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Wednesday Rally – INTC and JPM’s Piles of Chips

Jpmq3est82 cents a share for JPM!

That is a crushing beat of the 51 cents expected by analysts, who have been playing expectations catch-up for over a month, trying to get a handle on this quarter's earnings.  JPM's earnings are more exciting than GS's earnings as JPM were supposed to be "dragged down" by Chase Banking.  With $2Tn under management, the company put up $3.6Bn in quarterly profit, almost 10 times what they made last quarter (.09).   "These results included the negative impact of the tightening of the firm's credit spread, offset by the positive impact of counterparty spread tightening and gains on legacy leveraged lending and mortgage-related positions," the firm said.

Of course we could nitpick and point out that last year they had competition from LEH and BSC and last year they didn't have $25Bn in bailout money to play with and they didn't have a Fed Discount window feeding them countless other Billions every month at 0.25% interest but we won't, because we are trying to get more bullish!  Not wanting the Government to get the idea that they don't need any more free money, CEO Dimon said: "While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue."  Frankly, I think the company sandbagged the earnings as they put $4.967Bn aside as a provision for credit card losses against $5.159Bn in total sales so either their clients are MAJOR dead-beats, or there will be some more profits recognized down the road (assuming all this recovery stuff is real). 

INTC also beat earnings expectations last night but they are underperforming last year by a wide margin so not in any way as exciting as JPM's results.  Our strategy for INTC yesterday was to short sell the Nov $20 puts and calls for a total of $1.95 so our upside break/even on INTC is $21.95 but even last night, on the announcement, I still said to members I thought they were a short at $22 but we're not going to fight the market, not now that we're over our breakout levels. 

The levels we've been watching (Dow 9,829, S&P 1,071, Nas 2,146,  NYSE 7,047 and Russell 620), should be crushed this morning and, hopefully, will hold up through the end of day.  If this is a real rally then we should have no trouble and the last thing the bulls want to see is volume selling at this level, which we are still slightly concerned about.  Our picks yesterday reflected those concerns as we went for a mix of bullish and bearish directional plays with ERY, AIB, FXP, C and EWZ – three longs and two shorts, so we are shifting!  We also took a DIA spread ahead of the Fed, picking up the DIA $100 calls for .25 and the $97 puts for .25 and, with any luck, we can cash out the calls on the morning run for a nice profit and ride the puts back down into the Fed minutes at 2pm

MBA Mortgage Application fell 1.8% from a week ago as mortgage rates skipped back above 5%. The drop follows a 16.4% gain last week. 30-year fixed mortgages averaged 5.02%, up from 4.89% the previous week so we know what the magic number is to get buyers off the sidelines.   I have long maintained that the best way to turn housing around is through long-term rate reduction as that will both help people keep their homes and help people buy new ones and it's not even inflationary to the broader economy.  I'm generally against bubbles but a little re-inflation of the housing bubble would make a huge difference to 100M American families who have 1/3 of their wealth tied up in their homes.

Overall Retail sales for September were down 1.5%, but that was to be expected as Cash for Clunkers came to a close.  Also expected by us is that the Aug 2.7% gain was BS and that number has now been revised down to 2.2%, which is funny because without Cash For Clunkers in August, the outlook for consumer spending would have probably toppled the markets so it's "fortunate" that the Ex-Auto number was misstated by over 100%.  So this month, compared to the covered-up drop in August, Ex-Auto sales are up 0.5%, beating the 0.3% expected by economists off the numbers they thought were 0.5% higher last month so really we're overall down about 0.3% from the fake number last month but by first revising it downwards and then using the lower revised number for a comparison the government can report gains in two consecutive months that actually had losses in each month – isn't math great!  As George Orwell wrote in 1984:

Day by day and almost minute by minute the past was brought up to date. In this way every prediction made by the Party could be shown by documentary evidence to have been correct; nor was any item of news, or any expression of opinion, which conflicted with the needs of the moment, ever allowed to remain on record…   The fabulous statistics continued to pour out of the telescreen. As compared with last year there was more food, more clothes, more houses, more furniture….

A new survey says the long, severe recession is over. The National Association for Business Economics poll of 44 economists showed more than 80% of them think recovery has begun, with real gross domestic product expected to rise at a 2.9% pace in the second half of 2009 and at a 3% rate next year. However, deleveraging by consumers and joblessness threaten to slow the healing. Consumer spending makes up 70% of GDP, which is the broad measure of U.S. economic activity. Incomes are flat, unemployment keeps rising, and many households are in hock. U.S. consumer credit has fallen seven months in a row, according to a Federal Reserve report last week that indicated people are still paying down debt even as the economy recovers. Their delevaraging began last fall, when the financial markets ran amok. The supply of credit is tight, too.

Import prices climbed just 0.1% in September vs. 0.3% expected by those 44 economists who think the recovery has begun.  That is a dramatic fall from the 1.6% boost in August, which has also been revised down 20% now that no one is paying attention so we climbed 0.1% off a 0.4% drop which means this month's number is actually down 0.3% from the net 2.1% our economic brain trust had been expecting but, like I said, math is fun so we'll go with the good numbers.  Year over year, prices are down what would be a shocking 12% but only shocking to those who understand what deflation is so don't worry about the media catching on and spoiling the party.  Of course we can thank our government for being such good spenders:


So the people are spending 15% less than last year but the government is making up for it by spending 30% more.  How long do we expect this to last?  The best part is – when the government spends money we, the people, don't even end up with any assets. Rather than making loans available to the People to go out and buy houses and cars to stimulate the economy, the government is bailing out the banks for the loans the poor people can't pay, making the banks whole and leaving the people poor.   

Anyway, I'm sorry, I'm supposed to be all positive so let's go out and BUYBUYBUY!  As long as we hold our breakout levels we will shift to a bullish stance and that means dropping our short plays that haven't lost too much and pressing up our remaining put plays to build the 40% bearish side of a 60/40 bullish virtual portfolio.  I may not adjust our $100KP until tomorrow as we're mostly rolling positions over to November and we will treat the morning run as a spike until it proves otherwise with confirming volume and more than an hour of staying power. 

Don't forget the Fed Minutes at 2pm, it's going to be a crazy day!


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  1. Phil, based on your comments above, is it better to hang on to the DIA puts today and not unload them after the open? Are we expecting a pullback after the initial crazy rise at the open? Just wondering if I should hold tight or unload and reload after we peak…….

  2. Do you like OCT or NOV AMD puts today since they will be at a big discount before AMD screws the pooch with earnings?

  3. Phil – the SRS buy/write play from a couple weeks ago.  Would you close it out now – or continue to hold and roll the puts and calls to Nov. (Stock, short 10C and 10P)

  4.  In ERY with naked puts Nov 11 at .75 ….. any moves today to improve the position as ERY is down4% at the open ?

  5. what do u think about FAS as a play for today?

