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Wednesday’s Worry – World Wide Cash Crunch

Hugo Chavez is running low on cash

Should you care that he just had to withdraw $5Bn from reserves, sending them to a 10-month low and down 19% to $28.35Bn?  Well it’s not just Venezuela but they are a good example of what’s happening around the World as even oil-rich nations can no longer prop up their economies and will have to begin competing with the US, Europe and Japan to borrow money on the international markets.  Venezuela may have external debt financing needs this year of as much as $19 billion and as much as $22 billion in 2011 should authorities choose not to use non-reserve savings estimated at $41.1 billion, according to Morgan Stanley.  “Short of some break in Venezuela’s current dynamic, the economy may be faced with a severe dollar crunch as early as this year,” Pardelli and Volberg said. “The dollar crunch may prompt the authorities to attempt to buy time by drawing down their hard currency savings, issuing debt or significantly ratcheting up policy heterodoxy.”  

Greece needs $15.6Bn by the end of May and that much again in August and November.  Seven-year notes sold by the government this week fell even after the European Union and the International Monetary Fund crafted an aid package that would be triggered should the nation be unable to raise sufficient cash from capital markets to cover its financing needs. Greece may pay about 13 billion Euros more in interest on the debt it sells this year than it would have to had yields stayed at their pre-crisis levels relative to Germany’s.

The UK will be spending 10% of their tax revenues just to pay the interest on their debt as debt itself soars to 90% of GDP with debt now costing the UK more than their Defence and Transportation budgets combined.  Neighboring Ireland is looking at a $110Bn bill over the next 12 months to stabilize it’s bad banks – and that’s AFTER giving the banks a 47% haircut on the value of the assets the government will be picking up.  This will not be counted as an addition to Ireland’s already $95Bn in debt for 2010 because, technically, they are buying an asset - even if the asset is toxic.  It’s the same trick our Fed uses every month to pretend things are fine…

Fed President Richard Fisher says the U.S. can’t ignore the effect of the growing federal deficit on Treasury yields and the outlook of investors.  “Even under the most optimistic of scenarios, large deficits will be run for as far as the eye can see,” Fisher said in the text of a speech today in Tucson, Arizona. “The markets, fearing the consequences of runaway deficit financing, have bid up longer-term nominal rates, resulting in a yield curve that is now historically steep.”  

Fisher’s remarks underscore the view expressed last week by former Fed Chairman Alan Greenspan, who told Bloomberg Television that he’s “very much concerned” about the financial situation of the U.S. Greenspan said higher yields are a “canary in the mine” that may signal further interest-rate gains and reflect investor worry about the “huge overhang of federal debt.”  

To recap so far – Emerging markets need money, Greece, Dubai, Ireland, England, Spain, Turkey, Potugal and lots of other countries we don’t care about need money, the US needs so much money it’s almost impossible to concieve of (but here’s a video that helps and another fun one).  Understanding Trillions is very important for Americans because our states are approaching that magic number in their own debts.  Now it’s getting closer to home, isn’t it.  Remember, the closer to home it gets the closer they are to taxing your home to collect it!  

Every time you hear that someone on this planet is spending another $1Tn, that means they need $150 from every man, woman and child on the planet.  Unfortunately, 80% of the people on this planet don’t have $150 so that pretty much kicks the bill up to the 1Bn of us who can pay it at $1,000 each.  If you are unfortunate enough to live in a small country like America, with only 300M people, when your Government runs a $1.5Tn annual deficit like ours does, that means they will be needing all 300M of us to send in $5,000 to cover the shortfall.  If we don’t pay it now – then we’ll have to pay it later, plus the prevailing rates of interest. 

Now for the bad news.  Our banker is having a bit of a cash crunch.  It seems this brilliant global strategy of bailing out the banks and artificially keeping prices high has led to a commodity rally that has given China it’s first trade deficit in 17 years.  China’s trade gap is projected to reach $100Bn this year, driven by a 45 percent climb in imports as China’s demand growth outpaces that of other major economies, said Glenn Maguire, chief Asia- Pacific economist at Societe Generale in Hong Kong. He said yields on benchmark 10-year U.S. notes will hit 4.5 percent by the end of 2010, capping the biggest two-year increase since 1980-81.

We’re looking at a medium-term move of China into the red on the trade account,” Maguire, a former economic adviser to Australia’s cabinet, said in a telephone interview yesterday. “The automatic funding of the U.S. twin deficits that has come from China reinvesting its trade surplus will cease — and probably reverse,” he said, referring to the American budget and current-account shortfalls.  China’s Treasury purchases have already fallen for three consecutive months, to $889 billion at the end of January, according to U.S. Treasury Department data.  What?  China won’t even give us a lousy Trillion?  OK then, who can we tap out next?  We already killed Japan…

This is not a one-off dip into deficit,” Maguire said. “This is going to be one of those clear turning points where the entire economic debate changes.”  The 2009 Thomson Extel survey named Societe Generale as the top economics and strategy research firm for a third straight year.  Domestic U.S. investors will have to step up to fill the funding void for the U.S. deficit left by China’s absence, Maguire said. In order for them to do that, yields on Treasuries must rise to between 4.75 percent and 6 percent, he added.  Have I mentioned I like TBT lately?

Chinese markets sold off on the last day of the month with the Hang Seng dropping 135 points (0.6%) to finish the month at 21,239, which is up about 1% but still 3% shy of the Jan 4 open for the year (21,823).  The Shanghai Composite matched the mainland fall and finished the month at 3,109 also down about 3% for 2010 so far.  The Nikkei, on the other hand, flatlined today but that’s 11,089 – up 9% for the month of March and up 4% for the year, matching the BSE’s strong showing as they also flatlined into the end of the quarter – almost as if some invisible force was keeping them afloat…

Europe had a good open but went right off a cliff on a disappointing ADP report for US (-23K), which is funny because we had a terrible Consumer Comfort Report (-45) last night and none of the people pumping up the futures seemed to care.  Probably because, as I explained above – it doesn’t really matter if the US consumer doesn’t WANT to go another $5,000 per person into debt this year – our Government is spending the money for us and, so far, we haven’t gained a single job to show for it.  Inflation in Europe rose sharply, from 0.9% in Feb to 1.5% in March

We talked about real inflation in yesterday’s post and here’s a cool chart that illustrates the problem, comparing the price of Big Macs (a commodity consumers must choose to consume) and oil (a commodity consumers are forced to consume) over the past decade.  It’s much worse today as oil is flying back near $84 in pre-market trading (hey, oil traders need to make their quarters too) and until retailers like McDonald’s wise up and start spending the same Billions in lobbying dollars to get oil prices down as is now being spent to jack them up – then larger and larger portions of consumer’s "discretionary" income will continue to be chewed up by rising commodity prices.  Remember, Uncle Hugo needs a new pair of shoes! 

Speaking of oil, Obama says "drill baby, drill" as the administration proposes to open vast expanses of water along the Atlantic coastline, the eastern Gulf of Mexico and the north coast of Alaska to oil and natural gas drilling. The proposal — a compromise that will please oil companies and domestic drilling advocates but anger some residents of affected states and many environmental organizations — would end a longstanding moratorium on oil exploration along the East Coast from the northern tip of Delaware to the central coast of Florida, covering 167 million acres of ocean.  I think he’s just messing with the Republicans to find out if any of them are actually capable of voting yes on any legislation he proposes…

Last chance for window dressing today to end our first quarter of 2010.  Overall, our indexes are up right around 5% for the year other than the Russell, which is leading us with a 9% gain and up 15% since Feb 8th.  We’ve had a very dull week in cash on on the sidelines and that’s unlikely to change today or tomorrow but we are still loving our disaster plays over the weekend and we’ll have to get through the next weekend before we change our generally bearish stance. 

 


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  1. Phil,  what are your thoughts regarding Apr USO puts sold this week, considering all the news of higher oil prices, and oil futures being up? Is this just a pump job, and we can still make money on these?


  2. Dollar getting clobbered….they are dead set on getting oil to the moon


  3. Phil -
    Who is busy buying up all these oil contracts? Is there a normal ratio – Dollar index down x% leads to y% rise in oil futures? My math is not good enough to run this regression -
    I think I get it -
    Weaker jobs report
    Dollar Lower
    Oil taking off -


  4. Or more jobs = higher dollar and higher oil b/c the economy is rebounding. It’s a zero sum game, we get screwed….


  5. USO/Jbur – I am shorting oil below $83.50 in the futures and I like selling USO Apr $40s for $1.10 and I like buying the May $39 puts for $1.10.  Those are my oil plays of the moment.   Don’t forget inventory at 10:30.

    They need to kill the dollar today to get the market back up.  Gold is racing at $1,120 again and may make a fun short too. 

