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Whipsaw Wednesday – Buffet Bashes Bulls

Well, you can't say I didn't tell you so

Yesterday's post was all about what total nonsense the move up was and, per usual, the whole thing was taken away in the futures, where retail investors have no chance to profit from it.  Of course, this market isn't being run for your benefit and if you wait for Cramer to tell you what to do, then you are pretty screwed (and more so if you listen to him).  Yesterday our boy Jim fell off the wagon and declared victory for the Bulls saying: "The bears must be stunned and confused, flummoxed even" and made fun of those of us who worry about "facts" and "fundamentals" as we trade.  "Every argument the bears had for selling," Cramer said, "has been totally rebuffed by this great market."  Cramer, you are not just an idiot, you are a dangerous idiot!

As the more rational David Fry points out in his "Spin City" post: 

So we got a healthy bounce today but it didn’t undo Friday and Monday’s collective damage. We were a little short-term oversold and a bounce shouldn’t surprise even though economic and company news wasn’t great. But, the “better than expected” spin was in for retailers which frankly was laughable. And, golly, banks reported losses on credit cards were slowing (maybe because Chucky’s not shopping?) which was seen as a positive. Homebuilders disappointed (oops, scratch that)… a “worse than expected” report was spun positively because more single family homes were built. I wonder about that since there are too many of them, aren’t there? But that’s the way things are these days.

What a stark contrast between a sane and insane take on yesterday's action.  In Monday's post we targeted a drop to Dow 9,100, S&P 980, Nasdaq 1,950, NYSE 6,400 and Russell 550 and in my 9:48 Alert to Members yesterday I set the bounce targets at Dow 9,200, S&P 986, Nas 1,946, NYSE 6,400 and RUT 555 but noting they were rough numbers that I was eyeballing on the fly, following our 5% rule.  Those levels were beat across the board but on such low volume that I called an audible and we stayed bearish, taking aggressive short positions like the DIA Aug $93 puts at $1.50 which, unfortunately, didn't make our double down target of $1 but should do well this morning.  We also took short shots at COF, HPQ (backspread), RTP (looking very good this morning!), SRS (our old friend), RTH and a bull play on DUG, which is an ultra-short on oil so still bearish

At 12:38 I said to Members: "Just like plate spinning, they have so many balls in the air and if just one of them falls (dollar pops, oil falls, copper drops, Yen rises, China falls, news turns sour, companies lower guidance, banks fail…) the whole act can collapse all at once….  " but the plate spinning was so masterful that we didn't want to overdo it and I said to Members at 3:02: "So far, we haven’t done much of a breakout over our bounce levels but we are over and you have to respect the move today – even if you don’t believe in it." and my 3:26 Alert to Members called for a neutral stance on our DIA covers as we were already very bearish with our new picks (and we really don't have any longs that aren't massively covered already). 

It looks like we'll be back to testing our breakdown levels this morning and it's at least another 1.5% if we get through those and then we'll see what kind of bounce we get from there.  The futures really got hit hard this morning and I said to members in morning chat: "Lots of fun and games overnight.  Still holding our breakdowns so far but the suckers aren’t buying what GS was selling yesterday and don’t forget you get to a point where GS gives up and exits the game.  Look for signs they are turning negative like one of their major shareholders (Buffett) dissing the market or GS downgrading a Dow/commodity component like AA….   "

Indeed GS did downgrade AA (of course I knew that already) and of course Buffett did write an Op-Ed column in the NY Times in which the Oracle of Omaha said:

Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects.  For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itselfWith government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.

To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory… Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.

Niether Buffet nor I are predicting gloom and doom for the economy.  We are just pointing out that it's a little early to be shooting for a market "recovery" especially when you consider that the levels chartists are targeting for recovery are based on getting back to levels that were based on TOTALLY FALSE EARNINGS!   The financials should never have been worth 25% of the S&P because 75% of their earnings were stolen from future quarters and based on totally false accounting assumptions.  The land held by homebuilders was never worth 100% more than it is now – that was a bubble and XOM never had $5Tn in reserves as that was another bubble and the gold miners weren't really going to get $2,000 an ounce for gold (without massive inflation) nor were the copper miners going to sustain $400 copper, simply because it's not economical to use it at that price. 

GM couldn't sell cars without losing $20,000 per vehicle and AIG wasn't making any money at all, they were just booking 100% profits for writing policies they thought they would never have to pay but (funny story) it turns out they were wrong and they have now lost 13,000% of those profits with a potential of 1,000,000% more liabilities on the books.  Believing the market is going to race back to anywhere near those kinds of valuations is just as dumb as believing that 2001 was a good year to get a bargain on a sock puppet that sold pet food because "it was bound to come back."  IT'S OVER – DEAL WITH IT!

The Dow was NEVER worth 14,000 and the S&P was NEVER worth 1,500 and (yes, I'm going to say it) the Shanghai composite was NEVER worth 6,000.  So please pundits – stop targeting these numbers.  YHOO was once $300 a share and we've accepted that it's not likely to get back there, what is this fixation with getting back to market highs that have proven to be based on a total falsehood, on earnings that were not only reversed but were clawed back to erase half of this decade's earnings.  It is a market that has cost the US government $11Tn to bail out so far.  Do we even want S&P 1,500 if it costs the US government $1Tn per 100 point gain per year?  That's the question Warren and I are asking – at some point, you need to step back and figure out what it is we are trying to accomplish here.   The bubble popped, long live the new bubble may not be the right attitude for the second decade of the century.

Just in case you miss the news today, a series of car bombings killed 75 (so far) and injured 300 in Baghdad today (remember that place, we're still there) and it's been a long time since there's been a "terror premium" on the markets so let's keep tabs on that as Ramadan approaches, as that seems to be bombing season and we should probably stick with at least 55% bearish covers into each close for the duration.  The Nikkei dropped right back to the 4% line we discussed at 10,200 but this time finishing at the low of the day.  The Hang Seng dropped 350 points (1.7%) and also finished near the day's low and, more significantly, under 20,000 for the first time since July 23rd.  The Shanghai Composite was much worse, falling 4.3% with another slew of companies halted at their "limit down" levels of 10%.  That JPM analyst from yesterday must be ashamed of herself.  Quick – what was her name?  See, you don't remember and she doesn't care how many billions of dollars she tricked investors out of yesterday because her massive bonus check is in the mail!

"Unless you're a day-trader, why would you want to hold stocks in view of lingering uncertainties over Chinese stock markets?" said Yuanta Securities head of sales trading Riga Saito. "Yesterday's trade volume in Shanghai was a low 123.23 billion yuan (US$18.03 billion), a drastic reduction from July 29's record high of 302.82 billion yuan. This shows investors are still very cautious, afraid they'll lose money if they buy at these levels," said Guosen Securities analyst Tang Xiaosheng.  Take note US traders – this is good advice!!!

Europe is off about a point ahead of the US open, which also looks to be down about a point and all we're going to be doing today is taking our short profits and watching our levels to see what holds.  There's no sense in being greedy in this market so we are not looking to ride things down if the market is going to hand us huge one-day gains.  There is always tomorrow to trade and, chances are, we'll learn something between now and then!

Be careful out there. 

 


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  1. That old grey mare she aint what she used to be: Abby Joseph Cohen will stop making S&P 500 GUESSES!
     
    Link: http://www.bloomberg.com/apps/news?pid=20601087&sid=aBivITiDHG9g&refer=home


  2. Kwan … thanks for the short article…. sounds like a messy solution …. 18 months so far, SEC can’t figure out a practical solution….
     
    Phil :  here’s your GS shareholder … http://www.nytimes.com/2009/08/19/opinion/19buffett.html?scp=2&sq=warren%20buffett&st=cse
     
    COF; my short positions from yesterday will pay off nicely today !
     
    SPG – been getting whacked all week and last week.  Now in 57′s after hitting 67 recently.
    SLG … not back to reality yet, still over 30.


  3. Phil,
    RE-post from late yesterday:
     
    Phil
    Looking at your favorite TASR for buy / write- what do you think about Sept p/c vs. Dec? Pros/cons?


  4. I wouldn’t get too bearish yet. A pull-back to the 950 area is perfectly compatible with the spinmeisters and trade-bots jamming us to new highs in a few weeks. (A pull-back to 920, OTOH, not so much). I’ll be looking for long entries if/when we get to 960-ish.


  5. Another re-post from late yesterday:
    GE- I am in a buy / write- 400 sh -cost basis $9.51 which includes the premiums on the Aug 11 calls-sold @ 1.39 & Aug 11 puts sold @ .31. Puts will expire; Roll to the Sept 11’s calls @ 2.65 & wait for selling puts? What do you think about going out to Dec P/C’s?


  6. Buffet:     With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.
     
    That is scary my friend ( and Obama wants to spend more !)
     
    Buffet goes on to say that the solution to the dollar depreciation lies with Congress.    (YIKES – CONGRESS ??  DOES WARREN HAVE ALZHEIMERS).
     
    Without explicitly saying so, Buffet seems to be advocating that Congress both CUT SPENDING (good luck with that) AND RAISE TAXES (the Dems WILL do that), both of which he suggests earlier in his article are politically difficult.
     