  6. Phil,
    What are you  doing with your DIA spread from yesterday afternoon?

  7. Anybody fading this gap up?

  8. DIA/Ocelli – Lets see where we open.  We should get about .60 and we sure don’t want to let that get away but if we can pull the $97 puts for .15 then that’s a good plan.

    AMD/Jrom – I would sell into Intel’s excitement and just get out on the day trade as people get nervous into AMD earnings.

    SRS/Parth – I still think CRE will wreck the markets (see early morning notes on yesterday’s post).  The question is when.  I’d let them expire and roll the puts for another .75 or so and wait on the calls as you won’t get a good price today. 

    Levels are still:  Dow 9,829, S&P 1,071, Nas 2,146,  NYSE 7,047 and Russell 620

    There are no targets up from here, here is just so ridiculous so I’ll have to think about it over the weekend but, obviously, Dow 10,000, S&P 1,100, Nas 2.200, NYSE 7,100 and RUT 620 (which is not good if they  can’t beat it) are the near-term spots to watch.

    DIA $100 calls just .52, disappointing but the $97 puts are still .12 so a .14 gain is nice.  We’ll look for .60+ with a .05 trailing stop but don’t let .50 get away and then, once we take .50, don’t let .10 get away on the put side.

    Oil going nuts on last day of Nov contract.  Up to $75 again.  Not going to fight the tape but ERY Nov $11 puts are .80 and still make a nice naked sell (or a 2x roll if you sold the $12 puts, now $1.40).

  9. Nice volume for a change, 30M in the first 10 minutes!  Of course, that’s not a very bullish sign as we are not driving relentlessly higher, it’s more like sellers getting the hell out of Dodge while the getting is good.  Don’t forget we have to HOLD our levels ALL DAY and TOMORROW to flip over to bullish and start hitting the watch list! 

    FAS/EmC – I wouldn’t touch them, even as a short.  I think the financials are way too bullish and it will only take a couple of misses to trash the XLF so I’d rather play FAZ long but, as I keep saying, we’re not shorting things when we’re over our levels (even though the RUT isn’t still). 

    DIA Jan $102 puts are $5.50, that’s where you should be if you are using a DIA cover play.  Nov $97 puts are still $1.50, which is too bad as they are not worth buying back at the moment

    Dollar staying vey weak, that is surprising.   Rally not looking like it has any more legs at the moment.

    35M at 9:45.

  10.  Phil,
    Is the ISRG spread still valid? They’re not doing well due to a recent AMA study, but from what I am hearing, the "da Vinci Surgical System“ is selling very well in China, Taiwan and HK. One installation is in the range of 5 to 8M$, this of course is end-user price. 

  11. long DIA puts now 102′s? Dammit OX still didn’t even roll me to 101′s.

  12. Phil:
    Mattress question: Do you have a rough rule of thumb of what your mattress insurance should be costing you on an upswing? For instance, if a 1% increase in the Dow currently means your portfolio will increase by about $x without mattresses, then roughly what % of $x should your mattress should cost you on an upswing? I’m sure there’s no hard and fast rule, just trying to improve my mattress skills (there’s lots of room for improvement.)

  13. Phil, anything new to do on SRS  and/or EDZ  since they are getting so cheap?  emerging markets bear EDZ is ingteresting, if you sell the puts and calls at 6  for NOvember and collect $1.30  so in the stock effectively for $6 minus $1.30=  4.70
    your thoughts?

  14. FSLR looking lame in this rally.  BIDU not very impressive at $412 (thank goodness!). 

    Asset managers are shifting out of cash and into equities at a rate not seen since 2004, according to today’s BofA/Merrill Lynch fund manager survey. Risk appetite is at its highest since April 2006: "Equities remain in a sweet spot: fears of a double-dip have receded, while worries about inflation and monetary tightening are not imminent enough to prevent an October surge in risk appetite," firm says.

    Only one earnings miss all week so far (FAST missed by a penny).  6 companies raised guidance (JNJ, ALTR, INTC, LLTC, ABT and ASML) and year/year revs are down "just" 18% so you have to be impressed…

    DIA spread – done at .65 (up 30%, .51 and .14), I’d rather pick up $100 puts or $99 calls once the market picks a read direction and make a mo play.

    Oil futures make a nice short at $75.35, out at $75.48, looking for $74.85 or lower

    ERY Nov $12s for $1 is another way to play.

    ISRG/Balance – If you mean the short straddle from yesterday then yes, that has a $80 (30%) b/e on each side and, frankly, I’d buy them again at $170. 

  15.  Phil, We talked about leaps yesterday. You suggested DBC. What about the changes in the index at the end of the month?

  16. Arguably, GS and JPM are best of breed in the financial sector.  I made a call before Q2 earnings that was terribly wrong.  But that isn’t stopping me from making it again!  If we don’t have follow through with GS earnings I think the sector might be done for.  That’s what I’m looking for.

  17. steven:
    long DIA puts now 102’s? Dammit OX still didn’t even roll me to 101’s.
    I haven’t gotten the roll through TOS either. So perhaps it’s "systemic."

  18. phil,
    while getting a good pop, we seem not to be getting as much a boost from our numbers as much are europe and the far east. guess it just shows that on expiry week the option guys rule!!

  19. AAPL not popping with today’s bounce.  That is expected.  Historically they are usually quiet just before earnings, then up within 2 weeks of earnings.  They report the 19th, Monday, I believe.  I expect them to easily beat.  Anyone thinking otherwise? 

  20. just sold PARD Nov 5s for 4.75

  21. Mattress/Chaps – Well your goal is to use the mattress as the main way you shift from 55% bullish to 55% bearish so a rise in the Dow that causes you to gain 5.5% on your 55% bullish side should hit you for no more than 4.5% your short side mix.  If you are 60/40 then it’s 6% and 4%.  If you have JUST $30K of DIA puts protecting $70K in bullish positions and those bullish positions tend to drop 10% with each 100-point dop in the Dow and your $30K will doulble up on a 500-point drop then you would end up with $63K, $57K, $51K and $46K on a 500 point drop and your $30K will go to $60K so that would be actually a slightly bearish cover.  If the $70K gains 10% with each 100 point down move up, then you have $77K, $85K, $93K and $102K plus whatever value is left in the Jan $102 puts with the Dow at 10,500 (maybe $3.50) or about $15,000.  So if that tests out you should be able to live with it in either direction.  The trick is you have to KNOW what is happening to you on a 100-point Dow move and adjust accordingly.  Fortunately, we have 100-point Dow moves twice a day so many chances to test…

    SRS/Dman – Those are not so cheap as they were lower than $9.50 with the market much lower than this.  There seems to have been some rotation out of CRE.  EDZ, however is VERY cheap at $6 and I do like the buy/write in Nov but the Jan $5 puts and calls are $2.10 and that is net $3.80/4.40 and I’d rather have 2 of those that make $2.40 at $5 than one of the Nov $6 play that makes $1.30 at $6, just in case this rally keeps going. 

