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Toppy Tuesday – LA “Out of Money” on June 30th?

Is Los Angeles unique or just the first?

City Controller Wendy Greuel declared an "urgent financial crisis" and said the only way to continue paying bills in the short term was to begin to drain the city's already limited emergency reserve.  Greuel said the city would need to pull money from its $191 million in reserve funds immediately to pay its bills next month. She expects the city to be out of money, and probably in the red, by June 30.  Some officials fear that using that money would not only leave the city without reserves in case of emergencies, it would also probably trigger another downgrade in its Wall Street credit ratings.

Cities all over the nation are scrambling to pay their bills and that's nothing compared to the disasters state budgets face.  A study released Monday by Stanford University estimates that California's three largest state-operated, public-employee pension funds—the California Public Employees' Retirement System, California State Teachers' Retirement System and University of California Retirement System—currently face a total shortfall of more than $500 billion.  Gov. Schwarzenegger warned Monday that pension-fund shortfalls could lead California, which faces a $20 billion budget gap in the coming fiscal year, to divert more funds from other state programs to cover pension costs.

Fortunately, for the dollar, we are by no means the most screwed-up economy on the planet.  The Euro is dropping to new lows this morning amid speculation that a plan for Greece to obtain European Union and International Monetary Fund help in cutting its budget deficit may falter (again).  The report that Greece “isn’t keen on the IMF being involved in any bailout would seem to throw the whole plan into question,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “As an investor, do you really want to hang around and see what’s happening next? The Greece story is definitely a negative for the Euro.”  

The Dollar is not doing so well against the Aussie Dollar, which rose to 92.14 this morning as the ACB raised their main interest rates to 4.25%, it's fifth rate increase in six meetings.  Even more shocking to most Americans is the Canadian "Loonie," which is now trading at $1.0008 to the dollar – almost on par to the dollar and down from 1.26 Loonies to the Dollar last March!  So let's not get too full of ourselves, America – Canada is quietly taking over North American economic leadership

With our own Fed Funds rate lower than Japan's (0.3%) at the moment, we'll be getting a read of the Fed's Minutes this afternoon and looking for signs that the US will be as brave as the Band of England (0.5%) or the ECB (1%) in raising rates to within 1/10th of Australia's levels.  Our last rate change was an "emergency" 0.75% drop on Dec 16th, 2008, when the Fed slipped in what is now adding up to a $1.5Tn gift to their banking buddies who are able to borrow at 0.25% (subsidized by we, the people) and play the markets, buy commodities or simply put their money into countries that pay much higher rates like Brazil (8.75%), Egypt (8.25%), South Africa (6.5%), China (5.31%), India (5%) or Australia (4.25%).  China is pegged to our currency, for goodness sakes – that's a pretty good way to play the carry trade! 

Speaking of things that get carried – Despite the huge run-up in commodities this month, the Baltic Dry Index has fallen almost 20% as there is less and less actual demand for them.  This is especially true in the oil segment, where the number of tankers storing oil in order to create the false impression of demand and inflate prices has fallen from 168 in November to "just" 104 at the end of February and you can see the rapid delcine in rates on the BDI as oil shot up over $80 and investors like JPM, MS and C cashed in their winnings in another excellent use of taxpayer bailout dollars.  Now we face a serious tanker glut as there hasn't been any actual, non-speculative demand for anything in two years

Commodity pushers led the Asia/Pacific Index to new highs this morning as oil was jammed back over $86.50 in overnight trading and copper broke the magical $8,000/ton mark, which is about $3.63 on our futures.   The Nikkei was unable to hold their highs as the Yen bounced back slightly, finishing the day at just under 94 Yen to the dollar and that cost the Nikkei another 56 points this morning but fortunately, they gained 60 points in the last 45 minutes of trading or things might have looked ugly!  The Hang Seng is still closed and India was dead flat so we have a continuing rally in the MSCI that is based mainly on trading closed markets, forming a massive, speculative bubble that makes EDZ a really great hedge today after closing right at $39 yesterday.  We'll be looking at some option plays in the morning Alert. 

Europe is well off a strong open and now (9am) flatlining ahead of the US open.  British PM Brown called for a general election on May 6th, which is hurting the Pound ($1.515) on concerns that it may result in a hung Parliament, with no party holding a clear majority and, unlike the US, EU investors are not big fans of gridlock.  Here's a great video of Brown and Cameron going at it over the last election.  The Euro also went down sharply driving oil up a whopping 28% in two months against that currency and bond yields in Greece climbed back to Jan 29th highs (when the markets were tanking).  As in Asia, the commodity pushers were having a good old time with BP and RDS.A gaining 1.5% on the day and miners once again leading the indexes.  “The market is clearly betting on the improvement in the economy,” said Kilian de Kertanguy, who helps oversee about $3.1 billion at Cholet-Dupont Gestion SA in Paris. “Each time economic data support an amelioration, stocks are rising.”   

This morning's amelioration in the US is coming from our Retail Sales, with the ICSC Report showing a 4.7% year/year improvement.  As I pointed out last week, this is a fantastic number if we ignore the fact that last year was down over 10% from the year before AND it wasn't Easter last year (a week later) AND the sales report doesn't take into account that 10% of the competition went out of business so all we are really measuring is a redistribution of what's left of consumer spending to the surviving stores.  Look for the MSM to sum this all up as "great sales numbers."

We'll see if this "great" news is going to be enough to finally get us to that magic 11,000 mark on the Dow.  Our other resistance points have not been holding up and we continue to watch the NYSE, who hit the roof at 7,600 yesterday, as our strongest directional indicator while we wait for the Russell to catch up (700) and give us the all-clear to get a little more bullish.  Until then – we remain cautious and in cash.


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  1. If only Canada had a warmer climate :-(     Hmmm its a long shot but wonder if they would like to buy California…

    Canada…Its just another housing bubble, and the last time the currencies were at parity oil was 140+ a barrel
    That’s just what Tal thinks has happened. He notes that in the last 12 months, most of them when the economy was shrinking, household borrowing has increased by seven per cent, more than three times that of incomes.

    Given the red-hot housing market, it’s not surprising that 70 per cent of that has gone into mortgages as Canadians kept buying homes in the face of job uncertainty. There’s only one reason for that, says Tal – mortgage rates were too good to pass up.

  2. The CEO of cell phone carrier Verizon says any deal with Apple to allow the iPhone smartphone on its network as part of a user plan is far from done.
    CEO Ivan Seidenberg said:  “I’ve expressed interest in iPhone…It’s Apple’s call”

  3. Home builders getting slapped with downgrades
     KB Home (NYSE:KBH) downgraded to Neutral from Outperform at Credit Suisse… NVR Inc (NYSE:NVR) downgraded to Neutral from Outperform at Credit Suisse… Pulte Group (NYSE:PHM) downgraded to Underperform from Neutral at Credit Suisse

  4.  Phil, what do you think about selling some massey puts today?  Should be some juicey premiums on those puts? 
    Played with Ipad at apple store yesterday.  Very slick.  I was surprised, that it is a bit heavier than i expected.  Should be a game changer, as the software and apps catch up to the machine.  

  5.  yikes, the more i read about massey, the more i don’t like – too much headline risk for the moment.

  6.  Pharm- txs very much for your feedback last night. By the way, DVA (Davita) is focused on kidney dialysis centers…wih Fresenius they control over 2/3rds of the market for these centers. Not a big growth business, but a necessity for patients who need the service (only other options are transplantation or death). The interesting thing there is that earnings could improve as they go from cost-plus model to fixed rate pricing which should incent them to watch their expenses…by extension this could prove negative for the suppliers of drugs in the dialysis process (like Epogen) because DVA/Fresenius might reduce the amount of Epo they provide patients (there is a stong view that Epo is being over-provided because the centers get a mark-up on the drug).

  7. Good morning! 

    Still trying to break ALL of our recent highs of: Dow 10,955, S&P 1,180, Nas 2,432, NYSE 7,497 and Russell 693 – So we added the RUT since yesterday – now we’ll see if we can keep it.

    Above that, we’re looking for Dow 11,000, S&P 1,200, Nas 2,500, NYSE 7,600 and Russell 700 - so still some work to be done.  NYSE failing 7,500 is now a key indicator of weakness and RUT 700 will be a key indicator of strength. 

    Good spot to short the oil futures below $87 but probably need to take money and run at $86.50 if they hold it and reload with a new cycle below that line. 

    I like selling the EDZ Apr $38 puts for $1.20 (yesterday’s close) and I also like the EDZ May $35/39 bull call spread at $2 and that can be paired with a sale of the $36 puts, now $1.40, if EDZ dips further and they hit $2 – which turns this into a free trade with the EDZ put to you at net $36, about 10% down from here.  

    To the upside, RIMM is coming off the floor so don’t forget that trade (selling the May $70 puts short) and C is still looking strong as well. 

    Gold is a fun speculative short at $1,135 and you can play the futures below that line or go GLL $9 calls at .45, which is a dime premium or sell the $10 puts for .80 and collect a dime premium

    It will be a big disappointment if we can’t hit 11K this week. 

  8. Canada/Kustomz – NYC is posting a new record high today so I think global warming will take care of your wishes for you.  I’ll bet there’s some cheap Canadian beach-front property we could invest in! 

    VZ/Kustomz – That’s why we bought more T!

    JPM slapped a lot of buys on the financials today – trying to get us over the hump. 

    MEE/Jo – That’s not a bad idea!  Selling May $45 puts for $2 is still 10% away after a 10% drop.

    Still no volume – just 19M on the Dow in the first 20 mins.

    The U.S. recovery is "sustainable" and the economy is unlikely to see another dip, Richmond Fed President Jeffrey Lacker tells CNBC. “Friday’s employment report is evidence that the labor market is bottoming out."

    Some see Geithner’s visit to India as a roadshow. With the U.S. bond market preparing for 3-, 10- and 30-year auctions over the next few days, Geithner arrives knowing that his bid to raise more than $1T in 2010 on the open market depends on support from countries like India and China. But India’s interests may not coincide with those of the U.S.

  9. Do you like SCSS as a top 10% play?

  10. David Rosenberg says “Things are not really as they appear to be:

    1. U.S. consumer spending in the first quarter is higher because the savings rate has slipped to 3.1% from 4.7% at the end of last year. Organically, spending is actually doing quite poorly and that reflects the fact that wage-based incomes remain under pressure. So, without that unsustainable decline in what is already a low personal savings rate, consumer spending in January would have actually contracted 0.4% and 0.6% in February. In other words, what we are seeing unfold right now is a ‘low quality’ consumer recovery in the U.S., not deserving of the P/E multiple expansion that the retailers have enjoyed in recent months. A sector to clearly fade going forward is consumer discretionary.

    3. Consumer confidence (Conference Board version) rose to 52.5 in March and yet again this was treated gleefully on the Street and in the media because it beat the consensus estimate. But here is the reality: in recessions, this confidence index averages out to be 71.0, and in expansions, it averages 102.0. What does that tell you?

