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Friday Morning – Goldman’s Global Goose!

We have talked about manipulation all week but this takes the cake!

The Nikkei was plunging 250 points this morning as the dollar collapsed (in a move to boost commodities and the US markets – more on that later) below the critical 94 Yen mark and, EXACTLY AT THE MOMENT the Nikkei crossed the critical 10,200 line we've been watching all week (11 am, just as they were closing for lunch), Kathy Matsui, chief equity strategist at Goldman Sachs, jumped on the phone and literally stopped the presses by calling for a 73% increase in Japan's corporate profits next year buoyed by cost cuts, a weaker yen and rising demand.  “People are going to be surprised at how sharp the recovery will be,” Matsui said in a phone interview.  

Goldman’s estimates equate to 48.9 yen in earnings per share for the Topix in the financial year ending March 2011, placing the benchmark at 19.4 times estimated earnings. The brokerage also reversed its forecast among all industries to a 23.3 percent increase in pretax profits this year from a 15 percent decline.  “Our forecasts for both the March 2010 and March 2011 financial years exceed consensus estimates largely due to our expectations of stronger global growth, continued restructuring benefits, and a weaker yen,” Matsui wrote in a report titled “Back in Black.”

Note that Ms. Matsui is the only analyst who sees this Asian miracle occurring this year as Global emerging-market equity funds posted their biggest weekly outflows of 2009 as investors pulled money out of China on concern banks expanded credit too rapidly, EPFR Global said.  Funds that invest in emerging-market stocks worldwide lost $946 million, while China funds had their worst week since the first quarter of 2008, according to the Cambridge, Massachusetts-based research company. Investors pulled $810 million from Asia excluding-Japan funds, the most in 24 weeks, while Latin America and Europe, Middle East and Africa funds had “modest inflows,” said EPFR, which tracks funds with $10 trillion worldwide.  

This amazing 200% reversal of forecast timed at 10pm on option expiration eve East Coast time, took the S&P futures from 996 all the way back to 1,010 and took the Dow futures from 9,250 (down 100 from Thursday's close) all the way to 9,375.  The Nikkei managed a "stick save" and finished the day down "just" 1.4% at 10,250 and the Hang Seng was able to rally back 300 points off it's lows to finish it's session at 20,200 after a 400-point plunge to the 20,000 line at their lunch break.  Energy and other commodity pushers led the rally as oil soared from $72 at midnight back to $74 by 8am.  Gold had fallen back below $440 and is back near $450 ahead of the US open so everything must be fantastic in the world again

Well I'm going to be the bigger man and say Kudos to GS alumni Jim Cramer and the rest of the Goldman crew as I've never seen anything like this week in my entire life.  They say "you can't fight the Fed" but when the Fed teams up with GS, JPM and CS – all of whom made huge bullish calls this week with amazing timing, then all you can do is say "moo" and join the stampede.  Washington chipped in with the new Cash for Appliances program and I think this is just the first in a series of stimulus announcements that are designed to save Christmas this year. 

We are back to the point where we cashed out our long plays last week and I don't really regret sitting out this week's rally.  My annoyance is more that we were hoping for a pullback to give us an entry to buy.  We are long-term bullish – Christmas MUST be saved and saved it will be – it's just that we have a hard time buying more at these over-pumped levels.  We did follow through with yesterday's plan to go long on SHLD, and we made a good call on DIA calls early in the day but we cashed them out into the close, really never expecting Goldman's coup de grace this morning.  I did say to members in the 9:50 Alert: "If you don’t have any bull plays – GET SOME – as we could break higher here" but our hearts just weren't in the bull plays.  We're going to get nailed on SRS and we left our long DIA puts naked and that's a shame and our SKF calls will not be pretty this morning (but we'll roll them).

Commodities should be flying this morning as the dollar dives, because spinning the Fed's purchase of $66.6Bn of mortgage-backed securities THIS WEEK and the Fed's spending of $7.1Bn on Treasuries THIS WEEK as a "2.3% increase in their balance sheet" isn't fooling anyone who knows something about the currency game.  The Fed printed $46.4Bn this week, that's a rate of $2.4 Trillion added to the money supply in a year (about 20%).  So of course you need to have gold as a hedge against inflation because, if this hits the fan – it's going to hit hard!  We've been using gold as a hedge all year so I won't get into it now but new members should check out our strategy post from March "Spinning Straw Trades Into Gold" and we can discuss various entry strategies in chat

This is in no way an endorsement of commodities in general.  We are out of our DBC play as we close the $100,000 Virtual Portfolio and it will not be in the new one that we will be setting up this weekend as that play has run its course.  BHP's CEO just this morning said: "Global demand for metals won’t rise beyond what is required to rebuild stockpiles for the remainder of this year.  We won’t see clean demand until early next year," said the head of the World's largest mining company.  He does see inventory rebuilding as driving global demand for the remainder of the year but will they rebuild to what was obviously, in retrospect, excessive levels of the past? 

[baltic economy]Also good for gold:  Our friends at Hezbollah are stockpiling arms and readying themselves for a new round of attacks on Israel. Israeli Defense Minister Ehud Barak told Army Radio on Aug. 4 that Hezbollah has stockpiled more than 40,000 rockets and “if there is a conflict on our northern border, we will use all necessary force.”  Hezbollah leader Sheikh Hassan Nasrallah, appearing on a giant screen at a Beirut rally on Aug. 14, warned that the group would bomb Tel Aviv if Israel bombed the Lebanese capital.

Not that it matters though, Europe also got the good news about Japan this morning and the EU markets took off like rockets and are up about 1.5% ahead of the US Open at 9am.  There was a good report on EU PMI data, which was flat for the first time after 14 months of contraction and we had the first increase in manufacturing output since May of last year.  Armed with that bit of good news, Europe is able to shake off Britain's weakening finances and the total horror-show that is the Baltic  states (see chart).

Overall, the GDP of the OECD is 4.6% lower than Q2 of last year and that is a marginal improvement from the 4.7% decline that was booked in the first quarter but it plays perfectly into the global theme of "getting worse more slowly" that is the bullish investing premise for the year.  The OECD's director said: "It's very difficult to say what the recovery will look like," because there isn't enough data in hand. But there is nothing at this time to suggest it will be anything but the "weakish recovery" previously expected, he added. Compared with the second quarter of last year, Japan had the steepest drop in GDP of the major seven, with a 6.5% decrease. Italy posted a 6% slump, followed by Germany with a 5.9% decline, and the U.K. with a 5.6% drop. The U.S. posted a 3.9% drop in year-on-year terms, and France fell 2.6%.

A separate report by the International Chamber of Commerce and the German Ifo institute for economic research also said high unemployment rates and rising public debt in many countries had led to concerns about a sustained recovery in the global economy in the near term. "We need to caution against excess optimism and realize that the signs of recovery that we are seeing remain unfortunately weak," Jean Rozwadowski, the general secretary of the ICC, said in a statement

So you'll have to forgive me for not jumping on the bandwagon this morning.  I promise to drink heavily this weekend and kill as many brain cells as possible so that I can come back on Monday and be a good bull and follow the herd.  Well, probably not that far but I will do my best in setting up our new porfolio to be a little more bullish where I can but I'm still going a bit bearish into this weekend - simply because it's prudent (and, it's easier to press our bearish bets than to flip at the moment!).

 

 


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  1. Hi Phil,
    How long due you think they can keep this up as I am thinking of writing calls on ICE for Dec 110 at about $5.  Do you think that is a bad idea? I see their November report as a huge miss for Q3.  I can’t see anyway they can keep up the growth.  Their gross profit percentage is falling by the bucket load.. what do you think.


  2. Anyone have a web site where I can track current crude oil prices?


  3. By the looks of it, they want to get the indices to new heights TODAY.  I just can’t believe that we’ll have another up day like yesterday though.  I will be shocked.  The news is regarding Japan.  And it’s a forecast a year out.  How is that supposed to cause a stampede TODAY in OUR market?  But Phil, maybe your premise right and the writers really do want to get called away so they can unload before a correction.  Guess we’ll just have to wait and see. 


  4. Japan – The Japan External Trade Organization has released its latest trade figures, which paint a grim picture for foreign trade by the world’s second largest economy. Year to date imports have dropped by 31.9% to $252.9 billion, while exports have plunged 36.8% to $252.2 billion. Most stunning is the disclosure on trade flows with the United States: exports to the US have dropped by 43.5% to $40.5 billion, resulting in Japan’s largest positive trade balance. Another development is that China has now replaced the US as Japan’s primary trade destination. However that is not saying much: trade with China has declined for the 8th consecutive month.


  5. Matt – Upday like yesterday ? - I think so – just look at the pre-market.


  6. pstas:  http://www.nymex.com/WS_cso.aspx
     
    but are not realtime


  7. Good morning from Terminator land!  Nice ‘lil pre-market action.  Here is a graph that I have been looking for showing the rise of the market and then subsequent fall over several years (’29 crash).  Erie how they overlap now….
    http://dshort.com/charts/bears/road-to-recovery-large.gif



  8. like went broken. again here:
    http://www.finviz.com/forex.ashx



  9. Phil, i still have AAPL jan 170c and aug 150 callers…..you advised to DD on jans and roll augs to 2x sept 165’s..  i was thinking of assn the 150’s and go short for a limited time.  …..thoughts?  thanks..


