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Will We Hold It Wednesday – Fake Rally Follies!

In 1964, Justice Potter Stewart tried to explain "hard-core" pornography, or what is obscene, by saying, "I shall not today attempt further to define the kinds of material I understand to be embraced . . . but I know it when I see it . . ."

David Fry knows it when he sees it and points out the offending material in yesterday’s intra-day chart of the SPY.  I often sum up action like this for members as simply fake, Fake, FAKE – using one of my favorite Seinfeld clips where Elaine plays the part of Goldman Sachs, who admits to Jerry (the unsuspecting public) that she faked it "all the time."  As Elaine explains to Jerry – "It wasn’t you, I just couldn’t have them back then."  2009 was like that – we just couldn’t have any real rallies so our government and their pet IBanks (or is it our IBanks and their pet government – it’s hard to tell these days) simply got tired of waiting for investors to get in a groove and decided to fake the rallies.

Once the faked a few rallies early in the year, it just got too easy.  Also, with practice, they got better and better at faking the rallies – so good, that they began to get paid for it with record profits as the High-Frequency Trading Platforms (ie. front-running) they employed using the free money they borrowed from the Fed turned into little money machines to the point where (as you can see in the above chart) they now run them more than once a day.

Notice the pattern of high volume sell-offs or flat activity followed by low-volume run-ups.  The game is to run the markets up to levels that trip retail investor interests as the charts signal a "break-out" or, even better, trip buy signals at funds and ETFs where retail investors are forced to "go with the flow" as their committed capital chases every rally and then, once the trap is sprung, the big boys start to sell into it, leaving the retailers holding the multi-Billion Dollar bag. 

Right now, you can say it’s a win-win as the market has gone up for 6 consecutive months, with the entire US market gaining $7Tn in value in the second half of 2009.  Isn’t that fantastic?  Truly Lloyd Blankfein is doing God’s work here so what could be wrong with that?  The problem with playing God is that Lloyd Blankfein and the rest of the Gang of 12 CAN’T make the markets gain $7Tn in value – they can only make it LOOK like they have.  If you have 100 shares of POT, which was trading at $50 in March, and GS buys 1 share from you in April for $60 and sells it to Bob for $65 and then GS buys a share from you in May for $70 and sells it to Tom for $75 and so on and so on until, 6 months later, GS is buying a share from you for $115 and selling it to Mary for $120 (because it just so happens their analyst upgraded it that day). 

In this example, GS makes $30 selling POT for a $5 profit 6 times.  Bob, Tom and 6 other guys make money as POT goes from $65 to $115 – as long as they find Mary’s of their own along the way to buy it from them and you have sold 6 shares of POT for an $85 average so everyone’s a winner right?  Wait a minute though, even though you, yourself sold just 6 shares of POT, 18 shares were transacted in our low-volume market.  Your virtual portfolio of POT went from $5,000 to $10,810 on your 94 remaining shares plus the $510 you collected selling 6 shares.  Is your POT really worth $10,810 or are you high?

While you may feel rich, the fact of the matter is that an average of just 3 shares per month were sold.  There is not a lot of demand for POT outside of these occasional surges and if you find a need to liquidate your holdings you will find there is no real demand for your stocks.  We got a peek at how quickly a very small surge in selling can tank this market as the Dow dropped 100 points in 30 minutes on Thursday as someone tried to raise a little cash and quickly found out how fake, Fake, FAKE those buyers really were.

The danger with building a "rally" on false premises is you have effectively built a house of cards and, while you never know when, the slightest thing can topple the whole mess very quickly.   Only volume confirms a market move and the volume we’ve had in this markets since March has been less than 1/2 of what it was in the previous 6 months and even that is misleading as we have pointed out in previous posts that the HFT programs have worked the Financial sector into over 75% of the market volume (used to be 12%) as bank shares are traded back and forth between computers all day long.  THAT is bothering me a great deal…

Mortgage Applications don’t seem to be bothering anybody this morning, which I find amazing as it confirms the horrific Pending Home Sales Report we got yesterday (down 16%).  Mortgage Applications for the week ending 12/25 were down 22.8% and that’s the "adjusted" number – the raw number (that would be the ACTUAL physical number of applications) was down 46.9% from last year.  We bounced back in the week ending Jan 1st with a 0.5% gain with refinances making up 69% of the activity as rates creeped up to 5.08%.

We do have "good" news on the jobs front as the Challenger Job-Cut Report shows "just" 45,094 planned lay-offs in December and that makes the quarter’s 151,121 reductions the lowest since early 2000 (which wasn’t exactly a stellar time for the markets but Yay, I guess). 

Challenger noted that layoffs slowed in the second half for most of the hardest-hit sectors, including retail (down 85% from the first half to the second), industrial goods (down 62%), autos (down 54%) and government and nonprofits (down 33%).  Challenger’s monthly tally covers only a small fraction of those who lose their jobs each month. Most layoffs are not announced in press releases.  According to the government’s most recent report, 2.1 million people lost their jobs by layoff or termination in October. Through the first 10 months of the year, the government counted 23.5 million actual layoffs. 

We also have good news from the ADP Report, which showed "just" 84,000 jobs lost and that should give investors hope that Friday’s Non-Farm Payroll report will be close to flat as ADP had generally trended about 85,000 jobs below the official government statistics.  A positive revision was also made to November losses, moving from 169,000 to 145,000.  The service sector actually added 12,000 jobs as retailers staffed up for the holidays but that was offset by another 96,000 jobs lost in the Goods-Producing sector, including another 43,000 lost manufacturing jobs:


Speaking of weed sellers (or week sellers of weed killer, anyway) - MON missed expectations as sales fell 36% in Q4 and the company reported a net loss of $19M or 3 cents a share, compared with last year’s profit of $556M or $1 per share.  Revenues of $1.7Bn missed analyst expectations of $1.98Bn by a pretty wide margin (more than 10%) but: "We’ve delivered on our targets for the quarter," President and Chief Executive Hugh Grant said in a prepared statement." – maybe he prepared that statement before he saw the actual numbers

[RETAIL]We were waiting for MON’s results to short POT, hoping that the IBank upgrades would jam them to $120 and we’ll be executing those plays this morning as these valuations are truly stupid in the Ag sector.  Thank goodness for rich folks though – they may not eat enough to save the agriculture industry from overall demand weakness but they sure do know how to buy the bling bling and othe luxury items including all the newest electronics, saving overall retail sales from a repeat of last year’s disaster (but just barely). 

This is exactly the action I predicted way back on December 27th in my "2010 Outlook – A Tale of Two Economies" where there are plenty of picks for a bullish market as a companion to the Members Only Watch List.  So we have our bullish plays ready and all set to go if we can finally top our levels but so far, no good this week and we’ve been holding onto our bearish bets, expecting a repeat of last January’s massacre.  We’ll be pleasantly surprised if it doesn’t happen but there hasn’t really been any strong data to convince us it won’t so far and that makes the exuberance we’re seeing in the first few days of 2010 seem somewhat irrational. 

Asian markets were up about half a point with the Shanghai Composite the big exception with a half-point drop.  Europe is down slightly ahead of the US open but our futures have staged a fantastic recovery since 7:30 and we’re looking to open flat.  Will we continue to hold our breakdown levels (see Monday’s post) and can we finally do more than bounce off our breakout levels (also Monday’s post).  So far, we’re getting exactly the action we expected in our first three days (crazy pump, flat, flat) and we’ll see if the next step is dip or if we break the pattern. 

Menwhile, let’s be careful out there.  Oil inventories at 10:30 will be very critical (we’re short USO already). 


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  1. GS raising price targets on a bunch of steel names, AA, BA, F, GD, FCX, IP, LLL, LMT, MWV, SPR, TXT, MMM, WOR, yada yada yada

  2.  What are your thoughts on TBT?

  3. Phil -
    Still have dia 103 puts – hold or cut losses? did not make the roll – oops

  4. Do we have an official position on Japan index?  I don’t see anything in the WSS acct but I know we’ve talked about some calls on the etf?  Is that still in play?

  5. A headline shown on Marketwatch. " Treasurys dip after ADP shows jobs increase"
    Not sure how losing 84k jobs shows an increase…..

  6. TASR pop on upbeat revenue forecasts (I think) – yay!

  7. You were talking to gel yesterday about the UUP Jan. 2011 21/23 bull call spread.  Isn’t that a great long term bullish position for us to take to offset our shorter term bearish moves? 

  8. Phil: what is dia PUT SITUATION, LONGS AND SHORTS.

  9. Good morning!

    Levels we need to see held today are: Dow 10,457, S&P 1,127, Nasdaq 2,242, NYSE 7,380 and Russell 630.  3 of 5 over os good, 3 of 5 under is bad.

    Higher breakout levels are: Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 and we REALLY want to watch how the Nas performs up there.  As you can tell from the black, we are REALLY close on all but the NYSE.

    We are getting a big spike at the open and that is what we expect if this follows the blow-off top pattern of the last day of the pump that we had last year BUT, if it doesn’t reverse fairly quickly, we have to consider the possibility that we are actually breaking out..

    The dollar is not too weak today at 92.3 Yen and $1.435 to the Euro and $1.597 to the Pound.  Copper is out of control at $3.48 as the strike continues and global cooling shuts down or slows other global metal production.  Gold touched $1,130 – which is aa good line to short them on the futures, and silver is testing $18.  Oil is working on holding $81.50 into inventory and Nat gas is pumped back up to $5.85 on the bitter cold weather.

    POT is our short of the day, just touching $120 at the open and the Jan $120 calls can be sold naked for $3.25 and those can be rolled to the Feb $130s (now $3.20) if it doesn’t work out.

  10. Phil: my BIDU jan 400 putters jumped 55%, that is huge .

  11. More on CRE from Bloomberg

  12.  Morning! Whats the short POT trade…it just hit 120! 

  13. Phil
    do you recommend SONC for LTP at this level?

  14. what was that spike down on big volume?

  15. GILD comes flying out of the gate swinging.  YEAH!

  16. GS/Ac – That’s how they spike us up.  Notice people are selling into BA, AA etc this morning as it’s a tad late for the upgrade…

    TBT/OldG – I think TBT is good to $60 this year at least.  I’m hoping they pull back to $47 on a flight to dollar safety if the market tanks (which also takes Fed increases off the table) for a nice re-entry. 

    DIA/Samz – If you don’t want to take a huge risk, get the hell out.  I’m betting we have a sell-off this week that mirrors last year but it’s not a position we can afford to hold through the weekend if it doesn’t pan out as that would be cutting it way too close. 

    Japan/JCM – We picked up the EWJ Jan $10s at .10 simply based on the fact that we were very likely to be able to get out with .10 if they couldn’t break over.  So far, so good but if we break down, so will they so I’m more of a mindset to take .20 and run today.  We can’t make those kind of plays in WSS as they have a lot of trouble filling tight spreads so I don’t make those kinds of trades (anymore, I did make some that got killed).

    Marketwatch/Jrom – I know, it’s funny how CBS/Marketwatch, the Fox/WSJ and even Mayor/Bloomberg tend to spin these news items so positively.  Then they get picked up by the rest of the media and those become the "facts" on which all investment decisions are made. 

    TASR/Steve – New members should be aware that TASR is my stock pick of the 21st century.  The simplest way to put my logic is:  Try to imagine an episode of Star Trek where they are having a Phaser fight and stunning people but one of the guys suddenly whips out a 44 Magnum and blows someone’s head off.  That would not be cool right?  Once you have technology like this it inevitably takes over and soon the lawsuits will change from "Why did you Taser my client?" to "Why did you shoot him instead of Tasering him?" and that will be the game changer.  The 2011 $5s are just $1.55 and hopefully you will be able to sell the $7.50s (now .70) for the same on a good run and have a free shot at $2.50.  I also like the buy/write of the stock at $5.65, selling the 2011 $5 puts and calls for $2.65 for net $3/4 because I don’t mind having it put to me at $4 at all and, otherwise, a 66% gain is nice too.

  17. JRW – IWM is in one tight spot.  Any move will have to be a breakout either down or up.

  18. Picked up a couple of those FXP out of the money calls. Will get rid of them by the close tomorrow and just bite the bullet if no joy by then.

  19. VZ getting a haircut after dividend release.  Gotta remember that one, as every time they go down 1-2% on the date…..

  20. UUP/JCM – I’m not sure UUP is really long-term bullish as a big dollar rally may hurt stocks but it does cover job gains (more jobs require more dollars to pay workers) and increased exports so I like the play.  Also, keep in mind that other countries don’t WANT their currency to be so strong:

    France’s Sarkozy warns on the dangers of a strong euro, saying it hurts euro competitiveness and could damage the economic recovery of European countries. Disparities between the euro and the dollar pose a ‘considerable problem.’

    X heading for $60!  CNX making 52-week highs along with FAST, ACI, BA (again)..

    DIA/RMM – I’m taking a very bearish (and very unsuccessful) stance but, officially, the March $108 puts half covered with Jan $104 puts is the sensible way to protect a portfolio.  As a new hedge, I’d go for the June $107 puts, now $6.50 and sell 1/2 the Feb $105 puts at $2.15

    Dec. ISM Non-Manufacturing Index: 50.1 vs. 50.4 expected and 48.7 prior (>50 denotes expansion). Prices index rose to 58.7 from 57.8. Employment rose to 44 from 41.6. New orders fell to 52.1 from 55.1When I say STAG, you say FLATION – STAG – FLATION, STAG – FLATION – Go, go go!!

