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Top of the World Tuesday – The 566% Play

Yay 11K, we did it!!!

I think the only person more fed up than I am with this nonsense is David Fry (his chart with my note on volume), who summed it up nicely saying: "There’s no need to make this stuff up anymore since end-of-day stick saves are right there and in your face. No pretense or deception is necessary anymore. When you have “other people’s money”, including the taxpayers to work with; you can do what you wish and not be called-out on it. Who’s going to do that anyway, the financial media?  LOL!!! Anyway, the media got the headline number they wanted and Main Street is no doubt impressed…  Monday’s volume was pathetically light; so managing the market higher was easy for those who could. Breadth was positive per WSJ data below."

It’s all about S&P 1,200 now that the Dow has made it’s magic number.  As you can see from the chart, 1,200 is not even proper resistance, it’s just a stopping point that should not take so long to resolve in a proper rally but, then again, a proper rally usually has volume and we’ve had none at all – especially when you consider that of the entire NYSE listed volume yesterday of 4.6Bn shares traded, C, ABK, BAC and FNM made up 25% of the trading.  With S, GE, FRE, AA, F and RF adding up to another 10%, that leaves just 3Bn transactions spread out among the other 4,000 listings.  The bottom line is volume is far, far lower than it appears and it appears to suck…

None of that matters though, as David says, it’s right in your face and the people manipulating the market can’t even be bothered to pretend not to be doing it anymore.  I’ve already sent out an Alert to Members this morning with our last major disaster hedge of this cycle in preparation of HAVING to go bullish if we make S&P 1,200.  I say having to to go bullish because I’m still convinced it’s a different kind of bull that’s driving us higher and we’ll be making few long-term commitments for the first few weeks but if we have another 10% more to gain on our indexes – there’s no point on sitting it out, is there?

As you can see from this Fallond Stock Chart of the S&P, this train has already blown through a sell signal on the 8th and the top of the channel is rising to 1,220 with 1,200 ready to become the bottom of the range if we can punch through here.  The VIX has crashed but they are still willing to give money away to the bulls on the Dow.  Here’s a simple example of how you can make a 500% return by simply betting the Dow holds 11,000 through May options expiration (21st):

  • Buy the DIA May $108 calls for $3.20
  • Sell the DIA May $110 calls for $1.85 (net $1.35)
  • Sell the DIA May $107 puts for $1.05 (net .30)

This is a very simple play in which you buy a "bull call spread" that pays you net $2 if DIA finishes at $110 or higher (currently $110.18) on May 21st so your bet is, effectively, simply that the Dow doesn’t fall below 11,000.  Since you are a bull with conviction, you can sell a $107 puts for $1.05 to subsidize the spread, bringing your net cost to .30 with a possible $1.70 upside (566%) that is already completely in the money

What is your downside?  The downside is, if the Dow goes below 10,700, DIA will be $107 and you will lose the .30 you laid out and be forced to buy the DIA for $107, no matter what price it fell to.  This is your "put-to" price.  If you are a "buy on the dips" investor, this should be thrilling for you!  Of course there are many ways to adjust that and avoid the assignment – that’s the kind of things we teach our Members over at PSW and, as I said earlier, we sent out an Alert on a downside play that pays 4,900% so we can buy one of those for every 10 of these and we have a lot of really cool ways to make money, no matter which way the market moves!

Since our protection covers us out to October, we can make plays like the one above 5 times – all protected by the same hedge.  That’s what I mean when I say we’re going to be going with the flow on the market – there’s little need for us to worry about individual stocks when we can follow the trade-bots up to mindless new highs while we collect ridiculous ETF returns that are, ultimately, simply fallout from Uncle Ben’s Free Money machine.  It’s not supposed to be this easy to make money to the upside but, as I often say: We don’t care IF the game is rigged as long as we can figure out HOW the game is rigged and play along! 

I’m not going to talk about fundamentals this morning because fundamentals don’t matter.  If we make our levels, then we can go higher and if we don’t make our levels – we’re probably doomed (but we’re already playing for that!).  Oil failed $85 yesterday and hopefully will save our OIH shorts as it continues to slide into next week’s contract rollover.  Gold is still insane at $1,156 and copper is unaffordable at $3.59 but that doesn’t matter because no one is actually building anything or driving anywhere (see yesterday’s chart) so they can charge whatever they want for things no one is buying

I’m selling an old soda can for $8.5M and I’m declaring it as an asset but my bank isn’t stupid and they’re only going to allow 50% of that price to be used as collateral for my loan – if I need to borrow more I’ll have to go back to the 7-11 and "invest" another dollar for another can and then put that up for sale as well but I’m a little concerned that trying to sell 2 cans at once may flood the market so I’ll hold onto them, like the banks, and keep them both on my books at a slightly reduced price, maybe $6M each…

Japan fell 90 points at the Yen rose to 92.5 to the Dollar but was rescued into the close as the Dollar was pumped back up to 93.2 Yen but, now that the Nikkei is closed and the show is over, the Dollar sunk right back to 92.5 Yen.  Like Dave said, they don’t even bother to hide it anymore!  The Hang Seng dropped 250 points off the open but was saved at the 22,000 mark and "rallied" back to 22,103 for a net 34-point loss on the day and the Shanghai got such a huge boost into the close that it ened up 1% on the day. 

Europe is back to flat after a poor open and our own futures are well off a very nast bottom in overnight trading.  Greece sold $2.1Bn worth of bonds with strong demand as the implicit EU backing of their debt means 4.85% sounds pretty good to investors for 6 and 12-month notes that are priced in Euros.

We’ll just be watching our levels this morning, mostly S&P 1,200 will cause us to trigger the upside DIA play and below that, we already have our downside hedges with our eye on many, many more good candidates to short with our sidelined cash.  It’s the buying game that’s going to be tricky so let’s wait and see.


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  1.  Phil, I spoke to a oral surgeon yesterday – He said that 250 dentists in phoenix went out of buisiness last year.  Personally, i think there was a bit of a oversupply here and they priced themselves out of the market – plus they take cash (think unemployment)  Anyways – as a investing theme – The dental supply companies are priced for a rebound on the hope of future growth (similiar to oil).  Do you think these would make a good short or a candidate to buy puts such as  Henry Schein or Dent?
    Further down the chain, orthodontists are feeling the pinch as well and reducing their office days.  

  2. on my way to the gym i heard that the diane rheems (?) show today is abt who is paying the taxes in america. 

  3.  Ironically, Henry Schein is opening the NASDAQ today.

  4. I was out yesterday. Can someone tell me what the downside 4900% play that was referenced here. Thanks

  5. Phil/SCO – bull call spread 12/14 is back in the money today.  glad i’ve been patient with this one.  do you recommend letting it execute and take delivery on friday if it stays above $12 or close out?  Thx. 

  6. getting some more MEE

  7. Ambac going through the roof right now. From 60c to $3.40 in 3 days.

  8. aclend – that was this mornings post at 6:30 on the monday article, i think.  I would copy it for you but pasting  never works for me.

  9. Phil, like the can analogy! 
    I was wondering when you would abandon your ‘fundamentalism’ and join the party!  Hey, the punch is awesome.  8-)
    Btw, wasn’t today the day you were looking for us to get real for a bit?

  10. Thx Morx

  11. Dentists/Jo – Plus I heard Donal Trump yesterday on Howard Stern telling a story of one of his guys (47) who died from an infection he got at the dentist and Trump said the same thing happened to another guy he knows and advised people to think twice before visiting dentists!  So sure, HSIC is kind of toppy looking with big growth expectations and you can sell May $60s for $1.30 as those can be rolled to the Oct $65s even.  I wouldn’t pay premium to short them though.  DENT is interesting too - no options but they dropped like a rock last time they hit $21 so I’d say it’s worth a short at $20.90 with a stop at $21.10.

    Downside/AC – On the 4,900% play the downside is having BGZ put to you at net $11.10.  It’s a 3x ETF on "Large Caps" – I don’t even know which ones but figure it follows the S&P so S&P 1,350 is up 10% and that will knock BGZ down about 30% to $9.10 and you have a $2 loss on a 10% gain in the S&P.  Of course you can roll that along and also, we can assume it doesn’t all happen in one day so you can stop out or offset along the way as well.  If you go for the BGU puts to pay for the play, your only downside is a massive loss of more than 20% on the S&P that takes you below $30, where BGU hasn’t been since last July so we’re talkiing major tragedy and, once we get that low, we will be very likely to want to DD and use BGU to bet on a recovery anyway!