  10.  AIG gap up open and touched 35 in the first minute… now can it rip up to 40+…. hope so


  11. Upper levels for today are Dow 9,400, S&P 1,010, Nas 2,015, NYSE 6,600 and Russell 575.  My attitude is take the (short-term) bullish money off the table and press the puts over the weekend until we get confirmed breaks over ALL of these marks. 

    DIA – If not naked from yesterday afternoon, still a good idea to take out the Aug or Sept putters and we’ll have to sell 1/2 the Sept $94 puts, now $2.50, if we get 3 of 5 indexes over our levels.  Otherwise, the roll up to the Dec $96 puts should be cheap if you are not already that high

    I just do not, in my heart, belive this entire week’s move up is real.  The volume is too low, the sticks were too shakey, the spin from GS et al was relentless and all they’ve managed to do is retest the highs.  It’s just painful to buy things up this high without a firmly confirmed breakout by the overall markets to support the bottom.

    Let’s remember our signs of weakness at the top were SOX not making 300, Nas not making 2,017, Qs not breaking 40, and Russell’s rejection at 574.  Those will be the signs of a true breakout and THEN we can buy for the next leg up.  Otherwise, you may find yourself holding a very expensive bag on a pullback.  


  12. London Bridge is falling down.. falling down.  London Bridge is falling down.  My fair lady!


  13. Dollar is being savaged this morning.  Down to 93.4 Yen.  How can Japan be happy with that?  $1.434 for the Euro and $1.66 to the Pound.   Oil at $74, gold at $954.   Everyone but the Nas and SOX are over the lines at the moment.

    ICE/CJ – I don’t think those calls are a bad idea but it will be risky if the markets come back strong.  It’s not even the November report as regulation could sink them like a rock so I do like the bearish play. 

    Crude/Pstas – TOS has live futures and you can get a practice account.  Otherwise, if you just benchmark USO to oil at some point during the day, the moves are pretty consistent intra-day.

    ZION is back at $18 so it must be a good market day.  SRS down 3%, XLF coming up to $14.50.

    Called away/Matt – Don’t forget all the major index options go out today too so this isn’t about us with our piddly $5 AAPL calls, this is about people who sell thousands of Dow & SPX futures contracts for hundreds of millions of dollars getting called away. 

    Japan/DB – Hey, didn’t you get the memo – this is a "no facts" zone!  Don’t confuse us with obviously bearish information…  8-)

    By the way, that being said, I am in favor (as I said above) of pressing bearish bets into the weekend.  I just don’t want to take new ones in this craziness

    Woops, little slippy on the Nasdaq!

    Good chart Pharm but you will note that all crashes EXCEPT the Great Depression, were in the middle of a strong recovery 5 months out.  Ours is just stronger, which is why this breakout zone is simply beyond critical because we either make it and we can be off to the races or we fail and we begin to mirror the worst crash in history. 


  14. I smell a free money day with those housing numbers


  15. We are on the path to 1050 on the S&P


  16. AAPL/Onc – I’m sure we did this yesterday…  I’m very against being short on AAPL with the possible announcement of a deal with VZ and the possible announcement of a tablet PC and the possible announcement of getting into the EBook business and the upgraded price targets to $250….  Anyway, not for me.  If you want to be that bearish, just roll the caller forward to the Sept $150s and at least you get $1 for it.  The delta is .88 and it’s cheaper than having the short position.  Keep in mind you can also roll the $17 caller to the Oct $160 puts and calls at $18 but, it depend how bearish you are on AAPL.  The bottom line is your caller is effectively forcing you to buy AAPL for $150 now and that spread does you no worse but it does put him into $11 of premium which WILL run out and shifts his calls up $10 at no cost to you (but the margin on the put side). 

    Cap, I will assume you missed my warning but you have pissed off enough members that we are once again banning political commentary.  If you cannot restrain yourself then all your comments will be held for review in moderation before they are approved. 

    Hey that was a good head fake on the Nas!  Already flying back up.  Existing home sales were 5.24M, 124,000 better than expected and much better than last month’s 4.9M.  SRS players are once again screwed as VNO is now up 4%, BXP is up 4% (even though they have nothing to do with existing home sales).

    This is simply amazing!

    Excellent call Merk, we have blown through 1,010 like it was paper. 


  17. Phil
    Clarify what you mean by "press bearish bets" & "not take new ones"?


  18. Dollar : what do you mean with "salvaged"? its been KILLED!!


  19. All- thanks for the OIL links


  20. DIA covers
    I never did get my covers sold and the Decembers won’t roll up for .5
    What to do?


  21. Look at whats happening, classic blow off top…..lmao I’m losing it man


  22. DIA covers
    Roll to Dec 96s just filled


  23.  Phil, Ive got dia puts, 90′s and 92′s. What do you suggest?


  24. is anyone else flying blind without live options quotes?


  25.  Phil, Also spy Oct  and sept 95 puts. The dia puts  are both oct. I’m new at this.


  26. August Existing Home Sales: +7.2% to 5.24M, the biggest monthly gain on record, vs. consensus of +2.1% to 5M. NAR’s Lawrence Yun was ecstatic: "The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales."

    This is big news.  It seems they have lowered the expectations which caused the beat to sound bigger but 7.2% is a lot and that is going to be some serious rally fuel. 

    Obviously no bearish plays unless we fail something, anything… 

    Intraday highs to hold or beat are: Dow 9,466 (8/7), S&P 1,018 (8/7), Nas 2,015 (8/4), NYSE 6,634 (8/7) and Russell 575 (8/14).   We’re above all those now so crazy bullish until further notice but still want to uncover into the close, no matter how high.

    Of course we have the 2.5% levels for the day and we can round those off to Dow 9,500, S&P 1,020, Nas 2,020, NYSE 6,650 and Russell 576 so the NYSE and Russell are already over. 

    Oil is not breaking $75 and gold is still at $954 after being rejected at $960 at the open. 

    SOX under 300 makes no sense with all this crazy bullishness.  I suppose the USD (ultra semis) Sept $22.50s for 3.80 are good as they have little premium.  If the move is real, you can expect the semis to catch up at some point.  SOX were 309 at the end of July. 

    Transports are also slow to retake the highs and the DJT bears watching at 3,750 as a turn signal. 


  27. I said 2 weeks ago when they first started pumping the REITs that the charade would go on through OPEX week.  I said 2 days ago that it’s finally time we switch our brains off (weeks late).  Short of an unexpected catalyst, there is simply no reason to think fundamentals are going to start being at play in the market any time soon (Q1 ’10?).  They haven’t been for weeks, why are they start going to be now when the data continues to be terrible, but better than expected?  When we have coordinated pumping and outright misleading reports coming from all directions, fighting it is just a losing battle.


  28. Someone buying mucho $$ (BOJ?) halting the rally for the time being.  Damn that was an expensivee morning.


  29. Phil: rolling DIA dec puts tfor 50 cents ok, what about the oct 91 puts to 94 ?


  30. smasher, I would have to agree with you.  It must be the same people buying REITs who think their homes haven’t depreciated.  That and wishful thinking.. if only I buy an REIT.. maybe my home value WON"T go down.  Kinda like buying savings bonds during wartime.  Whatever the reason.  It’s nuts.  
     
    "Affordability" is the new positive spin on crashing prices!  Doesn’t ANYONE care that it’s not home sales, but home values that matter?   No.  They don’t.  But just in case someone does.. Values are down 15% from July last year!


  31. Phil, thoughts on C?  I have C 5 2011 LEAPS with a .96 basis.  thinking about sell half and selling some 7.5′s 2011 for a juicy spread – but i can’t help but think C is going higher  (greedy…greeedy….greedy)
    I agree – we need to keep the political commentary out of here.  I disagree with your opinion on health care but nothing is going to get achieved talking about it here – furthermore, most of us have pretty strong convictions….i.e. it is unlikely you are going to change any minds.


  32. eff eff effing optionsxpress. Yahoo can provide options quotes for free (albeit delayed) and my damn expensive broker cannot


  33. FOE moving right along.  Might need to cover here, or say thank you very much and move on.  Just too scary even for a few cents more.


  34. Phil….How do I deal with the urge to buy 10,000 shares of URE today?


  35.  Phil and David:  David Ristau posted in favor of ERY yesterday at $18.30.  I have an average cost of $17.87.  Would you keep adding to the position now or wait to see how things settle out.  The low on ERY this year was $16.06.  Any thoughts?


  36. For anyone interested COP has been a great LEAP income producer – it has very flexible strike prices and has reliably ranged between 42 and 45.5.  I usually sell 45′s for over a 1$ and buy them back when they loose 50% of value.  If COP stays over 45 i will roll, roll, etc.    XLE has also worked nicely for this with the 50 strike leaps.   XOM has also been very nice – just buy the 70 call or put whenever it hits a buck.


  37. Not in the indexes yet; but i am seeing a shift in character; some stocks starting to drop….


  38. Do TOS customers currently have live options quotes please?


  39.  Phil, or someone, once again, help out a newbie. I’ve got  spy   sept and oct  95 puts,  and dia oct 90 and 92 puts. what should i do with them?
     
