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Thank Jobs It’s Friday!

Do I know what the jobs data will be at 8:30?  Nope.

Then why would I title a post "Thank Jobs It's Friday!" – what if the report sucks and we go down?  Well, at this point, even if that does happen, I think that will be the end of it.  We've been building up to this "terrible" jobs number all week and we got a rotten ADP Report and a rotten Unemployment Report so everyone is expecting a rotten Non-Farm Payroll report.  When everyone expects the same thing, we like to bet against it.  Sometimes we're wrong and sometimes we're right but you make some amazing money when you are right.  The magnitude of the short squeeze that would follow a significantly BTE NFP Report could send up up 300 points or more on the day, likely with a big finish this afternoon and some follow-through on Tuesday as the rest of the world plays catch-up.

A bad report, on the other hand, is already baked into the cake and we have yet to test S&P 1,000 so we can expect support there.  It wouldn't be pleasant, but we should be able to scramble and protect ourselves if we head lower so the smart move is to play for the mega-move higher, and that's where we are.  Of course, it's also a balance issue.  In our last Weekly Wrap-Up, we had the following open trade ideas going into June 21st (we had gotten bearish at the end of the previous week):

  • APOL July $40 puts spread at .46, now .60 – up 30%
  • BBY Jan $37 puts sold for $4, now $3 – up 25%
  • BP July $30/32 bull call spread at $1, now .70 – down 30% 
  • YRCW at .21, now .15 – down 28%
  • BP Oct $33/July $33 ratio backspread (3:5) at net $225, now $524 – up 132%
  • TZA July $7 calls .08 (net of spread), now $1.50 – up 1,775%
  • SIRI 2012 $1 puts sold at .33, still .33 – even
  • USO July $33 puts at .51, now $1.08 – up 131%
  • GLL July $37 puts, sold for $1.30, now .35 – up 70%
  • TBT July $38 puts sold for $1, now $2.05 – down 105%
  • OIH June $104.10 puts at $2.02, now $8.70 – up 330%
  • TZA July $6/8 bull call spread for .55, now $1.48 – up 169%
  • TZA July $6 puts sold for .50, now .04 – up 92%  (pair trade) 
  • USO July $33 puts at .50, now $1.08 – up  136%
  • GLL July $37 puts sold for $1.40, now .35 – up 75%

These are all of our open short-term trades, which we published on June 19th and reflected our fairly bearish stance going into the next week (which was a turn-around from the prior week's bullish trades).  Our long-term trades are all well-hedged for a 20% market drop so we're hardly in a panic over this little shake.   People wonder why we would "flip flop" bullish so quickly and the answer is – BECAUSE WE CAN AFFORD TO!  As we make money on the bear side, we look for bullish opportunities to cover our gains.  It's a constant game of balance and you can't expect to understand our overall positions if you come in today and read a single article as they evolve over time.  This is why, the first assignment given out in our New Member's Guide is to have the Member go back and read the last 30 days of posts and comments – it is VERY dangerous to take this type of trading out of context!

So we've been getting more bullish all week long and we have cashed out the above short positions (adding a few new disaster hedges, of course) and added some now-painful longs but we have 2 weeks to turn it around in July and we remain confident until the jobs report proves the bear case that all hope is lost and we're heading into the Great Depression, Mark II.  We are no fools, of course – we have hedged for disaster as well.  On Tuesday morning, I felt so strongly about the need for protection that I not only published at TZA spread for protection (TZA July $6/7 bull call at .60, selling Aug $6 put for .48 is net .12 on $1 spread for a 733% upside) in the Morning Post but I also sent it out as a Special Alert to all members (even the Report Subscribers) AND I put it up on Seeking Alpha for my readers there AND I twittered it (which I almost never do) and, of course, put it on FaceBook for my friends, to help them protect themselves as well.  THAT's how positive I was on Tuesday morning that the market was going down! 

That trade is now up 475% but we got out at 500% because that's plenty of money to make in 2 days.  The AMAZING thing to me is that, 2 days after placing that trade, I find myself being branded a "perma-bear" because I've spent the last couple of days saying BUYBUYBUY while, well EVERYBODY ELSE, is saying SELLSELLSELL.  Yesterday, I laid out my buying premise for Members,which we also posted on Seeking Alpha, because I want my readers there to understand also why the tone has changed.  I won't get back into it now but I will say that I just call them as I see them and if we see 150,000 jobs lost this morning – I'm perfectly happy to rejoin the dark side but, until that time (just a half hour from now) I remain cautiously optimistic.

If you want someone who is always bullish or always bearish, I am not your guy.  My job is to find places where risk is mis-priced and take advantage of the fear and irrationality of the investing public.  We use options at PSW to both leverage our bets as well as to hedge them and it gives us the ability to take a dozen trades like the ones above.  

We had a massive strategy (and political) discussion in Member Chat already this morning and I say "thank jobs it's Friday" because I have spent 3 days now in a room full of bears, who all want to bet the market down and I have been very stingy with my downside trade ideas as I just don't believe in them so, finally, today is the day that I will either be vindicated if we hold our lows (the jobs report doesn't have to be good, just anticipated and priced in if bad) or I will finally come over to the dark side and we will ride this puppy down to 8,650

Either way, it's going to be fun!

8:30 Update:  Oh, how annoying!  It's 125,000 jobs lost, so nowhere near the doom and gloom predictions but also not enough to dissuade the bears, especially the all bear 3-ring circus on CNBC who are spinning every aspect of this report as far down as possible.  Unemployment is down to 9.5% from 9.7% in the prior report and the number includes 225,000 census workers that were laid off and the Private Sector ADDED 83,000 jobs but that is not at all what I'm hearing on TV at the moment.  I AM THRILLED as there is NO WAY that this number will take us lower than the lows we flipped bullish on this week.  They will now have to blow something up over the weekend (possible) to take the markets lower, despite all of CNBC's efforts.

Avalon's Peter Cardillo says: "If you axed government layoffs, it wouldn't be a bad reading. The basis of it is, the worst of the declines are over and we should be able to gain strength going forward."  I hope Peter is right because we sold a lot of puts at a pretty high VIX and we would be THRILLED just to flatline into July's options expiration (16th) – anything more than that is a bonus.  I don't think things are "all better" by a long shot but I do think they are getting better – VERY SLOWLY.  Good news for almost everyone reading this – Unemployment for people with a Bachelor's degree or higher is down to 4.4%.  High School dropouts are way up at 14.1% (but the best reading in a long time, down from 15% last month) and High School grads with no college up at 10.8% so, finally, a good reason to invest in a college education!  

Meanwhile, China revised their GDP UP, yes UP, that's UP, not the down that was being reported all week but UP to 9.1% from 8.7% because of higher contributions from secondary and tertiary industries.  That should mark the end of Doctor Copper's wild ride below $3.  Oil is at $72.50 and we're in on the futures above that line.  The USO $34 calls at .50 make a fun trade to to hold over the weekend, in case prices kick up but it is a high-risk position….  We get Factory Orders at 10am and Treasury's Alan Krueger will give the official spin on the jobs numbers at 10:30 and I'm sure he intends to spread some holiday cheer as the briefing is titled: "Pen and Pad Briefing on Employment Data and Economic Recovery" meaning he intends to be quotable for the weekend papers so we'll be looking for a lift around 10:30.  

Our FCX play should be a big winner and they are a great buy at $59 (we sold puts) as Australia backed off on their mining tax and are working out a compromise with the miners.  BP had some progress on their well and they are trading up in Europe (we're in that too) and Europe is trading up about 1% but down from 1.5% before our jobs number. Their initial reaction to our jobs number was a rally but then CNBC "explained" to them that the numbers were really awful.  Tune in this weekend when I plan to expose this scam from a new angle! 

So, we will see what we will see today.  I'm very excited as it would have sucked to have to run for covers in a pre-market crash, we're bound to get some short covering into the weekend and if we can pull an up 2% day out then we should get follow-through from Asia and Europe and we could be well over 10,000 again on Monday and what a relief that would be

Have a great weekend,

- Phil

 


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  1. Hours worked down .1…not sure anyone is buying the 9.5% "calculation looking at the futures.  140k birth/death.


  2. The Labor Department says employers cut 125,000 jobs last month, the most since last October. The loss was driven by the end of 225,000 temporary census jobs. Businesses added 83,000 workers to their payrolls, an improvement from May.


  3. Phil/others – a nice article by Andy Grove on how to create jobs in America.
    http://www.bloomberg.com/news/2010-07-01/how-to-make-an-american-job-before-it-s-too-late-andy-grove.html


  4. Oil is at $72.50 and we’re in on the futures above that line


  5. Shanghai Index, sank hard and manage to reverse and close near the highs forming a hammer doji, Since it cannot be shorted not reason for it to do so. Goldie downgraded the GDP


  6. @nicha
    Thanks for that Andy Grove piece.  
    Shouldn’t we get a copy of this to every one of the 535 people in Congress, the Exec and judical branches, and stuff a copy of this ino the Bamsters’ morning danish?  Maybe put it on repeat cycle once a week till they address it?
    I’ll take it to my elected and appointed reps here in PA, TODAY.


  7. fizz/booklet — interesting content in your post today (on yesterday’s thread). Is there a name and/or author of that booklet?


  8.  Art Cashin – Friday before a 3 day weekend, 60% chance of upside.  That’s a good statistic to remember.  
    DAX looks weak, but has higher lows since GER afternoon.  I think they will put the DAX higher bec. they will beat Argentina in the World Cup this weekend!


  9. phil - Where do you get your direct access for the unemployment report?  What was U6?  Thanks!



  10. Good morning,
     
    IWM 58.68, 59.39, 60.12, 60.88, 61.43, 62.54, 63.95


  11. Good morning!

    Not a strong open at all but anything but down is an improvement.

    Still hoping to take back those low closes but I really do expect us to pick up at least 1% today so I will not be happy with just those levels (but let’s make them first!):

    • Low Spikes:  Dow 9,725, S&P 1,042, Nasdaq 2,145, NYSE 6,480, Russell 608, SOX 326 and Transports 1,921. 
    • Low Closes: Dow 9,815, S&P 1,050, Nasdaq 2,158, NYSE 6,512, Russell 617, SOX 332 and Transports 1,955). 

    If we run up, then it will be prudent to get more neutral into the weekend but if we stay down and hold our levels, then saying a little bullish will be fine. 

    FCX is not moving up fast but I like them at $59.35 and you can also sell the July $60 puts for $3, which puts you in for a net $57 in two weeks so that’s my trade of the morning. 

    Out of short-term short trades if you haven’t already.  Keep in mind we have some great 500% upside plays you can still grab here if you think you are too short


  12. phil..
    that list of bear plays was awesome, do you have a list of the bull plays?
    Your article.cartoon on Libertarians was awesome!


  13. So TBT can actually go up?


  14. Jobs for DSL access??? And they call that infrastructure? They should have a look at the status of our current infrastructure: bridges, the grid, and dams.


  15. JRW III, can you drop me a line to arbtradermontreal@yahoo.com   There is something you really need to read.


  16. Go TBT!   8-)

    Grove/Nicha – Don’t you wish our actual politicians put that much thought into the issue? 

    Oil over $73 so that’s our stop now (.25 trailing otherwise)

    AAPL waking up – that could be a coiled spring on the Nas if they pop.  $260 is up 0.4% and would give the Nas a 0.1% push but right now we’re just hoping to hold 2,100. 

    So far, weak volume (20M at 9:45) so people aren’t exactly racing into the markets.

    Good idea Flip – No reason not to get active, if everyone here Emails stuff like this to Congresspeople, at least the ideas will be out there.

    Booklet/Rain – I think that was Bush’s High School Yearbook quote!  8-)

    Data/Goldman – Seeking Alpha Market Currents, they are good with that stuff when reports come out.   Speaking of which:

    General Motors’ first-half sales in China surpassed those in the U.S. for the first time. GM sales in China totaled 1.21M vehicles – nearly 50% higher than the year-ago period – topping 1.08M sold in the U.S.

     There’s usually something for everyone in the monthly jobs report. Among bits of hay for bulls to chew on: gains in manufacturing and temporary hiring. Red meat for bulls: hourly workweek and participation rate fell.


  17. Phil/Bush — I don’t like to use it but, but here it is: "LOL"


  18. I love it when Bloomberg says "Looks like traders don’t know how to react" B-)


  19. IWM 58.60 59.10 60.02 60.79 61.38 61.97 62.59 62.92 63.25 63.60


  20. BP/Goldman – We have to deploy out nuclear capabilities

    Awsomeness/Yip – Thanks.  Under Portfolio Tab are plays that are looking for 500% upside by Jan and also, of course, the Awesome Buy List Top 20! 

    TBT/Pstas – Must be some kind of mistake… 

    Factory orders were down 1%, down 0.6% was expected so there’s our final bit of bad news for the week


  21. Yip – good job on the 60.02. I had 59.95. not good enough.


  22. Good morning Phil
    Regarding RIMM AND FCX puts that were SOLD
    Rollin, Rollin, Rollin? OR
    Holdin, Holdin, holding?
    Meanwhile, I am learning, learning, though not yet minting any money


  23. yip             60.02  right on!        hope the leg is better


  24. Mor…close enough…  It’s so tricky at this level… As Phil has said to take shorts after looking at the charts is a hard thing to do.  I wouldn’t be so sure if it breaks that area it’s going to the next stop… The bulls and bears are in a major war.
    My other thoughts are I read most all the posts lat night for yesterday and I was thinking most people on here are bulls not bears as Phil had said?   I am definitely a longer term bear for sure but would not be remotely surprised if we go back to the 10,200 area but I’ve never been more sure of a lower market come Q4 and Q1.  The recovery is based on trumped up BS and funny balance sheets.  you cannot expand and economy at the rate we expanded from 1996 to 2006 and think we can be in a recovery already, at least I don’t think so.


  25. Bloomberg/Rainman – Traders that don’t know how to react are their audience! 

    I’ll feel better if we can hold 600 on the RUT this morning and 9,700 on the Dow and, of course 1,020 in S&P but that better not be in any danger.  They are giving the bears all the time in the world to get out or maybe they are giving the bulls all the rope they need to hang themselves…..

    VIX flew down to 31.

    Great – CNBC will be "celebrating" greed is good with a showing of Wall Street tonight.  I have to imagine that Oliver Stone is pissed at how many people get the message of this film totally wrong…

    EEM $38 calls at .99 are nice and liquid, stop if they can’t hold $38.70 (about .10 loss).


  26.  Phil, 
    Thanks a lot for the long educational post last night! I am sure most users will benefit from this…
    I was hoping to get out of the 105 DIA;s today with a big runup, but doesn;t seem to be in the cards. Should I kill it and revover a few pennies? (now down from 77 and DD at 24).? Any position do you recommend to make this back?
    Thanks 


  27. RUT traders -
    I started just trading off the 3 min chart  – stoch, rsi, and mom -
    I was getting whippeed around with the one minute – trading like a crazed monkey – it was just too much for my brain  – for those of you who play poker – I just went on tilt every time with that one minute chart.
    3 minute seems to be working well. Thanks to JRW for all the


  28. Phil – I agree with Amatta, it was a great post. The idea of protection is new to me and it’s taking me awhile to get accustomed to the idea and how to implement the strategy. Since being a member I’m not just buying a stock but now looking for ways to protect it with selling Cs&Ps and putting in some disaster plays as well. I sleep much better knowing I can ride out some short term pullbacks without getting absolutely killed. Thank You for all your help with this concept. I have reread some of these posts dozens of times and I think it is finally sinking in. 


  29.  phil--did you mean 37.8 on the EEM calls?