    Bill Gross’ January Investment Outlook: "If 2008 was the year of financial crisis and 2009 the year of healing via monetary and fiscal stimulus packages, then 2010 appears likely to be the year of exit strategies, during which investors should consider economic fundamentals and asset markets that will soon be priced in a world less dominated by the government sector."

    ECB Governing Council member Christian Noyer says a recovery won’t be quick in coming: "It will take time for the economy to return to a full-fledged recovery as the unemployment rate has risen and the momentum for recovery remains weak."

    Gary Gensler, head of the CFTC, calls for direct regulation of derivatives dealers. "Leading up the financial crisis, it was assumed that the banks that deal in derivatives… did not need to be explicitly regulated for their derivatives transactions," but this was a "flawed assumption."

    Dow leaders: MMM +1.7%. AA +1.3%. AXP +1.2%.
    Dow laggards: TRV -2.3%. KFT -2%. VZ -1%.

  21. ss
    If it breaks below the trend line I’m shorting; if they take it to the upper trend line and can;t push through, I’m shorting.

  22. JRW – using TZA?

  23. Hi, Peter D,
    I have RUT strangles Feb 450/680, which I entered in late December.  I thought the buffer zone was wide enough.  But RUT has gone up so much.  How do you suggest adjusting?  Or sit and wait?

  24. ss / TZA
    Yes, but that one you have to watch closely; for a LOT less money you can also buy TWM calls or go with a bull call spread on TWM. TZA options are too expensive so I like TWM.

  25. 10600, here we come.  Happy Happy Happy!  Go GO GO!

  26. cwan – Just for practice I’ll give my 2 cents.  I think you can roll up the short put to 500 for a credit of 0.70 cents.  I see a lot of support around the 550 560 area which is still around 15% down from here.  On the call side I would sit tight as the 680′s can be rolled to the March 700 for .30 credit in a meltup.  Let’s see if Peter concurs or if I need more practice.

  27. SONC got crushed last night but I do like them at $9.15, especially if you can buy the June $10 calls for .60 (and, if you sold them yesterday for $1.20 then I like buying them back here but standing pat on the sold $10 puts, now $1.55).

    BIDU/RMM – That seems like a lot.  I assume you mean including yesterday’s dip?

    CRE/Samz – That should send SRS plunging today (every day is opposite day in this market).

    Vacancies at U.S. strip malls hit an 18-year high in Q4, with a vacancy rate of 10.6%, worse than during the "commercial real estate depression" of the early 1990s. Unemployment and uneven consumer spending are expected to continue weighing on retail properties for at least another 18-24 months.

    POT/Hanna – The naked sale of the Jan $120 calls, now $3.10 is the official play.  Naked call selling is very dangerous aand you can mitigate the risk by buying say 3 March $130 calls ($4.50) for each 4 Jan $120 calls you sell, which also helps with the margin a bit.  It’s great if POT stays near $120 without going over but annoying if POT drops a lot as you make a less satisfying return but that needs to be weighed against how happy you’ll be if it goes the wrong way on us.

    WFR up ANOTHER 3.5%!  That’s without the SOX today. 

    SONC/Tcha – Not until after their conference presentation today but I do like buying the cheap June calls.

    XOM testing $70 – let’s watch that one.   XLF testing $15 – we should expect both of those to break higher if the rally is real.  Volume at 10:21 is anemic 36M on the Dow.

    Sector ETF strength: Base Metals– DBB +1.7%. Gold Miners– GDX +1.7%. Coal– KOL +1.5%. Basic Materials– IYM +1.2%. Steel– SLX +1%.
    Sector ETF weakness: Gasoline– UGA -0.9%. Broker/Dealers– IAI -0.6%.

    FCX is where we want to short them too.  Same deal, selling Jan $85 calls for $2.55.

  28.  OK. went long the jan 115 puts on POT at 1.5, in addition to phils suggestion. will cover today or tommorow if it doesnt seem like we’ll get a turn….

  29. FXP/Gil – Yes tomorrow we will have to capitulate on the bear side or at least move out to Feb and hedge.

    Copper testing $3.50 now, if they break over that we may want to rethink FCX but this spike up is what we wanted to short into. 

    Oil inventories in 2 mins.  OIH at $127 is another tempting short but I’ll just be happy if the USO’s work.

  30. Oil inventories UP 1.3Mb, Gasoline UP 3.7Mb, Distillates down 300K.  Bwa ha ha!!!  That is ridiculously bad, demand went right off a cliff the moment they popped gas over $2 (wholesale) per gallon.  Totally unsustainable at $80 a barrel.  GOOD TIME TO COVER VLO!

  31. Phil,
    When you have a chance, any opinion on any of these?  SYNA, SRX, QSII, GY, or AGO  They are recommendations from a couple monthly newsletters I follow (New Growth Investor and Breakaway Investor) at Taipan Publishing Group. They have had a lot of good winners for me so far but many of their recos can be pretty volatile. Thanks

  32. Cwan, Peter will confirm, but yesterday he seemed to still be tempted by entering a new strangle at 680, but was going to enter at 690.  He was thinking that RUT is due for a pullback.  I, too, entered a modest strangle in late December at 680 on the top side (this week I entered more at the 700 strike) and I’ve been looking at rolling up the 680 to 700, when it looks like the RUT has convincingly broken through 640, and paying for it by rolling up the PUT to 530 or 540.  In other words, I agree with SS, but I know that Peter usually advises not to touch these too often.  I’m doing this partly for practice, to see how difficult it is to roll when the market starts to move against you early.  Of course, I’d wait for Peter’s response.

  33. p.s. CTCT that you turned into a trade was from them…jsyk (just so you know). I just made that up. I like it better than "fyi." That’s how I roll.  8-)

  34. Pharm
    Did you goose GILD? All eight of my positions are UP, UP and AWAY

  35. GILD is my HK……MrM and CAP (as well as I) play HK up and down..

  36. EIA Petroleum Inventories: Crude +1.3M vs. consensus of -300K. Gasoline +3.7M vs. consensus of +300K. Distillate -0.2M vs. -1.8M.

    MDT making new highs. 

    List/AC -  SYNA is in a great space and just broke out but a 50% run in 90 days is a tough train to catch.    SRX is contract dependent but should be a nice, steady stock to sell options against.  QSII is in a space where they will be winners and losers and there’s already a lot of money being put on them to be a winner so not one I would chase.   GY is too war dependent (missiles must be used) and trades like a penny stock so I would only want them AFTER a huge pullback if at all.  AGO is interesting as there seems to be no interest on the part of our government in reigning in these derivatives and these guys have great growth potential in that space.  Strange leap pricing lets you do a 2012 bull call spread of $15/25 for $5, which is a mellow way to play them for a double

    ZION still going up so all is well(ish) in Financial Land. 

    Volume still not there and we’ll be lucky to hit the program-trading norm of 50M at 11 at this pace (45.6M with 10 mins to go). 

  37. I’m sure you’ve thought of this but I’d like to have your rationale on why you don’t pursue it? When we get a nice pull back or a fresh breakout and establish a floor, why don’t you go long S & P or RUT futures for a 5% rise on the indices. It seems like you could make a killing on that strategy.

  38. Phil, your thoughts on LDK longterm? I did a buy/write months ago and after several rolls is finally back
    to breakeven. I am leaning toward closing the trade with the accounting problems and BK chatter.

  39. Closed RTH jan 10 95p long for a wash

  40. JRW – What do you think?  Not exactly pushing through just yet.  Keeps bumping into resistance and stalling.

  41. RUT strangles / SS & Judah:
    Thank you for your inputs.  Yes, for practice, I’d like to discuss the alternative strategies.
    I agree that the overall market is due for a correction.  So, perhaps we should sit tight on the call side.  But do we want to roll up the put side NOW?  Will we catch a falling knife by rolling up too early?
    On the other hand, it’s hard to do "re-centering", eg, move 450/680 to 500/700 or 710.  You don’t get enough credits from rolling the put side to pay for the rolling on the call side.

  42. Cwan -  "You don’t get enough credits from rolling the put side to pay for the rolling on the call side."  Yeah, that’s what I’ve seen also.  That’s why I suggested rolling to the next month higher.  Hopefully you will collect all of the put side money, and the roll will start the next month’s strangle. 

  43. Phil: yesterday sold BIDU puts for 7.30$ and closed this am for 3.2$.  True and nice.
    what call should I sell now ??

  44. Crude futures exploding higher, talk about opposite day, lol.
    TSL is showing a little weakness after an amazing run up: I have a small day trade short going. Also watching DECK for possible weakness.

  45. Didn’t make it on volume, just 49M at 11 but it’s not stopping the bulls who are ramping everything right back to those upper levels.  NYSE up to 7,369 and that’s the missing link for a real rally (crossing 7,389) so we’ll watch that and XLF is at $14.93 and XOM is $69.70. 

    If we do manage to hold up through lunch, we will have to start taking this move seriously.  Gold is flying, up to $1,137 and oil is STILL $81.50 with Nat gas up 5% today at $5.91 as the dollar is getting spanked into Europe’s close ($1.44 to Euro, $1.602 to the Pound).

    Pullbacks/Ac – I’d have to say that I’m just not in a day-trading mood.  I have been tempted to cash out entirely and move back to day-trading but I’m not yet convinced that just adding to shorts on the way up isn’t going to be more productive as I strongly feel this is simply a blow-off top before reality bites.  When the moves are this unnatural, it’s hard to get behind betting the indexes will go up just because "they" won’t let them fail.  That strategy will work until it doesn’t and you have to be in the right frame of mind to risk a burn in the futures like we would have gotten if we were long on Thursday afternoon. 

    LDK/Doro – I like STP better now but LDK is fine but yes, getting out will save you a lot of potential heartache.  The problem for the low-cost providers is Moore’s Law has begun to take hold on the Solar sector and very few companies can manage themselves in that environment, especially with tight credit and cutbacks in R&D.  Think of how many great sounding chip companies INTC buried in the past 20 years.  That’s what Solar will be like, in the end, there can be only one – or two if you count some fake prop-job company like AMD who will exist soley so the monopoly winner can point to them and claim they have competition. 

    Strong early run in the Claymore Solar ETF but have seen some relative weakness in recent trade. (TAN) 11.07 +0.03 : The TAN is up for the third session in a row for a gain of roughly 9% during this period (+10.5% off last week’s low) — SOL, JASO, SOLF, LDK, SPWRA, FSLR, CSIQ, STP, TSL, YGE.

    This may be it – people are buying into this rally and money is flying out of bonds – possibly looking to jump on the stock market rally as we break technical levels.  DIA Feb $104/106 bull call spread is $1.25 and pays 60% if the Dow finishes up 10 points from here so a good hedge if you are worried you are too bearish.  Selling DIA Jan $106 puts for $1.02 is also a good cover as we break over 10,600, using that level as a stop to the downside.  This still may be a blow-off top but no sense in just watching with our jaws open if we do break over on the NYSE (now 7,376).   XLF is still red so no confirm there but that bond money staging in should concern any bear

    Agency mortgage bonds still in short supply as the spread between them and 10-year Treasurys narrows to 66 basis points, the lowest in more than 17 years. It’s narrowed nine basis points since the Christmas Eve announcement of an increased capital backstop for Fannie Mae (FNM -2.6%) and Freddie Mac (FRE -2.8%).


  46. By the way that AMZN 115 put calendar of long the April put and short the Feb seems like a decent risk-reward at 2.50, since the Feb costs fully half the April. Sort of a mellow short position there with good protection.

  47. Phil: yesterday you said sell 1/2 feb 10 or 11: you meant puts or calls?

  48. Pharm, WTF happened to GILD – just woke up from a long night on call and saw GILD going nuts!!

  49. ss
    Bounced off the line at 10:00 and again at 10:40, oil miss had no effect, I see no reason for them not to take it to 64.20.

  50. Pharm/GILD
    Good analogy re HK…. I used to play HK but gave it up as it made me a little too dizzy

  51. LDK/Doro – now I can’t find the link but LDK has spent a fortune building out plant to produce raw silicon for solar panel production. However they cannot produce it profitably and they have built using a technology (Siemens process) which is already being superceded. They also have very little cash left. While it is possible they could find an alternative market for the silicon amongst chip manufacturers, or that the cost of raw silicon will sky rocket, I would think the stock is very high risk.

  52. BIDU/RMM – I’d wait and see if any of this nonsense is real today.  If anything, I like selling the POT, FCX and OIH naked calls but those can get very painful if we do break out.  The ridiculous reversal in oil just now (up to $82.50) shows you how out of control these markets are as there is simply no participation by anyone other than trade-bots in this market.

    Feb/RMM – I have no idea what stock that is…

    From a futures perspective, I love shorting oil at the $82.50 line but with tight stops of course

    Gold is also a nice short at $1,137 with a stop at $1,141.