    Well, Warren, if throwing the ball over to Congress to solve, especially this Congress, is your best idea, we are in for a world of hurt !!


  7. Cap, totally agree. If Congress is the steward of our future, Lord help us!


  8. Phil, recently you advised listening for a sentiment change in the MSM.  It would appear CNBC is changing.  What do you take of Art Cashin’s recent comment on ‘historic trading’?  He’s been wrong so many times before.. I’m becoming wary of what he says.


  9. In ADIs (from David R. yesterday) Dec 20s @ 6.4…..let’s see


  10. as an addendum to my comment about the sentiment change from CNBC, while they are talking about a pullback.. they are also talking about another spurt higher towards the 1100 range for S&P.  The question is, will be get the final rally before the pullback or not.  What leads me to believe we will get the pullback is that oe is Friday. It would help the option writers considerably if we pullback some towards last months levels at oe.


  11. Abby/Chuck – Oh that’s too bad, she was a great bear indicator lately as GS would trot here out as a last-ditch attempt to prop things up.

    Once again we are holding our downside levels of:  Dow 9,100, S&P 980, Nasdaq 1,950, NYSE 6,400 and Russell 550 

    Let’s keep an eye out for bounces to:9,200, S&P 986, Nas 1,946, NYSE 6,400 and RUT 555 which would be much more impressive if they can get them back today. 

    Volume is close to 20M in first 10 minutes so heavier than usual and the quesition is are they hitting the "save" button now to stop us from going lower (if so, another flatline finish like Monday) or are we getting some real bottom fishing from the outside (we noted money flowing out of bonds yesterday, which becomes sideline cash today). 

    We have the oil inventory report at 10:30 but not much else that’s likely to move the markets so we’ll have to watch and wait.

    Uh-Oh – Cramer is on CNBC trying to spin "Don’t worry that China is down 20% in 2 weeks," which is valid IF they hold it but I would be concerned until they do prove it’s just a correction. 


  12. Phil, have the MA 210 Oct calls covered with 200 Aug callers. The Aug callers are already very profitable and am thinking of rolling them over to the Sep callers. Delta for MA 210 Oct is .34 and the delta for Sep 200 is .46. Is this a reasonable safe roll or should I roll to Sep 210 callers (delta of .27)?
    The 210 calls are basically a free ride now due to the profit on the 200 callers.


  13. Dollar being sold pretty heavy since the open.  Looks like it’s fueling the pump right now.


  14. phil,
      your bounce level for nyse is same as your downside level?


  15. Here goes oil green.


  16. What’s moving up ?  I don’t see anything …


  17. Don’t get too excited bears.  As I said in the post, profits need to come quickly off the table – this is not a market for riding 20% profits too far

    TASR/Pstas – They are not market immune but a nice entry with the Dec $5 puts and calls sold for net $3.53/4.27.  It’s not thrilling but as long as you REALLY want the stock for 10 years, it’s a nice first round.  The Septs simply do not give you enough protection. 

    Damn, only the Nas (5) and Dow (25) are more than 1 point off my bounce targets at the moment – that’s crazy!

    Right about not being too bearish Eric – it’s a dangerous profession being short on this market. 

    GE/Pstas – I generally want to try to avoid putting new money in so the $2.46 $11s would best be rolled to the Dec $13 puts and calls at $2.70.  You could sacrifice .40 to roll the puts to the Dec $12 puts rather than the $13s but it’s only .50 difference to your net so why spend .40 now?  As to timing, they are looking pretty resiliant along with the whole market

    Cashin/Matt – He has only been wrong in so far as he can’t believe all this BS in the markets so I don’t think he’s losing it just yet.  He is an old timer and doesn’t believe that some machine can be manipulating the markets, that’s the flaw in his logic as he places too much trust in the real trading that he sees and the live traders that he talks to. 

    ADI/Pharm and David – Wow, good earnings win out over idiotic knee-jerk reactions - amazing!


  18. Out of ADI….thank you very much.  Done for the day.


  19. LVS – reloaded my short yesterday, but missed chance to cover this morning…  need to be quicker in this market.


  20. MA/Mampcs – I don’t know if I’d want to effectively pay the $200 callers $4 in premium just to take them out 2 days early.  Especially if you are rolling, the reality is you don’t owe them $1 until MA moves up $4 and that would be a $1.50ish gain on the Sept $210s you are targeting.  So, since you are hoping to gain at least .50 on the transaction, you can ask for a credit of $2 on the roll and see if you get it rather than taking $1.50 now.  

    NYSE/Foss – Good catch, 6,350 is the lower end and 6,400 is the correct bounce.  

    Just crossing 40M in volume at 10:20, quite the slowdown after the first 20 mins.

    All about oil in 10 mins….


  21. Dow laggards: AA -5.2%. HPQ -1.9%. CAT -1.7%. BA -1.3%. HD -1.3%.  Dow leaders: MRK +1.6%. MCD +0.6%

    DE was not encouraging this morning. 

    Solars (KWT) are getting killed this morning despite the $71 oil and metals are down about 2.5% too.  Real estate down just a bit but SRS up 3%.  Coal companies trading down on low nat gas. 

    Very quick and dangerous trade selling naked OIH $100 calls naked for $2 ahead of inventories.


  22. Phil, any thoughts on PALM?  Stock at 13.37 and Nov Ps/Cs can be sold for 4.05 for a net of 8.77 if called away (I think that math is right)?  The chart isn’t tne cleanest, but it seems to want to hold the 23.6% retracement and found support at the 200dma last week.


  23. Dug Aug 17P moving like hotcakes.  me thinks they are going to jack it up…


  24. Phil, not sure where you saw the $4 premium on the Aug 200 callers. Its closer to $1 actually.
    My reason for rolling now is that I expect MA (and the market) to possibly drop over the next 2-3 days and would like to guard my Oct 210 calls as much as possible before that. I have only 1 to gain on the Aug callers (agreed it’s all premium), whereas my calls are 5.75.
    My concern with the sept 200 callers is that i might get burried if MA goes up due to the delta difference.


  25. Rejected at all bounce points ahead of inventories.  Makes me think the morning action was mechanical.

    Oil inventories:  8.4Mb DRAW in crude,  didn’t catch the rest but it doesn’t really matter!   Refinery Utilization up 0.5% (not an effect)  

    Out of OIH calls of course (they can be rolled to Sept $110 calls at $1.90 if you want to stick with them).


  26. CERS – blood system for platelets just approved by Swiss.   Rocketing up, 4.5-5 next stop.  Trying to get in on a pullback. 


  27. Phil:
    please help me sorting out my UNG situation:
    Holdings:
    UNG shares, base 14$,
    long calls jan 12, base 3.15 $,
    coverage with callers 55 %, sept 12, a few sep 13,
    coverage with putters 40 %, sep14, a few sep 12.
    UNG can hardly go lower, a hurrticane could blow it higher.
    what is your take ?


  28. Oh well, not gonna chase CERS. 


  29. WTF just happened?  I saw that my DUG $17 calls (got them at $.75 at closing yesterday) were trading at $.90 and I put an order to close them out at $1.  Yes, $.90 was a 20% profit and I should have sold half of them at that price….but….anyhow, just log back in to see the same calls are worth only $.40.
     
    Did the oil inventory numbers come out already?


  30. Well if refinery util is unchanged that means no one was demanding any more finished product.  It just means we imported less.  I’m all for importing less oil overall, but this news is hardly bullish for oil folks.  I wonder where the extra 8 mil barrels went?


  31. PHARMBOY
    CERS-anything wrong with the Jan 2.5 at 1, which is mostly current value? Or is that being too cute?


  32. Where- I think that the prices will reflect that soon enough.


  33. Morning All.
     
    Pharm check GOL   This airline has no ceiling !
     
    See, I have a page with all stocks you comment… and when I added CERS  (to keep in radar)  I saw GOL. Dam, every time I add something into your page that one is higher… sadly I didn’t bought. And if i bought at 6, for sure would be sold at 7+ for a nice 20%… The pain to be rational in an irrational market.
     
    CIEN = Somebody knows something about this one?. Yesterday AUG options where crazy, now 2 day only into exp. Maybe just speculation?


  34. drum – I would just wait, this was a sheer momentum trade.  They have pulled back off the high by 5%, so wait ’til they settle down a bit….IMHO.  If they stall, they could fall back to 2.4-2.7 range.  Then might be a good time to pick up a few hundred shares.


  35. FSLR   < $130  = welcome to realty !!


  36. Spider – had my order in on GOL and it missed by 1c.  Oh well, more will come our way.


  37. Selling 1/2 SPWRA $24 Sept09 P for 1.10.  Nice entry and  that gap I noted a few days ago needs to be filled.


  38. Phil, Do you have a target for the correction in China?


  39. A U.S. judge has upheld a patent for Merck & Co.’s (MRK) best-selling product, the asthma and allergy medication Singulair, handing Merck a victory in its battle to ward off early generic competition for the drug.
    http://money.cnn.com/news/newsfeeds/articles/djf500/200908191040DOWJONESDJONLINE000431_FORTUNE5.htm


  40. PALM/Smasher – I think they are a long-term dead company, like MOT when the Razr ran its course.   When you look at them, they LOOK like a company that will come back and everyone will say "if only the next XXXX catches on" but it never happens and the sales go down and down and down.  PALM has a forward p/e of 25 based on projections that sales will be up 50% next year – that’s a pretty big leap of faith.  I take it you are looking at selling the Nov $12.50 puts and calls for $4 and that’s $9.40 ($13.40 less $4) net if called away but keep in mind you may have another round put to you at $12.50 and you will be in for 2x at $10.95.  The question is – Do you WANT to own PALM at $10.95 long-term after they’ve dropped at least 20% (as that is why they would be put to you) between now and November?  If so, great but, if not – better to find stocks you don’t mind getting stuck with. 

