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Which Way Wednesday – Beige Book Boogie

The futures were boogying "all night long."

THIS is why we love being born-again bulls. China’s Hang Seng down 578 points on the Hangs Seng (2.5%) – It doesn’t matter! Shanghai down 3.1% – It doesn’t matter! Europe down half a point – It doesn’t matter!  Germany’s economy contracted 5% in 2009, the worst decline since WWII (the big one) – It doesn’t matter! ABC Consumer Comfort Poll drops 11% with just 9% of Americans rating the economy postively – IT JUST DOESN’T MATTER - because WE are those 9% of Americans, right! OUR economy is just fine and we don’t know what that 91% contingent of babies is whining about do we? 

Yes, it’s been a while since I dubbed us in a Meatball Market.  The last market I labled as such was November 30th, 2006, when the Dow broke through 12,000 on the way to 14,000.  Our bullish picks that day included BA, CAT, COF, DOW, GE, HD, JWN, QQQQ, TIE, TIF, XLE and XOM.  Those were all, of course, fantastic picks but what I want you to do is read the October 2nd, 2007 article, where I began to turn cynical on the "Meatball Market" and I made the following statement:

Superman ReturnsUp, up and away – it’s Super Market!  It’s bugdet proof, oil proof, terror (threat) proof, housing proof, inflation proof and pullback proof - 3 weeks in a row!

This is truly a Market of Steel (and the recent movement of X underscores that) and looking at the movement of the past week we really do have to believe it can fly…  Is the US consumer (driver of 2/3 of the economy) really impervious to harm?  What, if anything, is our stock market Kryptonite?

Unstable currency, runaway commodity prices, spiraling inflation, low savings rates, hedge fund collapses, declining home values, banks writing down their virtual portfolios, hundreds of thousands of layoffs, millions of foreclosures — it simply does not matter as long as they are LOCAL problems for the US as we are a smaller and smaller cog in the great global economy, one day we may even be granted emerging market status by our Chinese masters!

Doesn’t sound like much has changed in 2 years does it?  Unfortunately, that also happened to be the day that Alan Greenspan (now working for PimpCo) decided to call China, with the Hang Seng then at 28,199, (gasp!) a bubble.  "If you ever wanted to get a definition of a bubble in the works, this is it." he said, at the end of a third quarter in which the HSI gained 45%.  We don’t have to worry as the Hang Seng is only up 15% since early September, now sitting just under support at 21,748 and down 23% from that October morning, just over 2 years ago

Our own market is up over 30% since July of last year and Northern Dancer, over at Seeking Alpha, points out that: "Since March 9th, 2009 closing low at 6,547.05, the Dow Industrials have had 30 up Mondays (or Tuesdays after a Monday holiday) out of a possible 43, in other words, have been up 70% of the time. Further, 16 of the past 18 Mondays were up days, (89% up days). 80 percent of all the dollar gains from March 9th, 2009 came on those 30 Monday up days. I don’t know about you, but I find that bizarre. Why? Because only 58 percent of all trading days since March 2009 were up days. We should not have seen this many up Mondays, and further, we should not have seen 80% of all dollar gains for the rally from March 2009 on just 30 up Mondays..We’ve seen 80% of all gains since March on only 14% of the available trading days, and all of them were Mondays. (30 up Mondays out of 213 available trading days = 14%). And to top it off, of those 30 up Mondays, 16 of them occurred in the past 18. That’s darned near 18 in a row. C’mon… that just ain’t normal."

Not normal at all, niether is the action you see in the futures, or the regular market for that matter where yesterday’s trading opened (in the futures pictured here) at 10,540 and then rocketed up to 10,600.  Note the 2 black lines I drew through the volume to illustrate how little of the day’s total went into the up move.  The rest of the day was selling until the volume died down at 1:30 (which is how we knew to flip back to bullish ahead of the stick save in Member Chat) but another sudden move took us up from 10,540 (again!) to just under 10,600 (again) on a similar slice of volume.

If one didn’t know any better, one might assume some computer program was executing these moves in order to paint a pretty picture for the human guinea pigs so they will keep pushing the BUY lever every time the little line on the chart turns green at which point the bots begin their relentless "sell to the bagholders" program.  Our job as bulls is easy, buying into the afternoon dips but we’re not brave enough to ride out the overnights yet as we sadly, still have some nagging doubts

Our biggest nagging doubt is "Why can’t Super Market break our levles?"  It seems a simple enough goal, just finish the day above the targets we’ve been listing for over a month:  Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638.   They’ve all been individually broken but we are still waiting for the day when all 5 of our indexes finish above their marks on the same day.  Until then, we proceed with caution. 

As I mentioned above, Asia sold off sharply, as we expected yesterday, due to the change in Chinese banking policy.  The big news out of China today is Google announcing they may be exiting the Chinese market.  This has sent shares of BIDU up 16% after hours to over $450 as GOOG has about 1/3 of the Chinese search market and BIDU effectively has the rest. 

In theory, this is about censorship and hacking but perhaps it’s simply about Google wanting to cut costs in an unprofitable market and coming up with a good reason to stop indexing 1/4 of the World’s web pages (not to mention the translation and storage) and walk away from that expense.  Google has been very bottom-line oriented lately and we will be looking to buy into them if they have a nice sell-off

Over in Europe, nothing really matters there as German GDP contracts 5% for the year and Moody’s adds Portugal to Greece and warns that the economies of the two EU nations "may face a “slow death” as they dedicate a higher proportion of wealth to paying off debt and investors demand a premium to hold their bonds."  Portugal, with a negative outlook on its Aa2 rating, has more time “to reverse this trend” while Greece “has significantly less time.” Moody’s cut Greece’s rating to A2 from A1 on Dec. 22.  The premium that investors demand to hold Greek debt instead of German equivalents is six times more than it was two years ago, and the spread has doubled since 2008 in the case of Portugal.

In a damning report issued yesterday, the European Commission condemned Greece for falsifying data about its public finances. The EC says figures coming from Greece are so unreliable that its budget deficit may be even higher than the 12.5% of GDP previously estimated.

Despsite all that and despite a profit warning from Societe General and despite increased speculation that the BOE will be forced to tighten rates (driving the dollar down against the Pound), the EU markets are trading flat ahead of the US open, up considerably from their own sharply lower opens, no doubt cheered up by the US Futures spectacular recovery just as the EU markets opened at 3am.    

We’ll see what happens in our own markets today as the Financial Crisis Inquiry Commission grills Top executives from Goldman Sachs Group Inc., Morgan Stanley, Bank of America Corp. and J.P. Morgan Chase & Co.   The 10-member board was created by Congress in the wake of the financial crisis and is tasked with getting to the bottom of what caused the near collapse of global financial markets. We’ll see if the 2-days of testimony inspire confidence or a new round of panic – the XLF barely recovered $15 yesterday, which is a key watch level for us.  MBA Mortgage Applications were up 14.3% this week as rates ticked down from 5.18% to 5.13% so that will be our green shoot for the day.

10:30 we get oil inventories (I expect builds that won’t sustain $80) and at 2pm we get the Beige Book so stay tuned for that fun.  As usual, we’ll be day-trading the Dow around the Book, which is one of our favorite trades to make.  If the dollar does stage a comeback (it’s down 2% this week) that could be very bad for commodities and the commodity sector, which will likely be bad for the markets. It’s unclear how far, on the other hand, we’re going to be able to push things on a weak-dollar rally.

So the wild ride continues!

 


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  1. Phil — I posted this is the Tuesday section a few moments ago so ignore it if you see it there…with the TBT Jan 2011 spread — First time I’ve done such a long term spread, so my question is what am I looking for here, and what should I be on guard against before turning this into a bear call spd or just unwinding it?


  2. Phil
    What do you like for a UYG trade?


  3. Phil -
    Given the moves on Mondays – with some good puts in place why don’t we just start going long every friday or just buy the futures when they start trading on sunday? IT WORKS UNTIL IT DOESN’T OR THE MUSIC STOPS


  4. Hysterical Phil … It Just Doesn’t Matter !
    BIDU making some rich and some poor this morning.  It is a sell sell sell baby; but I won’t be shorting it other than calls maybe).


  5. samz3700, how can one buy the futures on sunday and/or after hours? i was always curious as to how this was done.


  6. Kyle Bass/Hayman Capital on Squawk Box today.  "Japan is next"   behind Greece and Dubai.   Do you think It Just Doesn’t
    Matter?


  7. JRW/SS, Wondering what levels you were looking at today. I see that yesterday was the first day IWM closed below its 5 dma in over a month (other than the sell-off on Dec. 30-31, which is just an end of the year tax-related selling kind of thing).  You think the 5 dma might now be a good entry point for TZA?


  8. RMBS.  Hearing today at 12:30 EST before Judge Kramer to decide whether the trial will go as scheduled, including whether he will preside over the case.  Kramer could announce his decision from the bench.  If Kramer announces that everything goes as scheduled, jury selection would likely start this month and the stock would likely bounce up. If the schedule is changed and/or a new judge is announced, stock could sell off.  If you have positions in RMBS and you see a big move just after midday, you’ll know why. 


  9. judah/JRW – Key levels I see today on IWM are: 
    High Side – Long term upper channel trend line 64.30 and 5dma 64.05;
    Low Side – 10dma 63.72 and 20dma 62.94
    Of course, this has to be played along with the broader market pivot points i.e. Dow 10600


  10. do u see any good option plays on short international ETFs such as EFU, EEV, FXP to bet on a market decline by the 2Q or 3Q?  is it too expensive to go out more than a quarter in terms of timing?    


  11. Check out RMBS



  12. Phil said that RMBS would be volatile


  13. b1ll-RMBS.  Yeah, it is going to have a lot of action today. There will be attorneys sitting in the audience of the hearing room with cell phones texting the Judge’s decision back to hedge fund traders.  I know people who are doing it, but no one is texting me unfortunately.


