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Monday Malicious Microbe Mania

Just when you thought it was safe to invest in Asia!

Today’s shocker came out of a World Health Organization meeting yesterday where officials estimate 20% to 30% of Asia’s population -  or between 448 million and 672 million people will be infected by swine flu H1N1 this season.  Hong Kong had their 15th death this weekend and eight more people are in critical condition.  492 new cases were confirmed over the weekend, bringing the official count in Hong Kong alone up to 22,054 infections.  According to the WHO: "China may not be in a situation of what we call extensive local transmission, which Hong Kong is in now." Once it does happen, we can see a lot of severe cases." 

It’s ironic that the G20s efforts to put lipstick on this pig of a global economy may all be derailed by a pig’s disease.  Despite skipping testing and relaxing safety regulations (which will, of course lead to other problems) in order to get tens of millions of doses of vaccines out for mass-inoculation programs, the WHO estimates that China, at best, will be able to inoculate just 5% of the population (65M people).  We went through our last major swine flu scare last April and, here at PSW, we turned it into a half-dozen very successful picks – so let’s look at a few more who should do well in this next round of the crisis: 

  • SVA is the primary vaccine maker in China and you can buy that stock for $8.88 and sell the Jan $7.50 puts and calls for $4.50, which is net $4.38 with a call away at $7.50 (up 71%) if they hold that level through Jan 15th and the break-even to the downside (where you would be assigned the puts) is $5.94, 33% lower than today’s price.  I’m not one to jump on disaster plays usually but this one has pretty good odds. 
  • BCRX has Perimavir in late-stage trials and the FDA is considering a "pre-emergency use authorization review," of the drug, which would be great for BCRX if it goes through and bad if it doesn’t.  As BCRX is already up a lot, the way I would play this one is buying the 2011 $10 calls for $4.10 and selling the 2011 $12.50 calls for $3.60, which is a net .50 entry with a 500% return if BCRX hits $12.50 in 15 months (now $10) and it shouldn’t cause too much damage (perhaps 30%) if things don’t work out and they fall back to the $7s.
  • CAH is a mask maker and I love mask makers in a crisis where 6Bn people will be looking for protections.  With a $10Bn market cap against $100Bn in sales and $1Bn in annual profits, I’m very happy with CAH as a long-term hold, especially with their 2.5% dividend.  A conservative way to play is buying the stock at $27.89 and selling the 2011 $25 puts and calls for $7.80 for a net $20.09 entry, which is a 24% profit if called away and a 19% discount if additional stock is put to you at an average of $22.55.  Meanwhile, over the course of 15 months, another .85 in dividend payments should come your way for another 4% gain.
  • CAH is also a good enough opportunity to me to play the March $30 calls for $1.30, looking for a quick pop after Cramer reads this article and then pretends he thought of them on his own…

In Chinese, the symbol for crisis is made up of two elements that signify danger and opportunity (more accurately, a time of change).  Preparation is a pre-requisite for taking advantage of an opportunity or all you have is a dangerous crisis.  Although the danger may be high, opportunities present themselves to those who are prepared – that’s what we try to do here at PSW, prepare ourselves for market contingencies and be ready to act, turning danger into opportunity whenever possible but never forgetting that the danger is there!  Remembering the danger that lies in the opportunities and hedging for both is the yin/yang of trading…

The Hang Seng erased it’s morning Ying with a large afternoon Yang that took 200 points off the market in the afternoon and that index finished down exactly 0.7% – the same exactly that the Nikkei finished down for the day an hour earlier.  I’m not going to say anything about this and we can all pretend that the random trading of millions of individual investor decisions cause this to happen, as opposed to trading programs controlled by a dozen people because it’s Monday and we’re already worried about the flu so why add that to our usual concerns about the actions of the Gang of 12? 

Speaking of the Gang of 12 however - last week I told you to read "The Creature from Jeckyll Island" to help understand why Ron Paul calls the Fed an evil, out-of-control creation that has undermined our nation.  Today the Fed dropped the pretense that it answers to our Government as they rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance.  While the report requested by the Treasury hasn’t been formally scrapped, no work has been done on the project, which was due Oct. 1, the people said. Treasury spokesman Andrew Williams declined to comment, as did Fed spokeswoman Michelle Smith. 

Europe is down about a point ahead of the US open (9am) but the really big news that no one is talking about is a major policy statement that is in the works for this week’s G-20 meeting that would commit the U.S., Europe and China to make big changes in national economic policies to produce lasting growth as the world recovers from the worst recession in decades.  The focus is on a U.S. proposal, called the "Framework for Sustainable and Balanced Growth," whose details haven’t been previously disclosed. If implemented, the framework would involve measures such as the U.S. saving more and cutting its budget deficit, China relying less on exports, and Europe making structural changes to boost business investment.

"As private and public saving rises," in the U.S. and other countries, "the world will face lower growth unless other G-20 countries undertake policies that support a shift towards greater domestic, demand-led growth," senior White House aide Michael Froman wrote to his G-20 colleagues in a letter dated Sept. 3. In the missive, which has not been made public, he called the framework "a pledge on the part of G-20 leaders" to press new policies. The G-20 countries have yet to decide how detailed to make their pledges to change. And the U.S. and Europe have different ideas on how to enforce them. "Implementation is always the issue," says Timothy Adams, a former senior Bush Treasury official. "If we wait even one more year, it may be too late." The sense of urgency will have faded, he says.

Gosh that sounds like a really big deal doesn’t it?  Almost as big of a deal as the WHO’s flu warning, both of which are absent from 90% of the media I’m looking at and listening to this morning.  You can bet though, that "THEY" are acting on this information and they will be SELLSELLSELLING, as they did on Friday afternoon even as the MSM pump-monkeys continue to tell you to BUYBUYBUY as if, not only has the economy fully recovered – but $70 oil, a global pandemic, massive unemployment, limited credit availability, record mortgage and credit card defaults and unsustainable levels of government stimulus and debt are nothing you should be concerned about either. 

We all remember how the Dow climbed a "wall of worry" from 11,000 to 14,000 and how all the "experts" told you that was a good thing.  Well guess what…  Had you taken it off the table at 11,000, you’d still be 20% of where the market is now.  Does that make sense to you or am I talking to a wall?  I’m willing to tell you this, even though it’s bad for my "ratings." 

Subscriptions are down and hits are down since I’ve gotten more bearish last month and if I had a board of directors, I’m sure they’d be telling me to get more postive and stop all this negative talk because it’s turning people off.  I’m sorry because I don’t like being bearish – I’m an optimistic guy usually but I can’t just sit here and tell people what they want to hear.  It’s just too irresponsible not to be cautious here.  We make plenty of bullish picks but I maintain a very wary outlook until we get some real fundamental improvements. 

The Baltic Dry Index is down another 1.4% today and heading for a critical test of the 200 dma at 2,200, perhaps by the end of the week if things don’t turn up.  As I’ve been saying for quite some time, if no one is shipping anything to the stores – what kind of Christmas season are we expecting?  If we don’t have a good Christmas season what happens to the retailers and the REITs that rent them spaces?  What happens to the people the retailers usually hire in Q4?  What happens to the money that has been pouring into those sectors like Retailers and REITs are the new .com companies? 

I don’t have all the answers, but I do have a lot of questions – too many to get comfortable buying at these levels

 


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  1. Phil
    I brought some BSX Jan 2010 at 1.9 now 1.550
    What do think I should do ? We were going to sell Jan 12.50


  2. SRS
    Trying to climb out of a hole.  Currently have
    72 Oct10C basis 1.50 now .55 – just DD’d at .5
    What do you think of the following buy/write
    Buy 11Jan10C about 3.55
    Sell 10Jan10 Calls and 9 Puts for about 3.55
    BE about  7/30, net 3.55/1.28
    Thanks, edro


  3. Hey all,

    Posted this morning picks with a buy into DUG and a sell into CYT. Check out my entry and exit prices as they have changed since the first post. Here is my post. 

    Thanks,

    David Ristau


  4. Anyone – I have not used trailing stops before, so when one uses them does the trailing stop price used the ask or the bid?  For instance, we have the 98 DIA P – currently 2.4.  I assume a nickle for trailing stop, but bid or ask?  Thx.


  5. Phil… Hold DIA Oct 98 puts since Friday bought 2.15.  I beleive your rec on these was sell at 3.00.  Has that changed?


  6. I did some homework this weekend on the ARNA debate asking a few doc friends as well some reading, and I have to eat my words and agree with Opt on the ARNA angle.  I am not sure that ARNA will make a combo dose of locaserin with phentermine, but docs will prescribe them together, taking patients off phetermine after a brief period of time, then on then off, etc due to the addictive nature of phentermine.  With that, ARNA should be the winner, and the others will make it to market, but not without some heated debates (and larger side effect profiles).  I am buying the stock here, selling the P/C against them, and then we will see where the ride takes us.  Here is a good summary of the results and subtle trial differences….


  7.  Phil, the vix is back up to 25+ is it time to hit some of our buy/writes?


  8. Pharm, at OX you can set bid ask or last as the trigger for a trailing stop. When I have used them I have used last, because I don’t trust the bid/ask as much. Your broker may have similar facilities.


