Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Thursday Thrust – DB says “Ignore the Unemployed Men Behind the Curtain”

Great news kids!

Gang of 12 member, DB says "The U.S. economy may grow as much as 6 percent this year, helped by sales of consumer durables and increases in inventories."  This forecast is up 50% since last month and double the 2.60 median forecast of the Bloomberg survey.  You have to forgive Deutsche Bank, they are not that stupid, it was just their turn to make a moronic bullish statement just like fellow Gang of 12 member, MS made the outrageous forecast that "Metals may gain 32% in 2010" yesterday – these are the kind of things that "THEY" must do to goose the markets over critical levles

It is an interesting quirk of GDP that inventory builds are counted as a positive, based on the assumption that businesses aren't stupid and they are only building inventory to satifsy coming demand trends.  This is how all this G12 cheerleading can become a self-fulfilling prophesy as business owners are convinced to stock up for demand that never actually materializes.  We already know that China has stockpiled an entire year's consumption of copper and investors and ETFs are stockpiling more copper, as well as gold and platinum at record levels, all in anticipation of the RETURN of demand and now DB tells us that the US will grow almost as fast as China this year (and we all know that China is the Holy Grail of growth).  

Of course a 6% jump in the $14Tn US GDP would be $840Bn while China's projected 9% growth of their $5Tn GDP is "only" $450Bn so IN YOUR FACE CHINA – Deutsche Bank says we're going to grow out economy at 17% of your puny economy – and don't even get me started on India, we could have a sale at Sears that would top their GDP!  

Of course the holy grail of foolish inventory building is our petroleum industry and we added a whopping 8.85 Million barrels to our already record stockpiles yesterday as demand for crude – just like the actual demand for everything else – fell off a cliff (a huge win for the USO puts I've been advocating for a week, by the way).  Of course, like many things about this economy, it is worse – far worse, than "THEY" would have you believe.  A reading of the actual EIA Weekly Petroleum Status Report shows us that refineries are still operating below their post Katrina/Rita levels (85%) at 81.3% of capacity,  Nonetheless, despite producing the lowest amount of product since the turn of the centruy – they still managed to have 1.25Mb per day too much.

But that isn't the big deal.  The big deal is much less obvious and is never mentioned by Criminal Narrators Boosting Crude – we also imported 2,041,000 barrels PER DAY LESS than we did last year!  What?  You may say, how can it be possible that we imported 14.3M barrels less crude for the week and still had an 8.85M barrel build?  Wouldn't that mean that demand is down over 23M barrels a week?  Why yes, it would.  But never fear, it won't hurt our inventory numbers and sully our GDP because the 109.7M barrels of fuel that we did use this week were inventoried in at $9.1Bn (average of $82.74 per barrel) while last year's 133.9M barrels that were used only counted as $5.4Bn worth of "economic activity" because we were only paying $40.69 at the time.

See, this solves everything!  By paying double for crude and other commodities we can have a "recovery" even if those damn poor people refuse to buy because there are plenty of things they HAVE to buy and we, my fellow top 10%'ers – can MAKE THEM PAY!  Do you care that a 20-gallon tank of gas went from $35 last year to $55 last week – of course not, we spend that at Whole Foods on peanut butter…

The magic of commodity inflation, especially on the essential commodites like food and energy (which are not counted as inflation by the Fed as it's "non-core") is that the average person cannot cut back.  Sure they may put off buying new sneakers or a new shirt or replacing the stove but THEY'VE GOTTA EAT and they NEED to drive their cars (unless, of course, they have (snicker) public transportation) so let them desperately try to cut back their consumption by 17% – WE'LL JUST CHARGE THEM DOUBLE!  

That is how we are "fixing" the economy.  It turns out you may not be able to get blood from a stone but we sure can bleed US and global consumers dry through commodity speculation that completely ignores the fundamentals of supply and demand in order to dig into consumers' pockets and pull out that last dollar.  This is a mainstay of the "Dooh Nibor Economy" and is, of course, great for us top 10% club members as we already know the bottom 90% are tapped out.

By getting that extra $20 for gas each week from 165M drivers, WE make sure that $3.3Bn goes to people who will actually spend it on stuff – further boosting the GDP.  Add another $5Bn in mandatory grocery spending (becaues EVERYONE needs to eat – muhaha) and we're getting $431Bn from those poor cheapskates, who would only save it or pay off some debt if left to their own devices (and we don't need them to pay off their loans – that's the government's job!).

So maybe DB is onto something – Sure "the people" lost another 444,000 jobs last week and sure Retail Sales actually declined 0.2% in December (yes, not at all what the MSM was telling us to rally the markets all month) but, if not for fuel prices leading 2.6% inflation – sales could have been off 3% and THAT would have looked bad!  We'll get our CPI report tomorrow and, again, inflation is what the "little people" worry about as it's our assets that inflate in value and only those without assets (or jobs) worry about rising prices.  This is exactly what we expected would happen in December, when I gave my 2010 outlook in "A Tale of Two Economies."      

The rich get richer and that's GOOD for the markets as the poor people weren't going to be buying IPhones or shopping at TIF anyway and we can continue charging them ridiculously high prices for commodities because clearly Obama and Congress have their collective heads up their asses (as evidenced by the toothless Congressional hearings going on this week) and tomorrow JPM is likely to stun us with about $2.5Bn in quarterly earnings, about triple what they made last year.  Ah, it's good to be the king!

So don't let poor Retail Sales or massive jobs losses fool you – we're going to party like it's 1999 - or 1929..

I was dreamin' when I wrote this
Forgive me if it goes astray

But when I woke up this mornin'
Coulda sworn it was judgment day

The sky was all purple
There were people runnin' everywhere

Tryin' 2 run from the destruction
U know I didn't even care

'Cuz they say two thousand zero zero party over
Oops out of time
So tonight I'm gonna party like it's 1999

I was dreamin' when I wrote this
So sue me if I go 2 fast

But life is just a party
And parties weren't meant 2 last

War is all around us
My mind says prepare 2 fight

So if I gotta die
I'm gonna listen 2 my body tonight

Yeah, they say two thousand zero zero party over
Oops out of time
So tonight I'm gonna party like it's 1999

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!

Comments (reverse order)

    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!

  1. How are we up on this crap

  2. Bad report = no rate increase anytime soon = stocks go up. 

  3. Let me guess.  A small gap down followed by modest selling that will then flatline followed by a slow and steady ramp back to even.

  4. Don’t wanna say "I told ya so" but most of us knew retail sales were gonna suck:
    clusterstock Retail Sales Unexpectedly Tank In December

  5. Barclay’s morning pump raises targets: AMZN $160 and GOOG $675.

  6.  It just doesn’t matter?

  7. Tempted to take all my $$$ out  of trading and just start buying forclosures and flipping/renting them. Still money to be made in that and the game isn’t as rigged. This is a joke…..

  8. John Harwood always sounds like he has a cabinet position in this administration.

  9. Completely random but does anyone watch Conan? He’s really sticking it to NBC with his jokes and they’re pretty funny! If he had been that funny earlier in his debut he wouldn’t be getting fired now… Anyways, worth DVRing for a show or two if you haven’t seen him lately….

  10. As you can tell from the morning post, I’m kind of fed up with this nonsense.  It’s like watching a slow-motion, tragic accident and knowing there’s nothing you can do to stop it – so we may as well make money off it I guess…

    The Dollar went from 91 to 92 Yen while the Nikkei was open (and they gained 178 points, as we expected) and is now back to 91 now that they don’t need to put on a show.  We’re at $1.45 to the Euro and $1.63 to the Pound.

    Copper is $3.43, Silver is $18.59, Gold $1,138 with oil just under $80 on expectations of a HUGE drawdown in nat gas at 10:30, which is trading at $5.78 in anticipation.

    Continuing loss of jobs means the free money train will ramble on and the markets love that and the ECB held rates steady so no pressure to raise coming from there either. 

    We’re still looking to get over 2,314 on the Nasdaq, they are our big holdout and 1,150 should be tough for the S&P but once we get past those two, we can put another leg up together.  I’m still not interested in getting off cash until we get through the holiday weekend and see some real earnings next week.  Of course Intel and JPM are going to have good numbers – that’s nothing to base investment decisions on. 

    Tomorrow we have CPI, Business Inventories, Industrial Production, Empire Manufacturing (which was awful last month) and Michigan Sentiment and then the 3-day weekend so cash will be comforting until Tuesday at least!

    Levels remain Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 and I’ll be re-charting over the weekend but, fundamentally, this is a top and not a breakout and it’s going to take some REALLY strong earnings to change that. 

    CNBC saying ETFs (which drive up the prices of stocks and commodities) have passed the $1Tn mark.  That’s nuts! 

    Be very careful today, I still feel like this whole thing can snap on one bad news story.

