you thought of roll to sep 37 (not aug) ??


  40. Phil,
    Alright …. this is quite  a shot up here across the board, Please give us your take on where we go with the different possible Fed Statements?   Also what is your take on the rest of the week?
    After the close yesterday you could see how all of the technical channels had breakout’s to the downside.  I thought to myself, "here we go maybe we will get our correction or the BOYS will be out in force to get us back in the channel." I don’t lnow if the BOYS are responsible for this?… just not that much good news or is it  becaouse everybody already knows the FED response?
    Thanks



  41. I just watched the Bob Prechter inverview DB (Elliot Wave) linked to.  Phil, what do you think, and what do the rest of you think?  Are we headed lower – much lower?


  42. Just curious.  If China was down last night, why would FXP be down?  Doesn’t look like good correlation.


  43. Prechter was at the top of his game in the 80s.  He sold Elliott Wave Theory and still does
    See   http://www.elliottwave.com
    Based on Kondratieff waves of 19th century economist who used theory to predict prices and wages.  Theory is that waves repeat in 69 to 75 year cycles.
    Like all models based on the past, they work until they don’t, and that is when they are needed the most.
    There is no easy way


  44. I GIVE UP!

    Fundamentals just don’t matter on anything especially oil. Good luck everyone.

    Economics is a waste!

    David Ristau


  45. a few weeks age I sold 5 DHI Aug 12.5 for .5 and bought 4 Sep 13c for .65. Should I sit tight for now or possibly roll the callers to the Sep14s


  46. Grant/Elliot Wave – Just like the Nasdaq never re-tested the extreme highs of the dotcom bubble I’m not sure if we’ll revisit the lows of this slump. What I do know is that the market "tried" to go for those highs after the initial dotcom crash and I think this market will make an attempt at the lows – I’m trying to position (very carefully, small bit at a time) for something like 750 on the S&P. October is always a good month for a crash !!


  47. David, Don’t be so unhappy with oil, it might help your LDK pick tonight!


  48. Phil:
    I’ve been trying to understand when one might DD on buy-writes versus being called away when the stock takes off. Below was written Aug. 3 about your CBS Aug 5s buy-write after CBS took off. First, I don’t understand the math; here’s my understanding: if the original basis is $4, your basis in the original shares would be $4 + (4.10-2.10)  = $6 after the roll. The basis in the new shares (CBS price when this was written was about $8.90) would be $8.90 – 2.10 = $6.80. Hence I get a basis of $6.40, and you’d pay ($6.40 + 7.50)/2 = $6.95. Am I missing something?
     
    CBS/Colberg – Since the Sept $7.50 puts and calls are $2.10 vs $4.10 for the Augs, you can DD the stock and roll to 2x, which puts you in from $4/5 to about $4.90/6.20 on 2x the amount so it’s worth doing.  This is what I meant about being able to scale in on already successful trades.


  49. Phil: any answer on my BUCY question of 10:25 ?


  50. BUCY/RMM – THe combo is $4 and a roll to the Sept $33 puts and calls is $4.85 so it’s really just a matter of choosing your strike for cover. 

    Still shorting AMZN cap?

    I’d say now would be the spot to take out putters and buy some puts in general, like DIA $91 puts at .43, looking to buy $94 puts, now $1.03, for .60 or less.

    FXE/Eric – I don’t know what the Fed can say that’s looser than what they already are at.

    Teachers/Morx – LOL, so true!  That was the bane of my existance in calculus – right answer but I got it the "wrong" way…  BK, of course, is Buger King, not bankruptcy.  It’s one thing if companies can’t pay their bills and go into default but, what’s really terrible is when they choose BK over MCD – it’s just unAmerican!   8-)

    SPWRA/Eric – I woudn’t short them down here.

    WMT/RMM – Also right on the money.

    Oil/Eric – True, it’s an amazing thing but I think it’s safe to assume they don’t retake $72 this week.

    MDT/RMM – Aug is over, I’m telling you what is good and sensible (conservative) not what is risky and exposes you to quick losses. 

    Fed/Chuck – I think the Fed won’t screw Obama, who just said how great everything is.  What they are likely to do is say things are much improved but still concerns in commercial lending so they will maintain easy stance but keep an eye on inflation even as they are ready to pump more money in until commercial lending expands back to "normal" levels.  So it will be a wishy/washy statement most likely with no particular food for either side which I don’t see supporting these levels but you never know – RUT is back to test 574 yet again, Qs are testing 40, XLF is back over 14 and C is hitting $4 so things must be good if the sheeple are buying, right?

    Elliot Wave/Grant – We’re not heading lower because of that theory.  Maybe I’m wrong but I swear they have a different target every two weeks.  I don’t think we’re going to go much lower unless something unexpected happens, I just think we need a 5-10% pullback before mounting the next leg up.

    FXP/SS – They just follow FXI and FXI is very much a forward price predictor, not backward follower of China so the US rally today means a China rally tomorrow, in theory.  It’s a great opportunity to buy in if we falter on this side


  51. Phil, was wondering if you could elaborate on what would happen with the following scenario:
    Buy 10 Dec 99 SPY Puts at 5.5
    Sell 10 Aug 99 SPY Puts at 0.75
    At Aug expiration, if SPY is > 99, then you get the .75 back. How much would the Dec 99s drop based on let’s say an SPY of 102?
    What about if SPY < 99? Can you lose more on the Aug 99 as opposed what you gain on to the Dec 99 (I believe that is possible because of the high gamma for the Aug puts, but want to verify that with you)?
    Can I use this to hedge against another SPY bear spread that I own?


  52. Phil: MDT, the point is you said roll to aug37 but I believe you meant sep37.


  53. DIA stuck in a 10 pt range for an hour.  Must have called the machines off until closer to 2.


  54. I’d say now would be the spot to take out putters and buy some puts in general, like DIA $91 puts at .43, looking to buy $94 puts, now $1.03, for .60 or less
    Phil, did you mean to say $94 calls at $103 for .60 or less??


  55. Phil:
    Here’s a Wednesday in August type question…. have been wondering for some time how my trading performance stacks up with others, and the answer I get will help me determine my strategy for the future. I have 263 positions – 70% in options ( balance stocks) in three portfolios with a value of 3 mil. YTD profit is about 750,000. I’m thinking I should be doing better given market moves since January. Thanks!


  56. guess i should of read the article first. another one of my shortcomings. YRCW should go to SONC. Makes more sense.


  57. GILD/Pharmboy – Hi, Pharmboy, thanks for the tips on BMY yesterday.  I didn’t thank you yesterday because I didn’t want to clutter the chat room.
    Let me throw you another one, GILD.  Seems like a solid company.  The only thing is that they don’t seem to pay dividends.


  58. WTF is going on with SRS again today? 


  59. Ssdirk- I think Phil meant the $92 puts for $.60 or under.


  60. SPWRA down?  Is it Phil’s favorite solar company?  Time to sell some puts?


  61. Updated Portfolio Results, click here.

    David


  62. Dividend paying stock/Phil – Another idea for the income portfolio: PM, one of the so-called Sin stocks.
    I heard someone saying that if you go to Sloan Kettering Medical Center in Manhattan (one of the best hospitals for treating cancer) at coffee break time, you see a bunch of nurses and doctors smoking on the sidewalk outside the building.  Those are the nurses and doctors treating cancer patients, but even they can’t get rid of the addiction.


  63. CNBC — there’s still time to get in ….hey investors, dump all your money in and chase this market !!


  64. Phil / AMZN …  small short at 85.20


  65. SRS / puttin on the squeeze today.
     
    Look at SLG, SPG for example.
     
    These are still good shorts; as long as you can put up with the squeeze plays.


  66. Phil, I was just seeing that SPWRA had broken support at 30 and doesn’t seem to have much until 27.5, where it has both support from last month and meets the 50 SMA. Even if it’s not a short, I wouldn’t want to go long here.


  67. cwan – GILD is a company that is growing YOY and has a nice little market share in the antiviral area.  They found ways to diversify their portfolio,as they expanded by making smart purchases of smaller, yet promising companies (i.e., Myogen and Corus).  I like GILD as a long term play, and I have noted on this board that I believe them to be either the next ‘Amgen’ or to be acquired by a big player.  Cramer has not picked up on my callings (yet).  They have been channel trading b’w 40 and 50 since Feb, and 52 week low is 35, 3-mo low is 41.3.  Buying here and selling the 48 Jan10 C and 43 Jan10 P is a nice way to play for a good company.  Phil may have a better play, but those are my recommendations.