    LOL Samz – You do have it and we’re all getting it right up the ass! 

    Gee, and I thought allowing drilling would solve all our energy problems…


  6. Good morning, by the way!

    Same levels as yesterday and forgive me for not changing the text but I’m in a hurry to get the Alert out:

    The recent highs we need to get back to are Dow 10,955, S&P 1,180, Nas 2,432, NYSE 7,497 and Russell 693 – Anything less than this will begin to become a problem for the bulls. 

    We expect big resistance at our even numbers of Dow 11,000, S&P 1,200, Nas 2,500, NYSE 7,500 and Russell 700 so many possible resistance points as we go up. 

    That makes the best play of the week to be PATIENTLY waitting to retest the highs and then finding some good things to short right up there.  If we get a pullback, then wheeeee!  If not, we get out if we cross 3 of 5 of our levels.

    I’m still skeptical and not very sure we’ll hit our topside breakouts without a 5-10% pullback but I do think "THEY" are going to pin us as high as they can into Wednesday’s close, at least. 

    ANY failure is going to be a very poor showing and there’s trouble if ANY of our indexes are below their prior highs of:  Dow 10,767, S&P 1,153, Nasdaq 2,362, NYSE 7,471 and Russell 678.   The NYSE has been giving us trouble but made it over this morning so let’s watch them closely!

    Below that we MUST hold 3 of 5 of our old breakout levels which are: Dow 10,700, S&P 1,050, Nas 2,350, NYSE 7,400 and Russell 677.

    We expected a massive pump job this week and tomorrow is D-Day for End of Quarter so let’s see what they’ve got…

    What’s new and important is we can play for Mr. Big Stick today with the DIA 12/31 $109 calls at .18 as a craps roll (small bet) as they can go 5x if we make a run to 11,000 so worth a small gamble


  7. Im thinking 10800 for the dow all depends on how quickly we break 10850


  8. VIX moving up, market moving down.  That’s my kind of day. 


  9. Wow, no sense in buying those calls, we may get to buy the $108 calls for that price at this rate!

    Chicago PMI sucked at 58.8 vs 61.7 expected and down from 62.6 in Feb – that’s not at all good.

    At 10 we get Factory Orders which have low expectations of being off by 50% at 0.8%, down from 1.7% in Jan so they may turn us back up. 

    They are looking for a 2.4Mb build in oil and a draw of 1.6Mb in distillates and a draw of 1.5Mb of gasoline so net – 700KB expected on the 10:30 oil report. 


  10.  Phil,
    What’s your take on the JPM silver market manipulation? Really big deal or just the usual stuff that just not as interesting as a camel drinking from a bottle of water?


  11.  Phil/DIA
    What am i missing here? the Dec 109 calls are priced at 5.35 – i must be looking at the wrong ones?  I dont see quarterlies either.


  12. DCTH continues its run.  Time to put trailing stops on them if one just has the calls. FWIW.


  13. salvum/DIA:
     
    Phil means the March quarterlies that expire tomorrow.


  14. Bad news day…  must mean we’re going up!  They sold into yesterday’s good news.


  15. Attn UK (or EU) members:  I have a person who wants to know what platforms are best to trade US options on from England.  Let me know if you are have some suggestions, thanks.

    JPM/JCEd – I’m waiting for a change in tone from the regulators where we can see perhaps word is given to get tough on these Bozos but, until then, stick to the zoo. 

    December/Salvum – Damn, I meant the 3/31 DIAs, not Dec 31!  Well, they are .10 now so much cheaper to buy and let’s no underestimate the power of the stick on the last day of the month in thin trading


  16. SS,  You around?  I’m just playing between 68 and 68.50, which is not very exciting but seems to be the range in this indecisive market.  I wish I’d been playing a 67/69 strangle on IWM these past two weeks.  Would’ve cleaned up.


  17. judah – getting in my last few minutes before heading to the airport.  I went to cash a couple of days ago as I didn’t want to take away from my time with family and friends.  I hope you make a mint while I am gone.  Just remember you can’t trust these bass tirds to the downside.  They have an agenda and are sticking to it.


  18.  Phil/DIA
    TOS only offers the Aprils. bummer


  19. salvum – the March’s are right above that…


  20. SS, Have a great trip!  Before my wife and I got married, we had to have some paperwork done at the Italian embassy here in DC.  When the fellow who was officiating heard that we would be spending our honeymoon in Tuscany, he said, "Pici, you must eat pici in Tuscany."  So, I pass those words of wisdom on to you.  Enjoy.


  21. Bank of Ireland (IRE +10.8%) reports a net loss of €1.46B ($2B) for the last nine months of 2009, but says it’s working with major I-banks to help raise the €2.7B of capital it needs by the end of the year, potentially making it the only participant in Ireland’s "bad bank" plan to avoid a fresh bailout.

    China may adjust its exchange rate system next month, according to Chinese media reports, possibly allowing the yuan a more flexible exchange rate. The timing is very likely intended to avoid a "currency manipulator" label in the Treasury’s April 15 report.

    Taking what has become somewhat of a contrarian stance, a high-profile World Bank official rejects claims that the yuan is undervalued and warns "a yuan appreciation, if it happened soon, would destroy Chinese exports, push up property prices and accelerate the inflow of hot money into China."

    China launched its trial program today for margin trading and short selling, part of its effort to introduce risky alternative-investment tools to its stock market. The two options are meant to better prepare investors for the April 16 launch of stock-index futures.

    The head of the International Energy Agency calls for China’s inclusion in the agency. "Our relevance is under question because half of the energy consumption already is in non-OECD countries. And for oil it is soon coming that the majority of consumption is happening in non-OECD countries."

    A federal court ruled yesterday that Novell (NOVL), not SCO Group, is the rightful owner of two key Unix copyrights. The decision could affect another Unix-related lawsuit that SCO filed against IBM (IBM) in 2003.

    March ADP Jobs Report: -23K vs. +50K expected and -24K prior (revised from -20K). Though it widely missed expectations, the decline is still the smallest since employment began falling in Feb. 2008.  Futures take a dip after the weak ADP employment number, forcing investors to consider whether expectations for Friday’s jobs data are a touch optimistic. This despite ADP’s insistence that the March number "does not incorporate a weather-related rebound that could be present in this month’s BLS data." S&P -0.51%.  

    Chicago PMI: 58.8 vs. 61 expected, 62.6 prior. Production 60.5 vs. 65.2 prior. New orders 61.8 vs. 62.2 prior. Order backlog 54.3 vs. 58.5 prior.

    YAY!  Feb. Factory Orders: +0.6% ($384B) vs. consensus of +0.3%. Factory orders had increased 1.7% in January. Ex-transport, +0.7%. Shipments -0.6% vs. -0.1% prior. Inventories +0.4%

    Drill, baby, drill! The Obama administration will propose allowing offshore oil and natural gas exploration and development in part of the eastern Gulf of Mexico and south Atlantic states. Enabling U.S. producers to drill in their own backyards may be critical to holding down their cost of exploration – and to keep up with China’s stepped-up efforts.

    Redwood Trust (RWT) is reportedly trying to jumpstart the market for mortgage-backed securities that aren’t backed by the government, and may launch an offer next week of at least $200M of securities backed by newly-originated "jumbo" mortgages. If successful, it would mark the first such sale in more than two years.

    Banks are getting ready for a change in iron ore pricing by developing a derivatives market like the ones that exist for commodities such as oil and coal. Analysts think the iron ore swaps market will grow to $200B by 2020 from $300M today.  Nice, a 70x increas in swaps – that should hold prices down

    A-Power Energy (APWR): Q4 EPS of $0.61 beats by $0.20. Revenue of $126M (+54.9%) vs. $131M. Shares -1.1% premarket.

    BPZ Energy (BPZ): Q4 EPS of -$0.09 misses by $0.07. Revenue of $15.1M (-16.7%) vs. $14.9M. (PR)  I’m seeing a lot of misses so far

    Rite Aid (RAD): Q4 EPS of -$0.24 misses by $0.05. Revenue of $6.5B (-3.6%) in-line. Shares -2.4% premarket. (PRFlu was a bust but these earnings really suck

    ArQule (ARQL) +66% on heavy premarket volume after its experimental lung cancer drug – ARQ 197 – shows positive results in a mid-stage trial. In tandem with another lung cancer drug, erlotinib, patients showed a 66% improvement in the time without cancer growth or death. (PR)


  22. Pstas.  I see those 1175s worked out for you after all.  $8.55 to $0.60 in a week.  That’s great.


  23. The Euro has some more depreciation in its future. There are more countries that are vulnerable to severe debt problems. The issue with Greece is far from over, however the big one coming is Spain, as their economy is in shambles – 20% unemployment, with the younger workers at 35%. With a retraction in government spending in order to contain defict problems, we may see some fireworks. The Euro has dropped 20% in the last 12 months, and will continue this trajectory, given the mounting problems with the PIIGS. The Euro could reach parity with the dollar before this is over. Yesterday I bought puts on FXE ( Currency Shares Euro Trust)  Puts bought were the Jan 2012 130′s (leaps) for $7.00. If we reach parity, then these puts should be a four bagger.