  11. SS/JRW, What do you think--can they run it up near 65 before the fall?

  12. Good Morning!  I suspect with todays negative news and the lack of negative reaction, that  good Intel numbers tonite and decent JPM numbers Friday morning, that Dow 11k will happen by next week…. Happy Days are here again…..

  13. DOW/NASDAQ/S&P all green. Sure can’t wait for some good news to help my shorts.

  14. QID getting down to the $18.40′s – I’ve seen it bounce back several times off the $18.20-$18-40 range.

  15. Dudely (NY Fed) yesterday said interest rate would remain low 6 months to two years. I think in French that translates to “quils management de la broiche. “. This low interest rate business is nor helping anybody that’s unemployed. Espescially when BB tells us there won’t be inflation because we are paying banks to keep thier money at the fed. — sorry for early morning jibber; but these low intersest rate policies is really annoying

  16. judah – it seems that if they want it at 65, they will get it to 65.

  17. Retail sales/Cap – We knew they sucked but the market was hammered over the head with glowing retail reports all of December, which turned out to be lies and we’re up 5% for the month.  Logically, you would think some of the people who bought into the "retail up 2-3%" story would now be taking some off the table but, instead, news that retail is actually lower than last year, which was the worst year since the 40s, is taking the market higher.  It’s just a joke…

    BCS/Tm – Ah, I missed that one, nice day for it.  That’s what I was talking about above, the Gang of 12 does this sort of thing in waves when they need to boost the markets. 

    LOL Diamond – I think you’ve got it!

    Cash/Jrom – It’s a good move except the rents are dropping too.  There’s tons of quick money to be made in this market but it’s going to be really tough to put a lot of cash into long positions until we get some rational buying premise going. 

    Harwood/Jo – Even better than a cabinet position is G12 access and Harwood has that. 

    Conan/Jrom – We’ve been catching up (thanks Tivo) on all the back and forth.  It is very funny as we watch Leno’s monolog, then Conan’s.  They are starting to get like a debate but I think they are both unified in thinking NBC sucks.  Conan is getting better as he’s got that "I don’t give a crap" attitude that was so great originally – he turned very stiff out in LA.

    We’re up 120 on the Dow off Tuesday’s bottom.

    11K/1020 – If we pop the Nas and the S&P then, sure, we can do it.

    LOL Llorens!

  18. jomama — you mean I’m not the only one that sees that in Harwood ?
    He is a joke; so in the tank.

  19. 107 DIA Ps for 57c.  This is gonna break down a bit.  Then if they bounce off the low on the open, out, otherwise….out at 50c

  20. ss, judah
    Good morning
    Well, so this is what happens when I leave the Russell unattended for the day; bad news, weak chart, and poof, a RALLY !!  I don’t suppose anybody reserved me a few TNA calls ?

  21. JRW – good to have you back coach.  Didn’t like driving the bike without the training wheels.  What lines are you looking at?

  22. Damn, I wanted an nice attempt to get back to yesterday’s highs to short into, this is kind of lame so far….

    DIA $106 puts are .18 and I’m taking a crack at them but a very iffy trade with 30 hours to expiration.

    Defaults on U.S. retail credit cards surged to near-record levels during the holiday shopping season, and 2010 looks poised to deliver more of the same. More than one in every eight dollars of receivables was written off as uncollectable during the Nov. collection period.

    Foreclosures climbed to a record 2.8M in 2009, a 21% jump from 2008 and more than double the foreclosures in 2007. If it’s any consolation to the one in 45 households that received notices last year, home repossessions rose just 1.1% from 2008.  That means there is a MASSIVE backlog!

    Nov. Business Inventories: +0.4% to $1.31B vs. +0.3% expected and +0.4% (revised) last month. Sales +2% to $1.03B. Inventory/sales ratio falls to 1.28 from prior 1.30, and down from 1.43 a year agoYay, nothing is selling – that will be GREAT for the GDP!  If we are making tons of stuff no one is actually buying – imagine what’s happening in China…

    "TARP will live on for years," warns a government watchdog. A new report points out markets now expect that too-big-to-fail firms will always get bailed out, while the Treasury has yet to explain how it plans to dispose of billions of dollars in assets.

    Obama is set to announce his bank fee proposal today, pulling in up to $120B from bailed-out banks over the next ten years. But given the size and timeline of the tax, it seems like the goal is to score political points rather than actually punish the banks.

    There’s a dollar crisis on the horizon unless the U.S. drastically reins in its debt, warns the Committee on the Fiscal Future of the U.S., while the World Economic Forum reports the global deterioration of public finances is one of 2010′s top threats and could push economies into full-fledged debt crises.

    With bids due tomorrow and 12 firms that are interested, sources say not a single bid has come in yet for MGM. Some potential bidders withdrew, others are hesitating over a confidentiality agreement – either way it’s bad news for studio owners and MGM’s $3.7B in debt.

    Google (GOOG) sold just 20,000 Nexus One phones in the first week, compared to first week sales of 250,000 for Motorola’s (MOT) Droid and 1.6M for Apple’s (AAPL) iPhone. Granted, Google has spent far less on marketing but as consumers have more choices, winning products will have to be far more innovative.

    China calls Google’s bluff, showing no signs of easing up on internet censorship. U.S. officials haven’t said much on the issue because of concerns the case will exacerbate U.S.-China relations, and Google’s (GOOG) tech rivals have been even less supportive.

    Speaking of China:  Origin Agritech (SEED): FY ’09 non-GAAP EPS of $0.08 vs. $0.10 single estimate. Revenue +15% Y/Y to $86.8M vs. $86.1M single est. Issues downside FY ’10 revenue guidance of RMB 630-660M vs. RMB 679.3M mln single est. Shares -7% premarket. (PR)

    Further cause for investors to worry about a Chinese bubble: Property prices in Chinese cities rose at the fastest pace in 17 months in December, while Fitch calls China’s credit and investment growth "unsustainable" and is worried about "an eventual deterioration in banks’ asset quality."

    More news out of China: The PBOC surprises the market this morning by leaving the yield on its three-month bills unchanged, slowing down a recent tightening campaign.

    I will like these guys long-term when they stop selling off:  Carlos Slim wants to bulk up, announcing a $21B plan yesterday to consolidate his Latin American telephone companies. Slim will use his America Movil (AMX) to create one large telecom firm that provides fixed-line telephone, mobile and internet services.

    Still smarting from the heavy criticism it faced when oil was $145/barrel, the CFTC is proposing limits today on the positions energy traders can take.

    Dow leaders: INTC +1%. MRK +1%. JPM +1%. MSFT +0.9%.
    Dow laggards: WMT -0.9%. DIS -0.9%.

  23. JRW, Welcome back. Yes, there seems to be real support down around 63.25.  Not sure there is such a thing as resistance anymore.  Do not resist. Resistance is futile…

  24. GS looks like a decent bullish chart set-up if someone wants more upside exposure. If the market is going to run it will likely pop up pretty strongly.

  25. Morning Phil; thanks for the great post today. Thats why we love you.

  26. Cap/Harwood  I have felt Harwood does a good job reporting the "news"  I guess that would not interest you…..

  27. ss / Lines
    64.19 & 64.90

  28. Well, we will play both sides now, so take me up with you DIAs.  107 DIA C for 36c.

  29. Phil:
    for my UNG 2011 jan10 calls: sell feb 10 or 11 ? 1/2 cover ?

  30. Any chance 4 something on intc or JPM if they will be green after earnings? I find the options very pricey on both sides-debating doing buy-write on everything as the vol’s really suck everywhere. With low vol’s nothing moves so whats the pt? Made a pledge that anything I make today goes to Haiti though rt now I’m stumped 4 something "rational?" HELP!

  31. Phil/Obama/banks  Obama seams to have difficulty keeping his shoe lace tied…..

  32. ss
    R2 65.42; Judah is right, " Resistance is futile…" ultimately, but in the meentime, we can still play the range !

  33. JRW, I’m sure Phil has some "resistance is futile" clip in his repetoire.  From the Borg, if memory serves.

  34. GS/Eric – Better get in ahead of JPM earnings I think. 

    Thanks Micro – Days like this I do wish I had a TV show, I’m pretty pissed off this morning after reading news like the above and then seeing how clueless the MSM is and it literally is just like 1999.  But, maybe it’s only 1998 and we double before the crash – there’s the rub…

    DIA/Pharm – I like those Feb $108s from yesterday better (now $1.28, up a dime) better as at least you can survive a drop with those. 

    UNG/RMM – Wait for the report, maybe a nice pop and, if not, full cover with Feb $10s. 

    Earnings plays/Pirate – I’ll take a look. 

    Oh no, Nat gas "just" minus 266Bcf, almost a record but not enough to support this BS pricing. 

    RMM – I would cover with the $10s.

  35. VIX… I seeing this correctly, the VIX is UP 10% right now & the market is UP as well. What in the hxll is going on here!