    Running out of gas after that spike already - Fake, Fake, Fake…

  53. Phil: putter/caller check please: roll or open ?
    have stock in all the following:
    MDT feb 39 putter, now 0.15
    PGH july 7.5 putter, now 0.15
    SPWRA jan 24 putter, now 0.35
    LDK jan 8 caller, now 0.15
    KBR march 17 putter, now 0.4

  54. Phil: it was UNG feb 10 or 11

  55.  Phil,
    I’m a new member and enjoying the site. What are your thoughts on RTP? Big moves up recently. Short opportunity?

  56. LDK – we should also remind outrselves when investing in ADR’s of Chinese companies  (as pointed out yesterday) the numbers in the SEC filing really can be pure fiction. Even if the "I can’t find an enormous fraud at home" SEC manages to detect fraud in these stocks, there is quite literally NOTHING they can do to someone who lied and lives in China

  57. I think money is flying out of bonds and straight into the oil futures market. Incredible.

  58. GILD HIV drug regimen  met is primary endpoint.  Focus on what you know……MRK has a little teaser in the pipeline that could be the statin of tomorrow.  Pfizer forged the way, but the compound died in PII due to increased heart rate (torcetripib).  Still like the bull call spread on MRK. 

  59. Putters/RMM – Come on, on the .15 Feb and July why do you have to ask?  All you can do is make .05 per month by waiting.  SPWRA should have a tight stop and LDK you are playing with fire as they touch $8.  KBR is the same, you can only make .10 a month – surely there is something you can do that has a better return than that…

    UNG/RMM – That would have been the calls as I favor more cover on UNG, not less and, if they do fall, you certainly don’t want more put to you.

    Welcome JC!  RTP is too dangerous to short.  Despite being up huge, they are still less than half of where they were last year.  I prefer to short FCX, who have recovered 75% of their drop and rely more on gold, which has a better chance of breaking down than copper does, even if the economy strenghens.  Our prefered way to short is selling the front-month calls (especially with just 8 sessions left to trade) as you can sell the FCX Jan $85 calls, now $2.85 and you can collect $2,800 for 10 against about $15,000 in margin and 1/2 of that $2,800 is pure premium, that will expire whether FCX goes up or down in the next 8 days.  Should the trade fail and FCX goes higher, the plan is to roll the $85 callers to the the Feb $90 calls, which are now $3 so you are effectively shorting FCX at $90, even though they are currently at $86.70.  Breakeven on the trade into next Friday expiration is $87.85, much better than straight shorting.

    Arnold speaks later – I forgot about that.  We talk about Greece and Spain and Iceland failing but all three combined are 1/10 the GDP of California, who are pretty much in worse shape than they are

    Oil $83!   Wow, that’s nasty. 

  60. Cwan/SS/Peter.  Yes, please regard my comments as practice (sometimes I don’t know what I think until I read what I’ve written).  I’m holding 680 until I see the current resistance level clearly broken, which right now appears to be at 642 (JRW is really the expert on that line, I’m just following his comments).  And then, I’d roll the putter higher than 500 to pay for it, since by then 15% is way up at 545.  But I’m really trying to follow Peter’s discipline, who advised against moves that leave you whipsawed.

  61. JRW – Taking a stab with TZA. 

  62. Good morning short strangler folks/RUT,
    I got so comfortable with my portfolio positions that I decided to sleep in this morning (West Coast)!  Both ss and judah gave great answers and I agree with them.  Thank you, guys.   Since I have the long PUT verticals for protection, I can roll the putters to 530 and 540 range, which still has a nice 16-18% cushion for the 6.4 weeks to expiration.  I still like the 690 callers and have both the 680 and 690.  The VIX dropped through the floor today, so the 680, 690 callers are flat, while the putters got killed today.  This can be temporary though.  To see how quickly things can change, just look at last Thursday, when VIX jumped 9% while SPX dropped just 1.5%.  Those times are great for rolling up the putters (playing with the bullish sentiment), so I have been slow to move the putters up, waiting for those moments, my portfolio is littered with 480, 490, 500, 520, 530 and 540 putters.  I have GTC order to move them up to the 530 and 540 and just wait out the time. 
    If the market doesn’t drop in another 4 weeks, I can close out these putters, which would be close to zero, and start selling off the longs in the PUT vertical.  I have 560/550 and 580/570 verticals and adding more today as we keep going up.  Those are cheap hedge at $0.7 to $1.1, and I can get $0.5 back by selling off the longs (and watchout for risks in sharp drops).  That’s it for now.

  63. And Wheeeeeee!

  64. Cwan, one more thing, in case you missed Peter’s comment yesterday:
    Peter D
    January 5th, 2010 at 11:47 am | Permalink   judah/RUT,  I’m still building the RUT positions.  The 680 callers are very tempting as RUT could be the most likely to pull back 3-5% due to its recent surge.  Then, I think we better off with adding the 690 callers and 530 putters for Feb.  I still keep my few 680 callers, and need to roll up the 480 putters to 520-530 range.

  65.  Starting to get a little more weakness in the markets…lets see if it continues/accelerates…

  66. Anyone looking at snss? HUge vol spike-up about half a buck-

  67. Boeing Buddies BEAV and AIR both making 52-week highs today, Buddy #3, TIE also about there. 

     A profit from Worthington (WOR +17.7%) and positive words from Goldman Sachs have steel issues on the rise today, as basic materials leads sector strength. Schnitzer Steel (SCHN) up 5.8%; U.S. Steel (X) up 2.8%; Olympic Steel (ZEUS) up 2.1%.

    Nas leading us lower – that’s new….

    Man, someone must have gotten something good on Dodd to have him suddenly resign like this.

  68. Phil
    I don’t see any catalyst for a fall in the next 5 days ( no data anyone cares about ) but in a " free market " this chart pattern usually results in a break to the downside. Maybe Friday maybe Tuesday.

  69. Dodd seemed more hypocritical than most – the whole countrywide thing and then pushing banking reform……

  70. AAPL & AMZN getting taken to the back of the shed for a work-over. Maybe AAPL (and S) will drop back to "coulda/shoulda" entry levels for long term positions.

  71. I guess VLO didn’t get the memo about supply.

  72. ss
    We’re in the middle of the range, but good luck ! I’m still in TNA from the 10:40 bounce.

  73. Just bought back a bunch of spwra 2011 Jan 20 puts for 3.5.  I had sold them for 5.  Not getting rich doing this, but a nice risk/reward with a good margin of safety, with a good company that i didn’t mind owning.  Will be looking for some irrational moves on earnings to initiate more positons like this.  I closed it out, because i wanted to lock in a 30% gain with 12 months still left in this position.   This strategy, has worked better for me than leaps/covering because of the low vix.

  74. Peter – Welcome to the fun.  I have a question about closing out my Jan PUT vert in my RUT strangle 550/560.  The 550 is up 98% while the 560 is down 96%.  With both at their max/loss gain, why would I not hold onto the long in the hopes of a market downturn by Jan 15?

  75. Dodd.  He didn’t want to leave the Senate in disgrace like his old man.  That apple didn’t fall far from the tree.

  76. short strangles/RUT,
    Oh, just saw more posts while writing mine and having breakfast.  Do not try to recenter the strangles frequently as you are correct that the credit is not enough to pay for the roll on the other end.  This is mentioned in my original short strangle article, Part 2.  Right now, we just want to reduce the 25% downside cushion to 15% for a credit as 2 weeks have passed and no major event that brought the market down, while leaving the callers alone.  Imagine that those callers would be killed if RUT drops 3%.  Like ss said, the ultimate escape route is to roll to Mar 700, Apr 720, May 740, and June 760.  It’s likely that we’d get a dip in the next 6 months that would kill the callers, then we are golden and free to set up new spreads.  With the rolling, we only need to be right one time to win.

  77. was that Dodd’s dad standing right behind him, judahbenhur?

  78. Jomama/Dodd.  Dodd’s father, also a Senator, died in 1971, having been censured by the Senate for corruption.  (The Senate is a club and you really have to screw up to be condemned by your fellow club members.)  The current Senator Dodd isn’t going to be censured like his father, but a re-election campaign would drudge up stories of his own corruption.  Better to beat a retreat and make money as a lobbyist.

  79. ss/RUT,
    We are playing with statistics where a 12% correction in 7 trading days (from 639 to 560) is very unlikely.  Even if RUT drops 6% tomorrow, the RUT 560 PUT would only gain $0.45, from $0.325 to $0.75 or so.  So we better off selling the long for $0.325 and keep the short, playing the odd that RUT doesn’t go to 550 next week.  This is possible with Portfolio Margin, but difficult with Reg-T accounts.  February, however, the Feb vertical has a much better chance of getting in the money.
    If you are more aggressive, you can roll the putters to 590, trying to get the $0.75 back, betting that RUT doesn’t drop 7.5% in a week, which is a fair bet as of today.

  80. Free Market/JRW – Ah, if only…   Jobs on Friday is the big possible disappointment.  They are looking for flat now, especially after that "great" ADP report where 90M manufacturing jobs are replaced by 10M shoe salesmen in the New American Economy.

    VLO/Llorens – Sure they got the memo – and then they did the opposide of what any rational person would expect….

    SPWRA/Jo – Great trading rationale! 

  81. GENZ – Adding to long position by selling Feb $47.50 Puts. Think (rather hope!) it remains above the $47.55 low it set in late Dec. Plan to sell half when it re-approaches the $50.x level resistance which I think is quite likely and hold the rest as a lottery play.

  82. Peter – makes sense.  Thanks for the advice.

  83. Peter / Judah / ss RE RUT:
    Thank you all!  Now I feel better to step out for a while to have my lunch (East Coast).  My wife keeps telling me that it’s not healthy to eat lunch while working / watching the market.  When you eat, your stomach is working hard and needs the blood supply.  If you work / watch the market at the same time, some of that blood is diverted to the brain.  Not good for either.  She claims that "working lunch" is the worst habit in American culture.

  84. my impression of shopping areas in 3rd wld countries is shoe store, florist, jewelry, pharmacy, then 2 more shoe stores repeat the others and more shoe stores…. maybe its a sign. Just so long as the sell CROX.

  85. lunch – whenever i go to lunch with my wife i lose money. ‘course if i don’t go to lunch i lose money.

  86. I feel like I’m riding a bucking bronco, knowing that either he’s getting broken, or I’m going to be trampled by him after be thrown. 

  87. Phil, the market could move down with a very good payroll number on friday. Sell the news….

  88. USO   I’ve got a long-term double diagonal and I sometimes make adjustments by over-selling the short months.   On the call side, I just did a 2X roll of half my longs and one of the short positions and am considering another 2X roll of rest of my Jan shorts (probably closer to op-ex).   My current call position is + 2 Apr 32, + 4 Apr 38 / – 2 Jan 38, – 2 Jan 39, -4 Jan 40…or a total of 6 long and 8 short.  I’m considering an A 2X roll of Jan 38 --> Feb 40/41 would put me at 10 short against 6 long, but that might be too risky if oil keeps moving up.  waddayathink?

  89. GENZ/m2 – lots of people betting against them.  One ounce of good news and they are at 60.  2 and back to 70.

  90. Friday jobs? If report is stronger than expected, stocks drop because FED will raise rates sooner than expected. If report is worse, stocks jump because happy days in bizarro world will continue. Or will these results be the reverse?

  91. Talk about opposite day, check out MON’s recovery.   Maybe if everyone misses their earnings we can get back to 14,000 on the Dow by Feb….

    Lunch/Cwan – I never thought of that.

    XLF sneaking up while the market is heading down.  Now $14.98.  NYSE was rejected right at 7,380 and is making another attempt at it and the Nas is holding 2,300 so none too bearish yet depite that little dip.

    USO/Eph – I think, for now, if you roll the $38 callers to the $41s for $2.20 you pick up .70 in premium and then you can see how it plays out into the weekend before you roll the rest. 

  92. USO  Sorry that’s -4 FEB 40s…my 2X roll was 2 Jan 37 --> 4 Feb 40s

  93. GENZ – Someone seems betting using April 47.50/50 calls today (and I think yesterday too). Just look at the volume.
    I don’t have level2 data on options to determine if buying or selling, but seems buying as nearer to ask than bid.

  94. USO   I’m sorry, my shorts are 2 Jan 38s, 2 Feb 39s, 4 Feb 40s…..I take it from your other answer that you’d just sit tight until the weekend since I’m not in that much jeopardy with only 2 Jan contracts.

  95. Relative weakness in Restaurant Index -DJUSRR- (TECHX) : The sector is down for the fifth session out of the last six with it displaying relative weakness in recent intraday action.  Individual names on the defensive include: WEN -3.2% (tested, thus far held at 50 ema today), PNRA -1.4% (down 5 in a row), MCD -1.5% (broke under 50 day today), CAKE -3%, YUM -0.6% (just slipped under yesterday’s low), BOBE -1.2%, PFCB 4% (held at 50 day ema in recent trade).

    AIR and DECK up and up and then up.

    USO/Eph – No change though, Febs are fine and you may was well wait to see if this thing sustains itself or not.

  96. phil — are you doing the dia feb bull/call spd or did you just put that up there for those of us feeling a little faint?

  97. Today looks to be the quiet day before the storm. None of the manipulators want to keep driving the market up anymore since they’ve goosed it up to nice and high levels. We’re now in a holding pattern signaling the start of the big sell-off!

  98.  On what rationale is MON up on those earnings results? And, up on good volume! 
    Concreata: I agree, that any anticipation of FED tightening would be the death of this market….so a great jobs number could possibly have a reverse effect (after initial euphoria?). That would certainly be interesting.