  24. @salvum1 – TOS offers them – MAR5 12  100 (Quarterlys).  They should be the first options in the grid


  25. LOL.  Well, I couldn’t get on FAS at open cuz I was busy and now that things are so rosey it just won’t pull back for me to get in at all.  Damn things are great!


  26. TOS/Salvum – That’s not right, look at the very top of the DIA grid, you should see them there – just make sure they are open.  The contract is BQQ100331C109 on their system. 

    Man that Factory report really saved us!   Unfortunately, it was a Feb report so of course it was up but no one in the MSM will mention that while they are busy telling you what market experts they are…

    ROFL!!!  Oil up 2.9Mb AND Gasoline up 300K and distillates down 1.1M – once again they completely underestimate the level of demand destruction

    OIH $120 calls can be sold for $4, stop at $4.50, happy to make $1+.


  27. Phil,
    Your question on trading from England.
    The person can trade the same as I trade from Mexico. I use TOS platform question is he US citizen or foreigner
    Needs to fill in all forms as usual from broker can use his Bank acc in England or better US Bank acc. Good idea to start at least with 25,000 US plus. Needs to have option trading exp if he does not wish to loose his shirt or better trade with Phil, but first learn the lingua!
    Have as well to run to the airport expecting my son who I have not seen for 30 years. will check up for any follow up questions later during the day


  28. Yodi,  You buried the lede.  "expecting my son who I have not seen for 30 years."  Now, that must be a story…


  29. someday i m going to write a mini series, "Desperate PSW Members" or "All Phil’s Children"…


  30. Juda- Got out at $1.15- not quick enough on the trigger earlier, it kept running away from me. Very pleased none the less. Sometimes it pays to be late and lucky-  I was going to roll them late yesterday. The extra profit from last night may be just enough to buy  a set of tires and an oil change on one of JRW’s cars.  :)


  31. Good Morning Phil
    Today I am doing some portfolio balancing, and have a big position in short puts in UNG ( 2011 - 7′s ) This has been a lousy investment, and I am not positive on gas pricing moving much unless a big snowstorm hits the gulf. What would you do with it ? My other gas play is CHK which also is a big position, looking for a M & A situation, hopefully.


  32. judahbenhur
    No I can give you better stories like this. He lives still in SA, I left there many moons ago


  33. Pstas. LOL. JRW has disappeared on me, he must be out driving on the PCH. 
     
    Have you started your May strangles yet?  What levels have you been looking at?


  34. gel – I agree with your assessment of Spain.  I was in Barcelona last summer.  I was suprised by the attitude in spain.  They expect & demand entitlements and embrace unemployment.


  35. In FAS at 96.45.  Small stake.  Playing for eom shenanigans.


  36. juda- I have an order in for May SPX 1260/100- no fill yet. I still have April 1050 putters; on RUT- have April 720 & 700 callers and 620 putters. How about you?


  37. Jo… was in Barcelona many years ago…. took in the bull fights there. I hope the transition to austerity will be peaceful, but I fear for the contrary.


  38. OMG – Now CNBC’s guy is saying "What happens if Israel attacks Iran?" to his guests.  What a friggin’ joke this network is! 

    Woo hoo on oil!  Nice drop all the way to $82.40 with a stop-out on the futures shorts of course, no need to be greedy there…  USO plays up great already too!

    Markets holding up well considering but that may not last so not very enthusiastic about the DIA calls now

    Thanks Yodi!

    I look forward to the premier Morx.  8-)

    UNG/Gel – They are all premium and Jan is a long way away.  I don’t see how you can like gold so much but not have faith in nat gas – they are all commodities….  I’d sit tight and, if it doesn’t work, there’s always a roll to 2012 but all your losses are paper ones at the moment and the crash today is a reaction to oil, nothing to do with gas at all, which has certainly not been ridiculously pumped up like oil.

    EIA Petroleum Inventories: Crude +2.93M vs. consensus of +2.1M. Gasoline +0.31M vs. consensus of -1.3M. Distillates -1.09M vs. consensus of -1.5M.

    More competition for cash:  The leveraged-loan market climbs to a 21-month high as buyouts pick up the pace. More than $5B has been raised in the market to finance buyouts YTD, vs. no activity in the year-ago period.


  39. Pstas, I have a very small number of 1230/1080 April strangles remaining, which I may close out tomorrow or next week.  I haven’t entered anything in May because the VIX has been so low.  If we get any kind of a sell-off today or tomorrow, I’ll start May.  Otherwise, I’ll wait to see what Monday brings.  Looking at 1260/1020.


  40. LMAO i just got a print of 15.95 high of the day and new 52 week high for C on my streamer what is that like a trillion dollar market cap for C


  41. Rates are sneaking up already – they were down hard in pre-market but bouncing.  Volatility is going to be crazy now that the Fed isn’t backstopping the Bond market (so they say). 

    Great article on short-selling and the shenanigans around it.

    C/Kustomz – Sell I think at that price!  8-)

    Google (GOOG) reverses itself again, and now blames yesterday’s China search outage on "a change in the Great Firewall," and not a technical glitch. The flip-flop has whipsawed Google watchers, and shows how fraught with confusion the Google/China relationship remains.

    Blockbuster (BBI) was under pressure yesterday after disclosing it wasn’t in compliance with exchange minimum-value requirements. Now its biggest shareholder – Carl Icahn – is headed for the door, selling 13M shares recently to cut his stake to 5.1% as of Monday, from January’s 16.9%.


  42. I found today that my Option Buying power dropped from 50k positive to 50k negative with TOS PM, does anybody else have same problem today?


  43. TOS/Tcha – My cash is maintaining it’s buying power (actually up a lot against the other currencies).   I’m not seeing a big change, perhaps they rebalanced some ultras?

    Mutual funds score win on fees. The mutual fund industry won a key Supreme Court case yesterday on the fairness of fees. The court ruled in favor of an earlier legal standard that gave funds considerable leeway in setting their investment adviser charges. The ruling reduces the potential that lawmakers or lower courts could try to force the industry to lower the roughly $90B in fees collected annually.

    Confidence still struggling for altitude. Three data points released yesterday showed that while consumer and investor confidence have seen some minor gains, uncertainty still reigns. The ABC Consumer Comfort Index dropped one-point to -45. There was an increase in those rating the national economy positively, but positive ratings of personal finance slipped. Conference Board’s Consumer Confidence Index came in at 52.5 vs. 51 expected and 46.4 prior, but "consumers continue to express concern about current business and labor market conditions. And, their outlook for the next six months is still rather pessimistic." The State Street Investor Confidence Index rose to 108 from a revised 102.6, but the breakdown saw a large jump in Asian confidence, a small increase in North American confidence and a fall in European confidence.


  44. Tchay/TOS: No change for me in buying power.


  45.  TOS/Tcha,
    Is your change from BP adjustment? If so, then complain to TOS.


  46. Tcha,
    Did you open new shorts yesterday?  With the 1.3X margin multiplier from Penson, there is a delay in "charging" the correct margin, meaning the margin would increase overnight after opening new shorts.   You can look at the bottom right corner to see the number in Yellow and in Brackets, which is the extra margin that Penson charges.  You can always call TOS to take off those extra margin.  However, it would be good to get back to positive, even with the extra margin.  In the mean time, you can only do closing trades if BP is negative, until TOS takes the extra margin requirement off your account.


  47. Phil/jobs report.  What is your thinking about Friday’s report, given the ADP numbers this morning?  More free money, so the market keeps rising, or might reality set in…


  48. ONTY – they are holding them hostage.  I have been trying to fill the Nov 2.5s for 1.35 for 3 days.  MM really wants their money.  These will be an all or nothing trade, and I am using some of my DCTH winnings to see if these creep back up.
     
    Picking up a few GSK 35 Jan12s for $5.35 with the low VIX.  As I noted in my article, GSK has a good pipeline that will pay off and they are fine with respect to the patent cliff.


  49. Kus, didn’t you hear?  The gov’t is selling its stake in equal, preannounced increments and Dick Bove says it’s a buy.  Great news!


  50. wow FA14 will fly faster than the speed of sound on 50% biomass…if they really want to save the planet ….replace nuclear war heads with thornless long stem roses….