  36. XLF – I show the vix down 1.62%

  37. Cld this be short covering-that wld act 4 the disparity in the vix? Cld be smelling a correction coming like Phil!

  38. VIX….that’s pretty strange, I logged back in & now it’s correct.

  39. JRW – is it time for a little tza.

  40. The Brazil, China and commodity success themes are still very much alive and doing well…. Sold puts on VALE today for hopefully good entry, if not then pocket the premium.

  41. pirate,
    This isn’t directly an answer to your questions, but in this low IV environment I’m liking call verticals or short put verticals for bullish trades, their opposites for bearish ones, and short condors for neutral trades. As long as you are positioning to sell at least as much extrinisic as you buy when you set them up, the low IV doesn’t hurt you.
    These trades are also good if we get a sudden violent move, because risk is well defined and their gamma is low so they will not flip over against you in a big move.

  42. Resistance/Juday – Here’s Lloyd Blankfein explaining it.

    VIX/XLF’d – That would be me buying puts…  8-)

    EIA Natural Gas Inventory: -266 bcf vs. consensus of -256 bcf. Nat-gas futures +0.85% to $5.782.  Nat gas down to $5.58 now.

    Testifying before the FCIC, Sheila Bair admits "it is clear that the regulatory community did not appreciate the magnitude and scope of the potential risks that were building in the financial system."

    Kodak (EK +5.1%) files suit against Apple (AAPL) and Research in Motion (RIMM) over alleged patent violations in the iPhone and BlackBerry

    Freddie Mac weekly mortgage survey: 30-year mortgage rate dipped down to 5.06% from 5.09% a week ago. A year ago the rate was 4.96%.

    Buiding those inventories: Rio Tinto’s (RTP +1.65%) iron ore output jumped 49% in Q4, mostly on Chinese demand, prompting analysts to suggest Rio, BHP Billiton (BHP) and other miners could see significant price gains this year after a weak 2009.

    Sector ETF strength: Solar– KWT +1.5%. Solar– TAN +1.5%. Base Metals– DBB +1.1%. Clean Energy– PBW +0.7%.
    Sector ETF weakness: Real Estate– IYR -0.7%. Basic Materials– XLB/a> -0.7%.

    Solar back on the stimulus bandwagon today, metals in day two of MS upgrade rally.

    VIX/Pirate – I dont’ see it up 10%, I see 17.57, which is a multi-year low.

    INTC/Pirate – I like the Feb $22/23 bull call spread at .27, selling the Feb $19 puts for .17 and 1/2 the Jan $22.50 calls for .12 which is a net cost of .04 on the $1 spread and you make $1.92 before you owe your caller more than .50 (safe until $24.42 to the upside).  On the downside you own INTC at net $19.04 – not bad.

    JPM/Pirate – Great Expectations so I like the $44 puts for .55, selling the Feb $41 puts for .52 on the premise that I make $3 fast on the way down to their level (so rollable) and, if it goes up, I never have to pay them.  Consider that $1.50 of downside protection on the spread so the Feb $43/45 bull call spread for $1.10 seems like a good deal as a pair trade.

    And wheeeee!

  43. JRW – when i want to get into TNA/TZA I put in a limit order for the bid price, and sometimes don’t get filled.  Do you just pay the ask price since the spread is usually just .01?

  44. DECK once again back to the bottom of its channel; still think it breaks (still short too).

  45. Shanghai finished up 1.35%, US is now up, so how the hell can FXI be down 1%???

  46. Thank you, Phi.  Nice to be on a board where a reference to the Borg is immediately understood.  and yes, that does bear a resemblance to Lloyd Borgfein.

  47. bord, FXI tracks the HSI (Hang Seng), which was down.
    No ETF tracks the Shanghai market.

  48. Speaking of metals, Phil what do you think of GSM?

  49. thanks EricL, still HSI was only down .15%…bizarre.

  50. Phil,
    sold Jan 5 SRZ for 1.2 last month and bought back at 1.6 today. Is SRZ roll worthy?

  51. Notwithstanding the negative news that prevails, the upward move in market sentiment is a leading indicator of where the "real " valuations are headed. This movement in advance of economic improvement sentiment has historical precident that is positive for the imminent recovery.

  52. ss
    Yes, when it’s time, ( buy or sell ) I use a markrt order as speed at that point is the most important consideration. It’s more like hunting and less like trapping ( options )

  53. FXI/Bord – FXI is more sentiment based than a trailing indicator so I think sentiment is building that this US session will not be good.  HSI had a very harsh rejection off 22,000 after a gap up and that didn’t help either.

    Selling naked EWJ $10 call for .45 is a fun day trade as we head lower, just looking for a dime.

  54. Phil: your 10:31 on UNG:L what is verdict to sell feb 10, full or 1/2 cover ?

  55. Thanks-already have the uso p @39 & it is moving in the rt direction-been hawking the JPM trade-seems it is on the way dwn on the news about the "PaybacK." They can’t wack the banks too hard as they get those millions in contributions for political favors-everyone I talk to are furious at the bailouts & they r not particularly knowledgeable about the reality of economic systems etc. One I talked to yesterday didn’t even know C went bankrupt or the nationalization of GM!! EVERYONE shld read PHil"s take-he definately shld be a national commentator so reg folks can know what’s REALLY going on!! OMO

  56. ss
    Only two days left on the flag

  57. I wonder if the G12 wants to tank the market today to show the "reaction" to Obama’s Bank Tax?

    GSM/Jrom – I’m in SMN, just doubled down on my Apr $10s so not bullish on GSM at all. 

    Shanghai/Bord – That exchange is a joke – can go up and down 1 or 2% in minutes, not something you want to hang your hat on.  They do have some Hang Seng stocks in the Shanghai though…

    SRZ/Drum – I like them long-term and you may as well roll as the price you get selling against the stock stinks right now. 

    What are "real" valuations Gel?

    Ags getting hit hard today.  Copper flew up to $3.44 and now back below $3.41, a total joke commodity.  Gold is at $1,132 and Silver testing $18.50 so bad for all metals if they can’t hold it (and copper $3.40, of course),   Nat gas hanging tough at $5.55 and oil bouncing off $79 at the moment. 

    OIH was up and down already this moring, our short calls looking good again.  XLF at $15.12 so no major crisis until they blow $15. 

    N making 52-week highs (funny metal rotation).  BIDU up another 2.5%, SRS up 1.25%, VNO $70.36, OIH about to blow $130 – also worth watching.

    UNG/RMM – I’d sell full cover of $10s.

    A recent Atlanta Fed survey finds that most small businesses are having no problem obtaining all or most of the credit they need. "What they don’t have are customers."

    President Obama says the 10-year fee on financial institutions he is proposing this morning is intended to "recover every single dime the American people are owed."

    Thanks Pirate – or Arrrrrrh!

  58. Dow volume 60M at 11:15 – a tad heavy. 

    Interesting chart, for what it’s worth:

  59. JRW – yeah, I had to redraw the lower channel this morning.  The upper channel seems to hold better.

  60. Gel/recovery  Now factor in less government stimuli, then what……

  61. Phil / Banks
    Based on you being Bullish on banks, what bull call spread do you recommend ( C, JPM, BAC, FAS ) ?

  62. Phil,
    What would be the best (safest) way to buy bidu for longer term (6 months to 2 yrs) in a 401k account??

  63.  Phil, I am a new member reading comments and trying to get up to speed.  I agree with your thoughts on the market and have expected a pull back that just hasn’t happened.  I have done some RUT iron condors in the past with success but would like your opinion on my current position on RUT Feb contacts.  long 520 P  short 530 P short 620 C long 630 C. 

  64. Phil, can you suggest a nice BIDU put spread or would you suggest just watching from the sidelines?

  65. SPX- Phil – going on an assumption that we keep grinding upwards, what do you see, peering through your crystal ball at the squiggly lines on the charts as "resistance’ point (s) for the next 30 days or so?

  66. Phil,
    One more question. What is your opinion about buying vxx as portfolio insurance, now that vix is at multi year lows??

  67. Phil -
    Do you still have dia covers – if so – are you going naked over the long weekend?
    Also those naked calls i was so pleased with yesterday on spy not looking so hot – . I would like to wait until friday to roll but nervous to hold into data / earnings tomorrow – any advice on the roll (not totally naked  b/c hold VTI - ETF) 
    short spy 114 calls @ .62
    short spy 115 calls @ .20
    Thank you

  68. Phil/CROX. Wow. Up on expansion its distribution in India?  A little while back when CROX was below $5 again, I sold some puts, bought some stock, bought some calls, but I didn’t like the tiny premium for selling the $6 calls.  So I waited. Now, I want to sell into the excitement.  What do you think--sell the Feb 7 calls?