    Get rid of all of them?


  40. SP – yes, TOS is working fine.


  41. Selling MYGN 22.5 Sept09 P for 60c.  Low is 24.15, and owning them at 22, well, makes good sense!  I am in them A LoT higher!!


  42. WHR reaching $64.  What about Sep $65 puts @ $4.2 ?  I just bought one contract  (big bet LOL)


  43. I guess every house sold will have a new fridge… so that probably explain the run up  :-D


  44. Press bets/Pstas – I mean if you already have something, like the SRS calls or the DIA puts then it makes sense to DD or roll them and not bail out over this one-day insanity but, if you are not trying to recover from a loss, there is no sense in trying to be bearish over the weekend when anything could happen. 

    Salvaged/Spider – Oops, I meant SAVAGED, not salvaged!  Fingers faster than brain when I type sometimes.

    DIA/Edro – Sit in lotus position on floor then relax each part in the body in turn. Starting with your feet and working your way up to your head, slowly relax each part of your body. Then keep that part relaxed whilst you start relaxing the next body part.  Once you’ve reached the relaxed state, slowly close your eyes. Slow down your breathing. Take a long, slow deep breath in and then slowly exhale. Count each breath for a few seconds. A couple of seconds at first, then slowly increase the time.  Once you are in a relaxed state, focus on the Dow and chant Bullsh*t, bullsh*t over and over until it falls. 

    DIA/Oldgaot – See above for Edro.  It depends what they are for.  If they are speculative and not covers, that’s a problem.  If they are covers, then hopefully your long gains are outpacing your losses.  Dec $91 puts (the average) are $3.70 and the Dec $97 puts (our new target) are $6.30.  So you need $2.60 to roll your puts up $5 in strike.  The very simply solution to that is sell 1/2 the Sept $96 puts for $2.70, which covers 1/2 of your roll cost.  Now you are spending just $1.25 per long contract to move them up $5 so that’s pretty much a no-brainer right?  The 1/2 cover on the Sept $96 puts can be rolled to 2x the Sept $93 puts so you have 400 points of leeway to the downside so you won’t be missing anything by selling the covers. 

    SPY/Oldgoat – Wow, OK well that would be about the same deal and I sure hope you have offsetting calls on those.  You are so far down on the SPYs they are not worth saving, better off taking that cash and using it to roll the DIAs back from Oct to December, which is where I thought you were and where you should be.

    Losing battle/Smasher – You said it!  This is just nuts but then the question is:  How do you play it?  Are you going to go long here – what is the exit strategy?  I need to see these levels hold for a couple of days but clearly shorting things is suicide and we’re even being punished for daring to have covers.  This is how the latecomers end up in 100% bullish positions right at the top and I really don’t want that to happen to us.

    BOJ/Where – Yeah, wow!  Dollar up from 93.4 to 94.5 in 45 minutes – that’s amazing.  

    DIA/RMM – I hope you used the Oct puts to stop out 1/2 of your Dec puts as planned and they aren’t now "even more" puts.  The idea was not to roll them up, the idea was to take the Dec profits off the table and leave the relatively low-delta Oct $91 puts as cover against the Sept or Aug puts you sold.  At this point, the Oct covers are not necessary and if you are at 1/2 x on the Dec calls, now is the time to roll up to the $97 puts and DD back to the original amount of covers, which will go naked into the close. 

    Home sales – I wonder how much of those home sales is the Fed buying "troubled assets" from the banks?   Could it be that they are booking bulk purchases as "sales" of homes?

    C/Jo – If you want to be bullish, why not roll down to the $2.50 calls for $1.15 and sell the $5s (maybe 1/2 at first) to someone else for $1.55.  That takes you out of premium and leaves you in a $2.50 spread for net .29, taking most of your money off the table with a $2.50 potential upside if C just flatlines into Jan 2011.  You are right about changing minds but healthy debate doesn’t have to be about changing minds, it can be a healthy exchange of ideas and positions but, sadly, too many people take things too personally and too many people substitute vitriol for discourse so it becomes a fruitless exercise here.   I get together with friends in NY and DC with very wide ranges of opinion and we argue all night long and it’s great.  I’m very sad we can’t have a similar forum here..

    Urges/Iflan – I know, things look so tempting.  URE was $37 last year, doesn’t $5.36 look cheap?  Since they had 2 FANTASTIC days that only got them from $4.70 to $5.36 (.76) then you can get "bulllish" by selling the Dec $5s for $1.15 and putting in a buy on URE at $5.60.  If they cross, you are in a covered call at net $4.45 with a 10% gain if called away.  If they dont’ break up, you’ll get a profit on the calls.


  45. Home sales, i can show you a list of condos here in FLA that sold for 170k last year that you can buy for 40k today. Last year i looked at a 1 acre property in Glen Cove asking price 1.2m, the home is still on the market but the asking price is now 648k……there is demand for homes especially after the big price drop


  46. Wow, bad morning to be tied up with work…
    So interesting situation shaping up with China. The pending lending restrictions may produce significant reductions in commodity demand, and in the Chinese the stock market. I know this is a ‘fundamentals’ consideration that should not be traded on at the moment, but this is a potentially serious development. China will probably follow us up Monday, but maybe not….


  47. Thanks Pharmboy. Did TOS have any problems this morning please? OX was without live quotes until 10.50, and if this did not affect their competitors I want to call OX up and let them know my level of happiness.


  48. SP – no, TOS was up and running all morning.


  49. savaged / salvaged : you goit it right in first place and I read wrong.  Actually I didnt know that word exist (without the L) and just learned that word in dictionary.  pretty opposite significance with just one extra letter.


  50. ERY/John – David is off today.  That ERY is too crazy for me (as has all of oil been lately) but it’s probably good long-term.  People need to remember that the last time GS was bullish on the markets and bullish on commodities that they were so spectacularly wrong that they cost people 50% of their portfolios (at least) and needed to be bailed out by the government and Warren Buffet after losing Billions of dollars on their own trading.  Now they are telling us not to worry as oil is back at $74 and everyone is listening to them again – madness!   Anyway, you own ERY at $17.87 and you can sell Sept $17s for $1.40, which drops you to $16.47, which is where it is now and, when it bottoms, you can then sell Sept $16 puts, now $1.05, to drop your basis to $15.50 or less with a $17 call away (10% profit) in a month.  As long as you are williing to DD at $16 ($16.24 avg) for the long term, then that’s the path to pursue. 

    Good energy plays Jo.

    TOS/Steve – They look live to me. 

    WHR/Spider – No way to short them!  Most people don’t even know about the new cash for appliances program.  That’s why we picked SHLD yesterday but it was WHR that got the big bounce today.  It seemed to obvious to me but, once again, I underestimated how far ahead of the MSM and the general investing public we are in identifying market movers.

    China/Eric – They’ve been talking about it for a while but it sure hasn’t had much effect.  Volumes in Asia and Europe are as thin as ours were but today we have 140M at 11 am already so this may actually be the volume breakout we’ve been waiting for if it holds.

    Savaged/Spider – Oh good, I feel better then.


  51. Phil – Jesus…booking Fed bought homes as "sales".  If they did that…I just don’t know what to say, isn’t that straight up fraud?  I mean the numbers are so good it’s fishy.  Just like the oil report from Wed.  Didn’t the banks just say they had tightened credit hard and won’t be letting it go soon.  Where did all the folks get the cash?  FHA?  Can you run some napkin calcs on the numbers on that and tell me what that had to cost the FHA?


  52. I don’t think its beyond the realm of rational thought….they can take this market straight up to 10500 if they wanted to


  53. "This is how the latecomers end up in 100% bullish positions right at the top and I really don’t want that to happen to us. "
     
    Word!


  54. I don’t think there is much chance that the Fed is buying homes, but it is buying the asset backed securities that include pools of mortgages (or their CDS synthetic equivalents).
     
    Besides the increase in sales, the NAR reported an increase in inventory for July to 4.09m, which is a little more than expected. Since inventory increased along with sales, their wasn’t any meaningful change in supply.


  55. Phil – Mattress – I am naked DEC 96 puts? Are you saying we should roll DIA DEC 96 puts to Dec 97′s if we can get them for 50cents? What cover should I add at this point, thx


  56. Keep pumping – nothing to worry about.
     
    Mass Layoff Events surged from 256,357 in June to a whopping 336,654 in July, a 31% increase, and surprisingly the second highest reading for the year since January’s 388 thousand. Actual MLE increased by 21% from 2,519 to 3,054. The primary weakness was focused in the manufacturing sector, where claims jumped from 85 thousand to 154 thousand, an 81% increase.


  57. Phil,
    I had DBC Jan 15s which I rolled up to Jan 20s.and I have sod Aug 20 and 21s against it ofr a full cover. Since I get nothing for rolling the callers to Sep. , and I basically want to be short DBC at this point, what do you think of my holding the Aug DBC callers so that I get assigned DBC short stock and just hold those againt my Jan calls to wait for a serious selloff?