    Blackstone (BX) CEO Steven Schwarzman says he’s seeing "more than green shoots" in the economy, and that private equity is in a "radically different place" than a year ago. "We do not expect the U.S. economy to slip back into recession," he said this morning, but weak consumer spending and continued constraints on bank lending could dampen the recovery.

    Aug. Business Inventories: -1.5% vs. -1.1% last month and consensus -1.2% – the biggest drop since Dec. 2008. Car inventories -7.9%, biggest drop since 2001. Sales +1% vs. July. Inventory/sales ratio 1.33 months’ worth, down from 1.36 in July.

    Not sure that Biz inventories are good.  Ideally you want them to build up to sell for Xmas.

  22. C at $4.94 and JAN 2001 2.50 calls are asking 2.71.  doesn’t seem to be much premium at all on those calls.  anyone think there is a play with those LEAPS?

  23. oops I meant JAN 2011

  24. Phil, nice play on the DIAs…..I did something yesterday before your post which did not work as well……did yours as well and it worked out nicely today……

  25. DBC/OldG – I see the changes as positive.   Right now WTIC is 35% of the fund and the new mix will drop crude to 12% and incorporate gasoline, nat gas and heating oil contracts to round out the energy portion.  These are massive funds run by DB for many years, I would consider a big dip to be a buying opportunity.  Like I said, I think they are running hot now but $21.50 on DBC, maybe even $22 is an entry I’d shoot for.   Hopefully other people will get nervous and dump the fund, creating a buy opportunity. 

    Expiry/High -  Well if we think this is just what the pumpers wanted to make their escape, it makes perfect sense.  Volume now 65M after 1 hour (50M by 11 has been high) and we’ve drifted down and down so there has been a seller for every dollar of new money that has come off the sidelines today and then some

    AAPL/Iflan – Well they won’t miss.  They need to beat last year by 10% and, according to INTC, notebooks were flying off the shelves this Q and that plays right to AAPL’s strength.  They also opened up new IPhone countries and rolled out the 3G and I can’t believe how many people I know got rid of their less than year-old IPhones and bought 3Gs.   Also, they start recognizing the revenues from T that they didn’t book last year.  The trick with AAPL is they are projected to make 30% more next year so guidance will be key and they often guide very conservatively.

    PARD/Drum – LOL!

    Yay oil!  Below $75 already!  Stop at $75.10 now and .25 trailing stop at $74.75.

    C/Eben – We like the 2011 $5/$7.50 bull call vertical for .60.

    DIA/Ocelli – Cool, glad one worked at least!

  26. Blackstone is really beating the recovery drum these days.  They’ve turned into quite the cheerleaders.  Maybe they should get a big red BUY button they can press like Cramer?  Guess all those phone calls Geitner has been making to Fink and Droll are continuing to pay off.

  27. Phil:
    Did you suggesting buying ERY Nov. $12 call for $1 as bearish play??

  28.  Phil, Re DBC. What about a big drop in nat gas? Just want your opinion. I’ve heard UNG is a great short.

  29. Phil why do SLB and VLO trade so differently on a day like today? Isn’t there a point where TSO gets too "cheap" for a longer term hold . . .

  30. WFR opens up only to get beat down

  31. Phil – Thanks for the gobs of good reading this morning!!!

  32. ERY/Bvar – Yes, a bearish play on oil at $75.

    What coordination!  Former Fed governor Frederic Mishkin says the central bank is unlikely to raise rates significantly for years: While we’ve dodged a bullet, "we’re going to have a tremendous amount of slack in the economy for quite a number of years," he says. "If there’s still a lot of slack there’s no reason to raise rates. In fact, it would be a big mistake."   More free money – Yay!!!

    UNG/OldG – If energy is going to drop, they are likely to go down but $4.50 is really not a very high price.  We were buyers at $3 on nat gas and we’re doine with UNG now but it’s not something I want to short with oil at $75. 

    SLB/B1 – There’s no rationale to that trade.  We just buy VLO at $16.50 whenever we can and ignore the rest.   We did the TSO play when they were $12 but we’re done with them too at $15.  TSO sucks compared to VLO. 

    WFR/B1 – At least we know it CAN go up.

    Gobs/1020 – Yeah I was trying to find sectors I wanted to be bullish in and I still couldn’t do it though.  It’s so strange that I just cannot get positive on things.  It’s like in a horror movie where the house is empty and the person goes into room after room after room and you keep thinking they will die but they don’t and then they go into another room and they don’t die there either – after a while it’s just annoying…

  33. Phil,
    Thanks for the AIB recommendation.  Implemented the more conservative position yesterday.
    How would you play ASTC right now?  Is this too speculative in your view?

  34. Horror Movie – Phil you just have to decide which room you found least annoying.

  35. Wow, $74.60 suddenly hit on oil, very nice! 

    Selling OIH Nov $125 calls at $5.75.

    ASTC/Seaquill – I do not generally play stocks with market caps under $100M and no options (ie penny stocks).  They are in a decent space but if you don’t really understand their contracts and prospects you may as well be betting a race horse. 

  36. RVSN trying to break higher; got crushed a couple weeks ago when CSCO bought a competitor (announced) but has like $6 cash and no debt, and trades at $6, seems kind of cheap.

  37. Got the DIA roll from Jan 99s to 101s for $1. 

  38. Is the OIH play have any stops or is it a roll?

  39. RVSN/Cap – If they had better brackets I’d like them but thinly traded options with giant bid/ask spreads is not pretty.

    Is my screen broken or is the Russell still not over 620?  Coal mine, meet canary…

  40. There is no doubt that HAL 9000 is gunning for at least a touch of 10,000 today ….withness the slow grind towards the target.
    But then what ?

  41. got my DIA roll up to Jan 101′s :D

  42. Blackstone — He’s a seller.  He sees an exit strategy for his PE investments.  Of course he wants to talk up the economy.

  43. c’mon hit 10k already so the sellers can get going.  there is no volume (again) and the market is rising while most stocks are not moving.

  44. Phil, do you think there is much room for oil to go higher?
    Also, do TOS Canada clients get the PSW discounted commissions?

  45. Yeah, RVSN not good for options.  You gotta play the stock.
    12 more points; pump the financials and REITs and you will have it.

  46. phil,
    if they keep aapl from breaking r2 then i bet dow wont make 10k!

  47. OIH/Roth – On those naked call sales you need to be thrilled to make 20%, generally DD if you get popped for 30% and then look to get out and/or roll up and start cycle again.  Following that logic on OIH, it’s the sale of the Nov $125s for $5.75 and happy to buy back for $4.  If they keep going up, the delta is .53 so figure I fall $1.50 behind (30%) at $128, where I either DD or roll to 2x the $135s (now $2.06) or roll to 1x the Jan $135s (now $4.90) depending on how worried I am, if there are still no Dec contracts etc.  At the point where I am forced to captiulate, I will also look to sell an offsetting put like the Jan $110 puts, which are $3.80 at the moment. 