  14. SS, I’m waiting to see if they can pump it back up above 64.


  15. Phil,
    …have any specifics on your aforementioned GOOG play?  Thanks.


  16. WFR down SRS down LVS down


  17. Here’s how I hope I took advantage of the excitement today:
     
    Sold 1 GOOG 560 Jan put for $2.00
    Sold 1 BIDU 500 Feb Call for $5.10
     
    If you told me I could own GOOG at 558 this week, I’ll take that.  Hope that’s still the case come Friday !


  18. Anyone – does anyone have the url for Bloomberg Earnings Calendar (free web site) I had it yesterday and cannot seem to find it again.
    Thanks


  19. Bought some more WFR – basis now $14.26.


  20. Read a lot of chat yesterday about AAPL. For those of you who may not have seen it, there is a good piece by Jason Schwarz on SA about why AAPL may be hugely undervalued. seekingalpha.com/article/182281-apple-at-cheapest-level-of-steve-jobs-era   Jason was the guy who was pounding the table to buy BA when it was 3.00 about 8 months ago.


  21. TBT/Jcm – Well step 1 is don’t worry about it.  There’s not much to do unless it clearly breaks off track.  Other than that, you just need to wait for the position to mature. 

    UYG/Pstas – I just like a simple buy/write at $6, selling the Feb $6 puts and calls for .63 as that’s a nice 10% for the first month.

    Monday’s/Samz – Yes, until it doesn’t but remind me on Friday and we’ll see if we can construct something.

    BIDU people cashing in quick on that run.  I wonder how much BIDU stock GOOG owns?

    Japan/Stock – I think you can make a case for pretty much every country being next so it doesn’t matter until it actually happens.  That was the point I was making above, at Dow 12,000 I said the valuations were getting ridiculous and we were ignoring all sorts of potentially catastrophic news yet we went up 20% to the point where, over a year later, I made a list of all the horrible, horrible things that were happening to try to illustrate why I was starting to get REALLY worried.  You never know what the tipping point is, which thing we’re ignoring suddenly changes sentiment, until it does – then we go from looking for green shoots to wallowing in the mud of despair very quickly….

    RMBS/Judah – Looks like someone thinks there’s a problem already.

    We’re still watching the same old levels at:  Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 to see what holds but we need ALL of them to hold in order to get motivated to make long-term bullish bets and 3 out of 5 below will be a signal for us to get bearish once again.  We didn’t get there yesterday and we’ll see if they hold through the BBook this afternoon. 

    Once again the Dow is leading us higher but, like yesterday, there’s weakness as we get near the top but no clear point to short so I’m staying neutral at the moment. 

    Copper is $3.38, silver is $18.45, gold is $1,131, Oil is $79.87, and Nat gas is $5.48.  The dollar is $1.67 to the Pound and $1.45 to the Euro and we’re at 91.5 Yen. 

    Oops, getting weaker now and the dia $106 puts are just .36 and could be fun for a ride down and if we do head higher, we can cover with the FEB $108 calls, now $1.18 to scalp a move higher but not with the Dow below magic 10,650!


  22. judah – IWM just sitting on the 10dma.  Tough to get direction.  I think if it moves up the move will be small, if it moves down the move will be much bigger.


  23. Not BA, BAC!


  24. judah – taking a stab with TZA at 9.20.


  25. RMBS – late yesterday I believe, MU filed a sealed motion for continuance.  So, RMBS in a flux not knowing what judge Kramer will do.


  26. Phil/RMBS. Or someone trying to scare others into thinking there is a problem in order to buy cheaper shares when the news comes out.  This stock always goes crazy on rumors.  That’s why I’ve got the LEAP calls--some day the trial will begin…


  27. Phil – I got a sneeky feeling about this market.  I think this elevator is heading down a few floors.


  28. SS, nice call.  I got temporarily distracted just as the IWM broke below the 10 dma.  sigh…I’ll wait for the ride back.


  29. GOOG/Onc – Not down enough to interest me yet.  Hopefully someone calculates that this shaves 20% off their value and they drop to $550 or lower, then I want to get in. 

    WFR $13.50 looming again.  VLO $16.50 is the other entry we love.  Gasoline is still holding $2 but probably won’t after the inventory report.  

    Good job on that pair trade Cap!

    While the White House congratulates itself on last year’s stimulus package, here’s a staggering statistic: Nearly 38M people, or one in eight Americans, rely on food stamps.

    The Fed’s equity could be wiped out by a 2.8% drop in the value of its Treasurys and its Fannie/Freddie securities, writes Heard on the Street. "True, the Fed could hold on to those securities and ride out any losses… but what self-respecting central bank wants to risk a negative net worth?"

    Thou doest protest too much, say many economists about Bernanke’s insistence that low interest rates didn’t cause the housing bubble. In a WSJ survey, over 75% of economists disagreed with Bernanke’s assessment.

    Mark Thoma weighs in on whether or not low interest rates were to blame for the housing bubble, and makes the very good point that the answer doesn’t have to be an either-or.

    German officials are raising their 2010 growth estimates, but Germany’s awful 2009 GDP data may signal more of a double-dip than an actual bottom.

    Bloomberg’s global economic confidence index rises to the highest level since the series began two years ago. "It may be a slow recovery but it appears to be sustainable and this is likely to give the markets the backbone they need to continue normalizing."

    As it continues to add customers, MetroPCS (PCS) is pushing ahead with its planned price war, offering service packages $10 cheaper than similar plans from Sprint (S). MetroPCS execs admit the move will hurt profitability, but are hoping the losses will be offset by higher customer retention.

    Really?  REALLY???  While Ford (F) bets on small cars, GM is staking its fortunes on full-size pickup trucks. A major update of its truck line could cost the company close to $1B.

    Sector ETF strength: Base Metals– DBB +1.8%. Healthcare Providers– IHF +1%. Silver– SLV +1%. Pharma– PPH +1%.
    Sector ETF weakness: Gasoline– UGA -1.5%. Heating Oil– UHN -1.3%. Oil– USO -0.8%.

    MS and some other Gang of 12 member upgraded their outlook on metals by 30% – that’s why they are up.  This is total BS pumping, trying to keep the markets up today.

    Dow leaders: MRK +3.7%. KFT +1.7%. BA +1.5%. PFE +1%. DD +0.9%.
    Dow laggards: GE -1.1%. T -0.7%.


  30. Funny how not one other Bank Exec has fielded a question.  The Squid is the only one.


  31. juday – Looking to get out at IWM 62.92.


  32. And wheeeeee!

    What’s scary is, this isn’t even very much volume so far – just 37M at 10:22 (50M at 11 is "normal").

    Elevator/SS – Looks like someone cut the cable!


  33. Phil:
    not getting out of bed cost me 7$ on BIDU, yet i AM NOT GREEDY AS THE POP WAS STILL 43 $, made 11$ with my putters.


  34. Phil, What about GE, what’s the PSW trade on it if any? i have not seen it mentioned much here.
    I hope whoever was talking about those AAPL naked calls yesterday did not pull the trigger.


  35. SS, Looking to get into TNA at 62.92. ;)


  36. Commodities taking it on the chin.


  37. Squid Boy/SS – I heard that they have pumped up their contributions, especially to the Democrats, considerably.  Remember this one:

    The Democratic Chairman of the Agriculture Committee yesterday announced to the press that “The banks run the place,” in reference to the US Congress. He is the second notable elected official to speak out in recent weeks over the gross and institutionally corrupt conflict of interest on Capitol Hill.

    “I will tell you what the problem is,” Collin Peterson told the New York Times, “they give three times more money than the next biggest group. It’s huge the amount of money they put into politics.”

    The New York Times reports that the top five financial sector companies — Goldman Sachs, Citigroup, JP Morgan Chase, Bank of America and Credit Suisse — gave $22.7 million and spent more than $25 million combined on lobbying activities in one year.  The banks have literally bought the House of Representatives

    Uh oh – I dont’ see the oil report but oil is diving down to $78 and we’re getting a nice, fresh leg of selling from OIH and XLE components.  USO hit our target $39 so YAY!!!

    Now we’ll see what levels they can hold.  SOX are leading us down again today but the volume isn’t there to stop the stick men.  We need to protect that 20% gain on the DIA puts! 

     

     


  38. BIDU/RMM – Congrats, good call!

    GE/Bord – I don’t like paying an extra $1 for them until we get our breakouts.  Long-term I like them and you can do a 2012 $15/20 bull call spread for $2 (.35 premium) and sell 1/2 March $17.50s for .42 as that’s .20 per long over 2 months so 10 of those sales is a free spread.

    Oil Holding $78.50 so far. 

    EIA Petroleum Inventories: Crude +3.7M vs. consensus of +1M. Gasoline +3.8M vs. consensus of +1M. Distillate +1.35M vs. consensus of -1.8M. Crude oil -$2.09 to $78.70.  ROFL!!!


  39. Phil
    I own OIH FEB BEAR CALL SPREAD 130/125. With todays report whats your take on this one? Thanks.


  40. Keep in mind that oil number is WITH 2.2Mb PER DAY LESS oil being imported than last year.  That’s another 17.5 MILLION barrels that are not being used vs. last year.  Wow, our economy must be booming with so little oil being used – that’s the same logic they have for China, who are also using far less oil than last year.

    On 1/2/09 Oil was $46.17 per barrel and we were using 10% more of it!

    Sorry but this market is priced to fantasy….


  41. judah – looking back on the daily IWM I can see support at 63.20. From 12/23 to 12/31 this line was support/resistance for 6 days straight.  So, it should provide support today.  I should have gotten out of TZA then, if it comes back to it I will.


  42. Phil -
    I am short  POT FEB 125 calls- cost basis 4.22  -  I don’t see any reason to close these out – do you?


  43. SS, Yes, that was the pattern yesterday. Fell hard after breaking the 10 dma down to 63.25 and moved up well from there. That was my entry target yesterday, but today for some reason I thought today we’d go closer to 63.  No matter, this really is like a train--miss one and there will be another along later.