  58. Phil I bought out the DIA Sept Cover and am now naked.  Would you sell the Sept 94 now?


  59. Kustomz,
    Where are these condo’s in FL for 40K? I’m going there next month from overseas. Where can I obtain that list?
    thanks


  60. Phil – comment on political commentary from newbie – I became premium member to learn more about options and am here solely for that reason. While amusing to watch, these politico diatribes are senseless and interfere with the learning process and siphon away the time you have available to recommend new trades and answer stupid newbie questions from people like me.


  61. FAZ- Phil I’ve got 4 Oct 25 calls covered with 3 Aug 28 calls.  Thoughts on rolls/adjustments?


  62. At least I get my prize for calling AIG $33.50!  8-)

    LONDON (Reuters) – Speculation rather than economic fundamentals has driven this year’s sharp rally in stocks, and equities may now be 20 percent overpriced, said the managing partner at hedge fund firm Bullman Investment Management.  Nick Bullman, who told Reuters he has this week placed bets on falling share prices, is concerned that government stimulus packages have not revived bank lending as much as hoped and that conditions remain as tough for companies as they did last year.

    "The rally has been a ‘dash for trash’ based on speculation … On Wednesday (I) went short on the S&P (500) and financials via ETFs (exchange-traded funds)," he said in an interview on Friday.  "Stocks that were on their knees have risen to pre-Lehman levels, but the fundamentals haven’t changed at all. Credit card debt in the U.S. is getting worse. I think the U.S. equity market is potentially up to 20 percent overvalued over the short term."

    So this poor guy got taken to the cleaners this morning!

    Housing/Where – I used to be in the Title Industry and you wouldn’t believe the games they can play with housing numbers but it’s virtually impossible to get real numbers.  First of all, the home-sale report comes from the NAR, who WANT to give you good numbers.  2nd, inventory numbers rose 7.3% this month so there was no improvement on the housing supply (9.4 months, 3x normal).  The median price of homes sold was 178,400, 15% lower than last year and 31% of all home sales were short sales or foreclosures. 

    At this point, I wonder if the median is misleading as it is the line above which half the homes are sold and below which half are sold.  I’m sure if we looked at the AVERAGE price of homes sold, the decline would be truly shocking as many of those homes below the median include $1,000 mansions in Detroit and $5,000 dumps by banks in Florida.   Another helping factor was the 30-year mortgage fell to 5.22% in July from 5.42% in June – that has reversed since.  

    10,500/Kustomz – Nothing is out of the question now.  The magazines this weekend are going to say "rally of the centrury" and all the old people will run to throw their money back into the markets and THEN GS will sell to them and crash the markets again.  

    Fed/Eric – I just get concerned when they lump $63Bn in weekly spending under the heading "mortgage-backed securities".  No matter what form it was in, this cerainly explains the bank rally as the Fed engaged in a secret "cash for crap" program this week.  

    DIA/Concreata – As long as the Dec $96s are a cover and not a bet, then yes, you should roll them up $1 for .50 whenever you get a chance.   That is your "cost" of the cover, .50 per 100 point move up in the Dow.   If your long positions don’t make more than enough to offset that cost, then you are over-covered.

    DBC/Maxt – That’s fine as long as the dollar doesn’t crash.  You could just roll the callers to Oct $20 for $3.15 (.20 in premium and no cost to you) and buy the Oct $20 puts for .15 so you can’t possibly miss anything without the hassle of the short position.  You can always make yourself more bearish by lowering your long delta by moving to the Jan $22s ($2.10, delta .63) or the 2011 $22.50s ($3.60, delta .60). 

    DIA/Bigs – I would not sell Sept $94 puts NOW as in after the Dow is up 150 points today.  I’m pretty sure we got our stick at 9:30 and that we’re probably done for the day.  The weekend is a huge risk but if we don’t hold the Aug highs into the close, I don’t think I want to cover over the weekend. 

    Politics/Concreata – I agree and we have been keeping it mostly out of trading hours but restraint just doesn’t seem to work so we have to go back to a ban, which we had around the elections too.  


  63. EXP Friday – Always the best day of the month watching all those sold options go to zero. Just entered a short strangle selling AFL Sept. 44 calls and Sept 39 puts for 2.15. Phil – you likey?


  64. Phil: my AAV stock is moving up, base 4.91, now 5.59, dividend play,
    have callers nov 5, base .34, now .95,
    cover is .75,
    what there to be done ?


  65. Phil: another situation asking what to do ?
    have TIP stock
    with caller and putter sep 100,
    caller from .9 tp 1.9,
    putter from 1.1 to .25 .


  66. "At this point, I wonder if the median is misleading as it is the line above which half the homes are sold and below which half are sold.  I’m sure if we looked at the AVERAGE price of homes sold, the decline would be truly shocking"  Good point Phil.
     
    COF going for a 36 pin — or will it be 37?  Who knew?


  67. Phil, what about shorting NILE above $55? NILE has had declining revenues and earnings. The stock is at over 50 times earnings and has no growth. If things pick up in the economy and they grow at 15% next year, the stock would still be at 40 times estimates. 
     
     
    This stock has a small float and a large short interest so it could lead to more squeezes but eventually people are not going to be willing to pay 50 times earnings for falling revenues. 


  68. Phil
    At the risk of getting my head handed to me I would like to know what you think of  Aug 7  faz.  I know I should
    of dealt with it weeks ago but I guess I kept thinking the situation would improve.  Do you have any thoughs on
    how I shoud handle them.    I could let them be put to me or roll them forward or just buy out the options.   thanks


  69. Phil – Mattress clarification - I have no cover, I sold 1/2 yesterday. I am long DIA DEC 96 puts naked. What cover should I add? thx.


  70. Never seen so many happy headlines. “We saved the world. “. Bernake went from behind the the curve to Americas Greatest hero. Now I am looking for cramer to start pushing the hoursemen line that he loves goog, rimm, appl. I guess we ride this wave till


  71. Phil,
    on DBC, I’m not superbearish, so I just want to have a lower Delta and the The short stock will have -100, so good for me,. What is the hassle with the short stock, I’m not sure what you mean?


  72. jomptien…west palm beach…give me your email i would be more than happy to pass along the realtor number to you


  73. I missed the SHLD play yesterday.  Still good to enter?  Or don’t chase?
     
    BTW, I just got out of my DIA meditation, counting all the way to 140 seconds per breath (1 second per Dow up point; and Dow is up 140 points just now)..  Oh, damn!  That’s pretty long breath!


  74. Sorry about that I should have told you they are the  faz  7 puts that I sold 


  75. Where to go ? You cant go long at these prices and you certainly cant short this market.


  76.  Phil
    When you have sold calls & puts on the same stock, (I have several like this but for example let’s say GE, Sep 14′s) at what point do you take out one side? 30%? 50%? I know it depends on several factors – but looking for the rule of thumb here. Thanks,


  77.  uuuuuuuuhhhhhhhhggg… morning pop then totally dead flat line day…. hope there is a nice stick at the end


  78. GPS. Let me preface my latest Virgin Island post by reiterating that I throw and absorb blows, give credit and, most importantly in all that I do, assume ultimate responsibility. That said, who had me betting against GPS? Was it the Oopsie Group? I put ‘em and took my loss. But the play last night – fortunately – was stock straight up. Yippee!


  79. Morning Phil;
    Well if nothing else my being relaxed when missing out on a run like this is a testament to all i have learned from you here, plus the small fact that the 2011 C spreat thats 10% of my portfolio with 90% cash is growing with the DOW :) now thats powerfull !!!!


  80. Meaning the whole 100% is growing with the DOW with the 10% invested :)


  81. COF/Phil – I’ve watched those 35 puts burn away, but I still own the Sept 34′s. Should I roll ‘em?


  82. I have gotten more bearish the higher this market has run, i have to tell you i haven’t felt this bullish in a long time.


  83. FXP – is flatline from yesterday even though Dow up 140+pts. China unhinged from Dow?


  84. Phil: strategy question: have we been too bearish/underinvested and looking for reversals down to  much ?
    while history supports 2.5/5 % moves/reversals up and down, these are not normal times,
    the financial disaster and the effect on the market the last 2 years was a traumatic event,
    the behavior of the market the last 4 months was essentially driven by factors like:
    slowdown of the rate of decline in the economy: that gets interpreted as good,
    some improved earnings in some sectors: that is good news,
    anticipation of not missing the boat of a move up: the smallest reversal triggers buyers to move in,
    Big money: right now most big money people are on summer vacation, when do they return ?
    hedge funds seem to be timid, mutual funds seem to be buyers,
    overall, the economic situation is still very bad, yet here the market is way up.
    Please give me your macroview on strategy .


  85. Political ban – here’s my issue with a ban…as a premium member I’m paying for trading education, stock market perspective, and a broad economic commentary.  By it’s very nature, economic commentary will include government policy decisions and their implications which leads right into politic conversations.  I’m hoping that this "ban" while not dilute the political content in Phil’s posts/comments.  I don’t always agree with them but they do make me think and that’s what I’m paying for.  I think it’s part of your competitive advantage relative to other sites like this.
     
    So Phil, my request of you is that you aggressively moderate the vitriolic rants while continuing to provide the perspective that I’m paying you for.  Some will call that censorship.  I say tough – if they want a soapbox let them start a website and see how many folks will pay 2k+/year to listen to them rant.  The unfortunate reality for some is that I do pay to hear you rant (among other things)…not them.
     