  69. Oh good, more John Harwood.

  70. Banks/JRW – My preference is to play XLF and UYG as you don’t know who’s going to blow up but, since you asked:

    • C – 2012 $2.50/5 bull call spread at .95.
    • BAC – 2012 $12.50/20 bull call spread at $3.55, selling 1/2 May $18s for .30 (trying to collect .10 a month to knock $2 off the net). 
    • JPM – Selling March $41 puts for $1.  Jan $45/50 bull call spread for $2, selling Feb $46 calls for $1.05.
    • FAS – 2011 $65/85 bull call spread for net $10, selling 1/2 Feb $98s for $2 (trying to collect $10 over the course of the year).

    BIDU/Harip – If you are free to do whatever then I like the 2012 $370/450 bull call spread for $40, selling the naked 2011 $310 puts for $30+ (now $24) if BIDU falls below $420 (threatening your break/even).  That would have BIDU put to you at net $320, which is 28% below the current price.  You can offset the purchase with just 8 $5 sales so no need to be greedy and you can sell the Feb $510s for $7.20 – don’t forget your spread would be $60 in the money before you even owe the callers their $7.20 back.    If you have restrictions - let me know what they are.

    Welcome Jsaunders!  Make sure you read the New Members Guitde (top of page) and do your homework – it helps a great deal.  On the RUT condor, it’s all about targeting and you are in trouble on the call side so far but I’d give it until next week before adjusting.  Look for comments by PeterD (green box) yesterday as those spreads are a specialty of his and I think he posted a list of links in that post.

    BIDU/Jo – I think they are worth $500 so I wouldn’t short them unless the GOOG situation changes.

    SPX/Pstas – Over 1,150 is a clear shot to 1,200, which fills the effective gap of last September.  I’ll be giving up shorting above 1,150, using that as a line and back to shorting (that has worked so poorly here) at 1,200 until we get over that line and the next stop would be 1,300 where I would short the hell out of it but bullish on the in-betweens!

    Financial Crisis Responsibility Fee, to raise $117B over 12 years ($90B in the next 10 years). The fee, effective June 30, would apply to about 50 companies with assets over $50B, but not hedge funds or mutual funds. The 10 biggest firms would end up paying 60% of the total. (White House fact sheet (.pdf))

    Great, a tax on banks is going to bring in money, say Peter Boone and Simon Johnson. But it’s still the regulations that need to be changed – and there’s no point in discussing tough rules while the previous rulemakers (notably Bernanke and Geithner) are still in charge.

    The global economy is still fragile, says IMF’s Dominique Strauss-Kahn, but the fund is going to revise up its worldwide growth estimates. He thinks that bigger economies will lag behind developing ones. Strauss-Kahn also applauded the White House’s bank levy: "It shows the political momentum to move in this direction is still there."  He’s right, you can’t fight the Global Fed!

  71. SNY – made a new 52-week high. Selling Feb Calls against half of stock held to protect downside. Fundamentally, it has been loosing vaccine orders that account for significant part of incremental earnings as fears of pandemics ratchets down…

    Chart does look nice though

  72. RUT stranglers – anyone feel comfortable rolling the Feb 530 short put to Feb 550 for a 0.40 credit?  550 brings it to
    -15% cushion.

  73. VXX/Harip – This still isn’t low for the VIX, if we cruise through 1,150 on the S&P you have to consider that the average VIX is about 12 and this is still way high.  You have to pull your view way back and ignore the 3-year insanity kind of how you ignore the watermarks from a record flood that’s not likely to happen again in the foreseeable future.   This is why I’m going for more and more vertical spreads as a low-volatility market goes back to being all about just picking good companies and leveraging your capital. 

    DIA/Samz – Almost all cash so covers are more like shorts and yes, I’ll be shorting the Dow over the weekend.  I wouldn’t worry about the naked calls, why on earth would you pay them a penny of premium?  Just roll if you have to at 3:30 tomorrow. 

    CROX/Judah – This is a fundamental change in value so maybe wait for an upgrade but no harm in locking some in with a 1/2 sale of March $7s at .85 as they were 1/2 that yesterday and you can always sell the other half if you get worried or roll them to 2x the June $9s if you stop worrying.

    RUT/SS – I would wait until Tues at least.

  74. CTCT making a nice run but I couldn’t find any news. What’s the "fundamental change" story on CROX?

  75. Phil – do you think something big is in store by Tues?

  76. DIA mattress: What’s the official long position now?  I think I am behind…

  77. Phil
    The "real" valuations is a term that is subject to conjecture, depending upon "at the moment" sentiment that exists in the minds of those buying the stock of an entity. I believe the average investor today is buying the future, with the assumption the stocks held in their portfolio are priced "for the future". Sales numbers, in many cases are down and profits are accordingly down, but in comparison the stock values are not as depressed. A good example is F – their stock is rising precipitously from its value last year (1.38) to a level 8 times as much. I would equate the "real" value closer to the lesser number as the company is not profitable. If the economy would stall at this point, with no hope of recovery, then the "real value" of the stock would be zero, as the stockholder would own a portion of an entity that has no value. The current stock pricing is based upon a cornacopia of hope, analysis and historical benchmarks that the investor has structured in his mind, as to what he believes the future value will be sometime in the future. In a recovering market, the "real" todays value is usually less than the trading value as directional hope is factored in. This pretty much sumarizes my definition of the term (real) as it is used in this context. This is as hard to define as Clinton experienced when he tried to define the meaning of "is". I guess one must assume it becomes very subjective, and a clear definition is difficult.

  78. Aclend/CROX, 2 billion feet in India?  I think it has much to do with the new executive team that took over last year, first showing it knew how to manage the company’s finances and its distribution channels, now expanding its distribution in India.

  79. Phil, after getting even and then some since rolling to short POT Feb 130c and FCX Feb 90c, both naked, how would you approach those? More specifically, how to balance normal desire for 20% gain on the position with happy just to get even and not being greedy? If I still have a small position, just leave it and be willing to DD if/when the pump monkeys do their thing, or cover half or what? Thanks.

  80. Kenneth Laub, whose real estate firm has handled more than $40B in transactions (he’s also a noted composer), says this downturn will dwarf previous ones. "It won’t be a typical part of a cycle where we’re down for two or three years and things recover." The silver lining: great opportunities for those with lots of patience.

    CROX/AC – The fact that they are expanding in emerging markets.  It’s not news to us but keep in mind that most investors are clueless and until a report comes out and some analyst reast the report and tells people to buy – it’s all a total surprise to most retail investors. 

    Tuesday/SS – Nothing in particular but we have a whole weekend with a dozen different economies teetering on the brink of collapse and then there’s a possible correction in commodities, China’s downtrend and, when we come back, we average 50 earnings reports a day for the next 2 weeks so it’s kind of shooting blind over the weekend.

    DIA/Cwan – At this point I’m for the naked June $109 puts, now $6.40 as a $1 roll off the June $107 puts.  The Feb $105s are down to $1.34 and can be bought back, paying for 1/2 of the roll.

  81. Yahoo finance has gone down hill, but this link from them will help you find the earnings date of any company. useful.

  82. So what do we think about the decay issue  (specifically SRS and TBT); and trading long term options.  It seems like it would be better to go with a non leveraged ETF?

  83. 1020?Stimulus
    The government stimulus has definitely skewed the valuations to the upside, however I believe the largest catalyst moving the valuations is the rotation dynamic of investors moving money into the market, hoping to get a better return than the comparable returns in the bond and CD markets. The "carry" investor is also adding to the valuation increase. – ie people using arbitrage between borrowing money at low rates and leveraging it into the higher return in equities. These same people used to do this with real estate when it was thriving, but now have moved into equities. The stinulus and low rates are definitely both drivers pushing the market generally up.

  84. Thanks Gel.

  85. Strangles / SS,
    You might want to roll down some calls if they already decay enough.  I rolled Feb 1250 down to Feb 1200 (gasp! only 5% cushion!)  But it’s a small position, only 2 contracts.  My rationale is to have more downside protection.  If  the market goes up, it goes up slowly, and I have time to roll the calls up and out.

  86. MA at $261 wow

  87. Does the SunTrust announcement justify that run up on MA?

  88. cwan – I am using the same rational when setting my strikes.  I currently have SPX 970/1210 and RUT 540/690 and 530/680.

  89. EricL – Nice call on GS

  90. Value/Gel – I’m just old fashioned (and that’s because I learned about stocks from my Grandfather, who was born in 1903) because to me a stock is worth what it earns and what it will earn over the next 3-5 years versus alternative investments so, right now, a stock with a p/e of 20 is paying me about 5% ROI and a 5-year note is 4% so the stock is better but that ratio is changing and I can get 8% from a Greek bond which the EU seems to consider "too big to fail" rather than an ROI of 4% from a shipping company (mostly Greek).  If I think the global economy will turn around then Greece won’t default and $100 invested in Greece goes $108, $116.6, $126, $136 and $147 over 5 years, a 47% gain.  To what extent am I better off putting my money in that than I am risking it on a shipping company or GE or KO – who have lost money over the past decade?   The more rates go up, the less attractive stocks become and we are in a VERY unique situation right now where almost every alternative investment pays less than market returns (projected).  That is as unlikely to last as the VIX at 80 was.