    4. The ISM index came out before the payroll numbers did and injected a big round of enthusiasm into the pro-cyclical camp. The index did shoot up in March, to 59.6 from 56.5, and while many of the components were up, the prime reason for the increase was the eight-point surge in the inventory component, to 55.3. Moreover, the orders-to-inventories ratio slid to a level suggesting that we could be in for a big pullback in the next few months. Meanwhile, very little attention has been made to the construction spending data, which sagged 1.3% MoM in February with broad-based declines across sectors — and January’s 0.6% drop was revised to -1.4% (the fourth slippage in a row).

    More in the article.

  11. Wells Fargo upgraded banks today.. JPM did as well?  If so, can collusion be ANYMORE obvious?
    Phil / Roadshow:  What would prevent the US from printing money to buy Indian bonds in exchange for the Indians printing money to buy our bonds?  There must be a way for them to keep it off the central bank balance sheets and since the $ is being doled out by the govts themselves.. no one would be for the wiser. 

  12. SCSS/Roast – ZZ had a big miss so I don’t see that SCSS will do better.  I think they need quantity sales and it’s too easy a purchase to put off so not where I want to be looking right now.  Top 10% companies are companies that only need a few rich people to buy like TIF, SKS, NILE, luxury hotels, travel companies.  I’m taking the kids to Disney this weekend so I’ll let you know how things look over there.

    By the way, I’ll have spotty availability Thurs and Friday and keep in mind that this Monday is our most likely Black Monday and next Tuesday’s Retail Sales will reverse the trend because last year that was Easter.  If we get past Tuesday, then I think we’ll be in good shape for a move up. 

    Wells/Matt – Maybe I got them mixed up.  JPM upped AAPL to $305 and made some Nat Gas deal with LNG yesterday so I guess that was their assignment…   As to the money printing circle-jerk…. That’s exactly how it’s always done.  Anyone can print money but it doesn’t count until someone launders it for you and gives it a value.  That’s why all the countries buy and sell each others notes all the time.  It’s pretty stupid on the surface because why would any country lend to another country when they all should be able to make what they need and then trade would set the balance.  That solution would leave the value of nations up to business though and World Leaders (for good reason) don’t want that so they create a gigantic fake market where eveyone trades completely worthless scraps of paper all day (they are not backed by anything and not exchangeable for anything) to determine the value of their currencies. 

    And so it begins:  Chinese companies are setting up factories and offices across the U.S., encouraged by state and local governments because the firms “could bring much-needed jobs and investments.” Still, the bulk of Chinese investment stays in Asia and the country is slow when securing projects.

    Fannie Mae (FNM) and Freddie Mac (FRE) will probably start using a clearinghouse for interest-rate swaps by year’s end. The mortgage giants are among the biggest buyers of the swaps, and the move would likely hurt profits at Wall St. banks (like GS and JPM) while boosting business for exchanges (like NDAQ and CME).

    Toyota slapped with heavy fine. Regulators are fining Toyota (TM) $16.4M for allegedly hiding gas-pedal problems from safety officials for four months. The fine is the largest allowed by law against an automaker, and far exceeds the previous record of $1M. Transportation Secretary Ray LaHood said "we now have proof that Toyota failed to live up to its legal obligations. Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families." Regulators are still investigating Toyota’s other recalls, and additional fines are possible. TM -0.5% premarket.  Heavy fine?  Are they kidding?  That’s about 700 cars worth of fines.

    Apartment rents start to rebound. Apartment rents rose 0.3% nationwide in Q1, ending five consecutive quarters of declines and suggesting the worst may be over as "deterioration seems not to have just been arrested but reversed." The increase came during what is usually a seasonally weak period for apartments, indicating improvements may be even more pronounced in Q2 and Q3. The apartment vacancy rate remained at an all-time high of 8%.

    12:00 PM Fed’s Kocherlakota: ‘Economic Recovery and Balance Sheet Normalization’

    1:00 PM 3-Year Note Auction

    2:00 PM FOMC Minutes

    5:00 PM ABC Consumer Confidence Index

  13. We may get a re-load opportunity on oil at $87.  The first drop was good for .40, not bad for 15 minute’s work.. 

  14. Phil: with the upgrade on AAPL, what’s the trade ?

  15.  Phil / FAZ – still holding FAZ long July 13C, short July 13P and short July 18C – any management in here?

  16. Phil: have 1x callers july10, base 1.09, now 1.89$ on PGH stock, no putters,
    what can be done to improve ?

  17. Heard a new term this morning at work.  I was using an instrument that was giving me fits and someone said. …… "Toyota made". 

  18. AAPL/RMM – Same as yesterday.  They are a little high to take too much risk on but no particular reson to think they go down (other than a Jobs health scare, which you have to be willing to ride out). 

    FAZ/Salv – It’s July so not too worried but you can roll down to the $11 calls for .85 and that’s buying $1.50 of intrinsic for .85.  

    PGH/RMM – Not much to be done with those, you’re just going to get called away most likley.  You can roll them to Oct for .10 and sell the Oct $12.50 puts for $1.50 if you can’t bear to part with them but they have wide strikes so there’s not much good to sell when you are in between strikes. 

    Former Citigroup (C) bigwigs Charles Prince and Robert Rubin will testify this Thursday in D.C., and they’ll be asked about their roles in running the bank into the ground. But some investors look forward, not backward, and make a case for continued growth.

  19. Pharm or anyone following it,
    Is there a good play on VIVO? The chart is ugly but looks like it could be near "point of maximum opportunity."

  20. With the upward movement in crude pricing, the Mexican Peso has been on a tear. When oil hits $100 ( my prediction), then we will see a fall, and the Peso will be one of the best currencies to short, as it is thinly traded and follows the oil price. The saga in the eurozone continues on……

  21. ARNA - Large number of July contracts trading again today. Same number of Oct contracts traded.

  22. gel1 Traded the euro against the MXN going well so fare

  23. Bought some more TBT today, building a base for the assault on Phil’s $60 target. When the target is reached, I’ll sell it all to the Fed, as I understand they continue to buy this stuff.

  24. Yodi… me too… keep an eye on crude pricing !

  25. Phil, would you care to elaborate on your "black Monday"  Tuesday reversal, and then a possible move up comment from your 10:18 post? Thank You

  26. Anyone think MSFT is a play?  New MSFT phones being released Monday, all new rotary dial design as per Steve Ballmers design, supposedly all the rage and makes texting nearly impossible. Seriously I think it looks promising

    Google Windows Phone 7

  27.  FXP:  Someone betting on a China disaster?  Over 14,000 May $7 calls bought on FXP today on the ask, which is bizarre given the open interest at that strike is only 485. I am always disappointed with the low liquidity for FXP but suddenly tons of action at the $7 strike. From what I can see, the biggest possible catalyst for a China sell-off would be an interest rate hike from the PBOC but that scare (which was a big reason for the January sell-off in markets) has not been in the press recently as everyone is talking about Yuan appreciation now. I may buy the May $7/8 call spread which is 0.35/.40 right now, or maybe try to sell the $7 puts for 0.40. Or both.

  28. Gel1 set up as well euro ZAR

  29. Anyone still continuing to defy rationality and make more cars today?

  30. Pharm thoughts on EW…WFC says buy on weakness

  31. The only thing down on my screen is the Euro

  32.  Phil/SDS –  On the SDS Jun call spread – are you going to sell puts here and roll the spread lower or just stay with what you have?

  33. The shippers are having a nice day. EXM,EGLE,DRYS all up 4% or more…..

  34. Sns1: I have to strongly disagree with you in your statement "By the way, DVA (Davita) is focused on kidney dialysis centers…Not a big growth business…".  I’ve spent a lot of time talking to nephrologists and transplant surgeons and transplant medicine doctors the past few months. Renal failure is huge and rising almost exponentially. The doctors tell me they could be doing three times the number of kidney transplants, if they could find the donors. One doctor kidding around told me "great job security." Surprisingly, the number one cause is Type II diabetes in young people, which was traditionally considered adult onset diabetes, . Too much sugar, high fat diets, and nothing but the couch and video games.

  35. Dow 11K today…..

  36. 1020….17 stocks red on the DOW…but it would take just a few key names to get us over

  37. YodiEUR
    I am beginning to believe Montezuma had the Euro in mind when he created his revenge. It looks pretty bad today !

  38. Reversals/1020 – I guess you could summarize by saying it’s choppy!  I have been looking for finally making our 11K level at some point but, then what?   I expect some sort of pullback and, if we pull back and Asia gets spooked, we could see the Hang Seng fall a quick 500+ and then we could drop 200 in a day very easily.  Since we KNOW that next Tuesday we’ll have poor retail comps and we have our Treasury Budget Monday night and Trade Balance Tuesday followed by CPI and March Retail Sales, Business Inventories AND the Beige Book on Wednesday next week – we may see some funds running for the exit into this weekend.   If we can get through all that, plus the earnings that begin next week – then there’s no good reason for us not to move up from 11,000 to 12,000 other than some pesky fundamentals that we’ll have to ignore until they matter again. 

    MSFT/Kustomz – They are kind of like a utility company – they’re going to survive no matter what.  I’d hope the phone sucks and they sell off next week, then you get a good entry. 

    FXP/Never – I’ve been buying the Apr $7 calls, haven’t moved on to May yet…  I like selling the May $7 puts for .40.

    Cars/Dibert – Well 50 oil futures shorts made $400 on the last cross from $87 to $86.40 and now we just crossed $87 again and we’re down to $86.84 so that locks in another dime for $25K – it’s not a nice car but it will take you to the mall to buy an IPad…

    SDS/Salvum – We need to see if 11K breaks or not, if it does, we can sell puts and kill the bull call spread and then it’s all about just gettingthe money back on the put side. 

    Shippers/1020 – That makes no sense at all. 

    Levels really lining up here:  NYSE 7,597, RUT 699, S&P 1,187, Nas 2,340 and Dow 10,962 – so close but yet so far..

  39. I think some IYR puts look good around here. Maybe the $52 or $51 April.

  40. Kustomz – Not that 11K matters, it might be 11,250 before we see a reversal. Fingers crossed.  :)

  41. Thanks Phil. Have fun at Disney World!

  42. Yodi
    I’m not in the Rand, but am playing the AUD long today, as they raised their interest rates again ( .25 ) today. This is one very strong currency !!!!!

  43. Phil,
    I am in on those long USO May 39 puts we did last week. Is it time to roll those up or stay put for now? If roll, to which strike? Thanks.

  44. Phil
    Should we be receiving e mail alerts from
    Wall Street Survivor ?

  45.  Anybody have a recommendation on a good short duration bond/money market fund that isn’t exposed to interest rate risk but would generate some income on cash at TOS?