  9. SP – Thx.


  10. GABBY’s back……..just returned from a stay at the VA hospital for treatment of "acute renal failure on chronic (kidney failure)." Try as they might they can’t 86 this 86 yr. "young" curmudgeon.  Good Navy training.  I plan to increase my "UP YOUR ASSETS" TRADES with PSW which is enriching my grandkids and enabling me to send them to college.  Not  too shabby for a WWII vet with two yrs of night school.  Right on, Phil and fellow investors.      GABBY


  11. BSX/QC – LOL, you do have to wait for them to go up first.  I wish I were 100% with my calls but that is why we scale in.  If you made a 1/4 entry at $1.90 then 20% down is $1.50 and this is time to go to 2x for a $1.70 avg entry, which is not so far down as we should be worried yet.  If you scale in, then a sell-off is an opportunity, not a problem. 

    SRS/Edro – Speaking of scaling in…  Your bais is $1.50 AFTER doubling down at .50?  Yes to the  buy/write, those are always fun.  You can also shift your Oct $10s, now .60 to the Nov $8/9 call spread at .50 so you get a double if SRS holds $9, as opposed to hoping for $11 this month.  It doesn’t pay to worry about capping your gain .50 shy of b/e because you have a much better chance of making .50 with $1 than you do with .50 and that’s what you are buying with that trade-off.

    Trailing/Pharm – In TOS or OptionsXpress you can specify which to use.  I like to use last price as it’s more real than the others but only TOS does that (that I know of).   Also, I try to avoid hard stops like the plague but if you’re away from the computer, it’s necessary unless you are very willing to roll or DD if something goes against you.

    DIA/Iflan – Very disappointed with the lack of action on these but no change so far.  Action is pretty weak this morning despite the low volume.  More likely than not we’re heading lower still. 

    Speaking of low volume, S&P not much over 1,056 and if they can’t hold that it’s trouble.  Then there is NYSE 6,959, which is already blown (that was too easy) so on the whole I’d say get ready for a real sell-off.  Let’s see where it goes.  S&P 1,030 and NYSE 6,700 are what we’d be counting on for strong support

    Oil is below $70 and gold is below $1,000 and we haven’t even begun to see a proper pullback in the miners or energy sector with OIH still at $116 and XLE at $54.  If oil can’t take $70 back or fails $67.50, there should be a nice 5-10% pullback on those two.

    More from Krugman: "Governments can help us cope with the crisis, but they have levels of debt that are sufficiently high to be a source of concern." And, on China fueling a recovery: "The problem is that this is a global financial crisis. How can we have an export-led recovery unless we find another planet to export to?"

    Leading Economic Indicators were up 0.6%, which is 25% less than the 0.8% expected.  If you click on link you’ll notice that coincident index (month/month) is not recovering at all and we’re not out of recession until we get a full turn up.  Also, these are July numbers and our August data was generally worse so next month may even be a negative.   


  12. VIX/Craig – I’m going for a VIX of 29 back at 9,600 and then we can do a little fishing if we hold.

    Welcome back Gabby, or should we now refer to you by your various part numbers?  8-)

    Notice we’re back around Tuesday’s highs, which is where I predicted we’d finish out last week.  Looks like I was off by 40 minutes of trading! 


  13. Phil -  Thanks for keeping a level head for all of us.  I know it’s important to grow a business like PSW, but I’m glad you are not catering to the masses in order to do it.
     
    On other terms can you help me with a few more bullish ideas (I’m getting set on the SVA play from above) but so many of my bullish positions got called and left me heavily bearish.  I just don’t want to get burned if they ramp on low vol.  Thanks.  (I was considering going back to my fav play with IPI)


  14. Thanks Where.  I hate to be the voice of caution but if no one else is going to do it…  You certainly don’t want to be too bearish here – tempting though it may be.  Even today our morning sell-off is running out of gas with just 37M Dow shares at 10:25  and already I see pumps on REITs, SHLD, retailers like LIZ, V, XOX (despite oil still down) and CME (despite all commodities selling off).  I am still looking for bullish plays and I do have a list but I’m hoping that we get a nice move down by tomorrow so we have a better place to buy but, if we don’t go down and make new highs – we may as well buy there and use our S&P and NYSE levels for stops.

    Speaking of lack of caution, AIG up over 10% on rumors that they may get their loans "restructured" (in other words, forgiven).  I don’t see how this is politically palatable but it’s keeping XLF from failing $15 so let’s watch that line

    The rest of 2009 could economically be good and "may even beat expectations. [But] I am more concerned about 2010. I am not forecasting a double dip, but we are not out of the woods yet." – World Bank president Robert Zoellick in a pre-G20 interview with the FT


  15. Phil:
    With your cautious bearish outlook this morning, recommending any stops on you Oct DIA $98 put play??


  16. That was a pretty weak bounce off our predicted support levels.  From 9,850 to 9,725, 9,750 (20% bounce) becomes the Dow level to watch this morning.  NYSE is struggling at 1.25% line (6,930) and failing 6,900 would lead the rest of the indexes down to the 1.25% line at least.

    DIA/Bvar – No change off our usual strategy which is:  If you don’t take a quick 50% profit off the table then you are insane…  8-)

    Also, note to all.  If you are up 20% on a bearish position then you need to be satisfied with it and either lighten up or set stops.  You can always get back in if we break through (in this case last Tuesday’s closing levels) but don’t assume the entire market will now turn on a dime and go down for days…  Make sure you are balanced above all other things and knnow which bullish or bearish positions are your favorites – so you can press the right buttons as we get a better sense of direction.


  17. HI Phil: Bearish or not, I like your caution approach. In the long run,more subscribers will stay w/you.If I want sweet talk, I’ll watch Cramer.
    I have no open P& C positions on CAT and STEC. Up 30 % on CAT. Took a 30 % hit on STEC last week. Thinking of closing both positions.Your advice ?
    dflam


  18. Phil my kudos as well. The advice here is soundly based and uniquely in my opinion, very open. Not only are too many sites inexplicably bullish, but also closed with "buy this now" as their complete recommendation. In my experience you are unique in telling us BOTH what you are thinking and WHY you are thinking it, leaving us all much better able to draw our conclusion and be educated at the same time. Your answering specific questions on our individual positions is incredibly helpful.
     
    Thankyou thankyou thankyou and please keep it up!


  19. SPY absolutely refusing the break down below 33% ….


  20.  Phil, How about a list tips on the order of the second and third paragraphs of your last post? That would be valuable to a lot of us.


  21. CAT, should in no way trade at its current price. The news today sucks big time. Gov talking about reining in spending, the only thing CAT had pined its hopes on for Pete’s sake!!

     
    CHICAGO (Dow Jones)--Caterpillar Inc. (CAT) said Monday that global machinery sales through retailers fell 48% in the three months to end August, compared with year-ago data.
    The retail sales’ trend was flat with the prior month, and though the North American market ticked up, Asia-Pacific, Latin America and Caterpillar’s rest-of-the-world segment all suffered sequential declines.


  22. Ahhhh…dumping $$ again.  Once again the $ carry trade rules the markets.  It’s getting pretty damn predictable, just watch it in real time.


  23. Shoot, I almost posted that I thought AZO was a good long this morning and then got distracted (I’m not in myself either). I’m not going to enter it here but I am going to watch for another pullback.

    This stock tends to be strong when there is some market weakness, by the way. It may be because it’s perceived to be a good safety stock, or is a place for a fund to park money.


  24. where – what do you watch to see movement in usd please?


  25. Green shoots, less credit cards issued ……All this crap doesnt matter…..until it does…..the gov again doing everything in its power to save the homeowner and they cant

     
    Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.
     
    August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed.
     
    The rate of subprime mortgage delinquencies now tops 41 percent, up from about 39 percent in each of the prior five months.
     
    The results, which correlate with consumer bankruptcy filings, suggest U.S. homeowners remain under financial stress despite signs of improving sentiment and fundamentals in the U.S. housing market.
     
    August bankruptcy filings were up 32 percent from a year earlier, compared with a 35 percent year-over-year increase in July.
     
    Still, while more Americans were late with mortgage payments, they are keeping up with other bills. The proportion of credit card accounts at least 60 days past due was down in August for the third straight month, while subprime card delinquencies also fell.
     
    That improvement in delinquency rates partly reflects risk-aversion among issuers, which have cut the number of cards by 82 million, or 19 percent, over the past year, while slashing credit limits by $721 billion, to about $3.6 trillion.
     
    The number of new cards being issued is down even more dramatically. In June, 2.6 million new cards were issued, compared with 4.7 million a year earlier.

     


  26. PharmBoy – my OREX calls are going up nicely lately, thanks for that idea.


  27. Steven – I use TOS and just use $DXY as a close proxy.  It’s bizzare, but oftentimes I’ll see dollars getting dumped about 2-3 min before major index stocks start to move up.  It’s almost uncanny.