  44. What do you think would be a good downside play, other than uso, on oil?  xom maybe?


  45. Hi Phil,
    Fun NLY play, even in accounts without margin.  Sell Jan 17.5 puts and cover with Jan 7.5 puts for a net credit of $5 on the $10 spread.  Makes for a very enjoyable 100% (unless you have margin and don’t need to do the vertical) in 2 years.  Breakeven is $12.50 near the 52-week low and the spike low of $10. 


  46. Phil/EDZ.  You suggested the other day that if I want to roll the EDZ 5 puts I sold, I should wait until the last minute.  By last minute you mean like last half hour, end of the day Friday, right?  They’ve made me money, I’m happy with them, and I want to keep selling EDZ puts, but I just wanted to check to see that I understood you correctly.


  47. Still watching DECK. It runs up each morning (and then I short it), then sells off, and so far has put in a series of lower highs. I think it will likely break down to at least the 105 area, but if it makes a new high I’ll go long for another breakout.

    X touched recent support in the 61 area, bounced, but is now selling off again. A failure to hold 60 will probably send it to the 57 area. SPG finding resistance now at 76 but if it can close above it will look better for it.
     
    AAPL looks to me like it may fill the Christmas eve gap up.


  48. phil, what do you think about TXN puts here?  (selling puts to open/start a postion)  Do you still like LMT?


  49. Commodity futures aren’t following that little spike up there in the markets.


  50. Phil, thoughts on AXL here as well.  If F and GM are realling turning around then AXL should really take off?


  51. Phil,
    Are you still in the SMN Apr 10c? Those have been decimated. What to do?


  52. how can we not be selling calls into these stupid spikes ?
    sold spy jan 114 @.62 this am – closed @ .49
    sold spy jan 114 @ .63  & watch out for stick


  53. Phil or others – whats a good entry on zion for buy write


  54. XOM/Jtif – I wouldn’t bet against XOM with earnings coming up but this massive pullback on refinery utilization and production makes me think OIH continues to be a good short as some of those companies may disappoint (especially the ones that get paid in dollars).

    They tried to run oil back up but got rejected at $79.50 we’ll see what happens now.

    VNO crawling back up along with BXP and the rest of the hot, Hot, HOT CRE space.  SRS down at 2.5% rule already!

    NLY/Bill – It’s good if you are not worried about the REITs too much. 

    EDZ/Judah – The $5 puts are .40 and still have a nickel of premium so you can offer .35 and be done with them but spending the nickel to get out early is more than 10% you’re giving away.  Do that 10 months a year and you’ve lost 100%.  So you want to wait until either the premium is essentially wiped out or you feel it’s not possible for your position to improve – which was not the case the other day but may be the case on today’s nice move up.  If we close green, then the other markets could bounce but you can always cover with FXI $41s, which have just .10 in premium and can make the whole .40 very fast if we start to recover. 

    Back in the DIA $106 puts at .35.

    Oil back to $79 yet again and OIH heading higher. 

    TXN/Jo – I do like that trade, selling the Feb $24 puts naked for .68 is a nice net entry.  AMAT Feb $14 puts sold naked for .60 is also a nice entry..   Wow, look – bottom fishing!

    AXL/Jo – I don’t trust GM to do anything and AXL is already up a lot.   I’d wait until after earnings and maybe you can get in on a nice dip.

    SMN/Ac – I’m in at avg .68 and they are .37 so will likely DD at .34 and wait for things to collapse. 


  55. Phil,
    Any suggestions for UUP puts- or stay away for now?


  56.  Phil, for those of us that are slowly scaling up long positions, can you comment on disaster hedges? I’m sure you’ve done it before, but cant find them. Anyone else have any input on this? thanks!


  57. Phil/FXI to cover.  I like that.  I’ll be looking at it depending on how we close today. Thanks as usual.


  58. Phil,
    Assuming BIDU returns to planet earth soon, what do you think of a ratio spread
    Buy 1X Feb 430 Puts @ 21.50
    Sell 2X Feb 400 Puts @10.50
    Maximum gain at 400 on Opex Feb
    Keeps things in the positive until 370.
    Comments


  59. Spikes/Samz – Because the bullbots have us SCARED!

    ZION/Samz – They can go much lower but starting with the sale of the Feb $15 puts at .80 is not a bad way to go but they were $1.20 earlier today so maybe wait and hope to get $1+ on a pullback.

    UUP/Drum – That jobs report makes it a stay away.  Also, China is tightening, the UK is tightening, Australia is tightening – pretty soon we’ll be the only loose-money currency and that can make us weaker.  Since there’s no demand for commodities, the best way to sustain them is to kill the dollar and everyone is waiting for the next $1Tn bailout.  Listening to today’s hearing – it sure doesn’t sound like any changes are going to come to the Financials so the free money party can rock on. 

    Lloyd BlankfeinLloyd Blankfein testifies that he was never asked to take a discount on the AIG swaps held by Goldman Sachs (GS) that got paid out at 100%. “I never got a request myself about taking less, it never came up in any conversation I can recall,” he told the Financial Crisis Inquiry Commission. (live videoROFL – It never came up in any conversation???  I can recall 100 conversations in the media on the topic – was Blankfein vacationing on Mars while these discussions were going on?

    Disaster Hedges/Hanna – Didn’t we just do those in the Weekend post?  Check that post and let me know if I’m wrong.

    Copper back to $3.40 on this BS: Metal prices may average 32 percent higher this year because of strengthening industrial production, driven by growth in China, said Morgan Stanley.  “The economic outlook has improved materially in response to unprecedented fiscal and monetary stimulus initiated in 2009,” analysts led by Melbourne-based Peter Richardson said today in a report, citing copper as its preferred metal.

    I guess MS doesn’t read BW:  China’s measures to rein in lending may curb price gains in copper and aluminum on concern the move foreshadows higher interest rates that will limit demand in the world’s largest metals consumer, four analysts said.

    “The government’s decision to pull back liquidity will damp commodities across the board,” said Fei Zhonghai, general manager at CGOG Futures Co., a unit of Cofco Ltd., by phone from Beijing today. China’s move may extend a decline in copper, said Chen Yonglin, an analyst at CITIC Newedge Futures Co.

    China’s increase in the reserve ratio “may deepen a downward correction in copper, to below $7,000 in the first quarter,” said Chen from CITIC Newedge Futures from Shanghai. The reserve-ratio move will almost certainly hurt investment demand, Chen said. Copper for three-month delivery traded at $7,338 a metric ton at 3:39 p.m. Singapore time today.


  60. It’s quite possible Blankfein was never asked to take a loss on the AIG swaps. If AIG declared BK GS would have just seized the $7bn+ in cash collateral that they held against their CDS positions, and also collected $2.5bn from the other counterparties that they had insured their AIG position with.
     
    They (GS) had it perfectly locked up, as it turns out, and presumably everyone in the negotiations knew this. A threatened AIG bankruptcy would not have hurt them (directly, anyway).


  61. Phil: any AAPL puts to trade ?


  62. BIDU/Onc – I don’t think they go back down but it’s a good risk/reward.  If GOOG marches out of China then BIDU is up 50% in search share and they weren’t doing badly before the boost. 

    10,675 is where we topped out yesterday on the Dow but the S&P is way below Monday’s 1,148 and the NYSE is well below 7,460 and the RUT far from 648 and the Nas isn’t even over 2,300 so this is just a runaway Dow at the moment.

    Oil back to $80 – that is incredible!

    GS/Eric – Who doesn’t at least ask a creditor to take a haircut to avoid BK? 

    AAPL/RMM – They hardly fell, not interesting enough. 

    SHLD breaking 52-week highs.

    The SEC votes 5-0 for a proposal to ban "naked access," where high-speed traders anonymously buy and sell large chunks of stock without a broker’s intervention. "Today’s proposal would, in short, require that if a broker-dealer is going to loan his keys, he not only must remain in the car, but he must also see to it that the person driving observes the rules before the car is ever put into drive," says SEC’s Schapiro.


  63. Lloyd, it is one thing if you are a principal/fiduciary in matching a buyer and a seller in a house transaction.  But, it is quite another when you are a home builder who sells a house that you know has faulty wiring, and then you take out insurance on that house on the good chance that it will burn down.


  64. Phil, you don’t ask if the creditor has nothing to lose from the BK, but lots of other vulnerable institutions do, and everyone knows this. It shouldn’t surprise us in retrospect that GS knew that AIG was doomed and had fully insured themselves against their collapse.
     
    GS really held all the cards in this game.


  65. Phil: is GOOG quitting China ?what’s the news?
    what are AGRI stocks now ? any trade ?


  66. Hedges/Phil : Whoops! You’re totally right….not enough coffee this morning.


  67. Phil,
    My ENP Mar 17.50 straddle has been getting away from me. Should I buy to close the call side on this pullback? Obviously your bullish since it is on the Buy List but please advise.


  68. Man, the photos coming out of Haiti are horrifying.


  69. JRW, You around today? 


  70.  Wow. Nice "V" shaped charts.


  71. They are wasting a lot of time asking Blankfein the wrong question.  Of course Goldman Sachs writes products they don’t believe in – that’s their job.  The CBOE writes puts AND calls  – that doesn’t mean they are cheating, it means there is a demand for each from their clients.  It’s not about the fact that GS created products that were contrary to their internal positions but HOW they sold the contrary products and did they, in fact, benefit from creating a contra- market they could bet against?  This is a bit too complex of an issue to figure out in Congress over the course of a few hours.

    Where GS stood with their clients pales in comparison to their involvement in bankrupting BSC and LEH and, of course, what they are currently doing as they account for 47% of all market transactions.  The more they skate by in these hearings, the happier the market gets and they are going to run this meeting right into the BBook. 