    If you stay away from the ultra-ETFs and stick to ETFs, this is a very nice income-producing strategy.  As an early scale (1/4 of max commit) I can sell one for $580, then roll to 2x at $210 (I would be down $150) and then over to 2x the Jan $145s and the Apr $170s are $1.35 so up to 4x those ($540 again) and that means that, as long as OIH doesn’t jump 36% by April, I should be OK (not even including selling puts).

    S&P upgrades Conseco (CNO) to stable from negative after hedge fund manager John Paulson says he intends to increase his stake to 9.9% and buy up to $200M of the $293M in convertible notes the insurer is selling; shares now up 25.1%That was my play from early moring but didn’t fill anyway.

    The House Financial Services Committee is debating derivatives reform legislation with a vote planned for later today, and Chairman Barney Frank says his bill would have all derivatives transactions reported through a central repository, but won’t give the SEC and CFTC authority to ban "abusive swaps."

    Man I am disgusted with the HFSC!  They have done NOTHING to prevent all this from happening again.

    Oil/Blair – I don’t see how people can afford it, this is just craziness.  But fundamentals don’t seem to matter so the 2,000 people who still have jobs in America will just have to pay $200 a barrel to drive to work while everyone tells the 299,998,000 unemployed people how great everything must be because energy demand is picking up.   As to TOS, contact Scott at thinkorswim dot com.

  48. then what/   World peace and harmony?  Trick question?

  49. watch for cnbc to take down thier dow watch box from the screen if we get any kind of dip

  50. phil,
    do you mean the 120 calls on OIH?
    Selling OIH Nov $125 calls at $5.75.

  51. [phil,
    which is going to happen first? the dow @10k or the cnbc girl rushed to the hospital? she seems pretty far along!

  52. Hi, Pharmboy,
    Do you still think MTXX good to enter?
    I had sold Oct $5 puts at 0.50 and bought them back at 0.05.  I am thinking about selling Nov %5 puts.
    On the other hand, Morx said yesterday:
    "CWAN – FWIW i have bought MTXX a couple times as it drops below 5.5 and gotten out at 5.75+. Looking to go again. Be interested in what Pharmboy has to say."

  53. phil,
    russell 2k rebufed from its daily high!! and it is already way over its r2 level

  54. Which drugs are good for Trader Insomnia?  Look at yesterday’s post.  1/4 of the comments were after midnight.  We should rename this site as "Traders Never Sleep"!

  55. Phil Hi . how about sell OIH 125c and buy 125p both Nov. dif is a debit of 54.00 debit margin some where 15,000 however your thoughts

  56. Cwan and Morx – sorry, been very busy at work as I watch this madness (and SYNA go Down down down……..although madness here is a good thing as Big Pharma is looking to pad its pipeline with little guys like us!  MTXX earnings are coming up. Last time they did that they broke $5, so I am inclined to wait and C where they go.  Someone keeps releasing rumors to spike the stock….

  57. Pharmboy

    I am going to be in San Diego on Oct. 28 for 5 day, staying at the Doubletree Hotel San Diego Downtown. If that’s closed thought we could meet coffee, drinks etc. This is my e mail

  58. Phil
    I have a question for the "grand master" – I have 20 JPM Dec 45 covered calls that dove $1700. today. Given the market dynamics that prevail today… would you roll up and out at this moment. The stock will probably drop a little tomorrow, IMO. Thanks!

  59. there goes aapl!!

    What is your intermediate term opinion on MYGN? I am asking because I have Jan long 25c against the 30 call. and I don’t know whether to double down now or later

  61. Phil, i’m looking to do some covered calls and on this list which do you like the best for stocks that won’t fall down more than 30% in 3 months from where they are trading now.  This investment is called "reverse convertible bonds" and yields 10% – 35% on different stocks, which the companyk, like RBC , structures, and they have a "Knock in " price, usually down 30%, below which you keep your high interest, but end up owning the stock instead of getting all y our money back.
    LIST:       AA    ACI   ATPG  BAC  C  DRYS  ELN  HIG   GMCR   LVS   X
    thanks a lot

  62. Recently sold WFMI Nov 30 calls for $2.50.  Price has gone up to $3.80.  What would you suggest to recover the loss?

  63. Perspective:  Last time the dollar traded this low was last July, when the weak dollar sent oil up to $145 and gold to $989 and the S&P was at 1,300 (Dow 12,500).  So, the question is – if the dollar were back at 90 (up 20%) would we get the 30-60% sell-offs we got last time from these levels?   One thing we haven’t done for one second since March is test a dollar rally.  The closest we came was May, when the dollar went from 79 to 81 before resuming a downtrend and that did take us down 400 points at the time.  

    I’m thinking the dollar MUST drop to $67.50 (another 10% down) in order for the markets to gain 20%.  That should give us oil at $90 and gold at $1,300 as they usually move 2:1 to the dollar.  The reason I don’t buy that premise is that a $15 increase in oil costs us about $25 in refnined product per barrel and, at 19Mbd in America, that’s $14.5Bn a month right out of consumers pockets.  I guess it’s survivable but it’s like losing 34M more jobs – it just doesn’t seem like it can happen without rippling into a massive crisis. 

    Too late Highlander – They already made the Dow 10,000 caps!

    OIH/Dman – No, it was the OIHKE, Nov $125 calls, still $5.80.

    ROFL High!

    Insomnia/Cwan – I don’t know about you guys but I often get into these odd sleep schedules sometimes.  I guess that’s why old folks take Ambien but I just get up and read until I’m tired again so it doesn’t seem like a big deal.  My problem is if I wake up anytime after midnight, I like to check the Asian markets and once I do that I’m screwed because that leads to reading and then more reading…

    OIH/Yodi – Yeah but you are just doubling up your risk.  Just because you borrowed the money to buy a put from the caller doesn’t mean it’s safer.  You owe that guy money and your money is now tied up in a position that becomes worth less as fast as his position becomes worth more.  Also, you take the whole safe and sensible concept of selling premium and negate it by buying premium to offset it.

    Volume 110M at noon and still the Fed Minutes to go!

    JPM/Gel – I have to believe JPM is fully valued at $47.50 and the old take the money and run plan should be the way to go.  If you have callers to deal with, you can turn it into a bear call spread but these earnings were as good or better than they could possibly be and soon there will be calls to investigate them and their use of TARP money and why should they make so much money while sitting on TARP funds etc….  

  64. Drum – I like them and have the stock and 25 May10 calls 1/2 covered with the 30 Nov call.  They are in support area, but if they go through 25, look out below.  Today will be a deciding day.  If the candle stays green and fills the drop from yesterday, then I think they are safe.  If not, we should cover hard or get out.