    That’s very important in evaluating a buy/write.  Do you want to DD on the stock AFTER it drops 20% so badly that you are willing to risk overpaying (as you have no choice) for the privilege?  I don’t want PALM for $10.95 if the break down that far by November and I’m not sure I want AAPL for $145 if they fall there by Jan but I do want GE for $11.35 in Jan (selling the $12.50 puts and calls) as I know I can turn around and sell another 20% discount buy/write for March and I’m damn sure I want to be in GE at $10 for next year (or for 10 years for that matter). 

    That was a very crappy rally by the energy sector.  Methinks there are shenanigans in the oil report! 

    Premium/Mampcs – Yes $1 for the call and $3 for how far out of position they are.  I had this discussion with RMM last week that the greeks do not take into account the reality of your position and they especially fail you as you get close to expiration.  You must have a conviction – Will MA break $200 by Friday and, if they do, are you willing to roll them to the Sept $205s if you are wrong?  If you don’t have a target for the stock, then you are essentially just playing statistics with the option spreads and that’s valid but it’s also a game you play for 0.5% gains.  Don’t ever get confused trying to play option arbitrage for big money, you can’t win that way. 

    Volume getting to 55M at 11, pretty much in-line again.

    UNG/RMM – I think this is a nice bottom for them.  They were always a hurricane play and nothing more as there is no fundamental reason for nat gas to be higher.  I’d take out all the Sept callers here (assuming you are up) and roll the Jan calls (1/2 x)  and the stock (3x) to the 2011 $10s at $3.90 and wait, hopefully you’ll be able to sell 1/2 the Sept 13s for $1 or more on a good run.  That would be collecting $1.75 per current stock position for one of the 15 months you have to sell. 

    DUG/GS – Quite the whipsaw!  Good chance to DD though.  When you have a good profit ahead of an event, it’s crazy not to cash it out as you never do know with events.


  41. Does anyone have an idea as to the number of contracts one has to trade per month through ToS to get a discount from the $1.50/contract rate?


  42. The $ is taking a real drubbing today…


  43. Pharmboy: those SPWRA sep Puts, I sold naked 30 minutes ago, that is way OTM and should be good.
    the gap: today’s 60 cents ?


  44. Just saw your post about the oil numbers Phil.  Couldn’t find ANY link to the news until a minute ago.  EFFING Google news….are they in on it too now?  It used to be that by running a search for EIA report or EIA Oil, you could find a link right after they reported but no, not today.  Oh well. 
     
    Can I please get my recognition as the one guy you don’t want trading in the same direction as you?  I go in on SRS, it tanks.  I try to short oil from yesterday and instead of the 1,100,000 barrels of BUILD-UP even the bulls who believe the economy is great were predicting, there’s an actual effing drop in the inventories.  WTF does a guy have to do to not curse almost every trade he makes?

    I’d like to also add that I was on the bandwagon for Yum and almost every other trade that didn’t work out. 


  45. I’m selling a few unbalanced SKF iron condors by selling the Aug 30 calls and puts and buying the Aug 28 put and 32 calls. Since I’m slightly bullish on SKF near-term I’m selling a few more of the put side (3:4 call/put ratio).


  46. Had to go out this afternoon so I left my shorts in place seeing as the pre-market was down so much – what happened ? just got bvack to find them all stopped out. Tough being a bear.


  47. FSLR/Spider – Reality for them is more like $90!

    SPWRA/Pharm – Excellent call!

    China target/CDS – LOL, talk about a manipulated market.  Wen Jaibao has an app that lets him punch a closing target into his IPhone and hit it on the nose when he wants to.  Cramer is right, 20% is a nothing correction off a 100% run - it’s what we’re looking for on the 5% rule in fact so, if they hold it here, there is nothing preventing the bulls from making a very good case.  The reality is that there was massive stimulus thrown into China to hit these numbers and, as we’ve been reporting in the weekend posts lately, a lot of the accounting that gives them 8% growth is total BS so it’s not so much what the target is for China as to what it’s actually worth, which is probably in the 17,500 to 20,000 range on the HSI.  Like the US, we’re probably bumping along the TOP of the range before the bulls acquiesce and we drift into a long-term consolidation while the global economy gathers some real strength. 

    MRK/Kustomz – They loved that news. 

    TOS/Shane – Constact scott@thinkorswim.com and tell him you are a member, that should get you down to $1.25 at least.

    Dollar/Where – Yep, that’s the emergency fallback for the manipulators as it revalues stocks up pretty quickly.  Almost a 1% drop vs the Euro and even the Yen since 8am to save the markets and that’s helped oil (new month) go from $70 to $72.50 along with the seemingly bogus energy report (as XOM hasn’t budged and I hear they do sell oil). 

    Look at these numbers:  Dow 9,200, S&P 987, Nas 1,947, NYSE 6,426 and Rut 554.  Amazing isn’t it?  XLF still under 14 and QQQQ still under 39.  SOX still under 300 (289) and Dow Transports are right on the 3,600 line and TRANQ is at 1,775, which is NOT impressive as they are our lagging index and down 100 points (5%) from last week.  Transports as skimming along the 50 dma and if they break it’s a quick trip to the 200 dma at 1,690, about another 5% and that should do the trick to drag the rest of the market lower

    So watching FDX ($64.38), UPS ($52.50), CAL ($11.87) and YRCW ($2.14) will be a good leading indicator for our next move. 

    This is a nice spot to speculate bearish with the DIA $93 puts again, now $1.33 and we can use our 3 of 5 rule (breaking over our bounce lines) to get out


  48. I’ve looked at the market pattern over the past 2 weeks or so.  If you had shorted the market when it was up at each day’s end, and held for 1 to 2 days, then gone long at days end as it rebounded, then repeated, and repeated, you would have made a killing.  This market is genuinely ‘whipsawed’.  I agree wholeheartedly with Phil that in this market you’ve got to pay less attention to ‘bear’ vs ‘bull’ characteristices of the market and , rather, get in long when it’s down, get in short when it pushes up, and take repetitive small profits frequently. 


  49. Phil: your comment on UNG;
    rolling the calls out to a 1/2 x is about even, I understand this,
    what is rolling stock out at 3x: is this stockprice divided by call price: 12/3.9= about 3 ???


  50. Speaking of shananigans (not Shamrocks and Shananigans, the great album from House of Pain), I also agree they must have figured out some way to alter these numbers……just as they did with the unemployement report last week.  If you haven’t read this article, I’d suggest checking it out.  http://www.chrismartenson.com/blog/unemployment-report-distortions/24080
     
    It’s Tyler Durden level stuff pointing out that the drop in unemployement last week was due almost exclusively to 637K people LEAVING the labor force.  Basically, they decided to drop a bunch of unemployed folks from the labor pool used to calculate unemployment.


  51. Phil: rolling options is an easy setop using the spread selection,
    when you roll the stock to the LEAp, I guess the only way I can do it sell the stock and buy the LEAP ?


  52. School please: what does it mean when the headline says Fed buys 2.6 billion in Treasuries. Does that mean 2.6 billion new pieces of 1 dollars were printed or it’s electronic equivalent. I don’t get the book keeping. What product does the fed make that allows it to have 2.6 billion lying around. Thanks ….


  53. MRK i thought they would have gone higher, its going in the right the direction. If the market turns should go higher unless its mostly baked in. Would love to hear PB thoughts on this one…PFE doing well today


  54. Treasuries are another thing to watch — demand is pretty strong today which suggests risk aversion, contrary to the dollar move (that’s more easily manipulated, as Phil said).


  55.  DIA – Phil instead of speculating on the dia 93, would you buy back our mattress cover?


  56. Oops, forgot I have a lunch meeting – back about 1pm!  Try not to wreck the markets while I’m out…

    SRS/GS – Those ultras will kill you if you don’t go in very lightly and scale and roll and scale and roll and then, they can still kill you…  YUM was the same thing – it worked, but only after we were fed up and out of it.  The markets can stay irrational longer than you can remain solvent is not just a cute saying.  Best bet is to work on timing (don’t even bother going in on the first round) and position sizing (1/4, 1/2 then 1/1 is the MOST aggrssive you should enter).  SRS is an exterme example but if we entered 20% off the top at $20 with 1/4 and then 20% off that at $16 at 1/2 and then 20% off that at $13, we’d be in for an average of $15.50 and down 16% at $13. 

    If that position was a proper 5% of your total portfolio, that last 2.5% should have only been spent if you had fully intended to DD again on another 20% drop.  We did drop 20% to $10.72 and a DD there would net $13.11, which was almost 50% off the top.  That puts you in too much (7.5%) of your portfolio in a position you were willing to buy 5% of at twice the price.  This is not a bad thing long-term but you have to have that plan when you start.   