    GS/Eric – The government, who was giving GS $10Bn of TARP money could have conditioned it on at least a $2Bn haircut on AIG – SOMETHING! 

    GOOG/RMM – All sabre rattling at the moment:  

    Yahoo (YHOO) says it is "aligned with Google" (GOOG) in condemning "cyber attacks" that have Google thinking about leaving the Chinese market. Some 34 companies are believed to be targeted in the attacks; Adobe Systems (ADBE) said yesterday it believes it’s been hit. GOOG -1.5%; YHOO +0.9%; BIDU +12.2%.

    What Google’s threat to pull out of China really means

    Wilbur Ross (who gathered distressed assets to form International Automotive Components Group) says the government needs a new "cash-for-clunkers" program "tomorrow" to stimulate the economy and create jobs.

    ENP/Ac – You have the stock I hope…  At the moment, there’s not much to be gained by rolling but keep an eye on breaking the March $17.50s (now $3) up into the June $20 puts and calls for about even. 

    This is very intersting math on the indexes, the lower the volume, the higher they go.  We got a retest of the top and we’re on lunch volume for a while longer.  12:30 Dow volume is 85M up 48M in 2 hours, which is right in-line with program trading.  

    Haiti/Eric – Thank goodness other countries have money to help with


  72. dd on the 106s or bail?


  73. Phil – what were you saying about the buy bots – oops.


  74. I trade SO MUCH BETTER when I don’t trade. "Don’t just do something, stand there!" right Phil? I come back from vacation to BIOF, PEIX, F, CYCC, MEOH, PAL, ELN all just blowing out the tubes.
    The cherry on top was eyeballing BIDU’s chart yesterday and buying Jan 400 calls (for fun) and a Feb 450 for a short term hold. In the car on the way home from work my wife reads a story about GOOG pulling out of the chinese market — and boom 1700% gain the next morning! After a bunch of miserable picks in Q4 last year, this made a nice start to 2010. Happy trading.


  75. US Steel (X) Diagonal Position – FEB/APR 55/60 $1.75 credit
    Here’s a nice little trade for your IRA accounts. This diagonal has an extra month to roll the short call in case you get in trouble; I think that’s it’s a very low risk trade; especially with Alcoa missing the other day.
    They announce earnings at the EOM
    -18 Delta with 0.86 Theta
    - Xlf’d


  76.  Phil, friday DIA puts 107 into the beige book? Seems a little risky, but….


  77. No ENP stock. This was one of those straddle entries like TIE that I didn’t fully understand to cover by buying stock. Not a big deal, small position and I think I just will kill it here since some of the previous loss has now been mitigated.


  78. I have to admit I’m starting to really like this market. You can buy nearly any breakout and quickly make money: JOYG, BAX, and SHLD just this week for me. My put positions keep getting plowed, but these upside breakouts make up for it. The fact that I’m liking it is probably a good indication that it’s about to change.


  79. XLF’d: please clarify this X trade for me.


  80. Phil, been away from my desk for a bit. When you say "Back in the DIA $106 puts at .35" Are you saying long puts?


  81. Those FXI $41s are up from $1.32 to $1.57 already!  Nice offset to the short side…  

    SNE making 52-week highs, that bodes well for Japan tomorrow and another reason to like FXI. 

    SHLD still flying, AMLN new highs along with RDY, AYR, FITB, IGR, FMER, GD, MSPD, SWM, LZ, ENOC, HMC, TGI, PAY, JDAS…

    At this point the DIA $106 puts dropped to .28, not enough for a DD to be worthwhile yet.  But an offer at .25 is not a bad idea and then look to get 1/2 back out at .30 (even).   We’re still playing for a dive on the BBook but if it goes the other way, there’s no saving this position so be aware of that!

    Bots/Samz – It’s the one thing we can count on in this crazy market.

    Cool BDC – Congrats!

    X/Xlf’d – That’s a good idea. 

    DIA/Hanna – I prefer the $106s, now .25 as they can double up fast and have a lower downside delta.  If we get a big move off the BB, it could be a drop all the way back to 10,500.

    ENP/AC – Well you can still roll them along to the June $20s.


  82. Do you think the sell-off in AET was overdone or are they now priced about right? This was another one I entered on Monday for the ride down.  :-)


  83. DIA/JB – Yes, buying the Jan $106 puts for (now average) .30. 

    Those of you who hit the DD, don’t forget we only doubled down to knock the basis down and we want to get 1/2 back out at .30 so we are back to 1x at .30 so don’t be greedy!


  84. RMBS. Looks like it got bad news at the 12:30 hearing…


  85. Phil: so what trade would you put on FXI ?


  86. RMM,
    Well, its easy of your using ThinkOrSwim’s trading platform…..but basically we’re selling the FEB 55 Call & Buying the APR 60 Call on US STEEL (X) at the same time using a combo "Diagonal" order.  The initial position pays you $1.75 credit to start this trade. So you only have $325 at risk with (1) to roll the FEB short call to MARCH; leaving us with diagonal or calendar spread…hopefully for credit.
    I would post an image of the trade if I could, but I think we’re limited to TEXT/ONLY here.
    - XLF’d


  87. Volume still looks pathetic. Banks having trouble holding onto gains, now REITs are softening too – I smell a bull trap forming.


  88.  White house commented on GOOG story, saying they are eager to hear what Beijing has to say in response to GOOG accusations and threat to withdraw. Likely positive for GOOG, IMO


  89. Out of WFR with a wee profit after my DD this morning, although I almost puked when it went under $14. Hope the BB reading produces some bargains this afternoon. Got out of TBT for even-steven before 10-yr sale since I thought it could go either way. Wee Profit in the hand is better than a home run in the bush.


  90. AET/AC – If they get back over $31 (50 dma) then that’s interesting but the chart looks like the test the 200 at $28. 

    RMBS very strange.  No official news on what’s going on yet.

    FXI/RMM – It was the $41s at 11:37 but they ran up already so I’d stay out now and see what the BBook looks like.  If our market takes off, then the Feb $43s, now $1.20 are a nice play.

    I’m torn on picking OIH shorts as I am trying to be bullish but selling the naked $130 calls for $1.32 is a good trade.  They can be rolled to the Feb $140 calls even and will lose value very quickly if OIH is rejected at $130.   

    Oil is staying at $80.  I guess if we had a draw in crude it would be at $140 a barrel now….

    Bull trap/Eric – The whole last 10% has been a massive bull trap I think.  Very possibly we will hit an event in which all the people who bought stocks for the past 3 months will be given about 1 day to sell before losing all their gains and then some. 

    GOOG/Hanna – Well it’s not like any negotiations we’ve done with China have worked in years.  Even Pauson failed to get concessions from them and he’s scary!

    Very useful lists from Bespoke:

    Furthestbelow112

    Furthestabove112


  91. A day at the beach and WT-100 in the evening can really make a difference. My screen is back to green, and the DD’s yesterday paid off. I heard from my friend in SF at the MS Pharma conference- he said the TEVA presentation was very positive. They believe their market share of generic drug business in the US will soon rise to 35% from its existing 22%.


  92. BID hitting it’s 52-week highs – If you’re not in the top 10%, they won’t even let you look!

    Chicago Fed President Charles Evans: Tight credit is keeping the reins on recovery – and the jobless rate high – but things could get surprisingly robust as some news is coming in much better than expected. Expects average GDP of 3-3.5% in 2010. Inflation isn’t going through the roof or falling through the floor; monetary policy will work to keep inflation near 2% over medium term.

    The Treasury sells $21B in 10-year notes at 3.754% (.pdf). Bid-to-cover ratio of 3.00 vs. a recent 2.8; indirect bidders take 29%, well off a recent 45.9%; direct bidders take 17.3%, highest in at least a year. Treasurys dipped slightly after the sale: the 30-year yield +0.06 to 4.68%; 10-year +0.05 to 3.76%; 5-year +0.04 to 2.52%; 2-year +0.04 to 0.95%.

    Well over 100,000 have died in Haiti’s earthquake, the country’s prime minister tells CNN.  That’s what, about 400 miles from Miami and we have a massive earthquake?  Don’t forget Cali had one this weekend – things are shifting…

    Would Google (GOOG) leaving China (a move that could lay groundwork for more exits) be a bold step – or a cowardly one?

    TEVA/Gel – I like those guys but they haven’t gone on sale in ages.

    AMZN with a snap up, taking the Nas over 2,300 again.  RIMM up past 2.5% and AAPL waking up so just waiting for GOOG to turn it around I guess


  93. Phil – do you like GOOG with a high likelihood of catching the other tech names?


  94. Phil, nice bespoke list – what do you think of Steris – I see their crap all over the operating room – what are their fundies like? Do you still like LMT?


  95. Gel, i think TEVA is a solid pick – valuation is a bit fair but they wouldn’t be pounding the drums if they didn’t have a good story to tell.  Thinking about sell 60 Jan 2011 puts for about 6 – not a smoking deal, but i would buy teva at 54 and not worried about the margin.  If i find better deployment of the cash, i will close out the trade.  Been looking at WU – like the chart and fundies.


  96. Hi, Phil, any idea of how best to play January options this week?  
    and best way to play GOOG and BIDU ?
    and
    how to best use the lists above , of stocks most above and below their moving averages?


  97. Nice Gel, that day off did wonders.

    GOOG/Llorens – Every sell-off is not a buying opportunity.  How much of their revenues come from China?  How much of their growth projections were China.  How many Chinese eyeballs are counted in their current ad revenues?  If you don’t know the answer to those questions (and I don’t) then how can you decide what a "bargain" is for GOOG?  EVERYTHING positive in this market is based on Chinese growth and now we have GOOG giving China up entirely and we act like that doesn’t matter?  If they were down $40 I’d say sure, take a gamble but down $7???  If I didn’t want to pull the trigger yesterday then potentailly terrible news and a 1% discount isn’t going to get me rushing out to buy today – but that’s JMHO….