  99. Microsoft CEO Steve Ballmer will reportedly announce a multimedia tablet computer with e-reader and multi-touch functions at CES on Wednesday, to be made by Hewlett-Packard. Ballmer will deliver the pre-show keynote address on Jan. 6, 2010 in Las Vegas to kick off CES. Live streaming video of the address starts at approximately 6:30 p.m. PST. – Ed. []

  100. Phil:
    so un UNG, you would 1/2 x sell feb 11 calls ??

  101. Interesting chart from Barry:

    Slope of hope chart of XLF is interesting:


    DIA/JCM – That’s for over 10,600 – not there yet and I want to see confirmation from the NYSE too (just 12 points away).  If you are worried about your positions though, it’s a very good idea to have an upside cover. 

    MON/Hannah – I don’t get it.  Don’t they realize SONC had poor earnings too?  Why arent’ they making new highs???  8-)

    VNO falling off the bull wagon.  BXP $70 puts at $2.30 can be used for a mo trade, out if they break $69 (now $68.60) and just looking for a quick 20% ($2.75)

    Treasurys are showing weakness, with the 30-year yield now +0.06 to 4.67%; 10-year +0.07 to 3.83%. The dollar reverses course against the yen, +1%; -0.2% against euro, -0.4% against Swiss franc.

  102. With the NFL closing out and the playoffs to begin, I think BWLD should make or break the numbers.  Lots of support here….gonna be conservative and sell some 40 Feb P for 2.35.

  103. Kwan, this is why apple probably leaked the announcement/release date of the itablet/slate.

  104. VZ coming down nicely – looking to sell some longterm 30 puts.

  105. pharm, BWLD does great here in scottsdale – they really have a "dumbass demographic"   A bunch of bubbas who end up spending a lot of money drinking beer and eating – they also do these IFC fights where there is an admission fee and a minimum for each table – these regularly are "oversubscribed"  according to the staff at BWLD. 

  106. Phil:
    have not had much chance to follow DIA,
    I have uncovered DIA march 105.
    so I move to mar 108 and cover 1/2 with jan 104 even though you are bearish ???
    with your bearish view you would also go out already to june 107 for new hedges?

  107. Phil,
    What kind of move do you think you will be looking at for XLF?

  108. Klack, klack, klack, klack…

    At its developer summit, AT&T (T -1.1%) announces support for five new smartphones based on the Android platform (GOOG -2.2%), including Dell’s (DELL -1.6%) Mini 3 entry into the market.

    UNG/RMM – Yes, the idea is to make SOMETHING while you wait under the assumption you want to stick with the leaps.

    XLF made $15!

    BWLD/Pharm – I stopped going because they let the wing quality slip.  Maybe just my local one but no way do I pay those outrageous prices for less than excellent wings.

    DIA/RMM – Better off going to June/Feb combo than getting into a tight spread.  I still think we have a 250-500 point drop directly ahead of us though. 

    Another Gang of 12 Cheerleader chimes in:  "The emerging markets have more blue sky,” says Bob Doll, BlackRock’s (BLK) chief investment officer for global equities, calling the developing world the "ultimate leveraged play on world growth." He expects 5.2% emerging-market growth vs. 2.3% in industrialized nations, and that inflation will be a "non-issue" in the U.S., Europe and Japan this year.

  109. IF you really like Vegas…..MNKD buying 10 Feb C for 1.15, selling 10/7.5 C/P Jan for 75c.  That is 50c on a huge bet that their insulin inhaler is approved.  Otherwise, sell the front month call and raise your net outlay.  Risk is data released BEFORE 16 Jan.  You can also buy the 7.5 Jan now and play the run up into next week although volitility is HIGH. 
    Not for the faint of heart.

  110. Short $cof

  111. COF

  112. COF

  113. XLF/Jtiff – I’m bullish on XLF with buy/writes as one of our major upside positions.  I don’t expect them to fall very far and up is much more likely over the year as things stabilize.  You can buy them for $15 and sell the March $15 puts and calls for $1.45 for a net $13.55/14.28 net entry or you can take advantage of the low VIX and buy the 2011 $12s for $3.55 and sell the March $15s for .70 and the March $14 puts for .38 which is net $2.47 on the $3 spread for a much better upside percentage

    COF/Cap – I’m in favor of sellingt he $41 calls for .85 naked.

  114. Now we’re going to get the minutes from the Dec 16th Fed statement that led to a 250-point crash so this will be interesting…

  115. Cwan/lunch.  Next time you want to go to lunch with your wife and you’re worried about the RUT popping up during the lunch hour, just give us your cell number and we’ll text you.  We got your back. See what we were able to do to the RUT while you were eating?

  116. GEL, ZION up 15% in the last week.     Do you think ist time to buy some puts?

  117. ss
    Good call,I got stopped out on TNA; a lot of work just to lose $2K. In TZA at $9.15.

  118. ss
    Well that didn’t last long stopped out, made $0.05, so that’s $1000, so down $1K on the day.

  119. Phil – Bonds – we have been focusing on TBT -
    What about giving PST 7-10 year a little love -

  120. Phil — do you have an explanation/opinion for what happened with oil/nat gas today? How did that # this morning get spun into a buy everything piece of info?

  121. JRW – yeah, a lot of whipsawing action.  Seems like a tug-a-war today.

  122. JRW – make that a tug-a-war in a phone booth.

  123. JRW – Do you use trailing stops or mental stops?

  124. magret/ZION
    I play it selling calls…. Might be a good time to put on some cover as this bean might be ready for a rest. Then wait for the next move.

  125. Pot calls not feeling so good right now

  126. Beware the head fake from the meeting.  There is nothing here to get excited about but you’d think the Fed just annonced negative 3% interest from the way they are punching things up again.  Watch the Nas – they are not participating and below 2,300 for the first time in days. 

    FOMC Minutes are huge this month.  Highlights are:

    Financial conditions generally had become somewhat more supportive of economic growth.  Since the Committee met in November, the Federal Reserve’s total assets were about unchanged, at nearly $2.2 trillion, as the increase in the System’s holdings of securities roughly matched a further decline in usage of the System’s credit and liquidity facilities.

    The TALF expanded modestly, supporting issuance of asset-backed securities collateralized by consumer, small business, and student loans as well as commercial mortgage-backed securities (CMBS). Indeed, over the intermeeting period, TALF lending supported the first new CMBS issue since June 2008. 

    Staff Review of the Economic Situation
    The information reviewed at the December 15-16 meeting suggested that the recovery in economic activity was gaining momentum. The pace of job losses slowed noticeably in recent months, and total hours worked increased in November; however, the unemployment rate remained quite elevated. Industrial production sustained the broad-based expansion that began in the third quarter, but capacity utilization remained very low. Consumer spending expanded solidly in October, reflecting in part a faster pace of motor vehicle sales. Both light vehicle sales and total retail sales rose again in November. Sales of new homes increased significantly in recent months, a development that, given the slow pace of construction, reduced the inventory of unsold new homes; sales of existing homes rose strongly. Spending on equipment and software continued to stabilize, but investment in nonresidential structures declined further as conditions in nonresidential real estate markets remained poor. Both imports and exports continued to recover from their depressed levels of earlier this year, and the U.S. trade deficit in September and October was wider than in earlier months. Although a jump in energy prices pushed up headline inflation somewhat, core consumer price inflation remained subdued.

    Data received over the intermeeting period suggested that the pace of job loss slowed considerably in recent months relative to the steep declines that occurred in the first half of the year. The average decline in private payrolls in October and November was much smaller than in the third quarter; that recent improvement was widespread across industries. The length of the average workweek for production and nonsupervisory workers increased in November; moreover, aggregate hours worked registered the first substantial increase since the recession began. The unemployment rate dropped in November but remained quite high, while the labor force participation rate continued to decrease. The four-week moving average of initial claims for unemployment benefits declined somewhat through early December. Continuing claims for unemployment insurance through regular state programs also moved down, but the average length of spells of unemployment continued to increase.

    After expanding briskly in the third quarter, industrial production increased further in October and November. The gains continued to be fairly broad based, and were particularly strong for consumer durables and materials. Business surveys suggested that factory output would advance further in the coming months. Capacity utilization rose again in November, but remained at a very low level by historical standards.

    Real personal consumption expenditures increased at a solid pace in October, with broad-based advances in both goods and services. The data for nominal retail sales in November showed continued widespread improvement, particularly at general merchandise stores, electronics and appliance stores, and nonstore retailers. Outlays for motor vehicles bounced back in October after a slump in September that followed the end of the "cash-for-clunkers" program in August. Sales of new light vehicles increased again in November. Real disposable personal income rose in October, reflecting modest gains in nominal labor income; moreover, the increase in real after-tax income during the spring and summer was revised up. The latest readings from indexes of consumer sentiment remained within the relatively low range that prevailed over the previous six months, apparently still weighed down by weak labor market conditions and prior declines in household net worth.

    Housing construction held fairly steady in recent months, while demand for housing continued to firm. Single-family housing starts remained roughly flat from June to November at levels only modestly above those reported earlier in the year. In the much smaller multifamily sector, where tight credit conditions persisted and vacancies stayed elevated, the average pace of starts in October and November decreased somewhat from the already very low rate in the third quarter. In contrast, sales of existing single-family homes increased significantly again in October. Sales of new homes also rose in October after two months of little change. With sales continuing to outpace construction, the inventory of unsold new homes declined to its lowest level in three years. The recent increases in sales likely reflected improved fundamentals: The average interest rate on 30-year conforming fixed-rate mortgages declined to less than 5 percent, and surveys suggested that households now expected home prices to be fairly stable over the next year. Although some house price indexes declined a little in September and October, they remained above the troughs reached last spring.

    Real spending on equipment and software was estimated to have risen slightly in the third quarter after falling sharply for more than a year. Increased outlays for transportation equipment and high-tech goods accounted for the stabilization. Outside of those sectors, spending declined a bit further in the third quarter, although not as steeply as it had earlier in the year. Shipments of transportation and high-tech equipment remained strong in October, but shipments of nondefense capital goods excluding those categories declined, and new orders fell sharply across a range of products. Business purchases of motor vehicles rose significantly again in November. Moreover, monthly surveys of business conditions, sentiment, and capital spending plans pointed to a moderate rise in business spending going forward. In contrast, conditions in the nonresidential construction sector generally remained quite poor. For instance, real outlays on structures outside of the drilling and mining sector plunged in the third quarter. Also in the third quarter, vacancy rates on nonresidential properties rose further, and property prices continued to fall amid difficult financing conditions. The book value of manufacturing and trade inventories excluding motor vehicles and parts increased in October for the first time in more than a year, even as the ratio of such inventories to sales declined further. Capital markets continued to become somewhat more supportive of business investment over the intermeeting period. In contrast, available data indicated that banks continued to raise spreads on business loans.

    The U.S. international trade deficit was somewhat wider in September and October than in previous months. Exports of goods and services increased sharply, and the gains were broadly distributed across most major categories of exports. After surging in September, imports flattened out in October, although the slowing almost entirely reflected reduced oil purchases. Most other categories of imports, including automotive goods, industrial supplies other than oil and gold, consumer goods, and capital goods, posted solid increases in the past two months.

    In the United States, the latest data indicated that total consumer price inflation turned up in recent months, while core consumer price inflation remained subdued. The higher readings on headline consumer price inflation were the result of a rebound in energy prices. Core consumer prices increased modestly in October and were unchanged in November. Median year-ahead inflation expectations in the Reuters/University of Michigan Survey of Consumers declined in early December, and the same survey’s measure of longer-term inflation expectations moved down to the lower end of the narrow range that prevailed over the previous few years. Revised data showed solid increases in hourly compensation in the second and third quarters, along with quite rapid productivity growth and a further decline in unit labor costs. Average hourly earnings of production and nonsupervisory workers increased modestly, on average, in October and November.

    Staff Review of the Financial Situation
    Debt of the private domestic nonfinancial sector appeared to be declining again in the fourth quarter, as estimates suggested a further drop in household debt and a tick down in nonfinancial business debt. Consumer credit contracted for the ninth consecutive month in October, reflecting a steep decline in revolving credit that offset a small increase in nonrevolving credit. Issuance of consumer credit asset-backed securities rebounded in November from its subdued pace in October. Moreover, with support from the TALF, the first CMBS issue in nearly 18 months came to market. A few other CMBS deals were subsequently completed without support from the TALF. Business debt was held down in November by another drop in bank loans, as well as a decrease in CP outstanding, though the latter was concentrated among a few large firms. In contrast, gross issuance of investment- and speculative-grade bonds was robust in November. The federal government continued to issue debt at a brisk pace, and gross issuance of state and local government debt remained strong in November.