    Almost back to even for the day…..tap your shoes three times and say theres no place like OZ

     $300 billion in commercial real estate loans will need to be refinanced every year for the next decade, and the industry warns it is virtually unable to do so.

    Anyone looking at F?


  51.  Also you’ll get margin calls tomorrow  if end of today you still have a negative BP.
    Two margin calls and you’ll lose your PM privilege, so be careful!


  52. Phil,
      I’m currently invested in energy, metals, banking, and emerging markets in my 403B. I’m up about 10% since the beginning of the year but and worried we’re in for a correction at 11k (at this point I think the upside is limited more than the downside). I’m tempted to go 100% cash and to wait to see what happens. Any thoughts? Going back in later, which sectors do you think would be best to invest in? I’m limited only to mutual funds in my 403B. Thanks.


  53. matt please only his friends call him Dick….if you don’t know the guy personally.. its Richard!!


  54. margin
    they just input extra 100k adjustment for my EDZ position (I guess by mistake) and take in off already


  55. Jobs/Judah – I think they are expecting almost 200K positive but who knows what’s real with the census and the dreaded "seasonal adjustments."  Pretty much it’s a lot of guys who think the fix is in and we’re going to get a fantastic number so the fund boys can dump shares into a retail frenzy.  That’s why the volume is still nothing (50M at 11:50) as all Da Boyz are patiently waiting for the signal

    Speaking of signals – looks like we’re heading up now as all the bad news is forgotten as that was so 50 minutes ago..

    Here’s our green shoot story – they must have been saving this one:  For the first time in four years, borrowers catching up on overdue mortagages outnumbered new delinquencies, an industry trade group says. Last month 80,758 privately insured homeowners got back on track vs. 68,675 that fell into default. Mortgage insurers having a banner day: MTG +9.6%; RDN +7.9%; PMI +17.8%.

    F/Kustomz – I was on the button with my short call last week! 

    403B/Jpar – LOL, that’s everything I’m short on!  I’d be REALLY worried if that’s your portfolio.  Yes to the cash, you can always get back in after taking a break.  Not sure what to invest in after a pullback (if there’s a pullback) but if you are in cash you’ll know as much as we do.  DBA is the only one I’d stick with at the moment and I like the Telcos and Utilities once they come down a bit in ETF land. 


  56. Hey Phil, had something sent to you via snail mail, they didnt have an email option….please let me know if you get it :-)

    F im thinking the selling pressure doesnt end here

     


  57. Good morning
    If you look at last Wed – Fri on IWM and overlay this week so far, it’s a match


  58. EDZ approaching 52 week low @ 43


  59. JRW/match.  I guess it’ll be a TZA afternoon then.  I’ve been holding onto TZA that I got for 6.90.  The market has stubbornly refused to go down so far.


  60. Phil/UNG
    Again… very good advice. Thanks!  I had forgotten for a moment I am in the premium selling business. Also… the Farmers Almanac is forcasting a very active hurricane season this year  ( tied to el nino )  Gold, alternatively has a far more finite supply – for me it is a hedge against the market drop when Iran is neitralized ( good probability I believe ), or alternatively, when the mighty dollar goes "sub-terranian"  ( eventual absolute probability ), as gold will move balistically.


  61. judah
    I’m in cash except for 200 April 68′s at  $0.86


  62. Can we get 11k on the DOW today please? Just 112 points to go


  63. Rimm earnings today. Any plays?


  64. Rimm earnings today. Any plays?


  65. Hi Phil, regarding the King world interview with andrew maguire the silver market(and gold) whistleblower, in Ilen’s blog, if asia and other countries started massively demanding gold, that would be catastrophic to all who are trading it in paper 100-1; would that drive gold up thru the roof?


  66.  This market has just kinda "hovered" here on low/no volume this week and lots of negative chatter here and elsewhere about EOQ, sentiment, etc. I just have this weird "spidy sense" that the jobs report on a Friday holiday is gonna surprise a lot of folks and that this market is gonna break up Monday and not down.
    I don’t have to guts to take a position on that feeling though and will just wait and see and if I am right try to find opportunities to sell into.


  67. Mail/Kustomz – I did, thanks.  I sent you an Email but I guess you didn’t get it. 

    EDZ/B1 – Yep, the fix is in worldwide.  Boy will there be a lot of shocked bulls out there if something goes wrong. 

    El Nino/Gel – As a lifetime skier, that is one weather trend I never ignore.  It’s amazing how reliable that effect is. 

    Wow, Dollar is down 2 cents to the Pound and 1.5 cents to the Euro since early morning – that’s insane volatility for FOREX.  It’s keeping all the commodites alive and back on track for the big finish

    RIMM/Dilbert – I’d sell the $75 puts for $3.85.  You can cover with June $70 puts at $3.30 but it’s just a nice play on the volatility crush.


  68. Phil;have PGH stock , base 9.9 now 11.6$, no putters but callers 1x julu10, base 1.12 now 1.8$: what trade adjustments to be made ?


  69. New TA post for those interested.


  70. Gel are you’ still naked MOS puts…. earnings are today after hours? Do you intend to cover before eod?


  71. Phil/CROX.  Looks like it is going to $10 before summertime.  Have you been to the mall buying more shoes?  I’ve got some CROX stock that I kept after a buy/write last month where I closed out both the putter and caller for a nice profit, but the premium hasn’t seemed good enough to do another.  Suggestions?  Sell some May $9 calls?


  72. RIMM/Dilbert – I’d sell the $75 puts for $3.85 -> Isn’t that risky in case stock falls around 5-10?


  73. Phil: this SAP needs continous adjustments: have stock base 53 now 48+ $,
    2.7$,
    have callers apr 46, base 1.34 now 2.7$,
    have putters sep 42, base 3.89 now 1.4$.
    with stock high at 48+ and possible marketdrop: any adjustments ?


  74. ISIS – for those still in the 10 Aprils….nice.  GSK signs a 1.35B deal.  Move on, as they filled the gap.


  75. JRW, If they are running the same program, we’re about to see a 50 plus point drop. 


  76. Volume is picking up on VIAP.  Again, these guys are all or nothing for 20c, but a nice bull chart is forming (not hard to do at 20c).  With a double, 1/2 can be taken off and the rest could be a free ride.


  77. Interesting discussion on CNBC regarding bond rate change potential. They believe the greatest driver will be the DEMAND-SUPPLY differential. The supply is growing and the demand is suffering because of fewer buyers. As in all markets, the price ( yield rate ) will have to rise in order to attract the needed buyers. Phil…. you DO like TBT, don’t you!


  78. Phil,
      In my 403b, my options are putting all of the money into a fund that invests in US treasuries, short or long-term bonds, or insurance company contracts (which I don’t really understand). I don’t have a cash option. Other option would be any Fidelity fund since they manage the plan. Any recommendations?


  79. japarikh- just an observation but they must have a money market fund which is usually @ $1 par value for cash dividends, fractional shares , etc. ? Same as cash.


  80. Magret/MOS
    Yes, I still have the naked puts. The move up today is a positive sign, so I am " hanging in there", as I am hoping the earnings will be good, and if they are then I’m out, as will sell into the excitement. I think Phil is less than excited about this play, and he may know far more than me. I think he believes fertilizer is a lot like BS ( he could br right! )


  81. Gold/Iprosp – In theory it might but the fact of the matter is that the paper countracts would simply fail and all holding them would find out there are tiny little clauses for failure to deliver that render them worthless.  Then you have the issue of motivation.  The US has 8,000 tons of gold, which is about 5% of all the gold on the planet earth (1/2 still in the ground), others are as follows:

    So who exactly is it that’s going to be buying gold to drive up the prices?  There is about 2,500 tons of production per year and the past 5 years worth of production have been effectively bought by ETFs, which is why gold is so expensive in the first place.  Should China buy more gold to diversify away from the dollar, they would likely drive their gold gap with the US from $21Bn to $281Bn to (assuming they double their holdings and double the price) $84 to $562Bn so they spend $42Bn buying gold up to $2,200 an ounce in order to increase the US’s value by $281Bn.  But China doesn’t see the world as US and them, they see the whole world as their competitors so they are looking at a 20:1 gold deficit, which cannot possibly be made up in any rational manney.

    There is also the side issue of the miners.  Driving up the price of gold will make ABX, for example, as rich as Germany and as powerful if you assume paper currency is worthless and gold is all that matters.  Between ABX and the other miners, you would tip the global balance of power and no country could be safe as a miner can shave off a few pounds and go buy up all of your country’s assets and, if they cease prodcution and begin hoarding, then they will truly rule the savage land where only gold has value. 