  30. Rut Pack - I did not think that we would bounce off Thurs 38.2% with factory order release matching March 2009 -1.4%…missed that $1.  Are we back in good is bad and bad is good news mode?


  31. RIG- Looking strong.  in @ July 50 calls @ 1.99. Stops set if RIG can’t hold 49 after breaking through it w/ volume.


  32. HI Phil — what are short term trade are you refer to — is it day trade position that you recommend each day ? thx


  33. no fun day so far


  34. There’s likely an obvious answer to this but  when placing an order to:
    1) buy the stock and
    2) sell puts and calls at the prices Phil suggests, can these three separate transactions be done simultaneously using TOS? 


  35. Yes flip call them they will walk you through it.


  36. Should’ve just sold options yesterday and just gone away for the weekend… >.<


  37. Expanding /Yip – One of the things I look at is how close a stock is to it’s 2003 level.  That was our last major sell-off and, even if you think the ENTIRE move up from there was BS, we sure had a nice 5-year test that seemed to confirm those levels had solid support.  As I keep saying, a company is worth what it earns for me X 10.  So I plan on holding it for 10 years and consider what I think they’ll make and they are either a good deal or not a good deal.  People hardly even look at p/e anymore, which is why you end up with relatively low-growth, high-risk companies commanding 50x multiples – investors have been "dumbed down" to believe that things like that don’t matter but, when push comes to shove – you are buying a business when you purchase a stock, but hardly anyone even glances at a balance sheet anymore….

    Euro testing $1.26!

    DIA/Amatta – I’d let it ride over the weekend.  Recovery is possible and another penny won’t matter much.  You can try selling the $106 calls and maybe someone will buy them for .03 and then you at least got your money out and you have a very slim chance of getting lucky. 

    Sinking in/Dk – Thanks!  It is a different way of thinking about your investments but, once you get used to it, you get to understand why they call uncovered positions "naked."

    EEM/OAK – Not om ny screen.    They have $38 calls, now .97 and, on TOS, it’s:  .EEM100717C38  Although the move up is fizzing out already and it’s not worth it if we aren’t getting a 10:30 bounce off the Treasury statement on the economy. 

    If oil can’t hold $72.50, that’s bearish (now $72.58).  Copper already weak as it was rejected at $2.96 and gold is lame at $1,204. 

    RIG/Jdub – If they start going down then OIH will make a good short again ($92 puts at $1.40).

    Shorrt-term/Gucci – As opposed to our longer, hedged positions.  Pretty much anything inside of 3 months (Oct) is short-term to me.  It means I’m going to be much more likely to take gains quickly since there’s not much time to adjusts.  So today, RIG, EEM, Oil Futures (of course) and FCX are all short-term trades.


  38. IMAX looks interesting here …. IMO


  39. samz,
    You should do just fine using only the 3 minute chart; I make 20%-30% more by getting better entry/exit info from the 1 minute, but some of those end up being non-confermed head fakes. Remember, if you only make 2% a day, that’s 500% / year, not bad !!


  40. Wonder why HK is up and the rest of nat gas is about even


  41. Phil…i’m not sure about that prognosis.  It’s logical but when the market went down 80% in 1933 did that level represent all companies worth/P/E at that time?  No.  Furthermore you mention a bottom in 2003, however much of the derivatives and credit was offered AFTER 2003 and some would argue is the reason we went up from 2003 to 2007, 100 percent.   The earnings that are being reflected on current balance sheets to support the P/E’s IMO are not sustainable and will be adjusted downward.  I look at PE but when the earnings themselves can’t truly be substantiated because of funny balance sheets and the like the PE number is skewed  and cannot be trusted. 


  42. Phil / Bank of China $9B capital raise.   Is this the canary in the coal mine.  Everyone knows that the Chinese banking sector has been making foolish and excessive loans at Gov’t direction.  I’m sure their bookeeping is even more corrupt than our banks, so they may be able to hide the write downs for a while yet, so little mkt impact?


  43. Phil do I have this correct?
    BUY FCX market order
    OPEN TO SELL FCX July 16 60.0 PUTS


  44. That’s funny.  I thought that they were giving the bears all the time in the world to keep selling short and buying puts, after which they will start buying and burn the bears.  That would be the opposite of your quote, below.
    I’ll feel better if we can hold 600 on the RUT this morning and 9,700 on the Dow and, of course 1,020 in S&P but that better not be in any danger.  They are giving the bears all the time in the world to get out or maybe they are giving the bulls all the rope they need to hang themselves


  45. VNO & BXP signaling a breakdown


  46. Transaction/Flips – I fill all 3 legs separately.  If I’m buying 20, I might put in a "wish price" for all 3 legs at 5 and see which one fills first and then work into the trade from there.  Happy to go into details on weekend when not so crazy. 

    Going away/Kinki – Taking money and running is always a good plan.

    IMAX/Cap – They should have a nice summer, I like that idea. 

    CNBC just relentlessly shredding the data.  It’s amazing because all spring they were dancing a jig no matter what the jobs number said

    Out of OIH with quck 10% – still having trouble feeling this bear thing…  


  47.  Hi Phil,
    I agree with you on the OIH…hoping for a rise on RIG and will actually hedge with OIH puts if it does. 
    I was reading your posts from last night and early this morning.  You mentioned this " If you have 10 positions, you may decide (as above) that XOM doesn’t need a hedge at all and you’d also be happy to own lots of KO, MCD, INTC, AA and MMM so you’re not even going to hedge them but PFE, WFR, HPQ and CHK all concern you that if they are falling 40%, there may be something seriously wrong with them and you may not REALLY want to own them for the rest of your life…."
    I have a PFE holding mainly bec. I thought it would be a relatively safe way to put some of my money into the equity market with its low beta.  So when you say falling 40%—well it has fell almost 60% from its high early this year.  I mean the only fundamental reason I can think of is their drugs losing their patents and w/o a deep pipeline to cover those cash cow meds.  I guess all it takes is for them to actually use their deep wallets and buy up a couple of biotechs here and there.  But if they haven’t done it, the question is will they ever do.  I guess it’s also conceivable that they think the market is headed lower and can probably buy those public cos. for a lower price.  
    Should I start to look at other low beta, high dividend big pharma names that have performed better than PFE?


  48.  Hey Phil,
    Are you out of your /CL futures?


  49. Hi Phil — question on short term trade — Goog — yesterday I sold August 480 short call for 8.5 now 7.65, these position should close today and wait for next week if need to sell the caller again ??? I am not good with day trade but with this market I guess I have to watch my position much closer…thx


  50.  Market is feeling like an upside spring all day, feels very different from last few days. 


  51. Phil – do you still think yesterday’s TZA spread & put are a good hedge? I wasn’t covered enough and most are now closed and sleeping would be nice over the weekend. Thanks


  52.  maybe this has been covered but any LT play on GOOG versus OWW / EXPE / PCLN now that they bought ITA?


  53. 1933/Yip – You are right, there is no logic to how low things can go but why should that stop me from buying them if I’m a long-term investor.  If I want a home for my family to live in and you tell me it’s $200,000 I may say no but at $150,000 I may say yes and if it goes down to $100,000 am I going to suddenly not like it?  At $75,000 I would strongly consider buying another one for my kids and at $25,000 I’ll be giving them out at Christmas.  What do I care what the seller thinks the value is if I WANT them?   This is the mentality I am trying to get people out of – that a stock is worth whatever the tape says.  The market IS AN IDIOT – you don’t follow the market.  It not only knows nothing but what it does know is mostly wrong.  I am not buying the balance sheet of the S&P and surely you can’t seriously be making a blanket statement that the earnings of any company are not sustainable?  If so, why buy anything.  Just buy some SPX $800 puts and wait until the world ends and you’ll be rich (assuming your broker survives to pay you and assuming money has any value after the meltdown). 

    Look, here’s a guy on CNBC right now telling people to get out of everything! 

    Anyone who thinks CNBC doesn’t move the markets is just not paying attention.  People were bailing like crazy during that segment and then they go to commercials and the selling eases off.  Volume 59M at 11:23 on the Dow, about average. 

    FCX/Chip – Well, I’d just sell the puts.  I don’t see the need to pay more than $57 for the stock. 

    ???/Fjd – This is not a good thing, we had a chance to move higher and there were not enough buyers out there.  If this is a bear trap – it’s a big one but you can’t count on that.  It’s very disturbing to me to see the Tranports leading us lower as they had good news this week and XAL is right back to the lows like nothing happened.  Bottom line is we didn’t hold 600 on the RUT and we didn’t hold 9,700 on the Dow and until we get back over them, there’s nothing to be bullish about

    I think we’re selling off on a commodities dump from Europe and the DAX dove into the close, down 0.36% for the day but the CAC held 0.62% and FTSE was up 0.88% so I’m still just not feeling the bearishness

    Oil just bounced off $72 but too quick to enter, worth watching that line.


  54. samz / 3 min chart
    Did you get into TZA at 10:24?


  55. I think the markets are falling because Brasil is losing in the World Cup. Close to elimination.. :)


  56. Wow. Didn’t expect closing on the otherside of the pond to signal an accelerated selloff.


  57. Will the trading bots start buying here, hnow that we’re at yesterdays lows on the Dow?


  58. Strange day.Thank goodness for stops and three day weekends! :)


  59. I don’t care WHY the markets are falling, I’m just happy that TZA is up 4%
     
    If the market closes more than 1% up or down into a 3 day weekend, there is a greater probability of follow-through on Tuesday. So options on your favorite index is a nice inexpensive way to play that !!


  60. WOW!  Now CNBC has a guy explaining:  Mother Theresa Bad/Greed Good!

    BXP/Onwisc – We need them back over $70.

    PFE/Jdub – Well the word on them is not good at all so yes, you should at least consider diversifying.  Government austerity is freaking out most sectors, there aren’t many that don’t benefit from that massive Government everyone loves to hate.  They are like a huge company – they fly planes, they stay in hotels, they buy office supplies, their employees turn out to be human beings who spend their money in the community but Arnold just said he’s going to cut Cali workers down to minimum wage and you can bet conservatives are high-fiving each other while the markets tank. 

    /CL/Jdub – Of course I was out by 11:17 (not 9:52 comment).  You must be very clear on this – YOU CANNOT AFFORD TO LOSE ,05 IN THE FUTURES – IT’S NOT WORTH IT!!!!  How’s that for a rule of thumb? 

    Now oil is crossing $72 the good way and they can be bought at $72 again with a nickel stop


  61. Phil..I know you’re super busy so I won’t go on and on all day here.  Of course I’m not saying the world is ending nor am I saying every company is losing money.  What I am saying is the market is way to high and it’s coming down that’s what I’m saying.  You said yourself the Bots mostly control this market and the rally from 3/09 lows up to 11,300 was absurd and mostly computer driven, not fundamental.  Agreed the market is Full of S and knows nothing.  My next point is that our option positions do not reflect a 10 year time frame.  Let’s use TASR as an example.  If TASR stays around 4 for the next 6 months I get killed.  If I roll out to another 6 months and it stays at down I get killed, not sure about the 10 year time frame, the house analogy doesn’t make sense.  If you are going to stay in a house with your family for 10 years that’s an altogether different discussion. I regress, I’m not sure how you can suggest a ten year time frame buying these strategies and rolling them.  The market is going down because spending, which makes up for 70% of our GDP is mostly gone becuase credit is mostly gone.  Add that to the decrease in employment which I believe will continue and what do you get?  Lower earnings, less spending, and a ultimately a lower market.  Housing?  Another joke.  lots of homes, lots of people who can’t pay, less income, and less credit.  Really?  The market is going up?  


  62. DIA Mattress:  Might it make sense to roll our July 100 putter to the Aug 97 putter for a 0.05 credit?  It seems we are more likely to be above 97 come august than over 100 in two weeks.


  63. JRW… Your line of 59.39 on the 76% fIb retrace on IWM from yesterdays low to high was perfect.  There are so many lines I never know which one will play out!
    Pulling Fibs from high to low today, I think 3x today already will reflect a reversal at every 50% or 62% retrace…  crazy


  64. yip,
    Working like clockwork for me today,2 TZA’s 2 TNA’s ( in one now) just playing my lines !!


  65. JRW -
    I got TNA at 10:07 and then again at 10:23 -
    it’s funny you ask about 10:23 / 24 because looking back that seems like an awful buy point and bad trade on my part


  66. Nice call Phil on Oil futures


  67. hi phil
    i sold some aug 55 rimm puts for $4
    what should i do with these
    Syd


  68. GOOG/Gucci – You have to weigh the risk/reward.  Can GOOG move 5% overnight?  Sure it can?  That’s $22 to $459 and they’d gain about $6 so, realistically, figure that’s your risk.  If you are committed to the position and intend to roll and stick with it all the way to 2012 $720 calls (now $9:50) then you don’t need to get out and you really shouldn’t play those kinds of positions if you aren’t willing to commit because you are often forced to anyway. 

    Weekend hedge/Morx – TZA is getting very chasey but still a nice, cheap way to play.  You can go for the $9/10 bull call spread at .28 and pay for 2x of those by selling IWM Aug $51 puts for .94.   That pays you $2 if the Russell drops 5% but you don’t have a problem with the $51 puts until the Russell drops 14% (512) and by that time, hopefully, we can roll the IWM’s down and add to our TZA position.  The margin selling 10 is $6,000 but you can hold $12,000 in margin and collect $1,880 and use $1,120 to buy 40 of the spreads and that pays $8,000 if the Russell drops 4% and, if it doesn’t, you can’t possibly have to pay the putter back and you’ll still have $1,120 to play with on an Aug bull call once we safely get through July.

    Lots of letters/BDC – If I were going to short, I’d short PCLN but it’s a really complex sector I’ve been staying away from. 

    Markets/Yip – I agree the rally was absurd but do you not see that the lows were absurd?  You can’t apply reasoning like that only to the place where it fits your premise.  It was a panic.  There was absolutely no fundamental reason that GE was $5.54 or  MCD $43 or GS $46.  If you are going to place your bets thinking that’s the "right" base for the markets you are going to be EXTREMELY disasppointed.   And I am NOT talking about open option positions – they are not a thing you own, they are a gamble.  I’m talking about Buy List plays that have the intend of establishing long-term ownership of stocks.  To believe what you believe and to buy a naked bullish call is madness.  But, like they say "believe what you want," which is what’s wrong with this world – there are certain things that are true in the world and the markets reflect the general public’s opinion that that is not the case and that things (like stock values) are only true if enough people believe them.  I’m not going to complain about it, it’s the most amazing opportunity I’ve ever seen for long-term value investors – but I will try to explain it to you guys if I can.

    DIA/Daveo – If it makes you nervous then of course roll it but two weeks is a long time.  Two weeks ago we were at 10,500. 

    Oh, Happy Death Cross Day by the way!

    RIMM/Sydney – Yeah, they are sucking aren’t they?  They are $6 so down $2, if you can roll them to the July $47.50 puts at $1.55 you’ll be giving back $4.45, which is just .45 more than you collected and you are shoving the rest into pure premium that expires in 2 weeks.  Around expiration, you can roll them along and work on getting the $45 back.


  69. samz
    Dicipline pays off; on the 3 min system you may leave some money on the table, but you get fewer head fakes and less stress. Congrats on the trades!!


  70. JRW – Your take on the 1.3M IWM volume spike just now?


  71.  Phil, 
    I am in the recommended RIMM $50 Puts I sold for $3.80 now upwards of $7… should I roll them down to the 47.5 as per above post or just try to ride out? 