    By the way, another interesting way to finance a disaster play if you are bullish is to sell puts in an unrelated stock you’d be happy to buy if it got cheap, like GOOG Jan $440 puts for $11 and that 100% pays for 10 of the bull call spreads so, if GOOG falls to $440 we would assume that it won’t be alone and you will collect your $50 from the BGZ play so you are really covered all the way to $390 and if the market falls and you get your $5,000 without having to pay back your putter, then it’s a very nice play but you will be tying up around $5K in margin on that one so it’s more a play for the PM crowd

    SCO/Terra – This sucks but safer to take money and run as we’re tight on time.  Typically, we get a low on Tuesday as the worry-warts sell ahead of inventories but the buy-bots come back in the afternoon and take oil back up.  If $82.50 doesn’t hold, then there’s chaos but, for now, I’d use $83.50 as the getting out line.

    MEE/Morx – Kind of down with Oil now more so than the mine news. 

  12. Aclend/
    SELL BGZ Oct $11 puts for $1, BUY Oct $12/17 bull call spread is $1.10
    Or more bullish, SELL BGU (3x bullish large caps) Oct $28.72 puts for $1 and BUY the BGZ call spread

  13. Watching gold for a possible re-entry after exiting half my positions on Friday. Some support here (1150) and if that fails then probably down to 1140.  The price makes no sense of course, but as long as the hype machine is running there will be buyers, I think.
    A short sharp correction would give stock buyers an entry and possibly give us the push over SPX 1200. Right now I’m thinking a blow-off top could hit the 1230 area in the next few weeks, unless earnings come in really poor. 

  14. Punch bowl/Matt – Sure, just get me one of those hats that holds 2 cans of beer with a hose and I’m all set!  Today is the day – AA didn’t spook the markets and we’re moving on up again although it’s interesting that the VIX popped 4% this morning already.  Now we only have to watch the S&P at 1,200 - just 5 points away.

    I simply have no faith in this BS holding up.  It’s like playing Jenga and betting that, because you’re on level 23 that you are bound to get to 25 but 23 is where it generally fails and 25 is a miracle…  I think the world record is 35 so anything is possible but if you know your family/friends and how they play (the way we THINK we understand the markets) then 25 is about as ridiculous as 35 and right now this market is priced to go to 40.

  15. Phil – "down with oil" – I have May $39 USO long put. Today is the best it’s looked in a few weeks. Do you think we go lower?

  16. LOL!  WAMU execs are now blaming the regulators for their demise.  They say they had it in the bag when the Feds pulled the plug on them!

  17.  uh oh boys, looks like the wheels are starting to come off this bus.

  18.  Phil/Jenga -awesome description.  But for dumba**es like myself, could you use Candyland or chutes and ladder in your next analogy?

  19. craigzooka – yeah no kidding…

  20. Alcoa (AA): Q1 EPS of $0.10, excluding one-time restructuring charges, in-line. Revenue of $4.89B (+17.8%) vs. $5.24B. Higher aluminum prices offset by more normalized buy/re-sell activity compared to Q4, lower shipments in alumina and primary metals, and impact of company strategy to improve long-term profitability in rigid packaging business. Shares +0.8% AH. (PRThis is the story of the commodity pushers "We sold less stuff but we charged more for it."

    I don’t know where this is coming fromWorld oil demand will hit a new high this year, says the IEA, averaging 86.6M bpd vs. 84.9M bpd last year and edging out the previous record of 86.5M bpd in 2007.

    I’ve said this before:  Even in a slow economy, Ed Yardeni believes stocks will continue to rise, with "short and shallow" corrections," because… well, what else is there? "The alternative to stocks is to earn zero in the money markets. That makes it hard to be a bear, unless you are convinced that stocks are about to tank." The sense of "distrust" in the market is natural, considering what we’ve been through.

    The FDIC is expected to vote today to extend unlimited deposit insurance on business accounts. The program was set to expire June 30, but officials worry ending the insurance coverage could cause more bank failures as businesses pull their accounts from banks they feel are in trouble.  Gosh, we don’t want troubled banks to stop taking on more deposits do we?

    At a hearing today that will look at WaMu’s role in the crisis, former WaMu CEO Kerry Killinger will call the bank’s failure "unnecessary" and "unfair," saying WaMu was shut out of key meetings that determined the "winners and losers" of the financial crisis.

    A very interesting read about Lehman’s shadowy relationship with Hudson Castle, the alter ego company it used to shift investments off its books without disclosing its connection to the firm. Many on Wall St. continue to use similar tricks to swap investments for cash and make their finances look better.

    Big banks are starting to push back against the idea of forgiving mortgage principal for millions of homeowners, saying methods like reduced interest rates would be a better option.

    Pimco says it’s staying away from Greek bonds, unconvinced that the European rescue package does anything to tackle Greece’s long-term financial problems. The news is a blow to Greece, which is courting investors to raise $5B-10B in dollar-denominated bonds.

    Before today, the Dow was last over 11K in September 2008 – but it was first over that level in May 1999. The DJIA may not have moved much over the past 11 years, but Floyd Norris counts some definite winners (AAPL, up 1,855%) and losers (EK, down 90%) in that time frame.

    I miss having the time in a slow market to actually analyze sectors like this: Morgan Stanley’s Mary Meeker says the mobile Web is taking off, moving much faster than on the desktop a decade ago. Speaking at Google’s Atmosphere conference for CIOs, she says consumer companies are taking the lead in that space over enterprise companies – and since global mobile today is where Japan was 10 years ago, look to Japan to see where revenue’s going.

    Expedia (EXPE +2.7%) upgraded to Conviction Buy from Neutral at Goldman Sachs (GS); target price raised to $31 from $25. Priceline (PCLN -2.4%) downgraded to Neutral from Buy.  Last week was nothing but positive travel news.

    With little fanfare, the Treasury Department ends its year-old program to guarantee payments to auto suppliers. The program was created to ensure that GM and Chrysler receive parts and components needed to manufacture vehicles, and to see that suppliers had access to credit from lenders.

    Talbots (TLB): Q4 EPS of $0.12 beats by $0.10. Revenue of $316M (-3.7%) vs. $314M. Shares +4.2% premarket. (PR)

    Fastenal Company (FAST): FQ1 EPS of $0.38 beats by $0.05. Revenue of $521M (+6.4%) vs. $511M. (PR)

    Molecular Insight Pharma (MIPI) +183% premarket after a Phase II trial of Onalta showed improved symptoms associated with metastatic carcinoid tumors. (abstract)

    Xoma shares (XOMA +14.5%) surge on news that the company was awarded two patents for use of its diabetes treatment product. (PR)

    Starbucks (SBUX) CEO Howard Schultz says China is set to overtake Japan as its second-biggest market, and the company plans to open thousands of stores in China over time. Schultz also says the chain is eager to crack into the potentially lucrative Indian and Vietnamese markets, where it doesn’t yet have a presence.

    JPMorgan Chase (JPM) may show a decline in net income when it reports Q1 earnings tomorrow. Mortgage writedowns may be as high as $2.5B per quarter during 2010, compared with $8.3B in all of 2009. “The key factor for this quarter for banks will be to say reserve builds are largely behind us and the outlook for lower problem loans and loan losses have improved for the second half of the year,” one analyst says.

    Inflation & Deflation in the same report!  March Import Prices: +0.7%vs. +1% expected, -0.3% prior. Ex-energy -0.2% vs. +0.2% prior.

    Feb. Trade Balance: -$39.7B vs. -$39B expected and -$37.3B prior. Exports +0.2% to $143.2B. Imports +1.7% to $182.9B.

    ICSC Retail Store Sales: +0.1% W/W, vs. +2.1% last week. +4.0% Y/Y, vs. +4.7% last week. April will prove to be key for retail sales as an early Easter pulled sales into March.

    Redbook Chain Store Sales: +3.3% Y/Y vs. +5.2% last week. Sales reflected the transition to the negative side of the Easter calendar shift, and a bump as buyers geared up for spring home improvements.

  21. Morning Phil
    Don’t the alarts showup as part of the comments on this page ? if so its not here

  22. oops. a little too hasty for MEE. Should of asked Phil.

  23. matt/Wamu – what a joke these jackasses are.  This is no different from Enron with shell companies holding worthless assets off of the main company’s balance sheet.  Let’s see if any of these jerks make the perp walk.  I doubt it.
    Craigzooka – man, I am praying this is the beginning of the real deal, but again…..I doubt it.  If it really starts to fall apart, I expect some Hail Mary announcement to save the day.
    Looks like my vacation didn’t cure my cynacism.