    If that sounds silly – it is because it’s never going to happen but gold bugs don’t think things through that far.   All they see is if they get some, then they think they’ll win but all the gold in that is produced in the world each year is about the size of a living room (2,500 tons) and all the gold that’s ever been produced in the world would be roughly a 10-story apartment building’s worth.  On the other hand, there are 100,000 tons worth of nuclear warheads and the people holding those will continue to make the rules and it’s very doubtful that their rules are that the schlubs (to them) who own gold mines should take a seat at the table with the G20 and decide policy and they certainly aren’t looking to see if they can make all the idiots buying gold because they saw an add on TV richer than they themselves can get by running their own countries. 

    Spider sense/Gil – That’s why we’re in cash.  There’s no way to tell what will happen over this 3-day weekend or next week for that matter so why risk it?  We get many opportunities to bet on sure things (like oil this morning) and having your cash ready makes sure you can take advantage of it. 

    PGH/RMM – Not much to do, you will be called away of course.  You can roll out but the put sales really suck and aren’t worth doing unless you can get $1.75+ for the Oct $12.50 puts AND you are intending to stick with them very long term.

    Thanks Pharm!

    CROX/Judah – I like selling the May $8 puts, now .45 but I’d rather see a sell-off first and sell them for .60+.  You can also do the Jan $7.50/10 bull call spread at $1.50 and sell the $7.50 puts for $1.10 for net .40 on the $2.50 spread and a net $7.90 put-to price if you are anxious to go right now.

    RIMM/Dilbert – Of course it’s risky!  You have to REALLY want to own them (or at least deal with the roll).  If you are worried, go with the spread – hard to lose there. 

    SAP/RMM – It doesn’t need adjustment if you let the damn thing get called away does it?   Just let it run out and then see where you are. 

    Bonds/Japar – Everyone is issuing them and there are fewer and fewer buyers.  Maybe it won’t work this month or next month but, one day.  It’s kind of like when we were waiting for housing to collapse or oil to collapse – The markets can remain irrational for a very long time, but not forever. 

    403B/Japar – I’d look for whatever you can move in and out of quickly or a diversified Fidelity dividend-paying fund. 

    66M on the Dow coming up on 1:30, what a joke!

    MOS/Gel – Still hanging in there?

    Atlanta Fed President Dennis Lockhart: Too early to bet on a quick change in rate policy, which would be very dependent on the labor situation. Growth in Q1 shouldn’t match Q4′s, which was boosted by a slowdown in inventory liquidation. Signs he’s looking for to change "extended period" language: improvement in job creation, and decline in underemployment.

    Economists were sanguine following the unexpected jump in eurozone inflation to 1.5% – the highest since 2008. Final numbers should show the jump "was primarily a food and energy phenomenon," BNP Paribas’s Eoin O’Callaghan says. And despite the marked rise, "the outlook still looks pretty benign," economist Howard Archer says, with inflation likely to stay below ECB’s target through 2010, and possibly 2011.


  82. Phil/MOS
    Oh Yes… still hanging,  but I have to admit by my fingernails! The wait is short though – just a few more hours


  83. Phil, I’m tempted to start scaling into EDZ, especially if we get any surge in here, wuddayathink ?


  84. Hi, Peter & pstas,
    Thanks, Peter, for your comment last night.  It really helps.
     
    Can Peter or Pstas elaborate on this: (copied from Peter’s 11:26 pm last night) "I think pstas said one time that he looks at the required margin at +/-5% move in the underlying.  If the required margin/BP affect at those level is more than your account value, your risk is extremely high and the portfolio needs to be cut down soon."
    Is the idea to look at how much my BP will go up/down if the underlying goes +/- 5% from the current price?  How do I do that in TOS platform?  I must have missed that discussion.  Thanks!


  85. steel is a buy buy buy

    No recovery for sinking shipyardson ……….March 17 that Quest Maritime, a Greek shipping company, had canceled five oil tankers out of a total of nine ordered. The ships were originally scheduled to be delivered by March 2012

    The Hyundai cancellation is the tip of a dangerous iceberg. In February, Germany-based KG financier Lloyd Fond said he had canceled construction of two of the eight 12,800-TEU vessels it ordered in 2007 from Hanjin Heavy Industries and Construction’s Subic shipyard in the Philippines. In January, Hanjin resold one of the four container ships that CMA CGM had ordered in 2007 to another owner when the French carrier failed to pay for it.

    A side effect of the excess capacity is that prices have plummeted, which ironically makes it an excellent time for shipping lines to buy new vessels, Choi said. But most suffer from insufficient liquidity. “Even if shipping companies want to buy ships, banks are not lending any money,” he said.
    http://joongangdaily.joins.com/article/view.asp?aid=2918606

     
     
    "From foreign investors, including Warren Buffett, we have received opinions that there is a concern about the shipbuilding sector outlook in general," said Lee Sang-chun, a POSCO spokesman.


  86. Peter D — I have been reading your old comment on teaching us how to roll up 2x or 3x etc, could you give an idea what premium left before you initiate the roll, Phil has mention 25% premium remain in the stock then it is a good time to roll.  But for index do you look at the position either on putter side or caller side if it goes against the position then you roll to extend the graft out more OTM, but at the same time not to over trade right?.  Do you look at the position and try to roll at the right time for even money  ?  I have SPX and RUT has to roll  to may, my mistake I think for the last two weeks I slowly closed out only the putters side only and not touching the callers side, not sure what to do except wait for the sell off to closed out the callers side, when you mention that you take position off the table, you are taking both caller and putter at the same time right, to free up the margin…..I think I understand now sorta.  So at this point VIX is low, should I wait till higher vix before restart selling May putters and roll the caller out even more (I have SPX May 1190 right now) , or should I sell those OTM putter now.  Thx


  87. got yet another census reminder in the mail today. sounds even a bit threatening. why do they ask who is in your house on apr 1 then spend tons of $ making sure you send it back before you know?


  88. Patience paid off, I’m finally above water on SOLF.


  89. Morx
    Big Brother is watching you !


  90. Phil: Bearish call: why did you suggest selling OIH calls?


  91. Phil : If the Chinese float the Yuan to devalue it,does it affect TBT?


  92.  SCO – Phil last week we entered a spread where we bought apr 12-14 call spread and sold 12 puts.  Would you make any adjustments to this?
    Thanks.


  93. Morxlntway, While I do think the government watches us more closely than we know about, the Census just ain’t the way they do it. The census is used for determining population for determining congressional seats and demographic information for properly apportioning federal funding. So if you want to run the risk of having your state lose congressional seats, receive less than your fair share of money for local road repairs, schools and hospitals, then I highly encourage you not to complete your census form. The census is actually a great resource for analyzing economic trends as well (eg- stock picks!). 


  94. SDS disaster hedge — Hi Phil — any adjustment needed for June 29 long call/ June 32 short put and June 33 short call . Thx


  95. dflam Yuan/TBT:
     
    Would help TBT, I think. Dollar would drop. Price of Chinese imports would rise, which is inflationary. Both would lead to the need to increase US bond rates.


  96. bord – no, u misread me. mine’s done & gone. I am just amused at the Apr 1 question. When i read that i thought, "i’ll send it back on Apr 2" but that isn’t what they ment. Having done a bit of manual writing, that would have stood out as a point of confusion.  I guess most folks know who’s going to be in their house next month but with the way housing is now that can change overnight.


  97. Would like to see market reaction to the dollar getting back above 81.09


  98. Speaking of Oil:  (from WSS)
    The price of oil continues its upside momentum in the session as the U.S. dollar index surrenders ground against the value of a basket of other international currencies, including the euro. The rebound in the broader equities markets from the session lows is also proving to be a supportive factor for oil prices today.

    The disappointing ADP numbers gave market participants pause as it recorded net job losses as opposed to a gain as was expected by the market. The whole premise behind the robust market rally was that the economy was improving dramatically. However, this number suggests that a little more economic moderation is probably more prudent. Expectations of GDP growth this year should moderate between 3% and 4%. At this juncture, however, all attention is now focused on the Department of Labor’s jobs number that is set to be released on Friday. The market has, however, looked past today’s ADP number as momentum is clearly in favor of additional upside.

    Technically, crude prices have remained relatively steady despite an intraday swoon immediately after the release of the inventory numbers. At this point, prices are poised to solidly break through the $83/$84 a barrel level on the upper range of the trading band and should see follow through in the wake of the current upside momentum. As we have observed in similar actions in the past, this kind of buying begets more buying and hence a move up in the price of oil.


  99. Phil,
    Something for weekend musing – what would be your investment ideas for an extended deflationary period due to persistently high unemployment levels, weak housing, etc? The Japanese solution when they went into their slump was to invest in other markets, but I think there’s a scenario where China, India,and other emerging markets can’t escape the downward spiral of the US and Europe.