  72. 1.3M again…


  73. my frontier just showed up – and puts got adjusted


  74. goldman
    Didn’t look like a test, or a dump, we’ll just have to see. ( I’m in cash )


  75. JRW – Ok…so I bought 1M and sold 1M for $0.06 in 4 minutes………………………..I wish! =D


  76. TSLA looks like they are going for a round-trip back to their IPO price. 

    AA July $9/10 bull call spread at .67, selling $10 puts for .49 is net .18 on the $1 spread that’s currently .96 in the money (433% up). Worst case is you own AA for net $10.18 and best case is free money (and you can roll the puts as Aug $9 puts are .39.

    RIMM/Amatta – What the Jan $50 puts?  Those are only $2.50 in the money, why pay $4.50 in premium to get out?  If you actually wanted to buy RIMM for net $46.20, then why worry at $47.90?  If you want to try to kill the position, then just take the loss ($3.20) and roll that to the Aug $47.50 puts (now $3). 


  77. Phil: I totally agree with your comment to YIP.  But my concern is: I started buying more in Oct, Nov, Dec of 2008 until I ran out of both cash and the will power to buy more in March of 2009 (of course I didn’t have the protection that you are advising here).  In relation to today (now you recommend investing 30% cash),  how much did you recommend investing in Oct 2008 through March of 2008?  Although you have been sounding bullish for a while, the fact that you still only recommend investing 30% says to me that you expect bigger drop ahead?


  78. Pretty good little skirmish going on here.


  79. Phil/TSLA - and Elon Musk is back in his castle sitting on a huge pile of cash… after having cashed out $40M instead of the original $20M!  We all need friends like that on Wall Street…to bail us out after we spend our last $70 million on a financially failed venture…


  80. Retesting lows.  Looking for a bounce.


  81.  TSLA/Phil: I was hoping they’d have options already for TSLA.  I was so eager to buy those puts!


  82. Business for U.S. home builders has been so slow that Habitat for Humanity emerged as one of the nation’s top 10 builders last year.

    Sallie Mae (SLM) says it will cut thousands of jobs despite making new hires as part of moving its headquarters from Virginia to Delaware; earlier the student lender forecast cutting more than 2,500 of its 8,600 jobs.

    Copper’s not feeling flat about the details of the jobs report, making its biggest move in a week, +1.4%. The metal fell 17% in the second quarter on broad expectations of a slowing economy.

    A new "super skimmer" from Taiwan capable of collecting 500K barrels of contaminated water each day is set to be tested in the Gulf of Mexico to help clean up the BP oil spill. But why is the cleanup so slow? There are obvious actions to speed things up, Paul Rubin writes, but the government oddly resists taking them.

    Sliding energy prices are causing an exodus from Europe’s energy hedge funds, with at least six collapsing in the first half of 2010. "The industry is limping… Risk capital has dropped off radically."

    General Motors is reportedly in talks to set up $5B in revolving credit, which would supply a working-capital cushion as the company aims for an IPO and investment-grade rating. Previously, Morgan Stanley’s John Mack said lending lines were coming up in IPO underwriting discussions.

    See, you guys think I’m kidding but look what Murdoch puts in the Journal this Morning to keep the retail buyers at bay under the title "Main Events That Could Ruin The Market’s Summer":

    Gavekal, a Hong Kong based investment research firm, has complied a list of the main events that could ruin your summer by roiling markets.

    For all the talk about how September and October are the cruelest months, analysts at Gavekal have come to await July and August with dread — “and it is not just because summer in Hong Kong is wet, hot, miserable and empty.” Remembering the bad memories of past summers — the 1997 Asian crisis, the 1998 Russia & LTCM crisis, the 2007 start of the subprime bust and first Fed cut, and the 2008 pre-Lehman sell-off — they point to five areas of risk:

    Spain’s bond roll-overs: Likely the biggest event of the summer will be Spain’s ability to roll over more than 20 billion euros in sovereign debt and at least as much in Caixa debt. If Spain is forced to turn to the newly created European/IMF backstop lending facility to meet its obligations, the euro could collapse and rapidly retrenching risk assets may prove to have just been a dress rehearsal.

    Japan’s monetary policy stance: Will the government’s tighter fiscal policy give the Bank of Japan room to ease monetary policy? If the answer is no, then Japan could once again be heading into a deflationary spiral on the back of an overvalued Yen, tight fiscal policy and tight monetary policy.

    U.S. economic data: In recent weeks, most economic data releases have disappointed, sparking renewed fears of a ‘double dip’ recession. “Undeniably, this adds another layer of uncertainty for the summer,” Gavekal says.

    China’s foreign exchange policy: The markets cheered China’s recent decision to provide more flexibility to its currency. But Gavekal’s take is that the yuan’s revaluation will be very modest.

    Three lunchtime reads:
    1) The little, but real, effects of unemployment
    2) Inflation or deflation – why settle for just one?
    3) Austerity and deflation: A 2.30% long bond yield?


  83.  Exxon  mobil should be renamed Exxon Mobil Widowmaker ha ha


  84. Phil
    Any recommended complex spread on ARNA? Up nicely on the stock & options, looking for some ideas.
    Thanks and happy holidays to you and your family.


  85. CNBC/Vacation Days - Congress vacation= 90days, Americans=25days, Brazil=41days….interesting…now get back to work America!


  86. Phil.
    Point taken we are all speculating.  No GE at 5 bucks seems crazy however it happened then and happened before that and based on the data or lack thereof I see us going there again.  I am not basing my opinions on what I want to happen I am currently 85% in cash and 10% of those investments have an upside bias.  I did make 4% on TZA and TNA today so far and currently I am in cash.
    I see smoke and I see mirrors.  I also know banks, and other companies at large would rather keep their jobs and have their stocks go up obviously so they do and say what they have to not to be fed to the wolves.  When the market at large is back at 5000 on the Dow and GE is again at 5 bucks I will be buying like no ones business.   I do not have a problem with your suggestions or upward bias, I just thought I would share mine.
    Where is MATT?  MATT don’t you have an opinion on this issue?


  87. Something is fishy:  AMZN down 1.85%, AAPL down 1.5%, RIMM down 1.7%, BIDU down 1.7% but the Nas is only down 0.8%.  Seems to me like the leaders are being pressed down while the little fish are getting bought, which is a great way for big boys to scoop things up cheap and, when they are done, they jam up the big boys and rocket their earlier purchases higher.  Not trying to be bullish or nothing – just saying….

    2008/Sean – I’ve gotten much more cautious since then.   We were way too complacent and never expected the market to tank the way it did.  I have been expecting a bigger drop, my target was 880 on the S&P for this sell-off but I have since decided that things are not bad enough to merit the sell-off although I seem to have convinced the rest of the planet they are so now I have to wait for the rest of the world to catch up to my way of thinking again! 

    Friends/Goldman – Gotta have ‘em.  Hmm, that reminds me to add IPO to my "to do" list…

    XOM/Chyer – LOL!  Very bad timing with XTO as nat gas is down about 20% since then and $72 oil doesn’t help either. 


  88. PhiL :Just read your write up on hedging last night. One of your best. Thank you.


  89. ARNA/Deano – Thanks, same to you.  This is NOT an endoresement of ARNA as I really don’t know if they are worth a nickel or not but you can buy the 2012 $2.50/4 bull call spread for .40 and sell the $2.50 puts for $1.30 so that’s net CREDIT of .90 on the $1.40 spread so you clear $2.40 at $4 and your worst case is the stock is put to you at net $1.60.  If Pharm says they are worth $1.60 long-term then I would change this to a black trade as it is very clever!  

    Oil back on the good side of $72!


  90.  Phil, thanks for the POT advice. I think I’ll ride it out for now. TASR Jan 5/7.5 spread, selling Jan 2.5 puts is available for about .03.


  91. Phil,
    After having a look at the economic calendar for next week, I would like to put a nice extra bullish bet based on your TZA design with a july expiry. From your earlier comment QLD could be a candidate to look at?


  92. Phil / Bank of China $9B capital raise.   Is this the canary in the coal mine.  Everyone knows that the Chinese banking sector has been making foolish and excessive loans at Gov’t direction.  I’m sure their bookeeping is even more corrupt than our banks, so they may be able to hide the write downs for a while yet, so little mkt impact?


  93. Bias/Yip – That’s fine, hard to keep straight who’s on what side of things but also I make comments to something you said based on the fact that many are reading so sometimes I may make a point that seems strong to you but I feel it’s important for others to hear. 

    Wow is oil getting dumped!  $71.64 with an hour to close.  This is some crazy selling on low volume which seems to me like its only one or a few people liquidating but you never know how long that can go on or if one triggers the next

    Thanks Dflam!

    TASR/Ajay – Love that one:  TASR Jan $5/7.5 bull call spread at .25, selling Jan 2.5 puts for .20 is .05 on the $2.50 spread and worst case is you own TASR for $2.55.

    Wow – this Norwegian Super-Size Cruise Ship is insane!  On CNBC now…

    QLD/lionel – Good call, how about the $50/53 bull call spread for $1.30, selling the Aug $39 puts for $1.20 is net .10 on the $3 spread and 20% down (10% Nas to 1,850) before you are in trouble.   


  94. JRW Hi
    Question on your trading method.
    say you entered a buy TNA at 13.30 for 34.15  do you follow up with any stop loss as the stk is going up just to protect yourself  or do you just let it run until you see the stoch crossing again at the top of the line for the down turn ?  . thks


  95. Maya1
    July 2nd, 2010 at 10:10 am | Permalink  
    Good morning Phil
    Regarding RIMM AND FCX puts that were SOLD
    Rollin, Rollin, Rollin? OR
    Holdin, Holdin, holding?
    Meanwhile, I am learning, learning, though not yet minting any money
    Please comment


  96. Too much in margin for me, but GOOG Jan 420/460 spread selling Jan 360 put is 3.95. Worst case, puts can be rolled down to 300. Best case 40 return on 3.95 invested. 


  97. Maya1
    July 2nd, 2010 at 10:10 am | Permalink  
    Good morning Phil
    Regarding RIMM AND FCX puts that were SOLD
    Rollin, Rollin, Rollin? OR
    Holdin, Holdin, holding?
    Meanwhile, I am learning, learning, though not yet minting any money
    Please comment


  98. Thanks Phil, great play.
    I got filled pretty quickly on those puts. So if someonelse is inclined to play this bet you can offer 1.25
    (I have paid 1.15 on the call spread)


  99. yodi,
    I never use a stop loss on a day trade !!


  100. Looks like this should be resolved in the next 15 minutes.


  101. China/Tusca – Well you assume corruption and poor lending practices but I think Chinese require more than 20% down on homes and there is no such thing as sub-prime.  The govenment executed the guys who put lead paint on toys so I’m not so sure you can expect bank managers are cooking the books.  Also, their economy is growing at at least 6% and that means every year there is 6% more money and 6% more housing demand and 6% more loan demand etc.   I think if they contract or fall down to 3% debt level then the wheels will come off the wagon but not as long as they keep growing – which is why all the pet congressment want the Yuan depegged – it’s another way to bring about long-term global stagnation for their Wall Street masterrs bye cutting China’s Growth model. 

    Leaning/Maya - The most important lesson is patience.   You don’t want to roll while you still have premium and a chance of winning.  Right now you have both.  

    GOOG/Ajay – France declared them a monopoly and if that spreads to the EU then they can get into one of those MSFT situations.


  102. ARNA/Deano – if they do not get approval, then there is nothing left in the pipe for a very long time…OK, off to the beach. 


  103. Phil got it I understand. 
    Boring market now for almost 3 hours.


  104. Paul Kedrosky applies Apple’s (AAPL) iPhone PR strategy to U.S. credit ratings in a tongue-in-cheek Bernanke letter to investors: "We sometimes display AAA when we should be displaying A2. Users observing a drop of several grades when they grip their debt certificates in a certain way are most likely in a region of the country with an insolvent state…"

    The eurozone bailout fund is being delayed by a change in government in little Slovakia, while some German banks are resisting release of stress test data. German regulators cannot legally disclose the results on individual banks without permission from the institutions, which many say they will not give.

    With austerity all the rage around the world, sharp cutbacks to stimulus are going to hit global growth to the tune of 1.25 percentage points, the Institute of International Finance says; the second quarter will probably be the "high-water mark for growth over the next 18-24 months.”


  105. Phil…It seems this chart above(I like it) details if the pattern repeats we go lower? Am I missing something?


  106. Phil; Congrats and many thanks on your excellent protection article to Amatta. Also it is so nice to see smart people caring about the wellness of many, thanks for your objective defense of Obama, it is so easy to lose track and fall prey to the disinformation campaign of the very few. When we finally grasp that the wellbeing of many is the solution to the world’s problems, many of these will be solved. Regretfully people like Cap with their short sighteness and selfish stance are dominant in times of crisis. Each one for its own is today’s motto. So sad.


  107. Phil
    Thanks for the RIMM and FCX advice
    I meant I am LEARNING and NOT leaning.


  108. Nice chart to me it proves H&S is silly, wrong more than right.


  109. Phil: keeping these AAPL calls july250 was a mistake.
    What  is going on with AAPL sstock ?


  110. Here we go !!


  111. JRW    is the Sig rune significant on a two minute chart or just the one minute chart?


  112. Patterns/Yip – Yep, that’s what EVERYONE is betting.  Patterns must repeat.  What I love about the H&S patten the most is that, when the market goes up (see last big dip) then they draw the lines under the dips and say "See!  There it was!" and when the market goes down, they draw the lines on the other side and say "See!  There it was!

    Thanks Arbo!

    Leaning/Maya – Puts me in the mood for Pizza….

    AAPL/RMM – Antenna issues on new phone trumps all other achievements to date.  Just sell the $260 calls ($2.45) and roll to Aug $270s ($7.15, + $1.70) and buy a few more calls if they head higher, otherwise you can then roll down again and sell higher calls for earnings. 

    3rd time is a charm on oil futures!


  113. Phil…they are only a guide, there should be no SEE!  Anyone who does that doesn’t have real experience……
    I still think we can easily have more rallies from here.  It seems the markets lack of wanting to really break down seems to me we go up into  July expiration…  Who knows….


  114. Phil- I don’t understand how the VIX can be down while all the other indexes are down as well.  Is there any significance to that or does it have more to do with the larger components being sold off like you mentioned earlier?  It just seems to me that by the time the "doom and gloom" stuff gets to CNBC and the like that most of it was already priced in.  So why don’t the talking heads at CNBC prognosticate a bounce and try to look good?  I don’t want to take up your time, I’m just trying to understand the market a little better.


  115. wilsons
    A Sig, with all of the other indicators is always sigificant !! Right now, the Bots are spooling, taking longer than usual.
    I would have thought a flush first (but not below 59.30) or a failed Stick, but we will see Yip is right, this has been boring since 12.13 !!


  116. yipcarl
    I sure hope your right, I sold my hedges because most spreads will pay in Jan if not before. July 17 could be great or not good at all. Stick up today?


  117. Phil -  after your definition of short term shorts this morning, help me with this please:
    FAZ Oct 9 call in at ^6.95, Oct 12 call sold for $3.10. The 12 was rolled up from an in the money $11. (can’t hold a neked call) (i’m from the south) Do i roll up & out (Jan ) to capture some of the profit?
    Thanks


  118. All should remember the dreaded Head & Shoulders pattern that ended 7/10/09 with the RALLY I TOTALLY MISSED !!


  119. Today’s TA Chart:


  120. Phil,
    Thanks for coming up with some nice oil plays on a day like today. Equity indices can be hard to play sometimes..
    Whereas with Oil it is way simpler. 
    Below $70 Iran gets upset and starts talking about war. Above $80, America gets upset and starts talking about war! So we just have to play in between :)


  121. Pharmboy
    July 2nd, 2010 at 1:59 pm | Permalink  
    ARNA/Deano – if they do not get approval, then there is nothing left in the pipe for a very long time…OK, off to the beach. 
    Hi Pharmboy  my question is do they last an other 14 days as I hope my stock will get called away at 4.00 and I am out of this one. thks


  122. Dang Phil, nice object lesson on the H&S


  123.  Phil nice MS Paint work on the TA chart


  124. Phil, do you think now would be the right time to cash part of the TZA / DXD  hedges….


  125. well here is something to stimulate a move:  Big boys left for the weekend and market will just flatline into close.