    Ok – back to my quiet corner of the world.


  86. AMZN. Okay I pussed and bought back those Aug 85s at .20 – sold at .50. Too many Red Stripes in the cooler for me to stress about them eekin’ over 85 today.


  87. Lessons learned- Dont be tempted by leveraged ETF’s, I’m personally not strong eboghbfor them yet) also, don’t trust fundamentals. Too bad these lessons cost me 20% total, but perhaps they were worth it. I’m interested in getting into a small spread to collect some of theremaining premium lying around until exp tomorrow, anyone hav any suggestions?


  88. Kaiser, I second that.


  89. AFL/Gel – I’d keep a stop on the puts but generally I like it.

    AAV/RMM – The problem with that one is the strikes are too wide so you have no flexibility.  They pay a 7% premiums so, in the interest of staying in the stock you can go to the Feb $5 puts and calls, now 1.70 as that pays you 20% now and you still get your dividends until called away.  On the TIP, also a 5% dividend is the key, Right now you have protection and the move up to the Dec whatever puts and calls isn’t going anywhere so no need to do anything.

    Speaking of mortgages, the 30-year just went up half a point today – that should be fun for real estate…

    FSLR in a power dive.  Why are solars selling off with $74 oil and a global mega-rally?  See, little things like that bother me too much to go bullish. 

    OK, now we have to be bullish because the Central Bankers walked out of their meeting together today and had "good body language" according to CNBC.  Yeah, my tea leaves spelled out TOL today to I guess I’d better go all in! 

    NILE/Soul – Every short looks good up here but it’s just so dangerous.  They are up almost 20% after those earnings and they were at $106 2 years ago on far less sales so it wouldn’t be a stock I’d short on.  In a crazy rally, you can’t short things just because they are overvalued.  Everything is overvalued and that logic bankrupted a lot of people in the .com bubble.  Nothing is more frustrating than shorting YHOO at $100, $150, $200, $250, $300 and $350 before giving up and then seeing them drop below $50 a year later…  I think YHOO had a p/e of about 1,500 at the top and people were STILL buying it.  If people start chasing this rally, the only good shorts will be stocks that are already at new ATH’s, stocks that are 50% off their tops will be considered "bargains" for the duration. 

    FAZ/Bill – You know, when my kid falls off a bike and scrapes her knee, I’ll yell at her and tell her that’s why she’s supposed to wear knee pads but when she wipes out and is bleeding all over the place – I just do what I can to help…  You need to step outside the box and look at what your bet is.  You are bearish on the financials with a $4.50 put sold.  You don’t need to stick with THIS $4.50 put, any one will do.   FAZ is at $24 and the Sept $23 puts are $2.20, you can roll to 2x the Sept $23 puts for near even and you are back on track selling premium.  You can also limit margin requirement by selling the Jan $27 puts for $8.25 and buying the Jan $20 puts to cover for $4 – that costs you net nothing and has the same margin requirement you have now but would pay you in full if FAZ goes up 20% (financials down 10%).   Those plays take your goals from unobtainable to obtainable. 

    DIA/Concreata – IF you can roll up for .50 (looks too late now) then that’s good to do.  If we flatline here, I’m inclined to stay naked over the weekend but I think we pull back into the close unless this is a genuine breakout, which would really surprise me.

    Oh nice, 1/3 of all homebuyers were 1st time homebuyers using the stimulus credit!

    DBC/Maxt – Just that you don’t want to get squeezed if the dollar drops 5% overnight and buries you. 

    SHLD/Cwan – We were selling the Sept $65 puts for $5, now $3.60 so not the same at all.  I think wait and hope the market sells off next week.  


  90. $63B in a week on mortgage backed securities?  Damn!  Who needs to set up an exchange for toxic assets when the Fed can just take them over for the banks directly.  You know.. the silence on that is deafening.  The toxic asset purchase was everywhere about a year ago and now no one says a peep.  And HELLO.. those toxic assets are EVEN MORE toxic now!  Why don’t they need it anymore?  There has been so much back and forth it’s almost impossible to know what the hell is going on anymore.  The FED needs to be audited.  Can we please elect Ron Paul next time?  And put the other Liliputian from Ohio on the ticket with him.  THEN we’d start getting some answers round here.


  91. Pols. So in reality, by banning Cappy-like pol commentary, you’re banning what I thought was unfettered, if not uninformed, comedy. Lol.


  92.  Phil:  Earlier this week I sold Aug 36 calls naked on COF for $.40.  Who expected that the financials would zoom on options expiration day?   If the stock stays up, I can roll them to September 39s or 40s(now for about a $1 or $.70 respectively) just before the close.  Or I can see how the market closes and if necessary buy the stock after hours.  I’m not thrilled about holding what will become a short position in the stock if it closes over 36 in case this madness continues next week.  Any thoughts?  Thank you.


  93. FAZ- Phil I’ve got 4 Oct 25 calls covered with 3 Aug 28 calls.  Thoughts on rolls/adjustments?


  94. Ron Paul, love the guy but he was a big disappointment. Did he really believe it was possible to run and win while discussing the boring issues that effect every American for generations to come. How stupid of him. Now Peter Schiff is running for office in Conn, good luck with that one.

    Dem and Rep politicians should be taken to the shed


  95. I think the economy is getting better but some things are puzzling to me.  Citigroup had to raise money and they sold a preferred issue a while back. The preferred issue will convert into common stock and as a result, the amount of shares outstanding will go from 5 Billion to 23 Billion. The market cap’s value of Citigroup’s common stock, if it stays at this price, will go to over $100 Billion.
     
    During the market peak of two years ago, the value of Citigroup was slightly higher then $100 Billion.  If stocks were inflated back then, how in the world could the value of Citigroup be worth as much now as then?


  96. Kustomz,
    jomptien1@yahoo.com
    thanks


  97. Hello all – i don’t think anyone has mentioned the SRS put i sold yesterday. Just thinking of your capitalist selves. Anyway, there was some thought accompanying that we would roll to the $10s. Is this a good time for it? Down abt 30%. Or would selling another be the way to go If we still think it’s a play for the future. Thanks :)


  98.  i gotta short some CREE here, just can’t help it. 


  99. Sent jomptien


  100. Look at this market simply amazing how they can keep it elavated like this…. S&P above 1020 since 10am


  101. Phil. Any comment on my 12:25 query? Thanks


  102. Keyser: you are making the appropriate comment as per 12:36,
    the rants are neither comedy, nor useful,
    I watched some of the townhall meetings about healthcare: as usual, some people hide behind the right of freedom of speech and YELL, INTERRUPT, show that they have no manners, are UNINFORMED, do not know the FACTS but shout with passion  RUBBISH, to say it mildly.
    Here we pay to get info on market and trading, a funny political comment is not a problem at all, but I believe we should not have the wild stuff, I am glad we have no audio, it would be worse.


  103. Politics, as long as we can keep the talk to Sunday morning news hour discussions and not Olberman/O’Reilly slugfests I think it’s adds value, but we do have a way of running off the rails don’t we?  :-)


  104. Doesnt seem to be souring the markets

    Aug. 21 (Bloomberg) — Meredith Whitney, the analyst who predicted that Citigroup Inc. would cut its dividend last year, said the number of U.S. bank failures will quadruple as lenders struggle with bad loans.
    http://www.bloomberg.com/apps/news?pid=20601087&sid=a1B7kV_7EPhI


  105. Phil: AAV has WIDE strikes,
    if I am bullish on stock, I take only 50-70 % cover,
    if I am bearish, I take 100%,
    you agree ?


  106. The market onlt trades the first and last hours these days. No chance to trade.


  107. DB: that is how I see it too: first and last hour, rest, play golf.
    Is it hot in Surrey ?


  108. Deano, I know you didn’t pay for my opinion, but on a buy/write I would suggest taking out one side if it makes 80% in the first half of its time to expiration. I am learning over time to generally leave these things alone until the last week. Interested in other thoughts.


  109. RMM – Warm summer day in Surrey. Watching the cricket (Ashes – UK v Australia) on TV. Great days play today so far. Going to the actual game tomorrow at the Oval. Should bve a great day out away from this crap. Thnx


  110. stevenparker:
    I do the same, when either the putter or caller have 50 %, I take out 1/2, at 75%+, all.
    Then look for a reload.


  111. Eh DB haven’t been to a test match in about 20 years. England Australia at Old Trafford. Mervyn Hughes (?) was the most entertaining player on the pitch and got a lot of interaction from the crowd….


  112. ???/DB – Nothing wrong with cash and waiting to be certain about something.

    Rule of thumb/Deano – When you sell both sides it’s tricky because you are ahead on one and behind on the other so, unless you are going to reposition or expecting a big turn, there’s not much point.  Keep in mind that the buy/writes are not meant to be gambles, they are plays where every month you sell premium.  Only if you are getting way off target should you be messing around.  Obviously, at 50% anything is worth a look, especailly if it is made with more than 2 weeks to expiration but than you are changing your play to gambling on one direction or the other and you have to weigh out the risk/reward each time. 