    Good article on "safe" assets.

    POT, FCX/Fein – Well if you are even they are new trades again, right?  I still like them as clearly there is much more Ag product than thought last month and it’s very hard to sustain POT without dire demand stories.  FCX is a tough one with the MS metals upgrade supporting everything and don’t look for China to admit they made a mistake stockpiling copper BUT, over the course of the year – China is off the market as a buyer and that’s going to cause a backlog in London and then it’s going to hit the fan.  Also, FCX, like AA, is prone to high energy costs and poor exchange rates so their earnings may disappoint. 

    The Justice Department confirms it’s investigating the seed industry for antitrust issues, and Monsanto (MON -2.2%) confirms it’s a target. Rivals have complained the company is limiting access to some earlier-generation soybeans in order to push a pricier new product.

    Earnings/Bord – Try

    Decay/Humvee - If you get the direction right on the ultras – the decay isn’t a factor but you must be right, flatlines don’t help so just stay aware of that.  I like longs on TBT and SRS as you can sell much better front-month premiums than IYR or TLT.

    LOL – CNBC says Dec retail sales were biggest drop in 27 years?  How could we have beaten last year?

    Dynamics/Gel – All true but what you are pointing out about real estate is what’s true in the markets.  My brother was buying Florida real estate (with my money) in 2006 and the first month things turned ugly I told him to pull the plug and we still lost 10%.  People who weren’t as fast dropped 20-25% the next month and people who held on for the bounce are still waiting - these BS bubbles are like roach motels – you can get in but you can’t get out. 

    After yesterday’s FCIC hearing gave us such classic Blankfein expressions as the stink eye and the scrunch face, Bess Levin thinks Goldman (GS) needs to give us a live cam so that we can get the Lloyd face on demand.

    MA/Llorens – Not JUSTIFY per se but it’s the catalyst.  They are a very tempting put here.  Notice the news earlier today that 1/8 of all CC transactions are defaults – something’s gotta give at some point.

    Good Rick Newman article:  "Let’s Hope These Four Things Don’t Happen"

  91. JRW--trading the range.  It’s a tough range to trade today.  Not like yesterday, so far.

  92. Speaking of copper – they just dove to $3.385.

    Something was strange on the Treasury auction and the 30 year went out at 4.64% with a 2.68 bid to cover but the big bidder was anonymous, which they may as well just stamp "shenanigans" on it.  Nonetheless, TBT taking a hit initially and they may make a nice bounce play so we’ll keep an eye on them.  I like selling the Feb $48 puts, now .77, for $1+ if we can get it.   

  93. I would never know where to start to figure out if the market is over or under. That’s why i appreciate y’all so much. But here’s 2cnts from a Zack’s post last night. Cut & paste so sorry if it doesn’t work.
    Customer asked: “The Economist headline article this week has a comment that the market is over-valued by quite a lot in their opinion.  What is your take on their position?” 
    I think the market is fairly valued at this time. Why? Below I will share two good measures of fair value for the market and both say the market is not overextended at this time.
    First, we can talk about the concept of Earnings Yield. Imagine you bought every share of every company in the S&P 500. The earnings of these companies would now be your income. Now compare that rate of return to the 10 year Treasury. You should be able to make more on the earnings to compensate for the extra risk. And that is the case now.
    The estimate for S&P 500 earnings in 2010 stands at around $78. Now divide that by tonight’s S&P closing price of 1145.68 = 6.8% earnings yield. That is nicely above the 3.8% yield on the 10 year. This clearly says that the stock market is still attractive at these levels.
    Second, we can look at the P/E of the S&P 500 which is to reverse the above equation. Now divide $78 in expected earnings into the index level = market P/E of 14.7. That is right around average over the last 20 years. And if truly the economy continues to rebound from bottom, then 2011 should be another year of above average earnings growth, which would make the P/E look even more reasonable. Note the market is much more attractive on earnings yield front and only reasonable on PE front. The key point is that it is not overvalued on either front.  
    Of course, if the current earnings estimates prove to be too optimistic, then yes the market would come down. Right now there are no pressing reasons to doubt the estimates and thus the market should stay aloft.

  94. Treasury sells $13B in 30-year bonds at 4.64% (.pdf). Bid-to-cover ratio of 2.68; indirect bidders stronger today, taking 40.7%. Treasurys were slightly higher across the board: 30-year yield -0.03 to 4.69%; 10-year -0.03 to 3.77%; 5-year -0.04 to 2.51%; 2-year -0.04 to 0.93%.  Fake, Fake, FAKE

    S&P/Morx – That’s fine for SPX investing but keep in mind that, sans financials, the earnings are less than 1/2 that. 

  95. Phil/Dynamics
    Right on… Bubbles are in the making, but we have the advantage over others because we KNOW it, and do not believe in the fairy tales that most people think is reality. This BS with the bond auctions is just a charade, one branch of the government buying the others debt through QE and calling it a market. Like all bubbles it will not last forever. I am increasing my TBT positions everytime I am reminded of the auction SUCCESS!

  96. judah / Range
    I think they want it over 64.65, but if it fails here it could fall $0.50 !

  97. JRW, Yes, I’m thinking--fail, drops .50 and rallies at the close back to where we started.

  98. EWZ – has a good risk/reward assuming we (the US markets) do not correct (5-10%, and not single down day down!) in the next week or so. Sold Mar $75 Puts for nice premium. Will re-evaluate if goes below the $74 level.


  99. 1020/Harwood.  Yes it does interest me; I just find Harwood’s bias to be pretty obvious.  I am sure he thinks he is totally objective but I don’t see it that way.

  100. Phil / Auction
    Treasury attributes those sales to " Households " when the Fed buys annonimously; They have purchased 1/3 of new treasuries sold in the last six months this way.

  101. The Commodity Futures Trading Commission proposes position limits in energy markets in order to tamp down speculation. The limits would cap contracts; violators would be told to get rid of especially large positions, though the CFTC is empowered to fine traders and revoke their privileges. (ETFs: USO, UNG)

    Woops, GMCR stopped going up  – possible sign of the apocolypse…  Gotta love those blow-off tops though.  DEC too – is this some kind of trend?  FSLR having a strange day.  YRCW continues to be a wild ride – I would love to figure out a channel for that one!

    Nas ground to a halt at 2,314 AGAIN.  Dow volume at 1:26 is 92M so very stickable (145M or less at 3pm is easy stick).

    Housholds/JRW – Yep those households can’t get enough of the 30-year can they?

  102. HUM – IYR vs SRS – rather than srs I have a diagonal put spread on iyr / kind of like the dia covers – started with phil’s recommending a vertical put spread - but i then write an otm call on iyr – you pick up more than enough income to cover the roll of your itm put.  
    I have not done all the calculation about this vs srs – I know srs is good income but i don’t really like the decay factor of the levaraged etfs -

  103. Phil & Solar investors
    KWT down .67%, SPWRA down 2.78% – overreaction to the German news?

  104. It’s too early for that spike up based on nothing so I wonder if it’s a set up for an EOD selloff?

  105. Airplane:  "Looks like I picked the right week to quit using trailing stops."

  106. hi, phil, are you going to play BIDU or GOOG from this level?  or too risky…

  107. bidu – high RISK PLAY
    Phil, if you really think BIDU has a shot at 500, then wouldn’t a 450/500 call side FEB back/ratio with a naked PUT sell be in-order? I believe this trade consumes about $5,000 margin but the back/ratio can be converted into butterfly within the next few weeks if BIDU hovers around the 435-465 range.  And of course the PUT can be taken out as well later on.
    Well that’s my 2 cents for today….I’ll shut up now :-)

  108. Alt energy getting MURDERED today, especially the Chinese ADRs

  109. JRW – nice article.  Someone really needs to pull the curtain back.

  110. thanks for input SAMZ  this group is a wealth of information

  111. Woops, 1:30 on the dot Mr. Stick jumps in (that’s his new time, look back all week) - GMCR now a buy I guess…  They popped the Nas, now we’ll see if they can hold it. 

    Copper bounced back to $3.40, dollar back at lows to the Pound and the Yen (Japan won’t like that but maybe they fix it by then) and still $1.451 to the Euro.  Gold flew back to $1,144 despite our FANTASTIC 30-year auction that clearly shows there is no fear of inflation for the next 3 decades, Silver jumped to $18.72 and oil is back to $80 with nat gas the big disappointment at $5.54.

    INTC hitting 52-week highs ahead of earnings (why wait when every day is an up day anyway?) so it’s strange the SOX is down 1% as INTC usually moves the whole sector. 