  46. Go RIMM!!!

    IYR/Jimmy – I hate to pick them.  I’d say in the past 12 months, betting against CRE has been our biggest loser.

    Homebuilders are going to lag the market over the next few months, Credit Suisse says, looking to the April 30 expiration of the buyer’s tax credit to take some juice out of demand. The bank downgrades Pulte (PHM -2.5%) to underperform, and cuts NVR (NVR -1.6%) and KB Home (KBH -2.4%) to neutral.

    USO/Bord – At this point I favor selling the Apr $41 puts (now .37), hopefully for .50+ on a nice dip, and then we’ll see what happens.  If we get a good reverse, then we can DD or roll up and, if not, at least we lower the basis. 

    WSS/QC – I haven’t traded that in a while.  I do need to update the $100KP (Conservative) but I’ve left the aggressive in cash for now so no alerts to send. 

    Companies are ramping up to ease into Apple’s (AAPL) tablet-PC wake, reports analyst Ashok Kumar, saying that Nokia (NOK) is priming to get a machine into the end-of-year holiday release window. Other "me-too" tablets will likely come from Samsung and H-P (HPQ).

    Home Depot (HD) ramps up for a rebound by adding store jobs for the first time in four years. "We are going to lean into our skis a little bit," says CEO Frank Blake, as sales advanced more than expected in the fourth quarter.

    You know what’s brilliant about the IPad?  It has 6x more screen space for App buttons.  That means, even if you transfer 6 full screens of IPhone Apps to it, your machine still feels empty.  Apple said they are already doing over 1M Aps a day to IPad Users and who knows how many songs/videos…  Interestingly, the two most popular Apps are a paid spreadsheet and word processing program – both from AAPL I think.

  47. Phil
    Anything to do with TNK selling off today?

  48. rimm good short @69.9

  49. I like the "Docs to go" App for spreadsheets & word. Don’t know if i paid for it or not, but sure it wouldn’t have been much, knowing my cheap self.

  50. energy outlook?

  51. Gel1 the Rand doing well specially as my son is visiting me. It is Montezuma for the euro.
    you playing the AUD against USD or euro?

  52. For Pharm (or Phil if he follows GILD),
    This is a re-post from a comment late Monday night, so sorry for the repetition. I know Pharm likes GILD, are there any recommended GILD plays in PSW-land?

  53. Yodi
    You are double-blessed today with the visit with your son. I am long the AUD/USD. My most profitable play today has been short EUR/CAD. The loonie is really "smokin" the Euro.

  54. TNK/Deano – Not a good time to enter tankers.  Is the market right or are the shipping rates right? 

    Docs/Morx – I forgot the name but I was playing with it in the Apple store and it looked like a good Word Processor but, since I pretty much only communicate here and on Emails, it wasn’t for me.  I would like a nice spreadsheet app though as Excel has now gotten to the point where it’s annoying for people who just want the damn basic functions.  That’s MSFT’s problem, they don’t know when to stop – every app they get their hands on gets bigger and bigger until it begins to crash systems and then they tell you that’s why you need the newer and even more bloated version of windows… 

    Dallas Fed President Richard Fisher – outspoken as an inflation fighter a couple of years ago – isn’t too worried about it today. “Because of the enormous slack in the system… we’re just not seeing price pressures right now,” he says. “If anything, the tail risks are on the deflationary side.”  Et tu, Fisher?  This is hopeless, they are never going to raise rates

    Of course the Transports are up again today with oil over $86.

    The EIA maintains its oil consumption forecast of an increased 1.5M barrels per day this year and 1.6M barrels per day in 2011. Prices "will likely continue to firm and increase slightly in response to the global economic recovery." Crude futures +0.13% to $86.73.

    VIX down to 16.68.  Dow volume 65M coming up on 12:30, normal is 90M by 1pm. 

    GILD/Bord – Trapped beneath the 200 dma at $46.14, then the 50 dma at $47 so that means selling May $47s for .92 probably won’t get you in trouble and you can go with the Jan $40/50 spread at $5.30 and selll those plus the Jan $40 puts at $2.15 and you have a net $2.69 on the $10 spread and you’re $5.50 in the money and you are 2x $8 in the money before you have to give the caller back his .92.  On the downside, the put-to price is $42.69, which is a small discount to current but it’s a nice play if you are bullish.

    The Chicago Fed says its Midwest Manufacturing Index slipped 0.8% to a seasonally adjusted 82.6%. The steel figure bumped to 72.3 from 71.7, but autos slipped to 56.5 from 58.1.

  55. Today I executed a nice Buy/Write on a healthcare stock – KCI ( Kinetic Concepts ), buying the stock and short selling a straddle – September 50 c & p  for a 16% entry. This company is on a terrific growth pattern, and controls 90% of its market.

  56. 20 stocks now red in the DOW..11k would be a miracle at this point…quick ..any sectors left to upgrade?

    I think Greece will have no other choice but to accept the terms of the IMF

  57. TNK – issued more shares at 12.25
    GILD – Sell the 45 Apr10 P for 45 C.  The 40 Jan12s are fine for an entry as well.  Holding off for a bounce or sell 1/2 46 Apr10s.
    ARNA – gonna be an explosion here in SD with them. 
    VIVO – They are holding here fine.  1/2 entry is ok, but be prepared to DD.
    DVA – Jberg is correct in the dialysis is expanding, hence my recommendation of the smaller competitor. EPO pricing will be a factor to think about though, as remember last year and the negative press associated with overuse of EPO.

  58. Check that on GILD – move to 1/2 May 45 C and 44 P IMO.  Mays can be rolled even to 48 Aug or ~2X to 50s.

  59. HP’s Slate comparison to the IPad.




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  60. FRX has a meeting tomorrow with the FDA for COPD (Roflumilast).   I am not convinced they will get approval, but in case they do, I think we can play a strangle on them, buying both the 32.5 calls and 27.5 P for 55c.  either way should pay for the trade, and the volatility is high. 
    IF they do get approval, we will need to watch ARRY closely.  They have a DP2 inhibitor in the clinic that would blow this away. (AZ and others are also in the DP2 space.)

  61. Pharm – Your comment on ARNA – What do you mean by "SD"?
    ARNA – gonna be an explosion here in SD with them.

  62. Does DNDN have some kind of drug trial results coming up soon??

  63. Trad – San Diego where they are based.
    NNVC – now that chart is gonna explode.  I think it is time to jump on board for a ride up.  Don’t care what they do at this point, but someone is buying like crazy.  1.91….

  64. Nice one Gel!

    Pure Bioscience (PURE) up 24.5% after it gets food packaging and processing clearance for its silver-based disinfectant.

    Miracle/Kustomz – With this volume level, we may make 11K but "mircacle" isn’t the word I’d use…

    3-year went out at 1.776%, bid to cover strong at 3.10 but if the 3-years aren’t strong we’re dead.  TBT kicking up a little but nothing exciting about this auction.

    Oil down to $86.40 and that’s a $86.50 stop now (.15 trail otherwise), not worth messing around this late on a Tuesday as we almost always get a pump into the close

  65. gel1 put NNVC on my watch list…..FYI.

  66. Pirates have attacked hundreds of vessels since 2007 and negotiated an estimated $200 million in ransoms.

    We are in the wrong business, whats an eye patch cost 99 cents and a slightly used AK-47 another 200 …boat rental another 100 give or take and were in business

    Europe The Stoxx Europe 600 Index closed up 0.7% at 269.37. France’s CAC-40 Index ended up 0.5% at 4053.94 and Germany’s DAX added 0.3% to 6252.21. In the U.K., the FTSE 100 Index rose 0.6% to 5780.35 after hitting fresh 21-month highs during the session….. .4% for the DOW to get to 11k…markets around the world showing little fear

  67. FRX, big bet today made on the 30 puts…

  68.  Bought back RIMM puts from yesterday – 65 Sept RIMM puts – 20% in one day seems enough.
    Bought back Smith 42.5  puts (SII) – which phil had recommended earlier as a nice ghetto arbritrage play.  They probably won’t close until the second half of the year since the DOJ is taking another look so i’ll take my 33% and run.  These are great plays – my XTO puts that i sold are still working out quite well.

  69. Pharm - No options for NNVC. Argghh.  No way to hedge them.

  70. Good morning from Fiji,
    IWM lines today 69.34, 69.82, and 70.44. Good luck to all; I’m in cash and will see you next Monday.

  71. Phil – I’m relatively new to the site and have been getting up to speed (paper trading, etc.).  I was wondering when you plan to set up a new "Buy List"?  I’m thinking you might be waiting for some clear market direction, like a sell-off – not sure.  Thanks in advance.

  72. I see growth in Brazil and beer as well.  Sold naked puts ( Oct 100′s ) on ABV ( AmBev ). If it is put to me I am happy, if the puts expire worthless, I am happy. If I drink the beer, I am happy. Whats not to like?

  73. Hi, Gel1,
    EURNOK (sell EUR & buy NOK) is doing well.  My position is over 1% in profit.  Do you recommend holding or closing out the position?
    I’m on the road, and can only check in once in a while.  So, thanks in advance.

  74. Pharm/NNVC

  75. NNVC/Trad – buy in a small quantity and be prepared to DD a few times.  They are up 100%, but many are following them.  BIG lots were going through, so I am assuming it is an accumulation phase, much like what happened to ARIA a few weeks back.

  76. Hi, Pharm & Phil,
    BEAT is about $8.45, steadily going up for weeks!  I have some buy/writes.  Looking forward to be called away.  Thxs for the reco.

  77. ONTY still has not filled and they are up 5% today.

  78. PhiL: AINV sept puts sold at $.60 ( as part of buy write you recommended with Sept.$12.50 calls) down to $.25. Sell & roll to $12.50 puts for $.90 ?

  79. Cwan
    I like the trade, as the NOK will continue to rise as long as oil stays strong. Euro is still a basket case, and will weaken further, in my opinion.

  80. RUT a bit out there on its own today.  Must be the magic draw of round numbers — 700.  Phil, I know you’ve written about the round number phenomenon. It still surprises me to see indexes with hundreds or thousands of individually traded stocks touch some round number and seemingly react by bouncing off.  I guess it is just the cumulative effect of computer programs and people like me (programmed to react), trading around the round numbers.

  81.  gel, i like your brk.b play from yesterday – look to sell 70 puts for about 3.

  82. Kustomz
    It is even better for the pirates… they steal the boats instead of renting. Tough to get life insurance though.

  83. Jo/BRKB
    I can’t see how you could lose on this one… takes some margin however.. $3.00 would be very nice!

  84. Phil/Fed. What are you looking for in the Fed Statement today that might cause the markets to react?

  85. Phil/Fed. I meant minutes, of course.

  86. After some weaker T-Bill auctions earlier, the Treasury sells $40B in three-year notes at 1.776% (.pdf). Bid-to-cover of 3.10; indirect bidders take 52.3%; direct bidders take 10.8%.