  126. Phil / Short term, medium term.   What I’m learning from you is patience.  I have a macro view (Ddip), but mkts are an emotional roller coaster, so short term factors (and media manipulation of these) are the key trading drivers.  So, as you (and I) expect a continuation of good earnings reports in July, I think a stick up is very possible in July, especially with the seeming temp stabilization of Euro sov’n debt issue (manufacturing stats would seem to underpin expectations of a decent 2nd quarter?).  By 4th qtr, the growing real unemployment and foreclosure tsunami may allow you to time us into making some big money on the short side?  When earnings do, eventually, slide and if sovereign debt crisis reemerge, then 2008 may look like a picnic with few gov options remaining, I assume that’s why you are 75% cash?  At the moment I’m 80% cash and 20% net long hoping for a decent July, before maybe going back to cash when you feel it’s appropriate. 


  127. Phil
    A 97 year old woman from NJ was asked what her secret was. Answer 3 beers and a shot of scotch every day for 70 years, won’t ever stop. I drink scotch or beer, maybe if we all do the combo we will all end up billionairs in our 90s!


  128. Shadow…
    Obvie as you know…no one knows anything.  I can only speculate.  The crux of my belief is simple simple simple.  I wish I could post a graph here.  You cannot increase home borrowing from an average of 50-200 billion per year from 1980-1995..then in the next 10 years average about 600 billion per year in home loans and expect the increased value of homes to hold up once credit is cut off.  That is foolish.  You cannot expect banks to dump all of their loan delinquencies into the market when the banks have been given absurd new accounting measures (another sort of bailout) that allow them to hide or postpone these losses by attempting to wait out the foreclosures on their books.   I personally know 5 people from 9 months to 25 months who haven’t made a single payment still in there homes, who wants to address that?  Banks dumping their delinquencies on the market would prove their insolvency and force closure or more bailouts.  You cannot expect Americans, who live on credit cards, whose manufacturing base has virtually disappeared, to keep shopping, traveling, and buying when they don’t have the equity in their homes or credit they previously had.  You cannot tell me with an unemployment where it is without any real signs of improvement that we are in a recovery.  You cannot tell me with Europe in dire straights and the rest of the worlds problems  we are about to have a few good years.  You cannot allow financial institutions to use Derivatives to the extent they have without any meaningful way to regulate them and now allow them to hide these losses and tell me everything is flushed out.  You cannot tell me of the 5 largest investment banks in the world are now deemed banks and more or less 3 of them gone, and turn around and tell me it’s all good.  You cannot tell me that trillions of dollars(Bailouts)in future tax dollars or printed money given to companies, we don’t even know who because the Feds won’t tell us, is a good plan and creates recovery. Hey i very well may be nuts myself but to me it’s crystal clear and proof reading what I wrote here has me laughing at how obvious it is to me.  We are not in a recovery and we will retest the lows, and this rally since March of 09 is nothing more than a dead cat bounce. 
     
    Watch me be dead wrong, fine, but this is my logic.


  129. Please , please O Lloyd please bless us with your Holy and merciful stick.


  130. FINALLY !!


  131. Verily we sing Hosanna!


  132. Phil, That’s a great chart at the 2:43pm post. The 3 down slopes from June 15-July 13 represents when I went way short, thinking "there’s no way this baby does NOT roll over," and dozens of "experts" and TA people were on CNBC telling me to do just that.. The constant green up slope from July – September represents the tens of thousand of dollars I lost being short and fighting the trend.  A cautionary tale for everyone who is thinking the world’s gonna end next Tuesday.  


  133. Lloyd will give us the stick…question is "where"….


  134.  It would really flummox everyone to get a full reversal.  But we are pretty far behind the DAX in performance this past week.  Or at least it seems to me.  Show thy power oh stick!


  135. Barton Biggs on Bloomberg (less optimistic than he was a month ago):  he is worried that the US, Europe Japan are making a policy error (tightening); he was shocked that the senate voted down the extension of unemployment benefts.  If they tighten like Roosevelt did in 1933, they will tank the stock markets. He said that Obama was the only world leader that argued for more stimulus. 
    He worries about double dip and earnings disappointment (he said market could goes down 10-15% more); he reduced net long position by 30-40% accordingly.  Still likes Asia and other EM.  


  136. Gmart: I only made a few bucks today,but man,u sure gave me a good laugh. Sometimes it helps to pray. We need Phil to go out to lunch. The market always goes up a couple of hundred points when he does.



  137. My birthday is the 4th. The best thing about it is that I have never had to work on my birthday. Also, when I was a child, I thought the fireworks were for me.


  138. yip,
    Read my 8:12 post from Wednesday, all the back up you need. However, I have found that it is better to be rich than right !!


  139. i have HOV at 6.15 and received 4.90 on 2012 call and puts. Is this worth a second helping?


  140. yipcarl
    Not only do I agree with you on every point Phil has said the same. I posted that after I unwind ALL my longs and that naked put that locked all my cash at etrade, I am going to Do the JRW thing and stay cash every night. I just hope the next 2 weeks has a dead cat bounce and the market does a normal PATTERN of up correct up and down correct and down further. I actually believe we have seen our high this year. I am Just plain over the blame the Dems for bush shit. Just say no has extended the problems you exposed. Thanks that was a good one!


  141. From Pulp Fiction
    St. Jules admoition to the evildoers
    "The path of the righteous man is beset on all sides by the iniquities of the selfish and the tyranny of evil men. Blessed is he who, in the name of charity and good will, shepherds the weak through the valley of the darkness, for he is truly his brother’s keeper and the finder of lost children. And I will strike down upon thee with great vengeance and furious anger those who attempt to poison and destroy my brothers. And you will know my name is The Lord when I lay my vengeance upon thee."
    The enemies of righteousness are thence smote . If only real life were so simple


  142. VIX/Jtiff – That’s actually a worrying sign as it’s possible that Down is the new Up but that would have to be confirmed by seeing the VIX go up when the markets go up.   If that’s not the case, then it’s likely that investors are so loaded up on puts that there’s no room to buy any more and they are not in the least surprised by a 75-point drop but expecting it and more as there is no covering activity.  Total complacency and very possibly deadly for them..  CNBC/GE first of all is protecting Cramer, who predicted a major market correction and looks like quite a moron (well more so than usual) as well as the Fast Money crew, who followed him and pointed to a cliff.  To some extent they are over-correcting for the criticism they got in the last two crashes, where they were the sunshine and lollipop crew – fiddling while Rome burned but now they are defending GE’s interest by trying to make sure that they get the message out that the markets don’t like financial reform or tax reform or raising rates – all things GE does not like and, especially, that no one likes Obama or his policies as Immelt now has Obama in his sights because he couldn’t get him in his pocket – even after all the sucking up he did earlier this year.   Nothing pisses off powerful men more than politicians who won’t play ball…

    FAZ/Morx – There’s nothing to do there but wait for expiration really.  I’m not at all clear on your goal on the spread because you are in a $3 spread for net $3.85 – you can’t win.  I guess you can roll out to the Jan $11/18 spread at $3 so at least you have $2 more upside but not being able to get out of that trade and leave the caller is bad.  Maybe you can cover with the Oct $28s ($2.10) so you can get $7.50 off the table at least (but then you have lots of margin. 

    LOL JRW – Great timing!

    Oil/Lionel – That sums it up quite nicely.

    TZA/DXD/Magret – I think keeping them over the weekend is prudent.  If you don’t think you need that much protection, then take some off the table but the 3-day weekend is a wild-card for sure. 

    Caution/Tusca – Sure, had we not gotten into cash at the top with big gains I would be a lot more cautious but we’re pretty much playing with "house money" anyway and it’s only July so worth, as I have said many times, SCALING into positions that we don’t mind being 50% invested in if the market drops 30% or more.  I think, even if we do drop, that 8,650 on the Dow is the lowest we should go so I don’t mind investing at 9,700 with a 20% discount.  If earnings are good, we should be back to 11,200 but, failing that, I’ll be bearish right along with you again!

    California courts side with Arnold!!! 

    Scotch and Beer/Shadow – Have a few for me.

    Amen Gmarts!


  143. Mr. Stick bringing the fireworks to the BBQ.   God Bless America.


  144. Well Guys all of you have a nice holiday have to run will leave a green DOW behind me bye See you Tuesday


  145. JRW….Glad we see the same, I will check out your post after close.
     
    Shadow…We’ll I guess I won’t be wrong alone then!  :)
     
    As far as the Dems or Repubs I don’t even get into that discussion. Carroll Quigley says it best…..
     
    “The two parties should be almost identical, so that the American people can ‘throw the rascals out’ at any election without leading to any profound or extensive shifts in policy"
    Dems and Repubs are all part of the same BS.


  146. thanks re FAZ, when i rolled up the caller i collected $2.39. Does that influence your answer?


  147. Phil: on your 2:29 comment you show "roll to aug270(7.15, +1.70) "
    what is the +1.70????


  148. Well, a very good day.  Two 4% TZA trades (not full possitions) and two 3% TNA trades had me up nearly 10% on the day and now Lloyd has come through !!
     
    BTW, samz, since you’re playing the 3 minute system, you should have been in TNA at 2:57 !!


  149. no rush on that FAZ answer. I m sure u r busy


  150. Phil, I had initially shorted 2x Jun $150 Calls on DECK @ $5.3 in premium.. then the stock shot up like crazy all the way to $167 on June’s expiration day, and I rolled up and out to 2x Sep $165 Calls combined with a 1x naked sold Jul $130 Put for $0.55 in premium. The cost of the transaction was negligible (I got a bit of credit, perhaps 0.05). Now that DECK is calming down, what do you think of me selling another Jul $130 put so that I can own 200 shares @ $130 so I can cover? If you think the markets will go up and squeeze the shorts big time, I should cover.. in fact, I’m thinking of even selling 1x Jul $140 Put to bring my avg price to $135 so that I can really OWN them.. they are still a bit expensive but I’m willing to own them at that price.


  151. gmarts
    The only problem with the god sellers is they don’t realize it is not for sale especially if you take the money, that is simple stealing. The right will find out what hell is all about. Of course they aren’t listening to me and bobody will hear them yell "I WAS WRONG!"


  152. Maria the "Money Honey" Bartiromo is shocked at seeing buyers into the close. I KNOW it’s not because she’s never seen The Stick before.


  153.  Happy Fourth all!!  


  154. Phil—would you hold the FAS 21.33 calls over the weekend?


  155. Everyone enjoy the 4th of July.
    It has been a "fun" week, and I really learned a lot about applying cover and the value of hedges, great lessons.
    Thanks Phil.


  156. JRW – If you get a chance, check for two emails…thxs!


  157. Phil: do you see 59 as support for IWM?


  158. JRW
    That 2:57 signal could be seen by a blind man, I not only lve you system, I have found other  confirmations and can’t thank you enough for showing the way. Cash at the end of the day is the ultimate hedge!


  159. 13% for the day,
     
    HAPPY 4th ALL !!!!!!


  160. TSLA back to $18.75 for those who think they missed something on the IPO….

    Cautionary/Kururi – Yep, those pattern people crack me up.  It’s always soooooo obvious until the pattern breaks and then they just go right back on TV the next week with a new chart and a new pattern to watch.  The patten I see is what you saw last year, babies being thrown out with the bathwater and 24/7 Doom and Gloom on CNBC.  Think about what we’re being hit with:  No Jobs, Deficits, Debt, BP, Japan, Europe, China slowing, Mortgage Defaults (year 3 of that), No Home Building (which used to be good that we "burn off inventory"), Mad Trade Bots, IBank Investigations…..  And we’re still at 1,026 on the S&P???  Someone is an optimist besides me…

    Lunch/Dfalm – Good idea, wish you had thought of it earlier….

    Fireworks/Jbur – If you have to have a birthday on a holiday, that’s a good one. 

    HOV/Drum – $4.90?  Is that selling the $2.50s for $1.90 and selling the $5 puts for $2.45?  I like that idea as that takes you down from $6.15 to $1.80/3.40.  As a new trade I like HOV at $3.61, selling the 2012 $2.50 puts and calls for $2.65 for net .96/1.73.

    Have fun Yodi!

    AAPL/RMM – $1.70 was the net cost of the roll.

    Good switching JRW!

    DECK/Rav- Absolutely I think they go back up if the market bounces.  Be careful with them though as a poor earnings report can send them flying down and consumer stocks are a bit iffy.

    Shocked/Gmarts – She’s shocked because it’s not on here script.  THAT never happens!

    Have a great weekend Occam – and everyone else while we’re at it! 

    FAS/Fortep – Yes, I think we go up next week as long as no tragedies on the weekend. 


  161. Yeah, Happy 4th everyone…be safe out there this weekend!
    P.S.  JRW/13%…WoW, NICE!


  162. Sold VLO Aug $17 puts for $1.20.


  163. Little bit of insider buying, over half a million, in SMRT reported today.  Click here for more info. http://www.philstockworld.com/2010/07/02/insiders-buying-smrt/


  164. Typing vision can’t see it till it’s posted sorry. I said I would check CRUS and AAPL problems will have no effect. My NY friend that also sold gust under $14 in April agree that they have to blow out earnings to get past recent high and above $14 is risky. Will keep ear out and update if any changes.


  165. Happy 4th all!  C U next week


  166. Whoop. Is that Lloyd pissing off the PPT?


  167. IWM/Sean – Damn I hope so!   Still plenty of sellers into the rally.

    VLO/Jordan – Good idea, selling Aug $17 puts for $1.20.


  168. The Lloyd giveth, and The Lloyd taketh away


  169. That was a very harsh put-down into the close.  

    At the close: Dow -0.48% to 9686. S&P -0.48% to 1022. Nasdaq -0.46% to 2092.
    Treasurys: 30-year -0.66%. 10-yr -0.25%. 5-yr -0.01%.
    Commodities: Crude -1.03% to $72.20. Gold +0.45% to $1212.10.
    Currencies: Euro +0.16% vs. dollar. Yen -0.38%. Pound +0.16%.

    Chris Kimble looks at head-and-shoulders formations, and why the "neckline" may be predicting a tanking stock market. But head-and-shoulders analysis – indeed all technical analysis – falls victim to all sorts of subjective biases.

    On the other hand:  First it was 5%, then 7%, 10% – no big deal. But now the market has dropped 16%, and the fear is that a normal selloff is now a warning of serious problems ahead. "We’re on the edge of something that’s tolerable," says one adviser. "Any more and you’re really running into a worry that it could be more than just a traditional-level pullback."

    The percentage of stocks in the S&P 500 now trading above their 50-day moving averages is down to 4%. This reading hit only 5% during the March 2009 lows, a stark reminder of the extreme nature of the current decline.

    Something’s gotta give next week….

    Have a great weekend everybody!

    - Phil


  170. SeanC / IWM
    58.68 !!


  171. JRW…. 58.68?  it’s 59.68


  172. Phil-
    Thanks for the clarification on the VIX and CNBC.  The notion that CNBC/GE might be gaming the system is really quite similar to the recent story about the NY Times not classifying waterboarding as torture as soon as the Bush Administration began to use it.  CNBC sure blew it last time so they need to build their credibility but there must be some disloyal subject in the process that could call them out on it.   I wonder why there aren’t more whistle blowers in these situations and not just after the fact?  I guess it must be wishful thinking that all the on-air talent and producers sit around a conference table and say, "Today we make the markets go down."   Have a nice 4th.