    Commercial bank credit decreased further in November, although the pace of decline slowed relative to recent months. Commercial and industrial (C&I) loans continued to drop, likely reflecting weak demand and a continued tightening of credit terms by banks. The Survey of Terms of Business Lending conducted in November indicated that the average C&I loan rate spread over comparable-maturity market instruments rose for the fifth consecutive survey. The runoff in commercial real estate loans continued, consistent with the further weakening of fundamentals in that sector. Bank loans to households rose, reflecting a slowdown in loan sales to the housing-related government-sponsored enterprises that resulted in a modest increase in banks’ on-balance-sheet holdings of closed-end residential mortgages in November. However, home equity loans and consumer loans fell again. According to third-quarter Call Report data, unused loan commitments shrank for the seventh consecutive quarter, though the rate of decline slowed, especially for commitments to lend to businesses. The aggregate profitability of the banking sector turned positive in the third quarter, but most of the increase was due to strong earnings at a few large institutions. Credit quality appeared to worsen as delinquency and charge-off rates increased further for most major loan categories. Banks’ regulatory capital ratios increased again as banks continued to raise equity and shrink their balance sheets.

    M2 expanded at a moderate rate in November. As was the case in recent months, liquid deposits grew rapidly, while small time deposits and retail money market mutual funds contracted, albeit at slightly slower paces. Currency declined somewhat in November as foreign demand for U.S. banknotes appeared to ebb, consistent with the continued stabilization in most global financial markets.

    Concerns about the potential for default by some sovereign borrowers rose over the intermeeting period. News that the Dubai government had requested a standstill on debts owed by Dubai World, a government-owned corporation, temporarily roiled some financial markets. However, those pressures eased as investors concluded that Dubai World’s difficulties were likely to be isolated. Subsequently, the sovereign debt rating for Greece was lowered amid long-standing concerns over its public finances and a widening of its sovereign CDS spreads.

    Although the central banks of the major foreign industrial economies kept policy rates on hold, the Bank of England expanded its asset purchase program and the Bank of Japan announced a new secured lending facility. In contrast, the European Central Bank took some initial steps toward scaling back emergency lending. It announced that the one-year refinancing operation in December would be its last and that the cost of the funds provided would float with interest rates set in future refinancing operations rather than being fixed as in previous such operations.

    Part 1 – More green than usual by far but some SERIOUS weak spots!

  127.  Yeah, you’re not kidding…POT is going crazy! Oh, well. We can at least hope for a soft close….or is anyone cutting losses on the trade today. If tommorow’s open is strong this could become a massacre….Still, only down about 30%+ now…

  128. …doing a buy/write on PFE w/ March 18p and 21c at .82 with possible scale in times 3. Wrote a naked AGO April 22.50p for 2.35, mostly premium. Bought SRX June 17.50c at 2.80, which is 1.40 ITM to sell front month calls against

  129. ss / stops
    Mental or trailing

  130. PST/Samz – I don’t play others as I prefer to concentrate on just the TBTs but it’s the same general logic, rates should drift up over the course of the year but PST is a bit more prone to downward spikes. 

    Oil/Jcm – No explanation at all, totally insane move, possibly just trying to shake out the shorts before a drop or possibly Rent-A-Rebel is already booked for the weekend and we can expect some news to spike the hell out of the market ahead of next week’s barrel rolling to the Feb contracts.   It is cold and they could be projecting a massive amount of use of nat gas and distillates this week and next and that could be the story for putting more "investors" into the funds that prop up the markets but those demand numbers we saw today were pathetic.

    POT is very crazy now.  Oil, Ags and metals are driving this rally.  BTU making new highs again, FCX new highs, X over $60, AGU, new highs allong with OII, CEO…. - madness, especially with the Transports selling off so the story is lots of demand but no shipping – yeah, right. 

  131. Phil, That FCX play selling Jan $85 calls for $2.55. They are at 3.75 now. At what point should we roll to February? And do we roll to Feb 85 or 90 calls?

  132. And if oil, ags and metals went down, the market would not doubt celebrate the anti-inflation implications.  We are in an environment where everything is greeted as good news.  As unreasonable as that may be, isn’t that by it’s very nature a bull market?   What new is there, short of some major exogenous event, that’s going to make the market go down in the short term?

  133.  I am newbie, would like to say Hi. I know most of you are good at this & I know this site will make me a better investor.   I have 55,000 in online IRA & 60 in other Acct.  I would like to Know what any of you would do with It.                                     
                                                                                                                                                       Thanks Dean-0.

  134. Hi Phil:  I bought VLO at $16.71 (now$18.96) and sold $16 puts which I closed out for 70% profit. Now have the stock  and Mar. $17 calls bought at $1.04 ( now $2.36 which has approx. $. 40 time premium left thru March expiration).Should I hold on to position which give  me small time premium but good protection on downside or ??? This is always the tough part for me .Truly appreciate your help.

  135. fwiw — I’m not being contrary — I’m just challenging my own assumptions and asking your opinion.

  136. More from the Fed Minutes:

    Staff Economic Outlook
    In the forecast prepared for the December FOMC meeting, the staff raised its projection for average real GDP growth in the second half of 2009 somewhat, and it also modestly increased its forecast for economic growth in 2010 and 2011. Better-than-expected data on employment, consumer spending, home sales, and industrial production received during the intermeeting period pointed to a somewhat stronger increase in real GDP in the current quarter than had previously been projected. In addition, the positive signal from the incoming data, along with the sizable upward revisions to household income in earlier quarters and more supportive financial market conditions, led to small upward adjustments to projected growth in real GDP over the rest of the forecast period. The staff again anticipated that the recovery would strengthen in 2010 and 2011, supported by further improvement in financial conditions and household balance sheets, continued recovery in the housing sector, growing household and business confidence, and accommodative monetary policy, even as the impetus to real activity from fiscal policy diminished. However, the projected pace of real output growth in 2010 and 2011 was expected to exceed that of potential output by only enough to produce a very gradual reduction in economic slack.

    The staff forecast for inflation was nearly unchanged. The staff interpreted the increases in prices of energy and nonmarket services that recently boosted consumer price inflation as largely transitory. Although the projected degree of slack in resource utilization over the next two years was a little lower than shown in the previous staff forecast, it was still quite substantial. Thus, the staff continued to project that core inflation would slow somewhat from its current pace over the next two years. Moreover, the staff expected that headline consumer price inflation would decline to about the same rate as core inflation in 2010 and 2011.

    Oil, nat gas and copper are up 20% since the staff determined consumer price inflation was "transitory."

    Participants’ Views on Current Conditions and the Economic Outlook
    In their discussion of the economic situation and outlook, meeting participants agreed that the incoming data and information received from business contacts suggested that economic growth was strengthening in the fourth quarter, that firms were reducing payrolls at a less rapid pace, and that downside risks to the outlook for economic growth had diminished a bit further. Although some of the recent data had been better than anticipated, most participants saw the incoming information as broadly in line with the projections for moderate growth and subdued inflation in 2010 that they had submitted just before the Committee’s November 3-4 meeting; accordingly, their views on the economic outlook had not changed appreciably. Participants expected the economic recovery to continue, but, consistent with experience following previous financial crises, most anticipated that the pickup in output and employment growth would be rather slow relative to past recoveries from deep recessions. A moderate pace of expansion would imply slow improvement in the labor market next year, with unemployment declining only gradually. Participants agreed that underlying inflation currently was subdued and was likely to remain so for some time. Some noted the risk that, over the next couple of years, inflation could edge further below the rates they judged most consistent with the Federal Reserve’s dual mandate for maximum employment and price stability; others saw inflation risks as tilted toward the upside in the medium term.

    A number of factors were expected to support near-term expansion in economic activity. Consumer spending appeared to be on a moderately rising trend, reflecting gains in after-tax income and wealth this year. Recent upward revisions to official estimates of the level of household income in recent quarters gave participants somewhat greater confidence that consumer spending would continue to expand. The housing sector showed continuing signs of improvement, though housing starts had leveled out after increasing earlier in the year and activity remained quite low. Businesses seemed to be reducing the pace of inventory reductions. The outlook for growth abroad had improved since earlier in the year, auguring well for U.S. exports. In addition, financial market conditions generally had become more supportive of economic growth. While these developments were positive, participants noted several factors that likely would continue to restrain the expansion in economic activity. Business contacts again emphasized they would be cautious in adding to payrolls and capital spending, even as demand for their products increases. Conditions in the commercial real estate (CRE) sector were still deteriorating. Bank credit had contracted further, and with many banks facing continuing loan losses, tight bank credit could continue to weigh on the spending of some households and businesses. Some participants remained concerned about the economy’s ability to generate a self-sustaining recovery without government support. In particular, they noted the risk that improvements in the housing sector might be undercut next year as the Federal Reserve’s purchases of MBS wind down, the homebuyer tax credits expire, and foreclosures and distress sales continue. Though the near-term outlook remains uncertain, participants generally thought the most likely outcome was that economic growth would gradually strengthen over the next two years as financial conditions improved further, leading to more-substantial increases in resource utilization.

    Financial market conditions were generally regarded as having become more supportive of continued economic recovery during the intermeeting period: Equity prices rose further, private credit spreads narrowed somewhat, and financial markets generally continued to function significantly better than early in the year. Participants noted, however, that securitization markets were still substantially impaired. In general, U.S. asset values did not seem out of line with improving fundamentals. While investors evidently had become less cautious and more willing to bear risk, they appeared to be discriminating among risky assets. Banks were raising new capital and in some cases paying back funds received from the Troubled Asset Relief Program. Bank loans, however, continued to contract sharply in all categories, reflecting lack of demand, deterioration in potential borrowers’ credit quality, uncertainty about the economic outlook, and banks’ concerns about their own capital positions. With rising levels of nonperforming loans expected to be a continuing source of stress, and with many regional and small banks vulnerable to the deteriorating performance of CRE loans, bank lending terms and standards were seen as likely to remain tight. Participants again noted the contrast between large and small firms’ access to financing. Large firms that can issue debt in the markets appeared to have relatively little difficulty obtaining credit. In contrast, smaller firms, which tend to be more dependent on commercial banks for financing, reportedly faced substantial constraints in gaining access to credit. While survey evidence suggested that small businesses considered weak demand to be a larger problem than access to credit, participants saw limited credit availability as a potential constraint on future investment and hiring by small businesses, which normally are a significant source of employment growth in recoveries.

    So this is GOOD news for the market because small firms are being wiped out as the rich (large firms) get richer.  This is just another verision of the Tale of Two Economies playing out but this one is good for stocks and the top 10% who invest in them while the middle class and small, non-public businesses with limited access to capital join the bread line with their former employees.

    The weakness in labor markets continued to be an important concern to meeting participants, who generally expected unemployment to remain elevated for quite some time. The unemployment rate was not the only indicator pointing to substantial slack in labor markets: The employment-to-population ratio had fallen to a 25-year low, and aggregate hours of production workers had dropped more than during the 1981-82 recession. Although the November employment report was considerably better than anticipated, several participants observed that more than one good report would be needed to provide convincing evidence of recovery in the labor market. Participants also noted that the slowing pace of employment declines mainly reflected a diminished pace of layoffs; few firms were hiring. Moreover, the unusually large fraction of those individuals with jobs who were working part time for economic reasons, as well as the uncommonly low level of the average workweek, pointed to only a gradual decline in unemployment as the economic recovery proceeded. Indeed, many business contacts again reported that they would be cautious in their hiring, saying they expected to meet any near-term increase in demand by raising their existing employees’ hours and boosting productivity, thus delaying the need to add employees. The necessity of reallocating labor across sectors as the recovery proceeds, as well as the loss of skills caused by high levels of long-term unemployment and permanent separations, also could limit the pace of employment gains. Nonetheless, the reported rise in employment of temporary workers in recent months could presage a broader increase in job growth and thus was a welcome development.

    The prognosis for labor markets remained an important factor in the outlook for consumer spending. Recent data on household expenditures were encouraging. Retail sales increased, spurred by price discounting. The Bureau of Economic Analysis revised up its estimates of the level of real disposable income--and thus of the personal saving rate--in the second and third quarters of this year. Those revisions, along with recent gains in equity prices, suggested a smaller probability that households would reduce spending to rebuild their savings more rapidly. However, uncertain job prospects, modest growth in real incomes, tight credit, and wealth levels that remained relatively low despite this year’s rise in equity prices and stabilization in house prices were seen as likely to weigh on consumer confidence and the growth of consumer spending for some time to come. Anecdotal evidence on consumer spending in this year’s holiday season was mixed.

    Participants noted that firms had made substantial progress in reducing inventories toward desired levels and were cutting stocks at a slower pace than earlier in the year. This adjustment likely was making an important contribution to economic growth in the fourth quarter, and participants expected that it would do so into 2010 as well. The combination of rising consumer spending, slower destocking, and rising goods production was reflected in reports from major transportation companies that shipping volumes were up.

    Investment in equipment and software appeared to have stabilized, and recent data on new orders continued to point to some pickup next year. Even so, many participants expressed the view that cautious business sentiment, together with low industrial utilization rates, was likely to keep new capital spending subdued until firms became more confident about the durability of increases in demand. Many also noted widespread reports from business contacts that uncertainties about health-care, tax, and environmental policies were adding to businesses’ reluctance to commit to higher capital spending. CRE activity continued to fall markedly in most parts of the country as a result of deteriorating fundamentals, including declining occupancy and rental rates, and very tight credit conditions. Prospects for nonresidential construction remained weak.