  28. I have just started this month with you guys and some of the short explanations are sometimes difficult to understand. Sometimes the buy or sell on puts and calls are unclear.
    I have gone through the 100K. To my surprise I nearly could understand it all. There are only two things unclear to me: under "change" we have two colors, red and green I do not understand the numbers you quote there, as they do not seem to have any relation ship to the option going up or down in reference to the price paid or sold. Most of the green squares have a positive number however some have as well a negative number. The reds have all negative numbers.
    I have not figured out when to jump on the train of this 100k portfolio, as some option differ greatly from the price they have been bought or sold. It is OK entering in a better price position but the other way does not look to good if you for example if Phil bought the option for say 5.00 and now one has to pay 8.00.
     
    In addition to the above I may recommend to give the explanations in the daily comments a bit more understandable for new comers, they are surly hard to grasp sometimes. People will cancel the membership as they can not follow. It would be simple to say buy or sell a put or a call at a specific strike price, clearly stating what to do.
     
    I guess after a while one can follow most of your abbreviations.
     
    I do not wish to criticize only want to make it better for both sides. As it can be very pain-full if you miss-read the recommendation and in-counter a considerable loss.


  29. Do you have a guideline as to what percentage cash one should keep when operating this kind of conglomerate portfolio strategy (mattress, buy/writes, straddles, collars, inverse hedges, spreads, etc.)?


  30. yodi - That is why it is best to "paper trade" until you understand … or not to do anything unless it is perfectly clear what is actually being done. It is better to miss a trade than to do one very wrong.


  31. Here’s an alert to all regarding something that happens to me occasionally, and again today.  I put in a trigger to sell DIA 98 puts at  2.25 or greater if the last sale was below 2.27.  This is a heavily traded option so I figure the trigger is going to fire and kick me out at 2.25.    But nooooooooo!!!   The option price skipped right over my limit price to 2.18 or so, and I still own the options.  I guess I should have set this up as sell at market if below 2.27, but I’m always disinclined to buy or sell anything at market.  A trigger on an option that you have already made money on may be an exception. 


  32. yodi folks have been trying to get Phil to write buy/sell and put/call consistently for at least the time I have been here. I have worked with traders extensively and found that they can be very cautious about changing the routine aspects of how they work. Often it is perceived that a change in routine will slow things down which can cost money and people are rightly cautious of this.
     
    However, in my experience when a trader is successful in changing a routine like this one, they do find that the change was not nearly as painful as they feared. I am in the camp that does wish Phil would make this change.


  33. Stevenparker,
    thanks for your response, let’s see what response Phil will give what about the red and the greens and their numbers


  34. aclend
    30-50% cash depending on what you are doing.  Doubling down and rolling can take some cash.  And don’t use any money from your callers until you take them out.


  35. CAT/Dfalm:

    Caterpillar Inc (NYSE:CATNews) said on Monday that dealer sales of its heavy equipment fell 48 percent in August, with the sharpest declines in the U.S. blue-chip industrial’s truck and bus and industrial segments.  The world’s largest maker of earth-moving equipment said dealer sales of its equipment fell 57 percent in North America in August — a more modest decline than the 59 percent July drop. But they but declined more sharply in Latin America, where they fell 37 percent compared with 28 percent in July, and 33 percent in the Asia-Pacific region, compared with 30 percent in July.  Sales in the Europe, Africa and Middle East region were down 50 percent, on par with July’s decline, according to a filing with the U.S. Securities and Exchange Commission.

    So, yes, I think it’s a good time to lighten up on CAT.  As to STEC – this is why we use stops!  That sector has been talked up plenty but I think half the demand is AAPL and they usually tie things up early so that’s given the chip sector a better outlook than is likely to be realized once the fall buying season ends.  Of course CAT pays a nice 3.5% dividend and in our old $100KP, we had a nice play selling what would now be the 2011 $50s for $10.50 and the 2011 $40 puts for $5.15 and that takes $15.65 off the table (30%) and drops your basis (from the current price – yours is less) to $37.71/38.85 with a call away back at $50 for an additional $12.39 profit, which is another 25% over the current price and more like 33% of the capital remaining at risk

    Thanks Steve!

    Volume 60M at 11:30 – low, low, low…

    Tips/Oldgoat – Deano and I are going to be working on a project like that but much of it is already in the strategy section.

    Dollar/Where – Good point – huge dump gave us this market boost, about half a point across the board.

    Credit/Kustomz – That noose is tightening.  That 20% slashing of credit limits is $721Bn of spending power that is not going to be coming back any time soon. 

    TOS/Where – They have a whole "Forex/Trader" section where you can track the dollar against a half dozen currencies on charts simultaneously. 

    Change/Yodi – That is from WallStreetSurvivor’s charts, not something I made but change is the day’s change and not much use really.  As to when to get in, I’d say just wait for new positions but make sure you take a fair mix of bull and bear side plays.  We haven’t added many in the past couple of weeks because the ones we had went against us and we’re in work-out mode at the moment.  Once we get back on track, then we’ll be adding positions again.  Also, you can always ask if you are thinking of a new position.   

    Cash/Aclend – I think 25% is the very least and under 1/3 you should be worried.  Of course that should go for any kind of portfolio and not just an options one as less cash = less flexibility. 

    Paper trading/Diamond – Very good point.  It advises as much in the New Members Guide but then it turns out that 75% of new members don’t read it so what’s the point?

    Triggers/Iflan – Try putting in orders to sell 1/2 AT your target, especially if that target gets you even after a DD or is up 20% (which is essentially the same thing).   Notice I hit it on the nose with my 10:30 warning and taking non-greedy exits there would leave you in cash to buy back the same puts now for $2.10 and that’s just as good as making an extra .15.  You have to WANT to take profits off the table and it has to make you feel bad not to do it.  The only way you can train yourself to feel that way is to force yourself to take quick profits CONSISTENTLY for a month or so.  Only when you see that you actually do outperform by taking lots of small profits vs. the occasional big one will you learn to enjoy getting out of your winners while they still are

    Changes/Steve – I make enough mistakes using my normal format thanks!  Soon the WSS platform will be putting out some sort of alerts with all the exactness you could wish for and I will be setting up a new, more aggressive portfolio there that you can follow in addition to the current $100KP.



  36. If subscriber counts are dwindling, I suspect that you might be losing people who tried it and don’t really want to intensely trade options. I think it would help if you had a highly standardized and perhaps more descriptive approach to setting out new ideas, but ultimately, your approach doesn’t fit all that many people – not because it is wrong, but because it is difficult.
     
    I seriously doubt your cautious bias hurts. I am more bullish in the near term, for sure, but even if your bias turns out to be quite wrong (or more likely, quite early), it does not diminish the value I find in the ideas I take from you.
     
    The screaming liberal bit might be more costly than you realize, but I’m paying for an honest and rational opinion and you have been delivering. Keep it up. :)


  37.  Phil,
     
    I second Yodi.


  38. Phil … funny line this morning about China.
    Saw a comment by Hu (Hu’s on first) over the weekend that managing recovery and ethnic unrest was going to be a big challenge for China; lots of headwinds; something like that … was on Bloomberg.
     
    This market is STUPID !
     
    Ramp due to:
    a) Obama speech
    b) Fed POMO
    c) Dollar dropping
    d) Goldman Sachs
    e) Why not ?
    f)  All of the above
     
    Winner gets a CFC voucher ..


  39. Just wait until Sept car sales #s come out !


  40. bar
    I would think of Phil as a liberal but more like a Barry Goldwater.  LOL After all that is where the dems have shited too and the republicans have vacated.


  41. Phil
    An earlier favorite, LYD. is about 7. Is the buy/write of the January 7.5 attractive? Or do you think ot could drop?


  42. Credit/Kustomz – That noose is tightening.  That 20% slashing of credit limits is $721Bn of spending power that is not going to be coming back any time soon.

    AXP getting weaker…..


  43. Thanks guys. Since I’m relatively new to this level of mixed trading, I’ve been keeping it closer to 60%. So, I’ve been more concerned that I’m not adequately utilizing my available capital/margin but not sure how far I should take it.


  44. Phil
    The "O" is pushing education. Do you have a Buy/Write recommendation on ESI. Thanks!


  45. Steve – Phil is gonna be pissed at you for comparing him to Barry Goldwater ..  :lol:


  46. SS,
    LOL, Freudian typo-slip:  :…the Dems have shited to"


  47. Here’s a glimpse of whats coming in commercial real estate…
     
    Sep 21, 2009 9:56 AM CDT

     

    NEW YORK-- (BUSINESS WIRE) — Fitch Ratings has taken various rating actions on 13 classes of Citigroup Commercial Mortgage Trust 2006-C5. In addition, Fitch has assigned Rating Outlooks as applicable. A detailed list of rating actions follows at the end of this press release.
    http://www.smartbrief.com/news/aaaa/industryBW-detail.jsp?id=226C36AE-51AD-4EE9-846C-99FF152F595E


  48. OREX/MrM – UR welcome.  Glad to help out a little.  As Phil says, a few small wins every month trump the home run once….


  49. Isnt DIS located in Orlando, they do not include DIS hotels in their data
    Orlando hotel occupancy continued to slide in August, wrapping up a rough summer for the destination. 
    The average occupancy for the Orlando market was 58 percent, a decline of 8.9 percent from August 2008, according to Smith Travel Research.  Hoteliers in Orlando slashed rates to an average of $76.29, a 14.4 percent decline from same month a year ago.
    North Orlando and East Kissimmee suffered the largest percentage drops in occupancy, while the greatest discounting occurred in the Lake Buena Vista area, where prices fell about 19 percent.  The Smith Travel data do not include Walt Disney World hotels.
    In the first eight months of the year,  Orlando hotels filled 64 percent of their rooms, a decline of 9.9 percent from the same period in 2008.