    Of course, it’s also important to realize that if you keep betting short-term contracts that will expire worthless then all the doubling down in the world won’t help you as you will have nothing left when the stock finally comes back so it’s important to roll back in time and not just lower in price as you increase your position

    SKF/Eric – Just watch that XLF $14 line.

    Whipsaw/Iflan – I totally agree!

    UNG/RMM – Yes, selling 100 shares of stock for 3 2011 $10s is 3x.   There’s no dividend and the premium doesn’t matter when you are looking at 15 months worth of potential sales to cover it.   Also, yes, you just need to cash out and reposition.

    Labor/GS – Yes, a lot of the "improvement" in unemployment is simply people giving up. 

    Fed books/Thatway – Pretty much the Fed is creating money when it writes a check.  Dollar bills are nothing more than checks written by the Fed to you saying "I owe you $1."  If you can figure out what exactly a dollar is anymore, you can go straight to Stockholm and get your prize….  8-)

    OK guys, see you later!


  57. thatway, the Fed credits the Treasury electronically in return for the Treasuries. It’s main focus (over $1.25 tn), however, has been on agency (FRE and FNM) mortgage-backed-securities, where it credits electronically the seller’s account in buying the MBSes. They are shooting to stimulate a modest rate of inflation. But it’s an electronic transaction, not actual ‘printing’.


  58. If anyone saw ABC news last night, Gardisil (HPV vaccine) took a drubbing.  They noted the biggest side effects were dizzyness, fainting, etc.  Well, have you seen the size of that needle??  32 deaths in 7M young women (oh, and by the way, those 32 ALL had other medical problems/complications).  MSM better get their stories straight.  I am really getting tired of the BS….just bet against ‘em.  Shorting all MSM….DIS, CBS and GE. 


  59. By the way, Gardisil is MRKs…..


  60. I swear this market is ‘there’s’ for the taking.  This has become ridiculous.  We are all squirrels just tryin to steal a nut from them! 


  61. Personally i think DELL’s clock is a ticking, they need to make some smart acquisitions (anyone care to guess on the possibilities) to transform the company and lure a hand full of guys (woman) away from successful competitors

    International Business Machines Corp. (IBM) has a current short interest of 15,795,800 shares, which is down 16.54% from where it was recently. At current levels of trading volume for IBM, it would take approximately 1.8 days to cover. Out of these three stocks in this industry, IBM is in the best shape.

    Hewlett-Packard Company (HPQ) has a current short interest of 31,993,300 shares, which is down 0.37% from where it was recently. At current levels of trading volume for HPQ, it would take approximately 2.1 days to cover.
     Dell Inc. (DELL) has a current short interest of 63,310,800 shares, which is up 15.38% from where it was recently. At current levels of trading volume for DELL, it would take approximately 2.1 days to cover. Out of these three stocks in this industry, DELL is in the worst shape.
    Of course, stocks with too much short interest are always in danger of becoming the target of a short squeeze so make sure to watch for those stocks with high levels of short interest to suddenly take off on any signs of good fundamental or economic news.


  62. Musings on a slow day re: Buffet/NYT op-ed:
    I ask my self, why this subject and why now? Nothing new but also nothing here to lend support to Obama/Congressionsl initiatives (manely health care & cap/tax) . In fact, it provides fuel to fire up opposition to more spending and more taxes. A known Obama/quasi-left leaning capitalist letting loose an across the bow shot amidst the great health care debate while also dropping in an honorable mention to the hated Bush for helping avert a "financial collapse" ?
    Interesting dymanics indeed.


  63. Pharm – SPWRA – re: "gap that needs to be filled" – I missed your comment, would you mind explaining again or link to it. thx.


  64. R U kidding me with this market sticking higher ???
     
    What can I short now ?


  65. There goes MRK


  66. SPYs going straight up .70 in 10 minutes. Amazing.


  67. Phil: ok, all UNG now in LEAPs,


  68. Maybe sell OIH 105′s for 79 cents !


  69. Wow, look at it go!


  70. We are massively overbought here on the RSI one minute (SPY).


  71. Its all energy ….


  72. PhiL Bought the Dia $93 puts  at 1.31. With the Dia  up 55 points,what’s next. DBL DB?
    dflam


  73. Phil : Meant Dbl. Down
    dflam


  74. I want to buy the DIA 93 puts at .85 but I’ve been burned too many times on timing trades.


  75. phil shouldnt of posted he was going out to lunch. big bro is watching.


  76. i m feeling the same Blair. I need to dd on them but i m chicken.


  77. RMM and Conc – look at the 3mo chart on SPWRA.  There is a huge gap up at 25 on Jun 26 or so.  The low is 22.XX.  So selling the Sept 24s should be a nice entry for 1/2 sell, and if they move lower, one can DD orLet’s see if this works….
    http://stockcharts.com/h-sc/ui?s=spwra


  78. Pharm, Do you follow ANPI (Angiotech Pharma)?  I’m considering a buy/write with Jan 2.5 calls and puts which, if put to me, would be net about 50 cents on the new shares.. They have high debt but I don’t have the expertise to properly evaluate their product line. Any opinion?


  79. Sorry Phil, I didn’t mean to break the market.  I sold a small FAZ vertical which caused the futures to jump 10 points.


  80. Holy S….batman, as I was typing…..


  81. Anyone know whats going on ?


  82. What a joke; 170 point Dow rally off the lows….


  83. FAZ/Craig – LOL! I know how you feel.


  84. no shares of OIH to short at Schwab.


  85. I did it. Hi 5s all around.


  86. WOW man, i just come and see green at all places.. I bet its the dollar diving moving all up.


  87. Pharm, Oops, left out a digit  on ANPI for the the cost of the new shares if put to me with the buy/write. It would be about 1.50 or less. Not enough premium there.


  88. Look at BAC, did not participate in the run up…. shocking


  89. What time are housing #’s tomorrow?


  90. Looks like they are setting this up for a run back to 1010 on the S&P


  91. Allen – don’t follow them, but insiders are buying and their products are getting approved outside the us.  Speads on options are too wide for me, so buying the stock is the way I would go if you like them.  Little light on volume as well.  They are channel trading right now, so IMO I would wait or buy a 1/4 position being prepared to DD a few times.


  92. Also, wouldn’t the potential for bad numbers prompt some profit taking off of this rally (in a logical world.. Too much to ask for, I know!)


  93. VIX up as well


  94. Well that says something, I’m not buying this.


  95. Possible second stimulus package may be reason for spike.
    Defined:  Stimulus – Gov’t sponsored market


  96. As someone who has traded for many years I should be able to find a reason for this spurt from such a bad open. But all I can find is B******ks,


  97. Ric/Second Stimulous – Madness if so -thnx


  98. Pharm: Thanks!


  99.  S&P still consolidating 1000… wouldn’t suprise me now if the market closes over 1000 today
     
    and DJIA probably finishes over 9300… this market is all about driving the bears nuts


  100. DIA 92P for .37c….now we are gambling.


  101. merk … nah


  102. Took profits on ADI… thank you kindly and please come again.


  103. Picked up OIH Sep 100 puts.


  104. This is probably fund managers with performance anxiety getting in on any pullback + "good news".  The fact that the sell off wasn’t more fierce probably signals them that now is as good as it is going to get for getting back in.  Lots of pundits out there think this retardo rally could continue for a couple more months until there really are no reasons left to keep buying both technically and "fundamentally".


  105. I am pissed, right after I make a move, the market goes in opposite direction:


  106. By my reckoning that spike on SPY erased Mondays gap down.


  107. LOL!  I set a stop on FAZ at 26.92 cuz I was going out to lunch.  And guess what?  That’s right, there was a 2 minute spike down to trip my stop while I was gone.  Now, there wasn’t much on the line for them to snatch but they are such ruthless bastards they’ll take anything. 
     
    Tommorow gentlemen will be the day we’ve been waiting for.  I’ll be short naked at close today.


  108. I missed again the increases in oil stocks, MUR, CVX, XOM, etc.
    are any of you guys watching this ?


  109. Email from ToS regarding rates

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    Shane:
     
    Ameritrade has started to restrict my ability to change rates but I have gone ahead and lowered all 3 of your accounts to a flat $1.25 per contract.
     
    Enjoy the day,
     
    Scott


  110. Lots of stocks and the markets testing last Fridays levels, we opened much lower the following Monday…..Im trading on the notion they take the S&P back around 1010….but being very cautious


  111. As pointed out above, SPY closed Monday’s gap down and is probably significant in that people who didnt get out before the fall Monday morning could now do so . I suspect that means the downward momentum can contune. (Hey but I know nothing !)


  112. Pharm: Mot Fl headline "4 stocks attracting top investors". FOE is one. Congrats on the Top Investor recognition.


  113. Does anyone know why the markets jumped suddenly at around 11:45?


  114. http://market-ticker.denninger.net/

    Note that the PDs (that’s the big banks that deal directly with The Fed) took basically all of the auction, and they were willing to loan all that money to the Treasury at an annual interest rate of 0.145%.
    That is essentially zero.
    So what is it that these big primary dealers see happening (or more importantly, have been told and thus know will happen) in the next two months that leads them to think parking $22 billion of money with Treasury at zero interest will provide them with the best possible return on their investment?  Oh, and they bid for nearly 5x as many bonds as were sold too…..
    I know, I know, its "a new bull market", and you should buy stocks, right?  We’re going to the mooooooon!
    Care to re-examine that thesis given that these huge banks, all of whom make a lot of money trading equities (and commodities) are falling all over themselves to park their money with Treasury at zero interest for the next two months?