  173. Sanofi-Aventis is plotting a big acquisition in the U.S., sources tell Bloomberg, but there’s no word yet on the identity of the supposed target. What they do say is that the deal may be worth $20 billion or more--a price that would top what Sanofi’s spent on all its acquisitions since Christopher Viehbacher took over as CEO in 2008.
    Viehbacher reportedly briefed Sanofi’s board on the potential deal at a special meeting this week. The company wouldn’t comment on the "market rumors" for either Bloomberg, Reuters or the Wall Street Journal. Analysts named Allergan (market value of $17 billion) and Biogen Idec ($12.5 billion) as possible targets.
    Now, we all know Sanofi is in the market for acquisitions. "They’ve been very clear external growth is part of their plan," Pictet Asset Management’s Marc Booty told the news service. But the French drugmaker typically goes for bite-sized deals. Sanofi has snapped up 25 companies during Viehbacher’s tenure, Bloomberg notes, which puts the average deal size at $680 million. And the biggest of those deals was the $4 billion acquisition of Merck’s half of their animal health joint venture, Merial.
    So, a $20 billion deal would be an anomaly--not an impossibility, but definitely a departure from Viehbacher’s modus operandi. Indeed, Viehbacher himself told Bloomberg in February that he’d like to stick to deals of $15 billion or less.
    Sanofi’s stock was down on the news; analysts pegged the dip to worries about the potential buyout’s price tag. But given the fact that it’s still in the early stages, this big buy might not materialize.


  174. Yip,
    Thanks, but it’s 58.68; see my 9:37 post !!


  175. OH!  Yea I see now… My bad!  It threw me off because my screen told me it closed at 59.68, so the coincidence threw me off!
    Did I mention I read you’re post and I would yes we agree I think 99.9%.  Gold is the biggest joke to me of all but since it’s so grossly manipulated God knows when they will allow it to come down.


  176. CNBC/Jtiff – I take it you’ve never worked for a giant, evil corporation.  They all sign confidentiality forms and the company makes sure they whack enough people with a legal stick once in a while to remind all employees that their lives will become a living hell if the breach it.  Otherwise there would be nothing but back-stage tell-alls about every celebrity who ever had an intern or a copy editor or whatever….  To be fair though, here’s a video of how great it is to work at NBC (just ask Conan, who is still in the video). 

    The ugly and uglier assessments of the Congressional Budget Office should serve as a wake-up call for Obama, Nile Gardiner says, to stop his "reckless" spending that threatens to bring on America’s decline. "It is not too late to reverse course, but so far there is not a shred of evidence that the president is willing to do what is necessary."

    Barton Biggs says he’s worried the U.S. may enter another recession and has "aggressively" reduced the risk of his investments. "I’m worried that we could have not just a soft patch but a double-dip which lasts two or three quarters [which would] have a big effect on profits… I’m afraid the market goes down another 10%-15% if that happens."

    Not the best statistic:

    Stocks wallowed in losses most of the day after the latest reports on jobs and factory orders indicated a weakening economy. Most commodities, especially in energy, fell again despite continued weakness in the dollar. NYSE declining issues led advancers nearly two to one. 

    Good jobs overview by MishGood summary of Factory Orders too.

    Gov. Arnold Schwarzenegger on Thursday ordered about 200,000 state workers to be paid the federal minimum wage this month because the state Legislature has not passed a budget, but the state controller is refusing to comply



  177.  JRW – Have you considered trading the e-mini russell futures (TFU10) instead of TNA/TZA? It would seem on the surface that this would be MUCH simpler than moving such enormous blocks of stock back and forth across the exchanges. The e-mini russell is $100/point per contract. If you’re goal is to make 2% of 750K/day, that’s about $15K profit, or 150 points. Figuring about 3 trades per day, that’s 50 points per trade. With a typical move being around 10 points (I haven’t researched this much), that’s 5 contracts, requiring only $25K margin (on OXP). Seems like a pretty good deal. I’m going to start mucking around with this next week instead of trading options on IWM, which is what I had been doing (semi-successfully). 


  178. No big corporations for me.  Although the video does make a compelling case to join in.  Perhaps I should abandon my career as a teacher and join the dark side.    But then my summers would be filled toiling away on some death star blowing up cultures and fighting off leftist rebels.  No thanks.  And why do they still have Tiki Barber in the video?  "Come work for us and meet a naive college intern, abandon your family, get divorced and declare bankruptcy!"  I hold out hope that someday, someone will release some damning evidence proving the collusion.  But I also hold out hope that someone will do the same thing with UFOs so I guess I’ll just shake my fist in anger and have a beer or two in the mean time.  Have a good weekend.


  179. One might consider the correlation between a political environment threatening to business and business reluctance to hire. One might consider the correlation between extended unemployment benefits and high unemployment.


  180. drcraig,
    My goal is minimum of 2% / day average / week. ( have been doing much better lately), on 20%-25% of the portfolio which, thankfully has been growing of late, ( 9 months ago, it was 1/3 of the portfolio).  So 10% on $1,200,000 / week.  I have not tried your futures; will find your experience enlightening. In the past, I have found options inappropriate for day-trading.  Good luck.


  181. Phil--reviewing posts from today--totally agree with you on what you said about "something fishy going on in the markets."   I had had that thought also--I know you don’t agree with those spikes, but watching them gives me a little bit of clue of what is going to happen--remember I thought XOM would go back to $60 (when it was on 62 or so)  just didn’t know it would go up to 64 first and didn’t know how far down it would go--just knew down at least to 60. If I just would’ve waited till AA went back down to 10.80 (like the spike showed would happen) before entering anything… AAPL still has not reached $199 on the 5/6 spike down, but other stocks have--so mask the increase in most stocks by driving down the indexes with AAPL, once everyone is out of them. So FWIW I have come to the same conclusion as yours due to my belief in these spikes meaning something to the computers that run the trades.


  182. Hey all
    I f you think all is well THE ARNOLD cut all state wages in California from an average of $20 per hour to $7.25 per hour, that will fix our consumer based economy and forclosure problems!


  183.  Here’s an interesting article pointing out that many of  the jobs lost since 2007 may have been lost permanently.  They aren’t coming back.  For people to go back to work new jobs will have to be created.  Not only that but those who have lost their jobs will have to obtain new skills.  That’s not going to happen very quickly.  Certainly, it will take years, perhaps a decade or longer, and we will probably never get back to the previous unemployment level of  4.4%.  finance.yahoo.com/news/79-million-jobs-lost-many-cnnm-1248019835.html


  184. iflantheman
    Very good but really 20 or so years will do it!


  185. Hey all,
    I’m trying to unravel a mystery about some VZ option positions I sold a while back, in light of its distribution of FTR shares this morning (24 FTR shares were distributed per 100 VZ shares).
    The options that I sold previously were Jan’11 29 calls and Jan’11 30 puts, and were standard 100-share option contracts.
    What I have now are Jan’11 29 calls and Jan’11 30 puts (so the strikes haven’t changed), but (according to TOS) each is a non-standard contract comprising the following: 100 shares of VZ, 24 shares of FTR, and $100 cash.
    The fact that 24 shares of FTR are included in the contracts is no surprise at all, given the distribution of shares to existing VZ shareholders.  But I’m trying to get my mind around why the $100 cash is included in the contract now.  Does this have to do with the fact that VZ shares came down this morning in the way they might if a dividend had been paid?  If so, why $100 when the value of the FTR shares was approximately $180 (based on this morning’s FTR price of $7.50)?
    Hoping someone can help me figure out the logic here, so I understand it better in the future.
    Thanks.


  186. JRW III can you tell me the TA study your using to set up and manage your trades?  I’m new here but have been in the markets for a while.  Any help is appreciated and I’m looking forward to contribution when I can.  Thank you and it looks like your on to something.


  187.  boobearsdad--Here’s some info for you:
     
    http://bit.ly/bVdqkB
    http://bit.ly/cFZc1b


  188. Just watched Gordon Gecko’s "greed is good" speech.  It really stands out more than ever especially in climate of the world as we know it today.  If there was ever a time where we can recognize how the greedy and richest 1% completely screw over the rest of the world, it’s now.  I’m not a religious person (in fact, I’m an atheist), but there is a reason that greed is one of the seven deadly sins! 
    I wonder when the next bloody revolution will be.


  189. Good morning!

    Death Star/Jtiff – LOL!  You have no idea how accurate that is…  I have to tell you that one of the experiences people don’t realize they may miss out on in life is working for a giant corporation.  Coming in from outside the box it’s downright surreal.  I was fortunate as a consultant to be able to "vacaction" at many types of companies at many levels and I love it but, if I actually had to work for one – chances are I’d show up one day with a duffle bag full guns and clean house…  Running my own companies, I have found that they stop being fun as soon as you get big enough to need an HR department but that’s because I’m more of an entrepreneur/builder than a manager – once a company goes on auto-pilot, the day to day redundancy quickly drives me crazy.  That’s why I love the markets – something new every day and I get to poke my nose into whatever businesses I like, whenever I like!

    Environment/Barf – It’s lack of small business hiring that’s killing the jobs market and that’s all about a lack of cash and that’s all about a lack of stimulus and dumb-ass things like cutting off unemployment, which takes $500M a week out of the economy (growing at $100M more per month) and drives 1.3M people closer to default and bankruptcy (growing by 200,000 people a month) and sets off a wave of misery and DEPRESSION that will drive down Retail Numbers and Consumer Confidence Numbers and creates an attitude in small businesspeople (who actually deal with the bottom 80%, unlike CEOs who have never met them) that precludes them from hiring.  It’s really not hard to figure out for people who don’t have their heads up their asses in some conservative fantasy-land…

    U.S. consumer bankruptcy filings rose to 770,117 in the first six months of 2010, a 14% rise from the year-ago period, the American Bankruptcy Institute reports. “Years of rising consumer debt and low savings rates” are pushing totals near the record set in 2005, according to the ABI.

    Spikes/Fizz – When they spike stocks or indexes, they are generally "fishing" for stops.  This is why it’s crazy to set hard stops other than day trades (and even then, this happens) because no matter how "safe" you think your stop is – you may find yourself getting filled on a spike that only lasted a few minutes.  On the other hand, buy orders can be very useful for the same reason because you can get some fantastic fills if you are a patient fisherman. 

    Arnold/Shadow – Yeah that will fix the California economy, cut the take home pay of 200,000 people by 2/3.  I’m sure they’re all going to be fine and they’ll still be good consumers and keep buying the same $160M a week worth of stuff, now that they’re only being paid $58M…  Another dopey thing about this idea, aside from the fact that you are destroying 200,000 people’s lives, is that now the government (State and Fed) is not collecting $40M worth of taxes on the lost wages. 

    That’s another thing that amazes me about the people who think that belt tightening is the answer.  How many businesses recover by scaling down?  Cutting waste and cutting inefficiency makes sense in a business mainly because the jobs they eliminate and the vendors they stop paying are not their customers.  That is not the case with the government.  Cutting a Federal $50,000 government job cuts $17,5000 in tax collection as well so the government only saves 65% of what they cut.  But, then there are repercussions on the state and local level as that consumer disappears and that then affects the GDP which lowers the income of all the businesses that person comes in contact with.  When you take into account that $1 spent by a consumer usually moves 3.2 times through the economy, the country loses far more than is saved with each job that is cut. 

    That’s why outsourcing is so dangerous to an economy.  Not only are you disemploying local workers and damaging the local economy but the buisness is spending our nations’s capital anyway and taking it out of circulation here in order to grow another country’s economy.  Even worse, they outsource manufacturing and then effectively sell us back the goods we used to produce at home so even more money (that we worked very hard to create) flows out of this country and now we have a trade imbalance and a relatively weak GDP so our borrowing costs go up and the value of our currency goes down and the country we outsource too becomes economically dominant and then, what are we?  We’re a colony! 

    The lack of fundamental economic understanding displayed by our leaders is downright scary.  What does America have as an asset?  Labor.  We are pretty much out of materials, we import all of those so all we have to offer is knowledge and labor but, oops – we sent our knowledge overseas and taught them how to make factories to make Barbie dolls and IPods because (logically for MAT and AAPL), their labor is cheaper than ours.  Well, that’s just great but that leaves America with just labor left to sell and the brilliant plan of the right is to make our labor cheaper to "compete". 

    This is both lazy and stupid.  Lazy because what a problem solver does is to come up with ways to utilize our labor to create things of value.  Stupid because, unless you have something else to sell, devaluing the labor of our 300M people is the same logic as OPEC attempting to drive down the price of oil in order to be competitive or ABX trying to figure out how to bust commodity traders so they can sell their gold for $300 an ounce again. 

    America has one product left to sell the world and that’s the US workforce.  We can come up with ways to make it valuable and use it to create wealth or we can destroy it for the short-term benefit of the people who consider them a business cost but those people, I guarantee you, are not Americans – they are Vulture Capitalists and they will simply pick the flesh off the bones of this country until there is nothing left to feed off then they will fly off and subjugate the next ripe market.  This won’t happen tomorrow and that’s really the problem, we have so many childish people in this country who think anything that takes more than 5 years to play out is too far in the future to worry about that we’re willing to sell our coutnry down the river for short-term profits.  Until we learn to change our mindsets – this country will continue to wither and die - which is just what the Vultures want….


  190. Jobs/Iflan – Absolutely those jobs aren’t coming back.  We are not just idling factories, we are shutting them down.  WMT is so efficient that a single Wal-Mart occupying 100,000 sq feet of rental space with 300 employees making minimum wage can replace 100 local stores that occupied 500,000 sq feet of rental space with 1,000 employess that, including the owners, made about triple that much money.  Even better, WMT consolidates all the accounting and legal functions in Arkansas (where they were originally able to thrive by tapping a cheap labor market) so the 1,000 buisnesses don’t pay hundreds of local professionals for those services.  And, of course, WMT doesn’t buy from local suppliers so there’s another huge chunk of revenues lost.  That’s what’s happening to this entire country but, like a frog in boiling water, most people don’t see it until they are dead.

    Cash/Boobear – I assume there was a cash component to the deal ($1 per share) that was paid either as a special dividend or as part of the overall deal (it’s very common that stockolders receive cash in lieu of fractional shares and the VZ holders got one share of FTR for each 4.166 shares of stock so that $1 per share may be the remainder of 24).  Contact your broker because they will have someone who has all the details (it’s their job).  I hate holding those things, they are so confusing because you are never quite sure what happens when they expire. 

    VZ/Jdub – LOL, that would have saved me some time if I saw it first! 

    Greed/Dbar – I was just talking about Greed along those lines yesterday I think…

    Failure Friday takes the holiday weekend off, with no reports of closed FDIC-insured institutions – and even the problem bank list is mostly unchanged at 798.

    Is the sky falling, or is the sun shining? Paul Krugman says we face nothing less than a "third depression," while John Paulson thinks the risk of a double-dip is "less than 10%" and "we’re about to turn a corner."


  191. Phil, Eric Jansen at ITulip seems to think the next gubermint induced recession is after the 2012 elections when conservatives win and withdraw the ’free’ money, letting the chips lie where they fall (like some think we should have done in ’08 after Lehman)?  I know this is a trading site but do you subscribe the this theory?  Does the macro influence the micro for your trading?
    I  personally think Grantham makes a lot of sense, lean years for the foreseeable future while we reboot the economy, money system and political alliances globally.