    Analysts at Credit Suisse estimate 2,535 Boeing and Airbus aircraft world-wide were in storage in July — 14.2% of the world’s fleet of these planes, a percentage that rivals the months after Sept. 11, 2001.
    The Association of American Railroads counts 501,472 freight cars stuck in storage at the beginning of September, roughly one-third of the nation’s total fleet. In housing, 18.7 million homes were vacant in the second quarter, up from 15.9 million four years ago, according to the Census Bureau. Vacancies in shopping malls and office buildings

    http://online.wsj.com/article/SB125348951896526259.html?mod=googlenews_wsj


  50. PharmBoyAEZS is ripping upwards, thoughts?


  51. Phil….Re taking small profits and how to do it.   You are right on, as usual.    Thanks.


  52. Phil
    Subscriptions down ? Must be investor concerns and the very conservative sentiment that prevails. The wounds of the past market downdrafts are still healing. I love the occasional political banter, as it adds some spice to the educational experience we enjoy here. Hey… who cares which way the market goes – we have all the skills in place to make adjustments – hedging, rolling, doubling down, but never defeated.


  53. I dont remember  Phil mentioning that subscriptions were down – I think it was just barfinger questioning the subscriber count… In any event, I like the liberal bits so keep em’ coming Phil! lol.


  54. MrM – chart looks nice on them now.  I’ve had them on my watch list for a while, but that drop to 3 has me a bit worried.  Here is why:  SNA may cut ties with them based upon that drop from $3 (that was their baby), they will need to raise $$$, and the jump today is on the Phase 1 completion of the trial, but does not mean anything yet.  I am not interested at this point, but as you well know…scale in … they could fill that gap up to 1.75 b’f they hit OH resistance.


  55. Phil,
    I may be early thinking about this but,
    I’m in the Oct SKF 24/27 call spread for $1.50 now $1.00. If the market stays up, what are the correct moves to be watching for to roll this position? Thanks


  56. Obama says he wants to put 3% of the GDP into R&D – that would rock!

    Oil Kustomz – I think it’s the widest spread ever recorded.  Could also be just the result of bulls hedging tremendous gains. 

    Difficulty/Barf – Well I haven’t changed my style and I’ve noticed a very strong correlation between subscribers (mostly basic and newsletter – the Premium people tend to be more serious and consistent) and message and I’ve spoken about this at length in the past so it’s only new if you weren’t around last time I was very bearish.  CNBC also loses ratings when they are bearish (so they’re not anymore).  Yes, being a liberal hurts too but I figure there’s enough sites featuring conservatives, or at least featurning spinelss jackasses who pretend to be conservatives in order to take your money rather than be honest with you about their viewpoints but I won’t name names or I’ll be banned from the next session of Liberals Anonymous (where we say "Hi, I’m Phil and I have thought poor people should have the right to food, shelter, education and health care for 30 years" to start our meetings…). 

    CFC voucher/Cap – No thanks on that, those can only lead to trouble!   We have ittle data this week until Durable Goods on Friday but we do have Home Prices tomorrow and the Fed non-decision on Wednesday and Existing Home Sales Thursday but nothing market moving other than Durable Goods so they can do whatever they want at the moment.  Actually I think the market rally came courtesy of Gang of 12 member BCS, who said:

    The American economy will add jobs before the year is out, says Barclays Capital’s chief U.S. economist. Dean Maki thinks unemployment will peak "slightly below 10%."

    Oddly enough we’re at 9.7% now (officially) so I guess this is the peak.  This is also interesting:

    New research based on 24M individual credit files shows that it’s not borrowers with bad credit but the super-prime credit scores that are 50% more likely to abruptly and intentionally abandon a mortgage in a "strategic default." Such sudden defaults grew to 18% of 60-plus-day delinquencies.

    LYD/Drum – I think you mean LYG?   I follow them and I don’t think the risk in the UK is being taken into account.   On Friday I posted some stunning debt numbers for England and the banks there are on the hook for massive amounts of commmercial debt that’s hard to get a handle on but is probably more money than will be able to be covered by the BOE so I’m only looking to go back into these banks when they are back at crazy low levels and $7 isn’t low enough on LYG but maybe at $5 I’ll like them again.

    60%/Aclend – In keeping in-line with a scaling in strategy, think of it this way.  You stay mainly in cash and establish a number of buy/write positions along with some downside hedges.  Let’s say you have $50K in cash and $30K in buy/writes and $20K in bearish positions.  The market falls 20% and your bear bets are then up 50% (now 30%) and your bull bets are down 30% (now 21%) of the portfolio.  At that point you will have more stock put to you and that forces you to take 21% of your cash and put it into the buy/writes (hopefully they don’t ALL trigger) and that leaves you with 42% buy writes, 29% cash and 30% bearish covers. 

    At that point, you are below 33% cash and should try to re-allocate and then you need to either scale back some of your bull plays or pare down your covers but it’s a good thing as it forces you to re-evaluate your portfolio at pretty much just the time when you SHOULD be re-evaluating your positions. 

    Should you decide to take more buy/write risk then you would sell 20% against them and raise 8% cash, which would put you at 37% cash, 30% bearish and 34% bullish and, if the market drops another 20% and forces you into all those buy/writes, then all your cash would come off the side and you’d end up 68% bullish and about 50% bearish (because, at that point your puts should be doing well) and 4% cash so getting back to more cash would require letting go of some bull plays that aren’t working and also taking some over-extended bear plays off the table.  I would strongly suggest you aggressively paper-trade this strategy to get an idea of how it works over time as it takes a very long time for these plays to unwind.

    ESI/Gel – Already getting jumped on and back near their highs.  I’d sell the Nove $115 calls for $6 and the Nov $100 puts at $3.60 against the 2011 $100 puts at $15 and the 2011 $120 calls at $17 for a net $22.40 entry.  If you can sell just $3 a month in premium over 15 months that’s $45 back on your investment.  

    Goldwater/Cap – The man made Reagan look like a moderate choice!


  57. Sorry for all the negative NEWS but lets step back for a moment and think about this. Governments around the globe have spent TRILLIONS to get things back on track, sure some areas have stabilized but if you take a deeper look you’ll see that we still have huge risks to the downside and unemployment peaking at 10% is VERY optimistic. I predict many more layoffs to come in every industry.

    Dean Maki needs to be smacked upside his head with $12.3 billion in risky assets
    The American economy will add jobs before the year is out, says Barclays Capital’s chief U.S. economist. Dean Maki thinks unemployment will peak "slightly below 10%."
     
    Air cargo has always been an optimistic industry, and in the second half of 2008, when traffic volumes started to drop, air cargo managers were confident that the downturn would be short-lived. Even in December and January, when year-on-year declines reached 23%, plenty of executives still predicted that there would be a sharp recovery by the third quarter of this year. The optimists expected that once the economy recovered, companies would be caught short with excessively low inventory levels and would rush to use air freight to replenish them. This is what had always happened in previous air cargo downturns.
    It is therefore ironic that nine months later, with reports of a fewgreen shoots and definite signs of inventory restocking, air cargo is locked in the worst depression it has ever known. Managers have not just discounted the prospect of a sharp bounce back,they are predicting several gloomy years ahead.
    "We think the industry could be in trouble for the next three to four years and donot expect to see the levels we saw in 2007 until 2013 at the earliest," says Ulrich Ogiermann, chief executive of Luxembourg-based all-cargo airline Cargolux. "There will be no peak season this year or next year. I think it will be two or three years before we see a recovery," agrees Robert Frei, head of corporate air freight for global freight forwarder Panalpina.

    http://www.flightglobal.com/articles/2009/09/21/332560/cargo-crisis.html

    Monday, 21 September 2009

    Germany’s Lufthansa Cargo has denied it might permanently ground several of its 19 MD-11 cargo planes, although it does say it has grounded three of its planes and plans to ground a fourth one from October 1 in response to a drop in demand.
    "We have no plans to permanently take freighters out of our fleet," a spokesman for the company said.
     

    http://www.impactpub.com.au/aircargo/index.php?option=com_content&task=view&id=4416&Itemid=60

    Heres a sample of whats happening to banks all over the counrty
    At the Bank of the Cascades — Bend’s largest locally based bank, with $2.4 billion in assets — total loans and leases are down 14% from a year ago. Its holdings of government securities and debt issued by government-backed lenders Fannie Mae and Freddie Mac are rising. In August, the Federal Deposit Insurance Corp. ordered Bank of the Cascades to improve its capital and liquidity, an indication the bank won’t be flooding the local economy with cash anytime soon.

     


  58. ATVI reaffirmed outlook and its green on a red day you got to like that


  59. Hi folks – I’ve been busy lately!  As today is the day after the September expiration, many people would have ended up with a bunch of short stocks due to the Short Calls being ITM and were exercised (market went up from the August expiration).  I suspected there was a couple of small short squeezes today as these people may have got their margin calls and needs to buy back the shorts, pushing up the market, even on lower volume.   If you see one at 2 PM Eastern, it’s more likely to be it as that’s a deadline for meeting the margin call.   Luckily, I didn’t get any assignment.  Just a thought!