  115. I know why the market goes up: Phil is out to lunch!
    Phil should go out to lunch every day at 11:45!


  116. Morx – good to know Motley Fool is following us here as well.  Now if WE could get this thing to flip over for us, then Matt, DB and Cap would be happy (for a brief while). 


  117. Wow, what the heck did you guys do?

    What was the catalyst for this move up other than me walking out the door?


  118. Phil is back.  Time to short?!
    8)


  119. My doubling down on oil stocks/funds was the reason for the further move up.  This is ridiculous. 


  120. Hope lunch was nice and now, about those Dia puts


  121. Those DIA 93′s are sooooooooo tempting, aren’t they ?    (puts)


  122. Volume dropped off a cliff and the markets are holding up

    Watching IBM, the ask was 118.70 someone thought that was too cheap and bought at 118.72, desperate moves to hold the markets up


  123. Phil – Its too expensive for us bears for you to have meetings – I’ll pay you to stay away :-)


  124. Sorry about being bearish before I left for lunch, I saw no sign at all of anything positive…

    I hate to say it but this is the BS move to 9,300 we expected yesterday and I would take the opportunity here to go naked again on the DIA Dec puts between now and the close where we should 1/2 cover again.

    Oil is $74 and gold is $945 and DUG Sept $17 puts are a nice naked sale at $1.20.

    DIA/Cap – Very tempting but not as much as the DXD (Dow ultra-short) $38s at $1 with .25 in premium.  This is an all or nothing play to hold overnight so very dangerous.

    XLF still below $14, QQQQ over 39 though.  Volume just 108M at 2:10 so probably didn’t even  burn the stick yet. 


  125. DIA- at close- back to the well with 1/2 cover on Sept 93′s?


  126. AW posted an interesting option play yesterday on MTW.  30K of $15 Jan2011 were purchased at 80-90c.  Scaling into a nice little position for growth (gulp)…buying $5 Mar10 for 2.45, selling $7.5 Sept 7.5 for 30c.


  127. Phil,
      I am waay too bearish. Can you suggest some upside plays.
    Thanks


  128. Hey Folks,

    Not going to do a whole writeup, but I really like the spot ERY is at right now. Oil up to 74 is unbelievably high and should not be there with these fundamentals. I expect a lower open tomorrow, and getting in right now at this price is excellent. The stock is only 12% off 52 week lows, and it over 80% off 52 week highs. Time to make some money here. I got in at 18.30, but its starting to move.

    David Ristau


  129. Catching up from 11:30 (If I miss you just reask):

    Buffett/Pstas – I think to some extent it’s self-serving as Warren is looking to start a new Buy List, just like we are and he wants to see the markets pull back.  Also, I know it’s confusing to conservatives but you don’t have to walk in lock-step with your leadership when you are a liberal.  Healthy debate is appreciated within the ranks. 

    DIA $93 puts/Dflam – Well, if you still have them then .73 is a great DD to get a $1 basis but if no sell-off at the close we need to cover or roll into the close. 

    FAZ/Craig – Ah, so that was the straw that broke the camel’s back…

    Don’t forget our premise yesterday was a flatline into Thursday (and we’re not too far above a flatline from yesterday) and then a big drop tomorrow as we get bad retail news. 

    Meetings/DB – Someone should pay me to go to lunch if the market can jump almost 100 points within 15 minutes of my leaving my desk…


  130. Bull plays/Foss – I like UNG because they can go up whether the markets do or not.  You can buy Oct $10s for $2.40, which is just .40 in premium and you can sell 1/2 the Sept $13s for .50 to make up most of that.  UYG is also a good upside play as you can buy the ETF at $5.13 and sell Dec $5 puts and calls for $1.50 which is net $3.63/4.31 so financials have to fall 10% (as it’s an ultra) for your to be below your strike in which case your shorts should do very well and anything better than that is even or better up to a whopping 37% gain at $5.  So if you have $100,000 bearishly invested dollars that you project will lose $15,000 if the market does well and make $15,000 if it does poorly, you can invest $51,300 in this trade (10,000 shares) and you’ll make $13,700 in a good market and if UYG falls 30% to $3.60, you’ll be down $7,100

    Seriously guys, was there no reason at all that the markets flew up 5 mins after I left?


  131. "Healthy debate" – translation: We stepped in it and don;’t know what to do.


  132. What’s the best way to eat Aug premiums from the oil-fake-out this morning?  Sell ERY $19 puts for $.85?  Or would it make sense to buy a truckload of those DUG $17 calls (and risk having the time decay go against me) that were a dollar earlier at $.30?


  133. Phil/Serious/gap – " Rich_"  thought maybe someone mentioned a second stimulous but other than just a stick getting in early who knows ?


  134. Let’s not kid ourselves, there is more to the story of the U.S. economy becoming the new Japan than meets the eye. With the U.S. Peso having taken over the carry trade from the Yen, all we have to do is what the Japanese housewives have been doing for years: watch the Forex market and buy when the Dollar is weak and sell when the Dollar is strong. This is the most  reasonable explantion to todays movement.


  135.   Also, I know it’s confusing to conservatives but you don’t have to walk in lock-step with your leadership when you are a liberal.  Healthy debate is appreciated within the ranks. 
     
    Phil, you are a riot; comrade Pelosi would not be amused.
     
    To the gulag, Philski.


  136. IBN – Again getting to a good point here to be a buy-write candidate or writing PUTs. Buy at this point around $29.5 and sell Aug/Sep 28-30 calls. If this BS move up on US continues or at least there is no drop below /ES 880 or so, IBN will bounce, else it will drop and give you an opportunity to cover the calls you sold. (My play from last week was to do a buy-write with Aug 30 calls and I covered them yesterday).
    Currently wrote Sep $30 Puts for a nice $1.80. Expect to cover by next week for less than $1.


  137. I see the EU was stick saved into the close, maybe we reacted to that (or were running off the same program). 

    Good article on low market volumes and the August effect in Europe

    Reuters data shows volumes for the Dow Jones industrial average .DJI for the full day on Tuesday were only 56 percent of the index’s 90-day average daily volume. They were higher for the Nasdaq .IXIX, but still only 73 percent of the norm.

    Still looking for what was so bullish…

    Shiller says we’re setting up for another housing bubble within five years: "The low interest rates, the affordability is leaning that way and the ratios are back down."

    Fed buys $2.6B of the $13.1B offered by dealers in Treasurys maturing 2021-2026. Last time the Fed bought back in this range, it purchased $3B of $11.7B offered so that’s an improvement of some sort.

    Fed eases margins on low-risk collateral used by banks to obtain loans from its discount window and Term Auction Facility, stressing the changes stem from a multi-year review, and are not a response to the financial crisis. Still, analysts say the move is a plus for the economy and the markets.

    I’d have to say that last one, which hit the wires at 11:57 but was certainly known earlier by the big boys (who sit at the table with the Fed govs) so effectively this was a money dump coupled with the 5% jump in crude for the day – all nonsense that doesn’t change the overall funamentals. 


  138. WOW The TICK just exploded over 1000 now working itself back down??


  139. Looks like the 15.00 stick is warming up to run salt into my wounds !


  140. IBN – Incorrect post above. Sold Sep $29 PUTs. Aim to cover below $1 next week or end up owning IBN for 10% below current price. See  http://finviz.com/publish/081909/IBNc1dl1500.png


  141. al ya gotta do is say "F U Stick !"


  142. Debate/Pstas – Yes, as opposed to "you are either with our stupid plan or you are against us."

    ERY/GS – If you can get $1 for them and don’t mind owning at $18 then it’s a nice trade.  Keep in mind oil can get REALLY crazy once they start jacking it up, especially at the beginning of the contract period when no one at the NYMEX is concerned about taking delivery.   Don’t buy Aug premiums, you have just 48 hours to be right and will have just 24 hours to dig out of a hole if tomorrow opens wrong. 

    Gulag/Cap – I just got an Email asking for input on health care and I get Emails all the time asking for opinions (essay, not polls) from "The Party."   Maybe it’s an illusion but it sure feels like participatory Democracy to me.  There’s a strategy meeting on healthcare tomorrow at 2:30, maybe you can be my "special" guest…   8-)

    IBN/M2 – I would love it if they pull back below $25 but a tough play here around $30.


  143. Short covering may have been a varialble in that run this morning too: things seemed pretty bearish at the open, so it probably wouldn’t have taken much to force a squeeze. Any desk willing to throw money at the 10:30 triangle consolidation pattern on all the main indexes this morning could have triggered it on no real news at all.
     