    MA $250 puts at .10 are a fun trade, a craps roll of $100 buys you 10 contracts and is a fun way to play overnight bearish but it’s almost a certain loser so keep that in mind.

    Germany/Deano – This is another one of those things that we talked about months ago that the MSM is finally catching on to so it’s suddenly "news" to investors.  Yes it’s an overreaction but they were flying high so not like it’s a fire sale yet.  I will be watching SPWRA closely to see if they hold the 50 dma at $24.   If they do, I’ll add them to the buy list.

    ZH/JRW – That is a good article, I used it a while ago but all should read!

    LOL Llorens!

    BIDU/DMan – Didn’t we do this yesterday?  See BIDU play above, GOOG not that interesting at the moment.  People are spinning that China is "only" $300M in revenues for GOOG but that’s $100M in profits at a p/e of 38 so until I see $3.8Bn knocked off their market cap (2%) how can I take them seriously?  Yesterday morning was not a bad entry but back to 590 way too fast. 

    Backspread/XLF’d – That’s not a bad way to play but I prefer the mellower, longer approach.  Don’t forget their COO just suddenly quit – that’s usually not a sign that things are great.

    And wheeee!

  112. PCLN is having a very bad day. Down to $206 just $10 above the November gap.

  113. Hi Phil, have a long position DELL at 13.38. Don’t want to own more but would like to pick up premium. Suggestions?

  114. PCLN another big one that’s fallen from grace.  

    FXI bouncing off the 5% rule for the week now, naked sale of $42 puts at .27 is a nice 1-day premium scalp (can be rolled to Feb $38 puts).

    SMH $27.50 puts can be sold naked for .20, also a way to play INTC up for tomorrow.  That’s a long way down for them as a 1% drop in the SOX today cost them .12 so for them to fall .34 to break/even point would be past a 2.5% SOX drop tomorrow.  

    This is why XLF is up half a point today:  Chris Kotowski of Oppenheimer runs the numbers on the president’s too-big-to-fail tax and equates the effect to a mere 15-basis point hike in the federal funds rate; still cheap money for all!

    DELL/JB – You are up $1.50 and you hope to make what, $3 more?  You can ditch the stock and get the 2011 $12.50/17.50 bull call spread for $2.40, so no more risk than your current ownership with a $2.50 upside and you can sell the 2011 $12.50 puts for $1.13, which now leaves you in for just $1.27 and your worst-case scenario is you own DELL again at net $13.77 and, at $17.50, you make $3.87 more than you have now.

    Dow leaders: MRK +2.7%. MSFT +2.3%. INTC +2.3%. IBM +1.6%.

    Dow laggards: WMT -1.2%. VZ -0.9%. DD -0.8%. DIS -0.7%. CAT -0.7%.

  115. Phil,
    So 2:30-45 STICK, or futures pump tomorrow to get us over ?

  116. CNBC online communicating "Market Pushes Toward Another Late Day Rally". My shorts hope it’s another "Dewey Defeats Truman" scenario.

  117. BWLD making new highs as we get into playoff season.  This is where we dumped them in April when they spiked up on us so possibly a fun short shaping up here.  They were upgraded today after touching the 50 dma at $39 on the 5th so, of course, they jump 15% in a week because that’s the kind of market we have, right?  I know they switched wings to much cheaper and worst tasting ones so I imagine they had some cost pressures with earnings on Feb 11 supposed to be up 20% from last year.   I like the backspread of 5 June $50s at $2.60, selling 4 Feb $45s at $2.50 so you are in for net .50 each on the longs.  If they do well, you add 3 June calls and roll the Febs to 2x March $50s and play the straight spread.  If they go down, you hope to hold .50 per long or better (the June $60s are. 60)

    Stick/JRW – We are over, now the battle is to hold it.  Defense levels are Dow 10,700, S&P 1,145, Nas 2,315, NYSE 7,450 (not there yet) and RUT 645 – holding those means bulls are large and in charge.  I’m still thinking we sell-off into this close as every single Fast Money person said they are buying into the close and they are rarely right when they all say the same thing.  Seems like everyone expects JPM and INTC to push us higher tomorrow – funny if either misses. 

    Cramer very made that they are taxing GS – that’s his payoff money they’re messing with!  8-)

  118. They are just taking a circuitous route on establishing a 60% effective tax – income, state, sales,  social security, health insurance + all of these "indirect taxes"  Just set a 60% flat tax on all "wealthy" americans and lets be done with this bull**&&& !

  119. Make illegal drugs legal, and tax them.  That will take care of healthcare and a big chunk of defense!!!

  120. Oh yeah, CA is trying to do just that with the green leafy stuff….

  121. Phil, good advice today and yesterday on google/bidu.

  122. Federated Investors’ international fixed-income chief Bob Kowit thinks an extension of Fed asset purchases will be irresistible "political raw meat" – and that market participants are betting on it.

    60%/Jo – That’s the opposite of what they are doing.  State, Sales, SS and health insurance are all massively disproportionate taxes on the poor.  My property taxes went up 30% this year – I can’t imagine what people on fixed incomes do when that sort of thing happens.  Charging the banking industry, which is on track to make $2Tn in profits this year, $12Bn a year to make the masses feel like something is being done is just a joke and the XLF heading higher today proves that.  There’s actually talk that they may extend the Bush tax cuts – using this $120Bn as an excuse.  That’s a nice trade-off for guys like Blanfein, who make $50M bonuses, that they pay 10% less tax - what does he care what taxes the firm pays? 

    Advice/Jo – Thanks!

    See why I like LMT:  The Pentagon’s revised five-year plan for spending on missile defense in Europe would increase spending by $4.6B and quadruple orders for Lockheed Martin’s (LMT) missiles, and triple orders from Raytheon (RTN).

  123. Phil – do you like QID as a selloff-at-the-end bet or do you think the INTC/JPM anticipation will keep the indexes within their current channel upward?

  124. 30 year Treasuries up .75% today; yet TBT down 2.3%  ( I know tbt tracks 2X the 20 year bond, but something is fishy here)

  125. Phil,
      Any thoughts on PGF as a way to play the financials for a dividend?

  126. Jo/Taxes
    I have been told "I am my brothers keeper" – maybe so. but I would like to see some of this go to making my brother self sufficient!

  127. Seems Mr. Mrkt won’t go dwn b-4 options expiration. this happens consistently BUT the next week it does take a hit. So clear out anything b4 close on Fri & get your Put spreads rolling. Anyone watching shld? Shld be a nice correction like Gmcr & V.

  128. Phil
    Russell now in the Zone, setting up for breakout; if intl or JPM don’t majorly disappoint, SHORT SQUEEZE !!

  129. gel,
    Why would your brother vote for THAT ??

  130. Hi Phil: I bought 800 shares of MRK at $31,now $40 & have been selling/rolling  up calls to present postion of short July $38 C at $ 3.60 (paid $2.27) A month ago,bought another 500 shares at $ 37.30 ,now $40, and sold July $40 C for $1.70,now $2.45. S& P came out w/upgrade with new target of $48 within 12 months which I find hard to believe.Anyway, I’m thinking  of rolling again the 8 July $38 to the July $40 priced at $2.53  What do u think?

  131. Phil if you think that JPM is going to beat, will this have a knock on effect on C prior to their earnings?

  132. Phil – Had a question regarding the INTC or BAC calls that you posted earlier today. How do you manage the short naked calls against a long call spread if the stock starts moving up?

  133. Jumped in QID looking for a last-hour selloff.

  134. RTH looks like it’s rolling over.  Any ideas for playing that?

  135. gel, i believe in helping and giving – i take care of a lot of people at no charge – I am very fortunate and make a good living, but it is disheartening when you see individuals on medicaid take pictures of their newborns with iphones. 

  136. Jo,
    If we had a 60% flat tax, we’d have to get rid of so many governmental employees who help to process all the various taxes, we better just make it 65% to be able to give them retraining and extended unemployment benefits.

  137. JRW/Brother
    Very intuitive question…. The problem is I have multiple brothers that have no desire to change the balance, and they have a majority vote in the family. Change does not look like it is part of my future.

  138. Right now QID is going mano-a-mano with its day low $18.40.
    (Let it Ride):  "C’mon baby! C’mon baby!"

  139. llorens – that’s the spirit.

  140. Thoughts from the Community Bank Frontline:
    My day job is working with hundreds of community banks nationwide and there are three over-arching themes are continue to repeat themselves.

    Mutli-Family continues to perform strongly and has an incredibly strong bid in the secondary market.
    Everyone is still waiting for CRE to dismantle and while there are losses, the market and community bank professionals were expecting much worse. There is still a very large bid-ask spread in the secondary market. The bid side is still waiting for catastrophe. In my opinion, this is biding more time for capital to form on the bid side and recapitalize local CRE. (Note: these are not the large office building type of loans rather generally less than $15 million) (Note 2: Strip Malls are still the weakest sub-set of community bank CRE)
    Cap Rates in many of the local markets I deal in are starting to have downward pressure at the top end of the 7.5% – 12% range…moving towards 8 and 9%. The new Apple Store in Chicago is out in the market at 7.5%…that would seem to be a pretty strong floor.