  60. Odds ‘n Ends:
     
    If subscriptions are down it’s because people are slowly coming to the realization I made last April.  And that it, this is not a market.  It’s highly manipulated POS that is more like video poker.  You know its programmed.  You just don’t know HOW it’s programmed.  GS / CD has killed the golden goose.
     
    REITs are getting new IPOs this week to buy the GREAT bargains that exist in real estate today.  Good luck! 
     
    They are now hyping REITs as a better return on your money then dividend paying stocks.  However, they forgot to factor in the risk discrepancy as well.
     
    The affluent are more likely to walk from a mortgage because it makes good business sense in ALOT of cases.  If I’m down $200k in a mortgage with under $50k on the line HELL YEAH I’m going to walk!  Piss on a credit score. 
     
    Obama wants 3% of GDP for R&D?  Yeah?  Well, I want to get some gold bullion from all my relatives this Christmas!  That guy is so detached from economic reality it’s frightening.  He wants this he wants that.  he’s gonna do this he’s gonna do that.  Bull$hit! 
     
    I’ve said it before but I guess I"m gonna have to say it again.  He has got the county bent over with its pants down around it’s ankles because of the greed on Wall Street.  We have mortgaged our future so GS can give their employees $10B each year in bonuses.  It’s simply amazing that he even stops to think for a second that the ONLY REPSONSIBLE THING FOR HIM TO DO IS GET OUR COUNTRY’S FINANCES BACK ON THE ROAD TO RECOVERY!  Impose common sense regs on the industry (bring back Glass-Stiegel) to prevent this RAPE from EVER happening again and send some F-ing white collar pigs to JAIL!!  Where are the arrests?????????????????????????? 
     
    He had bettter keep his eye on the ball or he is a one timer for sure. 


  61. matt….AMEN brother!


  62. matt1966 - Try some decaf …


  63. Matt – u go boy.  Wow!  Obama can try all he wants, Washington is the new Wall Street, I don’t care who is Prez.  They don’t control this country any more.


  64. Phil, I sold Sept ERY $15 Puts for $0.60 and rolled it to Oct $14 puts for a net $0.05(buy back the Sept $15 puts @$1.36 and sold the Oct $14 puts for $1.41), should I have to close the Oct $14 puts position since you mentioned above closing bearish position. But I’ll be taking a loss


  65. MYGN – if they fail here, back to 25, if not, I like ‘em, and would buy 25 May10, letting them go to over 30 and sell the 35 Nov09 for $1 or better.


  66. I spoke to an AT&T tech today, he says VZ fios is the future and no one will be able to compete….he was very adamant.
    Pricing power i figure but only when people get back to work 


  67. Fitch/Kustomz – I wonder if that’s what’s behind this sudden backlash against ratings agencies in the MSM.  Of course GE doesn’t want anyone to respect the ratings agency now that they are under too much scrutiny to falsify reports so GE and other CRE holders have little but red markes to look forward to long-term.   Overall though, Fitch was not damaging to C at all as they dropped ratings on "just" $350M out of $2Tn worth of properties – perhaps why C is up 3% today.

    Look at XLF flatline at $15 – someone doesn’t want to see them any lower in a big way. 

    Orlando/Kustomz – Yeah, they are strange about that.  Also note this is 8.9% worse than last year (which also sucked) AND they dropped rates 14.4% so that sounds like 23.3% less revenues to me (and much worse near Disney, who are sucking up all the biz with specials). 

    Subscriptions/Gel & Jrom – They are not down per-se so much as not growing as usual but that’s very normal when I am bearish because most investors don’t want to hear that it may not be a good time to invest, especially when my "competition" is telling people that now is the time to bet it all on black or whatever.  Also, I don’t do sleezy stuff like this, where they have giant buttons that say "start my free trial" but then the fine print says: "If you choose a free trial and do not call to cancel within your 14-day free-trial period, you will be billed $899.95 for an annual subscription."  I was told by a marketing consultant that using this method can jump your subscribers by 200% but it also turns out that 30% of them cancel each month so you have to constantly go out and find new people – that’s a nighmare. 

    So, in general, I like the site the way it is and I’d rather build a base slowly with people who are around all the time and make a commitment to learn and contribute than run some kind of constant boot camp for new people – where’s the fun in that?  The advantage these other newsletters have is they don’t talk to their members, they just drop trade ideas out of the sky and then go on TV to give bad advice to other people they don’t talk to.  Just not my style…

    SKF/Cds – If we don’t get a real sell-off tomorrow, you are right to be nervous.  The spread is still $1 and the important thing to decide is do you want to stay with it or not?  You are down .50 with $1.50 your max gain.  If you move to the Jan $21/25 spread, it will cost you $1 but you still have $1.50 of upside and your b/e drops from $25.50 to $23.50 and $25 is your max win.  If you have long-term faith in SKF, don’t let that roll (+$1) get away from you as it makes more sense than sitting in the $24/27 spread with your fingers crossed.  Also, never forget you can always offset with FAS 2011 $65/70 calls for $2  Those pay $3 profit if FAS doesn’t go down and b/e if FAS only drops 20% and should hold value even if FAS takes a quick dip and puts your SKF play in the money so they offer a lot of interesting ways to hedge your short-term bear play.  If your bear play fails and you lose $1.50, you still have $3 of cover (or $1.50 left) to try again some time or you can roll out the loss to something longer that offsets better. 

    The "council of regulators" approach being floated to protect financial consumers is one way to make regulation even more toothless than it already is (if that’s possible), Noam Scheiber says. How many agencies would have to agree before action is taken?

    ATVI/Kustomz – That’s odd as they just announced a delay on one of their releases too.

    2pm/Peter – Good call, coming up soon.   Speaking of pumps, they got gold back to $1,005 but oil can’t get back over $70.  Since oil was $140 on a weak dollar last year and gold was $900 or less at the same time – I’ll have to go out on a limb here and say gold is still way too high.  GLD $100 puts are reasonable at $3.10 ($1.60 in the money), looking for $4.50, rolling out around $2.

    Walking away/Matt – Yes, especially when you can 1ST buy a new home for a good price and THEN walk away from your old, overpriced one.  A friend of mine just picked up a 3BR home in Aspen for $1.2M that was $3M 2 years ago and he’s dumping his 2BR condo that was $1M and is now $500K but, if he had little or no equity, he’d just be trading mortgage payments and getting double the house for the same monthly outlay.  As to Obama’s 3%, I’m 100% for that.  What’s wrong with this country is we don’t invest in the future anymore.  This is not an either or proposition – the banks are being regulated, commodities are coming under pressure too, health care is being overhauled, the markets are being propped up, the safety net is widening and the budget is being worked on – I know it’s a lot to take in after 8 years of doing nothing but searching for "evildoers" in all the wrong places while the whole country self-destructed but I told you guys when I went to DC in the spring that I have never seen a more engaged group of people working their asses off to make these changes come to pass.  You may not like the results but things are starting to happen and this country is changing, which is pretty good with 4 month left to Obama’s first year. 

    ERY/Jlui – I didn’t say close all bearish positions, just to take some off the table, especially when you have profits as I expected (due to very low volume) that we’d get a move back up.  The Oct $14 puts are $1.10 and still all premium so I wouldn’t worry just yet but do be aware that you can roll those down to the Jan $12.50s, now $1.50 so, as long as that doesn’t get away from you, there’s not much to worry about.

    VZ/Kustomz – I 100% agree with that. We don’t have a technology that will beat fiber and none is likely to come up in the next decade or so and the other companies are a decade behind VZ in investment and roll-out and good luck getting that financing now just to play catch-up.  This is why I’ve been adamant about buying VZ on all dips for ages. 


  68. Phil, what do you think about this trade:  OFG (Oriental Financial Group) – I don’t like how that sounds, but…
     
    Buy stock, sell Nov $10 put and call is in for net $9, stock is at $13.50 currently, and $10 does look like a floor of sorts…


  69. MTXX – here we go again.  I am gonna try and get the 5 Nov09 for $1.5.  The 7.5 Oct calls are going like hot cakes…


  70. ATVI/Kustomz – That’s odd as they just announced a delay on one of their releases too.

    That should be a kick ass game too since the same guys produced PGR, but i like it…i know its a different type of game than MW2 but it just may shift more sales to that genre… green shoots


  71. I’m thinking banks go back to DC with hats in hand

    CEO warns of commercial real estate crisis
    AGC SmartBrief | 09/21/2009
    In the next five to seven years, $3.4 trillion in commercial real estate mortgages must be refinanced, said Tishman Construction CEO Daniel Tishman. He notes that unemployment in the construction industry is about 18.2% nationally and expects many companies to struggle to find financing. "The capacity just isn’t there," he said. To solve the looming crisis, the government must initiate new programs to assist with financing.