  100. Wells Fargo Chief Investment Officer is moderately bullish, esp. on Tech and Inflation (aka TBT)


  101. Morxintway, Oh I see, sorry about that…. I did see somewhere conservatives were bashing on the census as some kind of spying vehicle, which I think is a bit far fetched. The census is totally lame for monitoring individuals when compared to NSA phone taps, internet/email monitoring (thank you Patriot Act), the IRS, and the other tools the government has at its disposal. 


  102.  Is anyone going to make any fun plays for the end of quarter stick move? How much do you really believe in the stick???


  103. Cwan- I don’t think that citation was from me as I tend not to pontificate unless the subject is politics. :)
    However, i think he is referring to the analyze tab in TOS where you can pick "slices" showing BP/margin effects at up/down prices (percent or $)- i.e., positions sizing.


  104. Cwan, you can check the Buying Power level using TOS Analyze Tab (we can’t live without this Analyze Tab).  Type in the symbol (SPX, or RUT, etc.), click the Risk Profile to see the P/L graph.  In the Price Slice pane, in the middle of the screen, click on any slide to set "7 rows of 5% step".  On the last column of that pane, you’d see the BP Effect for each of the slice, at 0%, +/- 5%, +/-10%, etc.  If you see the Margin instead of BP Effect, you can change the view using the Setup button on the Top Right corner.  With PM, BP Effect is more accurate representation of the portfolio.


  105. Been following here for several months now trying to expand my options repertoire which to date has been limited to buy-writes, naked put sales and the occasional naked option transaction.
    So…sorry for the newbie question…
    What happens at expiration to a spread (eg bull call spread) that is fully in the money assuming neither leg is closed prior to expiration?
    An answer after market closes is fine and thanks in advance.


  106. Phil/TED.  Thanks for posting those TED presentations.  I’ve spent the afternoon watching many of them rather than watching the paint-drying market.  Very enjoyable.


  107. Phil: tempted to close all VLO position ? is that smart, they are all green .


  108. Sold half of FAS for 97.53, +1.1%.  Not positive about a strong finish today but inclined to think so.


  109. Phil: tempted to close all PGH, what do you think ?


  110. TZA finally showing me a little love.  Wheeee!


  111. EDZ/B1 – I’s start by just sellling some puts and seeing how the weekend goes first.

    Ships/Kustomz – I wonder if they are taking penalties to cancel or if these are just the easy contracts to kill?

    Census/Morx – they are pulling out all the stops to avoid hiring people so far, it’s something like $80 per house they have to physically visit. 

    SOLF/BDC – Congrats!

    OIH/RMM – Because they had a run-up that I thought would reverse on the oil news and they will but not today as it’s a magical day and oil is all the way back to $83.68 again – higher than it was before it fell $1.10 after inventories. 

    TBT/Dflam – Well, in theory a higher Yuan means a lower Dollar which means your 20-year is worth less (as it’s paid back in declining dollars at a fixed rate) which rasises TBT.

    SCO/BG – No adjustments here, the play is oil can’t hold $85 and we’re almost at $85.  Don’t forget, today is peak day.  If you want to be aggressive you can roll the $12 calls to the $11 calls for .60 as you are buying $1.10 of intrinsic for .60 but that’s about it for adjustments. 

    Big brother/Morx – If you are worried about the government tracking you then don’t get a flu shot.  The tin-foil hat crowd believes the government is injecting people with tracking devices under the guise of vaccines…

    SDS/Gucci – Same as SCO, if you can get the roll down to the $27 calls for $1.20 (same .60 per $1) then why not as it’s $2 of intrinsic. 

    Defaltion/Chuaeu – Probably easier to just short everything than pick long plays…   Worth looking at though but I do not belive that long-term deflation is possible. 

    Look at all the happy, happy talk: Fed Governor Elizabeth Duke: Despite weak conditions, small-bank lending issues are leveling off and loans might increase later in the year. Liquidity programs had a "dramatically positive" effect. Small-business lending isn’t down just on supply issues; credit demand is down as sound firms build up cash – and those firms think low sales is a bigger problem than credit access.

    He’s happy too!:  The Fed’s exit today from mortgage security purchases shouldn’t jostle the market, says Curtis Arledge, fixed-income investment chief for BlackRock. Yields on agency mortage securities relative to benchmarks shouldn’t expand more than 0.2 points after "one of the more telegraphed changes we’ve seen in a long time."

    Happier than ADP: Payroll withholding taxes apparently surged in March, which could serve as a precursor to a strong jobs report Friday. But much of the activity may be traced to temporary Census hiring rather than private sector hiring.

    Risk takers are happy:  After sinking to zero in February, junk bond issuance has surged to over $8B for each of the past two weeks, bringing Q1 issuance to $56.3B through March 25 – a record tally. Demand remains strong, but a sustained rise in interest rates could dampen demand and strain weaker issuers’ liquidity.

    Toyota (TM -0.7%) plans to extend no-interest loan and discount lease offers for at least another month and may make free maintenance standard for all U.S. buyers. The pressure of the eye-popping incentives likely will weigh on Ford’s (F -4.7%) pricing power.

    Not happy for RIMM:  A Crowd Science survey shows BlackBerry (RIMM) users are more likely to abandon the brand than iPhone (AAPL) or Android (GOOG) Android users. When asked of the likelihood of buying a particular brand of cell phone or smartphone if the purchase was made the following day, 39% of BlackBerry owners said they "definitely or probably would" nab an iPhone.

    Instead of worrying about the drama with China, Google (GOOG) investors should be bracing themselves for a slowdown that could make Google look much more like Microsoft (MSFT).  Oh now that’s just mean – comparing GOOG to MSFT!

    Wow – a guy who gets it:  Dan Seiver predicts yields are headed higher over the next year or two, with the 30-year Treasury likely hitting 6%. Think of it this way: "An investor buying a 30-year Treasury bond today… faces overwhelming uncertainty about the future and, consequently, a huge amount of risk. Do you really think [the current] yield of 4.76% is high enough to compensate for that risk?"


  112. Phil, USO 40 Put bought at 1.04,, would you DD or ride it out at this point? Logic says consider DD..


  113. Wheee indeed – they sure lull you into a false sense of security/boredom before pulling the rug out don’t they?

    PGH/RMM – You are not going to get me to talk you out of cash! 

    Nice chance to short OIH higher than we started if you missed it and also a chance to short oil futures at the $83.50 line but NYMEX is closed so not much movement and overnight is too risky (I do still like this mornings USO plays to get back into here). 


  114. Gucci, I think there are multiple questions in your post.  Rolling 2X is quite different than rolling to the next month, i.e. to start a position in another month, or closing the positions.  We use 2X rolling to get out of trouble, so we roll when the short strike is too close to the money for our liking (callers or putters).  Yes, you are correct that we want to be even (not putting money in) with the 2X roll.  Our tolerance is different, some of us would roll if it’s within 5% of the money, some would roll ATM, etc.  There is no wrong answer, try both, watch the margin level, and see what you are comfortable with.
    We have different rules of thumb for closing the positions also.  Some of us would buy the shorts back when they are less than $0.8, or $0.5.  I myself would close both legs of the short strangles at the same time, as I can use the margin for a new spreads.  If we are a few weeks from expiration, when one leg gets to $0.8 (say the put leg for example), it means the other legs (callers) would probably have a high value.  We could roll the callers 2X and adding a second set of short puts.  We can leave the first set of putters where they are or we roll them up also.  Basically, we reposition towards the center without putting money in, just use up the 2X margin.  Actually, we’d get more credit by selling the additional putters.  As you can see, it’s critical to have the margin for it.  We can do this up until 4X or even 8X, then our margin is all used up.  So at 4X or higher, we’d look to lighten up when the first opportunity arises.   Hope this helps.


  115. Ships compensation  Hyundai had not started building the ships yet, but already received a 20 percent prepayment. “Our company has been compensated for the loss from the cancellation,”

    81.09 close, the dollar could take off from here….we could see further weakness into the close…


  116. USO/JBur – The April $40 puts?  Those are .69 and I’d sell the $39 puts for .38 and roll to the May $39 puts at $1.08 for about an even move overall and IF USO falls so much that your putters go in the money, THEN you can DD the May $39 puts (or just add some). 

    Ships/Kustomz – Wow, getting paid 20% not to build ships is a NICE deal!  Let’s go take some orders – we can not build ships with the best of them…


  117. Phil: my bondfunds have all nice profits, is this thr top soon for these as when interest rates go up, the yield of vthose has to rise and the price will drop. How do you see this ?


  118. Phil   USO and DIA plays worked great this morning.  I did the DIA 108 Aprils instead of quarterlies though.
    Thank You for your recommendations.  I found them lucrative.