    Pirates/Kustomz – That may be easy but consider THIS GUY gets $165,000 a year plus a $200,000 expense allowance plus another $1,000,000 staff allowance and, after 5 years, he can retire (62) with 80% of his best 3 year’s salary!   Oh yeah, and free health care…  Of course, pirating is fun too

    Hit and Run/Jo – Nice way to play ‘em.

    Welcome/JCaesar!  If we clearly break over 11K and hold it, there will be a Buy/List contingent on holding those levels but, if we do sell off, then the Buy List is usually a bottom call but, as you can see, every day we have a few trade ideas in between.  The Buy List is generally a more conservative group, the kind of plays that are well-hedged and should make up the bulk of a portfolio.  Right now, the bulk of our portfolios are cash because we don’t know what’s going to happen. 

    ABV/Gel – Can’t fight that logic!  8-)

    BEAT/Cwan – About time for those, congrats! 

    AINV/Dflam – I don’t really see the point of upping your risk for .65.  The trade is working, you can take out the puts and re-sell on a pullback or just let it run its course.  A long play like that is not meant to be messed with – they idea was to safely capture dividends with very little risk so mission accomplished.  If you want to take a risk, why not roll to May $12.50 puts at .25 because, at least you can roll them back..

    Roundness/Judah – Yes, it’s a huge, psychological component that kicks in and, of course, the index plays force mass distributed buys and sells so it becomes a logical stopping point there as well.  It just goes to show you how little individual trading activity matters in the grand scheme of things. 

    Fed/Judah – It’s just the minutes, not all that meaningful.  More like tea-leaves, people will read into it what they wish and what they are wishing for is a continuation of low rates so those are going to be the key words people will focus on. 

    With a buying program complete, the Fed should think about getting out of mortgage-backed securities through a steady trickle of sales, some $20B per month, Minneapolis Fed’s Narayana Kocherlakota says. The central bank will have to be less passive "if [it] wants to normalize its balance sheet in the next five, 10, or even 20 years."

    With a buying program complete, the Fed should think about getting out of mortgage-backed securities through a steady trickle of sales, some $20B per month, Minneapolis Fed’s Narayana Kocherlakota says. The central bank will have to be less passive "if [it] wants to normalize its balance sheet in the next five, 10, or even 20 years."

    The future of pension plans at GM and Chrysler (FIATY.PK) is "uncertain," the GAO reports – and the Pension Benefit Guaranty Corp. has $14.5B of exposure. The GAO also pointed out potential conflicts in Treasury’s role as part owner of the companies along with regulating and insuring pensions.

  87. gel – i am just using it as a substitiute for a place to park cash.  
    gel – you will like this.  Yesterday, i had a 64 year old guy who had a hematoma or collection of blood in his bicep after should surgery.  He was on a blood thinner for atrial fibrillation but he says to me "Just get it right this time"  then later he says "I feel sorry for you with all of the health care reform"  I told him, don’t worry about me, I won’t be doing this at 9 pm much longer – his response – "they will make you"  I said, last time i checked this was still america.

  88. Phil / USO – Any suggestions for adjustments appreciated as my timing has been pretty poor so far. I have a 1/4 position in the May $39 puts at $1.09, now $0.56. Then I added another 1/4 position by selling May $41 calls at $1.71, now $2.01… wasn’t around yesterday when they both got killed. How would you allocate remaining capital for this position as it seems impossible to time when rationality might return, and would you also sell April 41 puts in my case too? I know May is a little way out, but how do you balance that vs. eroding premium on the longs? Thanks, and I hope you had a Chag Sameach this past week.

  89. BEAT/Cwan – glad you stuck ‘em out.  ONTY – OK now I am buying the stock.  This is crazy.  Selling a few P as well.

  90. gel good point…

    This guy??? He didnt say what i think he said LMAO.. and we pay this guy?  In some cases reality is Funnier than SNL!!

    BLK getting whacked, these guys are the best of the best..dont trust the markets moves

  91. MA AMZN RIMM have made some big moves and they are known to sell off rather quickly..time will tell

  92. VIAP – for those that bought it  FWIW, they announced a reduction in staff and will not be able to pay their loan.  They have a bridge loan for now, and I think they are awaiting data….

  93. Executed a Buy/Write that has a 34% discount – SWC (Stillwater Mining) . Bought the stock and sold Oct p & c . This is a great play on platinum, as I believe the auto industry is on the mend. 50% of all platinum mined goes to making catalytic converters, and 50% of all new car sales are projected to be in China in 2010. This company could also be a takeover target. Their principal competition comes from S Africa and is very unstable. Also with PSW membersship on the rise – this will create demand for more cars worldwide.

  94. Jo… LOL. Someday you could write a bokk that would be a bestseller.

  95. Now that Tiger has lost the " tilt to his kilt " (Scottish terminology) he will have a great Master’s experience. Hope so!

  96. The number of unemployed persons per job opening has started to rise again, hitting 5.5 in February, according to a Bureau of Labor Statistics survey. There was no improvement in the rate of hiring, dropping from 4.09M to 3.96M.

    Fed minutes:   They continue to say "exceptionally low for an extended period of time" and that’s all that matters. 

  97.  Instead of being a pirate on the high seas, you could opt to be a pirate on wall street. Instead of the US Navy shooting bullets at you, the FED shoots money at you. They are both good jobs that try to accomplish the same goals, they just take a different approach to achieving them.

  98. Phil   "this guy" is one of the safer ones, cause nobody listens to him. I’m concerned about the ones who are in control of the direction, and are listened to.

  99. 2:30 stick rearing its head….. today may be 11k day.

  100. Phil – GLD – last Feb I bought Sept 120 Call at 4.80 when index  was trading at $109, the index dropped and then moved up – now the index is $111.40 but the call option only trades at $2.75. For a Sept dated call, shouldn’t there be a closer correlation between the volatility of index price and call price on GLD?

  101. Fed minutes (short version):

    Developments in Financial Markets and the Federal Reserve’s Balance Sheet
    The Manager of the System Open Market Account reported on developments in domestic and foreign financial markets during the period since the Committee met on January 26-27, 2010. The net effect of these developments was that financial conditions had become modestly more supportive of economic growth. No market strains emerged in conjunction with the Federal Reserve’s closing of nearly all of its remaining special liquidity facilities over the intermeeting period. On February 1, the Primary Dealer Credit Facility, the Commercial Paper Funding Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, and the Term Securities Lending Facility were closed, and the Federal Reserve’s temporary currency swap lines with foreign central banks expired. Financial markets also adjusted smoothly to the final offering of funds through the Term Auction Facility on March 8.

    In his report on System open market operations, the Manager noted that over the period since the Committee had met in January, the Federal Reserve’s total assets had risen to about $2.3 trillion, as an increase in the System’s holdings of securities was partly offset by the declining usage of the System’s credit and liquidity facilities.

    The staff also briefed the Committee on potential approaches for managing the Treasury securities held by the Federal Reserve. To date, the Desk had been reinvesting all maturing Treasury securities by exchanging those holdings for newly issued Treasury securities, but an alternative strategy would be to allow some or all of those Treasury securities to mature without reinvestment. Redeeming all of its maturing Treasury holdings would significantly reduce the size of the Federal Reserve’s balance sheet over coming years and hence could be helpful in limiting the need to use other reserve draining tools such as reverse repurchase agreements and term deposits. Redemptions would also lower the interest rate sensitivity of the Federal Reserve’s portfolio over time. Nevertheless, the initiation of a redemption strategy might generate upward pressure on market rates, especially if that measure led investors to move up their expected timing of policy firming. Participants agreed that the Committee would give further consideration to these matters and that in the interim the Desk should continue its current practice of reinvesting all maturing Treasury securities.

    Staff Review of the Economic Situation
    The information reviewed at the March 16 meeting suggested that economic activity expanded at a moderate pace in early 2010. Business investment in equipment and software seemed to have picked up, consumer spending increased further in January, and private employment would likely have turned up in February in the absence of the snowstorms that affected the East Coast. Output in the manufacturing sector continued to trend higher as firms increased production to meet strengthening final demand and to slow the pace of inventory liquidation. On the downside, housing activity remained flat and the nonresidential construction sector weakened further. Meanwhile, a sizable increase in energy prices pushed up headline consumer price inflation in recent months; in contrast, core consumer price inflation was quite low.

    Available indicators suggested that the labor market might be stabilizing. Declines in private payrolls slowed markedly in recent months, and, in the absence of the snowstorms, private employment probably would have risen in February. The average workweek for production and nonsupervisory workers fell back in February after ticking up in January; however, the drop was likely due to the storms. The unemployment rate was unchanged at 9.7 percent in February, and the labor force participation rate inched up over the past two months. However, the level of initial claims for unemployment insurance benefits remained high.

    After increasing briskly in the second half of 2009, industrial production (IP) continued to expand, on net, in the early months of 2010, rising sharply in January and remaining little changed in February despite some adverse effects of the snowstorms. Recent production gains remained broadly based across industries, as firms continued to boost production to meet rising domestic and foreign demand and to slow the pace of inventory liquidation. Capacity utilization in manufacturing rose further, to a level noticeably above its trough in June, but remained well below its longer-run average. As a result, incentives for manufacturing firms to expand production capacity were weak. The available indicators of near-term manufacturing activity pointed to moderate gains in IP in coming months.

    Consumer spending continued to move up. Although sales of new automobiles and light trucks softened slightly, on average, in January and February, real outlays for a wide variety of non-auto goods and food services increased appreciably, and real outlays for other services remained on a gradual uptrend. In contrast to the modest recovery in spending, measures of consumer sentiment remained relatively downbeat in February and had improved little, on balance, since a modest rebound last spring. Household income appeared less supportive of spending than at the January meeting, reflecting downward revisions to estimates by the Bureau of Economic Analysis of wages and salaries in the second half of 2009. The ratio of household net worth to income was little changed in the fourth quarter after two consecutive quarters of appreciable gains.

    Activity in the housing sector appeared to have flattened out in recent months. Sales of both new and existing homes had turned down, while starts of single-family homes were about unchanged despite the substantial reduction in inventories of unsold new homes. Some of the recent weakness in sales might have been due to transactions that had been pulled forward in anticipation of the originally scheduled expiration of the tax credit for first-time homebuyers in November 2009; nonetheless, the underlying pace of housing demand likely remained weak. The slowdown in sales notwithstanding, housing demand was being supported by low interest rates for conforming fixed-rate 30-year mortgages and reportedly by a perception that real estate values were near their trough.