    STE/Jo – I like all those disposable medical plays.   I don’t know them in particular and I want to find out why they tanked in early Dec before jumping in but they look like an interesting candidate.  LMT I still like a lot.

    You need to like those DIA puts a lot to hold them with 5 minutes to BBook! 


  98. GOOG claims 30% of the search market in China? Wow. That’s amazing. I have never seen anyone use it in China.


  99.  nice call on the short OIH 130 calls.  I decided to short 2 OIH 130/135 verticals instead of the naked calls.  Since the 135 call is only going for $0.15 thats was net $1.23 credit for $500 in margin.  In my opinion that is a much better use of margin since the naked call requires $3000 in margin. 


  100. GOOG,BIDU/DMan – Cap had the right play this morning, shorting GOOG puts and BIDU calls but now I don’t see much on either that I like.  As to Jan options – I’m just messing around with the DIA puts ahead of the BBook – it’s hard to get excited about playing things this close to the top if we aren’t getting through it.  The lists above are great to buy the ones that are oversold and short the ones that are overbought but we need to look over each one and make a decision, hopefully I’ll get around to that soon. 

    Gotta love the way VNO gives us a crack to shorty them at$ 70 almost daily…

    GOOG/Steve – That’s the statistic I saw. 

    OIH/Craig – Cool!


  101. Don’t forget you can’t trust Leesman to tell you if the sun will come up tomorrow!

    Here’s the book – doesn’t look like much improvement over last time but we’re bouncing at the moment.

    Last time Steve said the book was great and it sucked, now it sounds kind of so-so and we’ll see. 

    I’ll have a review shortly but assume up is a head fake at the moment.


  102.  Woohoo. TBT seems to be reversing its dip yesterday.


  103. Many of those "Above 50 DMA" stocks in Phil’s list above are an easy short in the sense that the stocks have a clear exit point if the stock moves back up (namely the recent high, which in most cases is fairly close by). I have Feb put verticals on X, PCX.


  104. Jomama
    I like the 011 60 puts and got filled at 5.90. Can’t go too far wrong with this much excitement at the presentation. The other presentation that was notable was MDVN. re the alzheimers drug.. I have had the stock for awhile, but the positive reception might give it a boost.


  105. Hi craigzooka
    Very much like to know where you pull up these margins same deal on OIH 130c naked 5117.00 Vertical 800.00


  106. Transports still soft despite lower oil. It’s going to take a close above SPX 1146 to make me feel more bullish right now — but if we do that then probably up to 1160.


  107. Could be one of the largest CRE defaults -
    Stuyvesant Town Debt Holders Weigh Foreclosure (Update1)
    http://www.bloomberg.com/apps/news


  108. Samz – Surely there are some ‘green shoots’ to your story! No doubt SRS will come crashing down….


  109. SCHW…very strange trading youd think someone was going to take them out at 19


  110. Phil, look at the XHB 15/20  2012 Call spread…..about a 1.5 debit for a possible 3.5 gain?  plus about 1$ in the money…..i know plenty of risks but perhaps a good upside hedge.


  111. Problem at Grand Central ?  SWAT teams ?


  112. Problem at Grand Central ?  SWAT teams ?


  113. Keep in mind this is a collection of anecdotal information (Bernanke’s friend is a mechanic and he says a lot more people got tires last week…) and the Fed will try to spin it as positive as possible so watch out for key moderators, which I will try to highlight.

    Reports from the twelve Federal Reserve Districts indicated that while economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically than in the last report. Ten Districts reported some increased activity or improvement in conditions, while the remaining two--Philadelphia and Richmond--reported mixed conditions. The last Beige Book reported eight Districts with increased activity or improving conditions and four Districts showing little change and/or mixed conditions.

    Most Districts reported that consumer spending in the recent 2009 holiday season was slightly greater than in 2008, but still far below 2007 levels. Retail inventory levels remain very lean in nearly all Districts. Auto sales held steady or increased slightly since the last Beige Book in most Districts. Reports on tourism were mostly flat or weak, but for two Districts whose ski resorts enjoyed early season snowstorms. Nonfinancial services activity generally improved in Districts that reported on this sector. Of five Districts reporting transportation services, volumes were slightly up or mixed. Manufacturing activity has increased or held steady since the last report in most Districts. Among Districts reporting on near-term expectations, the manufacturing outlook was optimistic, but spending plans remain cautious.

    So far, this report is both wishy and washy!

    Toward the end of 2009, home sales increased in most Districts, especially for lower-priced homes. Home prices appeared to have changed little since the last Beige Book, and residential construction remained at low levels in most Districts. Commercial real estate was still weak in nearly all Districts with rising vacancy rates and falling rents. Since the last report, loan demand continued to decline or remained weak in most Districts, while credit quality continued to deteriorate. Cold weather at the end of the year adversely affected some late crops and stressed livestock, but above-average yields for early crops were reported by some Districts. Energy-related production has risen moderately since the last Beige Book.

    CRE continues to sound like the Titanic, with a little more water pouring in at each report.

    Although some hiring was reported in a few Federal Reserve Districts, labor market conditions remained generally weak with modest wage increases appearing in just a few Districts. Price pressures remained subdued in nearly all Districts, though increases in metals prices were reported and agricultural prices have been mixed.

    Consumer Spending and Tourism
    Consumer spending in the recent 2009 holiday season was modestly greater than in 2008 for eight Districts, although as retailers in the Philadelphia and San Francisco Districts noted, 2008 sales were so low compared with 2007, that the relatively small 2009 gains did not represent a significant shift in trend. Consumers were variously described as cautious, price sensitive, and focused on necessities, but sometimes willing to spend on discretionary purchases. Kansas City and New York reported holiday sales comparable to prior year sales, while Cleveland and Richmond reported weaker holiday sales in 2009 than in 2008. Entering the holiday period, retail inventories were maintained or lowered further to lean levels in the Atlanta, Boston, Chicago, Cleveland, and New York Districts. Some Chicago retailers reported running out of high-demand items during the holiday season, but inventory levels rose slightly in the Kansas City District.

    Auto sales were flat or up slightly for some dealers since the last Beige Book in the Atlanta, Chicago, Cleveland, and Philadelphia Districts. Dealer incentives boosted year-end inventory clearance according to Chicago District contacts. In the Dallas, Minneapolis, New York, and San Francisco Districts auto sales held steady or were mixed across states. The Kansas City and Richmond Districts reported lower auto sales since the last report. Some dealers in the Cleveland and New York Districts cited difficulties securing floor-plan financing. Difficulties securing customer financing was a concern cited by some Kansas City District dealers, while Philadelphia District dealers credited easier financing for supporting their recent sales.

    Early-season snowstorms gave ski resorts a big lift in the Richmond and Minneapolis Districts; otherwise travel and tourism reports were mostly flat or weak in these and other Districts. One Minnesota-based travel services firm shut down due to lack of demand, and Richmond’s tourism contacts reported consumers searching for deeply discounted packages and dining out less despite special offers. The New York, Atlanta, and Kansas City Districts also reported flat or weaker tourism. New York City’s Broadway theaters reported weaker attendance this past holiday season than in 2008. Atlanta reported sluggish tourism throughout their District, but expected a boost from hosting upcoming National Football League events, and from strong 2010 cruise line bookings--a result of deep discounting. Kansas City and San Francisco noted sluggish business travel, placing downward pressure on airline passenger volumes, while Dallas reported airline demand recovering and fares stabilizing. The San Francisco District reported greater visitor volumes in Hawaii and Las Vegas, while occupancy rates in Seattle and Southern California were down.

    Travel was not a problem area last time, this is coming on fast to challenge CRE as our biggest disaster (autos being a given).

    Nonfinancial Services
    Districts reporting on nonfinancial services generally indicated an upward trend in activity, although in some areas reports were mixed. Boston reported widespread positive activity in advertising, consulting, private equity firms, healthcare, biotechnology, education, and government services. High-tech service firms reported favorable conditions in Kansas City. New York reported a general pickup in activity. Health care providers reported increased demand in the San Francisco District, while professional services, especially advertising and accounting weakened. The Minneapolis District also reported mixed results across sectors, while activity in the Richmond District was generally down. Hiring through staffing firms was reported up in New York, Cleveland, Chicago, and Dallas with office and health care workers in greatest demand. Direct firm hiring was reported up in the St. Louis District, flat in Dallas, flat to down in New York, and down in Richmond.

    Among the five Districts reporting on transportation services, activity was mostly up slightly, or mixed. Freight shipping volumes were up slightly in the Atlanta, Cleveland, and Dallas Districts, while Kansas City reported a slight slowdown in activity. The Richmond District’s port activity gained from increased international trade, especially imports of high-end vehicles, but intermodal firms in the Dallas District reported that imports dropped and exports flattened producing no increase in cargo volumes. Dallas also reported continued declines in rail cargo volume.

    Hi-Tech, Biotech, Financial Consulting, Travel to Hawaii, High-End Vehicles – all things that go to the top 10%’ers where the economy is just fine and dandy.

    Manufacturing
    Manufacturing activity has improved since the last report in six Districts. New York reported a general pickup in activity, broad optimism, and some increase in employment. Production was stable or slightly up in the Cleveland District. Firms in the Cleveland District expect greater export opportunities going forward, but steel firms expect slow growth in overall demand. Manufacturers in the Chicago District cited gains at firms tied to the auto industry and those benefiting from an increase in exports to Asia. Firms in the Boston District also cited Asian exports as well as defense work as sources of their positive demand, but identified weak demand for exports to Europe and for products related to energy sectors and commercial construction. San Francisco reported a modest net improvement in manufacturing activity, with semiconductors strengthening and aircraft and parts stabilizing at moderate levels. Metal fabricators and housing products have also stabilized, but at very low levels.