    GPS/Dstill – I missed that one but it wasn’t mine.  There weren’t many bearish plays that paid off this week and, in a normal market, I would play these guys short up here ($19.57).  Keep in mind that David’s plays are for stocks, which you are able to ride out, average into and adjust if they go against you.  Taking a risky stock trade and leveraging it up 20:1 with options is a recipe for disaster if you don’t hedge your bets carefully. 

    Cool Micro!  Good to hear….  Those Long Shots are going like gangbusters this week.

    COF/Skas – Hard to say now, logically yes, nothing has happened to change COF’s value but sentiment has changed.  I’d stick with them but those puts are expensive, probably the Sept $34s are the best deal and you can add if you can at $1.25. 

    Bull/Bear/Kustomz – Huh? 

    FXP/Concreata – Well flat is giving them the benefit of the doubt as they were down 150 today so the assumption of recovery is already baked in. 

    Money/RMM – Good set of points by the way.  Funds generally are back after Labor Day (usually a week after) and mutual funds buy because they must mirror the S&P or Dow or whatever so GS can force funds to buy all their crap stocks by goosing the indexes at will in low volume.  Today, volume is way up but it’s only 167M now and was 140M at 11 so just 27M in 2:15 after 11, that’s very low!  Energy and commodities are leading the rally this week but nat gas is at a 7-year low and every single thing we hear about commercial real estate is a disaster but that is another leading sector. 

    Looking at the stock market should not be different than looking at the housing market when buying a home.  You KNEW a 2Br condo in Miami wasn’t worth $1M no matter what kind of view it had and you are smart enough not to buy it because $1M is a lot of money but, when it comes to stock, people spend $1,000 buying things that aren’t worth half of that all the time.   If you watch the market every day and have cash on the side, it’s like flying to Vegas and getting a big pile of chips and "just watching" the games.  You feel silly not playing so you start looking for things to buy, even if it’s not a good time.  With gambling, there is never a good time to play (other than poker at 3am) but with stocks, there are clearly times when it’s a good or bad idea to get in, whether long or short.  This is a period of uncertainty and it’s best to ether stay out or stay extremely well hedged. 

    Thanks Keyser!  I am, as a registered Socialist, er Democrat, against censorship conceptually so it’s hard for me to make rules I don’t follow myself but I will certainly in my posts continue to comment on what needs to be commented on, just less so in the comment section. 

    Expirations/Skasiah – It’s Friday, game over at today’s close.  I wouldn’t mess around the way our closings have been. 

    Lilipution/Matt – LOL!  And I agree, Ron Paul should be put in charge of at least the Treasury.  Wouldn’t that be too funny, having his signature on currency?!

    Comedy/Dstill – It’s funny until everyone gets pissed and starts insulting each other, then just annoying.

    COF/John – I think you are right to wait those out with that rolling logic.   I wouldn’t want the assignement but you have a roll to the Sept $40 calls at .70 so you can wait until 3:30 to decide. 

    FAZ/Bigs – Well you can get $2.25 for 3 Sept $25s and that pays to roll your Oct $25s down to the $21s, good way to get off the premium decay train. 

    C/Soul – C can earn $20Bn on a good year, even more now that so much of the competition has been eliminated, that’s a p/e of 5 so yes, they can be bought. 

    SRS/Morx – Not down far enough to panic yet.  Next week we can panic if we’re still heading down.


  113. Deano – in addition to SPs comments, when it starts to move against you, if it is a full cover, remove 1/4 at 25%, 1/4 @ 50% and then roll up with the other 1/2 cover if it continues to climb (or fall) – depending upon what you sold.


  114. StevenP – Been to Lords, Edgebaston and the Oval so far this series. Merv Hughes is at all games as a host for the touring parties from Aus. His "tache" is very grey now but he is the same intimidating larger than life guy and interacts with the crowd from the stands even today.


  115. Steven – Thanks for the opinion – yours is one of the comments I make sure I read so much appreciated. Be interested in others on the buy/writes as well. I’m waiting longer and longer as my experience level goes up. Must be the deep breathing.


  116. Deano/Parker -  are you talking abt taking out the side that is loosing value? There is a certain amount of sensing which way it’s going too, don’t you think?


  117. Phil- Thanks for the good advice, it’s been a helluva week.


  118. Morx, I was referring to taking out the short option that was in our favour.
     
    We had a couple recently. We did an MBIA buy/write with $5′s and it went up to $7 in about 2 days. There I think the correct action was to take out the whole thing because all of the premium had been squeezed out of both options.
     
    We also had a USU buy/write and the company lost financing and went from I think 6 to 4 overnight. There we took out the caller the view being we would book that profit and wait for recovery. Same with LDK which earnings were not received well  so we took out the caller and wait.


  119. Whitney/Kustomz – Amazing isn’t it.  When she says something positive, she’s co-hosting CNBC’s morning show but say something negative and they don’t even call it news

    There will be more than 300 failed banks before it’s over, Meredith Whitney says: "The small-business owner on Main Street continues to see liquidity come away." There have been 77 failures in FDIC-insured institutions this year, and eyes are on big lender Guaranty Bank (GFG +9.7%), which could be taken over by BBVA as soon as today

    I still like those SKF calls, the Sept $29s are now $1.35 so a roll if you had the $31s at the same price yesterday (now .90) and a DD next week if they drop again

    AAV/RMM – That’s fine but it’s not a lot of cover is it?  Depends what your goal is on the play.  Given that we are so overbought, it’s tough to go with 1/2 cover.

    80%/Steve – That’s a good rule actually.  At that point, they’re generally not worth keeping.

    Cricket/DB – I do try to watch that sometimes but it just doesn’t work for me, especially when the game goes into day 4!

    Stops/Dean – Pharm makes a point I forgot.  It is more important to stop out a cover that goes against you than to worry about taking profits if you are going to make adjustments.

    If we fall 50 points from here we are back to last Frdiay’s open (9,420)  so nowhere for the week after all this


  120. but yes Morx, point taken. With MBIA we had to believe it would not hold those levels and with USU and LDK we had to believe the stock would eventually recover.


  121. Phil:
    lets test the "cover for my BUCY stock, base 33.2$,
    am bullish,
    caller cover 1/2x with sep 33
    putter cover 1x with oct 31,
    any improvement ??
     
    also: DE dec47 calls, base 4.33, now 3.1$,
    just announced bad earings, that why its down, but moves up again,
    neutral stance,
    therefore caller cover 1x with sep 45,
    and putter cover 1x, with sep 42 ,
    any comment ?


  122. Last night, I was notified that my beloved LYG was called away, one day ahead.  I have nothing to complain, as we knew we had to part each other on Friday (today), and we had enjoyed each other for the short period time together.  But still, they wouldn’t even let us spend our last night together… Sigh…
    Even though she is kinda old (300+ years!?), she is quite resilient.  I wouldn’t mind call her back, only if she can lower her price a bit.


  123. As Fed bankers in Jackson Hole today debate an audacious proposal – to get into the credit-default swap business – Tyler Durden wonders whether the Fed is already in the arena, with "other contracts by risk type" to the tune of $1.3T

    Nobel economist Joseph Stiglitz on the dollar as the global reserve currency: "The current reserve system is in the process of fraying. The dollar is not a good store of value. Right now, the dollar is yielding almost no return, and yet anybody looking at the dollar has to say there’s a high degree of risk."

    FSLR in July looked very much like the rest of the market does now.  Racing along to a blow-off top for no good reason followed by a devastating drop and then a month of total pain.  I’m noticing in the S&P chart that we had a run from 700 to 950 and then a pullback to 875, whch was just about 30% of that leg.  I suppose we should count this leg as coming off 900 so a 25% overshoot at 1,000 would be 1,025 and that makes a pullback to 994 something we should expect.  If we don’t get it here, then this leg could be another 200 points but that is doubtful as a 2nd leg is often 1/2 of the first. 

    BUCY/RMM – Nothing to move this early on.  If they go up you can roll caller to 2x the $35s but that’s about all there is to do.  DE – I agree with that combo as long as you are willing to own DE long term at $42.  

    LOL Cwan!  I think there is a saying:  Don’t fall in love with your stocks…

    Good news – TEVA is pulling back a little.  Bad news – It’s only pulling back to $50!  I’m so mad I got out of them too early…

    Oil coming to a close trying hard to make $74.  Gold at $955.  Dollar at 94.35 Yen and Pound fell to $1.65 and Euro still hovering at $1.433


  124. Phil: the pattern has been for the market to run up during last hour although in the past, over years, at OPEX they would run it down,
    I have to make a decision on covering DIA dec and oct puts: When did you close the toasty DIA AUG 93 puts ?
    next week, the chance for a drop of the market might be higher,


  125. Bull/Bear/Kustomz – Huh? ….Exactly!!!!!

    Im beginning to believe they take the dow to 10000+ and 1100+ S&P before we see any kind of meaningful pull back. Why because no one believes it can happen


  126. Good REIT article with notes on the related ETFs.

    DIA/RMM – Current position is naked Dec $97 puts.  Only if we get a big drop will I sell 1/2 cover into weekend, otherwise naked. 