  65. Phil Thanks a very logical expl on OIH

  66. Phil… Thanks re JPM. My sentiment coincides with your guidance. I’m selling today. I have a load of X and am considering the same. Your thoughts!

  67. DMan list – I like AA, BAC, ELN, HIG best.  X is iffy at this price based on what I read re China steel today.   

    • FTSE finished up 2% but only at Sept high (5,256), which was last toucned last Sept. 
    • DAX finished up 2.5% at new high.  Last time up there was last Sept. 
    • CAC finsihed up 2% at 3,830, also a tie with Sept.    They were last up this high in Oct. 

    By comparison:

    • Dow is 180 points over the high at 10,000, last seen in Oct (all of our indexes would be Oct highs)
    • S&P 1,100 is 29 points over the high
    • Nas 2,165 was the spike high on 9/23 but closing high was 21 points lower (the day before)
    • NYSE 7,200 is 153 points over the best closing high.
    • Russell 620 is way below 625 spike high on 9/23 and closing high was 620.69. 

    So, look at 9/22 and 9/23, which were a blow-off top and we were down at 9,600 that Friday (25th) and 9,400 the next Friday (10/2).  This is why I remain paranoid on days like this.  If we are really BREAKING OUT, then we have another 1,000 points to play with but buying on a day like today or killing short plays can be extremely counter-productive.  The best thing you can do is add more conservative bullish plays that negate your short-side losses until we have a clear picture.  

    Meanwhile, it’s amazing how well the DIA Nov $97 puts are holding value, must be a lot of buying interest.  Rather than buying front-month DIA puts, I’d rather just go naked on the Jan puts and take the .60 profit off the table on the 1/2 sale of the Nov $97 puts but we’d have to re-cover with 1/2 the Nov $98 puts, now $1.80, if we break over 10,000

    Otherwise, I do like the DIA $99 puts for .40 into the Fed, out at .30, looking for .60+

  68. Pharmboy
    Any thoughts on Salix Pharmaceuticals Ltd. (SLXP)

  69. Phil – Any thoughts on ETFC? Seems like there is a lot of chatter going regarding acquisition, has high option volume.

  70. CapHK just hit a new 52-week high.  I have a little left but got out of most of it on the last downturn, regrettably.

  71. WFMI/Sarah – It’s  grocery store, this is just ridiculous!  Welll you have nothing to lose by selling the Nov $31 puts for $1.10 as you don’t owe them a penny until your callers lose $2.80.  Meanwhile, the $1.10 you collect can be used to roll your callers up to the Nov $33s if WFMI keeps going up or to the Jan $35s if it keeps going up some more.  On the whole, I’d just wait and see if the market holds up in general before doing anything. 

    SOX are not doing well at all considering INTC report.  In fact, INTC not doing that great, looking like AA did on their earnings day. 

    X/Gel – Oh yes, absolutely out of X, see my notes at the end of yesterday’s post on steel glut. 

    10K BuzzKill!  Moody’s drops Boeing’s (BA +0.5%) credit rating outlook to Negative: "A series of negative developments have had the cumulative effect of weakening Boeing’s financial flexibility at the A2 level, and led to the revision in the rating outlook to negative," firm says.

    ETFC/Trad – They are a mess and need to be acquired before people realize they used the overnight funds to play the markets last year and lost them all (so I heard).  We bought them when they were about .75 but I wouldn’t touch them at $1.75.

  72. mocha, hk, I am long gone; sadly   

  73. phi,
    what do you mean by:
    Too late Highlander – They already made the Dow 10,000 caps

  74. [Rebound]Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year-end by The Wall Street Journal.

    Total compensation and benefits at the publicly traded firms analyzed by the Journal are on track to increase 20% from last year’s $117 billion — and to top 2007′s $130 billion payout. This year, employees at the companies will earn an estimated $143,400 on average, up almost $2,000 from 2007 levels.

    The Journal’s analysis includes banking giants J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.; securities firms such as Goldman Sachs Group Inc. and Morgan Stanley; asset managers BlackRock Inc. and Franklin Resources Inc.; online brokerage firms Charles Schwab Corp. and Ameritrade Holding Corp.; and exchange operators CME Group Inc. and NYSE Euronext Inc.

  75. Hi Phil, following your moves on DIA I would like to have a new starting point on DIA what to buy and what to sell thank you

  76. I am bullish on the eventual move up in natural gas. Executing a Buy/Write on EPD with a dividend of 7.6%. Bought the stock and sold the March p & c @30.00 – 14% discount.

  77. QC – Rifaximin is an antibiotic used for travelers diarrhea and is in clinical trials for IBS.  The drug currently has orphan status for hepatic encephalopathy (started in 1998).  They have run up considerably over the past month.  I have been burned too many times on run ups like that….I would pass until after NDA submission (Q1 2010) and see if they pull back.

  78. RUT 620

  79. Caps/High – You said CNBC would take down the box (they did) and I said, too late, they already made the caps (ie, they are fully committed). 

    I hour to Fed minutes.  Of course keep in mind that Fed minutes say very little but they do give the Gang of 12 an excuse to coordinate a move in the market and pretend it had something to do with the Fed rather than something to do with what they illegally discussed at the country club.  

    Game back on for FSLR – what insanity, you can buy and sell those calls all day…

    If we do go up on the Fed, it will be a breakout on big volume (we’re already over 130M) so it has to be taken seriously. 

    • DDM Jan $37/39 bull call vertical is $1.20 (67% upside) with DDM currently $40 so a nice cover to bear plays.
    • IWM Jan $60/62 bull call vertical is $1.20 (67% upside) with IWM currently $62.
    • UYG Dec $6/7 bull call spread if .40 (150% upside) with UYG at $6.35.

     A judge finds big lenders made fraudulent transfers through secured loans to homebuilder Tousa six months before its bankruptcy. The ruling may cost banks including BofA (BAC), Citigroup (C), CIT Group (CIT) and Wells Fargo (WFC) more than $688M.

  80. DIA/Yodi – From scratch I’d go Jan $102 puts at $5.35 and sell 1/2 the Nov $98 puts at $1.75

  81. Dow 10,000 entry for the DIA $99s or is that one about to be stopped out?

  82. Phil – on the ISRG play – is your goal to own it – or just collect premium till April.  How high could the stock run up ?

  83. 9999.54

  84. let’s sell off to 9000 now ! 

  85. phil,
    you are so right on! most of these so called market movers are just cover stories for the manipulators to hide behind ! bs bs bs bs ….!!!!
    I hour to Fed minutes.  Of course keep in mind that Fed minutes say very little but they do give the Gang of 12 an excuse to coordinate a move in the market and pretend it had something to do with the Fed rather than something to do with what they illegally discussed at the country club

  86. DIA Mattress   My longs are currently Dec 100s and need to be rolled up and probably out.   To where do you suggest?

  87. Phil, do you think the 100KP gets the attention it needs?  It appears sometimes that maybe it isn’t as exciting as the day trades, and appears to languish, where things slip by and profits turn to losses.