    Three Districts reported mixed results for manufacturing. Food products, furniture, and chemical firms reported slight increases in the Philadelphia District while other manufacturing sectors continued to decline. Dallas reported strength in high-tech and corrugated packaging, seasonal increases in food producers, little change in fabricated metals and petrochemicals, seasonal decreases in aircraft components, and weaknesses in emergency vehicles and construction-related manufacturing. The Minneapolis District reported manufacturing activity up in Minnesota, but down in the Dakotas based on a recent survey of new orders.

    Manufacturing activity was weak in the other Districts. Richmond reported widespread weakness across shipments, new orders, and employment within its manufacturing sector and Atlanta saw orders and production drop back after an increase in November. The St. Louis District reported a continued decline in activity, persistent weakness in employment, and plant closings, on net.

    Where is my man jumping out the window sound effect?

    Manufacturers’ expectations for the near future as reported from the Boston, Chicago, Cleveland, Kansas City, New York, and Philadelphia Districts were all optimistic, although Kansas City firms were less optimistic than the last report. Capital spending plans remained more cautious. Only Boston and Philadelphia reported that firms were planning to increase capital spending in the current year. Cleveland, Chicago, and Kansas City reported expectations of continued modest spending.

    So they are ALL optimistic but only 2 of 12 are actually planning to spend, the others just hope to plan but they feel really good about it

    Real Estate and Construction
    Homes sales increased toward the end of 2009 in most Federal Reserve Districts, except San Francisco, where demand for housing has been steady, and Kansas City, where residential real estate activity has eased since the last Beige Book. In New York, Richmond, and Atlanta, residential real estate activity was described as mixed across areas of the District. In the Atlanta District, existing home sales increased, but new home sales decreased. In all Districts, sales of lower-priced homes tended to increase proportionately more than sales of higher-priced homes, due at least in part to the first-time buyer federal tax credit, according to real estate contacts. In several Districts real estate contacts reported that the original expiration date for the credit boosted sales in November and led to a more than usual slowdown in sales in December. However, some contacts noted that the extension of the credit into 2010 could give an added impetus to the expected seasonal sales upturn this spring. Residential construction activity remained at low levels in most Districts, although home building was reported to have increased in the Chicago and Minneapolis Districts. Home prices appeared to have changed little since the last Beige Book, overall. Boston, Philadelphia, and Cleveland reported declines in home prices since the last Beige Book. Richmond reported nearly steady prices. Dallas reported some firming in prices.

    Nonresidential real estate conditions remained soft in nearly all Districts. New York, Philadelphia, Kansas City, and San Francisco reported further weakening in demand for commercial and industrial space. Boston received mixed reports on sales and leasing activity from commercial real estate contacts in the District, and Minneapolis reported some increases in sales of commercial buildings. Richmond reported that sales of nonresidential properties remained slow, but that leasing of office and retail space has picked up. Vacancy rates were rising and rents were declining in most Districts. Several Districts reported that landlords were focused on tenant retention and that slack demand was allowing tenants to negotiate lease extensions at low rents and with favorable allowances. San Francisco reported that lower rents appeared to be supporting an upturn in leasing in some parts of that District, although vacancy rates continued to rise. Nonresidential construction activity was generally weak in all Districts, although St. Louis reported some gains in construction of education facilities and Cleveland reported a recent increase in nonresidential contracting.

    Could this actually be getting worse than the last report?  No way, last report, VNO was 40% lower.  In fact, the whole IYR was 20% lower than it is now.  Maybe the Fed just isn’t talking to the right people.  Yeah, that’s the ticket! 

    Banking and Finance
    Loan demand continued to decline or remained weak in most Districts. St. Louis, Kansas City, Dallas, and San Francisco noted general declines or soft loan demand. New York reported declining demand for all types of loans except residential mortgages for which demand has been steady. Philadelphia reported continuing declines for all categories of credit. Cleveland noted declining demand for business loans and underutilization of commercial credit lines. Richmond reported that commercial and industrial loan demand was steady to slightly up since the last Beige Book but still down year-to-year. Chicago noted low utilization of commercial credit lines but an uptick in financing of mergers and acquisitions. Other recent increases were reported for mortgage refinancing in the Atlanta District and auto loans in the Chicago District. San Francisco noted a small improvement in venture capital financing and initial public offerings.

    A number of Districts reported that credit quality continued to deteriorate. Financial institutions in the New York District reported ongoing increases in delinquencies for all types of loans. Banks in the Philadelphia District reported that delinquencies and defaults continued to rise for all types of loans, although less sharply than at the time of the previous Beige Book. Cleveland received reports of steady consumer credit quality but high and rising commercial loan delinquencies. Kansas City noted year-over-year declines in credit quality among financial institutions in the District, and Dallas and San Francisco reported continued deterioration at financial institutions in their Districts.

    Wait a minute – We may have a new winner for worst sounding category!  Yep, I think we’ll have to give it to lending and credit quality.  I guess that’s just one more thing that doesn’t matter.

    Agriculture and Natural Resources
    Federal Reserve District Banks reporting on agricultural conditions generally indicated that cold weather at the turn of the year had adversely affected crops and stressed livestock. Atlanta noted damage to citrus crops from the cold, and Chicago and Minneapolis reported that winter storms halted corn harvesting, and impeded tillage and fertilizer application. However, Dallas reported that rain improved soil conditions after a dry period in that District. Corn and soybean crop yields before the onset of cold weather and storms were described as above average in the Chicago and Kansas City Districts. Kansas City also reported that the winter wheat crop was progressing normally. San Francisco reported an increase in sales of agricultural products, with a boost from a rise in demand from foreign countries. Agricultural prices have been mixed. Grain and soybean prices were mostly on the rise, according to reports from Chicago and Kansas City. Chicago also reported increased prices for milk and hogs, but a decline in cattle prices.

    Production of energy-related materials has risen moderately since the last Beige Book. Atlanta reported that oil production has continued to increase. Minneapolis reported an increase in oil and gas exploration, and Kansas City and Dallas reported increases in drilling. San Francisco noted an increase in extraction of natural gas but a continued low rate of oil extraction. In contrast to generally rising oil and gas production, coal production was reported to have declined by Cleveland and St. Louis, and falling iron mining activity was reported by Minneapolis.

    Employment, Wages, and Prices
    Labor market conditions remained soft in most Federal Reserve Districts, although New York reported a modest pickup in hiring and St. Louis reported that several service-sector firms in that District recently announced plans to hire new workers. In the Richmond District, temporary employment agencies gave mixed reports, but some noted increased demand for administrative and sales workers, laborers, and warehousing and distribution workers. Wage pressures remained subdued in most Federal Reserve Districts, and Atlanta noted continued wage freezes at some employers in that District. However, Boston reported some modest pay increases, and Minneapolis indicated that wages in that District have been level or rising moderately.

    Price pressures remained subdued in nearly all Federal Reserve Districts, although increases in metals prices were noted in Boston, Cleveland, Minneapolis, Dallas, and San Francisco. Raw materials prices, other than metals, were reported to be mostly steady, although firms in the New York, Philadelphia, and Chicago Districts noted some increases in the cost of the inputs they use. Agricultural commodity prices were reported on the increase by Chicago, Kansas City, and Dallas. Most Districts reported that retail prices have been steady.

    One again a pretty poor report and I’m not impressed (see 10/21 report notes here).  Is this the report we should be seeing at the end of a 10% run in the markets and commodities over 10 weeks?  Apparently the market thinks so as we have been going up since and making day’s highs but the volume is still light and I’ll be looking for a sell-off into the close or possibly tomorrow morning

    This is simply not an all-clear signal for the economy but we thought the market would stay strong while our banking friends testified and it is options expiration week so anything can happen but now I’m not willing to capitulate until we cross 2,314 on the Nasdaq – the last holdout of our index breakouts. 


  114. Phil — I own some uyg that was bought at 5.83 with the Jan 5 calls wriiten against them.   I wrote the calls a while ago so I’ve meade the premium.  If I wanted to hold the position, would you buy the calls back and write Febs, or just let the position get called away and re enter the stock on Monday?  Write puts instead?  If we like this sector then I want to be in in but not sure the best way to do it.


  115. Interesting the way the DIA $106 puts are holding up as we fly the wrong way.  Can’t hold them overnight, that’s too risky so we’ll have to take the nickel loss if it comes to that…

    TBT/Hanna – That’s kind of based on the interpretation of the BBook as positive, reducing the need for stimulus.  Maybe I’m just cranky but does anyone see this as a big positive?

    Shorts/Eric – Good strategy!  At the moment, it looks like we can wait for stocks to test those highs again before entering.

    VNO back at $70 and that’s one of my favorite shorts.  The Feb $65s are $1.25 and were $1.75 yesterday while a quick $1.50 would be very satifying.

    XHB/Jo – It’s a good risk/reward and it sure doesn’t look like anyone wants to hear a bad word about real estat, commercial or otherwise. 

    SWAT/Cap – Yet another bullish signal I guess.

    UYG/JCM – The $5s are $1.15 and you can roll them out to the June $5s at $1.45 and sell the $5 puts for .30 so that’s another .60 for you (10%) to take you through June.  With the low VIX, it’s about as good as it’s going to get.

    Our old friends fear and greed are switching places again, says Todd Harrison, as cash is once again anathema to investors. "It’s amazing really, almost like the financial crisis never happened at all."

    Fed’s Beige Book: Continuing modest improvements are now geographically broader. Ten districts report improved conditions and two others (Philadelphia and Richmond) are mixed. Consumer spending up, but still far below 2007 levels. Labor market generally weak and nonresidential real estate soft in all districts. – Sounds pretty good out of context doesn’t it?

    Treasury Budget (.pdf): December’s deficit was $91.9B, almost exactly in line with consensus, and lower than November’s $120.3B but still the 15th straight monthly shortfall. Receipts: $219B; outlays: $311B. The first quarter of fiscal 2010 ends with a cumulative deficit of $388.5B

    S&P downgrades California (already the lowest credit rating in the nation, at A) to A-minus and maintains a negative outlook. The firm last downgraded the state last February; now California faces another multibillion-dollar budget gap.