  119. Phil re USO, OIH – are you saying this looks good but don’t hold over night?


  120. Pharm / TA
    Nicely done !!


  121. any big drawback on your 12.42 comment on RIMM Short Apr75put -Long 70Jun put as .60 or so positive trade?


  122. ships LOL.. sounds too easy..should work then

    dollar hit the wall 81.08
     


  123. judah / 2:40
    Like I said………..


  124. Thx JRW.


  125. IWM has support at 68.15 and more at 68.00, so be careful, there could easily be a Stick with this volume. April 68′s now at $1.04 for 25%


  126. Hi, Peter,
    Thanks for the info on TOS Analyze tab.  I should have learned to use it long time ago.  But I’ve been too busy during the day at work.  At night, my wife gets mad if I spend too much time on the computer.  I’ll give the Analyze tab a try as soon as I can.


  127. NLY bounced right off support.  Scaling in by selling a few 17.5 Jan11 P.   I have the stock already.
     
    Phil or anyone – inflation would affect NLY how?


  128. Peter D : I don’t know about Gucci,but it helped me


  129. Hi Peter D yes it is much clearer now, I though back then when you said roll 2x mean that roll out the next mos 2x that is why it eat up my margin so quickly and now I have to wait to wipe the callers out.  I think the main thing is to watch the current P/L line and adjust so that you are delta neutral as much as possible or as you said try to stay in the middle of the graft . Thanks I will try again when opportunity come hopefully next week with low vix, will you send out your range in may when you open the position thx ahead


  130. Bonds/RMM – Oh I’d certainly either get out of those or make sure you are well-hedged with TBT.  Obviously if rates run up and you are in fixed intsruments, you lose value very fast.   Even Bill Gross said the game may be over in bonds. 

    DIA/Wilsons – Great, I hope you also got out of those DIAs in time…

    Cool collection of Tea Party signage titled "Teabonics."  It’s so interesting to me as the Tea Party crowd are obviously NOT the Republicans who are benefitting from this record market rally and I’ve always found poor Republicans to be the most fascinating political group on the planet.

    USO, OIH/Morx – Oh they are both fine for overnight, the Oil futures shorts are dangerous overnight because clearly they are going for $85 and they’ll probably get it one way or the other.  Both of those plays are fine IF you are scaling in of course and ready to DD if they move against you. 

    Gold back to $1,112.

    NLY/Pharm – Hard to say with them, it depends on their borrowing cycle but they can get squeezed on rising rates with $54Bn in debt but, since they can cover it with cash – I imagine they are in pretty good shape overall, much better than most…


  131. JRW/2:40.  A beautiful thing.  I’m not putting enough on these trades for a car, but more than enough for a couple of iPads with 3G capability. 
     
    Let’s hope it follows through tomorrow and into next week.


  132. 3:30 with just 97m volume and last chance for Mr.  Stick.   DIA 3/31 $108 calls are .55, virtually no premium and a stop can be set at 10,850


  133. Pharm Hugh Hendry’s Eclectica Fund Likes Annaly Capital Management

    Their commentary highlights their new addition of Annaly Capital Management (NLY) to the portfolio. They like this position because it has a dividend of 17% but point out that it does come with risks, including the possibility that the Fed aggressively raises interest rates (which would negatively effect NLY’s business). This play sticks with Eclectica’s overall theme that inflation is not a worry here and they see the Fed keeping interest rates low longer than many anticipate. Hendry is more worried about deflation than anything and he thinks Annaly is a safe play in the meantime because he does not anticipate an aggressive rise in interest rates.
    http://seekingalpha.com/article/195590-hugh-hendry-s-eclectica-fund-likes-annaly-capital-management


  134. Damn, that fell fast!  Have to take the .05 loss on those DIA calls – don’t forget they expire in 15 mins! 


  135. fcx seems to be running out of steam……


  136. Thx Kuz.


  137. Steam/Iprosp – Casey Jones couldn’t get this market going now!


  138. Damn, 10 point drop on the RUT in about an hour – that’s steep! 

    So funny on CNBC – the same guys who said that not approving drilling would send oil to $100 are now saying that approving drilling is meaningless because it’s a 3-5 year lead – these people are never happy!

    6 minutes to go and they are still trying to rescue the Dow.  Volume just 114M but someone clearly took advantage of the stickman to dump a large position.  This will make tomorrow very interesting. 


  139. Yesterday, they painted a close for FAS $.25 higher then where it was trading at 3:59.  Hoping they’ll do the same so I can sell my last half for break even.  The stick has foresaken me twice now.  It’s been a while since we’ve had a crazy window dressing day.  But as soon as we don’t respect it, it will turn around and bite you in the a$$. 


  140. IWM April 68′s now $1.20 or 50% profit ! Closing 1/2


  141. Yay, got out.  Thanks Mr. Stick, Jr.


  142. Damn JRW!  Was that a position you opened today??


  143. Wow – what a move near the end!  Seller is still attacking but a huge push up.  This is when we get to the end of a stick cycle – when people start dumping into the buys because GS isn’t going to pay for other funds to make their exits. 


  144. Phil, yes they were the USO Apr 40 puts bought for 1.04. I adjusted as you recommended on 3:03 post for .03. Thanks for the assistance and teaching. Have a good evening!


  145. Nice dive by oil at the end to $83.20 and you have to be satisified with that on the futures as we don’t want to stare at them all night anyway!

    Fannie Mae reports its January total serious delinquency rate for single-family houses hit a new record of 5.54%, a jump from December’s 5.38% and double the year-over-year 2.77%. "A perfect time for the Fed to be moving away from the mortgage market," ZeroHedge sarcastically opines.

    Lower your expectations, Bill Gross says. "We should expect that the private economy is delevering on a global basis… In terms of risk assets, whether it’s stocks or high-yield bonds or even bonds themselves, that those types of returns will reflect a slower rate of growth. In other words, instead of 8-10% in terms of return for risk assets, you should expect 4-6%."

    Harbinger dumps another 1.5M New York Times (NYT -0.7%) shares, leaving Phil Falcone’s hedge fund with 16.9M shares, or 11.7% – down from 19.9% a year ago. Shares are up almost 150% since then but are still a far cry from the $15-20 range at which Harbinger invested over $500M.  If the fund is getting out with a loss here then they certainly think this rally is topping.

    Would Apple (AAPL) really dump Google (GOOG) in favor of Microsoft’s (MSFT) Bing? When Apple ships its first iPads on Saturday, Google investors may head straight to the gadget’s browser to see which search engine is the default choice. If Bing ends up on the iPad, then the iPhone surely would be next.


  146. RIMM and down she goes!!


  147. Now that we’re closed, Dow volume is 194M so more than double the entire day between 3:30 and 4 and most of that between 3:59 and 4. 

    Futures indexes for Dow, S&P and Nas bounced back about 1/2 but not the RUT, still down at 677.50. 

    RIMM – Ouch!  Didn’t seem so bad to me, they missed by a penny.  People just don’t know how to read a report:

    --  Revenue grew 35% over the prior fiscal year to $15 billion
    --  BlackBerry® subscriber account base grew 65% over the prior fiscal
        year to over 41 million, with a record 4.9 million net new subscriber
        accounts added in Q4
    --  BlackBerry smartphone shipments grew more than 40% over the prior fiscal
        year to 37 million
    --  BlackBerry was the number one selling smartphone brand in the United
        States at the end of calendar 2009(1)
    --  GAAP earnings per share grew 30% over the prior fiscal year to $4.31 per
        share diluted
     

    Micron (MU): Q2 2010 EPS of $0.39 beats by $0.15. Revenue of $1.96B (+97.5%) vs. $1.82B. Revenue from sales of DRAM products rose 24% over Q1. Shares +3.6% AH. (PR)


  148. Gel, kustom & other property gurus,
    I need some real estate advice to buy a house either in Northern San Diego, Irvine or San Jose and the target moving is 2 years or so.  I’d like to know what are the nice location with good school in each of the above areas.  Please email me at peterd188 at yahoo if it’s too much information for the group.  Thanks!


  149. Pharmboy: With mortgage rates expected to possibly rise when the Fed stops it’s mortgage buying program shortly,NLY & other morgage REIT’s are probably holding off putting money to work waiting for higher yields which may cause a decrease in future earnings & dividends . Based on $.65 dividend  payable 4/26,yield is about 14.3 %. Previous qtr dividend was $.75 ,so a 13.3 % decrease. CEO Michael Farrell, on 3/23, stated "they have prepared their portifolio for the upcoming period of uncertainity regarding interest rates" which I interpet to mean they are holding cash waiting for rates to  mortgage rates to rise to improve profitably.
    Anothe factor that affects their earnings are mortgage prepayments which,due to the decline ininterest in mortgage rates, causes them to reinvest at lower rates. I think mortgage rates have bottomed out which should be postive for NLY.I  have owned NLY for for several years and they are probably the premier company in their field.  