    Volume is so light that I bet PSW members could collectively force a short squeeze, not that I’m suggesting it. :)


  144. ah, no guts, no glory …. should have taken those DIA 93 puts in the 60s


  145. LOL – we may mirror the move up the way this is going.  Good job intimidating the stick Cap!


  146. Did a Sparc 5 go down?


  147. So…should we buy anything in anticipation of (hopefully) Thump-down Thur?


  148. See? My timing was absolutely right on the dot: Phil came back, market went down.


  149. Sold my FAZ for fear of the stick.  Will reenter at close.  Still holding SRS, 1/2 covered until close when I’ll let it all hang out.  8-)


  150. Phil – Ok…so yesterday’s request for "another GMCR/X/OIH (when it was at $108)" returned results that were positive in the first 30 minutes of the market….except I got greedy and didn’t sell.  Now I’m down huge (where have we heard that before) but luckily I didn’t spend all of my portfolio trying to make some last minute expiration premiums….so an improvement in behavior.

    Let’s give it another shot.  I’m not going to get $1 for the ERY $19 puts.  Any other suggestions for "easy pickings" in terms of SELLING some out of the money calls or puts….and hopefully collecting at least the 33% time decay between today and tomorrow…or better yet, keeping 100% of the premium by letting the option expire?


  151. Do you think they used up their STICK at lunchtime?


  152. Debate- interesting how disagreement with Obama among leftist is healthy debate but disagreement with Obama from the right is "fear mongering" and mob action.


  153. DIA- into the close- 1/2 cover with Sept 93′s again?


  154. Phil / anyone following IBN,
    IBN – I doubt it goes below $25 until the global markets correct 10-15% – the widely expected & awaited correction since early July that everyone (sane) seems to be waiting for – especially in the US markets. Till that happens, $30 is a nice key level with low $30s also being the 50 DMA. See chart below
     http://stockcharts.com/h-sc/ui?s=IBN&p=D&yr=0&mn=3&dy=0&id=p72590603606


  155. Aug DIA 93 puts- in at .72- out at .90. Goodenuf!


  156. Couple of interesting tidbits for CEOs buying shares…..TMRA CEO bought 10K @ $6.  TBBK bought 100K at 5.75 outright.



  157. In fact, TRMA CEO has been buying like crazy.


  158. Here are all too real examples of the rational, "healthy debate" that is typical of the Left …
     
    http://littlegreenfootballs.com/article/34471_A_Walk_Down_Memory_Hole_Lane
     
    http://littlegreenfootballs.com/article/34449_The_Bush_as_Hitler_Retrospective
     
    http://www.zombietime.com/zomblog/?p=612
     
    Those damn conservatives …


  159. Amazing how easily the bears give in – Mr stick wins again


  160. Pharm,
    CERS back at 2.88?


  161. Is it me or is the quietest close ever?


  162. I mean come on guys, really,

    Anticipation/GS – Other than the stuff we did 50 points ago, I’m not keen in making bearish bets, if Buffett can’t splash cold water on people’s faces, I’m not sure that retail earnings will either. 

    LZB had a beat today and that’s making me wonder if maybe the consumers are a bit better off than feared.  Sales were down 18.3% from last year but they are low-end furniture and not the kind of thing that should be recession-proof.  BJ beat today and DE was a beat but guidance wasn’t exciting.  Even PERY had a beat on 18% lower revenues.  So I don’t want to go crazy betting Retail will prove a bear case but it is what I’m expecting.  And, by bear case I mean that 8,650 to 9,100 is a proper range for the Dow, not that we’re falling 1,000 points! 

    GYMB, HAR, HOTT, JDSU, LTD, NTAP, PETM and PVH after the bell.  FLWS, BKS, PLCE, DKS, GME, HRL, ROST, SHLD, TK, BKE and TTC tomorrow morning.  ARO, BRCD, FL, GPS, INTU, NDSN, PSUN, CRM, WTSLA and ZUMZ at tomorrow’s close and ANN and SJM Friday morning.  It’s a consumer-palooza and if those are 75% green with less than 20% drops in revenues – the bull argument stenghtens.

    Plays/GS – Why do you always ask AFTER the market turns?  How about selling USO $38 calls naked for .65?  LVS Aug $13s can be sold for .25.   DUG $17 puts can be sold for .35.  POT $95s can be sold for $1.45 – those are a couple I see but the premiums aren’t all that exciting with the VIX at 26.60. 

    Fear mongering/Pstas – Yeah, why is that?  You should read Al Franken’s "Lies and the Lying Liars Who Tell Them," it defines the differences far better than I could.

    DIA/Pstas – Yes, 1/2 cover with Sept $93 puts, now $2.46 as we have no way of knowing what tomorrow will bring.   Good job taking a quickie on the Aug puts. 

    IBN/M2 – You know I loved them in the teens but it’s hard for me to get motivated at $30 just because the market hasn’t corrected to a rational level yet. 

    Bears/DB – Total wimps!  Of course, there is so little real trading that the bears are probably the same people who are the bulls on the way up, just sucking in some retail money and then chasing it all out with a loss, over and over again. 

    Note Caps reaction to a rational discussion on politics is exactly what Franken points out in his book as typical, immediately dropping the bar to the most sickening possible denominator to drown out any possiblility of heathy discourse. 

    Quiet/Steve – So far…


  163. From the "old salts" on the board, on a scale from 1-10, how difficult is this market to trade in comparison to the past?


  164. The funds with the biggest positions just aren’t selling, they want you to beg for their shares


  165. Al Franken ???   C’mon Phil, the guy is a nut job !  That’s who you are quoting …. I told this to Johnny Mac and he said "you cannot be serious !).  Oh right, Franken stole an election and is now a Senator (what a country).    What does Jesse The Body Ventura think ?
     
    Is it the photos that make you respond as you do; that you can’t just dismiss the unassailable evidence of the lunacy on the Left vs. your unfounded comments about the right ?
    When you get a bunch of conservatives running around w/ Obama Hitler signs and paraphenalia, please do let me know (and make sure its not some lone Aryan Nation nut).
     
    Sorry for dropping the bar on the possibility of healthy discourse, but facts are stubborn things.


  166. I cannot believe a 997 S&P close … what a joke.  9281 Dow.
     
    Will we get ‘em on Thurs & Friday ?


  167. Phil-  I did sell some USO calls…..at $39 strike actually when USO was at about $38.25…..can never catch the top or bottom though…as we found out with SRS.  I also sold some DIG calls and DUG puts…around the same time. 

    I was just checking to see if you might have any suggestions on non-oil stuff.


  168. Note Caps reaction to a rational discussion on politics is exactly what Franken points out in his book as typical, immediately dropping the bar to the most sickening possible denominator to drown out any possiblility of heathy discourse.
    How can their be discourse with people who want to end freedom and capitalism by providing universal healthcare….


  169. Speaking of healthcare since we are after trading hours….NPR had a nice piece on the Spanish ‘universal’ healthcare system…here is the link.
    http://www.npr.org/templates/story/story.php?storyId=112014770&ft=1&f=1027


  170. Its only going to get worse in this country for every class except the uber rich, might as well get free health care. ;-)

    http://www.zerohedge.com/article/quarterly-new-york-state-tax-revenues-drop-24-compared-2008


  171. Debate- Al Franken? Have you no shame? Pu-lease.
    If you don’t play nice I am going to start using Rush Limbaugh.


  172. Did i say free!! oops


  173. Pharm, to put it simple, those system (in their ideal form) are "comunist" meaning all people are equal, so there is a lot of complains because waiting and other issues. Expect in the waiting line to find bill gates, a dosser and why not Obama…
     
    Overall is good. But maybe you are not ready for a communist system… hahahah :-D
    I’m joking but at  same time I’m saying true
     
    PS: So we have to get ready for a recession: http://www.dossergame.co.uk/&nbsp; LOL  was selected "game of the year 2008" isnt ironic? :P


  174. So that was all about oil then ? Big draw – oil up – stocks up. Has no-one learnt last years lesson ? It seems the stock market has now completely decoupled from the economy. Lots of interesting talk about how China is collapsing from a parabolic rise similar to the S&P  Lots of commentators on Seeking Aplha have turned bullish , which is usually a bearish sign however everyone in the market is far too irrational for that. They want the market to rise and turn a blind eye to all the coming problems. So up we’ll go. Phil seems to be hedging his bets by having both bullish and bearish comments he can quote from. But the overall physcology appears to be buy,buy,buy because its going to go up. Just hope I’m not in it when the crash comes


  175. Guys, I think it’s time to switch off the incessant bear hope because it is obvious that fundamentals aren’t at play and aren’t going to be for awhile.  Either
    A) Money is coming in from somewhere at all pullbacks, or
    B) There is no fear to panic sell into drops.
    If 180pts in a day when everyone was thinking a pullback was inevitable and long overdue wasn’t enough to get a proper correction started, what is?  Especially when you consider days like today when the market rocketed higher on what appears to be bullish news for energy.