  192. It appears unproductive to discuss what I believe might be a major factor in our employment situation, since it apparently depends on what I think people do under certain pressures, which must strike liberals as "just plain stupid, when the answer lies in government doing this thing or that thing".
     
    I ran a business for 30 years, during which time I experienced massive changes in the economy, tax policy, and government regulation – several times each. Government regulation always increased when it changed, so you have to view that as a long-term hindrance to business with more or less constant effect. When my business slowed, and sales seemed stuck while costs steadily rose, I first chose to make less, then chose to give up what I could, and only then did I consider letting an employee go. In fact, I hated firing people who did nothing wrong (beyond choosing to work for me) so much that I became extremely reluctant to hire when things improved. Productivity improves when you do this. Is this what is happening today?
    I can honestly say that I never reacted when the government changed tax policy or employment costs, but it did change my outlook for the future. Eventually, when faced with the need to hire a significant number of new people in order to stay in business, I chose to quit for a number of reasons, but I knew those new employees would bring far less per person to the bottom line, and the expansion they would have made possible could not have survived a severe economic shock – like what we have today. Phil, you would have been proud of me. I took the money and ran.
     
    So is it fair to say that a prudent and responsible businessman is influenced by government policy? I say, in the longer term, for sure. Business makes decisions looking forward 3 to 5 years, not just next week. Things might change, but I can’t imagine a small business owner looking eagerly to hire given the governmental climate.


  193. It might be true that WMT has the impact you describe. What can be done about it is less clear. It may be true, as you have said before, that $100M is a ridiculous amount to earn in a year – that doing so is just "greed".
     
    But what can you do about it? The trouble is, people and business react to changes in tax and regulatory policy. For the arbitrary wand of government to wave away WMT and ridiculous salaries would require those entities to stay put, and not respond. Repeal the Bush tax cuts and presto, look at the money you then collect? So nobody changes a thing? total economic activity remains the same?
     
    Such misconceptions breed horrible unintended consequences.
     
    The problem is complicated. Any improvement must be carefully designed to provide the right incentives.


  194. And finally, a word about politics. I can count on Democrats to take a lot of my money and screw things up, while Republicans can screw things up without my money.
     
    If I vote for a Republican, there’s the reason.


  195. jdub and Phil,
    Thanks for the responses.  I had seen the two memos from OCC already, but the fractional shares didn’t seem to explain the $1/share in the option contract, as 1 FTR per 4.166 VZ shares implies 24.0038 FTR shares per 100 VZ shares.  0.0038 FTR shares is about three cents.  So $3 per option contract would make sense.  $100 doesn’t add up; it must come from something else.
    I’ll contact TOS next week and see what they can tell me.


  196. Great charts Phil as always


  197. There is endless talk in the MSMa and liberal "think tanks" about the subject of ‘greed". This term has been used to conjure up emotion in the minds of the masses, to ostensibly place the blame of the recession on those that have made a sucess of their capital formation endeavors. The liberal left seems to believe that financial sucess is a synonym for "greed".  Is it "greedy" to make a financial sucess of your life, through the honest pursuit of profits and growth in your entrepreneurial efforts?  I do not think so. The leader of our country continually screams the word "greed" in his effort to create the largest divide  we have ever seen in our country. This endless political talk does nothing more than create a new level of class warfare, and does nothing to create jobs, new businesses or a betterment of our economy.  "Greed" in its correct definition is reprehensible behavior,  but lately the term has been used to describe even minimal desire to suceed in our normal day to day lives, to provide for ourselves. Even a guy today driving a nice car, or living in a nice house is now classified as "greedy".. What is wrong with this, if you earned your financial resources in an honest, hardworking endeavor? Our country’s values have changed – we now reward failure in the form of free benefits, and bastardize those that have pursued sucess, in the form of excessive taxation. ( end of weekend political editorial )


  198. Macros/Loopy – Of course it influences our decisions, that’s why we end up talking politcs here and what Barfinger says in the comment below yours is a great example of how those macros end up affecting day to day business decisions.  Belive me, the financial sector didn’t spend $1.7Bn on lobbying because politics don’t matter – they are playing a big boys game – first they make their bets and then they get the laws changed to guarantee their bets pay off.  By the way, it doesn’t matter what "Conservatives" want – the average conservative is a wanna-be rich boy (there are only 10,000 actual RICH people in this whole country) or a middle-class sucker who buys into the "values" propoganda peddled by PR firrms and lobbyists whose goal is to get them to smile when they are bent over and raped by people whose wealth is on a scale that they can barely comprehend. 

    Thanks Barf, great anecdote!  As to what can be done about it?  It’s very simple and not a new concept – DISINCENTIFY greed!  If you earn up to $250,000 a year.  No change to taxes.  $250,000 – $2M (on the amount over $250K) = 40%.  $2M – $10M = 45% and over $10M pays 50% taxes.  Of course you have to crack down on deductions and nonsense too, like if you are making over $100M in dividends or Long-term capital gains, that’s 50% too.  You might say "Well 50% isn’t that much incentive for someone not to be greed" AND THAT IS EXACTLY MY POINT!  We used to have top tax rates at 90%

    Look how obvious the effect of lowering top tax rates is yet people like Gel (not to pick on you, Gel) will talk circles around this forever.  It’s a very simple, very obvious fact that every dollar a rich person shoves in a vault or uses to buy some brass fittings for their yacht, is a dollar that has been taken out of the mouth of someone who has, what is now (as it was in the great depression) 1/1,000th as much money as they do.  I don’t know if I can adequately express how angry this makes me. When Reagan took office, the top 0.01% made "only 150 times the average of the bottom 90%, now those same 10,000 people make 1,000 times the average of the bottom 90% ($50M per year or $500Bn).  Keep in mind that is INCOME that is adding to their assets at a rate of $5Tn per decade – no wonder they want that "death tax" repealed (and it’s already down to 45% from 77 since Reagan)!

    Meanwile, if the economy isn’t growing, where did that $15Tn come from in the 30 years since Reagan?  Why it was TAKEN from the bottom 90%, of course.  While the wealthy seek to protect the assets they build up over their lifetimes of struggle by avoiding taxes, the poor are forced to sell their family homes and their grandparent’s jewelry and push themselves further and further into debt in order to afford commodities like gas for their small, 30mpg car, which is very expensive because the yachts and jets they can’t afford to ride in consume 30 gallons per mile, which is a non-issue for people who have 1,000 times more money than they do.

    The solution is NOT complicated, the solution is only made to seem complicated because the 10,000 people in question have control of the media and they have armies of PR people, lobbyists and pet politicians who TELL YOU it’s complicated because the very UNCOMPLICATED truth is not to their benefit.  Ultra-rich people are like black holes, their money sucks up other money and resources and is NOT a benefit to anybody other than what some choose to give to charity (see "The Dooh Nibor Economy") and, since they are 1,000 times richer than the average person, they can pretty much pay off anyone they want.  

    I’ve been offered jobs to "shut up" – I just told Forbes to drop dead a couple of months ago when I realized they only wanted to carry my stuff so they could exercise editorial control over my content.  I was at a Seeking Alpha event last month and dozens of writers said to me "I wish I could get away with the things that you say."  That’s just sad!  This used to be America, didn’t it?  Unfortunately, when your paycheck is derived at the pleasure of someone who is even just 100 times richer than you – your point of view better make them happy…

    You are wrong to say you vote Repbulican because they screw things up without your money.  Democrats want to take "your money" to equalize mis-allocations of capital.  You can’t have a land of opportunity when 10% of the nation’s assets are transerred each decade to just 10,000 people.  That plan, by nature, can only work for 100 years before you have 10,000 people living in a shining city on the hill with 300M people living in abject poverty (see pretty much any third-world country for how this works). 

    Republicans pretend not to take your money but they give you a bill, through deficits and they take your money from your children and their children and they make it possible for WMT (back to them) and HD and LOW to put your hardware store or clothing store or whatever business you are in out of business by making it easy and profitable to be a big corporation on the very, very bad premise that bigger is better and they use FEAR to scare you into supporting it because (and you have heard this logic) "If we don’t let our banks/oil companies/manufacturers get insanely large, then they won’t be able to compete with the Japanese/Chinese/Russians/Germans." 

    As the Bush administration so aptly demonstrated, you can get people to give up their liberty and their principles if you keep the level of fear high enough.  It’s been a propoganda trick that corporations (and their pet politicians) have used to cower this country into submission since the 1950s (see "Centruy of the Self"). 

    Anything that increases the success rate of the 10,000 is to the detriment of the 300M but, as I said earlier, it’s like being a frog in a pot of water that is slowly being bought to a boil, at "just" 1% of our wealth being transferred to the top every year – it’s outside the scope of the average American to see it – this is why you and more so, your children, are being trained to have very short attention spans (and poor math/analytical skills) - most of us can’t even recognize a long-term scam because we can’t focus long enough on something that doesn’t look like it has an immediate pay-off. 

    Thank you Gel, for your perfect example of exactly the kind of BS Conservative dogma that I am talking about!  8-)

    Notice how Gel, who aspires to be a top 0.01%’er and is close enough to taste a glimpse of it, defends the idea of GREED, which I have already defined as having more than $100M in assets or more than $10M a year in income, as if it applies to YOU, the hapless middle class sucker who’s complicity is imperative for the top 0.01% to keep getting away with their con.  They need at least 3-30M of you to be on their side and that support needs to be fanatical enough that you will, in turn, influence others to vote to maintain the status quo so they will tell you that when THE LIBERALS talk about GREED, they care about whether you spent $300 a month to lease your car or $900. 

    That is, of course, asinine and it would be insulting to people’s intelligence but the target audience for this sort of rhetoric is the people who have been trained to be aspirational and have been trained to have very short attention spans and tend not to think things through past the first level or even past the first catchy slogan. 

    I think it’s just lovely that Gel says:  "Is it "greedy" to make a financial sucess of your life, through the honest pursuit of profits and growth in your entrepreneurial efforts?"  As if the LIBERALS are stomping their jack-boots on the throat of the working man and taking away his meager savings.  What did Obama say?  No tax increases for people making under $250,000.  What did Obma do?  No tax increases for people making under $250,000.  That right there means Gel’s argument is nothing but hollow BS to 98% of the American population. 

    Isn’t it bizzare that an obviously intelligent guy like Gel would even attempt to put forth an arguement like that?  The problem is that is how disconnected all of us are when we get to that level ($1M annual income, $10M in assets) and even those peole do not comprehend how poor they are compared to the top 0.01% but they contribut to the top 10,000′s causes and they support the top 10,000s political objectives because they are GREEDY and want to be in the top 10,000 too.  Heck, I WANT to be in the top 10,000 but, if I was, I’d be a joke to them like Ted Turner and Bill Gates who give away the bulk of their wealth since they realize they don’t NEED it.  

    The great American dream isn’t supposed to be squasing everyone else’s American dream.  Gel says "Even a guy today driving a nice car, or living in a nice house is now classified as "greedy"."  This is not even close to true unless that nice house happens to be a $10M+ mansion (assuming the average home is $250,000 in that neighborhood).  Take the next step and think about this logically – do you feel that a person in a house twice as nice as yours is "Greedy" or just successful?  How about 4x better (not that more expensive is really better but…)?  10x?  20x?  40x?  Everyone has a point at which they will, perhaps, find some grain of truth in the statement and therefore people like the Heritage foundation and Conservative PR flacks will stick it into every bit of literature they can so it becomes ingrained in people’s mindsets and they can count on someone just like Gel to spout it off and then vigorously defend it when challenged because he "KNOWS" it is true.

    Now (and I know it is boring and slow to analyze things but, stick with me), who thinks you are "GREEDY" because of your home and your car?  Is it people who have 1/2 as much as you?  1/4?  1/8th?  1/20th?  1/100th?  Let’s say that only people who have 1/100th as much as you have a right to call you greedy (although Gel argues that the top 0.01% are still not greedy – they are just that much better than you and deserve all they have). 

    • The mainland United States of America is 2,500,000 square miles, including Alaska.
    • A sqare mile is 640 acres so there are 1.6Bn acres of land in this country (some nicer than others, of course).

    So let’s follow the the premise that there is no such thing as greed and lets 1/4 of the land is available for housing or 400,000,000 acres.  That would mean there is enough land for 300M people in America to have 1.33 acres each to live on in a "Communist" distribution of land. 

    What though, if 10,000 people (who are not greedy, of course) have 1,000 times more wealth than the rest and they naturally accumulate 10,000 acres each for themselves?  Well they would have 25% of the livable land (and you know they take the best 25%), leaving just 1 acre for everyone else.  This is your "frog in a blender" example – the government once gave everyone who wanted it "40 acres and a mule" but that land has been taken back and back and back as the poor were, let’s not call it forced or Gel will be mad but "circumstantially motivated" to sell it to "more deserving" people over the course of the following 150 years.  That was the land grab of the Great Depression, where the bankers took over the land of this country – it’s greatest asset at the time. 

    Like good little frogs, we are trained not to hop out as our land gets taken away from us to the point where I’ll bet there are very few people reading this who have more than an acre for their homes yet SOMEONE, someone very rich, owns the rest of it now.   Between the 30s and the 70s the LABOR of the bottom 90% was converted into assets and since 1978, those assets have slowly but surely been turned into debt and, once again, we have a blow-off top of greed and there’d better be a big World War to distract people because they have once again been pushed past the breaking point and Gel is going to need to hire some security people in case his definition of greed doesn’t jibe with the local populace.


  199. LoL Gel!!  You are truly a "Moth to a flame"!  I love the debates….. Carry On…. :)


  200. Phil
    This is what caused me to shut down our business in July 2001. Didn’t go BK didn’t even sell out inventory and September confirmed my expectations. Funny fact at that time the bad guys to us were Circut City and Radio Shack. CC went BK and the local RS store closed last year. That spring 2001 I tried to hire people with an plan to make them a licensed electrician but they wanted $25 per hour to be trained. I promised once licensed they would be paid $25 per hour or more and if that wasn’t enough they could start their own business and try to get 40 to 50 and pay all the fees and insurance. Two are in Jail, one grows and will go, 4 are hoping the paveing companies call them back and have no clue their unemployment is over, if I tried to tell them they would only tell me I am stupid. The others have disappeared or waiting for those construction jobs to come back. 85% of the houses in Teton County Idaho are empty most never sold. The conservative developer puppets blame intitlements and unfair taxes. My community unnamed but a ranch 0f I think 160 acres has 11 houses a doctor and I only full time residents, 5 for sale all over 2 years, 1 sold empty now started at 1.5 million sold for 615 thousand, a doctor, 2 lawyers, an 80,  and 67 year old are so underwater its not funny. Because I get SS Disability and now they think they deserve some of that free money they made up a bunch of lies about me told the conservative puppets at the sheriff dept. in Jackson I was a violent person. In Sept 08 armed with a search warrant tore up my house and took my guns. Now these people preach 2nd amendment rights won’t give them back even though all charges were dismissed, the prosecuter has twice told the sheriff to return all property, My lawyer who charges unreal amounts and is also the part time Federal Judge is about to file contempt of court charges on the sheriff. This is what Bush fear, that conservative lie, and are control freaks. I like to hear comments that disagree with me but I wonder if they are that stupid, sucker puppets supporting those .01%ers, or fools. I use myself as an example and proof because it is true and verifiable. I am also disabled and spending federal taxes because Big money and insurance companies spend 80% fighting claims. I would wager the conservative will not say a word about themselves, reveal who gave them all their money, and why they have to preach the lie. Without changes the 10,000 will be the only ones not begging and then they will pound their chests and say if it weren’t for me you would be dead.