  68. AMZN.   I love ur stuff for lots of reasons, Cap.   But, IMHO, the only worthwhile shorties associated with AMZN are those written monthly against LEAPs.   AMZN is so damn good long term.   Even beyond retail, their "web services" and warehouse leasing is killer – and say what you will about Kindle – I never would have found Phil’s blog/site if I didn’t first subscribe there.   Publishers and news peeps are falling in line.  As they should.   Viva, Amazonia!  lol


  69. David- With all due respect, I think you’re forgetting there’s a tab at the top called Oxen group which people can click on to see your portfolio balances, "new gamble of the day", "questions about playing DYN or CMCSA", "blog entries about GM and Ebay teaming up", your thoughts on the Fed meeting and everything else you mention. 
    I’m probably stepping out of line here since it’s Phil’s site but quite honestly, half your posts seem like advertisements (like the radio station DJ right before going into a commercial) for us to go check out your blogs/articles.  Also, I scan for Phil’s posts based on the color and your posts use the same color…making it somewhat confusing.


  70. Pharmboy, I would buy a ITM Jan 2011 Leap and sell monthly calls against it…


  71. David- With all due respect, I think you’re forgetting there’s a tab at the top called Oxen group which people can click on to see your portfolio balances, "new gamble of the day", "questions about playing DYN or CMCSA", "blog entries about GM and Ebay teaming up", your thoughts on the Fed meeting and everything else you mention. 
    I’m probably stepping out of line here since it’s Phil’s site but quite honestly, half your posts seem like advertisements (like the radio station DJ right before going into a commercial) for us to go check out your blogs/articles.  Also, I scan for Phil’s posts based on the color and your posts use the same color…making it somewhat confusing.


  72.  phil, for a PG leap, would you recommend 55′s or 60′s?


  73. David- With all due respect, I think you’re forgetting there’s a tab at the top called Oxen group which people can click on to see your portfolio balances, "new gamble of the day", "questions about playing DYN or CMCSA", "blog entries about GM and Ebay teaming up", your thoughts on the Fed meeting and everything else you mention. 
    I’m probably stepping out of line here since it’s Phil’s site but quite honestly, half your posts seem like advertisements (like the radio station DJ right before going into a commercial) for us to go check out your blogs/articles.  Also, I scan for Phil’s posts based on the color and your posts use the same color…making it somewhat confusing.


  74. Apologies.  Did not mean to post three (or even two) times.  Lost my internet connection and hit submit once too many times seening nothing was happening after I hit Submit the first time. 


  75. UNG/Fab – Old news.

    LOL David!  Oil is a very tough game.  I gave up on it myself since the frustration (ultimately rewarded) we had shorting it last time around. 

    DHI/Drum – I’d wait for a hopefull pullback, you don’t have much harm in waiting as you’re in for net $10 and it’s now net -$70 while they have a definitive chance of going to zero on a small sell-off.  If you are worried about the upside, add a call – can’t hurt much. 

    CBS/Chaps – If you buy 100 at $6 you are spending $600.  If you then sell $210 worth of puts and calls you are in for net $390.  In the next round, you buy $890 worth of additional stock so you are in for $1,280, which is $6.40 on 200 shares.  If you roll the Aug puts and calls to 2x the Sept puts and calls even, it doesn’t add or subtract any money, it simply shifts your obligation and you’d be in for $6.40/6.95.  So I suppose the math was wrong on that other one but I don’t really know what the original play was.  If he was in for net $4, he would have had to have added at $5.80 to go to 4.90/6.20, which doesn’t make sense on Aug 3rd. 

    SPY/Mampcs – I am not an options calculator dude!  They have those on most services and you can plug in what/ifs but the key is to look up your deltas and the Dec $99 SPY puts have a delta of .43 and the Aug $99 SPY puts have a delta of .29 so you will lose about net .14 on a move to $102 but then the Septs will expire worthless and give you an extra .40 next Friday vs your expected premium decay of 1/15th or .36 so, pretty much, the sale of the Aug $99 puts covers your premium decay and not much else.  If that’s all you are seeking to accomplish over the next 10 days, then great. 

    MDT/RMM – Ah, well yes then, I meant Sept, not Aug.  See, you are learning – you can tell when something doesn’t make sense, which is good. 

    DIA/Smasher – A little earlier for a holding pattern into the Fed.

    DIA/SS – Damn, that’s 2 days in a row my brain is misfiring.  Gotta take this thing in for a tune-up.  I was trying to say that I like the DIA $91 puts at .43 (still .42) as an entry here.  Stage two is we want to buy the $94 CALLS, which are now trading at $1.02, for .60 or less on a sell-off.  That is the spread I want to take into the Fed at 2:15.  If we can’t get that spread then the trade is dead and we should just kill the puts

    Trading/Gel – You are up over 20% after 7 months and you are worried?  Don’t forget the market FELL 35% for the first couple of months.  If you can keep that pereformance up and compound your returns, you’ll have $6M in 3 years – most people would consider that fine and, hopefully, the reason you didn’t do much better is because you are hedging and balanced, which will prevent you from losing, which is actually more important than winning (Buffet’s Rule # 1 is: "Don’t lose money").

    SRS/GS – same nonsense as every other day except yesterday.

    Volume just hitting 80M at 12:30 – very weak.  Don’t forget we have not had a big volume up day lately so if the Fed takes us higher and we break levels, that will be a very bullish technical!

    SPWRA – MER said their shares were overpriced so it’s best to wait a bit in case the downgrade police come out in force but, ultimately, a nice buying opportunity for a long-term play.  I’m very suspicious of this downgrade because it comes on the same day that one of Cramer’s minions puts out a pre-market article titled "First Solar Has Everything Going Its Way" so it may be just Cramer and his fund buddies trying to shift capital from the winners into their loser trading vehicle. 

    PM/Cwan – I can’t believe what they have people paying for cigs now, like $8 a pack or something crazy…  I worry about PM suffering from legislation although they never do seem to.  As you say – addiction…

    SRS/Cap – just a retest of $11.50 so far (didn’t hit it). VNO and BXP snapped back up – it’s amazing how little conviction people trading those stocks have as the value of the companies goes up and down $250M a day, as if there’s no fixed value at all.  VNO only has 160M shares so $250M is $1.50 a share or 1/3 of the projected earnings so, efffectively, expectations of annual earnings go up and down 33% a day on the REITs on no news whatsoever…  Keep in mind that’s the kind of lunacy you are betting into.

    Speakling of lunacy – Nas up 1.5% at 2,000 so a big deal spot.  Qs just a little under 40.  RUT still a little under 574. XLF holding 14 but SOX are failing us under 300, which is bad considering AMAT had good outlook. 

    SPWRA/Eric – I agree, see above. 

    GILD/Pharm – Nice pick!


  76. dstillwe -
     
    thanks for the comments.
    on AMZN …. my thesis is simple…. valuation is absurd …its a trading toy…. the consumer is dead …. AMZN is a pure consumer play …. you have to pick your spots on it; both long and short.   I usually can’t justify a long play on it at these prices, so I look for short ops.   Its been working pretty well for me, so it is what it is ….
     
     
    Phil / SRS … good point … if you saw Taleb on CNBC this morning, he was talking about the marginal buyer; this stuff is a perfect example.
    When IYR breaks down, these REITs will go down with them.  At these prices I expect to see more secondaries (who on earth is buying them ???), which will only dilute these companies further, as are their divvy payments, which are largely in stock.  Supply of REIT stock will continue to expand; fundamentals suck; and eventually the house of cards will collapse.


  77. Sav – I assume you are referring to GILD.  Yes, then you could buy the $35 2011 Calls for 14.6, which have $3 in premium and a 0.8 delta JIC they pull back a bit.  Otherwise the 40s would work as well with $5 in premium……


  78. Phil; many, many times I see a sector dropping,
    then there is a reversal,
    this happens frequently,
    technology has been dropping, now, here comes the reversal.
    for instance:When AAPL is down, traders cannot resist to jump in again.
     
    You expect a drop in the market later today ? I do.


  79. RMM … remember, none of ths is traders … its all HFT Autobots !!!


  80. From Forbes - Fed faces it’s Zimbabwe Moment:

    WASHINGTON — When stock markets plumbed new lows in March, the Federal Reserve responded with nearly every tool in its box. It announced it would create new money to buy $1.25 trillion in mortgages and $300 billion in government debt.

    That purchase of government debt looked particularly ominous. Creating new money to buy government debt is the sort of strategy that’s known to destroy economies--just ask Zimbabwe, which suffered so much hyperinflation that it destroyed its currency. The Zimbabwe central bank printed bills in the denomination of 100 trillion Zimbabwean dollars, then found they had value only as a novelty item on eBay. Eventually, Zimbabwe was forced to abandon its currency altogether.