  176. Spoke too soon Steve – a nice little bonus goose in the last 10 mins… 

    Can’t quite close the deal at 9,300 though… 

    How difficult/SS – I’d say about a 10.  You have intrad-day moves that would have been big news if they were week moves back in the 80s.  We have 2.5% up and down reactions to things people say or news within an hour of the event that reverse another hour later.  You really have to be a very short-term or very long-term investor, trying to play for mid-range momentum is nuts when the whole market can reverse like it did at 11:30 for no real reason.   The only thing that could really be more difficult were if they actually turned the market into a roulette wheel and you had to pick red or black in the morning and stick with it for the day.  As I’m sure Peter will tell you – it used to be we’d show up on the Friday of expiration – sell a bunch of puts and calls and then go away for a month.  About once a year you’d get blown out but the other 11 months you pocketed the premium and sold again… 

    On Oct 1, 1964, the Dow was at 874 and on Oct 1979 the Dow was at 838 with a low at 650 in a 1-year slump in 1974 (Watergate/Ford) but that was about it.  From 1980 to 1995 the market pretty much went up 8% a year and not usually in a shocking way, mostly 1% a month with a few pullbacks.  In 1995-2000 we went up 2-3% a month (Clinton) and then it all hit the fan (Bush) and the markets were turned over to speculators and bankers who used it as an instrument to rob Americans of the retirement savings that Al Gore had tried to put in a lock box.  And that’s how we got here….

    Ouch – NTAP not good!  GYMB not too exciting either.  HOTT not hot.  Et tu PETM? 

    That’s Senator Franken to you Cap!

    Here’s Cap’s dream of American discourse.

    USO/GS – That’s why scaling in and out is critical.   It greatly increases your margin for error and forces you to re-evaluate the position at each 20% it goes against you before you fully commit at 60% off your original entry. 

    Point well taken Steve – Us totalitarian health care providers want to force adequate care on the citizens and we should be stopped at all costs (all costs being an average of $650,000 donated to each Republican member of Congress by health care lobbies in 2009 alone). 

    Franken vs. Coulter – a classic!  Watch Anne snarl…  too funny. 

    Free/Kustomz – Shhhhhh…. Do not reveal the secret stage 2 plans!!!

    Not ready for communism/Spider – Well, to be fair, neither was Russia.  Communism is a utopian dream that simply goes against human nature and thus, doesn’t work.  Capitalism is a simple extension of survival of the fittest and is hard-wired into our animal brains which is probably why conservative capitalists tend to be anti-evolution because societies (as in socialism) came about as man learned to overcome his base instincts to harm and degrade others in order to assert his primacy and it was this cooperation (as in co-op, as in communism) among the tribe that lifted us out of the mud and gave us dominance over the planet. 

    If you believe that we have achieved our place in this world through sharing and cooperation then evolution makes sense to you and you aspire to do more to help your fellow man, not less as you feel you are already a product of individual sacrifices that led, ultimately, to a greater good.  If you believe that you were handed the earth as is and placed justly on top of the food chain and that your success or failure in life is strictly a function of how rich you can get, then large-scale change is something to be feared as it may upset the machinations of the individual to gather as many earthly rewards as possible to prove his superiority.  So health care is effectively a religious debate for Americans, it’s very difficult for people from other countries to understand how it is that there is a question as to whether a person who is sick should be treated, regardless of their ability to pay. 

    It may seem horribly draconian to say that only those who pay deserve the best (or even any) care and that money should be the ultimate deciding factor in the quality of a person’s life.  It may seem cruel that a person who works their whole life teaching Donald Trump’s children and grandchildren should have their retirement benefits cut by the Board of Ed and then be told that their cancer thearapy ran out after 6 months, even though it was working very well.  It’s sad that the hundreds of thousands of people who worked for minimum wage in order to make 6 different members of the Walton family (WMT) multi-Billionaries have no benefits at all and no retirement plans and are probably some of the poorest working people in America but hey, those Walton children and grandchildren were just more deserving, right?

    Oil cans/DB – Yeah I think charging the US consumer another $100M a day for oil and $500M a day globally may not be the best reason for the markets to rally.  Logically, that $15Bn a month has to be sucked out of money that, as of Friday, would have gotten spent on all those other sectors, maybe even paid down a mortgage or two.  As to bullish or bearish – that’s what happens when you’re not sure.  It’s OK to not be sure DB, you don’t have to be certain that you should be one way or the other all the time.   I think I’ve said, often enough, that I think long-term we are going up but I also think short-term we are overbought and needing a correction.  If you want me to just scream SELLSELLSELL no matter what the market does – you are watching the wrong show…  Effectively, do you want to be right or do you want to make money?

    Switching off/Smasher – You are right, if the week is a bear failure (sorry DB, don’t quote me on that!) then we will have to respect our breakout levels and start calling them breakdown levels for the next leg of the rally – no matter how crazy it looks.  I still can’t imagine going into any weekend without some pretty good coverage for quite a while.


  177. Cab someone explain this staement for me ?
     
    "As energy demand starts to increase, that’s good for the economy, at least initially," said Mike Zrembski, senior commodities analyst at OptionsXpress.
    "In the past, traders would view higher energy prices as a negative for corporations, since their input costs increase," he said, adding: "It’s only recently that they see it as a positive."


  178. Hey you guys always assume because I’m bearish I trade bearish. Its all right to be sure of being bearish and to state that opinion but in trading its also ok to be hypocritical and trade with the bulls. Sure I short as well because I want to build a position for when I’m right (I have to be right sometime) but untill then I’m biased to where the markets momentum is.


  179. Phil
    Not ready for communism/Spider     WELL DONE  !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


  180. Petroleum Inventories, now that I have the full report, are a total joke. You need to focus on the facts: 

    Refinery activity is within 0.2% of last week.  (140Mb week used = +/- 280Kb)

    There was a draw in crude and product of 12.8Mb but from where?

    Imports were down 400Kbd so that’s 2.8Mb but Products supplied were 18,995Mbd vs 18,905Mbd last week.  So it somehow took 12.8Mb of oil to produce 630,000 barrels of product. 

    Are people drinking oil straight from the barrel now and, if so, wouldn’t that count as "All other Products?"  Despite this amazing surge in demand (almost an entire extra day’s supply of crude used up in a week) the price still fell from $70.97 on the 7th to $67.51 on the 14th.  I guess the traders didn’t know they were selling 10% more barrels than the week before…

    This is beyond stupid – there’s no logic to this other than someone is lying or some figure is simply totally wrong somewhere.  Since all the figures EXCEPT the total barrel count make sense, I think we would need to start there.   It’s also worth keeping in perspective that last year, on August 14th, there were 1,703Mb in storage in the US and this Aug 14th, even after the mysterious disappearance of 12 Million barrels, there are still 1,832Mb of oil in storage.  That’s up 7.5% and, if you take out the SPR, commercial stockpiles are up 11.5% from last year, when oil was crashing from $110 a barrel to $35 a barrel due to oversupply and lower demand.  

    Since we are only importing 9.7Mbd now vs. 11Mbd last year, the extra 129Mb represents an additional 13-day supply of imports, bringing the total supply in storage up to a staggering 188 days (and that’s with much of US production off-line). 

    In short, it’s a total scam as usual as 50,824 barrels scheduled for September delivery were traded 182,990 times today. 


  181. Sorry to be scarce. Tho David prob prefers when Im not around. Despite the crying, ADI turned out fine – tho I capped my gain by selling Aug 27.50 calls and will likely be exercised – exorcising ADI from my folio. Lol. And, again, big props to someone here for BPOP. BQWJZ cashed huge and I’m letting some ride with house money. Back to the beach!


  182. Communism / socialism breeds slackers. It is the opposite of what JFK famously said. Slackers say "what can my Country do for me, not what can I do for my Country."  They want everything given to them. The government "owes" them. They do not want to break a sweat to do anything as long as the government is there for handouts. With high taxation of those that work hard, there is no incentive to do well. This is why communism and socialism will never succeed compared to a capitalist society.


  183. Come’on Phil, the oil is going to make CROCs…..


  184. Hi, Pharmboy,
    Are you still there?  Do you think it’s time to go long on MTXX?  If so, what do you suggest, sell puts, bull spreads, etc?  When do you think we’ll hear from FDA, days, weeks, months?
    BTW, I have no positions in MTXX right now.
    Thanks!


  185. OIL = great analysis Phil.  Im not surprised with fake stats and fake reports coming from goverments (any) or organizations (any) or cooked banks books (any). What amaze me is how fast you figure there is something rotten. Like when we had the unemployment numbers some month ago, nice numbers, and the market sell into the news. There was something bad with the numbers… something about temporal employees for the 2010 census.
     
    Comunism = well, i just mentioned because those system the base is all are equal or common and remark what I said: "in the ideal form" Of course, the reality is beyond that.  
     
    Maybe i have to stop writing, because the idea was to make a joke (see the "hahaha" and smile in original post). Making fun about a common=equal=communism health system in a country who fight the comunist away. Seems the joke went wrong.


  186. cwan – many of us are in MTXX from about 6.4 or so.  I am long them to a point.  Not sure if they will make it back to 20, but 9-10 would be nice.  I believe the FDA info is due in 90d, so sometime in Oct/Nov.  You want to scale, Sept Puts (1/4 sale) would work.  I sold calls a while back on the earnings, knowing they would be bad, and sold puts and bought back recently.  The lawsuits are the big issues right now, and that is what is holding them down (and may for years).


  187. SELL!  SELL!  SELL! 
     
    Sold my IYR covering some SRS.  Took advantage of the consistantly bogus AH pop.  I may be a bear but I gotta eat!