  24. Hi Phil, You mention MEE above how a bout some thing like a JUL strangle 55/37 break even 33.58/58.42 if stays in between one would show a 25% return per month on the TOS margin your better thoughts pls

  25. USO/Morx – I expected $82.50 to hold and it looks like it did.  Fun bounce play in the futures with that as the stop line.

    Wheee!  At least we finally got a little volume – 46M at 10:44 so 1M a minute is more than the bots can handle.

    Candyland/Salvum – Sadly, I am familiar enough with the game to do that for you.  8-)

    Alert/Micro – That Alert came off the bottom of last night’s post, I didn’t have a morning post up yet to use the comments on. 

    MEE/Morx – I still like selling the May $45 puts, now $3.10 – I think $45 should hold up.

    Cynacism/SS – Yeah me too and I went to the happiest place on Earth!

    MEE/Yodi – I prefer the above put play as a starter as we’re selling into the initial excitement which is, after all, Rule #1.

  26. ss,
    I agree (that this is unlikley the start of a real correction). I want to see ‘blow-off-top’ mania before I get enthusiastic about the bear case. That means things like: more retail buying volume, lots of media talk about how silly anyone was to doubt the recovery, people insisting the market won’t go down, and so on. We’ve started seeing more of this recently.
    I think when this rolls over it will be a long, slow, grinding ride down that will surprise almost everyone with how long it lasts and how low it goes. No need to try to front-run it if I’m right.

  27. Jomama, I hope you don’t mind my adding a comment here. I practiced orthodontics for almost 30 years in Colorado Springs. Yes,  I’m sure there were way too many dentists in metropolitan Phoenix area, as there is in most large cities, where dentists tend to congregate because they feel it’s easier to get started there, and b/c of lifestyle considerations (you don’t think the missus, who put up with getting her professional  husband through school wants to live in hickville do you?) 
    I dunno, maybe dentists do charge a lot for what they do…. but perhaps a couple hundred thousand for educational expenses, a cool million to set up a nice private practice, and 70-80% in overhead have something to do with it.
    Americans don’t go without anything, whether it’s expensive coffees, cars, clothes, and this is certainly true of dentistry. They just find a less expensive outlet, and this case it would be the dental chains. Chains like "Perfect Teeth", "Comfort Dental", "Apple Orthodontics". The private dental practice is under intense pressure today, and while many will go out of business, especially  with the economy being the way it is… shorting dental stocks would be difficult. The dental supply companies: Schein, Patterson, GAC, Sybron etc. just supply a different  "vendor". Hope this helps…if I can provide more info, let me know. 
    Good investing.

  28. EricL    the real blow off top would be bullish magazine cover .

  29. From Bob Reich:

    Some economic cheerleaders say rising stock prices are making consumers feel wealthier and therefore readier to spend. But most Americans’ biggest asset is their homes. The "wealth effect" is felt mainly by the richest 10%, whose net worth is largely stocks and bonds. The top 10% accounted for about half of total national income in 2007. But they were only about 40% of total spending. A vigorous jobs recovery can’t be based on 40% of what was spent before the economy collapsed.

    The U.S. economy added 162,000 jobs in March. That sounds impressive until you look more closely. At least a third of them were temporary government hires to take the census-better than no job but hardly worth writing home about. The 112,000 real new jobs were fewer than the 150,000 needed to keep up with the growth of the U.S. population. It’s far better than it was-we’re not hemorrhaging jobs as we did in 2008 and 2009-but the bleeding hasn’t stopped.

    What’s likely to slow the jobs recovery most, however, is the indubitable reality that many of the jobs that have been lost will never return.

    More Americans will be working, but for pay they consider inadequate. The approaching recovery will be tepid because so many people will lack the money needed to buy all the goods and services the economy can produce.

    Americans will once again be employed, but they will also be back on the downward escalator of declining pay they rode before the Great Recession.

    Different vendors/Jbur – That’s a good take on it.  Still, I imagine that the dental equivalents of supercuts must put margin pressure on the suppliers that they don’t get from individual practices.  Also, I think dentistry is the kind of thing people put off when things are tight, which probably leads to a boom in major repairs a few years later but the cleaning and X-ray biz have got to be hurting a little. 

    Small business optimism slipped to a nine-month low, according to the NFIB’s index (.pdf), which dropped to 86.8 from February’s 88. Seven of 10 components declined. Purchases are up but "there’s not enough sales to go around to make the whole population of small businesses very healthy."

  30. Senate hearings on fraudulent loans, 83% of loans at WaMu were liar loans!! The risk officer didn’t do his job!

  31. stockbern,

    I agree, or something on the front page of the NY Times, since they always seem to get it wrong. All the way through the ’07-’08 correction, they would run articles by ‘investment experts’ telling people that if they sold their stock, they would only be locking in a loss. Finally, a week or so before the bottom, they ran a very bearish article saying that stocks would likely continue to decline for months.

  32. Back to the open, how nice. Glad I am traveling today to PHX (for a meeting, then back to San Diego), as this is getting very frustrating.  DIA bull call  spreads it is.

  33. Jburgess, thanks for the input – didn’t imply any disrespect. Just trying to share a little anecdotal info. Dentists should do well longterm since dental care is considered a privelege not a right. Dentists who embrace technology and cosmetics will be longterm winners imho.

  34. Let’s see if 11,000 can act as a ceiling, so we don’t have to turn bullish.  This board is a much happier place when the market is heading down.

  35. MEE – it was the May 45′s i sold this morning. Yesterday i took a gamble on some Apr $46 puts at $1.07. I might be rolling them along.

  36. Using my highly flawed volume monitoring system as an indicator, I sold my FAZ earlier to break even and am now short with a 12.02 stop.
    Kustomz, when will the first arrest be made?

  37. DCTH data looks like it will come out AFTER OPEX….I am rolling to the May 9 C for 2.2.  I am shooting for it all here with these, but spreads would reduce the risk.  They have a presentation in June at a conference, so I am going to go out on a limb and say they make it.

  38. Have the 2011 Goog  bull call spread  420/480 which is good, but selling 1/3 monthly calls against it  April 540 which is not good.  I guess I just roll the calls up and out?  I guess the market is expecting great earning report from them.

  39. Jomama, just trying to help, and certainly, no disrespect taken. I spent years teaching technical orthodontics and practice management. It’s a fascinating area of health care… but not a daily lifestyle that I wanted anymore…l’m  FREE!!

  40. As opposed to the DIA spreads, the BGZ s are hard to trade at a decent price. Not too many open contracts

  41. matt when citizens take a stand…when Washington is purged…in other words.. never

    The banks laid the burden on the buyer with no accountability, biggest ponzi in history..

  42. Good morning
    Sorry I’m late, jet lag. IWM lines at 69.97, 70.27, 70.50, and 70.70; I’m in cash

  43. Well, looks like I’m going to be stopped out here shortly.  The banks may in deed be rolling over today.  If only for a day..

  44. Pharm – Looks like OREX had some bad news today regarding their weight loss drug. Stock dropping.
    Does this change your opinion of ARNA? They are also selling off recently.

  45. Phil
    Have  AMR april 9 put
    What month do we roll to ?

  46. CFTC’s Gensler Says Regulators Failed to Stop Financial Fraud. Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, said regulators failed to prevent the financial crisis in 2008 and arguments of complexity in private derivatives markets are being used to impede reform. Gensler, a former Goldman Sachs Group Inc.(GS) partner, said Wall Street is trying to protect shareholder profit and its own compensation, according to remarks he is set to deliver this evening at Columbia University in New York. “Make no mistake: the financial system failed America. That’s not to say that the regulatory system did not also fail – - it did,” Gensler said. “The complexity of derivatives markets, though, is being used by some opponents of reform to raise all manners of issues – some legitimate – but some just to maintain the status quo.”

    Goldman Sachs(GS) Boosts Nashville’s Debt 40% for Convention Center. Nashville, home of country-music stars such as Taylor Swift and the Grand Ole Opry, will boost city-backed debt by almost 40 percent to borrow $633 million for a new convention center three times the size of the Tennessee municipality’s current one. Bonds to be sold today by Nashville and Davidson County’s Convention Center Authority through investment banks led by Goldman Sachs Group Inc. pledge general-fund revenue if hotel, airport and rental-car taxes and use of the Music City Center aren’t enough to repay investors. The tourism revenue won’t be adequate, said Councilwoman Emily Evans, a former municipal bond underwriter. “It’s a riverboat gamble with very little upside,” said Evans, who worked for 15 years at J.C. Bradford & Co., the Nashville firm acquired by Paine Webber in 2000. “It just doesn’t seem like a good bet to me.”