    Sector ETF strength: Pharma– PPH +1.7%. Silver– SLV +1.6%. Commercial Banks– KBE +1.5%. Healthcare Providers– IHF +1.5%. Livestock– COW +1.5%. Regional Banks– RKH +1.4%.
    Sector ETF weakness: Heating Oil– UHN -1.6%. Gasoline– UGA -1.3%. Clean Energy– PBW -1%. Oil– USO -0.7%. Telecom– IYZ -0.4%.


  116. so, things are still bad for the most part, and while some is better, some might even be worse?
     
    A market that wants to go up won’t pause on that news. The market is still trying to price in the next boom.


  117. how about the tbt feb 48 puts sold yesterday for 1.25.  the bb would seem to suggest maybe taking the $.20 profit but then again it’s an OTM put, so is there any rush to take the profit with so much premium left?


  118. Phil
    You are a realist, one who puts emphasis on the true fundamentals as they exist. I think this market is operating under a mind-set that thinks the worst is behind us and therefore it it uphill from here,no matter what. It is like the guy that just survived death- anything to the contrary is positive.


  119. Just relentless!!


  120. Yeah Phil, You need to be more like Cramer  ;)


  121. SDS under 33


  122. wow.  other then overbought sell-offs, is there any meaningful resistance between here and 11,000?


  123.  The facts don’t matter when the Fed is conducting quantitative easing operations, providing free money and the mandate from the back room is to raise equity values to take pressure off all credit vehicles and increase liquidity.  Is anyone really surprised at this?  Since this is a badly kept secret, my question is when the markets prepare for the end of QE in March – or does the Fed decide to extend the operations beyond March?   They don’t want to take the market off life support and have it die…my bet is that they keep this going for at least one or two quarters beyond March.   Especially if a major CRE default happens soon…


  124. Tomorrow is big data day with the usual Jobs at 8:30, Retail Sales 8:30, Import/Exports 8:30 and  Business Inventories at 10.  Before the bell is earnings from CLC, OHB and ZZ (tonight) and BGG, CRAI and SEED.

    Thurs night earnings are QDEL, INTC and SHFL and Friday Moring we see CRI and JPM. 

    Friday we have CPI and Empire Manufacturing at 8:30 and Industrial Production and Cap Utilization at 9:15 and Michigan Sentiment at 9:55.

    Boom/Barf – Unfortunately that’s why they call it a boom and bust cycle.  The assumption at the moment is that a 70% move up from the S&P low of 666 doesn’t constitute anything more than the early stage of a rally.  I guess if we are going to trade like an Asian market then sure, why not?  Just be aware that Asain markets lost 70-80% of their "value" with the Shanghai falling 50% in 6 months and then next 50% in 5 more months in ’08.  China spent 33% of their GDP to stimulate thier economy – that’s like us adding $5Tn (which we kind of did) but did we fix the hole or just fill the baloon with more air.

    Wow, this is just nuts.   At least the Feb $108 calls are earning their keep, up 10% so far.

    TBT/JCM – As long as you are REALLY willing to own them at net $46.75 then you don’t have to take the money but once they make 50%, then you need to consider it if there are more than 2 weeks left.

    Uphill/Gel – I agree.  As I was saying this morning, this "just doesn’t matter" phase of the market can go on for a long time.  Of course, long-term, we will retrace to value so if 9,500 is the right level now, it will still be the right level when we’re at 12,500 and it’s just a question of when we snap.

    Nas is getting close to 2,314, XLF over $15, OIH over $130, copper over $3.40 – only oil is lagging, down at $79.74 but I’m sure someone will attack something to push us over (I think it’s Iran’s turn to tussle with the US navy). 

    Resistance/JCM – Just the S&P 1,150.

    What happened to Congress – they never came back from their break? 


  125. Going short VNO and PCX at 3:59 and 59 seconds.


  126. Facts/LV – Yes but if you read the BBook (and there is more detail in the individual district reports) you’ll see that ALL this QE and direct stimulus has NOT fixed things.  So they MUST provide more stimulus and more QE and the bullish bet on the market is that everyone on this entire planet will ignore the implications of that.  Perhaps they will becasue they are all pretty much in the same boat but we have potential Iceland-type collapses in Spain, Portugal, Greece, Italy, Dubai, Argentina, Venezeula, Brazil, Mexico, California and the Baltic States so there’s nothing wrong with being bullish as long as it’s with some form of hedging so we don’t get caught by surprise with a down 500 open because someone defaults on $100Bn in debts. 

    If the American people weren’t so generously paying $80 a barrel for oil, the South American countries would already be gone and we’d have big trouble in the rest of the middle east as well – those guys all run red if oil drops below $70.

    Good shorts Llorens!


  127. Trying to increase my GOOG position… sold June 500′s puts for a "put to" price of 485.00 … safe I think


  128. Back in VXX…..


  129. Short VNO at $70.51 and short PCX at $21.10. Now I’m going to throw away my "Coal Miner’s Daughter" DVD.


  130. Phil, do you think BIDU today is an overreaction to a maybe news by GOOG.  It seems they are considering it but not have totally pulled out.  What happens if GOOG decides to stay.  Thinking of buying BIDU puts. What da ya think?


  131. Still a lower closing high on the SPX, but it won’t take much to change that tomorrow.


  132. SAN FRANCISCO (MarketWatch) — Sometimes a business motto such as "don’t be evil" can also be good business sense.
    Many are looking at Google Inc.’s GOOG possible exit from the Chinese market as a bold stance of defiance against the Chinese government. Kudos upon kudos are being heaped upon the Internet search giant for its altruistic stance.
    But let’s face it — Google also has some very good business reasons to exit China at this time. As the distant number two player to dominant Baidu Inc. BIDU, which according to comScore Inc. has 62.2% of the Chinese Internet search market, it is not exactly risking a lot. Google had a 14.1% stake in November, comScore said.
    And there is another reason. Google needs to protect its own intellectual property. Google said last week’s cyber attack on its corporate systems was "highly sophisticated and targeted," originated from China and "resulted in the theft of intellectual property from Google."
    Clearly, it does not want to face continued risk to its systems or its own intellectual property. At least 20 other companies systems were also attacked, it said.
    Wall Street analysts estimate that China’s contribution to Google’s revenue are in the $200 million range for 2009, with forecasts of about $300 million coming from China in 2010. That may sound like a decent chunk of revenue, but to Google it is a drop in the bucket, a mere 1% or so of overall revenue, estimated to reach $17.5 billion in 2009.
    "Based on data from comScore and Analysis International, Google’s search market share in China is less than 31%, far behind Baidu’s 64%," said Youssef Squali, an analyst with Jefferies & Co., in a note to clients Wednesday. He also noted that Google pays higher traffic acquisition costs (TAC) to its Chinese partners.


  133. SPG, I’m inadvertently long in CRE and it worked today.  I bought to close the short Jan 85 CALL and trying to sell the Feb 85 CALL.  One of a few times that I tried to do one leg at a time, so being naked on the short Feb 65 PUT means I’m long in CRE for a short while.
     
    SPX/RUT, the execution is really slow, seeming that no one is trading the index options in the past few days.  TD Ameritrade trading on TOS platform had problems yesterday where any order would take a few minutes to post.  Forget about canceling those as some were executed before being posted.


  134. A little selling into the close on the Dow but the Russelll finishing with an outstanding 1.3% gain and the Nas up 1.1% but missed the mark. 

    Of course now that we’re closed the futures are falling off.

    VNO/Llorens – The only positive they can spin on CRE is that big boys like VNO will be able to snap up distressed assets but that’s kind of a thin premise with vacancies and declining rents.  We’ll see when they report earnings. 

    BIDU/Lolo – They are only up "just" 13% because of that maybe.  If GOOG was gone then BIDU is worth $500 easy.  Forget the 50% gain in market share, they also lose their price competition. 

    GOOG/Onc – As I suspected, sound economic reasons for GOOG to blow of China, this is just a good excuse. 


  135. llorens, fyi, in case you mean you are short then common stock, VNO has a dividend of .65 going ex around jan. 26-28, somewhere near there. don’t want you ending up paying for some chucklehead’s dividend.


  136.  Phil,  I think we are agreeing.  And as always the market participants think when the music stops they will have a chair (or a hedge!), so the game goes on.   And, while the sovereign debt risk is very real, I would argue that the absolute risk level is reduced from last year, due to QE and improved liquidity in the credit markets.   Asset quality stinks, but just a little less than it did last year!  Moreover, sovereign debts are the most easily manipulated from the back room of the G-20.  When I shake my head at the "suspension of disbelief" in the equity markets, I ask myself what things would look like if the manipulation stopped and would we really want that.  As it is, the equity reflation is taking pressure off the financial system and credit values.  We stop the shenanigans and down go all the countries you mentioned as well as a few more major banks, and then what….?!  I think THEY will keep up the stimulus and QE as long as the credit contraction in private spending continues.  


  137. Bord – thanks for the heads up. Yes I’m short the stock but will be out by Friday latest given the economic data set to be reported over the next couple of days. VNO will distinctly move one way or the other, I’m betting/hoping it falls down the elevator shaft (of a commercial building).


  138. Peter, do you also trade short SPG strangles? What ranges do you use ?


  139. RMBS.  For those who haven’t seen the news--Micron asked for a 2-month delay in the trial because one of its lawyers is ill.  (In Aug., Samsung asked for a delay because its lawyer was ill.)  Reminds me of the end of a football game when players pretend injury to stop the clock.  So, a Jan 21 hearing to consider the request for a delay.  The stock dropped over 10% at one point on the possibility of a 2-month delay.  Crazy.  If there is a delay, I’m loading up.