  188. Joke/Spider – Not at all!  I totally got that you were joking and my response was also tongue in cheek.  Sometimes you just catch me in the mood to be philosophical and then other people may want to weigh in but it’s all in good fun (usually) as clearly we are all a bunch of capitalists here anyway.    Frankly, I very much like your perspective on things as it’s always good to hear what people from outside the US/Europe are thinking. 

    Speaking of outsiders – Thanks for checking in Dstil!  BPOP was mine from July 16th (how quickly they forget…) the in price was $1.35 at the time, hopefully you got out this morning on that crazy run. 

    Commie slackers/Richard – Actually a kibbutz is a communist society and they have proven to be wildly successful models but the difference is, as a closed unit, they can and do kick people out if they don’t pull their weight.  I don’t know if there are particularly more "slackers" under communism and I’m sure many Europeans would tell you it’s not a particular problem under socialism.  Also, this high taxation nonsense taking away incentive to well is just ridiculous.  Even when the UK had a 90% tax rate they still has plenty of hard-working rich people – unfortunately many of them left for the relative tax haven of America. 

    The real problem in all of these models is how do you define work?  Can you tell a person that if they go to work and get there on time and are not sick and do their jobs well (pre reviews) and put in 40 hours a week that they can be guaranteed to go home to a 3Br home where they can afford to feed a family of 4 (with medical care as required), send 2 kids to college and retire at 65 and expect to be able to live in a 1Br apartment with food and medical care after that?  Does it matter if that person is a nurse or a fry cook or a 7-11 person or a janitor?  All those jobs need to be done and why shouldn’t a person doing a job in society have a reasonable expectation of having a life? 

    This doesn’t take away from the incentives you crave to be all type-A but there is something wrong with a system that says a person who does work all day long as hard as they can can’t have the basic things that constitute a life in the USA.   Does there need to be some equitable distribution of wealth to get there?  Yes there does.  When TBoone Pickens makes $3.6Bn personally in 2008 by moving his piles of money from one place to another it is, as people like to say, a zero sum game.  It means someone on the other side "lost" $3.6Bn plus all the commissions that went to GS et al.  No product was created, no jobs were created, no societal benefit was derived.  In fact, the price of fuel for the 319,999,999 people in this country who were not TBoon Pickens went up over 100% in order to pay for his great windfall.

    So we have the "losers," the retirement funds, mutual funds and individual investors who were unlucky enough to be on the wrong side of TBoones bets and they directly lost $3.6Bn of the American people’s money that was going to go to retirements or maybe college or a car or whatever but, generally, back to work in the economy at ground zero.  Also on the wrong side are the American people who suffered at the hands of market manipulators and paid an extra $700Bn for energy last year all so Mr. Pickens could make $3.6Bn.  It would have been cheaper if he would have just bought a gun and robbed us for $7Bn wouldn’t it?

    Then, all alone on the other side of the equation, we have T Boone Pickens, who is an old man who made $3.6Bn in one year.  That $3.6Bn allows him to spend $1M a day for 10 years.  The interest on that money at 5% is $180M a year.  So, as a society, we can let him keep the money he made by raking it away from others or we can redistribute it through taxes.  You can argue whatever you want about incentives but I’d say that once a person makes over $100M in a year – 35% just does not cover what they can afford to give.  This is especailly true when just 20% of that money or $720M, would be enough to pay for 1M people’s health insurance or 100,000 college tuitions.  If TBoone pays just capital gains, that’s 20% (assuming 5% state) and, even if it’s income it’s going to be 50% at most. 

    What is the societal benefit of TBoone tying up $1.8Bn in addition to whatever pile he started with at the beginning of the year?  It does not flow through the economy.  The concentration of wealth in the investor class is poison for an economy, that was proven right here in the 1920s and pretty much again last year.  Even from TBoone’s point of view, he is better off giving up another 1/2 of his $1.8Bn after 50% tax profit so that 18,000 people can have $50,000 jobs because those people, down the road, will be able to afford his oil and will put their money into retirement accounts that TBoone can beat out of their funds in the next round of financial poker.

    5% of the people in this country have 70% of the money and that’s just the statistic they use to make "millionaires" feel like they are winners because the reality is that 40% of the wealth of this country is in the hands of 3,000 people and if you aren’t sure if you are one of them – you definitely are not! 

    What’s really sick about this is the BS math they use to make the people with 40% of the wealth (the top 10% excluding the top .001%) think this is a good thing.  By telling you (as I assume you are in the top 10%) that you simply can’t help everyone so why bother, THEY (the people so much richer than you that you would cry to discover it) keep you motivated to "keep what’s yours" and vote down any possible reform in the system. 

    The reality is that the bottom 40% of the people in this country have just 5% of the wealth and that’s 120M people who have less than $5,000 in assets.  Generally, the conservative arguement is that you can’t give 120M people $100,000 ($12Tn) because they don’t deserve it and it’s your money and screw them yadda, yadda, yadda.  But these people do not need and are not asking for $100,000 (the approximate net worth of the top 40% excluding the top 10%), they just would like to have more than $5,000. 

    All these statistics can be confusing but if you focus on the fact that 40% of this country has $5,000 or less and that’s 5% of the nation’s wealth then taking just 10% of the 40% that the top 3,000 people have would TRIPLE what the bottom 120M people have.  Triple is a lot to them.  10% out of 40% is 25% or $450M of TBoones $1.8Bn after taxes.  Will he miss the money?  Sure, he could have had a second helipad put on his third yacht and some of that money he spent might have even trickled down on some of you working people. Will TBoone go on strike because the government took 25% of his earnings over $100M and refuse to rip people off next year to make his next Billion?  I doubt it.

    Will bringing 140M people out of the lower 40% of the population and placing them where the current low end of the middle class is be of great benefit to the country?  Probably.  So probably that I’m strongly in favor of it and not just for that reason but because if you don’t redistribute that money, it simply becomes more and more concentrated at the top and scarcer and scarcer at the bottom and the only way middle class and upper middle class people have any real social mobility is if there is a strong base below them to buy their goods and services.  The TBoones of the world will always prey on us because it’s more efficient to take our money than to have to collect it from 140M poor people but if they starve out the people who pay us – we will be more likely to be moving down the ladder than up – which is exactly what’s been happening to 99% of the people in this country since Bush changed the tax laws. 


  189. thank you Phil for some great reading, what would cause more inflation the top 3000 keeping their wealth or to redistribute it to the bottom 120m


  190. Free market
    http://www.reuters.com/article/marketsNews/idINN1946918220090819?rpc=44
     
    Free to do whatever it is with accounting in this market


  191. Phil, i find your last post very informative and further supports my disgust with the greed, inadequacies and injustices within our society.  Growing up I remember my  friends and parents friends who were worth millions,bigger houses, nicer cars, but they didn’t seem so different,  now i drive my children to friends who have 100′s of millions, some more, and the differences are astounding (pls. excuse my spelling -its late).   Further, from personal interactions, I dont think the top 5% get it, they are so removed from the  realities of life. As one said recently,  "i too had to cook breakfast for 4 children and then take them for a bike ride". Hello! How about cooking, bike rides, a job, a loss of a job, laundry, bills, mortages, schools, camps, health care,  the list does not end. Though, as my 8 yr old told me to day  the end is death. Finally, some relief!
    on a related note, I drove over to the 4 seasons  (Exuma) , forlorn sight and actually eery.  Workers have told me that all outdoor furniture and some indoor, all soft goods, sheets comforters, towels, were taken to the local dump. Dump says everything was burned on orders.  Absolutely, disgusting.  This is a poverty stricken island.  Talk about social/ corporate irresponsibility. I am sickened.


  192. MTXX/Pharmboy: Thanks!  I’m not familiar with that sector.  Thank you so much for all the information.


  193. Phil,
    You definitely got it right. Without a middle class, there is no one to buy the goods that makes rich people richer. If you notice on talk shows – especially Fox, when anyone starts to make a point they don’t believe in – they get shouted down and don’t get to finish what they are saying. I think many people still believe Saddam had WMD and Obama is a Muslem.


  194. Communism / socialism breeds slackers. It is the opposite of what JFK famously said. Slackers say "what can my Country do for me, not what can I do for my Country."  They want everything given to them. The government "owes" them. They do not want to break a sweat to do anything as long as the government is there for handouts. With high taxation of those that work hard, there is no incentive to do well. This is why communism and socialism will never succeed compared to a capitalist society.
    RichardA  –
    Comunism. We were discussing universal healthcare provision. How on earth can you equate providing universal healthcare with becoming communist? Perhaps this was just deliberately being silly.
    Socialism. I agree that social benefits can risk disincentivising people to work or be productive. Again though, I don’t see how this applies to healtchare. Free healthcare won’t pay the rent or put dinner on the table or clothe you, so work is still required. And the poorest people can’t currently afford healthcare anyway, so the impact HAS to be zero on their incentive to work.


  195. Well said Stevenparker – I like you your comments – always very sensible and to-the-point and I always find you agreeable and that is important when discussing political policy.


  196. Now I hope someone is going to make me richer today but if not then there is always a movie like "Happy Go Lucky" (Mike Leigh) or "Miracle at Santa Anna" (Spike Lee) to stream from Netflix for a fixed $9 per month – and life goes on with our hopes and dreams – what would we do without them.

    Oh and Phil.