    But the difference between the U.S. Federal Reserve and the Reserve Bank of Zimbabwe (one would hope) is that the Federal Reserve will stop before it wrecks the dollar.

    We also have a 10-year auction at 1.

    10 Cities Facing the Next Real Estate Bust:  Las Vegas (18% Commercial Vacancy Rate), Baltimore (15.8%), Detroit (24.8%), Sand Benardino (15.9%), Hartford (20.2%), Dayton (22.8%), NYC! (12% and I just read JPM is desperately trying to dump space), Charelston (16.6%), Charelston (16.6%), Tacoma (13.6%), New Haven (17.2%).  Think about it, one out of 5 stores in a plaza is empty…

    Oxen/GS – David is new and it will take time for people to get used to clicking his stuff, I’m considering ways to integrate things more smoothly.  As to the blue, Opttrader is blue and that’s pretty much a moderators color, we just usually don’t end up in each other’s sections that often. 

    PG/Jo – I take it you  are  looking at Jans, which are hardly a leap at this point.  I wouldn’t want either as I’d rather go with the 2011 $45s for $10, which is $3 in premium and you can sell 3/4 Sept $52.50s for $1.20 so you are in for about $9 on the $7.50 spread as an entry.  You can start that by going with the Jan $50s and the same sale as you build up some cash to fund the roll back.

     

    $23Bn went out at a 2.49 bid to cover and 3.734%, which is low so still pretty strong demand overall


  81. Thanks, Phil…. I thought I might have been over-hedged. I’ll just press foreward and stay tuned in.


  82. Pharmboy – yes sir, that would be my play for GILD.


  83. PM…I read that that PM is a spin-off from MO to serve the "foreign" markets which are less effected by taxation than the U.S.


  84. Anyone have a consensus on market up or down after FED DECISION?


  85.  phil, i was talking about 2011′s


  86. lol savannah if only we knew. Can’t help the feeling the boys are ready to thump the buy button tho….


  87. Interesting – Bond yeilds going up (rates getting more expensive) so people did NOT like that auction so much.  At the same time we punched through levels as if it was a great auction so who knows what’s going on now, maybe just another pump but who’s to say they don’t keep going after the Fed so be careful.

    Drop/RMM – We’re sure not trading like people are even slightly worried about a drop but I do expect one.  If not later today, then next week but, for now, we are dangerously close to hitting all our levels again – this time it’s the Nas and SOX holding everyone back. 

    PM/Gumba – Well they still do kill Americans too, I don’t think they only kill foreigners…  8-)

    After Fed/Savannah – I Keep trying to think of what the market wants to hear – I guess more long-term loose money will make the commodities happy and that can keep everything going as XOM and CVX are leading the Dow up at the moment.  


  88. First trade I’ve made with your service today, didn’t follow your advice exactly but earlier bought the Aug $94 for .82 and Aug $92 Put for .64. Slightly different than yours but I’m comfortable with it for the day. Glad to be a member, Phil!


  89. I am curious, though, is it worth rolling those $92 puts to $91? I feel pretty well hedged, but do you have any tips for what I could’ve done better. Also, I will be getting rid of my Aug calls by the end of trade, thanks for the reminder!


  90. Phil – Marketwatch reported the 10yr auction as "So So" – I just assumed that "so so" is good enough for the market these days :-)


  91. Shucks!  A cloud is in the sky.  8-)
     
    Prediction for the Fed announcement:  QE will sunset.. until they need to do it again.  TALF will be expanded or more money put up to make it nearly irresistable for banks to refi commercial loans.  Shoot.. they might just announce that they’ll buy out the banks for loans of that type.  Looking for a pop in IYR.  If that doesn’t happen, loogout for the SRS rocketship blasting off.


  92. DIA/Skasiah – With those entries I’d take the $1.10 (up 34%) for the Aug $94s off table and probably cash the Aug $92 puts (still .61) as the trade was a gamble on a big move and we already got it.  You could leave 1/2 the puts on the table hoping for a pullback as that would be gambling with the proifts only and there’s a very good chance you will get 1/2 of that back regardless so a pretty good risk/reward on a free ride.

    So-so/DB – I think it was just a machine-timed BS move to make people think something good happened. 

    Clouds/Matt – Overall, this party is unlikely to end until the median home price in America is at least $500K (150% inflation). 


  93. Ooh, you can finally get more than .13 for selling an ATM C call option (Sept 4s just sold for .36).
     
    Incidentally, by comparison GOOG Sept. 460s are only 14.20, even though GOOG stock is 115 times more expensive. So adjusted for the stock price, C calls are three times more expensive than GOOG calls.


  94. This might be slightly off topic, but does anyone else notice that we get really excited over stuff that the general public couldnt care less about.  For instance, my friends have no idea why I get really excited the night before every third friday of the month.  Anyone else have any similiar incidents?  Maybe we could come up with a top 10 ways to tell if your a member of PSW.


  95. Can we defeat the machines ?!?!


  96. Total Budget Deficit in JULY = $180.68 Billion.   O B A M A !


  97. Don’t forget we might get a knee jerk reaction, either way (up first or down first) after the Fed.  Well, some of us wish there is no Fed, so we don’t have crazy announcements at 2:15 PM a few times a year, and the market often reversing the next day.


  98. C/Eric – But which is more likely to drop 10% by mid-Sept?

    LOL Craig – You’re right.  Like I said when I was stuck at the airport a couple of weeks ago, it’s so frustrating with the TVs all on CNN and CNN has just a tiny little ticker in the corner saying what the Dow is doing while they interview the florist for Michael Jackson’s funeral.  It’s like the whole world is upside down out there!   I was also honestly shocked by how little the Boca crowd really understand what happened to their retirement accounts and how passive they are about the whole thing, even though it has forced them to scale back their lives considerably and many of them don’t even have enough to expect to last anymore.  Yet they still have the same broker and the same account as if those are the guys that will fix things…

    Speaking of same accounts.  Bill Gross and the other fund all-stars are on CNBC ahead of the Fed, usually when that happens it means the announcement is in the bag and we’re going higher…

    Good point Peter – Beware the head fake!


  99. phil: BOUGHT LDK yesterday for 11$, when is it time to cover with calls and even sell puts ?


  100. Does it ever make sense in instances like this to take a straddle and set really tight stops (maybe trails)  just before the news?


  101. Cap: why do you care about the deficit ? did you care about it prior to Jan 2009 ?


  102. Selling naked X $45s for 1.50 is a fun short play.


  103. Come’on Cap, last year July it was $103B under Bush. 


  104. not to insult the guy but did anyone see regis on fast money yest?…he said he was still DDing on stocks he’s owned since pre 2000…and when karen finnerman mentioned that your purchase price was the least important factor when considering whther to sell or not, he had no clue what she was talking about, none whatsoever…


  105. Did I hear that right, the Fed to buy 1.2 TRILLION in MBSs?  Is that old news?


  106. LDK/RMM – If you are early in the scale then selling the Sept $11 puts for $1.20 is pretty good and you can wait on the $11 calls (now $1.35) with a sell stop at $1 but hopefully get $1 + for the $12s on a run up (now .75).

    Straddle/Smasher – It’s dangerous as this news can send us up or down 100 points really fast and you’ll get raped on the bid ask as it moves. 

    Oops, here it is!  No change (of course) no change for a long time

    Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out. Conditions in financial markets have improved further in recent weeks. Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

    The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

    In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

    This is NOT bullish – pretty much as expected but October is not far away.  Just the wishy-washy BS we expected on the whole...

    Overall, it was right to cash the DIA calls at $1.10, the $92 puts are now .67 and should be stopped out at .55 but could hit $1 themselves if sellers decide this isn’t all that exciting (certainly not new highs exciting).


  107. Clouds / Party / Phil, but what will occur before that hyperinflation?  Will we have to go back down on the second dip of this recession with fears of deflation closing in on us before we beg for inflation?  I don’t think we’re ready for it yet.  The gov’t might be.. but we’re not.  Btw, Safeway is lowering their prices upto 25% for 1000s of items.  Home Depot and Lowes are also lowering alot of their prices.    The only thing I see going up are gasoline and taxes.


  108. opt nazis say i cant sell naked calls.


  109. Yeah, yawn on the Fed. Love watching markets here as every trader tries to second-guess every trader.


  110. Phil, the Boca crowd? Im not part of it, but I’m in South Florida. No matter what, these people will not listen to alternative ideas. I’ve been trying in my group for several years now.
    And, I was sort of expecting a downturn, as the pre-Fed announcement speculation expired.


  111. And down we go!


  112. phil: looks like you ntriggered a drop in X temporarily,


  113. Wow, dollar just blew higher.


  114. Please allow me to ask a dull question after the Fed excitement: Does anybody here have experience with the broker tradeking?  How do you like it?
    I do have an account at TOS and I do love them.  But I am paranoid putting all the money in one broker account.  So, I’d like to spread my risk by splitting my investments into 2 brokers.