  201. In the Late 70′s as a land developer i started to hit the ceiling of 78% taxes.  It was not worth the risk.  So I scaled back.
    In the early 80′s I had negative income.  No unemployment no government benefits.
    In the 90′s I paid $400,000 (federal) on $1,000,000 of income.  People said that was an outrageous amount to pay in taxes.  I said I want to pay $400,000 every year because it means I am making $1,000,000.
    The tax brackets are too low for the  rich now.  Like Phil says they are a black hole sucking up the wealth.
    It is unconsionable that the financial industry makes 40% of the profits in this country generated by businesses.  They are a service industry and do little for the GNP of the country.  Then they rig the markets to boot.
    I was a republican – now I will not vote for any person who is associated with a politcal party.  They are all corrupt.
    The free trade treaty passed in the 90′s though good theoretically for the world sucked the manufacturing jobs and some service jobs out the country.  They will never come back.


  202. If the rich man chooses to buy a brass fitting for his boat, does not someone have to make it, ship it, sell it, and in the case of the rich man, install it. You mock the frivolous expenditure as if it were meaningless, but it is not so much so for the man who works in his supply chain. Phil presumes that the misallocation of capital would be improved if only our all-knowing government could control things. Have you been paying attention to what our government chooses to spend money on?
     
    Some of us just don’t buy it.


  203. Holy Cow, Phil… somebody must have spiked your Bloddy Mary with too much Tabasco at the barbeque today. You really  are a tough opponent for me, in my defense of conservative thought. I must admit, I have been a staunch conservative since I was very young, as I always believed in the concept of self reliance. I was always befuddled by the injustice of system of wealth distribution, wherein those that inherited wealth were given such an advantageous advantage in life, but in most cases contributed very little. I grew up, as a youngster, in a neighborhood that was populated by many heirs to large fortunes. My family was sucessful, and I could never accept the fact that the wealthy (trust fund recipients) were so inept at most everything attempted to achieve, although, they had the advantage.
    Fast forward to today…. I still feel the same. The more you give somebody for nothing, you will receive about the same in return. I know Phil you have been blessed in life with an extraordinary high level of inteligence, as well as a work ethic that is the envy of most, but I do believe your overly compasionate bias toward the unfortunate is jading your better judgement. I do not think it is beneficial to take from those that are the productive and give it to the less fortunate, just because they have chosen a path that ignores compensation for no effort.
    You have mentioned on many occasions, the evil in the current system of distribution of wealth. So many who embrace the "liberal" philosophy, seem to feel that once somebody has reached a certain level of wealth accumulation, then they should not be entitled to more, notwithstanding they might deserve more because of their contribution, or I might add, whose business is it anyway to judge what a man needs? He might be the largest contributor in the world to causes that are beneficial to the less fortunate. (Gates, Buffett?). Or possibly this man might ve a visionary, and need the resources to do something that no one could imagine without a large amount of capital? I have two neighbors in Pebble Beach, that are decendants of some of the most wealthy entrepreneurs in the countrty’s history. One built the Union Pacific railway system, the other the Northern Paciific Railway. This too big capital, and without this available at the time. we might have spent much of our time riding donkeys over the area now covered by railway tracks.
    Case in point relative to today…. should we have told Steve Jobs some time ago he "just has enough money"? Not at all. He was not "greedy"… he did not spend his wealth on personal stuff for himself – no he deployed his resources in order to bring to market some of the most beneficial products of our modern era. If the government confiscated his capital, then we might all be communicating on devices that do not meet our needs of today. So, Phil I can not agree with your thesis..
    We must remember, more so today, in the year 1776, the US was given the greatest gift of promise ever – that was the freedom to pursue ones own entrepreneurial dreams in the form of free market capitalism, and I as a conservative believe this is what made the USA the most sucessful country in the world. For those that say, "ya, but you were greedy and you took more out than you should have"  Well, I completely disagree, as I have paid out over 50% of what I have earned to those that were in need. The balance was spent primarily on developing businesses that created jobs and manufactured products that have made life much bettet for the millions that were the beneficiaries of my effort. I am proud, and have no regrets.


  204. Hey, 1020…. jump in… the water is fine. The result, in my case may be disappointing, but at least I can say " I tried to scale Mt Everest".  You will be up against the best (Phil).


  205. gel1? we probably are more or less on the same side, and in the majority here. but Phil is LOUDER :)


  206. Good morning!

    Business/Shadow – I don’t disagree with you, even the little people can be "greedy" but I assume the labor market at the time was tight enough that there were no available $10 an hour electricians to hire.  We had (and still have) the same issue with programmers but that’s all part of the great wealth imbalance in the country.  When rich companies want to suck up all the labor at rates small companies can’t afford to match – they can do so at a whim, and drive small companies like yours out of business.  Then, once you are gone, they then reverse course and lay off workers, creating a surplus of labor so now they can pay the same guys $10 an hour but you are gone, so they have all the business AND cheap labor.  Just like there are people manipulating commodities like gold, silver and oil buy hoarding it and dumping it, there are people who manipulate the price of labor by hoarding it and dumping it. 

    For a while, it was in the interest of American business to get as many people as possible trained as computer programmers, so the 10,000 people who control the money in this country threw some at anything with computers and that sent a wave of kids into computer school.  Again, this is long-term planning that is past the ability of most people (who are busy worrying about their day-to-day existence) to see.  Once their IT departments are fully staffed and they are able to compete – they pull the plug and now there is a huge surplus of IT people and more in process at colleges and they can drive down the cost of IT for the next 10 years.  This always happens, the "gold rush" in California and Alaska never made anyone (anyone who didn’t own a mine) rich but wave after wave of people went out there to make their fortune and ended up as cheap labor for the people like Hearst and his friends who publicized the great gold discoveries in order to draw labor out to California and then Alaska.  I mean, who on earth would move to Alaska just to get a job cutting trees or building roads?

    Think about the econonomic and social realities of why so many lawyers are crooks.  By paying them enough to be be aspirational top 2%’ers they are removed from the life of ordinary people and by creating a doctrine that there is no right or wrong, just winning the case, their morals are ground down and by creating the partnership system, young idealistic lawyers make money for the wealthy, jaded ones who attempt to move up the wealth ladder by forcing the young ones to work themselves to death and to bill their clients as much as possible and the young ones toe the line to "make partner" or their carreers are effectively dead-ended and, when they finally do, it’s their turn to "get theirs" and they continue the cycle. 

    The monetary attraction of the legal profession and the barriers to entry have driven the cost of law school through the roof to the point where "best and brightest lawyers", the only kind who would have a chance of fighting for social justice and political reform, are considered insane if they want to go to work for a small firm that fights the good fight but pays littel and those firms can’t affort to represent small clients against big firms because they too can be bankrupted by the time and costs of a trial.  If you set a system up to work a certain way – you do not need a "conspiracy" to keep things going.  There is simply no justice for the poor in America and there are very few good lawyers who are in a position to challenge unfair laws that infringe on the rights of citizens because, it simply doesn’t pay to do so.  That’s the system.

    What’s another thing rich people like to encourage people to be?  Doctors!  Rich people hate dying, so they create a system that has intense rewards for doctors and funnells the "best" doctors to the best hospitals and the best places to live so they too become aspirational top 2%’ers who are at the beck and call of the 10,000.   The reason universal health care really pisses of the wealthy is not just that it requires some of their money to operate but it threatens the model where only someone with 100x more money than you can be sure they will get a kidney or a heart if they need one, that they will have private beds in botique clinics and doctors on-call who still make house calls.  THAT’s the kind of medical care they don’t want the government getting in between them and their doctor for.  What if just ANYONE could afford a kidney transplant?  Then hospital might start taking those waiting lists seriously.  Outrageous, right?

    And of course, the worst thing about universal health care is it frees the workers from one of the greatest shackle employers have.  The fear of losing medical coverage is the number 1 (by a mile) reason people stay in jobs they don’t like and the intense expense of self-insurance prevents entrepreneures from starting businesses (that could compete with the big boys) and sends individuals back to the work-force, because it’s not possible for the average person to live without a job once their Cobra runs out.

    Taxes/Hia - That’s the point of a 78% tax rate.  When you hit a certain income level and you decide it’s not worth making more, it leaves the door open for the next entrepreneur to make money in that industry.  I do think 78% was a bit high but 35% is insanesly low.  As I’ve said, 50% over $10M (and only the amount OVER), which affects less than 100,000 people in this country, would generate $500Bn of additional tax revenues and taxing corporations properly, would generate an additional $2Bn, that’s MORE money than the government collects now in total!   Hmmm, there an interesting platform to run on – promise 99.9% of the people in this country they can pay NO taxes at all under that structue.  Watch Gel argue that having 99.1% of the country pay new taxes would not be an economic benefit…

    Brass/Barf – Really?  $100,000 worth of brass trimmings on a Yacht is going to create how many jobs vs. $100,000 moving through an ordinary communty?  How about when the guy calls the shipyard in Amsterdam and says his neighbor just bought a 100 footer so he needs to add 15 feet to his order for $10M or he’ll be embarrased to be seen with his 90-foot boat?  How many US jobs does that create when he (let’s say it’s the guy who owns the shop that makes brass fittings) takes $10M that was capital profit drawn from the imported good and the added labor of American workers, and ships that money out of the country to debalance our trade and debase our currency?  This is not about "the all-knowing government" (and notice how this kind of attitude is essential to the conservative argument whenever their party is not in power) controlling things – this is about the AMERICAN PEOPLE taking back control of their country and there are two ways to do that:  Nicely, through government or not so nicely, through the barrel of a gun.  The more you fight to take choice #1 away from them, the more you make choice #2 the only option.  Have you read the Declaration of Independence?

    We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness. Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security. --Such has been the patient sufferance of these colonies; and such is now the necessity which constrains them to alter their former systems of government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute tyranny over these states. To prove this, let facts be submitted to a candid world.

    He has refused to pass other laws for the accommodation of large districts of people, unless those people would relinquish the right of representation in the legislature, a right inestimable to them and formidable to tyrants only.  – Gerrymandering.

    He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public records, for the sole purpose of fatiguing them into compliance with his measures.  It costs an average of $5M to take a case to the Supreme court, not exactly justice for all, is it?    

    He has endeavored to prevent the population of these states; for that purpose obstructing the laws for naturalization of foreigners; refusing to pass others to encourage their migration hither, and raising the conditions of new appropriations of lands.  The "Crackdown on Immagration" is one of the factors that led to the economic downturn – no population growth, no economic growth.  Not a complicated concept.

    He has kept among us, in times of peace, standing armies without the consent of our legislature. 2 Wars yet we’re not really at war, are we?

    He has affected to render the military independent of and superior to civil power.  Totally.

    He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his assent to their acts of pretended legislation:  Patriot Act.

    For protecting them, by mock trial, from punishment for any murders which they should commit on the inhabitants of these states:   We do this with the military and with Financial theives.

    For depriving us in many cases, of the benefits of trial by jury: Unless you can afford it.

    For transporting us beyond seas to be tried for pretended offenses: Gitmo.

    For taking away our charters, abolishing our most valuable laws, and altering fundamentally the forms of our governments: Many examples of this.

    He has plundered our seas, ravaged our coasts, burned our towns, and destroyed the lives of our people.  Do I even need to give examples?

    He has excited domestic insurrections amongst us, and has endeavored to bring on the inhabitants of our frontiers, the merciless Indian savages, whose known rule of warfare, is undistinguished destruction of all ages, sexes and conditions.   Tea Party rallies.

    In every stage of these oppressions we have petitioned for redress in the most humble terms: our repeated petitions have been answered only by repeated injury. A prince, whose character is thus marked by every act which may define a tyrant, is unfit to be the ruler of a free people.  Amen!

    Nor have we been wanting in attention to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our separation, and hold them, as we hold the rest of mankind, enemies in war, in peace friends.

    We, therefore, the representatives of the United States of America, in General Congress, assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the name, and by the authority of the good people of these colonies, solemnly publish and declare, that these united colonies are, and of right ought to be free and independent states; that they are absolved from all allegiance to the British Crown, and that all political connection between them and the state of Great Britain, is and ought to be totally dissolved; and that as free and independent states, they have full power to levy war, conclude peace, contract alliances, establish commerce, and to do all other acts and things which independent states may of right do. And for the support of this declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor

    Happy 4th of July!


  207. Phil, I don’t think there’s any difference between a dollar going to buy brass fittings and a dollar given by the government to somebody. You might argue the brass fittings are an inferior use of the money, but the economic impact is statistically the same. I might argue that I don’t want you (or anyone else) to have the power to make that choice.
     
    Speaking of boats, remember the luxury tax on new boats costing over $100,000? Remember how it was argued that, for heaven’s sake, the government needs the money to spend, and nobody needs a damn boat worth that much? At first reading, it was quite a popular populist idea.
     
    Well, you will remember that boat sales crashed, and several long-standing manufacturers folded, and thousands lost their jobs. I wonder who remembers what the government did with the little money they collected from this idiotic tax? My point is simple. People with a lot of money have a lot of choices, and when you target a tax against them, it induces behavior you probably don’t want. And then, there’s the whole bit about freedom.
     
    It is much better if an economy operates freely, don’t you think? I share many of your concerns, but I don’t think your methods would succeed as you intend. Remember when the government decided that home ownership was an american ideal? And when the government chose to take tax money and subsidize people in the purchase of the home. Remember recently when you built a pretty compelling case against home ownership, arguing that renting is better? I am not against home ownership, mind you, but I wonder how we all feel about the government subsidy?
     
    I will always argue for a flat tax with a floor, all income treated equally, and possibly a surcharge over $1 million. That way the government loses its power for back-door subsidies.


  208. As an afterthought, is anyone aware of any study done on the relationship between the mortgage interest deduction and home prices? I wonder if the home price bubbles since WW2 were stimulated by this.


  209. Greed/Gel – First of all LOL on the railroads!  Government land grants, passage of eminant domain (taking land from the poor and giving it to the rich) liberal immagration laws that allowed cheap foreign labor, tax breaks and subsidies is your friggin example of how the system is built by successful capitalists????  I mean R O F L!  This is the problem with the corporate welfare crowd (per my GE example the other day – you take and take and take and want to give nothing back.  When counting national defense, infrasructure, education, municipal services… you want to count your contribution as one of 300M but when looking for tax breaks and bailouts, you count yourself as "too big to fail" because you "help" so many of the little people. 

    I know you don’t get it and I accept that about you.  You say you grew up in a rich neighborhood at the bottom of the food chain – THAT’S you kampf?  Guys were even richer than you?  I’ll bet the school was nice and you didn’t have bars on your windows and no one tried to sell you crack on the way to school…  Did both your parents work trying to make ends meet or did one of them have time to help you when you came home?  If so, you have a huge advantage over 70% of the country right there.  Were you fed properly and clothed properly and did you get adequate medical care?  20% of the children in this country start out with those disadvantages to overcome although I’m sure that’s nothing compared to having to deal with one of your friends having a bigger swimming pool than you did…

    I would think you get the concept of why inheritance tax is so necessary.  You pool ridiculous amounts of capital in the hands of the underserving and, rather than use that money to build more wealth and create jobs and grow the economy, they funnel it into various scemes that protect and grow the wealth, mainly by exploiting the labor of others – creating systems where they lend money with virtually no risk for usurous interest rates or they participate as venture capitalists, where they take half a business away for a small sum and contribute nothing.  The more they pool the money, the less opportunity for others to have som and the entrepreneurial spirit of the nation is destroyed.  Inheritance tax is meant to put the capital back to work in the country where it was created – how is that a bad thing? 