    1,100 Kustoms – That I cannot belive will happen.  Another 20%?  At some point someone will have to realize how insane that would be. 


  127. What would annoy more SPY to $102 or £103 , neatly positioned for either.


  128. UNG GAZ stay green even though Nat Gas dropped another 5%


  129. this is getting a little crazy – i’m covering or cashing out of a lot of leaps/plays. 


  130. 1,100 Kustoms – That I cannot belive will happen.
    LOL you just proved my point my little guinea pig


  131. phil, what do you think about  nyx here – got a leap and can’t decide what to do – don’t like call premiums, and the stock really isn’t moving – thoughts?


  132. OIH is at the magical 108 area where puts look irresistable.


  133. Phil, my paw in law is encouraging me to buy some CZZ. Do you have any thoughts on sugar shortages?


  134. Phil: I did a buy/write on TNK with 20 Feb.$7.50 calls for net of  $7.41 playing for the dividend. Yesterday ,dividend was effective & I got exercised on 16 leaving me with balance of 4.
    Why did they exercise just 16 instead of all 20? I obviously set it up wrong. Suggestions?
    dflam


  135. nice conversation today. Maybe Cwan is setting a new tone. xoxoxo


  136. So with this spike, will we see a large increase in short calls assigned, and come Monday, alot of buying to cover the shorts?


  137. Great day to sell covered calls with the underlying advancing. If this continues then DD and look for an opportunity to exit on first pullback.


  138. This attack on the dollar is within our own system, almost as if its being done deliberately. You have to ask yourself why, who benefits from a worth less dollar?

    Buying on a Friday pushing the markets to new highs, this is very bullish


  139. SPY/DB – How about $101, that would be a fun close but not looking likely, seems like they are going for  $103.

    NYX/Jo – You’re right, those are terrible premiums.  I think if you want to stay in you can be conservative selling the $27 puts and clals for $2.65 as you can roll them to almost any stike in Dec so it’s just a matter of collecting premiums for the month. 

    Volume 192M at 3pm – that’s the most we’ve seen in a while but we had 245M at the close yesterday so we’ll see what we end up with. 

    CZZ/Morx – $1.5Bn in sales and $16m in profits?  I don’t know anything about them but I do know its better to put some money down on an in-law’s pick than to act like you know better and don’t as he’ll think your an idiot if he makes money and will think you are a jerk if he loses.  As far as the sugar shortages go – I hear it over and over again but I don’t see evidence yet.  Kind of like oil shortages…

    TNK/Dfalm – It’s not one guy exercising you.  Your broker gets an order to exercise 10,000 TNK and they lay it off across the people who had the short calls.  Maybe it was an order for 80% of all outstanding TNKs so they hit everyone for 80%…  This is not a big deal at all, you just resell the $7.50s but maybe wait for them to pump back up after this premium dip.

    Oh man, here we go again!


  140. Phil… With this run-up, any thoughts on a DXD Ultra Short position over the weekend?  Mondays can be nasty.


  141. Yes, Phil, your thoughts for Monday morning.  My hunch is we’ll be fine over the weekend and even go up a little in the morning.  But by 10, the selling will begin.  Are you covering?


  142. NICE – TBBK is moving and grooving.  ARIA in the sweet zone for next week.  Now if we can get MTXX off its duff…many of us would be in heaven.


  143. Dive Goog Dive!  You overly manipulate POS!


  144. CTIC – 4K contracts have moved today through the 2.5 Sept C strike.  Nothing on the put side.  Hummm….is it gonna fly?


  145. Matt – "My hunch is we’ll be fine over the weekend and even go up a little in the morning.  But by 10, the selling will begin" You expect the market to pullback more times a day than I do and neither of us are ever right. :-)


  146. Matt: are we the dummies who always expect a drop yet it always keeps going up ?


  147. "Can anybody save me
    Save me, save me from the storm
    Save me, save me
    Save me ‘fore I’m gone
    I’m only a man
    And a man’s gotta break
    There’s a lot I can stand
    But not a lot I can take
    Save me, something is taking me over
    And there’s no place that I can hide"

    …Neil Diamond


  148. Phil, can you recommend a bearish OIH backspread?


  149. Monday/Cafords – Very possible.  People are getting burned on short calls and they’re getting bad rolls with the VIX drop too so a real catastrophe on the day.  There may be a lot of assignments but that only matters if we already have a violent move up to go with it. 

    Dollar/Kustomz – The government benefits from a weak dollar becasue they collect them through taxes as they inflate and then turn around and pay off debts at the old prices.  The people don’t suffer much from a weak dollar becasue we don’t import much except from China, where they peg the Yuan to the dollar.  People don’t care about inflation if they can still eat and buy clothes and listen to their IPod – it just sucks for the people we owe money to. 

    DXD/Gel – Way too riskly, I’m worried enough about naked Dec DIA puts. 

    Monday/Matt – Nothing to cover, mostly cash with a few light bearish bets now.   I think next Monday will be like this Monday but I think there will be follow-through on Tuesday.   I think this because I don’t see how we can possibly go up for another week but I have seriously given up trying to guess because JPM can say they see EU earnings up 75% next year and we could be gapped up 5% at the open.  It doesn’t matter if what these guys say makes sense (in the case of the Nikkei, most companies are off about 1/3 from last year so up 75% from 66% is 115% of last year – talk about a recovery!).  What can you do if people are going to buy into that nonsense?  You can only go with the flow – no one cares if you are right when you bet against the market, you have to figure out where the market will go.  My question in reading  this weekend is how much are people really buying into this?


  150. Covered my goog at 464.55.  Should have done so alot sooner but I had some operator error getting the order in.  Hate when that happens!  Now about that SRS…


  151. Pharm, any thoughts on AKRX? I could take my $30 and go home. Are you still expecting some future.


  152. Phil / Monday / the high of the day was at 12.  I suggested 10.  I now yield to the gentleman from NJ and give back my remainder of my time.
     
    DB / RMM / Drop /  See above.  Phill does, too!


  153. Phil, I had a pile of UAUA and wrote some 4 calls to get rid of it at a small profit, but I screwed up my scale-in and forgot to sell the other half. For once, I make a mistake and it helps me. Im back with my original unit and a cost basis of 3.28, and the stock is threatening 6. How about writing the 6calls and 5 puts for sep?


  154. Morx – assuming it is a small position, take the money over the weekend (assuming brokerage costs are minimal).  Nothing being announced from them.  The chart is tempting though, as they are moving on the daily and 3mo charts.  Facing a little OH resistance here….one can always go back in!


  155. Right now the markets are beginning to make those that had no belief in this rally a month ago feel euphoric, this can last for a while longer.

    These are the mind games that those in control use and turn you against your better judgement. Fools buying at the top or fools missing the next 10% move higher.


  156. CNBC says they are selling the name "Dow Jones Industrial Average"  I think I’ll see if I can get it changed to the PSWIA…

    OIH/Mampcs – How about selling 5 Oct $110s at $6.10 ($3,050) and buying 4 Jan $115s at $8.10 ($3,240).  You only have to hold a touch of value as they expire to win and you have 2 months to roll. 

    LOL Matt – the gentleman from NJ will filibuster this damn rally next week. 

    UAUA/Barf – Maybe throw in about 1/3 $5 calls as I’m remembering how hard they fell last month and oil is threatening a breakout.


  157. just bought some IBM 115 Sept Puts.    Need some balance



  158. 9500 PIN


  159. Well we are closing at all of our highs for the month of August.  That makes it less likely we’ll fall off the table on Monday but it will be up to China and Japan overall. 

    Why is TM down today?  That makes no sense at all!  YRCW is down too.  Solars are down… Oh well, I guess that’s stuff we can buy on a rally next week.

    SOX punched 300, XLF over 14.50, QQQQs at 40.29 – there simply are no bearish signs but I’m looking at the DIA covers and still can’t bring myself to take one. 

    I have to go with my gut here and my gut says this rally is wrong and, while it may continue, it can also be tragically undone on a bad report or any change in sentiment.  Our position is mainly cash, some bearish plays and some long bullish spreads so not very committed but we sure would like a chance to be dip buyers at least. 

    Have a good weekend,

    - Phil


  160. 103 pin on SPY too. BIDU pin 345 — it almost always pins. Missing this morning cost me a big chunk of the week’s gains. I was short SPY 101calls (against Dec.longs) and so was obviously playing with fire. Ah well.
    HANWE


  161. Pharmboy: ready to buy some MRK, Jan  11 $25 calls. what do u think. Nice work on previous report.
    dflam


  162. This is not a rally.  This is manipulators goosing it here with government money and there with some of their own and others piling on.  I think if we continue going up by Tuesday that I will bow out until September.  I just can’t stomach this b.s. much longer.  I don’t have enough shark in me to throw in with the rest of yen and live with myself.


  163. FSLR saved by the bell! 

    Times/Gumba – Man that poor guy!

    Denninger/DB – The markets don’t pay you for being right. 

    Morning/Eric – There was nothing to miss, it happened so fast there was little you could have done. 

    Nat gas fell another 4.8% today – that is just too strange…  

    Shark/Matt – Gotta swim where the fish are.  I know what you mean becasue we are way past reasonable here. 