    I don’t know if there is a direct way to trade this as many of the REIT assets are much larger (and different) animals… I would love to hear people’s thoughts that are more familiar with optionable securities that provide direct exposure to real estate.

  141. GS must have heard your whispers Phil – they said buy P on LMT b’f earnings…..(can’t find a link, but it is on TOS news)

  142. CXTrading – sorry, the cap rate part was unclear for me.  Are you seeing cap rates rising or falling?

  143. Yes, GS is taking the opposite stance as your whispers! 

  144. QID/Llorens – That’s a little dangerous with AAPL and BIDU on the warpath and INTC being a component and their success would influence a ton of other 4-letter stocks.  AMZN could come roaring back too (they usually do).

    Fishy/Humvee – Fishy is the new normal I think..

    PGF/Japar – They are weighted a lot to the EU banks, which worries me a bit and they are already up 300% since March and the premium for selling is not good at all so not for me but a good one to buy if they crash again.

    Dow spiking wildly but then following through on low but all bullish volume.  Ordinarily I’d say they are flushing out stops ahead of a drop but they haven’t dropped yet so who the hell knows? 

    SHLD/Pirate – I won’t bet against Eddie, he can make that stock paint happy faces on the charts if he wants to.

    Squeeze/JRW – Yeah both of those guys will have to roll over…  8-)

    MRK/Dflam – You have 1,300 shares, fully covered at about $33, now $40.  You can trade 500 shares for 20 2012 $35s, now $7.45 and that’s just $29.80 so $10.20 x 500 back in your pocket.  That leaves you with 20 Leaps and 800 dividend paying shares and just 13 callers and you can roll the 8 July $38 callser at $3.60 up to 16 Apr $40 calls at $1.75 and you’ll still have a couple of open positions and you can add 10 more calls with your extra money if they keep going higher (and you can always cash out another 400 and buy 16 more Leaps).

    JPM/EMC – I think they’ll be good for all the financials, which is why I liked those entries today. 

    Short calls/Trad – Pretty much treat them like naked shorts, just roll them up and along or stop them out if they get too scary.  Also, never forget that, like the MRK play for Dflam above, you can always add longs – if the stock is going up, then getting more longs makes sense, especially if you are well covered. 

    RTH/JCM – They already pulled back a bit but I still like the Feb $90 puts, which are pretty cheap at .80 considering earnings could kill this index.

    Very timely green shoot!  The Philadelphia Fed revises up its December factory activity, to 22.5 vs. previously reported 20.4 – which still makes it the highest reading since April 2005. Six-month conditions index was revised up to 35.9 from 24.4, but the employment gauge was changed to 4.5 from 6.3.  Yay, more productivity with less workers!  Didn’t Marx warn us this would happen? 

  145. LMT – can sell 2012 70′s for 9$ – so worse case scenerio, buy at 61.  March low was 57.  Takes margin, but probably a good gamble on a world full of military tension – Iran, North Korea etc.

  146.  Phil
    Have CSCO stock at $22 basis, fully covered with 24 calls, puts long gone. Any opinion on a roll from here?

  147. S&P high today 1150.41.    If you told me that even a month ago, I would not have believed it.
    BIDU …. sick …. this one can drop 20 or more by expiration easily or – heaven forbid – keep going up..

  148. Jo
    I too have been extremely charitable throughout my life, as I believe in order to live in happiness one must have this attitude and compassion for the not so fortunate. I have difficulty in the acceptance, however, of the current mind set, wherein our elected officials, who are ostensibly there to serve us take from one group in order to balance the playing field to achieve their desire to be charitable to their favored recipients. Who are they to judge who is deserving and who has ripped the system off. Usually market forces, if left to balance themselves out will in the end provide the equity that is fair. Forced equity results in imbalances that are never resolved, and create discord between the participants. I favor a flat tax of 17%, with no deductions. This way everybody pays something based upon the value of their ability to contribute benefit to others. 

  149. TBT dropped like a rock at 10.  What’s up with that?  Is that due to the inventories?

  150. CXTrading: Welcome back!  Long time no see.
    BTW, what is "cap rate"?  Sorry, I am not familiar with those stuff.

  151. Real Estate/CTX – IYR makes a great short on that premise.  They drop like a rock on bad news and, with the VIX at 17.50, you can go with March $46 puts at $2.20, which takes you through earnings.  Those can be offset with a 2011 $43/45 bull call spread at .90 so you have a nice buffer in case CRE loves earnings.

    Speaking of propping up the real-estate market: The Fed bought a net $14B in agency mortgage-backed securities this week – up from last week’s net $12B, and bringing their cumulative buys since January 2009 to $1.137T. Just $113B to go before the central bank reaches its target for purchases of agency MBS.  What would happen if they actually stopped?

    LMT/Jo – That’s a nice play.  TOS shows net margin use selling the naked 2012 $70 puts (after cash collected) of $867 a contract with a $900 upside so 100% gain on margin over 2 years if LMT holds $70.  You can also add the 2011 $80 calls for $5 and sell the March $80s for $1.55 as 3 of those sales gives you free calls and, if they go up past $80, those puts will be looking very good so a nice buffer

  152. Phil, sorry i started the politcal stuff.

  153. MAR making new highs – that Buy List is kicking ass already!

    CSCO/Deano – If INTC is good tomorrow, then you can just spend a quarter to roll them along to the Feb $25s.  If you can pick up $1 for .25 every month, you will have a good year! 

    Flat Tax/Gel – I like that too but a realistic amount like 20% Federal and 5% state with no deductions for people making over $40K (and something less than that for people below to none for people making less than $20K) and make them balance the budgets with that.  It would be nice to actually know what you have to pay wouldn’t it?

    TBT/Pharm – I think it was the ECB holding rates steady so no pressure on the Fed to raise. 

    Four pros (Robert Arnott, Jeremy Grantham, Bill Gross and Jeremy Siegel) give their quick takes on finding elusive investing opportunities for the next decade.

  154. TBT holding 49.

  155. Could not resist – sold some more TBT June 46 puts. The question now becomes if I can keep buying longer than the government can keep BS’ing the world that there is this demand for bonds with such a low yield.

  156. S back to $3.74 – looking good for an entry.

  157. Phil — any other ideas for playing the retail numbers?  The ramp them up on one set of numbers, killing us in the Jan RTH puts, and now we wee a whole different set of numbers.  Which one is correct?  The specialist with RTH is f*cking around with me and I refuse to bid up for the Feb 90′s.

  158. TBT/Gel – It’s going to be a tough race but at least there’s always rolling!  I’ve got a target on TBT at $60 by the end of the year (long rates over 6%).  I will be amazed if they can keep things lower than that for so long.  Also, don’t forget, the banks HATE 5% interest, they don’t want their money out there at 5% – they want people paying 6 and 7% home mortgages at least.

    Finally getting my tiny little DIA sell-off, just in time to barely get out even on 2nd set of $107 puts

  159.  Phil…I went along w/ eric and bot GS Jan 170s to ride a JPM blowout…what do you think??

  160. Phil/Flat Tax
    The concept is good and the details could be worked out, Im sure. Probably could not pass though – most Cpa’s and Tax attorneys would be put out of work and would object.

  161.  Phil also bot  jan 165 puts what do you think?

  162. Not sure why S dropped so bad at the end but I managed to pick some up at $3.68. WooHoo.

  163. JRW/SS, Tried to catch a sell-off from 64.75.  Waited and waited, made a whopping .05.  Hardly worth the wait.  Not much better than a poke in the eye.  Always tomorrow.

  164. judah/JRW, missed all trains today.  Will be at the station early tomorrow.

  165. Llorens,  That was quite a swing for S today.  I sold some $4 covered calls this morning.  Maybe I’ll buy some calls tomorrow.  It is back below to its 50 dma, which can be good for a bounce.

  166. Phil, The buy list…. lots of choices….. can you pick one of your favorites and offer a play on them?

  167. RTH/JCM – Just hope for a nice move up tomorrow and short into that.  We can look at some  spreads too depending on how things shake out. 

    Now comes the fun with INTC earnings…

    GS/Big – Those with the puts are a fun spread but it will be very easy for GS to flatline and wipe them both out so hopefully just a fun bet. 