    You can’t have Capitalism without CAPITAL and if capital is pooled in the hands of very few people, it is no longer a fair system.  This is NOT complicated.

    You say:  "I do not think it is beneficial to take from those that are the productive and give it to the less fortunate, just because they have chosen a path that ignores compensation for no effort."  First of all, then, what is your solution for Shadow?  He was permanently injured in his job and his employer walked away from responsibility.  Is that just "tough luck" in your world?  I guess he should just get the hell out of his wheelchair and go dig a ditch somewhere rather than tap you for your precious tax dollars, right?  I’m not going to sugar-coat this, I find it sickening when you mmake generalizations like that.

    Now you can say, "I didn’t mean in THAT case" but where is your line?  Where do you pass judgement on what makes someone fit to live in your world.  My friend’s husband died and she never had a job as she got married right out of law school and he provided for her and they decided to have kids (3 – a good, Conservative number) and the little one is 2 and the others are 5 and 7.  They had about $100,000 cash saved up (age 38) and $100,000 in equity on a $400,000 home and his life insurance paid $250,000 (they meant to get more but never got around to it).  Her living expenses are about $4,000 a month so she’s going to sell the home in a bad market for $300,000 and she’ll have about $350,000 left to start a new life – much better shape than most who are in that situation but now she’s going to have to start paying $1,500 a month for health care ($18,000 a year) and if she goes to get a job it’s going to cost her another $20,000 in child care a year so if she can’t make $20,000 take home it doesn’t pay for her to leave the house and she’ll need at least $50K to move back into a modest home but, SURPRISE, she can’t do that because she has no job.  It’s even hard for her to rent now with no job and 3 kids.  She’s making all the right choices to scale back, given her situation but there is adversity at every turn and her kids will now never get the quality of education she had planned and, the cold, hard fact is, unless she finds a guy who wants her and her three kids, the chance of her being ready to send them all to college over the next 15 years is not very likely. 

    I imagine she MUST be below your cut-off line.  She has too much money, she made the wrong choices (should have picked a husband who drove better, should have had less kids, should have had a job), she can "choose a path" that compensates her better because, of course, NOTHING ELSE MATTERS IN LIFE, right?  And there are, of course, people far worse off than that.  When I had a company we were very pro-active in helping our employees get their lives going with home loans and advances when they needed them and I found that very small boosts early in life (like contributing $20K for a deposit on a first home, helping out with expenses, providing day care, health care, etc.) went miles towards helping people get a firm footing in life.   I found it was not only immensely satisfying to do things like that for my people but it also worked to our benefit as we had a loyal, family-like atmosphere in the company so when you say: "I do believe your overly compasionate bias toward the unfortunate is jading your better judgement," I can only hope I die before my "better judgment" ever comes to resemble yours!

    The "evil in the current system of distribution of wealth" is the LACK of distribution.  Of course you don’t see that when you are in the deep end of the distribution pool…  10,000 people make 30% of the income in the United States of America and the next 29.99M people make another 40% and the next 30M people make 12% and THE OTHER 240M people have to fight over the remaining 18%.  This is your idea of fair? Let’s say it’s a poker tournament:

    • Table 1 has 10,000 people who have $1M each to play with
    • Table 2 (top 10-0.01%) has 30M people who have $433 each to play with
    • Table 3 (top 20-10%) has 30M people who have $133 each to play with
    • Table 4 (bottom 60%) has 240M people who have $25 each to play with.

    What are the chances of someone from the lower tables winning enough money to compete at table 1?  First of all, the only way to advance is to take money away from other, that should be obvious.  Second of all, even if someone from table 2 accumulates the wealth of 1,000 people (who are nocked down to table 4 or out of the tournament entirely), they are still at a huge disadvantage once they have to move up to table 1 and, of course, what effectively happens is the person from the lower table who accumulates the wealth of his neighbors and takes his winning up to table one – if often swatted back down to nothing as the more experienced, better funded players at the big table make short work of him. 

    What’s the net effect?  The money that our lucky/skillful player from the lower tables takes from his fellow players in the lower ranks is either left on table one and added to their very eclusive wealth poor or, failing to wipe out the new guy, they may reluctantly make room for another seat at the table and chant "One of us" at the initiation ceremony but, what they WON’T do, is put that money back into circulation in the lower tables – the tournament just isn’t designed to work that way is it? 

    Evenually, invevitably, when you design a system like that and you refuse to redistribute the wealth back from top to bottom – there can be only one winner in the end but, as I’ve been saying, it’s a long, slow game that grinds away for decades and the money goes up and up the ladder and is a long, painful death for those down below, who don’t even realize what they are losing until there’s nothing they can do about it.

    So, should we have told Steve Jobs that he has "enough money?"  YES!  If Steve Jobs doesn’t want to work anymore because 1/2 of his additional income will go back into the pool then he is free to stop at any time and I’m sure there are many, many people in this country who would be happy to earn the part of AAPL’s $10Bn in profits Steve doesn’t want to make because it so sickens him to help others that he would rather not work at all.  Is that reallly how your brain works?  I find that fascinating…

    Did AT&T’s monopoly spur innovation (we’ll we did go from rotary phones to push button phones in just 100 years) or did the breakup of AT&T spur innovation?  You can’t agree with my thesis?  Does Microsoft innovate since they have come to dominate or is everything now about defending their position and stomping out competition?  How about big autos?  How did their domination of manufacturing work out for America? 

    The promise of freedom in 1776 was the promise of freedome from wealthy, elitist bastards who sucked up the wealth of the colonies and made it impossible for the common man to have the freedoms they believed they would get in the new world.  The reason we had a revolution is because this country was full of the kind of people who would risk their lives and give up everything they had for a chance to live somewhere where they system wasn’t rigged against them like it was in Europe so when the bastards started trying to rig the same game over here, the people revolted.  Unfortunately, that spirit has been crushed out of the American people and what made (PAST tense) the USA the most successful country in the world was the opportunity for anyone to succeeed and that pipline for opportunity has gotten narrower and narrower to the point where upward mobility is no longer a realistic expectation for the bottom 240M people because they can work their entire lives and not even come close to having a stake big enough to compete at the main table. 


  210. I just love conspiracies. Everyone a victim- very egalitarian. Nameless and faceless mysterious evil doers stuffing ill-gotten plunder in hidden vaults. (Now there is an investment premise – who makes the vaults and security systems?)
    Here’s a tip for anyone having trouble following along. You may have an old set of rabbit ear TV antennae in the basement or garage. Clip this to your tin foil hat for better reception. If you don’t have one, a wire coat hanger and some duct tape will do in a pinch. Most importantly, always check for overhead black helicopters before proceeding. THEY are always watching!
    Meanwhile, enjoy your hot dogs and fireworks while you still can.
    ):


  211.  I love the exchanges but Phil, no way can you pin this all on conservatives and/or republicans.  Democrats and liberals are as greedy, corrupt and irresponsible.  For every argument against the abuses of one side of the aisle, there is another stemming from the other side. 
    One thing I do disagree with you on Obama’s taxes--no income tax increase for those who make less than 250K. Cap gains will go up and for everyone.  So there’s a tax increase for you.
    How about what’s in the healthcare law:
    -starting in 2013, medical expense deductions will only be allowed for expenses above 10% of AGI (2016 for those 65 years or older).
    So 2 instances of tax increases for those who make below 250K.  One to take effect next year and the other 1 year Obama’s 1st term.  


  212. Phil… this dialogue started with the beiief "geeed" is destroying our society. The conventional definition of greed is "excessive desire to acquire more than what we need or deserve". Well, with this definition in mind, when thinking who might be experiencing this "desire to acquire" in an excessive manner, one word comes immediately to mind – GOVERNMENT. I am talking about all levels of government today. No matter how much financial resources they strip from the economy, it is never enough, and furthermore, the amount that is collected on a current basis is but a miniscule amount compared to the funds borrowed, and unfunded committments in the future. It is insane!  Now that is greed in its purest form, as it meets the test "needs or deserves"
    Do the governments deserve more of our resources when their ability to efficiently spend it is so blatently clear? A disaster at best!. They would not "need" near as much if it was not squandered.  I am not offering hollow rhetoric, as I have witnessed this first hand, having lived in Washington DC, and did business with the federal government at the highest levels, for over six years. Phil, you are familiar with DC…. have you ever in your life seen such a failure in the execution of social experiments. It is a massive embarassment to the idea our government can execute anything.
    Our government has racheted its way to the top of the debt ladder, with no possible way to make repayment, other than the painful cure of hyperinflation. Same for the 48 out of 50 states, that are also insolvent. Our great leaders (economic geniuses) now want to solve the problem with TAXATION – not some, but lots. In addition to the monumental amount of new taxes scheduled for January, these ravenous hyenas are now talking about a VAT tax and even plan to tax all sales over the internet. This is NUTS. Do they not realize this plan will tank the economy on a permanent basis?  We don’t need more new taxes – we need new government, that understand a little about economics, and recognizes a free market entrepreneurial driven economy will get us out of this mess they have created.. The current administration has voiced their hate for the corporate infrastructure of our country and I personally believe they think the union movement is at the base of a solution to transform our corporate structure. I know they have very little understanding of economics, but also have never studied history, otherwise they would be on a totally different track.
    If they are ignorant of historical data, then all they need to observe is the demise of Greece, wherein 43% of all of employed work for the government, leaving very few to financially support the "out of control" inneficient government budget. Biden and his wife should have taken their vacation in Greece instead of Iraq – they might have learned something.


  213. Sometime in the 1950s, the New York Thruway was completed. Funding was largely federal, but a fair amount of state money was involved. Tolls were established to pay for construction,maintenance and improvement. By 1975 (or so) enough money was collected to pay off the state bonds used for construction – years ahead of schedule. They were not paid off. Years passed, toll revenue piled up, maintenance was deferred and bridges began to deteriorate. Toll rates were increased twice, long after all capital costs were repaid. Eventually, the tolls were nearly triple the required maintenance and improvement budget. The tolls were supposed to go away, but the state had become addicted to the revenue. Just another tax. There was talk of yet another toll increase.
     
    I live in Florida now, where several bridges were built with bond issuance backed by toll revenue. Guess what? The bonds were paid off, and maintenance was deferred to the point that one bridge was not far from being declared unsafe. And the tolls were raised. The one defective bridge was replaced, but instead of taking the accumulated surplus from past toll collection (it turned out there was nothing left) they TRIPLED the toll to pay for it – by my figuring, the tolls are just shy of double what is actually required – this time, they PLANNED to steal the excess tolls.
     
    My point? Phil may get his millionaire’s tax someday, and it may actually raise some money (although nowhere near what seemed likely at the time). Eventually, government will grow to like this extra revenue, only they will want more, so it will become a half-millionaire’s tax. No tax ever goes away, and if it changes at all, it grows and covers more people.
     
    And all the problems we needed to spend money on will remain. Does anyone notice that governments at all levels do a crappy job?


  214. jdub… The pledge Obama made to those that make $250,000 or less is total BS, and he knew it at the time. This was nothing more then populist pandering to get his 50% plus voting majority.  Politicians lie first, and everything else is secondary.  The coming VAT tax will impact the "less than 250" folks far more than the boys in the upper range, because on a percentage basis this tax will have an effect on all who purchase anything. The guy who has money invested in dividend paying stocks will see an increase, as this tax is slated for a double. (yes even those that make less than 250,000 have investments). The coming inflation (2011-2012) will hurt the lower income folks much worse than others. Inflation is a tax, as it is caused by poor management of government budgets. Lots of new taxes for EVERYONE are on the way. I guess Obama must have lied!


  215. Barfinger… Your bridge statement applies to so many other scams the governments have created to raise money, but blow it in other ways.  Medicare is just one that comes to mind.  Bridges….. the Golden Gate bridge was finished in 1937 (73 years ago), and has been paid for over and over, however the tolls keep going up and up.  Most of the money winds up in the San Francisco general fund, and is spent on union pensions. Deception prevails!


  216. Phil, I’m surprised to see you on the side of the little guys as I imagine you are well off. The disparity between the rich and the poor has become alarming, particularly in the past decade. Our government seems irrevocably corrupt, no matter who is in power the banks and elite get all the breaks and prosper more, while the average peasant (99.9% of the population) is hung out to dry. 
     
    One of the problems in any society is the more money you have, the more power you have to earn more money which is squeezed out of those below you. Strong governance is needed to prevent this, and a high tax bracket can certainly help. I don’t buy the argument that rich people are visionary and doing great things in this country, on the contrary many behaviors the rich engage in to create more wealth and power are extremely destructive. 
     
    Unfortunately all these taxes no matter who pays them, goes to a government that no longer serves the betterment of the country for all it’s people. The majority of taxes goes to illegal wars and paying interest on our massive debt. We have the constitutional authority to create our own legal tender, yet we have a private bank do it and we pay them interest on it, which eats up a huge chunk of tax receipts.
     
    I don’t pay much in taxes because I am probably one of the poorest people here. But if I were well off paying more than half my income in taxes, I would be more outraged about how my tax dollars are being spent, rather than the fact that I’m paying so much in taxes. 


  217. After many debates about what is the best economic system is for the country, and what is a fair way to tax the earners and non-earners, and additionally what dominance the government should have over our lives… in NY they would say "nuff already", and in the southern part of the country, they would say "no mas" to this discussion   I have to agree, as an consensus to solve this "great divide" is void of any possibility   Further commentary should be left to others, that believe this venue is appropriate for these "mind exercises", and are compelled to vent their opinions…. so I am out of the discussions going forward.  I will restrict my comments to only the subject matters that I feel will be beneficial to the PSW community, related to investment strategy.  My conservative views are deeply ingrained from my life experiences and educational background,  that can not be rewritten,  therefore my lack of ability to accept inverse opinions renders me unqualified as an objective participant, and therefore I should not engage further. Thanks to the many that support my opinions and the respect for the oblique from which I form my positions.


  218. Happy Holiday Phil!    Since you are in the middle of this politics debate, I’m assume your mind is preoccupied with it, but I do have an investing question. We can deal with it later if you wish.
    A week ago Chaps made an observation for possible buy/write, and you came back with a suggestion for synthetic buy/write:

    chaps
    June 25th, 2010 at 10:08 am | Permalink  
    RIG: Jan 2012 50 P + Cs can be sold for about $28.50 as part of a buy-write on a $50 stock price.

    RIG/Chaps – I’d go for the 2012 $40/65 bull call spread at $11 and sell the $35 puts for $7.60 for net $3.40 on the $25 spread and your worst case is you own RIG for net $38.40 (now $50.24) with a 635% upside at $65 and a BE at $43.40.  Your buy/write is good too.
    I seem to remember you saying in a post several months ago that you don’t own a lot of stock, that you prefer to work with the options…. am I remembering correctly? Also, do you always look at both possibilities, the buy/write and the synthetic? And what parameters make you chose one over the other?
    Couldn’t find anything about this in the archives, although I’ll bet it’s there. Thanks.


  219.  Phil,
    Turning away somewhat from the philosophical discussions that although interesting are unlikely to result in any kind of consensus, I would like to turn the subject towards a topic that in my opinion has profound consequences for our country. It has been neglected for generations and even now all we hear is lip service & platitudes. I speak of course about energy and our ever increasing dependence on others. Specifically, I’d like your take on the plan put forward by Boone Pickens which in essence proposes that we convert America’s 18 wheelers to run on liquefied natural gas in place of diesel.  According to Pickens this can be done within 7 years and would reduce our oil imports by 1/3 while improving our air quality and providing many thousands of new permanent jobs.  It is unlikely that this heavy duty segment of our transportation fleet will be running on any form of battery in the near future so to me this makes a lot of sense. What is your view?


  220. Gel.
    AMEN!