  115. Phil-  I own 100 SRS Aug $13 calls (average cost $.93/contract) which are currently trading at $.35.  I’m also short 50 SRS Aug $14 calls (sold them for $.72/contract average) which are now trading for  ~$.175.  The 50% cover saved me even bigger losses than I experienced with SRS over the last week.  The question is…what to do at this point?  A couple of things come to mind.  Let me know your thoughts please.
     
    -Close both positions and use the funds to buy Sept SRS calls.
    -Sell 50 of the $13 calls and convert the funds to Septs SRS calls.  Leave 50 long $13 calls (in case SRS explodes to $14 or $15) and 50 short calls (to help lessen the pain if SRS drops further).
     
    Thanks in advance.


  116. I was part of the boca crowd when i attended FAU in the early 70′s. But i don’t think thats the crowd to which he’s referring.


  117. JOLT – Job openings and labour turnover - interesting facts from BLS


  118. Is it just me… or are we at a crossroads here? 


  119. Guess what road they took.


  120. Someone tell me what just happened. 9400?


  121. Woo hoo – Go X!

    Regis/New – Hes just like the old guys in Boca!

    $1.2Tn/Smasher – Yep, old news, that’s why I didn’t highlight it.

    Hyperinflation/Matt – Depends what you call Hyper.  I think they need 150% in the next 10 years at least so that’s about 10% a year and the longer they put it off the more they’ll need.  We have a $13Tn debt and the Government is spending $3Tn a year on $2Tn in collections so they need to goose the GDP to $35Tn (up 150%) and spend $5Tn (up 66%) with $5Tn in collections just to stop losing money.  Don’t forget debt service is $500Bn of $2Tn and that won’t inflate if they do it right so you’re looking at $2.5Tn of real spending heading up to $4.5Tn (up 80%) so spending increases at 1/2 the rate of inflation.  If they add 5% more tax (VAT) to all that it’s another $1.5Tn a year and Presto – we can pay off our debts!  That’s my plan and I don’t know of one that works better, or at all for that matter…

    Wow, no volume on the Fed – THAT was unexpected.  Volume just 120M coming into 3pm, that’s 20M shy of "normal."  This, of course, puts the stick back on the table so be careful bears!

    Florida/Barf – I think one of the greatest scams in this country is the raping of all those people’s retirement accounts and things like Madoff just make them even more fearful of doing something intelligent with their money (maybe that was the point?).  The GS crowd has their money in the markets and they are making a fortune, the retired folks in Florida are sitting on the sidelines and sampling cat food at the supermarket – it’s ridiculous as they’ve effectively re-established the exlusivity of the investor class to exclude the average American.

    Oh WTF?


  122. PPT is on the scene-


  123. Blood big stick – what happened ?


  124. Dollar got jammed right back down.


  125. LOL, we got head-faked!!! 

    Still waiting on Nas 2,017 but Qs broke 40, RUT is over 574 and XLF still over $14 so all is well at the moment. 

    Good time to take out DIA $93 calls and Roll Dec $95 puts up to Dec $96 puts for .50.


  126. Phil, Were you quick enough on the X calls?


  127. Phil: take out means what in proper Options-English ? open or close ?


  128. SRS dancing around the $12 mark.
     
    Phil- help por favor…..on killing the Aug SRS calls.  I don’t have enough margin to leave the 50 $14 contract short unless i also leave some of my $13 calls at risk of that 15% a day decay you talked about.


  129. RMM- close


  130. Another way to try the X trade (if anyone’s still game) is to sell the Aug 45/47 call vertical. This uses $200 margin and collects .80 credit at the moment. The naked sale of the 45 uses $880 margin, at least in my account. So that’s $200 margin to try to collect $80, vs. $880 margin to collect $155.

    So higher profit potential with the bear call vertical, and also a smaller maximum loss.


  131. The Russell is a c. hair away from breaking its on the 7th.  Pretty bold action.  If we close above, looks like there could be more pain on the way.  Lower and it’s just a final spurt before the plunge.


  132. GSsucks: txs a lot,
    have you noticed that verbal expressions people use often suck ?


  133. TORONTO, Aug 12 (Reuters) – Finning International (FTT.TO), the world’s largest Caterpillar equipment dealer, said on Wednesday its quarterly profit fell 29 percent as the weak economy sapped demand in many of the areas where it does business.
     
    The company, which sells and rents heavy industrial equipment and engines, said it will no longer provide revenue forecasts for 2009 and that it would likely not achieve the forecast it gave for 2009 in late 2008.


  134. Split/Cwan – Good plan!  Don’t know TradeKing though.  What you need to consider is perhaps having an active and more passive account.  If TOS is good for active trading, that’s where you want to concentrate the trades that reqire 90% of your attention while you can put longer-term investments into the account you don’t monitor all day long.

    SRS/GS – I was just looking at them for the $5KP.  I would flip the 50 Aug $14s to 50 Aug $12s at .70 (+.50) and roll the calls to 50 Sept $12s  at $1.15.  That’s $3,500 + $2,500 sold and 50 $12s are $5,750 so an even move overall.  If you want to be a bit more aggressive, either buy 25 more Septs or sell 25 less Augs for now and give SRS a chance to come through.  Of course, once the Aug callers are dead, you can still sell Sept calls to get more cash – the $14s are .90 so that would be most of what you lost right there.  

    FAU/Morx – No, more like the upper, upper, upper classmen…

    JOLT/DB – Those are interesting charts but I don’t really see there that we can’t, in fact, be at a bottom. 

    X/Jamie – Nope!  As you can see I was writing go X at the top of the comment and then WTF? by the time I hit submit – CRAZY!  Oh well, they still have to break $55 and THEN go up 3% before I have to roll to Sept…  Eric’s idea is good too. 

    Take out/RMM – Sorry that would be close.  Proper DIA stance now is naked Dec $96 puts as we stare in total disbelief into this tower of bull that’s being build around that position. 


  135.  Phil…….Could you type out a short glossary of your terms, for us newcomers?     Some of your terminology is a bit confusing to me………..ntil I’ve time to learn what the phrases mean.
    Examples:   "kill the calls"…..sell them?, "take out the calls"…..sell them?, buy them?, "putter"…….long put?,short put, "caller"….long call?, short call?
    I’m sorry for being so ingnorant about this.


  136. Today’s wild up and down and up is totally irrationally exuberant ?


  137. to my wife take out means clothes.


  138. SRS in 5KP
    Phil, are you closing out the Aug 13′s or rolling to Sept?


  139. lfl: txs for speaking up, you are not ignorant about this, its a battle I have been fighting for a while and got beaten up,
    it would be so simple to use action terms like, open or close , long or short,


  140. Wow, that CROX is a monster, up 150% since my May buy-in so I’m getting back a little of the dough I lost on that pig last year.  Gains are muted, however, by endless rolling of covers – I was too afraid of the downside to sell puts along the way.  Lesson learned.


  141. DIA/Phil, you mean Aug $96 puts, correct?


  142. Completely insane !


  143. RMM — do I really have to answer that question about the deficit ?
    I understand you worship Obama, but does that make his reckless spending policies just okey dokey with you ?


  144. Pharmboy ….. so up 80% YOY (and getting worse by the month) is good ?


  145. FTT/Kustomz – Good find but no one seems to care about the reality on the ground. 

    We did get a big move on the day after the last Fed day (June 25), up about 180 but we faded from there (at 8,600) and made lows the next week.  At this point we can only look to see if we are breaking new highs so:

    Dow 9,432, S&P 1,017, Nas 2,015, NYSE 6,632, RUT 576 – that puts us into our 3 of 5 rule where 3 breaks to new highs means we go bullish and use these lines to flip

    If no sell-off into the close then we must cover DIA Dec $96 puts with 1/2 Sept $94 puts, now $2.55 but if we are below 9,400, we can afford to risk naked overnight. 

    Keep in mind the volume is so low as to be meaningless at the moment. 

    DIA Sept $90 puts are good speculative play at $1.20, they were $1.80 yesterday


  146. Will we break the Naz and RUT highs from Friday….  will be a battle royale.


  147. RMM: I have to agree.


  148. Cap" I worship nobody,
    the spending is all about fixing things, the only complaint on this I have that the application of all this money is accompanied with fraud plus some recipients should not have received any $$.
    Why would I give GS $$$ ???????