    China May Force State Banks to Exit Underperforming Businesses. China may force state-controlled lenders to exit underperforming businesses, as the banking regulator moves to limit financial risks following last year’s surge in credit. The China Banking Regulatory Commissions told the nation’s five biggest lenders to inspect performance at non-bank units set up over the past few years, Vice Chairman Jiang Dingzhi said at a forum in Beijing today.

     May Start Monopoly Probe Into Vale, Rio, BHP, Daily Says. The Chinese government is preparing to conduct an anti-monopoly investigation into BHP Billion Ltd., Vale SA and Rio Tinto Group, the Economic Information Daily, which is affiliated with the state-run Xinhua News Agency, said.

    Jobless-Benefits Measure Advances in Senate. In a 60-34 vote, Democratic senators on Monday overcame Republican opposition to an extension of unemployment benefits and health-insurance subsidies for jobless people.

    Yen’s 3-Year Rally to End on Support Breaks: Technical Analysis. The yen may snap a three-year rally against the dollar as it drops toward key so-called support levels, signaling Japan’s currency may flip into a long-term cycle of declines, Shinko Research Institute Ltd. said, citing trading patterns. The currency is trading weaker than its 18-month moving average and threatens to slide through the 20-month average, levels that have stood as key support points since 2007, said Norihiro Tsuruta, chief strategist in Tokyo at the unit of Japan’s second-largest banking group Mizuho Financial Group Inc.

    Asia Needs Higher Interest Rates to Avert Bubbles, ADB Says. Asia needs to start raising interest rates to prevent inflation from accelerating and avert the formation of asset bubbles as the region’s economies recover from the global crisis, the Asian Development Bank said. “As recovery takes hold, inflation pressures, particularly in asset prices, may well start to mount in the region,” the ADB said. “Unusually easy monetary policy throughout the region cannot be kept for too long, and there is a need to revert to a normal stance.”

    ICBC Says Biggest China Banks Face $70 Billion Capital Hole. China’s four largest publicly traded banks need 480 billion yuan ($70 billion) of capital to comply with regulatory requirements for financial strength, according to Industrial & Commercial Bank of China Ltd.

    S&P 500 Backed by Most Momentum Since 1986: Technical Analysis.

    Demand for Hedge Funds Heated Up Again in February. Global hedge funds took in $16.6 billion in new money in February as pension funds and wealthy investors raced to capture a piece of the industry’s recent strong returns, data released on Monday show. The flood of new money helped raised assets in the loosely regulated industry to $1.5 trillion, the highest level since the financial crisis, researchers at TrimTabs Investment Research and BarclayHedge found. "Money is chasing performance," Sol Waksman, founder and president of BarclayHedge, one of a handful of asset tracking firms in the hedge fund industry, said in a statement. And industry analysts and investors expect more to come.

    ‘Earthshaking’ Ways to Fix U.S. Debt. If lawmakers opted to reduce the deficit strictly through tax increases, they would need raise more than $500 billion in new revenue, according to a Tax Policy Center study. And they’d have to hike tax rates by a third to pull it off — the bottom rate would go from 10% to 13.7%, and the top rate would rise from 35% today to 48%. If they just wanted to raise the top three rates, they’d have to jack them up by 88%. So, for example, the top rate would rise from 35% to 66%. To hit the deficit target by only raising rates on the highest-income households would require a far more drastic jump. Rates for individuals making more than $200,000 (or $250,000 for couples) would more than double, with the top rate approaching 77%. All of these estimates don’t account for how those taxpayers would behave when faced with higher taxes. If they did, the rate jumps would need to be even higher, said Roberton Williams, a senior fellow at the Tax Policy Center.

    • Washington Will Spend $31,406 Per Household This Year. Taxpayers filing their 1040s are likely wondering just where all their hard-earned tax dollars are going, anyway. Washington will spend $31,406 per household in 2010 — the highest level in American history (adjusted for inflation). It will collect $18,276 per household in taxes. The remaining $13,130 represents this year’s staggering budget deficit per household, which, along with all prior government debt, will be dumped in the laps of our children. Government spending has increased by $5,000 per household since 2008, and nearly $10,000 per household over the past decade. Yet there is no free lunch: If spending is not reined in, then eventually taxes must also rise by $10,000 per household. Washington will spend this $31,406 per household.

  47. Here is a great chart.  Notice that there is LITERALLY not enough money in the world to pay off the debt – that’s not too complicated to grasp

  48. Phil,
    Do you think MON is interesting now relative to other ag plays?? If not, at what point it is worth looking at mon 2012 leaps??

  49. Phil, yesterday I saw this great comment from you, however it confused me a bit because I was under the impression that it was ok to buy premium so you get to keep more money in cash BUT coupled with the regular selling (except earnings months) of front-month calls so you eventually get to have this play for free. So, which one is better? Thanks.
    Considerations/RMM – For buying calls, you are generally choosing to go for leverage and paying for it in premiums.  Sometimes that makes very good sense like INTC Jan $17.50s for $5.40, which is just .33 in premium in exchange for keeping $17.50 in cash for 9 months (1.8%) and sometimes it makes no sense at all like buying the INTC Jan $25 calls for $1.05 which requires INTC to get to $26.05 (up 15%) just to get your money back.  So one call is you borrowing $17.50 at 1.8% interest and one call is you lending someone $1 and paying $3.48 in interest before you get a penny back.  Why I have to keep telling people to sell premium and not buy it over and over again amazes me as it would seem pretty obvious, don’t you think?

  50. Pharm – What are your thoughts on BMRN? I have a buddy who is pretty hot on them and wanted some more perspective on a speculative play like this.

  51. Hi Phil I have SRS april 7 putter that you recommended to roll to July 7 yestrday, the order did not get filled ueaterday and I got assign with the stocks today, I guess I will be long the stock now, what can I do in the mean time continue sell call agains the stock till I break even ? thx

  52. Jo
    My Dental Industry play is SIRO (Sirona Dental Systems). I have been in it for over a month, and I am very pleased with it. My original tip on this one came from an analyist that I have known personally for years, and he has never let me down…. check this one out!!
    Saw your comment regarding Defined Benefit Plans. GREAT IDEA. I set one up in my last company, and the nice thing about it is you can taylor the terms of the plan to meet your respective needs. There are of course a lot of parameters that must be followed, but at the outset, when doing the initial set up, there is a lot of flexability. It definitely does give you the opportunity to shelter income. One caveat though…. you need to watch the expenses that accrue from trades, that are paid to the originator ( usually hidden). When I sold my company, the defined benefit plan I set up, just three years previously, I had accrued over  $1 million in it, and upon the sale of the company, I as trustee, liquidated it, and saw the ugly side of it for the first time. The CPA firm that initiated it received 5% on all the trades and there was a lot of churning going on. Also. a third party usually manages it and has discretionary control over the investment positions – study that provision very carefully ( the firm I used was HD Vest – A financial service company owned by Wells Fargo ). Good Luck!

  53. Covered my short on FAZ for .10 sheckels.

  54. Go Gennseler Go!  Prolly the smartest guy in the administration.  Summers would be the slimy-ist.
    The way I feel about financial reform is the same way I do about taxes.  You got to have skin in the game.  That means if you’re making loans you need to hold a % of the lowest quality.  If you live in this country you need to pay a % of what you make.  If you don’t make anything then WTF?  BY ALL MEANS DON’T GIVE THEM A FRIGGIN CREDIT!!

  55. Dancing on the ceiling/Judah – Looks like you may get your wish.

    GOOG/Humvee – I think you jmay as well go to 2x the May $580s about even as you still have 1/3 uncovered and if GOOG goes down, you win the same and if GOOG goes up, you have a $20 buffer to $600 before you pay more while the $540s are already in the money and will cost you $20 more at $600 but, since they are 1/3 vs 2/3, you actually do worse over $610 but you can always then sell some puts and roll up to $700 or add more longs.

    BGZ/Drum – Yes they are a bit thin but just put in the offer and be patient, we just need a spike one way or the other.  The put side will be the hard one to fill, I think.

    AMR/QC – I think just roll along to the May $8 puts for .10, you can sell 25% more to keep it even.  

    MON/Harip – They are interesting as an underperformer but I’m not sure I like the space at the moment.  Someone asked me about them last week and I said I’d like to see a retest of $65, that’s still fantastic advice. 