    In the residential real estate sector, home sales and construction had risen relative to the very low levels reported in the spring; moreover, house prices appeared to be stabilizing and in some areas had reportedly moved higher. Generally, the outlook was for gains in housing activity to continue. However, some participants still viewed the improved outlook as quite tentative and again pointed to potential sources of softness, including the termination next year of the temporary tax credits for homebuyers and the downward pressure that further increases in foreclosures could put on house prices. Moreover, mortgage markets could come under pressure as the Federal Reserve’s agency MBS purchases wind down.

    Stronger foreign economic activity, especially in the emerging market economies in Asia, as well as the partial reversal this year of the dollar’s appreciation during the latter part of 2008, was providing further support to U.S. exports, including agricultural exports. Further improvements in foreign economies would likely buoy U.S. exports going forward, but import growth would also strengthen as the recovery took hold in the United States. Participants noted that any tendency for dollar depreciation to put significant upward pressure on inflation would bear close watching.

    Most participants anticipated that substantial slack in labor and product markets, along with well-anchored inflation expectations, would keep inflation subdued in the near term, although they had differing views as to the relative importance of those two factors. The decelerations in wages and unit labor costs this year, and the accompanying deceleration in marginal costs, were cited as factors putting downward pressure on inflation. Moreover, anecdotal evidence suggested that most firms had little ability to raise their prices in the current economic environment. Some participants noted, however, that rising prices of oil and other commodities, along with increases in import prices, could boost inflation pressures going forward. Overall, many participants viewed the risks to their inflation outlooks as being roughly balanced. Some saw inflation risks as tilted to the downside, reflecting the quite elevated level of economic slack and the possibility that inflation expectations could begin to decline in response to the low level of actual inflation. But others felt that inflation risks were tilted to the upside, particularly in the medium term, because of the possibility that inflation expectations could rise as a result of the public’s concerns about extraordinary monetary policy stimulus and large federal budget deficits. Moreover, a few participants noted that banks might seek, as the economy improves, to reduce their excess reserves quickly and substantially by purchasing securities or by easing credit standards and expanding their lending. A rapid shift, if not offset by Federal Reserve actions, could give excessive impetus to spending and potentially result in expected and actual inflation higher than would be consistent with price stability. To keep inflation expectations anchored, all participants agreed that monetary policy would need to be responsive to any significant improvement or worsening in the economic outlook and that the Federal Reserve would need to continue to clearly communicate its ability and intent to begin withdrawing monetary policy accommodation at the appropriate time and pace.

    There’s plenty of nice-sounding items for the bulls to point to but is this really the report of a market that’s going to retake the 2007 highs 25% from now?   The Fed is blind towards rampant commodity inflation and not one thing I read here regarding CRE is positive. 

    Small companies are being squeezed out by big ones, people are losing their good jobs and taking crap ones and we’re counting on the rising Chinese middle class to create demand for the food our old American middle class can no longer afford – what can go wrong?

    Another silly run-up while I was writing this up but once the big boys get back from theri meetings we should get an end of day sell-off.  Just another day of churning into a flatline – just as we predicted we’d get on Monday…

  137. Peter – you often talk about reserving margin for doubling down.  Can you give an example of when you would do that?  Thanks.

  138. Phil,
    Roll on the Mar DIA 106 and 106 puts or hold the course? I keep going back and forth. Thanks.

  139. samz – re 10 year bond yields….. Fidelity bond experts just published their prognostications for 2010 re these shorter term bonds. They say these will take a big hit, as they assume the yields will have to rise in order to attract buyers. Pretty much the same story as the longer term bonds.Lots of things could create this situation, MO – a rising stock market could daw money out of bonds and into stocks, or a rise in interest rates (they can’t go any further down). The only thing that will maybe reverse this eventual change is a geo-political shock, such as a soverign bankruptcy or outbreak of war in Iran. Some say the possibility of the latter is 40%, but I believe it to be far less. I may publish the link to the Fidelity bond opinion later in the day.

  140. Phil, are you holding that POT is a good short given todays’ action?   I hope so (maybe even more so than this morning), so I sold POT Jan 125′s for 2.17….still looks like its running up.

  141. TBT on the march again!

    FCX/Bord – Hold, hold, holllllld….  Keep in mind that, at $87.70, the FCX $85s are worth $2.70, not $3.75.  You have no reason to pay the caller a $1 premium when the onus is on him to prove he’s worth it.  The Feb $90s are $3.50, as long as that roll doesn’t get away from you, there’s no reason at all to rush it while your caller still has more than 25% premium.

    Bull market/JCM – If we break and hold our breakout levels, I’ll be inclined to agree with you but all you are seeing now is an upgrade-driven speculative rally and it will take very little bad news to set off a wave of profit taking from commodity holders who are up 20% in 30 days.

    Welcome PDis!  Make sure you read the New Members Guide first and foremost and that guide recommends you read a month’s worth of posts and comments before you even begin paper-trading our picks to get a feel for what you are comfortable with.  Once you do that, then we can talk about which trades you want to go with. 

    VLO/Dflam – You can roll the March $17s up to the $18s for .70 and pay for it by selling the $17 puts, which are, of course, rollable to longer, lower strikes.  That bumps your call-away up $1 and you are still nicely protected.

    Contrary/JCM – Nothing wrong with that…

    DIA/Japar – We have a low VIX and a high Dow so if you sell the Feb $105 puts for $2.10 and spend $2.85 to roll to the June $107 puts it’s a nice strategic retreat providing you are using this as a long-term hedge.  Of course I’d give it a couple of days to give drops a chance.  I know I sound like a broken (and wrong) record this week but this is what we expected to happen on Monday – big move up, churn, churn, drop.  We had a big move up and this is day two of churn – what’s the harm in waiting a day?

    Speaking of positive spin:  In a sign activity may be returning to CRE, two big-name private-equity investors (Harry Macklowe and Blackstone (BX)) are snapping up high-profile commercial real-estate assets. Analysts say more than $160B of U.S. commercial properties are now in default, foreclosure or bankruptcy.

    FOMC minutes: While unanimous on the key points and language, the board saw a few participants showing concern about undercutting housing as purchases of mortgage-backed securities wind down – and a few said that resource slack would diminish slowly, so large-scale asset buys might need to be expanded.

    More from FOMC minutes: Amid agreement that underlying inflation was subdued (and, of course, would be for some time), views for the next two years began to diverge – with some members thinking inflation could be too low for employment/price stability targets, and a few others worried about upside risk. The committee tabled discussion of what to do with the proceeds of maturing issues – adopting an interim approach of continuing not to reinvest them.  These Fed guys are just idiots!

    It’ll be a boring year for investing in financials, according to FBR Capital Markets – at least compared with last year. But boring doesn’t mean safe, as the firm warns clients that unemployment is going to stress residential loans and financial earnings overall will disappoint. (ETFs: IYF, XLF)

    Sector ETF strength: Gold Miners– GDX +3.2%. Oil Services– OIH +2%. Coal– KOL +1.9%. Steel– SLX +1.9%. Basic Materials– IYM +1.8%. Silver– SLV +1.8%.
    Sector ETF weakness: Internet– HHH -1.3%. Telecom– IYZ -1.3%. Tech– XLK -1.1%. Livestock– COW -0.8%. Nasdaq– QQQQ -0.7%.

    Check out those leaders – there’s that ultra-low inflation the Fed is talking about..

    Dow leaders: AA +5.2%. BA +2.9%. BAC +1.7%. MMM +1.7%. AXP +1.6%.
    Dow laggards: VZ -2.6%. TRV -1.7%. MCD -1.2%. T -1.1%.

    BA has added 50 dow points in 2 days!

  142. Hay, Judah,
    Thank you for holding RUT while I was out.  No, I didn’t have a big lunch.  I just got caught up with other stuff.  Looks like you folks had a roller coaster ride and just got back to where we were in the morning…
    Yawn.  Maybe Peter is right.  Go get some sleep, take a nap…

  143. Phil: shorting POT ??? any suggestion ?

  144. what are we doing with potash?

  145. VZ: Any story causing the drop?  The dividend is $0.47.  But VZ dropped $1 or so.  Can’t be just haircut due to dividend pay out.
    Any suggestion on playing?  Or wait a couple of days?

  146. POT/Lv – Same as FCX, the Jan $120s are only worth $2.50 and the Feb $135s are $2.80 so where’s the urgency to roll? 

    POT/RMM – Selling those $125s for $2.50 seems like a good deal but we could get another pop tomorrow so maybe better to wait.

  147. cwan/VZ – I just sold the Apr 31 puts for 1.10 when it neared the 50dma.

  148. VZ/Cwan – GOOG and AAPL are now causing problems for the Telcos as the devices are becomming more important than the providers.  That’s bringing in uncertainty and people who invest in telcos tend to be a bit conservative.

    Wow, an entire 1% move down in the dollar to the Euro since 2am.  Much smaller loss to the Pound and we gained 1% on the Yen – things are wacky!  Copper still $3.488, gold is $1,139, silver $18.21, oil $83.11 and Nat gas $5.98 so everything is great in commodity land. 

    ZION almost at $15.

    POT – The problem with POT today is you guys (the group you guys) sold THOUSANDS of calls at the open.  That created a $500,000+ incentive for someone to squeeze us out of the position.  Since you sold calls to people who WANT the stock to go higher, there is little risk in them driving the price up and up and up now as they make money on the shares they buy and the calls they bought.  If you don’t scale into a position sensibly, this will happen to you every time!

  149. POT – got nervous and rolled to the feb. 125′s for a credit – - I know prob. a bab move but
    Problem is largely that i cannot be at my computer all the time to monitor the position – just give me a little more breathing room – or rope to hang myself ;)

  150. Phil, No 3 out of 5 breakout today.  I really like the 3, 4 and 5 out of 5 rule.  It seems to help suss out the fake moves.

  151. Phil-
    Do you think retailers will benefit at all from Dec sales?

  152. phil;  POT
    What about a bullcall or bullput spread ??

  153. Gel, You seem to trade with Fidelity, is that right?  Do you also have a TOS account?  I ask because I use Fidelity.

  154. I kinda doubt the 10 calls I sold at $3.35 created much of an incentive for anyone to squeeze me, but I get the larger point.  So does this mean we take our lashes and move on, or rice them another day?

  155. Judah…. Yes I have an account at Fidelity, but also Schwab and TOS. I like TOS and Fidelity the best. Have been with Fidelity for the longest period.

  156.  Well, i agree in POT on principal…but i scaled into a naked long Jan PUT position over several strikes….(including some in the money). I think POT just traveled with the commodities today as a day-trade….Will wait in the hopes that rationality overtakes the market by friday…if not, then i’ll close it or roll it. Overall, it was a fairly uneventful and totally non-commital market today. Although, maybe this is what marks the top…

  157. Gold futures topped out at $1,140.90, just missing my stop at $1,141.  Now at $1,138 and looking a bit better and FCX is pulling back as well. 

    DECK is still going up.  Theres no business like shoe business….

    POT/Samz – These are not good trades if it’s the kind of thing you can’t watch or you are going to worry about.  Just like you should only sell a naked put if you REALLY want to be long-term long at the net strike, you should only sell a naked call if you REALLY want to be long-term short at the net strike.

    3 of 5/Judah – So important in this kind of market.  You need to take the emotion out of it at the breakout areas. 

    Another beyond pathetic volume day.  That’s disturbing as we should be seeing a pick-up by now but finishing the Dow at175M (plus whatever they jam in on the bell). 

    Retail/Jtiff – I think that they will not benefit enough to justify the move up.  As from the chart above, luxury should do well (and shoes are toys for rich girls) but the middle class cut way back this Xmas.

    POT/RMM – I picked a ratio spread earlier that held up well so far.  We’ll see in the morning, maybe they test $125.

    10 calls/Jcm – It’s not your 10, it’s the group’s aggregate 4,000.  That’s too many for a smallish position like this.  The way to fight that is to SCALE in.  If you wanted to sell 10, then selling 3 at $3.50 was the way to start, then you could have sold 3 more at $4.20 (20% loss) for a $3.85 avg and 3 more at $5 (another 20%) for an average of 9 sold at $4.23 and you’d be down 20% but with a b/e at $124.23 and an easy roll to the Feb $130s, now $4.50.   Lack of patience/scaling in is the biggest killer of people’s accounts.

  158. Nice 20% move in YRCW today.   Still holding the premise that the banks somehow offloaded the bad debt to the Fed and will now use free money from the Fed to loan to themselves and book income; and since they own 95% of the equity will patiently build value and hold for the mid-term.   It’s hard to see how they will BK, especially since they can re-finance themselves at any time.

  159. Thanks for the welcome and tips Phil/Pharm. I will be paper trading as I read through past chats, but question on a LEAP I did jump into more quickly than I should have. For EXC, which I like long-term, I sold a 2012 40/30 put spread to fund the 60 calls at a slight net debit (now would be a credit). Wondering if this is (ever) a good way to play it or if you still like selling front month calls along the way instead (or in addition?).