  149. Bears turning bullish is a good time to go bearish

     


  150. kustomz there are still bears? Haven’t read a good bear case in ages (and would REALLY like to)


  151. SRS in 5KP
    What to do with the Aug13C now .30


  152. Cap – most of that money was already allocated by Bush.  Obama’s hasn’t even been seen yet.  Concerned, yes, but I would rather have what we have now than the failed state we had for 8 years.  No more from me on this.


  153. Glossary/Ifl – If you want to create a Phil to English dictionary I think that would be great to add to the New Members guide..  I’ll be happy to discuss with you when the market isn’t testig new highs 20 minutes to the close. 

    SRS/Allen – I’m giving it another day.  I don’t like the roll prices and I certainly don’t like today’s move so I’d rather wait. 

    CROX/Mr M – Lesson should not be don’t cover, lesson should be stick with something you believe in, cover sensibly and the small gains add back up.

    DIA/Blair – No, that was the net cost of the roll up from Dec $95 puts to Dec $96 puts.  In those trades, you always want to roll up $1 for .50. 

    Bears/Kustomz – Yes, yummy yummy capitulation!

    Bear case – This move was total BS of a nothing Fed statement that didn’t change a thing and the volume indicates there is less buying interest at these "breakout" levels than we would expect.  I see no reason to get bullish off this move as we haven’t broken Friday’s highs and we weren’t bullish then either (and we were right).   The big drops came on expiration weeks, not the week before and that was our worry from the start – that we’d have this prolonged top before the fall


  154. a jab to the left..


  155. Looks like a battle to pin DIA at 94 even.


  156. glossery – is there a way for us to have a wikipedia type glossery that you members can create and add to as things come up?


  157. SRS/GS – I was just looking at them for the $5KP.  I would flip the 50 Aug $14s to 50 Aug $12s at .70 (+.50) and roll the calls to 50 Sept $12s  at $1.15.  That’s $3,500 + $2,500 sold and 50 $12s are $5,750 so an even move overall.  If you want to be a bit more aggressive, either buy 25 more Septs or sell 25 less Augs for now and give SRS a chance to come through.  Of course, once the Aug callers are dead, you can still sell Sept calls to get more cash – the $14s are .90 so that would be most of what you lost right there. 
     
    Phil- The Sept $12′s are at $1.55.  Did you mean the Sept $13′s?


  158. wow  CAT  Got some puts when it touched $48.
     
    Pharm:  GOL is going to touch $10!!!!! (but im not in now)  amazing call your in the 6′s


  159. SRS/GS – Oh sure, NOW they’re $1.55!  I meant the $12s, and I’m sure they didn’t move that much so I must have looked at the wrong one.  Yes to the $13s if you have the margin for it. 


  160. You have to be pretty bullish to buy into a sell off like that with th ejobs numbers before tomorrow’s open ! – but quite a few were buying the dips.


  161. LOL….NOW they’re $1.55….it’s feasible actually with the flash trading and such.


  162. Man you have to love these Fed days!  90 points up and 70 points down in 90 minutes.  We make China look rational. 

    We’re sitting right back at Friday’s close so our bull goal for tomorrow is not to break below 9,340, which was pretty good resistance on Monday.  Below that and there’s noting stoping us from heading back to the week’s lows at 9,220 again.  

    Wiki Glossary is a great idea – Can’t anyone start one of those things? 

    So glad I didn’t panic on WHR and VNO – still not sure about SRS….

    OK guys – Everyone get’s an "I survived a Fed day" badge and now we have 48 hours to expiration week


  163. Thoughts on Selling Aug DIA $94 calls?  They should drop tomorrow if the DOW stays the same right?  And if we get a selloff, oh Nelly!!!


  164. Good comment by guy on CNBC – Said the Fed essentially said "We’re still up a creek but now we might have a paddle."


  165. Spider – didn’t even play, but thansk … just watching the charts and following the $$.  I can only allocate 5% of my capital to  under $10 stocks.


  166. LDK tanking; I thought the news wasn’t till 5PM.


  167. Boy, old cnbc never fails to impress! good old Bob Pisani referes to the big pc maker acer as if were pronounced as a lower part of his anatomy as opposed to it being the high card in poker!
     


  168. morx release is out for ldk
     

    Second quarter 2009 revenue was $228.3 million;
    Shipped 231.7 MW of wafers, up 20.9% year-over-year;
    Secured a RMB 500 million (equivalent to approximately US$73 million) short-term loan from The Export-Import Bank of China, and an RMB 500 million three-year loan from Huarong International Trust Co., Ltd.;
    And reached mechanical completion of the first 5,000 metric ton (MT) train in its 15,000 MT annualized capacity polysilicon plant in Xinyu, China.

    Net sales for the second quarter of fiscal 2009 were $228.3 million, compared to $283.3 million for the first quarter of fiscal 2009, and $441.7 million for the second quarter of fiscal 2008.
    For the second quarter of fiscal 2009, gross profit was negative $205.5 million, compared to $4.9 million in the first quarter of fiscal 2009, and $112.3 million for the second quarter of fiscal 2008.


  169. http://finance.yahoo.com/news/LDK-Solar-Reports-Financial-prnews-2555572525.html?x=0&amp;.v=1
    Their margins collapsed totally, like most other solar co’s this Q.


  170. DIA/GS – I don’t like naked call selling unless you are catching the top of a run (like I thought I was with X).  That way, you have the extra cushion of the caller overpaying for the calls you sell.  Even as wrong as my timing was on X, those calls only ran to $1.65 at the close.  If you sell the DIA $94s now, they are already back from the top and who knows what nonsense can happen overnight.  It’s a high-percentage trade but you could open down 50% in the morning and never recover – just too random for me.  On the other hand, a 2:1 backspread against the Sept $95s at $1.64 is fine because you can roll them to a vertical as the Sept $96 calls are $1.15 so that’s +.20 and you can always buy more $95s to cover and you’d be in the $1 spread for net .50 or less and that would only happen on a big breakout over 9,400. 

    LDK – huge inventory write-down, $2.03 per share loss!  I missed this concept – Solar companies have been sitting on inventories as project financing freezes.  During this time, there are improvements in technology and now no one wants the old crap that’s laying in their warehouses.  This is very disappointing and I’m not sure I’d buy more down here, better to load up on SPWRA…

    Of course, if I were INTC, I’d jump all over this industry and take it over.  They have alread played this game of selling into Moore’s law and they can bury all these ameteurs by scaling up massive panel production. 

    LOL High! 


  171.     
    It occurs to me that the word sell and the word buy would change everything if used freely. To "close out" is pretty clear and to "get" as well, but if you don’t know if you are long or short to begin with, it’s confusing. I don’t usually know because I don’t follow every word in here all day long – and that’s the problem in a nutshell.
    If the software would support it, I would suggest having a persistent window in which the current day trades are shown – as "long DIA 91P" and long DIA94C", with possible price objectives for each.
    And Phil, I’m up 17x what I paid in fees for your service, and that only counts the trades I didn’t think of myself. So don’t count me as complaining.


  172. Sorry, thats 170x, not 17x.


  173. Advice to folks who have a couple of pops when the market closes: "Don’t do mental arithmetic". It’s 34x. Trust me.


  174. Barf.. that only in one month? incredable.
     
    LDK WOoooops
    David, What your recommendation, sell now at 10 + cents or tomorrow maybe at 9?


  175. LDK earnings:

    The company did have a -2.01 EPS. However, the company made two one time charges, a huge one time write down and another one time charge:

    "During the preparation of its second quarter 2009 financial results, LDK Solar’s management determined that an inventory write-down and loss on firm purchase commitments of polysilicon materials of approximately $175.8 million and $16.7 million, respectively, was required as a result of the continued rapid market price decline for solar wafers. As a result, gross margin and results from operations were negatively impacted in the second quarter of fiscal 2009."

    This should be configured into EPS when looking at it. Why are they not being configured into EPS estimates?

    With that the negative earnings is only a 14 million dollar loss. Therefore, it would mean that the EPS is extremely better than expectations.

    Additionally, the company said:

    "For the third quarter of fiscal 2009, LDK Solar estimates its revenue to be in the range of $240 million to $270 million"

    Estimates were only at $236 million for average revenue estimates.

    Better guidance as well.


  176. John Paulson just disclosed 168M shares of BAC bought recently!  $2.8Bn!!!   I told you I liked them…

    LOL Barf!  Glad you are not complaining… Good deal on the gains – you know it follows that if you getting a 34x return on the fees, then the thing that makes the most financial sense would be to pay much more fees!  8-)


  177. LDK/Phil, would you consider rolling the LDK covered calls down tomorrow?


  178. Pharmboy – That’s simply not true (about the spending).


  179. Great news for SRS longs.  I’m officially out after having taken another massive beating on it.  Why is that good news?  Because, as you’ll see over the next week plus, it takes off when I don’t have any calls/shares.  I did sell some $12 Aug puts against it so I guess I’m still "in" it but it was 80% of my portfolio (so you can imagine the losses) and now it’s like 10%.  I may come back to it at some point but with expiration around the corner, it was getting too stressful watching the calls plummet each day…..and the rolls to September were rather costly (i.e. to get the same .56 delta as a $.75 Aug call, one has to pay $1.50 for a corresponding September call).  Anyway, good luck.  I still believe in SRS and a pending CRE crash/insolvency/refi-problems just as I have since last year so I’ll be rooting for you guys.