    Premium/Ravalos – Ah but then you are not buying premium, you are buying a spread where you anticipate working off your premium so it’s different.  This is why I stress having a trading plan before entering a trade.  It’s crazy to pay $52 for the GOOG Jan $590s (break-even $642) but much less so if you are selling the May $590s for $18 because $18 pays for you to roll down to about the $550s so you have a realistic expectation of selling $10 a month for 8 months against your $52 and, obviously, you can always roll the callers up into a vertical if GOOG takes off.   So it very much depends on what your intentions are.  If you want to buy the Jan $590s on the spread, I would say "excellent" and if you want to buy the Jan $590s because you think GOOG is going over $600 then I would say "have I taught you nothing?"  See, subtle things…

    Back to green with 75M in the Dow at 12:30 so about 30M in 2 hours since the sell-off which was 46M in 44 minutes.  That’s why the crooks can’t lose – they can sell 46M shares at an average of Dow 10,990 and then they can buy 10M at the bottom that they caused at 10,970 and then they can buy 10M more at an average of 11,000 and start the cycle again once the retail suckers get their fill. 

    SRS/Gucci – I guess you are in at net $6.50 ish so you can sell the Jan $5 puts and calls for $2.05 and that’s net $4.45/4.73 and, of course, you can always roll it.  It’s not a thrilling gain but wiping out a $1.10 loss is the gain we are going for!

    DIA $110 calls can be sold for .62 and that pays for the $111/110 bear put spread that’s .85 in the money.  It’s a high/risk play as you owe every penny over $110.50 on Friday but, on the other hand, you make each penny under.  Out at S&P 1,201 of course. 

    Three lunchtime reads:
    1) Imagine the bailouts are working
    2) Bonds: A look at the sidelined cash theory
    3) Three firms forecast to lift dividends, buybacks

    The FCIC is focusing on Citigroup’s (C) "liquidity puts" – sale-boosting guarantees that let customers sell debt securities back at face value if credit markets froze, a possibility Citigroup’s traders figured would never happen. The result: $25B in repurchased CDOs now valued at 33 cents on the dollar.

    There’s little bearish to find in the latest Merrill Lynch survey of fund managers, which finds the risk trade at a four-year high, and respondents expecting above-trend growth and below-trend inflation – a sweet spot that has managers pouring into cyclical stocks.

    I guess they don’t know about this:  Cash-strapped Colorado Springs is doing what it can to lower costs and shrink the local government; in this case, that means turning to private sector volunteers for everything from police patrol to garbage collection.

    With Massey Energy (MEE -1.8%) unable to replace 100% of its production after the Upper Big Branch mining disaster, Alpha Natural Resources (ANR) and Patriot Coal (PCX) are set to benefit from the tightening of an already tight market for metallurgical coal, where prices have surged 22% since the April 5 accident.

    Ford (F) says April U.S. sales are running ahead of last year’s 133,979 vehicles as "we’re starting to see the economic metrics start to go in the right direction." The automaker finished the first quarter with 17.4% of the domestic market after a 2.7-point increase, the largest quarterly gain since the end of 1977.

    If China lets the yuan appreciate, it could be the South Korean won (and Singapore’s dollar and Indonesia’s rupiah and…) that see notable gains.

  56. I believe there is a correlation between tax season and alcohol consumption …two of my plays in this industry are up today – SAM and DEO

  57. JRW, Welcome back. You playing anything at the moment, or still recovering from the jet lag?

  58. judah – we have seen this action so many times.  Looking at a 15 min chart I think it resembles a "screen play". Quaterback drops back to pass, line holds their blocks for a few seconds then releases, qb dumps the ball off to the running back who has blockers all the way down the sideline.

  59. SS/screen play.  I like that. Now we have a name for it.  Next time you say "Screen Play,"  I’ll just buy TNA at the first level of support and let it run for the day.

  60. gel1 / taxes and alcohol
    I agree, but don’t forget, "they" ( Federal, State, and Local governments ) can create new taxes at a pace at which the Scotch industry could never keep up !!
    Of course they could triple the tax on Scotch to solve that problem !

  61. TZA $6 calls at .40 with .05 premium are a fun play down here with a stop at RUT 705 (now 704.73).

    Drinking/Gel – Works for me!

    Fed Governor Daniel Tarullo: If market discipline is going to be incorporated in regulations, market participants need good information. Instead of stress-testing banks just in crisis times, "regularizing" stress tests and making them transparent deserves real consideration.

  62. Hello all,

    I am available all day for questions, comments. Just let me know.


  63. judah
    Bought 2000 TNA at $60.40 around noon, IWM 70.27 just to get back in the swing. No conviction so no post, I suspect this week’s  earnings ( banks ) will be bullish, but I’m really waiting for a good place to short; there’s something new.

  64. JRW…. I am mostly Irish and German, and a small percentage Scotch ( I had to add the Scotch myself though)

  65. Phil/SRS – we are getting ever so close to having to back up the truck at 5.00……..or maybe 4.50…….. or…

  66. SS/SRS.  Don’t you have a stickie on your computer screen that says:  Never, never trade SRS.

  67. Good timing with the Energy play David!

    Excellent observations from Trader Mark:

    The move in Ambac is especially awesome because, despite a (Wall Street) "reported profit," apparently in its 10Q it says it could be insolvent within a year.

    • Ambac Financial Group Inc., the bond insurer that stopped paying some claims and accepting new business, jumped 71% in New York trading after reporting fourth-quarter net income of $558.1 million amid a tax benefit and unrealized gains on derivatives.
    • The company, which also said it has “insufficient capital” to finance itself past the second quarter of next year and may need to file for bankruptcy …
    • The “equity market reaction is dumbfounding,” Rob Haines, an insurance analyst with CreditSights Inc. in New York, said in an e-mail. The “GAAP earnings number sounds good, but nothing has really changed.”

    Since no one in the equity market bothers to read anything but a headline anymore (since by doing so it would take more than 2 seconds – and HAL9000 will already have made 8000 trades in that time) in the dumbed down market, bankruptcy potential is just a meaningless detail. Further, since there is no risk in the stock market anymore and no public company can fail, people are brushing off such warnings and piling in. (Click to enlarge)

    • "The transfer of structured finance obligations to the state regulator and the subsequent payment at a discounted rate is a de-facto default," said Egan-Jones Ratings, a rating agency that’s paid by investors rather than issuers, on Friday. "However, credit quality of the remaining corpus is enhanced."

    Woo-hoo on oil – $84 is now the downside stop on Futures.  Oops, that’s out.  

  68. judah – LOL, I think it means Short….Repent…..Short……

  69. I believe there is a very good chance of an Iranian embargo of gasoline supplies, that might materialize near the end of April. Both houses of Congress have approved it, Obama will sign it, and it looks as though China and Russia may cooperate. If this plays out, there will be a large glut of gasoline on the market that will have a significant impact on pricing, as this commodity is not usually stored in large quantities. This oversupply will will impact the etf I like which is DBE. Once the embargo becomes reality, I will buy puts on the etf as this etf is the best one, I believe as it uncludes gasoline as a principal component. VLO might also be impacted. Phil… do you like this play?

  70. I like Geitner’s Op-Ed today on financial reform.  It sure ‘sounds’ good.

  71. SRS/Judah – Thanks for reminding me.  So damn tempting though.  In fact, if it wasn’t for SRS, I would have played TBT much more heavily but SRS has forever shaken my faith in "sure things" based on silly things like facts and logic….

    Damn, I can’t believe the damn RUT won’t go down.  Nas now at critical test in futures at 2,000  so let’s keep an eye on that.  Logically, this should be a great place to short but how many times can we take an anvil to the head? 

    VNO up 6% since Friday morning.

    Gasoline/Gel – I’m figuring that Iran will get 1Mb through a back door so we’re looking at maybe 1.5% of global consumption down max and that’s pretty much the margin of error on refinery runs so I don’t disagree with your premise but I’d be very careful as any escallation in hostilities and you know what happens to oil and gas pricing.  

    Sounds/Matt – Sadly that’s all we have after 2 years.

    Wow MTN (Vail) making 52-week highs too.   What the hell is going on with real estate?

    In non-financials, BK still scares people: Shares in troubled trucker YRC Worldwide (YRCW -7.5%) have rebounded somewhat from a steep morning plunge following the resignation of President Tim Wicks, complicating the firm’s turnaround efforts. Analyst Jon Langenfeld: "Though we believe a bankruptcy filing is less likely near term, YRCW’s intermediate-term bankruptcy risk remains elevated."