  160. Phil, Now that market’s closed-- to address you question yesterday on the income levels of these fully booked Macau tour groups from Southeast Asia. These are "rich Thai." The men individually are dropping probably several thousand US dollars over a couple days at the baccarat table while the wives are shopping at Louis Vutton type shops (not fakes, the real thing). They are spending lots. To give you a frame of reference, a "rich" Thai person surprisingly has as much, or more, purchasing power than the average "upper income/rich American" due to the absolutely obscene income disparity here between rich and poor. Plus primarily due to corruption and lax enforcement, the rich often pay little, if any, taxes. US income distribution and income tax burden looks like a socialist utopia in comparison (ok, ok, ok no one get lippy on that comment, I am here to make money, not to kvetch about politics).  Bottom line this is not the senior casino bus doing pick ups in Newark, the per capita spending is likely much much much higher than what the average American would spend at a casino. So international regional demand for Macau appears to be strong. However, what I don’t know is what the demand is domestically within China and the other big player in the region (Japan, Korea, etc.)

  161. Goodbye Dodd …. corrupt, arrogant and useless.   Too bad he didn’t stay on; the ass kicking he would have gotten in Nov. would have been fun to watch.
    Now can someone please get Barney Frank to resign ?  And Charles Rangel ?  And Pelosi ?  And Reid ?

  162. Short and cover COF about 5 times today.  Not big money; but it adds up.
    Why not ?  I am providing liquidity.

  163. Phil $ COF; I did that w/ the 42′s calls … at 50 cents.
    Still, this thing can drop 2-3 points pretty quickly and that would be more fun.

  164. Phil, Per your scale in lesson, I have been thinking on this a lot… one part I can’t figure out. What should you do if you scale in and the position goes your way? This sounds stupid at the surface, but it’s not, because I have been good about scaling in on naked positions since I joined your site…. and because of the good calls you provided, many times I found myself 20-25% ahead (and thus cash out) even though I deployed only about 1/3 of the capital I was wanting to invest in the trade. The result is that I get some small wins, but my overall profit does not make a lot of progress. I know I should be thankful for small wins. Is there anything else we can do besides take our 25 points and go home? Thoughts?

  165. Marking the Top/Hannah – Well I hope so because I’m not prepared for a breakout at the moment. 

    BBBY had a big beat, .15 out of .58 on 11% better revenue but, of course, Linens and Things went BK so no competition. 

    Bed Bath & Beyond (BBBY): Q3 EPS of $0.58 beats by $0.15. Revenue of $2B (+11%) vs. $1.9B. Sees Q4 EPS of $0.67-$0.71 vs. $0.62, and full-year EPS of $2.11-$2.15 vs. $1.91. Shares +6.9% AH. (PR)

    YRCW/LV – I do like them long term but it may be a very long-term.

    EXC/Fein – I like them with all the nuke approvals coming up.  Your strategy is valid but dull as there’s not much you can do with it while you wait.  I’m not a big fan of out of the money leaps unless there’s a very specific purpose.  The way I’d play EXC going to $60 is the $50/60 bull call spread for $2.70 and if they fall back to the lows below $45, THEN you can sell Naked $30 puts for $2.70 to cover the cost.  Meanwhile, you can sell 1/3 the Feb $50 calls for .65 because if you collect just .20 per month against your leap, it’s a free ride and you can roll the 1/3 Feb $50s to 2/3 the Apr $55s and then a full cover of July $60s by which time you are $10 in the money on your long calls. 

    Macau/Bord – Great summary, thanks!  That’s pretty much in-line with my theory not to underestimate the global top 10%’s ability to spend money.  Vegas casinos are slanted towards the "average" gambler and they suffer from an economy that harms the middle and lower classes but I’m under the impression that Macau is tailored more for the kind of gamblers you describe and not waiting for bus-loads of blue-haired old ladies to show up with bags of quarters to play the slots (or whatever the Asian equivalent would be). 

    Thans for providing that liquidity Cap! 

    Commodity madness continues:






  166. CRE … Harry Macklowe isn’t snapping up anything.  Aside from losing properties he vastly overpayed for; he found an investor to buy out the debt on a development site he controls in midtown … what this does is prevent him from losing it.

  167. COF does look like it’s near the top of a 3 to 4 month range. Speaking of ranges, SPG looks like it’s nearing the bottom of it’s range. Still like that one as a short?

  168. CRE … Harry Macklowe isn’t snapping up anything.  Aside from losing properties he vastly overpayed for; he found an investor to buy out the debt on a development site he controls in midtown … what this does is prevent him from losing it.

  169. I am always puzzled when people make divisive political commentary on this website. Any thoughtful person would understand that by doing so, you are probably pissing off, or at least alienating, around 50% of the people here. And isn’t the whole idea behind this site to work collaboratively as a team to help each other make money?? I doubt many people pay $250 bucks a month in order to read Republicans wailing on Democrats and vice-versa, when they can get that daily on MSM for free.

  170. Pharm
    Just a couple of comments re Biotech….Steven Burrill the guru at Burrill & Co, who is the leader in Biotech IPO’s interim financing etc predicts there will be 15 Biotech IPO’s in 2010. That is a lot.  Also, he predicts there will be lots of acquisitions of Biotechs by the big guys, in order to fill the gap created by expiring patents. I guess it is a good time to take on some additional risk in this sector. The JP Morgan Healthcare Conference next week in SF might expose a few prospects. By the way… thanks for the GILD pump – that stock is fun to play!

  171. Volume:  you would think there would be better volume.  If anything it seems that HAL9000 and the upgrade monkeys are taking advantage of beginning of year 401k and mutual fund buyers; but even with that, the volume stinks.
    At least SPG and SLG have sold off nicely despite the pumping going on.
    I saw a headline this morning that TradeStation volume was down 37% in Dec.

  172. Scaling/Bord – This gets filed under the heading of "greed kills."  Generally, we do take the profits and run.  If you are only 1/4 or 1/3 scaled in and you make 20%+ then you most likely got a quick win.  Let’s say you have a $5K budget per position and open with $1,500 and your goal is to make 20% of $5K ($1,000) over the course of a month.  If you "accidentally" make 20% of $1,500 in 1 week, that’s a rate of $1,200 a month anyway.  It’s the difference between being a singles hitter that bats .400 or a home run hitter who bats .250 – they both have value but who’’s more likely to be in the Hall of Fame and who is the guy you want up in a clutch situation?  With your cash on the line – they are all clutch situations, right?

    Now if you have a longer-term play, like AAPL Apr $200s that you bought for $12 and they go $16 (up 33%), if you really want to stick with the play, you can scale in at $16 and then you are in 2x at net $14 with the calls at $16 (up 14%).  It’s perfectly valid to scale into a winner providing you REALLY feel that the 20% gain you already had was nothing compared to what’s ahead but, generally, taking the money and running is a much higher percentage play. 

    Politics/Bord – You are right, evey once in a while some people (Cap) need to be reminded that we try to avoid that crap here as it’s way too distracting. 

    And more pumping:  The IMF’s 2010 forecast of 3.1% global growth is likely to get raised "somewhat higher," says No. 2 official John Lipsky. The fund expects continued progress from Japan and a strong post-stimulus rebound in China.   CHINA, he said CHINA – quick BUYBUYBUY – it’s CHINA!!!!

    Volume/Cap – Check out these stats:

    According to, this year has seen

    1. U.S. stock funds: $32 billion OUTFLOWs
    2. U.S. ETFs: $18 billion OUTFLOWS
    3. International stock funds: $26 billion INFLOWS
    4. International ETFs: $35 billion INFLOWS
    5. U.S. bond funds: $370 billion INFLOWS
    6. U.S. bond ETFs: $39 billion INFLOWS .


    1. OUTFLOWS from U.S. stock funds all year
    2. RECORD AMOUNT ($311 billion) of new stock offerings (includes IPOs, secondaries, and converts, but particularly a large offering of secondaries in the second half of the year);
    3. Announced cash M&A, as well as corporate stock buybacks, AT THE LOWEST LEVELS FOR ANY YEAR THIS DECADE

    Via CBS Marketwatch:

    • Charles Biderman, chief executive of TrimTabs Investment Research,a research firm that tracks liquidity flows in the market is the latest and most credible person to charge that the Federal Reserve and the Treasury (in league with top Wall Street firms) is rigging the stock market.
    • We cannot identify the source of the new money that pushed stock prices up so far so fast," Biderman said in a statement Tuesday. (I believe it’s called "magic" Charles)
    • The source of approximately $600 billion net new cash necessary to lift the market’s overall capitalization by $6 trillion last year could not be identified by TrimTabs, Biderman said. The money, he said, didn’t come from traditional players such as companies, retail investors, foreign investors, hedge funds or pension funds

  173. Phil: In light of your discussion with Bord on whether to take profits and run, how about the TBT 45/55 bull call spread.  I entered the position yesterday at $4.05.  Now the spread is about $4.9-$5.0.  Time to take profits & run?

  174. Great post on scaling and greed Phil, thanks. One more question because it is related to scaling-- and that’s the role of one’s short calls while running a bull spread play. Using AAPL as an example, where I have a Feb bull spread long 200 call short 210 call. Let’s say that the 200 calls drop 20%…. a decision point for scaling in. If one wanted to scale in at this point, I can see three courses (1. covering your short 210s, leaving 200 calls naked, but putting in a stop loss, 2. adding naked 200 calls to the spread, 3. adding an equal number of 200 long calls and 210 short calls to the spread) From a prudent "scaling in" perspective, how would you handle such a situation?

  175. Phil
    is it good time to sell ERY puts? or still risky?

  176. Thanks Phil, EXC follow ups: what if anything would cause you to alter your cover percentages of 1/3 at $50, 2/3 at $55, full at $60? Richer premiums I’d think, but do you risk the LEAPs not responding to pops in the stock the way the covers do, or do you need to have rolled by the point that’s a problem? On the Feb 50s for instance for $0.65, when hypothetically would you roll those if EXC lays around dead vs. a jump up into the low 50 range around break even for the short call? Lots to learn, thanks for your patience!

  177. Phil/TrimTabs.  Thanks for the link to TraderMark’s post.  Whenever I mention to people who don’t follow the market closely that I believe there is continuous and large-scale manipulation by Wall Street firms in league with the Fed, I tend to get looks like I’m a conspiracy-theory nutcase.  Glad to see the ranks of us nutcases is growing and may be gaining credibility.

  178. Phil : I don’t know how u can keep up w/all the questions . I try to keep mine to a minimum,but i would like to learn the stragedy u come up with. It’s the old teach a man to fish ,etc. can u recommend 1 or 2 books that cover the stragedy after a position has been entered.Thank u for your time,

  179. Phil,
    I sent you an email through Greg….jsyk  :-)

  180. Nice commentary today. Wanted to add some stuff on POT and a general Question :
    1. POT previous highs were dec 4 (123.86) and dec 10 (124.10). Before this, it was june 1 (121.36). The stock is up 0.5 after hours to 123.5…assumably it will test the december highs tommorow.
    2. A ton of POT put action today : jan 120 had 4.9k vs 4.2 open interest. jan 115 had 5.5k vs 6.4 open interest.. Same was true throughout PUT strkes. Folks hedging stock positions? or combo call/put plays?
    Given these two, i am considering a double down on phils position tomorow morning, with a cut and run above 124.5-125 or so….
    As a secondary note to folks / question : is anyone concerned that a blow-out jobs number (due to seasonal garbage, etc) could send the market up like crazy on friday? Tyler had a nice aritcle on this possibility….
    have a great evening! Hanna

  181. Oh Phil, just having a little fun.  This insane fake market is making me crazy.
    Besides, even most Democrats wouldn’t vouch for people like Rangel or Pelosi.

  182. Volume:  exactly.  Did you see Biderman’s piece over the weekend ?

  183. Ah, you did … you should read that piece … devastating.

  184. Street-level economics: My local Pizza Hut delivery just gave me a 75 minute wait time because they "are slammed and only have 3 drivers", which I think is 1 more than usual. I jog by there several times per week.

  185. …but then they showed up in 20 minutes so maybe they are just clueless.  :-/

  186.  aclend……Did you know that jogging increases your life expectancy?………… increases your life one-to-one for time spent jogging.  This means all the extra life you live is spent..    that’s right, jogging.  :)

  187. That’s funny. It’s more of a quality-of-life issue w/ me as opposed to quantity…stress relief, sleep hygiene, staying in shape, psychological health, etc.

  188. TBT/Cwan – When you have a vertical spread like that its really a question of do you have something else to do with $5 that’s got a better chance of turning into $10 over that timefame than this play.  If you do, then cash out – if not, then stay in it.  Generally with a vertical, I look at my goal per month.  In other words, if you are expecting to make $5 in the next 3 months then that’s about $1.70 per month and if you find yourself more than 50% ahead of goal at any particular time – then it’s probably a good idea to take it off the table.  Verticals are meant to be be played to the end, with TBT I strongly feel we’ll hit $55 so my tendency would be to stick with it.

    AAPL/Bord – Well that spread is $5.80 and you hope to make $10.  Rather than add $17.20 to buy more calls, I’d rather spend $3.40 to roll down to the $195s as I’m buying $5 for $3.40 straight up.  Paying $17.20 for more $200s is effectively buying AAPL for $217.20, which is a $6.23 premium.  $6.23 (actually $7.23) buys me an entire $190/200 bull call spread that’s already $10 in the money so why would I mess around giving someone else $6.23 in premium or even buying back the $210 callers with $11 in premium?    When the underlying dips like that (and assuming you want to ride it out) the biggest advantage you have is that the calls below you lose value faster than you do so your best bet is to ladder down and widen the spread which reduces your own net premium, lowers your break-even point and increases your best-case pay-off.