    Love how these stories counter one another
    Banks regaining optimism about commercial real estate
    Real Estate Investment SmartBrief | 09/21/2009
    The firms that gathered for last week’s Barclays investor conference were expressing the kind of positive opinions about the commercial real estate market that haven’t been heard within the financial sector for several years. "Following commentary from our financial services conference, we believe commercial real estate prices may have bottomed for the time being, resulting in no meaningful markdown" of property values through September, said Roger Freeman in a research note to clients.


  72. I know VZ is a dividend payer, but if you are willing to forgo that, I just got fills on some 2011 20 calls near the bottom of the ask, so zero extrinsic and free leverage to sell calls against.


  73. Is it possible we’re still not angry enough at the banks?

    OFG/Jordan – I think their old symbol was OMFG! when they fell from $24 to 0.89 last year around this time.  Now that they are back a $13.50, after being at $14.50 on Friday, you want to bet that they hold $10 in November in order to get the grand prize of $1 for putting $14.50 of cash and margin at risk?   I’ll have to say no to that one…  If you want to lay them to hold $10, better to sell the current $12.50 puts for .60, which can be rolled to the Nov $10 puts, now .45 and those pay .60 on $6.25 in margin in 30 days if they hold up but, frankly, I’d still pass on this one unless you know something very cool about them.

    Speaking of wild swings – DNDN is off an running, just broke through $30. 

    Someone explain to me why POT is getting bought after a huge guide-down on Friday?

    PALM taking off too – something is very strange here…

    BCS/Kustomz – Now these guys are just talking their book as their book will be marked down by 30% if they can’t talk up the real-estate sector, that’s the motivation behind this whole REIT sector push.  Meanwhile in the old "fox guarding the hen-house" news:

    While some argue whether many heads are better than one in financial oversight (the "council of regulators" idea), Mark Thoma goes beyond even Chris Dodd’s proposal to say the Fed should oversee the entire system.

    Volume at 2:45 just 103M – very stickable and failing to hold would, of course, be very bearish. 


  74. phil aig 2011 55 puts at $25.55 which is our buy target. are you inteested in it now?


  75. CHSI – was one of PharmBoy’s recommendations a while back, I got in at 25 and stopped out at 28 but have watched it, it’s looking pretty strong again.


  76. Phil – let me tell you why people are buying POT after they guided down Friday – "they love to get high"


  77. Interesting psychological game they are playing….push up the garbage to rally the markets.. i like it!!

     


  78. CHSI – P/E is coming in line with MHS and ESRX.  They have a much higher Quarterly growth rate than the other two but margins are not quite as high FWIW.  They could stall here.


  79. I’m looking for a selloff into close and a gap down premarket tomorrow.  We may go up from there, but I’ll take what scraps they’re throwin out.


  80. POT – I’m not a chart guy (yet) but I overlaid other agri names on the POT 10-day chart and the one that mostly closely mirrors POT looks to be MOS, which is now lagging POT’s move so I bought the MOS 30/35 spread for $2 on the thought that MOS may follow POT up.


  81. MOS – sorry, I meant the 50/55 spread (OCT).


  82. HBAN - nice little pop all of a sudden…


  83. "Is it possible we’re not angry enough with banks?"
     
    I KNOW HE’S NOT TALKING TO ME!


  84. Phil – with DIA puts now at 2.13 do you think we should exit and wait for a better price later in the week?


  85. Matt,
    Me Too, TZA !


  86. AIG/Foss – Sure we are but let’s wait and see where it goes first.  The logic remains, we are paying $26 or less to establish a $25 spread for a total of $39 and that assures us that we can sell puts and calls for 15 more months and collect the premiums.  The Oct $47 puts and calls are $15 so 15 collections like that is $225 of premium collection against our $14 at risk – THAT’s a good spread! 

    High/Kustomz – I guess the recession is making drugs cheaper so more money for stoners to play the markets….

    MOS/Mr. M – So you’ve identified the only other Ag that isn’t beyond ridiculous yet…  Let me know how that works out.  8-)

    Banks/Matt – Come on, surely you can be just a little more angry?

    DIA/Jrom – Nope, if you weren’t worried enough to get out at 10:30, getting out now is kind of silly.  We have 4 weeks left, kind of early to dump out unless you weren’t using them for any kind of cover and just as a mo play.  Even so, I still think we find some sellers tomorrow.


  87. Man, PALM!  I held on to the Nov. strangles from last week’s earnings trade thinking it might make a big move. Didn’t take it long.


  88. XRT – I’m looking for some protection for my IRA and it seems like XRT is screaming for a long-term PUT spread here.  Phil, any recommendations?


  89. and we’re off!


  90. Stickeroo!


  91. The stick is alive and well


  92. Out of the PALM strangles for a huge extra gain. That was a fabulous trade.


  93. Rumor swirling that the Fed is in talks to buy PALM


  94. Kustomz – Latest analyst comments on POT.

    XRT/Mr. M – How about the 2011 $38/34 spread for $2.  XRT only spiked up over $38 once last year and was under $35 the rest of the year so this ($34.40) is a bit of a stretch for them.  You can do a 1/2 cover of the $34 puts at $5.40 and cover the rest if they fall below $4.40 and you would still have an average spread of $2.50 but, if they fall farther, you can improve your coverage considerably. 

    LOL, market is just so funny these days…  Having some whole number trouble now:  Dow 9,800 & NYSE 7,000, that can be a sentiment thing building as the bots don’t care about whole numbers


  95. Nothing wrong with indulging but never during business hours ;-)


  96. Pharm,
    No anything about MELA?


  97. LOL kustomz. Actually, I think the Fed is opening up a swap line with PALM in which millions of failed Palm T|Xes will be exchanged for treasuries at original MSRP.


  98. Phil I’m considering a VZ buy/write at $29.58 but can’t make up my mind on which strkes to go for since I’ve watched VZ swing from 29 to 32 but I’d like to buy also for the long haul. Any suggestions?


  99. Standard & Poor’s Ratings Services lowered its outlook on Vornado Realty Trust (VNO) to negative from stable because of the softening commercial real- estate market, saying that will make it hard for the real estate investment trust to improve its credit measures soon.
    S&P also predicts Christmas may be on Dec 25 this year but are not sure!!


  100. MELA/Aclend – the filing date for regulatory purposes was 6/9/09, which is the date the FDA received the Company’s submission. The FDA also confirmed that the application will receive expedited review and processing with an expected review period of six months.  So, nothing on them.  I would expect approval with the confidence intervals from their studies.  Options are premium pricing…whoa.


  101. I was gonna sell my Lehman stock but then i got high!!

    matt im beginning to doubt the stick and respect your call


  102. kustomz – not only are they buying PALM, but Mr. O is going to force every American to buy a Pre…it won’t be called a "tax" though, because you’re getting something for your new added expense (even though it’s crap)… 


  103. If no stick within 10 minutes I’m inclined to buy more DIA puts.


  104. VZ/Technology – to throw in a different voice I think FIOS is a big risk for them. It is too expensive to roll out quickly giving competitor telco’s plenty of time to mature and roll out less expensive ADSL2+ or other competing services.
     
    Even if nothing is technically as fast as FIOS at the moment, plenty of competing technologies are "fast enough" (how many HD movies can you watch simultaneously in the average home anyway?)  and much less expensive to deploy.
     
    I have time warner cable and I hate them almost as much as I did a year ago. But their connection is fast enough for HD video, and I can’t use anything faster. If FIOS were available in this part of Manhattan (which it isn’t), or if it was cheaper (which it isn’t), or if they had a better TV programming (which for me they don’t), or if I was a massive pirate video distributor (which I am not) I would consider switching to FIOS.
     
    I think I am a voice of one on this, because everyone else I speak to thinks it’s wonderful and that’s usually a good  indication that I am wrong yet again :)


  105. LOL kustomz. Actually, I think the Fed is opening up a swap line with PALM in which millions of failed Palm T|Xes will be exchanged for treasuries at original MSRP …..lmao

    CD lol S&P…true

    SS, its a conspiracy i tell ya, speaking of forcing…. this market is just passing the bag to the next guy


  106. Another company I wrote up on in my Phavorites II is ECLP.  They are in the same space as CERN, and have a P/E of 12, compared to CERNs 30.  Their gross margin is 1/2 that of CERN, but revenue growth is negative (CERN slightly positive).  Somenone is loading up on the 20 Oct09.  I am gonna ease into the 17.5 Dec09 for $3.
     
    EM is another in this arena that Cramer pushed hard on, and it is now at its low (Only trading 1 mo).


  107. Oh this is not a good stick save at all!  That’s another day when the stick is being sold into by an opportunist. 

    VZ/Red – I think we did this in the weekend wrap-up but, with a 6.4% dividend, the play is to buy them for $29.50 and sell the 2012 $25 puts and $30 calls for $7.75 for net $21.75/23.38 so that’s 38% if called away and their $1.90 dividend is like getting another 8.5% a year which, on the whole, makes it a very nice place to park your money for 27 months.

    VNO/CDS – And they are only off 2% on the day – MADNESS!

    PALM/SS – I think Obama’s a Blackberry guy. 