    And yes, a la Brett Favre, I might get back into it tomorrow and you’ll have to put up with my "WTF is up with SRS?" posts again LOL.


  180. Not sure what the question was earlier about Trade King but Ive had them for 2 years and love em. Great broker, probably the best discount out there.


  181. LDK – I dunno David.
    FSLR, a solar company we don’t like, grew it’s top line 25% and bottom line 10% yoy, didn’t write down inventory, didn’t take on a huge mountain of new debt and was trading at half the P/E of LDK before these results.
    I am extremely dissappointed in these results, and not sure how much I can trust "it wil be ok tomorrow" from a company that apparently can’t even give it’s product away.


  182. Paulson …. what price did he get in ?  is he now trying to get out ?  are they real shares ?  option s ?  equity swaps ?
     
    Will he go down like Bill Ackman did on TGT ?


  183. BAC – if Paulson bought all those shares in the 2nd Qtr, he paid between 6.44 & 13.45, according to the charts; so he has made good money; but he also could be long gone ….
     
    He probably has a good HFT program to goose BAC also …


  184. GSsucks- Sorry about the losses but good to see a sense of humor about it. I also feel like I’m doing a favor whenever I get out of a play I got beat on-it always works out how I had planned all along two days too late


  185. What other stocks did Paulson bottom feed on ?   News now hitting wires:
    Capital One
    Regions Financial
     
     
    Me thinks this will be a sell the news event (sell the pops in those stocks).
    Paulson bought much much lower.


  186. Was paulson buying these as treasury sec? Such a corrupt guy.


  187. different Paulson …


  188. skasiah, this is John Paulson, not Henry Paulson the treasury secretary.


  189. Whoops. Wondering why I couldn’t find a news release. Thanks for the correction.


  190. I stand by my Hank paulson’s a crook comment, though.


  191. Skasiah-  Agreed on all points…particularly things working out "exactly"….just a couple of days (possibly right after options expiration?) or a week later.


  192. PRXL, LDK … Isn’t it all just the gamble of the day>  Geez.  Maybe just add an alternate link to Bodog or Pokerstars?  Or, better yet, recast it as OxenGroup.net (instead of .com) – then you could advertise on national TV that its a play-money site and "not for gambling…"  Good stuff.   Darts and target seem like an improvement by now.  


  193. TradeKing/skasiah – I was asking if anybody had experience with TradeKing.  I’m glad to hear your good comments on them.  I’ll consider opening an account with them.


  194. Tho at least the LDKs et al of the world are useful for training on working ur way out of the sh**ter.  Yeah, thats it, right?  It’s a mock trading training tab?  Okay.  I get it now. 


  195. 34x/Phil – Wait a second, Phil.  If you are going to charge more fees for someone who won 34x, can you charge LESS for us guys who suffer in SRS?
    8)
    [I hope the smiley shows up.]


  196. LDK conference call notes, if interested. Sorry if not.
    Apparently their writedown mostly applies to 2500 tons polysilicon thay they purchased about 45% above the current spot price.  (I think STP will have this problem too)
    They have not written down any finished product yet, so may be more writedowns to come, they have $40 million in finished goods plus $86 million work in progress in inventory.
    $200 million shelf offering of new shares as soon as market condition allows.
    All their short term loans will need refinancing soon, they expect interest rates to remain unchanged.
    They have spent $1.6 billion building plant so far but not depreciated any of it yet. Expect to start Q4 but declined to give  guidance at what rate.
    They have built a new polysilicon plant but the cost structure wont support economic operation so they are not ramping up. They can produce at $80-100/kilo market rate is well below $80. This plant cost $250 million. Declined to give forecast for cost of completing the plant and making it competitive, but indicated it would take at least 18 months.
    I think I heard this right "They are not sure the local power company can provide enough electricity to operate their new poly plant at full capacity."
    Limited project pipeline transparency given in china (!) with only one notable project of 40MW mentioned, and  "hope to participate in government sponsored projects next year". Not very convincing, but maybe just a presentation issue.
    Expect to ship 290MW next Q which is 90% of their current wafer capacity.
    Forecast 95 cents/watt cost for next Q giving "mid single digit gross margin on wafers". I think this is around average for their competitors. Declined to state gross margins for sold wafers in Q2 they will have to "get back to us".


  197. Ummm, yes it was Cap (about the spending).
    $85 billion for its housing and economic recovery program (passed in Oct 2008), which includes buying preferred stock from both Fannie and Freddie. $22 billion of its $700 billion Troubled Asset Relief Program (also 2008 legislation)….That’s $107B of the $181B. 


  198. OK, now I am done with that.


  199. cwal/Trade king: Yeah I haven’t had a bad experience yet, it surprises me sometimes that they’re as cheap as they are. They’re doing a promo now where if you get referred by someone they give you both $50 for ‘national friendship day’ so let me know if you do start one and we can get free money. :) That’s not why I recommending them to you though, honest to god.


  200. HUM, etc al: Anyone have any ideas for how to play healthcare reform when the bill gets closer? Obviously it’ll depend on the specifics but I can’t imagine insurance company shareholders wont be at least a little jittery. Public plan would of course be a huge catalyst but co-op could hurt, too.


  201. thx, steven


  202. LDK.   Holding 9.55 in extended.  I’m buying another 1/4 my base and I’ll write 1:1 to bring price down closer to 10 – and then, well, itll be a long-er play.


  203. dstill – I am in the 9 Dec09s for $3.  I will most likely do the same and roll down.  Not so bad on the earnings, just not quite what I expected….


  204. LDK I think I will let it ride.
    The beauty of Phil’s play is that if it trades sideways from here we’re at break even in a month anyway.



  205. Cap I was looking more specifically at how reform might affect insurance tickers. For instance, Humana already works as a Medicare third party, does that put them at a competitive advantage during these negotiations, etc.


  206. Thanks Cap. The most expensive healthcare system in the world is only 25th most successful at stopping infants from dying.
     
    Was that on the list?


  207. Skasiah -
    To be honest, I don’t really follow the public insurers; so I don’t have a strong view at the moment as to how any of this stuff might affect them.  
    My focus has been more on a) expansion of government; b) expansion of deficits; c)creating more entitlements; and d) detrimental impact on choices, coverage and quality of care.
    But it would seem that this would not be good for most insurers.


  208.  dstill/steven – LDK is a freaking widowmaker.  Before the Sh$$@t hit the fan i sold LDK 10 2011 puts for 3$.  LDK then went all the way to 3 or 4.  then i sold 4 2011 puts for 2.5 and closed that with a 60% profit.  Then i ended up closed LDK with a small loss of .5.  Of course than china announced a stimulus and subsidies for LDK which shot is right up and I had screwed myself out of a profitable play.  So I am a little emotional when it comes to LDK – so i sit and watch.  But good luck to you guys!


  209.  skasiah, i think the easy money has been made on the health insurers (i.e. the risk reward isn’t there anymore)  I would definitely stay away from insurers that are heavily involved in Medicare part D like HUM.   "Reform" will probably result in a very watered down bill that will marginally increase coverage for "some" of the uninsured IMHO.  I would recommend Big pharma – i think they are severely mispriced between generic concerns and obama b.s.   There are probably some other plays in companies that attempt to streamline medical administrative costs.  I like MRK, and CVS here.  


  210. LDK/Blair – It’s rare that I see earnings that make me change my fundamental view on a company but LDK is offering little that I see to justify a $1.5Bn market cap.  Assuming you got in for the net $9/10 buy/write, we’re right about $9.50 after earnings so not a catastrophe yet.  The problem is the Sept $11s will likely retain .50 of $1.20 while the $11 puts will be around $2 so still the same $2.30 we started with or more.  So we’ll have to see in the morning but, at this point, maybe rolling to Dec $7.50 puts and calls for +$2 and being happy to get out even.  Maybe by then things will be looking up again as all this sector’s woes trace back to a bad economy which, according to global indexes – is over…

    Spending/Cap – Oh Cap, that is so ridiculous!  Blaming Obama for spending money to fix the economy is like blaming someone for having an "extavagant" triple bypass after having a heart attack.  They are doing what it takes to fix the train wreck they were handed.  Job losses, DESPITE the Bush stimulus, were accelerating out of control and peaked in the Jan NFP Report at 681K, which was more than 3 times what they were in September, when the prior administration had carte blanche to fix things and the only thing they chose to fix was making sure GS got all their money back from AIG. 