    ERY/Tcha - After today’s action I’d say very risky but fun.  I don’t like the put prices though (low VIX) so I’d be more inclined to do the Feb $8/9 bull call spread for .65 and plan on selling the Feb $8 puts, now .20 for .45 if we got a dip down to $9 (their delta is .31), which would put you in the $1 spread for net .20 with a put-to net of $8.20 if they stay that low, which is significantly below their all-time low (which is here at $9.77).   Let’s say you are willing to risk owning 500 shares at $4,100 on this play - you can take 5 of the spread for $325 and if all goes well and you never trigger the put, you just make $175 in 6 weeks.  That’s still 4.3% of the full $4,100 you are willing to commit without using more than 8% of the buying power – not bad

    EXC/Fein – Those are just planned rolls IF EXC pops up on you.  In reality, the chance of them jumping 20% in 2 months or less is amazingly slim but, even if they do, you still have significant cover on the long vertical.  It may be a loss on paper but you KNOW you’ll be getting your $10 if it holds up so the main point is it’s not a big problem with that small call sale.  Ideally, each month we’d want to sell another .60 call or whatever it takes to collect .20 per long position, slowly but surely whittling down the cost basis of the vertical.

    Nutcases/Judah – I know, it does seem crazy to think things are rigged but I was just speaking to Ilene and she’s working on an article that’s going to look into just how low the volume really is with the premise that the real cover-up is how many investors have left the markets entirely and how incredibly low the trading volume would be if it weren’t for the big 5 IBanks running bots all day long.  In other words, "THEY" don’t want investors to know that people have turned their backs on Wall Street as they’ll never get people back into the markets if that news gets out so they are pumping and pumping to try to make things exciting again before people realize the emporer has no clothes. 

    Books/Dflam – I don’t know any books that really teach that well.  Sages book (the one on the link at the top of the page) talks about adjustments and his Market Tamer site (also a link at the top) has a lot of good stuff on position management but mostly it’s a learn by doing kind of thing as each trade is situationally dependent.  You can always ask and we can look at good saving strategies.  After a while, you’ll get the hang of it.

    GS Outlook/Ac – Thanks a lot, I skimmed it but hopefully I can get to it tomorrow.

    POT/Hanna – That’s why I like the short play here, must be some resistance ahead.  Only a breakout of the indexes would get me to back off I think.  Yes on the jobs.  Certainly, so far, they are playing the markets like they have no fear of the jobs report – we’ll see how that holds up tomorrow but we already get the regular jobs number in the morning.

  189. Waiting for the MSFT presentation to start….

  190. Who cares if the market is up or down tomorrow, because ….
    We Are All Doomed !
    And I’m not talking Al Gore, either:

  191. CES people are also clueless.   Apparently they are having technical difficulties and delaying the presentation.  I’ve been to 5 of these shows and 3 times there’ve been technical problems – that is really unacceptable for our great technology expo.

    And, of course, MSFT chooses not to show you the auditorium but instead streams video muzak at you while you wait – they are so totally hopeless when it comes to marketing and presentation.

    20 Mins late so far but now they are showing the room at least….

    Now a half hour late….

    Kurzweil has a reader now called a Blio that is a 2-page (book open) format in full color that can read the books to you.  Better for illustrated books and magazines.  They claim to have 1M books already.

    Finally!  They say there are 2,500 companies exhibiting at CES this year – that’s nuts.  I used to go every other year to keep up but we skipped last year and this one as it’s just as easy to check things out from home rather than fight the crowds.  I’d rather go to Vegas when there aren’t an extra 250,000 people there…

  192. Steve says tech companies have saved the world this year.  How nice!

    Mercifully cutting to SNL’s Seth Meyers who is showing us the wonders of technology (and making me glad I didn’t go to Vegas and sit through this keynote already). 

    I wonder what Steve paid for that waste of 5 minutes…

    Steve loves the cloud.  Screens are everywhere.  Natural User Interface is in our future.  

    We Bing (according to Steve).  Didn’t know that was a verb and no Steve, we don’t…

    Last year MSFT delivered an amazing range of products of unprecedented value:  XBox 360 with Facebook and Twitter (500M games sold, $20Bn in revenues), Bing (11M users – "Bing maps steal the cool crown from Google" – seriously, that’s what it said in big letters like they actually think that’s an expression that will win us over – "Bing will be the default search engine on HPQ computers!"), SYNC will be in Ford cars, Blue & Me in Fiat (does anyone know what this stuff is?), UVO in Kia (seems to be an entertainment system with voice recognition), Zune (yes, it’s still there – getting "rave reviews" he says), Windows Mobile 6.5 for phones is "very exciting" and, of course, Windows 7 ("New Windows Lucky 7" – wow, their ad guys suck!). 

    Ballmer hinting that there will be a big phone announcement at Mobile World Conference in Barcelona next month – gee that space is getting crowded..

    Finally, 20 mins into the speech, they fix the audio, which was way too low.

    Product manager comes out to show us "stuff." 

    • All in ones – Basically an IMac format (self-contained computer in the screen).
    • Super-Thin laptops
    • Cool looking laptops with B&O speakers
    • Laptops that run games with good video (Direct X11)
    • Laptops with 3D gaming – playing Batman on it (seems to change any game to 3D). 
    • PCs that run your TV.

    Basically they seem to have gone to the Apple store and tried to match everything they saw there. 

    Now they are showing us how this will improve our lives:

    • Showing Blio – this is just silly as MSFT counts anyting that runs on Windows as an innovation they have brought you.  Blio does look cool though – pages come to life with video that plays, highlighting etc….
    • Document sharing.  They seem to be trying to say they invented digital photography now. 
    • Demoing video on a computer – AMAZING!  Demoing Bing Maps, which do look kind of cool.
    • Watching TV through your PC – maybe not good for Tivo.  They say you can record 4 HD channels at one time. 

    This presentation is so dull it’s crashing the futures!

  193. Forbes article on price pressure on potash as bhp and vale open new mines – won’t help us in the next few weeks but interesting

  194. I missed half an hour of the MSFTs CES presentation b/c of a phone call. Irritating.
    They haven’t announced a tablet yet (that’s no where near production ready)? Lame.

  195. They’re suspending the stream for a Halo product that’s already been alluded to on XBox Live? Pretty ballsy after starting half an hour late with the audio cutting out every 30 seconds.

  196. Damn, this is painful! 

    MSFT Media Room 2.0 - does something but I can’t figure out what.  Seems to be content creation suite but also has video on demand.  Again, this is just what’s in the AAPL store except the 20-year old kid at the AAPL store does a better presentaion than these two guys. 

    Finally a look at the "Slate" PC’s – yep, they stole it already!  IPad baby, that’s the phrase that pays… 

    All they are doing is showing some screens but HPQ PROTOTYPE Slate PC is in Steve’s hands.  It’s about the size of a hardcover book, mostly screen but a big boarder, which is a waste.  Showing it running Kindle software and now a video that Steve is fat-fingering.  Ah, finally runs it and it’s Seth Meyers again with some more "comedy." 

    Wow, that was it?  Oh no, it’s not.  This guy is a MSFT guy too.  I’m losing interest though…

    2010 will be a landmark year for XBox customers.  Why?  Games like Mass Effect 2 and Splinter Cell and Call of Duty and Fable, and Crackdown 2 and Alan Wake (at this point I am just morbidly fascinated by how poorly one of the largest and most successful corporations in the world presents itself) and Halo with Master Chief, who is the last of the Super Soldiers standing between mankind and it’s destruction. 

    Oh WTF?  "In respect to the intellectual property being demonstrated on stage, we are temporarily suspending the media.  Thank you for your patience."  This is MSFT’s own friggin video feed – are they insane?!?

    This is going on long enough that they ran out of music on the loop and had to start it over.  Ah, now it’s back.  Fall of 2010 EXCLUSIVELY on XBox 360 with a Beta in the spring. 

    Moving on to reason #2 our lives are going to be so great:  XBox live.  20M people are members.  Netflix works on it and Sky networks and Channel+.  100M songs and games downloaded (AAPL has 3Bn apps and 5Bn songs so far).  Zune video on XBox allows you to watch movies on demand. 

    Seriously at this point if I was at the show I would have walked out by now, the guy has spent 20 minutes showing us games and videos.  And again the intellectual property message comes up and we can’t even see what he’s showing so I am done….

  197. Of course what MSFT isn’t telling you about project natal is that the lag is perceptible enough that it’s irritating after a while. Sony’s motion tracking controller is supposed to be better with sub-millisecond accuracy but it tracks a purple ball on a stick.
    I would have walked out by now too.

  198. Oh wait, it’s over. Time to walk out regardless.

  199. This 3D stuff at CES is out of control. 3D televisions (LCDs and plasmas), 3D camcorders, live performances by Taylor swift encoded on the fly and projected on a screen behind her in 3D, 3D HD channels to be launched later this year by DirecTV. Even TVs that are supposed to convert 2D content into 3D content in realtime (Toshiba). 
    What happens if this is a big flop? Congrats to all of the companies still attempting to be innovative while there was a major economic downturn but maybe they should have collectively focused on something less radical? Then again, Avatar has made over 1 billion and is the third highest grossing movie of all time so maybe they are on to something. And maybe I’m getting old.

  200. Netflix and Warner Bros have agreed to delay all new releases 28 days before they are available for rental. More content is supposed to be available for streaming on demand however.

  201. gel -  I have seen a partial list of companies going IPO, and am trying to research what they have in the pipeline – many appear to be device and specialty pharma.  And from my comments on Monday, I wholly agree that this is gonna be a big year for M&A in Pharma. In the next 2 yrs, PFE will lose Lipitor , BMY will lose Plavix, MRK singulair, and on and on….those 3 alone are 20B in sales.  All need to fill the pipeline with something.
    On another note, LLY is moving towards the outsourcing of trials, and they will be the marketing/sales store.  In 15 yrs, I would not be surprised if big pharma is only in the development of drugs (PII and PIII), and biotechs lead the way forward for discovery.  The years of Billion $$$ blockbusters are on the way out, specialized medicine is on the way in.  A few cancer drugs will be big $$$, but not what they used to be.  So much of the data generated about targets is from NIH grants and big pharma then capitalizes on it… Now that’s capitalism.

  202. My Mitsubishi I purchased from Costco in July is 3-D ready, had no idea it had the feature until we got it home. Woo Hoo!  I guess…..

  203. 3D TV – I am old because I can’t imagine why I would want it.  Mainly I don’t want to wear glasses to watch TV (when will they discover it ruins your vision) but also I imagine it’s like HD TV, where 99.9% of the content isn’t ready for it and many things that are shot in HD take no advantage of the medium. I don’t have the numbers but it seems to me that HD TV didn’t really catch on and Blu-Ray is an obvious flop so, for the most part, it seems like just another way to goose TV sales with a new reason to get a new set this year but I can’t see how it’s practical for a multi-tasking generation to have a device you need special glasses to look at. 

    Maybe we’re strange but Tina usually has her laptop in front of here when watching TV and my kids have their IPods or are at their computer and looking over their shoulder and I’m often using my IPhone to check things out – If we had to put on and take off glasses every time it would drive us nuts and the fact of the matter is TV doesn’t have very much content that is compelling enough to demand our full attention.

    My kids just got the 3D Miley Cirus concert for Christmas but when they watched it they decided to use the 2D disk because "we saw it in 3D already at the movies" – that does not sound like technology that will be taking over any time soon.  Maybe for games and stuff it will be cool – we’ll see. 

    That MSFT thing at the end (Natal) is also for games and is cool but no more so than a Wii.  What they are saying is you don’t need to hold the controller like a bat, you can just hold your hands out and pretend to have a bat – how is that better?  For soccer it makes sense I guess but again, maybe I am getting old because I’m having trouble imagining why I want this stuff (and my daughter and I do play Warcraft so it’s not like I’m anti-game).

  204. Wow, LEN beat estimates of -.46 by .67, scoring a +.19!  They had $914M revs vs. $863M expected (but down 28.5% from last year).  Deferred taxes helped a lot (these builders won’t have to pay taxes again this decade!). 

    Dec. Monster Employment Index: -4 to 115, the second month of a relatively mild seasonal fall. Year-on-year, the index is down 12%, the mildest rate of annual decline in the past 18 months. There’s evidence of "a slight firming in underlying employer demand."

    Citigroup downgrades Alcoa (AA) to Hold from Buy on concerns foreign exchange fluctuations may prevent Alcoa from meeting earnings expectations. AA -1.3% to $16.75.

    Apartment vacancies hit a 30-year high of 8% last year, and landlords cut rents 3% to attract tenants.

    Japan’s new finance minister says he’d like to see the yen weaken "a bit more," adding many Japanese firms want to see the dollar trading around ¥95. His comments sent the yen down 0.5% against the dollar; with the euro and sterling also down, risk appetite evaporating and U.S. equity markets in the red, more dollar upside looks likely.

    Thursday’s economic calendar:
    1:00 Fed’s Bullard speaks on monetary policy
    6:00 Monthly retail same-store sales
    6:00 Monster Employment Index
    7:00 BoE Announcement
    8:30 Jobless Claims
    10:30 EIA Natural Gas Inventory
    1:00 PM Fed’s Hoenig speaks on economic outlook
    4:30 PM Money Supply