    FIOS/Steve – Ah but VZ has alread mainly deployed FIOS and is in the end game.  Best of all for investors, they’ve already spent all the money and taken the hits on their books for doing it so now is the time to step in and reap the rewards.  As to how many HD movies you can watch simultaneously – I have a huge bandwidth draw, my daughter is on her web, my wife is watching something, I have CNBC on and I would have Bloomberg too if there was bandwidth and my other daughter will be home from school soon and would love to worship the Jonas brothers in HD – ADSL2 et al would melt under those loads and that barely touches fiber’s capacity.  Also, don’t forget that bandwidth quickly expands to fill available capacity so once fiber gains serious penetration, there will be all sorts of new bandwidth-hogging apps to take advantage of it. 

    By the way, do you know who bought up 80% of the dark bandwidth capacity in the US over the last 5 years?  Google! 


  108. VIX does not care about this drop.


  109. Thanks Phil, I will pass on OFG but I need to learn to think like you about putting this in perspective based on margin required and trade alternatives.


  110. Hey guys.. long time :)
     
    Even i’m not posting i’ do read almost every day. About Subscriptions going down when you get bearish… That explains very well what some money managers are feeling. Probably they feel market is running in high sugar but will be worst (an maybe fired) if they miss  (or keep missing) the rally. And because they managing "others" money they can say: – what th hell… BUY BUY BUY and set stop loss GTC and leave things like that :)
     
    So far so good. Now if that picture is true and there are huge stop orders and lack of shorts that will act as a support in a meltdown… well, it will be bloody, very bloody. When? nobody knows, ans maybe never if dollar get weak and inflation picks up.
     
    So  im taking easy, I have meet by far my goals and will keep selling puts on some companies I like, if market does not go down i keep the premium or in worst case I can end owning some shares of them. Hedging with Vix to reduce impact in case volatility goes up…


  111. This is good they are beginning to make me believe this may be the top so a small pullback is in order maybe 180 points on the Dow then the next push up past 10000….does this sound right…i like it

    SP, FIOS quite simply its the future and you have no idea how much information can be piped through that stuff


  112. VZ – lol I guess I need more daughters AND more televisions to fully understand!
    I suppose we would all be using high def webcams as well if we had faster connections. Put one of those on every computer in the house and boy that will chew up bandwidth also….


  113. Phil, can you please elaborate on the AIG play you recommended to Foss. Thanks


  114. Hey, Phil,
    Can you plot your subscriptions vs DJIA over time?  You might have already had a new market indicator!


  115.  Phil, If I see that picture of the little girl licking the pig’s snout one more time…..


  116. Great Jordan – that’s why I give reasons when I have time, just writing down what I’m thinking as I look at them.

    Hey Spider!  Vix hedge is a good play against volatility, especially as it generally pairs with a downturn but I don’t think we’ll be going much over 30 on the VIX again. 

    FIOS – One ore thing on this.  Once enough people have FIOS, GOOG or AAPL will provide a TV on Demand service that let’s you watch any show any time for like .25/hour (average person watches 4 hours a day so $30 a month, maybe $60-75 for family so comparable to premium cable or satelite).  Then you can just go to your PC and say "The Sienfeld where they have the contest" and you’ll get your hits and it will jump to a que that can be pulled up by any TV in your house for 3 days.  You can say, "let me see the last 3 episodes of Suvivor" and when you pause it will save your place and your wife’s place and your kids place or my daughter can say "let me see all Jonas Brother appearances in date order on any show" and she can disappear in here room for a week. 

    It’s not complicated, it’s just turning TV into ITunes but the difference is people don’t feel an ownership right to video like they do with songs so we will agree more readily to the "rental" model.   From a TV station’s point of view – Survivor was watched by 20M people last week and I’ll bet they didn’t sell $4M in advertising during the show – and that’s on the first viewing.  From the studio standpoint, it’s a goldmine as their whole valut starts producing money because, while you may not want to pay a penny to see the original "Little Rascals," if it comes up just 1,000 times a day on the planet earth that someone wants to pay .25 for it, then that’s $91,000 a year for something that was gathering dust. 

    The trick will be how to promote new shows and stuff but it’s the same kind of changes that led to TV Guide (now owned by Murdoch) being created in the 60s, when people had all of 5-10 channels to choose from. 

    AIG/Magret – That is an old play we were looking at for the $100KP.  We already have the 2011 $30 calls at $13.45 and I had said if we could pick up the 2011 $55 puts for $26 or less it would put us in a $25 spread for $39 total dollars.  That means, no matter what AIG finishes at, the most we can lose is and if AIG goes BK, then our puts would be worth $55 and if AIG goes to $100, then our calls would be worth $70 etc.   Meanwhile, every month, we can sell puts and calls against the position that are both fully covered by our longer positions.  Currently, you can collect $14.50 for the $48 puts and calls and AIG would have to fall to $34 or rise to $62 before you lose money to that combo.  Consistently selling $15 a month in premium for 15 months means you are selling $225 worth of puts and calls so AIG would have to move $225 off target for you to lose over time – not too likely, and you only have to gain $15 to offset your leap premium. 

    Subscriptions to DJI/Cwan – Hard to tell as we have kept growing throughout but there are drop-offs when the market is bad.  If we were a more mature site (as opposed to immature?) with a stready annual base, then it would probably be a good indicator.  Najerian dropped his price to $495 a month so times must be tough…

    Pictures/Oldgoat – I think it’s a boy actually…  8-)


  117. h1n1 trade, short the airlines


  118. Phil
    "It’s not complicated, it’s just turning TV into ITunes but the difference is people don’t feel an ownership right to video like they do with songs so we will agree more readily to the "rental" model.   From a TV station’s point of view – Survivor was watched by 20M people last week and I’ll bet they didn’t sell $4M in advertising during the show – and that’s on the first viewing.  From the studio standpoint, it’s a goldmine as their whole valut starts producing money because, while you may not want to pay a penny to see the original "Little Rascals," if it comes up just 1,000 times a day on the planet earth that someone wants to pay .25 for it, then that’s $91,000 a year for something that was gathering dust."

    Your business savvy borders on lunacy my good man!! How are you not employed by the Russian mafia?


  119. I have a question for those of you who are parking money in taxable money market funds at this point, especially those that are not invested in Treasuries. And the question is this, “Are you out of your mind?”

    http://www.citizeneconomists.com/blogs/2009/09/21/money-market-funds-lose-treasury-backing/


  120. Phil- Now that its after the close I want to add that it is BECAUSE you are willing to be bearish that I will keep my subscription going for a long time.


  121. Shippers brace for 20-30% increase in airfreight rates
    http://www.cargonewsasia.com/secured/article.aspx?id=15&article=20665


  122. Getting the same message from every part of the world….things is bad and people hoping its going to get better
    http://www.reuters.com/article/RussiaInvestment09/idUSTRE58F3IW20090916

    This size of investment increase could help Russia diversify its economy away from the energy sector and help the company emerge stronger from the crisis, which sent cargo freight, a broad indicator of economic activity, plummeting.
     
    He said that freight was expected to rise between 1.6 and 2 percent in 2010 after an anticipated fall of 15.4 percent this year. But Yakunin said recovery was seen only in shipments of oil, coal, metals and other raw materials.
     
    "This (the type of shipments seeing recovery) is evidence that no stimulus for domestic consumption has been created," said Yakunin, one of the closest allies of former president and current Prime Minster Vladimir Putin.

    How in the world after spending trillions and seeing modest growth at best and only in commodities can they still try and convince us that economies are getting better, take out the gov back stop and it all falls apart.


  123. oops left out the best part
     
    The railway chief said that if he were to bring the number of employees in the company in line with the current freight levels, he would have to fire 173,000 people.
     
    Instead, he wages or reduced the working hours for some 500,000 employees. Yakunin said that unlike many bankers or entrepreneurs he does not see many positive, cleansing effects from the crisis.


  124. Airlines/Kustomz – Well that is so logical it is certain to fail.  The airlines are being used to pump the transports and the Dow so I wouldn’t go shorting them here.  I wonder to what extent the increased air rates boosted them today.   As to the Russian mob – remind me some weekend as I have a great story about doing some consulting work for them….  Money market thing will be interesting but I am not seeing an effect so far. 

    Thanks WS!  "To thine own self be true" seems to be the best advice to follow in writing my daily posts.  You can’t be all things to all people and I’m really happy with the group we do have so why try to make it something it’s not?

    Trillions/Kustomz – Reminds me of the line in Python’s Parrot sketch where he says "That parrot wouldn’t go voom if you put 50,000 volts through him."

    Meanwhile, in other news:

    Citigroup (C) analysts aren’t mincing words about the rally in junk bonds, where yields have narrowed by 80 basis points relative to benchmark in two weeks: "This is starting to become a bit ridiculous."

    Quantitative-finance ubergeek Paul Wilmott is still beating the too-much-math drum, calling for "common sense" in market forecasting. "There is too much mathematics in this business … I just want people to stop and think for once." “We explain to people how to think for themselves,” said Wilmott, who also founded the Diploma in Mathematical Finance at Oxford University, according to his Web site. “People don’t really question those assumptions enough. If the assumptions are wrong, then obviously the models and what follows can be wrong as well.”  Reliance on computer models and trading using algorithmic formulas also has led to a shift in the types of people hired by Wall Street, he said. “You go back 20 years, and people running finance, they were maybe history graduates,” Wilmott said. Now, much of the industry is run by mathematicians, he said. “A lot of mathematicians do not have that common sense that the old guard had,” he said.  