    Real spending on equipment and software increased at a solid pace in the fourth quarter of 2009 and apparently rose further early in the first quarter of 2010. Business outlays for motor vehicles seemed to be holding up after a sharp increase in the fourth quarter, purchases of high-tech equipment appeared to be rising briskly, and incoming data pointed to some firming in outlays on other equipment. The recent gains in investment spending were consistent with improvements in many indicators of business demand. In contrast, conditions in the nonresidential construction sector generally remained poor. Real outlays on structures outside of the drilling and mining sector fell again in the fourth quarter, and nominal expenditures dropped further in January. The weakness was widespread across categories and likely reflected rising vacancy rates, falling property prices, and difficult financing conditions for new projects. However, real spending on drilling and mining structures increased strongly in response to the earlier rebound in oil and natural gas prices.

    The pace of inventory liquidation slowed considerably in late 2009. As measured in the national income and product accounts, real nonfarm inventories excluding motor vehicles were drawn down at a much slower pace in the fourth quarter than in each of the preceding two quarters. Available data for January indicated a further small liquidation of real stocks early this year in the manufacturing and wholesale trade sectors. The ratio of book-value inventories to sales (excluding motor vehicles and parts) edged down again in January and stood well below the recent peak recorded near the end of 2008. Inventories remained elevated for equipment, materials, and, to a lesser degree, construction supplies, while inventories of consumer goods and business supplies appeared to be low relative to demand.

    Although rising energy prices continued to boost overall consumer price inflation, consumer prices excluding food and energy were soft, as a wide variety of goods and services exhibited persistently low inflation or outright price declines. On a 12-month change basis, core personal consumption expenditures (PCE) price inflation slowed in January 2010 compared with a year earlier, as a marked and fairly widespread deceleration in market-based core PCE prices was partly offset by an acceleration in nonmarket prices. Survey expectations for near-term inflation were unchanged over the intermeeting period; median longer-term inflation expectations edged down to near the lower end of the narrow range that prevailed over the previous few years. With regard to labor costs, the revised data on wages and salaries showed that last year’s deceleration in hourly compensation was even sharper than was evident at the January meeting.

    The U.S. international trade deficit widened in December but narrowed slightly in January, ending the period a little larger. Both exports and imports rose sharply in December before pulling back somewhat the following month. For the period as a whole, the rise in exports was broadly based, with notable gains in aircraft and industrial supplies. Oil and other industrial supplies accounted for much of the increase in imports over the two months, while purchases of consumer products declined.

    Staff Review of the Financial Situation
    The decision by the Federal Open Market Committee (FOMC) at the January meeting to keep the target range for the federal funds rate unchanged and to retain the "extended period" language in the statement was widely anticipated by market participants. However, investors reportedly read the statement’s characterization of the economic outlook as somewhat more upbeat than they had anticipated, and Eurodollar futures rates rose a bit in response.

    The dollar value of commercial real estate sales remained very low in February, and the share of properties sold at a nominal loss inched higher. The delinquency rate on commercial mortgages in securitized pools increased in January, and the delinquency rate on commercial mortgages at commercial banks rose in the fourth quarter. The percentage of delinquent construction loans at banks also ticked higher in the fourth quarter. Nonetheless, indexes of commercial mortgage credit default swaps changed little, on balance, over the intermeeting period. 

    Delinquency rates on credit card loans in securitized pools and on auto loans at captive finance companies remained elevated in January but were down a bit from their recent peaks.

    Total bank credit contracted substantially in January and February. Banks’ securities holdings declined at a modest pace after several months of steady growth, and total loans on banks’ books continued to drop. Commercial and industrial (C&I) loans continued falling, as spreads of interest rates on C&I loans over comparable-maturity market instruments climbed further in the first quarter and nonfinancial firms’ need for external finance apparently remained subdued. Commercial real estate loans also posted significant declines. Household loans on banks’ books contracted as well, in part because of a pickup in bank securitizations of first-lien residential mortgages with the government-sponsored enterprises in February. Consumer loans originated by banks declined, primarily reflecting a large drop in credit card loans. In contrast, other consumer loans--including auto, student, and tax advance loans--were roughly flat during January and February.

    M2 decreased in January, owing partly to a contraction in liquid deposits. Many institutions opted out of the Federal Deposit Insurance Corporation’s Transaction Account Guarantee Program because of the higher fees associated with participation after year-end, reportedly driving depositors to transfer funds out of transaction accounts and into alternative investments outside of M2. M2 expanded in February, however, as liquid deposits resumed their growth. Small time deposits and retail money market mutual funds contracted in January and, to a lesser extent, in February, while currency declined a bit in January but advanced notably in February. The monetary base rose in both months, as the increase in reserve balances resulting from the ongoing large-scale asset purchases by the Federal Reserve more than offset the contraction in balances associated with the decline in credit outstanding under the System’s liquidity and credit facilities.

    Staff Economic Outlook
    In the forecast prepared for the March FOMC meeting, the staff’s outlook for real economic activity was broadly similar to that at the time of the January meeting. In particular, the staff continued to anticipate a moderate pace of economic recovery over the next two years, reflecting the accommodative stance of monetary policy and a further diminution of the factors that had weighed on spending and production since the onset of the financial crisis. The staff did make modest downward adjustments to its projections for real GDP growth in response to unfavorable news on housing activity, unexpectedly weak spending by state and local governments, and a substantial reduction in the estimated level of household income in the second half of 2009. The staff’s forecast for the unemployment rate at the end of 2011 was about the same as in its previous projection.

    Recent data on consumer prices and unit labor costs led the staff to revise down slightly its projection for core PCE price inflation for 2010 and 2011; as before, core inflation was projected to be quite subdued at rates below last year’s pace. Although increased oil prices had boosted overall inflation over recent months, the staff anticipated that consumer prices for energy would increase more slowly going forward, consistent with quotes on oil futures contracts. Consequently, total PCE price inflation was projected to run a little above core inflation this year and then edge down to the same rate as core inflation in 2011.

    This is important, they were TOTALLY wrong about energy prices so the summary of the whole thing so far is:  The Fed has been pursuing a disastrous free money policy and ignoring the plight of the consumer based on completely misguided expectations that energy prices would not derail the consumer.  Since energy prices are already up 10% since this meeting and up lamost 25% since early February, when these idiots were gathering data – we can pretty safely assume that the policy they came up with was totally wrong!

  102.  Phil,
    $VIX.X (CBOE Vol Index) … lowest in 3 years at 16.10.  Sustainable?
    Realize not same as VIX, but can this be played in any way?
    - AJS 

  103. Hello gel1,
    What strike did you sell for SWC Oct?  Thx.  It looks good.

  104.  "exceptionally low for an extended period of time" .. CNBC is now going even further and saying that  "exceptionally low for an extended period of time"  could be alot longer then what investors think!  Since when does the phrase ‘extended period of time’ need qualifying by another indefinite phrase?  And when does a company that is already trading at -625x earnings(BAC) need an upgrade?
    All this is is hot money.  There is simply too much money in this world and it has to go somewhere.  All it takes is faith to make money in this market.

  105. Anyone else experiencing TOS outage?

  106. kustomz
    My TOS is out

  107. More Fed nonsense:  

    Participants’ Views on Current Conditions and the Economic Outlook
    In their discussion of the economic situation and outlook, participants agreed that economic activity continued to strengthen and that the labor market appeared to be stabilizing. Incoming information on economic activity received over the intermeeting period was somewhat mixed but generally confirmed that the economic recovery was likely to proceed at a moderate pace. On the positive side, recent data pointed to significant gains in retail sales, a substantial pickup in business spending on equipment and software, and a further expansion of goods exports. Moreover, the latest labor market readings had been mildly encouraging, with a considerable increase in temporary employment, especially in the manufacturing and information technology sectors. However, housing starts had remained flat at a depressed level, investment in nonresidential structures was still declining, and state and local government expenditures were being depressed by lower revenues. Moreover, consumer sentiment continued to be damped by very weak labor market conditions, and firms remained reluctant to add to payrolls or to commit to new capital projects. Participants saw recent inflation readings as suggesting a slightly greater deceleration in consumer prices than had been expected. In light of stable longer-term inflation expectations and the likely continuation of substantial resource slack, they generally anticipated that inflation would be subdued for some time.

    Participants agreed that financial market conditions remained supportive of economic growth. Spreads in short-term funding markets were near pre-crisis levels, and risk spreads on corporate bonds and measures of implied volatility in equity markets were broadly consistent with historical norms given the outlook for the economy. Participants were also reassured by the absence of any signs of renewed strains in financial market functioning as a consequence of the Federal Reserve’s winding down of its special liquidity facilities. In contrast, bank lending was still contracting and interest rates on many bank loans had risen further in recent months. Participants anticipated that credit conditions would gradually improve over time, and they noted the possibility of a beneficial feedback loop in which the economic recovery would contribute to stronger bank balance sheets and so to an increased availability of credit to households and small businesses, which would in turn help boost the economy further.

    While participants saw incoming information as broadly consistent with continued strengthening of economic activity, they also highlighted a variety of factors that would be likely to restrain the overall pace of recovery, especially in light of the waning effects of fiscal stimulus and inventory rebalancing over coming quarters. While recent data pointed to a noticeable pickup in the pace of consumer spending during the first quarter, participants agreed that household spending going forward was likely to remain constrained by weak labor market conditions, lower housing wealth, tight credit, and modest income growth. For example, real disposable personal income in January was virtually unchanged from a year earlier and would have been even lower in the absence of a substantial rise in federal transfer payments to households. Business spending on equipment and software picked up substantially over recent months, but anecdotal information suggested that this pickup was driven mainly by increased spending on maintaining existing capital and updating technology rather than expanding capacity. The continued gains in manufacturing production were bolstered by growing demand from foreign trading partners, especially emerging market economies. However, a few participants noted the possibility that fiscal retrenchment in some foreign countries could trigger a slowdown of those economies and hence weigh on the demand for U.S. exports.

    Some labor market indicators displayed positive signals over the intermeeting period, including a pickup in temporary employment and increased job postings. Indeed, nonfarm payrolls might well have increased in February in the absence of weather disruptions. Nevertheless, participants were concerned about the scarcity of job openings, the elevated level of unemployment, and the extent of longer-term unemployment, which was seen as potentially leading to the loss of worker skills. Moreover, the downward trend in initial unemployment insurance claims appeared to have leveled off in recent weeks, while hiring remained at historically low rates. Information from business contacts and evidence from regional surveys generally underscored the degree to which firms’ reluctance to add to payrolls or start large capital projects reflected their concerns about the economic outlook and uncertainty regarding future government policies. A number of participants pointed out that the economic recovery could not be sustained over time without a substantial pickup in job creation, which they still anticipated but had not yet become evident in the data.

    Participants were also concerned that activity in the housing sector appeared to be leveling off in most regions despite various forms of government support, and they noted that commercial and industrial real estate markets continued to weaken. Indeed, housing sales and starts had flattened out at depressed levels, suggesting that previous improvements in those indicators may have largely reflected transitory effects from the first-time homebuyer tax credit rather than a fundamental strengthening of housing activity. Participants indicated that the pace of foreclosures was likely to remain quite high; indeed, recent data on the incidence of seriously delinquent mortgages pointed to the possibility that the foreclosure rate could move higher over coming quarters. Moreover, the prospect of further additions to the already very large inventory of vacant homes posed downside risks to home prices.