    Flat tax/Gel – Well, a Shakespeare wisely said "first thing we do, let’s kill all the lawyers" and, if they had such a thing at the time, I’m sure accountants would have ranked 2nd!  Think about that – if we could actually create a VERY straightforward, no loophole flat tax, like just take 25% all corporate profits and all individual incomes that should be about $4.5Tn a year for government to play with.  We would probably save about $1.5Tn just on what we spend on legal and accounting fees relating to taxes (150M filers spend avg $2K each is $300Bn plus what corporations spend), not to mention the time involved.  We could re-train all the accountants to star in realty shows or something…

    Buy List/Bord – Each time I update it, my favorites are the ones I put in bold.  Obviously, if you see one dropping that week that you are interested in, that’s the one we want to look at for possible bargain hunting.   At the moment, I’m now waiting until next week and will update the list once we get a look at some earnings.

    A McKinsey study that looks at worldwide liabilities indicates the deleveraging has only just begun. And that’ll be a continued anchor on job growth.

    INTC with huge numbers.  65% gross margin is just crazy (it’s good to have a monopoly!).  Revenues beat by 4%, guiding up – it’s a home run.   Should work just right on our spread as they won’t make $22.50 (or just barely) and those Feb $19 puts are toast! 

    CSCO going up too and the Qs of course. 

  168. Intel (INTC): Q4 EPS of $0.40 beats by $0.10. Revenue of $10.6B (+28%) vs. $10.2B. Shares +2% AH. (PR)

  169. CXT Trading — do you have access to REO and real estate note sales from these banks — re: CRE.
    If you do, I would like to speak w/ you.

  170. Glad I sold my QID with two minutes to go at $18.48 and a hefty $16 (net of fees) profit. It looks like it’s trying to go under $18.20 AH.
    JudahBenHur childhood friend of Massala:  I sold my $3.68 S position for $3.74 AH. Bird in the Hand too hard to pass up.

  171. Make that "Messala"

  172. Intel (INTC): Q4 EPS of $0.40 beats by $0.10. Revenue of $10.6B (+28%) vs. $10.2B. Gross margin of 65%. Sequential revenue gains in PC Client Group (up 10%), Data Center Group (up 21%), Other Intel Architecture Group (up 22%). Atom processor and chipset revenue up 6% sequentially. Sees Q1 revenue of $9.3B-10.1B vs. $9.4B. Shares +2% AH. (PR)

  173. Gel/Brother, From David Rosenberg’s phenomenal translation: "Where is your brother, Abel?" "I didn’t know it is I," he answered, "that am my brother’s watchman."    To me, "watchman" has a slightly different connotation than "keeper", and ever since I read that translation years ago, I have thought of that phrase and its use differently. 
    I agree with you on the Flat Tax, in part for the reasons you state and in part because it would end the endless tinkering with the already convoluted tax code and in part because if would end the use of the tax code for social policy.  (As a young man, I worked in Congress tinkering with the tax code.) Cheers.

  174.  Phil..w/ Intel crushing earnings and GS up aftermarket, I think the calls will be ITM, yes?

  175. Clarification on Cap Rate comment: I am seeing cap rates decreasing at the top end of the range i.e.) former 12% deals are now 10% however, best credits are holding firm in the 7 – 7.5% range.
    Cap: I do work directly with community banks on a number of balance sheet items…including REO, NPA and performing loan sales.

  176. Here is a link to a DIA chart….very interesting from a TA movement.  The humps move in 200 point moves, then the big burst up to 10200 (similar to the 2007 highs).   Now they are in little moves up, and volume is dwindling again and the force of the up moves is also waning.  Trend line is still up and higher lows/higher highs still being set.  Again, cost cutting helps the bottom line (AKA Intel). 
    Hope this helps.  As much as I like to buy Ps, i am gonna get out until the trends are  broken and lower lows/lower highs are in.  Then go short.  Just not worth the hassle.

  177. PHARM/DIA chart: Great chart and info.Thanks

  178. Interesting after hours trading with INTC.  INTC 4PM close was $21.48.   After hours high was $22.20 but now trading at $21.45 at 5:50PM.   We’ll see what happens tomorrow and INTC probably will be up but I wouldn’t be shocked to see it flat or down.    Linear Tech (LLTC) had good earnings on Wednesday but the stock was still down today.   Each day I am more and more convinced that this market survives purely on manipulation.   It just makes me want to be mostly in cash.  The uneducated will get slaughtered I believe.  I hope it’s not me!

  179. This is the next frontiers of medicine, esp. understanding the complexities of the brain (my wife sent it to me).  one of the original people was Dr. Amen, but this is much more powerful….jomama, what are your thoughts on fMRI?  Possible side effects??

  180. Why is INTC coming down after hours on the beat?  Anyone listening to the CC?  Something must not be what it appears.

  181. ss
    Sell the news.

  182.  Hi pharm, will look into it.

  183. Good news for bears? Depending on who you listen to, Robert Prechter (the Elliott Wave guy) is either a genius, or a permabear. I haven’t followed him that closely but he claims to be right in shorting the market in July 2007 and closing his short in Feb 2009. Anyways, he has gone ‘maximum short’ in his newsletter from Jan 14th (today) saying that a bear market rally top has been put in. His stop is 10,822 on the Dow (so just 100 points from here) in case the madness isn’t finished yet. He is worried about what he sees in the broader chart formations, but also the low volume, the falling VIX, and the high positive sentiment indicators. I think the reactions of the market to ‘blow-out’ earnings like INTC and (maybe) JPM tomorrow will be all telling.
    Most of the fund managers and traders I know have told me the same thing in recent months "i’m just gonna ride this as the Fed isn’t going to let it go down". I just don’t understand that logic. Didn’t the market tank in 2008 on heavy volume? The Fed barely stopped Armageddon. So a year later and suddenly the Fed can keep this facade going indefinitely? The guys riding this on momentum will find the exit doors are awfully small. Phil’s disaster plays, as painful as they have been with the monthly slippage as the market grinds higher, have never been more critical. Thanks Phil for not capitulating despite this relentless pressure. When you see a stinker, you call a stinker.  

  184.  Is it possible that these banks have so much money at their disposal that they can buy up most of the float for any particular stock then just trade it back and forth to go higher?  Meaning that there actually is no seller large enough to matter?

  185. What’s tanking the futures?

  186. That, Craig, is our current theory.   There may be no sellers large enough to matter compared to the banks that are buying.  I mentioned last week that Ilene and I are working on a theory that the retail traders, for the most part, have left the market and, when you look at the known volume of the IBanks (GS alone is measured at over 40% of all NYSE trading) and subtract the volume of trading that is concentrated in a dozen financials (C alone trade 600M shares a day) – then you are left with effectively less than 1/10th of a normal market’s volume actually being traded by real people. 
    That means that nothing we do effectively matters, which is nice if we guess GS’s intentions correctly because all we have to do is hitch a ride.  If we make it though next week without a big sell-off that changes things – then we can start experimenting with afternoon stick-save bets and even Friday bullish bets.  As I’ve said, if this is 1998 and not 1999 then we have a lot of partying to do before this baby blows up!

    INTC/Big – They are perfect for expiring the puts and calls we sold but they won’t be putting our bull call spread in the money most likely, not today anyway but we also should keep the .27 value at least off our .04 cost basis so we can cash out with a nice gain regardless.  Maybe take 1/2 off the table and have a totally free ride on possibly gaining $1 on the spread next month.

    JPM just reported and, as expected, it’s a disappointment but not so much so we can get a quick profit (hopefully) on our Jan puts, leave the Feb puts naked and hopefully the longer $43/44 bull spread holds up.
    Markets taking an early dip on JPM news, it takes constantly upbeat news to support these levels and that wasn’t it!

    INTC/SS – It looks like a lot of that good news was priced in on the run off $20 this week.  $21.50 is up 7.5% in anticipation of good earnings so it’s not about whether earnings were worth a boost to $22.50 but were they worth a 12.5% boost from $20 – that was the basis for constructing that play as $2.50 (looking at long-term charts) is a huge move for INTC.

    OK, so we’re testing yesterday’s lows at 7:15 already, the dollar is much stronger-looking this morning and copper is below the magic $3.40 mark indicating no one really believes all this global growth nonsense.  Oil is $78.73 at the moment and gold is $1,133 so it’s going to be a very interesting options expiration day – stay tuned!

  187. is fcx – a short candidate here?

  188.  Market manipulation…. One of the things I’ve gained from this site is the concept of market manipulation.  I never thought it was so prevalent, but now I know it is.  I actually consider its effect when I make trades.  Several days ago, when AAPL was moving toward 220 I sold 210 calls.  My reasoning was that they will probably pin this month at 210.  They came in big time as the stock moved ever closer to 210.   I agree with Phil’s comment that one of the things we need to do is find out what they are manipulating, and how, and hitch a ride.  They are doing this with several equities.  I’ve actually seen one article describing several equities that were being manipulated to pin at expiration each month, and describing how it was done, and of course Phil has described it well.  In some ways it’s easier to figure this out than it is a ‘normal’ market behavior, and thus easier to make money in certain equities.