    1, 2, 3, 4 – I declare a trade war!  China imposes duties on imports from the U.S. and Russia of a common type of electrical steel used in the power sector. The announcement by China’s commerce ministry comes after last week’s U.S. decision to impose anti-dumping duties of up to 99.14% on imports of steel pipes from China.

  72. Gel- do you think there is a possiblity the nut job in Iran could interpret this as an act of war and take an action of his own ? Mining the straits could drive the cost of oil and it’s derivatives through the roof, at least for a short period of time. I agree with you that some action is coming but I have a difficult time predicting the reaction the leadership in Iran will have. I doubt they will just roll over. 

  73. Phil:  On buying GOOG leaps/selling near month calls: I’d like to do it with BIDU.  I could buy Jan10 620 calls for $87, and sell May 620 calls for about $30.  I thought the delta on the leaps would be smaller than the near month options; but according to TS, they are very close.  So I could buy the same amount of leaps/sell front months options and achieve delta neutral - does that make sense?

  74. In the wake of growing pessimism reflected in the NFIB report, "There’s a huge disconnect between the stock market and the real economy," Lynn Tilton says. Liquidity is plentiful on Wall Street but small and mid-sized businesses are still dealing with a "huge credit crisis."

    "I think there’s a huge disconnect between the stock market and the real economy," says Lynn Tilton, founder and CEO of private equity firm Patriarch Partners. With a portfolio of more than 70 small and mid-sized businesses, many of them manufacturing companies.  "If we didn’t lend to our own [portfolio] companies we’d be in huge trouble."

    Tilton points to the growing reliance on trading on Wall Street as a cause of the problems with the ‘real economy.’  The percentage of business from traditional businesses like IPOs, M&A and debt offerings -- which support broader economic activity -- are shrinking, she notes, while revenue from proprietary trading grows, benefiting few beyond the trading floor.

    BIDU/Sean – It works but I wouldn’t do it with BIDU because it’s crazy volatile and that is not good for that kind of spread.  GOOG is volatile but generally picks a direction and sticks with it, allowing you to adjust.  BIDU can go up 100 and down 100 on the same news.  Also, if push comes to shove, I’m willing to sit on GOOG long-term but if BIDU goes down – where is the floor?

    IYR May $52 puts at $1.20, were $1.85 yesterday.

  75. DKGuy/Iran
    This proposed embargo, I believe, has a better than 50-50 chance of taking place. There is a lot of "behind the scenes" activity in order to achieve this. The Iranian "nitwit" will really have a fit, but will do no good, as the Chinese and Russian  cooperation will be the clincher. I do not believe there will be a mining of the Straits, as the few outsiders that will try to bring gasoline, are insignificant. Gasoline pricing in Iran is 39 cents/gal, and is a government perk. When they tried to raise the price a small amount recently, there were riots. Think what will happen when they have only a small amount to supply the massive needs – Oh yes there will be riots and the nitwit and his clan will most likely be overthrown.. This is a reprieve for those of us that were punished by the last Iranian embargo in the US. My short play on DBE will be for three weeks only, so I am not worried about too much fireworks coming out of Iran. I believe the riots that will sure to take place will be short lived., and if not and there is a fear of oil shortages on the world market, then I would reverse my position.

  76. David/AMD
    Thanks for the play – I entered it yesterday, selling April $10 puts…. so far so good, but I like the potential return vs the risk.

  77. Phil – have the April EDZ 7.5 put sold for .8. Roll to May 7? 2x?

  78. Gel, I hear you but I meant that the "nut job" would do the mining. No telling what his reation would be. I think your theory is possible IF the coalition holds together. If it does it will be the first time.

  79.  PARD … IT’S … ALIVE … !!!

  80. Phil/ABK – Man you put the kibosh on that one.  Maybe someone read past the headline.

  81. I hope SOMEONE out there used lflan’s one stock option run up method on GOOG today.  I sure didn’t.  I would have, but it requires I have an your or two at the computer in the morning, which I didn’t because of my ‘day job’.  But I’ve checked the computer a couple of times and watched the May 570 calls go from 20 to 30.   Sigh   ):

  82.  Entering back into TBT by selling Sept 46 puts for 2.15

  83.  Bought back all RIMM puts for a nice profit on a very conservative play.  sold 70 2011 jan puts for 9.1 on earnings, went the wrong way and added another round for 11 – out today on all of them for 8.1.

  84. DKGuy/Embargo
    I don’t think the "nut job" will do any mining… this would preclude Iran from shipping or receiving much of their commerce. The coalition, as you say, is difficult to imagine. There is however one hell of a lot of arm twisting at the moment, and I believe we can offer much more to the reluctant, than Iran could muster up. Isreal is the trump card in whole deal, as all parties are concerned with the inevitable respone should Isreal enter the game.

  85.  MON puts are not doing so well – sold 70′s for 7.  This is the downside of this kind of play – when it goes against you, margin increases and then eventually you have to either roll or nut up and have the stock "put" to you.

  86. Phil, I think you mentioned something about this a while ago, right?  8-)

  87. Phil……We all know that insider trading is very prevalent but seldom are people caught.  When you see a pre announcement run up on a stock like GOOG, aren’t you suspicious that someone is quietly ‘spreading the word’ that they are going to have a fabulous quarter, and that the recipients of the news are the buyers?  Or am I just being cynical. 

  88. Sold IYR puts today ( September 50′s ). I believe real estate is on the mend. Lots of insider buying in this sector – BFS is an example – CEO continuously buying (Saul Centers).

  89. Sold TBT September $48 puts @3.10. I need to stop buying here, as I am worried ( as is that Congressman from Georgia ) that my portfolio could tilt over with all the TBT positions.

  90. gel:   rolf  good one

  91. Hi Phil, Just got back. What is your current SPX play?

  92. Out of TNA at $ 61.54 for $1.14 or 2%

  93.  Gotta love those ‘analysts’, I bought MTL a year ago at $5, it’s up 500% so I took some profit yesterday, and then today I read "Mechel Steel (MTL) upgraded by Citigroup from Sell to Buy."  Can you say "Late to the party!"

  94. PhiL : I bought WFR at $12.95 ,now $16.25 and sold July $13 calls for $1.29 ,now $3.60 . Thinking I should roll calls to Oct. $14. for $3.35 and sell Oct $14 puts for $1.08 . Your opinion?

  95. EDZ/Drum – I’m not showing May $7s but you can roll to 1x the May $39 puts at $3.40 with EDZ at $39.55.

    PARD/Diamond – LOL!   Talk about long-suffering positions….

    ABK/SS – It was getting silly.

    GOOG/Iflan – Damn, what a day to miss it! 

    GOOG spread:  Selling May $590 puts and calls for $42 and buying June $550 calls for $49 and June $580 puts for $22 which is net $29 on the $40 upside spread so it’s a bit bullish bias and if GOOG goes lower you need to cash the calls and use that money to roll the puts.

    TBT/Jo – Good idea on that, May $48 puts can be sold for $1.35.

    RIMM/Jo – Yeah nice on those too!  I’m sticking with $70 puts to expiration.

    MON/Jo – That’s why you don’t want to sell puts unless you REALLY want the stock – it gives you a huge advantage when you don’t mind standing pat.

    Mortgages/Matt – Yep, that’s the same thing I was tracking:

    Lender Processing Services just put out its "Mortgage Monitor Report," and we have a new record:

    The nation’s foreclosure inventories reached record highs. February’s foreclosure rate of 3.31 percent represented a 51.1 percent year-over-year increase. The percentage of new problem loans also remains at a five-year high. The total number of non-current first-lien mortgages and REO properties is now more than 7.9 million loans. Furthermore, the percentage of new problem loans is also at its highest level in five years. More than 1.1 million loans that were current at the beginning of January 2010 were already at least 30 days delinquent or in foreclosure by February 2010 month-end. 

    Insider trading/Iflan – I don’t know if you ever saw that Cramer video where he talks about manipulating the market for his hedge fund but that’s exactly what goes on all the time.  There are thousands of guys like Cramer out there all with the morals of (I really can’t think of anything with lower morals than the average fund manager) who are willing to do ANYTHING to make money.  Ethics does not matter, law doesn’t matter, there is even an equation they have for what’s "worth" getting caught over so it’s pretty hard to say you are too cynical when trying to get a handle on this nonsense. 