    Are these people nuts?  This is a TERRIBLE report!  The reaction we’re getting to it is total BS.  I don’t have any trades because TOS just crashed (which is a very bad sign) but I am all for shorting into this crap!

  108. what will the cause be for  substantial reduction in the estimated level of household income in the second half of 2009?    The higher gas prices we’ll be paying?
    Phil, the rise in commodities is a necessary trade off to allowing our banks to recapitalize.  We aren’t anti-consumer.  It’s just that we’re pro-banks.  Thanks for caring, Ben Bernanke

  109. TOS is acting flakey

  110. surprised that TOS being down is not Ameritrade’s fault… TD Ameritrade is working fine…

  111. Thanks qcmike

  112. Bobhu/SWC
    My short strangle was on the Oct 15′s.

  113.  Perhaps TOS needed to be taken out for a brief period to allow the market to continue to climb. Maybe TOS traders aren’t "playing according to the rules of ‘long is good, short is bad".

  114. TOS working but very slow

  115. kustomz
    My TOS is up

  116. End of Fed Minutes:

    Participants referred to a wide array of evidence as indicating that underlying inflation trends remained subdued. The latest readings on core inflation--which exclude the relatively volatile prices of food and energy--were generally lower than they had anticipated, and with petroleum prices having leveled out, headline inflation was likely to come down to a rate close to that of core inflation over coming months. While the ongoing decline in the implicit rental cost for owner-occupied housing was weighing on core inflation, a number of participants observed that the moderation in price changes was widespread across many categories of spending. This moderation was evident in the appreciable slowing of inflation measures such as trimmed means and medians, which exclude the most extreme price movements in each period.

    In discussing the inflation outlook, participants took note of signs that inflation expectations were reasonably well anchored, and most agreed that substantial resource slack was continuing to restrain cost pressures. Measures of gains in nominal compensation had slowed, and sharp increases in productivity had pushed down producers’ unit labor costs. Anecdotal information indicated that planned wage increases were small or nonexistent and suggested that large margins of underutilized capital and labor and a highly competitive pricing environment were exerting considerable downward pressure on price adjustments. Survey readings and financial market data pointed to a modest decline in longer-term inflation expectations over recent months. While all participants anticipated that inflation would be subdued over the near term, a few noted that the risks to inflation expectations and the medium-term inflation outlook might be tilted to the upside in light of the large fiscal deficits and the extraordinarily accommodative stance of monetary policy.

    Committee Policy Action
    In their discussion of monetary policy for the period ahead, members agreed that it would be appropriate to maintain the target range of 0 to 1/4 percent for the federal funds rate and to complete the Committee’s previously announced purchases of $1.25 trillion of agency MBS and about $175 billion of agency debt by the end of March. Nearly all members judged that it was appropriate to reiterate the expectation that economic conditions--including low levels of resource utilization, subdued inflation trends, and stable inflation expectations--were likely to warrant exceptionally low levels of the federal funds rate for an extended period, but one member believed that communicating such an expectation would create conditions that could lead to financial imbalances. A number of members noted that the Committee’s expectation for policy was explicitly contingent on the evolution of the economy rather than on the passage of any fixed amount of calendar time. Consequently, such forward guidance would not limit the Committee’s ability to commence monetary policy tightening promptly if evidence suggested that economic activity was accelerating markedly or underlying inflation was rising notably; conversely, the duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further. A few members also noted that at the current juncture the risks of an early start to policy tightening exceeded those associated with a later start, because the Committee could be flexible in adjusting the magnitude and pace of tightening in response to evolving economic circumstances; in contrast, its capacity for providing further stimulus through conventional monetary policy easing continued to be constrained by the effective lower bound on the federal funds rate.

    Members noted the importance of continued close monitoring of financial markets and institutions--including asset prices, levels of leverage, and underwriting standards--to help identify significant financial imbalances at an early stage. At the time of the meeting the information collected in this process, including that by supervisory staff, had not revealed emerging misalignments in financial markets or widespread instances of excessive risk-taking. All members agreed that the Committee would continue to monitor the economic outlook and financial developments and would employ its policy tools as necessary to promote economic recovery and price stability.

    In light of the improved functioning of financial markets, Committee members agreed that it would be appropriate for the statement to be released following the meeting to indicate that the previously announced schedule for closing the Term Asset-Backed Securities Loan Facility was being maintained. The Committee also discussed possible approaches for formulating and communicating key elements of its strategy for removing extraordinary monetary policy accommodation at the appropriate time. No decisions about the Committee’s exit strategy were made at this meeting, but participants agreed to give further consideration to these issues at a later date.

    Man these people are dangerous.  They ignore hugely negative data and blow it off "due to storms" and they ignore poor hiring conditions and rising commodity prices because they EXPECT them to stabilize, even though they haven’t since March of last year.  They haven’t got one nice thing to say about CRE or Real Estate in general yet they ignore that too as if jobs are going to magically appear to replace the 2M lost in that sector overnight. 

    This is some very scary stuff – made even more so by the general conformity of the Governors

    DIA Apr $111 puts at $1.62.

    TZA Apr $6 calls at .50.

  117. Bobhu/SWC
    Additionally, I mentioned the company COULD be a takeover target. China has been quite concerned about environmental issues and with the very strong growth in automobile sales, the Chinese could very well be on the hunt for a supplier of this metal, as the sources are rare and not reliable, IMO

  118. kustomz
    TOS  no quotes on TRADE screen

  119. I don’t know what’s wrong with TOS but I have to reboot – back in a few.

    Dow volume 100M at 3pm – super low still. 

  120. kustomz
    all TOS  working

  121. TOS – outage – seems to be tied to who your ISP is.  I lost all TOS (both TOS and TOS on Ameritrade simultaneously) – using Comcast as ISP.  I  had to swtich to my backup ISP – Verizon DSL (slow) – but the connections are restored.
    Somewhere – Comcast to TOS server route is down for some of us.  I am in Bay Area.

  122. Thanks qc im back up but running

  123. The stick is on its way……

  124. gel1/SWC
    Thanks again, looking for a good entry

  125. TOS still slow – My theory is that slow trading platforms = selling pressure.

  126. I wonder if the issues with Comcast are linked to the ruling today that allows them to limit bandwidth to customers?
    No issues here with Time Warner

  127. Yeah, I see William "The Fridge" Perry lurking in the backfield……

  128. Phil – No – its a tehcnical issue on traffic between Comcast and TOS servers.  I am back up on Verizon DSL and everything works fine.  If I try Comcast Cable link – I loose my connection …

  129. …..and its gone…

  130. Ironic that on the same day federal courts ruled in favor of Comcast and against net-neutrality.

  131. gel1 they need armchairs to sit at the computer not cars ! Also with PSW membersship on the rise

  132. 1020,
    I hear Blankfein yelling "take the hill, take the hill!!!" with the Marine Corps anthem playing in the background…. covering fire provided by CNBC.

  133. Hi Phil Is this for the mattress play ?  thks  DIA Apr $111 puts at $1.62.

  134. Rolling some dice here… going long AUD/JPY… looking for a strong "carry trade" reaction to the Aussie interest rate change

  135. Bord/11K   :)

  136. Naw TOS heldup well in the worst of drops, they have an internal issue of sorts

  137. TOS is working well at the moment.

  138. USO/Fein – I’d sell the Apr $41 puts (.38) and see how that goes but maybe better to wait for inventories tomorrow as this run-up is silly.  Those puts topped out at .45 today and we don’t put much stock in the rally into the NYMEX close that added .50 back in the last minutes.  I suppose, since you have the May $39 puts, that you may as well roll them up to the $41 puts for .60 as you intend to sell a short put anyway.  Then tomorrow, if oil goes the wrong way, you can sell Apr $42 puts instead.  I had to look up Chag Sameach but thanks – it’s Pizza night!

    EDZ Apr $38 puts up nicely already today, interesting considering the Dow is going the wrong way. 

    Pirating/JcEd – Arrrrrrrrrh, that’s a good point!  8-)

    GLD/Concreata – No, that’s not how it works.  You bought a 20-month calls for $4.80 in premium plus whatever price the stock had to move, now you only have 6 months to make your target so your "gain" is the fact that you didn’t lose 70% of your value yet.  That’s why I don’t like those plays much. 

    VIX/Andrew – Yes.  Keep in mind the VIX, historically, is between 10 and 15.  What we’ve had the past 3 years is the unusual activity.  Remind me later and I’ll be happy to discuss but I do not, at this time, like the payoffs on the VIX options. 

    Really, if there were any reason in the world to rally would it be so hard for the Dow to get green?

    TOS is back for me.

    Household income/Matt – Higher gas is good because the only jobs available will be washing windows at the gas station! 

    DIA/Yodi – Not for the Mattress, that was BUYING the DIA $111 puts, now $1.70 so an act of pure bravery to hold it over night.

    Volume 111M now so about 10M in 1/2 hour into all this "excitement" – that by itself is an excellent reason to stay in cash!

  139. Phil:
    You planning on holding the TZA April 6 calls overnight?

  140. The S&P 500 and all 10 sub-sectors are overbought, according to this analysis.

    Americans will pay an average $2.92 a gallon for gasoline this summer, 20% more than in summer 2009, the Energy Information Association says. "The boost to gasoline consumption from the economic recovery is being countered by higher gasoline prices compared with last year," the report says.

    Sen. Richard Shelby, ranking Republican on the Senate Banking Committee, floats a proposal that would create an independent consumer protection agency, apparently reversing a previous Republican position.

    "Nothing really surprising," in the FOMC meeting minutes, as pundits weigh in. The Fed is "still relatively cautious because they are worried about foreclosures in the housing market and the sustainability of jobs growth."

    FOMC minutes released: Economic activity expanded at moderate pace in early 2010. Inflation is likely subdued for some time. If economic outlook worsened or trend inflation declined further, "extended period" of low rates could last "quite some time."

    The number of unemployed persons per job opening has started to rise again, hitting 5.5 in February, according to a Bureau of Labor Statistics survey. There was no improvement in the rate of hiring, dropping from 4.09M to 3.96M.

  141. Now we need the big dump when everyone are expecting a stick

  142. TZA/Chaps – Risky but yes. 

  143. PharmBoy – ONTY – I have stock and a half cover of  short Nov 5 calls (my buywrite didnt fill completely).  Should I fully cover now – or just let it run ?

  144. From a TA perspective – not that it is always right – SWC has had 3 (this being the 3rd) tops of 14.50ish.  IF they cannot punch through, then careful.  Small lots are warranted.  One can always add if the move up.  They are trading at 4X book, similar to ABX FWIW.  AUY, on the other hand, is 1.1X.  Mind you, the latter two are in gold, not platinum.