  140. magret/SPG,
     
    I have the Feb 65 short PUT and will have the Feb 85 short CALL, just a few contracts for fun and see how these CRE move.  The strikes are a bit close to the money for my liking, but other strikes don’t have as much premium.  It is the only stock in my short strangle portfolios.  Everything else is either indices or ETFs.


  141. Someone here offered before one jobs report that a great jobs report would send the market down because it would create a perception that interest rates would be going sooner that later. I am beginning to embrace this logic. A neutral or lousy report just gets ignored from a fundamentals standpoint and reinforces the notion that the liquidity keg will keep on pumping so let’s all gather round with our plastic cups. Just like the beige book today, fair at best, so keep the liquidity pumping boys.


  142. Today’s pump job.  Looks like the GS and JPM traders gave their bosses a little FU to DC today.  Behold the power of GS Algo’s.  How dare you question Lloyd, he who doeth the Lord’s work.
     
    Earthquakes — terrible news in Haiti of course. 
    Still, one wonders if the global warming alarmists might have a new cause to latch on to … man caused earthquakes or some such nonsense.  Blame the oil companies for drilling and destabilizing the earth’s core.  Its also surprising that Obama hasn’t blamed this on Bush yet.


  143. Hi, Peter,
    I tried to sell some RUT strangles (Feb 690/540) and buy put spreads (Feb 600/590).  The put spreads got filled @ $1.75 but the strangles hadn’t.  The price of the strangle kept dropping and I kept lowering my bid.  But still no fill.
    Any suggestion?
    BTW,  I have a bunch of SPX strangles & put spreads, a smaller number of RUT strangles and spreads.  The new ones are just additional positions.
     
    This time, I put strangles & spreads in 2 order tickets.  Next time, I’ll try to put all 4 options onto one order ticket.


  144. In the next few months, the jobs reports will be skewed by the 2010 census (mentioned here previously by folks), and can be spinned in many ways.  The pay is reasonable $12 to $19 an hour, and they needs hundreds of thousands part timers.  See the pay scale here:
    2010.census.gov/2010censusjobs/how-to-apply/local-office-map.php


  145. As I said last night, GOOG giving up on China should have greater negative implications for China as a place that companies should be doing business in.


  146. Cap/Earthquakes
    Don’t underestimate the wisdom of Gore… He is partially right in his theory of heat, it is BELOW the earth’s surface causing earthquakes, so therefore he is at least partially deserving of the Nobel prize.


  147. Peter – SPG — shorting the 85 calls should be pretty safe.   The 65 puts; less so; but you can always roll either side up or down as you might need to .


  148. Howdy cwan and the short strangler folks,
     
    I don’t have any new suggestion, just repeating a few that others have mentioned before.  Try the strikes that have the high number of Open Interest, usually the rounded number like RUT 700, 550, 600, etc.  The PUT vertical is easier to fill than the strangles, which usually get fills on a sharp swing either up or down.  It’s when other people get panic into bidding either the short CALL or short PUT higher, making the strangle more expensive, and thus go past the limit order value.  What I do is to target certain strikes and set GTC orders and don’t touch them for a week.  If we look at them every 5 minutes, we tend to raise the target during the market swings, reducing the chance of getting filled (as mentioned in yesterday’s chat).  Scaling in is great as we can enter a new spread at a higher price after the first one get executed. 
     
    Putting 4 legs into one order will make it much harder to get a fill.  Since we are saving 10x the commission cost versus SPY, IWM contracts, we just need to be patient with these.


  149. cap, agreed with the 65 short PUT be not too safe.  Given the downhill slope in SPG for the past 2.5 weeks, we can get to 65 in another 2.5 weeks.


  150. HOG reversed course today.


  151. Peter, any particular reason why you chose SPG? A range bound stock would be ideal for short strangles….any suggestions anyone.


  152. Hi, Peter,
    Thanks for the suggestions.  I gotta learn patience in a hurry! 8)
    How is your January strangling coming along?  As I am still learning, I don’t even have a monthly profit target yet.  I’m glad that I’m making some good money!
    Thanks!


  153. Gotta love AMZN. When you go to donate to the Red  Cross now you are offered the option of donating through "Amazon Payments" which allows you to make your donation using AMZN’s payment information for you so you don’t have to enter it again.
     
    Maybe AMZN really will rule us all.


  154. magret, I also like trading options on SPG since options are liquid and premiums are decent given the moves in the stock (i.e., it’s not like BIDU). Premiums have come way down on it but then they have on everything.
     
    It’s one of many like this but not a bad one to trade. I short SPG straddles in conjunction with longer-term puts that I own for a net bear position that still makes a decent monthly income.


  155. magret/SPG, I didn’t really pick this one.  It got talked about a lot here so I started with a long PUT vertical, Jan 70/65, betting that it would go down, then sold the strangle to cover the cost, the Jan 90/60 strangle.  Then the Jan 90 callers was toasted, and was rolled to Jan 85 CALLs.  The Jan 60 PUT also got killed, so I close it out, then I also closed out the Jan 70 long PUT, leaving me with the Jan 65 short PUT, which was rolled to Feb 65 short PUT.  To make the long story short, I like the premium from the putters and callers, just like Eric said, to play another month with it.  Nothing in particular in picking this SPG.


  156. cwan,
     
    January plays have been awesome of course, with the market going nowhere and VIX dropped.  I already made my 5% profit (of the entire portfolio) in the first 7 trading days of the year (today is about even).  I even slept in for most days last week.  The gain was due to the play that I sold off the Jan 1040 long PUTs and left the 1030 putters alone, ending up with hundreds of 1030 short PUTs that is very close to zero now.  With PM, the 1030 strike is just outside the -8% range, so the margin is minimal.  I don’t expect to be that lucky going forward, but it was a perfect ending for January expiration.  Most of the spreads are now in Feb with 20 contracts or so in March’s.


  157. Hi, Peter, you already started in March!  I’ve thinking about March but haven’t looked yet.  I’ll take a look tonight or tomorrow.  What buffer zones are you using?  The usual +10% / -15% for SPX?  And wider for RUT?
     
    As far as the Jan 1030 putters, do you think it’s safe to leave them alone and let them expire?


  158. The good thing about a stock like SPG is that there really is an upper limit on price, unlike, say an AAPL.
     
    Cap rates can only go so low; plus the whole mall retail business will be challenged by overcapicity, weak retailers and a weak consumer, for some time to come.  You have flat to declining rents; and add in declining values, ongoing shareholder dilution  and lack of financing, in my view the upside moves should be contained from here.
     
    Let’s call 90 about as crazy as it can get; barring a miraculous industry turnaround.  Even with a completely healthy real estate and financing market and economy, 90 would be hard to justify.


  159. cwan, for March, I’d start with the widest possible spread with reasonable return, which is around 925/1250 for SPX.  You can pick the PUT vertical that you like.  Yup, RUT should be wider as that index is an untamed beast up or down.  There are just too many weeks to March expiration to commit to 975 or 1000 strikes for the short PUT.  For the Jan 1030 putters, I’m leaving them to expire because we are in such a buying frenzy, with many folks aggressively buy on any dip (thanks to Gel for helping us squeezing the putters to zero).  A 10% dip in the S&P 500 in 1 trading day and 3 nights are unimaginable as of tonight.  I also feel that I have enough February long PUT verticals that those would gain big time if we do have the 10% dip.


  160. Peter, Glad to hear you are already going to March.  I was thinking about it today but was concerned it might be too early.  Figured I’d turn to it next week.  Nice job on the January strangles.  My Feb strangles all look very good.


  161.  CAP – re your 4:51 -
     
    Earthquakes – terrible news in Haiti of course. 
    Still, one wonders if the global warming alarmists might have a new cause to latch on to man caused earthquakes or some such nonsense.  Blame the oil companies for drilling and destabilizing the earth’s core.  Its also surprising that Obama hasn’t blamed this on Bush yet.
     
    LOL – Seriously man, you are a wealthy, apparently educated man. I can’t believe you keep writing stuff like this here. Everyone knows you are right wing. I am too, although I don’t think I would be in your country. Your words are a pathetic, funny invention and I hope you are just joking. I’m just guessing (sarcasm) but I think that the folks here just roll their eyes when they read stuff like this. Go ahead, flame away – LOLOLOL.


  162. Hundreds of 1030 short puts?
     
    whew.


  163. Bord – futures -
    sorry missed your question today – too much of a frenzy and probably posting too much -
    Futures trade almost 24hrs a day – if you bring up the contract – it should show you the trading hours somewhere - I don’t have my system open – they get halted pre-market at some point – if you listen to cnbc – they sometimes say the futures have stopped trading -
    You need to have futures trading permission on your account – like with options -
    Futures start trading on Sunday night at 6pm and go all week until Friday evening – I think -
     Someone like Peter would be better able to answer your question – check out ticker ES – it’s the E-mini (S & P) – x 50 rather than the big contract spx =  250 x index?


  164. hihihihi, yes, barf, 248 SPX Jan short PUTs and 116 short RUT Jan short PUTs left naked that are 10% or more OTM.  This is the largest in my trading history, because of the crazy plays.


  165. Peter D/SPX spreads. Peter, could you add a little more detail to the SPX spreads you are considering for March. This would greatly help my learning process.


  166. bord/sam/futures, I’m not the future expert, Optrader is.  Futures let you leverage 10 times, a 1% move in S&P500 net you 10% profit/loss.  For example, a 10 points move gives $500 per contract (when SPX is exactly at 1,000), and the collateral is around $5,000.  This is 2 times more leverage than the normal Reg-T account at 20% margin.  This is high risk as the futures can drop or spike after trading hours and if we don’t have enough margin, we can get into trouble while sleeping so to speak.


  167. Peter, at TOS the intraday margin on the e-minis (spx futures) is only 500$ per contract.


  168. As I said last night, GOOG giving up on China should have greater negative implications for China as a place that companies should be doing business in.
    Surely the story on google/china is just made up to pin the stock for expiration….
    Sheesh you guys take things so serious