  88. How funny would it be to stop at 9999.61 ?

  89. I think they would lose too many headline points today if they just went straight through 10K. If it takes the next 4-5 days to do it, they get more time to get everyone all lathered up and happy with repeatedly bullish "10K" headlines.

  90. an engineered shake down of dow @ 10k could push aapl down and would allow the buy back of the huge ‘oct 190 call’ exposure by the market makers!

  91. Let the selloff begin !

  92. gotta love Santelli !!

  93. This is getting so damn annoying ; Will someone please stick a pin in this freakin’ balloon?

  94. DIA $99 puts/Mbaisley – They are still above .30 and the Dow is still below 10,000 (but close).  They may spike it up but this looks very forced so I’d rather cover buy buying the $100 calls as we cross over (now .61) and keep tight stops on them.  If the $100s make .30, then I have an almost free ride on the other side.

    ISRG/Partha – I don’t see it getting that far out of range.  If it heads down, I like it to own but otherwise, it’s just a premium collecting play. 

    Oops, there it goes, what a joke!   Dropped 3 points 10 seconds later. 

    Volume 141M at 1:22

    DIA/Eph – The Jan $102 puts with 1/2 the Nov $98 puts sold are the way to go.

    $100KP/Java – It’s not a very active portfolio.  If we miss our targets in Oct, we roll them along to Nov and maybe one day we’ll be right.  That’s how 90% of your portfolio should be – fairly balanced, low-touch and requiring only rare adjustments.  I looked over all those positions last night with the future up 1% (now we are up 1.25%) and found nothing I felt needed to be moved today.  An option portfolio will go up and down 5% regularly – it’s not negligence to ignore it, it’s the overtrading that will kill you.

  95. Is it safe to short oil into the fed meeting?

  96. "Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007"
    O.k., great. So they can pay back the taxpayer-funded AIG CDS bailout payments that made these bonuses possible by saving the named firms’ asse(t)s. But of course they won’t; instead they’ll ignore that and make a big fuss about paying off TARP. Nice shell game if you’re on the winning side.

  97. Phil on IWM you sell the 60 and buy the 62 jan call correct?

  98. Check out BIDU now. Hmmm.

  99. Oil/Roth – It’s not safe but it’s fun!  I like those ERY Nov $12s best, still $1.

    IWM/Yodi – NO, if it’s a bull call spread you BUY the LOWER call and SELL the HIGHER call. 

    Well I’m feeling better about holding out at the moment

  100. Thanks Phil

  101. WOW – GLD 500 option collar went in on the 90 Jan11 P and 145 C for 20c credit.

  102. 20K GLD 93/105 Jan10 C….someone is loading the gun….

  103. Oh what a bad joke this ‘market’ is.  Phil, if you’re having trouble getting bullish maybe I should start vocalizing my bearishness more.  That should put you on the bull bandwagon in no time flat!

  104.  Phil … I like the bear vertical spread SPY Nov 107 at 2.17 and selling Nov 106 at 1.85 … thoughts ?

  105. This is a nice site for some quick stock data. Type in a ticker symbol:

  106. Don’t forget I’m leaving about 2:30 so good luck on that 300-point move (whichever way it goes).

    SLX (steel) Nov $62/60 bear call spread at $1.30 (pays $2, up 53%) but you can be brave and just go for naked Nov $62 puts at $5.70.

    GLD/Pharm – Something’s in the wind…

    Good plan Matt!  8-)

  107. SPY/CMC – I do like that!  It’s a great payoff on a small drop.  Those are Buying the SPY Nov $107 puts for $2.17 and selling the SPY Nov $106 puts for $1.85 for net .32 and a $1 payoff if SPY goes back below about 1,067

    Wolfram/Eric – That’s interesting. 

    Oops, Fed minutes were released early! 

  108. Phil on the DIA the Jan 102 puts are long right?

  109. Minute look at the minutes:

    • Lots of happy talk about the economy improving. 
    • Not worried about inflation. 
    • Credit still tough.
    • Jobs suck.
    • No talk of raising rates this year at all. 
    • Withdawl of liquidity in progress over time. 

  110. Yodi yes you are buying Jan 102′s.

  111. Thank you Steve

  112. DIA/Yodi – That’s the Jan $102 puts that we buy, selling 1/2 the Nov $98 puts if we head over 10,000.

    Well, I have to run but there sure isn’t anything in those minutes that deserves a Dow 10,000 party that I see. 

    I have to run but I’m happy to stay slightly bearish here.  Don’t forget lots more data ahead:

    • Tonight we get:  CCK, LSTR, OHB, SPTN, STLY (BDK doubled guidance), STLD, WDFC and XLNX. 
    • Thursday ahead of the bell is: BAX, SCHW, CIT (CEO resigned just now so maybe earnings are not good), C, CY, FCS, HOG, HOMB, KNL, NOK, ORB, BPOP, PPG, SWY, LUV, USAK, WSO, WGO
    • Thursday Data is Jobs and CPI at 8:30, Philly Fed at 10, Oil says 1pm but I have no idea if that’s right. 

    Keep in mind that we only had ONE MISS all week and we’ve had great data so far (well headline great) and all it’s done is get us back to Sept highs.  If we close above our levels then don’t be bearish but don’t be bullish if we don’t under any circumstances.  A miss by C would, of course, be taken very badly by the markets

    • Thursday night is AMD, GOOG, IBM, PBCT and TCSM.
    • Friday morning is: BAC, FHN, GE, GPC, HAL, MAT, MTG

    Obama up next, if he can’t give us 10K, no one can!

    Later all….

  113. is he  gone?
    what do you want to do?

  114. Hell now we left with out a Fuehrer!

  115. CIT free play – Buy the 2011 $1.50 puts for $1.20 and sell the CIT $2 puts for $1.70 is net .50 on a .50 spread.  As long as you get net .50 for the spread, you cannot lose on the trade.  It would be a miracle if you win (CIT must not go BK and get over $1.50) but if you can get a free spread, why not?

    NOW I’m leaving!

  116. Oops. We’ll tell Phil that the stain on his couch is apple juice, even though it smells like bongwater.

  117. Since Phil is gone – anyone care to answer -
    Is there a rule for buying back your DIA covers? At 20% gain or try and let them expire worthless or depending on judgement?
    Thanks Sam

  118. How can BAC be up today more then JPM?  That’s just friggin absurd!!  There is no way they do better then JPM this quarter.  It shows me that this is a sell on the news earnings season.

  119. DIA covers / Sam: For DIA mattress plays, in general, you buy back the putters when you have $0.50 profits on them.  The idea is to use that profit to roll your long DIA puts.

  120. eric lol!