  145. ONTY/parth – let it run.  I think they move to 5 (before the move down).

  146. Time to give up on the fact mkt is going to crash & work on positive side? maybe get a car?

  147. Phil : Do you still like KEY. Thinking of buy write  with sale of Sept. $8 puts & calls. Yes?

  148. RIMM   Just checking in so I apologize if I’m asking a question that’s already been asked….I bought back most of my callers on the big drop and now my position +2 Jun 65, + 2 Jan 60/-1 Apr 70….I’m tempted to go to at least 1/2 if not 3/4 cover on this bounce, but wonder if it has any legs tomorrow.

  149. April is most often the best month of the year for the S&P and Dow…. Hope the trend continues!

  150. RIMM shorts running for cover GS probably putting the squeeze on after their dg a few days ago

    ..possible pull back tom in the markets…i see weakness

  151. Phil, If you like TZA is it time to buy DUG?  Working folks in Charlotte NC suburbs can’t afford $3 gas to get to work.

  152. gel April they wont let you take a position other than long so its up up up

  153. Wait until Cap sees what the REITS did today, his heads going to explode

  154. Car/Dilbert – Sorry but I have to say slightly bearish or cash through next Tuesday at least. 

    KEY/Dflam – I don’t like them as much at $8.50 as I did at $5 but ZION has shown us that we shouldn’t sell our picks short and I was very careful looking for banks that I didn’t feel were going to have major issues when we took that set so I’d have to say they are all still playable if they "only" doubled so far.

    Trend/Gel – It’s just amazing isn’t it?  Gee, I sure hope earnings justifies this nonsense…

    What the heck happened with BIDU?  They shot up pretty suddenly…

    DUG/Tusca – If you can’t afford $3 gas then getting burned on DUG won’t help.  At the moment we just have to wait this out to see how far they can push it.  We are now over all of our previous highs – this is the first time we’ve finished here.  All that is left now is for EITHER the Dow to make 11,000 (30 points), the S&P 1,200 (11 points) OR the Nas to make 2,500 (64 points) and we have a 3 of 5 breakout and that is just too technically bullish to ignore

  155. Phil,  I am looking at a strangle on GS Jan 11 sell 210c and 150p credit 14.05 your thoughts pls thks

  156. Nearly two-thirds of Americans think the time is right to buy a house and nearly 70% view home ownership as a relatively safe investment, according to a Fannie Mae survey. However, 60% believe that buying a home today is harder than it was for their parents, and 68% think it will be even more difficult for their children.

    Japan Airlines (JALSY.PK) says it will cut 16,500 jobs within this fiscal year, reducing labor costs by 81B yen per year.

    At the close: Dow -0.03% to 10969. S&P +0.17% to 1189. Nasdaq +0.3% to 2436.

    Treasurys: 30-year +0.16%. 10-yr +0.27%. 5-yr +0.21%.

    Commodities: Crude +0.22% to $86.81. Gold +0.24% to $1036.50.

    Currencies: Euro -0.58% vs. dollar. Yen -0.64%. Pound -0.12%.

  157. From the FOMC minutes.. they say that core inflation is subdued due to, among other things, dropping rent equivalent of owner occupied real estate.  Now, I’m not EXACTLY sure what the heck that means but if they mean housing prices… then why didn’t core inflation go through the roof during the housing boom?  Or did they find a way back then to strip out the volatile housing sector, along with energy, food, taxes and pretty much everything else that is impacted by inflation from the core inflation calculation!

  158. Here’s one way to look at stocks as being "cheap":

    Very good list by Barry

    Credit Crisis:
    Hated by: Hank Paulson, Short Term Borrowers, EMH adherents,
    Loved by: John Paulson, Book Authors, Hyman Minsky Fans

    Financial Regulatory Reform:
    Hated by: Banks, Investment Houses, Free Marketers, Conservatives, Larry Summers
    Loved by: Smaller regional banks, Elizabeth Warren, Investors, Barney Frank

    Market Crash (circa January to March 2009):
    Hated by: Stock Bulls, Fed, Bank execs, White House
    Loved by: Bears, WSJ OpEd, Obama Haters, IBD OpEd, Larry Kudlow

    Market Recovery (circa March 2009 to present):
    Hated by: Bears, WSJ OpEd, Obama Haters, IBD OpEd
    Loved by:  Stock Bulls, Fed, Bank execs, White House, Larry Kudlow

    Real Estate Collapse:
    Hated by: Home Owners, Mortgage Lenders, David Lereah
    Loved by: Fannie Mae critics, Short Sellers, Calculated Risk

    Hated by: Stock Bulls, Fed, Savers
    Loved by:  Gold bugs, Bond Bears, Dollar Bears

    The Federal Reserve’s Balance Sheet:
    Hated by: Gold Bugs, Dollar Bears, Fed Haters, Survivalists, David Kotok
    Loved by: Stock Bulls

    Bail Outs:
    Hated by: Elected Democrats and Republicans
    Loved by: Lobbyists, Bailed Out Wall-Streeters, C, BAC, AIG

    US Deficit:
    Hated by: Newly minted deficit hawks (mostly GOP), Bond Bears, US ex-Pats
    Loved by:  Government wonks, lobbyists, Tea Party

    Still worth watching:

    With a yield at the highest since Aug ‘09 and a maturity tied to expectations of Fed monetary policy and the direction of the fed funds rate which seems stuck at zero for a while to come, the 3 yr note auction was decent. The yield was right in the middle of the 1.77-1.78% when issued level. The bid to cover was good at 3.10, down from 3.13 in March but above the 12 month average of 2.87. Both the level of direct and indirect bidders were in line with the previous two. Bottom line, while a focus, tomorrow’s 10 yr and Thursday’s 30 yr are much more relevant in gauging expectations of inflation, growth and supply as today’s short end is more anchored to the fed funds rate where a hike isn’t expected until November.

  159. matt …has to do with the cost of living and its calculated in the CPI
    The CPI Housing Survey is the source of the data on residential rents used to calculate changes in rents for the Rent of primary residence index. The Housing survey also uses these rent data in calculating changes in the rental value of owned homes for the Owners’ equivalent rent of primary residence index. The other shelter components, Lodging away from home and Tenants’ and household insurance, use data from the main CPI pricing survey, which BLS calls the CPI Commodities and Services Survey.

  160. The new foreclosure plan does invite a question that lurks in the background of any housing discussion: Have we reached the end of the housing bust? In short, the answer is no. One of the reasons the foreclosure plan won’t work is because despite recent rosy talk about housing, the housing bust is worse than ever, and even now neither banks nor policy makers are willing to confront just how bad it is.  Which is odd, because if you have been following the news from the realty and mortgage trade, you might think that it’s time to pop the Champagne corks and celebrate the end of the housing crisis. The National Association of Realtors points in its latest report to “stabilizing prices,” “steadying home prices,” and “consistent price gains” in the market—a veritable potpourri of calming language. “We are likely seeing the beginning of the end of the unprecedented wave of delinquencies and foreclosures,” declares the chief economist of the Mortgage Bankers Association.” Prices are up, foreclosures are down (we’ll get to that in a second): There’s always a reason to be happy in mortgage land.  The dirty secret of the housing recovery, though, is that in the worst hit markets—Florida, California, Nevada, Arizona, and other places where the foreclosure boom is concentrated—there’s one important number that hasn’t gotten better. That’s the percent of people who can’t pay their mortgages. Believe it or not, that number is rising faster than ever.

    America's Most Unemployed

    Mortgage Delinquency in America

    Per earlier discussion – "How to Run Your Business Like a Somali Pirate":

    Somalian pirate operations are becoming increasingly sophisticated, according to a March 10 UN Security Council report, with a funding and incentive model that could double as a business school curriculum.

    Here is a handy guide to the piracy business plan, based on some of their findings.

    Step 1: Round up investors to provide start-up capital.

    Step 2: Gather between eight and twelve pirates to form the at-sea team. They will need "a minimum of two attack skiffs, weapons, equipment, provisions, fuel and preferably a supply boat." Each pirate should bring his own firearm in exchange for a class A share of the profits. If a pirate brings a skiff or a particularly heavy-duty firearm like a machine gun or, say, a rocket launcher, throw in another share. One more share to the guy who boards the besieged ship first.

    Step 3: Assemble another team of about 12 people. Each class A pirate can contribute a friend or relative to this team. These are the class B investors and they’ll provide land-based protection. The B shares are typically set at a fixed amount, currently worth about $15,000.

    Step 4: Hijack ship, take hostages.

    Step 5: Find someone to front the cost of the siege — to be repaid with interest — while the ransom is negotiated.

    Step 6: Collect ransom.

    Step 7: Distribute profits. The lead investor gets a 30 percent cut, local elders are paid between 5 and 10 percent for anchoring rights and the class B holders receive their fixed-sum payouts. Whatever is left is split among the class A shareholders.

    Bonus: You don’t want your pirates running off with the loot! Be sure to incentivize your workforce and set compensation levels fairly. Here’s a translation of a seized pirate document:

    This is to notify all the ship’s staff that the company has given out a merit-based reward:

    1. Gaanburi (pirate name) has qualified for it and the company has promised him $2000. Likewise, similar awards for Cadiin (pirate name) and Ina Cabdulqaadir Dhuxyaweyn (pirate name) will be announced soon. The company will continue its reward system and it is open to all. As the saying goes ‘the parents initially love their children equally but it is the children who make them love some more than the others’. So does the company. It is up to your abilities to qualify this easy-to-earn reward.

  161. So the purchase price of housing can go through the roof, so to speak, without affecting inflation as long as rents don’t go up.  Okie dokie!
    Does the Fed have a metric for hot money?  That is, money that is borrowed from the Fed for speculative purposes?  Would that be M1, M2, M3…Mn?  If there is one, that’s what we should be looking at.  Of course, that won’t account for all the money that is already deployed in one sector that could be liquidated and deployed to another, ie. bonds to equities.

  162. BofA holds 1 million mortgages that are 60 days delinquent?  Well, then!  They deserve an upgrade!!

  163. Ken Cage isn’t your typical repo man. Rather than snatch cars from an over-extended middle class, he takes back yachts, planes and other toys from the over-leveraged rich.  Business is thriving, even as the economy begins to improve. His company, Orlando-based International Recovery Group, repossessed more than 700 boats, planes, helicopters and other property last year valued at more than $100 million. Business, he says, is up six-fold from 2007.  He has reclaimed everything from $18 million Gulfstream jets and Bell helicopters to 110-foot Broward yachts, $500,000 recreational vehicles and even a racehorse. Before the financial crisis, most of the luxury items he pulled in were valued between $30,000 and $50,000. Today, they are valued at $200,000 to $300,000—meaning defaults are hitting people at a much higher income level.