    IYR/Gel – Well then you are my sworn enemy in real estate!  LOL, just kidding but it seems to me they’ve already had their run and now it’s a blow-off top before the earnings hit the fan.   Good luck though…  LOL on portfolio tilt too – maybe you can apply to him for some aid?

    SPX/Phlit – I still like the SDS hedge.  Just something simple like the short June $29 puts at $1.30 which pay for part of the $27/32 bull call spread at $2.05 for net .75 on the $5 spread that’s already $2.47 in the money.

    TNA/JRW – Back with style!


  96. If you bought the April $71 IWM calls today, it was a double !!

  97. Phil
    Thanks, hopefully I’ll be better tomorrow without the jet lag !!

  98. ss
    BTW welcome back; how was Tuscany ?

  99. MTL/Mr. M – They are amazing with their timing.

    WFR/Dflam – I think that’s a good plan, I’m long-term bullish on them.

    Speaking of timing:  Ambac (ABK -18.2%) shares pull a stunning reversal as JPMorgan Chase (JPM) analysts say they have "no value." To pay claims from mortgage guarantees, it will issue a $2B secured note and additional surplus notes that will rank ahead of common shareholders and be “materially dilutive,” the analysts say.

    Minutes from the March 16 FOMC meeting show that officials discussed a second discount rate hike but most agreed that "the current accommodative stance of monetary policy remained appropriate."

    Defenders of the status quo:  "We must not pass the financial reform bill that’s about to hit the floor," Senate Republican leader Mitch McConnell says, raising the prospect of a fierce fight. “This bill not only allows for taxpayer-funded bailouts of Wall Street banks; it institutionalizes them.”

    Despite Chinese pushback on Obama’s jawboning, Geithner remains confident that China eventually "will decide it’s in their best interests" to allow the yuan to strengthen for domestic reasons. Nouriel Roubini is the latest economist to say that China will need to allow its currency to appreciate gradually.

    More flogging the BlackRock story:  Randall Forsyth wonders if the conventional wisdom that yields can only head higher is a sign of a top. But we’ve seen several contrarian statements in recent days. “There is a near-term risk of flipping to deflation [since] consumers are not yet ready to stand on their own two feet,” Pimco’s Mihir Worah says. BlackRock had said it is becoming bullish on Treasuries because “there isn’t inflation in the pipeline.”

    If Dow 11,000 was nothing more than a psychological barrier, then history shows that the stock market should move strongly in coming days to catch up with where it otherwise would have been had that barrier not held it back. But if the Dow’s recent struggles represent more serious problems, then expect the listless meandering of a tired market.

    Buy-and-hold simply has not worked for 10+ years, and may or may not work in the future, Richard Shaw says on today’s retirement investing livechat. "We think owning rising stocks and exiting declining stocks is a better approach, based on significant trend changes. We use trailing stop-loss orders on all positions, to at least prevent catastrophic loss, and in other cases as appropriate enter and exit on major trend changes."

    Intel (INTC +0.8%) reports Q1 earnings after the close today, and analysts are expecting strong processor demand. Piper Jaffray offers a typical assessment: Intel “is in its best competitive position in many years heading into what we believe will be a period of strong demand for PCs.”

    Getting no press at all for some reason:  UBS downgrades four regional banks to Sell – Huntington Bancshares (HBAN -5.0%), KeyCorp (KEY -3.0%), Regions (RF -3.1%) and TCF Financial (TCB -3.5%) – calling the group’s valuations “unsustainable" and expecting a “meaningful pullback” in the stocks. (ETF: RKH)

    Still no 1,200 on S&P but I sure am ready to throw in the bear towel – it’s just exhausting! 

  100. JRW – Thanks.  Extremely relaxing.  Only made a day trip to Parma to bring my son to a castle and an overnight trip to Venice on the train.  Other than that we just hung out with friends and a lot of food and wine.  How was Fiji?

  101. A blood product marketed by Baxter International (BAX +1.4%) shows considerable promise in treating Alzheimer’s disease, a new study reveals.

  102. sorry phil, i meant TZA 7.5 Aprils

  103. I continue to be fascinated by the housing/refinancing market here in scottsdale/phoenix.  The same guys selling 800k houses for 1.5 million are now showing you how to short sale and buy that same house down the street for 800k.  Just amazing.  Whats even better – the banks and the government are cognisant of this – i know, iknow phil – these same guys banks/govt deluded the people on the way up…..and the beat goes on……

  104. Phil is TBT back in play here? If yes HOW?

  105. JRW, Great lines today as usual.  RIght on the money.  Sorry I was in an out most of the day and couldn’t participate.  Tomorrow.

  106. Phil,
    I’m not sure if you saw my question the other day. Do I recall correctly that you have said one should always have at least 30% in cash as a safety guideline?

  107. if PARD can do that about 8 more times i might get out even

  108. ss
    " A beach to walk on ", actually an island, but a small island;. The family loved the privacy; this is what one has to do for a break from the hustling throngs of the surf swept Sonoma coast.

  109. judah
    Thanks, I’ll be here; see you then.

  110. At the close: Dow +0.12% to 11019. S&P +0.07% to 1197. Nasdaq +0.33% to 2466.

    Treasurys: 30-year +0.22%. 10-yr +0.23%. 5-yr +0.07%.

    Commodities: Crude -0.33% to $84.06. Gold -0.71% to $1153.90.

    Currencies: Euro +0.05% vs. dollar. Yen -0.11%. Pound +0.05%

    JetBlue (JBLU +7.8%) shares jump as the airline announces strong traffic and revenue growth for March. Unit revenue rose 17% from the year-ago period, and traffic increased 9.1% to 2.45B revenue passenger miles. (PRWow – this gave us the last-minute boost?  A year ago the market was in free-fall and JBLU was down below $3 per share, now it’s up 100% on that 17% rise in revenue (and are there profits)?   These are the kind of stories they save up to strategically release when they need them.

    TZA/Drum – Oh that’s a little different but same answer, more or less – I’d just roll over to 1.2x the May $7 puts, now $1 as I still believe TZA goes up.

    Housing/Gel – It’s just a shell game.  Don’t forget that there are so many people who make $10-20,000 just for touching a transaction like that that they will say or do anything to get a transaction to happen.  The problem is we let that system get out of control and now the majority of the people left in the game are the unethical operators who do nothing but game the system.  How this translates to "healthy" is completely beyond me.

    TBT/Phlit – As above, just selling the May $48 puts is a nice start.

    Big data day tomorrow with CPI, Retail Sales (the actual numbers), Business Inventories, Oil Inventories, and the Beige Book.  Earnings from JPM, PGR and GWW are the biggies in the morning and HTLD, STLY and YUM after the bell. 

     CSX (CSX): Q1 EPS of $0.78 beats by $0.09. Revenue of $2.5B (+11.0%) vs. $2.38B. Record 1Q operating ratio and operating income. Shares +2.3% AH. (PR)

    INTC with a nice win:  Intel Corporation today reported first-quarter revenue of $10.3 billion. The company reported operating income of $3.4 billion, net income of $2.4 billion and EPS of 43 cents.

    “The investments we’re making in leading edge technology are delivering the most compelling product line-up in our history,” said Paul Otellini, Intel president and CEO. “These leadership products combined with growing worldwide demand and continued outstanding execution resulted in Intel’s best first quarter ever. Looking forward, we’re optimistic about our business as Intel products are designed into a variety of new and exciting segments.”


    GAAP Financial Comparison
                                              Q1 2010                                           vs. Q4 2009                                           vs. Q1 2009  
    Revenue                                         $10.3 billion                                           down 3%                                           up 44%  
    Operating Income                                         $3.4 billion                                           up 38%                                           up 433%  
    Net Income                                         $2.4 billion                                           up 7%                                           up 288%  
    Earnings Per Share                                         43 cents                                           up 3 cents                                           up 32 cents  



    Non-GAAP Financial Comparison
                                                Q1 2010                                       vs. Q4 2009
    Revenue                                           $10.3 billion                                       down 3%
    Operating Income                                           $3.4 billion                                       down 8%
    Net Income                                           $2.4 billion                                       down 21%
    Earnings Per Share                                           43 cents                                       down 12 cents
    The settlement agreement with AMD of $1.25 billion and the related tax impacts of that charge are excluded from Q4 2009 results in this Non-GAAP comparison.

    Shameful if they can’t pop the S&P on this one despite the obvious non-GAAP issues

  111. Phil, nice call on oil today!!!

  112. Cash/Aclend – Yes, I am a big advocate of keeping a good deal of cash at hand.  You never know when an emergency may crop up.  If you do have an opportunity to deploy it, you should make it a top priority to get back to about 1/3 cash.  Look at today – we had a great opportunity to go long on oil at $82.50 – there was no way to know that would happen and it took a good amount of cash and margin but having it to play with allows you to take advantage of quick opportunities. 