    Bush mailed $168Bn worth of checks to people in May 2008 and managed to drive job losses down from 160,000 a month in July to 128,000 in August after which things totally fell apart so roughly $4.2M per job saved per month for Bush.  Obama has driven NFP down to 250,000 so that’s 400,000 Jobs improved and anything less than $1.6Tn sprent for the month means Obama is more efficent than Bush at creating jobs.  Those are the fun numbers but the reality is 400,000 jobs at $38,000 national median is only $15.2Bn so we are, in fact, better off handing out cash but the problem is the political whiners in this country would freak out if we just handed $570Bn to 15M unemployed people (instead of spending Trillions to bail out the banks they default on) and allowed them to put that money back in the economy so instead we spend the money on whatever crap and hope that GS doesn’t steal all of it and some of the money actually finds its way down to the people who need it.  Trickle down indeed….

    SRS/GS – It’s been a terrible play, such a massive disappointment on something that seems so obvious. 

    Thursday’s economic calendar:
    8:30 Retail Sales
    8:30 Jobless Claims
    8:30 Import/Export Prices
    9:00 RBC CASH Index
    10:00 Business Inventories
    10:30 EIA Natural Gas Inventory
    4:30 PM Fed Balance Sheet
    4:30 PM Money Supply

    J.D. Power goes bullish on autos, saying U.S. sales could rise 15% to 11.5M units next year. The firm also could raise its outlook for 2009 by 200,000 units.

    U.S. stocks could still go higher, Dr. Stephen Leeb says, but once Wall Street realizes how serious earnings issues are, it’s only a question of who’s left holding the bag. "For the next 10 years or more, money will be made by those who invest in the hard stuff – commodities – and the emerging markets."

    Foreclosures Set 3rd Record High in 5 Months – A total of 360,149 properties received a default or auction notice or were seized last month.  “We’re in a deep hole,” Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc., said in an interview. “There is a whole new wave of foreclosures tied to the cyclical dynamics of the economy.”  The median price of an existing single-family house dropped 15.6 percent to $174,100 in the second quarter, the most in records dating to 1979, the National Association of Realtors said yesterday.  “There are a slew of factors showing fundamental weakness on the demand side: tighter underwriting, job loss, investors who’ve been badly burned,” said Stuart Gabriel, director of the UCLA Ziman Center for Real Estate in Los Angeles. “We have not seen the bottom of the housing market.”

    California was 3x the national average with 1/123 homes foreclosed last month and up 15% from June.  That’s a rate of 1/10 homes foreclosed for the year!  Arizona was only 1/135 but they are coming on strong with a 25% increase from June so maybe McCain can give them some more good government and make them number 1!  Also, 126,000 people went BK last month, 34% more than last July and we are on pace for 1.4M for the year and that’s in the average 3.2 person household so 4.5M people in families that have nothing at all and will not likely be "rebounding" for 7 more years at least.  

    Only 235,000 out of a possible 4M home loans have been modified under the loan modification program (set up by Bush in the Fall to "fix" things).  BAC has modified just 4% of it’s qualifying loans (the worst) and JPM was the best at 20% but they hardly have any loans and they are mainly to rich clients.  “It has been more profitable to put a home in foreclosure than restructure the loan,” Swonk said. “The only thing that helps is forgiveness of principal, and there is little willingness to do that.”    

    New Jersey had the 18th highest rate and 6,467 filings, a 40 percent increase from a year earlier.  Las Vegas had the highest foreclosure rate among metropolitan areas with a population 200,000 or more. One in 47 households got a notice, up 89 percent from a year earlier and up 6 percent from the previous month.  One in 47 for the MONTH!!! That’s on in 4 homes in foreclosure this year and their rate is accelerating rapidly.  California had 7 cities in the top 10.  Don’t you think if the housing market were turning around there would be some improvement (signs of a bottom) in the two places that were hit first???  Keep in mind a foreclosure means the people couldn’t sell the home for even a small loss.  One in 4 homes in Las Vegas boarded up is not going to quickly lead to improving property values.  Casino stocks were, of course, on fire this week in this insane market…


  211. I thought i was the only zombie up this late. go to bed man there is time enough during the day to worry our selves to death :)
    Look at Asia they seem happy, what could be wrong ? :)
    take the rubber hammer to the head and sleep !


  212. LDK/Steve – as I said above, way worse than expected but FSLR is uup 40% since May and FSLR is down 20% so I think we were on the right horse but, sadly, our horse may have broken it’s leg now…

    Paulson (John, not Hank)/Cap – That was his June position, there was a 1.2Bn share day on May 20th, capping off some active buying in early May that took them from $9 to $15 so my guess is Paulson came in around $11.50 on average.  It makes more sense that he bought that big AFTER 4/20 earnings, not before.  There hasn’t been huge selling and I doubt he was day-trading them (or quarter-trading for that matter).  I was just saying earlier in the week I like BAC for the low $20s at the end of the year so I guess Paulson saw the same thing. 

    German GDP down "just" 5.9% vs down 6.6% expected.  

    LOLSkasiah – Have to agree with you re. Paulson (Hank). 

    Gambles/GS – Yes, this earnings have been less than predictable, which led me to stop making my own picks in the $5KP (my gambling portfolio) while we wait for resolution on the crap we’re already stuck with.   I simply am not seeing things I feel confident in ahead of earnings and this is why I don’t do anything "of the day" as some days the winning move is not to play at all…

    LOL Cwan – Good point! 

    LDK/Steve – Good notes, thanks.  I’d say if LDK goes back to $5ish I’d like them again as I wouldn’t mind buying them wholesale but $10 is now too steep, especially if the economy isn’t going to be as great as the markets would have us believe. LDK has doubled capacity but is shipping just 24% more product and that is for 10% LESS money than they sold it for last year.  This is not unwinnable – as I said earlier, INTC ran their company this way for decades but they also had one of the best management teams ever assembled and they were ruthless monopolists, which is always helpful..

    HUM/Skasiah – I’d go for wating and bottom fishing on companies people panic out of.  They already had a good run and, if they break higher, then you can buy anyway long-term.  More likely people cash out at some point and there will be buying opportunities on the pullbacks (oh my gosh, did I just say buy on the dips?!?).

    Health care/Cap – Hey good stuff but… Oops, excuse me, I had to pause as another person died in the US due to inadequate health care coverage….  I think that you need to take into account that…..  Oops, I’m sorry another baby died in a home delivery for an uninsured mother….  perhaps health care may have some actual economic benefit as…. Damn, sorry, a lady in Florida just went into a diabetic coma because she couldn’t afford the co-pay for here medication this month…  this country currently diverts $2Tn to that industry that does nothing more… Oops, sorry nothing worth mentioning this time, some homeless bastard finally kicked the bucket — now we can give his spot on the sidewalk to someone more deserving….  than the minimum necessary to keep people alive but certainly does nothing to make sure they are…  Oops, that one was serious, guy had a heart attack but ambulance won’t take him to the 3 closest hospitals because he doesn’t have the right card so he’s got to go 40 minutes away to County General…  actually healthy as that would negatively imact the bottom line. 

    CVS/Jo – That is a good way to play, the existing distribution networks should benefit from even a watered-down version of health care but I get the vibe from Obama that he’s not going to settle and he’s willing to go down as a one-term President on this one if he has to.  I wonder if the Republicans have the balls to take this to November?  The Dems are about to unleash a PR campaign that’s going to make them look like real jackasses on this issue and the only way they can press their point is with more vitriolic BS (please visit http://hopeychange.blogspot.com for your daily suppliment of vitriolic BS) which is the same crap that cost them the House, the Senate and the Presidency already.  I guess you can say they never learn but that should be pretty obvious for the book burning crowd…

    Since it’s 3 am and I’m not tired, I will take a moment to address the nonsense in Caps "Top 10 list" on healthcare but rules are no moving debate to the morning post – I don’t want to talk about this nonsense when the market is open.

    1) 88M lose current employer insurance - A) it’s a BS figure, B) The employees are paying for it C) NO ONE in Europe has employer sponsored insurance – THAT’s THE IDEA.  You don’t pay for it, your boss doesn’t pay for it – it’s a distributed social burden like Education, Police, Roads, Fire Departments, EMS…  or should we privatize those evil socialist institutions too?  Wouldn’t it be great if EMS was privatized and an ambulance wouldn’t come unless you had a valid credit card to give them?  Then the jaws of life could be sold in designer colors and you’d have to decide if you wanted them to save you with the deluxe or basic model… 

    2) Your health care coverage will change – Wow really?  Thank goodness my coverage is the same $50 per month it was when I got my first job and my co-pay is still $1 but at least now I have to go through my primary care physician (and another co-pay) in order to get permission to take my daughter for an MRI after she slams her head into a tree (2 day delay - this actually just happened to one of our neighbors). 