  121. Cwan -
    Thanks – that makes sense – lol – I only read Phil’s post about 20 times trying to understand the mattress plays – starting to feel really challenged.

  122. Just bot 100 faz @ 17.80.  So much for conviction. ;)

  123.  I figured they would try to paint 10,000 on the dow before year’s end but this is just silly (in October?!)

  124. It is amazing how bearish/negative this board is. Turn your charts upside down, look at 90% employment instead of 10% unemployment. Just an idea to balance this board,

  125. OMG! The bulls have been in EricL’s "garden" again…..

  126. Selling ITMN 12.5 Nov09 P here fro 0.70c.  This is craziness.  They WILL get approval for their drug in IPF, and this is a good way to enter. I am also looking at the shares, but I might sell the Nov 15s for 0.7c and wait for a direction on the shares.

  127. cwan120
    Coming back to DIA again why do you actually buy the Jan 102 put if you expect to make a profit on the Nov 98 put you will loose every time on the Jan put. ???

  128. yodi, sell the next put up for ~2-2.5 and roll up your longs for 0.5 c which covers the rolls.  Your net out should be about the same.

  129. Jamie, yes, it is bearish here (maybe that will change a bit after breaking today’s levels) but the unemployment and under employment numbers bother a lot of people. the real unemployment rate is actually over 16% last time I looked if you include the part-timers that want to work full-time and those who have given up looking for work. Then there is some additional percentage of workers who have had significant pay cuts (see front page of NY Times today). So the number of those with reduced incomes is probably around 20%, give or take.  I think that, in addition to all the other factors mentioned repeatedly, makes this board, and many other bloggers, very bearish.

  130. Volume is accelerating.

  131.  eric…wolframalpha…
    you can do cool stuff like type in "GOOG BIDU"

  132. Peru mine workers going on strike next week.  Wonder what that will do to PCU and FCX? 

  133. Pharm,
    do you have an opinion on BMY?

  134. Own ‘em.  Luv ‘em for the dividend.  I would do a straddle in december 23/22 C/P  for 1.35 or so if you buy the stock. Dividend should be Nov or Dec…

  135. Well, I’m so hedged out that I missed today completely. I hate to say it, but its just about time to capitulate to the bulls, don’t you think? I did one thing that may work after all. I sold a bunch of DIA 100 puts for Oct, and when they got to 4.75, I held. They are now well under a buck, and I’m holding them all the way. Other than that, and a bunch of other puts that will expire, I underperformed this rally pathetically. I must go beat myself up with a bottle of Vodka. If I live, I will return tomorrow to watch the horror unfold.

  136. Hi Pharmboy Still humming over DIA rolling Nov 98 to 99 brings me .34cents rolling Jan 102 to Jan 103 debit .55 cents net debit .21 cents Pls can you explain thanks

  137. yodi – first, DIAs are not an exact science.  Your portfolio should be able to handle a net small loss, as your portfolio should be outpacing the DIAs. 
    That being said, the roll up is not ready yet as it is not 50c or better per $1.  Put in your long order for rolling up at 50c and leave it be, if you get it, great.  As for the 1/2 covers, I do not think they are ready yet either, as the deltas are 0.37 and 0.43 for the ones you mentioned.  Should you roll them up now, that is fine, b’c if the market tanks tomorrow or Friday, you can roll the putter down 2X to the Nov96s or out to Dec 95 or 96s even, or better yet 2X Dec 90/92 for a full cover.  That gives you 800-1000 points b’f you owe the putter anything and your puts will be just fine.
    I have been killed by the rolls up and down in the past.  If you are in a position and have not paper traded it, then I would recommend that you exit and do that first.   Below is an excerpt from one of Phils posts as well as links FYI.
    You should always look to roll up your longs for .50 or less per $1.  You should be able to get to the $89 puts for that price.  The idea is this always keeps you with at least a ..50 delta, meaning you would get at least a $1.50 gain on a 300-point drop.  Since you are 1/2 covered with the $88 puts, you know a 300-point drop will put them $2 in the money and that’s no problem at all.  A 600-point drop (to 8,300) would put your putters $5 in the money but you know you will gain at least $3 but, realistically, your downside delta improves as you go more in the money too.  So, with the 1/2 cover and a 300-point drop, you gain 25% on the long but your putters only get their money back (and, of course you sell Sept whatever).   In a 600-point drop you gain 50% and you have a 1/2 cover at $5 so you will roll them to 2x the Sept whatever is $2.50 (unless we think the market is going much lower) and your 50% gain will be well covered.  All those are the IFs – what matters is that you ALWAYS take advantage of the opportunity to roll up the long side.  This is, of course, all under the assumption that you have something on the bull side that is making money while this is going on! 
    Conc – here are a few posts in the past on DIA plays.  UR question may be answered here.  For all newbies, bookmark ‘em, read ‘em, read ‘em and paper trade ‘em.  They are frustrating in the beginning, but then things start making sense as to how to keep the losses to a minimum.

  138. barfinger… we must share the same internist – he also recommends this medication as it works the best for this condition.

  139. Hi Thank you Pharmboy great explaination see you tomorrow

  140. Pharmboy – any damage from the wind & rain?  We didn’t do too bad here in Calistoga – just a lot of rain; no flooding or wind damage.

  141. Java – nothing here in North County but a little rain.   Most of the damage was up north from what I have heard.  Enjoy Napa!

  142. Pharmboy,
    Thanks for the link to the BoA/ML report…further confirms my cover today of my Treasury shorts. Pretty interesting how many areas they listed as crowded.

  143. Hi, yodi,
    I hope that Pharmboy answered your question regarding DIA.  I was out for a while.  Just came back.

  144. AA price slightly below earnigs level; $1 below the after hours excitement.
    INTC up 30 cents
    JNJ down
    JPM up 3%

  145. Hi there!

    Looks like I didn’t miss much…  STLY is the only one that missed this eveing.  WDFC and XLNX raised guidance so all is well after hours. 

    Covers/Samz/Cwan – To clarify, .50 is the point at which we strongly protect our gains, not take them off automatically.  Generally, when you think the move is toppy, you roll first and THEN place a tight stop on the cover or, if the market is just jumping up and down, then we might try to day-trade the covers. 

    Upside down/Jamie – I agree.  As I said this morning, you get to a certain point and you just have to go with it.  THIS happens to be the critical juncture where even a bear can go bullish and use these breakout levels as stops.  I made that same 90 EMPLOYMENT argument back in the Spring and I was bullish then but not 50% gains on the Dow and S&P kind of bullish.  That’s the thing people are having trouble with, myself included. 

    Peru/Pharm – Hmm, depends who’s got Peru mines and who will be benefitting from the price spike.

    Thanks Pharm!