    PARD/Morx – LOL, that will be a trick.

    Thanks Ocelli!

    Intel (INTC): Q1 EPS of $0.43 beats by $0.05. Revenue of $10.3B (+44.2%) vs. $9.83B. Sees Q2 revenue above consensus. Shares +3.7% AH. (PR)

    Q1 2010 Highlights (all comparisons sequential)


    • PC Client Group revenue was flat, with record mobile microprocessor revenue.
    • Data Center Group revenue down 8 percent.
    • Other Intel Architecture group revenue down 9 percent.
    • Intel® Atom™ microprocessor and chipset revenue of $355 million was down 19 percent.
    • The average selling price (ASP) for microprocessors was slightly up.
    • Excluding shipments of Intel Atom microprocessors, the ASP was approximately flat.
    • R&D plus MG&A spending of $3.1 billion was higher than the company’s prior expectation.
    • The effective tax rate was 29 percent, in-line with the company’s prior expectation.


    Business Outlook

    The Outlook for the second quarter does not include the gain expected from the sale of our investment in Numonyx, nor does it include the effect of any other acquisitions, divestitures or similar transactions that may be completed after April 12th.

    Q2 2010


    • Revenue: $10.2 billion, plus or minus $400 million.
    • Gross margin percentage: 64 percent, plus or minus a couple percentage points.
    • R&D plus MG&A spending: Approximately $3.1 billion.
    • Impact of equity investments and interest and other: approximately zero.
    • Depreciation: Approximately $1.1 billion.


    Full-Year 2010


    • Gross margin percentage: 64 percent, plus or minus a couple percentage points. The company’s prior expectation was 61 percent plus or minus 3 percentage points.
    • Spending (R&D plus MG&A): $12.4 billion, plus or minus $100 million. The company’s prior expectation was $11.8 billion, plus or minus $100 million.
    • R&D spending: Approximately $6.4 billion.
    • Tax rate: Approximately 31 percent for the second, third and fourth quarters.
    • Depreciation: Approximately $4.4 billion, plus or minus $100 million.
    • Capital spending: Expected to be $4.8 billion, plus or minus $100 million.

    On the whole, I don’t think INTC says anything great about the economy.  Flat PC clients says corporations are not buying new desktops as does the declining datacenter revenues.  INTC is yet another commodity supplier selling less items for more money per item and booking nice profits with fewer workers.  It’s a pretty big stretch to get from this to a sustainable economic rally but I will shut up now and put on my 1,200 rally cap and come up with tomorrow’s 500% upside play

  113. U.S. taxpayers owe public school teacher retirement accounts some $933B, nearly triple the amount reported by the plans themselves, according to a Manhattan Institute study – and that result may be too low because it includes an “aggressive” 8% assumption on future investment earnings.

    No comment…. trying to be bullish….

  114. David nailed it with his AMD recommendation yesterday! My putters are toast.

  115. Sold MSFT off the INTC news, i never kick myself for taking profits but this market looks like its ready to break loose. Something i will be contemplating.

    Kudos to David, If AMD pulls off a good Q they can hit 12 in a jiffy

  116. Phil/IYR
    LOL… Now that is my contrarian play… I did everything upside down on SRS… so maybe this will work !!!!

  117. David, great call on AMD. I was there with you until the close today when I wimped out and sold for a 1.3% profit going into the INTC earnings. I will miss a good chunk of the move that will happen in the morning but still made some $. I’ll take it. Thanks for making the call in the first place.

  118. Phil, Reluctantly, I am playing your upside plays.  Yay, I guess.  On to SPX 1300, Dow 13,000, etc.  Thanks for providing them.  I look forward to tomorrow’s edition. 

  119. Found a reason for RUT not going down.  It’s because of our very own 9000 bots in PSW!  Here’s a typical day:
    - JRW9000 Mark III kicks in with buying a large number of TNA shares on any morning dips.  Before the Judah9000 kicks in the ss9000 and the larger HAL9000 would have already bought heavily, bringing the market up.
    - Next the lflan9000 buys the AAPL options in large volume as the market has turned up, leveraging to the tune of $4M, driving up the Nasdaq.  The rest of the traders jumped on board, making the short stranglers rolling up the putters and callers, boosting the market further.
    - The kustomz9000, matt9000 plus cap9000 need to do short covering while swearing out loud – see the big green uptick in the 5 minutes chart?
    - Lastly Gel1000 adds positions to the large bullish portfolio along with the hanna9000.  The rest is history!

  120. Not today Peter!  Matt9000 took a lil off the table today.  8-)

  121. Peter:  we should forget TOS and just start our own exchange.  the PSW exchange!

  122. I think the only person more fed up than I am with this nonsense is David Fry (his chart with my note on volume), who summed it up nicely saying: "There’s no need to make this stuff up anymore since end-of-day stick saves are right there and in your face.
    I think I am on record as being pretty damn fed up w/ this BS ….

  123. BTW; I now see some folks doing some talking about a run to 1250; particularly if 1200 gets broken and holds this week.
    Crazy s**t for sure; fwiw.

  124. Cap:  its starting to remind me of the huge Nasdaq run-up; i got out at 3500 and watched it climbed to 5000, couldn’t pass up all the fun so got back in just in time to crash and burn.   I continue to wait for the one piece of news, coming completely unexpectedly, which will pop this bubble.  Anyway, I am fed up with this nonsense too and agree 100%.

  125. Dentists / shoot, I got a dentist appt for Thurs — cleaning + a crown.  So if you don’t hear from me after Thursday …..

  126. Just got back from BBY and i did a little detective work, INTC in every notebook but 2. Thats right 2 AMD powered notebooks and 2 desktops, the rest were all INTC powered!!

    LMAO Pete i got caught once with my pants down this year…trust me i learned my lesson. Still laughing at that one!

  127. Phil, what do you think about pairing the BGZ 4900% play with a similar BGU play… maybe Oct 50.72/54.72s and sell Oct 36.72 puts. This puts you in for 0.8 with a 500% return if BGU just holds 54. If BGU holds 54, then it’s possible BGZ hasn’t risen to 17, but we still make 5x. If BGZ rises to 17, we make 4900% and lose our 0.8, but it shouldn’t matter too much. If BGU crashes and we get assigned at 36.72, that’s probably not a bad thing, or we can roll.
    Thoughts on this? Seems like a win-win scenario. But the last time we tried this w/ FAS/FAZ paired trade, we lost on both big time.

  128. ABK …. now that is one crazy Mon-Tues chart !!!

  129. Gel – IRAN – China / Russia cooperation on real sanctions — I just don’t see it….
    Plus Obama is a  _ussy; and Putin, Hu and NutJob all know it.

  130. INTC w/ big hiring announcement …. plans to hire a whopping 1,000 – 2,000 people this year.
    That should really impact the US employment picture !

  131. Peter D – 7.10 pm … ROFLMAO !!

  132. Sorry all, I have been travelling and will be tomorrow as well.  BMRN – write up is here.  ARNA – I don’t think it hurts them at all, in fact I think it gives even more conviction to their data.  I have sold the July 3 P and am long stock. I would buy more if it gets to 3 or so.

  133. Sorry, BMRN here and here.

  134. Safe travels Pharm thanks mucho!!

  135. Cap… IRAN…. I know, it also stretches my imagination, however I do know everything has been thrown at this, and the posturing is still playing out. In the end, there will be a lot of hard swallowing, but sanctions will become reality. Putin and Hu, are the stumbling blocks, but they have two choices and both taste horrible…. sanctions may not be palatable, but will be like a dinner at the Tavern on the Green compared to what Isreal has in store for everyone, and I believe this is front and center at the moment.

  136. It’s pretty amazing that the JPM can make so much money trading when all the market does is go up.  Seems like they would do better with more volatility.  I can’t wait to see what the charts look like once the big banks have to actually think about their trades before they make them.  Knowing what they know and ez access to money clearly got them long early on.  Maybe they bought an s-load early on and are now simply selling some back into the market each quarter for these profits..  but at some point it will have to end.  That’s what I want to see.  Not that we’ll go straight down.. but the ups and downs.  Because this straight up stuff is just hard to believe.  I’ll be getting short with FAZ towards the end of the day and then again tomorrow at this time.  I think we’ll have a pull back for oe like last month.