  164. Karl/Pay – Still a great read. He actually seems to care rather than hype/pump like our CNBC and Marketwatch friends.


  165. Phil UNG is trading at a premium to Nat gas, but they are talking about freezing shares limiting them in other ways. Couldn’t that cause a complete colapse of the trade, premium etc…?


  166. well… in 21 running days August  i’m only  1.45% up. If i take into account the savaged dollar is more like 0%. 
    Seems I loaded too much into bear side and matress. Im realy looking into some pullback for next week, maybe profit taking so I will improve positions on some bear bets i keep over week end. Very bad to be bear  and as was told yesterday, probably there is a lot of people in sidelines jumping in so there will be no pullback.
     
    I always wonder about a overbought market with no shorts support because all burned in this way up. we shall see what mr market comes. Denninger is great, but seems is to early with the Armageddon.  And in some way i hope he be wrong (he usually is right) because he is painting a very obscure image of future.
     
    Good weekend for all – Spider


  167. dflam – MRK like them, but I would definitely scale in here.  They (who hasn’t) have run a bit to fast for me.  The Singulair patent was a big deal ($4B/yr), so that will help, and the Gardasil bullcrap looks to be laid to rest – the FDA reaffirms the safe and effective bit (http://www.youtube.com/watch?v=BBh2mjkI57Q)….They have an OK pipeline with the SGP deal coming on-line in November.  Next stop for them looks to be 35ish.  Phil may think differently, but I would say take the $27.5 Jan10s for $5.5 (50c premium) and sell 1/2 or 3/4 the 32 Sept09 which have the same premium.  That way you can roll to the March or June10s with the $$ if they pull back a bit or have room to roll up to 2X the 34 Oct09s.  Very tempted to also sell the 30 Sept09 P for 40-50c.  (I own MRK shares)


  168. Phil/COF – I’ve scaled in my average 34 put price to $1.50 and am 1/2 covered with 35′s. Never trading without covers again after this week. it only really took 2 moved against me to be a major frustration. Phil, I don’t meet margin req for naked puts or calls, is there still a way (through spreads, perhaps?) that you recommend I can still get involved in trades like your naked DIA puts, or should I just avoid them? I’m going buy/write almost exclusively for the time. This uncertainty is too high right now.


  169. Comedy. Agreed. Cuz I meant comedy in an unintended myopic view kind way.



  170. pstas/chart – Very interesting, thanks for sharing that. Unfortunately I don’t think anyone’s paying attention to things like “p/e” or “common sense logic” anymore, the s&p will never crash like it did last year again!


  171. pstas, that is interesting.  I talked to a coworker today who is a casual trader.  His sentiment is that so what if it takes 5 years for his investment today to pay off down the road.  He thinks the market has bottomed and we’re still close enough to it for him to get in now.  This isn’t a fundamental assessment type thing.  This is an I’ve been hearing great daily percentage increases in the Dow and looknig at the chart.. we’re still near the bottom compared to September ’07.  Not too sophisticated.  But he feels time is on his side.  And it is.  But he won’t think so when he’s massively underwater.  He’ll want out.  It’s easy to be cavalier when things are going your way. 


  172. Now that GS has made their $1 Billion bogey this week by goosing the market for the past 4 days and options expiration is over, here is your Friday afternoon after-market news bomb of the week:
     
    http://www.zerohedge.com/article/long-term-budget-deficit-revised-now-2-trillion-dollars-worse
     
    (political comment unnecessary).
     
    Have a good weekend.


  173. Just came back from City Place in West Palm, lots of people shopping dinning and cant forget to add drinking. The line for valet parking was pretty long.

    If you look at the S&P chart you will see 1100 is the exact point of the massive drop off, i think we fill the gap. Look at the macd very curious.

    I too have spoken to one particular casual trader (loves to gamble), he has a pretty large position in C and he’s expressed his desire to sell come Monday. If someone believes the market is headed for a steep drop again then i believe that someone will have plenty of time to take a short position. I think we don’t head lower until we hit 1100.


  174. Phil, I really want to own some Boeing long term.  They pay a great dividend and have enough volatility to generate some decent income selling options against them.  However, I am afraid that the giant crash can happen at any time and I want to be protected.  So rather than buying leaps and writing calls,  does it make more sense to buy 100 shares  of BA at 45 and the SEP 55 PUT with only $.07 in premium and sell the 45 call for $1.60.  Can you explain how this isnt a guaranteed $153 for the month?
     
    I realize that I am commiting $5500 for a month but I have also removed any downside with the 55 PUT.    


  175. woopsy, I see the problem.  If at the end of the month BA is at 50 then I get called away at $45 but my put is only worth $5.  Thus I paid $5500 and at the end of the month I have no shares and only $5153 in my account.


  176. Craizooka, be patient,sell some puts out of the money, below 50dma, generate some cash to get in your position. If the Big bottom drops out you will own them at a price that is fair giving you nice upside. if no drop you still generate income, I do that withquite a few of our regular plays. I.E. SHLD sold dec 50′s for 3.30. And BA 35 Nov puts for a 1.00 If I own either Shld at 46.70 or BA at 34 I am long term a happy camper. If all I do is crush premium, I am a happy camper. 


  177. I’ve been spending all night doing homework on ideas, the site’s strategies, etc.. Phil, your 3 hour livestock video is in the background. You’d do a good podcast, just turn your normal writing rants into 1/2 hour podcasts that I can listen to on the bus ride. You could talk about economic issues, investing, everything that you’ve been writing about. I’d subscribe.


  178. Cap, I saw the AP article on that. Did the White House get those bean counters from Enron? They were only off by $2 trillion.


  179. At some point in the coming week I think we will top out.  Shocker!  But the longer I’m wrong, the sooner I’ll be right.  And I’ve been wrong about this ‘rally’ for a long time!  I’m looking for us to go no higher then S&P 1056 (3%) and Dow 9850 (3.6%).  So my hunch is we are within 4% of the top.
     
    Alot of data this week and very low volume so we could easily get there.  But will they try and put a brave face on September?  Maybe we’ll drop this week and have a blow off top the first week in Sept?  Very hard to say.  But the end is near.  At some point during the next 2 weeks, more likely this week, I will take a stand and just go away and bury my head in the sand until I’m right. 


  180. Here is a case presented for near term positive; longer term- dark clouds on the horizon. It may shed some light on what we are seeing in recent market action. Here is some date which actually shows small, but positive moves in the economy- not just things not getting worse , faster.
    His points regarding increased work hours and vendor performance jive with what I have been seeing in my business. More requests for quotes; a few more discretionary type projects being approved; my crews are working more hours to keep up and I am using more fill-in subs to keep "even with the workload" & material suppliers are going from "you need it yesterday is OK" to "is next week OK?"
    http://ezines.kci-com.com/display.php?M=615947&C=e00d03f043581509e63abbdf65eb4abf&S=7850&L=11&N=5134


  181. Hey Phil, I’m going to shoot you an email in a bit about the wiki. Keep your eyes open for it..


  182. pharmboy:appreciate the advice
    dflam


  183. Zero Hedge exposed by NY Post ?    http://www.nypost.com/seven/08212009/business/blogger_may_have_a_past_185653.htm
     
    If indeed these guys have offices and telephones and so on, it would seem pretty difficult to remain anonymous (and while the mystery surrounding ZH is interesting, I don’t think it adds anything to what they are doing and perhaps they should consider changing that).
     
    Others seem to be interested in this story as well:
    http://wallstreetpit.com/9714-outing-zero-hedge
    http://files.wallstreetfolly.com/wordpress/2009/08/zero-hedge-contributor-uncloaked-and-he-was-apparently-very-naughty/
    http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114×69059  (phil’s buds here see a right wing conspiracy everywhere !)


  184. Hey, that’s my Towel(ie) !


  185. This guys funny what planet does Timmeh live on?!
    http://www.youtube.com/watch?v=nErPRSSoZ8o


  186. http://finance.yahoo.com/news/Regulators-shut-Guaranty-Bank-apf-468075343.html?x=0&.v=21
    The Federal Deposit Insurance Corp. seized Guaranty Bank, with about $13 billion in assets and $12 billion in deposits, and sold all of its deposits and $12 billion of the assets to BBVA Compass, the U.S. division of Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank. It was the first foreign bank to buy a failed U.S. bank. In addition, the FDIC agreed to share losses with BBVA on about $11 billion of Guaranty Bank’s assets.


  187.   Pharm, I follow Health Care Service Corp. a little bit. They are the fourth largest US health insurance organization.(They acquired sofware provider MEDecision for 121 million.)  I think one or two medical/clinical  software providers might  be winners in the next 12 months , but it is hard to narrow the field.


  188.  Hey Phil… what do you think will probably happen to stock prices if the USD loses 5% and drops from 0.77 down to 0.72 (back to where the US dollar was trading in the summer of 2008)?
     
    Since stocks are commodities priced in USD, it seems to me a sudden dollar plunge would cause the indexes to surge upwards. Maybe we see a corresponding 5% upsurge on the indexes as an inverse reaction to a dollar drop?
     
    If so, that would put us back to DJIA 9975 and S&P 1077 where some resistance levels exist on my charts.
    What do you think?