    I feel bad putting up negative news but there’s lot’s of it (I’ll "Kudlowize" them and accentuate the positive) :

    Job market snapshot: Positions in the Louisville, Ky., area assembling washing machines for General Electric (GE) – that pay $27,000 with nice benefits (but used to pay more) – drew 10,000 applicants for 90 openings. The county’s unemployment rate is 10.6%.

    Banks might be getting a mixed message: As they slash business loans under directives to keep higher capital reserves, regulators today say banks need to keep lending though it will certainly lead to more losses.

    CIT Group (CIT +21%) closer to finalizing terms for new loan of $3-6.5B, sources say. Terms could be finalized this week. Facility to be arranged by Bank of America.  Did anyone fill that spread? 

    The Pragmatic Capitalist summarizes some continuing weakness in railroad indicators, including carloads down 14.2% (see chart) and intermodal traffic down 14.6% Y/Y.  I’ve got nothing on this one

    The New York Times Co. (NYT) takes The Boston Globe off the selling block, as reported bids of about $35M cash and pension assumptions lacked appeal. The Globe was threatened with closure when it was set to lose $85M this year, but finances have improved.

    Wow, I’d like to own the Boston Globe for $35M!  NYT is a $3Bn operation so the Globe has got to be good for $500M+ a year, surely there’s a way to turn that thing around.

    By the way, not to poop the Dow 10,000 Party but I don’t remember TRV and CSCO being in the Dow last time we were at 10,000, do you?  HMM, GM is at 0 and C is at 5, so they are good for 40 Dow points (8 per dollar).  And TRV is at 48 and CSCO is at 24 so they are good for 576 Dow points.   Hmmmm… 

    The financial sector’s five fatal flaws have created a monster that is draining the lifeblood of the real economy, professor William Black says: "The focus on finance carries a grave risk. Remember, the sole purpose of finance is to aid the real economy. Our ultimate focus needs to be on the real economy, which creates goods and services, our jobs, and our incomes."

  146. Dollar getting worse and worse.  $1.495 to the Euro and $1.605 to the Pound.  Even ahead of the Nikkei thay can only get it to 89.44 Yen.  That Fed statement was not very dollar positive. 

    I met with a money guy and he said he expects a big squeeze up if we hold these levels because the money guys he knows are freaking out that they’d better not miss another leg up.  He’s a smart guy, he’s playing currencies, and bonds, like our TBT play, not buying many stocks but he said he’s got to dress up his portfolio to make sure people know he’s a player in this rally if these levels hold…

  147. Jamie you are right it’s bearish here. People look at 10% unemployment and explain it’s "really" 16%. But they don’t look at unemployment when it "was" 6% and explain it was "really" 10%. I have no idea why people choose to contort an already ridiculous number before they compare it with a previous ridiculous number, it’s not like the bullshit coefficient has changed that much. I guess it does help make their point.
    We are 40% below the previous highs and the economy is at least 70% as strong as it was then. I see no reason for us to fall off a cliff from here.
    I expect I’m may be admonished for this post, but am just calling it like I see it :)

  148. Real Estate in NYC:
    Stuy Town likely to default on $5 B in loans.
    W Hotel Union Square to default on loan; rates down 25%
    960 Sixth Avenue … defaulted mortgage sold by Societe Generalle for $40 M.  SocGen lent $90 M on $105 M purchase by Italian investor in 2007.
    Hotel owner I know in NY (owns mutliple NYC hotels).  Last year Sept Occ = 92%; rate $230.  This year Sept Occ = 92%; rate = $130.
    But party on, buy REITs !

  149. Phil, I noticed you did a 100KP trade on WSS today at 3:39 pm where you sold -4 FEWVS at $1.65.  I can’t find any mention of it here.

  150. The invisible hand that moves is the invisible hand the binds. Binds the broken rock to the moss amongst the tangled algae cross.  nestling itself above the floor, the rock floats forever more in the current, with the tide. never to shed its new hide. it’s broken glue lost in the vast  …
    File under: Government Sachs

  151. Phil
    Your comments from late Tuesday evening on into early Wednesday morning  were terrific. When you consider the amount of wrangling the Congress and state legislatures go through each year trying to figure out budgets and all the convoluted BS taxation schemes, that most people do not even have a clue how to deal with, and not to mention all the wasted CPA involvement, a single VAT tax is really the most logical answer. Like you say, charity is not the answer, again because it is so intertwined with tax considerations. This approach would really simplify one of the most complex problems we have today, and the collection of taxes would be far more efficient. I have a very bright CPA, and I honestly believe he is challenged by the imensity of the out of date tax code.

  152. Thanks for the links to the DIA plays Pharmboy, good stuff.

  153.  non-trading result of nat gas…upstate New York down to West Virginia…

  154. Bearish/Steve – I do wish we were more bullish, this is a very smart group of people and we’re pretty bearish but so is the general investing public or there’d be volume to this rally.  I have a hard time ignoring the fact that 600,000 more people lost their jobs this week and, even if it’s "only" 500,000, I still think that’s not really a sign of a healty economy.  I think the REITs are off in fantasy land and I think so is the government, who cannot keep borrowing money at these low rates.  The dollar has dropped 25% of it’s value since March so the market is only 25% ahead of the currency fall which means a flight back to the dollar, which could happen very suddenly if an EU nation like Spain collapses, could send our market down as fast a 9/11. 

    That being said, we have no choice but to follow the technicals and now that we can look at nice, easy support levels like Dow 10,000, S&P 1,100, NYSE 7.200, Nas, 2,200 and RUT 620 and simply call that the mark at which we’re 60% bullish.  I’ve given some thought to what kind of protection we should use in a market like this and I’m thinking of taking some higher-percentage payers for protection as the higher we go, the more likely we have a scary correction as some point but, on the other hand, we want to try to minimize our capital at risk on the short side because once we’re over these levels, there’s no reason we can’t just go up another 20% because Dow 12,000 is no stupider than Dow 10,000 – we’ve already maxed out the stupid meter and the next stop is panic buying by the herd. 

    How’s that for a bullish sentiment?  8-)

    $100KP/Java – Those are FAZ Oct $19 puts from an order I forgot about ages ago.  Not a smart play triggering 2 days to expiration but I’ll be cleaning up that portfolio today (or maybe waiting until tomorrow if the market is heading lower as we’re fairly bearish there and would benefit from a drop).

    Goldman downgraded the dollar at the open of the Asian markets.  Someone stepped in and supported the dollar against the Yen but we hit the 2.5% rule against the Pound, which now cost $1.628.  The Euro is not as bad at $1.491 and we’re back over 90.2 Yen at the moment on a very sharp move.   If the Pound starts pulling back, we’ll get a dollar bounce of some sort that should keep oil from going over $75 but I’m more interested in what happens to gold ($1,053) and copper (just fell under $2.80) who are way past reality

    Taxes/Gel – Yes, unfortunately your CPA is part of a very powerful lobby that spends tons of money to make sure we never simplify the tax codes!

    Firewater/New – Excellent!