  150. Peter- I am also planning on a CA move hopefully in the not too distant future.( A much more complicated endeavor than I anticipated but I have had enough of winter ).  I have been out to look and my choice is North County San Diego- particularly the community of Carlsbad which is about 20 some miles north of SD proper. I don’t know about the schools but a very appealing town. I believe there a couple of active members of this site who are current residents and may be able to answer more specific questions.


  151. JRW, Judah – sitting on the plane to milano, we knew those puts would pay off one day. Nice job waiting it out. I hope some of the selloff waits until my return. Just in case it doesn’t I bought some edz, srs and fxp spreads.

    Phil – I’ll let you know how line2 works.


  152. pstas, my sister lives in la jolla.  Carlsbad is a very nice area.   Right next to LegoLand :) .


  153. Peter, I’m sure there are deals to be had in your area of interest but you will pay a premium for the good schools through price and taxes. Not familiar with California but may be possible to find home that can take advantage of the great shools but not the price premium and taxes by looking into area’s that fall into the jurisdiction of the great schools but not the price premiums. Look into appreciation rates, 2-year appreciation, 5-year appreciation, 10-year appreciation. Much can happen in 2 years. Finding a reputable buyers agent is a must and this person must live in the area of interest to you.


  154. This supplements our dialogue on renting vs. buying…. interesting article
    http://realestate.yahoo.com/promo/vacation-homes-deal-or-no-deal


  155. ouch! So like is Greece better off today than a few months ago…i think the answer is quite obvious

    Interest on the three bonds it sold this year, including a seven-year note offered this week, will amount to 7.7 billion euros over the life of the securities, compared with 3.8 billion euros if they had sold them at the average extra yield, or spread, over German debt that prevailed between 2000 and 2008, the data show. Greece will incur a further 18.9 billion euros of interest on this year’s remaining issuance, compared with 9.4 billion euros before the crisis began, according to Bloomberg calculations based on Credit Agricole data.


  156. Anyone have the link for the original post a few weeks ago on the Rent vs. Buy article? Can’t find it – still looking though- thx


  157. Peter/Real Estate
    Happy to jump in to the conversation, and will express my opinions as I see the benefits/demerits of the three areas. My first suggestion is to take a week away and physically visit the targeted areas, and evaluate them for the issues that are important to your lifestyle.  All three are signicantly different in so many ways, but they all are terrific locations to live, in spite of the tax burden. All locations, are growing in population, so they are obviously desirable, but you have to be very careful where you locate in each region. I have never resided in the metro San Jose area, but I have many friends and relatives who do and like it.  If I were to pick a place to live near San Jose, I would look in Los Gatos – small town atmosphere, close to all the action, and good educational standards. Traffic is an issue in all areas you have selected, so you need to investigate the commuting pattern you might face, and identify the location you feel comfortable with. Home prices are riduculously high in the whole San Jose area, as the tech industry is alive and well, and the real estate drop was somewhat mitigated in this general area. I have relatives that work in the tech industry- – HP and Palm (at least for the present). I formerly resided in Laguna Beach and Newport Beach – verry expensive, but nice places to live. I had my business facilities in Irvine, but the traffic there will drive you nuts, so I would be careful with that decision. The last location, N. San Diego, would be my first choice, as I love the ocean, and the recreation associated with this area. Schools eyc, are subjective and need to be thoroughly checked out. I currently live in Pebble Beach , on the coast, and it is a quick drive to San Francisco, so I am happy, as I have the best of all worlds, and the wife likes it  (important), but I can tell you I would look closely at the N. San Diego area before you make a final decision. ( I lived in La Jolla for a year, when I was seytting up a business ) Timing is an issue as far as a purchase is concerned, I can only recommend a thorough study of the whole enchelada and an evaluation should be invested in the decision, as it might be the most important decision you will ever make. Becoming fully familiar with your future location, prepares you for the amunition to make the best decision – good insurance.  Good Luck, Peter !


  158. matt / position
    Yes


  159. Thanks for the link Phil- I just spent a long weekend in N. San Diego/ Carlsbad looking at property- was going for some acreage for horses but the prices are still up there-way up there- even smaller town homes are $850+ /// Beware if looking in San Diego for any  ‘hidden tax’ as my agent referred to it known as Mello Roo’s- they are Special Assessments/ Public Bond Offerings levied on top of property tax and home owners dues (HOA) that the county and the developer basically agreed to pass on to home buyers of certain communities- can be several hundred dollars per month!  Brief explanation @ http://www.realestatelibrary.com/taxes.html


  160.  Phil……Do you know any studies dealing with earnings reports and how stocks respond to them, relating this to current market trends?  I’ve sensed a relationship between an individual stock’s response to an earnings report and the general market trend AT THE  MOMENT, but I don’t know whether it’s ever been studied.  


  161.  Peter…Have you considered Maine?   Our state motto is "Vacationland" and our subtitle is "The Way Life Should Be".  :)


  162.  Peter…Have you considered Maine?   Our state motto is "Vacationland" and our subtitle is "The Way Life Should Be".  :)


  163. Iflan….. Maine????? – Where in the hell is that ?


  164. Iflan…. Just kidding… Great location! – Have been to the lobster fest many time in Rockland.


  165. Thanks (so far) to pstas, customz, jo, Gel, philisit, Pharmboy and lflan!  That link on property tax is very useful, philisit.
     
    We are moving as we have had plenty of the rain in the Northwest for the past 12 years!  Somewhere warmer with a bit more sunshine would suit us a lot better.  Yes, I’ve been to Portland, Maine, but unfortunately during February one year and wouldn’t be back there for a while.  Sorry iflan!  We also spent a week in Los Gatos last summer and love it there, and all ready to move, until the Haiti earthquake made us rethink about that risk.  Then my friends in San Diego said we’d love it there, so I searched Trulia and Zillow and was very impressed with the houses, especially the acreage lots in Solana Beach/Fairbanks Ranch.  It’s too good to be true, so I’m trying to figure out if there is a catch.
     
    To my surprise, house prices in Irvine is more expensive than San Jose for comparable houses.  Hopefully, we’ll get to explore SD and Irvine some time this year.  North San Diego/Solana Beach is currently on top of the list. 
     
    Finding a good Real Estate agent is going to be a huge problem (didn’t we say that before).  The top agents just want to spend the minimal time, close the deal and move on.  Too arrogant, even if they could get us good deals.  The so so agents takes too long and usually don’t know what to look for.  I’ve been through the buying and selling before and we, as poor consumers, can’t win most of the time.


  166. Phil, letting you know the annoying alert problem is appearing again. Your 8:37AM posting alert received 5:11PM. Erratic from day to day.


  167. Peter D – I live near Los Gatos (in Saratoga) – and am familiar with school and other issues.  If you need more information or a polite realtor who puts in good effort – email me – partha dot gyana at gmail dot com


  168. RIMm – how will my Sell 75 Apr Puts/Buy 70 Jun Puts cost now?


  169. Just got back from Delray, place was packed lots and lots of people..restaurants live music plenty of families walking the streets… it was nice to get away from all the doom and gloom..


  170. Was talking with an explosives expert this evening (he works on helping mining companies, etc), and says in all his travels around the world, he would not know that a recession is talking hold.  Now, he goes to good areas, mind you, but he does travel around and sees the land.  His business is just fine FWIW and growing, esp after last year.


  171. Peter – If you are looking for a nice home, acreage, a great school district and close to the coast, google "Santa Luz". It’s a very cool community east of Del Mar.  Rancho Santa Fe is very nice and the town of Bonsall is a little gem located at the northern-most end of San Diego county, about 20 minutes from the coast.  Good Luck!


  172. Peter - I have a smart, honest and competant agent friend as well. "They" do exist…..  :)


  173. Peter – One last thing, A plug for my town, Carlsbad. As the locals favorite saying goes: "Life is Rad in Carlsbad"…… :)   :)


  174. Hey psst here comes that guy that plays with dynamite and blows things up…pretend all is well… steak and drinks are on the house and make sure everyone smiles…a lot!


  175. Thanks, 1020.  I just google Santa Luz, and they make me register to see the listings.  I’ll probably do, but not tonight while doing the tax return.  I looked further in Carlbad too.  Nice place, and takes 20 minutes shorter than from SD to get to LA.  Love to work with those good agents.  I thought I had one, then found out 7 years later that she didn’t quite put our interests first.


  176. Peter D- what’s going on? As a person from the NW I’m shocked that you prefer Cali, usually the Californians migrate to Washington not the other way around..


  177. Thanks for the DIA Put Recommendation, Phil.    Picked up 20 percent on those babies
    Much Appreciated!!!