    "The new foreclosure wave is here," CNBC’s Diana Olick says, expecting a monthly record when the numbers come out next week. "And this is just the beginning…"

    LOL Matt – are you trying to make sense of OER?  It’s a scam that is designed to make inflation seem tame so the Fed (who have a mandate to control inflation) can pretend there isn’t any inflation and keep giving inflationary free money to their banker pals for as long as possible.  This is the same crap as what happens with the IBanks – they don’t care if the government makes a rule, as long as they can exploit it to their benefit.  That’s what the Fed is, it’s an exploited rule that allows the banks to get free money from the government without anyone voting on it. 

    That’s the disturbing thing about S&P earnings – 1/3 of them are coming from the financial sector and those are just pumped-up nonsense thanks to free Fed money, government bailouts (another form of free money) and a free pass on their impaired assets.  It will last as long as it lasts but, when it ends, it’s not going to be much different than the first crash.

  164. Phil,
    B/W ACI at 23.25 and July call for 2.50 at 3/2, miss the run to 26+ at 3/17(50%+ profit).  ACI is going up again, should I take profit if I can get 50%+ profit?
    Thanks a lot.

  165. Did I tell anyone that I hate this market ?

  166. Phil
    The data you have published relating to mortgage stress is enlightening. The "big" shoe has yet to drop. There are 7 million mortgages in default and another 11 million that are underwater. The elephant in the room is the 11 million that represent the home mortgages that are far in excess of the current value of the respective properties. Most of these mortgages are held by people that are employed and are able to service the mortgage payments, however, many are now looking at the imbalance and are opting to "throw in the towel" and mail the keys back to the bank. They just don’t care and cannot accept the fact they are paying into something that will never offer them equity. This tto me is a breakdown of "character" as they have voluntarily chosen to dismiss their obligations under the terms of their contract, and shove it to the lender. These were not " fair weather " contracts based upon future property value. I think bankruptcy has its remedy for those who are unable to perform, but I see no reprieve for those that are bailing just because they don’t like the outcome. We all have to pick up the shortfall on their behalf. What ever happened to the concept of responsibility? I happen to know of two people who did just this, in order to go out and buy a home for half the price.Contract law should prevail and these people should be faced with liquidation IMO.

  167. you got your glove ready, gel? i can feel him windin’ up.

  168.  gel, i know a few physicians who have walked away from their homes in order to buy a home for half the price.  It is totally immoral imho.  "I am gonna get mine" has become the prevailing attitude.  Very disheartening.  Whatever happened to personal responsibility.

  169. kustomz; oh cap saw w/ the REITs and his head did explode !
    crazy; bs nonsense.
    spoke to a special servicer yesterday who personally was handling 60 problem CRE loans.
    Party on.

  170. Cap, no rhyme or reason….i look at properties every single day ,not exaggerating. There are so many short sales you dont know where to look first and they are still building new homes…and they are selling!!!  Rents have come down the past 3 months and home prices are still too high drying up the market for the smart investor.

    Jomama, hate to break it to ya but the banks walked away too…with all our money ;-)

  171. Kustomz
    I never disagree with your positions, however I must defer in this case. The banks entered into a binding contract with the mortagee and each signed the document memorandum. The bank is the party that put up most of the money. The bank is not breaking the contract… it is the guy that promissed to pay under the terms recited in the written mortgage agreement, and is in default  Sure, if the one who has contracted with the bank is faced with difficulty that was not anticipated, and is unable to meet his obligations, because of legitimate reasons such as illness or loss of job or whatever, then he is protected from the creditors through legal bankruptcy procedures. If the banks exercised fraud to entice the mortagee, or missled intentionally the mortagee to execute the mortgage, then they are at fault, however I doubt this is the case overall. .A teaser rate is just that… it is not misrepresentation. Most of these dudes who got in trouble, misrepresented the banks – not the other way around. I personally know of a guy that bought seven homes with the idea if flipping them shortly after they were built.  He bailed on them all, and was never required to file for bankruptcy protection, as he should have been. Kustomz, you are in and out of deals all the time, and you must agree with me, the documentation necessary to acquire financing is voluminous and is filled with boilerplate text that leaves no doubt as to the intent and terms of the agreement. If someone is willing to enter into an agreement of this magnitude and is unable to understand the meaning, then they need to engage someone who can read it and read it back to them, so they can understand the meaning, and the consequences of the terms. This is a "hard ass" position to take, but it is the US that created this mess for the entire world to solve, and we need to qualify who we are willing to extend credit.

  172. "the documentation necessary to acquire financing is voluminous" ….Thats where you’re wrong, today that statement holds true

     Someone close to me used to be a mortgage broker. No docs were all the rage a few years ago, i do blame the banks 100%. How in the world do you give someone a mortgage for 800k with no documentation? They knowingly lent money on over priced properties for a quick buck (MBS). I have no doubts at all, I’m a realist. I recommend some reading, like Greenspan’s spewing to the people when interest rates were at all time lows he was a huge advocate of ARM’s for Pete’s sake. Realtors mortgage brokers, all greedy swine…not to mention WS and the rating agencies.

    Everyone was promised riches, i recommend you watch some videos on youtube of Bernanke spewing how well the economy was doing and how home prices were stable all while Rome was burning…people were duped into buying real estate…every state in our great nation was making money hand over fist…closing costs.. property taxes.. permits etc etc etc…now that the parties over no one wants to take responsibility…blaming the home buyer is at the bottom of my list….with all do respect gel we were robbed…..TWICE!!!

  173. Kustomz
    I understand your well stated points – everybody was complicit that made profit on the transactions, as it was common knowlege that many who were borrowing money to finance a home were really not qualified, and documentation for qualification purposes was often times absent. The government acted as a cheerleader in order to encourage home ownership, however never understood the catastrophic ramifications that might ensue should a recession take place, wherein many of those that took on the obligations to meet mortgage payments could no longer do so. I guess I am one who focuses on the bottom line, and that is regardless of the incentives or motives of the primary parties to an agreement, the terms are well known and each party  has an obligation to perform. In very simple terms, the bank put up the money, and the one who asked the bank for the consideration promissed to pay it back under the terms of the agreement.. The defaulting party, regardless of his sophistication or knowlege of the terms breached his contractual obligation.  We are a country of laws, and contract law places blame on the defaulting party which is the guy that did not meet his obligation as spelled out in the mortgage agreement.  He may have been influenced by many ( realtors, bank employees and any who might profit from the transaction ) however he in the end is responsible. The other party to the transaction has already performed 100% of its obligation when the money was transferred. I have owned property in Canada for many years, as a speculator. In order to even be considered for a residential mortgage, the minimum down stroke is 35% of the appraised value.( Canada Banking Regulations ) All homeowners in Canada have skin in the game, and they had no problems whatsoever in this recent real estate recession, as experienced here in the US. The debt to equity ratio that was permitted in the US is a principal cause of the landslide that hit us. It is dangerous to extend excessive credit to those that have nothing to lose if times get tough. Just my humble opinion!

  174. Responsibilities/Gel – I am torn on this issue actually.  I view the bank as, in the very least, the money partner in the home-buying transaction and the home buyer is the working partner.  For whatever reason, both the money partner and the working partner, decided it would be a good idea to invest in a home together and both had the expectations of making a profit and both took on risks. 

    As circumstances change and the working partner realizes they are in a very bad deal – should they be forced to honor their contract, Gel?  Well, you say it very clearly…  There IS a contract and it was written by the bank, not the homeowner, and they used all the legal power in the world and lobbied Congress and bribed people to make it as advantageous as possible yet, WITHIN THE CONTRACT, there is the ability for the working partner to walk away from a bad deal. 

    That being the case – isn’t the working partner a fool not to take advantage of an escape clause in a bad deal?  

    Now consider the repercussions for each partner.  For the working partner, staying in a bad investment may mean 20 years of struggling to make payments and no retirement savings at the end as the home is not a nest egg but a money pit and their life is, effectively, destroyed.  Clearly they are not getting the deal they bargained for.  This is like taking a job and finding out you hate it AND the pay is just half of what you thought and there are no benefits but Mr. Gel says you have to keep working for 30 years because you shook the guy’s hand.

    For the money partner, they get to keep the 20% (or whatever they agreeed to on day one) of the working partner’s deposit money plus all the money that was put into the property since plus they take full possession of the property plus they get bailed out on the back end by the government plus they probably insured themselves against loss plus they have plenty of captial to move on and enter into new business agreements so this will hardly be a life-changing event for the money partner because, unlike the working partner, they are too big to fail….

    Keep in mint that the Bank wasn’t some innocent, injured party – the bank WANTED to invest their money and they USE borrowers to give them an excuse to leverage their captial 10x to puchase homes with the expectations of getting back 270% of what they put in over 30 years on these loans.  They go into these deals expecting a certain percentage to fail and they perform extensive due dilligence before taking the risk.  To say it is unfair for them to suffer any exposure to that risk and that their investment should be made whole at all costs to the borrower is one step below just taking a gun out and forcing people to buy properties and work them off for the rest of their lives – effectively the old feudal system that we, Americans, had to have a whole revolution to get rid of.  Now you want to bring it back?

    It’s been a while since I’ve taken a business ethics or philosophy class but I really can’t construct an argument against the working partner terminating the relationship and seeking a more rewarding partnership elsewhere. 

  175. gel i respect your opinion greatly and the others here on PSW.

    You cant give someone a raw deal and expect them to be complacent. The whole housing bubble was orchestrated by our Gov the Fed and the banks. Without these 3 elements housing would have been much more affordable and we would not be in this crisis. Bernanke gave the all clear sign when he said there was no housing bubble. The banks created a belief that one could own a home for no money down and stated income,  they would even finance 120% of the homes value to get the sale. Irresponsible and criminal in my eyes.

  176. I think it’s kind of the same as blaming any victims of a con game and using the old "caveat emptor" defence for the banks. 

  177. Housing- I am with Gel on this one. He hit the nail- we are a nation of laws, not men. That is the governing principal despite the seeming inequities or perceived injustice we must follow the law and leave it to the judge to sort out the particulars.
    The working / money partner argument has some appeal however it falls apart when one considers it is a debt vs. equity issue. Sure the deal is stacked against the borrower but the lender does not participate in appreciation/profit. Lot’s of borrowers cleaned up for a long time flipping/rolling over properties.
    I am just a bit tired of the absolution of the borrowers sins. While I regret their plight and wish it were otherwise, contrary to popular mythology, no on put the proverbial gun to one’s head and forced anyone into these deals. Millions upon millions of ordinary citizens DID NOT engage in these risky deals. These are the genuine victims in this fiasco. They are the one’s left holding the bag.

  178. Has anyone attempted a law suit against the Gov, Fed, &/or banks to expose their guilt?
    Re ethics – maybe it’s going the way of marriage. "For better or worse…. til death do us part", "but he leaves his underwear on the floor!"

  179. Morx- ethics- another word for personal responsibility. An appalling lack of it in today’s society and culture- across the board.