    Noting that the turning point in bull and bear markets is frequently punctuated by the public capitulation of one or more prominent contrarians, Michael Panzner wonders at James Grant’s much-discussed "the deeper the slump, the zippier the recovery" op-ed: "Did one of the world’s best-known bears just ring the bell at the top of the great dead cat bounce?"


  125. DELL / Perot Systems — nothing to see here; move along ….
     
    http://www.zerohedge.com/article/dear-sec-your-viewing-pleasure-obvious-perot-front-running


  126. cdspdean:  Interesting note on S&P / VNO.
     
    I notice that S&P was also out recently on SLG, with a $28 price target.  Meanwhile, the stock is pumped to 43-44.
     
    As some may recall, my valuation for SLG is in the 20-30 range.
     
    The comments about the commercial RE market stabilizing are complete nonsense from everything that I see.


  127. Someone needs to pull the good Mr.Grants head out of his ass and explain to him that we live in a different era….this is not the 1930s for what followed were60 years of manufacturing expansion. Does the good Mr.Grant believe as does the Fed we can simply reinflate ourselves out of this mess and create a new stock market and housing bubble? HMMMM

    "As if they really knew, leading economists predict that recovery from our Great Recession will be plodding, gray and jobless. But they don’t know, and can’t. The future is unfathomable." 

    O really Mr.Grant well i beg to differ… MR.Nouriel Roubini: ‘To say I was just lucky is nonsense. I made specific predictions that turned out to be right. Not advocating Roubini is correct we are out of the woods.


    There are many factors we can look at to predict a long grinding recession but all we need is one because its the most important, lets use this analogy since pigs are on every one’s mind lately……the world was a litter of piglets that suckled on the nipples of every hard working American that gained in wealth on paper and proceeded to leverage this paper wealth through credit that was driven by easy money that fueled the housing and stock market bubbles. KABOOM bubble burst the parties over. SIMPLE! Lets not forget the trillions spent that will become our burden to bear. Boy o boy these guys with PHD’s love to complicate the simple facts don’t they.

    James Grant perfect example of how u cant underestimate the stupidity of brilliant (schooled) people

     People used to come to this country to get a job with hopes of starting their own business. Those days are long gone. What am i going to get a loan for? To buy a car, a house, some clothes maybe go into debt for getting a degree that will have no use!!! Small business loans comprised mostly of construction companies building during the bubble that they wanted to flip for a 100% gain that the bank loaned the person with no business sense to buy.

     If you have 1 million dollars your a millionaire in this country (at least for the next few hours) but in Europe your a thousandaire (its a real word in the ghetto) By the way things are going we should polish up on our ghetto terminology.. so we can get advice on how to cheat the government through ACORN

    3 cheers for congress!! 

     


  128. Kustomz agreed more bandwidth is good and 50mbps from FIOS is a lot.
    I think what verizon have is a great first mover advantage in deploying these speeds first. However I don’t believe the difference between currently available speeds of 50Mbps through FTTP and 24Mbps through ADSL2+ is a deal breaker for most consumers today. I would think that package pricing and TV content are as important. I am also confident that copper will be able to deliver 50mbps+ in the not too distant future.
    I admit Phil’s home is an eye opener  for me (5 concurrent HD streams)  but I have to believe that cable companies don’t offer higher rates as much for fear of decimating broadcast TV revenues as overriding technical concerns. They already put 15 HD streams into my local pub.
    FTTP is by some estimates 5 times more expensive to deploy than xDSL, and perhaps it is no coincidence that VZ recently announced their withdrawal from fixed line service in 13 states as they pursue this more expensive internet option. It’s interesting and visionary no doubt, but only time will tell by how much and for how long it is profitable.


  129. I figure when CNBC stops broadcasting those extenze commercials we are officially out the recession


  130. AIG party – didn’t have a chance to look at AIG till now.  With the high priced options, there are fun plays.  One of them is:
    - Buy Nov 45/50 CALL vertical (buy 45, sell 50) for $2.08
    - Sell Nov 85 CALL for $2.1 credit
    The net cost is zero, i.e. no loss on the downside, breakeven is 87 or so.  Watch to make sure that the Nov 85 short CALL doesn’t get away from you.
     
    You can try other spreads such as Buy Nov 60/65 CALL vertical for $1.13, sell Nov 100 CALL for $1.27 credit which has a higher breakeven point, etc.  The PUT side is less rewarding with a similar scheme of buying a vertical and selling a naked short.


  131. SP…..only threat i see to VZ fiber……What was old is new again

    JOHANNESBURG (Reuters) – A South African information technology company on Wednesday proved it was faster for them to transmit data with a carrier pigeon than to send it using Telkom , the country’s leading internet service provider.
    http://www.reuters.com/article/internetNews/idUSTRE5885PM20090909


  132. Phil,
    …just wanted to add my piece that your methods are exactly what I was looking for and believe that you are an excellent mentor, which is noticably lacking in the "retail trader" segment of the industry. I look forward to a long, prosperous relationship. Please don’t quit OR let anything bad happen to you for at least a year. :-O   Seriously, I can tell that you are truly appreciated by many here, myself included.
    -Aaron


  133. lol Kustomz. Do you have FIOS?


  134. SP, unfortunately i do not im stuck with cable. I had AT&T dsl but they could never get the system to work correctly. I would experience outages that they could not explain so i basically had crappy internet for 2 months for free.


  135. SP, unfortunately i do not im stuck with cable. I had AT&T dsl but they could never get the system to work correctly. I would experience outages that they could not explain so i basically had crappy internet for 2 months for free.


  136. hey!! theres an echo in here


  137. US manufacturers after tax profits mining and trade….this shows they are half of what they were in the second Q of 05 yet the markets are basically at the same level yet the economy was firing on all cylinders back in 05 lets not even talk about 07
    http://www2.census.gov/econ/qfr/current/mmw_mg.jpg

     


  138. Those seeking to acquire quality assets at distressed prices are hoping that expected near-term defaults and looming due dates on commercial mortgage-backed securities will jump-start buying opportunities that so far have been absent, according to the new PricewaterhouseCoopers (PwC) Korpacz Real Estate Investors Survey.
    So far, the de-leveraging of the commercial real estate industry has disappointed many investors, said the PwC analysts.
    “Investors seem surprised at the lack of quality buying opportunities, given the problems in the financial markets and the continued weakening of the industry’s fundamentals,” said Susan Smith, editor-in-chief of the survey. “Some investors sense that near-term defaults with commercial banks will allow them to acquire quality

    assets at steep discounts, as banks may no longer be able to continue to ‘pretend and extend’ troubled loans and would be forced to place assets up for sale.”

    http://www.dsnews.com/articles/index/distressed-investors-still-on-sidelines-as-commercial-real-estate-decline-continues-2009-09-21


  139. Must be the cable kust!
     
    Screening through companies, and since VZ is on the topic CRNT, which provides high capacity WiMax solutions is looking to gain big contracts from VZ.  Cramer noted them on Friday, moved a bit much today, but one to watch on a pullback.


  140. Look at the increase in the percentage of loans at the peak of the bubble
     
    commercial and multifamily mortgage loan originations increased 34.2%

    During the first quarter of 2006 commercial and multifamily mortgage bankers’ loan originations increased 34.2 percent compared to the same quarter last year, according to the Mortgage Bankers Association (MBA).
    The increase in commercial/multifamily lending activity during the first quarter was across all property types. The increase over the first quarter of 2005 included a 26 percent increase in loans for office buildings, a 23 percent increase in loans for multifamily properties, a 55 percent increase in loans for retail, a 33 percent increase in loans for industrial space, and a 123 percent increase for health care properties. The largest percentage increase in lending was for hotel properties which saw a 165 percent increase from the first quarter of 2005.
    Among investor types, commercial banks, life insurance companies and CMBS conduits drove much of the overall increase, although lending activity increased among almost all types. Mortgage bankers’ originations for commercial mortgage-backed securities (CMBS) conduits increased 35 percent from the first quarter of 2005; originations for commercial banks increased by 64 percent; and originations for life insurance companies increased 2 percent. Originations for Fannie Mae and Freddie Mac increased 29 percent; originations for FHA increased 62 percent; and originations for pension funds dropped by 86 percent from the fourth quarter of 2005.


  141. This is a must read
    Take a gander at this, some really wonderful charts and interesting reading….This is where Mr. Barclays gets his optimistic unemployment numbers from …..peaking at 9.9%……Take a look at the pie chart on page 48 yummy….Chart on 52 ……i can go on and on you have to read the whole report
    http://www.mortgagebankers.org/files/Research/DataBooks/1Q09QuarterlyDatabook.pdf


  142. TASR:
     Phil, Back on 9/6 you suggested a trade in the 100KP to buy 500 shares of TASR and to sell 5 Oct puts for .60. I was filled on that soon after but it is not listed in the portfolio on WSS.. Shouldn’t that be included or did you cancel that trade?


  143. http://www.pcworld.com/article/172254/amd_reinstates_salaries_after_eliminating_pay_cuts.html
    According to the news report, Meyer wrote in the e-mail that AMD was expected to end the year on a profitable note.