    3) Umpire 4) Fed picks your treatment 5) Less Liberty – How is any of this different from the current system where companies have been convicted of denying coverage illegally as a policy?  In the current system a person who is terminally ill gets 180 days of home care, after which they get none so they’d better make sure they die within 6 months or their family is just screwed so most people (not rich people of course) go to "hospice" care, which is essentially a place to die because families simply cannot afford the burden of keeping them alive anymore.  Those are the sick choices forced upon the majority of Americans and if you can’t understand why people are angry about this then you are going to be really shocked at the political backlash that rains down on the Republicans if they defeat this measure.  Every visit to the doctor, every co-pay, every medical bill, every medical emergency, every sick child will remind voters why Republicans suck for many, many years….

    6) Higher Taxes than Europe Hurt Small Business – Hurt them more than paying $1,000 a month per employee for health care coverage or are we only talking about the pain felt by business who pay nothing for health care now and currently let thier employees shoulder the burden?  This question asks – Is that the right recipe for jobs and wage growth?  Well, yes, it is…  Whether paid by the company or the employee $12,000 per family per year goes out to health care, that’s close to 30% of the average American familiy’s total income.  Isn’t that a tax already?  Even worse (or better if you are a  conservative) it’s the same $12,000 whether you make $1M a year or minimum wage (which conservatives also fight to keep down at $7 ($14,560/yr) so the poor are forced to choose between food and medicine, with access to higher education being a luxury they can never even aspire to in the land of opportunity but thank goodness Cap is going stop us from taxing people who earn 20 times that much $15,000 more because that might force them to choose not to have that new granite countertop installed this year and will crash the economy of the interior decorator just to save a few miserable, unproductive, uneducted deadbeats’ lives. 

    7) Who makes medical decisions – So now 3, 4, 5 and 7 are the same thing?  Seriously, there are so few arguments that you guys can’t even make up 4 different ones out of 10? 

    8) Taxpayer Funded Abortions.  Wow, I’m not going to touch this.  The fact that Cap is proud enough to publish this list and then advertise it here says enough for me.  Maybe we should ban tonsillectomies too as they are based on Darwins theory of evolution that we no longer need them. 

    9) It’s not paid for.  Yes it is.  Americans pay $2Tn a year for health care now.  Anything that relieves that burden from the consumer and transfers it to the government for less than $2Tn is a savings.  It’s not about the cost, it’s about the redistribution of the cost…

    10) Rusing it – Yep, while I was writing this another 100 uninsured people died (2,700 people a day, one 9/11 every other day) and we’ve been debating health care since Truman and not rushing it was the delaying tactic that worked on Hillary until they dug up enough dirt to derail the process back in 1993 – just $28Tn ago…  

    This debate is nothing more than a battle by the corporations who are currently feasting at a $2Tn annual trough in an industry that is growing 20% per year and has gone from consuming 5% of a family’s income in 1980 to 25% in 2009.  Health care is not an option, it’s a necessity and it’s a tax on every single person in America except for those "lucky" enough to be uninsured, who make out like bandits until they die young.  

    A heart bypass operation in the US is $100,000.  In France it’s $33,000 for Americans who want to fly there and in India its $7,000.  A hip replacement with the same ZMH hip in India is $5,800 vs $40,000 if you have the job done here.  France will do that one for $15,000.  India can even save you 70% on boob jobs or Liposucition.  It’s the same equipment and the same doctors you find in US hospitals (they rank higher than us in health care) – they just don’t have a blood-sucking corporate infrastructure that creates 14 layers of profit between the operation and your bank account. 

    Just because your insurance company pays for most of it and not you doesn’t mean you aren’t being ripped off.  That’s what this is all about, that 200% mark-up between France and us is $1.4Tn of that $2Tn we currently spend on health care and that translates into hundreds of Billions of profits for some very influential political donars, as pointed out by Michael Moore in Sicko


  213. Hey micro!  I fell asleep early and then got up and couldn’t get back to sleep (as Cap got me all riled up with his nonsense again).  Now I can get another hour or two seeing as it’s such a happy, happy day in the futures..  8-)



  214. You pullin’ an all nighter Phil!?  Crazy indeed.
     
    And to answer a question asked earlier…things are getting pretty desperate here in the UK.  The crime rate is up and it’s really not pleasent to go out at night because of all the crazy drinkers.  And this is in Aberdeen which is supposedly better off because it is the oil capital of Europe. 
     
    On another note, I’m seeing lots of majors (BP, Shell, Marathon etc.) pushing capex and exploration back until mid 2010, when it was supposed to start beginning of 2010.  This is for North Sea stuff, so they may just be spending the budgets elsewhere, but I’m talking with these folks every day.  It just looks like they are not forcasting enough demand to make investment here in the North Sea worthwhile.


  215. Nice parabolic futures action…


  216. Buy Buy Buy – Irrational exhuberance – these pumpers should read Phils earlier comment on the housing market.


  217. No doubt DB…no doubt.  Cool!  We must have burned off that pesky 1+mil build in crude overnight as oil just touched $72.  Must be a reverse of the dollar from yesterday.


  218. DB, I’m thinking they did read it.. but were expecting something much worse.


  219. Good morning!

    Not an all-nights, just broke up my sleep to 3 and 3.   8-)

    Futures aren’t up, dollar is down 1% and stocks moved to keep up.  OPEC may have lowered demand forecast but the IEA gets paid to pump and they RAISED the demand forecast and that got oil traders all excited in Europe and sent the energy sector flying despite Where’s comment on the reality of the situation. 

    Meanwhile, in case anyone cares BHP, BTU, CVX and the other criminals who control the American Coalition for Clean Coal Electricity, were caught doing something wrong again.  This time they forged letters to Congress attempting to have them vote down the climate change bill.  Of course BTU etc. was "outraged" at the behavior of the lobbying group but fortunately they traced it down to one scapegoat and fired him so all is well in lobby-land again.

    Jobs will be interesting at 8:30, anythng less than 500,000 weekly claims will "prove" the bull case.  WMT was lower than expected but gave OK guidance so that’s being ignored by the broader market even though, to me, it means retail sales must have turned down in July…


  220. Healthcare – I love the way CAP quotes Thatcher.
    Thatcher increased spending on public health 50% in real terms during her time in office and devoted enormous energy to improving the quality of the national health service. She also spoke prooudly and often of this achievement.
    Thatcher smashed the unions, took an axe to state handouts, privatised dozens of natinalised companies and totally  transformed the british economy. Her impact was profound and profoundly positive. Even then, Thatcher was still able to see that only having medicine in exchange for profit was just not a valid option.


  221. Phil / Spending – your claim that Obama’s spending is somehow related to "fixing the economy" is completely ridiculous !
     
    As to your own top ten, and using Michael Moore’s Sicko as your source material — well, that says it all doesn’t it !
     
    Stevenparker … its curious the way you try to discredit ideas — a quote by Thatcher on socialism is discredited because of your view on her policies .  I’m no expert on Britain, but is seems the Labor has been taking that country down the tubes in many ways for quite some time, NHS, taxes, the overall economy.  Not an example I want the US to follow.
     
    Thatcher’s role in that, whatever it was or wasn’t, in no way diminishes the relevance or power of her comment about socialism.


  222. WTF is going on with SRS?  Since yesterday afternoon, it’s been more then it’s extremely volatile self.


  223. Cap – I would never discredit that quote by Thatcher, I agree with it wholeheartedly.
    The point is that Thatcher GOT the need for public health-care without being a raving socialist.
    I think it is truly ironic that you are quoting someone who was a strong supporter of public health care in a ranty blog against public health care.
    Thatcher knew that public health care did not spell the end of capitalism and this was one area she expanded state spending substantially. She did this at the same time as dramatically and successfully winding back the state in other areas.


  224. Phil,
    DO you gameplan on the MOS puts, mine are under water…  I have the AUG 50′s , With Expiry coming should we start look at rolling?  I would think a DD might not be smart unless today is a small armageddon (sp?) like selloff.
    thanks


  225. Poor PPT.  The data just isn’t cooperating this morning.  Is there anyway they can spin this positive?  Jobs WTE.  Retail WTE.  Not good.  But no suprise to me.  Oh, there it is.. the silver lining.  Business inventories are down.  So happy days are clearly on the horizon!